-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WoM7YOWlGx4dL85pJHcqs253mmNUWvNDiG5Yy9MNAkYMIsuRI01ify2YGKvG0haG WgbYai88HAJR85NXhEI/+Q== 0000950103-02-000321.txt : 20020415 0000950103-02-000321.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950103-02-000321 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 20020327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEINZ H J CO CENTRAL INDEX KEY: 0000046640 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 250542520 STATE OF INCORPORATION: PA FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-85064-01 FILM NUMBER: 02589258 BUSINESS ADDRESS: STREET 1: 600 GRANT ST CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4124565700 MAIL ADDRESS: STREET 1: P O BOX 57 STREET 2: P O BOX 57 CITY: PITTSBURGH STATE: PA ZIP: 15230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEINZ HJ FINANCE CO CENTRAL INDEX KEY: 0001169077 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 820382406 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-85064 FILM NUMBER: 02589257 BUSINESS ADDRESS: STREET 1: 600 GRANT ST CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4124565700 MAIL ADDRESS: STREET 1: P.O BOX 57 CITY: PITTSBURGH STATE: PA ZIP: 15230-0057 S-4 1 mar2202_s4.txt As filed with the Securities and Exchange Commission on March 27, 2002 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 H. J. HEINZ FINANCE COMPANY (Exact Name of Registrant as Specified in Its Charter) Delaware 2030 82-0382406 (State or other (Primary Standard Industrial (I.R.S. Employer jurisdiction of Classification Code Number) Identification incorporation or Number) organization) 600 Grant Street Pittsburgh, Pennsylvania 15219 (412) 456-5700 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ----------------------- Leonard A. Cullo, Jr. President 600 Grant Street Pittsburgh, Pennsylvania 15219 (412) 456-5700 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------------- Copies to: Michael E. Hooton, Esq. Sarah J. Beshar, Esq. Associate General Counsel Davis Polk & Wardwell H. J. Heinz Company 450 Lexington Avenue 600 Grant Street New York, New York 10017 Pittsburgh, Pennsylvania 15219 (212) 450-4000 (412) 456-5700 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.|[ ] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] ----------------------- CALCULATION OF REGISTRATION FEE ======================================================================================================================= Proposed Proposed Maximum Maximum Offering Aggregate Amount of Title of Each Class Amount to be Price Offering Price Registration of Securities to be Registered Registered Per Unit (1) (1) Fee - --------------------------------------------------------------------------------------- ------------------------------- 6.625% Guaranteed Notes due 2011........................ $750,000,000 100% $750,000,000 $69,000 6.00% Guaranteed Notes due 2012......................... $700,000,000 100% $700,000,000 $64,400 6.75% Guaranteed Notes due 2032......................... $550,000,000 100% $550,000,000 $50,600 Guarantee of 6.625% Guaranteed Notes due 2011 (2)....... (3) (3) (3) (4) Guarantee of 6.00% Guaranteed Notes due 2012 (2)........ (3) (3) (3) (4) Guarantee of 6.75% Guaranteed Notes due 2032 (2)........ (3) (3) (3) (4) - ----------------------------------------------------------------------------------------- ----------------------------- Total................................................... $2,000,000,000 100% $2,000,000,000 $184,000 =======================================================================================================================
(1) Determined pursuant to Rule 457(f) under the Securities Act of 1933. (2) See inside facing page for table of registrant guarantor. (3) No separate consideration will be received for the guarantee. (4) Pursuant to Rule 457(n), no separate filing fee is required for the guarantees. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================
State or other jurisdiction of IRS Employer Exact Name of incorporation or Identification Address of Registrant Registrant Guarantor organization Number Guarantor's Executive Offices H. J. Heinz Company Pennsylvania 25-0542520 600 Grant Street Pittsburgh, Pennsylvania, 15219 (412) 456-5700
2 EXPLANATORY NOTE This registration statement contains: o a prospectus to be used by H. J. Heinz Finance Company in connection with its exchange offer for its 6.625% Guaranteed Notes Due 2011; and o a prospectus to be used by H. J. Heinz Finance Company in connection with its exchange offer for its 6.00% Guaranteed Notes Due 2012 and its 6.75% Guaranteed Notes Due 2032. 3 The information in this prospectus is not complete and may be changed. This prospectus is not an offer to acquire these securities and it is not soliciting an offer to acquire these securities in any jurisdiction where the offer, exchange or sale is not permitted. Subject to Completion, dated March 27, 2002 PROSPECTUS , 2002 [H. J. Heinz Company LOGO] H. J. Heinz Finance Company Offer to Exchange $750,000,000 6.625% Guaranteed Notes due 2011 for $750,000,000 6.625% New Guaranteed Notes due 2011 unconditionally and irrevocably guaranteed by H. J. Heinz Company ----------------------- We are offering to exchange up to $750,000,000 of our 6.625% guaranteed notes due 2011, the "New Notes," which will be registered under the Securities Act of 1933, as amended, for up to $750,000,000 of our issued and outstanding 6.625% guaranteed notes due 2011, the "Old Notes." We are offering to issue the New Notes to satisfy our obligations contained in the exchange and registration rights agreement we entered into when the Old Notes were sold in transactions in reliance on Rule 144A and Regulation S under the Securities Act. The New Notes are unconditionally and irrevocably guaranteed by H. J. Heinz Company, "Heinz" or the "Guarantor." The terms of the New Notes are identical in all material respects to the terms of the Old Notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the Old Notes do not apply to the New Notes. The exchange offer and withdrawal rights will expire at 5:00 p.m., New York City time, on o , 2002 unless extended. You should carefully review the risk factors on page o of this prospectus. ----------------------- To exchange your Old Notes for New Notes of the same series: o You must complete and send the letter of transmittal that accompanies this prospectus to the exchange agent by 5:00 p.m., New York City time, on o , 2002. o If your Old Notes are held in book-entry form at The Depository Trust Company, "DTC," you must instruct DTC, through your signed letter of transmittal, that you want to exchange your Old Notes for New Notes. When the exchange offer closes, your DTC account will be changed to reflect your exchange of Old Notes for New Notes. o You should read the section called "The Exchange Offer" for additional information on how to exchange your Old Notes for New Notes. ----------------------- The Securities and Exchange Commission and state securities regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ----------------------- TABLE OF CONTENTS ----------------------- Page ---- Forward-Looking Statements............................................. 2 Where You Can Find More Information.................................... 3 Incorporation of Certain Documents by Reference........................ 4 Summary................................................................ 5 Risk Factors........................................................... 9 No Cash Proceeds....................................................... 11 Ratio of Earnings to Fixed Charges..................................... 11 Overview of Entity Structure, Reorganization and Financial Statement Presentation.................................. 12 Heinz Finance Selected Historical Consolidated and Combined Financial Data........................................... 14 H. J. Heinz Company.................................................... 16 Heinz Selected Consolidated Financial Data............................. 16 Management's Discussion and Analysis of Financial Condition and Results of Operation.............................................. 18 Business............................................................... 36 Related Party Transactions ............................................ 43 Management............................................................. 44 Description of the New Notes........................................... 49 The Exchange Offer..................................................... 58 Taxation............................................................... 66 Plan of Distribution................................................... 67 Notice to Investors.................................................... 68 Validity of the New Notes.............................................. 68 Experts................................................................ 69 Index to Combined Financial Statements of H. J. Heinz Finance Company.. F-1 --------------------------- FORWARD-LOOKING STATEMENTS This prospectus (including the information incorporated by reference in this prospectus) contains statements that constitute forward-looking statements. These statements appear in a number of places in this prospectus or the documents incorporated by reference and include statements regarding the intent, belief or current expectations of, and with respect to, the H. J. Heinz Finance Company, or "Heinz Finance," or its officers or Heinz with respect to future events or the results of operations and financial condition of Heinz, Heinz Finance and their subsidiaries and involve known and unknown risks, uncertainties and other factors. In some cases, you can identify forward-looking statements in this document by words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "potential," "should" or the negative of those terms or similar expressions. Such statements reflect the current views of Heinz Finance or of Heinz with respect to future events and are subject to certain risks, uncertainties and assumptions. The following is a non-exclusive list of important factors which may affect the business and results of operations of Heinz Finance and/or Heinz. o Changes in laws and regulations, including changes in food and drug laws, accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws; o Competitive product and pricing pressures and the ability to gain or maintain share of sales in the global market as a result of actions by competitors and others; 2 o Fluctuations in the cost and availability of raw materials and the ability to maintain favorable supplier arrangements and relationships; o The impact of higher energy costs on the cost of producing, transporting and distributing products; o The ability to generate sufficient cash flows to support capital expenditures and general operating activities; o The inherent risks in the marketplace associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance; o The ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume, product mix and other items; o The ability to integrate acquisitions and joint ventures into existing operations; o The ability to achieve cost savings objectives, including the continued implementation of our restructuring programs; o The impact of unforeseen economic and political changes in markets where we compete, such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which we have no control; o Interest rate fluctuations and other capital market conditions; o The effectiveness of advertising, marketing and promotional programs; o Weather conditions, which could impact demand for our products and the supply and cost of raw materials; o The ability to maintain our profit margin in the face of a consolidating retail environment; and o The ability to offset the reduction in volume and revenue resulting from participation in categories experiencing declining consumption rates. Such forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and actual results may differ from those in such forward-looking statements as a result of various factors. The information in this prospectus identifies important factors that could cause such differences. See also the factors described in "Cautionary Statement Relevant to Forward-Looking Information" in the Guarantor's Annual Report on Form 10-K for the fiscal year ended May 2, 2001 and "Where You Can Find More Information" and "Risk Factors" both in this prospectus. WHERE YOU CAN FIND MORE INFORMATION This prospectus is part of a registration statement on Form S-4 that we have filed with the Securities and Exchange Commission, the "Commission," under the Securities Act of 1933, as amended, the "Securities Act." This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the New Notes, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have filed these documents as exhibits to our registration statement. 3 After the effectiveness of the registration statement, we will become subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will file reports and other information with the Commission. You may read and copy any reports and information statements and other information we file at the public reference facilities of the Securities and Exchange Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at 233 Broadway, New York, New York 10279, and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. You may obtain copies of those materials from the Commission by mail at prescribed rates. You should direct requests to Securities and Exchange Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a website (www.sec.gov) that will contain reports and other information filed by us. In addition, for so long as any of the Old Notes remains outstanding, we have agreed to make available to any holder or purchaser of the Old Notes or the New Notes in connection with any sale thereof the information required by Rule 144A(d) (4) under the Securities Act. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE Heinz is subject to the informational requirements of the Exchange Act. In accordance with the Exchange Act, Heinz files reports, proxy statements and other information with the Commission. Those reports, proxy statements and other information can be inspected and copied at the public reference facilities that the Commission maintains at the above mentioned address, and at the Commission's regional offices located in New York, New York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further information on its public reference rooms. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the Commission at its principal offices referred to above, or over the Internet at the Commission's web site at the above mentioned web address. The following documents filed with the Commission are incorporated by reference in and made a part of this prospectus: Heinz's Annual Report on Form 10-K for the fiscal year ended May 2, 2001, its Quarterly Reports on Form 10-Q for the three months ended August 1, 2001, the three and six months ended October 31, 2001 and the three and nine months ended January 30, 2002 and its Current Reports on Form 8-K dated June 26, 2001, September 17, 2001 and November 13, 2001. Any statement contained in a document all or a portion of which is incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein modifies or supersedes such statement. Any statement so modified or superseded, except as so modified or superseded, shall not be deemed to constitute a part of this prospectus. We will provide without charge to each person to whom this prospectus has been delivered, upon such person's written or oral request, a copy of any document referenced in or incorporated by reference into this prospectus. Requests for such copies should be directed to the Corporate Affairs Department, H. J. Heinz Company, P.O. Box 57, Pittsburgh, Pennsylvania 15230-0057; telephone number (412) 456-6000. To obtain timely delivery, you must request the information no later than o, 2002, or five business days prior to the expiration date of the exchange offer if the exchange offer is extended. You should rely only on the information contained in this prospectus or that we have referred you to. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer of the New Notes in any state where the offer is not permitted. You should assume that the information appearing in this prospectus, as well as information Heinz has previously filed with the Commission and are incorporating by reference, is accurate only as of the date on the front cover of this prospectus. Our and Heinz's business, financial condition, results of operations and prospects may have changed since that date. 4 SUMMARY The following summary contains basic information about us, Heinz, the New Notes and this exchange offer. It may not contain all the information that is important to you in making your investment decision. More detailed information appears elsewhere in this prospectus and in our consolidated and combined financial statements and accompanying notes and in Heinz's consolidated financial statements and accompanying notes that we incorporate by reference. "The Exchange Offer" and the "Description of the New Notes" sections of this prospectus contain more detailed information regarding the terms and conditions of the exchange offer and the New Notes. References in this prospectus to the terms "we," "us," "our," "Heinz Finance" or the "Issuer" refer to H. J. Heinz Finance Company and its consolidated subsidiaries and to the terms "Heinz" or the "Guarantor" refer to H. J. Heinz Company. H. J. Heinz Company (The Guarantor) H. J. Heinz Company was incorporated under the laws of the Commonwealth of Pennsylvania on July 27, 1900. In 1905, it succeeded to the business of a partnership operating under the same name that had developed from a food business founded in 1869 at Sharpsburg, Pennsylvania by Henry J. Heinz. The principal executive offices of Heinz are located at 600 Grant Street, Pittsburgh, Pennsylvania 15219. The principal products of Heinz include ketchup, condiments and sauces, frozen food, pet food, soups, beans and pasta meals, tuna and other seafood products, infant food and other processed food products. H. J. Heinz Finance Company (The Issuer) We are engaged in the business of acquiring, holding and financing equity and debt investments in subsidiaries that own and operate the U.S. businesses historically operated by Heinz. Heinz Finance has been, directly or indirectly, a wholly-owned subsidiary of Heinz since 1983 and had no significant operating history until Heinz completed a reorganization of its corporate organization in the United States on May 3, 2001. As a result of the reorganization, all of the U.S. business operations that had historically been conducted by Heinz through its Heinz USA division and eight subsidiary corporations, are now conducted by Heinz Finance. The Exchange Offer Issuer.............................. H. J. Heinz Finance Company New Notes........................... Up to $750,000,000 aggregate principal amount of our new 6.625% guaranteed notes due 2011. The Exchange Offer.................. We are offering to issue the New Notes in exchange for a like principal amount of outstanding Old Notes that we issued on July 6, 2001. We are conducting this exchange offer to satisfy our obligations contained in the exchange and registration rights agreement we entered into when we sold the Old Notes in transactions pursuant to Rule 144A and Regulation S under the Securities Act. The Old Notes were subject to transfer restrictions that will not apply to the New Notes so long as you are acquiring the New Notes in 5 the ordinary course of your business, you are not participating in a distribution of the New Notes and you are not an affiliate of ours. Maturity............................ The New Notes will mature on July 15, 2011. Interest Payment Dates.............. January 15 and July 15 of each year commencing from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid, from July 6, 2001. Redemption.......................... The Issuer may choose to redeem some or all of the New Notes at any time. If the Issuer chooses to do so, it will mail a notice of redemption to the holders of the New Notes not less than 30 days and not more than 60 days before the redemption occurs. Payment of Additional Amounts....... The Issuer shall pay all stamp and other duties, if any, which may be imposed by the United States or the United Kingdom or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance, transfer, exchange or conversion of the New Notes. The Issuer will not be required to make any payment with respect to any other tax, assessment or governmental charge imposed by any government or any political subdivision thereof or taxing authority therein. Ranking............................. The New Notes will be unsecured and will rank equally with all our other unsecured indebtedness and other obligations. Guarantee........................... The New Notes will be unconditionally and irrevocably guaranteed by Heinz. No Cash Proceeds.................... We will not receive any proceeds from the issuance of the New Notes. Form of the New Notes............... The New Notes will be issued in the form of one or more global securities which will be deposited with, or on behalf of, DTC and registered in the name of Cede & Co., DTC's nominee. Beneficial interests in the global securities will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Governing Law....................... The New Notes, the guarantee and the indenture will be governed by New York law. Tenders, Expiration Date, Withdrawal The exchange offer will expire at 5:00 p.m., New York City time, on , 2002 unless it is extended. To tender your Old Notes you must follow the detailed procedures described under the heading "The Exchange Offer--Procedures for Tendering" including special procedures 6 for certain beneficial owners and broker- dealers. If you decide to exchange your Old Notes for New Notes, you must acknowledge that you do not intend to engage in and have no arrangement with any person to participate in a distribution of the New Notes. If you decide to tender your Old Notes pursuant to the exchange offer, you may withdraw them at any time prior to 5:00 p.m., New York City time, on the expiration date. Federal Income Tax Consequences..... Your exchange of Old Notes for New Notes pursuant to the exchange offer will not result in a gain or loss to you. Exchange Agent...................... Bank One Trust Company is the exchange agent for the exchange offer. Failure to Exchange Your Old Notes.. If you fail to exchange your Old Notes for New Notes in the exchange offer, your Old Notes will continue to be subject to transfer restrictions and you will not have any further rights under the exchange and registration rights agreement, including any right to require us to register your Old Notes or to pay any additional interest. Trading Market...................... To the extent that Old Notes are tendered and accepted in the exchange offer, your ability to sell untendered, and tendered but unaccepted, Old Notes could be adversely affected. There may be no trading market for the Old Notes. There can be no assurance that an active public market for the New Notes will develop or as to the liquidity of any market that may develop for the New Notes, the ability of holders to sell the New Notes, or the price at which holders would be able to sell the New Notes. For more details, see the section called "Notice to Investors." General Indenture Provisions Applicable to the New Notes and the Old Notes Indenture........................... The New Notes will be issued under the same indenture as the Old Notes. No Limit on Debt.................... The indenture does not limit the amount of debt that we may issue or provide holders any protection should we be involved in a highly leveraged transaction. Restrictions on Secured Debt........ If the Guarantor or any Restricted Subsidiary shall after the date of the Indenture incur or guarantee any Debt secured by a Mortgage on any Principal Property of the Guarantor or any Restricted Subsidiary, or on any share of stock or Debt of any Restricted Subsidiary, the Guarantor will secure or cause such Restricted Subsidiary to secure the Notes, equally and ratably with (or, at the option of the Guarantor, prior to) such secured Debt, 7 unless the aggregate amount of all such secured Debt would not exceed 10% of Consolidated Net Assets. These restrictions will not apply in some circumstances. (All terms are defined under "Description of the New Notes - Certain Definitions.") Events of Default................... Each of the following is an event of default with respect to the Notes under the indenture: o default in the payment of any installment of interest for 30 days after becoming due; o default in the payment of principal when due; o default in the deposit of any sinking fund payment when due; o default by Heinz Finance or the Guarantor in the performance or breach of any other covenant or warranty in the Notes or the Indenture for 90 days after notice; o certain events of bankruptcy, insolvency or reorganization with respect to Heinz Finance or the Guarantor; or o the Guarantor contests the validity or enforceability of the Guarantee or related obligations. 8 RISK FACTORS In addition to the information set forth elsewhere in this prospectus, you should consider carefully the factors set forth below before exchanging your Old Notes for New Notes. Heinz's and Heinz Finance's Business Is Subject to Numerous Risks We produce a broad range of food products and we acquire, hold and finance equity and debt investments in subsidiaries that own and operate the U.S. business of Heinz. Accordingly, the results of operations and financial condition of our business and of the business of Heinz are subject to certain risks and uncertainties, including: o Changes in laws and regulations, including changes in food and drug laws, accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws; o Competitive product and pricing pressures and the ability to gain or maintain share of sales in the global market as a result of actions by competitors and others; o Fluctuations in the cost and availability of raw materials and the ability to maintain favorable supplier arrangements and relationships; o The impact of higher energy costs on the cost of producing, transporting and distributing products; o The ability to generate sufficient cash flows to support capital expenditures and general operating activities; o The inherent risks in the marketplace associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance; o The ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume, product mix and other items; o The ability to integrate acquisitions and joint ventures into existing operations; o The ability to achieve cost savings objectives, including the continued implementation of our restructuring programs; o The impact of unforeseen economic and political changes in the markets where we compete, such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which we have no control; o Interest rate fluctuations and other capital market conditions; o The effectiveness of our advertising, marketing and promotional programs; o Weather conditions, which could impact demand for our products and the supply and cost of raw materials; o The ability to maintain our profit margin in the face of a consolidating retail environment; and o The ability to offset the reduction in volume and revenue resulting from participation in categories experiencing declining consumption rates. 9 No Operating History; Risk of Future Revisions in Policies and Strategies Prior to May 2001, Heinz Finance was an inactive subsidiary of Heinz and had no relevant operating history. Since May 2001, Heinz Finance has operated the historical U.S. business of Heinz. Although the U.S. business of Heinz consisted of business entities with established operations, these businesses have no operating history as a combined entity. As a result, there can be no assurances regarding the future results of operations or financial condition of Heinz Finance. Amendments or changes to our bylaws, and changes in our operating policies and strategies, may be made from time to time at the discretion of the board of directors and, in the case of the bylaws, by the holders of capital stock of Heinz Finance entitled to vote generally in the election of directors. We Depend Upon Our Subsidiaries to Service Our Debt We are a holding company and derive all of our operating income from our subsidiaries. Our primary source of cash to pay principal of and interest on the New Notes is from cash distributions, dividends and other payments from our subsidiaries. The payment of dividends by our subsidiaries is subject to the declaration of dividends by those subsidiaries' boards of directors, and our subsidiaries are not obligated to pay dividends. The distribution of cash by H. J. Heinz Company, LP, "Heinz LP," is subject to the discretion of the general partner of Heinz LP (Heinz Management Company, "HMC," a wholly owned subsidiary of the Guarantor). Our subsidiaries' ability to make such payments may also be restricted by, among other things, applicable state laws and other laws and regulations. In addition, our right and the rights of our creditors, including holders of the New Notes, to participate in the assets of any subsidiary upon its liquidation or recapitalization would be subject to the prior claims of such subsidiary's creditors, except to the extent that we may ourselves be a creditor with recognized claims against such subsidiary. The New Notes will be unconditionally guaranteed by Heinz. In addition, a liquidity agreement between Heinz and Heinz Finance provides a credit facility that may be drawn upon by Heinz Finance subject to its terms, in the event of a cash shortfall. An Active Trading Market For Our New Notes May Not Develop There is no established trading market for the New Notes since they are a new issue of securities. We do not intend to apply for the listing of any New Notes on a national securities exchange. We cannot assure you as to the liquidity of the public market for the New Notes or that any active public market for the New Notes will develop or continue. If an active public market does not develop or continue, the market price and liquidity of the New Notes may be adversely affected. Old Notes are Subject to Transfer Restrictions and May Not Have An Active Trading Market If you fail to exchange your Old Notes for New Notes in the exchange offer, your Old Notes will continue to be subject to transfer restrictions and you will not have any further rights under the exchange and registration rights agreement, including any right to require us to register your Old Notes or to pay any additional interest. 10 NO CASH PROCEEDS This exchange offer is intended to satisfy certain of our obligations under the exchange and registration rights agreement. We will not receive any proceeds from the issuance of the New Notes and have agreed to pay the expenses of the exchange offer. In consideration for issuing the New Notes as contemplated in the registration statement, of which this prospectus is a part, we will receive in exchange Old Notes in like principal amount. The form and terms of the New Notes are identical in all material respects to the form and terms of the Old Notes, except as otherwise described herein under "The Exchange Offer--Terms of the Exchange Offer." The Old Notes surrendered in exchange for the New Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the New Notes will not result in any increase in our outstanding debt. RATIO OF EARNINGS TO FIXED CHARGES(1)
Nine months ended Years Ended January 30, January 31, May 2, 2001 May 3, 2000 April 28, 1999 April 29, 1998 April 30, 1997 2002 2001 (52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks) H. J. Heinz Company 4.87 4.12 2.79 5.83 3.88 5.29 2.56 H. J. Heinz Finance Company(2).............. 3.39 37.14 22.36 46.75 49.76 44.04 8.13
- ------------------- (1) The ratios of earnings to fixed charges were calculated by dividing earnings by fixed charges. Earnings were calculated by adding income before income taxes, interest expense (including amortization of debt expense and any discount or premium relating to indebtedness), the interest component of rental expense and the amortization of capitalized interest. Fixed charges were calculated by adding interest expense (including amortization of debt expense and any discount or premium relating to indebtedness), capitalized interest and the interest component of rental expense. (2) The ratios of earnings to fixed charges for the periods prior to January 30, 2002 relate to the U.S. Group and are not representative of the expected ratio of earnings to fixed charges for Heinz Finance as debt was not allocated to the U.S. Group prior to the reorganization discussed in this prospectus. 11 OVERVIEW OF ENTITY STRUCTURE, REORGANIZATION, AND FINANCIAL STATEMENT PRESENTATION Reorganization On the first day of fiscal year 2002 (May 3, 2001) Heinz reorganized the structure of its U.S. business as follows: o Operations. All of the U.S. business operations, formerly conducted through eight subsidiaries and a division of Heinz were consolidated into Heinz LP. Heinz Management Company, a wholly-owned subsidiary of Heinz, is the general partner of Heinz LP and holds a 1% partnership interest. The limited partner interests in Heinz LP consist of "Class A" and "Class B" interests as described under "Business--General." Heinz owns all of the Class A interests. Heinz Finance owns all of the Class B interests. o Treasury. U.S. cash management and treasury activities were transferred to Heinz Finance. On the day of the reorganization, Heinz Finance assumed then outstanding term debt obligations of Heinz in the amount of $2.57 billion and $258 million of the commercial paper obligations of Heinz. Since the reorganization, Heinz Finance has issued term debt and commercial paper in its own name as described under "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Financial Position." All of the debt of Heinz Finance is unconditionally guaranteed by Heinz and is included on the consolidated balance sheet of Heinz. On July 6, 2001, Heinz Finance issued $325 million of preferred stock to outside investors. The preferred shares are entitled to elect 25% of the directors of Heinz Finance and, if declared, are entitled to receive dividends at a rate of 6.226% per annum. o Trademarks. Substantially all of the trademarks used in the U.S. businesses (including "Heinz," "Star-Kist," "Ore-Ida," "Smart Ones," "9-Lives" and "Kibbles 'n Bits"), are owned by Promark International Inc., an indirect subsidiary of Heinz, and are licensed to us. 12 The following diagram provides a summary overview of the ownership structure and significant affiliate relationships of Heinz Finance and Heinz. [A graphic appears here depicting the basic corporate structure of H. J. Heinz Finance Company. The graphic shows H. J. Heinz Company as the owner of the common stock of Heinz Finance, and unrelated investors as the owners of the preferred stock of Heinz Finance. Heinz Finance is shown as the owner of the Class B interests in H. J. Heinz Company, LP, and Heinz is shown as the owner of the Class A and General Partner inerests in H. J. Heinz Company, LP.] Financial Statement Presentation For all Heinz financial reporting and disclosure purposes, Heinz Finance and its subsidiaries (including Heinz LP) are treated as fully consolidated subsidiaries. All of the assets, liabilities, results of operations and cash flows of these entities are included in the Heinz consolidated financial statements. All of the intercompany transactions and accounts are eliminated within the Heinz consolidated financial statements. The preferred shares issued by Heinz Finance are shown as minority interest in the Heinz consolidated financial statements. Heinz Finance's consolidated financial statements include the assets and liabilities, results of operations and cash flows of Heinz LP and all other subsidiaries of Heinz Finance. In the Heinz Finance consolidated statements, the general partner and Class A interests in Heinz LP, that are held by Heinz, are reflected as minority interest. The financial statements and the related management's discussion and analysis of financial condition and results of operations included herein for periods ending on or before May 2, 2001 relate to the U.S. businesses that were contributed to Heinz Finance on May 3, 2001. Results for these periods have been prepared using "carve-out" and "push-down" accounting methods. With respect to periods ending on or before May 2, 2001, the corporations and businesses described above are referred to as the "U.S. Group." For a more complete discussion of the presentation of the Heinz financial statements, please refer to the consolidated financial statements and accompanying notes included in Heinz's 2001 Annual Report on Form 10-K, which is incorporated herein by reference. 13 HEINZ FINANCE SELECTED HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL DATA The following table presents selected historical financial data of the U.S. Group. The following data, insofar as it relates to each of the fiscal years 1998 and 1997, has been derived from annual financial statements of Heinz and was prepared utilizing the domestic segment information in the Heinz annual reports and removing those items that are not part of the U.S. Group's operations. The data for the fiscal years ended May 2, 2001, May 3, 2000 and April 28, 1999 (Fiscal Year 2001, Fiscal Year 2000 and Fiscal Year 1999, respectively) has been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants. Combined statements of assets and liabilities at May 2, 2001 and May 3, 2000 and the related combined statements of operations and of cash flows for the three years ended May 2, 2001 and notes thereto appear elsewhere in this prospectus. The data for the nine-month periods ended January 30, 2002 and January 31, 2001 have been derived from unaudited financial statements also appearing herein and which, in the opinion of Heinz Finance management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of results for the unaudited interim periods.
Nine months ended Fiscal year ended ---------------------------------------------------------------------------------------------------- January 30, January 31, May 2, May 3, April 28, April 29, April 30, 2002 2001 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (In thousands) Sales....................... $3,095,761 $3,520,667 $4,938,197 $4,789,188 $4,687,123 $4,542,948 $4,360,524 Operating income............ 414,415 534,335 438,069 609,337 578,398 664,858 170,167 Interest expense............ 156,962 6,571 10,278 7,138 6,266 7,621 29,649 Net income.................. 60,498 375,874 306,898 448,295 432,757 -- -- Current portion - long-term debt....................... 501,576 28,890 29,833 2,998 51,384 12,421 2,496 Long-term debt.............. 4,215,495 25,283 23,932 33,071 25,594 47,063 56,206 Preferred stock............. 325,000 -- -- -- -- -- -- Total assets................ 7,648,087 5,893,255 5,601,491 5,068,456 4,588,108 4,730,030 5,944,697
The results for the nine months ended January 30, 2002 include implementation costs for Streamline (as defined below) of $1.2 million pretax. The results for the nine months ended January 31, 2001 include Operation Excel (as defined below) costs of $101.7 million pretax. The 2001 results include restructuring and implementation costs of $84.7 million pretax relating to Streamline and net restructuring and implementation costs of $173.3 million pretax for Operation Excel. Results also include a loss of $94.6 million on the sale of The All American Gourmet business and attempted acquisition cost of $18.5 million pretax. The 2000 results include net restructuring and implementation costs of $175.8 million pretax for Operation Excel. The 1999 results include net restructuring and implementation costs of $156.1 million pretax for Operation Excel and costs of $9.4 million pretax related to the implementation of Project Millennia (as defined below), offset by the reversal of unutilized Project Millennia accruals for severance and exit costs of $16.6 million pretax. The 1998 results include costs of $30.2 million pretax related to the implementation of Project Millennia. 14 The 1997 results include a pretax charge for Project Millennia restructuring and implementation costs of $455.8 million. Project Millennia was a reorganization and restructuring program commencing in the fourth quarter of the fiscal year ended April 30, 1997, which was designed to strengthen the U.S. Group's core businesses and improve profitability and global growth. Key initiatives focused on process changes and product line rationalizations. Operation Excel was a growth and restructuring initiative that commenced in the fiscal year ended April 28, 1999, which created manufacturing centers of excellence, focused the product portfolio, realigned management teams and invested in growth activities. In the fourth quarter of Fiscal 2001, Heinz announced a restructuring initiative named "Streamline." This initiative includes worldwide organization restructuring aimed at reducing overhead costs, the close of Heinz's tuna operations in Puerto Rico, the consolidation of the North American canned pet food production to Bloomsburg, Pennsylvania, and the divestiture of our fleet of fishing boats and related equipment. 15 H. J. HEINZ COMPANY H. J. Heinz Company was incorporated under the laws of the Commonwealth of Pennsylvania on July 27, 1900. In 1905, it succeeded to the business of a partnership operating under the same name that had developed from a food business founded in 1869 at Sharpsburg, Pennsylvania by Henry J. Heinz. The principal executive offices of Heinz are located at 600 Grant Street, Pittsburgh, Pennsylvania 15219. The principal products of Heinz include ketchup, condiments and sauces, frozen food, pet products, soups, beans and pasta meals, tuna and other seafood products, infant food and other processed food products. HEINZ SELECTED CONSOLIDATED FINANCIAL DATA The following tables contain selected financial data for H. J. Heinz Company and its consolidated subsidiaries. The income statement data for the fiscal years ended May 2, 2001 (Fiscal Year 2001), May 3, 2000 (Fiscal Year 2000) and April 28 1999 (Fiscal Year 1999), and the balance sheet data as of May 2, 2001 and May 3, 2000 are derived from the consolidated financial statements included in the Heinz's 2001 Annual Report on Form 10-K, which is incorporated herein by reference, and which were audited by PricewaterhouseCoopers LLP, whose reports also appear in the Annual Report. The income statement data for the fiscal years ended April 29, 1998 (Fiscal Year 1998) and April 30, 1997 (Fiscal Year 1997) and the balance sheet data as of April 28, 1999, April 29, 1998 and April 30, 1997 are derived from consolidated financial statements audited by PricewaterhouseCoopers LLP, but not incorporated by reference in this prospectus. The unaudited income statement data for the nine months ended January 30, 2002 and January 31, 2001 and the unaudited balance sheet data as of January 30, 2002 are derived from the Guarantor's unaudited condensed consolidated financial statements for the nine months ended January 30, 2002 and January 31, 2001 included in the Heinz's Quarterly Report on Form 10-Q for the nine months ended January 30, 2002, which is incorporated herein by reference. In the opinion of Heinz management, such unaudited income statement and balance sheet data include all adjustments, consisting of those of a normal and recurring nature, necessary for a fair statement of results of operations for those interim periods on a basis substantially consistent with that of the audited financial statements. For all Heinz financial reporting and disclosure purposes, Heinz Finance and its subsidiaries (including Heinz LP) are treated as fully consolidated subsidiaries. All of the assets and liabilities, results of operations and cash flows of these entities are included in the Heinz consolidated financial statements. All of the intercompany transactins and accounts are eliminated within the Heinz consolidated financial statements. The preferred shares issued by Heinz Finance are shown as minority interest in the Heinz consolidated financial statements. 16
Nine months ended Fiscal year ended ------------------------------ ----------------------------------------------------------------- January 30, January 31, May 2, May 3, April 28, April 29, April 30, 2002 2001 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- ---- ---- (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (In thousands) Sales ...................... $ 7,301,932 $ 6,737,631 $ 9,430,422 $ 9,407,949 $ 9,299,610 $ 9,209,284 $ 9,357,007 Operating income ........... 1,180,739 1,111,088 982,354 1,733,099 1,109,312 1,520,330 756,271 Interest expense ........... 220,824 249,515 322,957 269,748 258,813 258,616 274,746 Net income ................. 610,375 648,533 478,012 890,553 474,341 801,566 301,871 Net income per share- diluted .................... 1.73 1.85 1.36 2.47 1.29 2.15 0.81 Net income per share-basic 1.75 1.87 1.37 2.51 1.31 2.19 0.82 Short-term debt and current portion of long-term debt ............ 744,841 3,096,379 1,870,834 176,575 904,207 339,626 1,163,442 Long-term debt, exclusive of current portion ................... 4,864,133 1,894,561 3,014,853 3,935,826 2,472,206 2,768,277 2,283,993 Preferred stock ............ 111 126 126 139 173 199 241 Total assets ............... 10,092,287 9,148,736 9,035,150 8,850,657 8,053,634 8,023,421 8,437,787 Cash dividends per common share .............. 1.2025 1.1525 1.5450 1.4450 1.3425 1.2350 1.1350
The results for the nine months ended January 30, 2002 include restructuring charges and implementation costs for Streamline of $16.2 million pretax. The results for the nine months ended January 31, 2001 include net Operation Excel costs of $206.9 million pretax and a pretax loss of $5.6 million, which represented Heinz's equity loss associated with The Hain Celestial Group's fourth quarter results which included charges for its merger with Celestial Seasonings. The 2001 results include restructuring and implementation costs of $298.8 million pretax for the Streamline initiative, net restructuring and implementation costs of $288.5 million pretax for Operation Excel, a benefit of $93.2 million from tax planning and new tax legislation in Italy, a loss of $94.6 million pretax on the sale of The All American Gourmet business, attempted acquisition costs of $18.5 million pretax, a loss of $5.6 million pretax which represents Heinz's equity loss associated with The Hain Celestial Group's fourth quarter results which included charges for its merger with Celestial Seasonings and the after-tax impact of adopting SAB No. 101 and SFAS No. 133 of $16.9 million. See Notes 3 and 4 to the Consolidated Financial Statements of Heinz for the fiscal year ended May 2, 2001 incorporated by reference in this prospectus. The 2000 results include net restructuring and implementation costs of $392.7 million pretax for Operation Excel, a pretax contribution of $30.0 million to the H. J. Heinz Company Foundation, costs related to Heinz's Ecuador tuna processing facility of $20.0 million pretax, a gain of $464.6 million pretax on the sale of the Weight Watchers classroom business and a gain of $18.2 million pretax on the sale of an office building in the United Kingdom. The 1999 results include restructuring and implementation costs of $552.8 million pretax for Operation Excel and costs of $22.3 million pretax related to the implementation of Project Millennia, offset by the reversal of unutilized Project Millennia accruals for severance and exit costs of $25.7 million pretax and a gain of $5.7 million pretax on the sale of the bakery products units. Results recorded in 1998 include costs of $84.1 million pretax related to the implementation of Project Millennia, offset by the gain on the sale of the Ore-Ida frozen foodservice business, $96.6 million pretax. Results recorded in 1997 include a pretax charge for Project Millennia restructuring and implementation costs of $647.2 million. These charges were partially offset by gains recognized on the sale of the New Zealand ice cream business, $72.1 million pretax and real estate in the United Kingdom, $13.2 million pretax. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion in conjunction with our unaudited condensed consolidated and combined financial statements, the notes to our unaudited condensed consolidated and combined financial statements, our combined financial statements and the notes to our combined financial statements included elsewhere in this prospectus. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Please see "Forward-Looking Statements" and "Risk Factors" for a discussion of the uncertainties, risks and assumptions associated with these statements. Overview Reorganization On the first day of fiscal year 2002 (May 3, 2001) Heinz reorganized the structure of its U.S. business as follows: o Operations. All of the U.S. business operations, formerly conducted through eight subsidiaries and a division of Heinz were consolidated into Heinz LP. Heinz Management Company, a wholly-owned subsidiary of Heinz, is the general partner of Heinz LP and holds a 1% partnership interest. The limited partner interests in Heinz LP consist of "Class A" and "Class B" interests as described under "Business-General." Heinz owns all of the Class A interests. Heinz Finance owns all of the Class B interests. o Treasury. U.S. cash management and treasury activities were transferred to Heinz Finance. On the day of the reorganization, Heinz Finance assumed all of the then outstanding term debt obligations of Heinz in the amount of $2.57 billion and $258 million of the commercial paper obligations of Heinz. Since the reorganization, Heinz Finance has issued term debt and commercial paper in its own name as described under "-Liquidity and Financial Position." All of the debt of Heinz Finance is unconditionally guaranteed by Heinz. On July 6, 2001, Heinz Finance issued $325 million of preferred stock to outside investors. The preferred shares are entitled to elect 25% of the directors of Heinz Finance and, if declared, are entitled to receive dividends at a rate of 6.226% per annum. o Trademarks. Substantially all of the trademarks used in the U.S. businesses (including "Heinz," "Star- Kist," "Ore-Ida," "Smart Ones," "9-Lives" and "Kibbles 'n Bits"), are owned by Promark International Inc., an indirect subsidiary of Heinz, and are licensed to us. Financial Statement Presentation For all Heinz financial reporting and disclosure purposes, Heinz Finance and its subsidiaries (including Heinz LP) are treated as fully consolidated subsidiaries. All of the assets, liabilities, results of operations and cash flows of these entities are included in the Heinz consolidated financial statements. All of the intercompany transactions and accounts are eliminated within the Heinz consolidated financial statements. The preferred shares issued by Heinz Finance are shown as minority interest in the Heinz consolidated financial statements. Heinz Finance's consolidated financial statements include the assets and liabilities, results of operations and cash flows of Heinz LP and all other subsidiaries of Heinz Finance. In the Heinz Finance consolidated statements, the general partner and Class A interests in Heinz LP that are held by Heinz are reflected as minority interest. The financial statements and the related management's discussion and analysis of financial condition and results of operations included herein for periods ending on or before May 2, 2001 relate to the U.S. businesses that 18 were contributed to Heinz Finance on May 3, 2001. Results for these periods have been prepared using "carve-out" and "push-down" accounting methods. With respect to periods ending on or before May 2, 2001, the corporations and businesses described above are referred to as the "U.S. Group." Certain assets and liabilities which are included in the Fiscal Year 2001 "carve out" balance sheet were not contributed to Heinz Finance. Substantially all finished goods inventories of the U.S. Group remained assets of Heinz. These retained inventories resulted in reduced sales and operating results of Heinz Finance for the nine months ended January 30, 2002 when compared to the nine months ended January 31, 2001 and will result in reduced sales and operating results of Heinz Finance in the fiscal year ending May 1, 2002 ("Fiscal Year 2002") when compared to Fiscal Year 2001. The sales and operating results related to the retained inventories were recorded on the consolidated financial statement of Heinz. Segment Data We report our business in three segments as follows: o Heinz North America - This segment manufactures, markets and sells ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels. o U.S. Pet Products and Seafood - This segment manufactures, markets and sells dry and canned pet food, pet snacks, tuna and other seafood products. o U.S. Frozen - This segment manufactures, markets and sells frozen potatoes, entrees, snacks and appetizers. Discussion of Critical Accounting Policies In the ordinary course of business, Heinz Finance has made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America. Our actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results and require management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Marketing Costs In order to support Heinz Finance's products, we offer various marketing programs to our customers which reimburse them for a portion or all of their promotional activities related to our products. We regularly review and revise, when deemed necessary, estimates of our costs for these marketing programs based on estimates of what has been incurred by our customers. Our actual costs may differ significantly if factors such as the level and success of our customers' programs or other conditions differ from our expectations. Inventories Inventories are stated at the lower of cost or market value. Cost is principally determined by the first-in, first- out method. We record adjustments to the value of inventory based upon our forecasted plans to sell our inventories. The physical condition (e.g., age and quality) of the inventories is also considered in establishing our valuation. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations. 19 Property, Plant and Equipment and Other Assets Property, plant and equipment is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of such assets. Changes in circumstances such as technological advances, changes to our business model or changes in our capital strategy can result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of property, plant and equipment should be shortened, we would depreciate the net book value in excess of the salvage value, over its revised remaining useful life thereby increasing depreciation expense. Factors such as changes in the planned use of fixtures or software or closing of facilities could result in shortened useful lives. Long-lived assets, including fixed assets and intangibles other than goodwill, are reviewed by Heinz Finance for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The estimate of cash flow is based upon, among other things, certain assumptions about expected future operating performance. Our estimates of undiscounted cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions, changes to our business model or changes in our operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset. Goodwill Heinz Finance evaluates goodwill in accordance with Statement of Financial Accounting Standards ("SFAS") 121 by comparing expected future cash flows to the carrying amount of the goodwill. If future cash flows are less favorable than those anticipated, goodwill may be impaired. Special Items Operation Streamline In the fourth quarter of Fiscal Year 2001, Heinz announced a restructuring initiative named "Streamline." This initiative includes an organizational restructuring aimed at reducing overhead costs and the consolidation of our canned pet food production to Bloomsburg, Pennsylvania (which resulted in ceasing canned pet food production at our Terminal Island, California facility). During Fiscal Year 2001, the U.S. Group recognized restructuring charges and implementation costs totaling $84.7 million on a pretax basis. Pretax charges of $65.3 million were classified as cost of products sold and $19.4 million as SG&A. Implementation costs were recognized as incurred in Fiscal Year 2001 ($11.8 million pretax) and consist of incremental costs directly related to the implementation of the Streamline initiative. These include idle factory costs, consulting fees and asset relocation costs. In Fiscal Year 2001, we ceased production of canned pet food in our Terminal Island, California facility. In addition, we are continuing implementation of our overhead reduction plan. To date, these actions have resulted in a net reduction of our workforce of approximately 300 employees. Operation Excel In Fiscal Year 1999, Heinz announced a growth and restructuring initiative, named "Operation Excel." This initiative was a multi-year, multi-faceted program which established manufacturing centers of excellence, focused the product portfolio, realigned the U.S. Group's management teams and invested in growth initiatives. The U.S. Group established manufacturing centers of excellence which resulted in significant changes to its manufacturing footprint. The U.S. Group completed the following initiatives: 20 o Focused the Pittsburgh, Pennsylvania factory on soup and baby food production and shifting other production to existing facilities; o Downsized the Pocatello, Idaho factory by shifting Bagel Bites production to the Ft. Myers, Florida factory, and shifted certain Smart Ones entree production to the Massillon, Ohio factory; o Closed the El Paso, Texas pet treat facility and transferred production to the Topeka, Kansas factory and to co-packers; and o Disposed of the Bloomsburg, Pennsylvania frozen pasta factory. As part of Operation Excel, the U.S. Group focused its portfolio of product lines on six core food categories: ketchup, condiments and sauces; frozen foods; tuna; soups, beans and pasta meals; infant foods; and pet products. A consequence of this focus on the core categories was the sale of two smaller businesses, which had combined annual revenues of approximately $15 million. Realigning the U.S. Group's management teams provided processing and product expertise across the United States. Specifically, Operation Excel: o Established a single frozen food headquarters, resulting in the closure of the U.S. Group's Ore-Ida head office in Boise, Idaho, and o Established a single Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania, resulting in the relocation of the U.S. Group's seafood and pet food headquarters from Newport, Kentucky. The pretax savings generated from Operation Excel initiatives were approximately $40 million in Fiscal Year 2000 and $70 million in Fiscal Year 2001 and are projected to grow to approximately $85 million in Fiscal Year 2002 and $95 million in Fiscal Year 2003 and thereafter. During Fiscal Year 2001, the U.S. Group recognized restructuring charges of $44.8 million pretax. These charges were primarily associated with exiting the U.S. Group's domestic can making operations and higher than originally expected severance costs associated with creating the single Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania. This charge was recorded in cost of products sold ($36.3 million) and SG&A ($8.5 million). This charge was offset by the reversals of unutilized Operation Excel accruals and asset write-downs of $21.0 million pretax. These reversals were recorded in costs of products sold ($8.2 million) and SG&A ($12.7 million) and were primarily the result of the U.S. Group's decision not to exit certain warehouses due to higher than expected volume growth. Implementation costs of $149.5 million pretax were also recognized in Fiscal Year 2001. These costs were classified as cost of products sold ($62.2 million) and SG&A ($87.3 million). During Fiscal Year 2000, the U.S. Group recognized restructuring charges of $95.3 million pretax. Pretax charges of $53.5 million were classified as cost of products sold and $41.8 million as SG&A. Also, during Fiscal Year 2000, the U.S. Group recorded a reversal of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs, primarily for the closure of the West Chester, Pennsylvania facility, which remains in operation as a result of the sale of the Bloomsburg frozen pasta facility in Fiscal Year 2000. Implementation costs of $96.9 million pretax were classified as cost of products sold ($33.7 million) and SG&A ($63.2 million). During Fiscal Year 1999, the U.S. Group recognized restructuring charges and implementation costs of $156.1 million pretax. Pretax charges of $94.3 million were classified as cost of products sold and $61.8 million as SG&A. 21 Implementation costs were recognized as incurred and consisted of incremental costs directly related to the implementation of Operation Excel, including consulting fees, employee training and relocation costs, unaccruable severance costs associated with terminated employees, equipment relocation costs and commissioning costs. The U.S. Group has closed or exited all of the five factories or businesses that were originally scheduled for closure or divestiture. In addition, the U.S. Group exited its domestic can making operations. Operation Excel impacted approximately 2,000 employees with a net reduction in the workforce of approximately 1,500 after expansion of certain facilities. During Fiscal Year 2001, Fiscal Year 2000 and Fiscal Year 1999, the U.S. Group's workforce had a net reduction of approximately 800 employees, 500 employees and 200 employees, respectively. Acquisitions and Divestitures The following acquisitions were made by Heinz Finance or its predecessor: The nine months ended January 30, 2002 o Borden Food Corporation's pasta sauce, dry bouillon and soup business - In this transaction, we acquired such brands Classico pasta sauces, Aunt Millie's pasta sauce, Mrs. Grass Recipe soups and Wyler's bouillons and soup. o Anchor Food Products branded retail business - In this transaction, we acquired the Poppers brand of retail appetizer lines and licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers. o Delimex Holdings, Inc. - Delimex is the leading U.S. producer of frozen taquitos, tightly rolled fried corn and flour tortillas with fillings such as beef, chicken or cheese. Delimex also makes quesadillas, tamales and rice bowls. Fiscal Year 2001 o Cornucopia, Inc. and Central Commissary - Two privately held U.S. foodservice companies which make and market refrigerated and frozen reciped food products. o IDF Holdings, Inc., the parent of International DiverseFoods Inc. - A leading manufacturer of customized dressings, sauces, mixes and condiments for restaurant chains and foodservice distributors. o Alden Merrell Corporation - A manufacturer of high-quality, premium-priced frozen desserts for casual dining restaurants and foodservice distributors. o Additional investment in the Hain Celestial Group, "Hain," restoring our ownership interest to approximately 19.5 percent of the outstanding stock. Fiscal Year 2000 o Quality Chef Foods, - A leading manufacturer of frozen heat-and-serve soups, entrees and sauces. o Yoshida - A line of Asian sauces marketed in the U.S. o Thermo Pac, Inc. - A U.S. leader in single-serve condiments. o A strategic alliance with and investment in Hain for the global production and marketing of natural and organic foods and soy-based beverages. 22 Fiscal Year 1999 o College Inn brand of canned broths and other smaller acquisitions. During the periods presented, the U.S. Group divested the All American Gourmet business and its Budget Gourmet and Budget Gourmet Value Classics brands of frozen entrees. Results of Operations Nine Months Ended January 30, 2002 and January 31, 2001 Sales For the nine months ended January 30, 2002, our sales decreased $424.9 million, or 12.1%, to $3,095.8 million from $3,520.7 million in the comparable period last year. Sales were unfavorably impacted by lower volumes of $675.2 million, or 19.2%, lower pricing by $26.5 million, or 0.8%, and divestitures by $74.9 million, or 2.1%. The majority of the volume decrease is a result of the finished goods inventories which were not contributed to Heinz Finance as previously discussed. Sales were favorably impacted by acquisitions of $351.7 million, or 10.0%. Sales of the Heinz North America segment decreased $136.0 million, or 8.4%. Sales volume decreased 16.5%, primarily due to the finished goods inventories which were not contributed to Heinz Finance. Acquisitions, net of divestitures, increased sales 10.4%. Lower pricing decreased sales 2.3%, primarily related to foodservice ketchup. Sales of the U.S. Pet Products and Seafood segment decreased $337.4 million, or 30.0%. Sales volume decreased 29.9% due primarily to the finished goods inventories which were not contributed to Heinz Finance. Volume decreases were also experienced in pet food partially offset by increases in pet snacks and tuna. Slightly higher pricing increased sales 0.1%. Divestitures decreased sales 0.2%. Sales of the U.S. Frozen segment increased $48.5 million, or 6.2%. Sales volume decreased 9.4% due primarily to the finished goods inventories which were not contributed to Heinz Finance. Volume decreases were also experienced in frozen potatoes partially offset by Boston Market HomeStyle Meals, SmartOnes frozen entrees and Bagel Bites snacks. Acquisitions increased sales 22.0%. Higher pricing increased sales 1.3%, primarily in SmartOnes frozen entrees and frozen potatoes partially offset by lower pricing of Boston Market HomeStyle Meals. Divestitures reduced sales by 7.7% due to the sale of Budget Gourmet. Special Items Our results for the nine months ended January 30, 2002 were negatively impacted by additional Streamline implementation costs totaling $1.2 million pretax. Pretax charges of $1.1 million were classified as cost of products sold and $0.1 million as SG&A. Last year's results in the corresponding period include net Operation Excel costs of $123.2 million pretax. Also included in the nine months ended January 31, 2001 results is a pretax loss of $5.6 million, which represents an equity loss associated with Hain Celestial Seasonings. 23 The following tables provide a comparison of our reported results and the results excluding special items for the periods presented.
Nine months ended January 30, 2002 ---------------------------------- Gross Operating Net Profit Income Income ------ ------ ------ (Dollars in millions) Reported results ...................... $ 1,247.9 $ 414.4 $ 60.5 Streamline implementation costs ....... 1.1 1.2 0.7 --------- ------ ----- Results excluding special items ....... $ 1,249.0 $ 415.6 $ 61.2 ========= ====== =====
Nine months ended January 31, 2001 --------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results.......................................... $1,377.8 $534.3 $375.8* Operation Excel restructuring........................... 32.7 32.7 20.2 Operation Excel implementation costs.................... 41.0 95.1 60.1 Operation Excel reversals............................... (2.3) (4.6) (2.9) Equity loss on Investment in The Hain Celestial Group... -- -- 3.5 --------- --------- --------- Results excluding special items......................... $1,449.2 $657.5 $456.7 ========= ========= =========
- ------------------- * Before cumulative effect of accounting change Gross Profit Gross profit decreased $129.9 million, or 9.4%, to $1,247.9 million from $1,377.8 million and the gross profit margin increased to 40.3% from 39.1%. Gross profit across all of our segments decreased as a result of the retention of finished goods inventories by Heinz as discussed above. Excluding the special items noted in the table above, our gross profit decreased $200.2 million, or 13.8%, to $1,249.0 million from $1,449.2 million and our gross profit margin decreased to 40.3% from 41.2%. Excluding special items noted above, gross profit for the Heinz North America segment decreased $85.0 million, or 12.3% due primarily to inventories retained by Heinz, lower pricing and the decline in the foodservice business partially offset by acquisitions. Excluding special items noted above, the U.S. Pet Products and Seafood segment's gross profit decreased $125.1 million, or 31.5%, primarily due to inventories retained by Heinz, price decreases in pet food and pet snacks, increased ingredient and manufacturing costs and a shift to less profitable larger size products. Pet food ingredient costs also increased as a result of reformulating recipes to improve palatability. Excluding special items noted above, the U.S. Frozen segment's gross profit increased $11.0 million, or 3.1%, due primarily to acquisitions and increased pricing partially offset by retained inventories by Heinz. SG&A SG&A decreased $62.9 million, or 8.2%, to $707.7 million from $770.6 million, and increased as a percentage of sales to 22.9% from 21.9%. Excluding the special items noted in the table above, our SG&A decreased $8.9 million, or 1.2%, to $707.6 million from $716.5 million and increased as a percentage of sales to 22.9% from 20.4%. This decrease is a result of the finished goods inventories which were retained by Heinz partially offset by increases from acquisitions, increased promotional spending and increased selling and distribution costs. 24 Operating Income Operating income decreased $119.9 million, or 22.4%, to $414.4 million from $534.3 million, and decreased as a percentage of sales to 13.4% from 15.2%. Excluding the special items noted above, our operating income decreased $242.0 million, or 36.8%, to $415.6 million from $657.6 million and decreased as a percentage of sales to 13.4% from 18.7%. The Heinz North America segment's operating income decreased $154.2 million, or 38.3%, to $248.3 million from $402.4 million. Excluding the special items noted in the table above, operating income decreased $194.5 million, or 43.9%, to $248.3 million from $443 million, due primarily to the decrease in gross profit and higher selling and distribution costs. The U.S. Pet Products and Seafood segment's operating income increased $19.9 million, or 45.3%, to $63.8 million from $43.9 million. Excluding the special items noted in the table above, operating income decreased $44.5 million, or 40.6%, to $65.0 million from $109.4 million, due primarily to the decrease in gross profit. The U.S. Frozen segment's operating income increased $15.4 million, or 17.4%, to $104.3 million from $88.9 million. Excluding the special items noted in the table above, operating income decreased $1.7 million, or 1.6%, to $104.3 million from $106.0 million as the favorable impact of acquisitions was offset by the decrease in gross profit, increased selling and distribution costs and the divestiture of Budget Gourmet. Other Items Interest expense increased $150.4 million to $157.0 million from $6.6 million last year, due primarily to the assumption of approximately $2.9 billion of Heinz's outstanding U.S. debt by Heinz Finance on May 3, 2001. Interest income decreased $63.5 million to $29.9 million from $93.4 million due primarily to the exchange of related party notes receivable for $1.9 billion of non-voting 6.5% cumulative participating preferred stock of PM Holdings during the fourth quarter of Fiscal Year 2001. The provisions for income taxes consists of provisions for federal and state income taxes. The tax provision in the January 30, 2002 financial statements declined significantly since Heinz Finance has no tax obligation on the minority partner's interest in Heinz LP's income. Net Income Net income for the current nine months was $60.5 million compared to $375.9 million last year. Excluding the special items noted in the table above and the cumulative effect of the accounting change for revenue recognition in the prior year, net income decreased $395.6 million to $61.2 million from $456.7 million last year. The majority of this decrease is due to the minority interest in Heinz LP. Fiscal Years Ended May 2, 2001 and May 3, 2000 Sales Sales for Fiscal Year 2001 increased $149.0 million, or 3.1%, to $4.94 billion from $4.79 billion in Fiscal Year 2000. Volume increased sales by $126.3 million, or 2.6%, and acquisitions increased sales by $109.8 million, or 2.3%. Divestitures reduced sales by $45.7 million, or 1.0%, and lower pricing reduced sales by $41.3 million, or 0.9%. Sales of the Heinz North America segment increased $208.9 million, or 10.2%. Sales volume increased 5.5%, due to increases in ketchup, condiments and sauces, foodservice, gravy and canned soups. Acquisitions, net of divestitures, increased sales 4.5%. Slightly higher pricing increased sales 0.2%. 25 Sales of the U.S. Pet Products and Seafood segment decreased $161.2 million, or 9.4%. Lower pricing decreased sales 4.4%, primarily in light meat tuna, dry dog food and cat snacks. Sales volume decreased 4.5%, primarily in tuna and canned pet food. Divestitures decreased sales 0.6%. Sales of the U.S. Frozen segment increased $101.4 million, or 9.7%. Sales volume increased 8.6%, driven by Smart Ones frozen entrees, Boston Market HomeStyle Meals, Bagel Bites snacks and frozen potatoes, partially offset by a decrease in The Budget Gourmet line of frozen entrees and frozen pasta. Higher pricing increased sales by 2.9% driven by Smart Ones frozen entrees and frozen potatoes. Divestitures reduced sales 1.8% mainly due to the sale of The All American Gourmet business and its Budget Gourmet and Budget Gourmet Value Classics brands of frozen entrees. Special Items Fiscal Year 2001 was impacted by a number of special items which are summarized in the tables below. These include Operation Excel implementation costs of $149.5 million pretax, additional Operation Excel restructuring charges of $44.8 million pretax and reversals of $21.0 million pretax of restructuring accruals and asset write-downs. Fiscal Year 2001 results also include Streamline restructuring charges of $72.9 million pretax and related implementation costs of $11.8 million pretax. During the fourth quarter of Fiscal Year 2001, the U.S. Group completed the sale of The All American Gourmet business that resulted in a pretax loss of $94.6 million. The Fiscal Year 2001 results also include pretax costs of $18.5 million related to attempted acquisitions and a loss of $5.6 million pretax which represents the U.S. Group's equity loss associated with The Hain Celestial Group's fourth quarter results which include charges for its merger with Celestial Seasonings. Fiscal Year 2000 results include Operation Excel restructuring charges of $95.3 million pretax, Operation Excel implementation costs of $96.9 million pretax and reversals of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs. The following tables provide a comparison of the U.S. Group's reported results and the results excluding special items for Fiscal Year 2001 and Fiscal Year 2000.
Fiscal year (52 weeks) ended May 2, 2001 -------------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results................................. $1,852.9 $438.1 $312.1 (1) Operation Excel restructuring................... 36.3 44.8 28.0 Operation Excel implementation costs............ 62.2 149.5 94.4 Operation Excel reversal........................ (8.2) (21.0) (13.3) Streamline restructuring........................ 58.2 72.9 45.9 Streamline implementation costs................. 7.1 11.8 9.3 Loss on the sale of The All American Gourmet Company................................ - 94.6 66.2 Equity loss on investment in The Hain Celestial Group.................................. - - 3.5 Acquisition costs............................... - 18.5 11.7 -------- ------ ------ Results excluding special items.................. $2,008.5 $809.2 $557.9 ======== ====== ======
- ------------------- (1) Before cumulative effect of accounting changes 26
Fiscal year (53 weeks) ended May 3, 2000 ------------------------------------------------------------ Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results....................... $1,775.6 $609.3 $448.3 Operation Excel restructuring............... 53.4 95.3 61.5 Operation Excel implementation costs........ 33.7 96.9 61.0 Operation Excel reversal.................... (16.4) (16.4) (11.8) -------- ------ ------ Results excluding special items........ $1,846.3 $785.1 $559.0 ======== ====== ======
Note: Totals may not add due to rounding. Gross Profit Gross profit increased $77.3 million to $1.85 billion from $1.78 billion in Fiscal Year 2000. The gross profit margin increased to 37.5% from 37.1%. Excluding the special items identified above, gross profit increased $162.1 million, or 8.8%, to $2.01 billion from $1.85 billion and the gross profit margin increased to 40.7% from 38.5%. Gross profit across all major segments was favorably impacted by savings from Operation Excel. Excluding special items noted above, gross profit for the Heinz North America segment increased $101.5 million, or 11.7%, due primarily to acquisitions and increased sales volume of ketchup partially offset by higher energy costs. Excluding special items noted above, the U.S. Pet Products and Seafood segment's gross profit increased $18.1 million, or 3.6%. Excluding special items noted above, the U.S. Frozen segment's gross profit increased $42.5 million, or 8.9%, due to increased sales volume mainly attributable to Boston Market HomeStyle Meals and higher selling prices, partially offset by higher energy costs. SG&A SG&A increased $213.8 million to $1.29 billion from $1.07 billion and increased as a percentage of sales to 26.0% from 22.4%. Excluding the special items identified above, SG&A increased $103.3 million to $1.07 billion from $966.9 million and increased as a percentage of sales to 21.7% from 20.2%. Selling and distribution expenses increased $66.0 million to $387.3 million from $321.2 million, or 20.6%, primarily due to acquisitions and increased fuel costs. Marketing increased $63.2 million, or 13.6% primarily due to the national rollouts of StarKist Tuna in a pouch, Boston Market products, and the new packaging for Ore-Ida frozen potatoes. Total marketing support (including trade and consumer promotions and media) decreased 4.9% to $1.08 billion from $1.13 billion on a sales increase of 3.1%. However, advertising costs to support our key brands increased 11.6%. See Note 16 to the Combined Financial Statements. Operating Income Operating income decreased $171.3 million, or 28.1%, to $438.1 million from $609.3 million last year. Excluding the special items identified above, operating income increased $24.1 million, or 3.1%, to $809.2 million from $785.1 million last year. Operating income, across all major segments, was favorably impacted by savings from Operation Excel. The Heinz North America segment's operating income increased $22.3 million to $451.5 million from $429.1 million last year. Excluding the special items noted above, operating income increased $30.6 million, or 5.8%, to $553.6 million from $523.0 million last year due to the strong performance of ketchup, condiments and sauces, and the acquisitions of Quality Chef, Yoshida and IDF Holding, Inc., partially offset by higher energy costs. The U.S. Pet Products and Seafood segment's operating income decreased $119.2 million to a loss of $35.1 million from income of $84.1 million last year. Excluding the special items noted above, operating income decreased $22.7 million, or 16.4% to $116.0 million from $138.7 million due to lower tuna and canned pet food 27 sales volumes, a significant decrease in the selling price of tuna and higher energy costs, partially offset by the strong performance of pet snacks. The U.S. Frozen segment's operating income decreased $73.6 million to $23.3 million from $96.9 million last year. Excluding the special items noted above, operating income increased $17.1 million, or 13.7%, to $141.2 million from $ 124.1 million last year. This increase is attributable to increased sales of Smart Ones frozen entrees, Boston Market frozen meals and Bagel Bites snacks, partially offset by marketing spending behind the national rollouts of Boston Market products, the new Ore-Ida potato packaging and higher energy costs. Other Items Other income, net totaled $79.4 million compared to $91.2 million last year. The effective tax rate for Fiscal Year 2001 was 39.7% compared to 36.0% last year. The current year rate is negatively impacted by a lower tax basis in dispositions. Excluding the special items identified in the tables above, the effective tax rate was 37.6% for Fiscal Year 2001 compared to 36.2% last year. Net Income Net income decreased $141.4 million to $306.9 million from $448.3 million last year. In Fiscal Year 2001, the U.S. Group changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." See Note 2 to the Combined Financial Statements. The cumulative effect of adopting SAB No. 101 was $4.8 million. Excluding the special items noted above and the prescribed accounting change, net income decreased 0.2% to $557.9 million from $559.0 million last year. Fiscal Years Ended May 3, 2000 and April 28, 1999 Sales Sales for Fiscal Year 2000 increased $102.1 million, or 2.2%, to $4.79 billion from $4.69 billion in Fiscal Year 1999. Volume increased sales by $187.9 million, or 4.0%, and acquisitions increased sales by $67.9 million, or 1.5%. Lower pricing reduced sales by $121.9 million, or 2.6%, and divestitures reduced sales by $31.8 million, or 0.7%. Sales of Heinz North America segment increased $174.4 million, or 9.3%. Sales volume increased 7.0%, due to increases in ketchup, condiments and sauces, foodservice, and canned soup. Acquisitions, net of divestitures, increased sales 3.1%. Lower pricing reduced sales by 0.8%, due mainly to decreases in retail ketchup. Sales of the U.S. Pet Products and Seafood segment decreased $85.2 million, or 4.8%. Sales volume increased 0.1%, due to increases in tuna, partially offset by a decrease in canned pet food. Lower pricing reduced sales by 4.9%, due mainly to decreases in tuna. Sales of the U.S. Frozen segment increased $12.9 million, or 1.2%. Sales volume increased 5.3%, driven by Smart Ones frozen entrees, Boston Market frozen meals and Bagel Bites snacks, partially offset by a decrease in The Budget Gourmet line of frozen entrees. The divestiture of several non-core product lines, net of acquisitions, reduced sales 2.5%. Lower pricing reduced sales 1.6%, primarily due to frozen potatoes. Special Items Fiscal Year 2000 results include Operation Excel implementation costs of $96.9 million pretax, additional Operation Excel restructuring charges of $95.3 million pretax and a reversal of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs. Fiscal Year 1999 results included Operation Excel restructuring 28 and implementation costs of $156.1 million pretax, Project Millennia restructuring implementation costs of $9.4 million pretax and the reversal of unutilized Project Millennia restructuring accruals of $16.6 million pretax. The following tables provide a comparison of the U.S. Group's reported results and the results excluding special items for Fiscal Year 2000 and Fiscal Year 1999.
Fiscal year (53 weeks) ended May 3, 2000 ----------------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results............................ $1,775.6 $609.3 $448.3 Operation Excel restructuring............. 53.4 95.3 61.5 Operation Excel implementation costs...... 33.7 96.9 61.0 Operation Excel reversal.................. (16.4) (16.4) (11.8) -------- ------ ------ Results excluding special items............. $1,846.3 $785.1 $559.0 ======== ====== ======
Fiscal year (52 weeks) ended April 28, 1999 --------------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results........................................ $1,696.0 $578.4 $432.8 Operation Excel restructuring and implementation costs................................................. 94.3 156.1 103.1 Project Millennia restructuring implementation costs.. 6.7 9.4 5.9 Project Millennia restructuring reversal.............. (16.6) (16.6) (10.5) -------- ------ ------ Results excluding special items........................ $1,780.4 $727.3 $531.3 ======== ====== ======
Gross Profit Gross profit increased $79.6 million to $1.78 billion from $1.70 billion in Fiscal Year 1999. The gross profit margin increased to 37.1% from 36.2%. Excluding the special items identified above, gross profit increased $65.9 million, or 3.7%, to $1.85 billion from $1.78 billion, and the gross profit margin increased to 38.6% from 38.0%. Excluding the special items identified above, gross profit for the Heinz North America segment increased $64.1 million, or 8.0%, due primarily to acquisitions and increased volume of ketchup. Excluding the special items identified above, gross profit for the U.S. Pet Products and Seafood segment decreased $13.0 million, or 2.5%, due primarily to a significant decrease in the selling price of tuna. Excluding the special items identified above, the U.S. Frozen segment's gross profit increased $14.7 million, or 3.2%, as increased sales volume was offset by lower pricing and the elimination of several non-core product lines. SG&A SG&A increased $50.9 million to $1.07 billion from $1.02 billion and increased as a percentage of sales to 22.4% from 21.8%. Excluding the special items identified above, SG&A increased $10.3 million to $966.9 million from $956.6 million and decreased as a percentage of sales to 20.2% from 20.4%. Total marketing support (including trade and consumer promotions and media) increased 3.5% to $1.13 billion from $1.09 billion on a sales increase of 2.2%. Advertising costs in Fiscal Year 2000 were $189.1 million compared to $205.7 million in Fiscal Year 1999. 29 Operating Income Operating income increased $30.9 million, or 5.3%, to $609.3 million from $578.4 million last year. Excluding the special items identified above, operating income increased $57.8 million, or 7.9%, to $785.1 million from $727.3 million last year. The Heinz North America segment's operating income decreased $23.6 million, or 5.2%, to $429.1 million from $452.7 million in Fiscal Year 1999. Excluding the special items identified above, operating income increased $42.0 million, or 8.7%, to $523.0 million from $481.0 million in Fiscal Year 1999. The increase is due to the increase in gross profit and savings from Operation Excel. The U.S. Pet Products and Seafood segment's operating income decreased $20.4 million, or 19.5%, to $84.1 million from $104.5 million in Fiscal Year 1999. Excluding the special items identified above, operating income increased $2.2 million, or 1.6%, to $138.7 million from $136.6 million in Fiscal Year 1999. The strong performance of the pet food business and savings from Operation Excel were offset by a significant decrease in the selling price of tuna. The U.S. Frozen segment's operating income increased $75.1 million to $96.9 million from $21.8 million last year. Excluding the special items identified above, operating income increased $13.8 million, or 12.5%, to $124.1 million from $110.3 million last year. This increase is attributable to a reduction in SG&A resulting from the consolidation of the frozen business as part of Operation Excel, offset by higher marketing expenses as a result of the national campaign in support of Boston Market and lower pricing on Ore-Ida frozen potatoes. Other Items Other expenses, net totaled $27.9 million compared to $13.2 million last year. The effective tax rate for Fiscal Year 2000 was 36.0% compared to 37.1% last year. The Fiscal Year 1999 effective tax rate was unfavorably impacted by nondeductible expenses related to restructuring. Excluding the special items identified above, the effective tax rate for Fiscal Year 2000 was 36.2% compared to 36.6% last year. Net Income Net income increased $15.5 million to $448.3 million from $432.8 million last year. Excluding the special items identified above, net income increased 5.2% to $559.0 million from $531.3 million. Liquidity and Financial Position Cash flows from operating activities Cash used for operating activities for the nine months ended January 30, 2002 was $388.6 million compared to $244.7 million in the same period last year. The decrease in Fiscal Year 2002 versus Fiscal Year 2001 is primarily due to decreased working capital performance. Cash provided by operating activities decreased to $77.5 million in Fiscal Year 2001, compared to $433.9 million in Fiscal Year 2000 and $813.5 million in Fiscal Year 1999. The-decrease in Fiscal Year 2001 versus Fiscal Year 2000 is primarily due to higher expenditures on Streamline and Operation Excel. These decreases were partially offset by a reduction of inventory levels at certain locations that had risen during Fiscal Year 2000 in order to facilitate the plant shutdowns and reconfigurations related to Operation Excel. Cash flows from investing activities 30 Cash used for investing activities for the nine months ended January 30, 2002 totaled $840.9 million compared to $313.2 million in the same prior year period. Acquisitions in the current period required $777.7 million, due primarily to the purchase of Borden Food Corporation's pasta and dry bouillon and soup business, Delimex Holdings, Inc. and Anchor Food Products branded retail business and licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers. Acquisitions in the prior period required $161.0 million, due primarily to the purchase of International DiverseFoods Inc. During the prior year period, Heinz Finance also invested $79.7 million in The Hain Celestial Group, Inc. Capital expenditures in the current period required $51.8 million compared to $108.6 million last year. Cash used for investing activities was $232.0 million in Fiscal Year 2001 compared to $394.2 million in Fiscal Year 2000. Acquisitions during Fiscal Year 2001 required $229.9 million versus $73.9 million in Fiscal Year 2000. Fiscal Year 2001 acquisitions included International DiverseFoods Inc., Alden Merrell Corporation and two privately held U.S. foodservice companies, Cornucopia. Inc. and Central Commissary. Fiscal Year 2000 acquisitions included Quality Chef Foods, Yoshida and Thermo Pac. Inc. Also during Fiscal Year 2001, the U. S. Group exercised its preemptive right to purchase additional equity in Hain to restore the U.S. Group's investment level to approximately 19.5% of the outstanding stock of Hain, for $79.7 million. In Fiscal Year 2000, the U.S. Group invested $99.8 million in Hain. In Fiscal Year 2001, divestitures provided $96.5 million from the sale of The All American Gourmet business and can making assets. In Fiscal Year 2000, divestitures provided $25.0 million. Capital expenditures totaled $183.5 million in Fiscal Year 2001 compared to $215.4 million in the prior year. The decrease is attributable to a reduction in Operation Excel related capital expenditures. Proceeds from disposals of property, plant and equipment increased to $165.5 million in Fiscal Year 2001 compared to $4.8 million in Fiscal Year 2000. The increase was primarily due to the sale of equipment which was then utilized under operating lease arrangements. Cash flows from financing activities Cash provided by financing activities during the nine months ended January 30, 2002 increased to $1,229.0 million from $567.0 million during the same prior year period. Proceeds from long-term debt were $751.1 million in the current period. Payments on long-term debt required $9.2 million this period compared to $310.0 million last year. Net payments on commercial paper and short-term borrowings required $270.1 million in the current year period. In addition, $325.0 million was provided during the current period via the issuance of preferred stock, (see below). Dividend payments totaled $10.6 million compared to $316.7 million for the same period last year. Financing activities provided $152.6 million in Fiscal Year 2001 and required $40.3 million and $691.3 million in Fiscal Years 2000 and 1999, respectively. Net funds paid were $12.2 million in Fiscal Year 2001 compared to $47.8 million in Fiscal Year 2000. Cash requirements of Streamline In the first nine months of Fiscal Year 2002, the cash requirements of Streamline were $10.0 million, consisting of spending for severance and exit costs ($8.8 million) and implementation costs ($1.2 million). In Fiscal Year 2001, the cash requirements of Streamline were $14.3 million, consisting of spending for severance and exit costs ($2.3 million), capital expenditures ($0.3 million) and implementation costs ($11.8 million). The cash requirements of Operation Excel were $231.9 million, consisting of spending for severance and exit costs ($21.6 million), capital expenditures ($60.8 million) and implementation costs ($149.5 million). In Fiscal Year 2000, the cash requirements of Operation Excel were $199.9 million, consisting of spending for severance and exit costs ($20.3 million), capital expenditures ($82.7 million) and implementation costs ($96.9 million). In Fiscal Year 1999, the cash requirements of Operation Excel were $23.5 million, consisting of spending for severance and exit costs ($8.9 million), capital expenditures ($2.2 million) and implementation costs ($12.4 million). In Fiscal Year 2002, we expect the cash requirements of Streamline to be approximately $37.0 million, consisting of severance and exit costs ($30.0 million of the $30.7 million accrued as of May 2, 2001), capital 31 expenditures ($3.0 million) and implementation costs ($4.0 million). We are financing the cash requirements of these programs through operations, proceeds from the sale of non-strategic assets and with short-term and long-term borrowings. The cash requirements of these programs have not had and are not expected to have a material adverse impact on our liquidity or financial position. Other Financial and Liquidity Matters Pretax return on average invested capital ("ROIC") was 9.3% in Fiscal Year 2001, 14.5% in Fiscal Year 2000 and 14.4% in Fiscal Year 1999. Excluding the special items identified above, ROIC was 17.7% in Fiscal Year 2001, 18.8% in Fiscal Year 2000 and 18.2% in Fiscal Year 1999. In connection with the reorganization, we assumed as co-obligor the responsibility to pay Heinz debt issues totaling $2.57 billion in principal amount, plus accrued interest thereon. We also assumed as co-obligor the obligation to pay approximately $258 million of commercial paper issued by Heinz. Since May 3, 2001, we have issued commercial paper to refinance the commercial paper obligations assumed by us in the reorganization, to make loans to Heinz and to fund our ongoing operations. For a further discussion of our liquidity and financing arrangements with Heinz, please see "Related Party Transactions" in this prospectus. On July 6, 2001, we raised $325.0 million through the issuance of Voting Cumulative Preferred Stock, Series A with liquidation preference of $100,000 per share. The Series A Preferred shares are entitled to receive quarterly dividends at a rate of 6.226% per annum and are required to be redeemed for cash on July 15, 2008. In addition, we issued $750 million of 6.625% Guaranteed Notes due July 15, 2001. The proceeds were used for general corporate purposes, including retiring commercial paper borrows and financing acquisitions and ongoing operations. On September 6, 2001, Heinz Finance, Heinz and a group of domestic and international banks entered into a $1.50 billion credit agreement which expires in September 2006 and an $800 million credit agreement which expires in September 2002. These credit agreements, which support our commercial paper programs, replaced the $2.30 billion credit agreement which expired on September 6, 2001. As of January 30, 2002, $1.38 billion of domestic commercial paper is classified as long-term debt due to the long-term nature of the supporting credit agreement. In January 2002, Moody's Investor Service changed the credit ratings on Heinz's debt to A-3 for long-term debt and P-1 for short-term debt. The previous ratings were A-2 and P-1, respectively. Heinz's long-term and short-term debt ratings by Standard & Poor's remained at A and A-1, respectively. On March 7, 2002, Heinz Finance issued $700 million of 6.00% Guaranteed Notes due March 15, 2012 and $550 million of 6.75% Guaranteed Notes due March 15, 2032, which are guaranteed by Heinz. The proceeds will be used to retire commercial paper borrowings. Heinz Finance converted $750 million of the new debt from fixed to floating through interest rate swap agreements. Commitments and Contingencies The Commission recently issued an interpretive release on disclosures related to liquidity and capital resources, including off-balance sheet arrangements. We are not aware of factors that are reasonably likely to adversely affect liquidity trends or increase our risk beyond the risk factors presented in this filing. However, the following additional information is provided to assist financial statement users. Purchase Commitments - We have purchase commitments for materials, supplies, services, and property, plant and equipment as part of the ordinary conduct of business. A few of these commitments are long-term and are based on minimum purchase requirements. In the aggregate, such commitments are not at prices in excess of current market. Due to the proprietary nature of some of our materials and processes, certain supply contracts contain penalty provisions for early termination. We do not believe a material amount of penalties is reasonably likely to be incurred under these contracts based upon historical experience and current expectations. 32 Leases - We have entered into operating & synthetic leases for certain of our warehouses, equipment and office buildings where the economic profile is favorable. Contractual obligations under existing synthetic leases, which are due at the end of the lease period (fiscal years 2007 and 2008), totaled approximately $138.0 million as of January 30, 2002. The liquidity impact of outstanding leases is not material to Heinz Finance - by reference to both annual cash flow and total outstanding debt nor do they adversely affect our on-going business. Other Contractual Obligations - We do not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity. Related Party Transactions - All related party transactions that materially affect the results of operations, cash flow and financial condition have been disclosed in our Related Party Transaction section in this prospectus and in the notes to the condensed consolidated and combined financial statements for the nine months ended January 30, 2002 and Jaunaury 31, 2001 included in this prospectus. Heinz Finance's financial position continues to remain strong, enabling it to meet cash requirements for operations, capital expansion programs and debt service during the next twelve months and the foreseeable future. Recently Adopted Accounting Standards In Fiscal Year 2001, we changed our method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements". Under the new accounting method, adopted retroactive to May 4, 2000, we recognize revenue upon the passage of title, ownership and risk of loss to the customer. The cumulative effect adjustment of $26.2 million in revenue ($4.8 million in net income) as of May 4, 2000, was recognized during the first quarter of Fiscal Year 2001. The Fiscal Year 2001 nine month amounts reflect the effect of the change in accounting for revenue recognition. Recently Issued Accounting Standards In September 2000, the FASB Emerging Issues Task Force (the "EITF") issued new guidelines entitled "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products." In addition, during May 2000, the EITF issued new guidelines entitled "Accounting for Certain Sales Incentives." Both of these issues provide guidance primarily on income statement classification of consideration from a vendor to a purchaser of the vendor's products, including both customers and consumers. Generally, cash consideration is to be classified as a reduction of revenue unless specific criteria are met regarding goods or services that the vendor may receive in return for this consideration. In the fourth quarter of Fiscal Year 2002, we will reclassify promotional payments to our customers and the cost of consumer coupons and other cash redemption offers from SG&A to net sales. We are currently assessing the combined impact of both issues, however, we believe that, based on historical information, sales could be reduced up to 7 to 8%. SG&A will be correspondingly reduced such that net earnings would not be affected. In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." These standards require that all business combinations be accounted for using the purchase method and that goodwill and intangible assets with indefinite useful lives should not be amortized but should be tested for impairment at least annually, and they provide guidelines for new disclosure requirements. These standards outline the criteria for initial recognition and measurement of intangibles, assignment of assets and liabilities including goodwill to reporting units and goodwill impairment testing. The provisions of SFAS 141 and 142 apply to all business combinations after June 30, 2001. We have not fully assessed the potential impact of the adoption of SFAS No. 142 which is effective for us in Fiscal Year 2003. The reassessment of intangible assets, including the ongoing impact of amortization, must be completed during the first quarter of Fiscal Year 2003. The assignment of goodwill to reporting units, along with completion of the first step of the transitional goodwill impairment tests, must be completed during the first six months of Fiscal Year 2003. 33 In June 2001, the FASB approved SFAS 143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset, except for certain obligations of lessees. This standard is effective for fiscal years beginning after June 15, 2002. Heinz Finance does not expect that the adoption of this standard will have a significant impact on the consolidated financial statements. In October 2001, the FASB issued SFAS No. 144 "Accounting for Impairment or Disposal of Long-lived Assets." SFAS No. 144 clarifies and revises existing guidance on accounting for impairment of plant, property, and equipment, amortized intangibles, and other long-lived assets not specifically addressed in other accounting literature. This standard will be effective for us beginning in Fiscal Year 2003. We do not expect the adoption of this standard to have a significant impact on the combined financial statements. Market Risk Factors We are exposed to market risks from adverse changes in interest rates and commodity prices and production costs. As a policy, we do not engage in speculative or leveraged transactions, nor do we hold or issue financial instruments for trading purposes. Interest Rate Sensitivity We are exposed to changes in interest rates primarily as a result of its borrowing and investing activities used to maintain liquidity and fund business operations. The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. The following table summarizes our debt obligations at January 30, 2002. The interest rates represent weighted-average rates, with the period-end rate used for the variable rate debt obligations. The fair value of the debt obligations approximated the recorded value as of January 30, 2002.
Expected Fiscal Year of Maturity --------------------------------------------------------------------- 2002 2003 2004 2005 2006 Thereafter Total ---- ---- ---- ---- ---- ---------- ----- (Dollars in thousands) Fixed rate ............ 501,576 250,237 511 259,037 511 2,318,230 3,330,102 Average interest rate . 7.07% 5.95% 6.50% 5.05% 6.50% 6.09% -- Variable rate ......... -- -- -- -- -- 1,386,969 1,386,969 Average interest rate . 0.00% 0.00% 0.00% 0.00% 0.00% 3.15% --
Commodity Price Sensitivity We purchase certain commodities such as corn, wheat and soybean meal and oil. We generally purchase these commodities based upon market prices that are established with the vendor as part of the purchase process. In general, we do not use significant levels of commodity financial instruments to hedge commodity prices due to a high correlation between the commodity cost and the ultimate selling price of the product. On occasion, we may enter into commodity future or option contracts, as deemed appropriate, to reduce the effect of price fluctuations on some future manufacturing requirements. Such contracts are accounted for as hedges, with gains and losses recognized as part of cost of products sold, and generally have a term of less than one year. As of January 30, 2002, unrealized gains and losses related to commodity contracts held by us were not material nor would they be given a hypothetical 10% fluctuation in market prices. It should be noted that any change in the value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. 34 Inflation In general, costs are affected by inflation and the effects of inflation may be experienced by Heinz Finance in future periods. We believe, however, that such effects have not been material to us during the past three years. 35 BUSINESS General We have been a direct or indirect subsidiary of Heinz since 1983. Heinz Finance had no significant operating history until Heinz completed a corporate reorganization in the United States on May 3, 2001. The reorganization was designed to simplify Heinz's U.S. corporate structure and establish centers of excellence for the management of the U.S. trademarks and for U.S. treasury functions. As a result of the reorganization, all of the U.S. business operations that had historically been conducted by Heinz through its Heinz USA division and eight subsidiary corporations, are now conducted by Heinz Finance. Since May 3, 2001, we have been engaged in the business of acquiring, holding and financing equity and debt investments in subsidiaries that own and operate Heinz's historical U.S. businesses, which manufacture, market, distribute and sell food and pet food products in the United States. Our most significant asset is our ownership interests in Heinz LP, a Delaware limited partnership formed on October 9, 2000. Heinz LP has two classes of limited partnership interests, Class A and Class B, both of which are owned entirely by Heinz and Heinz affiliates. Heinz, directly and through wholly-owned subsidiaries, owns the Class A interests in Heinz LP. Heinz Finance directly and indirectly owns the Class B interests in Heinz LP. Heinz Management Company ("HMC"), a wholly- owned subsidiary of Heinz, is the managing general partner of Heinz LP and employs its salaried personnel. Heinz LP reimburses HMC for all its management costs. We participated in the growth of the U.S. businesses over Fiscal Year 2002 through the financing of the acquisition of the assets of the retail business of Anchor Food Products and the purchase of the stock of Delimex Holdings, Inc. Both of these acquisitions expanded our participation in the frozen appetizer and hand held food products category with the addition of T.G.I. Friday's frozen appetizers and Delimex taquitos. In addition, we financed the acquisition of certain assets of the sauce, soup and bouillon business of Borden Foods Corporation and its affiliates. Through this transaction, we acquired the Classico pasta sauce line of products. Description of the Business We conduct our food business through three segments, Heinz North America, U.S. Pet Products and Seafood and U.S. Frozen. The Heinz North America segment manufactures, markets and sells ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels in the United States. For the nine months ended January 30, 2002, Heinz North America accounted for $1,477.4 million, or 47.7% of our revenue. The U.S. Pet Products and Seafood segment manufactures, markets and sells dry and canned pet food, pet snacks, tuna and other seafood. For the nine months ended January 30, 2002, this segment accounted for $785.9 million or 25.4% of our revenue. The U.S. Frozen segment manufactures, markets and sells frozen potatoes, entrees, snacks and appetizers, and accounted for $832.4 million or 26.9% of our revenue for the nine months ended January 30, 2002. Products and Markets Our products are manufactured and packaged to provide safe, wholesome foods for consumers, foodservice and institutional customers. Many products are prepared from recipes developed in our research laboratories and experimental kitchens. Ingredients are carefully selected, washed, trimmed, inspected and passed on to modern factory kitchens where they are processed, after which the finished product is filled automatically into containers of glass, metal, plastic, paper or fiberboard which are then closed, processed, labeled and cased for market. Finished products are processed by sterilization, homogenization, chilling, freezing, pickling, drying, freeze drying, baking or extruding. Certain finished products and seasonal raw materials are aseptically packed into sterile containers after 36 in-line sterilization. Although crops constituting some of our raw food ingredients are harvested on a seasonal basis, most of our products are produced throughout the year. The primary brands and products marketed and sold by us include, by segment, the following: Heinz North America Heinz tomato ketchup, mustard and sauces Chef Francisco soups Heinz baby food Classico pasta sauce College Inn broth Yoshida sauces Wyler's bouillon and soups U.S. Frozen Ore-Ida potato products Bagel Bites Boston Market HomeStyle meals Smart Ones meals Rosetto pasta Delimex snacks Poppers appetizers T.G.I. Friday's appetizers U.S. Pet & Seafood StarKist tuna 9-Lives cat food Kibbles 'n Bits dog food Gravy Train and Nature's Recipe dog food Jerky Treats, Meaty Bone, Pup-Peroni and Snausages dog treats Pounce cat treats The Heinz brand is our flagship and largest single brand. We believe that its strength derives from over 130 years of devotion to the idea of quality. Heinz ketchup is our signature product. It is the most popular brand of ketchup in the United States. Along with the Heinz brand, we have many other powerful brands that lead in their respective categories. Heinz North America Heinz Ketchup #1 brand with an approximate 60% dollar share of the over $ 460 million U.S. ketchup market Heinz Baby Food #2 brand with an approximate 16% volume share of the $1.0 billion U.S. baby food market Classico Pasta Sauce #1 brand premium pasta sauce U.S. Frozen Ore-Ida Potatoes #1 brand with an approximate 48% dollar share of the $1 billion U.S. frozen potato market Delimex Snacks #1 Mexican frozen snack brand 37 U.S. Pet and Seafood StarKist Tuna #1 brand with an approximate 38% dollar share of the over $1 billion U.S. tuna market The brand and market share data were sourced from AC Nielsen and reflect grocery stores, drug stores and mass merchandisers (excluding Wal-Mart) for the 52-week period ended December 29, 2001. The market share data does not include all retail outlets. Competitive Strengths Innovation We believe that we are one of the most innovative companies in the food industry in the United States. One of our key strategies is to continue innovation in products and packaging. We believe this will allow us to address consumer trends in taste, convenience and on-the-go eating. We have had a number of recent innovations. Some of them include: o Heinz EZ Squirt Kids' Condiment. This product has driven overall volume growth for Heinz ketchup during the past year while helping to establish new market share records. o Ketchup Kick'Rs This flavored ketchup is designed to appeal to adult appetites for bold and spicy flavors. o Jack Daniel's and Mr. Yoshida's Grilling Sauces o Boston Market HomeStyle Meals and Gravy. Our combined retail sales of these two businesses reached approximately $150 million in fiscal year 2001, making Boston Market the most successful new product launch in the history of Heinz. o Hot Bites frozen snacks o StarKist pouch tuna. This value-added, premium-priced product and packaging breakthrough may achieve retail sales of $100 million in Fiscal Year 2002. o Pup-Peroni NawSomes! dog snacks Acquisitions Over the past few years we have focused on improving our portfolio of products. As part of that strategy, we have made acquisitions that expand on our capabilities, build on our core competencies and open new markets for us. Some of our recent acquisitions include: o Classico, the leading premium pasta sauce in the U.S. and a perfect fit with our tomato expertise and heritage; 38 o Alden Merrell, a maker of high-quality, premium-priced frozen desserts for casual dining restaurants and foodservice distributors; o Delimex frozen hand-held Mexican foods, which allow us to compete in the fastest-growing segment of the food business, ethnic foods; o Ethnic Gourmet frozen meals, a line of premium quality all-natural Indian and Thai meals and wraps; and o Anchor Foods, a rapidly growing producer of frozen snacks under the Poppers and TGI Friday's brand names. Consumer Marketing and Advertising Since 2000, we have implemented a major new focus on sports marketing, which we believe is beginning to generate momentum. Sports marketing is now a significant part of our overall marketing strategy and seeks to leverage the popularity of legendary athletes. We know that our business significantly benefited from our associations with Tony Hawk for Bagel Bites, and we believe that the use of Larry Bird for Boston Market and now Kristi Yamaguchi for Smart Ones will benefit those businesses. Each of these celebrities reaches a specific audience and represents the brand in a highly targeted way. For example, o NBA basketball great Larry Bird is the focus of the ironic "Eat Like a Bird" advertising campaign that resulted in increased sales of Boston Market HomeStyle Meals among adult males. o Fitness-conscious consumers can identify with Smart Ones brand's spokesperson, Olympic and World Champion figure skater Kristi Yamaguchi. o Teenagers view Tony Hawk as being fun, irreverent and on the edge, which are characteristics that we seek to identify with our Bagel Bites and Hot Bites frozen snacks. In 2001, we also introduced a new color of EZ Squirt Kids' Condiment - "Funky Purple." The launch of this product generated more than 1,000 television news reports and hundreds more newspaper and magazine articles around the world. This marketing impact more than doubled the extensive media coverage of the introduction of our Blastin' Green "kids ketchup" in 2000. We believe that the naming rights to Heinz Field in Pittsburgh created another powerful and unique sports marketing opportunity. We are informed by the NFL that each weekend during the football season over 100 million viewers watch NFL pro football on television. Total advertising impressions from Heinz Field now number three billion, the equivalent of $44 million in advertising. Millions more listen to the games on radio or read about them in a myriad of newspapers and sports publications. This audience represents an opportunity to further extend Heinz brand awareness. Competition Our products are sold under highly competitive conditions, with many large and small competitors. We regard our principal competition to be other manufacturers of processed foods, including branded, retail products, foodservice products and private label products, that compete with us for consumer preference, distribution, shelf space and merchandising support. We compete primarily on the basis of product quality, brand recognition, brand loyalty and consumer value. 39 Customers Our products are sold through our own sales force and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, pharmacies, mass merchants, club stores, pet stores, foodservice distributors and institutions, including hotels, restaurants and certain government agencies. Our retail sales force consists of approximately 300 employees and seven teams that are dedicated to our key customers. We use two national brokers in connection with our retail sales efforts. In addition, we have a dedicated direct sales force for most of our large foodservice customers and service smaller ones through distributors. The following were our top ten U.S. customers based on revenue in Fiscal Year 2001: o Albertson's, Inc. o Publix Super Markets, Inc. o C&S Wholesale o Safeway Inc. o Food Lion o SuperValu, Inc. o Fleming Companies, Inc. o SYSCO/SYGMA o Kroger Co. o Wal-Mart Stores, Inc. For Fiscal Year 2001, one customer, Wal-Mart Stores, Inc., represented more than 10% of our sales, and the top ten customers represented over 50% of our sales. We closely monitor the credit risk associated with these customers and to date have never experienced significant losses. Properties We operate the following factories, distribution centers and other properties involved in manufacturing our products: Company/Location Owned Leased Primary Products Pittsburgh, PA x soup, baby food Fremont, OH x condiments Holland, MI x pickles, vinegar, soup Muscatine, IA x soup, sauces Stockton, CA x tomato paste, sauces and condiments Mason, OH x sauces and condiments Dallas, TX x x sauces and condiments Escalon, CA x tomato products King of Prussia, PA x frozen soup Chatsworth, CA x sauces and condiments Jacksonville, FL x sauces and condiments Stone Mountain, GA x sauces and condiments Cedar Rapids, IA x soup Nashville, TN x sauces Industry, CA x sauces Newburyport, MA x frozen desserts Le Center, MN x frozen desserts Phoenix, AZ x sauces and condiments Irvine, CA x sauces and condiments San Diego, CA x frozen appetizers Northbrook, IL x dry soup, bouillon Pennsauken, NJ x sauces Ontario, OR x frozen potatoes West Chester, PA x frozen filled pasta 40 Company/Location Owned Leased Primary Products Ft. Myers, FL x frozen meals Massilon, OH x frozen meals Pocatello, ID x frozen meals Bloomsburg, PA x canned pet food Topeka, KS x dry pet food Lawrence, KS x dry pet food We also own or lease office space, warehouses, distribution centers and research and other facilities. Our food processing plants and principal properties are in good condition and are satisfactory for the purposes for which they are being utilized. Trademarks, Patents and Licenses We own or license the following trademarks from related and unrelated parties: Major Trademarks Heinz North America Heinz, College Inn, StarKist, Classico, Quality Chef Yoshida, Jack Daniels*, Bell 'Orto, Bella Rosa, Chef Francisco, Domani, Wyler's U.S. Frozen Ore-Ida, Bagel Bites, Rosetto, Weight Watchers*, Boston Market*, Smart Ones, T.G.I. Friday's, Poppers, Delimex U.S. Pet Products Star-Kist, 9-Lives, Pounce, Kibbles n' Bits, and Seafood Ken-L-Ration, Reward, Gravy Train, Skippy, Nature's Recipe, Pounce, Snausages, Jerky Treats, Pup-Peroni, Wagwells, Meaty Bone *Used under license from third parties We have participated in the development of certain food processing equipment, some of which is patented. We regard these patents as important but do not consider any one or group of them to be materially important to our business as a whole. Employees On a full-time basis, as of May 2, 2001, approximately 13,000 people were employed as part of our business, and of those employees, approximately 4,900 are represented by labor unions. Approximately 3,100 are salaried employees and approximately 10,200 are hourly employees. Almost all of the employees are full-time workers. We believe that we have good relations with our employees. Regulatory Compliance with the provisions of national, state and local environmental laws and regulations has not had a material effect upon our capital expenditures, earnings or competitive position. Our estimated capital expenditures for environmental control facilities for the remainder of fiscal year 2002 and the succeeding fiscal year are not material and will not materially affect either our earnings or competitive position. The Marine Mammal Protection Act of 1972, as amended, the "Act," and regulations thereunder, the "Regulations," regulate the incidental taking of dolphin in the course of fishing for yellowfin tuna in the eastern tropical Pacific Ocean, where a portion of our light-meat tuna is caught. In 1990, Heinz voluntarily adopted a worldwide policy of refusal to purchase tuna caught in the eastern tropical Pacific Ocean through the intentional encirclement of dolphin by purse seine nets and reaffirmed its policy of not purchasing tuna caught anywhere using gill nets or drift nets. Also in 1990, the Dolphin Protection Consumer Information Act the "Dolphin Information 41 Act," was enacted which regulates the labeling of tuna products as "dolphin safe" and bans the importation of tuna caught using high seas drift nets. The Act was amended in 1992 to further regulate tuna fishing methods which involve marine mammals. Compliance with the Act, the Regulations, the Dolphin Information Act, and Heinz's voluntary policy and the 1992 amendments has not had, and is not expected to have, a material adverse effect on our operations. Congress passed the International dolphin Conservation Program Act, "IDCPA," on August 15, 1997. It modified the regulation of the incidental taking of dolphins in the course of fishing for yellowfin tuna in the eastern tropical Pacific Ocean and revised the definition of "dolphin safe." Revision of the definition of "dolphin safe" and modification of the regulation of the incidental taking of dolphins in the course of fishing for yellowfin tuna in the eastern tropical Pacific Ocean have not had and are not expected to have a material adverse effect on our operations. Our factories are subject to inspections by various governmental agencies, and our products must comply with all the applicable laws, including food and drug laws, of the jurisdictions in which they are manufactured and marketed. Legal Proceedings We are not involved in any material pending legal proceedings. From time to time we may be a party to a variety of legal proceedings arising out of the normal course of business. 42 RELATED PARTY TRANSACTIONS Heinz Finance and Heinz have entered into agreements that provide for financial support, administrative and other services, reimbursement for employee services and intellectual property. This section describes those agreements between Heinz Finance and Heinz. For further information regarding related party transactions, please see Note 9 of Heinz Finance's Condensed Consolidated and Combined Financial Statements for the nine months ended January 30, 2002 and January 31, 2002 included in this prospectus. Operational Agreements Heinz Finance has entered into a services agreement with Heinz pursuant to which Heinz will provide certain accounting, legal, tax and other support services and facilities to us. Under the services agreement, we will reimburse Heinz for services provided by Heinz thereunder. In addition, some of the officers and employees of Heinz Finance are officers or employees of Heinz or its affiliates. In particular, Heinz Management Company employs the salaried people who conduct the business of Heinz LP, and the costs and expenses of those employees are reimbursed by Heinz LP. If any individual provides more than de minimis services to both Heinz and Heinz Finance, the compensation of that individual will be apportioned between the two groups on an arm's-length basis. We pay a royalty to Promark International, Inc., for use of trademarks historically used in Heinz's U.S. business. Guarantee Facility Agreement; Liquidity Agreement Heinz Finance has also entered into a guarantee facility agreement with Heinz, pursuant to which Heinz agrees to guarantee our payment of third-party obligations we have issued or owe. We will pay Heinz fees equal to 10 basis points per year of the sum of the highest balance of the debt obligations with respect to which Heinz is a guarantor and the highest balance of the debt obligations with respect to which Heinz is a co-obligor. Under the terms of a liquidity agreement between Heinz and Heinz Finance, Heinz has agreed to provide or make available to us from time to time loans in an aggregate principal amount of up to $400 million outstanding at any one time, with normal and customary conditions to disbursement for each loan made. Each loan under the liquidity agreement will bear interest at a floating rate per annum equal to the then applicable LIBOR plus 100 basis points. We will pay Heinz a fee of 25 basis points per annum of the amount of loans available but not drawn. 43 MANAGEMENT Directors and Executive Officers Our Board of Directors is composed of four members, one of whom is an Independent Director. An "Independent Director" is a director who is not a current officer or employee of Heinz Finance, Heinz or any affiliate of Heinz or of any other person or persons that, in the, aggregate, own or owns more than 50% of the outstanding common stock of Heinz Finance and who is elected by holders of Heinz Finance's outstanding Series A Preferred Shares and the holders of any Heinz Finance stock expressly being designated by us as being at parity with the Series A Preferred Shares, "Parity Securities," with like voting rights, collectively, the "Voting Parity Securities." Andrew L. Stidd, the initial Independent Director, was named in the Certificate of Designation for the Series A Preferred Shares. Our directors will serve until resignation or removal. There is no current intention to alter the number of directors comprising the Board of Directors, and our Bylaws provide that the Board of Directors may not comprise more than nine members. Our directors and executive officers are:
Positions and offices held with the Company and principal occupations or Other Name Age Director Since employment during the past five years Directorships - ----- ---- -------------- ------------------------------------------ -------------- Leonard A. Cullo.......... 43 September 14, 2000 Director; President since June 14, 2001. Treasurer of Heinz since August 2000, attorney at Heinz from 1991 to August 2000, last serving as Assistant General Counsel. Laura Stein............... 40 September 14, 2000 Vice President and Secretary since June 17, Nash Finch Co. 2001. Senior Vice President and General Counsel of Heinz since January 2000; attorney at the Clorox Company from 1992 to 1999, last serving as Assistant General Counsel - Regulatory Affairs. Andrew L. Stidd........... 44 July 6, 2001 Director, President and Chief Operating Officer Global Securitization Services, LLC since December 1996. Arthur Winkleblack........ 44 January 8, 2002 Director, Vice President, Chief Financial and Accounting Officer since January 8, 2002. Executive Vice President and Chief Financial Officer of Heinz since January 7, 2002; executive of Indigo Capital from 1999 to December 2001; Executive Vice President and Chief Financial Officer of C. Dean Metropoulos & Co. from 1998 to 1999; Chief Financial Officer of Six Flags Entertainment Corporation 1996-1998.
Each director, other than the Independent Director, is an officer or employee of Heinz or an affiliate of Heinz. Compensation of Directors We intend to pay fees to our Independent Director for his service as a director. The Independent Director (and any subsequent additional Independent Director) is entitled to receive annual compensation of $3,500 plus reimbursement of expenses for attendance at each meeting of the Board of Directors. We do not intend to pay fees to directors who are not Independent Directors. 44 Executive Compensation The following table sets forth information concerning the total compensation paid by us (except as discussed below for executive officers Cullo, Winkleblack, Stein, Johnson and Renne) to our executive officers for the periods set forth below.
SUMMARY COMPENSATION TABLE Long-Term Compensation ---------------------- Annual Compensation Awards Payouts ------------------------------------------------ ------ ------- Securities Underlying Other Options /SARs Long-term All Other Annual (No. Incentive Compensation Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Awarded) Payouts ($)(3) - --------------------------- ---- ---------- --------- ---------------- -------- -------- ------ Leonard A. Cullo(1) 2001 $139,320 $62,195 $-- - 0 - $25,132 President Arthur Winkleblack(4) 2001 - 0 - - 0 - -- - 0 - - 0 - - 0 - Vice President, Chief Financial and Accounting Officer Paul F. Renne(5) 2001 315,000 218,259 -- 50,000 - 0 - 143,506 Vice President 2000 289,594 537,253 -- -- - 0 - 61,170 1999 274,357 557,889 106,393 50,000 - 0 - 132,580 Laura Stein(6) 2001 300,000 186,418 62,187 (7) 50,000 - 0 - 34,742 Vice President and Secretary 2000 90,000 153,000 50,000 - 0 - 13,186 William R. Johnson(8) 2001 920,000 721,851 -- 500,000 - 0 - 384,526 (9) Chairman, President and Chief 2000 900,000 1,776,864 -- - 0 - - 0 - 402,911 Executive Officer of Heinz 1999 720,000 2,071,000 172,439 350,000 - 0 - 238,692
- ------------------- (1) Executive officer Cullo is also employed by Heinz and receives a portion of his compensation from Heinz and the remainder from Heinz Finance. (2) No awards of restricted stock were made by Heinz to the executive officers employed by Heinz during the period covered by the Summary Compensation Table. (3) Includes for Messrs. Johnson, Renne and Cullo and Ms. Stein, respectively, the following: (i) amounts contributed by Heinz Finance under the Employees and Retirement and Savings Plan, $307,255, $107,570, $22,682 and $28,304; (ii) amounts attributable to "split dollar" life insurance provided by Heinz Finance, $66,043, $20,720, $2,450 and $6,438; and (iii) the portion of interest accrued (but not currently paid or payable) on deferred compensation above 120% of the applicable federal long-term rate, $9,483, $15,216, $0 and $0. (4) Mr. Winkleblack became an officer of Heinz Finance on January 8, 2002. (5) Mr. Renne resigned from his position at Heinz Finance on January 8, 2002. During the time Mr. Renne held a position at Heinz Finance, he received no direct compensation from Heinz Finance. The annual base salary and annual bonus opportunity for Mr. Renne was determined by the Heinz Management Development and Compensation Committee. Because Mr. Renne was also an executive officer of Heinz and his compensation from Heinz was previously required to be disclosed, his compensation received from Heinz is included for the Heinz fiscal years ended May 3, 2000 and April 28, 1999. (6) Executive officer Stein is also employed by Heinz, and Ms. Stein receives no direct compensation from Heinz Finance. The annual base salary and annual bonus opportunity for Ms. Stein was determined by the Heinz Management Development and Compensation Committee. Ms. Stein became an executive officer of Heinz on January 10, 2000. Because Ms. Stein is an executive officer of Heinz and her compensation from Heinz was previously required to be disclosed, her compensation received from Heinz is included for the Heinz fiscal year ended May 3, 2000. (7) Includes $39,138 in transition expenses for temporary housing rental and travel. 45 (8) Mr. Johnson was not employed by Heinz Finance, but has been included because of his position at Heinz, which pays all of his compensation. The annual base salary and annual bonus opportunity for Mr. Johnson is determined by the Heinz Management Development and Compensation Committee. Because Mr. Johnson is an executive officer of Heinz and his compensation from Heinz was previously required to be disclosed, his compensation received from Heinz is included for the Heinz fiscal years ended May 3, 2000 and April 28, 1999. (9) "All Other Compensation: includes $1,745 in imputed income relating to a split dollar survivorship life insurance retention policy insuring Mr. Johnson and his spouse that was purchased in connection with Mr. Johnson's becoming Chairman of Heinz in September 2000. Upon the death of the last surviving insured, the policy provides for a payment to Mr. Johnson's designated beneficiaries or to a trust established by him of an amount equal to the policy's face value, with Heinz receiving under the policy an amount equal to the grater of the premium paid by Heinz or the policy's cash value. As of May 2, 2001, the cash value of the policy was $3,313,915, and the premium paid by Heinz for the policy was $3,389,414. The premium paid by Heinz is equal to the amount of a deferred compensation award granted to Mr. Johnson under the Heinz Executive Deferred Compensation Plan plus interest, which Mr. Johnson waived. Heinz has agreed to make a separate death benefit available to Mr. Johnson's designated beneficiaries equal to the amount received by Heinz under the policy, minus the Heinz-paid premium. The foregoing insurance policy and Heinz-paid death benefit are subject to vesting, and Mr. Johnson will forfeit any rights under the policy or the Heinz-paid death benefit if he voluntarily terminates employment with Heinz or is terminated for cause prior to September 12, 2003. Option Grants by Heinz in Fiscal Year 2001
Grant Date Individual Grants Value ----------------------------------------------------------------------- ------------- Percent of Number of Total Options Shares Underlying Granted to Grant Date Options Granted Employees Exercise Price Expiration Present Value ----------------- --------- -------------- ---------- ------------- Name (#) (1) in Fiscal Year ($/Share) Date ($) (2) Leonard A. Cullo 15,000 0.31% $37.0625 9/12/10 $127,950 Arthur Winkleblack(3) -0- -0- -0- -0- -0- Paul F. Renne 50,000 1.04% $37.0625 9/12/10 426,500 Laura Stein 50,000 1.04% $37.0625 9/12/10 426,500 William R. Johnson 500,000 10.40% $37.0625 9/12/10 4,265,000
- ------------------- (1) All options were granted on September 12, 2000, pursuant to the terms of Heinz's 2000 Stock Option Plan, relate to Heinz shares and have identical terms. All options vest on September 12, 2003. (2) The estimated grant date present value reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the option grants reflected in the above table include the following: (i) exercise price on the options ($37.0625) equal to the fair market value of the underlying stock on the date of grant; (ii) expected option term of 6.5 years; (iii) dividend yield of 3.8%; (iv) risk-free interest rate of 6.02%; and (v) volatility of 23.5%. The ultimate values of the options will depend on the future market price of Heinz's common stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of Heinz's common stock over the exercise price on the date the option is exercised. (3) Mr. Winkleblack became an officer of Heinz Finance on January 8, 2002 and became an executive officer of Heinz on January 7, 2002. 46 Aggregated Option/SAR Exercises in Fiscal Year 2001 and Fiscal Year-End Option/SAR Value (1)
Number of Securities Underlying Unexercised Value of Unexercised Options/SARs In-the-Money Options/SARs at Fiscal Year-End at Fiscal Year-End ($) (3) ------------------ -------------------------- Shares Acquired on Value Name Exercise (#) Realized ($) (2) Exercisable Unexercisable Exercisable Unexercisable - ---- ------------ ---------------- ----------- ------------- ----------- ------------- Leonard A. Cullo -0- -0- 10,334 27,166 $53,094 $33,969 Arthur Winkleblack(4) -0- -0- -0- -0- -0- -0- Paul F. Renne 102,500 $2,171,826 227,501 449,999 569,122 234,287 Laura Stein -0- -0- -0- 100,000 -0- 165,500 William R. Johnson 137,500 2,520,829 1,408,334 1,616,666 14,076,111 2,342,912
- ------------------- (1) All options are denominated in shares of Heinz. (2) The "Value Realized" is equal to the fair market value of a Heinz share on the date of exercise, less the exercise price, times the number of shares acquired. No Heinz SARs were exercised during the last fiscal year. (3) The "Value of Unexercised In-the-Money Options at Fiscal Year-End" is equal to the fair market value of each Heinz share underlying the options at May 2, 2001 less the exercise price, times the number of options. (4) Mr. Winkleblack became an officer of Heinz Finance on January 8, 2002 and became an executive officer of Heinz on January 7, 2002. Retirement Benefits Most full-time salaried employees in the United States who were hired before January 1, 1993 are entitled to retirement benefits from Plan A of the H. J. Heinz Company Employees' Retirement System, "Plan A." Benefits are based on credited service and five-year average eligible compensation through December 31, 1992, the date on which Plan A was frozen. Heinz has a Supplemental Executive Retirement Plan, the "SERP," which provides additional retirement benefits for eligible executives, including the executive officers Cullo, Winkleblack, Renne and Stein and Mr. Johnson. The SERP was adopted in order to attract and retain executives, and to compensate them for reductions in benefits due to limitations imposed by the Internal Revenue Code. The SERP benefit is a lump sum equal to a multiple of the employee's final average eligible compensation during any five of the last ten years prior to retirement. It is reduced by (i) the lump sum value of the Plan A benefit (if any), and (ii) the value of the employee's Age-Related Company Contribution Account under the Heinz Employees Retirement and Savings Plan and the Heinz Employees Retirement and Savings Excess Plan. The following table shows the estimated maximum retirement benefit from all sources described above, at various combinations of pay and service, stated as an annual pension equivalent beginning at age 65. The pay included in the earnings base is the executive's base salary and annual bonus. As of May 2, 2001, the years of service for executive officers Cullo, Winkleblack, Renne, Stein and Mr. Johnson were, as rounded to the nearest full year, 10, 0, 28, 1 and 19, respectively. 47 Table I--U.S. Retirement Plans
Years of Service ------------------------------------------------------- Average Earnings High Five of Last Ten Years Prior to Retirement 15 20 25 30 35 ---------- ------- ------- ------- ------- ------- $200,000 $52,452 $61,194 $69,936 $78,678 $87,420 400,000 104,904 122,388 139,872 157,356 174,840 450,000 118,017 137,687 157,356 177,026 196,696 500,000 131,130 152,985 174,840 196,696 218,551 600,000 157,356 183,582 209,809 236,035 262,261 700,000 183,582 214,180 244,777 275,374 305,971 800,000 209,809 244,777 279,745 314,713 349,681 900,000 236,035 275,374 314,713 354,052 393,391 1,000,000 262,261 305,971 349,681 393,391 437,101 1,200,000 314,713 367,165 419,617 472,069 524,521 1,400,000 367,165 428,359 489,553 550,747 611,942 1,600,000 419,617 489,553 559,489 629,426 699,362 2,000,000 524,521 611,942 699,362 786,782 874,202 2,500,000 655,652 764,927 874,202 983,478 1,092,753 3,000,000 786,782 917,912 1,049,043 1,180,173 1,311,303
Executive Deferred Compensation Plan Heinz has an Executive Deferred Compensation Plan, "Deferred Compensation Plan," under which contingent retention bonuses may be awarded. During fiscal year 2001, Heinz granted awards under the Deferred Compensation Plan to certain executives. Vesting of the awards will occur on the third anniversary following the date of the award, so long as the executive has not prior to that date voluntarily terminated employment with Heinz or been terminated for cause. Vested awards will be paid in cash following the fifth anniversary date of the award, or, in the case of certain named executive officers, upon retirement. Awards under the Deferred Compensation Plan for fiscal year 2001 include the award described in footnote 3 of the Summary Compensation Table above for Mr. Johnson (subsequently waived as noted below), and $250,000 for Ms. Stein. Messrs. Cullo, Renne and Winkleblack did not participate in this plan. In connection with the split-dollar life insurance arrangement with Mr. Johnson described in footnote 3 of the Summary Compensation Table, Mr. Johnson waived the right to receive the award granted to him during fiscal year 2001 under the Deferred Compensation Plan plus interest in exchange for Heinz's payment of the premium to purchase a split-dollar survivorship insurance policy insuring Mr. Johnson and his spouse as set forth in footnote 3 to the Summary Compensation Table above. The split-dollar life insurance arrangement is subject to the same three-year vesting requirement as applies to awards under the Deferred Compensation Plan. Severance Arrangements Heinz maintains severance agreements with Ms. Stein and Messrs. Johnson and Winkleblack. If an executive's employment is terminated involuntarily other than for cause, or voluntarily for good reason, within two years after a change in control of Heinz, the agreements provide for the lifting of restrictions on outstanding incentive awards, continuation of medical, life insurance and disability coverage for a three-year period, and a lump sum payment equal to three times the sum of the annual salary and bonus of the executive plus a benefit determined by taking into account an additional three years of age and service for purposes of calculating retirement benefits. The agreements also provide that Heinz will reimburse the executive for the impact of excise taxes, if any, which may be imposed under the Internal Revenue Code with respect to certain payments contingent on a change in control. 48 DESCRIPTION OF THE NEW NOTES The Old Notes and the New Notes constitute a separate series of debt securities issued under an Indenture, dated as of July 6, 2001 (the "Indenture"), among Heinz Finance, as Issuer, Heinz, as Guarantor and Bank One, National Association, as Trustee (the "Trustee") and are collectively the notes under the indenture. The following summaries of certain provisions of the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by their reference to, the detailed provisions of the New Notes and the Indenture. Copies of these documents are available from us upon request. General The New Notes will be unsecured obligations of Heinz Finance and will be limited to up to $750,000,000 in aggregate principal amount. The New Notes will be unconditionally and irrevocably guaranteed as to the payment of interest and principal by the Guarantor. The notes due 2012 will accrue interest at the rate of 6.625% per annum in each case from the most recent date to which interest has been paid on the corresponding Old Notes or, if no interest has been paid, from July 6, 2001. Interest on the New Notes is payable semi-annually in arrears on January 15 and July 15 of each year to the persons in whose names the notes are registered at the close of business on the applicable regular record date. Principal on the notes will be payable and the notes will be transferable at the corporate trust office of the Trustee in New York, N.Y. Unless other arrangements are made, interest will be paid by check mailed to the address of the person entitled thereto as it appears in the security register. The New Notes will be issued only in fully registrable form, without coupons, in denominations of $1,000 and any integral multiple thereof. For so long as the New Notes are held solely in book-entry form through the facilities of Depositary Trust Company ("DTC"), the only registered holder of the New Notes will be Cede & Co., as nominee for DTC. It is expected that beneficial interests in the New Notes issued and sold in the United States will trade in the Settlement System of DTC and that beneficial interests in the Notes issued sold outside of the United States will trade through the facilities of the Euroclear system, "Euroclear," and Clearstream Banking, societe anonyme, Luxembourg, "Clearstream, Luxembourg," and secondary market transactions in such beneficial interests will be effected in the Settlement System of DTC. See "Form and Denomination," "Transfer and Exchange," and "Depository Procedures with Respect to Global Notes." Form and Denomination The New Notes will initially be represented by one or more global notes in fully registered form without interest coupons, collectively, the "global note." The New Notes will be issued in denominations of $1,000 and integral multiples thereof. The global note will be deposited with the Trustee as custodian for DTC and registered in the name of DTC or a nominee of DTC. Owners of beneficial interests in any global note will hold such interests pursuant to the procedures and practices of DTC and must exercise any rights in respect of their interests in accordance with those procedures and practices. Such beneficial owners will not be holders, and will not be entitled to any rights under any New Note or the Indenture, with respect to any global note, and Heinz Finance, the Guarantor and the Trustee, and any of their respective agents, may treat DTC as the holder and owner of any global note. See "Depository Procedures with Respect to Global Notes." Except as set forth below, the global notes may be transferred, in whole but not in part, only to another nominee of DTC or to a successor of DTC or its nominee. The New Notes are issuable in bearer form. For a description of the depository procedures with respect to the global notes, see "Depository Procedures with Respect to Global Notes." 49 Optional Redemption Heinz Finance may choose to redeem some or all of the New Notes at any time. If Heinz Finance chooses to do so, it will mail a notice of redemption to the holders of the New Notes not less than 30 days and not more than 60 days before the redemption occurs. The redemption price will be equal to the greater of: o 100% of the principal amount of the New Notes to be redeemed plus accrued interest to the date of redemption, or o the sum of the present values of the Remaining Scheduled Payments on the Notes being redeemed, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points. If Heinz Finance is redeeming less than all of the New Notes, the Trustee will select the particular New Notes to be redeemed by lot or by another method the Trustee deems fair and appropriate. Unless Heinz Finance defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the New Notes or portions thereof called for redemption. Except as described above, the New Notes will not be redeemable by Heinz Finance prior to maturity and will not be entitled to the benefit of any sinking fund. For purposes of calculating the redemption price, the following terms have the meanings set forth below: "Treasury Rate" means the rate per annum equal to the semiannual equivalent yield to maturity (computed as of the second business day immediately preceding the redemption date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date. "Comparable Treasury Issue" means the U.S. treasury security selected by an Independent Investment Banker that would be used, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. "Independent Investment Banker" means one of the Reference Treasury Dealers that Heinz Finance appoints. "Comparable Treasury Price" means: o the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) as of the third business day preceding the redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or o if that release (or any successor release) is not published or does not contain such prices on that business day, (1) the average of the Reference Treasury Dealer Quotations for the redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all quotations obtained. "Reference Treasury Dealer" means each of Goldman, Sachs & Co. (and each of its successors) and three other nationally recognized investment banking firms that are primary U.S. Government securities dealers specified from time to time by Heinz Finance. If, however, any of them ceases to be a primary U.S. Government securities dealer, we will substitute another nationally recognized investment banking firm that is such a dealer. 50 "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and in each case for settlement on the next business day) quoted in writing to the Trustee by such reference treasury dealer as of 3:30 p.m., New York time, on the third business day preceding the redemption date. "Remaining Scheduled Payments" means the remaining scheduled payments of the principal and interest (excluding any interest accrued and paid as of the date of redemption) on each New Note to be redeemed that would be due after the related redemption date but for such redemption. Certain Definitions "Consolidated Net Assets" means total assets after deducting therefrom all current liabilities as set forth on the most recent balance sheet of the Guarantor and its consolidated Subsidiaries and computed in accordance with generally accepted accounting principles. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal Property" means any manufacturing or processing plant or warehouse owned at the date hereof or hereafter acquired by the Guarantor or any Restricted Subsidiary which is located within the United States and the gross book value (including related land and improvements thereon and all machinery and equipment included therein without deduction of any depreciation reserves) of which on the date as of which the determination is being made exceeds 2% of Consolidated Net Assets other than (i) any such manufacturing or processing plant or warehouse or any portion thereof (together with the land on which it is erected and fixtures comprising a part thereof) which is financed by industrial development bonds which are tax exempt pursuant to Section 103 of the Internal Revenue Code (or which receive similar tax treatment under any subsequent amendments thereto or any successor laws thereof or under any other similar statute of the United States), (ii) any property which in the opinion of the board of directors is not of material importance to the total business conducted by the Guarantor as an entirety or (iii) any portion of a particular property which is similarly found not to be of material importance to the use or operation of such property. "Restricted Subsidiary" means a Subsidiary of the Guarantor (i) substantially all the property of which is located, or substantially all the business of which is carried on, within the United States and (ii) which owns a Principal Property. "Subsidiary" means any corporation or limited partnership more than 50% of the outstanding Voting Stock of which, or any limited partnership interests in which, at the time of determination is owned, directly or indirectly, by the Guarantor and/or by one or more other Subsidiaries. "Voting Stock" means capital stock of a corporation of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power upon the occurrence of any contingency). Restrictions on Secured Debt If the Guarantor or any Restricted Subsidiary shall after the date of the Indenture incur or guarantee any evidence of indebtedness for money borrowed, "Debt," secured by a mortgage, pledge or lien, referred to as a "Mortgage," on any Principal Property of the Guarantor or any Restricted Subsidiary, or on any share of stock or Debt of any Restricted Subsidiary, the Guarantor will secure or cause such Restricted Subsidiary to secure the Notes, other than any series of Notes established by or pursuant to a Board Resolution or in one or more supplemental indentures which specifically provide otherwise, equally and ratably with (or, at the option of the 51 Guarantor, prior to) such secured Debt, unless the aggregate amount of all such secured Debt would not exceed 10% of Consolidated Net Assets. The above restrictions will not apply to, and there will be excluded from secured Debt in any computation under such restrictions, Debt secured by (a) Mortgages on property of, or on any shares of stock of or Debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary, (b) Mortgages in favor of the Guarantor or a Restricted Subsidiary, (c) Mortgages in favor of governmental bodies to secure progress, advance or other payments pursuant to any contract or provisions of any statute, (d) Mortgages on property, shares of capital stock or Debt existing at the time of acquisition thereof (including acquisition through merger or consolidation) and purchase money and construction Mortgages which are entered into within time limits specified in the Indenture, (e) Mortgages securing industrial revenue bonds, pollution control bonds or other similar tax-exempt bonds, (f) mechanics' and similar liens arising in the ordinary course of business in respect of obligations not due or being contested in good faith, (g) Mortgages arising from deposits with or the giving of any form of security to any government agency required as a condition to the transaction of business or to the exercise of any privilege, franchise or license, (h) Mortgages for taxes, assessments or governmental charges or levies which are not then due or, if delinquent, are being contested in good faith, (i) Mortgages (including judgment liens) arising from legal proceedings being contested in good faith, (j) Mortgages existing at the date of the Indenture and (k) any extension, renewal or refunding of any Mortgage referred to in the foregoing clauses (a) through (j) inclusive. Merger and Consolidation Each of Heinz Finance and the Guarantor covenants that it will not merge or sell, convey, transfer or lease all or substantially all of its assets unless we are the successor Person or the successor entity is another Person organized under the laws of the United States (including any state thereof and the District of Columbia) which assumes its obligations on the debt securities and under the Indenture and, after giving effect to such transaction, Heinz Finance, the Guarantor or the successor Person would not be in default under the Indenture. Events of Default The Indenture defines "Events of Default" with respect to the debt securities of any series as being one of the following events: (i) default in the payment of any installment of interest on that series for 30 days after becoming due; (ii) default in the payment of principal on that series when due; (iii) default in the deposit of any sinking fund payment when due; (iv) default by Heinz Finance or the Guarantor in the performance or breach of any other covenant or warranty in the Notes of that series or the Indenture (other than a covenant included in the Indenture solely for the benefit of any series of Notes other than that series) for 90 days after notice; (v) certain events of bankruptcy, insolvency or reorganization with respect to Heinz Finance or the Guarantor; (vi) any other Event of Default provided with respect to Notes of that series; or (vii) the Guarantor contests the validity or enforceability of the Guarantee or any obligation under the Guarantee shall not be (or is claimed by the Guarantor not to be) in full force and effect. No sinking fund is provided for the New Notes, and no other Event of Default has been provided with respect to the Notes. If an Event of Default shall occur and be continuing with respect to the debt securities of any series, either the Trustee or the holders of at least 25% in principal amount of the debt securities then outstanding of that series may declare the principal (or such portion thereof as may be specified in an offering memorandum relating to such series) of the debt securities of such series to be due and payable. Under certain conditions, such a declaration may be annulled. The Indenture provides that the Trustee shall, within 90 days after the occurrence of a default known to it, give the holders of debt securities notice of all uncured defaults known to it (the term "default" to mean the events specified above without grace periods); provided, however, that, except in the case of default in the payment of 52 principal of or interest on any Debt Security, the Trustee shall be protected in withholding such notice if it in good faith determines the withholding of such notice is in the interest of the holders of debt securities. Heinz Finance will be required to furnish to the Trustee annually a statement by certain officers of Heinz Finance to the effect that to the best of their knowledge Heinz Finance has complied with all of its conditions and covenants under the Indenture or, if Heinz Finance has not so complied, specifying each such default. The holders of a majority in principal amount of the outstanding debt securities of any series will have the right, subject to certain limitations, to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the debt securities of such series, and to waive certain defaults with respect thereto. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee shall exercise such of its rights and powers under the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any of the holders of debt securities unless they shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request. Modification of the Indenture With certain exceptions, the Indenture may be modified or amended with the consent of the holders of not less than a majority in principal amount of the outstanding debt securities of each series affected by the modification; provided, however, that no such modification or amendment may be made, without the consent of the holder of each debt security affected, which would (i) reduce the principal amount of or the interest on any debt security, change the stated maturity of the principal of, or any installment of principal of or interest on, any debt security, or the other terms of payment thereof, or (ii) reduce the above-stated percentage of debt securities, the consent of the holders of which is required to modify or amend the Indenture, or the percentage of debt securities of any series, the consent of the holders of which is required to waive compliance with certain provisions of the Indenture or to waive certain past defaults. Defeasance and Discharge The New Notes will be subject to defeasance and discharge and to defeasance of certain obligations as described below. The Indenture provides that Heinz Finance may elect, with respect to the debt securities of any series, either: (i) to terminate (and be deemed to have satisfied) any and all obligations in respect of such debt securities (except for certain obligations to register the transfer or exchange of debt securities, to replace stolen, lost or mutilated debt securities, to maintain paying agencies and hold monies for payment in trust and, if so specified with respect to the debt securities of a certain series, to pay the principal of (and premium, if any) and interest, if any, on such specified debt securities); or (ii) to be released from its obligations with respect to such debt securities under Section 1004 of the Indenture (being the restrictions described above under "Restrictions on Secured Debt"); in either case on the 91st day after the deposit with the Trustee, in trust, of money and/or U.S. Government Obligations (as defined) which through the payment of interest and principal thereof in accordance with their terms will provide money in an amount sufficient to pay any installment of principal (and premium, if any) and interest, if any, on and any mandatory sinking fund payments in respect of such debt securities on the stated maturity of such payments in accordance with the terms of the Indenture and such debt securities. Such a trust may be established only if, among other things, Heinz Finance has delivered to the Trustee an Opinion of Counsel (who may be counsel to Heinz Finance) to the effect that, based upon applicable Federal income tax law or a ruling published by the 53 United States Internal Revenue Service, such a defeasance and discharge will not be deemed, or result in, a taxable event with respect to holders of such debt securities. If so specified with respect to the Notes of a series, such a trust may be established only if establishment of the trust would not cause the debt securities of any such series listed on any nationally recognized securities exchange to be de-listed as a result thereof. Concerning the Trustee Bank One, National Association, is the Trustee under the Indenture and has been appointed by Heinz Finance as initial security registrar with regard to the New Notes. Heinz Finance currently does, and from time to time in the future may, maintain lines of credit and have customary banking relationships with the Trustee. The Trustee currently serves as trustee for certain debt securities of the Guarantor and Heinz Finance, including the Old Notes. In addition, the Trustee may serve as Trustee for other debt securities issued by Heinz Finance from time to time. Guarantees The New Notes are guaranteed by Heinz. Heinz will unconditionally and irrevocably guarantee the due and punctual payment of principal of and interest, including any additional amounts, on the New Notes when the same shall become due and payable whether at maturity, by declaration of acceleration or otherwise. Transfer and Exchange At the option of the holder upon written request, and subject to the terms of the Indenture, any New Note will be exchangeable at any time into an equal aggregate principal amount of New Notes of different authorized denominations provided that any applicable transfer restrictions are satisfied. New Notes may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed) or exchange, at the office of any transfer agent, the "security registrar," without service charge, but, in the case of a transfer, upon payment of any taxes and other governmental charges as described in the Indenture. Any registration of transfer or exchange will be effected upon the transfer agent or the security registrar, as the case may be, being satisfied with the documents of title and identity of the person making the request, and subject to such reasonable regulations as Heinz Finance may from time to time agree upon with the transfer agents and the security registrar, all as described in the Indenture. Subject to the applicable transfer restrictions, Notes may be transferred in whole or in part in authorized denominations. Heinz Finance has initially appointed the Trustee as security registrar and transfer agent, acting through its Corporate Trust Office in the Borough of Manhattan, The City of New York. Heinz Finance reserves the right to vary or terminate the appointment of the security registrar or of any transfer agent or to appoint additional or other transfer agents or to approve any change in the office through which any security registrar of any transfer agent acts, provided that there will at all times be a security registrar in and a transfer agent in the Borough of Manhattan, The City of New York. Purchase and Cancellation Heinz Finance, the Guarantor or any subsidiary may at any time and from time to time purchase New Notes at any price in the open market or otherwise. All securities surrendered for payment, redemption, repurchase, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All securities so delivered to the Trustee shall be cancelled promptly by the Trustee. No securities shall be authenticated in lieu of or in exchange for any securities cancelled as provided in the Indenture. 54 Title With respect to any New Note, Heinz Finance, the Guarantor, the Trustee, the paying agent and any other agent of Heinz Finance, the Guarantor or the Trustee may treat the Person in whose name such New Note is registered as the owner thereof for the purpose of receiving payment thereof and for all other purposes whatsoever. Notices Notices to holders of New Notes will be given by mail to the addresses of such holders as they appear in the Security Register. Such notices will be deemed to have been given when mailed. Replacement of Notes New Notes that become mutilated, destroyed, stolen or lost will be replaced by Heinz Finance at the expense of the holder upon delivery to the Trustee of the mutilated Notes or evidence of the loss, theft or destruction thereof satisfactory to Heinz Finance and the Trustee. In the case of a lost, stolen or destroyed New Note, indemnity satisfactory to the Trustee and Heinz Finance may be required at the expense of the holder of such New Note before a replacement New Note will be issued. Payment of Stamp and Other Taxes Heinz Finance shall pay all stamp and other duties, if any, which may be imposed by the United States or the United Kingdom or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance, transfer, exchange or conversion of the New Notes. Heinz Finance will not be required to make any payment with respect to any other tax, assessment or governmental charge imposed by any government or any political subdivision thereof or taxing authority therein. Depository Procedures with Respect to Global Notes With respect to the global notes, DTC has advised Heinz Finance as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised Heinz Finance that pursuant to procedures established by it, (i) upon deposit of the global notes, DTC will credit the accounts of Participants designated by the Purchasers with portions of the principal amount of the global notes and (ii) ownership of such interests in the global notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the global notes). Investors in the global note within the United States may hold their interests therein directly through DTC, if they are Participants in such system, or indirectly through organizations (including Euroclear and Clearstream, Luxembourg) that are Participants in such system. Investors in the global notes, outside of the United States, may 55 hold interests therein through Euroclear or Clearstream, Luxembourg or organizations other than Euroclear and Clearstream, Luxembourg that are Participants in the DTC system. Euroclear and Clearstream, Luxembourg will hold interests in the any global note on behalf of their Participants through customers' securities accounts in their respective names on the books of their respective depositories. The depositories, in turn, will hold such interests in such global note in customers' securities accounts in the depositaries' names on the books of DTC. All interests in a global note, including those held through Euroclear or Clearstream, Luxembourg, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream, Luxembourg may also be subject to the procedures and requirements of such system. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a global note to such persons may be limited to that extent. Because DTC can act only on behalf of its Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having beneficial interests in a global note to pledge such interests to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. Except as described above under "--Transfer and Exchange," owners of Interests in the Registered global notes will not have Notes registered in their names, will not receive physical delivery of Notes in certificated form and will not be considered the registered owners or holders thereof under the Indenture for any purpose. DTC has advised Heinz Finance that its current practice, upon receipt of any payment in respect of interests in securities such as the global notes (including principal and interest) held by it or its nominee, is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security such as the global notes as shown on the records of DTC unless DTC has reason to believe it will not receive payment on such payment date. Payments by the Participants and the Indirect Participants to the beneficial owners of New Notes will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers registered in "street name." Such payments will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee, Heinz Finance or the Guarantor. Neither Heinz Finance, the Guarantor nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the New Notes, and Heinz Finance, the Guarantor and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee as the registered owner of the global notes for all purposes. Transfers of beneficial interests in the global note between Participants in DTC will be effected in accordance with DTC's procedures, and such beneficial interests will trade in DTC's Settlement System; and consequently, secondary market trading activity in such interests will settle in immediately available funds. Transfers of beneficial interests in the global notes between participants in Euroclear and Clearstream, Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures, whereas cross-market transfers of such interests (including by DTC Participants other than Euroclear and Clearstream, Luxembourg) will be subject to considerations described below. Cross-market transfers with respect to the global notes between the Participants in DTC, on the one hand, and Euroclear or Clearstream, Luxembourg participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depository; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparts in such system. Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant global note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream, Luxembourg participants may not deliver instructions directly to the depositories for Euroclear or Clearstream, Luxembourg. 56 Because of time zone differences, the securities account of a Euroclear or Clearstream, Luxembourg participant purchasing an interest in a global note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream, Luxembourg participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream, Luxembourg) immediately following the settlement date of DTC. Cash received in Euroclear or Clearstream, Luxembourg as a result of sales of interests in a global note by or through a Euroclear or Clearstream, Luxembourg participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day for Euroclear or Clearstream, Luxembourg following DTC's settlement date. DTC has advised Heinz Finance that it will take any action permitted to be taken by a holder of New Notes only at the direction of one or more Participants to whose account with DTC interests in the global notes are credited and only in respect of such portion of the aggregate principal amount of the New Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the New Notes, DTC reserves the right to exchange the global notes for New Notes in certificated form, and to distribute such Notes to its Participants. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of beneficial ownership interests in the global notes among Participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of Heinz Finance, the Guarantor, the Trustee nor any of their respective agents will have any responsibility for the performance by DTC, its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations, including maintaining, supervising or reviewing the records relating to, or payments made on account of, beneficial ownership interests in global notes. Governing Law The Indenture is, and the New Notes will be, governed by and construed in accordance with the laws of the State of New York. 57 THE EXCHANGE OFFER Purpose of the Exchange Offer The Old Notes were delivered by us on July 6, 2001 to the initial purchasers pursuant to a purchase agreement dated June 27, 2001 between us, Heinz and the initial purchasers. The initial purchasers subsequently sold the Old Notes to "qualified institutional buyers," as defined in Rule 144A under the Securities Act, in reliance on Rule 144A and outside the United States in accordance with Regulation S under the Securities Act. As a condition to the initial sale of the Old Notes, we, Heinz and the initial purchasers entered into the exchange and registration rights agreement. Pursuant to the exchange and registration rights agreement, we agreed that we would: o file with the Commission within 270 days after the Old Notes closing date, which is the date we delivered the Old Notes to the initial purchasers, a registration statement under the Securities Act relating to a registered exchange offer; o use our reasonable best efforts to cause such registration statement to become effective under the Securities Act within 330 days after the Old Notes closing date; and o keep the exchange offer open for at least 30 days beginning and ending within 45 days of the registration statement becoming effective. During this period, Heinz Finance agrees to exchange the Old Notes for all New Notes properly surrendered and not withdrawn before the expiration date of this period. If Commission interpretations are changed on or before the exchange offer such that the Notes received by each holder, except for certain restricted holders, are not or would not be transferable without restriction, and the exchange offer has not been completed within 375 days after the sale of the Old Notes or the exchange offer is not available to any holder of Notes, Heinz Finance will file a shelf registration statement for resale of the Notes within at least 30 days of such obligation arising. Heinz Finance will use its reasonable best efforts to cause the shelf registration statement to become effective no later than 60 days after filing and to keep the registration effective for up to two years after the shelf registration statement becomes effective. Heinz Finance will provide to the holders of the Old Notes copies of a prospectus, notify such holders when the resale registration for the Old Notes has become effective and take certain other actions as are required to permit unrestricted sales of the Old Notes. A holder of the Old Notes that sells such Old Notes pursuant to the resale registration generally would be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to the purchaser, will be subject to certain of the civil liability provisions of the Securities Act in connection with such sales and will be bound by the provisions of the exchange and registration rights agreement that are applicable to such holder (including certain indemnification obligations). If within the time required by the exchange and registration rights agreements, Heinz Finance does not complete this exchange offer or, if applicable, does not register the Old Notes for shelf resale, Heinz Finance will generally be deemed to be in registration default. Holders of Old Notes will accrue special additional interest for the period in which Heinz Finance is deemed to be in default. This special interest will accrue as follows; if, within a period of 330 days following the date of original issuance of the Old Notes, the registration statement with regard to the New Notes is not declared effective by the Commission, this special interest will accrue at an annual rate of 0.25% from and including the first day following the end of this period and will cease to accrue on the date on which the registration statement is declared effective by the Commission. Additionally, if, within a period of 375 days following the date of original issuance of the Old Notes, Heinz Finance does not complete the exchange offer, special interest will accrue at an annual rate of 0.50% from and including the first day following the end of this period and will cease to accrue on the date on which the exchange offer is completed. At no time will the aggregate of any such special interest described above accrue at an annual rate in excess of 0.50%. 58 Terms of the Exchange Offer For each of the Old Notes properly surrendered and not withdrawn before the expiration date, Heinz Finance will issue a New Note having a principal amount equal to that of the surrendered Old Note. The form and terms of the New Notes will be the same as the form and terms of the Old Notes except that the New Notes will be registered for the exchange offer under the Securities Act and, therefore, the New Notes will not bear legends restricting the transfer of the New Notes; and holders of the New Notes will not be entitled to any of the registration rights of the holders of Old Notes under the exchange and registration rights agreement, which will terminate upon the consummation of the exchange offer. The New Notes will evidence the same indebtedness as the Old Notes, which they replace, and will be issued under, and be entitled to the benefits of, the same indenture, which authorized the issuance of the Old Notes. As a result, both series of notes will be treated as a single class of notes under the Indenture. Heinz Finance intends to conduct the exchange offer in accordance with the provisions of the exchange and registration rights agreement and the applicable requirements of the Exchange Act and the related Commission rules and regulations. Under existing Commission interpretations, the New Notes would generally be freely transferable after the exchange offer without further registration under the Securities Act, except that broker-dealers receiving the New Notes in the exchange offer will be subject to a prospectus delivery requirement with respect to resale of those New Notes. Heinz Finance bases its view on interpretations by the staff of the Commission in no-action letters issued to other issuers in exchange offers like ours. Heinz Finance has not, however, asked the Commission to consider this particular exchange offer in the context of a no-action letter. Therefore, holders of Old Notes cannot be sure that the Commission will treat the exchange offer in the same way it has treated other exchange offers in the past. A broker-dealer that has bought Old Notes for market-marking or other trading activities has to deliver a prospectus in order to resell any New Notes it has received for its own account in the exchange. The prospectus may be used by a broker-dealer to resell any of its New Notes. Heinz Finance has agreed in the exchange and registration rights agreement to send a prospectus to any broker-dealer that requests copies in the notice and questionnaire for a period of up to 180 days after the registration statement relating to this exchange offer is declared effective. Expiration Date; Extensions; Amendments The term "expiration date" shall mean 5:00 p.m., New York City time, on o , 2002, unless we, in our sole discretion, extend the exchange offer, in which case the term "expiration date" shall mean the latest date and time to which the exchange offer is extended. If we determine to extend the exchange offer, we will, prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date: o notify the exchange agent of any extension by oral or written notice; and o issue a press release or other public announcement which shall include disclosure of the approximate number of Old Notes deposited to date. We reserve the right, in our sole discretion: o to delay accepting any Old Notes; o to extend the exchange offer; or 59 o if, in the opinion of our counsel, the consummation of the exchange offer would violate any applicable law, rule or regulation or any applicable interpretation of the staff of the Commission, to terminate or amend the exchange offer by giving oral or written notice of such delay, extension, termination or amendment to the exchange agent. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a press release or other public announcement thereof. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders of the Old Notes, and we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the holders, if the exchange offer would otherwise expire during such five to ten business day period. Without limiting the manner in which we may choose to make a public announcement of any delay, extension, amendment or termination of the exchange offer, we shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. Interest on the New Notes The New Notes will accrue interest at the rate of 6.625% per annum for the notes due 2011 from the most recent date to which interest has been paid on the corresponding Old Notes or, if no interest has been paid, from July 6, 2001, payable semi-annually in arrears on January 15 and July 15 of each year, commencing on January 15, 2002. Resale of the New Notes With respect to the New Notes, based upon interpretations by the staff of the Commission set forth in certain no-action letters issued to third parties, we believe that a holder who exchanges Old Notes for New Notes in the ordinary course of business, who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in a distribution of the New Notes, and who is not an "affiliate" of ours within the meaning of Rule 405 of the Securities Act, will be allowed to resell New Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the New Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. If any holder acquires New Notes in the exchange offer for the purpose of distributing or participating in the distribution of the New Notes, such holder: o cannot rely on the position of the staff of the Commission enumerated in such no-action letters issued to third parties; and o must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes acquired by such broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of any New Notes received in exchange for Old Notes acquired by such broker-dealer as a result of market-making or other trading activities. We will make this prospectus, as it may be amended or supplemented from time to time, available to any such broker- dealer that requests copies of such prospectus in the letter of transmittal for use in connection with any such resale for a period of up to 180 days after the expiration date. See "Plan of Distribution." 60 Procedures for Tendering To tender in the exchange offer, a holder of Old Notes must either: o complete, sign and date the letter of transmittal or facsimile thereof, have the signatures thereon guaranteed if required by the letter of transmittal, and mail or otherwise deliver such letter of transmittal or such facsimile to the exchange agent; or o if such Old Notes are tendered pursuant to the procedures for book-entry transfer set forth below, a holder tendering Old Notes may transmit an agent's message (as defined below) to the exchange agent in lieu of the letter of transmittal, in either case for receipt on or prior to the expiration date. In addition: o certificates for such Old Notes must be received by the exchange agent along with the letter of transmittal; o a timely confirmation of a book-entry transfer (a "book-entry confirmation") of such Old Notes into the exchange agent's account at DTC pursuant to the procedure for book-entry transfer described below, along with the letter of transmittal or an agent's message, as the case may be, must be received by the exchange agent on or prior to the expiration date; or o the holder must comply with the guaranteed delivery procedures described below. The term "agent's message" means a message, transmitted to the exchange agent's account at DTC and received by the exchange agent and forming a part of the book-entry confirmation, which states that such account has received an express acknowledgment from the tendering participant that such participant has received and agrees to be bound by the letter of transmittal and that Heinz Finance may enforce the letter of transmittal against such participant. To be tendered effectively, the letter of transmittal and other required documents, or an agent's message in lieu thereof, must be received by the exchange agent at the address set forth below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration date. The tender by a holder that is not withdrawn prior to the expiration date will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. The method of delivery of Old Notes, the letter of transmittal and all other required documents to the exchange agent is at the election and risk of the holder. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service, properly insured. In all cases, sufficient time should be allowed to assure delivery to the exchange agent before the expiration date. Do not send the letter of transmittal or any Old Notes to us. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the above transactions for such holders. Any beneficial owner(s) of the Old Notes whose Old Notes are held through a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such intermediary promptly and instruct such intermediary to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing the letter of transmittal and delivering such owner's Old Notes: o make appropriate arrangements to register ownership of the Old Notes in such owner's name; or o obtain a properly completed bond power from the registered holder. 61 The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal described below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by an eligible institution unless the Old Notes tendered pursuant thereto are tendered: o by a registered holder who has not completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on the letter of transmittal; or o for the account of an eligible institution. In the event that signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by an eligible institution, which is a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an "eligible guarantor institution" (within the meaning of Rule 17Ad-15 under the Exchange Act) which is a member of one of the recognized signature guarantee programs identified in the letter of transmittal. If the letter of transmittal is signed by a person other than the registered holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder exactly as such registered holder's name appears on such Old Notes. In connection with any tender of Old Notes in definitive certificated form, if the letter of transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal. The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may utilize DTC's Automated Tender Offer Program to tender Old Notes. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be determined by us in our sole discretion, which determination will be final and binding. We reserve the absolute right: o to reject any and all Old Notes not properly tendered and any Old Notes our acceptance of which would, in the opinion of our counsel, be unlawful; and o to waive any defects, irregularities or conditions of tender as to particular Old Notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities in connection with tenders of Old Notes, neither we, the exchange agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. While we have no present plan to acquire any Old Notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any Old Notes that are not tendered pursuant to the exchange offer, we reserve the right in our sole discretion to purchase or make offers for any Old Notes that remain outstanding subsequent to the expiration date and, to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer. 62 By tendering Old Notes pursuant to the exchange offer, each holder of Old Notes will represent to us that, among other things: o the New Notes to be acquired by such holder of Old Notes in connection with the exchange offer are being acquired by such holder in the ordinary course of business of such holder; o such holder is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the New Notes; o such holder acknowledges and agrees that any person who is participating in the exchange offer for the purpose of distributing the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the New Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters; o such holder understands that a secondary resale transaction, described above, and any resales of New Notes obtained by such holder in exchange for Old Notes acquired by such holder directly from us should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission; and o such holder is not an "affiliate", as defined in Rule 405 under the Securities Act, of ours. If the holder is a broker-dealer that will receive New Notes for such holder's own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, such holder will be required to acknowledge in the letter of transmittal that such holder will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Return of Old Notes In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of: o Old Notes or a timely book-entry confirmation of such Old Notes into the exchange agent's account at DTC; and o a properly completed and duly executed letter of transmittal and all other required documents, or an agent's message in lieu thereof. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if Old Notes are withdrawn or are submitted for a greater principal amount than the holders desire to exchange, such unaccepted, withdrawn or otherwise non-exchanged Old Notes will be returned without expense to the tendering holder thereof (or, in the case of Old Notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described below, such Old Notes will be credited to an account maintained with DTC) as promptly as practicable. Book-Entry Transfer The exchange agent will make a request to establish an account with respect to the Old Notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in DTC may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. However, 63 although delivery of Old Notes may be effected through book-entry transfer at DTC, the letter of transmittal or facsimile thereof, with any required signature guarantees and any other required documents, or an agent's message in lieu of a letter of transmittal, must, in any case, be transmitted to and received by the exchange agent at the address set forth below under "--Exchange Agent" on or prior to the expiration date or pursuant to the guaranteed delivery procedures described below. Guaranteed Delivery Procedures If a holder of the Old Notes desires to tender such Old Notes and the Old Notes are not immediately available or the holder cannot deliver its Old Notes (or complete the procedures for book-entry transfer), the letter of transmittal or any other required documents to the exchange agent prior to the expiration date, a holder may effect a tender if: o the tender is made through an eligible institution; o prior to the expiration date, the exchange agent receives from such eligible institution (by facsimile transmission, mail or hand delivery) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by us setting forth the name and address of the holder, the certificate number(s) of such Old Notes (if applicable) and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the expiration date: (i) the letter of transmittal (or a facsimile thereof), or an agent's message in lieu thereof, (ii) the certificate(s) representing the Old Notes in proper form for transfer or a book-entry confirmation, as the case may be, and (iii) any other documents required by the letter of transmittal, will be deposited by the eligible institution with the exchange agent; and o such properly executed letter of transmittal (or facsimile thereof), or an agent's message in lieu thereof, as well as the certificate(s) representing all tendered Old Notes in proper form for transfer or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the expiration date. Upon request to the exchange agent, a form of Notice of Guaranteed Delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. Withdrawal of Tenders Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date. To withdraw a tender of Old Notes in the exchange offer, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth herein prior to the expiration date. Any such notice of withdrawal must: o specify the name of the person having deposited the Old Notes to be withdrawn; 64 o identify the Old Notes to be withdrawn (including the certificate number or numbers, if applicable, and principal amount of such Old Notes or, in the case of Old Notes transferred by a book-entry transfer, the name and number of the account at DTC to be credited); and o be signed by the holder in the same manner as the original signature on the letter of transmittal by which such Old Notes were tendered (including any required signature guarantees or, in the case of Old Notes transferred by book-entry transfer, be transmitted by DTC and received by the exchange agent in the same manner as the agent's message transferring the Old Notes). If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Old Notes and otherwise comply with the procedures of DTC. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by us, in our sole discretion, which determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no New Notes will be issued with respect thereto, unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the expiration date. Exchange Agent Bank One Trust Company has been appointed as exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for a copy of the Notice of Guaranteed Delivery should be directed to the exchange agent addressed as follows: By Mail or Hand/Overnight Delivery: By Facsimile: Bank One Trust Company 312-407-8853 One North State Street Chicago, Illinois 60602 Confirm by Telephone: Attention: Exchanges 800-524-9472 Bank One Trust Company is an affiliate of the trustee under the Indenture. Fees and Expenses The expenses of soliciting tenders will be borne by us. The principal solicitation is being made by mail. Additional solicitation may be made by facsimile transmission, telephone or other electronic means or in person by our officers and regular employees or those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The expenses to be incurred in connection with the exchange offer, including registration fees, fees and expenses of the exchange agent and the trustee, accounting and legal fees, and printing costs, will be paid by us. We will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the Old Notes pursuant to the 65 exchange offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Consequence of Failure to Exchange Participation in the exchange offer is voluntary. Holders of the Old Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. Old Notes that are not exchanged for the New Notes pursuant to the exchange offer will remain "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act. Accordingly, such Old Notes may not be offered, sold, pledged or otherwise transferred except: o to a person whom the seller reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A; o in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S under the Securities Act; o pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available); o pursuant to an effective registration statement under the Securities Act; or o pursuant to another available exemption from the registration requirements of the Securities Act, and, in each case, in accordance with all other applicable securities laws. TAXATION The exchange of Old Notes for New Notes in the exchange offer will not constitute a taxable transaction for United States federal income tax purposes and the New Notes will be treated as a continuation of the investment in the Old Notes. The holder will not recognize taxable gain or loss as a result of the exchange and will have the same basis in the New Notes as in the Old Notes immediately before the exchange. Concerning the tax consequences arising under state, local, or foreign laws of the exchange of Old Notes for New Notes holders should consult their own tax advisors. 66 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account in exchange for Old Notes acquired by the broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of those New Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of New Notes received in exchange for such Old Notes. For a period of up to 180 days after the expiration date, we will make this prospectus, as amended or supplemented, available to any such broker-dealer that requests copies of this prospectus in the letter of transmittal for use in connection with any such resale. We will not receive any proceeds from any sale of New Notes by broker-dealers or any other persons. New Notes received by participating broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions or through the writing of options on the New Notes, or a combination of these methods of resale, at market prices prevailing at the time of resale or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such participating broker-dealer that resells the New Notes that were received by it for its own account pursuant to the exchange offer. Any broker or dealer that participates in a distribution of New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by these persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 67 NOTICE TO INVESTORS Based on interpretations of the staff of the Commission set forth in no-action letters issued to third parties, we believe that New Notes issued pursuant to the exchange offer in exchange for Old Notes may be offered for resale, resold, and otherwise transferred by a holder (other than broker-dealers, as set forth below, and any holder that is an "affiliate" of Heinz Finance within the meaning of Rule 405 under the Securities Act) without further registration under the Securities Act and without delivery to prospective purchasers of a prospectus pursuant to the provisions of the Securities Act, provided that the holder is acquiring the New Notes in the ordinary course of its business, is not participating and has no arrangement or understanding with any person to participate in the distribution of the New Notes. Eligible holders wishing to accept the exchange offer must represent to us in the letter of transmittal that these conditions have been met. See "The Exchange Offer--Procedures for Tendering." Each broker-dealer who holds Old Notes acquired for its own account as a result of market-making or other trading activities and who receives New Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of New Notes. The letter of transmittal states that by acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with the resales of New Notes received for the broker-dealer's own account in exchange for Old Notes where Old Notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. For a period of up to 180 days after the expiration date, we will make this prospectus available to those broker-dealers (if they so request in the letter of transmittal) for use in connection with those resales. See "Plan of Distribution." The New Notes constitute new issues of securities with no established public trading market. We do not intend to apply for listing of the New Notes on any securities exchange or for inclusion of the New Notes in any automated quotation system. There can be no assurance that an active public market for the New Notes will develop or as to the liquidity of any market that may develop for the New Notes, the ability of holders to sell the New Notes, or the price at which holders would be able to sell the New Notes. Future trading prices of the New Notes will depend on many factors, including among other things, prevailing interest rates, our operating results and the market for similar securities. Any Old Notes not tendered or accepted in the exchange offer will remain outstanding. To the extent that Old Notes are tendered and accepted in the exchange offer, your ability to sell untendered, and tendered but unaccepted, Old Notes could be adversely affected. Following consummation of the exchange offer, the holders of Old Notes will continue to be subject to the existing restrictions on transfer thereof and we will have no further obligation to those holders, under the exchange and registration rights agreement, to provide for the registration under the Securities Act of the Old Notes. There may be no trading market for the Old Notes. We will not receive any proceeds from, and have agreed to bear the expenses of, the exchange offer. No underwriter is being used in connection with the exchange offer. The exchange offer is not being made to, nor will we accept surrenders for exchange from, holders of Old Notes in any jurisdiction in which the exchange offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of those jurisdictions. VALIDITY OF THE NEW NOTES The validity of the New Notes will be passed upon for us by Davis Polk & Wardwell, New York, New York. 68 EXPERTS The combined and consolidated financial statements of Heinz Finance and Heinz as of May 2, 2001 and May 3, 2000 and for each of the three fiscal years ended May 2, 2001, either included or incorporated herein by reference to Heinz's Annual Report on Form 10-K for the fiscal year ended May 2, 2001 have been so either included or incorporated by reference in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 69 INDEX TO FINANCIAL STATEMENTS Page ---- Report of Independent Accountants on the Combined Statements of Assets and Liabilities of the U.S. Group as of May 2, 2001 and May 3, 2000 and the related Combined Statements of Operations and Cash Flows for each of the three years ended May 2, 2001....................F-2 Combined Statement of Assets and Liabilities as of May 2, 2001 and May 3, 2000.................................................................F-3 Combined Statements of Operations for the three years ended May 2, 2001.....F-4 Combined Statements of Cash Flows for the three years ended May 2, 2001.................................................................F-5 Notes to Combined Financial Statements .....................................F-6 Consolidated and Combined Statements of Operations for the nine months ended January 30, 2002 and January 31, 2001 (unaudited).....................F-23 Condensed Consolidated and Combined Balance Sheets as of January 30, 2002 and May 2, 2001 (unaudited).................................................F-24 Condensed Consolidated and Combined Statements of Cash Flows for the nine months ended January 30, 2002 and January 31, 2001 (unaudited).........F-25 Notes to Condensed Consolidated and Combined Financial Statements (unaudited).................................................................F-26 F-1 Report of Independent Accountants To the Board of Directors of H. J. Heinz Finance Company and H. J. Heinz Company: In our opinion, the accompanying combined statements of assets and liabilities and the related combined statements of operations and cash flows present fairly, in all material respects, the financial position of U.S. Group of H. J. Heinz Company (the "U.S. Group") at May 2, 2001 and May 3, 2001, and the results of its operations and its cash flows for each of the three years in the period ended May 2, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania August 27, 2001 F-2 U.S. Group Combined Statements of Assets and Liabilities May 2, 2001 and May 3, 2000
May 2, 2001 May 3, 2000 ----------- ----------- (In thousands) Assets Current assets: Cash and cash equivalents............................ $ 393 & 2,322 Receivables, (net of allowances 2001--$2,606; 2000--$6,597) .................................... 506,447 314,762 Due from related parties............................ 75,429 35,830 Short-term notes receivable from related parties.... -- 505,995 Inventories: Finished goods and work-in-process................ 515,315 594,814 Packaging material and ingredients................ 139,855 131,914 Deferred income taxes............................... 50,042 62,757 Prepaid expenses and other current assets........... 49,428 61,905 ---------- ---------- Total current assets............................ 1,336,909 1,710,299 Property, plant and equipment: Land................................................ 18,684 11,544 Buildings and leasehold improvements................ 399,802 360,794 Equipment, furniture and other...................... 1,190,028 1,359,972 Less accumulated depreciation....................... (738,731) (756,398) ---------- ---------- Total property, plant and equipment, net........ 869,783 975,912 Other noncurrent assets: Long-term notes receivable from related parties..... 35,000 1,019,250 Investments in related parties...................... 1,895,245 11,487 Other investment.................................... 201,438 131,419 Goodwill (net of amortization: 2001--$226,085; 2000--$213,343)................................... 1,108,898 1,074,188 Other intangible assets (net of amortization: 2001--$143,375; 2000--$133,136)................... 99,396 99,417 Other noncurrent assets.............................. 54,822 46,484 ---------- ---------- Total other noncurrent assets................... 3,394,799 2,382,245 ---------- ---------- Total assets.................................... $5,601,491 $5,068,456 ========== ========== Liabilities and Parent Company's Investment Current liabilities: Portion of long-term debt due within one year....... $ 29,833 $ 2,998 Accounts payable.................................... 321,222 304,421 Due to related parties.............................. 96,221 63,500 Salaries and wages ................................. 14,407 13,629 Accrued marketing .................................. 60,292 107,559 Accrued restructuring costs......................... 42,405 34,724 Other accrued liabilities........................... 107,280 78,353 ---------- ---------- Total current liabilities....................... 671,660 605,184 Long-term debt....................................... 23,932 33,071 Deferred income taxes................................ 205,134 215,877 Deferred income...................................... 29,684 7,522 Other................................................ 12,684 8,531 Total long-term debt and other liabilities...... 271,434 265,001 Parent company's investment.......................... 4,658,397 4,198,271 ---------- ----------- Total liabilities and parent company's investment $5,601,491 $5,068,456 ========== ==========
The accompanying notes are an integral part of these financial statements. F-3 U.S. Group Combined Statements of Operations Fiscal Years ended May 2, 2001, May 3, 2000 and April 28, 1999
Fiscal year ended --------------------------------------------------- May 2, 2001 May 3, 2000 April 28, 1999 (52 Weeks) (53 Weeks) (52 Weeks) ----------- ----------- -------------- (in thousands) Sales............................................................ $4,938,197 $4,789,188 $4,687,123 Cost of products sold............................................. 3,085,270 3,013,574 2,991,088 ---------- ---------- ---------- Gross profit...................................................... 1,852,927 1,775,614 1,696,035 Selling, general and administrative expenses...................... 1,285,756 1,071,930 1,020,994 Royalty expense to related parties................................ 129,102 94,347 96,643 ---------- ---------- ---------- Operating income.................................................. 438,069 609,337 578,398 Interest income................................................... 110,979 126,236 129,558 Interest expense.................................................. 10,278 7,138 6,266 Other expenses, net............................................... 21,303 27,896 13,171 ---------- ---------- ---------- Income before income taxes and cumulative effect of accounting change......................................................... 517,467 700,539 688,519 Provision for income taxes........................................ 205,358 252,244 255,762 ---------- ---------- ---------- Income before cumulative effect of accounting change.............. 312,109 448,295 432,757 Cumulative effect of accounting change............................ (5,211) -- -- ---------- ---------- ---------- Net income........................................................ $ 306,898 $ 448,295 $ 432,757 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-4 U.S. Group Combined Statements of Cash Flows Fiscal Years ended May 2, 2001, May 3, 2000 and April 28, 1999
Fiscal year ended --------------------------------------------------- May 2, 2001 May 3, 2000 April 28, 1999 (52 Weeks) (53 Weeks) (52 Weeks) ----------- ----------- -------------- (in thousands) Operating activities: Net income.......................................................... $306,898 $448,295 $432,757 Adjustments to reconcile net income to cash provided by operating activities: Depreciation....................................................... 70,277 90,219 77,192 Amortization....................................................... 51,464 49,467 51,786 Deferred tax provision............................................. 29,417 13,250 35,626 Loss on sale of The All American Gourmet business.................. 94,600 -- -- Cumulative effect of changes in accounting principle............... 5,211 -- -- Provision for restructuring........................................ 257,983 175,737 139,541 Deferred income.................................................... 22,162 (570) (540) Other items, net................................................... (16,816) 9,763 (43,030) Changes in current assets and liabilities, excluding effects of acquisitions and divestitures: Receivables...................................................... (158,331) (52,916) (5,271) Inventories...................................................... 73,329 (100,548) (61,263) Prepaid expenses and other current assets........................ 2,989 (5,912) 2,559 Due from/to related parties...................................... (413,346) (52,773) 232,781 Accounts payable................................................. 10,094 16,341 5,846 Accrued liabilities.............................................. (230,964) (163,654) (38,129) Other............................................................ (27,445) 7,187 (16,385) -------- --------- --------- Cash provided by operating activities.......................... 77,522 433,886 813,470 -------- --------- --------- Investing activities: Capital expenditures............................................... (183,494) (215,404) (122,197) Proceeds from disposals of property, plant and equipment .......... 165,450 4,781 20,450 Acquisitions, net of cash acquired................................. (229,916) (73,923) (23,219) Proceeds from divestitures......................................... 96,524 25,000 -- Investment in The Hain Celestial Group, Inc........................ (79,743) (99,764) -- Other items, net................................................... (827) (34,847) 3,262 -------- --------- --------- Cash used for investing activities............................. (232,006) (394,157) (121,704) -------- --------- --------- Financing activities: Payments on long-term debt......................................... (12,160) (52,110) (45,661) Proceeds from long-term debt....................................... -- 4,344 31,373 Payment of dividends to related parties............................ (350,648) (306,244) (441,653) Net parent advances (settlements).................................. 515,363 313,689 (235,334) -------- --------- --------- Cash provided by (used for) financing activities................. 152,555 (40,321) (691,275) -------- --------- --------- Net (decrease) increase in cash and cash equivalents................ (1,929) (592) 491 Cash and cash equivalents, beginning of year........................ 2,322 2,914 2,423 -------- --------- --------- Cash and cash equivalents, end of year.............................. $ 393 $ 2,322 $ 2,914 ======== ========= =========
The accompanying notes are an integral part of these financial statements. F-5 U.S. Group Notes to Combined Financial Statements (in thousands) 1. Basis of Presentation The accompanying combined financial statements include assets and liabilities and related operations of the U.S. Group, which are included in the consolidated financial statements of Heinz. The U.S. Group includes the following operations /subsidiaries of Heinz: o Heinz USA Division o Foodservice Subsidiaries o Heinz Pet Products o StarKist Seafood o Heinz Frozen Food Company o All American Gourmet o Jameson, Inc. o CMH, Inc. The U.S. Group manufactures and markets an extensive line of processed food products. The U.S. Group's principal products include ketchup, condiments and sauces, frozen food, pet products, soups, beans and pasta meals, tuna and infant food. The preparation of these financial statements include the use of "carve out" and "push down" accounting procedures wherein certain assets, liabilities and expense historically recorded or incurred at the parent company level or an affiliate of Heinz, which related to or were incurred on behalf of the U.S. Group, have been identified and allocated or pushed down as appropriate to reflect the financial results of the U.S. Group for the periods presented. See Note 6 for a further discussion regarding the allocation of Heinz parent company costs. 2. Significant Accounting Policies Fiscal Year The U.S. Group operates on a 52- or 53-week fiscal year ending the Wednesday nearest April 30. Fiscal years for the financial statements included herein ended May 2, 2001, May 3, 2000 and April 28, 1999. Principles of Combination The combined financial statements include the accounts of the U.S. Group and its subsidiaries. All intercompany accounts and transactions have been eliminated. Investments owned less than 50%, where significant influence exists, are accounted for on an equity basis. F-6 U.S. Group Notes to Combined Financial Statements -- (Continued) Use of Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash Equivalents Cash equivalents are defined as highly liquid investments with original maturities of 90 days or less. Inventories Inventories are stated at the lower of cost or market. Cost is determined principally under the average cost method. Property, Plant and Equipment Land, buildings and equipment are recorded at cost. For financial reporting purposes, depreciation is provided on the straight-line method over the estimated useful lives of the assets. Accelerated depreciation methods are generally used for income tax purposes. Expenditures for new facilities and improvements that substantially extend the capacity or useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. When property is retired or otherwise disposed, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. Investments The U.S. Group's Investments balance primarily represents an investment in Weight Watchers International and the U.S. Group's investment in Hain Celestial (see Note 3). Intangibles Goodwill and other intangibles arising from acquisitions are being amortized on a straight-line basis over periods ranging from seven to 40 years. The U.S. Group regularly reviews the individual components of the balances by evaluating the future undiscounted cash flows of the businesses to determine the recoverability of the assets and recognizes, on a current basis, any diminution in value. Parent Company's Investment Heinz's investment represents the original investment by Heinz plus accumulated net income, less dividends, capital contributions, certain intercompany accounts and current federal and state income taxes payable. Revenue Recognition The U.S. Group recognizes revenue when title, ownership and risk of loss pass to the customer. See Recently Adopted Accounting Standards for additional information. Advertising Expenses Advertising costs are generally expensed in the year in which the advertising first takes place. F-7 U.S. Group Notes to Combined Financial Statements -- (Continued) Income Taxes The U.S. Group joins with Heinz in the filing of a consolidated U.S. income tax return and certain state income tax returns. Tax expense for all years includes the effect of certain tax sharing agreements the U.S. Group has with Heinz regarding these consolidated filings. Specifically, Heinz charges (refunds) the U.S. Group at the U.S. statutory rate for its actual taxable income (loss). In addition, Heinz charges the U.S. Group for its share of consolidated state tax expense based on the U.S. Group's share of the state allocation factors. Deferred income taxes result primarily from temporary differences between financial and tax reporting. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. Financial Instruments The U.S. Group uses derivative financial instruments for the purpose of hedging price exposures which exist as part of ongoing business operations. As a policy, the U.S. Group does not engage in speculative or leveraged transactions, nor does the U.S. Group hold or issue financial instruments for trading purposes. See Recently Adopted Accounting Standards for additional information. The cash flows related to financial instruments are classified in the combined statements of cash flows in a manner consistent with those of the transactions being hedged. Recently Adopted Accounting Standards On February 1, 2001, the U.S. Group adopted Statement Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," and its related amendment, Statement of Financial Accounting Standards No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities" (SFAS No. 133). SFAS No. 133 requires that all derivative financial instruments be recorded on the consolidated balance sheet at their fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded each period in earnings or parent company's investment, depending on whether the derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses reported in parent company's investment are included in earnings in the periods in which earnings are affected by the hedged item. Such gains and losses are reported by the U.S. Group on the same line as the underlying hedged item. Gains and losses which represent hedge ineffectiveness are reported by the U.S. Group as other income and expense in the period of change. Prior to the adoption of SFAS No. 133, the U.S. Group accounted for derivative financial instruments that qualified as hedges by recording deferred gains or losses from such instruments as assets or liabilities and recognizing them as part of the cost basis of the underlying hedged transaction. Realized and unrealized gains and losses from financial instruments that did not qualify as hedges were recognized immediately in earnings as other income and expense. On February 1, 2001, the adoption of SFAS No. 133 resulted in a cumulative effect of an accounting change that reduced net income by $0.4 million and increased parent company's investment by $0.1 million. See Note 13 for additional information on the U.S. Group's hedging activities. In Fiscal Year 2001, U.S. Group changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." Under the new accounting method, adopted retroactive to May 4, 2000, the U.S. Group recognizes revenue upon passage of title, ownership and risk of loss to the customer. The cumulative effect of the change on prior years resulted in a charge F-8 U.S. Group Notes to Combined Financial Statements -- (Continued) to income of $4.8 million (net of income taxes of $2.8 million), which has been included in net income for the year ended May 3, 2000. The change did not have a significant effect on revenues or results of operations for the year ended May 2, 2001. The pro forma amounts, assuming that the new revenue recognition method had been applied retroactively to prior periods, were not materially different from the amounts shown in the Combined Statements of Operations for the years ended May 3, 2000 and April 28, 1999. Therefore, these amounts have not been presented. Recently Issued Accounting Standards In May 2000, the Financial Accounting Standards Board Emerging Issues Task Force (the EITF) issued new guidelines entitled "Accounting for Certain Sales Incentives" which address the recognition, measurement and income statement classification for certain sales incentives (e.g., coupons). These guidelines will be effective for the U.S. Group beginning in the fourth quarter of Fiscal Year 2002. The implementation of these guidelines will require the U.S. Group to make reclassifications between selling, general and administrative expenses (SG&A) and sales, the amounts of which have not yet been determined. In September 2000, the EITF issued new guidelines entitled "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products," which address the income statement classification of consideration from a vendor to a retailer. These guidelines will be effective for the U.S. Group beginning in the fourth quarter of Fiscal Year 2002. The implementation of these guidelines will require the U.S. Group to make reclassifications between SG&A and sales, the amounts of which have not yet been determined. In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". These standards require that all business combinations be accounted for using the purchase method and that goodwill and intangible assets with indefinite useful lives should not be amortized but should be tested for impairment at least annually, and they provide guidelines for new disclosure requirements. These standards outline the criteria for initial recognition and measurement of intangibles, assignment of assets and liabilities including goodwill to reporting units and goodwill impairment testing. The provisions of SFAS Nos. 141 and 142 apply to all business combinations after June 30, 2001. The provisions of SFAS No. 142 for existing goodwill and other intangible assets are required to be implemented in the first quarter of Fiscal Year 2003. The U.S. Group is currently evaluating the impact of these standards on the combined financial statements. 3. Acquisitions All of the following acquisitions have been accounted for as purchases and, accordingly, the respective purchase prices have been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. Operating results of businesses acquired have been included in the combined statements of operations from the respective acquisition dates forward. Pro forma results of the U.S. Group, assuming all of the following acquisitions had been made at the beginning of each period presented, would not be materially different from the results reported. Fiscal Year 2001 The U.S. Group acquired businesses for a total of $234.0 million, including obligations to sellers of $4.1 million. The preliminary allocations of the purchase price resulted in goodwill of $186.5 million and trademarks and other intangible assets of $0.1 million, which are being amortized on a straight-line basis over periods not exceeding 40 years. The final allocation is subject to valuation and other studies that have not been completed. On March 1, 2001, the U.S. Group acquired two privately held U.S. foodservice companies: Cornucopia, Inc. of Irvine, California, and Central Commissary, Inc. of Phoenix, Arizona. Both companies make and market refrigerated and frozen reciped food products. Also during Fiscal Year 2001, the U.S. Group completed the acquisitions of IDF Holdings, Inc., the parent of International DiverseFoods Inc., a leading manufacturer of customized dressings, sauces, mixes and condiments for restaurant chains and foodservice distributors, and Alden F-9 U.S. Group Notes to Combined Financial Statements -- (Continued) Merrell Corporation, a manufacturer of high-quality, premium-priced frozen desserts for casual dining restaurants and foodservice distributors. On June 19, 2000, the U.S. Group exercised its preemptive right to purchase an additional 2,582,774 shares of Hain for $79.7 million, or $30.88 per share. The transaction restored the U.S. Group's ownership interest in Hain to 19.5%. The U.S. Group's ownership was diluted as a result of Hain's stock-for-stock merger with Celestial Seasonings on May 30, 2000. Fiscal Year 2000 The U.S. Group acquired businesses for a total of $84.4 million, including obligations to sellers of $10.4 million. The allocations of the purchase price resulted in goodwill of $56.5 million, which is being amortized on a straight-line basis over periods not exceeding 40 years. During Fiscal Year 2000, the U.S. Group completed the acquisition of Quality Chef Foods, a leading manufacturer of frozen heat-and-serve soups, entrees and sauces; Yoshida, a line of Asian sauces marketed in the U.S.; and Thermo Pac, Inc., a U.S. leader in single-serve condiments. On September 27, 1999, the U.S. Group and Hain announced an agreement to form a strategic alliance for the global production and marketing of natural and organic foods and soy-based beverages. The U.S. Group's investment of $99.8 million gave it a 19.5% interest in Hain. The U.S. Group will provide procurement, manufacturing and logistic expertise while Hain will provide marketing, sales and distribution services. Additionally, Hain acquired from the U.S. Group the trademark for Earth's Best organic baby foods. The U.S. Group's investment in Hain Celestial and applicable equity income/loss is recorded in investments in the accompanying combined statements of assets and liabilities and equity income/loss is recorded in other expenses in the accompanying statements of operations. Fiscal Year 1999 The U.S. Group acquired businesses for a total of $54.3 million, including obligations to sellers of $31.1 million. The allocations of the purchase price resulted in goodwill of $60.5 million, which is being amortized on a straight-line basis over periods not exceeding 40 years. Acquisitions made during Fiscal Year 1999, include the College Inn brand of canned broths and other smaller acquisitions. 4. Divestitures On February 9, 2001, the U.S. Group announced it had sold The All American Gourmet business and it Budget Gourmet and Budget Gourmet Value Classics brands of frozen entrees for $55.0 million. The transaction resulted in a pretax loss of $94.6 million. The All American Gourmet business contributed approximately $141.4 million in sales for Fiscal Year 2000. Pro forma results of the U.S. Group, assuming all of the above divestitures had been made at the beginning of each period presented, would not be materially different from the results reported. 5. Restructuring Charges Streamline In the fourth quarter of Fiscal Year 2001, Heinz announced a restructuring initiative named "Streamline" which includes an organizational restructuring aimed at reducing overhead costs and the consolidation of the U.S. Group's canned pet food production to Bloomsburg, Pennsylvania (which results in ceasing canned pet food production at the U.S. Group's Terminal Island, California facility). Management estimates that these actions will impact approximately 400 employees. F-10 U.S. Group Notes to Combined Financial Statements -- (Continued) During Fiscal Year 2001, the U.S. Group recognized restructuring charges and implementation costs totaling $84.7 million pretax. Pretax charges of $65.3 million were classified as cost of products sold and $19.4 million as SG&A. The major components of the restructuring charge and implementation costs and the remaining accrual balance as of May 2, 2001 were as follows:
Employee Non-cash Asset Termination And Accrued Exit Implementation Write-Downs Severance Costs Costs Costs Total -------------- --------------- ------------ -------------- ----- (in millions) Restructuring and implementation costs -- 2001......................... $ 34.7 $ 15.4 $ 22.8 $ 11.8 $ 84.7 Amounts utilized -- 2001...... (34.7) (5.8) (1.7) (11.8) (54.0) ------- ------ ------ ------ ------ Accrued restructuring cost -- May 2, 2001................... $ -- $ 9.6 $ 21.1 $ -- $ 30.7 ======= ====== ====== ====== ======
Non-cash asset write-downs consisted primarily of long-term asset impairments that were recorded as a direct result of the U.S. Group's decision to consolidate its canned pet food operations. Non-cash asset write-downs totaled $34.7 million and related to property, plant and equipment ($30.8 million) and current assets ($3.9 million). Long-term asset write-downs were based on third-party appraisals, contracted sales prices or management's estimate of salvage value. The carrying value of these long-term assets was approximately $1 million as of May 2, 2001. Current asset write-downs included inventory and packaging material, prepaid and other current assets and were determined based on management's estimate of net realizable value. Employee termination and severance costs are primarily related to involuntary termination and represent cash termination payments to be paid to affected employees as a direct result of the restructuring program. Non-cash pension and postretirement benefit charges related to the approved projects are also included as a component of total severance costs ($5.3 million). Exit costs are primarily contractual obligations incurred as result of the U.S. Group's decision to exit these facilities. Implementation costs were recognized as incurred in Fiscal Year 2001 ($11.8 million pretax) and consist of incremental costs directly related to the implementation of the Streamline initiative. These include idle facility costs, consulting fees and asset relocation costs. In Fiscal Year 2001, the U.S. Group ceased production of canned pet food in its Terminal Island, California facility. In addition, the U.S. Group initiated its overhead reduction plan. These actions resulted in a net reduction of the U.S. Group's workforce of approximately 300 employees. Operation Excel In Fiscal Year 1999, Heinz announced a growth and restructuring initiative, named "Operation Excel." This initiative was a multi-year, multi-faceted program which established manufacturing centers of excellence, focused the product portfolio, realigned the U.S. Group's management teams and invested in growth initiatives. Creating manufacturing centers of excellence resulted in significant changes to the U.S. Group's manufacturing footprint including the following initiatives: focused the Pittsburgh, Pennsylvania factory on soup and baby food production and shifted other production to existing facilities, downsized the Pocatello, Idaho factory by shifting Bagel Bites production to the Ft. Myers, Florida factory, and shifted certain Smart Ones entree production to the F-11 U.S. Group Notes to Combined Financial Statements -- (Continued) Massillon, Ohio factory, closed the El Paso, Texas pet treat facility and transferred production to the Topeka, Kansas factory and to co-packers, and disposed of the Bloomsburg, Pennsylvania frozen pasta factory. As part of Operation Excel, the U.S. Group focused the portfolio of product lines on six core food categories: ketchup, condiments and sauces; frozen foods; tuna; soup, beans and pasta meals; infant foods; and pet products. Realigning the U.S. Group's management teams provided processing and product expertise. Specifically, Operation Excel includes established a single frozen food headquarters, resulting in the closure of the U.S. Group's Ore-Ida head office in Boise, Idaho and established a single U.S. Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania, resulting in the relocation of the U.S. Group's seafood and pet food headquarters from Newport, Kentucky. During Fiscal Year 2001, the U.S. Group recognized restructuring charges of $44.8 million pretax. These charges were associated with exiting the U.S. Group's can making operations, which were sold during Fiscal Year 2001, and higher than originally expected severance costs associated with creating the single U.S. Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania. This charge was recorded in cost of products sold ($36.3 million) and SG&A ($8.5 million). This charge was offset by reversals of unutilized Operation Excel accruals and asset write-downs of $21.0 million pretax. These reversals were recorded in cost of products sold ($8.2 million) and SG&A ($12.7 million) and were primarily the result of revisions in estimates of fair values of assets which were disposed of as part of Operation Excel and the U.S. Group's decision not to exit certain U.S. warehouses due to higher than expected volume growth. Implementation costs of $149.5 million pretax were also recognized in Fiscal Year 2001. These costs were classified as costs of products sold ($62.2 million) and SG&A ($87.3 million). During Fiscal Year 2000, the U.S. Group recognized restructuring charges of $95.3 million pretax. Pretax charges of $53.5 million were classified as cost of products sold and $41.8 million as SG&A. Also during Fiscal Year 2000, the U.S. Group recorded a reversal of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs, primarily for the closure of the West Chester, Pennsylvania facility, which remains in operation as a result of the sale of the Bloomsburg frozen pasta facility in Fiscal Year 2000. Implementation costs of $96.9 million pretax were classified as cost of products sold ($33.7 million) and SG&A ($63.2 million). During Fiscal Year 1999, the U.S. group recognized restructuring charges and implementation costs totaling $156.1 million pretax. Pretax charges of $94.3 million were classified as costs of products sold and $61.8 million as SG&A. Implementation costs were recognized as incurred and consisted of incremental costs directly related to the implementation of Operation Excel, including consulting fees, employee training and relocations costs, unaccruable severance costs associated with terminated employees, equipment relocation costs and commissioning costs. F-12 U.S. Group Notes to Combined Financial Statements -- (Continued) The major components of the restructuring charges and implementation costs and the remaining accrual balances as of May 2, 2001, May 3, 2000 and April 28, 1999 were as follows:
Employee Termination Non-cash Asset And Severance Accrued Exit Implementation Write-Downs Costs Costs Costs Total -------------- ------------- ------------ -------------- ----- (in millions) Restructuring and Implementation costs -- 1999........................ $ 96.7 $27.0 $20.0 $ 12.4 $156.1 Amounts utilized -- 1999.............. (96.7) (18.6) (4.3) (12.4) (132.0) ------ ----- ----- ------- ------- Accrued restructuring costs -- April 28, 1999............................. -- 8.4 15.7 -- 24.1 Restructuring and Implementation costs -- 2000........................ 50.2 37.4 7.6 96.9 192.1 Accrual reversal -- 2000.............. (15.4) (0.6) (0.4) -- (16.4) Amounts utilized -- 2000.............. (34.8) (27.0) (6.9) (96.9) (165.6) ------ ----- ----- ------- ------- Accrued restructuring costs -- May 3, 2000................................. -- 18.2 16.0 -- 34.2 Restructuring and Implementation costs -- 2001........................ 33.1 5.2 6.5 149.5 194.3 Accrual reversal -- 2001.............. (7.9) (5.1) (8.0) -- (21.0) Amounts utilized -- 2001.............. (25.2) (13.7) (7.4) (149.5) (195.8) ------ ----- ----- ------- ------- Accrued restructuring costs -- May 2, 2001................................ $ -- $ 4.6 $ 7.1 $ -- $ 11.7 ====== ===== ===== ======= =======
Non-cash asset write-downs consisted primarily of long-term asset impairments that were recorded as a direct result of the U.S. Group's decision to exit facilities. Net non-cash asset write-downs totaled $25.2 million in Fiscal Year 2001 and related to property, plant and equipment ($14.9 million) and other current assets ($10.3 million). In Fiscal Year 2000, non-cash asset write-downs totaled $34.8 million and related to property, plant and equipment ($27.0 million) and current assets ($7.8 million). In Fiscal Year 1999, non-cash asset write-downs consisted of property, plant and equipment ($68.2 million), goodwill and other intangibles ($18.7 million) and current assets ($9.8 million). Long-term asset write-downs were based on third-party appraisals, contracted sales prices or management's estimate of salvage value. The carrying value of these long-term assets was approximately $2.4 million at May 3, 2000 and $8.1 million at April 28, 1999. These assets were sold or removed from service by the end of Fiscal Year 2001. The results of operations, related to these assets, including the effect of reduced depreciation were not material. Current asset write-downs included inventory and packaging material, prepaids and other current assets and were determined based on management's estimate of net realizable value. Severance charges are primarily related to involuntary terminations and represent cash termination payments to be paid to affected employees as a direct result of the restructuring program. Non-cash pension and postretirement benefit charges related to the approved projects are also included as a component of total severance costs ($13.6 million and $14.0 million in Fiscal Year 2000 and Fiscal Year 1999, respectively). Exit costs are primarily related to contract and lease termination costs ($23.8 million of the total $25.7 million net exit costs). The U.S. Group has closed or exited all of the five factories that were originally scheduled for closure. In addition, the U.S. Group also exited its can making operations. Management estimates that Operation Excel will impact approximately 2,000 employees with a net reduction in the workforce of approximately 1,700 after F-13 U.S. Group Notes to Combined Financial Statements -- (Continued) expansion of certain facilities. The exit of the U.S. Group's can making operations resulted in a reduction of the U.S. Group's workforce of approximately 500 employees. During Fiscal Year 2001, Fiscal Year 2000 and Fiscal Year 1999, the U.S. Group's workforce had a net reduction of approximately 700 employees, 500 employees and 200 employees respectively. The remaining employee reductions are expected to take place within six months. 6. Related Party Transactions Employee Costs Certain of Heinz's general and administrative expenses are allocated to the U.S. Group. Total costs allocated include charges for salaries of corporate officers and staff and other Heinz corporate overhead. Total costs charged to the U.S. Group for these services were $28.4 million, $28.7 million and $28.5 million for Fiscal Years 2001, 2000 and 1999, respectively, based on a percent of revenue which represents a reasonable allocation of Heinz's corporate overhead. These costs are recorded in selling, general and administrative expense in the accompanying combined statement of operations. Heinz charges the U.S. Group for its share of group health insurance costs for eligible company employees based upon location-specific costs, overall insurance costs and loss experience incurred during a calendar year. In addition, various other insurance coverages are also provided to the U.S. Group through Heinz's consolidated programs. Workers compensation, auto, property, product liability and other insurance coverages are charged directly based on the U.S. Group's loss experience. Amounts charged to the U.S. Group for insurance costs were $80.3 million, $73.7 million and $63.9 million for fiscal years 2001, 2000 and 1999, respectively, and are recorded in selling, general and administrative expenses in the accompanying combined statement of operations. Pension costs and postretirement costs are also charged to the U.S. Group based upon eligible employees participating in the Plans. See Note 12. Cash Management The U.S. Group maintains a cash management arrangement with Heinz. On a daily basis, all available cash is deposited and disbursements are withdrawn. Heinz charges (credits) the U.S. Group interest on the average daily balance maintained in the resulting intercompany account. Net interest (income) expense related to this arrangement, included in the combined statement of income was $3.3 million, $(4.7) million and $(12.2) million in fiscal years 2001, 2000 and 1999, respectively. The interest rate charged to or received by the U.S. Group was 6.73%, 6.57% and 6.79% in fiscal years 2001, 2000 and 1999, respectively. Product Sales and Purchases The U.S. Group sells and purchases products and services to and from other Heinz affiliates. The result of such transactions is the $75.4 million and $35.8 million balances due from related parties in fiscal years 2001 and 2000, respectively, and the $96.2 million and $63.5 million balances due to related parties in fiscal years 2001 and 2000, respectively. Sales to related parties were $61.1 million, $53.8 million and $58.1 million in fiscal years 2001, 2000 and 1999, respectively, and purchases from related parties were $421.4 million, $543.8 million and $684.7 million in fiscal years 2001, 2000 and 1999, respectively. Other Related Party Items The U.S. Group sells undivided interests in certain accounts receivable to a Heinz affiliate, Receivables Servicing Company. The U.S. Group sold $1,291.0 million and $1,590.3 million of receivables net of discount expense of $9.4 million and $10.5 million in fiscal years 2001 and 2000, respectively, to RSC. At the fiscal years ending 2001 and 2000, respectively, the U.S. Group had $126.9 million and $124.9 million of receivables sold to F-14 U.S. Group Notes to Combined Financial Statements -- (Continued) RSC. These sales were reflected as reductions of trade accounts receivable. The U.S. Group's contract with RSC will terminate on December 2001. Until the fourth quarter of Fiscal Year 2000, the U.S. Group had outstanding notes receivable from Heinz affiliates which are used for working capital purposes and to fund acquisitions. The short-term notes had interest rates ranging from 6.50% to 7.00%. The long-term notes had interest rates ranging from 6.75% to 7.50% with a maturity of May 2003. Interest income earned by the U.S. Group related to these receivables was $104.3 million, $115.9 million and $115.6 million in fiscal years 2001, 2000 and 1999, respectively. In the fourth quarter of Fiscal Year 2000, these notes receivable from related parties were exchanged by the U.S. Group with a subsidiary of Heinz, PM Holding, Inc. (PM Holding), for $1.9 billion of non-voting, 6.5% cumulative non-participating preferred stock of PM Holding. This preferred stock investment is recorded in the Investments in related parties balance on the combined statement of asset and liabilities as of May 2, 2001. The U.S. Group paid royalties of $129.1 million, $94.3 million and $96.6 million in fiscal years 2001, 2000 and 1999, respectively, to Promark International, Inc. for the use of trademarks. The $35.0 million long-term note receivable on the May 2, 2001 combined statement of assets and liabilities is a receivable from Heinz that earns interest at a rate of 5.25% annually. The portion of long-term debt due within one year on the May 2, 2001 and the receivables on the May 3, 2000 combined statements of assets and liabilities includes a $21.0 million and $22.5 million, respectively, interest-bearing loan with a 6.00% interest rate to a related party, Caribbean Fishing Company. In addition, the long-term debt balance on the May 2, 2001 and May 3, 2000 combined statements of assets and liabilities includes a $5.4 million non-interest bearing loan to another related party, Boise Associates, Inc. F-15 U.S. Group Notes to Combined Financial Statements -- (Continued) 7. Income Taxes The following table summarizes the provision for U.S. federal and state taxes on income: 2001 2000 1999 -------- -------- -------- Current: U.S. federal..............................$176,776 $227,632 $208,293 State..................................... (835) 11,362 11,843 -------- -------- -------- 175,941 238,994 220,136 Deferred: U.S. federal.............................. 25,759 12,929 34,814 State..................................... 3,658 321 812 -------- -------- -------- 29,417 13,250 35,626 -------- -------- -------- Total tax provision .......................$205,358 $252,244 $255,762 ======== ======== ======== The difference between the U.S. federal statutory tax rate and the U.S. Group's combined effective tax rate are as follows: 2001 2000 1999 ------ ------ ----- U.S. federal statutory tax rate ............ 35.0% 35.0% 35.0% State income taxes (net of federal benefit). 0.6 1.1 1.2 Goodwill amortization....................... 1.2 0.9 1.3 Other ...................................... 2.9 (1.0) (0.4) ---- ---- ---- Effective tax rate.......................... 39.7% 36.0% 37.1% ==== ==== ==== The deferred tax (assets) and deferred tax liabilities recorded on the balance sheet as of May 2, 2001 and May 3, 2000 are as follows: 2001 2000 -------- -------- Depreciation/amortization.............. $242,023 $241,920 Other.................................. 21,669 7,554 -------- -------- 263,692 249,474 Provision for estimated expenses....... (39,788) (40,204) Operating loss carryforwards........... (3,171) (447) Promotions and advertising............. (3,436) (17,729) Other.................................. (62,205) (37,974) -------- -------- (108,600) (96,354) -------- -------- Net deferred tax liabilities........... $155,092 $153,120 ======== ======== At the end of 2001, net operating loss carryforwards totaled $9.1 million and expire through 2021. The U.S. income tax returns of Heinz have been audited by the Internal Revenue Service for all years through 1994. F-16 U.S. Group Notes to Combined Financial Statements -- (Continued) 8. Debt Range Maturity of (Fiscal Interest Year) 2001 2000 -------- ----- ---- ---- Long-term: Revenue bonds............. 3.39-7.70% 2002-2027 $12,392 $14,892 Promissory notes.......... 3.00-6.00 2002-2005 5,081 3,447 Other..................... 6.00-7.93 2002-2034 36,292 17,730 ------- ------- Total long-term debt........ 53,765 36,069 Less portion due within one year.................. 29,833 2,998 ------- ------- $23,932 $33,071 ======= ======= The amount of long-term debt that matures in each of the four years succeeding 2002 is: $3.7 million in 2003, $0.7 million in 2004, $0.5 million in 2005 and $0.5 million in 2006. 9. Parent Company Investment The components of the investment by Heinz as of May 2, 2001 and May 3, 2000 are as follows: 2001 2000 ---------- ---------- Parent company investment, beginning of year... $4,198,271 $3,742,531 Net income..................................... 306,898 448,295 Dividends paid to related parties.............. (350,648) (306,244) Net parent advances............................ 515,363 313,689 Transfer of investment balance................. (11,487) -- ---------- ---------- Parent company investment, end of year......... $4,658,397 $4,198,271 ========== ========== 10. Supplemental Cash Flow Information Net cash paid during the year for: 2001 2000 1999 -------- -------- ------- Interest expense................. $ 1,569 $ 1,907 $ 1,244 ======== ======= ======= Details of acquisitions: Fair value of assets............. $247,270 $108,229 $54,319 Liabilities*..................... 17,354 32,047 31,100 -------- ------- ------- Cash paid........................ 229,916 76,182 23,219 Less cash acquired............... -- 2,259 -- -------- ------- ------- Net cash paid for acquisitions... $229,916 $73,923 $23,219 ======== ======= ======= * Includes obligations to sellers of $4.1 million, $10.4 million and $31.1 million in 2001, 2000 and 1999, respectively. F-17 U.S. Group Notes to Combined Financial Statements -- (Continued) 11. Management Incentive Plans The U.S. Group's management incentive plan covers officers and other key employees. Participants may elect to be paid on a current or deferred basis. The aggregate amount of all awards may not exceed certain limits in any year. Compensation under the management incentive plan was $4.6 million in 2001, $15.4 million in 2000 and $12.7 million in 1999. In addition, the U.S. Group maintains various other bonus plans that cover other employees of the U.S. Group. 12. Employee Retirement Benefits Employees participate in certain defined benefit pension plans, certain defined contribution plans, and certain stock option plans, all of which are sponsored by Heinz. The U.S. Group also provides post-retirement health care and life insurance benefits for employees who meet the eligibility requirements of the Heinz plans. Retirees share in the cost of these benefits based on age and years of service. Heinz allocates costs for the defined benefit plans to the U.S. Group as determined by actuarial valuations. Company contributions to the defined contribution plans amount to a qualified age-related contribution, a matching of employee's contributions up to a specified amount, and for certain employees, supplemental contributions. The pro forma effect of the fair value of stock options on the U.S. Group net income was not determinable as such information is not available on an individual company basis. The following (income)/expense was included in the U.S. Group's result of operations: 2001 2000 1999 -------- ------- -------- Defined Benefit Pension Plans.......... $(15,311) $(8,968) $(10,598) Defined Benefit Postretirement Medical. $9,697 $7,705 $6,915 Defined Contribution Plans............. $ 17,677 $15,972 $ 17,208 Employees also participate in the Employee Stock Ownership Plan (ESOP) and the Global Stock Purchase Plan (GSPP). Heinz established the ESOP in 1990 to replace in full or in part the U.S. Group's cash-matching contributions to the H. J. Heinz Company Employees Retirement and Saving Plan, a 401(k) plan for salaried employees. The GSPP gives employees an option to acquire stock at the lower of 85% of the fair market value of Heinz's stock on the first or last day of a purchase period. 13. Financial Instruments Commodity Price Hedging The U.S. Group uses commodity futures and options in order to reduce price risk associated with anticipated purchases of raw materials such as corn, soybean oil and soybean meal. Commodity price risk arises due to factors such as weather conditions, government regulations, economic climate and other unforeseen circumstances. Hedges of anticipated commodity purchases which meet the criteria for hedge accounting are designated as cash flow hedges. When using a commodity option as a hedging instrument, the U.S. Group excludes the time value of the option from the assessment of hedge ineffectiveness. F-18 U.S. Group Notes to Combined Financial Statements -- (Continued) Hedge Ineffectiveness During Fiscal Year 2000, hedge ineffectiveness related to cash flow hedges was a net loss of $0.4 million, which is reported in the combined statements of operations as other expense. Deferred Hedging Gains and Losses As of May 2, 2001, the U.S. Group is hedging forecasted transactions for periods not exceeding 12 months, and expects $0.3 million of net deferred loss reported in parent company's investment to be reclassified to earnings within that time frame. During Fiscal Year 2000, the net deferred losses reclassified to earnings because the hedged transaction was no longer expected to occur were not significant. Concentrations of Credit Risk For Fiscal Year 2000, one customer represented more than 10% of the U.S. Group's sales and the top ten customers represented over 30% of the U.S. Group's sales. The U.S. Group closely monitors the credit risk associated with these customers and has never experienced significant losses. 14. Segment Data Descriptions of the U.S. Group's reportable segments are as follows: o Heinz North America - This segment markets ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels. o U.S. Pet Products and Seafood - This segment markets dry and canned pet food, pet snacks, tuna and other seafood. o U.S. Frozen - This segment markets frozen potatoes, entrees, snacks and appetizers. The U.S. Group's management evaluates performance based on several factors including net sales and the use of capital resources; however, the primary measurement focus is operating income excluding unusual costs and gains. The accounting policies used are the same as those described in Note 2, "Significant Accounting Policies." Intersegment sales are accounted for at current market values. Items below the operating income line of the combined statements of operations are not presented by segment, since they are excluded from the measure of segment profitability reviewed by the U.S. Group's management. The following table presents information about the U.S. Group's reportable segments: F-19 U.S. Group Notes to Combined Financial Statements -- (Continued)
May 2, 2001 May 3, 2000 April 28, 1999 May 2, 2001 May 3, 2000 April 28, 1999 Fiscal Year ended (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks) - ------------------------------- ----------- ----------- -------------- ----------- ----------- -------------- (in thousands) Net External Sales Intersegment Sales ------------------------------------------- ----------------------------------------- Heinz North America........... $2,254,867 $2,045,995 $1,871,587 $ 2,870 $ 3,533 $ 2,387 U.S. Pet Products and Seafood. 1,545,274 1,706,496 1,791,745 1,136 3,086 1,379 U.S. Frozen................... 1,138,056 1,036,697 1,023,791 - - 4,969 ------------------------------------------- ----------------------------------------- Combined totals............ $4,938,197 $4,789,188 $4,687,123 $ 4,006 $ 6,619 $ 8,735 =========================================== ========================================= Operating Income (Loss) Operating Income (Loss) Excluding Special Items (a) ------------------------------------------- ----------------------------------------- Heinz North America........... $ 451,469 $ 429,125 $ 452,683 $553,569 $522,995 $480,963 U.S. Pet Products and Seafood. (35,077) 84,092 104,499 116,018 138,725 136,569 U.S. Frozen................... 23,257 96,892 21,786 141,180 124,126 110,310 Non-Operating (c)............. (1,580) (772) (570) (1,580) (772) (570) ------------------------------------------- ----------------------------------------- Combined totals............ $ 438,069 $ 609,337 $ 578,398 $809,187 $785,074 $727,272 =========================================== ========================================= Depreciation and Amortization Expense Capital Expenditures (b) ------------------------------------------- ----------------------------------------- Heinz North America........... $ 41,384 $ 48,933 $ 45,364 $151,850 $112,460 $ 49,307 U.S. Pet Products and Seafood. 42,796 56,642 45,211 10,876 27,248 37,792 U.S. Frozen................... 37,561 34,111 38,403 20,768 75,696 35,098 ------------------------------------------- ----------------------------------------- Combined totals............ $ 121,741 $ 139,686 $ 128,978 $183,494 $215,404 $122,197 =========================================== ========================================= Identifiable Assets ------------------------------------------- Heinz North America........... $1,514,598 $1,252,728 $ 978,525 U.S. Pet Products and Seafood. 1,119,359 1,382,932 1,387,714 U.S. Frozen................... 556,878 741,214 692,533 Non-Operating (c)............. 2,410,656 1,691,582 1,529,336 ------------------------------------------- Combined totals............ $5,601,491 $5,068,456 $4,588,108 ===========================================
- --------- (a) Fiscal year ended May 2, 2001 - Excludes net restructuring and implementation costs of Operation Excel as follows: Heinz North America $68.2 million, U.S. Pet Products and Seafood $81.8 million and U.S. Frozen $23.3 million. Excludes restructuring and implementation costs of the Streamline initiative as follows: Heinz North America $15.3 million and U.S. Pet Products and Seafood $69.3 million. Excludes the loss on the sale of The All American Gourmet in U.S. Frozen of $94.6 million. Excludes acquisition costs in Heinz North America $18.5 million. Fiscal year ended May 3, 2000 - Excludes net restructuring and implementation costs of Operation Excel as follows: Heinz North America $93.9 million, U.S. Pet Products and Seafood $54.6 million and U.S. Frozen $27.2 million. Fiscal year ended April 28, 1999 - Excludes restructuring and implementation costs of Operation Excel as follows: Heinz North America $27.6 million, U.S. Pet Products and Seafood $26.3 million and U.S. Frozen $102.2 million. Excludes costs related to the implementation of Project Millennia as follows: Heinz North America $0.7 million, U.S. Pet Products and Seafood $5.7 million and U.S. Frozen $2.9 million. Excludes the reversal of unutilized Project Millennia accruals for severance and exit costs in U.S. Frozen of $16.6 million. (b) Excludes property, plant and equipment obtained through acquisitions. (c) Includes charges/assets not directly attributable to operating segments. F-20 U.S. Group Notes to Combined Financial Statements -- (Continued) 15. Commitments and Contingencies Legal Matters Certain suits and claims have been filed against the U.S. Group and have not been finally adjudicated. These suits and claims when finally concluded and determined, in the opinion of management, based upon the information that it presently possesses, will not have a material adverse effect on the U.S. Group's combined financial position, results of operations or liquidity. Lease Commitments Operating lease rentals for warehouse, production, office facilities and equipment amounted to $35.4 million in 2001, $24.6 million in 2000 and $23.6 million in 1999. At May 2, 2001, future lease payments for non- cancellable operating leases totaled $59.9 million, (2002 -- $9.9 million, 2003 -- $12.1million, 2004 -- $11.9 million, 2005 -- $11.0 million, 2006 -- $10.2 million and thereafter -- $4.8 million). Purchase Commitments The U.S. Group entered into an agreement on August 14, 2000 with Metal Packaging Holdings, B.V. (Impress) Impress to purchase from Impress metal cans and ends annually of approximately $90 million for a ten year term. 16. Advertising Costs Advertising costs for fiscal years 2001, 2000 and 1999 were $211.0 million, $189.1 million and $205.7 million, respectively. 17. Subsequent Events On May 3, 2001, Heinz simplified its U.S. corporate structure and established two companies for the management of U.S. trademarks and for U.S. treasury functions. As a result, all of the operations of the U.S. Group are now being conducted by H. J. Heinz Finance Company and its wholly-owned subsidiaries (collectively, Heinz Finance), and H. J. Heinz Company, L.P. (Heinz LP). Heinz LP owns or leases the operating assets involved in manufacturing for the U.S. Group throughout the United States which were contributed by Heinz and its subsidiaries, together with other assets and liabilities, to Heinz LP and manages the business. In addition, as part of the realignment, the Heinz Finance assumed $2.9 billion of Heinz's outstanding senior unsecured debt and accrued interest by becoming co-obligor with Heinz. On July 6, 2001, Heinz Finance raised $325 million via the issuance of Voting Cumulative Preferred Stock, Series A with a liquidation preference of $100,000 per share. The Series A Preferred shares are entitled to receive quarterly dividends at a rate of 6.226% per annum and are required to be redeemed for cash on July 15, 2008. In addition, Heinz Finance issued $750 million of 6.625% Guaranteed Notes due July 15, 2011. The proceeds were used for general corporate purposes, including retiring commercial paper borrows and financing acquisitions and ongoing operations. During the first quarter of Fiscal Year 2002, the U.S. Group completed the acquisition of Borden Food Corporation's pasta sauce and dry bouillon and soup business. Under this transaction, the U.S. Group acquired such brands as Classico pasta sauces, Aunt Millie's pasta sauce, Mrs. Grass Recipe soups and Wyler's bouillons and soups. During the second quarter of Fiscal Year 2002, the U.S. Group acquired Anchor Food Products branded retail business which includes the retail licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers and F-21 U.S. Group Notes to Combined Financial Statements -- (Continued) the Poppers brand of retail appetizer lines. Also during the second quarter of Fiscal Year 2002, the U.S. Group completed the acquisition of Delimex Holdings, Inc. (Delimex), a leading maker of frozen Mexican food products. Delimex is a leading U.S. producer of frozen taquitos, tightly rolled fried corn or flour tortillas with fillings such as beef, chicken or cheese. Delimex also makes quesadillas, tamales and rice bowls. Pro forma results of the U.S. Group, assuming the acquisitions had been made at the beginning of the periods presented, would not be materially different from the results reported. F-22 H.J. Heinz Finance Company and Subsidiaries Consolidated and Combined Statements of Operations Nine months ended January 30, 2002 and January 31, 2001
Nine months ended ---------------------------------------- January 30, 2002 January 31, 2001 FY 2002 FY 2001 ---------------- ---------------- (Unaudited) (In thousands) Sales.................................................. $3,095,761 $3,520,667 Cost of products sold.................................. 1,847,838 2,142,884 ---------- ---------- Gross profit........................................... 1,247,923 1,377,783 Selling, general and administrative expenses........... 707,733 770,641 Royalty expense to related parties..................... 125,775 72,807 ---------- ---------- Operating income....................................... 414,415 534,335 Interest income........................................ 29,860 93,421 Interest expense....................................... 156,962 6,571 Dividends from related parties......................... 99,923 -- Other expenses, net.................................... 5,176 16,960 ---------- ---------- Income before income taxes, minority interest and cumulative effect of account change.................. 382,060 604,225 Provision for income taxes............................. 35,836 223,502 ---------- ---------- Income before minority interest and cumulative effect of accounting change.......................... 346,224 380,723 Minority interest...................................... (285,726) -- ---------- ---------- Income before cumulative effect of account change...... 60,498 380,723 Cumulative effect of accounting change................. -- (4,849) ---------- ---------- Net income............................................. $ 60,498 $ 375,874 ========== ==========
See notes to condensed consolidated and combined financial statements. F-23 H.J. Heinz Finance Company and Subsidiaries Condensed Consolidated and Combined Balance Sheets January 30, 2002 and May 2, 2001
January 30, 2002 May 2, 2001(1) FY 2002 FY 2001 ---------------- -------------- (Unaudited) (in thousands) Assets Current assets: Cash and cash equivalents.................................... $ 9,589 $ 393 Receivables, net............................................. 682,572 506,447 Due from related parties..................................... 187,368 75,429 Short-term notes receivable from related parties............. 894,880 - Inventories.................................................. 783,917 655,170 Deferred income taxes........................................ 4,395 50,042 Prepaid expenses and other current assets.................... 152,050 49,428 ---------- ---------- Total current assets....................................... 2,714,771 1,336,909 Property, plant and equipment................................. 1,507,334 1,608,514 Less accumulated depreciation................................ 664,581 738,731 ---------- ---------- Total property, plant and equipment, net................... 842,753 869,783 Long-term notes receivable from related parties............... 35,000 35,000 Investments in related parties................................ 1,895,245 1,895,245 Other investments............................................. 195,475 201,438 Intangible assets, net........................................ 1,900,022 1,208,294 Other noncurrent assets....................................... 64,821 54,822 ---------- ---------- Total other noncurrent assets.............................. 4,090,563 3,394,799 ---------- ---------- Total assets............................................... $7,648,087 $5,601,491 ========== ========== Liabilities and Shareholders' Equity Current liabilities: Short-term debt.............................................. $ 43,455 $ - Portion of long-term debt due within one year................ 501,576 29,833 Accounts payable............................................. 277,995 321,222 Due to related parties....................................... 229,930 96,221 Other accrued liabilities.................................... 219,475 224,384 ---------- ---------- Total current liabilities.................................. 1,272,431 671,660 Long-term debt................................................ 4,215,495 23,932 Deferred income taxes......................................... 9,422 205,134 Deferred income............................................... 33,259 29,684 Other liabilities............................................. 5,986 12,684 Minority interest............................................. 1,601,455 - Mandatorily Redeemable Series A Preferred shares.............. 325,000 - Shareholders' equity: Common stock................................................. 11 - Additional Capital........................................... 135,386 - Retained earnings............................................ 49,876 - Accumulated other comprehensive (loss)....................... (234) - Parent company's investment.................................. - 4,658,397 ---------- ---------- Total shareholders' equity................................. 185,039 4,658,397 ---------- ---------- Total liabilities and shareholders' equity................. $7,648,087 $5,601,491 ========== ==========
- --------- (1) Summarized from audited Fiscal Year 2001 balance sheet See notes to condensed consolidated and combined financial statements. F-24 H.J. Heinz Finance Company and Subsidiaries Condensed Consolidated and Combined Statements of Cash Flows Nine months ended January 30, 2002 and January 31, 2001
Nine months Ended --------------------------------------- January 30, 2002 January 31, 2001 FY 2002 FY 2001 ---------------- ---------------- (Unaudited) (in thousands) Operating Activities: Cash used by operating activities.............................................. $ (388,589) $(244,673) ---------- --------- Investing Activities: Capital expenditures.......................................................... (51,888) (108,666) Proceeds from disposals of property, plant and equipment...................... 3,046 -- Acquisition, net of cash acquired............................................. (777,718) (161,008) Investment The Hain Celestial Group, Inc...................................... -- (79,743) Other items, net.............................................................. (14,395) 36,200 ---------- --------- Cash used for investing activities.......................................... (840,955) (313,217) ---------- --------- Financing Activities: Payments on long-term debt.................................................... (9,179) (310,029) Proceeds from long-term debt.................................................. 751,059 323,928 Proceeds from (payments on) commercial paper and short-term borrows, net...... 270,131 (217) Distribution to Partners...................................................... (96,835) -- Dividends..................................................................... (10,622) (316,678) Net parent advances........................................................... -- 870,023 Proceeds from mandatorily redeemable Series A preferred shares................ 325,000 -- Other items, net.............................................................. (548) -- ---------- --------- Cash provided by financing activities....................................... 1,229,006 567,027 ---------- --------- Net (decrease) increase in cash and cash equivalents........................... (538) 9,137 Cash and cash equivalents, beginning of period................................. 10,127 2,322 ---------- --------- Cash and cash equivalents, end of period....................................... $ 9,589 $ 11,459 ========== =========
See notes to condensed consolidated and combined financial statements. F-25 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements (Unaudited) 1. Basis of Presentation On May 3, 2001, H. J. Heinz Company ("Heinz") reorganized its U.S. corporate structure and established two primary companies for the management of U.S. trademarks and for U.S. treasury functions. As a result, all of the business operations of Heinz's domestic operations ("the U.S. Group") are now being conducted by H. J. Heinz Finance Company and its wholly-owned subsidiaries (collectively, "Heinz Finance"), and H. J. Heinz Company, L.P. ("Heinz LP"). Heinz Finance has limited partnership interests in Heinz LP. Heinz Finance assumed primary liability for approximately $2.9 billion of Heinz's outstanding senior unsecured debt and accrued interest by becoming co-obligor with Heinz. Heinz LP owns or leases the operating assets involved in manufacturing throughout the United States which were contributed by Heinz and its subsidiaries, together with other assets and liabilities, to Heinz LP and manages the business. Heinz LP has two classes of limited partnership interests, Class A and Class B. Heinz Finance, directly and through wholly-owned subsidiaries, owns the Class B interests. Heinz, directly and through wholly-owned subsidiaries, owns the Class A interests. Heinz Management Company, a wholly-owned subsidiary of Heinz, is the managing General Partner of Heinz LP and employs the salaried personnel of the U.S. Group. The minority interest amounts on the January 30, 2002 statement of income and balance sheet represents the Class A and General Partner limited partnership interest in Heinz LP. The preparation of the January 31, 2001 and May 2, 2001 financial statements include the use of "carve out" and "push down" accounting procedures wherein certain assets, liabilities and expenses historically recorded or incurred at the parent company level or an affiliate of Heinz, which related to or were incurred on behalf of the U.S. Group, have been identified and allocated or pushed down as appropriate to reflect results of the U.S. Group for the periods presented. See Note 9, for a further discussion regarding Heinz parent company costs. As a result of the finalizing of the reorganization, certain assets and liabilities which are included in the May 2, 2001 "carve out" balance sheet, were not contributed to Heinz Finance. Substantially all finished goods inventories of the U.S. Group remained assets of Heinz and were not contributed to Heinz LP. These retained inventories result in reduced sales and operating results in Fiscal Year 2002 when compared to Fiscal Year 2001. 2. The results for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year due to the seasonal nature of the business of Heinz Finance. In the opinion of management, all adjustments which are of a normal and recurring nature, necessary for a fair statement of the results of operations of these interim periods have been included. F-26 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements 3. Inventories The composition of inventories at the balance sheet dates was as follows: January 30, May 2, 2002 2001 ----------- --------- (in thousands) Finished goods and work-in-process....... $624,059 $515,315 Packaging material and ingredients....... 159,858 139,855 -------- -------- $783,917 $655,170 ======== ======== 4. Taxes The provision for income taxes consists of provisions for federal and state income taxes. The tax provision in the January 30, 2002 financial statements declined significantly since Heinz Finance has no tax obligation on the minority partners' interest in Heinz LP's income. 5. Restructuring In the fourth quarter of Fiscal Year 2000, Heinz announced a restructuring initiative named "Streamline" which includes an organizational restructuring aimed at reducing overhead costs and the consolidation of Heinz Finance's canned pet food production to Bloomsburg, Pennsylvania (which resulted in ceasing canned pet food production at Heinz Finance's Terminal Island, California facility). The major components of the restructuring charge and implementation costs and the remaining accrual balances as of January 30, 2002 were as follows:
Employee Non-Cash Termination Asset and Severance Accrued Exit Implementation Write-Downs Costs Costs Costs Total ----------- ------------- ------------ -------------- ----- (in millions) Restructuring and Implementation costs-Fiscal Year 2000................... $34.7 $15.4 $22.8 $11.8 $84.7 Amounts utilized-Fiscal Year 2000 ........ (34.7) (5.8) (1.7) (11.8) (54.0) ----- ----- ----- ---- ----- Accrued restructuring costs-May 2, 2001 .. - $9.6 $21.1 - $30.7 Implementation Costs-Fiscal Year 2002..... - - - 1.2 1.2 Amounts utilized-Fiscal Year 2002......... - (2.5) (8.5) (1.2) (12.2) Liability assumed by related party-Fiscal Year 2002................................ - (3.8) (0.6) - (4.4) ----- ----- ----- ---- ----- Accrued restructuring costs-August 1, 2001................................... - $ 3.3 $12.0 - $15.3 ===== ===== ===== ==== =====
During the first nine months of Fiscal Year 2002, Heinz Finance incurred implementation costs totaling $1.2 million pretax, which consisted of incremental costs directly related to the implementation of the Streamline initiative. Pretax charges of $1.1 million were classified as cost of products sold and $0.1 million as selling, general F-27 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements and administrative expenses ("SG&A"). In addition, Heinz Management Company, a wholly-owned subsidiary of Heinz, assumed a portion of the Heinz Finance's restructuring liability as a result of the realignment that occurred on May 3, 2001. During the first nine months of Fiscal Year 2002, Heinz Finance utilized $11.0 million of severance and exit cost accruals, principally for ceasing canned pet food production in its Terminal Island, California facility and its overhead reduction plan. 6. Acquisitions During the second quarter of Fiscal Year 2002, Heinz Finance acquired Anchor Food Products branded retail business which includes the retail licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers and the Poppers brand of retail appetizer lines. Also during the second quarter of Fiscal Year 2002, Heinz Finance completed the acquisition of Delimex Holdings, Inc., a leading maker of frozen Mexican food products. Delimex is a leading U.S. producer of frozen taquitos, tightly rolled fried corn and flour tortillas with fillings such as beef, chicken or cheese. Delimex also makes quesadillas, tamales and rice bowls. During the first quarter of Fiscal Year 2002, Heinz Finance completed the acquisition of Borden Food Corporation's pasta sauce and dry bouillon and soup business. Under this transaction, Heinz Finance acquired such brands as Classico pasta sauces, Aunt Millie's pasta sauce, Mrs. Grass Recipe soups, Wyler's bouillons and soups. Heinz Finance also made another smaller acquisition. The above acquisitions have been accounted for as purchases and, accordingly, the respective purchase prices have been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition dates. Final allocations of the purchase prices are not expected to differ significantly from the preliminary allocations. Operating results of the businesses acquired have been included in the consolidated and combined statements of income from the respective acquisition dates forward. Pro forma results of Heinz Finance, assuming all of the acquisitions had been made at the beginning of each period presented, would not be materially different from the results reported. 7. Recently Adopted Accounting Standards In Fiscal Year 2001, Heinz Finance changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." Under the new accounting method, adopted retroactive to May 4, 2000, Heinz Finance recognizes revenue upon the passage of title, ownership and risk of loss to the customer. The cumulative effect adjustment of $4.8 million in net income as of May 4, 2000, was recognized during the first six months of Fiscal Year 2001. The Fiscal Year 2001 first nine months amounts include the effect of the change in accounting for revenue recognition. 8. Recently Issued Accounting Standards In September 2000, the FASB Emerging Issues Task Force (the "EITF") issued new guidelines entitled "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products". In addition, during May 2000, the EITF issued new guidelines entitled "Accounting for Certain Sales Incentives". Both of these issues provide guidance primarily on income statement classification of consideration from a vendor to a purchaser of the vendor's products, including both customers and consumers. Generally, cash consideration is to be classified as a reduction of revenue, unless specific criteria are met regarding goods or services that the vendor may receive in return for this consideration. F-28 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements In the fourth quarter of Fiscal Year 2002, Heinz Finance will reclassify promotional payments to its customers and the cost of consumer coupons and other cash redemption offers from SG&A to net sales. Heinz Finance is currently assessing the combined impact of both issues, however, we believe that, based on historic information, sales could be reduced up to 7 to 8%. SG&A would be correspondingly reduced such that net earnings would not be affected. In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". These standards require that all business combinations be accounted for using the purchase method and that goodwill and intangible assets with indefinite useful lives should not be amortized but should be tested for impairment at least annually, and they provide guidelines for new disclosure requirements. These standards outline the criteria for initial recognition and measurement of intangibles, assignment of assets and liabilities including goodwill to reporting units and goodwill impairment testing. The provisions of SFAS 141 and 142 apply to all business combinations after June 30, 2001. We have not fully assessed the potential impact of the adoption of SFAS No. 142 which is effective for us in Fiscal Year 2003. The reassessment of intangible assets, including the ongoing impact of amortization, must be completed during the first quarter of Fiscal Year 2003. The assignment of goodwill to reporting units, along with completion of the first step of the transitional goodwill impairment tests, must be completed during the first six months of Fiscal Year 2003. In June 2001, the FASB approved SFAS 143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset, except for certain obligations of lessees. This standard is effective for fiscal years beginning after June 15, 2002. Heinz Finance does not expect that the adoption of this standard will have a significant impact on the consolidated financial statements. In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-lived Assets." SFAS No. 144 clarifies and revises existing guidance on accounting for impairment of plant, property, and equipment, amortized intangibles, and other long-lived assets not specifically addressed in other accounting literature. This standard will be effective for Heinz Finance beginning in Fiscal Year 2003. Heinz Finance does not expect that the adoption of this standard will have a significant impact on the consolidated financial statements. 9. Related Party Transactions Employee Costs Certain of Heinz's general and administrative expenses are allocated to Heinz Finance. In Fiscal Year 2001, total costs allocated include charges for salaries of corporate officers and staff and other Heinz corporate overhead. In Fiscal Year 2002, these costs primarily include a management charge of all salaried employee costs from the Heinz Management Company which is the general partner of Heinz LP. Total costs charged to Heinz Finance for these services were $252.6 million and $20.5 million for the nine months ended January 30, 2002 and January 31, 2001, respectively. These costs are recorded as selling, general and administrative expense in the accompanying condensed consolidated and combined statements of income. Heinz charges Heinz Finance for its share of group health insurance costs for eligible company employees based upon location-specific costs, overall insurance costs and loss experience incurred during a calendar year. In addition, various other insurance coverages are also provided to Heinz Finance through Heinz's consolidated programs. Workers compensation, auto, property, product liability and other insurance coverages are charged directly based on Heinz Finance's loss experience. Amounts charged to Heinz Finance for insurance costs were F-29 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements $45.8 million and $60.7 million for the nine months ended January 30, 2002 and January 31, 2001, respectively, and are recorded in selling, general and administrative expense in the accompanying consolidated and combined statement of income. Pension costs and postretirement costs are also charged to Heinz Finance based upon eligible employees participating in the Plans. Cash Management In Fiscal Year 2001, the U.S. Group maintained a cash management arrangement with Heinz. On a daily basis, all available cash was deposited and disbursements were withdrawn. Heinz charged (credited) the U.S. Group's interest on the average daily balance maintained in the resulting intercompany account. Net interest expense related to this arrangement, included in the combined statement of income was $9.3 million for the nine months ended January 31, 2001. The interest rate charged to or received by the U.S. Group was 6.83% for the nine months ended January 31, 2001. Beginning in Fiscal Year 2002, Heinz Finance became the treasury center for cash management and debt financing for all of Heinz's domestic operations resulting in the $894.8 million of short term notes receivable with related parties on the January 30, 2002 condensed consolidated balance sheet. An average interest rate of 3.21% was charged on these notes resulting in $27.5 million of interest income for the nine months ended January 30, 2002. Product sales and purchases Heinz Finance sells and purchases products and services to and from other Heinz affiliates. The results of such transactions are the $187.4 million and $75.4 million balances due from related parties as of January 30, 2002 and May 2, 2001, respectively, and the $229.9 million and $96.2 million balances due to related parties as of January 30, 2002 and May 2, 2001, respectively. Sales to related parties were $37.6 million and $50.3 million in the nine months ended January 30, 2002 and January 31, 2001, respectively, and purchases from related parties were $258.7 million and $338.4 million in the nine months ended January 30, 2002 and January 31, 2001, respectively. Other related party items Heinz Finance sells undivided interests in certain accounts receivable to a Heinz affiliate, Receivables Servicing Company (RSC). Heinz Finance sold $619.2 million and $1,291.0 million of receivables net of discount expense of $2.8 million and $9.4 million for the nine months ended January 30, 2002 and the year ended May 2, 2001, respectively, to RSC. As of January 30, 2002 and the year ended May 2, 2001, respectively, Heinz Finance had $0 million and $126.9 million of receivables sold to RSC. These sales were reflected as reductions of trade accounts receivable. Heinz Finance ceased the factoring of its receivables to RSC in October 2001. Heinz Finance's contract with RSC terminated in December 2001. Until the fourth quarter of Fiscal Year 2001, Heinz Finance had outstanding notes receivable from Heinz affiliates which are used for working capital purposes and to fund acquisitions. The short-term notes had interest rates ranging from 6.50% to 7.00%. The long-term notes had interest rates ranging from 6.75% to 7.50% with a maturity of May 2003. Interest income earned by Heinz Finance related to these receivables was $90.7 million for the nine months ended January 31, 2001. In the fourth F-30 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements quarter of Fiscal Year 2001, these notes receivable from related parties were exchanged by Heinz Finance with a subsidiary of Heinz, PM Holding, Inc. ("PM Holding"), for $1.9 billion of non-voting, 6.5% cumulative non- participating preferred stock of PM Holding. This dividend amounted to $99.9 million for the first nine months of Fiscal Year 2002. This preferred stock investment is recorded in the Investments in related parties balance on the condensed consolidated and combined balance sheets as of January 30, 2002 and May 2, 2001. Heinz Finance paid royalties of $125.8 million and $72.8 million for the nine months ended January 30, 2002 and January 31, 2001, respectively, to Promark International, Inc., an indirect subsidiary of Heinz, for the use of trademarks. The $35.0 million long-term note receivable from related parties recorded on the accompanying condensed consolidated and combined balance sheets relates to a receivable from Heinz that was contributed to Heinz Finance in exchange for common stock of Heinz Finance. Heinz Finance received an administrative fee from Heinz for acting as the agent in the sale of the retained inventory discussed in Note (1). This fee was $10.2 million for the nine months ended January 30, 2002, which is recorded as income in SG&A expense in the accompanying consolidated statement of income. 10. Long-term Debt The amount of long-term debt that matures in each of the four years following 2002 is: $450.1 million in 2003, $0.5 million in 2004, $259.0 million in 2005, and $0.5 million in 2006.
Long-term debt Maturity (dollars in thousands) Range of Interest (Fiscal Year) January 30, 2002 May 2, 2001 - --------------------- ----------------- ------------- ---------------- ----------- Commercial Paper.................. Variable $1,380,527 $ - Revenue Bonds..................... 3.25 - 7.12% 2002-2020 1,810,352 12,392 Promissory notes.................. 5.00 - 7.002% 2003-2028 1,507,210 5,081 Other............................. 18,982 36,292 ---------- ------- Total long-term debt.............. 4,717,071 53,765 Less portion due within one year.. 501,576 29,833 ---------- ------- $4,215,495 $23,932 ========== =======
On September 6, 2001, Heinz Finance, Heinz and a group of domestic and international banks entered into a $1.50 billion credit agreement which expires in September 2006 and an $800 million credit agreement which expires in September 2002. These credit agreements, which support Heinz Finance's commercial paper program, replaced the $2.30 billion credit agreement which expired on September 6, 2001. As of January 30, 2002, $1.38 billion of commercial paper was outstanding and classified as long-term debt due to the long-term nature of the supporting credit agreement. On July 6, 2001, Heinz Finance raised $325 million via the issuance of Voting Cumulative Preferred Stock, Series A with a liquidation preference of $100,000 per share. The Series A Preferred shares are entitled to receive quarterly dividends at a rate of 6.226% per annum and are required to be redeemed for cash on July 15, 2008. In addition, Heinz Finance issued $750 million of 6.625% Guaranteed Notes due July 15, 2011 which are guaranteed F-31 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements by Heinz. The proceeds were used for general corporate purposes, including retiring commercial paper borrows, financing acquisitions and ongoing operations. 11. Comprehensive Income Nine Months Ended ---------------- January 30, 2002 FY 2002 ---------------- Net income.............................................. $60,498 Deferred gains/(losses) on derivatives: Net change from periodic revaluations.................. 51 Net amount reclassified to earnings.................... (24) ------- Comprehensive income.................................... $60,525 ======= 12. Segment Data Descriptions of Heinz Finance's reportable segments are as follows: o Heinz North America - This segment manufactures, markets and sells ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels. o U.S. Pet Products and Seafood - This segment manufactures, markets and sells dry and canned pet food, pet snacks, tuna and other seafood. o U.S. Frozen - This segment markets frozen potatoes, entrees, snacks and appetizers. Heinz Finance's management evaluates performance based on several factors including net sales and the use of capital resources; however, the primary measurement focus is operating income excluding unusual costs and gains. Intersegment sales are accounted for at current market values. Items below the operating income line of the consolidated and combined statements of income are not presented by segment, since they are excluded from the measure of segment profitability reviewed by Heinz Finance management. F-32 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements The following tables present information about Heinz Finance's reportable segments:
Nine Months Ended --------------------------------------- January 30, 2002 January 31, 2001 FY 2002 FY 2001 ---------------- ---------------- (in thousands) Net external sales: Heinz North America................................... $1,477,443 $1,613,509 U.S. Pet Products and Seafood......................... 785,944 1,123,310 U.S. Frozen........................................... 832,374 783,848 ---------- ---------- Consolidated and combined totals.................... $3,095,761 $3,520,667 ========== ========== Intersegment sales: Heinz North America................................... $ 155 $ 2,305 U.S. Pet Products and Seafood......................... - 1,136 U.S. Frozen........................................... 17 - ---------- ---------- Consolidated and combined totals.................... $ 172 $ 3,441 ========== ========== Operating income (loss): Heinz North America................................... $ 248,291 $ 402,442 U.S. Pet Products and Seafood......................... 63,826 43,916 U.S. Frozen........................................... 104,333 88,869 Non-Operating (b)..................................... (2,035) (892) ---------- ---------- Consolidated and combined totals.................... $ 414,415 $ 534,335 ========== ========== Operating income (loss) excluding special items (a): Heinz North America................................... $ 248,291 $ 442,966 U.S. Pet Products and Seafood......................... 64,997 109,455 U.S. Frozen........................................... 104,333 106,033 Non-Operating (b)..................................... (2,035) (892) ---------- ---------- Consolidated and combined totals.................... $ 415,586 $ 657,562 ========== ==========
- --------- (a) Nine Months ended January 30, 2002 - Excludes implementation costs of Streamline as follows: U.S. Pet Products and Seafood $1.2 million. Nine Months ended January 31, 2001 - Excludes implementation and net restructuring costs of Operation Excel as follows: Heinz North America $40.5 million, U.S. Pet Products and Seafood $65.5 million and U.S. Frozen $17.2 million. (b) Includes charges/assets not directly attributable to operating segments. 13. Financial Instruments Heinz Finance utilizes certain financial instruments to manage its commodity price and interest rate exposures. F-33 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements Commodity Price Hedging Heinz Finance uses commodity futures and options in order to reduce price risk associated with anticipated purchases of raw materials such as corn, soybean oil and soybean meal. Commodity price risk arises due to factors such as weather conditions, government regulations, economic climate and other unforeseen circumstances. Hedges of anticipated commodity purchases which meet the criteria for hedge accounting are designated as cash flow hedges. When using a commodity option as a hedging instrument, Heinz Finance excludes the time value of the option from the assessment of hedge effectiveness. Interest Rate Hedging Heinz Finance uses interest rate swaps to manage interest rate exposure. These derivatives are designated as cash flow hedges or fair value hedges depending on the nature of the particular risk being hedged. During Fiscal Year 2002, Heinz Finance entered into interest rate swap agreements to convert the interest rate exposure on certain of Heinz Finance's existing long-term debt from fixed to floating. The weighted average fixed rate of the associated debt is 6.433%. The aggregate notional amount of these swaps is $1.3 billion and their average duration is 12 years. Hedge Ineffectiveness During the nine months ended January 30, 2002, hedge ineffectiveness related to cash flow hedges was immaterial. Deferred Hedging Gains and Losses As of January 30, 2002, Heinz Finance is hedging forecasted transactions for periods not exceeding 12 months, and expects $0.2 million of net deferred gain reported in accumulated other comprehensive income to be reclassified to earnings within that time frame. 14. Commitments and Contingencies Legal Matters Certain suits and claims have been filed against the U.S. Group and have not been finally adjudicated. These suits and claims when finally concluded and determined, in the opinion of management, based upon the information that it presently possesses, will not have a material adverse effect on the U.S. Group's combined financial position, results of operations or liquidity. Purchase Commitments The U.S. Group entered into an agreement on August 14, 2000 with Impress to purchase from Impress metal cans and ends annually in an amount of approximately $90 million for a ten year term. 15. Subsequent Event On March 7, 2002, Heinz Finance issued $700 million of 6.00% Guaranteed Notes due March 15, 2012 and $550 million of 6.75% Guaranteed Notes due March 15, 2032, which are guaranteed by Heinz. The proceeds will F-34 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements be used to retire commercial paper borrowings. Heinz Finance converted $750 million of the new debt fixed to floating through interest rate swap agreements. F-35 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS IS NOT AN OFFER TO ACQUIRE THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO ACQUIRE THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER, EXCHANGE OR SALE IS NOT PERMITTED. Subject to Completion, dated March 27, 2002 PROSPECTUS , 2002 [H. J. Heinz Company LOGO] H. J. Heinz Finance Company Offer to Exchange $700,000,000 6.00% Guaranteed Notes due 2012 $550,000,000 6.75% Guaranteed Notes due 2032 for $700,000,000 6.00% New Guaranteed Notes due 2012 $550,000,000 6.75% New Guaranteed Notes due 2032 both unconditionally and irrevocably guaranteed by H. J. Heinz Company ----------------------- We are offering to exchange up to $700,000,000 of our 6.00% guaranteed notes due 2012 and $550,000,000 of our 6.75% guaranteed notes due 2032 (collectively, the "New Notes") which will be registered under the Securities Act of 1933, as amended, for up to $700,000,000 of our issued and outstanding 6.00% guaranteed notes due 2012 and $550,000,000 of our issued and outstanding 6.75% guaranteed notes due 2032 (collectively, the "Old Notes"). We are offering to issue the New Notes to satisfy our obligations contained in the exchange and registration rights agreement we entered into when the Old Notes were sold in transactions in reliance on Rule 144A and Regulation S under the Securities Act. The New Notes are unconditionally and irrevocably guaranteed by H. J. Heinz Company, "Heinz" or the "Guarantor." The terms of the New Notes are identical in all material respects to the terms of the Old Notes, except that the transfer restrictions, registration rights and additional interest provisions relating to the Old Notes do not apply to the New Notes. The exchange offer and withdrawal rights will expire at 5:00 p.m., New York City time, on o, 2002 unless extended. You should carefully review the risk factors on page o of this prospectus. ----------------------- To exchange your Old Notes for New Notes of the same series: o You must complete and send the letter of transmittal that accompanies this prospectus to the exchange agent by 5:00 p.m., New York City time, on o, 2002. o If your Old Notes are held in book-entry form at The Depository Trust Company, "DTC," you must instruct DTC, through your signed letter of transmittal, that you want to exchange your Old Notes for New Notes. When the exchange offer closes, your DTC account will be changed to reflect your exchange of Old Notes for New Notes. o You should read the section called "The Exchange Offer" for additional information on how to exchange your Old Notes for New Notes. ----------------------- The Securities and Exchange Commission and state securities regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ----------------------- TABLE OF CONTENTS ----------------------- Page ---- Forward-Looking Statements....................................................2 Where You Can Find More Information...........................................3 Incorporation of Certain Documents by Reference...............................4 Summary.......................................................................5 Risk Factors..................................................................9 No Cash Proceeds.............................................................11 Ratio of Earnings to Fixed Charges...........................................11 Overview of Entity Structure, Reorganization and Financial Statement Presentation.....................................................12 Heinz Finance Selected Historical Consolidated and Combined Financial Data.............................................................14 H. J. Heinz Company..........................................................16 Heinz Selected Consolidated Financial Data...................................16 Management's Discussion and Analysis of Financial Condition and Results of Operation.......................................................18 Business.....................................................................35 Related Party Transactions ..................................................42 Management...................................................................43 Description of the New Notes.................................................48 The Exchange Offer...........................................................57 Taxation.....................................................................65 Plan of Distribution.........................................................66 Notice to Investors..........................................................67 Validity of the New Notes....................................................67 Experts......................................................................68 Index to Combined Financial Statements of H. J. Heinz Finance Company.......F-1 --------------------------- FORWARD-LOOKING STATEMENTS This prospectus (including the information incorporated by reference in this prospectus) contains statements that constitute forward-looking statements. These statements appear in a number of places in this prospectus or the documents incorporated by reference and include statements regarding the intent, belief or current expectations of, and with respect to, the H. J. Heinz Finance Company, or "Heinz Finance," or its officers or Heinz with respect to future events or the results of operations and financial condition of Heinz, Heinz Finance and their subsidiaries and involve known and unknown risks, uncertainties and other factors. In some cases, you can identify forward-looking statements in this document by words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "potential," "should" or the negative of those terms or similar expressions. Such statements reflect the current views of Heinz Finance or of Heinz with respect to future events and are subject to certain risks, uncertainties and assumptions. The following is a non-exclusive list of important factors which may affect the business and results of operations of Heinz Finance and/or Heinz. o Changes in laws and regulations, including changes in food and drug laws, accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws; o Competitive product and pricing pressures and the ability to gain or maintain share of sales in the global market as a result of actions by competitors and others; 2 o Fluctuations in the cost and availability of raw materials and the ability to maintain favorable supplier arrangements and relationships; o The impact of higher energy costs on the cost of producing, transporting and distributing products; o The ability to generate sufficient cash flows to support capital expenditures and general operating activities; o The inherent risks in the marketplace associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance; o The ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume, product mix and other items; o The ability to integrate acquisitions and joint ventures into existing operations; o The ability to achieve cost savings objectives, including the continued implementation of our restructuring programs; o The impact of unforeseen economic and political changes in markets where we compete, such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which we have no control; o Interest rate fluctuations and other capital market conditions; o The effectiveness of advertising, marketing and promotional programs; o Weather conditions, which could impact demand for our products and the supply and cost of raw materials; o The ability to maintain our profit margin in the face of a consolidating retail environment; and o The ability to offset the reduction in volume and revenue resulting from participation in categories experiencing declining consumption rates. Such forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and actual results may differ from those in such forward-looking statements as a result of various factors. The information in this prospectus identifies important factors that could cause such differences. See also the factors described in "Cautionary Statement Relevant to Forward-Looking Information" in the Guarantor's Annual Report on Form 10-K for the fiscal year ended May 2, 2001 and "Where You Can Find More Information" and "Risk Factors" both in this prospectus. WHERE YOU CAN FIND MORE INFORMATION This prospectus is part of a registration statement on Form S-4 that we have filed with the Securities and Exchange Commission, the "Commission," under the Securities Act of 1933, as amended, the "Securities Act." This prospectus does not contain all of the information set forth in the registration statement. For further information about us and the New Notes, you should refer to the registration statement. This prospectus summarizes material provisions of contracts and other documents to which we refer you. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents. We have filed these documents as exhibits to our registration statement. 3 After the effectiveness of the registration statement, we will become subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will file reports and other information with the Commission. You may read and copy any reports and information statements and other information we file at the public reference facilities of the Securities and Exchange Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at 233 Broadway, New York, New York 10279, and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. You may obtain copies of those materials from the Commission by mail at prescribed rates. You should direct requests to Securities and Exchange Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a website (www.sec.gov) that will contain reports and other information filed by us. In addition, for so long as any of the Old Notes remains outstanding, we have agreed to make available to any holder or purchaser of the Old Notes or the New Notes in connection with any sale thereof the information required by Rule 144A(d) (4) under the Securities Act. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE Heinz is subject to the informational requirements of the Exchange Act. In accordance with the Exchange Act, Heinz files reports, proxy statements and other information with the Commission. Those reports, proxy statements and other information can be inspected and copied at the public reference facilities that the Commission maintains at the above mentioned address, and at the Commission's regional offices located in New York, New York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further information on its public reference rooms. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the Commission at its principal offices referred to above, or over the Internet at the Commission's web site at the above mentioned web address. The following documents filed with the Commission are incorporated by reference in and made a part of this prospectus: Heinz's Annual Report on Form 10-K for the fiscal year ended May 2, 2001, its Quarterly Reports on Form 10-Q for the three months ended August 1, 2001, the three and six months ended October 31, 2001 and the three and nine months ended January 30, 2002 and its Current Reports on Form 8-K dated June 26, 2001, September 17, 2001 and November 13, 2001. Any statement contained in a document all or a portion of which is incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained herein modifies or supersedes such statement. Any statement so modified or superseded, except as so modified or superseded, shall not be deemed to constitute a part of this prospectus. We will provide without charge to each person to whom this prospectus has been delivered, upon such person's written or oral request, a copy of any document referenced in or incorporated by reference into this prospectus. Requests for such copies should be directed to the Corporate Affairs Department, H. J. Heinz Company, P.O. Box 57, Pittsburgh, Pennsylvania 15230-0057; telephone number (412) 456-6000. To obtain timely delivery, you must request the information no later than o, 2002, or five business days prior to the expiration date of the exchange offer if the exchange offer is extended. You should rely only on the information contained in this prospectus or that we have referred you to. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer of the New Notes in any state where the offer is not permitted. You should assume that the information appearing in this prospectus, as well as information Heinz has previously filed with the Commission and are incorporating by reference, is accurate only as of the date on the front cover of this prospectus. Our and Heinz's business, financial condition, results of operations and prospects may have changed since that date. 4 SUMMARY The following summary contains basic information about us, Heinz, the New Notes and this exchange offer. It may not contain all the information that is important to you in making your investment decision. More detailed information appears elsewhere in this prospectus and in our consolidated and combined financial statements and accompanying notes and in Heinz's consolidated financial statements and accompanying notes that we incorporate by reference. "The Exchange Offer" and the "Description of the New Notes" sections of this prospectus contain more detailed information regarding the terms and conditions of the exchange offer and the New Notes. References in this prospectus to the terms "we," "us," "our," "Heinz Finance" or the "Issuer" refer to H. J. Heinz Finance Company and its consolidated subsidiaries and to the terms "Heinz" or the "Guarantor" refer to H. J. Heinz Company. H. J. Heinz Company (The Guarantor) H. J. Heinz Company was incorporated under the laws of the Commonwealth of Pennsylvania on July 27, 1900. In 1905, it succeeded to the business of a partnership operating under the same name that had developed from a food business founded in 1869 at Sharpsburg, Pennsylvania by Henry J. Heinz. The principal executive offices of Heinz are located at 600 Grant Street, Pittsburgh, Pennsylvania 15219. The principal products of Heinz include ketchup, condiments and sauces, frozen food, pet food, soups, beans and pasta meals, tuna and other seafood products, infant food and other processed food products. H. J. Heinz Finance Company (The Issuer) We are engaged in the business of acquiring, holding and financing equity and debt investments in subsidiaries that own and operate the U.S. businesses historically operated by Heinz. Heinz Finance has been, directly or indirectly, a wholly-owned subsidiary of Heinz since 1983 and had no significant operating history until Heinz completed a reorganization of its corporate organization in the United States on May 3, 2001. As a result of the reorganization, all of the U.S. business operations that had historically been conducted by Heinz through its Heinz USA division and eight subsidiary corporations, are now conducted by Heinz Finance. The Exchange Offer Issuer.............................. H. J. Heinz Finance Company New Notes........................... Up to $700,000,000 aggregate principal amount of our new 6.00% guaranteed notes due 2012 and up to $550,000,000 aggregate principal amount of our new 6.75% guaranteed notes due 2032. The Exchange Offer.................. We are offering to issue the New Notes in exchange for a like principal amount of outstanding Old Notes that we issued on March 7, 2002. We are conducting this exchange offer to satisfy our obligations contained in the exchange and registration rights agreement we entered into when we sold the Old Notes in transactions pursuant to Rule 144A and Regulation S under the Securities Act. 5 The Old Notes were subject to transfer restrictions that will not apply to the New Notes so long as you are acquiring the New Notes in the ordinary course of your business, you are not participating in a distribution of the New Notes and you are not an affiliate of ours. Maturity............................ The notes due 2012 will mature on March 15, 2012 and the notes due 2032 will mature on March 15, 2032. Interest Payment Dates.............. March 15 and September 15 of each year commencing from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid, from March 7, 2002. Redemption.......................... The Issuer may choose to redeem some or all of the New Notes at any time. If the Issuer chooses to do so, it will mail a notice of redemption to the holders of the New Notes not less than 30 days and not more than 60 days before the redemption occurs. Payment of Additional Amounts....... The Issuer shall pay all stamp and other duties, if any, which may be imposed by the United States or the United Kingdom or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance, transfer, exchange or conversion of the New Notes. The Issuer will not be required to make any payment with respect to any other tax, assessment or governmental charge imposed by any government or any political subdivision thereof or taxing authority therein. Ranking............................. The New Notes will be unsecured and will rank equally with all our other unsecured indebtedness and other obligations. Guarantee........................... The New Notes will be unconditionally and irrevocably guaranteed by Heinz. No Cash Proceeds.................... We will not receive any proceeds from the issuance of the New Notes. Form of the New Notes............... The New Notes will be issued in the form of one or more global securities which will be deposited with, or on behalf of, DTC and registered in the name of Cede & Co., DTC's nominee. Beneficial interests in the global securities will be represented through book-entry accounts of financial institutions acting on behalf of beneficial owners as direct and indirect participants in DTC. Governing Law....................... The New Notes, the guarantee and the indenture will be governed by New York law. Tenders, Expiration Date, Withdrawal The exchange offer will expire at 5:00 p.m., New York City time, on , 2002 unless it is extended. To tender 6 your Old Notes you must follow the detailed procedures described under the heading "The Exchange Offer--Procedures for Tendering" including special procedures for certain beneficial owners and broker- dealers. If you decide to exchange your Old Notes for New Notes, you must acknowledge that you do not intend to engage in and have no arrangement with any person to participate in a distribution of the New Notes. If you decide to tender your Old Notes pursuant to the exchange offer, you may withdraw them at any time prior to 5:00 p.m., New York City time, on the expiration date. Federal Income Tax Consequences..... Your exchange of Old Notes for New Notes pursuant to the exchange offer will not result in a gain or loss to you. Exchange Agent...................... Bank One Trust Company is the exchange agent for the exchange offer. Failure to Exchange Your Old Notes.. If you fail to exchange your Old Notes for New Notes in the exchange offer, your Old Notes will continue to be subject to transfer restrictions and you will not have any further rights under the exchange and registration rights agreement, including any right to require us to register your Old Notes or to pay any additional interest. Trading Market...................... To the extent that Old Notes are tendered and accepted in the exchange offer, your ability to sell untendered, and tendered but unaccepted, Old Notes could be adversely affected. There may be no trading market for the Old Notes. There can be no assurance that an active public market for the New Notes will develop or as to the liquidity of any market that may develop for the New Notes, the ability of holders to sell the New Notes, or the price at which holders would be able to sell the New Notes. For more details, see the section called "Notice to Investors." General Indenture Provisions Applicable to the New Notes and the Old Notes Indenture........................... The New Notes will be issued under the same indenture as the Old Notes. No Limit on Debt.................... The indenture does not limit the amount of debt that we may issue or provide holders any protection should we be involved in a highly leveraged transaction. Restrictions on Secured Debt........ If the Guarantor or any Restricted Subsidiary shall after the date of the Indenture incur or guarantee any Debt secured by a Mortgage on any Principal Property of the Guarantor or any Restricted Subsidiary, or on any share of stock or Debt of any Restricted Subsidiary, the Guarantor 7 will secure or cause such Restricted Subsidiary to secure the Notes, equally and ratably with (or, at the option of the Guarantor, prior to) such secured Debt, unless the aggregate amount of all such secured Debt would not exceed 10% of Consolidated Net Assets. These restrictions will not apply in some circumstances. (All terms are defined under "Description of the New Notes - Certain Definitions.") Events of Default................... Each of the following is an event of default with respect to the Notes under the indenture: o default in the payment of any installment of interest for 30 days after becoming due; o default in the payment of principal when due; o default in the deposit of any sinking fund payment when due; o default by Heinz Finance or the Guarantor in the performance or breach of any other covenant or warranty in the Notes or the Indenture for 90 days after notice; o certain events of bankruptcy, insolvency or reorganization with respect to Heinz Finance or the Guarantor; or o the Guarantor contests the validity or enforceability of the Guarantee or related obligations. 8 RISK FACTORS In addition to the information set forth elsewhere in this prospectus, you should consider carefully the factors set forth below before exchanging your Old Notes for New Notes. Heinz's and Heinz Finance's Business Is Subject to Numerous Risks We produce a broad range of food products and we acquire, hold and finance equity and debt investments in subsidiaries that own and operate the U.S. business of Heinz. Accordingly, the results of operations and financial condition of our business and of the business of Heinz are subject to certain risks and uncertainties, including: o Changes in laws and regulations, including changes in food and drug laws, accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws; o Competitive product and pricing pressures and the ability to gain or maintain share of sales in the global market as a result of actions by competitors and others; o Fluctuations in the cost and availability of raw materials and the ability to maintain favorable supplier arrangements and relationships; o The impact of higher energy costs on the cost of producing, transporting and distributing products; o The ability to generate sufficient cash flows to support capital expenditures and general operating activities; o The inherent risks in the marketplace associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance; o The ability to achieve sales and earnings forecasts, which are based on assumptions about sales volume, product mix and other items; o The ability to integrate acquisitions and joint ventures into existing operations; o The ability to achieve cost savings objectives, including the continued implementation of our restructuring programs; o The impact of unforeseen economic and political changes in the markets where we compete, such as currency exchange rates, inflation rates, recession, foreign ownership restrictions and other external factors over which we have no control; o Interest rate fluctuations and other capital market conditions; o The effectiveness of our advertising, marketing and promotional programs; o Weather conditions, which could impact demand for our products and the supply and cost of raw materials; o The ability to maintain our profit margin in the face of a consolidating retail environment; and o The ability to offset the reduction in volume and revenue resulting from participation in categories experiencing declining consumption rates. 9 No Operating History; Risk of Future Revisions in Policies and Strategies Prior to May 2001, Heinz Finance was an inactive subsidiary of Heinz and had no relevant operating history. Since May 2001, Heinz Finance has operated the historical U.S. business of Heinz. Although the U.S. business of Heinz consisted of business entities with established operations, these businesses have no operating history as a combined entity. As a result, there can be no assurances regarding the future results of operations or financial condition of Heinz Finance. Amendments or changes to our bylaws, and changes in our operating policies and strategies, may be made from time to time at the discretion of the board of directors and, in the case of the bylaws, by the holders of capital stock of Heinz Finance entitled to vote generally in the election of directors. We Depend Upon Our Subsidiaries to Service Our Debt We are a holding company and derive all of our operating income from our subsidiaries. Our primary source of cash to pay principal of and interest on the New Notes is from cash distributions, dividends and other payments from our subsidiaries. The payment of dividends by our subsidiaries is subject to the declaration of dividends by those subsidiaries' boards of directors, and our subsidiaries are not obligated to pay dividends. The distribution of cash by H. J. Heinz Company, LP, "Heinz LP," is subject to the discretion of the general partner of Heinz LP (Heinz Management Company, "HMC," a wholly owned subsidiary of the Guarantor). Our subsidiaries' ability to make such payments may also be restricted by, among other things, applicable state laws and other laws and regulations. In addition, our right and the rights of our creditors, including holders of the New Notes, to participate in the assets of any subsidiary upon its liquidation or recapitalization would be subject to the prior claims of such subsidiary's creditors, except to the extent that we may ourselves be a creditor with recognized claims against such subsidiary. The New Notes will be unconditionally guaranteed by Heinz. In addition, a liquidity agreement between Heinz and Heinz Finance provides a credit facility that may be drawn upon by Heinz Finance subject to its terms, in the event of a cash shortfall. An Active Trading Market For Our New Notes May Not Develop There is no established trading market for the New Notes since they are a new issue of securities. We do not intend to apply for the listing of any New Notes on a national securities exchange. We cannot assure you as to the liquidity of the public market for the New Notes or that any active public market for the New Notes will develop or continue. If an active public market does not develop or continue, the market price and liquidity of the New Notes may be adversely affected. Old Notes are Subject to Transfer Restrictions and May Not Have An Active Trading Market If you fail to exchange your Old Notes for New Notes in the exchange offer, your Old Notes will continue to be subject to transfer restrictions and you will not have any further rights under the exchange and registration rights agreement, including any right to require us to register your Old Notes or to pay any additional interest. 10 NO CASH PROCEEDS This exchange offer is intended to satisfy certain of our obligations under the exchange and registration rights agreement. We will not receive any proceeds from the issuance of the New Notes and have agreed to pay the expenses of the exchange offer. In consideration for issuing the New Notes as contemplated in the registration statement, of which this prospectus is a part, we will receive in exchange Old Notes in like principal amount. The form and terms of the New Notes are identical in all material respects to the form and terms of the Old Notes, except as otherwise described herein under "The Exchange Offer--Terms of the Exchange Offer." The Old Notes surrendered in exchange for the New Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the New Notes will not result in any increase in our outstanding debt. RATIO OF EARNINGS TO FIXED CHARGES(1)
Nine months ended Years Ended ------------------------- ---------------------------------------------------------------------------- January 30, January 31, May 2, 2001 May 3, 2000 April 28, 1999 April 29, 1998 April 30, 1997 2002 2001 (52 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks) ----------- ----------- ----------- ----------- -------------- -------------- -------------- H. J. Heinz Company... 4.87 4.12 2.79 5.83 3.88 5.29 2.56 H. J. Heinz Finance Company(2)........... 3.39 37.14 22.36 46.75 49.76 44.04 8.13
- --------- (1) The ratios of earnings to fixed charges were calculated by dividing earnings by fixed charges. Earnings were calculated by adding income before income taxes, interest expense (including amortization of debt expense and any discount or premium relating to indebtedness), the interest component of rental expense and the amortization of capitalized interest. Fixed charges were calculated by adding interest expense (including amortization of debt expense and any discount or premium relating to indebtedness), capitalized interest and the interest component of rental expense. (2) The ratios of earnings to fixed charges for the periods prior to January 30, 2002 relate to the U.S. Group and are not representative of the expected ratio of earnings to fixed charges for Heinz Finance as debt was not allocated to the U.S. Group prior to the reorganization discussed in this prospectus. 11 OVERVIEW OF ENTITY STRUCTURE, REORGANIZATION, AND FINANCIAL STATEMENT PRESENTATION Reorganization On the first day of fiscal year 2002 (May 3, 2001) Heinz reorganized the structure of its U.S. business as follows: o Operations. All of the U.S. business operations, formerly conducted through eight subsidiaries and a division of Heinz were consolidated into Heinz LP. Heinz Management Company, a wholly-owned subsidiary of Heinz, is the general partner of Heinz LP and holds a 1% partnership interest. The limited partner interests in Heinz LP consist of "Class A" and "Class B" interests as described under "Business--General." Heinz owns all of the Class A interests. Heinz Finance owns all of the Class B interests. o Treasury. U.S. cash management and treasury activities were transferred to Heinz Finance. On the day of the reorganization, Heinz Finance assumed then outstanding term debt obligations of Heinz in the amount of $2.57 billion and $258 million of the commercial paper obligations of Heinz. Since the reorganization, Heinz Finance has issued term debt and commercial paper in its own name as described under "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Financial Position." All of the debt of Heinz Finance is unconditionally guaranteed by Heinz and is included on the consolidated balance sheet of Heinz. On July 6, 2001, Heinz Finance issued $325 million of preferred stock to outside investors. The preferred shares are entitled to elect 25% of the directors of Heinz Finance and, if declared, are entitled to receive dividends at a rate of 6.226% per annum. o Trademarks. Substantially all of the trademarks used in the U.S. businesses (including "Heinz," "Star- Kist," "Ore-Ida," "Smart Ones," "9-Lives" and "Kibbles 'n Bits"), are owned by Promark International Inc., an indirect subsidiary of Heinz, and are licensed to us. 12 The following diagram provides a summary overview of the ownership structure and significant affiliate relationships of Heinz Finance and Heinz. [A graphic appears here depicting the basic corporate structure of H. J. Heinz Finance Company. The graphic shows H. J. Heinz Company as the owner of the common stock of Heinz Finance, and unrelated investors as the owners of the preferred stock of Heinz Finance. Heinz Finance is shown as the owner of the Class B interests in H. J. Heinz Company, LP, and Heinz is shown as the owner of the Class A and General Partner inerests in H. J. Heinz Company, LP.] Financial Statement Presentation For all Heinz financial reporting and disclosure purposes, Heinz Finance and its subsidiaries (including Heinz LP) are treated as fully consolidated subsidiaries. All of the assets, liabilities, results of operations and cash flows of these entities are included in the Heinz consolidated financial statements. All of the intercompany transactions and accounts are eliminated within the Heinz consolidated financial statements. The preferred shares issued by Heinz Finance are shown as minority interest in the Heinz consolidated financial statements. Heinz Finance's consolidated financial statements include the assets and liabilities, results of operations and cash flows of Heinz LP and all other subsidiaries of Heinz Finance. In the Heinz Finance consolidated statements, the general partner and Class A interests in Heinz LP, that are held by Heinz, are reflected as minority interest. The financial statements and the related management's discussion and analysis of financial condition and results of operations included herein for periods ending on or before May 2, 2001 relate to the U.S. businesses that were contributed to Heinz Finance on May 3, 2001. Results for these periods have been prepared using "carve-out" and "push-down" accounting methods. With respect to periods ending on or before May 2, 2001, the corporations and businesses described above are referred to as the "U.S. Group." For a more complete discussion of the presentation of the Heinz financial statements, please refer to the consolidated financial statements and accompanying notes included in Heinz's 2001 Annual Report on Form 10-K, which is incorporated herein by reference. 13 HEINZ FINANCE SELECTED HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL DATA The following table presents selected historical financial data of the U.S. Group. The following data, insofar as it relates to each of the fiscal years 1998 and 1997, has been derived from annual financial statements of Heinz and was prepared utilizing the domestic segment information in the Heinz annual reports and removing those items that are not part of the U.S. Group's operations. The data for the fiscal years ended May 2, 2001, May 3, 2000 and April 28, 1999 (Fiscal Year 2001, Fiscal Year 2000 and Fiscal Year 1999, respectively) has been derived from financial statements audited by PricewaterhouseCoopers LLP, independent accountants. Combined statements of assets and liabilities at May 2, 2001 and May 3, 2000 and the related combined statements of operations and of cash flows for the three years ended May 2, 2001 and notes thereto appear elsewhere in this prospectus. The data for the nine-month periods ended January 30, 2002 and January 31, 2001 have been derived from unaudited financial statements also appearing herein and which, in the opinion of Heinz Finance management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of results for the unaudited interim periods.
Nine months ended Fiscal year ended -------------------------- ----------------------------------------------------------------- January 30, January 31, May 2, May 3, April 28, April 29, April 30, 2002 2001 2001 2000 1999 1998 1997 ----------- ----------- ------ ------ --------- --------- --------- (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (In thousands) Sales....................... $3,095,761 $3,520,667 $4,938,197 $4,789,188 $4,687,123 $4,542,948 $4,360,524 Operating income............ 414,415 534,335 438,069 609,337 578,398 664,858 170,167 Interest expense............ 156,962 6,571 10,278 7,138 6,266 7,621 29,649 Net income.................. 60,498 375,874 306,898 448,295 432,757 -- -- Current portion - long-term debt....................... 501,576 28,890 29,833 2,998 51,384 12,421 2,496 Long-term debt.............. 4,215,495 25,283 23,932 33,071 25,594 47,063 56,206 Preferred stock............. 325,000 -- -- -- -- -- -- Total assets................ 7,648,087 5,893,255 5,601,491 5,068,456 4,588,108 4,730,030 5,944,697
The results for the nine months ended January 30, 2002 include implementation costs for Streamline (as defined below) of $1.2 million pretax. The results for the nine months ended January 31, 2001 include Operation Excel (as defined below) costs of $101.7 million pretax. The 2001 results include restructuring and implementation costs of $84.7 million pretax relating to Streamline and net restructuring and implementation costs of $173.3 million pretax for Operation Excel. Results also include a loss of $94.6 million on the sale of The All American Gourmet business and attempted acquisition cost of $18.5 million pretax. The 2000 results include net restructuring and implementation costs of $175.8 million pretax for Operation Excel. The 1999 results include net restructuring and implementation costs of $156.1 million pretax for Operation Excel and costs of $9.4 million pretax related to the implementation of Project Millennia (as defined below), offset by the reversal of unutilized Project Millennia accruals for severance and exit costs of $16.6 million pretax. The 1998 results include costs of $30.2 million pretax related to the implementation of Project Millennia. The 1997 results include a pretax charge for Project Millennia restructuring and implementation costs of $455.8 million. 14 Project Millennia was a reorganization and restructuring program commencing in the fourth quarter of the fiscal year ended April 30, 1997, which was designed to strengthen the U.S. Group's core businesses and improve profitability and global growth. Key initiatives focused on process changes and product line rationalizations. Operation Excel was a growth and restructuring initiative that commenced in the fiscal year ended April 28, 1999, which created manufacturing centers of excellence, focused the product portfolio, realigned management teams and invested in growth activities. In the fourth quarter of Fiscal 2001, Heinz announced a restructuring initiative named "Streamline." This initiative includes worldwide organization restructuring aimed at reducing overhead costs, the close of Heinz's tuna operations in Puerto Rico, the consolidation of the North American canned pet food production to Bloomsburg, Pennsylvania, and the divestiture of our fleet of fishing boats and related equipment. 15 H. J. HEINZ COMPANY H. J. Heinz Company was incorporated under the laws of the Commonwealth of Pennsylvania on July 27, 1900. In 1905, it succeeded to the business of a partnership operating under the same name that had developed from a food business founded in 1869 at Sharpsburg, Pennsylvania by Henry J. Heinz. The principal executive offices of Heinz are located at 600 Grant Street, Pittsburgh, Pennsylvania 15219. The principal products of Heinz include ketchup, condiments and sauces, frozen food, pet products, soups, beans and pasta meals, tuna and other seafood products, infant food and other processed food products. HEINZ SELECTED CONSOLIDATED FINANCIAL DATA The following tables contain selected financial data for H. J. Heinz Company and its consolidated subsidiaries. The income statement data for the fiscal years ended May 2, 2001 (Fiscal Year 2001), May 3, 2000 (Fiscal Year 2000) and April 28 1999 (Fiscal Year 1999), and the balance sheet data as of May 2, 2001 and May 3, 2000 are derived from the consolidated financial statements included in the Heinz's 2001 Annual Report on Form 10-K, which is incorporated herein by reference, and which were audited by PricewaterhouseCoopers LLP, whose reports also appear in the Annual Report. The income statement data for the fiscal years ended April 29, 1998 (Fiscal Year 1998) and April 30, 1997 (Fiscal Year 1997) and the balance sheet data as of April 28, 1999, April 29, 1998 and April 30, 1997 are derived from consolidated financial statements audited by PricewaterhouseCoopers LLP, but not incorporated by reference in this prospectus. The unaudited income statement data for the nine months ended January 30, 2002 and January 31, 2001 and the unaudited balance sheet data as of January 30, 2002 are derived from the Guarantor's unaudited condensed consolidated financial statements for the nine months ended January 30, 2002 and January 31, 2001 included in the Heinz's Quarterly Report on Form 10-Q for the nine months ended January 30, 2002, which is incorporated herein by reference. In the opinion of Heinz management, such unaudited income statement and balance sheet data include all adjustments, consisting of those of a normal and recurring nature, necessary for a fair statement of results of operations for those interim periods on a basis substantially consistent with that of the audited financial statements. For all Heinz financial reporting and disclosure purposes, Heinz Finance and its subsidiaries (including Heinz LP) are treated as fully consolidated subsidiaries. All of the assets and liabilities, results of operations and cash flows of these entities are included in the Heinz consolidated financial statements. All of the intercompany transactions and accounts are eliminated within the Heinz consolidated financial statements. The preferred shares issued by Heinz Finance are shown as minority interest in the Heinz consolidated financial statements. 16
Nine months ended Fiscal year ended January 30, January 31, May 2, May 3, April 28, April 29, April 30, 2002 2001 2001 2000 1999 1998 1997 ----------- ----------- ---------- ---------- ---------- ---------- ---------- (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) (In thousands) Sales....................... $7,301,932 $6,737,631 $9,430,422 $9,407,949 $9,299,610 $9,209,284 $9,357,007 Operating income............ 1,180,739 1,111,088 982,354 1,733,099 1,109,312 1,520,330 756,271 Interest expense............ 220,824 249,515 322,957 269,748 258,813 258,616 274,746 Net income.................. 610,375 648,533 478,012 890,553 474,341 801,566 301,871 Net income per share- diluted..................... 1.73 1.85 1.36 2.47 1.29 2.15 0.81 Net income per share-basic 1.75 1.87 1.37 2.51 1.31 2.19 0.82 Short-term debt and current portion of long-term debt............. 774,841 3,096,379 1,870,834 176,575 904,207 339,626 1,163,442 Long-term debt, exclusive of current portion.................... 4,864,133 1,894,561 3,014,853 3,935,826 2,472,206 2,768,277 2,283,993 Preferred stock............. 111 126 126 139 173 199 241 Total assets................ 10,092,287 9,148,736 9,035,150 8,850,657 8,053,634 8,023,421 8,437,787 Cash dividends per common share............... 1.2025 1.1525 1.5450 1.4450 1.3425 1.2350 1.1350
The results for the nine months ended January 30, 2002 include restructuring charges and implementation costs for Streamline of $16.2 million pretax. The results for the nine months ended January 31, 2001 include net Operation Excel costs of $206.9 million pretax and a pretax loss of $5.6 million, which represented Heinz's equity loss associated with The Hain Celestial Group's fourth quarter results which included charges for its merger with Celestial Seasonings. The 2001 results include restructuring and implementation costs of $298.8 million pretax for the Streamline initiative, net restructuring and implementation costs of $288.5 million pretax for Operation Excel, a benefit of $93.2 million from tax planning and new tax legislation in Italy, a loss of $94.6 million pretax on the sale of The All American Gourmet business, attempted acquisition costs of $18.5 million pretax, a loss of $5.6 million pretax which represents Heinz's equity loss associated with The Hain Celestial Group's fourth quarter results which included charges for its merger with Celestial Seasonings and the after-tax impact of adopting SAB No. 101 and SFAS No. 133 of $16.9 million. See Notes 3 and 4 to the Consolidated Financial Statements of Heinz for the fiscal year ended May 2, 2001 incorporated by reference in this prospectus. The 2000 results include net restructuring and implementation costs of $392.7 million pretax for Operation Excel, a pretax contribution of $30.0 million to the H. J. Heinz Company Foundation, costs related to Heinz's Ecuador tuna processing facility of $20.0 million pretax, a gain of $464.6 million pretax on the sale of the Weight Watchers classroom business and a gain of $18.2 million pretax on the sale of an office building in the United Kingdom. The 1999 results include restructuring and implementation costs of $552.8 million pretax for Operation Excel and costs of $22.3 million pretax related to the implementation of Project Millennia, offset by the reversal of unutilized Project Millennia accruals for severance and exit costs of $25.7 million pretax and a gain of $5.7 million pretax on the sale of the bakery products units. Results recorded in 1998 include costs of $84.1 million pretax related to the implementation of Project Millennia, offset by the gain on the sale of the Ore-Ida frozen foodservice business, $96.6 million pretax. Results recorded in 1997 include a pretax charge for Project Millennia restructuring and implementation costs of $647.2 million. These charges were partially offset by gains recognized on the sale of the New Zealand ice cream business, $72.1 million pretax and real estate in the United Kingdom, $13.2 million pretax. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion in conjunction with our unaudited condensed consolidated and combined financial statements, the notes to our unaudited condensed consolidated and combined financial statements, our combined financial statements and the notes to our combined financial statements included elsewhere in this prospectus. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Please see "Forward-Looking Statements" and "Risk Factors" for a discussion of the uncertainties, risks and assumptions associated with these statements. Overview Reorganization On the first day of fiscal year 2002 (May 3, 2001) Heinz reorganized the structure of its U.S. business as follows: o Operations. All of the U.S. business operations, formerly conducted through eight subsidiaries and a division of Heinz were consolidated into Heinz LP. Heinz Management Company, a wholly-owned subsidiary of Heinz, is the general partner of Heinz LP and holds a 1% partnership interest. The limited partner interests in Heinz LP consist of "Class A" and "Class B" interests as described under "Business-General." Heinz owns all of the Class A interests. Heinz Finance owns all of the Class B interests. o Treasury. U.S. cash management and treasury activities were transferred to Heinz Finance. On the day of the reorganization, Heinz Finance assumed all of the then outstanding term debt obligations of Heinz in the amount of $2.57 billion and $258 million of the commercial paper obligations of Heinz. Since the reorganization, Heinz Finance has issued term debt and commercial paper in its own name as described under "-Liquidity and Financial Position." All of the debt of Heinz Finance is unconditionally guaranteed by Heinz. On July 6, 2001, Heinz Finance issued $325 million of preferred stock to outside investors. The preferred shares are entitled to elect 25% of the directors of Heinz Finance and, if declared, are entitled to receive dividends at a rate of 6.226% per annum. o Trademarks. Substantially all of the trademarks used in the U.S. businesses (including "Heinz," "Star- Kist," "Ore-Ida," "Smart Ones," "9-Lives" and "Kibbles 'n Bits"), are owned by Promark International Inc., an indirect subsidiary of Heinz, and are licensed to us. Financial Statement Presentation For all Heinz financial reporting and disclosure purposes, Heinz Finance and its subsidiaries (including Heinz LP) are treated as fully consolidated subsidiaries. All of the assets, liabilities, results of operations and cash flows of these entities are included in the Heinz consolidated financial statements. All of the intercompany transactions and accounts are eliminated within the Heinz consolidated financial statements. The preferred shares issued by Heinz Finance are shown as minority interest in the Heinz consolidated financial statements. Heinz Finance's consolidated financial statements include the assets and liabilities, results of operations and cash flows of Heinz LP and all other subsidiaries of Heinz Finance. In the Heinz Finance consolidated statements, the general partner and Class A interests in Heinz LP that are held by Heinz are reflected as minority interest. The financial statements and the related management's discussion and analysis of financial condition and results of operations included herein for periods ending on or before May 2, 2001 relate to the U.S. businesses that were contributed to Heinz Finance on May 3, 2001. Results for these periods have been prepared using "carve-out" 18 and "push-down" accounting methods. With respect to periods ending on or before May 2, 2001, the corporations and businesses described above are referred to as the "U.S. Group." Certain assets and liabilities which are included in the Fiscal Year 2001 "carve out" balance sheet were not contributed to Heinz Finance. Substantially all finished goods inventories of the U.S. Group remained assets of Heinz. These retained inventories resulted in reduced sales and operating results of Heinz Finance for the nine months ended January 30, 2002 when compared to the nine months ended January 31, 2001 and will result in reduced sales and operating results of Heinz Finance in the fiscal year ending May 1, 2002 ("Fiscal Year 2002") when compared to Fiscal Year 2001. The sales and operating results related to the retained inventories were recorded on the consolidated financial statement of Heinz. Segment Data We report our business in three segments as follows: o Heinz North America - This segment manufactures, markets and sells ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels. o U.S. Pet Products and Seafood - This segment manufactures, markets and sells dry and canned pet food, pet snacks, tuna and other seafood products. o U.S. Frozen - This segment manufactures, markets and sells frozen potatoes, entrees, snacks and appetizers. Discussion of Critical Accounting Policies In the ordinary course of business, Heinz Finance has made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America. Our results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results and require management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Marketing Costs - In order to support Heinz Finance's products, we offer various marketing programs to our customers which reimburse them for a portion or all of their promotional activities related to our products. We regularly review and revise, when deemed necessary, estimates of our costs for these marketing programs based on estimates of what has been incurred by our customers. Our actual costs incurred by Heinz Finance may differ significantly if factors such as the level and success of our customers' programs or other conditions differ from our expectations. Inventories Inventories are stated at the lower of cost or market value. Cost is principally determined by the first-in, first- out method. We record adjustments to the value of inventory based upon our forecasted plans to sell our inventories. The physical condition (e.g., age and quality) of the inventories is also considered in establishing our valuation. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations. 19 Property, Plant and Equipment and Other Assets Property, plant and equipment is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of such assets. Changes in circumstances such as technological advances, changes to our business model or changes in our capital strategy can result in the actual useful lives differing from our estimates. In those cases where we determine that the useful life of property, plant and equipment should be shortened, we would depreciate the net book value in excess of the salvage value, over its revised remaining useful life thereby increasing depreciation expense. Factors such as changes in the planned use of fixtures or software or closing of facilities could result in shortened useful lives. Long-lived assets, including fixed assets and intangibles other than goodwill, are reviewed by Heinz Finance for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The estimate of cash flow is based upon, among other things, certain assumptions about expected future operating performance. Our estimates of undiscounted cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions, changes to our business model or changes in our operating performance. If the sum of the undiscounted cash flows (excluding interest) is less than the carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset. Goodwill Heinz Finance evaluates goodwill in accordance with Statement of Financial Accounting Standards ("SFAS") 121 by comparing expected future cash flows to the carrying amount of the goodwill. If future cash flows are less favorable than those anticipated, goodwill may be impaired. Special Items Operation Streamline In the fourth quarter of Fiscal Year 2001, Heinz announced a restructuring initiative named "Streamline." This initiative includes an organizational restructuring aimed at reducing overhead costs and the consolidation of our canned pet food production to Bloomsburg, Pennsylvania (which resulted in ceasing canned pet food production at our Terminal Island, California facility). During Fiscal Year 2001, the U.S. Group recognized restructuring charges and implementation costs totaling $84.7 million on a pretax basis. Pretax charges of $65.3 million were classified as cost of products sold and $19.4 million as SG&A. Implementation costs were recognized as incurred in Fiscal Year 2001 ($11.8 million pretax) and consist of incremental costs directly related to the implementation of the Streamline initiative. These include idle factory costs, consulting fees and asset relocation costs. In Fiscal Year 2001, we ceased production of canned pet food in our Terminal Island, California facility. In addition, we are continuing implementation of our overhead reduction plan. To date, these actions have resulted in a net reduction of our workforce of approximately 300 employees. Operation Excel In Fiscal Year 1999, Heinz announced a growth and restructuring initiative, named "Operation Excel." This initiative was a multi-year, multi-faceted program which established manufacturing centers of excellence, focused the product portfolio, realigned the U.S. Group's management teams and invested in growth initiatives. The U.S. Group established manufacturing centers of excellence which resulted in significant changes to its manufacturing footprint. The U.S. Group completed the following initiatives: 20 o Focused the Pittsburgh, Pennsylvania factory on soup and baby food production and shifting other production to existing facilities; o Downsized the Pocatello, Idaho factory by shifting Bagel Bites production to the Ft. Myers, Florida factory, and shifted certain Smart Ones entree production to the Massillon, Ohio factory; o Closed the El Paso, Texas pet treat facility and transferred production to the Topeka, Kansas factory and to co-packers; and o Disposed of the Bloomsburg, Pennsylvania frozen pasta factory. As part of Operation Excel, the U.S. Group focused its portfolio of product lines on six core food categories: ketchup, condiments and sauces; frozen foods; tuna; soups, beans and pasta meals; infant foods; and pet products. A consequence of this focus on the core categories was the sale of two smaller businesses, which had combined annual revenues of approximately $15 million. Realigning the U.S. Group's management teams provided processing and product expertise across the United States. Specifically, Operation Excel: o Established a single frozen food headquarters, resulting in the closure of the U.S. Group's Ore-Ida head office in Boise, Idaho, and o Established a single Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania, resulting in the relocation of the U.S. Group's seafood and pet food headquarters from Newport, Kentucky. The pretax savings generated from Operation Excel initiatives were approximately $40 million in Fiscal Year 2000 and $70 million in Fiscal Year 2001 and are projected to grow to approximately $85 million in Fiscal Year 2002 and $95 million in Fiscal Year 2003 and thereafter. During Fiscal Year 2001, the U.S. Group recognized restructuring charges of $44.8 million pretax. These charges were primarily associated with exiting the U.S. Group's domestic can making operations and higher than originally expected severance costs associated with creating the single Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania. This charge was recorded in cost of products sold ($36.3 million) and SG&A ($8.5 million). This charge was offset by the reversals of unutilized Operation Excel accruals and asset write-downs of $21.0 million pretax. These reversals were recorded in costs of products sold ($8.2 million) and SG&A ($12.7 million) and were primarily the result of the U.S. Group's decision not to exit certain warehouses due to higher than expected volume growth. Implementation costs of $149.5 million pretax were also recognized in Fiscal Year 2001. These costs were classified as cost of products sold ($62.2 million) and SG&A ($87.3 million). During Fiscal Year 2000, the U.S. Group recognized restructuring charges of $95.3 million pretax. Pretax charges of $53.5 million were classified as cost of products sold and $41.8 million as SG&A. Also, during Fiscal Year 2000, the U.S. Group recorded a reversal of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs, primarily for the closure of the West Chester, Pennsylvania facility, which remains in operation as a result of the sale of the Bloomsburg frozen pasta facility in Fiscal Year 2000. Implementation costs of $96.9 million pretax were classified as cost of products sold ($33.7 million) and SG&A ($63.2 million). During Fiscal Year 1999, the U.S. Group recognized restructuring charges and implementation costs of $156.1 million pretax. Pretax charges of $94.3 million were classified as cost of products sold and $61.8 million as SG&A. 21 Implementation costs were recognized as incurred and consisted of incremental costs directly related to the implementation of Operation Excel, including consulting fees, employee training and relocation costs, unaccruable severance costs associated with terminated employees, equipment relocation costs and commissioning costs. The U.S. Group has closed or exited all of the five factories or businesses that were originally scheduled for closure or divestiture. In addition, the U.S. Group exited its domestic can making operations. Operation Excel impacted approximately 2,000 employees with a net reduction in the workforce of approximately 1,500 after expansion of certain facilities. During Fiscal Year 2001, Fiscal Year 2000 and Fiscal Year 1999, the U.S. Group's workforce had a net reduction of approximately 800 employees, 500 employees and 200 employees, respectively. Acquisitions and Divestitures The following acquisitions were made by Heinz Finance or its predecessor: The nine months ended January 30, 2002 o Borden Food Corporation's pasta sauce, dry bouillon and soup business - In this transaction, we acquired such brands Classico pasta sauces, Aunt Millie's pasta sauce, Mrs. Grass Recipe soups and Wyler's bouillons and soup. o Anchor Food Products branded retail business - In this transaction, we acquired the Poppers brand of retail appetizer lines and licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers. o Delimex Holdings, Inc. - Delimex is the leading U.S. producer of frozen taquitos, tightly rolled fried corn and flour tortillas with fillings such as beef, chicken or cheese. Delimex also makes quesadillas, tamales and rice bowls. Fiscal Year 2001 o Cornucopia, Inc. and Central Commissary - Two privately held U.S. foodservice companies which make and market refrigerated and frozen reciped food products. o IDF Holdings, Inc., the parent of International DiverseFoods Inc. - A leading manufacturer of customized dressings, sauces, mixes and condiments for restaurant chains and foodservice distributors. o Alden Merrell Corporation - A manufacturer of high-quality, premium-priced frozen desserts for casual dining restaurants and foodservice distributors. o Additional investment in the Hain Celestial Group, "Hain," restoring our ownership interest to approximately 19.5 percent of the outstanding stock. Fiscal Year 2000 o Quality Chef Foods, - A leading manufacturer of frozen heat-and-serve soups, entrees and sauces. o Yoshida - A line of Asian sauces marketed in the U.S. o Thermo Pac, Inc. - A U.S. leader in single-serve condiments. o A strategic alliance with and investment in Hain for the global production and marketing of natural and organic foods and soy-based beverages. 22 Fiscal Year 1999 o College Inn brand of canned broths and other smaller acquisitions. During the periods presented, the U.S. Group divested the All American Gourmet business and its Budget Gourmet and Budget Gourmet Value Classics brands of frozen entrees. Results of Operations Nine Months Ended January 30, 2002 and January 31, 2001 Sales For the nine months ended January 30, 2002, our sales decreased $424.9 million, or 12.1%, to $3,095.8 million from $3,520.7 million in the comparable period last year. Sales were unfavorably impacted by lower volumes of $675.2 million, or 19.2%, lower pricing by $26.5 million, or 0.8%, and divestitures by $74.9 million, or 2.1%. The majority of the volume decrease is a result of the finished goods inventories which were not contributed to Heinz Finance as previously discussed. Sales were favorably impacted by acquisitions of $351.7 million, or 10.0%. Sales of the Heinz North America segment decreased $136.0 million, or 8.4%. Sales volume decreased 16.5%, primarily due to the finished goods inventories which were not contributed to Heinz Finance. Acquisitions, net of divestitures, increased sales 10.4%. Lower pricing decreased sales 2.3%, primarily related to foodservice ketchup. Sales of the U.S. Pet Products and Seafood segment decreased $337.4 million, or 30.0%. Sales volume decreased 29.9% due primarily to the finished goods inventories which were not contributed to Heinz Finance. Volume decreases were also experienced in pet food partially offset by increases in pet snacks and tuna. Slightly higher pricing increased sales 0.1%. Divestitures decreased sales 0.2%. Sales of the U.S. Frozen segment increased $48.5 million, or 6.2%. Sales volume decreased 9.4% due primarily to the finished goods inventories which were not contributed to Heinz Finance as discussed above. Volume decreases were also experienced in frozen potatoes partially offset by Boston Market HomeStyle Meals, SmartOnes frozen entrees and Bagel Bites snacks. Acquisitions increased sales 22.0%. Higher pricing increased sales 1.3%, primarily in SmartOnes frozen entrees and frozen potatoes partially offset by lower pricing of Boston Market HomeStyle Meals. Divestitures reduced sales by 7.7% due to the sale of Budget Gourmet. Special Items Our results for the nine months ended January 30, 2002 were negatively impacted by additional Streamline implementation costs totaling $1.2 million pretax. Pretax charges of $1.1 million were classified as cost of products sold and $0.1 million as SG&A. Last year's results in the corresponding period include net Operation Excel costs of $123.2 million pretax. Also included in the nine months ended January 31, 2001 results is a pretax loss of $5.6 million, which represents an equity loss associated with Hain Celestial Seasonings. 23 The following tables provide a comparison of our reported results and the results excluding special items for the periods presented.
Nine months ended January 30, 2002 ------------------------------------------------------ Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results.......................... $1,247.9 $414.4 $60.5 Streamline implementation costs......... 1.1 1.2 0.7 -------- ------ ----- Results excluding special items......... $1,249.0 $415.6 $61.2 ======== ====== =====
Nine months ended January 31, 2001 ------------------------------------------------------ Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results.......................... $1,377.8 $534.3 $375.8* Operation Excel restructuring........... 32.7 32.7 20.2 Operation Excel implementation costs.... 41.0 95.1 60.1 Operation Excel reversals............... (2.3) (4.6) (2.9) Equity loss on Investment in The Hain Celestial Group....................... -- -- 3.5 -------- ------ ------ Results excluding special items......... $1,449.2 $657.5 $456.7 ======== ====== ======
- --------- * Before cumulative effect of accounting change Gross Profit Gross profit decreased $129.9 million, or 9.4%, to $1,247.9 million from $1,377.8 million and the gross profit margin increased to 40.3% from 39.1%. Gross profit across all of our segments decreased as a result of the retention of finished goods inventories by Heinz as discussed above. Excluding the special items noted in the table above, our gross profit decreased $200.2 million, or 13.8%, to $1,249.0 million from $1,449.2 million and our gross profit margin decreased to 40.3% from 41.2%. Excluding special items noted above, gross profit for the Heinz North America segment decreased $85.0 million, or 12.3% due primarily to inventories retained by Heinz, lower pricing and the decline in the foodservice business partially offset by acquisitions. Excluding special items noted above, the U.S. Pet Products and Seafood segment's gross profit decreased $125.1 million, or 31.5%, primarily due to inventories retained by Heinz, price decreases in pet food and pet snacks, increased ingredient and manufacturing costs and a shift to less profitable larger size products. Pet food ingredient costs also increased as a result of reformulating recipes to improve palatability. Excluding special items noted above, the U.S. Frozen segment's gross profit increased $11.0 million, or 3.1%, due primarily to acquisitions and increased pricing partially offset by retained inventories by Heinz. SG&A SG&A decreased $62.9 million, or 8.2%, to $707.7 million from $770.6 million, and increased as a percentage of sales to 22.9% from 21.9%. Excluding the special items noted in the table above, our SG&A decreased $8.9 million, or 1.2%, to $707.6 million from $716.5 million and increased as a percentage of sales to 22.9% from 20.4%. This decrease is a result of the finished goods inventories which were retained by Heinz partially offset by increases from acquisitions, increased promotional spending and increased selling and distribution costs. 24 Operating Income Operating income decreased $119.9 million, or 22.4%, to $414.4 million from $534.3 million, and decreased as a percentage of sales to 13.4% from 15.2%. Excluding the special items noted above, our operating income decreased $242.0 million, or 36.8%, to $415.6 million from $657.6 million and decreased as a percentage of sales to 13.4% from 18.7%. The Heinz North America segment's operating income decreased $154.2 million, or 38.3%, to $248.3 million from $402.4 million. Excluding the special items noted in the table above, operating income decreased $194.5 million, or 43.9%, to $248.3 million from $443 million, due primarily to the decrease in gross profit and higher selling and distribution costs. The U.S. Pet Products and Seafood segment's operating income increased $19.9 million, or 45.3%, to $63.8 million from $43.9 million. Excluding the special items noted in the table above, operating income decreased $44.5 million, or 40.6%, to $65.0 million from $109.4 million, due primarily to the decrease in gross profit. The U.S. Frozen segment's operating income increased $15.4 million, or 17.4%, to $104.4 million from $88.9 million. Excluding the special items noted in the table above, operating income decreased $1.7 million, or 1.6%, to $108.4 million from $106.0 million as the favorable impact of acquisitions was offset by the decrease in gross profit, increased selling and distribution costs and the divestiture of Budget Gourmet. Other Items Interest expense increased $150.4 million to $157.0 million from $6.6 million last year, due primarily to the assumption of approximately $2.9 billion of Heinz's outstanding U.S. debt by Heinz Finance on May 3, 2001. Interest income decreased $63.5 million to $29.9 million from $93.4 million due primarily to the exchange of related party notes receivable for $1.9 billion of non-voting 6.5% cumulative participating preferred stock of PM Holdings during the fourth quarter of Fiscal Year 2001. The provisions for income taxes consists of provisions for federal and state income taxes. The tax provision in the January 30, 2002 financial statements declined significantly since Heinz Finance has no tax obligation on the minority partner's interest in Heinz LP's income. Net Income Net income for the current nine months was $60.5 million compared to $375.9 million last year. Excluding the special items noted in the table above and the cumulative effect of the accounting change for revenue recognition in the prior year, net income decreased $395.6 million to $61.2 million from $456.7 million last year. The majority of this decrease is due to the minority interest in Heinz LP discussed above. Fiscal Years Ended May 2, 2001 and May 3, 2000 Sales Sales for Fiscal Year 2001 increased $149.0 million, or 3.1%, to $4.94 billion from $4.79 billion in Fiscal Year 2000. Volume increased sales by $126.3 million, or 2.6%, and acquisitions increased sales by $109.8 million, or 2.3%. Divestitures reduced sales by $45.7 million, or 1.0%, and lower pricing reduced sales by $41.3 million, or 0.9%. Sales of the Heinz North America segment increased $208.9 million, or 10.2%. Sales volume increased 5.5%, due to increases in ketchup, condiments and sauces, foodservice, gravy and canned soups. Acquisitions, net of divestitures, increased sales 4.5%. Slightly higher pricing increased sales 0.2%. 25 Sales of the U.S. Pet Products and Seafood segment decreased $161.2 million, or 9.4%. Lower pricing decreased sales 4.4%, primarily in light meat tuna, dry dog food and cat snacks. Sales volume decreased 4.5%, primarily in tuna and canned pet food. Divestitures decreased sales 0.6%. Sales of the U.S. Frozen segment increased $101.4 million, or 9.7%. Sales volume increased 8.6%, driven by Smart Ones frozen entrees, Boston Market HomeStyle Meals, Bagel Bites snacks and frozen potatoes, partially offset by a decrease in The Budget Gourmet line of frozen entrees and frozen pasta. Higher pricing increased sales by 2.9% driven by Smart Ones frozen entrees and frozen potatoes. Divestitures reduced sales 1.8% mainly due to the sale of The All American Gourmet business and its Budget Gourmet and Budget Gourmet Value Classics brands of frozen entrees. Special Items Fiscal Year 2001 was impacted by a number of special items which are summarized in the tables below. These include Operation Excel implementation costs of $149.5 million pretax, additional Operation Excel restructuring charges of $44.8 million pretax and reversals of $21.0 million pretax of restructuring accruals and asset write-downs. Fiscal Year 2001 results also include Streamline restructuring charges of $72.9 million pretax and related implementation costs of $11.8 million pretax. During the fourth quarter of Fiscal Year 2001, the U.S. Group completed the sale of The All American Gourmet business that resulted in a pretax loss of $94.6 million. The Fiscal Year 2001 results also include pretax costs of $18.5 million related to attempted acquisitions and a loss of $5.6 million pretax which represents the U.S. Group's equity loss associated with The Hain Celestial Group's fourth quarter results which include charges for its merger with Celestial Seasonings. Fiscal Year 2000 results include Operation Excel restructuring charges of $95.3 million pretax, Operation Excel implementation costs of $96.9 million pretax and reversals of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs. The following tables provide a comparison of the U.S. Group's reported results and the results excluding special items for Fiscal Year 2001 and Fiscal Year 2000.
Fiscal year (52 weeks) ended May 2, 2001 -------------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results................................. $1,852.9 $438.1 $312.1 (1) Operation Excel restructuring................... 36.3 44.8 28.0 Operation Excel implementation costs............ 62.2 149.5 94.4 Operation Excel reversal........................ (8.2) (21.0) (13.3) Streamline restructuring........................ 58.2 72.9 45.9 Streamline implementation costs................. 7.1 11.8 9.3 Loss on the sale of The All American Gourmet Company................................ - 94.6 66.2 Equity loss on investment in The Hain Celestial Group.................................. - - 3.5 Acquisition costs............................... - 18.5 11.7 -------- ------ ------ Results excluding special items.................. $2,008.5 $809.2 $557.9 ======== ====== ======
- --------- (1) Before cumulative effect of accounting changes 26
Fiscal year (53 weeks) ended May 3, 2000 ----------------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results............................. $1,775.6 $609.3 $448.3 Operation Excel restructuring............... 53.4 95.3 61.5 Operation Excel implementation costs........ 33.7 96.9 61.0 Operation Excel reversal.................... (16.4) (16.4) (11.8) -------- ------ ------ Results excluding special items.............. $1,846.3 $785.1 $559.0 ======== ====== ======
Note: Totals may not add due to rounding. Gross Profit Gross profit increased $77.3 million to $1.85 billion from $1.78 billion in Fiscal Year 2000. The gross profit margin increased to 37.5% from 37.1%. Excluding the special items identified above, gross profit increased $162.1 million, or 8.8%, to $2.01 billion from $1.85 billion and the gross profit margin increased to 40.7% from 38.5%. Gross profit across all major segments was favorably impacted by savings from Operation Excel. Excluding special items noted above, gross profit for the Heinz North America segment increased $101.5 million, or 11.7%, due primarily to acquisitions and increased sales volume of ketchup partially offset by higher energy costs. Excluding special items noted above, the U.S. Pet Products and Seafood segment's gross profit increased $18.1 million, or 3.6%. Excluding special items noted above, the U.S. Frozen segment's gross profit increased $42.5 million, or 8.9%, due to increased sales volume mainly attributable to Boston Market HomeStyle Meals and higher selling prices, partially offset by higher energy costs. SG&A SG&A increased $213.8 million to $1.29 billion from $1.07 billion and increased as a percentage of sales to 26.0% from 22.4%. Excluding the special items identified above, SG&A increased $103.3 million to $1.07 billion from $966.9 million and increased as a percentage of sales to 21.7% from 20.2%. Selling and distribution expenses increased $66.0 million to $387.3 million from $321.2 million, or 20.6%, primarily due to acquisitions and increased fuel costs. Marketing increased $63.2 million, or 13.6% primarily due to the national rollouts of StarKist Tuna in a pouch, Boston Market products, and the new packaging for Ore-Ida frozen potatoes. Total marketing support (including trade and consumer promotions and media) decreased 4.9% to $1.08 billion from $1.13 billion on a sales increase of 3.1%. However, advertising costs to support our key brands increased 11.6%. See Note 16 to the Combined Financial Statements. Operating Income Operating income decreased $171.3 million, or 28.1%, to $438.1 million from $609.3 million last year. Excluding the special items identified above, operating income increased $24.1 million, or 3.1%, to $809.2 million from $785.1 million last year. Operating income, across all major segments, was favorably impacted by savings from Operation Excel. The Heinz North America segment's operating income increased $22.3 million to $451.5 million from $429.1 million last year. Excluding the special items noted above, operating income increased $30.6 million, or 5.8%, to $553.6 million from $523.0 million last year due to the strong performance of ketchup, condiments and sauces, and the acquisitions of Quality Chef, Yoshida and IDF Holding, Inc., partially offset by higher energy costs. The U.S. Pet Products and Seafood segment's operating income decreased $119.2 million to a loss of $35.1 million from income of $84.1 million last year. Excluding the special items noted above, operating income decreased $22.7 million, or 16.4% to $116.0 million from $138.7 million due to lower tuna and canned pet food 27 sales volumes, a significant decrease in the selling price of tuna and higher energy costs, partially offset by the strong performance of pet snacks. The U.S. Frozen segment's operating income decreased $73.6 million to $23.3 million from $96.9 million last year. Excluding the special items noted above, operating income increased $17.1 million, or 13.7%, to $141.2 million from $ 124.1 million last year. This increase is attributable to increased sales of Smart Ones frozen entrees, Boston Market frozen meals and Bagel Bites snacks, partially offset by marketing spending behind the national rollouts of Boston Market products, the new Ore-Ida potato packaging and higher energy costs. Other Items Other income, net totaled $79.4 million compared to $91.2 million last year. The effective tax rate for Fiscal Year 2001 was 39.7% compared to 36.0% last year. The current year rate is negatively impacted by a lower tax basis in dispositions. Excluding the special items identified in the tables above, the effective tax rate was 37.6% for Fiscal Year 2001 compared to 36.2% last year. Net Income Net income decreased $141.4 million to $306.9 million from $448.3 million last year. In Fiscal Year 2001, the U.S. Group changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." See Note 2 to the Combined Financial Statements. The cumulative effect of adopting SAB No. 101 was $4.8 million. Excluding the special items noted above and the prescribed accounting change, net income decreased 0.2% to $557.9 million from $559.0 million last year. Fiscal Years Ended May 3, 2000 and April 28, 1999 Sales Sales for Fiscal Year 2000 increased $102.1 million, or 2.2%, to $4.79 billion from $4.69 billion in Fiscal Year 1999. Volume increased sales by $187.9 million, or 4.0%, and acquisitions increased sales by $67.9 million, or 1.5%. Lower pricing reduced sales by $121.9 million, or 2.6%, and divestitures reduced sales by $31.8 million, or 0.7%. Sales of Heinz North America segment increased $174.4 million, or 9.3%. Sales volume increased 7.0%, due to increases in ketchup, condiments and sauces, foodservice, and canned soup. Acquisitions, net of divestitures, increased sales 3.1%. Lower pricing reduced sales by 0.8%, due mainly to decreases in retail ketchup. Sales of the U.S. Pet Products and Seafood segment decreased $85.2 million, or 4.8%. Sales volume increased 0.1%, due to increases in tuna, partially offset by a decrease in canned pet food. Lower pricing reduced sales by 4.9%, due mainly to decreases in tuna. Sales of the U.S. Frozen segment increased $12.9 million, or 1.2%. Sales volume increased 5.3%, driven by Smart Ones frozen entrees, Boston Market frozen meals and Bagel Bites snacks, partially offset by a decrease in The Budget Gourmet line of frozen entrees. The divestiture of several non-core product lines, net of acquisitions, reduced sales 2.5%. Lower pricing reduced sales 1.6%, primarily due to frozen potatoes. Special Items Fiscal Year 2000 results include Operation Excel implementation costs of $96.9 million pretax, additional Operation Excel restructuring charges of $95.3 million pretax and a reversal of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs. Fiscal Year 1999 results included Operation Excel restructuring 28 and implementation costs of $156.1 million pretax, Project Millennia restructuring implementation costs of $9.4 million pretax and the reversal of unutilized Project Millennia restructuring accruals of $16.6 million pretax. The following tables provide a comparison of the U.S. Group's reported results and the results excluding special items for Fiscal Year 2000 and Fiscal Year 1999.
Fiscal year (53 weeks) ended May 3, 2000 ----------------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results............................ $1,775.6 $609.3 $448.3 Operation Excel restructuring............. 53.4 95.3 61.5 Operation Excel implementation costs...... 33.7 96.9 61.0 Operation Excel reversal.................. (16.4) (16.4) (11.8) -------- ------ ------ Results excluding special items............. $1,846.3 $785.1 $559.0 ======== ====== ======
Fiscal year (52 weeks) ended April 28, 1999 ----------------------------------------------------------- Gross Profit Operating Income Net Income ------------ ---------------- ---------- (Dollars in millions) Reported results............................ $1,696.0 $578.4 $432.8 Operation Excel restructuring and implementation costs.................... 94.3 156.1 103.1 Project Millennia restructuring implementation costs.................... 6.7 9.4 5.9 Project Millennia restructuring reversal.. (16.6) (16.6) (10.5) -------- ------ ------ Results excluding special items............. $1,780.4 $727.3 $531.3 ======== ====== ======
Gross Profit Gross profit increased $79.6 million to $1.78 billion from $1.70 billion in Fiscal Year 1999. The gross profit margin increased to 37.1% from 36.2%. Excluding the special items identified above, gross profit increased $65.9 million, or 3.7%, to $1.85 billion from $1.78 billion, and the gross profit margin increased to 38.6% from 38.0%. Excluding the special items identified above, gross profit for the Heinz North America segment increased $64.1 million, or 8.0%, due primarily to acquisitions and increased volume of ketchup. Excluding the special items identified above, gross profit for the U.S. Pet Products and Seafood segment decreased $13.0 million, or 2.5%, due primarily to a significant decrease in the selling price of tuna. Excluding the special items identified above, the U.S. Frozen segment's gross profit increased $14.7 million, or 3.2%, as increased sales volume was offset by lower pricing and the elimination of several non-core product lines. SG&A SG&A increased $50.9 million to $1.07 billion from $1.02 billion and increased as a percentage of sales to 22.4% from 21.8%. Excluding the special items identified above, SG&A increased $10.3 million to $966.9 million from $956.6 million and decreased as a percentage of sales to 20.2% from 20.4%. Total marketing support (including trade and consumer promotions and media) increased 3.5% to $1.13 billion from $1.09 billion on a sales increase of 2.2%. Advertising costs in Fiscal Year 2000 were $189.1 million compared to $205.7 million in Fiscal Year 1999. 29 Operating Income Operating income increased $30.9 million, or 5.3%, to $609.3 million from $578.4 million last year. Excluding the special items identified above, operating income increased $57.8 million, or 7.9%, to $785.1 million from $727.3 million last year. The Heinz North America segment's operating income decreased $23.6 million, or 5.2%, to $429.1 million from $452.7 million in Fiscal Year 1999. Excluding the special items identified above, operating income increased $42.0 million, or 8.7%, to $523.0 million from $481.0 million in Fiscal Year 1999. The increase is due to the increase in gross profit and savings from Operation Excel. The U.S. Pet Products and Seafood segment's operating income decreased $20.4 million, or 19.5%, to $84.1 million from $104.5 million in Fiscal Year 1999. Excluding the special items identified above, operating income increased $2.2 million, or 1.6%, to $138.7 million from $136.6 million in Fiscal Year 1999. The strong performance of the pet food business and savings from Operation Excel were offset by a significant decrease in the selling price of tuna. The U.S. Frozen segment's operating income increased $75.1 million to $96.9 million from $21.8 million last year. Excluding the special items identified above, operating income increased $13.8 million, or 12.5%, to $124.1 million from $110.3 million last year. This increase is attributable to a reduction in SG&A resulting from the consolidation of the frozen business as part of Operation Excel, offset by higher marketing expenses as a result of the national campaign in support of Boston Market and lower pricing on Ore-Ida frozen potatoes. Other Items Other expenses, net totaled $27.9 million compared to $13.2 million last year. The effective tax rate for Fiscal Year 2000 was 36.0% compared to 37.1% last year. The Fiscal Year 1999 effective tax rate was unfavorably impacted by nondeductible expenses related to restructuring. Excluding the special items identified above, the effective tax rate for Fiscal Year 2000 was 36.2% compared to 36.6% last year. Net Income Net income increased $15.5 million to $448.3 million from $432.8 million last year. Excluding the special items identified above, net income increased 5.2% to $559.0 million from $531.3 million. Liquidity and Financial Position Cash flows from operating activities Cash used for operating activities for the nine months ended January 30, 2002 was $388.6 million compared to $244.7 million in the same period last year. The decrease in Fiscal Year 2002 versus Fiscal Year 2001 is primarily due to decreased working capital performance. Cash provided by operating activities decreased to $77.5 million in Fiscal Year 2001, compared to $433.9 million in Fiscal Year 2000 and $813.5 million in Fiscal Year 1999. The-decrease in Fiscal Year 2001 versus Fiscal Year 2000 is primarily due to higher expenditures on Streamline and Operation Excel. These decreases were partially offset by a reduction of inventory levels at certain locations that had risen during Fiscal Year 2000 in order to facilitate the plant shutdowns and reconfigurations related to Operation Excel. Cash flows from investing activities 30 Cash used for investing activities for the nine months ended January 30, 2002 totaled $840.9 million compared to $313.2 million in the same prior year period. Acquisitions in the current period required $777.7 million, due primarily to the purchase of Borden Food Corporation's pasta and dry bouillon and soup business, Delimex Holdings, Inc. and Anchor Food Products branded retail business and licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers. Acquisitions in the prior period required $161.0 million, due primarily to the purchase of International DiverseFoods Inc. During the prior year period, Heinz Finance also invested $79.7 million in The Hain Celestial Group, Inc. Capital expenditures in the current period required $51.8 million compared to $108.6 million last year. Cash used for investing activities was $232.0 million in Fiscal Year 2001 compared to $394.2 million in Fiscal Year 2000. Acquisitions during Fiscal Year 2001 required $229.9 million versus $73.9 million in Fiscal Year 2000. Fiscal Year 2001 acquisitions included International DiverseFoods Inc., Alden Merrell Corporation and two privately held U.S. foodservice companies, Cornucopia. Inc. and Central Commissary. Fiscal Year 2000 acquisitions included Quality Chef Foods, Yoshida and Thermo Pac. Inc. Also during Fiscal Year 2001, the U. S. Group exercised its preemptive right to purchase additional equity in Hain to restore the U.S. Group's investment level to approximately 19.5% of the outstanding stock of Hain, for $79.7 million. In Fiscal Year 2000, the U.S. Group invested $99.8 million in Hain. In Fiscal Year 2001, divestitures provided $96.5 million from the sale of The All American Gourmet business and can making assets. In Fiscal Year 2000, divestitures provided $25.0 million. Capital expenditures totaled $183.5 million in Fiscal Year 2001 compared to $215.4 million in the prior year. The decrease is attributable to a reduction in Operation Excel related capital expenditures. Proceeds from disposals of property, plant and equipment increased to $165.5 million in Fiscal Year 2001 compared to $4.8 million in Fiscal Year 2000. The increase was primarily due to the sale of equipment which was then utilized under operating lease arrangements. Cash flows from financing activities Cash provided by financing activities during the nine months ended January 30, 2002 increased to $1,229.0 million from $567.0 million during the same prior year period. Proceeds from long-term debt were $751.1 million in the current period. Payments on long-term debt required $9.2 million this period compared to $310.0 million last year. Net payments on commercial paper and short-term borrowings required $270.1 million in the current year period. In addition, $325.0 million was provided during the current period via the issuance of preferred stock, (see below). Dividend payments totaled $10.6 million compared to $316.7 million for the same period last year. Financing activities provided $152.6 million in Fiscal Year 2001 and required $40.3 million and $691.3 million in Fiscal Years 2000 and 1999, respectively. Net funds paid were $12.2 million in Fiscal Year 2001 compared to $47.8 million in Fiscal Year 2000. Cash requirements of Streamline In the first nine months of Fiscal Year 2002, the cash requirements of Streamline were $10.0 million, consisting of spending for severance and exit costs ($8.8 million) and implementation costs ($1.2 million). In Fiscal Year 2001, the cash requirements of Streamline were $14.3 million, consisting of spending for severance and exit costs ($2.3 million), capital expenditures ($0.3 million) and implementation costs ($11.8 million). The cash requirements of Operation Excel were $231.9 million, consisting of spending for severance and exit costs ($21.6 million), capital expenditures ($60.8 million) and implementation costs ($149.5 million). In Fiscal Year 2000, the cash requirements of Operation Excel were $199.9 million, consisting of spending for severance and exit costs ($20.3 million), capital expenditures ($82.7 million) and implementation costs ($96.9 million). In Fiscal Year 1999, the cash requirements of Operation Excel were $23.5 million, consisting of spending for severance and exit costs ($8.9 million), capital expenditures ($2.2 million) and implementation costs ($12.4 million). In Fiscal Year 2002, we expect the cash requirements of Streamline to be approximately $37.0 million, consisting of severance and exit costs ($30.0 million of the $30.7 million accrued as of May 2, 2001), capital 31 expenditures ($3.0 million) and implementation costs ($4.0 million). We are financing the cash requirements of these programs through operations, proceeds from the sale of non-strategic assets and with short-term and long-term borrowings. The cash requirements of these programs have not had and are not expected to have a material adverse impact on our liquidity or financial position. Other Financial and Liquidity Matters Pretax return on average invested capital ("ROIC") was 9.3% in Fiscal Year 2001, 14.5% in Fiscal Year 2000 and 14.4% in Fiscal Year 1999. Excluding the special items identified above, ROIC was 17.7% in Fiscal Year 2001, 18.8% in Fiscal Year 2000 and 18.2% in Fiscal Year 1999. In connection with the reorganization, we assumed as co-obligor the responsibility to pay Heinz debt issues totaling $2.57 billion in principal amount, plus accrued interest thereon. We also assumed as co-obligor the obligation to pay approximately $258 million of commercial paper issued by Heinz. Since May 3, 2001, we have issued commercial paper to refinance the commercial paper obligations assumed by us in the reorganization, to make loans to Heinz and to fund our ongoing operations. For a further discussion of our liquidity and financing arrangements with Heinz, please see "Related Party Transactions" in this prospectus. On July 6, 2001, we raised $325.0 million through the issuance of Voting Cumulative Preferred Stock, Series A with liquidation preference of $100,000 per share. The Series A Preferred shares are entitled to receive quarterly dividends at a rate of 6.226% per annum and are required to be redeemed for cash on July 15, 2008. In addition, we issued $750 million of 6.625% Guaranteed Notes due July 15, 2001. The proceeds were used for general corporate purposes, including retiring commercial paper borrows and financing acquisitions and ongoing operations. On September 6, 2001, Heinz Finance, Heinz and a group of domestic and international banks entered into a $1.50 billion credit agreement which expires in September 2006 and an $800 million credit agreement which expires in September 2002. These credit agreements, which support our commercial paper programs, replaced the $2.30 billion credit agreement which expired on September 6, 2001. As of January 30, 2002, $1.38 billion of domestic commercial paper is classified as long-term debt due to the long-term nature of the supporting credit agreement. In January 2002, Moody's Investor Service changed the credit ratings on Heinz's debt to A-3 for long-term debt and P-1 for short-term debt. The previous ratings were A-2 and P-1, respectively. Heinz's long-term and short-term debt ratings by Standard & Poor's remained at A and A-1, respectively. On March 7, 2002, Heinz Finance issued $700 million of 6.00% Guaranteed Notes due March 15, 2012 and $550 million of 6.75% Guaranteed Notes due March 15, 2032, which are guaranteed by Heinz. The proceeds will be used to retire commercial paper borrowings. Heinz Finance converted $750 million of the new debt from fixed to floating through interest rate swap agreements. Commitments and Contingencies The Commission recently issued an interpretive release on disclosures related to liquidity and capital resources, including off-balance sheet arrangements. We are not aware of factors that are reasonably likely to adversely affect liquidity trends or increase our risk beyond the risk factors presented in this filing. However, the following additional information is provided to assist financial statement users. Purchase Commitments - We have purchase commitments for materials, supplies, services, and property, plant and equipment as part of the ordinary conduct of business. A few of these commitments are long-term and are based on minimum purchase requirements. In the aggregate, such commitments are not at prices in excess of current market. Due to the proprietary nature of some of our materials and processes, certain supply contracts contain penalty provisions for early termination. We do not believe a material amount of penalties is reasonably likely to be incurred under these contracts based upon historical experience and current expectations. 32 Leases - We have entered into operating & synthetic leases for certain of our warehouses, equipment and office buildings where the economic profile is favorable. Contractual obligations under existing synthetic leases, which are due at the end of the lease period (fiscal years 2007 and 2008), totaled approximately $138.0 million as of January 30, 2002. The liquidity impact of outstanding leases is not material to Heinz Finance - by reference to both annual cash flow and total outstanding debt nor do they adversely affect our on-going business. Other Contractual Obligations - We do not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity. Related Party Transactions - All related party transactions that materially affect the results of operations, cash flow and financial condition have been disclosed in our Related Party Transaction section in this prospectus and in the notes to the condensed consolidated and combined financial statements for the nine months ended January 30, 2002 and January 31, 2001 included in this prospectus. Heinz Finance's financial position continues to remain strong, enabling it to meet cash requirements for operations, capital expansion programs and debt service during the next twelve months and the foreseeable future. Recently Adopted Accounting Standards In Fiscal Year 2001, we changed our method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements". Under the new accounting method, adopted retroactive to May 4, 2000, we recognize revenue upon the passage of title, ownership and risk of loss to the customer. The cumulative effect adjustment of $26.2 million in revenue ($4.8 million in net income) as of May 4, 2000, was recognized during the first quarter of Fiscal Year 2001. The Fiscal Year 2001 nine month amounts reflect the effect of the change in accounting for revenue recognition. Recently Issued Accounting Standards In September 2000, the FASB Emerging Issues Task Force (the "EITF") issued new guidelines entitled "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products." In addition, during May 2000, the EITF issued new guidelines entitled "Accounting for Certain Sales Incentives." Both of these issues provide guidance primarily on income statement classification of consideration from a vendor to a purchaser of the vendor's products, including both customers and consumers. Generally, cash consideration is to be classified as a reduction of revenue unless specific criteria are met regarding goods or services that the vendor may receive in return for this consideration. In the fourth quarter of Fiscal Year 2002, we will reclassify promotional payments to our customers and the cost of consumer coupons and other cash redemption offers from SG&A to net sales. We are currently assessing the combined impact of both issues, however, we believe that, based on historical information, sales could be reduced up to 7 to 8%. SG&A will be correspondingly reduced such that net earnings would not be affected. In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." These standards require that all business combinations be accounted for using the purchase method and that goodwill and intangible assets with indefinite useful lives should not be amortized but should be tested for impairment at least annually, and they provide guidelines for new disclosure requirements. These standards outline the criteria for initial recognition and measurement of intangibles, assignment of assets and liabilities including goodwill to reporting units and goodwill impairment testing. The provisions of SFAS 141 and 142 apply to all business combinations after June 30, 2001. We have not fully assessed the potential impact of the adoption of SFAS No. 142 which is effective for us in Fiscal Year 2003. The reassessment of intangible assets, including the ongoing impact of amortization, must be completed during the first quarter of Fiscal 2003. The assignment of goodwill to reporting units, along with completion of the first step of the transitional goodwill impairment tests, must be completed during the first six months of Fiscal Year 2003. 33 In June 2001, the FASB approved SFAS 143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset, except for certain obligations of lessees. This standard is effective for fiscal years beginning after June 15, 2002. Heinz Finance does not expect that the adoption of this standard will have a significant impact on the consolidated financial statements. In October 2001, the FASB issued SFAS No. 144 "Accounting for Impairment or Disposal of Long-lived Assets." SFAS No. 144 clarifies and revises existing guidance on accounting for impairment of plant, property, and equipment, amortized intangibles, and other long-lived assets not specifically addressed in other accounting literature. This standard will be effective for us beginning in Fiscal Year 2003. We do not expect the adoption of this standard to have a significant impact on the combined financial statements. Market Risk Factors We are exposed to market risks from adverse changes in interest rates and commodity prices and production costs. As a policy, we do not engage in speculative or leveraged transactions, nor do we hold or issue financial instruments for trading purposes. Interest Rate Sensitivity We are exposed to changes in interest rates primarily as a result of its borrowing and investing activities used to maintain liquidity and fund business operations. The nature and amount of our long-term debt can be expected to vary as a result of future business requirements, market conditions and other factors. The following table summarizes our debt obligations at January 30, 2002. The interest rates represent weighted-average rates, with the period-end rate used for the variable rate debt obligations. The fair value of the debt obligations approximated the recorded value as of January 30, 2002.
Expected Fiscal Year of Maturity ------------------------------------------------------------------------------------------- 2002 2003 2004 2005 2006 Thereafter Total ------ ------ ------ ------ ------ ---------- ----- (Dollars in thousands) Fixed rate............. 501,576 250,237 511 259,037 511 2,318,230 3,330,102 Average interest rate.. 7.07% 5.95% 6.50% 5.05% 6.50% 6.09% - Variable rate.......... - - - - - 1,386,969 1,386,969 Average interest rate.. 0.00% 0.00% 0.00% 0.00% 0.00% 3.15% -
Commodity Price Sensitivity We purchase certain commodities such as corn, wheat and soybean meal and oil. We generally purchase these commodities based upon market prices that are established with the vendor as part of the purchase process. In general, we do not use significant levels of commodity financial instruments to hedge commodity prices due to a high correlation between the commodity cost and the ultimate selling price of the product. On occasion, we may enter into commodity future or option contracts, as deemed appropriate, to reduce the effect of price fluctuations on some future manufacturing requirements. Such contracts are accounted for as hedges, with gains and losses recognized as part of cost of products sold, and generally have a term of less than one year. As of January 30, 2002, unrealized gains and losses related to commodity contracts held by us were not material nor would they be given a hypothetical 10% fluctuation in market prices. It should be noted that any change in the value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. Inflation In general, costs are affected by inflation and the effects of inflation may be experienced by Heinz Finance in future periods. We believe, however, that such effects have not been material to us during the past three years. 34 BUSINESS General We have been a direct or indirect subsidiary of Heinz since 1983. Heinz Finance had no significant operating history until Heinz completed a corporate reorganization in the United States on May 3, 2001. The reorganization was designed to simplify Heinz's U.S. corporate structure and establish centers of excellence for the management of the U.S. trademarks and for U.S. treasury functions. As a result of the reorganization, all of the U.S. business operations that had historically been conducted by Heinz through its Heinz USA division and eight subsidiary corporations, are now conducted by Heinz Finance. Since May 3, 2001, we have been engaged in the business of acquiring, holding and financing equity and debt investments in subsidiaries that own and operate Heinz's historical U.S. businesses, which manufacture, market, distribute and sell food and pet food products in the United States. Our most significant asset is our ownership interests in Heinz LP, a Delaware limited partnership formed on October 9, 2000. Heinz LP has two classes of limited partnership interests, Class A and Class B, both of which are owned entirely by Heinz and Heinz affiliates. Heinz, directly and through wholly-owned subsidiaries, owns the Class A interests in Heinz LP. Heinz Finance directly and indirectly owns the Class B interests in Heinz LP. Heinz Management Company ("HMC"), a wholly- owned subsidiary of Heinz, is the managing general partner of Heinz LP and employs its salaried personnel. Heinz LP reimburses HMC for all its management costs. We participated in the growth of the U.S. businesses over Fiscal Year 2002 through the financing of the acquisition of the assets of the retail business of Anchor Food Products and the purchase of the stock of Delimex Holdings, Inc. Both of these acquisitions expanded our participation in the frozen appetizer and hand held food products category with the addition of T.G.I. Friday's frozen appetizers and Delimex taquitos. In addition, we financed the acquisition of certain assets of the sauce, soup and bouillon business of Borden Foods Corporation and its affiliates. Through this transaction, we acquired the Classico pasta sauce line of products. Description of the Business We conduct our food business through three segments, Heinz North America, U.S. Pet Products and Seafood and U.S. Frozen. The Heinz North America segment manufactures, markets and sells ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels in the United States. For the nine months ended January 30, 2002, Heinz North America accounted for $1,477.4 million, or 47.7% of our revenue. The U.S. Pet Products and Seafood segment manufactures, markets and sells dry and canned pet food, pet snacks, tuna and other seafood. For the nine months ended January 30, 2002, this segment accounted for $785.9 million or 25.4% of our revenue. The U.S. Frozen segment manufactures, markets and sells frozen potatoes, entrees, snacks and appetizers, and accounted for $832.4 million or 26.9% of our revenue for the nine months ended January 30, 2002. Products and Markets Our products are manufactured and packaged to provide safe, wholesome foods for consumers, foodservice and institutional customers. Many products are prepared from recipes developed in our research laboratories and experimental kitchens. Ingredients are carefully selected, washed, trimmed, inspected and passed on to modern factory kitchens where they are processed, after which the finished product is filled automatically into containers of glass, metal, plastic, paper or fiberboard which are then closed, processed, labeled and cased for market. Finished products are processed by sterilization, homogenization, chilling, freezing, pickling, drying, freeze drying, baking or extruding. Certain finished products and seasonal raw materials are aseptically packed into sterile containers after 35 in-line sterilization. Although crops constituting some of our raw food ingredients are harvested on a seasonal basis, most of our products are produced throughout the year. The primary brands and products marketed and sold by us include, by segment, the following: Heinz North America Heinz tomato ketchup, mustard and sauces Chef Francisco soups Heinz baby food Classico pasta sauce College Inn broth Yoshida sauces Wyler's bouillon and soups U.S. Frozen Ore-Ida potato products Bagel Bites Boston Market HomeStyle meals Smart Ones meals Rosetto pasta Delimex snacks Poppers appetizers T.G.I. Friday's appetizers U.S. Pet & Seafood StarKist tuna 9-Lives cat food Kibbles 'n Bits dog food Gravy Train and Nature's Recipe dog food Jerky Treats, Meaty Bone, Pup- Peroni and Snausages dog treats Pounce cat treats The Heinz brand is our flagship and largest single brand. We believe that its strength derives from over 130 years of devotion to the idea of quality. Heinz ketchup is our signature product. It is the most popular brand of ketchup in the United States. Along with the Heinz brand, we have many other powerful brands that lead in their respective categories. Heinz North America Heinz Ketchup #1 brand with an approximate 60% dollar share of the over $460 million U.S. ketchup market Heinz Baby Food #2 brand with an approximate 16% volume share of the $1.0 billion U.S. baby food market Classico Pasta Sauce #1 brand premium pasta sauce U.S. Frozen Ore-Ida Potatoes #1 brand with an approximate 48% dollar share of the $1 billion U.S. frozen potato market Delimex Snacks #1 Mexican frozen snack brand 36 U.S. Pet and Seafood StarKist Tuna #1 brand with an approximate 38% dollar share of the over $1 billion U.S. tuna market The brand and market share data were sourced from AC Nielsen and reflect grocery stores, drug stores and mass merchandisers (excluding Wal-Mart) for the 52-week period ended December 29, 2001. The market share data does not include all retail outlets. Competitive Strengths Innovation We believe that we are one of the most innovative companies in the food industry in the United States. One of our key strategies is to continue innovation in products and packaging. We believe this will allow us to address consumer trends in taste, convenience and on-the-go eating. We have had a number of recent innovations. Some of them include: o Heinz EZ Squirt Kids' Condiment. This product has driven overall volume growth for Heinz ketchup during the past year while helping to establish new market share records. o Ketchup Kick'Rs This flavored ketchup is designed to appeal to adult appetites for bold and spicy flavors. o Jack Daniel's and Mr. Yoshida's Grilling Sauces o Boston Market HomeStyle Meals and Gravy. Our combined retail sales of these two businesses reached approximately $150 million in fiscal year 2001, making Boston Market the most successful new product launch in the history of Heinz. o Hot Bites frozen snacks o StarKist pouch tuna. This value-added, premium-priced product and packaging breakthrough may achieve retail sales of $100 million in Fiscal Year 2002. o Pup-Peroni NawSomes! dog snacks Acquisitions Over the past few years we have focused on improving our portfolio of products. As part of that strategy, we have made acquisitions that expand on our capabilities, build on our core competencies and open new markets for us. Some of our recent acquisitions include: 37 o Classico, the leading premium pasta sauce in the U.S. and a perfect fit with our tomato expertise and heritage; o Alden Merrell, a maker of high-quality, premium-priced frozen desserts for casual dining restaurants and foodservice distributors; o Delimex frozen hand-held Mexican foods, which allow us to compete in the fastest-growing segment of the food business, ethnic foods; o Ethnic Gourmet frozen meals, a line of premium quality all-natural Indian and Thai meals and wraps; and o Anchor Foods, a rapidly growing producer of frozen snacks under the Poppers and TGI Friday's brand names. Consumer Marketing and Advertising Since 2000, we have implemented a major new focus on sports marketing, which we believe is beginning to generate momentum. Sports marketing is now a significant part of our overall marketing strategy and seeks to leverage the popularity of legendary athletes. We know that our business significantly benefited from our associations with Tony Hawk for Bagel Bites, and we believe that the use of Larry Bird for Boston Market and now Kristi Yamaguchi for Smart Ones will benefit those businesses. Each of these celebrities reaches a specific audience and represents the brand in a highly targeted way. For example, o NBA basketball great Larry Bird is the focus of the ironic "Eat Like a Bird" advertising campaign that resulted in increased sales of Boston Market HomeStyle Meals among adult males. o Fitness-conscious consumers can identify with Smart Ones brand's spokesperson, Olympic and World Champion figure skater Kristi Yamaguchi. o Teenagers view Tony Hawk as being fun, irreverent and on the edge, which are characteristics that we seek to identify with our Bagel Bites and Hot Bites frozen snacks. In 2001, we also introduced a new color of EZ Squirt Kids' Condiment - "Funky Purple." The launch of this product generated more than 1,000 television news reports and hundreds more newspaper and magazine articles around the world. This marketing impact more than doubled the extensive media coverage of the introduction of our Blastin' Green "kids ketchup" in 2000. We believe that the naming rights to Heinz Field in Pittsburgh created another powerful and unique sports marketing opportunity. We are informed by the NFL that each weekend during the football season over 100 million viewers watch NFL pro football on television. Total advertising impressions from Heinz Field now number three billion, the equivalent of $44 million in advertising. Millions more listen to the games on radio or read about them in a myriad of newspapers and sports publications. This audience represents an opportunity to further extend Heinz brand awareness. Competition Our products are sold under highly competitive conditions, with many large and small competitors. We regard our principal competition to be other manufacturers of processed foods, including branded, retail products, foodservice products and private label products, that compete with us for consumer preference, distribution, shelf space and merchandising support. We compete primarily on the basis of product quality, brand recognition, brand loyalty and consumer value. 38 Customers Our products are sold through our own sales force and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, pharmacies, mass merchants, club stores, pet stores, foodservice distributors and institutions, including hotels, restaurants and certain government agencies. Our retail sales force consists of approximately 300 employees and seven teams that are dedicated to our key customers. We use two national brokers in connection with our retail sales efforts. In addition, we have a dedicated direct sales force for most of our large foodservice customers and service smaller ones through distributors. The following were our top ten U.S. customers based on revenue in Fiscal Year 2001: o Albertson's, Inc. o Publix Super Markets, Inc. o C&S Wholesale o Safeway Inc. o Food Lion o SuperValu, Inc. o Fleming Companies, Inc. o SYSCO/SYGMA o Kroger Co. o Wal-Mart Stores, Inc. For Fiscal Year 2001, one customer, Wal-Mart Stores, Inc., represented more than 10% of our sales, and the top ten customers represented over 50% of our sales. We closely monitor the credit risk associated with these customers and to date have never experienced significant losses. Properties We operate the following factories, distribution centers and other properties involved in manufacturing our products:
Company/Location Owned Leased Primary Products ---------------- ----- ------ ---------------- Pittsburgh, PA x soup, baby food Fremont, OH x condiments Holland, MI x pickles, vinegar, soup Muscatine, IA x soup, sauces Stockton, CA x tomato paste, sauces and condiments Mason, OH x sauces and condiments Dallas, TX x x sauces and condiments Escalon, CA x tomato products King of Prussia, PA x frozen soup Chatsworth, CA x sauces and condiments Jacksonville, FL x sauces and condiments Stone Mountain, GA x sauces and condiments Cedar Rapids, IA x soup Nashville, TN x sauces Industry, CA x sauces Newburyport, MA x frozen desserts Le Center, MN x frozen desserts Phoenix, AZ x sauces and condiments Irvine, CA x sauces and condiments San Diego, CA x frozen appetizers Northbrook, IL x dry soup, bouillon Pennsauken, NJ x sauces Ontario, OR x frozen potatoes West Chester, PA x frozen filled pasta Ft. Myers, FL x frozen meals
39
Company/Location Owned Leased Primary Products ---------------- ----- ------ ---------------- Massilon, OH x frozen meals Pocatello, ID x frozen meals Bloomsburg, PA x canned pet food Topeka, KS x dry pet food Lawrence, KS x dry pet food
We also own or lease office space, warehouses, distribution centers and research and other facilities. Our food processing plants and principal properties are in good condition and are satisfactory for the purposes for which they are being utilized. Trademarks, Patents and Licenses We own or license the following trademarks from related and unrelated parties: Major Trademarks ---------------- Heinz North America Heinz, College Inn, StarKist, Classico, Quality Chef Yoshida, Jack Daniels*, Bell 'Orto, Bella Rosa, Chef Francisco, Domani, Wyler's U.S. Frozen Ore-Ida, Bagel Bites, Rosetto, Weight Watchers*, Boston Market*, Smart Ones, T.G.I. Friday's, Poppers, Delimex U.S. Pet Products and Seafood Star-Kist, 9-Lives, Pounce, Kibbles n' Bits, Ken-L-Ration, Reward, Gravy Train, Skippy, Nature's Recipe, Pounce, Snausages, Jerky Treats, Pup-Peroni, Wagwells, Meaty Bone *Used under license from third parties
We have participated in the development of certain food processing equipment, some of which is patented. We regard these patents as important but do not consider any one or group of them to be materially important to our business as a whole. Employees On a full-time basis, as of May 2, 2001, approximately 13,000 people were employed as part of our business, and of those employees, approximately 4,900 are represented by labor unions. Approximately 3,100 are salaried employees and approximately 10,200 are hourly employees. Almost all of the employees are full-time workers. We believe that we have good relations with our employees. Regulatory Compliance with the provisions of national, state and local environmental laws and regulations has not had a material effect upon our capital expenditures, earnings or competitive position. Our estimated capital expenditures for environmental control facilities for the remainder of fiscal year 2002 and the succeeding fiscal year are not material and will not materially affect either our earnings or competitive position. The Marine Mammal Protection Act of 1972, as amended, the "Act," and regulations thereunder, the "Regulations," regulate the incidental taking of dolphin in the course of fishing for yellowfin tuna in the eastern tropical Pacific Ocean, where a portion of our light-meat tuna is caught. In 1990, Heinz voluntarily adopted a worldwide policy of refusal to purchase tuna caught in the eastern tropical Pacific Ocean through the intentional encirclement of dolphin by purse seine nets and reaffirmed its policy of not purchasing tuna caught anywhere using gill nets or drift nets. Also in 1990, the Dolphin Protection Consumer Information Act the "Dolphin Information Act, " was enacted which regulates the labeling of tuna products as "dolphin safe" and bans the importation of tuna caught using high seas drift nets. The Act was amended in 1992 to further regulate tuna fishing methods which 40 involve marine mammals. Compliance with the Act, the Regulations, the Dolphin Information Act, and Heinz's voluntary policy and the 1992 amendments has not had, and is not expected to have, a material adverse effect on our operations. Congress passed the International dolphin Conservation Program Act, "IDCPA," on August 15, 1997. It modified the regulation of the incidental taking of dolphins in the course of fishing for yellowfin tuna in the eastern tropical Pacific Ocean and revised the definition of "dolphin safe." Revision of the definition of "dolphin safe" and modification of the regulation of the incidental taking of dolphins in the course of fishing for yellowfin tuna in the eastern tropical Pacific Ocean have not had and are not expected to have a material adverse effect on our operations. Our factories are subject to inspections by various governmental agencies, and our products must comply with all the applicable laws, including food and drug laws, of the jurisdictions in which they are manufactured and marketed. Legal Proceedings We are not involved in any material pending legal proceedings. From time to time we may be a party to a variety of legal proceedings arising out of the normal course of business. 41 RELATED PARTY TRANSACTIONS Heinz Finance and Heinz have entered into agreements that provide for financial support, administrative and other services, reimbursement for employee services and intellectual property. This section describes those agreements between Heinz Finance and Heinz. For further information regarding related party transactions, please see Note 9 of Heinz Finance's Condensed Consolidated and Combined Financial Statements for the nine months ended January 30, 2002 and January 31, 2001 included in this prospectus. Operational Agreements Heinz Finance has entered into a services agreement with Heinz pursuant to which Heinz will provide certain accounting, legal, tax and other support services and facilities to us. Under the services agreement, we will reimburse Heinz for services provided by Heinz thereunder. In addition, some of the officers and employees of Heinz Finance are officers or employees of Heinz or its affiliates. In particular, Heinz Management Company employs the salaried people who conduct the business of Heinz LP, and the costs and expenses of those employees are reimbursed by Heinz LP. If any individual provides more than de minimis services to both Heinz and Heinz Finance, the compensation of that individual will be apportioned between the two groups on an arm's-length basis. We pay a royalty to Promark International, Inc., for use of trademarks historically used in Heinz's U.S. business. Guarantee Facility Agreement; Liquidity Agreement Heinz Finance has also entered into a guarantee facility agreement with Heinz, pursuant to which Heinz agrees to guarantee our payment of third-party obligations we have issued or owe. We will pay Heinz fees equal to 10 basis points per year of the sum of the highest balance of the debt obligations with respect to which Heinz is a guarantor and the highest balance of the debt obligations with respect to which Heinz is a co-obligor. Under the terms of a liquidity agreement between Heinz and Heinz Finance, Heinz has agreed to provide or make available to us from time to time loans in an aggregate principal amount of up to $400 million outstanding at any one time, with normal and customary conditions to disbursement for each loan made. Each loan under the liquidity agreement will bear interest at a floating rate per annum equal to the then applicable LIBOR plus 100 basis points. We will pay Heinz a fee of 25 basis points per annum of the amount of loans available but not drawn. 42 MANAGEMENT Directors and Executive Officers Our Board of Directors is composed of four members, one of whom is an Independent Director. An "Independent Director" is a director who is not a current officer or employee of Heinz Finance, Heinz or any affiliate of Heinz or of any other person or persons that, in the, aggregate, own or owns more than 50% of the outstanding common stock of Heinz Finance and who is elected by holders of Heinz Finance's outstanding Series A Preferred Shares and the holders of any Heinz Finance stock expressly being designated by us as being at parity with the Series A Preferred Shares, "Parity Securities," with like voting rights, collectively, the "Voting Parity Securities." Andrew L. Stidd, the initial Independent Director, was named in the Certificate of Designation for the Series A Preferred Shares. Our directors will serve until resignation or removal. There is no current intention to alter the number of directors comprising the Board of Directors, and our Bylaws provide that the Board of Directors may not comprise more than nine members. Our directors and executive officers are:
Positions and offices held with the Company and principal occupations or Other Name Age Director Since employment during the past five years Directorships Leonard A. Cullo 43 September 14, 2000 Director; President since June 14, 2001. Treasurer of Heinz since August 2000, attorney at Heinz from 1991 to August 2000, last serving as Assistant General Counsel. Laura Stein.......... 40 September 14, 2000 Vice President and Secretary since June 17, Nash Finch Co. 2001. Senior Vice President and General Counsel of Heinz since January 2000; attorney at the Clorox Company from 1992 to 1999, last serving as Assistant General Counsel - Regulatory Affairs. Andrew L. Stidd...... 44 July 6, 2001 Director, President and Chief Operating Officer Global Securitization Services, LLC since December 1996. Arthur Winkleblack... 44 January 8, 2002 Director, Vice President, Chief Financial and Accounting Officer since January 8, 2002. Executive Vice President and Chief Financial Officer of Heinz since January 7, 2002; executive of Indigo Capital from 1999 to December 2001; Executive Vice President and Chief Financial Officer of C. Dean Metropoulos & Co. from 1998 to 1999; Chief Financial Officer of Six Flags Entertainment Corporation 1996-1998.
Each director, other than the Independent Director, is an officer or employee of Heinz or an affiliate of Heinz. Compensation of Directors We intend to pay fees to our Independent Director for his service as a director. The Independent Director (and any subsequent additional Independent Director) is entitled to receive annual compensation of $3,500 plus reimbursement of expenses for attendance at each meeting of the Board of Directors. We do not intend to pay fees to directors who are not Independent Directors. 43 Executive Compensation The following table sets forth information concerning the total compensation paid by us (except as discussed below for executive officers Cullo, Winkleblack, Stein, Johnson and Renne) to our executive officers for the periods set forth below.
SUMMARY COMPENSATION TABLE Long-Term Compensation ---------------------- Annual Compensation Awards (2) Payouts -------------------------------------------------- ------------- --------- Securities Underlying Long-term Other Options /SARs Incentive All Other Annual (No. Payouts Compensation Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) Awarded) ($)(3) - ------------------------------- ---- --------- --------- --------------- ------------- --------- ------------ Leonard A. Cullo(1) 2001 $139,320 $ 62,195 $ -- - 0 - $ 25,132 President Arthur Winkleblack(4) 2001 - 0 - - 0 - -- - 0 - - 0 - - 0 - Vice President, Chief Financial and Accounting Officer Paul F. Renne(5) 2001 315,000 218,259 -- 50,000 - 0 - 143,506 Vice President 2000 289,594 537,253 -- -- - 0 - 61,170 1999 274,357 557,889 106,393 50,000 - 0 - 132,580 Laura Stein(6) 2001 300,000 186,418 62,187 (7) 50,000 - 0 - 34,742 Vice President and Secretary 2000 90,000 153,000 50,000 - 0 - 13,186 William R. Johnson(8) 2001 920,000 721,851 -- 500,000 - 0 - 384,526 (9) Chairman, President and Chief 2000 900,000 1,776,864 -- - 0 - - 0 - 402,911 Executive Officer of Heinz 1999 720,000 2,071,000 172,439 350,000 - 0 - 238,692
- --------- (1) Executive officer Cullo is also employed by Heinz and receives a portion of his compensation from Heinz and the remainder from Heinz Finance. (2) No awards of restricted stock were made by Heinz to the executive officers employed by Heinz during the period covered by the Summary Compensation Table. (3) Includes for Messrs. Johnson, Renne and Cullo and Ms. Stein, respectively, the following: (i) amounts contributed by Heinz Finance under the Employees and Retirement and Savings Plan, $307,255, $107,570, $22,682 and $28,304; (ii) amounts attributable to "split dollar" life insurance provided by Heinz Finance, $66,043, $20,720, $2,450 and $6,438; and (iii) the portion of interest accrued (but not currently paid or payable) on deferred compensation above 120% of the applicable federal long-term rate, $9,483, $15,216, $0 and $0. (4) Mr. Winkleblack became an officer of Heinz Finance on January 8, 2002. (5) Mr. Renne resigned from his position at Heinz Finance on January 8, 2002. During the time Mr. Renne held a position at Heinz Finance, he received no direct compensation from Heinz Finance. The annual base salary and annual bonus opportunity for Mr. Renne was determined by the Heinz Management Development and Compensation Committee. Because Mr. Renne was also an executive officer of Heinz and his compensation from Heinz was previously required to be disclosed, his compensation received from Heinz is included for the Heinz fiscal years ended May 3, 2000 and April 28, 1999. (6) Executive officer Stein is also employed by Heinz, and Ms. Stein receives no direct compensation from Heinz Finance. The annual base salary and annual bonus opportunity for Ms. Stein was determined by the Heinz Management Development and Compensation Committee. Ms. Stein became an executive officer of Heinz on January 10, 2000. Because Ms. Stein is an executive officer of Heinz and her compensation from Heinz was previously required to be disclosed, her compensation received from Heinz is included for the Heinz fiscal year ended May 3, 2000. (7) Includes $39,138 in transition expenses for temporary housing rental and travel. 44 (8) Mr. Johnson was not employed by Heinz Finance, but has been included because of his position at Heinz, which pays all of his compensation. The annual base salary and annual bonus opportunity for Mr. Johnson is determined by the Heinz Management Development and Compensation Committee. Because Mr. Johnson is an executive officer of Heinz and his compensation from Heinz was previously required to be disclosed, his compensation received from Heinz is included for the Heinz fiscal years ended May 3, 2000 and April 28, 1999. (9) "All Other Compensation: includes $1,745 in imputed income relating to a split dollar survivorship life insurance retention policy insuring Mr. Johnson and his spouse that was purchased in connection with Mr. Johnson's becoming Chairman of Heinz in September 2000. Upon the death of the last surviving insured, the policy provides for a payment to Mr. Johnson's designated beneficiaries or to a trust established by him of an amount equal to the policy's face value, with Heinz receiving under the policy an amount equal to the grater of the premium paid by Heinz or the policy's cash value. As of May 2, 2001, the cash value of the policy was $3,313,915, and the premium paid by Heinz for the policy was $3,389,414. The premium paid by Heinz is equal to the amount of a deferred compensation award granted to Mr. Johnson under the Heinz Executive Deferred Compensation Plan plus interest, which Mr. Johnson waived. Heinz has agreed to make a separate death benefit available to Mr. Johnson's designated beneficiaries equal to the amount received by Heinz under the policy, minus the Heinz-paid premium. The foregoing insurance policy and Heinz-paid death benefit are subject to vesting, and Mr. Johnson will forfeit any rights under the policy or the Heinz-paid death benefit if he voluntarily terminates employment with Heinz or is terminated for cause prior to September 12, 2003. Option Grants by Heinz in Fiscal Year 2001
Grant Date Individual Grants Value ------------------------------------------------------------------------------- ------------- Percent of Number of Total Options Shares Underlying Granted to Grant Date Options Granted Employees Exercise Price Expiration Present Value Name (#) (1) in Fiscal Year ($/Share) Date ($) (2) - ---------------------- ----------------- -------------- -------------- ---------- ------------- Leonard A. Cullo 15,000 0.31% $37.0625 9/12/10 $ 127,950 Arthur Winkleblack(3) -0- -0- -0- -0- -0- Paul F. Renne 50,000 1.04% $37.0625 9/12/10 426,500 Laura Stein 50,000 1.04% $37.0625 9/12/10 426,500 William R. Johnson 500,000 10.40% $37.0625 9/12/10 4,265,000
- --------- (1) All options were granted on September 12, 2000, pursuant to the terms of Heinz's 2000 Stock Option Plan, relate to Heinz shares and have identical terms. All options vest on September 12, 2003. (2) The estimated grant date present value reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the option grants reflected in the above table include the following: (i) exercise price on the options ($37.0625) equal to the fair market value of the underlying stock on the date of grant; (ii) expected option term of 6.5 years; (iii) dividend yield of 3.8%; (iv) risk-free interest rate of 6.02%; and (v) volatility of 23.5%. The ultimate values of the options will depend on the future market price of Heinz's common stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of Heinz's common stock over the exercise price on the date the option is exercised. (3) Mr. Winkleblack became an officer of Heinz Finance on January 8, 2002 and became an executive officer of Heinz on January 7, 2002. 45 Aggregated Option/SAR Exercises in Fiscal Year 2001 and Fiscal Year-End Option/SAR Value (1)
Number of Securities Underlying Unexercised Value of Unexercised Options/SARs In-the-Money Options/SARs at Fiscal Year-End at Fiscal Year-End ($) (3) ---------------------------- ------------------------------ Shares Acquired on Value Name Exercise (#) Realized ($) (2) Exercisable Unexercisable Exercisable Unexercisable - --------------------- ----------- --------------- ----------- ------------- ----------- ------------- Leonard A. Cullo -0- -0- 10,334 27,166 $ 53,094 $ 33,969 Arthur Winkleblack(4) -0- -0- -0- -0- -0- -0- Paul F. Renne 102,500 $2,171,826 227,501 449,999 569,122 234,287 Laura Stein -0- -0- -0- 100,000 -0- 165,500 William R. Johnson 137,500 2,520,829 1,408,334 1,616,666 14,076,111 2,342,912
- -------------- (1) All options are denominated in shares of Heinz. (2) The "Value Realized" is equal to the fair market value of a Heinz share on the date of exercise, less the exercise price, times the number of shares acquired. No Heinz SARs were exercised during the last fiscal year. (3) The "Value of Unexercised In-the-Money Options at Fiscal Year-End" is equal to the fair market value of each Heinz share underlying the options at May 2, 2001 less the exercise price, times the number of options. (4) Mr. Winkleblack became an officer of Heinz Finance on January 8, 2002 and became an executive officer of Heinz on January 7, 2002. Retirement Benefits Most full-time salaried employees in the United States who were hired before January 1, 1993 are entitled to retirement benefits from Plan A of the H. J. Heinz Company Employees' Retirement System, "Plan A." Benefits are based on credited service and five-year average eligible compensation through December 31, 1992, the date on which Plan A was frozen. Heinz has a Supplemental Executive Retirement Plan, the "SERP," which provides additional retirement benefits for eligible executives, including the executive officers Cullo, Winkleblack, Renne and Stein and Mr. Johnson. The SERP was adopted in order to attract and retain executives, and to compensate them for reductions in benefits due to limitations imposed by the Internal Revenue Code. The SERP benefit is a lump sum equal to a multiple of the employee's final average eligible compensation during any five of the last ten years prior to retirement. It is reduced by (i) the lump sum value of the Plan A benefit (if any), and (ii) the value of the employee's Age-Related Company Contribution Account under the Heinz Employees Retirement and Savings Plan and the Heinz Employees Retirement and Savings Excess Plan. The following table shows the estimated maximum retirement benefit from all sources described above, at various combinations of pay and service, stated as an annual pension equivalent beginning at age 65. The pay included in the earnings base is the executive's base salary and annual bonus. As of May 2, 2001, the years of service for executive officers Cullo, Winkleblack, Renne, Stein and Mr. Johnson were, as rounded to the nearest full year, 10, 0, 28, 1 and 19, respectively. Table I--U.S. Retirement Plans
Years of Service ---------------------------------------------------- Average Earnings High Five of Last Ten Years Prior to Retirement 15 20 25 30 35 - --------------------- ------- ------- ------- ------- ------- $200,000 $52,452 $61,194 $69,936 $78,678 $87,420 400,000 104,904 122,388 139,872 157,356 174,840 450,000 118,017 137,687 157,356 177,026 196,696 46 Years of Service ---------------------------------------------------- Average Earnings High Five of Last Ten Years Prior to Retirement 15 20 25 30 35 - --------------------- ------- ------- ------- ------- ------- 500,000 131,130 152,985 174,840 196,696 218,551 600,000 157,356 183,582 209,809 236,035 262,261 700,000 183,582 214,180 244,777 275,374 305,971 800,000 209,809 244,777 279,745 314,713 349,681 900,000 236,035 275,374 314,713 354,052 393,391 1,000,000 262,261 305,971 349,681 393,391 437,101 1,200,000 314,713 367,165 419,617 472,069 524,521 1,400,000 367,165 428,359 489,553 550,747 611,942 1,600,000 419,617 489,553 559,489 629,426 699,362 2,000,000 524,521 611,942 699,362 786,782 874,202 2,500,000 655,652 764,927 874,202 983,478 1,092,753 3,000,000 786,782 917,912 1,049,043 1,180,173 1,311,303
Executive Deferred Compensation Plan Heinz has an Executive Deferred Compensation Plan, "Deferred Compensation Plan," under which contingent retention bonuses may be awarded. During fiscal year 2001, Heinz granted awards under the Deferred Compensation Plan to certain executives. Vesting of the awards will occur on the third anniversary following the date of the award, so long as the executive has not prior to that date voluntarily terminated employment with Heinz or been terminated for cause. Vested awards will be paid in cash following the fifth anniversary date of the award, or, in the case of certain named executive officers, upon retirement. Awards under the Deferred Compensation Plan for fiscal year 2001 include the award described in footnote 3 of the Summary Compensation Table above for Mr. Johnson (subsequently waived as noted below), and $250,000 for Ms. Stein. Messrs. Cullo, Renne and Winkleblack did not participate in this plan. In connection with the split-dollar life insurance arrangement with Mr. Johnson described in footnote 3 of the Summary Compensation Table, Mr. Johnson waived the right to receive the award granted to him during fiscal year 2001 under the Deferred Compensation Plan plus interest in exchange for Heinz's payment of the premium to purchase a split-dollar survivorship insurance policy insuring Mr. Johnson and his spouse as set forth in footnote 3 to the Summary Compensation Table above. The split-dollar life insurance arrangement is subject to the same three-year vesting requirement as applies to awards under the Deferred Compensation Plan. Severance Arrangements Heinz maintains severance agreements with Ms. Stein and Messrs. Johnson and Winkleblack. If an executive's employment is terminated involuntarily other than for cause, or voluntarily for good reason, within two years after a change in control of Heinz, the agreements provide for the lifting of restrictions on outstanding incentive awards, continuation of medical, life insurance and disability coverage for a three-year period, and a lump sum payment equal to three times the sum of the annual salary and bonus of the executive plus a benefit determined by taking into account an additional three years of age and service for purposes of calculating retirement benefits. The agreements also provide that Heinz will reimburse the executive for the impact of excise taxes, if any, which may be imposed under the Internal Revenue Code with respect to certain payments contingent on a change in control. 47 DESCRIPTION OF THE NEW NOTES The Old Notes and the New Notes constitute a separate series of debt securities issued under an Indenture, dated as of July 6, 2001 (the "Indenture"), among Heinz Finance, as Issuer, Heinz, as Guarantor and Bank One, National Association, as Trustee (the "Trustee") and are collectively the notes under the indenture. The following summaries of certain provisions of the Indenture do not purport to be complete and are subject to, and are qualified in their entirety by their reference to, the detailed provisions of the New Notes and the Indenture. Copies of these documents are available from us upon request. General The New Notes will be unsecured obligations of Heinz Finance and will be limited to up to $700,000,000 in aggregate principal amount in respect of the notes that mature in 2012 and $550,000,000 aggregate principal amount in respect of the notes that mature in 2032. The New Notes will be unconditionally and irrevocably guaranteed as to the payment of interest and principal by the Guarantor. The notes due 2012 will accrue interest at the rate of 6.00% per annum and the notes due 2032 will accrue interest at the rate of 6.75% per annum, both from the most recent date to which interest has been paid on the Old Notes or, if no interest has been paid, from March 7, 2002. Interest on these notes is payable semi-annually in arrears on March 15 and September 15 of each year to the persons in whose names the notes are registered at the close of business on the applicable regular record date. Principal on the notes will be payable and the notes will be transferable at the corporate trust office of the Trustee in New York, N.Y. Unless other arrangements are made, interest will be paid by check mailed to the address of the person entitled thereto as it appears in the security register. The New Notes will be issued only in fully registrable form, without coupons, in denominations of $1,000 and any integral multiple thereof. For so long as the New Notes are held solely in book-entry form through the facilities of Depositary Trust Company ("DTC"), the only registered holder of the New Notes will be Cede & Co., as nominee for DTC. It is expected that beneficial interests in the New Notes issued and sold in the United States will trade in the Settlement System of DTC and that beneficial interests in the Notes issued sold outside of the United States will trade through the facilities of the Euroclear system, "Euroclear," and Clearstream Banking, societe anonyme, Luxembourg, "Clearstream, Luxembourg," and secondary market transactions in such beneficial interests will be effected in the Settlement System of DTC. See "Form and Denomination," "Transfer and Exchange," and "Depository Procedures with Respect to Global Notes." Form and Denomination The New Notes will initially be represented by one or more global notes in fully registered form without interest coupons, collectively, the "global note." The New Notes will be issued in denominations of $1,000 and integral multiples thereof. The global note will be deposited with the Trustee as custodian for DTC and registered in the name of DTC or a nominee of DTC. Owners of beneficial interests in any global note will hold such interests pursuant to the procedures and practices of DTC and must exercise any rights in respect of their interests in accordance with those procedures and practices. Such beneficial owners will not be holders, and will not be entitled to any rights under any New Note or the Indenture, with respect to any global note, and Heinz Finance, the Guarantor and the Trustee, and any of their respective agents, may treat DTC as the holder and owner of any global note. See "Depository Procedures with Respect to Global Notes." Except as set forth below, the global notes may be transferred, in whole but not in part, only to another nominee of DTC or to a successor of DTC or its nominee. The New Notes are issuable in bearer form. For a description of the depository procedures with respect to the global notes, see "Depository Procedures with Respect to Global Notes." 48 Optional Redemption Heinz Finance may choose to redeem some or all of the New Notes at any time. If Heinz Finance chooses to do so, it will mail a notice of redemption to the holders of the New Notes not less than 30 days and not more than 60 days before the redemption occurs. The redemption price will be equal to the greater of: o 100% of the principal amount of the New Notes to be redeemed plus accrued interest to the date of redemption, or o the sum of the present values of the Remaining Scheduled Payments on the Notes being redeemed, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 15 basis points for the notes due 2012 or 20 basis points for the notes due 2032, plus in each case accrued and unpaid interest thereon to the date of redemption. If Heinz Finance is redeeming less than all of the New Notes, the Trustee will select the particular New Notes to be redeemed by lot or by another method the Trustee deems fair and appropriate. Unless Heinz Finance defaults in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the New Notes or portions thereof called for redemption. Except as described above, the New Notes will not be redeemable by Heinz Finance prior to maturity and will not be entitled to the benefit of any sinking fund. For purposes of calculating the redemption price, the following terms have the meanings set forth below: "Treasury Rate" means the rate per annum equal to the semiannual equivalent yield to maturity (computed as of the second business day immediately preceding the redemption date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date. "Comparable Treasury Issue" means the U.S. treasury security selected by an Independent Investment Banker that would be used, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. "Independent Investment Banker" means one of the Reference Treasury Dealers that Heinz Finance appoints. "Comparable Treasury Price" means: o the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) as of the third business day preceding the redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or o if that release (or any successor release) is not published or does not contain such prices on that business day, (1) the average of the Reference Treasury Dealer Quotations for the redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all quotations obtained. "Reference Treasury Dealer" means each of J.P. Morgan Securities, Inc., Bank of America Securities LLC, UBS Warburg LLC (and their successors) and one other nationally recognized investment banking firm that is a primary U.S. Government securities dealer specified from time to time by Heinz Finance. If, however, any of them ceases to be a primary U.S. Government securities dealer, we will substitute another nationally recognized investment banking firm that is such a dealer. 49 "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and in each case for settlement on the next business day) quoted in writing to the Trustee by such reference treasury dealer as of 3:30 p.m., New York time, on the third business day preceding the redemption date. "Remaining Scheduled Payments" means the remaining scheduled payments of the principal and interest (excluding any interest accrued and paid as of the date of redemption) on each New Note to be redeemed that would be due after the related redemption date but for such redemption. Certain Definitions "Consolidated Net Assets" means total assets after deducting therefrom all current liabilities as set forth on the most recent balance sheet of the Guarantor and its consolidated Subsidiaries and computed in accordance with generally accepted accounting principles. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Principal Property" means any manufacturing or processing plant or warehouse owned at the date hereof or hereafter acquired by the Guarantor or any Restricted Subsidiary which is located within the United States and the gross book value (including related land and improvements thereon and all machinery and equipment included therein without deduction of any depreciation reserves) of which on the date as of which the determination is being made exceeds 2% of Consolidated Net Assets other than (i) any such manufacturing or processing plant or warehouse or any portion thereof (together with the land on which it is erected and fixtures comprising a part thereof) which is financed by industrial development bonds which are tax exempt pursuant to Section 103 of the Internal Revenue Code (or which receive similar tax treatment under any subsequent amendments thereto or any successor laws thereof or under any other similar statute of the United States), (ii) any property which in the opinion of the board of directors is not of material importance to the total business conducted by the Guarantor as an entirety or (iii) any portion of a particular property which is similarly found not to be of material importance to the use or operation of such property. "Restricted Subsidiary" means a Subsidiary of the Guarantor (i) substantially all the property of which is located, or substantially all the business of which is carried on, within the United States and (ii) which owns a Principal Property. "Subsidiary" means any corporation or limited partnership more than 50% of the outstanding Voting Stock of which, or any limited partnership interests in which, at the time of determination is owned, directly or indirectly, by the Guarantor and/or by one or more other Subsidiaries. "Voting Stock" means capital stock of a corporation of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power upon the occurrence of any contingency). Restrictions on Secured Debt If the Guarantor or any Restricted Subsidiary shall after the date of the Indenture incur or guarantee any evidence of indebtedness for money borrowed, "Debt," secured by a mortgage, pledge or lien, referred to as a "Mortgage," on any Principal Property of the Guarantor or any Restricted Subsidiary, or on any share of stock or Debt of any Restricted Subsidiary, the Guarantor will secure or cause such Restricted Subsidiary to secure the Notes, other than any series of Notes established by or pursuant to a Board Resolution or in one or more supplemental indentures which specifically provide otherwise, equally and ratably with (or, at the option of the 50 Guarantor, prior to) such secured Debt, unless the aggregate amount of all such secured Debt would not exceed 10% of Consolidated Net Assets. The above restrictions will not apply to, and there will be excluded from secured Debt in any computation under such restrictions, Debt secured by (a) Mortgages on property of, or on any shares of stock of or Debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary, (b) Mortgages in favor of the Guarantor or a Restricted Subsidiary, (c) Mortgages in favor of governmental bodies to secure progress, advance or other payments pursuant to any contract or provisions of any statute, (d) Mortgages on property, shares of capital stock or Debt existing at the time of acquisition thereof (including acquisition through merger or consolidation) and purchase money and construction Mortgages which are entered into within time limits specified in the Indenture, (e) Mortgages securing industrial revenue bonds, pollution control bonds or other similar tax-exempt bonds, (f) mechanics' and similar liens arising in the ordinary course of business in respect of obligations not due or being contested in good faith, (g) Mortgages arising from deposits with or the giving of any form of security to any government agency required as a condition to the transaction of business or to the exercise of any privilege, franchise or license, (h) Mortgages for taxes, assessments or governmental charges or levies which are not then due or, if delinquent, are being contested in good faith, (i) Mortgages (including judgment liens) arising from legal proceedings being contested in good faith, (j) Mortgages existing at the date of the Indenture and (k) any extension, renewal or refunding of any Mortgage referred to in the foregoing clauses (a) through (j) inclusive. Merger and Consolidation Each of Heinz Finance and the Guarantor covenants that it will not merge or sell, convey, transfer or lease all or substantially all of its assets unless we are the successor Person or the successor entity is another Person organized under the laws of the United States (including any state thereof and the District of Columbia) which assumes its obligations on the debt securities and under the Indenture and, after giving effect to such transaction, Heinz Finance, the Guarantor or the successor Person would not be in default under the Indenture. Events of Default The Indenture defines "Events of Default" with respect to the debt securities of any series as being one of the following events: (i) default in the payment of any installment of interest on that series for 30 days after becoming due; (ii) default in the payment of principal on that series when due; (iii) default in the deposit of any sinking fund payment when due; (iv) default by Heinz Finance or the Guarantor in the performance or breach of any other covenant or warranty in the Notes of that series or the Indenture (other than a covenant included in the Indenture solely for the benefit of any series of Notes other than that series) for 90 days after notice; (v) certain events of bankruptcy, insolvency or reorganization with respect to Heinz Finance or the Guarantor; (vi) any other Event of Default provided with respect to Notes of that series; or (vii) the Guarantor contests the validity or enforceability of the Guarantee or any obligation under the Guarantee shall not be (or is claimed by the Guarantor not to be) in full force and effect. No sinking fund is provided for the New Notes, and no other Event of Default has been provided with respect to the Notes. If an Event of Default shall occur and be continuing with respect to the debt securities of any series, either the Trustee or the holders of at least 25% in principal amount of the debt securities then outstanding of that series may declare the principal (or such portion thereof as may be specified in an offering memorandum relating to such series) of the debt securities of such series to be due and payable. Under certain conditions, such a declaration may be annulled. The Indenture provides that the Trustee shall, within 90 days after the occurrence of a default known to it, give the holders of debt securities notice of all uncured defaults known to it (the term "default" to mean the events specified above without grace periods); provided, however, that, except in the case of default in the payment of principal of or interest on any Debt Security, the Trustee shall be protected in withholding such notice if it in good faith determines the withholding of such notice is in the interest of the holders of debt securities. 51 Heinz Finance will be required to furnish to the Trustee annually a statement by certain officers of Heinz Finance to the effect that to the best of their knowledge Heinz Finance has complied with all of its conditions and covenants under the Indenture or, if Heinz Finance has not so complied, specifying each such default. The holders of a majority in principal amount of the outstanding debt securities of any series will have the right, subject to certain limitations, to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the debt securities of such series, and to waive certain defaults with respect thereto. The Indenture provides that in case an Event of Default shall occur and be continuing, the Trustee shall exercise such of its rights and powers under the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any of the holders of debt securities unless they shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request. Modification of the Indenture With certain exceptions, the Indenture may be modified or amended with the consent of the holders of not less than a majority in principal amount of the outstanding debt securities of each series affected by the modification; provided, however, that no such modification or amendment may be made, without the consent of the holder of each debt security affected, which would (i) reduce the principal amount of or the interest on any debt security, change the stated maturity of the principal of, or any installment of principal of or interest on, any debt security, or the other terms of payment thereof, or (ii) reduce the above-stated percentage of debt securities, the consent of the holders of which is required to modify or amend the Indenture, or the percentage of debt securities of any series, the consent of the holders of which is required to waive compliance with certain provisions of the Indenture or to waive certain past defaults. Defeasance and Discharge The New Notes will be subject to defeasance and discharge and to defeasance of certain obligations as described below. The Indenture provides that Heinz Finance may elect, with respect to the debt securities of any series, either: (i) to terminate (and be deemed to have satisfied) any and all obligations in respect of such debt securities (except for certain obligations to register the transfer or exchange of debt securities, to replace stolen, lost or mutilated debt securities, to maintain paying agencies and hold monies for payment in trust and, if so specified with respect to the debt securities of a certain series, to pay the principal of (and premium, if any) and interest, if any, on such specified debt securities); or (ii) to be released from its obligations with respect to such debt securities under Section 1004 of the Indenture (being the restrictions described above under "Restrictions on Secured Debt"); in either case on the 91st day after the deposit with the Trustee, in trust, of money and/or U.S. Government Obligations (as defined) which through the payment of interest and principal thereof in accordance with their terms will provide money in an amount sufficient to pay any installment of principal (and premium, if any) and interest, if any, on and any mandatory sinking fund payments in respect of such debt securities on the stated maturity of such payments in accordance with the terms of the Indenture and such debt securities. Such a trust may be established only if, among other things, Heinz Finance has delivered to the Trustee an Opinion of Counsel (who may be counsel to Heinz Finance) to the effect that, based upon applicable Federal income tax law or a ruling published by the United States Internal Revenue Service, such a defeasance and discharge will not be deemed, or result in, a taxable event with respect to holders of such debt securities. If so specified with respect to the Notes of a series, such a trust may be established only if establishment of the trust would not cause the debt securities of any such series listed on any nationally recognized securities exchange to be de-listed as a result thereof. 52 Concerning the Trustee Bank One, National Association, is the Trustee under the Indenture and has been appointed by Heinz Finance as initial security registrar with regard to the New Notes. Heinz Finance currently does, and from time to time in the future may, maintain lines of credit and have customary banking relationships with the Trustee. The Trustee currently serves as trustee for certain debt securities of the Guarantor and Heinz Finance, including the Old Notes. In addition, the Trustee may serve as Trustee for other debt securities issued by Heinz Finance from time to time. Guarantees The New Notes are guaranteed by Heinz. Heinz will unconditionally and irrevocably guarantee the due and punctual payment of principal of and interest, including any additional amounts, on the New Notes when the same shall become due and payable whether at maturity, by declaration of acceleration or otherwise. Transfer and Exchange At the option of the holder upon written request, and subject to the terms of the Indenture, any New Note will be exchangeable at any time into an equal aggregate principal amount of New Notes of different authorized denominations provided that any applicable transfer restrictions are satisfied. New Notes may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed) or exchange, at the office of any transfer agent, the "security registrar," without service charge, but, in the case of a transfer, upon payment of any taxes and other governmental charges as described in the Indenture. Any registration of transfer or exchange will be effected upon the transfer agent or the security registrar, as the case may be, being satisfied with the documents of title and identity of the person making the request, and subject to such reasonable regulations as Heinz Finance may from time to time agree upon with the transfer agents and the security registrar, all as described in the Indenture. Subject to the applicable transfer restrictions, Notes may be transferred in whole or in part in authorized denominations. Heinz Finance has initially appointed the Trustee as security registrar and transfer agent, acting through its Corporate Trust Office in the Borough of Manhattan, The City of New York. Heinz Finance reserves the right to vary or terminate the appointment of the security registrar or of any transfer agent or to appoint additional or other transfer agents or to approve any change in the office through which any security registrar of any transfer agent acts, provided that there will at all times be a security registrar in and a transfer agent in the Borough of Manhattan, The City of New York. Purchase and Cancellation Heinz Finance, the Guarantor or any subsidiary may at any time and from time to time purchase New Notes at any price in the open market or otherwise. All securities surrendered for payment, redemption, repurchase, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All securities so delivered to the Trustee shall be cancelled promptly by the Trustee. No securities shall be authenticated in lieu of or in exchange for any securities cancelled as provided in the Indenture. Title With respect to any New Note, Heinz Finance, the Guarantor, the Trustee, the paying agent and any other agent of Heinz Finance, the Guarantor or the Trustee may treat the Person in whose name such New Note is registered as the owner thereof for the purpose of receiving payment thereof and for all other purposes whatsoever. 53 Notices Notices to holders of New Notes will be given by mail to the addresses of such holders as they appear in the Security Register. Such notices will be deemed to have been given when mailed. Replacement of Notes New Notes that become mutilated, destroyed, stolen or lost will be replaced by Heinz Finance at the expense of the holder upon delivery to the Trustee of the mutilated Notes or evidence of the loss, theft or destruction thereof satisfactory to Heinz Finance and the Trustee. In the case of a lost, stolen or destroyed New Note, indemnity satisfactory to the Trustee and Heinz Finance may be required at the expense of the holder of such New Note before a replacement New Note will be issued. Payment of Stamp and Other Taxes Heinz Finance shall pay all stamp and other duties, if any, which may be imposed by the United States or the United Kingdom or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance, transfer, exchange or conversion of the New Notes. Heinz Finance will not be required to make any payment with respect to any other tax, assessment or governmental charge imposed by any government or any political subdivision thereof or taxing authority therein. Depository Procedures with Respect to Global Notes With respect to the global notes, DTC has advised Heinz Finance as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code, as amended, and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the "Indirect Participants"). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interest and transfer of ownership interest of each actual purchaser of each security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants. DTC has also advised Heinz Finance that pursuant to procedures established by it, (i) upon deposit of the global notes, DTC will credit the accounts of Participants designated by the Purchasers with portions of the principal amount of the global notes and (ii) ownership of such interests in the global notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interests in the global notes). Investors in the global note within the United States may hold their interests therein directly through DTC, if they are Participants in such system, or indirectly through organizations (including Euroclear and Clearstream, Luxembourg) that are Participants in such system. Investors in the global notes, outside of the United States, may hold interests therein through Euroclear or Clearstream, Luxembourg or organizations other than Euroclear and Clearstream, Luxembourg that are Participants in the DTC system. Euroclear and Clearstream, Luxembourg will hold interests in the any global note on behalf of their Participants through customers' securities accounts in their respective names on the books of their respective depositories. The depositories, in turn, will hold such interests in such global note in customers' securities accounts in the depositaries' names on the books of DTC. All interests in a global note, including those held through Euroclear or Clearstream, Luxembourg, may be subject to the procedures 54 and requirements of DTC. Those interests held through Euroclear or Clearstream, Luxembourg may also be subject to the procedures and requirements of such system. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a global note to such persons may be limited to that extent. Because DTC can act only on behalf of its Participants, which in turn act on behalf of Indirect Participants and certain banks, the ability of a person having beneficial interests in a global note to pledge such interests to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interests, may be affected by the lack of a physical certificate evidencing such interests. Except as described above under "--Transfer and Exchange," owners of Interests in the Registered global notes will not have Notes registered in their names, will not receive physical delivery of Notes in certificated form and will not be considered the registered owners or holders thereof under the Indenture for any purpose. DTC has advised Heinz Finance that its current practice, upon receipt of any payment in respect of interests in securities such as the global notes (including principal and interest) held by it or its nominee, is to credit the accounts of the relevant Participants with the payment on the payment date, in amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security such as the global notes as shown on the records of DTC unless DTC has reason to believe it will not receive payment on such payment date. Payments by the Participants and the Indirect Participants to the beneficial owners of New Notes will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers registered in "street name." Such payments will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the Trustee, Heinz Finance or the Guarantor. Neither Heinz Finance, the Guarantor nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the New Notes, and Heinz Finance, the Guarantor and the Trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee as the registered owner of the global notes for all purposes. Transfers of beneficial interests in the global note between Participants in DTC will be effected in accordance with DTC's procedures, and such beneficial interests will trade in DTC's Settlement System; and consequently, secondary market trading activity in such interests will settle in immediately available funds. Transfers of beneficial interests in the global notes between participants in Euroclear and Clearstream, Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures, whereas cross-market transfers of such interests (including by DTC Participants other than Euroclear and Clearstream, Luxembourg) will be subject to considerations described below. Cross-market transfers with respect to the global notes between the Participants in DTC, on the one hand, and Euroclear or Clearstream, Luxembourg participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, Luxembourg, as the case may be, by its respective depository; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, Luxembourg, as the case may be, by the counterparts in such system. Euroclear or Clearstream, Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depository to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant global note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream, Luxembourg participants may not deliver instructions directly to the depositories for Euroclear or Clearstream, Luxembourg. Because of time zone differences, the securities account of a Euroclear or Clearstream, Luxembourg participant purchasing an interest in a global note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream, Luxembourg participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream, Luxembourg) immediately following the settlement date of DTC. Cash received in Euroclear or Clearstream, Luxembourg as a result of sales of interests in a global note by or through a Euroclear or Clearstream, Luxembourg participant to a Participant in DTC will be 55 received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day for Euroclear or Clearstream, Luxembourg following DTC's settlement date. DTC has advised Heinz Finance that it will take any action permitted to be taken by a holder of New Notes only at the direction of one or more Participants to whose account with DTC interests in the global notes are credited and only in respect of such portion of the aggregate principal amount of the New Notes as to which such Participant or Participants has or have given such direction. However, if there is an Event of Default under the New Notes, DTC reserves the right to exchange the global notes for New Notes in certificated form, and to distribute such Notes to its Participants. Although DTC has agreed to the foregoing procedures in order to facilitate transfers of beneficial ownership interests in the global notes among Participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of Heinz Finance, the Guarantor, the Trustee nor any of their respective agents will have any responsibility for the performance by DTC, its Participants or Indirect Participants of their respective obligations under the rules and procedures governing their operations, including maintaining, supervising or reviewing the records relating to, or payments made on account of, beneficial ownership interests in global notes. Governing Law The Indenture is, and the New Notes will be, governed by and construed in accordance with the laws of the State of New York. 56 THE EXCHANGE OFFER Purpose of the Exchange Offer The Old Notes were delivered by us March 7, 2002 to the initial purchasers pursuant to a purchase agreement dated February 28, 2002 between us, Heinz and the initial purchasers. The initial purchasers subsequently sold the Old Notes to "qualified institutional buyers," as defined in Rule 144A under the Securities Act, in reliance on Rule 144A and outside the United States in accordance with Regulation S under the Securities Act. As a condition to the initial sale of the Old Notes, we, Heinz and the initial purchasers entered into the exchange and registration rights agreement. Pursuant to the exchange and registration rights agreement, we agreed that we would: o file with the Commission within 120 days after the Old Notes closing date, which is the date we delivered the Old Notes to the initial purchasers, a registration statement under the Securities Act relating to a registered exchange offer; o use our reasonable best efforts to cause such registration statement to become effective under the Securities Act within 180 days after the Old Notes closing date; and o keep the exchange offer open for at least 30 days beginning and ending within 45 days of the registration statement becoming effective. During this period, Heinz Finance agrees to exchange the Old Notes for all New Notes properly surrendered and not withdrawn before the expiration date of this period. If Commission interpretations are changed on or before the exchange offer such that the Notes received by each holder, except for certain restricted holders, are not or would not be transferable without restriction, and the exchange offer has not been completed within 225 days after the sale of the Old Notes or the exchange offer is not available to any holder of Notes, Heinz Finance will file a shelf registration statement for resale of the Notes within at least 30 days of such obligation arising. Heinz Finance will use its reasonable best efforts to cause the shelf registration statement to become effective no later than 60 days after filing and to keep the registration effective for up to two years after the shelf registration statement becomes effective. Heinz Finance will provide to the holders of the Old Notes copies of a prospectus, notify such holders when the resale registration for the Old Notes has become effective and take certain other actions as are required to permit unrestricted sales of the Old Notes. A holder of the Old Notes that sells such Old Notes pursuant to the resale registration generally would be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to the purchaser, will be subject to certain of the civil liability provisions of the Securities Act in connection with such sales and will be bound by the provisions of the exchange and registration rights agreement that are applicable to such holder (including certain indemnification obligations). If within the time required by the exchange and registration rights agreements, Heinz Finance does not complete this exchange offer or, if applicable, does not register the Old Notes for shelf resale, Heinz Finance will generally be deemed to be in registration default. Holders of Old Notes will accrue special additional interest for the period in which Heinz Finance is deemed to be in default. This special interest will accrue as follows; if, within a period of 180 days following the date of original issuance of the Old Notes, the registration statement with regard to the New Notes is not declared effective by the Commission, this special interest will accrue at an annual rate of 0.25% from and including the first day following the end of this period and will cease to accrue on the date on which the registration statement is declared effective by the Commission. Additionally, if, within a period of 225 days following the date of original issuance of the Old Notes, Heinz Finance does not complete the exchange offer, special interest will accrue at an annual rate of 0.50% from and including the first day following the end of this period and will cease to accrue on the date on which the exchange offer is completed. At no time will the aggregate of any such special interest described above accrue at an annual rate in excess of 0.50%. 57 Terms of the Exchange Offer For each of the Old Notes properly surrendered and not withdrawn before the expiration date, Heinz Finance will issue a New Note having a principal amount equal to that of the surrendered Old Note. The form and terms of the New Notes will be the same as the form and terms of the Old Notes except that the New Notes will be registered for the exchange offer under the Securities Act and, therefore, the New Notes will not bear legends restricting the transfer of the New Notes; and holders of the New Notes will not be entitled to any of the registration rights of the holders of Old Notes under the exchange and registration rights agreement, which will terminate upon the consummation of the exchange offer. The New Notes will evidence the same indebtedness as the Old Notes, which they replace, and will be issued under, and be entitled to the benefits of, the same indenture, which authorized the issuance of the Old Notes. As a result, both series of notes will be treated as a single class of notes under the Indenture. Heinz Finance intends to conduct the exchange offer in accordance with the provisions of the exchange and registration rights agreement and the applicable requirements of the Exchange Act and the related Commission rules and regulations. Under existing Commission interpretations, the New Notes would generally be freely transferable after the exchange offer without further registration under the Securities Act, except that broker-dealers receiving the New Notes in the exchange offer will be subject to a prospectus delivery requirement with respect to resale of those New Notes. Heinz Finance bases its view on interpretations by the staff of the Commission in no-action letters issued to other issuers in exchange offers like ours. Heinz Finance has not, however, asked the Commission to consider this particular exchange offer in the context of a no-action letter. Therefore, holders of Old Notes cannot be sure that the Commission will treat the exchange offer in the same way it has treated other exchange offers in the past. A broker-dealer that has bought Old Notes for market-marking or other trading activities has to deliver a prospectus in order to resell any New Notes it has received for its own account in the exchange. The prospectus may be used by a broker-dealer to resell any of its New Notes. Heinz Finance has agreed in the exchange and registration rights agreement to send a prospectus to any broker-dealer that requests copies in the notice and questionnaire for a period of up to 180 days after the registration statement relating to this exchange offer is declared effective. Expiration Date; Extensions; Amendments The term "expiration date" shall mean 5:00 p.m., New York City time, on o, 2002, unless we, in our sole discretion, extend the exchange offer, in which case the term "expiration date" shall mean the latest date and time to which the exchange offer is extended. If we determine to extend the exchange offer, we will, prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date: o notify the exchange agent of any extension by oral or written notice; and o issue a press release or other public announcement which shall include disclosure of the approximate number of Old Notes deposited to date. We reserve the right, in our sole discretion: o to delay accepting any Old Notes; o to extend the exchange offer; or 58 o if, in the opinion of our counsel, the consummation of the exchange offer would violate any applicable law, rule or regulation or any applicable interpretation of the staff of the Commission, to terminate or amend the exchange offer by giving oral or written notice of such delay, extension, termination or amendment to the exchange agent. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a press release or other public announcement thereof. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders of the Old Notes, and we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to the holders, if the exchange offer would otherwise expire during such five to ten business day period. Without limiting the manner in which we may choose to make a public announcement of any delay, extension, amendment or termination of the exchange offer, we shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. Interest on the New Notes Interest will accrue at the rate of 6.00% per annum for the notes due 2012 and 6.75% per annum for the notes due 2032, in each case from the most recent date to which interest has been paid on the corresponding Old Notes or, if no interest has been paid, from March 7, 2002, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2002. Resale of the New Notes With respect to the New Notes, based upon interpretations by the staff of the Commission set forth in certain no-action letters issued to third parties, we believe that a holder who exchanges Old Notes for New Notes in the ordinary course of business, who is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in a distribution of the New Notes, and who is not an "affiliate" of ours within the meaning of Rule 405 of the Securities Act, will be allowed to resell New Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the New Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. If any holder acquires New Notes in the exchange offer for the purpose of distributing or participating in the distribution of the New Notes, such holder: o cannot rely on the position of the staff of the Commission enumerated in such no-action letters issued to third parties; and o must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes acquired by such broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of any New Notes received in exchange for Old Notes acquired by such broker-dealer as a result of market-making or other trading activities. We will make this prospectus, as it may be amended or supplemented from time to time, available to any such broker- dealer that requests copies of such prospectus in the letter of transmittal for use in connection with any such resale for a period of up to 180 days after the expiration date. See "Plan of Distribution." 59 Procedures for Tendering To tender in the exchange offer, a holder of Old Notes must either: o complete, sign and date the letter of transmittal or facsimile thereof, have the signatures thereon guaranteed if required by the letter of transmittal, and mail or otherwise deliver such letter of transmittal or such facsimile to the exchange agent; or o if such Old Notes are tendered pursuant to the procedures for book-entry transfer set forth below, a holder tendering Old Notes may transmit an agent's message (as defined below) to the exchange agent in lieu of the letter of transmittal, in either case for receipt on or prior to the expiration date. In addition: o certificates for such Old Notes must be received by the exchange agent along with the letter of transmittal; o a timely confirmation of a book-entry transfer (a "book-entry confirmation") of such Old Notes into the exchange agent's account at DTC pursuant to the procedure for book-entry transfer described below, along with the letter of transmittal or an agent's message, as the case may be, must be received by the exchange agent on or prior to the expiration date; or o the holder must comply with the guaranteed delivery procedures described below. The term "agent's message" means a message, transmitted to the exchange agent's account at DTC and received by the exchange agent and forming a part of the book-entry confirmation, which states that such account has received an express acknowledgment from the tendering participant that such participant has received and agrees to be bound by the letter of transmittal and that Heinz Finance may enforce the letter of transmittal against such participant. To be tendered effectively, the letter of transmittal and other required documents, or an agent's message in lieu thereof, must be received by the exchange agent at the address set forth below under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the expiration date. The tender by a holder that is not withdrawn prior to the expiration date will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal. The method of delivery of Old Notes, the letter of transmittal and all other required documents to the exchange agent is at the election and risk of the holder. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service, properly insured. In all cases, sufficient time should be allowed to assure delivery to the exchange agent before the expiration date. Do not send the letter of transmittal or any Old Notes to us. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the above transactions for such holders. Any beneficial owner(s) of the Old Notes whose Old Notes are held through a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such intermediary promptly and instruct such intermediary to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing the letter of transmittal and delivering such owner's Old Notes: o make appropriate arrangements to register ownership of the Old Notes in such owner's name; or o obtain a properly completed bond power from the registered holder. 60 The transfer of registered ownership may take considerable time. Signatures on a letter of transmittal or a notice of withdrawal described below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by an eligible institution unless the Old Notes tendered pursuant thereto are tendered: o by a registered holder who has not completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" on the letter of transmittal; or o for the account of an eligible institution. In the event that signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by an eligible institution, which is a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or an "eligible guarantor institution" (within the meaning of Rule 17Ad-15 under the Exchange Act) which is a member of one of the recognized signature guarantee programs identified in the letter of transmittal. If the letter of transmittal is signed by a person other than the registered holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder exactly as such registered holder's name appears on such Old Notes. In connection with any tender of Old Notes in definitive certificated form, if the letter of transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal. The exchange agent and DTC have confirmed that any financial institution that is a participant in DTC's system may utilize DTC's Automated Tender Offer Program to tender Old Notes. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be determined by us in our sole discretion, which determination will be final and binding. We reserve the absolute right: o to reject any and all Old Notes not properly tendered and any Old Notes our acceptance of which would, in the opinion of our counsel, be unlawful; and o to waive any defects, irregularities or conditions of tender as to particular Old Notes. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities in connection with tenders of Old Notes, neither we, the exchange agent nor any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. While we have no present plan to acquire any Old Notes that are not tendered in the exchange offer or to file a registration statement to permit resales of any Old Notes that are not tendered pursuant to the exchange offer, we reserve the right in our sole discretion to purchase or make offers for any Old Notes that remain outstanding subsequent to the expiration date and, to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer. 61 By tendering Old Notes pursuant to the exchange offer, each holder of Old Notes will represent to us that, among other things: o the New Notes to be acquired by such holder of Old Notes in connection with the exchange offer are being acquired by such holder in the ordinary course of business of such holder; o such holder is not participating, does not intend to participate, and has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the New Notes; o such holder acknowledges and agrees that any person who is participating in the exchange offer for the purpose of distributing the New Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the New Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters; o such holder understands that a secondary resale transaction, described above, and any resales of New Notes obtained by such holder in exchange for Old Notes acquired by such holder directly from us should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission; and o such holder is not an "affiliate", as defined in Rule 405 under the Securities Act, of ours. If the holder is a broker-dealer that will receive New Notes for such holder's own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, such holder will be required to acknowledge in the letter of transmittal that such holder will deliver a prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Return of Old Notes In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of: o Old Notes or a timely book-entry confirmation of such Old Notes into the exchange agent's account at DTC; and o a properly completed and duly executed letter of transmittal and all other required documents, or an agent's message in lieu thereof. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if Old Notes are withdrawn or are submitted for a greater principal amount than the holders desire to exchange, such unaccepted, withdrawn or otherwise non-exchanged Old Notes will be returned without expense to the tendering holder thereof (or, in the case of Old Notes tendered by book-entry transfer into the exchange agent's account at DTC pursuant to the book-entry transfer procedures described below, such Old Notes will be credited to an account maintained with DTC) as promptly as practicable. Book-Entry Transfer The exchange agent will make a request to establish an account with respect to the Old Notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in DTC may make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at DTC, the letter of transmittal or 62 facsimile thereof, with any required signature guarantees and any other required documents, or an agent's message in lieu of a letter of transmittal, must, in any case, be transmitted to and received by the exchange agent at the address set forth below under "--Exchange Agent" on or prior to the expiration date or pursuant to the guaranteed delivery procedures described below. Guaranteed Delivery Procedures If a holder of the Old Notes desires to tender such Old Notes and the Old Notes are not immediately available or the holder cannot deliver its Old Notes (or complete the procedures for book-entry transfer), the letter of transmittal or any other required documents to the exchange agent prior to the expiration date, a holder may effect a tender if: o the tender is made through an eligible institution; o prior to the expiration date, the exchange agent receives from such eligible institution (by facsimile transmission, mail or hand delivery) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by us setting forth the name and address of the holder, the certificate number(s) of such Old Notes (if applicable) and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the expiration date: (i) the letter of transmittal (or a facsimile thereof), or an agent's message in lieu thereof, (ii) the certificate(s) representing the Old Notes in proper form for transfer or a book-entry confirmation, as the case may be, and (iii) any other documents required by the letter of transmittal, will be deposited by the eligible institution with the exchange agent; and o such properly executed letter of transmittal (or facsimile thereof), or an agent's message in lieu thereof, as well as the certificate(s) representing all tendered Old Notes in proper form for transfer or a book-entry confirmation, as the case may be, and all other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the expiration date. Upon request to the exchange agent, a form of Notice of Guaranteed Delivery will be sent to holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. Withdrawal of Tenders Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date. To withdraw a tender of Old Notes in the exchange offer, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth herein prior to the expiration date. Any such notice of withdrawal must: o specify the name of the person having deposited the Old Notes to be withdrawn; o identify the Old Notes to be withdrawn (including the certificate number or numbers, if applicable, and principal amount of such Old Notes or, in the case of Old Notes transferred by a book-entry transfer, the name and number of the account at DTC to be credited); and 63 o be signed by the holder in the same manner as the original signature on the letter of transmittal by which such Old Notes were tendered (including any required signature guarantees or, in the case of Old Notes transferred by book-entry transfer, be transmitted by DTC and received by the exchange agent in the same manner as the agent's message transferring the Old Notes). If Old Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Old Notes and otherwise comply with the procedures of DTC. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by us, in our sole discretion, which determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the exchange offer, and no New Notes will be issued with respect thereto, unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the expiration date. Exchange Agent Bank One Trust Company has been appointed as exchange agent for the exchange offer. Questions and requests for assistance, requests for additional copies of this prospectus or the letter of transmittal and requests for a copy of the Notice of Guaranteed Delivery should be directed to the exchange agent addressed as follows: By Mail or Hand/Overnight Delivery: By Facsimile: Bank One Trust Company 312-407-8853 One North State Street Chicago, Illinois 60602 Attention: Exchanges Confirm by Telephone: 800-524-9472 Bank One Trust Company is an affiliate of the trustee under the Indenture. Fees and Expenses The expenses of soliciting tenders will be borne by us. The principal solicitation is being made by mail. Additional solicitation may be made by facsimile transmission, telephone or other electronic means or in person by our officers and regular employees or those of our affiliates. We have not retained any dealer-manager in connection with the exchange offer and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We, however, will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The expenses to be incurred in connection with the exchange offer, including registration fees, fees and expenses of the exchange agent and the trustee, accounting and legal fees, and printing costs, will be paid by us. We will pay all transfer taxes, if any, applicable to the exchange of Old Notes pursuant to the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of the Old Notes pursuant to the exchange offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 64 Consequence of Failure to Exchange Participation in the exchange offer is voluntary. Holders of the Old Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. Old Notes that are not exchanged for the New Notes pursuant to the exchange offer will remain "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act. Accordingly, such Old Notes may not be offered, sold, pledged or otherwise transferred except: o to a person whom the seller reasonably believes is a "qualified institutional buyer" within the meaning of Rule 144A purchasing for its own account or for the account of a qualified institutional buyer in a transaction meeting the requirements of Rule 144A; o in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S under the Securities Act; o pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available); o pursuant to an effective registration statement under the Securities Act; or o pursuant to another available exemption from the registration requirements of the Securities Act, and, in each case, in accordance with all other applicable securities laws. TAXATION The exchange of Old Notes for New Notes in the exchange offer will not constitute a taxable transaction for United States federal income tax purposes and the New Notes will be treated as a continuation of the investment in the Old Notes. The holder will not recognize taxable gain or loss as a result of the exchange and will have the same basis in the New Notes as in the Old Notes immediately before the exchange. Concerning the tax consequences arising under state, local, or foreign laws of the exchange of Old Notes for New Notes holders should consult their own tax advisors. 65 PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account in exchange for Old Notes acquired by the broker-dealer as a result of market-making or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of those New Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of New Notes received in exchange for such Old Notes. For a period of up to 180 days after the expiration date, we will make this prospectus, as amended or supplemented, available to any such broker-dealer that requests copies of this prospectus in the letter of transmittal for use in connection with any such resale. We will not receive any proceeds from any sale of New Notes by broker-dealers or any other persons. New Notes received by participating broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions or through the writing of options on the New Notes, or a combination of these methods of resale, at market prices prevailing at the time of resale or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such participating broker-dealer that resells the New Notes that were received by it for its own account pursuant to the exchange offer. Any broker or dealer that participates in a distribution of New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commissions or concessions received by these persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker- dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 66 NOTICE TO INVESTORS Based on interpretations of the staff of the Commission set forth in no-action letters issued to third parties, we believe that New Notes issued pursuant to the exchange offer in exchange for Old Notes may be offered for resale, resold, and otherwise transferred by a holder (other than broker-dealers, as set forth below, and any holder that is an "affiliate" of Heinz Finance within the meaning of Rule 405 under the Securities Act) without further registration under the Securities Act and without delivery to prospective purchasers of a prospectus pursuant to the provisions of the Securities Act, provided that the holder is acquiring the New Notes in the ordinary course of its business, is not participating and has no arrangement or understanding with any person to participate in the distribution of the New Notes. Eligible holders wishing to accept the exchange offer must represent to us in the letter of transmittal that these conditions have been met. See "The Exchange Offer--Procedures for Tendering." Each broker-dealer who holds Old Notes acquired for its own account as a result of market-making or other trading activities and who receives New Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of New Notes. The letter of transmittal states that by acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with the resales of New Notes received for the broker-dealer's own account in exchange for Old Notes where Old Notes were acquired by the broker-dealer as a result of market- making activities or other trading activities. For a period of up to 180 days after the expiration date, we will make this prospectus available to those broker-dealers (if they so request in the letter of transmittal) for use in connection with those resales. See "Plan of Distribution." The New Notes constitute new issues of securities with no established public trading market. We do not intend to apply for listing of the New Notes on any securities exchange or for inclusion of the New Notes in any automated quotation system. There can be no assurance that an active public market for the New Notes will develop or as to the liquidity of any market that may develop for the New Notes, the ability of holders to sell the New Notes, or the price at which holders would be able to sell the New Notes. Future trading prices of the New Notes will depend on many factors, including among other things, prevailing interest rates, our operating results and the market for similar securities. Any Old Notes not tendered or accepted in the exchange offer will remain outstanding. To the extent that Old Notes are tendered and accepted in the exchange offer, your ability to sell untendered, and tendered but unaccepted, Old Notes could be adversely affected. Following consummation of the exchange offer, the holders of Old Notes will continue to be subject to the existing restrictions on transfer thereof and we will have no further obligation to those holders, under the exchange and registration rights agreement, to provide for the registration under the Securities Act of the Old Notes. There may be no trading market for the Old Notes. We will not receive any proceeds from, and have agreed to bear the expenses of, the exchange offer. No underwriter is being used in connection with the exchange offer. The exchange offer is not being made to, nor will we accept surrenders for exchange from, holders of Old Notes in any jurisdiction in which the exchange offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of those jurisdictions. VALIDITY OF THE NEW NOTES The validity of the New Notes will be passed upon for us by Davis Polk & Wardwell, New York, New York. 67 EXPERTS The combined and consolidated financial statements of Heinz Finance and Heinz as of May 2, 2001 and May 3, 2000 and for each of the three fiscal years ended May 2, 2001, either included or incorporated herein by reference to Heinz's Annual Report on Form 10-K for the fiscal year ended May 2, 2001 have been so either included or incorporated by reference in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 68 INDEX TO FINANCIAL STATEMENTS Page ---- Report of Independent Accountants on the Combined Statements of Assets and Liabilities of the U.S. Group as of May 2, 2001 and May 3, 2000 and the related Combined Statements of Operations and Cash Flows for each of the three years ended May 2, 2001....................F-2 Combined Statement of Assets and Liabilities as of May 2, 2001 and May 3, 2000.................................................................F-3 Combined Statements of Operations for the three years ended May 2, 2001.....F-4 Combined Statements of Cash Flows for the three years ended May 2, 2001.....F-5 F-6 Notes to Combined Financial Statements......................................F-6 Page ---- Consolidated and Combined Statements of Operations for the nine months ended January 30, 2002 and January 31, 2001 (unaudited).....................F-23 Condensed Consolidated and Combined Balance Sheets as of January 30, 2002 and May 2, 2001 (unaudited).................................................F-24 Condensed Consolidated and Combined Statements of Cash Flows for the nine months ended January 30, 2002 and January 31, 2001 (unaudited).........F-25 Notes to Condensed Consolidated and Combined Financial Statements (unaudited).................................................................F-26 F-1 Report of Independent Accountants To the Board of Directors of H. J. Heinz Finance Company and H. J. Heinz Company: In our opinion, the accompanying combined statements of assets and liabilities and the related combined statements of operations and cash flows present fairly, in all material respects, the financial position of U.S. Group of H. J. Heinz Company (the "U.S. Group") at May 2, 2001 and May 3, 2001, and the results of its operations and its cash flows for each of the three years in the period ended May 2, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania August 27, 2001 F-2 U.S. Group Combined Statements of Assets and Liabilities May 2, 2001 and May 3, 2000
May 2, 2001 May 3, 2000 ----------- ----------- (In thousands) Assets Current assets: Cash and cash equivalents............................ $393 $2,322 Receivables, (net of allowances 2001--$2,606; 2000--$6,597) .................................... 506,447 314,762 Due from related parties............................ 75,429 35,830 Short-term notes receivable from related parties.... -- 505,995 Inventories: Finished goods and work-in-process................ 515,315 594,814 Packaging material and ingredients................ 139,855 131,914 Deferred income taxes............................... 50,042 62,757 Prepaid expenses and other current assets........... 49,428 61,905 ---------- ---------- Total current assets............................ 1,336,909 1,710,299 Property, plant and equipment: Land................................................ 18,684 11,544 Buildings and leasehold improvements................ 399,802 360,794 Equipment, furniture and other...................... 1,190,028 1,359,972 Less accumulated depreciation....................... (738,731) (756,398) ---------- ---------- Total property, plant and equipment, net........ 869,783 975,912 Other noncurrent assets: Long-term notes receivable from related parties..... 35,000 1,019,250 Investments in related parties...................... 1,895,245 11,487 Other investment.................................... 201,438 131,419 Goodwill (net of amortization: 2001--$226,085; 2000--$213,343)................................... 1,108,898 1,074,188 Other intangible assets (net of amortization: 2001--$143,375; 2000--$133,136)................... 99,396 99,417 Other noncurrent assets.............................. 54,822 46,484 ---------- ---------- Total other noncurrent assets................... 3,394,799 2,382,245 ---------- ---------- Total assets.................................... $5,601,491 $5,068,456 ========== ========== Liabilities and Parent Company's Investment Current liabilities: Portion of long-term debt due within one year....... $ 29,833 $ 2,998 Accounts payable.................................... 321,222 304,421 Due to related parties.............................. 96,221 63,500 Salaries and wages ................................. 14,407 13,629 Accrued marketing .................................. 60,292 107,559 Accrued restructuring costs......................... 42,405 34,724 Other accrued liabilities........................... 107,280 78,353 ---------- ----------- Total current liabilities....................... 671,660 605,184 Long-term debt....................................... 23,932 33,071 Deferred income taxes................................ 205,134 215,877 Deferred income...................................... 29,684 7,522 Other................................................ 12,684 8,531 ---------- ----------- Total long-term debt and other liabilities...... 271,434 265,001 Parent company's investment.......................... 4,658,397 4,198,271 ---------- ----------- Total liabilities and parent company's investment $5,601,491 $5,068,456 ========== ==========
The accompanying notes are an integral part of these financial statements. F-3 U.S. Group Combined Statements of Operations Fiscal Years ended May 2, 2001, May 3, 2000 and April 28, 1999
Fiscal year ended --------------------------------------------------- May 2, 2001 May 3, 2000 April 28, 1999 (52 Weeks) (53 Weeks) (52 Weeks) ----------- ----------- -------------- (in thousands) Sales............................................................ $4,938,197 $4,789,188 $4,687,123 Cost of products sold............................................. 3,085,270 3,013,574 2,991,088 ---------- ---------- ---------- Gross profit...................................................... 1,852,927 1,775,614 1,696,035 Selling, general and administrative expenses...................... 1,285,756 1,071,930 1,020,994 Royalty expense to related parties................................ 129,102 94,347 96,643 ---------- ---------- ---------- Operating income.................................................. 438,069 609,337 578,398 Interest income................................................... 110,979 126,236 129,558 Interest expense.................................................. 10,278 7,138 6,266 Other expenses, net............................................... 21,303 27,896 13,171 ---------- ---------- ---------- Income before income taxes and cumulative effect of accounting change......................................................... 517,467 700,539 688,519 Provision for income taxes........................................ 205,358 252,244 255,762 ---------- ---------- ---------- Income before cumulative effect of accounting change.............. 312,109 448,295 432,757 Cumulative effect of accounting change............................ (5,211) -- -- ---------- ---------- ---------- Net income........................................................ $ 306,898 $ 448,295 $ 432,757 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-4 U.S. Group Combined Statements of Cash Flows Fiscal Years ended May 2, 2001, May 3, 2000 and April 28, 1999
Fiscal year ended --------------------------------------------------- May 2, 2001 May 3, 2000 April 28, 1999 (52 Weeks) (53 Weeks) (52 Weeks) ----------- ----------- -------------- (in thousands) Operating activities: Net income.......................................................... $306,898 $448,295 $432,757 Adjustments to reconcile net income to cash provided by operating activities: Depreciation....................................................... 70,277 90,219 77,192 Amortization....................................................... 51,464 49,467 51,786 Deferred tax provision............................................. 29,417 13,250 35,626 Loss on sale of The All American Gourmet business.................. 94,600 -- -- Cumulative effect of changes in accounting principle............... 5,211 -- -- Provision for restructuring........................................ 257,983 175,737 139,541 Deferred income.................................................... 22,162 (570) (540) Other items, net................................................... (16,816) 9,763 (43,030) Changes in current assets and liabilities, excluding effects of acquisitions and divestitures: Receivables...................................................... (158,331) (52,916) (5,271) Inventories...................................................... 73,329 (100,548) (61,263) Prepaid expenses and other current assets........................ 2,989 (5,912) 2,559 Due from/to related parties...................................... (413,346) (52,773) 232,781 Accounts payable................................................. 10,094 16,341 5,846 Accrued liabilities.............................................. (230,964) (163,654) (38,129) Other............................................................ (27,445) 7,187 (16,385) -------- --------- --------- Cash provided by operating activities.......................... 77,522 433,886 813,470 -------- --------- --------- Investing activities: Capital expenditures............................................... (183,494) (215,404) (122,197) Proceeds from disposals of property, plant and equipment .......... 165,450 4,781 20,450 Acquisitions, net of cash acquired................................. (229,916) (73,923) (23,219) Proceeds from divestitures......................................... 96,524 25,000 -- Investment in The Hain Celestial Group, Inc........................ (79,743) (99,764) -- Other items, net................................................... (827) (34,847) 3,262 -------- --------- --------- Cash used for investing activities............................. (232,006) (394,157) (121,704) -------- --------- --------- Financing activities: Payments on long-term debt......................................... (12,160) (52,110) (45,661) Proceeds from long-term debt....................................... -- 4,344 31,373 Payment of dividends to related parties............................ (350,648) (306,244) (441,653) Net parent advances (settlements).................................. 515,363 313,689 (235,334) -------- --------- --------- Cash provided by (used for) financing activities................. 152,555 (40,321) (691,275) -------- --------- --------- Net (decrease) increase in cash and cash equivalents................ (1,929) (592) 491 Cash and cash equivalents, beginning of year........................ 2,322 2,914 2,423 -------- --------- --------- Cash and cash equivalents, end of year.............................. $ 393 $ 2,322 $ 2,914 ======== ========= =========
The accompanying notes are an integral part of these financial statements. F-5 U.S. Group Notes to Combined Financial Statements (in thousands) 1. Basis of Presentation The accompanying combined financial statements include assets and liabilities and related operations of the U.S. Group, which are included in the consolidated financial statements of Heinz. The U.S. Group includes the following operations/subsidiaries of Heinz: o Heinz USA Division o Foodservice Subsidiaries o Heinz Pet Products o StarKist Seafood o Heinz Frozen Food Company o All American Gourmet o Jameson, Inc. o CMH, Inc. The U.S. Group manufactures and markets an extensive line of processed food products. The U.S. Group's principal products include ketchup, condiments and sauces, frozen food, pet products, soups, beans and pasta meals, tuna and infant food. The preparation of these financial statements include the use of "carve out" and "push down" accounting procedures wherein certain assets, liabilities and expense historically recorded or incurred at the parent company level or an affiliate of Heinz, which related to or were incurred on behalf of the U.S. Group, have been identified and allocated or pushed down as appropriate to reflect the financial results of the U.S. Group for the periods presented. See Note 6 for a further discussion regarding the allocation of Heinz parent company costs. 2. Significant Accounting Policies Fiscal Year The U.S. Group operates on a 52- or 53-week fiscal year ending the Wednesday nearest April 30. Fiscal years for the financial statements included herein ended May 2, 2001, May 3, 2000 and April 28, 1999. Principles of Combination The combined financial statements include the accounts of the U.S. Group and its subsidiaries. All intercompany accounts and transactions have been eliminated. Investments owned less than 50%, where significant influence exists, are accounted for on an equity basis. F-6 U.S. Group Notes to Combined Financial Statements -- (Continued) Use of Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash Equivalents Cash equivalents are defined as highly liquid investments with original maturities of 90 days or less. Inventories Inventories are stated at the lower of cost or market. Cost is determined principally under the average cost method. Property, Plant and Equipment Land, buildings and equipment are recorded at cost. For financial reporting purposes, depreciation is provided on the straight-line method over the estimated useful lives of the assets. Accelerated depreciation methods are generally used for income tax purposes. Expenditures for new facilities and improvements that substantially extend the capacity or useful life of an asset are capitalized. Ordinary repairs and maintenance are expensed as incurred. When property is retired or otherwise disposed, the cost and related depreciation are removed from the accounts and any related gains or losses are included in income. Investments The U.S. Group's Investments balance primarily represents an investment in Weight Watchers International and the U.S. Group's investment in Hain Celestial (see Note 3). Intangibles Goodwill and other intangibles arising from acquisitions are being amortized on a straight-line basis over periods ranging from seven to 40 years. The U.S. Group regularly reviews the individual components of the balances by evaluating the future undiscounted cash flows of the businesses to determine the recoverability of the assets and recognizes, on a current basis, any diminution in value. Parent Company's Investment Heinz's investment represents the original investment by Heinz plus accumulated net income, less dividends, capital contributions, certain intercompany accounts and current federal and state income taxes payable. Revenue Recognition The U.S. Group recognizes revenue when title, ownership and risk of loss pass to the customer. See Recently Adopted Accounting Standards for additional information. Advertising Expenses Advertising costs are generally expensed in the year in which the advertising first takes place. F-7 U.S. Group Notes to Combined Financial Statements -- (Continued) Income Taxes The U.S. Group joins with Heinz in the filing of a consolidated U.S. income tax return and certain state income tax returns. Tax expense for all years includes the effect of certain tax sharing agreements the U.S. Group has with Heinz regarding these consolidated filings. Specifically, Heinz charges (refunds) the U.S. Group at the U.S. statutory rate for its actual taxable income (loss). In addition, Heinz charges the U.S. Group for its share of consolidated state tax expense based on the U.S. Group's share of the state allocation factors. Deferred income taxes result primarily from temporary differences between financial and tax reporting. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. Financial Instruments The U.S. Group uses derivative financial instruments for the purpose of hedging price exposures which exist as part of ongoing business operations. As a policy, the U.S. Group does not engage in speculative or leveraged transactions, nor does the U.S. Group hold or issue financial instruments for trading purposes. See Recently Adopted Accounting Standards for additional information. The cash flows related to financial instruments are classified in the combined statements of cash flows in a manner consistent with those of the transactions being hedged. Recently Adopted Accounting Standards On February 1, 2001, the U.S. Group adopted Statement Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," and its related amendment, Statement of Financial Accounting Standards No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities" (SFAS No. 133). SFAS No. 133 requires that all derivative financial instruments be recorded on the consolidated balance sheet at their fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded each period in earnings or parent company's investment, depending on whether the derivative is designated and effective as part of a hedge transaction and, if it is, the type of hedge transaction. Gains and losses reported in parent company's investment are included in earnings in the periods in which earnings are affected by the hedged item. Such gains and losses are reported by the U.S. Group on the same line as the underlying hedged item. Gains and losses which represent hedge ineffectiveness are reported by the U.S. Group as other income and expense in the period of change. Prior to the adoption of SFAS No. 133, the U.S. Group accounted for derivative financial instruments that qualified as hedges by recording deferred gains or losses from such instruments as assets or liabilities and recognizing them as part of the cost basis of the underlying hedged transaction. Realized and unrealized gains and losses from financial instruments that did not qualify as hedges were recognized immediately in earnings as other income and expense. On February 1, 2001, the adoption of SFAS No. 133 resulted in a cumulative effect of an accounting change that reduced net income by $0.4 million and increased parent company's investment by $0.1 million. See Note 13 for additional information on the U.S. Group's hedging activities. In Fiscal Year 2001, U.S. Group changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." Under the new accounting method, adopted retroactive to May 4, 2000, the U.S. Group recognizes revenue upon passage of title, ownership and risk of loss to the customer. The cumulative effect of the change on prior years resulted in a charge F-8 U.S. Group Notes to Combined Financial Statements -- (Continued) to income of $4.8 million (net of income taxes of $2.8 million), which has been included in net income for the year ended May 3, 2000. The change did not have a significant effect on revenues or results of operations for the year ended May 2, 2001. The pro forma amounts, assuming that the new revenue recognition method had been applied retroactively to prior periods, were not materially different from the amounts shown in the Combined Statements of Operations for the years ended May 3, 2000 and April 28, 1999. Therefore, these amounts have not been presented. Recently Issued Accounting Standards In May 2000, the Financial Accounting Standards Board Emerging Issues Task Force (the EITF) issued new guidelines entitled "Accounting for Certain Sales Incentives" which address the recognition, measurement and income statement classification for certain sales incentives (e.g., coupons). These guidelines will be effective for the U.S. Group beginning in the fourth quarter of Fiscal Year 2002. The implementation of these guidelines will require the U.S. Group to make reclassifications between selling, general and administrative expenses (SG&A) and sales, the amounts of which have not yet been determined. In September 2000, the EITF issued new guidelines entitled "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products," which address the income statement classification of consideration from a vendor to a retailer. These guidelines will be effective for the U.S. Group beginning in the fourth quarter of Fiscal Year 2002. The implementation of these guidelines will require the U.S. Group to make reclassifications between SG&A and sales, the amounts of which have not yet been determined. In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". These standards require that all business combinations be accounted for using the purchase method and that goodwill and intangible assets with indefinite useful lives should not be amortized but should be tested for impairment at least annually, and they provide guidelines for new disclosure requirements. These standards outline the criteria for initial recognition and measurement of intangibles, assignment of assets and liabilities including goodwill to reporting units and goodwill impairment testing. The provisions of SFAS Nos. 141 and 142 apply to all business combinations after June 30, 2001. The provisions of SFAS No. 142 for existing goodwill and other intangible assets are required to be implemented in the first quarter of Fiscal Year 2003. The U.S. Group is currently evaluating the impact of these standards on the combined financial statements. 3. Acquisitions All of the following acquisitions have been accounted for as purchases and, accordingly, the respective purchase prices have been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. Operating results of businesses acquired have been included in the combined statements of operations from the respective acquisition dates forward. Pro forma results of the U.S. Group, assuming all of the following acquisitions had been made at the beginning of each period presented, would not be materially different from the results reported. Fiscal Year 2001 The U.S. Group acquired businesses for a total of $234.0 million, including obligations to sellers of $4.1 million. The preliminary allocations of the purchase price resulted in goodwill of $186.5 million and trademarks and other intangible assets of $0.1 million, which are being amortized on a straight-line basis over periods not exceeding 40 years. The final allocation is subject to valuation and other studies that have not been completed. On March 1, 2001, the U.S. Group acquired two privately held U.S. foodservice companies: Cornucopia, Inc. of Irvine, California, and Central Commissary, Inc. of Phoenix, Arizona. Both companies make and market refrigerated and frozen reciped food products. Also during Fiscal Year 2001, the U.S. Group completed the acquisitions of IDF Holdings, Inc., the parent of International DiverseFoods Inc., a leading manufacturer of customized dressings, sauces, mixes and condiments for restaurant chains and foodservice distributors, and Alden F-9 U.S. Group Notes to Combined Financial Statements -- (Continued) Merrell Corporation, a manufacturer of high-quality, premium-priced frozen desserts for casual dining restaurants and foodservice distributors. On June 19, 2000, the U.S. Group exercised its preemptive right to purchase an additional 2,582,774 shares of Hain for $79.7 million, or $30.88 per share. The transaction restored the U.S. Group's ownership interest in Hain to 19.5%. The U.S. Group's ownership was diluted as a result of Hain's stock-for-stock merger with Celestial Seasonings on May 30, 2000. Fiscal Year 2000 The U.S. Group acquired businesses for a total of $84.4 million, including obligations to sellers of $10.4 million. The allocations of the purchase price resulted in goodwill of $56.5 million, which is being amortized on a straight-line basis over periods not exceeding 40 years. During Fiscal Year 2000, the U.S. Group completed the acquisition of Quality Chef Foods, a leading manufacturer of frozen heat-and-serve soups, entrees and sauces; Yoshida, a line of Asian sauces marketed in the U.S.; and Thermo Pac, Inc., a U.S. leader in single-serve condiments. On September 27, 1999, the U.S. Group and Hain announced an agreement to form a strategic alliance for the global production and marketing of natural and organic foods and soy-based beverages. The U.S. Group's investment of $99.8 million gave it a 19.5% interest in Hain. The U.S. Group will provide procurement, manufacturing and logistic expertise while Hain will provide marketing, sales and distribution services. Additionally, Hain acquired from the U.S. Group the trademark for Earth's Best organic baby foods. The U.S. Group's investment in Hain Celestial and applicable equity income/loss is recorded in investments in the accompanying combined statements of assets and liabilities and equity income/loss is recorded in other expenses in the accompanying statements of operations. Fiscal Year 1999 The U.S. Group acquired businesses for a total of $54.3 million, including obligations to sellers of $31.1 million. The allocations of the purchase price resulted in goodwill of $60.5 million, which is being amortized on a straight-line basis over periods not exceeding 40 years. Acquisitions made during Fiscal Year 1999, include the College Inn brand of canned broths and other smaller acquisitions. 4. Divestitures On February 9, 2001, the U.S. Group announced it had sold The All American Gourmet business and it Budget Gourmet and Budget Gourmet Value Classics brands of frozen entrees for $55.0 million. The transaction resulted in a pretax loss of $94.6 million. The All American Gourmet business contributed approximately $141.4 million in sales for Fiscal Year 2000. Pro forma results of the U.S. Group, assuming all of the above divestitures had been made at the beginning of each period presented, would not be materially different from the results reported. 5. Restructuring Charges Streamline In the fourth quarter of Fiscal Year 2001, Heinz announced a restructuring initiative named "Streamline" which includes an organizational restructuring aimed at reducing overhead costs and the consolidation of the U.S. Group's canned pet food production to Bloomsburg, Pennsylvania (which results in ceasing canned pet food production at the U.S. Group's Terminal Island, California facility). Management estimates that these actions will impact approximately 400 employees. F-10 U.S. Group Notes to Combined Financial Statements -- (Continued) During Fiscal Year 2001, the U.S. Group recognized restructuring charges and implementation costs totaling $84.7 million pretax. Pretax charges of $65.3 million were classified as cost of products sold and $19.4 million as SG&A. The major components of the restructuring charge and implementation costs and the remaining accrual balance as of May 2, 2001 were as follows:
Employee Non-cash Asset Termination And Accrued Exit Implementation Write-Downs Severance Costs Costs Costs Total -------------- --------------- ------------ -------------- ----- (in millions) Restructuring and implementation costs -- 2001......................... $ 34.7 $ 15.4 $ 22.8 $ 11.8 $ 84.7 Amounts utilized -- 2001...... (34.7) (5.8) (1.7) (11.8) (54.0) ------- ------ ------ ------ ------ Accrued restructuring cost -- May 2, 2001................... $ -- $ 9.6 $ 21.1 $ -- $ 30.7 ======= ====== ====== ====== ======
Non-cash asset write-downs consisted primarily of long-term asset impairments that were recorded as a direct result of the U.S. Group's decision to consolidate its canned pet food operations. Non-cash asset write-downs totaled $34.7 million and related to property, plant and equipment ($30.8 million) and current assets ($3.9 million). Long-term asset write-downs were based on third-party appraisals, contracted sales prices or management's estimate of salvage value. The carrying value of these long-term assets was approximately $1 million as of May 2, 2001. Current asset write-downs included inventory and packaging material, prepaid and other current assets and were determined based on management's estimate of net realizable value. Employee termination and severance costs are primarily related to involuntary termination and represent cash termination payments to be paid to affected employees as a direct result of the restructuring program. Non-cash pension and postretirement benefit charges related to the approved projects are also included as a component of total severance costs ($5.3 million). Exit costs are primarily contractual obligations incurred as result of the U.S. Group's decision to exit these facilities. Implementation costs were recognized as incurred in Fiscal Year 2001 ($11.8 million pretax) and consist of incremental costs directly related to the implementation of the Streamline initiative. These include idle facility costs, consulting fees and asset relocation costs. In Fiscal Year 2001, the U.S. Group ceased production of canned pet food in its Terminal Island, California facility. In addition, the U.S. Group initiated its overhead reduction plan. These actions resulted in a net reduction of the U.S. Group's workforce of approximately 300 employees. Operation Excel In Fiscal Year 1999, Heinz announced a growth and restructuring initiative, named "Operation Excel." This initiative was a multi-year, multi-faceted program which established manufacturing centers of excellence, focused the product portfolio, realigned the U.S. Group's management teams and invested in growth initiatives. Creating manufacturing centers of excellence resulted in significant changes to the U.S. Group's manufacturing footprint including the following initiatives: focused the Pittsburgh, Pennsylvania factory on soup and baby food production and shifted other production to existing facilities, downsized the Pocatello, Idaho factory by shifting Bagel Bites production to the Ft. Myers, Florida factory, and shifted certain Smart Ones entree production to the F-11 U.S. Group Notes to Combined Financial Statements -- (Continued) Massillon, Ohio factory, closed the El Paso, Texas pet treat facility and transferred production to the Topeka, Kansas factory and to co-packers, and disposed of the Bloomsburg, Pennsylvania frozen pasta factory. As part of Operation Excel, the U.S. Group focused the portfolio of product lines on six core food categories: ketchup, condiments and sauces; frozen foods; tuna; soup, beans and pasta meals; infant foods; and pet products. Realigning the U.S. Group's management teams provided processing and product expertise. Specifically, Operation Excel includes established a single frozen food headquarters, resulting in the closure of the U.S. Group's Ore-Ida head office in Boise, Idaho and established a single U.S. Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania, resulting in the relocation of the U.S. Group's seafood and pet food headquarters from Newport, Kentucky. During Fiscal Year 2001, the U.S. Group recognized restructuring charges of $44.8 million pretax. These charges were associated with exiting the U.S. Group's can making operations, which were sold during Fiscal Year 2001, and higher than originally expected severance costs associated with creating the single U.S. Grocery & Foodservice headquarters in Pittsburgh, Pennsylvania. This charge was recorded in cost of products sold ($36.3 million) and SG&A ($8.5 million). This charge was offset by reversals of unutilized Operation Excel accruals and asset write-downs of $21.0 million pretax. These reversals were recorded in cost of products sold ($8.2 million) and SG&A ($12.7 million) and were primarily the result of revisions in estimates of fair values of assets which were disposed of as part of Operation Excel and the U.S. Group's decision not to exit certain U.S. warehouses due to higher than expected volume growth. Implementation costs of $149.5 million pretax were also recognized in Fiscal Year 2001. These costs were classified as costs of products sold ($62.2 million) and SG&A ($87.3 million). During Fiscal Year 2000, the U.S. Group recognized restructuring charges of $95.3 million pretax. Pretax charges of $53.5 million were classified as cost of products sold and $41.8 million as SG&A. Also during Fiscal Year 2000, the U.S. Group recorded a reversal of $16.4 million pretax of Fiscal Year 1999 restructuring accruals and asset write-downs, primarily for the closure of the West Chester, Pennsylvania facility, which remains in operation as a result of the sale of the Bloomsburg frozen pasta facility in Fiscal Year 2000. Implementation costs of $96.9 million pretax were classified as cost of products sold ($33.7 million) and SG&A ($63.2 million). During Fiscal Year 1999, the U.S. group recognized restructuring charges and implementation costs totaling $156.1 million pretax. Pretax charges of $94.3 million were classified as costs of products sold and $61.8 million as SG&A. Implementation costs were recognized as incurred and consisted of incremental costs directly related to the implementation of Operation Excel, including consulting fees, employee training and relocations costs, unaccruable severance costs associated with terminated employees, equipment relocation costs and commissioning costs. F-12 U.S. Group Notes to Combined Financial Statements -- (Continued) The major components of the restructuring charges and implementation costs and the remaining accrual balances as of May 2, 2001, May 3, 2000 and April 28, 1999 were as follows:
Employee Termination Non-cash Asset And Severance Accrued Exit Implementation Write-Downs Costs Costs Costs Total -------------- ------------- ------------ -------------- ----- (in millions) Restructuring and Implementation costs -- 1999........................ $ 96.7 $27.0 $20.0 $ 12.4 $156.1 Amounts utilized -- 1999.............. (96.7) (18.6) (4.3) (12.4) (132.0) ------ ----- ----- ------- ------- Accrued restructuring costs -- April 28, 1999............................. -- 8.4 15.7 -- 24.1 Restructuring and Implementation costs -- 2000........................ 50.2 37.4 7.6 96.9 192.1 Accrual reversal -- 2000.............. (15.4) (0.6) (0.4) -- (16.4) Amounts utilized -- 2000.............. (34.8) (27.0) (6.9) (96.9) (165.6) ------ ----- ----- ------- ------- Accrued restructuring costs -- May 3, 2000................................. -- 18.2 16.0 -- 34.2 Restructuring and Implementation costs -- 2001........................ 33.1 5.2 6.5 149.5 194.3 Accrual reversal -- 2001.............. (7.9) (5.1) (8.0) -- (21.0) Amounts utilized -- 2001.............. (25.2) (13.7) (7.4) (149.5) (195.8) ------ ----- ----- ------- ------- Accrued restructuring costs -- May 2, 2001.................................. $ -- $ 4.6 $ 7.1 $ -- $ 11.7 ====== ===== ===== ======= =======
Non-cash asset write-downs consisted primarily of long-term asset impairments that were recorded as a direct result of the U.S. Group's decision to exit facilities. Net non-cash asset write-downs totaled $25.2 million in Fiscal Year 2001 and related to property, plant and equipment ($14.9 million) and other current assets ($10.3 million). In Fiscal Year 2000, non-cash asset write-downs totaled $34.8 million and related to property, plant and equipment ($27.0 million) and current assets ($7.8 million). In Fiscal Year 1999, non-cash asset write-downs consisted of property, plant and equipment ($68.2 million), goodwill and other intangibles ($18.7 million) and current assets ($9.8 million). Long-term asset write-downs were based on third-party appraisals, contracted sales prices or management's estimate of salvage value. The carrying value of these long-term assets was approximately $2.4 million at May 3, 2000 and $8.1 million at April 28, 1999. These assets were sold or removed from service by the end of Fiscal Year 2001. The results of operations, related to these assets, including the effect of reduced depreciation were not material. Current asset write-downs included inventory and packaging material, prepaids and other current assets and were determined based on management's estimate of net realizable value. Severance charges are primarily related to involuntary terminations and represent cash termination payments to be paid to affected employees as a direct result of the restructuring program. Non-cash pension and postretirement benefit charges related to the approved projects are also included as a component of total severance costs ($13.6 million and $14.0 million in Fiscal Year 2000 and Fiscal Year 1999, respectively). Exit costs are primarily related to contract and lease termination costs ($23.8 million of the total $25.7 million net exit costs). The U.S. Group has closed or exited all of the five factories that were originally scheduled for closure. In addition, the U.S. Group also exited its can making operations. Management estimates that Operation Excel will impact approximately 2,000 employees with a net reduction in the workforce of approximately 1,700 after F-13 U.S. Group Notes to Combined Financial Statements -- (Continued) expansion of certain facilities. The exit of the U.S. Group's can making operations resulted in a reduction of the U.S. Group's workforce of approximately 500 employees. During Fiscal Year 2001, Fiscal Year 2000 and Fiscal Year 1999, the U.S. Group's workforce had a net reduction of approximately 700 employees, 500 employees and 200 employees respectively. The remaining employee reductions are expected to take place within six months. 6. Related Party Transactions Employee Costs Certain of Heinz's general and administrative expenses are allocated to the U.S. Group. Total costs allocated include charges for salaries of corporate officers and staff and other Heinz corporate overhead. Total costs charged to the U.S. Group for these services were $28.4 million, $28.7 million and $28.5 million for Fiscal Years 2001, 2000 and 1999, respectively, based on a percent of revenue which represents a reasonable allocation of Heinz's corporate overhead. These costs are recorded in selling, general and administrative expense in the accompanying combined statement of operations. Heinz charges the U.S. Group for its share of group health insurance costs for eligible company employees based upon location-specific costs, overall insurance costs and loss experience incurred during a calendar year. In addition, various other insurance coverages are also provided to the U.S. Group through Heinz's consolidated programs. Workers compensation, auto, property, product liability and other insurance coverages are charged directly based on the U.S. Group's loss experience. Amounts charged to the U.S. Group for insurance costs were $80.3 million, $73.7 million and $63.9 million for fiscal years 2001, 2000 and 1999, respectively, and are recorded in selling, general and administrative expenses in the accompanying combined statement of operations. Pension costs and postretirement costs are also charged to the U.S. Group based upon eligible employees participating in the Plans. See Note 12. Cash Management The U.S. Group maintains a cash management arrangement with Heinz. On a daily basis, all available cash is deposited and disbursements are withdrawn. Heinz charges (credits) the U.S. Group interest on the average daily balance maintained in the resulting intercompany account. Net interest (income) expense related to this arrangement, included in the combined statement of income was $3.3 million, $(4.7) million and $(12.2) million in fiscal years 2001, 2000 and 1999, respectively. The interest rate charged to or received by the U.S. Group was 6.73%, 6.57% and 6.79% in fiscal years 2001, 2000 and 1999, respectively. Product Sales and Purchases The U.S. Group sells and purchases products and services to and from other Heinz affiliates. The result of such transactions is the $75.4 million and $35.8 million balances due from related parties in fiscal years 2001 and 2000, respectively, and the $96.2 million and $63.5 million balances due to related parties in fiscal years 2001 and 2000, respectively. Sales to related parties were $61.1 million, $53.8 million and $58.1 million in fiscal years 2001, 2000 and 1999, respectively, and purchases from related parties were $421.4 million, $543.8 million and $684.7 million in fiscal years 2001, 2000 and 1999, respectively. Other Related Party Items The U.S. Group sells undivided interests in certain accounts receivable to a Heinz affiliate, Receivables Servicing Company. The U.S. Group sold $1,291.0 million and $1,590.3 million of receivables net of discount expense of $9.4 million and $10.5 million in fiscal years 2001 and 2000, respectively, to RSC. At the fiscal years ending 2001 and 2000, respectively, the U.S. Group had $126.9 million and $124.9 million of receivables sold to F-14 U.S. Group Notes to Combined Financial Statements -- (Continued) RSC. These sales were reflected as reductions of trade accounts receivable. The U.S. Group's contract with RSC will terminate on December 2001. Until the fourth quarter of Fiscal Year 2000, the U.S. Group had outstanding notes receivable from Heinz affiliates which are used for working capital purposes and to fund acquisitions. The short-term notes had interest rates ranging from 6.50% to 7.00%. The long-term notes had interest rates ranging from 6.75% to 7.50% with a maturity of May 2003. Interest income earned by the U.S. Group related to these receivables was $104.3 million, $115.9 million and $115.6 million in fiscal years 2001, 2000 and 1999, respectively. In the fourth quarter of Fiscal Year 2000, these notes receivable from related parties were exchanged by the U.S. Group with a subsidiary of Heinz, PM Holding, Inc. (PM Holding), for $1.9 billion of non-voting, 6.5% cumulative non-participating preferred stock of PM Holding. This preferred stock investment is recorded in the Investments in related parties balance on the combined statement of asset and liabilities as of May 2, 2001. The U.S. Group paid royalties of $129.1 million, $94.3 million and $96.6 million in fiscal years 2001, 2000 and 1999, respectively, to Promark International, Inc. for the use of trademarks. The $35.0 million long-term note receivable on the May 2, 2001 combined statement of assets and liabilities is a receivable from Heinz that earns interest at a rate of 5.25% annually. The portion of long-term debt due within one year on the May 2, 2001 and the receivables on the May 3, 2000 combined statements of assets and liabilities includes a $21.0 million and $22.5 million, respectively, interest-bearing loan with a 6.00% interest rate to a related party, Caribbean Fishing Company. In addition, the long-term debt balance on the May 2, 2001 and May 3, 2000 combined statements of assets and liabilities includes a $5.4 million non-interest bearing loan to another related party, Boise Associates, Inc. F-15 U.S. Group Notes to Combined Financial Statements -- (Continued) 7. Income Taxes The following table summarizes the provision for U.S. federal and state taxes on income: 2001 2000 1999 -------- -------- -------- Current: U.S. federal..............................$176,776 $227,632 $208,293 State..................................... (835) 11,362 11,843 -------- -------- -------- 175,941 238,994 220,136 Deferred: U.S. federal.............................. 25,759 12,929 34,814 State..................................... 3,658 321 812 -------- -------- -------- 29,417 13,250 35,626 -------- -------- -------- Total tax provision .......................$205,358 $252,244 $255,762 ======== ======== ======== The difference between the U.S. federal statutory tax rate and the U.S. Group's combined effective tax rate are as follows: 2001 2000 1999 ------ ------ ----- U.S. federal statutory tax rate ............ 35.0% 35.0% 35.0% State income taxes (net of federal benefit). 0.6 1.1 1.2 Goodwill amortization....................... 1.2 0.9 1.3 Other ...................................... 2.9 (1.0) (0.4) ---- ---- ---- Effective tax rate.......................... 39.7% 36.0% 37.1% ==== ==== ==== The deferred tax (assets) and deferred tax liabilities recorded on the balance sheet as of May 2, 2001 and May 3, 2000 are as follows: 2001 2000 -------- -------- Depreciation/amortization.............. $242,023 $241,920 Other.................................. 21,669 7,554 -------- -------- 263,692 249,474 Provision for estimated expenses....... (39,788) (40,204) Operating loss carryforwards........... (3,171) (447) Promotions and advertising............. (3,436) (17,729) Other.................................. (62,205) (37,974) -------- -------- (108,600) (96,354) -------- -------- Net deferred tax liabilities........... $155,092 $153,120 ======== ======== At the end of 2001, net operating loss carryforwards totaled $9.1 million and expire through 2021. The U.S. income tax returns of Heinz have been audited by the Internal Revenue Service for all years through 1994. F-16 U.S. Group Notes to Combined Financial Statements -- (Continued) 8. Debt Range Maturity of (Fiscal Interest Year) 2001 2000 -------- ----- ---- ---- Long-term: Revenue bonds............. 3.39-7.70% 2002-2027 $12,392 $14,892 Promissory notes.......... 3.00-6.00 2002-2005 5,081 3,447 Other..................... 6.00-7.93 2002-2034 36,292 17,730 ------- ------- Total long-term debt........ 53,765 36,069 Less portion due within one year.................. 29,833 2,998 ------- ------- $23,932 $33,071 ======= ======= The amount of long-term debt that matures in each of the four years succeeding 2002 is: $3.7 million in 2003, $0.7 million in 2004, $0.5 million in 2005 and $0.5 million in 2006. 9. Parent Company Investment The components of the investment by Heinz as of May 2, 2001 and May 3, 2000 are as follows: 2001 2000 ---------- ---------- Parent company investment, beginning of year... $4,198,271 $3,742,531 Net income..................................... 306,898 448,295 Dividends paid to related parties.............. (350,648) (306,244) Net parent advances............................ 515,363 313,689 Transfer of investment balance................. (11,487) -- ---------- ---------- Parent company investment, end of year......... $4,658,397 $4,198,271 ========== ========== 10. Supplemental Cash Flow Information Net cash paid during the year for: 2001 2000 1999 -------- -------- ------- Interest expense................. $ 1,569 $ 1,907 $ 1,244 ======== ======= ======= Details of acquisitions: Fair value of assets............. $247,270 $108,229 $54,319 Liabilities*..................... 17,354 32,047 31,100 -------- ------- ------- Cash paid........................ 229,916 76,182 23,219 Less cash acquired............... -- 2,259 -- -------- ------- ------- Net cash paid for acquisitions... $229,916 $73,923 $23,219 ======== ======= ======= * Includes obligations to sellers of $4.1 million, $10.4 million and $31.1 million in 2001, 2000 and 1999, respectively. F-17 U.S. Group Notes to Combined Financial Statements -- (Continued) 11. Management Incentive Plans The U.S. Group's management incentive plan covers officers and other key employees. Participants may elect to be paid on a current or deferred basis. The aggregate amount of all awards may not exceed certain limits in any year. Compensation under the management incentive plan was $4.6 million in 2001, $15.4 million in 2000 and $12.7 million in 1999. In addition, the U.S. Group maintains various other bonus plans that cover other employees of the U.S. Group. 12. Employee Retirement Benefits Employees participate in certain defined benefit pension plans, certain defined contribution plans, and certain stock option plans, all of which are sponsored by Heinz. The U.S. Group also provides post-retirement health care and life insurance benefits for employees who meet the eligibility requirements of the Heinz plans. Retirees share in the cost of these benefits based on age and years of service. Heinz allocates costs for the defined benefit plans to the U.S. Group as determined by actuarial valuations. Company contributions to the defined contribution plans amount to a qualified age-related contribution, a matching of employee's contributions up to a specified amount, and for certain employees, supplemental contributions. The pro forma effect of the fair value of stock options on the U.S. Group net income was not determinable as such information is not available on an individual company basis. The following (income)/expense was included in the U.S. Group's result of operations: 2001 2000 1999 -------- ------- -------- Defined Benefit Pension Plans.......... $(15,311) $(8,968) $(10,598) Defined Benefit Postretirement Medical. $9,697 $7,705 $6,915 Defined Contribution Plans............. $ 17,677 $15,972 $ 17,208 Employees also participate in the Employee Stock Ownership Plan (ESOP) and the Global Stock Purchase Plan (GSPP). Heinz established the ESOP in 1990 to replace in full or in part the U.S. Group's cash-matching contributions to the H. J. Heinz Company Employees Retirement and Saving Plan, a 401(k) plan for salaried employees. The GSPP gives employees an option to acquire stock at the lower of 85% of the fair market value of Heinz's stock on the first or last day of a purchase period. 13. Financial Instruments Commodity Price Hedging The U.S. Group uses commodity futures and options in order to reduce price risk associated with anticipated purchases of raw materials such as corn, soybean oil and soybean meal. Commodity price risk arises due to factors such as weather conditions, government regulations, economic climate and other unforeseen circumstances. Hedges of anticipated commodity purchases which meet the criteria for hedge accounting are designated as cash flow hedges. When using a commodity option as a hedging instrument, the U.S. Group excludes the time value of the option from the assessment of hedge ineffectiveness. F-18 U.S. Group Notes to Combined Financial Statements -- (Continued) Hedge Ineffectiveness During Fiscal Year 2000, hedge ineffectiveness related to cash flow hedges was a net loss of $0.4 million, which is reported in the combined statements of operations as other expense. Deferred Hedging Gains and Losses As of May 2, 2001, the U.S. Group is hedging forecasted transactions for periods not exceeding 12 months, and expects $0.3 million of net deferred loss reported in parent company's investment to be reclassified to earnings within that time frame. During Fiscal Year 2000, the net deferred losses reclassified to earnings because the hedged transaction was no longer expected to occur were not significant. Concentrations of Credit Risk For Fiscal Year 2000, one customer represented more than 10% of the U.S. Group's sales and the top ten customers represented over 30% of the U.S. Group's sales. The U.S. Group closely monitors the credit risk associated with these customers and has never experienced significant losses. 14. Segment Data Descriptions of the U.S. Group's reportable segments are as follows: o Heinz North America - This segment markets ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels. o U.S. Pet Products and Seafood - This segment markets dry and canned pet food, pet snacks, tuna and other seafood. o U.S. Frozen - This segment markets frozen potatoes, entrees, snacks and appetizers. The U.S. Group's management evaluates performance based on several factors including net sales and the use of capital resources; however, the primary measurement focus is operating income excluding unusual costs and gains. The accounting policies used are the same as those described in Note 2, "Significant Accounting Policies." Intersegment sales are accounted for at current market values. Items below the operating income line of the combined statements of operations are not presented by segment, since they are excluded from the measure of segment profitability reviewed by the U.S. Group's management. The following table presents information about the U.S. Group's reportable segments: F-19 U.S. Group Notes to Combined Financial Statements -- (Continued)
May 2, 2001 May 3, 2000 April 28, 1999 May 2, 2001 May 3, 2000 April 28, 1999 Fiscal Year ended (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks) - ------------------------------- ----------- ----------- -------------- ----------- ----------- -------------- (in thousands) Net External Sales Intersegment Sales ------------------------------------------- ----------------------------------------- Heinz North America........... $2,254,867 $2,045,995 $1,871,587 $ 2,870 $ 3,533 $ 2,387 U.S. Pet Products and Seafood. 1,545,274 1,706,496 1,791,745 1,136 3,086 1,379 U.S. Frozen................... 1,138,056 1,036,697 1,023,791 - - 4,969 ------------------------------------------- ----------------------------------------- Combined totals............ $4,938,197 $4,789,188 $4,687,123 $ 4,006 $ 6,619 $ 8,735 =========================================== ========================================= Operating Income (Loss) Operating Income (Loss) Excluding Special Items (a) ------------------------------------------- ----------------------------------------- Heinz North America........... $ 451,469 $ 429,125 $ 452,683 $553,569 $522,995 $480,963 U.S. Pet Products and Seafood. (35,077) 84,092 104,499 116,018 138,725 136,569 U.S. Frozen................... 23,257 96,892 21,786 141,180 124,126 110,310 Non-Operating (c)............. (1,580) (772) (570) (1,580) (772) (570) ------------------------------------------- ----------------------------------------- Combined totals............ $ 438,069 $ 609,337 $ 578,398 $809,187 $785,074 $727,272 =========================================== ========================================= Depreciation and Amortization Expense Capital Expenditures (b) ------------------------------------------- ----------------------------------------- Heinz North America........... $ 41,384 $ 48,933 $ 45,364 $151,850 $112,460 $ 49,307 U.S. Pet Products and Seafood. 42,796 56,642 45,211 10,876 27,248 37,792 U.S. Frozen................... 37,561 34,111 38,403 20,768 75,696 35,098 ------------------------------------------- ----------------------------------------- Combined totals............ $ 121,741 $ 139,686 $ 128,978 $183,494 $215,404 $122,197 =========================================== ========================================= Identifiable Assets ------------------------------------------- Heinz North America........... $1,514,598 $1,252,728 $ 978,525 U.S. Pet Products and Seafood. 1,119,359 1,382,932 1,387,714 U.S. Frozen................... 556,878 741,214 692,533 Non-Operating (c)............. 2,410,656 1,691,582 1,529,336 ------------------------------------------- Combined totals............ $5,601,491 $5,068,456 $4,588,108 ===========================================
- --------- (a) Fiscal year ended May 2, 2001 - Excludes net restructuring and implementation costs of Operation Excel as follows: Heinz North America $68.2 million, U.S. Pet Products and Seafood $81.8 million and U.S. Frozen $23.3 million. Excludes restructuring and implementation costs of the Streamline initiative as follows: Heinz North America $15.3 million and U.S. Pet Products and Seafood $69.3 million. Excludes the loss on the sale of The All American Gourmet in U.S. Frozen of $94.6 million. Excludes acquisition costs in Heinz North America $18.5 million. Fiscal year ended May 3, 2000 - Excludes net restructuring and implementation costs of Operation Excel as follows: Heinz North America $93.9 million, U.S. Pet Products and Seafood $54.6 million and U.S. Frozen $27.2 million. Fiscal year ended April 28, 1999 - Excludes restructuring and implementation costs of Operation Excel as follows: Heinz North America $27.6 million, U.S. Pet Products and Seafood $26.3 million and U.S. Frozen $102.2 million. Excludes costs related to the implementation of Project Millennia as follows: Heinz North America $0.7 million, U.S. Pet Products and Seafood $5.7 million and U.S. Frozen $2.9 million. Excludes the reversal of unutilized Project Millennia accruals for severance and exit costs in U.S. Frozen of $16.6 million. (b) Excludes property, plant and equipment obtained through acquisitions. (c) Includes charges/assets not directly attributable to operating segments. F-20 U.S. Group Notes to Combined Financial Statements -- (Continued) 15. Commitments and Contingencies Legal Matters Certain suits and claims have been filed against the U.S. Group and have not been finally adjudicated. These suits and claims when finally concluded and determined, in the opinion of management, based upon the information that it presently possesses, will not have a material adverse effect on the U.S. Group's combined financial position, results of operations or liquidity. Lease Commitments Operating lease rentals for warehouse, production, office facilities and equipment amounted to $35.4 million in 2001, $24.6 million in 2000 and $23.6 million in 1999. At May 2, 2001, future lease payments for non- cancellable operating leases totaled $59.9 million, (2002 -- $9.9 million, 2003 -- $12.1million, 2004 -- $11.9 million, 2005 -- $11.0 million, 2006 -- $10.2 million and thereafter -- $4.8 million). Purchase Commitments The U.S. Group entered into an agreement on August 14, 2000 with Metal Packaging Holdings, B.V. (Impress) Impress to purchase from Impress metal cans and ends annually of approximately $90 million for a ten year term. 16. Advertising Costs Advertising costs for fiscal years 2001, 2000 and 1999 were $211.0 million, $189.1 million and $205.7 million, respectively. 17. Subsequent Events On May 3, 2001, Heinz simplified its U.S. corporate structure and established two companies for the management of U.S. trademarks and for U.S. treasury functions. As a result, all of the operations of the U.S. Group are now being conducted by H. J. Heinz Finance Company and its wholly-owned subsidiaries (collectively, Heinz Finance), and H. J. Heinz Company, L.P. (Heinz LP). Heinz LP owns or leases the operating assets involved in manufacturing for the U.S. Group throughout the United States which were contributed by Heinz and its subsidiaries, together with other assets and liabilities, to Heinz LP and manages the business. In addition, as part of the realignment, the Heinz Finance assumed $2.9 billion of Heinz's outstanding senior unsecured debt and accrued interest by becoming co-obligor with Heinz. On July 6, 2001, Heinz Finance raised $325 million via the issuance of Voting Cumulative Preferred Stock, Series A with a liquidation preference of $100,000 per share. The Series A Preferred shares are entitled to receive quarterly dividends at a rate of 6.226% per annum and are required to be redeemed for cash on July 15, 2008. In addition, Heinz Finance issued $750 million of 6.625% Guaranteed Notes due July 15, 2011. The proceeds were used for general corporate purposes, including retiring commercial paper borrows and financing acquisitions and ongoing operations. During the first quarter of Fiscal Year 2002, the U.S. Group completed the acquisition of Borden Food Corporation's pasta sauce and dry bouillon and soup business. Under this transaction, the U.S. Group acquired such brands as Classico pasta sauces, Aunt Millie's pasta sauce, Mrs. Grass Recipe soups and Wyler's bouillons and soups. During the second quarter of Fiscal Year 2002, the U.S. Group acquired Anchor Food Products branded retail business which includes the retail licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers and F-21 U.S. Group Notes to Combined Financial Statements -- (Continued) the Poppers brand of retail appetizer lines. Also during the second quarter of Fiscal Year 2002, the U.S. Group completed the acquisition of Delimex Holdings, Inc. (Delimex), a leading maker of frozen Mexican food products. Delimex is a leading U.S. producer of frozen taquitos, tightly rolled fried corn or flour tortillas with fillings such as beef, chicken or cheese. Delimex also makes quesadillas, tamales and rice bowls. Pro forma results of the U.S. Group, assuming the acquisitions had been made at the beginning of the periods presented, would not be materially different from the results reported. F-22 H.J. Heinz Finance Company and Subsidiaries Consolidated and Combined Statements of Operations Nine months ended January 30, 2002 and January 31, 2001
Nine months ended ---------------------------------------- January 30, 2002 January 31, 2001 FY 2002 FY 2001 ---------------- ---------------- (Unaudited) (In thousands) Sales.................................................. $3,095,761 $3,520,667 Cost of products sold.................................. 1,847,838 2,142,884 ---------- ---------- Gross profit........................................... 1,247,923 1,377,783 Selling, general and administrative expenses........... 707,733 770,641 Royalty expense to related parties..................... 125,775 72,807 ---------- ---------- Operating income....................................... 414,415 534,335 Interest income........................................ 29,860 93,421 Interest expense....................................... 156,962 6,571 Dividends from related parties......................... 99,923 -- Other expenses, net.................................... 5,176 16,960 ---------- ---------- Income before income taxes, minority interest and cumulative effect of account change.................... 382,060 604,225 Provision for income taxes............................. 35,836 223,502 ---------- ---------- Income before minority interest and cumulative effect of accounting change.......................... 346,224 380,723 Minority interest...................................... (285,726) -- ---------- ---------- Income before cumulative effect of account change...... 60,498 380,723 Cumulative effect of accounting change................. -- (4,849) ---------- ---------- Net income............................................. $ 60,498 $ 375,874 ========== ==========
See notes to condensed consolidated and combined financial statements. F-23 H.J. Heinz Finance Company and Subsidiaries Condensed Consolidated and Combined Balance Sheets January 30, 2002 and May 2, 2001
January 30, 2002 May 2, 2001(1) FY 2002 FY 2001 ---------------- -------------- (Unaudited) (in thousands) Assets Current assets: Cash and cash equivalents.................................... $ 9,589 $ 393 Receivables, net............................................. 682,572 506,447 Due from related parties..................................... 187,368 75,429 Short-term notes receivable from related parties............. 894,880 - Inventories.................................................. 783,917 655,170 Deferred income taxes........................................ 4,395 50,042 Prepaid expenses and other current assets.................... 152,050 49,428 ---------- ---------- Total current assets....................................... 2,714,771 1,336,909 Property, plant and equipment................................. 1,507,334 1,608,514 Less accumulated depreciation................................ 664,581 738,731 ---------- ---------- Total property, plant and equipment, net................... 842,753 869,783 Long-term notes receivable from related parties............... 35,000 35,000 Investments in related parties................................ 1,895,245 1,895,245 Other investments............................................. 195,475 201,438 Intangible assets, net........................................ 1,900,022 1,208,294 Other noncurrent assets....................................... 64,821 54,822 ---------- ---------- Total other noncurrent assets.............................. 4,090,563 3,394,799 ---------- ---------- Total assets............................................... $7,648,087 $5,601,491 ========== ========== Liabilities and Shareholders' Equity Current liabilities: Short-term debt.............................................. $ 43,455 $ - Portion of long-term debt due within one year................ 501,576 29,833 Accounts payable............................................. 277,995 321,222 Due to related parties....................................... 229,930 96,221 Other accrued liabilities.................................... 219,475 224,384 ---------- ---------- Total current liabilities.................................. 1,272,431 671,660 Long-term debt................................................ 4,215,495 23,932 Deferred income taxes......................................... 9,422 205,134 Deferred income............................................... 33,259 29,684 Other liabilities............................................. 5,986 12,684 Minority interest............................................. 1,601,455 - Mandatorily Redeemable Series A Preferred shares.............. 325,000 - Shareholders' equity: Common stock................................................. 11 - Additional Capital........................................... 135,386 - Retained earnings............................................ 49,876 - Accumulated other comprehensive (loss)....................... (234) - Parent company's investment.................................. - 4,658,397 ---------- ---------- Total shareholders' equity................................. 185,039 4,658,397 ---------- ---------- Total liabilities and shareholders' equity................. $7,648,087 $5,601,491 ========== ==========
- --------- (1) Summarized from audited Fiscal Year 2001 balance sheet See notes to condensed consolidated and combined financial statements. F-24 H.J. Heinz Finance Company and Subsidiaries Condensed Consolidated and Combined Statements of Cash Flows Nine months ended January 30, 2002 and January 31, 2001
Nine months Ended --------------------------------------- January 30, 2002 January 31, 2001 FY 2002 FY 2001 ---------------- ---------------- (Unaudited) (in thousands) Operating Activities: Cash used by operating activities.............................................. $ (388,589) $(244,673) ---------- --------- Investing Activities: Capital expenditures.......................................................... (51,888) (108,666) Proceeds from disposals of property, plant and equipment...................... 3,046 -- Acquisition, net of cash acquired............................................. (777,718) (161,008) Investment The Hain Celestial Group, Inc...................................... -- (79,743) Other items, net.............................................................. (14,395) 36,200 ---------- --------- Cash used for investing activities.......................................... (840,955) (313,217) ---------- --------- Financing Activities: Payments on long-term debt.................................................... (9,179) (310,029) Proceeds from long-term debt.................................................. 751,059 323,928 Proceeds from (payments on) commercial paper and short-term borrows, net...... 270,131 (217) Distribution to Partners...................................................... (96,835) -- Dividends..................................................................... (10,622) (316,678) Net parent advances........................................................... -- 870,023 Proceeds from mandatorily redeemable Series A preferred shares................ 325,000 -- Other items, net.............................................................. (548) -- ---------- --------- Cash provided by financing activities....................................... 1,229,006 567,027 ---------- --------- Net (decrease) increase in cash and cash equivalents........................... (538) 9,137 Cash and cash equivalents, beginning of period................................. 10,127 2,322 ---------- --------- Cash and cash equivalents, end of period....................................... $ 9,589 $ 11,459 ========== =========
See notes to condensed consolidated and combined financial statements. F-25 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements (Unaudited) 1. Basis of Presentation On May 3, 2001, H. J. Heinz Company ("Heinz") reorganized its U.S. corporate structure and established two primary companies for the management of U.S. trademarks and for U.S. treasury functions. As a result, all of the business operations of Heinz's domestic operations ("the U.S. Group") are now being conducted by H. J. Heinz Finance Company and its wholly-owned subsidiaries (collectively, "Heinz Finance"), and H. J. Heinz Company, L.P. ("Heinz LP"). Heinz Finance has limited partnership interests in Heinz LP. Heinz Finance assumed primary liability for approximately $2.9 billion of Heinz's outstanding senior unsecured debt and accrued interest by becoming co-obligor with Heinz. Heinz LP owns or leases the operating assets involved in manufacturing throughout the United States which were contributed by Heinz and its subsidiaries, together with other assets and liabilities, to Heinz LP and manages the business. Heinz LP has two classes of limited partnership interests, Class A and Class B. Heinz Finance, directly and through wholly-owned subsidiaries, owns the Class B interests. Heinz, directly and through wholly-owned subsidiaries, owns the Class A interests. Heinz Management Company, a wholly-owned subsidiary of Heinz, is the managing General Partner of Heinz LP and employs the salaried personnel of the U.S. Group. The minority interest amounts on the January 30, 2002 statement of income and balance sheet represents the Class A and General Partner limited partnership interest in Heinz LP. The preparation of the January 31, 2001 and May 2, 2001 financial statements include the use of "carve out" and "push down" accounting procedures wherein certain assets, liabilities and expenses historically recorded or incurred at the parent company level or an affiliate of Heinz, which related to or were incurred on behalf of the U.S. Group, have been identified and allocated or pushed down as appropriate to reflect results of the U.S. Group for the periods presented. See Note 9, for a further discussion regarding Heinz parent company costs. As a result of the finalizing of the reorganization, certain assets and liabilities which are included in the May 2, 2001 "carve out" balance sheet, were not contributed to Heinz Finance. Substantially all finished goods inventories of the U.S. Group remained assets of Heinz and were not contributed to Heinz LP. These retained inventories result in reduced sales and operating results in Fiscal Year 2002 when compared to Fiscal Year 2001. 2. The results for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year due to the seasonal nature of the business of Heinz Finance. In the opinion of management, all adjustments which are of a normal and recurring nature, necessary for a fair statement of the results of operations of these interim periods have been included. F-26 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements 3. Inventories The composition of inventories at the balance sheet dates was as follows: January 30, May 2, 2002 2001 ----------- --------- (in thousands) Finished goods and work-in-process....... $624,059 $515,315 Packaging material and ingredients....... 159,858 139,855 -------- -------- $783,917 $655,170 ======== ======== 4. Taxes The provision for income taxes consists of provisions for federal and state income taxes. The tax provision in the January 30, 2002 financial statements declined significantly since Heinz Finance has no tax obligation on the minority partners' interest in Heinz LP's income. 5. Restructuring In the fourth quarter of Fiscal Year 2000, Heinz announced a restructuring initiative named "Streamline" which includes an organizational restructuring aimed at reducing overhead costs and the consolidation of Heinz Finance's canned pet food production to Bloomsburg, Pennsylvania (which resulted in ceasing canned pet food production at Heinz Finance's Terminal Island, California facility). The major components of the restructuring charge and implementation costs and the remaining accrual balances as of January 30, 2002 were as follows:
Employee Non-Cash Termination Asset and Severance Accrued Exit Implementation Write-Downs Costs Costs Costs Total ----------- ------------- ------------ -------------- ----- (in millions) Restructuring and Implementation costs-Fiscal Year 2000................... $34.7 $15.4 $22.8 $11.8 $84.7 Amounts utilized-Fiscal Year 2000 ........ (34.7) (5.8) (1.7) (11.8) (54.0) ----- ----- ----- ---- ----- Accrued restructuring costs-May 2, 2001 .. - $9.6 $21.1 - $30.7 Implementation Costs-Fiscal Year 2002..... - - - 1.2 1.2 Amounts utilized-Fiscal Year 2002......... - (2.5) (8.5) (1.2) (12.2) Liability assumed by related party-Fiscal Year 2002................................ - (3.8) (0.6) - (4.4) ----- ----- ----- ---- ----- Accrued restructuring costs-August 1, 2001................................... - $ 3.3 $12.0 - $15.3 ===== ===== ===== ==== =====
During the first nine months of Fiscal Year 2002, Heinz Finance incurred implementation costs totaling $1.2 million pretax, which consisted of incremental costs directly related to the implementation of the Streamline initiative. Pretax charges of $1.1 million were classified as cost of products sold and $0.1 million as selling, general F-27 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements and administrative expenses ("SG&A"). In addition, Heinz Management Company, a wholly-owned subsidiary of Heinz, assumed a portion of the Heinz Finance's restructuring liability as a result of the realignment that occurred on May 3, 2001. During the first nine months of Fiscal Year 2002, Heinz Finance utilized $11.0 million of severance and exit cost accruals, principally for ceasing canned pet food production in its Terminal Island, California facility and its overhead reduction plan. 6. Acquisitions During the second quarter of Fiscal Year 2002, Heinz Finance acquired Anchor Food Products branded retail business which includes the retail licensing rights to the T.G.I. Friday's brand of frozen snacks and appetizers and the Poppers brand of retail appetizer lines. Also during the second quarter of Fiscal Year 2002, Heinz Finance completed the acquisition of Delimex Holdings, Inc., a leading maker of frozen Mexican food products. Delimex is a leading U.S. producer of frozen taquitos, tightly rolled fried corn and flour tortillas with fillings such as beef, chicken or cheese. Delimex also makes quesadillas, tamales and rice bowls. During the first quarter of Fiscal Year 2002, Heinz Finance completed the acquisition of Borden Food Corporation's pasta sauce and dry bouillon and soup business. Under this transaction, Heinz Finance acquired such brands as Classico pasta sauces, Aunt Millie's pasta sauce, Mrs. Grass Recipe soups, Wyler's bouillons and soups. Heinz Finance also made another smaller acquisition. The above acquisitions have been accounted for as purchases and, accordingly, the respective purchase prices have been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition dates. Final allocations of the purchase prices are not expected to differ significantly from the preliminary allocations. Operating results of the businesses acquired have been included in the consolidated and combined statements of income from the respective acquisition dates forward. Pro forma results of Heinz Finance, assuming all of the acquisitions had been made at the beginning of each period presented, would not be materially different from the results reported. 7. Recently Adopted Accounting Standards In Fiscal Year 2001, Heinz Finance changed its method of accounting for revenue recognition in accordance with Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." Under the new accounting method, adopted retroactive to May 4, 2000, Heinz Finance recognizes revenue upon the passage of title, ownership and risk of loss to the customer. The cumulative effect adjustment of $4.8 million in net income as of May 4, 2000, was recognized during the first six months of Fiscal Year 2001. The Fiscal Year 2001 first nine months amounts include the effect of the change in accounting for revenue recognition. 8. Recently Issued Accounting Standards In September 2000, the FASB Emerging Issues Task Force (the "EITF") issued new guidelines entitled "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products". In addition, during May 2000, the EITF issued new guidelines entitled "Accounting for Certain Sales Incentives". Both of these issues provide guidance primarily on income statement classification of consideration from a vendor to a purchaser of the vendor's products, including both customers and consumers. Generally, cash consideration is to be classified as a reduction of revenue, unless specific criteria are met regarding goods or services that the vendor may receive in return for this consideration. F-28 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements In the fourth quarter of Fiscal Year 2002, Heinz Finance will reclassify promotional payments to its customers and the cost of consumer coupons and other cash redemption offers from SG&A to net sales. Heinz Finance is currently assessing the combined impact of both issues, however, we believe that, based on historic information, sales could be reduced up to 7 to 8%. SG&A would be correspondingly reduced such that net earnings would not be affected. In June 2001, the FASB issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". These standards require that all business combinations be accounted for using the purchase method and that goodwill and intangible assets with indefinite useful lives should not be amortized but should be tested for impairment at least annually, and they provide guidelines for new disclosure requirements. These standards outline the criteria for initial recognition and measurement of intangibles, assignment of assets and liabilities including goodwill to reporting units and goodwill impairment testing. The provisions of SFAS 141 and 142 apply to all business combinations after June 30, 2001. We have not fully assessed the potential impact of the adoption of SFAS No. 142 which is effective for us in Fiscal Year 2003. The reassessment of intangible assets, including the ongoing impact of amortization, must be completed during the first quarter of Fiscal Year 2003. The assignment of goodwill to reporting units, along with completion of the first step of the transitional goodwill impairment tests, must be completed during the first six months of Fiscal Year 2003. In June 2001, the FASB approved SFAS 143, "Accounting for Asset Retirement Obligations." SFAS 143 addresses accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset, except for certain obligations of lessees. This standard is effective for fiscal years beginning after June 15, 2002. Heinz Finance does not expect that the adoption of this standard will have a significant impact on the consolidated financial statements. In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-lived Assets." SFAS No. 144 clarifies and revises existing guidance on accounting for impairment of plant, property, and equipment, amortized intangibles, and other long-lived assets not specifically addressed in other accounting literature. This standard will be effective for Heinz Finance beginning in Fiscal Year 2003. Heinz Finance does not expect that the adoption of this standard will have a significant impact on the consolidated financial statements. 9. Related Party Transactions Employee Costs Certain of Heinz's general and administrative expenses are allocated to Heinz Finance. In Fiscal Year 2001, total costs allocated include charges for salaries of corporate officers and staff and other Heinz corporate overhead. In Fiscal Year 2002, these costs primarily include a management charge of all salaried employee costs from the Heinz Management Company which is the general partner of Heinz LP. Total costs charged to Heinz Finance for these services were $252.6 million and $20.5 million for the nine months ended January 30, 2002 and January 31, 2001, respectively. These costs are recorded as selling, general and administrative expense in the accompanying condensed consolidated and combined statements of income. Heinz charges Heinz Finance for its share of group health insurance costs for eligible company employees based upon location-specific costs, overall insurance costs and loss experience incurred during a calendar year. In addition, various other insurance coverages are also provided to Heinz Finance through Heinz's consolidated programs. Workers compensation, auto, property, product liability and other insurance coverages are charged directly based on Heinz Finance's loss experience. Amounts charged to Heinz Finance for insurance costs were F-29 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements $45.8 million and $60.7 million for the nine months ended January 30, 2002 and January 31, 2001, respectively, and are recorded in selling, general and administrative expense in the accompanying consolidated and combined statement of income. Pension costs and postretirement costs are also charged to Heinz Finance based upon eligible employees participating in the Plans. Cash Management In Fiscal Year 2001, the U.S. Group maintained a cash management arrangement with Heinz. On a daily basis, all available cash was deposited and disbursements were withdrawn. Heinz charged (credited) the U.S. Group's interest on the average daily balance maintained in the resulting intercompany account. Net interest expense related to this arrangement, included in the combined statement of income was $9.3 million for the nine months ended January 31, 2001. The interest rate charged to or received by the U.S. Group was 6.83% for the nine months ended January 31, 2001. Beginning in Fiscal Year 2002, Heinz Finance became the treasury center for cash management and debt financing for all of Heinz's domestic operations resulting in the $894.8 million of short term notes receivable with related parties on the January 30, 2002 condensed consolidated balance sheet. An average interest rate of 3.21% was charged on these notes resulting in $27.5 million of interest income for the nine months ended January 30, 2002. Product sales and purchases Heinz Finance sells and purchases products and services to and from other Heinz affiliates. The results of such transactions are the $187.4 million and $75.4 million balances due from related parties as of January 30, 2002 and May 2, 2001, respectively, and the $229.9 million and $96.2 million balances due to related parties as of January 30, 2002 and May 2, 2001, respectively. Sales to related parties were $37.6 million and $50.3 million in the nine months ended January 30, 2002 and January 31, 2001, respectively, and purchases from related parties were $258.7 million and $338.4 million in the nine months ended January 30, 2002 and January 31, 2001, respectively. Other related party items Heinz Finance sells undivided interests in certain accounts receivable to a Heinz affiliate, Receivables Servicing Company (RSC). Heinz Finance sold $619.2 million and $1,291.0 million of receivables net of discount expense of $2.8 million and $9.4 million for the nine months ended January 30, 2002 and the year ended May 2, 2001, respectively, to RSC. As of January 30, 2002 and the year ended May 2, 2001, respectively, Heinz Finance had $0 million and $126.9 million of receivables sold to RSC. These sales were reflected as reductions of trade accounts receivable. Heinz Finance ceased the factoring of its receivables to RSC in October 2001. Heinz Finance's contract with RSC terminated in December 2001. Until the fourth quarter of Fiscal Year 2001, Heinz Finance had outstanding notes receivable from Heinz affiliates which are used for working capital purposes and to fund acquisitions. The short-term notes had interest rates ranging from 6.50% to 7.00%. The long-term notes had interest rates ranging from 6.75% to 7.50% with a maturity of May 2003. Interest income earned by Heinz Finance related to these receivables was $90.7 million for the nine months ended January 31, 2001. In the fourth F-30 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements quarter of Fiscal Year 2001, these notes receivable from related parties were exchanged by Heinz Finance with a subsidiary of Heinz, PM Holding, Inc. ("PM Holding"), for $1.9 billion of non-voting, 6.5% cumulative non- participating preferred stock of PM Holding. This dividend amounted to $99.9 million for the first nine months of Fiscal Year 2002. This preferred stock investment is recorded in the Investments in related parties balance on the condensed consolidated and combined balance sheets as of January 30, 2002 and May 2, 2001. Heinz Finance paid royalties of $125.8 million and $72.8 million for the nine months ended January 30, 2002 and January 31, 2001, respectively, to Promark International, Inc., an indirect subsidiary of Heinz, for the use of trademarks. The $35.0 million long-term note receivable from related parties recorded on the accompanying condensed consolidated and combined balance sheets relates to a receivable from Heinz that was contributed to Heinz Finance in exchange for common stock of Heinz Finance. Heinz Finance received an administrative fee from Heinz for acting as the agent in the sale of the retained inventory discussed in Note (1). This fee was $10.2 million for the nine months ended January 30, 2002, which is recorded as income in SG&A expense in the accompanying consolidated statement of income. 10. Long-term Debt The amount of long-term debt that matures in each of the four years following 2002 is: $450.1 million in 2003, $0.5 million in 2004, $259.0 million in 2005, and $0.5 million in 2006.
Long-term debt Maturity (dollars in thousands) Range of Interest (Fiscal Year) January 30, 2002 May 2, 2001 - --------------------- ----------------- ------------- ---------------- ----------- Commercial Paper.................. Variable $1,380,527 $ - Revenue Bonds..................... 3.25 - 7.12% 2002-2020 1,810,352 12,392 Promissory notes.................. 5.00 - 7.002% 2003-2028 1,507,210 5,081 Other............................. 18,982 36,292 ---------- ------- Total long-term debt.............. 4,717,071 53,765 Less portion due within one year.. 501,576 29,833 ---------- ------- $4,215,495 $23,932 ========== =======
On September 6, 2001, Heinz Finance, Heinz and a group of domestic and international banks entered into a $1.50 billion credit agreement which expires in September 2006 and an $800 million credit agreement which expires in September 2002. These credit agreements, which support Heinz Finance's commercial paper program, replaced the $2.30 billion credit agreement which expired on September 6, 2001. As of January 30, 2002, $1.38 billion of commercial paper was outstanding and classified as long-term debt due to the long-term nature of the supporting credit agreement. On July 6, 2001, Heinz Finance raised $325 million via the issuance of Voting Cumulative Preferred Stock, Series A with a liquidation preference of $100,000 per share. The Series A Preferred shares are entitled to receive quarterly dividends at a rate of 6.226% per annum and are required to be redeemed for cash on July 15, 2008. In addition, Heinz Finance issued $750 million of 6.625% Guaranteed Notes due July 15, 2011 which are guaranteed F-31 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements by Heinz. The proceeds were used for general corporate purposes, including retiring commercial paper borrows, financing acquisitions and ongoing operations. 11. Comprehensive Income
Nine Months Ended ---------------- January 30, 2002 FY 2002 ---------------- Net income.............................................. $60,498 Deferred gains/(losses) on derivatives: Net change from periodic revaluations.................. 51 Net amount reclassified to earnings.................... (24) ------- Comprehensive income.................................... $60,525 =======
12. Segment Data Descriptions of Heinz Finance's reportable segments are as follows: o Heinz North America - This segment manufacturers, markets and sells ketchup, condiments, sauces, soups, pasta meals and infant foods to the grocery and foodservice channels. o U.S. Pet Products and Seafood - This segment manufacturers, markets and sells dry and canned pet food, pet snacks, tuna and other seafood. o U.S. Frozen - This segment manufacturers, markets and sells frozen potatoes, entrees, snacks and appetizers. Heinz Finance's management evaluates performance based on several factors including net sales and the use of capital resources; however, the primary measurement focus is operating income excluding unusual costs and gains. Intersegment sales are accounted for at current market values. Items below the operating income line of the consolidated and combined statements of income are not presented by segment, since they are excluded from the measure of segment profitability reviewed by Heinz Finance management. F-32 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements The following tables present information about Heinz Finance's reportable segments:
Nine Months Ended --------------------------------------- January 30, 2002 January 31, 2001 FY 2002 FY 2001 ---------------- ---------------- (in thousands) Net external sales: Heinz North America................................... $1,477,443 $1,613,509 U.S. Pet Products and Seafood......................... 785,944 1,123,310 U.S. Frozen........................................... 832,374 783,848 ---------- ---------- Consolidated and combined totals.................... $3,095,761 $3,520,667 ========== ========== Intersegment sales: Heinz North America................................... $ 155 $ 2,305 U.S. Pet Products and Seafood......................... - 1,136 U.S. Frozen........................................... 17 - ---------- ---------- Consolidated and combined totals.................... $ 172 $ 3,441 ========== ========== Operating income (loss): Heinz North America................................... $ 248,291 $ 402,442 U.S. Pet Products and Seafood......................... 63,826 43,916 U.S. Frozen........................................... 104,333 88,869 Non-Operating (b)..................................... (2,035) (892) ---------- ---------- Consolidated and combined totals.................... $ 414,415 $ 534,335 ========== ========== Operating income (loss) excluding special items (a): Heinz North America................................... $ 248,291 $ 442,966 U.S. Pet Products and Seafood......................... 64,997 109,455 U.S. Frozen........................................... 104,333 106,033 Non-Operating (b)..................................... (2,035) (892) ---------- ---------- Consolidated and combined totals.................... $ 415,586 $ 657,562 ========== ==========
- --------- (a) Nine Months ended January 30, 2002 - Excludes implementation costs of Streamline as follows: U.S. Pet Products and Seafood $1.2 million. Nine Months ended January 31, 2001 - Excludes implementation and net restructuring costs of Operation Excel as follows: Heinz North America $40.5 million, U.S. Pet Products and Seafood $65.5 million and U.S. Frozen $17.2 million. (b) Includes charges/assets not directly attributable to operating segments. 13. Financial Instruments Heinz Finance utilizes certain financial instruments to manage its commodity price and interest rate exposures. F-33 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements Commodity Price Hedging Heinz Finance uses commodity futures and options in order to reduce price risk associated with anticipated purchases of raw materials such as corn, soybean oil and soybean meal. Commodity price risk arises due to factors such as weather conditions, government regulations, economic climate and other unforeseen circumstances. Hedges of anticipated commodity purchases which meet the criteria for hedge accounting are designated as cash flow hedges. When using a commodity option as a hedging instrument, Heinz Finance excludes the time value of the option from the assessment of hedge effectiveness. Interest Rate Hedging Heinz Finance uses interest rate swaps to manage interest rate exposure. These derivatives are designated as cash flow hedges or fair value hedges depending on the nature of the particular risk being hedged. During Fiscal Year 2002, Heinz Finance entered into interest rate swap agreements to convert the interest rate exposure on certain of Heinz Finance's existing long-term debt from fixed to floating. The weighted average fixed rate of the associated debt is 6.433%. The aggregate notional amount of these swaps is $1.3 billion and their average duration is 12 years. Hedge Ineffectiveness During the nine months ended January 30, 2002, hedge ineffectiveness related to cash flow hedges was immaterial. Deferred Hedging Gains and Losses As of January 30, 2002, Heinz Finance is hedging forecasted transactions for periods not exceeding 12 months, and expects $0.2 million of net deferred gain reported in accumulated other comprehensive income to be reclassified to earnings within that time frame. 14. Commitments and Contingencies Legal Matters Certain suits and claims have been filed against the U.S. Group and have not been finally adjudicated. These suits and claims when finally concluded and determined, in the opinion of management, based upon the information that it presently possesses, will not have a material adverse effect on the U.S. Group's combined financial position, results of operations or liquidity. Purchase Commitments The U.S. Group entered into an agreement on August 14, 2000 with Impress to purchase from Impress metal cans and ends annually in an amount of approximately $90 million for a ten year term. 15. Subsequent Event On March 7, 2002, Heinz Finance issued $700 million of 6.00% Guaranteed Notes due March 15, 2012 and $550 million of 6.75% Guaranteed Notes due March 15, 2032, which are guaranteed by Heinz. The proceeds will F-34 H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES Notes to Condensed Consolidated and Combined Financial Statements be used to retire commercial paper borrowings. Heinz Finance converted $750 million of the new debt fixed to floating through interest rate swap agreements. F-35 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. Section 102(b)(7) of the Delaware General Corporation Law (the "Delaware Law") permits a corporation to include in its certificate of incorporation a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision may not eliminate or limit the liability of a director for any breach of the director's duty of loyalty to the corporation or its stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for the unlawful payment of dividends, or for any transaction from which the director derived an improper personal benefit. Article 11 ("Article 11") of the H. J. Heinz Finance Company's ("Heinz Finance") certificate of incorporation provides that a director of Heinz Finance shall not be liable to Heinz Finance or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by Delaware Law. Each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of Heinz Finance or is or was serving at the request of Heinz Finance as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, will be indemnified and held harmless by Heinz Finance to the fullest extent permitted by Delaware Law. The right to indemnification conferred in Article 11 includes the right to be paid by Heinz Finance expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Delaware Law. The right to indemnification conferred in Article 11 is a contract right. Section 145 of the Delaware Law permits a corporation to indemnify any of its directors, officers, employees or agents who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that such person is or was a director, officer, employee or agent of the corporation (or another enterprise if serving at the request of the corporation), against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reason to believe that his or her conduct was unlawful. In any threatened, pending or completed action or suit by or in the right of the corporation, a corporation is permitted to indemnify any director, officer, employee or agent against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made if such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which the action or suit was brought shall determine upon application that, despite such adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the court shall deem proper. Article 11 provides that Heinz Finance may, by action of its Board of Director, provide indemnification to such of the officers, employees and agents of the Corporation to such extent and to such effect as the Board of Directors determines to be appropriate and authorized by Delaware Law. Heinz Finance has the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of Heinz Finance, or is or was serving at the request of Heinz Finance as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise II-1 against any expense, liability or loss incurred by such person in any such capacity or arising out of his or her status as such, whether or not Heinz Finance would have the power to indemnify him or her against such liability under Delaware Law. The rights and authority conferred in Article 11 are not exclusive of any other right which any person may otherwise have or acquire. Neither the amendment nor repeal of Article 11, nor the adoption of any provision of the certificate of incorporation or the bylaws of Heinz Finance, nor, to the fullest extent permitted by Delaware Law, any modification of law, shall eliminate or reduce the effect of Article 11 in respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification. Andrew Stidd is also entitled to indemnification from Heinz pursuant to a Services and Indemnity Agreement among Stidd, Heinz and Heinz Finance dated June 1, 2001. Heinz has obtained directors' and officers' insurance against loss, within certain policy limits, arising from any claim made against Heinz Finance's directors and officers by reason of any wrongful act, as defined in such insurance policies, in their respective capacities as directors and officers or as fiduciaries under certain of the Heinz's employee benefit plans. Item 21. Exhibits and Financial Statement Schedules. (a) List of Exhibits. Exhibit Number Description --------- ------------- 1.1 Purchase Agreement dated June 27, 2001 among the H. J. Heinz Finance Company, H. J. Heinz Company, and Goldman Sachs & Co., as representative for the initial purchasers. 1.2 Purchase Agreement dated February 28, 2002 among the H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 1.3 Purchase Agreement dated February 28, 2002 among the H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 3.1 Certificate of Incorporation. 3.2 Bylaws. 4.1 Indenture, dated as of July 6, 2001, among H. J. Heinz Finance Company, H. J. Heinz Company, and Bank One, National Association, as Trustee. 4.2 Form of New Note (included in Exhibit 4.1). 4.3 Form of Guarantee (included in Exhibit 4.1). 4.4 Exchange and Registration Rights Agreement, dated as of June 27, 2001, among H. J. Heinz Finance Company, H. J. Heinz Company, and Goldman Sachs & Co., as representative for the initial purchasers. 4.5 Exchange and Registration Rights Agreement, dated as of February 28, 2002, among H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 4.6 Exchange and Registration Rights Agreement, dated as of February 28, 2002, among H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 5.1 Opinion of Davis Polk & Wardwell regarding the validity of the New Notes. 8.1 Opinion of Davis Polk & Wardwell regarding tax matters (included in Exhibit 5.1). 10.1 Liquidity Agreement dated as of June 26, 2001 between H. J. Heinz Company and H. J. Heinz Finance Company. 10.2 Administrative Services Agreement dated as of May 1, 2001 between H. J. Heinz Company and H. J. Heinz Finance Company. 10.3 Guarantee Facility Letter Agreement dated May 3, 2001 to H. J. Heinz Finance Company from H. J. Heinz Company. II-2 Exhibit Number Description --------- ------------- 10.4 Second Amended and Restated Partnership Agreement of H. J. Heinz Company, LP. 10.5 First Amendment to Second Amended and Restated Limited Partnership Agreement of H.J. Heinz Company, LP. 21.1 Subsidiaries of the registrant. 23.1 Consent of PricewaterhouseCoopers LLP with respect to H. J. Heinz Finance Company financial statements. 23.2 Consent of PricewaterhouseCoopers LLP with respect to H. J. Heinz Company financial statements. 23.3 Consent of Davis Polk & Wardwell (included in Exhibit 5.1). 24.1 Powers of Attorney for H. J. Heinz Finance Company. 24.2 Powers of Attorney for H. J. Heinz Company. 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of Bank One, National Association. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Exchange Agent Agreement. (b) Financial Statement Schedules. Not applicable (c) Item 4(b) Information. Not applicable Item 22. Undertakings. (a) The undersigned registrant hereby undertakes: (1) That for purposes of determining any liability under the Securities Act, each filing of the Guarantor's and Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act") (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (2) To respond to requests for information that is incorporated by reference into the prospectus contained in this Registration Statement pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this Registration Statement through the date of responding to the request. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer II-3 or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act, and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on this 27th day of March, 2002. H. J. HEINZ FINANCE COMPANY By: /s/ Leonard A. Cullo ------------------------------ Name: Leonard A. Cullo, Jr. Title: President Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature Capacity Date - ------------------------------------- ----------------------------------------- ---------------- /s/Leonard A. Cullo - ------------------------------------- Director and President March 27, 2002 Leonard A. Cullo, Jr. * Director Chief Financial and Accounting March 27, 2002 - ------------------------------------- Officer Arthur Winkleblack * Director, Vice President and Secretary March 27, 2002 - ------------------------------------- Laura Stein * Director March 27, 2002 - ------------------------------------- Andrew L. Stidd
/s/Leonard A. Cullo - ------------------------------------- * By Leonard A. Cullo, Jr., as attorney-in-fact II-5 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pittsburgh, State of Pennsylvania, on this 27th day of March, 2002. H. J. HEINZ COMPANY By: /s/ Leonard A. Cullo ------------------------------ Name: Leonard A. Cullo, Jr. Title: Treasurer Pursuant to the requirements of the Securities Act, this Registration Statement has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature Capacity Date - ------------------------------------ ----------------------------------------------- ---------------- * Chairman of the Board of Directors, President March 27, 2002 - ------------------------------------ and Chief Executive Officer William R. Johnson * Director March 27, 2002 - ------------------------------------ Nicholas F. Brady * Director March 27, 2002 - ------------------------------------ Mary C. Choksi * Director March 27, 2002 - ------------------------------------ Leonard S. Coleman, Jr. * Director March 27, 2002 - ------------------------------------ Peter Coors * Director March 27, 2002 - ------------------------------------ Edith E. Holiday * Director March 27, 2002 - ------------------------------------ Samuel C. Johnson * Director March 27, 2002 - ------------------------------------ Candace Kendle * Director March 27, 2002 - ------------------------------------ Dean R. O'Hare * Director March 27, 2002 - ------------------------------------ Thomas J. Usher * Director March 27, 2002 - ------------------------------------ David R. Williams II-6 Signature Capacity Date - ------------------------------------ ----------------------------------------------- ---------------- * Director March 27, 2002 - ------------------------------------ James M. Zimmerman * Executive Vice President and Chief Financial March 27, 2002 - ------------------------------------ Officer (Principal Financial Officer) Arthur Winkleblack * Corporate Controller March 27, 2002 - ------------------------------------ (Principal Accounting Officer) Bruna Gambino
/s/Leonard A. Cullo - ------------------------------------- *By Leonard A. Cullo, Jr., as attorney-in-fact II-7 EXHIBIT INDEX Exhibit Number Description --------- ----------- 1.1 Purchase Agreement dated June 27, 2001 among the H. J. Heinz Finance Company, H. J. Heinz Company, and Goldman Sachs & Co., as representative for the initial purchasers. 1.2 Purchase Agreement dated February 28, 2002 among the H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 1.3 Purchase Agreement dated February 28, 2002 among the H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 3.1 Certificate of Incorporation. 3.2 Bylaws. 4.1 Indenture, dated as of July 6, 2001, among H. J. Heinz Finance Company, H. J. Heinz Company, and Bank One, National Association, as Trustee. 4.2 Form of New Note (included in Exhibit 4.1). 4.3 Form of Guarantee (included in Exhibit 4.1). 4.4 Exchange and Registration Rights Agreement, dated as of June 27, 2001, among H. J. Heinz Finance Company, H. J. Heinz Company, and Goldman Sachs & Co., as representative for the initial purchasers. 4.5 Exchange and Registration Rights Agreement, dated as of February 28, 2002, among H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 4.6 Exchange and Registration Rights Agreement, dated as of February 28, 2002, among H. J. Heinz Finance Company, H. J. Heinz Company, and J.P. Morgan Securities Inc., as representative for the initial purchasers. 5.1 Opinion of Davis Polk & Wardwell regarding the validity of the New Notes. 8.1 Opinion of Davis Polk & Wardwell regarding tax matters (included in Exhibit 5.1). 10.1 Liquidity Agreement dated as of June 26, 2001 between H. J. Heinz Company and H. J. Heinz Finance Company. 10.2 Administrative Services Agreement dated as of May 1, 2001 between H. J. Heinz Company and H. J. Heinz Finance Company. 10.3 Guarantee Facility Letter Agreement dated May 3, 2001 to H. J. Heinz Finance Company from H. J. Heinz Company. 10.4 Second Amended and Restated Partnership Agreement of H. J. Heinz Company, LP. 10.5 First Amendment to Second Amended and Restated Limited Partnership Agreement of H.J. Heinz Company, LP. 21.1 Subsidiaries of the registrant. 23.1 Consent of PricewaterhouseCoopers LLP with respect to H. J. Heinz Finance Company financial statements. 23.2 Consent of PricewaterhouseCoopers LLP with respect to H. J. Heinz Company financial statements. 23.3 Consent of Davis Polk & Wardwell (included in Exhibit 5.1). 24.1 Powers of Attorney for H. J. Heinz Finance Company. 24.2 Powers of Attorney for H. J. Heinz Company. 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of Bank One, National Association. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Exchange Agent Agreement. E-1 EX-1.1 3 mar2202_ex0101.txt EXHIBIT 1.1 EXECUTION COPY $750,000,000 H. J. Heinz Finance Company 6.625% Guaranteed Notes due July 15, 2011 unconditionally and irrevocably guaranteed by H. J. Heinz Company ------------ Purchase Agreement ------------------ June 27, 2001 Goldman, Sachs & Co. J.P. Morgan Securities Inc. Banc of America Securities LLC HSBC Securities (USA) Inc. BNP Paribas Securities Corp. UBS Warburg LLC Mellon Financial Markets, LLC PNC Capital Markets, Inc. Banc One Capital Markets, Inc. c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004 Ladies and Gentlemen: H.J. Heinz Finance Company, a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of $750,000,000 principal amount of its 6.625% Guaranteed Notes due July 15, 2011. The Notes will be unconditionally and irrevocably guaranteed as to the payment of principal and interest (the "Guarantees") by H.J. Heinz Company, a Pennsylvania corporation (the "Guarantor"). The Notes and the Guarantees are hereinafter collectively referred to as the "Securities". 1. The Company (in respect of itself) and the Guarantor (in respect of itself and the Company) represent and warrant to, and agree with, each of the Purchasers that: 2 (a) An offering circular, dated June 27, 2001 (the "Offering Circular"), which incorporates by reference the Guarantor's Annual Report on Form 10-K for the fiscal year ended May 3, 2000, its Quarterly Reports on Form 10-Q for the quarters ended August 2, 2000, November 1, 2000, and January 31, 2001, and its Current Reports on Form 8-K dated March 8, 2001 and June 26, 2001, has been prepared in connection with the offering of the Securities. Any reference to the Offering Circular, as amended or supplemented, as of any specified date, shall be deemed to include (i) any documents filed with the Securities and Exchange Commission (the "Commission") pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date of the Offering Circular and prior to such specified date and (ii) any Additional Issuer Information (as defined in Section 5(f)) furnished by the Company or the Guarantor prior to the completion of the distribution of the Securities; and all documents filed under the Exchange Act and so deemed to be included in the Offering Circular, or any amendment or supplement thereto, are hereinafter called the "Exchange Act Reports". The Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder. The Offering Circular and any amendments or supplements thereto and the Exchange Act Reports did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a Purchaser through Goldman, Sachs & Co. expressly for use therein; (b) None of the Company, the Guarantor nor any of the Guarantor's subsidiaries (including the Company) has sustained since the date of the latest audited consolidated financial statements of the Guarantor incorporated by reference in the Offering Circular any material loss or interference with its business otherwise than as set forth or contemplated in the Offering Circular; and, since the respective dates as of which information is given in the Offering Circular, there has not been any change in the capital stock or long-term debt of the Guarantor and its subsidiaries (including the Company), or any material adverse change, or any development that is reasonably likely to cause a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries (including the Company), taken as a whole, otherwise than as set forth or contemplated in the Offering Circular; (c) The Guarantor and the Guarantor's principal domestic subsidiaries (the Company, H.J. Heinz Company, L.P., CMH, Inc., Trademark Management Company, and Promark International, Inc., collectively, the "Principal Subsidiaries"), have good and marketable title to all real property and to all personal property owned by them; (d) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with power and authority to own its properties and conduct its business as described in the Offering Circular, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified in any such jurisdiction would not have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; and each Principal Subsidiary has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization, with 2 power and authority to own its properties and conduct its business as described in the Offering Circular; (e) Each of the Company and the Guarantor has an authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Company and the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; and all of the issued shares of capital stock or partnership interests, as the case may be, of each other Principal Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors' qualifying shares and except as otherwise set forth in the Offering Circular) are owned directly or indirectly by the Company or the Guarantor, as the case may be, free and clear of all liens, encumbrances, equities or claims; (f) The Securities have been duly authorized and, when issued and delivered pursuant to this Agreement and the Indenture (hereinafter defined) will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Company and the Guarantor entitled to the benefits provided by the Indenture to be dated as of July 6, 2001 (the "Indenture"), between the Company and Bank One, National Association, as Trustee (the "Trustee"), under which they are to be issued; the Indenture has been duly authorized and, when executed and delivered by the Company, the Guarantor and the Trustee, the Indenture will constitute a valid and legally binding instrument, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; and the Securities and the Indenture will conform to the descriptions thereof in the Offering Circular; (g) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations G, T, U, and X of the Board of Governors of the Federal Reserve System; (h) Prior to the date hereof, neither the Company, the Guarantor nor any of their affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company or the Guarantor in connection with the offering of the Securities; (i) The issue and sale of the Securities and the compliance by the Company and the Guarantor with all of the provisions of the Securities, the Indenture and this Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or the Guarantor is a party or by which the Company or the Guarantor is bound or to which any of the property or assets of the Company or the Guarantor is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or the Guarantor or any of either of their respective properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities or the consummation by the Company or the Guarantor of the transactions contemplated by this Agreement or the Indenture, except for the filing of a registration statement by the Company and the Guarantor 3 with the Commission pursuant to the Securities Act of 1933, as amended (the "Act"), pursuant to Section 5(l) hereof, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers; (j) None of the Guarantor, the Company or the other Principal Subsidiaries is in violation of its Certificate of Incorporation or By-laws or Partnership Agreement, as the case may be, or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, which default has not been irrevocably waived and would have a material adverse effect on the business, operations or financial condition of the Company or the Guarantor and its subsidiaries taken as a whole; (k) The statements set forth in the Offering Circular under the caption "Description of the Notes", insofar as they purport to constitute a summary of the terms of the Securities, and under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, and fair; (l) Other than as set forth in the Offering Circular, there are no legal or governmental proceedings pending to which the Guarantor, the Company or any of the other Principal Subsidiaries is a party or, to the Company's and the Guarantor's knowledge, of which any property of the Guarantor, the Company or any of the other Principal Subsidiaries is the subject which, if determined adversely to the Company or the Guarantor or any of its subsidiaries, would have a material adverse effect on the consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor and its subsidiaries (including the Company) taken as a whole; and, to the best of the Company's and the Guarantor's knowledge, no such proceedings have been overtly threatened; (m) When the Securities are issued and delivered pursuant to this Agreement, the Securities will not be of the same class (within the meaning of Rule 144A under the Act) as securities which are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system; (n) The Guarantor is a "reporting issuer" as defined by Regulation S under the Act; (o) The Company is not, and after giving effect to the offering and sale of the Securities, will not be an "investment company", as such term is defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (p) Neither the Company, the Guarantor nor any person acting on its or their behalf has offered or will offer or sell the Securities by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act or, with respect to Securities sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act, and the Company and the Guarantor and any person acting on its or their behalf have complied with and will comply with the offering restriction requirements of Rule 903 under the Act; 4 (q) Within the preceding six months, neither the Company nor any other person acting on behalf of the Company has offered or sold to any person any of the Securities, or any securities of the same or a similar class as the Securities, other than Securities offered or sold to the Purchasers hereunder. The Company will take reasonable precautions designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Act) of any Securities or any substantially similar security issued by the Company, within six months subsequent to the date on which the distribution of the Securities has been completed (as notified to the Company by Goldman, Sachs & Co.), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Securities in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Act; (r) PricewaterhouseCoopers LLP, who have audited certain financial statements of the Company, the Guarantor and its subsidiaries, are independent public accountants with respect to the Company, the Guarantor and its subsidiaries as required by the Act and the rules and regulations of the Commission thereunder; and (s) The pro forma financial information included in the Offering Circular is based upon assumptions that provide a reasonable basis for presenting the significant effects of the transactions and events described therein, the related pro forma adjustments give effect to those assumptions, and the pro forma adjustments have been properly applied to the historical amounts in the compilation of those statements. 2. Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each of the Purchasers, and each of the Purchasers agrees, severally and not jointly, to purchase from the Company, at a purchase price of 99.21% of the principal amount thereof, plus accrued interest, if any, from July 6, 2001 to the Time of Delivery hereunder, the principal amount of Securities set forth opposite the name of such Purchaser in Schedule I hereto. 3. Upon the authorization by you of the release of the Securities, the several Purchasers propose to offer the Securities for sale upon the terms and conditions set forth in this Agreement and the Offering Circular and each Purchaser hereby represents and warrants to, and agrees with the Company and the Guarantor that: (a) It will offer and sell the Securities only to: (i) persons who it reasonably believes are "qualified institutional buyers" ("QIBs") within the meaning of Rule 144A under the Act in transactions meeting the requirements of Rule 144A or (ii) upon the terms and conditions set forth in Annex I to this Agreement; and (b) It will not offer or sell the Securities by any form of general solicitation or general advertising, including but not limited to the methods described in Rule 502(c) under the Act. 4. (a) The Securities to be purchased by each Purchaser hereunder will be represented by one or more definitive global Securities in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian. The Company will deliver the Securities to Goldman, Sachs & Co., for the account of each Purchaser, against payment by or on behalf of such Purchaser of the purchase price therefor in Federal (same day) funds, by causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at DTC. 5 The Company will cause the certificates representing the Securities to be made available to Goldman, Sachs & Co. for checking at least twenty-four hours prior to the Time of Delivery (as defined below) at the office of DTC or its designated custodian (the "Designated Office"). For purposes of Rule 15c6-1 of the Exchange Act, the Time of Delivery shall be the date and time for the payment of funds and delivery of securities for all of the Securities sold pursuant to the offering. The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on July 6, 2001 or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and date are herein called the "Time of Delivery". (b) The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Securities and any additional documents requested by the Purchasers pursuant to Section 7(h) hereof, will be delivered at such time and date at the offices of H.J. Heinz Finance Company, 600 Grant Street, 60th Floor, Pittsburgh, PA 15219 (the "Closing Location"), and the Securities will be delivered at the Designated Office, all at the Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. Each of the Company (in respect of itself) and the Guarantor (in respect of itself and the Company) agrees with each of the Purchasers: (a) To make no amendment or any supplement to the Offering Circular which shall be disapproved by Goldman, Sachs & Co. promptly after reasonable notice thereof; and to furnish you with copies thereof; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Securities or offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities, provided that in connection therewith neither the Company nor the Guarantor shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) To furnish the Purchasers with ten copies of the Offering Circular and each amendment or supplement thereto signed by an authorized officer of the Company and the Guarantor with the independent accountants' reports included or incorporated by reference in the Offering Circular, and any amendment or supplement containing amendments to the financial statements covered by such report(s), signed by the accountants, and to furnish additional written and electronic copies thereof in such quantities as you may from time to time reasonably request, and if, at any time prior to the expiration of nine months after the date of the Offering Circular, any event shall have occurred as a result of which the Offering Circular as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Offering Circular is delivered, not misleading, or, if for any other reason it shall be necessary or desirable during such same period to amend or supplement the Offering Circular, to notify you and upon your request to prepare and furnish without charge to each Purchaser and to any dealer in securities as 6 many written and electronic copies as you may from time to time reasonably request of an amended Offering Circular or a supplement to the Offering Circular which will correct such statement or omission or effect such compliance; (d) During the period beginning from the date hereof and continuing to and including the Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Company which mature more than one year after the Time of Delivery and which are substantially similar to the Securities, without your prior written consent; (e) Not to be or become, at any time prior to the expiration of two years after the Time of Delivery, an open-end investment company required to be registered under Section 8 of the Investment Company Act; (f) At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of the Securities, to furnish at its expense, upon request, to holders of the Securities and prospective purchasers of securities information (the "Additional Issuer Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act; (g) If requested by you, to use its best efforts to cause the Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc.; (h) During the period of two years after the Time of Delivery, the Guarantor and the Company will not, and will not permit any of their "affiliates" (as defined in Rule 144 under the Act) to, resell any of the Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them; (l) The Company and the Guarantor shall enter into an Exchange and Registration Rights Agreement with the Purchasers pursuant to which the Company and the Guarantor shall agree to file and use its best efforts to cause to be declared or become effective under the Act, on or prior to 330 days after the Time of Delivery, a registration statement on Form S-4 providing for the registration of another series of debt securities of the Company, with terms identical to the Securities (the "Exchange Securities"), and the exchange of the Securities for the Exchange Securities, all in a manner which will permit persons who acquire the Exchange Securities to resell the Exchange Securities pursuant to Section 4(1) of the Act. (m) To use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Offering Circular under the caption "Use of Proceeds". 6. The Company and the Guarantor covenant and agree with the several Purchasers that the Company or the Guarantor will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's and the Guarantor's counsel and accountants in connection with the issue and listing of the Securities, the preparation and delivery of the Securities in temporary, permanent and definitive forms, and the preparation, printing and filing of the Offering Circular and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Purchasers and dealers; (ii) the cost of printing or producing any Agreement among Purchasers, this Agreement, the Indenture, any Blue Sky and legal investment surveys, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale 7 and delivery of the Securities; (iii) all expenses in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Purchasers in connection with such qualification and in connection with the Blue Sky and legal investment surveys; (iv) any fees charged by securities rating services for rating the Securities; (v) the cost of preparing the Securities; (vi) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities; and (vi) all other costs and expenses incident to the performance of the Company's and the Guarantor's obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on resale of any of the Securities by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Purchasers hereunder shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and the Guarantor herein are, at and as of the Time of Delivery, true and correct, the condition that each of the Company and the Guarantor shall have performed all of its respective obligations hereunder theretofore to be performed, and the following additional conditions: (a) Sullivan & Cromwell, counsel for the Purchasers, shall have furnished to you such opinion or opinions, dated the Time of Delivery, with respect to the matters covered in paragraphs (i), (vi), (vii), (viii), (xii), (xv), and (xvi) of subsection (b) below as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. In rendering such opinion or opinions, Sullivan & Cromwell may rely as to all matters governed by Pennsylvania law upon the opinion referred to in subsection (b) of this Section 7; (b) Theodore N. Bobby, Vice President - Legal Affairs of the Guarantor, or an Assistant General Counsel of the Guarantor, shall have furnished to you his written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Circular; (ii) Each of the Company and the Guarantor has an authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Company and the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; (iii) Each of the Company and the Guarantor has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except as failure to qualify would not have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; 8 (iv) Each other Principal Subsidiary has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization; and all of the issued shares of capital stock or partnership interests, as the case may be, of each such Principal Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable, and (except for directors' qualifying shares and except as otherwise set forth in the Offering Circular) are owned directly or indirectly by the Guarantor; (v) To the best of such counsel's knowledge and other than as set forth in the Offering Circular, there are no legal or governmental proceedings pending to which the Company or the Guarantor or any of its subsidiaries is a party or of which any property of the Company or the Guarantor or any of its subsidiaries is the subject which, if determined adversely, would have a material adverse effect on the consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor and its subsidiaries taken as a whole; and, to the best of such counsel's knowledge, no such proceedings have been overtly threatened; (vi) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantor; (vii) The Guarantees have been duly authorized, executed and delivered by the Guarantor and constitute valid and legally binding obligations of the Guarantor entitled to the benefits provided by the Indenture; the Notes have been duly authorized, executed, authenticated, issued and delivered by the Company and constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; and the Securities and the Indenture conform to the descriptions thereof in the Offering Circular; the temporary global Securities have been duly executed, authenticated, issued and delivered and constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; the Securities in definitive form, when executed, authenticated, issued and delivered in exchange for the temporary global Securities in accordance with the terms of the Indenture, will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; and the temporary global Securities and the Indenture conform, and the Securities will conform, to the descriptions thereof in the Offering Circular; (viii) The Indenture has been duly authorized, executed and delivered by the parties thereto and constitutes a valid and legally binding instrument, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; (ix) The issue and sale of the Securities and the compliance by the Company and the Guarantor with all of the provisions of the Securities, the Indenture, and this Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Guarantor or the Company is a party or by which the Guarantor or the Company is bound or to which any of the property or assets of the Company or the Guarantor is subject, nor will such actions result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Guarantor or the Company or any statute or any 9 order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor or the Company or any of their properties; (x) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities or the consummation by the Company and the Guarantor of the transactions contemplated by this Agreement or the Indenture, except such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers; (xi) Neither the Guarantor, the Company nor any of the other Principal Subsidiaries is in violation of its Certificate of Incorporation (or Partnership Agreement, as the case may be) or By-laws or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound which would have a material adverse effect on the Guarantor and its subsidiaries taken as a whole; (xii) The statements set forth in the Offering Circular under the caption "Description of Notes", insofar as they purport to constitute a summary of the terms of the Securities, are complete and accurate in all material respects; (xiii) The Exchange Act Reports (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder; and such counsel has no reason to believe that any of such documents, when they were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; (xiv) No registration of the Securities under the Act, and no qualification of an indenture under the Trust Indenture Act of 1939 with respect thereto, is required for the offer, sale and initial resale of the Securities by the Purchasers in the manner contemplated by this Agreement, including Annex I hereto, and the Offering Circular; (xv) Although such counsel does not assume any responsibility for the completeness or accuracy of the statements contained in the Offering Circular, except for those referred to in subsection (xii) of this Section 7(b), such counsel have no reason to believe that the Offering Circular and any further amendments or supplements thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) contained as of its date or contains as of the Time of Delivery an untrue statement of a material fact or omitted or omits, as the case may be, to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (xvi) Neither the Company nor the Guarantor is an "investment company", as such term is defined in the Investment Company Act. 10 In rendering such opinion or opinions, Mr. Bobby or such Assistant General Counsel of the Guarantor may rely as to all matters governed by the law of the State of New York upon the opinion of Sullivan & Cromwell referred to in subsection (a) of this Section 7. (d) On the date of the Offering Circular prior to the execution of this Agreement and also at the Time of Delivery, PricewaterhouseCoopers LLP shall have furnished to you, in your role as Underwriters of the Securities, a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, as to such matters as you may reasonably request. (e) (i) None of the Company and its subsidiaries, nor the Guarantor and its subsidiaries (including the Company) shall have sustained, in the case of the Company and its subsidiaries, since the date of the latest financial statements of the Company included in the Offering Circular, and in the case of the Guarantor and its subsidiaries, since the date of the latest audited financial statements of the Guarantor incorporated by reference in the Offering Circular, any loss or interference with its business, otherwise than as set forth or contemplated in the Offering Circular, and (ii) since the respective dates as of which information is given in the Offering Circular, there shall not have been any change in the capital stock or long-term debt of the Guarantor and its subsidiaries (including the Company), or of the Company and its subsidiaries, or any change, or any development that is reasonably likely to cause a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries (including the Company) taken as a whole, or of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Offering Circular, the effect of which, in any such case described in clause (i) or (ii), is in your judgment so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in this Agreement and in the Offering Circular; (f) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; (g) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange; or on; (ii) a suspension or material limitation in trading in the Company's common stock on the New York Stock Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iv) in your judgment makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in the Offering Circular; (h) Each of the Guarantor and the Company shall have furnished or caused to be furnished to you at the Time of Delivery certificates of officers of the Guarantor and the Company satisfactory to you as to the accuracy of the representations and warranties of the Guarantor and the Company herein at and as of such Time of Delivery, as to the performance by the Guarantor and the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the 11 matters set forth in subsection (e) of this Section and as to such other matters as you may reasonably request. (i) The Company shall have issued 3,250 shares of its Voting Cumulative Preferred Stock, Series A (liquidation preference $100,000 per share). 8. (a) The Guarantor (in respect of itself and the Company) and the Company (in respect of itself) will indemnify and hold harmless each Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made, not misleading, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Company nor the Guarantor shall be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company and/or the Guarantor by any Purchaser through Goldman, Sachs & Co. expressly for use therein. (b) Each Purchaser will indemnify and hold harmless each of the Company and the Guarantor against any losses, claims, damages or liabilities to which the Company or the Guarantor may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact or necessary to make the statements therein in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company or the Guarantor by such Purchaser through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company or the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying 12 party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Purchasers on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company or the Guarantor on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Guarantor bear to the total underwriting discounts and commissions received by the Purchasers, in each case as set forth in the Offering Circular. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor on the one hand or the Purchasers on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantor and the Purchasers agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to investors were offered to investors exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in 13 proportion to their respective underwriting obligations and not joint. No party guilty of fraudulent misrepresentation shall be entitled to contribution by any person who was not guilty of fraudulent misrepresentation. (e) The obligations of the Company and the Guarantor under this Section 8 shall be in addition to any liability which the Company or the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Act; and the obligations of the Purchasers under this Section 8 shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and the Guarantor and to each person, if any, who controls the Company or the Guarantor within the meaning of the Act. 9. (a) If any Purchaser shall default in its obligation to purchase the Securities which it has agreed to purchase hereunder, you may in your discretion arrange for you or another party or other parties to purchase such Securities on the terms contained herein. If within thirty-six hours after such default by any Purchaser you do not arrange for the purchase of such Securities, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Securities on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Securities, or the Company notifies you that it has so arranged for the purchase of such Securities, you or the Company shall have the right to postpone the Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Offering Circular, or in any other documents or arrangements, and the Company agrees to prepare promptly any amendments to the Offering Circular which in your opinion may thereby be made necessary. The term "Purchaser" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Securities. (b) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by the non-defaulting Purchasers and the Company as provided in subsection (a) above, the aggregate principal amount of such Securities which remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the Securities, then the Company shall have the right to require each non-defaulting Purchaser to purchase the principal amount of Securities which such Purchaser agreed to purchase hereunder and, in addition, to require each non-defaulting Purchaser to purchase its pro rata share (based on the principal amount of Securities which such Purchaser agreed to purchase hereunder) of the Securities of such defaulting Purchaser or Purchasers for which such arrangements have not been made; but nothing herein shall relieve a defaulting Purchaser from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by you and the Company as provided in subsection (a) above, the aggregate principal amount of Securities which remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Securities, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Purchasers to purchase Securities of a defaulting Purchaser or Purchasers, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Purchaser or the Company or the Guarantor, except for the expenses to be borne by the Company, the Guarantor and the Purchasers as provided in Section 6 14 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Purchaser from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Guarantor and the several Purchasers, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Purchaser or any controlling person of any Purchaser, or the Company or the Guarantor, or any officer or director or controlling person of the Company or the Guarantor, and shall survive delivery of and payment for the Securities. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, neither the Company nor the Guarantor shall then be under any liability to any Purchaser except as provided in Sections 6 and 8 hereof; but, if for any other reason, the Securities are not delivered by or on behalf of the Company as provided herein, the Company or the Guarantor will reimburse the Purchasers through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Purchasers in making preparations for the purchase, sale and delivery of the Securities, but neither the Company nor the Guarantor shall then be under further liability to any Purchaser except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Purchasers, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Purchaser made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Purchasers shall be delivered or sent by mail or facsimile transmission to you as the representatives in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company or the Guarantor shall be delivered or sent by mail or facsimile transmission to the Company and the Guarantor at 600 Grant Street, 60th Floor, Pittsburgh, Pennsylvania 15219, Attention: President (for the Company) and Treasurer (for the Guarantor); provided, however, that any notice to a Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail or facsimile transmission to such Purchaser at its address set forth in its Purchasers' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company or the Guarantor by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Purchasers, the Company, the Guarantor and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and the Guarantor and each person who controls the Company or the Guarantor or any Purchaser, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Securities from any Purchaser shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. 15 15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 16 If the foregoing is in accordance with your understanding, please sign and return to us one for each of the Company and the Guarantor and each of the Purchasers plus one for each counsel counterparts thereof, and upon the acceptance hereof by you, on behalf of each of the Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the Purchasers and the Company and the Guarantor. It is understood that your acceptance of this letter on behalf of each of the Purchasers is pursuant to the authority set forth in a form of Agreement among Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, H.J. Heinz Finance Company By: /s/ Leonard A. Cullo, Jr. ----------------------------- Name: Leonard A. Cullo, Jr. Title: President Accepted as of the date hereof: Very truly yours, Goldman, Sachs & Co. H.J. Heinz Company J.P. Morgan Securities Inc. Banc of America Securities LLC By: /s/ Leonard A. Cullo, Jr. HSBC Securities (USA) Inc. ----------------------------- BNP Paribas Securities Corp. Name: Leonard A. Cullo, Jr. UBS Warburg LLC Title: Treasurer Mellon Financial Markets, LLC PNC Capital Markets, Inc. Banc One Capital Markets, Inc. By: /s/ Goldman, Sachs & Co. ------------------------------ (Goldman, Sachs & Co.) 17 SCHEDULE I Principal Amount of Securities to be Purchaser Purchased ------------ Goldman, Sachs & Co................................................ $150,000,000 J. P. Morgan Securities Inc........................................ $150,000,000 Banc of America Securities LLC..................................... $150,000,000 HSBC Securities (USA) Inc.......................................... $90,000,000 BNP Paribas Securities Corp........................................ $52,500,000 UBS Warburg LLC.................................................... $52,500,000 Mellon Financial Markets, LLC...................................... $45,000,000 PNC Capital Markets, Inc........................................... $45,000,000 Banc One Capital Markets, Inc...................................... $15,000,000 ------------ $750,000,000 =========== 18 ANNEX I (1) The Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act. Each Purchaser represents that it has offered and sold the Securities, and will offer and sell the Securities (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Time of Delivery, only in accordance with Rule 903 of Regulation S or Rule 144A under the Act. Accordingly, each Purchaser agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and it and they have complied and will comply with the offering restrictions requirement of Regulation S. Each Purchaser agrees that, at or prior to confirmation of sale of Securities (other than a sale pursuant to Rule 144A) it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Act. Terms used above have the meaning given to them by Regulation S." Terms used in this paragraph have the meanings given to them by Regulation S. Each Purchaser further agrees that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Securities, except with its affiliates or with the prior written consent of the Company. (2) Notwithstanding the foregoing, Securities in registered form may be offered, sold and delivered by the Purchasers in the United States and to U.S. persons pursuant to Section 3 of this Agreement without delivery of the written statement required by paragraph (1) above. (3) Each Purchaser further represents and agrees that (i) it has not offered or sold and prior to the date six months after the date of issue of the Securities will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995, (b) it has complied, and will comply, with all applicable provisions of the Financial Services Act of 1986 of Great Britain with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (c) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of the Securities to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 of Great Britain or is a person to whom the document may otherwise lawfully be issued or passed on. F-1 (4) Each Purchaser agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. Each Purchaser understands that no action has been taken to permit a public offering in any jurisdiction outside the United States where action would be required for such purpose. Each Purchaser agrees not to cause any advertisement of the Securities to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Securities, except in any such case with Goldman, Sachs & Co.'s express written consent and then only at its own risk and expense. F-2 EX-1.2 4 mar2202_ex0102.txt EXHIBIT 1.2 EXECUTION COPY $700,000,000 H. J. Heinz Finance Company 6.00% Guaranteed Notes due March 15, 2012 unconditionally and irrevocably guaranteed by H. J. Heinz Company ------------ Purchase Agreement ------------------ February 28, 2002 J.P. Morgan Securities Inc., As representative of the several Purchasers named in Schedule I to the Purchase Agreement 270 Park Avenue, New York, New York 10017 Ladies and Gentlemen: H.J. Heinz Finance Company, a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of $700,000,000 principal amount of its 6.00% Guaranteed Notes due March 15, 2012. The Notes will be unconditionally and irrevocably guaranteed as to the payment of principal and interest (the "Guarantees") by H.J. Heinz Company, a Pennsylvania corporation (the "Guarantor"). The Notes and the Guarantees are hereinafter collectively referred to as the "Securities". 1. The Company (in respect of itself) and the Guarantor (in respect of itself and the Company) represent and warrant to, and agree with, each of the Purchasers that: (a) An offering memorandum, dated February 28, 2002 (the "Offering Memorandum"), which incorporates by reference the Guarantor's Annual Report on Form 10-K for the fiscal year ended May 2, 2001, its Quarterly Reports on Form 10-Q for the quarters ended August 1, 2001 and October 31, 2001, and its Current Reports on Form 8-K dated June 26, 2001, September 17, 2001 and November 13, 2001, has been prepared in connection with the offering of the Securities. Any reference to the Offering Memorandum, as amended or supplemented, as of any specified date, shall be deemed to include (i) any documents filed with the Securities and Exchange Commission (the "Commission") pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date of the Offering Memorandum and prior to such specified date and (ii) any Additional Issuer Information (as defined in Section 5(f)) furnished by the Company or the Guarantor prior to the completion of the distribution of the Securities; and all documents filed under the Exchange Act and so deemed to be included in the Offering Memorandum, or any amendment or supplement thereto, are hereinafter called the "Exchange Act Reports". The Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder. The Offering Memorandum and any amendments or supplements thereto and the Exchange Act Reports did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a Purchaser through you expressly for use therein; (b) None of the Company, the Guarantor nor any of the Guarantor's subsidiaries (including the Company) has sustained since the date of the latest audited consolidated financial statements of the Guarantor incorporated by reference in the Offering Memorandum any material loss or interference with its business otherwise than as set forth or contemplated in the Offering Memorandum; and, since the respective dates as of which information is given in the Offering Memorandum, there has not been any change in the capital stock or long-term debt of the Guarantor and its subsidiaries (including the Company), or any material adverse change, or any development that is reasonably likely to cause a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries (including the Company), taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum; (c) The Guarantor and the Guarantor's principal domestic subsidiaries (the Company, H.J. Heinz Company, L.P., CMH, Inc., Trademark Management Company, and Promark International, Inc., collectively, the "Principal Subsidiaries"), have good and marketable title to all real property and to all personal property owned by them; (d) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with power and authority to own its properties and conduct its business as described in the Offering Memorandum, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified in any such jurisdiction would not have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; and each other Principal Subsidiary has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization, with power and authority to own its properties and conduct its business as described in the Offering Memorandum; (e) Each of the Company and the Guarantor has an authorized capitalization as set forth in the Offering Memorandum, and all of the issued shares of capital stock of the Company and the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; 2 and all of the issued shares of capital stock or partnership interests, as the case may be, of each other Principal Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors' qualifying shares and except as otherwise set forth in the Offering Memorandum) are owned directly or indirectly by the Company or the Guarantor, as the case may be, free and clear of all liens, encumbrances, equities or claims; (f) The Securities have been duly authorized and, when issued and delivered pursuant to this Agreement and the Indenture (hereinafter defined) will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Company and the Guarantor entitled to the benefits provided by the Indenture dated as of July 6, 2001 (the "Indenture"), between the Company and Bank One, National Association, as Trustee (the "Trustee"), under which they are to be issued; the Indenture has been duly authorized, executed and delivered by the Company and the Guarantor, and constitutes a valid and legally binding instrument, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; and the Securities and the Indenture will conform to the descriptions thereof in the Offering Memorandum; (g) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations G, T, U, and X of the Board of Governors of the Federal Reserve System; (h) Prior to the date hereof, neither the Company, the Guarantor nor any of their affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company or the Guarantor in connection with the offering of the Securities; (i) The issue and sale of the Securities and the compliance by the Company and the Guarantor with all of the provisions of the Securities, the Indenture and this Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or the Guarantor is a party or by which the Company or the Guarantor is bound or to which any of the property or assets of the Company or the Guarantor is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or the Guarantor or any of either of their respective properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities or the consummation by the Company or the Guarantor of the transactions contemplated by this Agreement or the Indenture, except for the filing of a registration statement by the Company and the Guarantor with the Commission pursuant to the Securities Act of 1933, as amended (the "Act"), pursuant to Section 5(l) hereof, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers; 3 (j) None of the Guarantor, the Company or the other Principal Subsidiaries is in violation of its Certificate of Incorporation or By-laws or Partnership Agreement, as the case may be, or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, which default has not been irrevocably waived and would have a material adverse effect on the business, operations or financial condition of the Company or the Guarantor and its subsidiaries taken as a whole; (k) The statements set forth in the Offering Memorandum under the caption "Description of the Notes", insofar as they purport to constitute a summary of the terms of the Securities, and under the caption "Plan of Distribution", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, and fair; (l) Other than as set forth in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Guarantor, the Company or any of the other Principal Subsidiaries is a party or, to the Company's and the Guarantor's knowledge, of which any property of the Guarantor, the Company or any of the other Principal Subsidiaries is the subject, which, if determined adversely to the Company or the Guarantor or any of its subsidiaries, would have a material adverse effect on the consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor and its subsidiaries (including the Company) taken as a whole; and, to the best of the Company's and the Guarantor's knowledge, no such proceedings have been overtly threatened; (m) When the Securities are issued and delivered pursuant to this Agreement, the Securities will not be of the same class (within the meaning of Rule 144A under the Act) as securities which are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system; (n) The Guarantor is a "reporting issuer" as defined by Regulation S under the Act; (o) The Company is not and, after giving effect to the offering and sale of the Securities, will not be an "investment company", as such term is defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (p) Neither the Company, the Guarantor nor any person acting on its or their behalf has offered or will offer or sell the Securities by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act or, with respect to Securities sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act, and the Company and the Guarantor and any person acting on its or their behalf have complied with and will comply with the offering restriction requirements of Rule 903 under the Act; (q) Within the preceding six months, neither the Company nor any other person acting on behalf of the Company has offered or sold to any person any of the Securities, or any securities of the same or a similar class as the Securities, other than Securities offered or sold to the Purchasers hereunder. The Company will take reasonable precautions designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Act) of any Securities or any substantially similar security issued by the Company, within six months 4 subsequent to the date on which the distribution of the Securities has been completed (as notified to the Company by you), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Securities in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Act; and (r) PricewaterhouseCoopers LLP, who have audited certain financial statements of the Company, the Guarantor and its subsidiaries, are independent public accountants with respect to the Company, the Guarantor and its subsidiaries as required by the Act and the rules and regulations of the Commission thereunder. 2. Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each of the Purchasers, and each of the Purchasers agrees, severally and not jointly, to purchase from the Company, at a purchase price of 98.599% of the principal amount thereof, plus accrued interest, if any, from March 7, 2002 to the Time of Delivery hereunder, the principal amount of Securities set forth opposite the name of such Purchaser in Schedule I hereto. 3. Upon the authorization by you of the release of the Securities, the several Purchasers propose to offer the Securities for sale upon the terms and conditions set forth in this Agreement and the Offering Memorandum and each Purchaser hereby represents and warrants to, and agrees with the Company and the Guarantor that: (a) It will offer and sell the Securities only to: (i) persons who it reasonably believes are "qualified institutional buyers" ("QIBs") within the meaning of Rule 144A under the Act in transactions meeting the requirements of Rule 144A or (ii) upon the terms and conditions set forth in Annex I to this Agreement; and (b) It will not offer or sell the Securities by any form of general solicitation or general advertising, including but not limited to the methods described in Rule 502(c) under the Act. 4. (a) The Securities to be purchased by each Purchaser hereunder will be represented by one or more definitive global Securities in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian. The Company will deliver the Securities to you, for the account of each Purchaser, against payment by or on behalf of such Purchaser of the purchase price therefor in Federal (same day) funds, by causing DTC to credit the Securities to your account at DTC. The Company will cause the certificates representing the Securities to be made available to you for checking at least twenty-four hours prior to the Time of Delivery (as defined below) at the office of DTC or its designated custodian (the "Designated Office"). For purposes of Rule 15c6-1 of the Exchange Act, the Time of Delivery shall be the date and time for the payment of funds and delivery of securities for all of the Securities sold pursuant to the offering. The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on March 7, 2002 or such other time and date as you and the Company may agree upon in writing. Such time and date are herein called the "Time of Delivery". (b) The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Securities and any additional documents requested by the Purchasers pursuant to Section 7(g) hereof, will be delivered at such time and date at the offices of H.J. Heinz Finance Company, 600 Grant Street, 60th Floor, Pittsburgh, 5 PA 15219 (the "Closing Location"), and the Securities will be delivered at the Designated Office, all at the Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. Each of the Company (in respect of itself) and the Guarantor (in respect of itself and the Company) agrees with each of the Purchasers: (a) To make no amendment or any supplement to the Offering Memorandum which shall be disapproved by you promptly after reasonable notice thereof; and to furnish the Purchasers with copies thereof; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Securities for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities, provided that in connection therewith neither the Company nor the Guarantor shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) To furnish the Purchasers with ten copies of the Offering Memorandum and each amendment or supplement thereto signed by an authorized officer of the Company and the Guarantor with the independent accountants' reports included or incorporated by reference in the Offering Memorandum, and any amendment or supplement containing amendments to the financial statements covered by such report(s), signed by the accountants, and to furnish additional written and electronic copies thereof in such quantities as you may from time to time reasonably request, and if, at any time prior to the expiration of nine months after the date of the Offering Memorandum, any event shall have occurred as a result of which the Offering Memorandum as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Offering Memorandum is delivered, not misleading, or, if for any other reason it shall be necessary or desirable during such same period to amend or supplement the Offering Memorandum, to notify you and upon your request to prepare and furnish without charge to each Purchaser and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Offering Memorandum or a supplement to the Offering Memorandum which will correct such statement or omission or effect such compliance; (d) During the period beginning from the date hereof and continuing to and including the Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Company which mature more than one year after the Time of Delivery and which are substantially similar to the Securities, without your prior written consent; (e) Not to be or become, at any time prior to the expiration of two years after the Time of Delivery, an open-end investment company required to be registered under Section 8 of the Investment Company Act; 6 (f) At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of the Securities, to furnish at its expense, upon request, to holders of the Securities and prospective purchasers of securities information (the "Additional Issuer Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act; (g) If requested by you, to use its best efforts to cause the Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc.; (h) During the period of two years after the Time of Delivery, the Guarantor and the Company will not, and will not permit any of their "affiliates" (as defined in Rule 144 under the Act) to, resell any of the Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them; (l) The Company and the Guarantor shall enter into an Exchange and Registration Rights Agreement with the Purchasers pursuant to which the Company and the Guarantor shall agree to file and use its best efforts to cause to be declared or become effective under the Act, on or prior to 180 days after the Time of Delivery, a registration statement on Form S-4 providing for the registration of another series of debt securities of the Company, with terms identical to the Securities (the "Exchange Securities"), and the exchange of the Securities for the Exchange Securities, all in a manner which will permit persons who acquire the Exchange Securities to resell the Exchange Securities pursuant to Section 4(1) of the Act. (m) To use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Offering Memorandum under the caption "Use of Proceeds". 6. The Company and the Guarantor covenant and agree with the several Purchasers that the Company or the Guarantor will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's and the Guarantor's counsel and accountants in connection with the issue and listing of the Securities, the preparation and delivery of the Securities, and the preparation, printing and filing of the Offering Memorandum and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Purchasers and dealers; (ii) the cost of printing or producing any Agreement among Purchasers, this Agreement, the Indenture, any Blue Sky and legal investment surveys, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iii) all expenses in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Purchasers in connection with such qualification and in connection with the Blue Sky and legal investment surveys; (iv) any fees charged by securities rating services for rating the Securities; (v) the cost of preparing the Securities; (vi) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities; and (vi) all other costs and expenses incident to the performance of the Company's and the Guarantor's obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on resale of any of the Securities by them, and any advertising expenses connected with any offers they may make. 7 7. The obligations of the Purchasers hereunder shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and the Guarantor herein are, at and as of the Time of Delivery, true and correct, the condition that each of the Company and the Guarantor shall have performed all of its respective obligations hereunder theretofore to be performed, and the following additional conditions: (a) Sullivan & Cromwell, counsel for the Purchasers, shall have furnished to you such opinion or opinions, dated the Time of Delivery, with respect to the matters covered in paragraphs (i), (vi), (vii), (viii), (xii), (xiv) and (xv) of subsection (b) below as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. In rendering such opinion or opinions, Sullivan & Cromwell may rely as to all matters governed by Pennsylvania law upon the opinion referred to in subsection (b) of this Section 7; (b) Theodore N. Bobby, Vice President - Legal Affairs of the Guarantor, or an Assistant General Counsel of the Guarantor, shall have furnished to you his written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Memorandum; (ii) Each of the Company and the Guarantor has an authorized capitalization as set forth in the Offering Memorandum, and all of the issued shares of capital stock of the Company and the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; (iii) Each of the Company and the Guarantor has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except as failure to qualify would not have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; (iv) Each other Principal Subsidiary has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization; and all of the issued shares of capital stock or partnership interests, as the case may be, of each such Principal Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable, and (except for directors' qualifying shares and except as otherwise set forth in the Offering Memorandum) are owned directly or indirectly by the Guarantor; (v) To the best of such counsel's knowledge and other than as set forth in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company or the Guarantor or any of its subsidiaries is a party or of which any property of the Company or the Guarantor or any of its subsidiaries is the subject which, if determined adversely, would have a material adverse effect on the consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor and its subsidiaries taken as a whole; 8 and, to the best of such counsel's knowledge, no such proceedings have been overtly threatened; (vi) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantor; (vii) The Guarantees have been duly authorized, executed and delivered by the Guarantor and constitute valid and legally binding obligations of the Guarantor entitled to the benefits provided by the Indenture; the Notes, including the temporary global Notes offered and sold in offshore transactions in reliance on Regulation S, have been duly authorized, executed, authenticated, issued and delivered by the Company and constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; the permanent global Notes have been duly authorized, and when executed, authenticated, issued and delivered in exchange for the temporary global Notes, in accordance with the terms of the Indenture, will have been duly executed, authenticated, issued and delivered by the Company and will constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; and the Securities and the Indenture conform, and will conform, as the case may be, to the descriptions thereof in the Offering Memorandum; (viii)The Indenture has been duly authorized, executed and delivered by the parties thereto and constitutes a valid and legally binding instrument, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; (ix) The issue and sale of the Securities and the compliance by the Company and the Guarantor with all of the provisions of the Securities, the Indenture and this Agreement, and the consummation of the transactions herein and therein contemplated, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Guarantor or the Company is a party or by which the Guarantor or the Company is bound or to which any of the property or assets of the Company or the Guarantor is subject, nor will such actions result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Guarantor or the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor or the Company or any of their properties; (x) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities or the consummation by the Company and the Guarantor of the transactions contemplated by this Agreement or the Indenture, except such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers; (xi) Neither the Guarantor, the Company nor any of the other Principal Subsidiaries is in violation of its Certificate of Incorporation (or Partnership Agreement, as the case may be) or By-laws or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may 9 be bound which would have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; (xii) The statements set forth in the Offering Memorandum under the caption "Description of Notes", insofar as they purport to constitute a summary of the terms of the Securities, are complete and accurate in all material respects; (xiii) The Exchange Act Reports (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder; and such counsel has no reason to believe that any of such documents, when they were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; (xiv) No registration of the Securities under the Act, and no qualification of an indenture under the Trust Indenture Act of 1939 with respect thereto, is required for the offer, sale and initial resale of the Securities by the Purchasers in the manner contemplated by this Agreement, including Annex I hereto, and the Offering Memorandum; (xv) Although such counsel does not assume any responsibility for the completeness or accuracy of the statements contained in the Offering Memorandum, except for those referred to in subsection (xii) of this Section 7(b), such counsel has no reason to believe that the Offering Memorandum and any further amendments or supplements thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) contained as of its date or contains as of the Time of Delivery an untrue statement of a material fact or omitted or omits, as the case may be, to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (xvi) Neither the Company nor the Guarantor is an "investment company", as such term is defined in the Investment Company Act. In rendering such opinion or opinions, Mr. Bobby or such Assistant General Counsel of the Guarantor may rely as to all matters governed by the law of the State of New York upon the opinion of Sullivan & Cromwell referred to in subsection (a) of this Section 7. (c) On the date of the Offering Memorandum prior to the execution of this Agreement and also at the Time of Delivery, PricewaterhouseCoopers LLP shall have furnished to you, in your role as Underwriters of the Securities, a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, as to such matters as you may reasonably request. (d) (i) None of the Company and its subsidiaries, nor the Guarantor and its subsidiaries (including the Company) shall have sustained, since the date of the latest audited financial statements of the Guarantor incorporated by reference in the Offering Memorandum, any loss or interference with its business, otherwise than as set forth or contemplated in the Offering 10 Memorandum, and (ii) since the respective dates as of which information is given in the Offering Memorandum, there shall not have been any change in the capital stock or long-term debt of the Guarantor and its subsidiaries (including the Company), or of the Company and its subsidiaries, or any change, or any development that is reasonably likely to cause a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries (including the Company) taken as a whole, or of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (i) or (ii), is in your judgment so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in this Agreement and in the Offering Memorandum; (e) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the debt securities of, or guaranteed by, the Guarantor by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the debt securities of, or guaranteed by, the Guarantor; (f) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange; (ii) a suspension or material limitation in trading in the Guarantor's common stock on the New York Stock Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption of commercial banking or securities settlement or clearance services in the United States; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iv) in your judgment makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in the Offering Memorandum; (g) Each of the Guarantor and the Company shall have furnished or caused to be furnished to you at the Time of Delivery certificates of officers of the Guarantor and the Company satisfactory to you as to the accuracy of the representations and warranties of the Guarantor and the Company herein at and as of such Time of Delivery, as to the performance by the Guarantor and the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsection (d) of this Section and as to such other matters as you may reasonably request. 8. (a) The Guarantor (in respect of itself and the Company) and the Company (in respect of itself) will indemnify and hold harmless each Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made, not misleading, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such action or claim as such expenses are incurred; provided, 11 however, that neither the Company nor the Guarantor shall be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Memorandum or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company and/or the Guarantor by any Purchaser through you expressly for use therein. (b) Each Purchaser, severally and not jointly, will indemnify and hold harmless each of the Company and the Guarantor against any losses, claims, damages or liabilities to which the Company or the Guarantor may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Memorandum or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company or the Guarantor by such Purchaser through you expressly for use therein; and will reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company or the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, 12 claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Purchasers on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company or the Guarantor on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Guarantor bear to the total underwriting discounts and commissions received by the Purchasers, in each case as set forth in the Offering Memorandum. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor on the one hand or the Purchasers on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantor and the Purchasers agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to investors were offered to investors exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. No party guilty of fraudulent misrepresentation shall be entitled to contribution by any person who was not guilty of fraudulent misrepresentation. (e) The obligations of the Company and the Guarantor under this Section 8 shall be in addition to any liability which the Company or the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Act; and the obligations of the Purchasers under this Section 8 shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and the Guarantor and to each person, if any, who controls the Company or the Guarantor within the meaning of the Act. 9. (a) If any Purchaser shall default in its obligation to purchase the Securities which it has agreed to purchase hereunder, you may in your discretion arrange for you or another party or other parties to purchase such Securities on the terms contained herein. If within thirty-six hours after such default by any Purchaser you do not arrange for the purchase of such Securities, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other 13 parties satisfactory to you to purchase such Securities on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Securities, or the Company notifies you that it has so arranged for the purchase of such Securities, you or the Company shall have the right to postpone the Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Offering Memorandum, or in any other documents or arrangements, and the Company agrees to prepare promptly any amendments to the Offering Memorandum which in your opinion may thereby be made necessary. The term "Purchaser" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Securities. (b) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by the non-defaulting Purchasers and the Company as provided in subsection (a) above, the aggregate principal amount of such Securities which remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the Securities, then the Company shall have the right to require each non-defaulting Purchaser to purchase the principal amount of Securities which such Purchaser agreed to purchase hereunder and, in addition, to require each non-defaulting Purchaser to purchase its pro rata share (based on the principal amount of Securities which such Purchaser agreed to purchase hereunder) of the Securities of such defaulting Purchaser or Purchasers for which such arrangements have not been made; but nothing herein shall relieve a defaulting Purchaser from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by you and the Company as provided in subsection (a) above, the aggregate principal amount of Securities which remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Securities, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Purchasers to purchase Securities of a defaulting Purchaser or Purchasers, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Purchaser or the Company or the Guarantor, except for the expenses to be borne by the Company, the Guarantor and the Purchasers as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Purchaser from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Guarantor and the several Purchasers, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Purchaser or any controlling person of any Purchaser, or the Company or the Guarantor, or any officer or director or controlling person of the Company or the Guarantor, and shall survive delivery of and payment for the Securities. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, neither the Company nor the Guarantor shall then be under any liability to any Purchaser except as provided in Sections 6 and 8 hereof; but, if for any other reason, the Securities are not delivered by or on behalf of the Company as provided herein, the Company or the Guarantor will reimburse the Purchasers through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Purchasers in making preparations for the purchase, sale and 14 delivery of the Securities, but neither the Company nor the Guarantor shall then be under further liability to any Purchaser except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Purchasers, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Purchaser made or given by you. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Purchasers shall be delivered or sent by mail or facsimile transmission to you as the representatives in care of J.P. Morgan Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Transaction Execution Group; and if to the Company or the Guarantor shall be delivered or sent by mail or facsimile transmission to the Company and the Guarantor at 600 Grant Street, 60th Floor, Pittsburgh, Pennsylvania 15219, Attention: President (for the Company) and Treasurer (for the Guarantor); provided, however, that any notice to a Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail or facsimile transmission to such Purchaser at its address set forth in its Purchasers' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company or the Guarantor by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Purchasers, the Company, the Guarantor and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and the Guarantor and each person who controls the Company or the Guarantor or any Purchaser, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Securities from any Purchaser shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 15 If the foregoing is in accordance with your understanding, please sign and return to us one for each of the Company and the Guarantor and each of the Purchasers plus one for each counsel counterparts thereof, and upon the acceptance hereof by you, on behalf of each of the Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the Purchasers and the Company and the Guarantor. It is understood that your acceptance of this letter on behalf of each of the Purchasers is pursuant to the authority set forth in a form of Agreement among Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, H.J. Heinz Finance Company By: /s/ Leonard A. Cullo, Jr. ----------------------------- Name: Leonard A. Cullo, Jr. Title: President Very truly yours, H.J. Heinz Company By: /s/ Leonard A. Cullo, Jr. ----------------------------- Name: Leonard A. Cullo, Jr. Title: Treasurer Accepted as of the date hereof: J.P.Morgan Securities Inc. By: /s/ Maria Sramek --------------------------------- Name: Maria Sramek Title: Vice President On behalf of each of the Purchasers 16 SCHEDULE I Principal Amount of Securities to be Purchaser Purchased --------- ---------- J. P. Morgan Securities Inc....................................... $175,000,000 UBS Warburg LLC................................................... $175,000,000 HSBC Securities (USA) Inc. ....................................... $175,000,000 Banc of America Securities LLC.................................... $35,000,000 Goldman, Sachs & Co. ............................................. $35,000,000 Lehman Brothers Inc............................................... $35,000,000 ABN AMRO Incorporated............................................. $14,000,000 Banc One Capital Markets Inc...................................... $14,000,000 BNP Paribas Securities Corp....................................... $14,000,000 Mizuho International plc.......................................... $7,000,000 NatCity Investments, Inc.......................................... $7,000,000 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank International," London Branch........................... $7,000,000 SG Cowen Securities Corporation................................... $7,000,000 ------------ $700,000,000 ============ 17 ANNEX I (1) The Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act. Each Purchaser represents that it has offered and sold the Securities, and will offer and sell the Securities (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Time of Delivery, only in accordance with Rule 903 of Regulation S or Rule 144A under the Act. Accordingly, each Purchaser agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and it and they have complied and will comply with the offering restrictions requirement of Regulation S. Each Purchaser agrees that, at or prior to confirmation of sale of Securities (other than a sale pursuant to Rule 144A) it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Act. Terms used above have the meaning given to them by Regulation S." Terms used in this paragraph have the meanings given to them by Regulation S. Each Purchaser further agrees that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Securities, except with its affiliates or with the prior written consent of the Company. (2) Notwithstanding the foregoing, Securities in registered form may be offered, sold and delivered by the Purchasers in the United States and to U.S. persons pursuant to Section 3 of this Agreement without delivery of the written statement required by paragraph (1) above. (3) Each Purchaser further represents and agrees that: (i) it has not offered or sold and, prior to the date that is six months after the date of issue of the Securities, will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied, and will comply, with all applicable provisions of the Financial Services and Markets Act 2000 (the "FSMA") with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Securities in circumstances in which section 21(1) of the FSMA does not apply to the Company or the Guarantor. F-1 (4) Each Purchaser agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. Each Purchaser understands that no action has been taken to permit a public offering in any jurisdiction outside the United States where action would be required for such purpose. Each Purchaser agrees not to cause any advertisement of the Securities to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Securities, except in any such case with J.P. Morgan Securities Inc.'s express written consent and then only at its own risk and expense. F-2 EX-1.3 5 mar2202_ex0103.txt EXHIBIT 1.3 EXECUTION COPY $550,000,000 H. J. Heinz Finance Company 6.75% Guaranteed Notes due March 15, 2032 unconditionally and irrevocably guaranteed by H. J. Heinz Company ------------ Purchase Agreement ------------------ February 28, 2002 J.P. Morgan Securities Inc., As representative of the several Purchasers named in Schedule I to the Purchase Agreement 270 Park Avenue, New York, New York 10017 Ladies and Gentlemen: H.J. Heinz Finance Company, a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Purchasers named in Schedule I hereto (the "Purchasers") an aggregate of $550,000,000 principal amount of its 6.75% Guaranteed Notes due March 15, 2032. The Notes will be unconditionally and irrevocably guaranteed as to the payment of principal and interest (the "Guarantees") by H.J. Heinz Company, a Pennsylvania corporation (the "Guarantor"). The Notes and the Guarantees are hereinafter collectively referred to as the "Securities". 1. The Company (in respect of itself) and the Guarantor (in respect of itself and the Company) represent and warrant to, and agree with, each of the Purchasers that: (a) An offering memorandum, dated February 28, 2002 (the "Offering Memorandum"), which incorporates by reference the Guarantor's Annual Report on Form 10-K for the fiscal year ended May 2, 2001, its Quarterly Reports on Form 10-Q for the quarters ended August 1, 2001 and October 31, 2001, and its Current Reports on Form 8-K dated June 26, 2001, September 17, 2001 and November 13, 2001, has been prepared in connection with the offering of the Securities. Any reference to the Offering Memorandum, as amended or supplemented, as of any specified date, shall be deemed to include (i) any documents filed with the Securities and Exchange Commission (the "Commission") pursuant to Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the date of the Offering Memorandum and prior to such specified date and (ii) any Additional Issuer Information (as defined in Section 5(f)) furnished by the Company or the Guarantor prior to the completion of the distribution of the Securities; and all documents filed under the Exchange Act and so deemed to be included in the Offering Memorandum, or any amendment or supplement thereto, are hereinafter called the "Exchange Act Reports". The Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder. The Offering Memorandum and any amendments or supplements thereto and the Exchange Act Reports did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a Purchaser through you expressly for use therein; (b) None of the Company, the Guarantor nor any of the Guarantor's subsidiaries (including the Company) has sustained since the date of the latest audited consolidated financial statements of the Guarantor incorporated by reference in the Offering Memorandum any material loss or interference with its business otherwise than as set forth or contemplated in the Offering Memorandum; and, since the respective dates as of which information is given in the Offering Memorandum, there has not been any change in the capital stock or long-term debt of the Guarantor and its subsidiaries (including the Company), or any material adverse change, or any development that is reasonably likely to cause a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries (including the Company), taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum; (c) The Guarantor and the Guarantor's principal domestic subsidiaries (the Company, H.J. Heinz Company, L.P., CMH, Inc., Trademark Management Company, and Promark International, Inc., collectively, the "Principal Subsidiaries"), have good and marketable title to all real property and to all personal property owned by them; (d) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with power and authority to own its properties and conduct its business as described in the Offering Memorandum, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except to the extent that the failure to be so qualified in any such jurisdiction would not have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; and each other Principal Subsidiary has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization, with power and authority to own its properties and conduct its business as described in the Offering Memorandum; (e) Each of the Company and the Guarantor has an authorized capitalization as set forth in the Offering Memorandum, and all of the issued shares of capital stock of the Company and the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; 2 and all of the issued shares of capital stock or partnership interests, as the case may be, of each other Principal Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors' qualifying shares and except as otherwise set forth in the Offering Memorandum) are owned directly or indirectly by the Company or the Guarantor, as the case may be, free and clear of all liens, encumbrances, equities or claims; (f) The Securities have been duly authorized and, when issued and delivered pursuant to this Agreement and the Indenture (hereinafter defined) will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Company and the Guarantor entitled to the benefits provided by the Indenture dated as of July 6, 2001 (the "Indenture"), between the Company and Bank One, National Association, as Trustee (the "Trustee"), under which they are to be issued; the Indenture has been duly authorized, executed and delivered by the Company and the Guarantor, and constitutes a valid and legally binding instrument, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; and the Securities and the Indenture will conform to the descriptions thereof in the Offering Memorandum; (g) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations G, T, U, and X of the Board of Governors of the Federal Reserve System; (h) Prior to the date hereof, neither the Company, the Guarantor nor any of their affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company or the Guarantor in connection with the offering of the Securities; (i) The issue and sale of the Securities and the compliance by the Company and the Guarantor with all of the provisions of the Securities, the Indenture and this Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or the Guarantor is a party or by which the Company or the Guarantor is bound or to which any of the property or assets of the Company or the Guarantor is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or the Guarantor or any of either of their respective properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities or the consummation by the Company or the Guarantor of the transactions contemplated by this Agreement or the Indenture, except for the filing of a registration statement by the Company and the Guarantor with the Commission pursuant to the Securities Act of 1933, as amended (the "Act"), pursuant to Section 5(l) hereof, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers; 3 (j) None of the Guarantor, the Company or the other Principal Subsidiaries is in violation of its Certificate of Incorporation or By-laws or Partnership Agreement, as the case may be, or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound, which default has not been irrevocably waived and would have a material adverse effect on the business, operations or financial condition of the Company or the Guarantor and its subsidiaries taken as a whole; (k) The statements set forth in the Offering Memorandum under the caption "Description of the Notes", insofar as they purport to constitute a summary of the terms of the Securities, and under the caption "Plan of Distribution", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, and fair; (l) Other than as set forth in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Guarantor, the Company or any of the other Principal Subsidiaries is a party or, to the Company's and the Guarantor's knowledge, of which any property of the Guarantor, the Company or any of the other Principal Subsidiaries is the subject, which, if determined adversely to the Company or the Guarantor or any of its subsidiaries, would have a material adverse effect on the consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor and its subsidiaries (including the Company) taken as a whole; and, to the best of the Company's and the Guarantor's knowledge, no such proceedings have been overtly threatened; (m) When the Securities are issued and delivered pursuant to this Agreement, the Securities will not be of the same class (within the meaning of Rule 144A under the Act) as securities which are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system; (n) The Guarantor is a "reporting issuer" as defined by Regulation S under the Act; (o) The Company is not and, after giving effect to the offering and sale of the Securities, will not be an "investment company", as such term is defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (p) Neither the Company, the Guarantor nor any person acting on its or their behalf has offered or will offer or sell the Securities by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act or, with respect to Securities sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act, and the Company and the Guarantor and any person acting on its or their behalf have complied with and will comply with the offering restriction requirements of Rule 903 under the Act; (q) Within the preceding six months, neither the Company nor any other person acting on behalf of the Company has offered or sold to any person any of the Securities, or any securities of the same or a similar class as the Securities, other than Securities offered or sold to the Purchasers hereunder. The Company will take reasonable precautions designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Act) of any Securities or any substantially similar security issued by the Company, within six months 4 subsequent to the date on which the distribution of the Securities has been completed (as notified to the Company by you), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Securities in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Act; and (r) PricewaterhouseCoopers LLP, who have audited certain financial statements of the Company, the Guarantor and its subsidiaries, are independent public accountants with respect to the Company, the Guarantor and its subsidiaries as required by the Act and the rules and regulations of the Commission thereunder. 2. Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each of the Purchasers, and each of the Purchasers agrees, severally and not jointly, to purchase from the Company, at a purchase price of 98.461% of the principal amount thereof, plus accrued interest, if any, from March 7, 2002 to the Time of Delivery hereunder, the principal amount of Securities set forth opposite the name of such Purchaser in Schedule I hereto. 3. Upon the authorization by you of the release of the Securities, the several Purchasers propose to offer the Securities for sale upon the terms and conditions set forth in this Agreement and the Offering Memorandum and each Purchaser hereby represents and warrants to, and agrees with the Company and the Guarantor that: (a) It will offer and sell the Securities only to: (i) persons who it reasonably believes are "qualified institutional buyers" ("QIBs") within the meaning of Rule 144A under the Act in transactions meeting the requirements of Rule 144A or (ii) upon the terms and conditions set forth in Annex I to this Agreement; and (b) It will not offer or sell the Securities by any form of general solicitation or general advertising, including but not limited to the methods described in Rule 502(c) under the Act. 4. (a) The Securities to be purchased by each Purchaser hereunder will be represented by one or more definitive global Securities in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian. The Company will deliver the Securities to you, for the account of each Purchaser, against payment by or on behalf of such Purchaser of the purchase price therefor in Federal (same day) funds, by causing DTC to credit the Securities to your account at DTC. The Company will cause the certificates representing the Securities to be made available to you for checking at least twenty-four hours prior to the Time of Delivery (as defined below) at the office of DTC or its designated custodian (the "Designated Office"). For purposes of Rule 15c6-1 of the Exchange Act, the Time of Delivery shall be the date and time for the payment of funds and delivery of securities for all of the Securities sold pursuant to the offering. The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on March 7, 2002 or such other time and date as you and the Company may agree upon in writing. Such time and date are herein called the "Time of Delivery". (b) The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Securities and any additional documents requested by the Purchasers pursuant to Section 7(g) hereof, will be delivered at such time and date at the offices of H.J. Heinz Finance Company, 600 Grant Street, 60th Floor, Pittsburgh, 5 PA 15219 (the "Closing Location"), and the Securities will be delivered at the Designated Office, all at the Time of Delivery. A meeting will be held at the Closing Location at 2:00 p.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. Each of the Company (in respect of itself) and the Guarantor (in respect of itself and the Company) agrees with each of the Purchasers: (a) To make no amendment or any supplement to the Offering Memorandum which shall be disapproved by you promptly after reasonable notice thereof; and to furnish the Purchasers with copies thereof; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Securities for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities, provided that in connection therewith neither the Company nor the Guarantor shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) To furnish the Purchasers with ten copies of the Offering Memorandum and each amendment or supplement thereto signed by an authorized officer of the Company and the Guarantor with the independent accountants' reports included or incorporated by reference in the Offering Memorandum, and any amendment or supplement containing amendments to the financial statements covered by such report(s), signed by the accountants, and to furnish additional written and electronic copies thereof in such quantities as you may from time to time reasonably request, and if, at any time prior to the expiration of nine months after the date of the Offering Memorandum, any event shall have occurred as a result of which the Offering Memorandum as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Offering Memorandum is delivered, not misleading, or, if for any other reason it shall be necessary or desirable during such same period to amend or supplement the Offering Memorandum, to notify you and upon your request to prepare and furnish without charge to each Purchaser and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Offering Memorandum or a supplement to the Offering Memorandum which will correct such statement or omission or effect such compliance; (d) During the period beginning from the date hereof and continuing to and including the Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any debt securities of the Company which mature more than one year after the Time of Delivery and which are substantially similar to the Securities, without your prior written consent; (e) Not to be or become, at any time prior to the expiration of two years after the Time of Delivery, an open-end investment company required to be registered under Section 8 of the Investment Company Act; 6 (f) At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of the Securities, to furnish at its expense, upon request, to holders of the Securities and prospective purchasers of securities information (the "Additional Issuer Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act; (g) If requested by you, to use its best efforts to cause the Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc.; (h) During the period of two years after the Time of Delivery, the Guarantor and the Company will not, and will not permit any of their "affiliates" (as defined in Rule 144 under the Act) to, resell any of the Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them; (l) The Company and the Guarantor shall enter into an Exchange and Registration Rights Agreement with the Purchasers pursuant to which the Company and the Guarantor shall agree to file and use its best efforts to cause to be declared or become effective under the Act, on or prior to 180 days after the Time of Delivery, a registration statement on Form S-4 providing for the registration of another series of debt securities of the Company, with terms identical to the Securities (the "Exchange Securities"), and the exchange of the Securities for the Exchange Securities, all in a manner which will permit persons who acquire the Exchange Securities to resell the Exchange Securities pursuant to Section 4(1) of the Act. (m) To use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Offering Memorandum under the caption "Use of Proceeds". 6. The Company and the Guarantor covenant and agree with the several Purchasers that the Company or the Guarantor will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's and the Guarantor's counsel and accountants in connection with the issue and listing of the Securities, the preparation and delivery of the Securities, and the preparation, printing and filing of the Offering Memorandum and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Purchasers and dealers; (ii) the cost of printing or producing any Agreement among Purchasers, this Agreement, the Indenture, any Blue Sky and legal investment surveys, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities; (iii) all expenses in connection with the qualification of the Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Purchasers in connection with such qualification and in connection with the Blue Sky and legal investment surveys; (iv) any fees charged by securities rating services for rating the Securities; (v) the cost of preparing the Securities; (vi) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities; and (vi) all other costs and expenses incident to the performance of the Company's and the Guarantor's obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on resale of any of the Securities by them, and any advertising expenses connected with any offers they may make. 7 7. The obligations of the Purchasers hereunder shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company and the Guarantor herein are, at and as of the Time of Delivery, true and correct, the condition that each of the Company and the Guarantor shall have performed all of its respective obligations hereunder theretofore to be performed, and the following additional conditions: (a) Sullivan & Cromwell, counsel for the Purchasers, shall have furnished to you such opinion or opinions, dated the Time of Delivery, with respect to the matters covered in paragraphs (i), (vi), (vii), (viii), (xii), (xiv) and (xv) of subsection (b) below as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. In rendering such opinion or opinions, Sullivan & Cromwell may rely as to all matters governed by Pennsylvania law upon the opinion referred to in subsection (b) of this Section 7; (b) Theodore N. Bobby, Vice President - Legal Affairs of the Guarantor, or an Assistant General Counsel of the Guarantor, shall have furnished to you his written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) Each of the Company and the Guarantor has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Offering Memorandum; (ii) Each of the Company and the Guarantor has an authorized capitalization as set forth in the Offering Memorandum, and all of the issued shares of capital stock of the Company and the Guarantor have been duly and validly authorized and issued and are fully paid and non-assessable; (iii) Each of the Company and the Guarantor has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except as failure to qualify would not have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; (iv) Each other Principal Subsidiary has been duly organized and is validly existing in good standing under the laws of its jurisdiction of organization; and all of the issued shares of capital stock or partnership interests, as the case may be, of each such Principal Subsidiary have been duly and validly authorized and issued, are fully paid and non-assessable, and (except for directors' qualifying shares and except as otherwise set forth in the Offering Memorandum) are owned directly or indirectly by the Guarantor; (v) To the best of such counsel's knowledge and other than as set forth in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company or the Guarantor or any of its subsidiaries is a party or of which any property of the Company or the Guarantor or any of its subsidiaries is the subject which, if determined adversely, would have a material adverse effect on the consolidated financial position, stockholders' equity or results of operations of the Company or the Guarantor and its subsidiaries taken as a whole; 8 and, to the best of such counsel's knowledge, no such proceedings have been overtly threatened; (vi) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantor; (vii) The Guarantees have been duly authorized, executed and delivered by the Guarantor and constitute valid and legally binding obligations of the Guarantor entitled to the benefits provided by the Indenture; the Notes, including the temporary global Notes offered and sold in offshore transactions in reliance on Regulation S, have been duly authorized, executed, authenticated, issued and delivered by the Company and constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; the permanent global Notes have been duly authorized, and when executed, authenticated, issued and delivered in exchange for the temporary global Notes, in accordance with the terms of the Indenture, will have been duly executed, authenticated, issued and delivered by the Company and will constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; and the Securities and the Indenture conform, and will conform, as the case may be, to the descriptions thereof in the Offering Memorandum; (viii) The Indenture has been duly authorized, executed and delivered by the parties thereto and constitutes a valid and legally binding instrument, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; (ix) The issue and sale of the Securities and the compliance by the Company and the Guarantor with all of the provisions of the Securities, the Indenture and this Agreement, and the consummation of the transactions herein and therein contemplated, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Guarantor or the Company is a party or by which the Guarantor or the Company is bound or to which any of the property or assets of the Company or the Guarantor is subject, nor will such actions result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Guarantor or the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Guarantor or the Company or any of their properties; (x) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities or the consummation by the Company and the Guarantor of the transactions contemplated by this Agreement or the Indenture, except such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Purchasers; (xi) Neither the Guarantor, the Company nor any of the other Principal Subsidiaries is in violation of its Certificate of Incorporation (or Partnership Agreement, as the case may be) or By-laws or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may 9 be bound which would have a material adverse effect on the Guarantor and its subsidiaries (including the Company) taken as a whole; (xii) The statements set forth in the Offering Memorandum under the caption "Description of Notes", insofar as they purport to constitute a summary of the terms of the Securities, are complete and accurate in all material respects; (xiii)The Exchange Act Reports (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder; and such counsel has no reason to believe that any of such documents, when they were so filed, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such documents were so filed, not misleading; (xiv) No registration of the Securities under the Act, and no qualification of an indenture under the Trust Indenture Act of 1939 with respect thereto, is required for the offer, sale and initial resale of the Securities by the Purchasers in the manner contemplated by this Agreement, including Annex I hereto, and the Offering Memorandum; (xv) Although such counsel does not assume any responsibility for the completeness or accuracy of the statements contained in the Offering Memorandum, except for those referred to in subsection (xii) of this Section 7(b), such counsel has no reason to believe that the Offering Memorandum and any further amendments or supplements thereto made by the Company or the Guarantor prior to the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) contained as of its date or contains as of the Time of Delivery an untrue statement of a material fact or omitted or omits, as the case may be, to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (xvi) Neither the Company nor the Guarantor is an "investment company", as such term is defined in the Investment Company Act. In rendering such opinion or opinions, Mr. Bobby or such Assistant General Counsel of the Guarantor may rely as to all matters governed by the law of the State of New York upon the opinion of Sullivan & Cromwell referred to in subsection (a) of this Section 7. (c) On the date of the Offering Memorandum prior to the execution of this Agreement and also at the Time of Delivery, PricewaterhouseCoopers LLP shall have furnished to you, in your role as Underwriters of the Securities, a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, as to such matters as you may reasonably request. (d) (i) None of the Company and its subsidiaries, nor the Guarantor and its subsidiaries (including the Company) shall have sustained, since the date of the latest audited financial statements of the Guarantor incorporated by reference in the Offering Memorandum, any loss or interference with its business, otherwise than as set forth or contemplated in the Offering 10 Memorandum, and (ii) since the respective dates as of which information is given in the Offering Memorandum, there shall not have been any change in the capital stock or long-term debt of the Guarantor and its subsidiaries (including the Company), or of the Company and its subsidiaries, or any change, or any development that is reasonably likely to cause a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Guarantor and its subsidiaries (including the Company) taken as a whole, or of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (i) or (ii), is in your judgment so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in this Agreement and in the Offering Memorandum; (e) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the debt securities of, or guaranteed by, the Guarantor by any "nationally recognized statistical rating organization", as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the debt securities of, or guaranteed by, the Guarantor; (f) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange; (ii) a suspension or material limitation in trading in the Guarantor's common stock on the New York Stock Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption of commercial banking or securities settlement or clearance services in the United States; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this clause (iv) in your judgment makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in the Offering Memorandum; (g) Each of the Guarantor and the Company shall have furnished or caused to be furnished to you at the Time of Delivery certificates of officers of the Guarantor and the Company satisfactory to you as to the accuracy of the representations and warranties of the Guarantor and the Company herein at and as of such Time of Delivery, as to the performance by the Guarantor and the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsection (d) of this Section and as to such other matters as you may reasonably request. 8. (a) The Guarantor (in respect of itself and the Company) and the Company (in respect of itself) will indemnify and hold harmless each Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made, not misleading, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such action or claim as such expenses are incurred; provided, 11 however, that neither the Company nor the Guarantor shall be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Memorandum or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company and/or the Guarantor by any Purchaser through you expressly for use therein. (b) Each Purchaser, severally and not jointly, will indemnify and hold harmless each of the Company and the Guarantor against any losses, claims, damages or liabilities to which the Company or the Guarantor may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Memorandum or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company or the Guarantor by such Purchaser through you expressly for use therein; and will reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company or the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, 12 claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor on the one hand and the Purchasers on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company or the Guarantor on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantor on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Guarantor bear to the total underwriting discounts and commissions received by the Purchasers, in each case as set forth in the Offering Memorandum. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Guarantor on the one hand or the Purchasers on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantor and the Purchasers agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to investors were offered to investors exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. No party guilty of fraudulent misrepresentation shall be entitled to contribution by any person who was not guilty of fraudulent misrepresentation. (e) The obligations of the Company and the Guarantor under this Section 8 shall be in addition to any liability which the Company or the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Act; and the obligations of the Purchasers under this Section 8 shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and the Guarantor and to each person, if any, who controls the Company or the Guarantor within the meaning of the Act. 9. (a) If any Purchaser shall default in its obligation to purchase the Securities which it has agreed to purchase hereunder, you may in your discretion arrange for you or another party or other parties to purchase such Securities on the terms contained herein. If within thirty-six hours after such default by any Purchaser you do not arrange for the purchase of such Securities, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other 13 parties satisfactory to you to purchase such Securities on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Securities, or the Company notifies you that it has so arranged for the purchase of such Securities, you or the Company shall have the right to postpone the Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Offering Memorandum, or in any other documents or arrangements, and the Company agrees to prepare promptly any amendments to the Offering Memorandum which in your opinion may thereby be made necessary. The term "Purchaser" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Securities. (b) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by the non-defaulting Purchasers and the Company as provided in subsection (a) above, the aggregate principal amount of such Securities which remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the Securities, then the Company shall have the right to require each non-defaulting Purchaser to purchase the principal amount of Securities which such Purchaser agreed to purchase hereunder and, in addition, to require each non-defaulting Purchaser to purchase its pro rata share (based on the principal amount of Securities which such Purchaser agreed to purchase hereunder) of the Securities of such defaulting Purchaser or Purchasers for which such arrangements have not been made; but nothing herein shall relieve a defaulting Purchaser from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Purchaser or Purchasers by you and the Company as provided in subsection (a) above, the aggregate principal amount of Securities which remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Securities, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Purchasers to purchase Securities of a defaulting Purchaser or Purchasers, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Purchaser or the Company or the Guarantor, except for the expenses to be borne by the Company, the Guarantor and the Purchasers as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Purchaser from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Guarantor and the several Purchasers, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Purchaser or any controlling person of any Purchaser, or the Company or the Guarantor, or any officer or director or controlling person of the Company or the Guarantor, and shall survive delivery of and payment for the Securities. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, neither the Company nor the Guarantor shall then be under any liability to any Purchaser except as provided in Sections 6 and 8 hereof; but, if for any other reason, the Securities are not delivered by or on behalf of the Company as provided herein, the Company or the Guarantor will reimburse the Purchasers through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Purchasers in making preparations for the purchase, sale and 14 delivery of the Securities, but neither the Company nor the Guarantor shall then be under further liability to any Purchaser except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Purchasers, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Purchaser made or given by you. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Purchasers shall be delivered or sent by mail or facsimile transmission to you as the representatives in care of J.P. Morgan Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Transaction Execution Group; and if to the Company or the Guarantor shall be delivered or sent by mail or facsimile transmission to the Company and the Guarantor at 600 Grant Street, 60th Floor, Pittsburgh, Pennsylvania 15219, Attention: President (for the Company) and Treasurer (for the Guarantor); provided, however, that any notice to a Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail or facsimile transmission to such Purchaser at its address set forth in its Purchasers' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company or the Guarantor by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Purchasers, the Company, the Guarantor and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and the Guarantor and each person who controls the Company or the Guarantor or any Purchaser, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Securities from any Purchaser shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 15 If the foregoing is in accordance with your understanding, please sign and return to us one for each of the Company and the Guarantor and each of the Purchasers plus one for each counsel counterparts thereof, and upon the acceptance hereof by you, on behalf of each of the Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the Purchasers and the Company and the Guarantor. It is understood that your acceptance of this letter on behalf of each of the Purchasers is pursuant to the authority set forth in a form of Agreement among Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, H.J. Heinz Finance Company By: /s/ Leonard A. Cullo, Jr. ---------------------------- Name: Leonard A. Cullo, Jr. Title: President Very truly yours, H.J. Heinz Company By: /s/ Leonard A. Cullo, Jr. ---------------------------- Name: Leonard A. Cullo, Jr. Title: Treasurer Accepted as of the date hereof: J.P.Morgan Securities Inc. By: /s/ Maria Sramek --------------------------------- Name: Maria Sramek Title: Vice President On behalf of each of the Purchasers 16 SCHEDULE I Principal Amount of Securities to be Purchaser Purchased --------- ----------- J. P. Morgan Securities Inc........................................ $192,500,000 Banc of America Securities LLC..................................... $192,500,000 UBS Warburg LLC.................................................... $27,500,000 Goldman, Sachs & Co. .............................................. $27,500,000 HSBC Securities (USA) Inc. ........................................ $27,500,000 Lehman Brothers Inc................................................ $27,500,000 ABN AMRO Incorporated.............................................. $11,000,000 Banc One Capital Markets Inc....................................... $11,000,000 BNP Paribas Securities Corp........................................ $11,000,000 Mizuho International plc........................................... $5,500,000 NatCity Investments, Inc........................................... $5,500,000 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., $5,500,000 "Rabobank International," London Branch............................ SG Cowen Securities Corporation.................................... $5,500,000 ----------- $550,000,000 ============ 17 ANNEX I (1) The Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act. Each Purchaser represents that it has offered and sold the Securities, and will offer and sell the Securities (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Time of Delivery, only in accordance with Rule 903 of Regulation S or Rule 144A under the Act. Accordingly, each Purchaser agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and it and they have complied and will comply with the offering restrictions requirement of Regulation S. Each Purchaser agrees that, at or prior to confirmation of sale of Securities (other than a sale pursuant to Rule 144A) it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Act. Terms used above have the meaning given to them by Regulation S." Terms used in this paragraph have the meanings given to them by Regulation S. Each Purchaser further agrees that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Securities, except with its affiliates or with the prior written consent of the Company. (2) Notwithstanding the foregoing, Securities in registered form may be offered, sold and delivered by the Purchasers in the United States and to U.S. persons pursuant to Section 3 of this Agreement without delivery of the written statement required by paragraph (1) above. (3) Each Purchaser further represents and agrees that: (i) it has not offered or sold and, prior to the date that is six months after the date of issue of the Securities, will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied, and will comply, with all applicable provisions of the Financial Services and Markets Act 2000 (the "FSMA") with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Securities in circumstances in which section 21(1) of the FSMA does not apply to the Company or the Guarantor. F-1 (4) Each Purchaser agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. Each Purchaser understands that no action has been taken to permit a public offering in any jurisdiction outside the United States where action would be required for such purpose. Each Purchaser agrees not to cause any advertisement of the Securities to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Securities, except in any such case with J.P. Morgan Securities Inc.'s express written consent and then only at its own risk and expense. F-2 EX-3.1 6 mar2202_ex0301.txt EXHIBIT 3.1 CERTIFICATE OF INCORPORATION of ORE-IDA FOODS JAPAN, INC. 1. The name of the corporation is Ore-Ida Foods Japan, Inc. 2. The address of its registered office in the State of Delaware is No. 100 West Tenth Street, City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to grow, process, freeze, market, buy, sell store and generally deal in and with agricultural products of every nature and description; and to conduct any lawful business, to promote any lawful purpose and to engage in any lawful act or activity for which corporation may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is one thousand (1,000) shares of Common Stock, par value $1.00 per share. 5. The name and mailing address of the incorporator is as follows: NAME MAILING ADDRESS ---- --------------- Ore-Ida Foods, Inc., Post Office Box 10 a Delaware Corporation Boise, Idaho 83707 6. The corporation is to have perpetual existence. 7. In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized; (a) To make, alter or repeal the by-laws of the corporation. (b) To authorized and cause to be executed mortgages and liens upon the real and personal property of the corporation. (c) To set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. (d) By a majority of the whole board, to designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The by-laws may provide that in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified form voting whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, or in the by-laws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it ; but no such committee shall have power or authority to amend the certificate of incorporation, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommend to the stockholder a dissolution, or amend the by-laws of the corporation; and, unless the resolution or by-laws expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. (e) When and as authorized by the stockholders in accordance with statute, to sell, lease or exchange all or substantially all of the property and assets of the corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including shares of stock in, and/or other securities of, any other corporation or corporations, as its board of directors shall deem expedient and for the best interests of the corporation. 8. Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provision of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourth in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of 2 such compromise or arrangement, and the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. 9. Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the corporation may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. 10. The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute and all rights conferred upon stockholders herein are granted subject to this reservation. THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, does make this certificate, hereby declaring ad certifying that this is its act and deed and the facts herein stated are true, and accordingly has hereunto executed this certificate this 9th Day of December 1983. Attest: ORE-IDA FOODS, INC. By /s/ J. G. Mueller By /s/ F. T. Osborne ----------------------------------- ---------------------------------- J. G. Mueller F. T. Osborne Treasurer and Assistant Secretary Vice President-Finance and Secretary (Corporate Seal) 3 CERTIFICATE OF AMENDMENT of CERTIFICATE OF INCORPORATION Ore-Ida Foods Japan, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, by the unanimous written consent of its members, filed with the minutes of the Board, adopted resolutions proposing and declaring advisable the following amendments to be Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of Ore-Ida Foods Japan, Inc. be amended by changing the first article thereof so that, as amended, said article shall be and read as follows: "1. The name of the corporation is H. J. Heinz Finance Company." FURTHER RESOLVED, that the Certificate of Incorporation of Ore-Ida Foods Japan, Inc. be amended by changing the third article thereof so that, as amended, said article shall be and read as follows: "3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware including, but not limited to, to manufacture, produce, buy, sell and generally deal in food and grocery products and goods, wares, merchandise and personal property of every kind and description." FURTHER RESOLVED, that the Certificate of Incorporation of Ore-Ida Foods Japan, Inc. be amended by changing the fourth article thereof so that, as amended, said article shall be and read as follows: "4. The total number of shares which the corporation shall have authority to issue is one million one thousand (1,001,000) shares of Common Stock, par value $1.00 per share." FURTHER RESOLVED, that the Certificate of Incorporation of Ore-Ida Foods Japan, Inc. be amended by the addition of an eleventh article thereto that shall be and read as follows: "11 A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit." SECOND: That in lieu of a meeting and vote of shareholders, the sole shareholder has given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this Certificate is executed as of this 11th day of October, 2000. ORE-IDA FOODS JAPAN, INC. By: /s/ Leonard A. Cullo, Jr. ------------------------------------- Name: Leonard A. Cullo, Jr. Title: Vice President and Treasurer CERTIFICATE OF AMENDMENT of CERTIFICATE OF INCORPORATION H. J. Heinz Finance Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said Corporation, by the unanimous written consent of its members, filed with the minutes of the Board, adopted resolutions proposing and declaring advisable the following amendments to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of H. J. Heinz Finance Company be amended by changing the fourth article thereof so that, as amended, said article shall be and read as follows: "4. (a) The total of number of shares which the Corporation shall have authority to issue is one million one thousand (1,001,000) shares of Common Stock, par value $1.00 per share (the "Common Stock") and five thousand (5,000) shares of Preferred Stock, without par value (the "Preferred Stock"). (b) The Board of Directors is hereby empowered to authorize by resolution of resolutions from time to time the issuance of one or more classes or series of Preferred Stock and to fix the designations, powers, preferences and relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, if any, with respect to each such class or series of Preferred Stock and the number of shares constituting each such class or series, and to increase or decrease the number of shares of any such class or series to the extent permitted by the General Corporation Law of the State of Delaware, as amended from time to time. FURTHER RESOLVED, that the Certificate of Incorporation of H. J. Heinz Finance Company be amended by changing the eleventh article thereof so that, as amended, said article shall be and read as follows: "11. (a) A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director to the fullest extent permitted by Delaware Law. (b) (i) Each person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the corporation or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by Delaware Law. The right to indemnification conferred in this Article 11 shall also include the right to be paid by the Corporation expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent authorized by Delaware Law. The right to indemnification conferred in this Article 11 shall be a contract right. (ii) The Corporation may, by action of its Board of Directors, provide indemnification to such of the officers, employees and agents of the Corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by Delaware Law. (c) The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under Delaware Law. (d) The rights and authority conferred in this Article 11 shall not be exclusive of any other right which any person may otherwise have or hereafter acquire. 3 (e) Neither the amendment nor repeal of this Article 11, nor the adoption of any provision of this Certificate of incorporation or the bylaws of the Corporation, nor, to the fullest extent permitted by Delaware Law, any modification of law, shall eliminate or reduce the effect of this Article 11 in respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification." SECOND: That in lieu of a meeting and a vote of shareholders, the sole shareholder has given written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 242 and 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, this certificate is executed as of this 8th day of March 2001. H.J. HEINZ FINANCE COMPANY By: /s/ Leonard A. Cullo, Jr. ----------------------------- Name: Leonard A. Cullo, Jr. Title: Vice President and Treasurer CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF VOTING CUMULATIVE PREFERRED STOCK, SERIES A of H. J. HEINZ FINANCE COMPANY Pursuant to Section 151 of the General Corporation Law of the State of Delaware I, the undersigned, Leonard A. Cullo, President of H. J. Heinz Finance Company, a Delaware corporation (hereinafter called the "Corporation"), pursuant to the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware, do hereby make this Certificate of Designations and do hereby state and certify that pursuant to the authority expressly vested in the board of directors of the Corporation (the "Board of Directors") by the Certificate of Incorporation, the Board of Directors duly adopted the following resolution: RESOLVED, that, pursuant to Article 4 of the Certificate of Incorporation, which authorizes 5,000 shares of preferred stock, no par value (the "Preferred Stock"), the Board of Directors hereby fixes the powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of a series of Preferred Stock. RESOLVED, that each share of such series of Preferred Stock shall rank equally in all respects and shall be subject to the following provisions: 1. Number of Shares and Designation. 3,250 shares of the Preferred Stock of the Corporation shall be designated as Voting Cumulative Preferred Stock, Series A (the "Series A Preferred Stock"). 2. Rank. (a) The Series A Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution and winding up, rank senior to the common stock of the Corporation, $1.00 par value (the "Common Stock") and all other classes or series of equity securities of the Corporation now or hereafter issued (collectively with the Common Stock, "Junior Securities"), except equity securities of the Corporation expressly designated as ranking at parity (whether with respect to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock (collectively, the "Parity Securities") and any indebtedness of the Corporation and its subsidiaries. So long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not, without the approval of a majority of the Independent Directors (as defined herein) authorize, create, increase the authorized number of shares of or issue any Parity Securities if (i) immediately after such action the Consolidated Net Worth (as defined herein) of the Corporation would decline from the level immediately prior to such action or (ii) an Increased Dividend Rate Event or a Special Voting Rights Event (each as defined herein) has occurred and is continuing. (b) So long as any shares of Series A Preferred Stock remain outstanding, the Corporation shall not authorize, create or issue any shares that would rank senior to the Series A Preferred Stock (whether with respect to dividends or upon liquidation, dissolution, winding up or otherwise) (collectively, "Senior Securities"). (c) The Corporation may at any time issue additional Junior Securities without the consent of the holders of the Series A Preferred Stock or the Independent Directors. (d) The respective definitions of Senior Securities, Junior Securities, and Parity Securities shall also include any rights or options exercisable for or into any of the Senior Securities, Junior Securities and Parity Securities, as the case may be. The Series A Preferred Stock shall be subject to the creation of Junior Securities and Parity Securities, as provided herein. 3. Dividends. (a) The holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cash dividends at the annual rate of the stated liquidation preference per share ($100,000 per share) equal to 6.226% (the "Annual Dividend Rate"). Such dividends shall be payable in arrears in equal amounts quarterly on January 15, April 15, July 15 and October 15 of each year (unless such day is not a business day, in which event on the next succeeding business day) (each of such dates being a "Dividend Payment Date" and each such quarterly period being a "Dividend Period"), commencing October 15, 2001. Such dividends shall be cumulative from the date of issue, whether or not in any Dividend Period or Periods there shall be funds of the Corporation legally available for the payment of such dividends. Each dividend shall be payable to holders of record as they appear on the securities register of the Corporation on the corresponding record date. The record dates for the Series A Preferred Stock will be, for so long as the Series A Preferred Stock remains in book-entry form, one business day prior to the relevant Dividend Payment Date 2 and, in the event that any of the Series A Preferred Stock is not in book-entry form, the fifteenth day (whether or not a business day) prior to the relevant Dividend Payment Date. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date, not more than 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. (b) The amount of dividends payable for each full Dividend Period for the Series A Preferred Stock shall be computed by dividing the Annual Dividend Rate by four. The amount of dividends payable for the initial Dividend Period, or any other period shorter or longer than a full Dividend Period, on the Series A Preferred Stock shall be computed on the basis of twelve 30-day months and a 360-day year. Except as provided in Paragraphs 4 and 5 hereof, holders of shares of Series A Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Series A Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Stock that may be in arrears. (c) So long as any shares of the Series A Preferred Stock are outstanding, no dividends or other distributions (other than dividends or distributions in the form of Parity Securities or Junior Securities or dividends as described in the next succeeding sentence) shall be declared or paid or set apart for payment on Parity Securities, for any period unless full cumulative dividends have been or contemporaneously are declared and paid, or declared and a sum sufficient for the payment thereof set apart for such payment, on the Series A Preferred Stock for all Dividend Periods terminating on or prior to the date of payment of the dividend on such class or series of Parity Securities. When dividends are not paid in full, or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the Series A Preferred Stock and all dividends declared upon any Parity Securities shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Stock and accumulated and unpaid on such Parity Securities. (d) So long as any shares of the Series A Preferred Stock are outstanding, no dividends or other distributions (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities) shall be declared or paid or set apart for payment on Junior Securities, nor shall any Junior Securities be redeemed, purchased or otherwise acquired or funds set apart for redemption, purchase or acquisition of Junior Securities (all such dividends, distributions, redemptions or purchases being hereinafter referred to as a "Junior Securities Distribution") for any consideration (or any moneys be paid to or made available for a sinking fund 3 for the redemption of any shares of any such stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Securities), unless in each case (i) full cumulative dividends on all outstanding shares of the Series A Preferred Stock and any other Parity Securities shall have been paid or set apart for payment for all past Dividend Periods with respect to the Series A Preferred Stock and all past dividend periods with respect to such Parity Securities and (ii) sufficient funds shall have been paid or set apart for the payment of the dividend for the current Dividend Period with respect to the Series A Preferred Stock and the current dividend period with respect to such Parity Securities. (e) So long as any shares of the Series A Preferred Stock are outstanding, the Corporation shall not declare or make any Junior Securities Distribution (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Securities) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Securities), if an Increased Dividend Rate Event or a Special Voting Rights Event has occurred and is continuing or would result from such Junior Securities Distribution. 4. Increased Dividends. (a) If any Increased Dividend Rate Event has occurred and is continuing, holders of shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for the payment of dividends, in addition to any dividends otherwise accrued on the Series A Preferred Stock, a cash dividend (the "Additional Dividend") at an annual rate per share (the "Increased Dividend Rate") equal to the product of (i) the Annual Dividend Rate and (ii) 0.25. The amount of Additional Dividends payable shall be computed by multiplying the Increased Dividend Rate by a fraction, the numerator of which is (x) the number of days during the relevant Dividend Period such Increased Dividend Rate Event continues without cure and (y) the denominator of which is 360. Additional Dividends which shall have accrued shall be payable (if declared) on the next succeeding Dividend Payment Date to the holders of record of the shares of the Series A Preferred Stock on such record dates applicable to such Dividend Payment Date. For the avoidance of doubt, any Additional Dividends shall immediately cease to accrue upon the payment, discharge or other cure of such failure, action or other event giving rise to an Increased Dividend Rate Event. (b) As used herein, an "Increased Dividend Rate Event" means: (i) the Corporation shall have failed to pay accrued dividends (other than any Additional Dividends, but including Gross-Up Payments, if any) on the Series A Preferred Stock for any two Dividend Periods 4 (whether or not consecutive), and such failure continues for 30 days following written notice thereof from holders of at least 10% of the outstanding shares of Series A Preferred Stock; (ii) the Corporation shall have failed to pay or discharge its Mandatory Redemption Obligation (as defined herein) on the Redemption Date (as defined herein); (iii) the Corporation is merged, voluntarily liquidates or reorganizes, sells, leases, transfers or otherwise disposes of all or substantially all of its assets, effects any business combination with any person or permits any person to merge into it, or sell, lease, transfer or otherwise dispose of all or substantially all its assets, in each case at any time and without possibility of cure; provided that, such action shall not constitute an Increased Dividend Rate Event: if (1) in the case of a reorganization, merger, consolidation or other business combination, (A) if the Corporation survives, the Series A Preferred Stock maintains all the preferences, redemption and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions it had prior to such transaction and the Corporation remains an affiliate of H. J. Heinz Company, or (B) if the Corporation does not survive, (x) the surviving entity shall be H. J. Heinz Company or an affiliate of H. J. Heinz Company, (y) each holder of shares of the Series A Preferred Stock immediately prior to such transaction shall receive securities of the surviving entity with the same preferences, redemption and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions as the Series A Preferred Stock held by such holder immediately prior thereto and (z) no Trigger Event has occurred and is continuing and (2) both Standard & Poor's Rating Group and Moody's Investors Services, Inc. (or any successor thereto) affirm the rating of the Series A Preferred Stock (or, in the case of clause (B), the Securities of such surviving entity) as in effect immediately prior to such transaction, after giving effect to such action; or (iv) a Trigger Event occurs and is continuing for a period of 30 days following written notice to the Corporation from holders of at least 25% of outstanding shares of the Series A Preferred Stock. (c) As used herein, a "Trigger Event" means: (i) the failure by the Corporation to maintain, or the entry by the Corporation, without the vote or consent of holders of two-thirds of the shares of Series A Preferred Stock then outstanding, voting as a separate 5 class, at a meeting duly called and held, into any amendment (other than to increase the amount that may be borrowed thereunder) of, or consent to any non-compliance with, or waiver of its rights under, the Liquidity Agreement dated as of June 26, 2001 between the Corporation and H. J. Heinz Company or any other loan agreement or line of credit between the Corporation and one or more unaffiliated financial institutions the obligations of the Corporation under which are guaranteed by H. J. Heinz Company (such liquidity agreement or other agreement or line of credit being referred to herein as the "Liquidity Facility"); provided that a Trigger Event shall not include any such entry into any amendment, consent or waiver, without such vote or consent, with respect to the Liquidity Facility (1) adds to the rights, privileges or protections of the Corporation under the Liquidity Facility, (2) cures any ambiguity or corrects or supplements any provision contained in the Liquidity Facility that may be defective or inconsistent with any provisions contained therein or (3) makes such other provisions with regard to matters or questions arising under the Liquidity Facility that does not have a material adverse affect on the Corporation's credit quality. (ii) the Corporation shall fail to maintain a Minimum Net Worth Ratio as measured at the end of each fiscal quarter of the Corporation (each such date a "Testing Date") for a period of 30 days following notice of such failure to the Corporation from any holder of shares of Series A Preferred Stock. (d) As used herein, (i) "Minimum Net Worth Ratio" means a Consolidated Net Worth Ratio as of the Testing Date of not less than 100%, or at the Corporation's option with respect to any Testing Date, an Appraised Net Worth Ratio of not less than 125%. The Corporation will promptly provide written notice to each holder of Series A Preferred Stock of its election to apply the Appraised Net Worth Ratio with respect to a Testing Date, and will make available to holders of Series A Preferred Stock upon request the relevant Independent Appraisal Report. (ii) "Consolidated Net Worth Ratio" means the ratio of (i) the stockholders' equity of the Corporation and its consolidated subsidiaries (including for this purpose the Series A Preferred Stock and any Parity Securities if otherwise excluded) determined in accordance with U.S. GAAP ("Consolidated Net Worth") to (ii) then-applicable redemption price for the Series A Preferred Stock and any Parity Securities. 6 (iii) "Appraised Net Worth Ratio" means the ratio of (1) (a) the Appraised Company Net Worth as specified in the applicable Independent Appraisal Report less (b) the aggregate amount of any distributions by the Corporation with respect to, or for repurchase or redemption of, any Junior Securities made subsequent to such Independent Appraisal Report (to the extent not reflected therein) to (2) the then-applicable Redemption Price for the Series A Preferred Stock and any Parity Securities. (iv) "Appraised Company Net Worth" means the excess of (i) the fair value of the Corporation's unconsolidated assets over (ii) the Corporation's unconsolidated liabilities (excluding, for this purpose, the Series A Preferred Stock and any Parity Securities, if otherwise included), as specified in an appraisal report prepared by a nationally recognized firm of independent auditors or other independent specialists in the valuation field (an "Independent Appraisal Report"), which report is dated not earlier than nine months prior to the Testing Date. 5. DRP Adjustment. (a) If, prior to 18 months after the date of the original issuance of the Series A Preferred Stock, one or more amendments to the Internal Revenue Code of 1986, as amended (the "Code"), are enacted that reduce the percentage of the dividends-received deduction (it being understood such deduction currently is 70%) as specified in section 243(a)(1) of the Code or any successor provision (the "Dividends-Received Percentage"), the amount of each dividend payable (if declared) per share of Series A Preferred Stock for dividend payments made on or after the effective date of such change in the Code will be adjusted by multiplying the amount of the dividend payable described above (before adjustment) by the following fraction (the "DRD Formula"), and rounding the result to the nearest cent (with one-half cent rounded up): 1-.35(1-.70) -------------------- 1-.35(1-DRP) For the purposes of the DRD Formula, "DRP" means the Dividends-Received Percentage (expressed as a decimal) applicable to the dividend in question; provided, however, that if the Dividends-Received Percentage applicable to the dividend in question shall be less than 50%, then the DRP shall equal .50. Notwithstanding the foregoing provisions, if, with respect to any such amendment, the Corporation receives either an opinion of nationally recognized independent tax counsel or a private letter ruling or similar form of authorization from the Internal Revenue Service ("IRS") to the effect that such amendment does not apply to a dividend payable on the Series A Preferred Stock, then such amendment will not result in the adjustment provided for pursuant to the DRD Formula with respect to such dividend. 7 (b) If any such amendment to the Code specified in Paragraph 5(a) hereof is enacted and the reduction in the Dividends-Received Percentage retroactively applies to a Dividend Payment Date as to which the Corporation previously paid dividends on the Series A Preferred Stock (each, an "Affected Dividend Payment Date"), the Corporation will pay (if declared) additional dividends (the "Retroactive Dividends") on the next succeeding Dividend Payment Date to holders of Series A Preferred Stock on the Dividend Payment Record Date applicable to such Dividend Payment Date (or, if such amendment is enacted after the dividend payable on such Dividend Payment Date has been declared, to holders of Series A Preferred Stock on the Dividend Payment Record Date following the date of enactment) in an amount equal to the excess of (x) the product of the dividends paid by the Corporation on each Affected Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the greater of the Dividends-Received Percentage and .50 applied to each Affected Dividend Payment Date) over (y) the sum of the dividends paid by the Corporation on each Affected Dividend Payment Date. The Corporation will only make one payment of Retroactive Dividends for any such amendment. Notwithstanding the foregoing provisions, if, with respect to any such amendment, the Corporation receives either an opinion of nationally recognized independent tax counsel or a private letter ruling or similar form of guidance from the IRS to the effect that such amendment does not apply to a dividend payable on an Affected Dividend Payment Date for the Series A Preferred Stock, then such amendment will not result in the payment of Retroactive Dividends with respect to such Affected Dividend Payment Date. (c) For the avoidance of any doubt, no adjustment in the dividends payable by the Corporation shall be made, and no Retroactive Dividends shall be payable by the Corporation, in respect of the enactment of any amendment to the Code 18 months or more after the date of original issuance of the Series A Preferred Stock that reduces the Dividends-Received Percentage. (d) In the event that the amount of dividends payable per share of the Series A Preferred Stock is adjusted pursuant to the DRD Formula and/or Retroactive Dividends are to be paid, the Corporation will give notice of each such adjustment and, if applicable, any Retroactive Dividends to the holders of Series A Preferred Stock. 6. Earnings and Profits Gross-Up Payments. (a) If any distributions on shares of Series A Preferred Stock with respect to any taxable year of the Corporation are not eligible for the dividend received deduction for U.S. federal income tax purposes solely on account of insufficient current or accumulated earnings and profits of the Corporation ("Applicable Distribution(s)"), the Corporation will, within 120 days after the end of such taxable year, provide 8 notice thereof to each holder of shares of Series A Preferred Stock that was entitled to receive an Applicable Distribution during such taxable year. The Corporation shall, within 30 days after such notice is given, pay, out of lawful funds, to each such holder an amount equal to the aggregate Gross-Up Payment (as defined below) with respect to all Applicable Distributions during such taxable year. Gross-Up Payments, if not made when due, shall be treated as accrued and unpaid dividends on shares of Series A Preferred Stock. (b) As used herein, "Gross-Up Payment(s)" means payment with respect to an Applicable Distribution of an amount which, when taken together with such Applicable Distribution, would cause the net yield in dollars (after federal income tax consequences and treating, for purposes of calculating net yield in dollars, that portion of the Applicable Distribution otherwise treated as a return of capital as capital gain received upon the taxable sale or exchange of shares of Series A Preferred Stock) from the aggregate of both the Applicable Distributions and the Gross-Up Payment to be equal to the net yield in dollars (after U.S. federal income tax consequences) that would have been realized if the amount of the aggregate Applicable Distributions treated as a return of capital instead had been treated as a dividend for U.S. federal income tax purposes. Such Gross-Up Payment will be calculated without consideration being given to the time value of money, assuming the Gross-Up Payment is subject to tax as ordinary income, giving effect to the dividends received deduction (as adjusted pursuant to Paragraph 5 above) that would have applied to each such Applicable Distribution had it been treated as a dividend for U.S. federal income tax purposes, and using the maximum marginal corporate U.S. federal tax rate applicable to ordinary income and capital gains, as the case may be. The Corporation shall provide notice to each holder of shares of Series A Preferred Stock of the right to receive a Gross-Up Payment in respect of any taxable year of the Corporation, if applicable, no later than 120 days following the end of such year, and any applicable Gross- Up Payment will be due within 30 days of such notice. Gross-Up Payments, if not made when due, will be treated as accrued and unpaid dividends on the shares of Series A Preferred Stock. 7. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Securities, the holders of shares of Series A Preferred Stock shall be entitled to receive $100,000 per share of Series A Preferred Stock plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to and including the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, 9 distributable among the holders of the shares of Series A Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any Parity Securities, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Series A Preferred Stock and any such other Parity Securities ratably in accordance with the respective amounts that would be payable on such shares of Series A Preferred Stock and any such other stock if all amounts payable thereon were paid in full. For the purposes of this Paragraph 7, (i) a consolidation or merger of the Corporation with one or more corporations, or (ii) a sale or transfer of all or substantially all of the Corporation's assets, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation. (b) Subject to the rights of the holders of any Parity Securities, after payment shall have been made in full to the holders of the Series A Preferred Stock, as provided in this Paragraph 7, any other series or class or classes of Junior Securities shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Preferred Stock shall not be entitled to share therein. 8. Redemption. (a) On July 15, 2008 (the "Redemption Date"), the Corporation shall redeem all outstanding shares of the Series A Preferred Stock, at a redemption price of $100,000 per share in cash, together with accrued and unpaid dividends thereon to such date, without interest (the "Redemption Price") out of funds legally available for such payment. The Series A Preferred Stock shall not be redeemable by the Corporation prior to the Redemption Date. If the Redemption Date falls on a day that is not a business day, the Redemption Price will be payable on the next succeeding business day without adjustment for interest or further payment as a result of the delay. (b) Shares of Series A Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed, shall (upon compliance with any applicable provisions of the laws of the State of Delaware) have the status of authorized and unissued shares of the class of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of the Preferred Stock; provided that no such issued and reacquired shares of Series A Preferred Stock shall be reissued or sold as Series A Preferred Stock. 10 9. Procedure for Redemption. (a) In the event the Corporation shall redeem shares of Series A Preferred Stock, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 days nor more than 60 days prior to the Redemption Date, to each holder of record of the shares to be redeemed at such holder's address as the same appears on the stock register of the Corporation; provided that neither the failure to give such notice nor any defect therein shall affect the validity of the giving of notice for the redemption of any share of Series A Preferred Stock to be redeemed except as to the holder to whom the Corporation has failed to give said notice or except as to the holder whose notice was defective. Each such notice shall state: (i) the Redemption Date; (ii) the number of shares of Series A Preferred Stock to be redeemed; (iii) the Redemption Price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (b) Notice having been duly given, from and after the Redemption Date (unless default shall be made by the Corporation in providing money for the payment of the redemption price of the shares called for redemption), dividends on the shares of Series A Preferred Stock so called for redemption shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such share shall be redeemed by the Corporation at the Redemption Price aforesaid. (c) Payment of the Redemption Price of the Series A Preferred Stock shall be made only upon surrender of the share certificates to Mellon Investor Services, as paying agent to the Corporation (including any successor to Mellon Investor Services approved by the Corporation as its paying agent, the "Paying Agent"). If the Corporation gives or causes to be given a notice of redemption, timely pays to the Paying Agent an amount of cash sufficient to redeem the Series A Preferred Stock and gives the Paying Agent irrevocable instructions and authority to pay the full amount payable on redemption of the Series A Preferred Stock to holders of the Series A Preferred Stock, then on the date of such payment, all rights of the holders of Series A Preferred Stock, as such, will terminate (except the right of the holders of Series A Preferred Stock to receive the full amount payable upon redemption thereof upon surrender of the share certificates, but without interest) and the Series A Preferred Stock will no longer be deemed to be outstanding for any purpose. Any funds paid to the Paying Agent which are unclaimed at the end of two years from the Redemption Date will be 11 returned to the Corporation, after which the holders of Series A Preferred Stock will look only to the Corporation for payment of the Redemption Price of the Series A Preferred Stock. 10. Voting Rights. (a) In addition to the other voting rights provided in this Certificate of Designations or as otherwise required by law or the Certificate of Incorporation of the Corporation, as amended, holders of shares of the Series A Preferred Stock and any Parity Securities expressly designated with the same voting rights as the Series A Preferred Stock (collectively, the "Voting Parity Securities") shall be entitled to vote together as a separate voting class to elect a number of directors of the Corporation which is equal to the smallest whole number that is not less than 25% of the Board of Directors (such director or directors collectively referred to as the "Independent Directors"). For so long as shares of Series A Preferred Stock are outstanding, the Corporation shall have no fewer than one Independent Director. The initial Independent Director is Mr. Andrew L. Stidd. Except with respect to (i) the election of directors, as to which the Series A Preferred Stock shall have only the voting rights provided in the first sentence of this Paragraph 10, and (ii) those matters for which a series or class vote is required by applicable law, the Certificate of Incorporation, as amended, or this Certificate of Designations, holders of shares of Series A Preferred Stock shall be entitled to cast one vote per share on all matters submitted for a vote of the stockholders of the Corporation and with respect to such matters shall vote together with the holders of Voting Parity Securities and with the holders of the Common Stock, all voting as a single class. (b) Except (i) with respect to Special Voting Rights Matters upon the occurrence and during the continuance of a Special Voting Rights Event or (ii) as otherwise provided in this Certificate of Designations, each Independent Director shall be entitled to cast one vote (voting together with each member of the Board of Directors) on all matters before the Board of Directors. The Independent Directors shall hold office until the next annual meeting of the stockholders or special meeting held in lieu thereof. If any vacancy shall occur among the Independent Directors, then the other Independent Director or Independent Directors shall designate a successor to fill such vacancy to serve until the next annual meeting of the stockholders or special meeting held in lieu thereof; provided that if there are no Independent Directors to designate such a successor, within 40 days after the creation of such vacancy or vacancies, the Secretary of the Corporation shall call a special meeting of the holders of Series A Preferred Stock and any Voting Parity Securities entitled to vote for the election of Independent Directors and such vacancy or vacancies shall be filled at such special meeting to serve until the next annual meeting of the stockholders or special meeting held in 12 lieu thereof. Any Independent Director may be removed, with or without cause, by the holders of a majority of Series A Preferred Stock and any Voting Parity Securities outstanding entitled to vote for the election of Independent Directors. Election and removal of Independent Directors requires the vote of the holders of the Series A Preferred Stock, voting together as a class with holders of any Voting Parity Securities, holding a plurality, in the case of an election, or a majority, in the case of removal, in voting power of the outstanding shares of Series A Preferred Stock and Voting Parity Securities. (c) A meeting of holders of Series A Preferred Stock and any Voting Parity Securities may be called by the holders of at least 25% in voting power of the outstanding shares of Series A Preferred Stock and any Voting Parity Securities, voting together as a class. Any shares of Series A Preferred Stock held directly or indirectly by the Corporation or any corporation of which the Corporation holds a majority of the shares entitled to vote in the election of directors shall not be entitled to vote or be counted for quorum purposes. (d) For so long as any shares of Series A Preferred Stock are outstanding, the following actions of the Corporation shall require the approval of a majority of the Independent Directors: (i) the issuance of Parity Securities requiring approval of Independent Directors as set forth in Paragraph 2(a) hereof and (ii) if and for so long as a Special Voting Rights Event has occurred and is continuing, any action of the Board of Directors with respect to Special Voting Rights Matters. For so long as there is only one Independent Director, any action requiring the approval of a majority of the Independent Directors shall be approved by such Independent Director. In the event the Independent Directors cast an equal number of votes for and against approval of a given action requiring the approval of a majority of the Independent Directors, such action shall be deemed not to have been approved by a majority of Independent Directors. (e) If and for so long as a Special Voting Rights Event has occurred and is continuing while any shares of Series A Preferred Stock are outstanding, the Independent Directors shall have "Special Voting Rights" enabling the Independent Directors only (and not any directors that are not Independent Directors) to cast votes in meetings of the Board of Directors (or to take action by consent in lieu thereof) with respect to, but only with respect to following matters (collectively, the "Special Voting Rights Matters"): (i) the declaration and payment of dividends on, or the payment of the Redemption Price of, the Series A Preferred Stock and any Parity Securities, to the extent that funds are legally available therefor; and then, 13 (ii) if, but only if, all Special Voting Rights Events then existing cannot be cured by the taking of such actions described in clause (i) hereof, to cause the Corporation to enforce and not waive its rights under all material contracts with affiliates, including the Liquidity Facility; and then, (iii) if, but only if, all Special Voting Rights Events then existing cannot be cured by the taking of such actions described in clause (ii) hereof, to cause the sale or disposition of any of the Corporation's assets for a commercially reasonable consideration or to cause the repayment, retirement or redemption in accordance with their terms of any or all of the Corporation's liabilities that rank senior to the Series A Preferred Stock, in each case as, if and to the extent that the taking of such actions would enable the Corporation to cure the occurrence and continuance of any then existing Special Voting Rights Event. At any time that the Independent Directors shall have Special Voting Rights, a majority of the Independent Directors shall be entitled to take action on behalf of the Board of Directors only with respect to any Special Voting Rights Matter. (f) All Special Voting Rights of the Independent Directors shall terminate immediately at such time as all Special Voting Rights Events then existing have been cured or, if earlier, when shares of the Series A Preferred Stock shall have been redeemed in full or are otherwise no longer outstanding. All Special Voting Rights Events shall be deemed to have been cured and not to be continuing at such time when (i) all accrued and unpaid dividends on the Series A Preferred Stock shall have been declared and paid, (ii) if after the Redemption Date, the Mandatory Redemption Obligation shall have been paid or otherwise discharged, or, as the case may be, (iii) no Trigger Event that materially adversely affects the financial condition of the Corporation and its consolidated subsidiaries, taken as a whole, is continuing. (g) Notwithstanding the foregoing and for the avoidance of doubt: (i) Independent Directors shall not have Special Voting Rights with respect to any matter before the Board of Directors other than the Special Voting Rights Matters; and (ii) Special Voting Rights Matters do not include any action by the Independent Directors or the Board of Directors to elect or remove managers of H. J. Heinz Company, L.P. ("Heinz LP") under the interest in Heinz LP designated as the Class B Interest pursuant to the First Amended and Restated Limited Partnership Agreement of Heinz LP dated of May 3, 14 2001 or to exercise any rights of the Corporation as a limited partner or shareholder of Heinz LP or any other subsidiary of the Corporation (other than the right of a limited partner or shareholder to dispose of its limited partnership interests or shares). (h) As used herein, a "Special Voting Rights Event" means: (i) the giving of notice by the Independent Director of the failure by the Corporation to pay accrued dividends on the Series A Preferred Stock in full (including any Gross-Up Payments), which failure has continued for four consecutive quarterly periods, subject to a 10 day cure period following notice from the Independent Director; (ii) the failure by the Corporation to pay or otherwise discharge its Mandatory Redemption Obligation on the Redemption Date subject to a 10 day cure period following notice from the Independent Director; or (iii) a Trigger Event that materially adversely affects the financial condition or credit quality of the Corporation occurs and is continuing for at least 60 days following written notice from the holders of a majority of outstanding shares of the Series A Preferred Stock. (i) For so long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the consent or vote of holders of a majority of shares of the Series A Preferred Stock, voting as a class, amend, alter or repeal (i) any provision of the Corporation's Certificate of Incorporation (including the terms of the Series A Preferred Stock, but excluding the filing of any Certificate of Designations with respect to any Parity Securities or Junior Securities otherwise permitted to be issued hereunder) or (ii) any provision of the Corporation's Bylaws, in each case, if such amendment, alteration or repeal would materially and adversely affect the rights, preferences, powers or privileges of the Series A Preferred Stock. (j) For so long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the consent or vote of each holder of shares of the Series A Preferred Stock amend, alter or repeal the Corporation's Certificate of Incorporation (including the terms of the Series A Preferred Stock) that would (i) reduce the rate of or change or have the effect of changing the time for payment of any dividends on the Series A Preferred Stock, (ii) reduce the redemption price therefor or (iii) make any amount payable on the Series A Preferred Stock payable in other than U.S. dollars. 15 11. Maintain Existence. The Corporation shall not merge, voluntarily liquidate or reorganize, sell, lease, transfer or otherwise dispose of all or substantially all of its assets, effect any business combination with any person or permit any person to merge into it, or sell, lease, transfer or otherwise dispose of all or substantially all its assets, in each case at any time and without possibility of cure, unless in the case of a reorganization, merger, consolidation or other business combination, (A) if the Corporation survives, the Series A Preferred Stock shall maintain all the preferences, redemption and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions it had prior to such transaction and the Corporation remains an affiliate of H. J. Heinz Company, or (B) if the Corporation does not survive, (x) the surviving entity shall be H. J. Heinz Company or an affiliate of H. J. Heinz Company, (y) each holder of shares of the Series A Preferred Stock immediately prior to such transaction shall receive securities with the same preferences, redemption and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of the surviving entity as the Series A Preferred Stock held by such holder immediately prior thereto and (z) no Trigger Event has occurred and is continuing. 12. General Provisions. (a) The term "affiliate" as used herein means, with respect to any Person, a Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person. (b) The term "Person" as used herein means any corporation, limited liability company, partnership, trust, organization, association, other entity or individual. (c) The term "outstanding", when used with reference to shares of stock, shall mean issued shares, excluding shares held by the Corporation or a subsidiary. (d) The headings of the paragraphs, subparagraphs, clauses and subclauses of this Certificate of Designations are for convenience of reference only and shall not define, limit or affect any of the provisions hereof. (e) Each holder of Series A Preferred Stock, by acceptance thereof, acknowledges and agrees that payments of dividends, interest, premium and principal on, and exchange, redemption and repurchase of, such securities by the Corporation are or may become subject to restrictions on the Corporation contained in certain credit and financing agreements. 16 IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be signed and attested by the undersigned this 6th day of July 2001. H. J. HEINZ FINANCE COMPANY By: /s/ Leonard A. Cullo, Jr. ---------------------------------------- Name: Leonard A. Cullo, Jr. Title: President ATTEST: /s/ Michael Hooton - ---------------------------------- Name: Michael Hooton Title: Secretary EX-3.2 7 mar2202_ex0302.txt EXHIBIT 3.2 H.J. HEINZ FINANCE COMPANY BY-LAWS ARTICLE I OFFICES Section 1. Registered Office. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Time and Place of Meetings. All meetings of stockholders for the election of directors shall be held at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. The board of directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of Delaware. If so authorized, and subject to such guidelines and procedures as the board of directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication, participate in a meeting of stockholders and be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation. Section 2. Annual Meetings. Annual meetings of stockholders shall be held on such date, time and place as determined by the board of directors, at which they shall elect a board of directors and transact such other business as may properly come before the meeting. Section 3. Notice of Annual Meeting. Written notice of the annual meeting stating the place, if any, date and hour of the meting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. Stock Ledger. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Section 5. Special Stockholder Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose of the proposed meeting. Section 6. Notice of Special Meetings. Written notice of a special meeting stating the place, if any, date and hour of the meeting and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and the purpose or purposes for which the meeting is called, shall be given not less than ten or more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 7. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which 2 might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 8. Majority Vote. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 9. Voting. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 10. Stockholder Action by Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. Number of Directors. The number of directors which shall constitute the whole board shall be not less than three nor more than nine. The first board shall consist of three directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having 3 the right to vote for such directors, summarily order an election to beheld to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. Powers. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. Section 4. Meetings of the Board of Directors. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. First Meeting of Newly Elected Board of Directors. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular Meetings. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special Meetings. Special meetings of the board may be called by the president on five days' notice to each director, either personally or by mail or by facsimile communication; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 8. Quorum. At all meetings of the board not less than one-third of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other an announcement at the meeting until a quorum shall be present. Section 9. Director Action By Consent. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing or electronic transmission, and the writing or writings for electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee. Such 4 filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Section 10. Participation in Meetings by Telephone Conference. Unless otherwise restricted by the certificate of incorporation of these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. Section 11. Committees of Directors. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternative members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporation Law of Delaware to be submitted to stockholders for approval or (ii) adopting, amending or repealing any by-law of the corporation. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Section 12. Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 13. Compensation of Directors. Unless otherwise restricted by the certificate of incorporation, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 14. Preferred Directors. Notwithstanding anything else contained herein, whenever the holders of one or more classes or series of preferred stock (as defined in the certificate of incorporation) shall have the right, voting separately as a class or series, to elect directors, the election, term of office, filling of vacancies, removal and other features of such directorships shall be governed by the terms of the resolutions applicable thereto adopted by the board of directors pursuant to the certificate of incorporation, and such directors so elected shall not be subject to the provisions of Sections 1, 2 and 15 of this Article III. 5 Section 15. Removal of Directors. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire board of directors may be removed, with or without case, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Notices. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by facsimile communication. Notice may also be given to stockholders by a form of electronic transmission in accordance with and subject to the provisions of Section 232 of the General Corporation Law of Delaware. Section 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a written waiver thereof, signed by the person or persons entitled to notice or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. Officers. The officers of the corporation shall be elected by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also elect additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. Election of Officers. The board of directors at its first meeting after each annual meeting of stockholders shall elect a president, one or more vice-presidents, a secretary and a treasurer. Section 3. Additional Officers. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Section 4. Compensation of Officers. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. Term of Office, Removal and Vacancy. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a 6 majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. Section 6. The President. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. Section 7. The Vice-Presidents. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 8. The Secretary. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision the secretary shall be. The secretary shall have custody of the corporate seal of the corporation and the secretary, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the secretary's signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by the secretary's signature. Section 9. The Assistant Secretary. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of the secretary's inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. Section 10. The Treasurer. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. The treasurer shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all transactions as treasurer and of the financial condition of the 7 corporation. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the treasurer's office and for the restoration to the corporation (in case of the treasurer's death, resignation, retirement or removal from office) of all books, papers, vouchers, money and other property of whatever kind in the treasurer's possession or under the treasurer's control belonging to the corporation. Section 11. The Assistant Treasurer. The assistant treasurer, or if there being more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of the treasurer's inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CERTIFICATES FOR SHARES Section 1. Certificates of Stock. The shares of the corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice-president, and by the treasurer, or an assistant treasurer, or the secretary or an assistant secretary of the corporation. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law of Delaware or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Facsimile Signatures on Certificates. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has 8 signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if they were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct or indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfer of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation. Section 5. Fixing Record Date. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board if directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. Section 6. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 9 ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the corporation subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Reserves for Contingencies. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Annual Statement. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. Section 4. Checks. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. Section 6. Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 7. Indemnification of Directors, Officers and Employees. The corporation shall indemnify its directors and officers as provided in its Certificate of Incorporation, as amended, and shall indemnify its employees and agents to the fullest extent permitted by Delaware Law. ARTICLE VIII AMENDMENTS Section 1. Amendments. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation at any regular meeting of the stockholders or the board of directors or at any special meeting of the stockholders or the board of directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. 10 EX-4.1 8 mar2202_ex0401.txt EXHIBIT 4.1 H.J. HEINZ FINANCE COMPANY, As Issuer AND H.J. HEINZ COMPANY, As Guarantor TO BANK ONE, NATIONAL ASSOCIATION, As Trustee -------------- Indenture Dated as of July 6, 2001 -------------- TABLE OF CONTENTS PAGE ---- PARTIES..................................................................... 1 RECITALS OF THE COMPANY..................................................... 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions:............................................. 1 Act...................................................... 2 Affiliate................................................ 2 Agent Member............................................. 2 Applicable Procedures.................................... 2 Authenticating Agent..................................... 2 Board of Directors....................................... 2 Board Resolution......................................... 2 Business Day............................................. 2 Capital Stock............................................. 2 Clearstream............................................... 2 Commission............................................... 2 Company.................................................. 3 Company Request; Company Order........................... 3 Comparable Treasury Issue................................ 3 Comparable Treasury Price................................ 3 Consolidated Net Assets.................................. 3 Corporate Trust Office................................... 3 Corporation.............................................. 3 Covenant Defeasance...................................... 3 Defaulted Interest....................................... 3 Depositary............................................... 3 DTC...................................................... 3 Euroclear................................................ 3 Event of Default......................................... 3 Exchange Act............................................. 3 Exchange Offer........................................... 3 Exchange Registration Statement.......................... 4 Exchange Security........................................ 4 Expiration Date.......................................... 4 Global Security.......................................... 4 Guarantee................................................ 4 guarantee................................................ 4 Guarantor................................................ 4 Holder................................................... 4 -i- Indenture................................................ 4 Interest Payment Date.................................... 4 Investment Company Act................................... 4 Maturity................................................. 5 Notice of Default........................................ 5 Officer's Certificate.................................... 5 Opinion of Counsel....................................... 5 Original Security........................................ 5 Outstanding.............................................. 5 Paying Agent............................................. 6 Person................................................... 6 Place of Payment......................................... 6 Predecessor Security..................................... 6 Principal Property....................................... 6 Purchasers............................................... 6 QIB...................................................... 6 Redemption Date.......................................... 7 Redemption Price......................................... 7 Reference Treasury Dealer................................ 7 Reference Treasury Dealer Quotation...................... 7 Registered Securities.................................... 7 Registration Default..................................... 7 Registration Rights Agreement............................ 7 Regular Record Date...................................... 7 Regulation S............................................. 7 Regulation S Certificate................................. 7 Regulation S Global Security............................. 7 Regulation S Legend...................................... 7 Regulation S Securities.................................. 7 Remaining Scheduled Payments............................. 7 Resale Registration Statement............................ 7 Restricted Global Security............................... 7 Restricted Period........................................ 7 Restricted Securities.................................... 8 Restricted Securities Certificate........................ 8 Restricted Securities Legend............................. 8 Restricted Subsidiary.................................... 8 Rule 144A................................................ 8 Rule 144A Securities..................................... 8 Securities............................................... 8 Securities Act........................................... 8 Securities Act Legend.................................... 8 Security Register and Security Registrar................. 8 Special Interest......................................... 8 Special Record Date...................................... 8 Stated Maturity.......................................... 8 Subsidiary............................................... 8 Treasury Rate............................................ 9 -ii- Trust Indenture Act...................................... 9 Trustee.................................................. 9 Unrestricted Global Security............................. 9 Unrestricted Securities.................................. 9 Vice President........................................... 9 Voting Stock............................................. 9 SECTION 102. Compliance Certificates and Opinions..................... 9 SECTION 103. Form of Documents Delivered to Trustee................... 10 SECTION 104. Acts of Holders; Record Dates............................ 10 SECTION 105. Notices, Etc., to Trustee, Company and Guarantor......... 12 SECTION 106. Notice to Holders; Waiver................................ 12 SECTION 107. Conflict with Trust Indenture Act........................ 13 SECTION 108. Effect of Headings and Table of Contents................. 13 SECTION 109. Successors and Assigns................................... 13 SECTION 110. Separability Clause...................................... 13 SECTION 111. Benefits of Indenture.................................... 13 SECTION 112. Governing Law............................................ 13 SECTION 113. Legal Holidays........................................... 13 ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally.......................................... 14 SECTION 202. Form of Face of Security................................. 15 SECTION 203. Form of Reverse of Security.............................. 20 SECTION 204. Form of Legend for Securities............................ 25 SECTION 205. Form of Trustee's Certificate of Authentication.......... 26 SECTION 206. Form of Guarantee........................................ 26 ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series..................... 29 SECTION 302. Denominations............................................ 31 SECTION 303. Execution, Authentication, Delivery and Dating........... 31 SECTION 304. Temporary Securities..................................... 33 SECTION 305. Registration, Registration of Transfer and Exchange; Certain Transfers and Exchanges.................. 33 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities......... 37 SECTION 307. Payment of Interest; Interest Rights Preserved........... 38 SECTION 308. Persons Deemed Owners.................................... 39 SECTION 309. Cancellation............................................. 39 SECTION 310. Computation of Interest.................................. 39 -iii- ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture.................. 39 SECTION 402. Application of Trust Money............................... 40 ARTICLE FIVE REMEDIES SECTION 501. Events of Default........................................ 41 SECTION 502. Acceleration of Maturity; Rescission and Annulment....... 42 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee............................ 43 SECTION 504. Trustee May File Proofs of Claim......................... 43 SECTION 505. Trustee May Enforce Claims Without Possession of Securities..................................... 44 SECTION 506. Application of Money Collected........................... 44 SECTION 507. Limitation on Suits...................................... 44 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest.............................. 45 SECTION 509. Restoration of Rights and Remedies....................... 45 SECTION 510. Rights and Remedies Cumulative........................... 45 SECTION 511. Delay or Omission Not Waiver............................. 46 SECTION 512. Control by Holders....................................... 46 SECTION 513. Waiver of Past Defaults.................................. 46 SECTION 514. Undertaking for Costs.................................... 46 SECTION 515. Waiver of Usury, Stay or Extension Laws.................. 47 ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities...................... 48 SECTION 602. Notice of Defaults....................................... 48 SECTION 603. Certain Rights of Trustee................................ 48 SECTION 604. Not Responsible for Recitals or Issuance of Securities... 49 SECTION 605. May Hold Securities...................................... 49 SECTION 606. Money Held in Trust...................................... 49 SECTION 607. Compensation and Reimbursement........................... 50 SECTION 608. Conflicting Interests.................................... 50 SECTION 609. Corporate Trustee Required; Eligibility.................. 50 SECTION 610. Resignation and Removal; Appointment of Successor........ 51 SECTION 611. Acceptance of Appointment by Successor................... 52 SECTION 612. Merger, Conversion, Consolidation or Succession to Business....................................... 53 -iv- SECTION 613. Preferential Collection of Claims Against Company........ 53 SECTION 614. Appointment of Authenticating Agent...................... 53 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders........................................ 55 SECTION 702. Preservation of Information; Communications to Holders........................................ 55 SECTION 703. Reports by Trustee....................................... 56 SECTION 704. Reports by Company and Guarantor......................... 56 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company or Guarantor May Consolidate, Etc., Only on Certain Terms..................................... 56 SECTION 802. Successor Substituted.................................... 57 ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders....... 57 SECTION 902. Supplemental Indentures with Consent of Holders.......... 58 SECTION 903. Execution of Supplemental Indentures..................... 59 SECTION 904. Effect of Supplemental Indentures........................ 59 SECTION 905. Reference in Securities to Supplemental Indentures....... 60 ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest............... 60 SECTION 1002. Maintenance of Office or Agency.......................... 60 SECTION 1003. Money for Securities Payments to Be Held in Trust........ 60 SECTION 1004. Restrictions on Secured Debt............................. 61 SECTION 1005. Statement by Officer as to Default....................... 63 SECTION 1006. Existence................................................ 63 SECTION 1007. Maintenance of Properties................................ 63 -v- SECTION 1008. Payment of Taxes and Other Claims........................ 64 SECTION 1009. Waiver of Certain Covenants.............................. 64 SECTION 1010. Registration Rights...................................... 64 ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article................................. 64 SECTION 1102. Election to Redeem; Notice to Trustee.................... 64 SECTION 1103. Selection by Trustee of Securities to Be Redeemed........ 65 SECTION 1104. Notice of Redemption..................................... 65 SECTION 1105. Deposit of Redemption Price.............................. 66 SECTION 1106. Securities Payable on Redemption Date.................... 66 SECTION 1107. Securities Redeemed in Part.............................. 67 ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article................................. 67 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.... 67 SECTION 1203. Redemption of Securities for Sinking Fund................ 67 ARTICLE THIRTEEN GUARANTEE OF THE SECURITIES SECTION 1301. Guarantee................................................ 68 SECTION 1302. Execution and Delivery of Guarantee...................... 69 SECTION 1303. Obligations of the Guarantor Unconditional............... 69 SECTION 1304. Waivers.................................................. 71 SECTION 1305. Waiver of Subrogation and Contribution................... 72 SECTION 1306. Certain Agreements....................................... 72 SECTION 1307. No Waiver; Cumulative Remedies........................... 73 SECTION 1308. Continuing Guarantee..................................... 73 ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Company's Option to Effect Defeasance or Covenant Defeasance............................................... 74 SECTION 1402. Defeasance and Discharge................................. 74 SECTION 1403. Covenant Defeasance...................................... 74 SECTION 1404. Conditions to Defeasance or Covenant Defeasance.......... 75 -vi- SECTION 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous Provisions............ 76 SECTION 1406. Reinstatement............................................ 77 TESTIMONIUM................................................................. 78 SIGNATURES AND SEALS........................................................ 79 ACKNOWLEDGEMENTS............................................................ 79 Annex A - Form of Regulation S Certificate ..............................A-1 Annex B - Form of Restricted Securities Certificate......................B-1 Annex C - Form of Unrestricted Securities Certificate ...................C-1 -vii- INDENTURE, dated as of July 6, 2001 among H.J. Heinz Finance Company, a corporation duly organized under the laws of the State of Delaware (herein called the "Company"), H. J. Heinz Company, a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania (herein called the "Guarantor"), and Bank One, National Association, a national banking association duly organized and existing under the laws of the United States, as Trustee (herein called the "Trustee"). Recitals of the Company The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. The Guarantor desires to guarantee irrevocably and unconditionally the payment of the principal of, premium, if any, and any interest on, and any other amount due under, this Indenture and the Securities, as the same shall become due in accordance with the terms of this Indenture and the Securities pursuant to the Guarantee provided in this Indenture and endorsed on the Securities, and to provide therefore has duly authorized the execution and delivery of the Guarantee and this Indenture. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. Now, Therefore, This Indenture Witnesseth: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities or of a series thereof, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; -1- (4) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; and (5) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Member" means any member of, or participant in, the Depositary. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of Euroclear, Clearstream and the Depositary for such Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company or the Guarantor or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the Guarantor to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day", when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law or executive order to close. "Capital Stock", as applied to the stock of any corporation, means the capital stock of every class whether now or hereafter authorized, regardless of whether such capital stock shall be limited to a fixed sum or percentage with respect to the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of such corporation. "Clearstream" means Clearstream Banking, societe anonyme, Luxembourg (or any successor securities clearing agency). "Commission" means the Securities and Exchange Commission, from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this -2- instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, a Vice Chairman of the Board, its President, a Vice President, its Treasurer, its Secretary, an Assistant Secretary, or an Assistant Treasurer and delivered to the Trustee. "Comparable Treasury Issue" has the meaning set forth in the form of Security contained in Section 203. "Comparable Treasury Price" has the meaning set forth in the form of Security contained in Section 203. "Consolidated Net Assets" means total assets after deducting therefrom all current liabilities as set forth on the most recent balance sheet of the Guarantor and its consolidated Subsidiaries and computed in accordance with generally accepted accounting principles. "Corporate Trust Office" means the principal corporate trust office of the Trustee at which, at any particular time, its corporate trust business shall be administered, which office at the date hereof is located at 1 Bank One Plaza, Suite IL1-0126, Chicago, Illinois 60670-0126, Attention: Global Corporate Trust Services, except for purposes of Section 1002, if required with respect to a series of Securities, such term shall mean the office or agency of the Trustee in the Borough of Manhattan, the City of New York, which office at the date hereof is located at 14 Wall Street, Eighth Floor, New York, New York 10005. "Corporation" means a corporation, association, company, LLC, joint-stock company or business trust. "Covenant Defeasance" has the meaning specified in Section 1403. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 1202. "Depositary" means, with respect to Securities of any series issuable in whole or in part in the form of one or more Global Securities, a clearing agency registered under the Exchange Act that is designated to act as Depositary for such Securities as contemplated by Section 301. "DTC" means The Depository Trust Company. "Euroclear" means the Euroclear System (or any successor securities clearing agency). "Event of Default" has the meaning specified in Section 501. -3- "Exchange Act" means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time. "Exchange Offer" has the meaning set forth in the form of Security contained in Section 202. "Exchange Registration Statement" has the meaning set forth in the form of Security contained in Section 202. "Exchange Security " means any Security issued in exchange for an Original Security or Original Securities pursuant to the Exchange Offer or otherwise registered under the Securities Act and any Security with respect to which the next preceding Predecessor Security of such Security was an Exchange Security. "Expiration Date" has the meaning specified in Section 104. "Global Security" means a Security that evidences all or part of the Securities of any series and bears the legend set forth in Section 204 (or such legend as may be specified as contemplated by Section 301 for such Securities). "Guarantee" means the irrevocable and unconditional guarantee of the Securities by the Guarantor, as contained in Article Thirteen of this Indenture and endorsed on the Securities. "guarantee" by any Person means the obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "guarantee" used as a verb has a corresponding meaning. "Guarantor" means H.J. Heinz Company, and its respective Successors, if any, who becomes a Successor pursuant to Section 801. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. The term "Indenture" shall also include the terms of particular series of Securities established as contemplated by Section 301. -4- "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Investment Company Act" means the Investment Company Act of 1940 and any statute successor thereto, in each case as amended from time to time. "Maturity" when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, tender for purchase by the Company, or otherwise. "Notice of Default" means a written notice of the kind specified in Section 501(4). "Officer's Certificate" of the Company means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President, a Vice President, the Treasurer, the Secretary or an Assistant Secretary, or an Assistant Treasurer of the Company, and delivered to the Trustee. "Officer's Certificate" of the Guarantor means a certificate signed by the Chairman of the Board, a Vice Chairman of the Board, the President, a Vice President, the Treasurer, the Secretary or an Assistant Secretary, or an Assistant Treasurer of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee. "Original Security" means any Security, other than an Exchange Security, that is entitled to the benefits of a Registration Rights Agreement. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (1) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (2) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company or the Guarantor) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (3) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given, made or taken any request, demand, authorization, -5- direction, notice, consent, waiver or other action hereunder as of any date, (A) the principal amount of an Original Issue Discount Security which shall be deemed to be Outstanding shall be the amount of the principal thereof which would be due and payable as of such date upon acceleration of the Maturity thereof to such date pursuant to Section 502, (B) if, as of such date, the principal amount payable at the Stated Maturity of a Security is not determinable, the principal amount of such Security which shall be deemed to be Outstanding shall be the amount as specified or determined as contemplated by Section 301, (C) the principal amount of a Security denominated in one or more foreign currencies or currency units which shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of such date in the manner provided as contemplated by Section 301, of the principal amount of such Security (or, in the case of a Security described in Clause (A) or (B) above, of the amount determined as provided in such Clause), and (D) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of or any premium or interest on any Securities on behalf of the Company. "Person" means any individual, Corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" when used with respect to the Securities of any series, means the place or places where the principal of or Redemption Price, and any premium and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Principal Property" means any manufacturing or processing plant or warehouse owned at the date hereof or hereafter acquired by the Guarantor or any Restricted Subsidiary of the Guarantor which is located within the United States and the gross book value (including related land and improvements thereon and all machinery and equipment included therein without deduction of any depreciation reserves) of which on the date as of which the determination is being made exceeds 2% of Consolidated Net Assets, other than (i) any such manufacturing or processing plant or warehouse or any portion thereof (together with the land on which it is erected and fixtures comprising a part thereof) which is financed by industrial development bonds which are tax exempt pursuant to Section 103 of the Internal Revenue Code (or which receive similar tax treatment under any subsequent amendments thereto or any successor laws thereof or under any other similar statute of the United States), (ii) any property which in the opinion of the Board of Directors is not of material importance to the total business conducted by the Guarantor as an -6- entirety or (iii) any portion of a particular property which is similarly found not to be of material importance to the use or operation of such property. "Purchasers" means the initial purchasers from the Company of Securities being sold pursuant to Rule 144A. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Redemption Date" when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price" when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Reference Treasury Dealer" has the meaning set forth in the form of Security contained in Section 203. "Reference Treasury Dealer Quotation" has the meaning set forth in the form of Security contained in Section 203. "Registered Securities" means the Exchange Securities and all other Securities sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act, together with their respective Successor Securities. "Registration Default" has the meaning set forth in the form of Security contained in Section 202. "Registration Rights Agreement" has the meaning specified in the form of security in Section 202. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Regulation S" means Regulation S under the Securities Act (or any successor provision), as it may be amended from time to time. "Regulation S Certificate" means a certificate substantially in the form set forth in Annex A. "Regulation S Global Security" has the meaning specified in Section 201. "Regulation S Legend" means a legend substantially in the form of the legend required in the form of Security set forth in accordance with Section 202 to be placed upon each Regulation S Security". "Regulation S Securities" means all Securities required pursuant to Section 305(c) to bear a Regulation S Legend. Such term includes the Regulation S Global Security. "Remaining Scheduled Payments" has the meaning set forth in the form of Security contained in Section 203. "Resale Registration Statement" has the meaning set forth in the form of Security contained in Section 202. "Restricted Global Security" has the meaning specified in Section 201. "Restricted Period" means the period of 40 consecutive days beginning on and including the later of (i) the day on which Securities are first offered to persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (ii) the original issuance date of the Securities. "Restricted Securities" means all Securities required pursuant to Section 305(c) to bear any Restricted Securities Legend. Such term includes the Restricted Global Security. "Restricted Securities Certificate" means a certificate substantially in the form set forth in Annex B. "Restricted Securities Legend" means, collectively, the legends substantially in the forms of the legends required in the form of Security set forth in accordance with Section 202 to be placed upon each Restricted Security. "Restricted Subsidiary" means a Subsidiary of the Guarantor (i) substantially all the property of which is located, or substantially all the business of which is carried on, within the United States and (ii) which owns a Principal Property. "Rule 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time. "Rule 144A Securities" means the Securities purchased by the Purchasers from the Company pursuant to Rule 144A. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time. "Securities Act Legend" means a Restricted Securities Legend or a Regulation S Legend. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Interest" has the meaning set forth in the form of Security contained in Section 202. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. -8- "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or any installment of principal or interest is due and payable. "Subsidiary" means any Corporation or limited partnership more than 50% of the outstanding voting stock or partnership interest of which is owned, directly or indirectly, by the Guarantor or by one or more other Subsidiaries, or by the Guarantor and one or more other Subsidiaries. For the purposes of this definition, "voting stock" means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency. "Treasury Rate" has the meaning set forth in the form of Security contained in Section 203. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "Unrestricted Global Security" has the meaning specified in Section 201. "Unrestricted Securities" has the meaning specified in Section 201. "Vice President", when used with respect to the Company, the Guarantor or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock" means Capital Stock of a Corporation of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Corporation (irrespective of whether or not at the time stock of any other class or classes shall have or might have power upon the occurrence of any contingency). SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company or the Guarantor to the Trustee to take any action under any provision of this Indenture, the Company or the Guarantor shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officer's Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. -9- Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (except for certificates provided for in Section 1005) shall include, (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders; Record Dates. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof -10- of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. The ownership of Securities shall be proved by the Security Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. The Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series, provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106. The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 502, (iii) any request to institute proceedings referred to in Section 507(2) or (iv) any direction referred to in Section 512, in each case with respect to Securities of such series. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of such series on such record date, and no other Holders, -11- shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company's expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 106. With respect to any record date set pursuant to this Section, the Company party hereto which sets such record dates may designate any day as the "Expiration Date" and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the Trustee and the other party hereto in writing, and to each Holder of Securities of the relevant series in the manner set forth in Section 106, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the Company party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date. Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. SECTION 105. Notices, Etc., to Trustee, Company and Guarantor. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company or the Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Global Corporate Trust Services, or (2) the Company or the Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company or the Guarantor addressed to it at the address previously furnished in writing to the Trustee by the Company or the Guarantor, as the case may be. -12- SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act which is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company or the Guarantor shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities or the Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Except to the extent otherwise expressly provided in the form of Security or Form of Guarantee for any series, nothing in this Indenture, in the Guarantee or in the Securities, express -13- or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. This Indenture, the Guarantee and the Securities shall be governed by and construed in accordance with the law of the State of New York. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities (other than a provision of any Security which specifically states that such provision shall apply in lieu of this Section)) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity. ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution, Officer's Certificate delivered pursuant to Section 303 or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or Depositary therefor or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. Definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Upon their original issuance, Rule 144A Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Security Registrar, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Such Global Securities, together with their Successor Securities that are Global -14- Securities other than a Regulation S Global Security, are collectively herein called the "Restricted Global Security". Upon their original issuance, Regulation S Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Security Registrar, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct), provided that upon such deposit all such Securities shall be credited to or through accounts maintained at DTC by or on behalf of Euroclear or Clearstream. Such Global Securities, together with their Successor Securities that are Global Securities other than a Restricted Global Security, are collectively herein called a "Regulation S Global Security". After such time as the Restricted Period shall have terminated, such Global Securities shall be referred to herein collectively as the "Unrestricted Global Securities". The aggregate principal amount of the Regulation S Global Security or the Unrestricted Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the U.S. Depositary, in connection with a corresponding decrease or increase in the aggregate principal amount of the Restricted Global Security, as hereinafter provided. As used herein, the term "Restricted Period" means the period of 40 consecutive days beginning on and including the first day after the later of (i) the day that the Initial Purchasers advise the Company and the Trustee is the day on which the Securities are first offered to persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (ii) the Closing Date. The Regulation S Global Security, the Unrestricted Global Security and all other Securities that are not Restricted Securities shall collectively be referred to herein as the "Unrestricted Securities." The Company, the Guarantor, the Trustee and either of their Agents shall not be responsible for any acts or omissions of a Depository, for any depository records of beneficial ownership interests or for any transactions between the Depository and beneficial owners. SECTION 202. Form of Face of Security. [Insert any legend required by Section 204.] -15- H. J. Heinz FINANCE Company o% Guaranteed Note due o Unconditionally and irrevocably guaranteed by H. J. Heinz Company No. __ CUSIP: o H. J. Heinz Finance Company, a Delaware corporation (the "Company"), which term includes any successor corporation under the Indenture hereinafter referred to, for value received, hereby promises to pay to Cede & Co. or registered assigns, the principal sum of dollars ($ ) on ______________________ at the office or agency of the Company maintained for this purpose in the City of Chicago, Illinois, which shall initially be the corporate trust office of Bank One, National Association, the Trustee under the Indenture hereinafter referred to, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay to the registered holder hereof, as hereinafter provided, interest thereon, in like coin or currency, on ______________ and ______________ of each year, or, if such date is not a Business Day (as defined below), on the next Business Day, commencing ______________ , 20___ at the rate per annum specified below. Interest shall be paid to the persons in whose name this Security is registered on ______________ and ______________ (whether or not a Business Day) immediately preceding such ______________ and ______________ (the "Record Date"). "Business Day" means any day other than a Saturday, a Sunday or a day on which banking institutions in The City of New York are authorized or obligated by law, executive order or governmental decree to be closed. This Security will bear interest at an annual rate of o% per annum in arrears from the date hereof on said principal amount on each ______________ and ______________, beginning ______________ , 20___, until payment of said principal amount has been made or duly provided for; [if Original Security, insert -- provided, however, that if (i) a registration statement (the "Exchange Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), registering a security substantially identical to this Security pursuant to an exchange offer (the "Exchange Offer") has not been filed with the Securities and Exchange Commission (the "Commission") within ___ days after the Securities have been initially issued as required by the Exchange and Registration Rights Agreement, dated as of ______________ , 20___ by and between the Company, the Guarantor and the Holders from time to time of the Securities (the "Registration Rights Agreement") or, if applicable, a registration statement registering this security resale (the "Shelf Registration Statement") has not been filed as required by the Exchange and Registration Rights Agreement or (ii) such Exchange Registration Statement has not become effective or been declared effective by the Commission within 330 days after the Securities have been initially issued or such Shelf Registration Statement has not become effective on or before the date on which such registration statement is required to become or be declared effective or (iii) the Exchange Offer has not been completed within 45 days after the initial effective date of the Exchange Registration Statement relating to the Exchange Offer (if the -16- Exchange Offer is then required to be made) or (iv) any Exchange Registration Statement or Shelf Registration Statement required to be filed is filed and declared effective but shall thereafter either be withdrawn by the Company or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement without being succeeded immediately by an additional registration statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default" and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then special interest ("Special Interest"), in addition to the stated interest on the Securities, shall accrue at a per annum rate of 0.25% for the first 90 days of the Registration Default Period, and at a per annum rate of 0.50% thereafter for the remaining portion of the Default Period. At no time will the aggregate of any such Special Interest described above accrue at an annual rate in excess of 0.50% and Special Interest shall accrue and be payable until such time as no Registration Default is in effect (after which such Special Interest will cease to accrue). Accrued Special Interest, if any, shall be paid semi-annually on each Interest Payment Date and the amount of accrued Special Interest shall be determined on the basis of the number of days actually elapsed.] Any accrued and unpaid interest [if Original Security, insert -- (including Special Interest)] on this Security upon the issuance of an Exchange Security (as defined in the Indenture) in exchange for this Security shall cease to be payable to the Holder hereof but such accrued and unpaid interest [if Original Security, insert -- (including Special Interest)] shall be payable on the next Interest Payment Date for such Exchange Security to the Holder thereof on the related Regular Record Date. Interest on this Security [if Original Security, insert --, with the exception of Special Interest,] shall be computed on the basis of a 360-day year of twelve 30-day months. [if Original Security, insert Following the date on which all Registration Defaults are cured, the accrual of Special Interest will cease.] Notwithstanding anything to the contrary herein, neither the Company nor the Guarantor shall be required to pay Special Interest to a Holder of Transfer Restricted Securities if such Holder failed to comply with its obligations to make certain of the representations set forth in, or failed to provide certain of the information required to be provided by it pursuant to the Registration Rights Agreement. As used herein, the term "Transfer Restricted Securities" means (i) each Security until the date on which such Security has been exchanged for a freely transferable Exchange Security in the Exchange Offer, (ii) each Security until the date on which it has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) each Security until the date on which it is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act]. [If the Security is not to bear interest prior to Maturity, insert - The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal and any overdue premium shall bear interest at the rate of __% per annum (to the extent that the payment of such interest shall be legally enforceable), from the dates such amounts are due until they are paid or made available for payment. Interest on any overdue principal or premium shall be payable on demand. [Any such interest on overdue principal or premium which is not paid on demand shall bear interest at the rate of __% per annum (to the extent that the payment of such interest on interest shall be legally enforceable), from the date of such demand until the amount so demanded is paid or made available for payment. Interest on any overdue interest shall be payable on demand.] -17- This Security has initially been issued in the form of a Global Security (as defined on the reverse hereof), and the Company has initially designated The Depository Trust Company ("DTC," which term shall include any successor) as the Depositary for this Security. For as long as this Security or any portion hereof is issued in such form, and notwithstanding the foregoing, all payments of interest, principal and other amounts in respect of this Security or such portion (including payments upon repurchase or redemption referred to on the reverse hereof) shall be made to the Depositary or its nominee in accordance with its applicable procedures, in the coin or currency specified above and as further provided on the reverse hereof. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Security shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been executed by the Trustee under the Indenture referred to on the reverse hereof. -18- IN WITNESS WHEREOF, the Company has caused this Security to be signed by its duly authorized officer and has caused its corporate seal to be affixed hereunto. H.J. HEINZ FINANCE COMPANY By: ------------------------------- Title: Attest: - ---------------------- Secretary -19- SECTION 203. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of July 6, 2001 (herein called the "Indenture", which term shall have the meaning assigned to it in such instrument), by and among the Company, the Guarantor and Bank One, National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Guarantor, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [if applicable, insert -- , limited in aggregate principal amount to $______________]. As provided in Article Thirteen of the Indenture, the Guarantor has, for the benefit of the Holders, irrevocably and unconditionally guaranteed the due and punctual payment of all amounts payable by the Company under the Indenture and the Securities as and when the same shall become due and payable. Reference is hereby made to Article [Thirteen] of the Indenture for a statement of the respective rights, limitations of rights, duties and amounts thereunder of the Guarantor and the Trustee. [If Original Securities, insert -- This Security is entitled to the benefits of a Registration Rights Agreement as provided for on the face of this Security and in Section 1010 of the Indenture. The Company may register a security substantially identical to this Security (except that such Security will not contain terms with respect to the payment of Special Interest (as described on the face of this Security) or Transfer Restrictions) pursuant to an Exchange Offer, or in lieu thereof, a Resale Registration Statement.] Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Guarantor, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. [if applicable, insert -- The Securities are subject to redemption, as a whole or from time to time in part, upon not less than 30 nor more than 60 days' notice mailed to each Holder of Securities to be redeemed at its address as it appears in the Securities Register, on any date prior to their Stated Maturity at a Redemption price equal to the greater of (i) 100% of the principal amount of such Securities plus accrued interest to the date of redemption or (ii) the sum of the present values of the Remaining Scheduled Payments of principal and interest thereon (not including any portion of such payments of interest accrued as of the Redemption Date) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus [____] basis points, plus accrued interest thereon to the redemption date; provided, however, that unless the Company defaults in payment of the Redemption Price, on or after the Redemption Date, interest will cease to accrue on the Securities or portions thereof called for redemption. "Treasury Rate" means the rate per annum equal to the semiannual equivalent yield to maturity (computed as of the second business day immediately preceding the redemption date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue -20- (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date. "Comparable Treasury Issue" means the U.S. treasury security selected by an Independent investment banker that would be used, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Notes. "Independent investment banker" means one of the Reference Treasury Dealers that the Company appoints. "Comparable Treasury Price" means (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) as of the third business day preceding the redemption date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S. Government Securities" or (ii) if the release (or any successor release) is not published or does not contain such prices on that business day, (1) the average of the Reference Treasury Dealer Quotations for the redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all quotations obtained. "Reference Treasury Dealer" means each of [______________________] (and its successors) and three other nationally recognized investment banking firms that are primary U.S. Government securities dealers specified from time to time by the Company. If, however, any of them ceases to be a primary U.S. Government securities dealer, the Company will substitute another nationally recognized investment banking firm that is such a dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and in each case for settlement on the next business day) quoted in writing to the Trustee by such Reference Treasury Dealer as of 3:30 p.m., New York time, on the third business day preceding the redemption date. "Remaining Scheduled Payments" means the remaining scheduled payments of the principal and interest (excluding any interest accrued and paid as of the date of redemption) on each Note to be redeemed that would be due after the related redemption date but for such redemption.] [If applicable, insert - The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, (1) on .......... in any year commencing with the year .... and ending with the year .... through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [if applicable, insert - on or after .......], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning ...........of the years indicated, -21- Redemption Price For Redemption Through Redemption Price For Redemption Operation of the Otherwise Than Through Year Sinking Fund Operation of the Sinking Fund ---- -------------------- -------------------------------
and thereafter at a Redemption Price equal to ....% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.] [If applicable, insert - Notwithstanding the foregoing, the Company may not, prior to ......., redeem any Securities of this series as contemplated by [if applicable, insert - Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than.....% per annum.] [If applicable, insert - The sinking fund for this series provides for the redemption on ......... in each year beginning with the year ..... and ending with the year .... of [if applicable, insert - not less than $...... ("mandatory sinking fund") and not more than] $...... aggregate principal amount of Securities of this series. Securities of this series acquired or redeemed by the Company otherwise than through [if applicable, insert - mandatory] sinking fund payments may be credited against subsequent [if applicable, insert - mandatory] sinking fund payments otherwise required to be made [if applicable, insert -, in the inverse order in which they become due].] [If the Security is subject to redemption of any kind, insert - - If the Company is redeeming less than all the Securities, the Trustee will select the particular Notes to be redeemed by lot or by another method the Trustee deems fair and appropriate. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof will be issued in the name of the holder hereof upon the cancellation hereof.] Except as described above, the Securities will not be redeemable by the Company prior to maturity and will not be entitled to the benefit of any sinking fund. [If applicable, insert paragraph regarding subordination of the Security.] [If applicable, insert - The Indenture contains provisions for defeasance at any time of [the entire indebtedness of this Security] [or] [certain restrictive covenants and Events of Default with respect to this Security] [, in each case] upon compliance with certain conditions set forth in the Indenture.] In the event of a deposit or withdrawal of an interest in this Security (including upon an exchange, transfer, redemption or repurchase of this Security in part only) effected in -22- accordance with the Applicable Procedures, the Security Registrar, upon receipt of notice of such event from the Depositary's custodian for the Security, shall make an adjustment on its records to reflect an increase or decrease of the Outstanding principal amount of this Security resulting from such deposit or withdrawal, as the case may be. Unless the context otherwise requires, the Original securities (as defined in the Indenture) and the Exchange Securities (as defined in the Indenture) shall constitute one series for all purposes under the Indenture, including without limitation, amendments, waivers and redemptions. [If the Security is not an Original Issue Discount Security, insert -- If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.] [If the Security is an Original Issue Discount Security, insert-- If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to -- insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal, premium and interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and premium and interest, if any, on the Securities of this series shall terminate.] The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the Guarantor and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company, the Guarantor and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of a majority in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such -23- notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest and other amounts due on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of $_________ and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, the Guarantor or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Guarantor, the Trustee nor any such agent shall be affected by notice to the contrary. All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture. -24- SECTION 204. Form of Legend for Securities. Unless otherwise specified as contemplated by Section 301 for the Securities evidenced thereby, every Security authenticated and delivered hereunder shall bear one or more of the appropriate legends in substantially the following forms: [If Security is a Restricted Security, insert - THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS. THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL BE DEEMED, BY THE ACCEPTANCE HEREOF, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT. EACH PURCHASER OF THIS SECURITY OR ANY INTEREST HEREIN IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.] [If the Security is a Regulation S Security, insert - THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON UNLESS THIS SECURITY IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.] [If the Security is a Global Security, insert - THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY -25- PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.] [If the Security is a Global Security and The Depository Trust Company is to be the Depositary therefor, insert - UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] SECTION 205. Form of Trustee's Certificate of Authentication. The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. BANK ONE, NATIONAL ASSOCIATION, As Trustee By............................. Authorized Officer SECTION 206. Form of Guarantee GUARANTEE OF H. J. HEINZ COMPANY For value received, H. J. HEINZ COMPANY, a corporation duly organized under the laws of the Commonwealth of Pennsylvania (the "Guarantor"), hereby unconditionally and irrevocably guarantees (the "Guarantee") to and for the benefit of the Holder of the Note (the "Note") upon which this Guarantee is endorsed, being one of the o% Guaranteed Notes due o issued in aggregate principal amount of o (the "Notes") of H. J. Heinz Finance Company, a corporation duly organized under the laws of the State of Delaware (the "Issuer"), all obligations of the Issuer under such Note and under the Indenture with respect to such Note (the "Indenture"), including the due and punctual payment of the principal of (and any amount payable upon redemption, if any) and interest on, any additional interest in respect of and of all other amounts (including interest on defaulted payments to the extent permitted by law) payable in respect of, such Note, when and as the same shall become due and payable, whether at stated maturity, by declaration of acceleration, call for redemption, purchase or otherwise, according to the terms and conditions of the Note and the Indenture. In the case of a failure of the Issuer punctually to make -26- any such payment when and as the same shall become due and payable, the Guarantor hereby agrees to cause such payment to be made at such time as if such payment were made by the Issuer and according to the Terms and conditions of such Note and the Indenture. The Guarantor hereby agrees that its obligations hereunder and under the Indenture shall be as if it were principal obligor and not merely surety, and shall be unconditional, irrespective of the validity, regularity or enforceability of such Note or the Indenture or the absence of any action to enforce the same; any creation, exchange, release or non-perfection of any lien on any collateral for all or of any of the Notes; any election by or on behalf of any of the Holders of the Notes in any proceeding, any borrowing or grant of a security interest by the Issuer or the disallowance of all or any portion of the claims of the Trustee or any of the Holders for payment of any of the Notes under, or the application of any provision of, any applicable bankruptcy, insolvency, suspension of payments, reorganization or other similar law; or any waiver or consent by or on behalf of the Holder of such Note with respect to any provisions thereof or of the Indenture, the obtaining of any judgment against the Issuer or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor hereby waives the benefits of diligence, presentment or demand of payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other lien on any property subject thereto or exhaust any right or take any action against the Issuer or any other person or any collateral, any filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to such Note or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in such Note and in this Guarantee. The Guarantor hereby agrees that, in the event of a default in payment of principal of (or any amount payable upon redemption, if any) or interest on such Note or of any Special Interest or other amount (including such Special Interest) in respect of such Note, whether at stated maturity, by acceleration, call for redemption, purchase or otherwise, legal proceedings may be instituted by or on behalf of the Holder of such Note directly against the Guarantor to enforce this Guarantee without first proceeding against the Issuer. The Guarantor agrees that if, after the occurrence and during the continuance of an event of default applicable to the Notes, any of the Holders, or any representatives thereof, are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Notes, to collect interest on the Notes or to enforce or exercise any other right or remedy with respect to the Notes, the Guarantor shall pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by any of the Holders or their representatives. The Guarantor hereby irrevocably waives (i) any right to which it may be entitled in connection with any obligation to sue the Issuer prior to a claim being made against the Guarantor hereunder and (ii) any right to which it may be entitled to have the assets of the Issuer first be used as payment of the Issuer's or the Guarantor's obligations under the Note or this Guarantee, respectively, prior to any amounts being claimed from or paid by the Guarantor hereunder. This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer in bankruptcy or for liquidation or reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a -27- receiver or trustee be appointed for all or any significant part of the Issuer's assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes, whether as a "voidable preference," "fraudulent transfer" or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. No reference herein to the Indenture and no provision of this Guarantee or of the Indenture shall alter or impair the Guarantee of the Guarantor, which is absolute and unconditional, of the due and punctual payment of the principal (and any amount payable upon redemption, if any) and interest on, and of all Special Interest and other amounts (including as aforesaid) payable in respect of the Note upon which this Guarantee is endorsed. The Guarantor shall be subrogated to all rights of the Holder of such Note against the Issuer in respect of any amounts paid by the Guarantor on account of such Note pursuant to the provisions of this Guarantee or the Indenture; provided, however, that the Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and any amount payable upon redemption, if any) and interest on, and of all Special Interest and other amounts (including as aforesaid) payable in respect of, such Note and all the other Notes shall have been irrevocably paid in full. The Guarantor agrees to pay to the Holder of the Note upon which this Guarantee is endorsed on demand all reasonable out-of--pocket expenses (including reasonable fees and expenses of counsel) incurred by such Holder that in any way relate to the enforcement of the rights of such Holder under this Guarantee; provided that the Guarantor shall not be liable for any such expenses if (i) no payment under this Guarantee is due or (ii) the Guarantor shall not have received such documentation of such expenses as it may reasonably require. The Guarantor hereby makes, for the benefit of the Holder of the Note upon which this Guarantee is endorsed, the covenants and agreements applicable to it set forth in the Indenture, all of which shall be enforceable by the Holder of such Security, subject to the Terms and conditions and the terms of the Indenture, directly against the Guarantor. This Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Guarantee is endorsed shall have been executed by the Trustee (or an authenticating agent) under the Indenture. All capitalized terms used in this Guarantee shall have the meanings assigned to them in the Note upon which this Guarantee is endorsed or in the Indenture referred to in such Security. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of laws principles thereof. -28- IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly executed and its corporate seal to be affixed hereto. H. J. HEINZ COMPANY As Guarantor By: ................................ ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities that may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to Section 303, set forth, or determined in the manner provided, in an Officer's Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906 or 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal of any Securities of the series is payable; (5) the rate or rates at which any Securities of the series shall bear interest, if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for any such interest payable on any Interest Payment Date; (6) the place or places where the principal of and any premium and interest on any Securities of the series shall be payable; -29- (7) the period or periods within which, the price or prices at which and the terms and conditions upon which any Securities of the series may be redeemed, in whole or in part, at the option of the Company and, if other than by a Board Resolution, the manner in which any election by the Company to redeem the Securities shall be evidenced; (8) the obligation, if any, of the Company to redeem or purchase any Securities of the series pursuant to any sinking fund or analogous provisions or at the option of the Holder thereof or at the option of any remarketing dealer and the period or periods within which, the price or prices at which and the terms and conditions upon which any Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) if other than denominations of $1,000 and any integral multiple thereof, the denominations in which any Securities of the series shall be issuable; (10) if the amount of principal of or any premium or interest on any Securities of the series may be determined with reference to an index or pursuant to a formula, the manner in which such amounts shall be determined; (11) if other than the currency of the United States of America, the currency, currencies or currency units in which the principal of or any premium or interest on any Securities of the series shall be payable and the manner of determining the equivalent thereof in the currency of the United States of America for any purpose, including for purposes of the definition of "Outstanding" in Section 101; (12) if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or the Holder thereof, in one or more currencies or currency units other than that or those in which such Securities are stated to be payable, the currency, currencies or currency units in which the principal of or any premium or interest on such Securities as to which such election is made shall be payable, the periods within which and the terms and conditions upon which such election is to be made and the amount so payable (or the manner in which such amount shall be determined); (13) if other than the entire principal amount thereof, the portion of the principal amount of any Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (14) if the principal amount payable at the Stated Maturity of any Securities of the series will not be determinable as of any one or more dates prior to the Stated Maturity, the amount which shall be deemed to be the principal amount of such Securities as of any such date for any purpose thereunder or hereunder, including the principal amount thereof which shall be due and payable upon any Maturity other than the Stated Maturity or which shall be deemed to be Outstanding as of any date prior to the Stated Maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined); (15) if applicable, that any Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective -30- Depositaries for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in Section 204 and any circumstances in addition to or in lieu of those set forth in Clause (2) of the last paragraph of Section 305(a) in which any such Global Security may be exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Security or a nominee thereof; (16) any addition to or change in the Events of Default which applies to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 502; (17) any addition to or change in the covenants set forth in Article Ten which applies to Securities of the series; and (18) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)). All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 303) set forth, or determined in the manner provided, in the Officer's Certificate referred to above or in any such indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officer's Certificate setting forth the terms of the series. SECTION 302. Denominations. The Securities of each series shall be issuable only in registered form without coupons and only in such denominations as shall be specified as contemplated by Section 301. In the absence of any such specified denomination with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, a Vice Chairman of the Board, its President, a Vice President, or its Treasurer under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. -31- At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company and the Guarantor to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, (1) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 201, that such form has been established in conformity with the provisions of this Indenture; (2) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 301, that such terms have been established in conformity with the provisions of this Indenture; and (3) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company and the Guarantor enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officer's Certificate otherwise required pursuant to Section 301 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. -32- SECTION 304. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company and the Guarantor may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series, the Company and the Guarantor shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. SECTION 305. Registration, Registration of Transfer and Exchange; Certain Transfers and Exchanges. (a) Registration of Transfer and Exchange Generally. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security of a series at the office or agency of the Company in a Place of Payment for that series, the Company and the Guarantor shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company and the Guarantor shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. -33- Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. If the Securities of any series (or of any series and specified tenor) are to be redeemed in part, the Company shall not be required (A) to issue, register the transfer of or exchange any Securities of that series (or of that series and specified tenor, as the case may be) during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of any such Securities selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (B) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. The provisions of Clauses (1), (2), (3) and (4) below shall apply only to Global Securities: (1) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (2) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (A) such Depositary (i) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (ii) has ceased to be a clearing agency registered under the Exchange Act, (B) there shall have occurred and be continuing an Event of Default with respect to such Global Security or (C) there shall exist such circumstances, if any, in addition to or in lieu of the foregoing as have been specified for this purpose as contemplated by Section 301. (3) Subject to Clause (2) above, any exchange of a Global Security for other Securities may be made in whole or in part, and all Securities issued in exchange for a Global Security or any portion thereof shall be registered in such names as the Depositary for such Global Security shall direct. (4) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Section, Section 304, 306, 906 or 1107 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. -34- (b) Certain Transfers and Exchanges. Notwithstanding any other provision of this Indenture or the Securities, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 305(b) shall be made only in accordance with this Section 305(b). (i) Restricted Global Security to Regulation S Global Security. If the owner of a beneficial interest in a Restricted Global Security wishes at any time to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in a Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) and Clause (b)(iv) below and subject to the Applicable Procedures. Upon receipt by the Security Registrar of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Regulation S Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Restricted Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) a Regulation S Certificate, satisfactory to the Security Registrar and the Trustee and duly executed by the owner of such beneficial interest in the Restricted Global Security or his attorney duly authorized in writing, then the Security Registrar, subject to Clause (b)(iv) below, shall reduce the principal amount of the Restricted Global Security and increase the principal amount of the Regulation S Global Security by such specified principal amount. (ii) Regulation S Global Security to Restricted Global Security. If the owner of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to acquire the same in the form of a beneficial interest in a Restricted Global Security, such transfer may be effected only in accordance with this Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by the Security Registrar of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Restricted Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Regulation S Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) if such transfer is to occur during a Restricted Period, a Restricted Securities Certificate, satisfactory to the Security Registrar and the Trustee and duly executed by the owner of such beneficial interest in the Regulation S Global Security or his attorney duly authorized in writing, then the Security Registrar shall reduce the principal amount of the Regulation S Global Security and increase the principal amount of the Restricted Global Security by such specified principal amount. If transfers under this Clause (b)(ii) occur after a Restricted Period, no Restricted Securities Certificates will be required. (iii) Non-Global Security to Non-Global Security. A Security that is not a Global Security may be transferred, in whole or in part, to a Person who takes delivery in the form of another Security that is not a Global Security as provided in Section 305(a), provided that, if the Security to be transferred in whole or in part is a Restricted Security, then the Security Registrar shall have received a Restricted Securities Certificate, satisfactory to the Security Registrar and the Trustee and duly executed by the transferor Holder of his attorney duly authorized in writing, in which case the transferee Holder shall take delivery in the form of a Restricted Security (subject in every case to Section 305(c)). (iv) Regulation S Global Security to be Held Through Euroclear or Clearstream during Restricted Period. The Company shall use its best efforts to cause the Depositary to ensure that -35- beneficial interests in a Regulation S Global Security may be held only in or through accounts maintained at the Depositary by Euroclear or Clearstream (or by Agent Members acting for the account thereof), and no person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account, provided that this Clause (b)(iv) shall not prohibit any transfer or exchange of such an interest in accordance with Clause (b)(ii) above. (v) Restricted Non-Global Security to Restricted Global Security or Regulation S Global Security. If the Holder of a Restricted Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Restricted Global Security or a Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(v) and Clause (b)(iv) above and subject to the Applicable Procedures. Upon receipt by the Security Registrar of (A) such Security as provided in Section 305(a) and instructions satisfactory to the Security Registrar and the Trustee directing that a beneficial interest in a Restricted Global Security or Regulation S Global Security in a specified principal amount not greater than the principal amount of such Security be credited to a specified Agent Member's account and (B) a Restricted Securities Certificate, if the specified account is to be credited with a beneficial interest in a Restricted Global Security, or a Regulation S Certificate, if the specified account is to be credited with a beneficial interest in a Regulation S Global Security, in either case satisfactory to the Security Registrar and the Trustee and duly executed by such Holder or his attorney duly authorized in writing, then the Security Registrar, subject to Clause (b)(iv) above, shall cancel such Security (and issue a new Security in respect of any untransferred portion thereof) and increase the principal amount of the Restricted Global Security or the Regulation S Global Security, as the case may be, by the specified principal amount, both as provided in Section 305(a). (c) Securities Act Legends. Restricted Securities and their Successor Securities shall bear a Restricted Securities Legend, and Regulation S Securities and their Successor Securities shall bear a Regulation S Legend, subject to the following: (i) subject to the following Clauses of this Section 305(c), a Security or any portion thereof which is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear the Securities Act Legend borne by such Global Security while represented thereby; (ii) subject to the following Clauses of this Section 305(c), a new Security which is not a Global Security and is issued in exchange for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall bear the Securities Act Legend borne by such other Security, provided, that, if such new Security is required pursuant to Section 305(b)(v) to be issued in the form of a Restricted Security, it shall bear a Restricted Securities Legend and, if such new Security is so required to be issued in the form of a Regulation S Security, it shall bear a Regulation S Legend; (iii) at any time after the Securities may be freely transferred without registration under the Securities Act or without being subject to transfer restrictions pursuant to the Securities Act, a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if the Security Registrar has received an Unrestricted Securities Certificate, satisfactory to the -36- Security Registrar and Trustee and duly executed by the Holder of such legended Security or his attorney duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall authenticate and deliver such a new Security in exchange for or in lieu of such other Security as provided in this Article Three; (iv) a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if, in the Company's judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the direction of the Company, shall authenticate and deliver such a new Security as provided in this Article Three; and (v) notwithstanding the foregoing provisions of this Section 305(c), a Successor Security of a Security that does not bear a particular form of Securities Act Legend shall not bear such form of legend unless the Company has reasonable cause to believe that such Successor Security is a "restricted security" within the meaning of Rule 144, in which case the Trustee, at the direction of the Company, shall authenticate and deliver a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article Three. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. -37- The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest (including any Special Interest) on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given to each Holder of Securities of such series in the manner set forth in Section 106, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. -38- Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Guarantor, the Trustee and any agent of the Company, or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and any premium and (subject to Section 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Guarantor, the Trustee nor any agent of the Company, the Guarantor or the Trustee shall be affected by notice to the contrary. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. SECTION 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced -39- or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company or the Guarantor, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose money in an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal and any premium and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company or the Guarantor has paid or caused to be paid all other sums payable hereunder by the Company and the Guarantor; and (3) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal and any premium and interest for whose payment such money has been deposited with the Trustee. -40- ARTICLE FIVE remedies SECTION 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of or any premium on any Security of that series at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company or the Guarantor in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company or the Guarantor, as the case may be, by the Trustee or to the Company or the Guarantor, as the case may be, and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company or the Guarantor in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company or the Guarantor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or the Guarantor under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or the Guarantor or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (6) the commencement by the Company or the Guarantor of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company or the Guarantor in an involuntary case or proceeding under any applicable -41- Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or the Guarantor or of any substantial part of its property, or the making by either of them of an assignment for the benefit of creditors, or the admission by either of them in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company or the Guarantor in furtherance of any such action; (7) any other Event of Default provided with respect to Securities of that series; or (8) The Guarantor shall contest the validity of or the enforceability of the Guarantee or any obligation of the Guarantor under the Guarantee shall not be (or is claimed by the Guarantor not to be) in full force and effect. SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 501(5) or 501(6)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount of all the Securities of that series (or, if any Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms thereof) to be due and payable immediately, by a notice in writing to the Company and the Guarantor (and to the Trustee, the Company and the Guarantor if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. If an Event of Default specified in Section 501(5) or 501 (6) with respect to Securities of any series at the time Outstanding occurs, the principal amount of all the Securities of that series (or, if any Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms thereof) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company, the Guarantor and the Trustee, may rescind and annul such declaration and its consequences if (1) the Company or the Guarantor has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor in such Securities, -42- (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal and any premium and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal and premium and on any overdue interest, at the rate or rates prescribed therefor in such Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or the Guarantee or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company, the Guarantor (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute -43- the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or any premium or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of and any premium and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal and any premium and interest, respectively. SECTION 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Guarantee, or for the appointment of a receiver or trustee, or for any other remedy hereunder or under the Guarantee, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; -44- (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and any premium and (subject to Section 307) interest and any other amounts on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, including under the Guarantee, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or the Guarantee and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein or in the Guarantee conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. -45- SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of or any premium or interest or other amounts payable on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or the Guarantee , or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Guarantor. -46- SECTION 515. Waiver of Usury, Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. -47- ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Defaults. If a default occurs hereunder with respect to Securities of any series, the Trustee shall give the Holders of Securities of such series notice of such default as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 60 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution; (3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (4) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; -48- (5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and (7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company or the Guarantor, as applicable, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, the Guarantee or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company or the Guarantor, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company or the Guarantor with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. -49- SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The provisions of this Section shall survive the resignation or removal of the Trustee and the satisfaction and discharge of the Indenture. SECTION 608. Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. To the extent permitted by the Trust Indenture Act, the Trustee shall not be deemed to have a conflicting interest by virtue of being a trustee under this Indenture with respect to Securities of more than one series. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be one (and only one) Trustee hereunder with respect to the Securities of each series, which may be Trustee hereunder for Securities of one or more other series. Each Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such, and has a combined capital and surplus of at least $50,000,000 . If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee with respect to the Securities of any series shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. -50- SECTION 610. Resignation and Removal; Appointment of Successor. No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company and the Guarantor. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (B) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company, the Guarantor and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, -51- become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 106. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company, the Guarantor and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company, the Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver a written instrument wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such written instrument the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all -52- property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company, the Guarantor (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company or the Guarantor (or any such other obligor). SECTION 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the -53- combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee, the Company and the Guarantor. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent, the Company and the Guarantor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and the Guarantor and shall give notice of such appointment in the manner provided in Section 106 to all Holders of Securities of the series with respect to which such Authenticating Agent will serve. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. -54- BANK ONE, NATIONAL ASSOCIATION As Trustee By....................... As Authenticating Agent By....................... Authorized Officer ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee (1) semi-annually, not more than 15 days after such semi-annual dates as may be specified by the Trustee, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Securities of each series as of such semi-annual date as the case may be, and (2) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the Security Registrar, no such list need be furnished. SECTION 702. Preservation of Information; Communications to Holders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Guarantor nor the Trustee nor any agent of any of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act. -55- SECTION 703. Reports by Trustee. The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission with the Company and with the Guarantor. The Company will notify the Trustee when any Securities are listed on any stock exchange. SECTION 704. Reports by Company and the Guarantor. The Company and the Guarantor shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company or Guarantor May Consolidate, Etc., Only on Certain Terms. Neither the Company nor the Guarantor shall consolidate with or merge into any other Person or sell, convey, transfer or lease its properties and assets substantially as an entirety to any Person unless: (1) the Person formed by such consolidation or into which the Company or the Guarantor is merged or the Person which acquires by sale, conveyance, transfer or lease the properties and assets of the Company or the Guarantor substantially as an entirety shall be a corporation organized and existing under the laws of the United States, any state thereof or the District of Columbia; (2) the Person formed by such consolidation or into which the Company or the Guarantor is merged or the Person which acquires by sale, conveyance, transfer or lease the properties and assets of the Company or the Guarantor substantially as an entirety shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest and other amounts payable, if any, on all the Securities and the performance of every covenant of this Indenture or the Guarantee on the part of the Company or the Guarantor to be performed or observed; (3) immediately after giving effect to such transaction, and treating any indebtedness which becomes an obligation of the Company or the Guarantor or a Subsidiary as a result of such transaction as having been incurred by the Company or the Guarantor or such Subsidiary at the time of such transaction no Event of Default, and no event which, after -56- notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing; and (4) the Company or the Guarantor has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, sale, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. Successor Substituted. Upon any consolidation of the Company or the Guarantor with, or merger of the Company or the Guarantor into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company or the Guarantor substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company or the Guarantor is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company or the Guarantor under this Indenture or the Guarantee with the same effect as if such successor Person had been named as the Company as the case may be herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company and the Guarantor, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company or the Guarantor and the assumption by any such successor of the covenants of the Company or the Guarantor herein and in the Securities or the Guarantee, as the case may be; or (2) to add to the covenants of the Company or the Guarantor for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company or the Guarantor; or (3) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of such series); or -57- (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities in uncertificated form; or (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (A) shall neither (i) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (ii) modify the rights of the Holder of any such Security with respect to such provision or (B) shall become effective only when there is no such Security Outstanding; or (6) to secure the Securities pursuant to the requirements of Section 1004 or otherwise; or (7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611; or (9) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this Clause (9) shall not adversely affect the interests of the Holders of Securities of any series in any material respect. SECTION 902. Supplemental Indentures With Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company , the Guarantor and the Trustee, the Company and the Guarantor, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of or terms of purchase of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security or any other Security which would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or interest thereon is payable, -58- or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1009, except to increase any such percentage or to provide that certain other provisions of this Indenture and the Guarantee cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section and Section 1009, or the deletion of this proviso, in accordance with the requirements of Sections 611 and 901(8). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. -59- SECTION 905. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and any premium and interest and other amounts payable, if any, on the Securities of that series in accordance with the terms of the Securities and this Indenture. The Guarantor covenants that it will, as and when any amounts are due hereunder or under any Security, duly and punctually pay such amounts as provided in the Guarantee. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company or the Guarantor in respect of the Securities of that series and this Indenture or the Guarantee may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and each of the Company and the Guarantor hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of or any premium or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal and any premium and interest so becoming due until -60- such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of or any premium or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided by the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (1) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent and (2) during the continuance of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or any premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in each Place of Payment, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Restrictions on Secured Debt. The Guarantor covenants and agrees for the benefit of each series of Securities, other than any series established by or pursuant to a Board Resolution, Officer's Certificate or in one or more supplemental indentures hereto which specifically provides otherwise, that it will not itself, and will not permit any Restricted Subsidiary to, incur, issue, assume, or guarantee any loans, whether or not evidenced by negotiable instruments or securities, or any notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (loans, and notes, bonds, debentures or other similar evidences of indebtedness for money borrowed being hereinafter in this Section 1004 called "Debt"), secured after the date hereof by pledge of, or mortgage or lien on, any Principal Property of the Guarantor or any Restricted Subsidiary or any shares of Capital Stock of or Debt of any Restricted Subsidiary (mortgages, pledges and liens being hereinafter in -61- this Section 1004 called "Mortgage" or "Mortgages"), without effectively providing that the Securities, other than Securities of a series not entitled to the benefits of this covenant (together with, if the Guarantor shall so determine, any other Debt of the Guarantor or such Restricted Subsidiary then existing or thereafter created which is not subordinate to the Securities) shall be secured equally and ratably with (or, at the option of the Guarantor, prior to) such secured Debt, so long as such secured Debt shall be so secured, unless, after giving effect thereto, the aggregate amount of all such secured Debt would not exceed 10% of Consolidated Net Assets; provided, however, that this Section 1004 shall not apply to, and there shall be excluded from secured Debt in any computation under this Section 1004, Debt secured by: (1) Mortgages on property of, or on any shares of Capital Stock of or Debt of, any corporation existing at the time such corporation becomes a Restricted Subsidiary; (2) Mortgages in favor of the Guarantor or any Restricted Subsidiary; (3) Mortgages in favor of any governmental body to secure progress, advance or other payments pursuant to any contract or provision of any statute; (4) Mortgages on property, shares of Capital Stock or Debt existing at the time of acquisition thereof (including acquisition through merger or consolidation) or to secure the payment of all or any part of the purchase price thereof or construction thereon or to secure any Debt incurred prior to, at the time of, or within 360 days after the later of the acquisition of such property, shares of Capital Stock or Debt or the completion of construction for the purpose of financing all or any part of the purchase price thereof or construction thereon; (5) Mortgages securing obligations issued by a State, territory or possession of the United States, any political subdivision of any of the foregoing, or the District of Columbia, or any instrumentality of any of the foregoing to finance the acquisition or construction of property, and on which the interest is not, in the opinion of tax counsel of recognized standing or in accordance with a ruling issued by the Internal Revenue Service, includible in gross income of the holder by reason of Section 103 (a) (1) of the Internal Revenue Code (or any successor to such provision or any other similar statute of the United States) as in effect at the time of the issuance of such obligations; (6) Mechanics', materialmen's, carriers' or other like liens arising in the ordinary course of business (including construction of facilities) in respect of obligations which are not due or which are being contested in good faith; (7) Any mortgage arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulations, which is required by law or governmental regulation as a condition to the transaction of any business, or the exercise of any privilege, franchise or license; -62- (8) Mortgages for taxes, assessments or governmental charges or levies not yet delinquent, or mortgages for taxes, assessments or governmental charges or levies already delinquent but the validity of which is being contested in good faith; (9) Mortgages (including judgment liens) arising in connection with legal proceedings so long as such proceedings are being contested in good faith and, in the case of judgment liens, execution thereon is stayed; (10) Mortgages existing at the date of this Indenture; and (11) Any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any mortgage referred to in the foregoing clauses (1) to (10), inclusive; provided, however, that such extension, renewal or replacement Mortgage shall be limited to all or part of the same property, shares of Capital Stock or Debt that secured the Mortgage extended, renewed or replaced (plus improvements on such property). SECTION 1005. Statement by Officer as to Default. The Company and the Guarantor will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, an Officer's Certificate, complying with Section 314(a)(4) of the Trust Indenture Act, stating whether or not to the best knowledge of the signers thereof the Company or the Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture or the Guarantee (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company or the Guarantor shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. SECTION 1006. Existence. Subject to Article Eight, each of the Company and the Guarantor will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that neither the Company nor the Guarantor shall be required to preserve any such right or franchise if its Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of its business and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1007. Maintenance of Properties. The Guarantor will cause all properties used or useful in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Guarantor may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Guarantor from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Guarantor, desirable in the conduct of its business or the business of any Restricted Subsidiary and not disadvantageous in any material respect to the Holders. -63- SECTION 1008. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. SECTION 1009. Waiver of Certain Covenants. Except as otherwise specified as contemplated by Section 301 for Securities of such series, the Company may, with respect to the Securities of any series, omit in any particular instance to comply with any term, provision or condition set forth in any covenant provided pursuant to Section 301(17), 901(2) or 901(7) for the benefit of the Holders of such series or in Section 1004 or 1007, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. SECTION 1010. Registration Rights. Each of the Company and the Guarantor agrees that the Holders of Original Securities are entitled to the benefits of the Registration Rights Agreement, and each of the Company and the Guarantor covenants that it will perform or cause to be performed all duties and obligations arising thereunder. Other than the payment of Special Interest, the rights and remedies of the Holders for a breach of this Section 1010 are set forth in the Registration Rights Agreement. This Section 1010 shall not apply to Exchange Securities. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for such Securities and in the form of Security contemplated by Article Two) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by a Board Resolution or in another manner specified as contemplated by Section 301 for such Securities. In case of any redemption at the election of the Company of less than all the Securities of any series -64- (including any such redemption affecting only a single Security), the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, the Redemption Price; including reasonable detail as to its computation, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of any series are to be redeemed (unless all the Securities of such series and of a specified tenor are to be redeemed or unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security of such series, provided that the unredeemed portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. If less than all the Securities of such series and of a specified tenor are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption as aforesaid and, in case of any Securities selected for partial redemption as aforesaid, the principal amount thereof to be redeemed. The provisions of the two preceding paragraphs shall not apply with respect to any redemption affecting only a single Security, whether such Security is to be redeemed in whole or in part. In the case of any such redemption in part, the unredeemed portion of the principal amount of the Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, -65- (2) the Redemption Price, (3) if less than all the Outstanding Securities of any series consisting of more than a single Security are to be redeemed, the identification (and, in the case of partial redemption of any such Securities, the principal amounts) of the particular Securities to be redeemed and, if less than all the Outstanding Securities of any series consisting of a single Security are to be redeemed, the principal amount of the particular Security to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where each such Security is to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. SECTION 1105. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. -66- SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of any series except as otherwise specified as contemplated by Section 301 for such Securities. The minimum amount of any sinking fund payment provided for by the terms of any Securities is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of such Securities is herein referred to as an "optional sinking fund payment". If provided for by the terms of any Securities, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities as provided for by the terms of such Securities. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to any Securities of such series required to be made pursuant to the terms of such Securities as and to the extent provided for by the terms of such Securities; provided that the Securities to be so credited have not been previously so credited. The Securities to be so credited shall be received and credited for such purpose by the Trustee at the Redemption Price, as specified in the Securities so to be redeemed, for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund Not less than 60 days prior to each sinking fund payment date for any Securities, the Company will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities pursuant to Section 1202 and will -67- also deliver to the Trustee any Securities to be so delivered. Not less than 30 days prior to each such sinking fund payment date, the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. ARTICLE THIRTEEN GUARANTEE OF THE SECURITIES SECTION 1301. Guarantee. Subject to the provisions of this Article Thirteen, the Guarantor hereby unconditionally guarantees, on an unsecured basis, to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors, irrespective of the validity and enforceability of this Indenture, the Securities or the obligations of the Company or any other Guarantor to the Holders or the Trustee hereunder or thereunder, that: (a) the principal of (and premium, if any) and interest on the Securities (including any Special Interest, Defaulted Interest and other amounts, if any, payable) will be duly and punctually paid in full when due, whether at maturity, by acceleration, call for redemption, purchase or otherwise, and all obligations of the Company or the Guarantor to the Holders or the Trustee hereunder or thereunder (including amounts due the Trustee under Section 607 hereof) or under the Securities (including fees, expenses or other disbursements) will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration, call for redemption, purchase or otherwise (all such obligations guaranteed by the Guarantor, the "Guaranteed Obligations"). The guarantees of the Guarantor under this Article Thirteen are herein referred to as the "Guarantee". Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders, for whatever reason, the Guarantor will be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Securities shall constitute an event of default under this Guarantee the Holders of Securities or the Trustee to accelerate the obligations of the Guarantor hereunder in the same manner and to the same extent as the obligations of the Company. The Guarantor agrees to pay any and all fees and expenses (including reasonable attorney's fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under this Article Thirteen with respect to the Guarantor. Without limiting the generality of the foregoing, this Guarantee guarantees, to the extent provided herein, the payment of all amounts that constitute part of the Guaranteed Obligations and would be owed by the Company under this Indenture or the Securities but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company. -68- No stockholder, officer, director, employee or incorporator, past, present or future, of any Guarantor, as such, shall have any personal liability under this Guarantee by reason of his, her or its status as such stockholder, officer, director, employee or incorporator. SECTION 1302. Execution and Delivery of Guarantee. The Guarantee to be endorsed on the Securities shall include the terms of the Guarantees set forth in this Article Thirteen and any other terms that may be set forth in the form established pursuant to Section 206. The Guarantor hereby agrees to execute the Guarantee in the form established pursuant to Section 206, to be endorsed on each Security authenticated and delivered by the Trustee. The Guarantee shall be executed on behalf of the Guarantor by an Officer of the Guarantor. The signature of such Officer on the Guarantee may be manual or facsimile. A Guarantee bearing the manual or facsimile signature of an individual who was at any time the proper officer of the Guarantor shall bind the Guarantor, notwithstanding that such individual has ceased to hold such office prior to the authentication and delivery of the Security on which such Guarantee is endorsed or did not hold such office at the date of such Guarantee. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee endorsed thereon on behalf of the Guarantor. The Guarantor hereby agrees that its respective Guarantee set forth in Section 1301 shall remain in full force and effect notwithstanding any failure to endorse a Guarantee on any Security. SECTION 1303. Obligations of the Guarantor Unconditional. Nothing contained in this Article Thirteen or elsewhere in this Indenture or in any Security is intended to or shall impair, as between the Guarantor and the Holders and the Trustee, the obligation of the Guarantor, which is absolute and unconditional, to pay to the Holders and the Trustee the principal of (and premium, if any) and interest (including Special Interest, Defaulted Interest and other amounts, if any, payable) on the Securities (and to the Trustee amounts due under Section 607) as and when the same shall become due and payable in accordance with the provisions of this Guarantee, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon Default under this Indenture. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not affect the liability of any Guarantor hereunder: (a) the lack of validity, regularity or enforceability of this Indenture or the Securities with respect to the Company or the agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from this Indenture; (c) any amendment or modification of or deletion from or addition or supplement to or other change in the Guarantee, the Indenture or the Securities or any other instrument or agreement applicable to any of the parties to the Guarantee, the Indenture or the Securities; -69- (d) any furnishing or acceptance of any security or any guarantee or other liability of any Subsidiary or any other party, or any release of any security or any guarantee or other liability of any Subsidiary or any other party, for the Guarantee Obligations, or the failure of any security or any guarantee or other liability of any Subsidiary or any other party or the failure of any Person to perfect any interest in any collateral; (e) any failure, omission or delay on the part of the Company, to conform or comply with any term of the Indenture or the Securities or any other instrument or agreement referred to in paragraph (a) above, including, without limitation, failure to give notice to the Guarantor or the Trustee of the occurrence of an Event of Default; (f) any waiver of the payment, performance or observance of any of the obligations, conditions, covenants or agreements contained in the Guarantee, the Indenture or the Securities, or any other waiver, consent, extension, indulgence, compromise, settlement, release or other action or inaction under or in respect of the Guarantee, the Indenture or the Securities or any other instrument or agreement referred to in paragraph (a) above or any obligation or liability of the Company, or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of any such instrument or agreement or any such obligation or liability; (g) any failure, omission or delay on the part of the Trustee or any Holder of Securities to enforce, assert, exercise or continue exercising any right, power or remedy conferred on it in the Guarantee or the Indenture, or any such failure, omission or delay on the part of the Trustee or any Holder of Securities in connection with the Guarantee, the Indenture or the Securities, or any other action on the part of the Trustee or any Holder of Securities; (h) the assignment of any right, title or interest of the Trustee or any Holder in this Indenture or the Securities to any other Person; (i) any voluntary or involuntary bankruptcy, insolvency, suspension of payments, reorganization, arrangement, readjustment, assignment for the benefit of creditors, receivership, liquidation or similar proceedings with respect to the Company, the Guarantor or any other Person or any of their respective properties or creditors, or any action taken by any trustee, receiver or sindico or by any court in any such proceeding; (j) any limitation on the liability or obligations of the Company or any other Person under the Guarantee, the Indenture or the Securities, or any partial discharge, cancellation or unenforceability of the Guarantee, the Indenture or the Securities or any other agreement or instrument referred to in paragraph (c) above or any term hereof, to the extent not mutually agreed upon by the parties hereto; (k) any merger or consolidation of the Company or the Guarantor into or with any other corporation or any sale, lease or transfer of any of the assets of the Company or any Guarantor to any other Person; (l) any change in the ownership of any shares of capital stock of the Guarantor, or any change in the corporate relationship between the Company and the Guarantor, or any termination of such relationship, or any change in the corporate existence, structure, or ownership of the Company; -70- (m) any release or discharge, by operation of law, of the Guarantor from the performance or observance of any obligation, covenant or agreement contained in the Guarantee, the Indenture or the Securities; (n) any action, failure, omission or delay on the part of the Trustee or any Holder of Securities that may impede any Guarantor from acquiring or subrogating such Holder's or Trustee's rights or benefits; or (o) any other occurrence, circumstance, happening or event whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or unforeseen, and any other circumstance that might otherwise constitute a legal defense or discharge of the liabilities of the Guarantor or that might otherwise limit recourse against the Guarantor; it being the intent of the Guarantor that its obligations hereunder shall not be discharged except by payment of all amounts owing pursuant to this Indenture or the Securities. The Guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment or performance with respect to any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Trustee, any Holder or any other Person upon the insolvency, bankruptcy or reorganization of the Company or otherwise, all as though such payment or performance had not been made or occurred. In the event that any payment, or any part thereof, is rescinded or must otherwise be returned, the Guaranteed Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded or returned. The obligations of the Guarantor under the Guarantee shall not be subject to reduction, termination or other impairment by any set-off, recoupment, counterclaim or defense or for any other reason. SECTION 1304. Waivers. The Guarantor hereby irrevocably waives, to the extent permitted by applicable law: (a) promptness, demand for payment, diligence, presentment, notice of acceptance and any other notice with respect to any of the Guarantee Obligations and the Guarantee; (b) any requirement that the Trustee, any Holder or any other Person protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right, sue or take any action against the Company or any other Person, or obtain any relief pursuant to this Indenture or pursue any other available remedy prior to making a claim against any Guarantor hereunder; (c) filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to such Security or the Indebtedness evidenced thereby and all demands whatsoever; (d) any defense arising by reason of any claim or defense based upon an election of remedies by the Trustee or any Holder that in any manner impairs, reduces, releases or otherwise adversely affects its subrogation, contribution or reimbursement rights or other rights to proceed against the Company or any other Person; -71- (e) any right to which it may be entitled to have the assets of the Company first be used as payment of the Company's or the Guarantor's obligations hereunder prior to any amounts being claimed from or paid by such Guarantor hereunder; (f) any duty on the part of the Trustee or any Holder to disclose to such Guarantor any matter, fact or thing relating to the business, operation or condition of the Company and its assets now known or hereafter known by the Trustee or such Holder; or SECTION 1305. Waiver of Subrogation and Contribution. The Guarantor hereby irrevocably waives any claim or other right that it may now or hereafter acquire against the Company that arises from the existence, payment, performance or enforcement of such Guarantor's obligations under this Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Trustee or any Holder of Securities against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or Security on account of such claim or other rights. If any amount shall be paid to the Guarantor in violation of the preceding sentence and the Securities shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Securities, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Securities, whether matured or unmatured, in accordance with the terms of this Indenture. The Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 1305 is knowingly made in contemplation of such benefits. The Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any Guaranteed Obligations until payment in full of all Guaranteed Obligations. The Guarantor further agrees that, as between itself, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations may be accelerated as provided in Article Five hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations, and (y) in the event of any declaration of acceleration of the Guarantee Obligations as provided in Article Five hereof, the Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by such Guarantor for the purpose of this Guarantee. SECTION 1306. Certain Agreements. The Guarantor covenants and agrees that, as a condition to the acceptability of the Guarantee to the Trustee and the Holders, it will: (a) preserve and maintain its existence, rights (contractual and statutory) and franchises; provided, however, that the Guarantor shall not be required to preserve any right or franchise if the board of directors of the Guarantor shall determine that the preservation thereof is no longer -72- desirable in the conduct of the business of the Guarantor and the loss thereof is not disadvantageous in any material respect to the Guarantor or such Holders; and (b) not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person whether or not affiliated with the Guarantor unless: (i) the Person formed by or surviving any such consolidation, unless such successor entity is the Company or the Guarantor, unconditionally assumes all the obligations of the Guarantor, pursuant to a supplemental indenture in form and substance satisfactory to the Trustee, under the Securities, the Indenture and the Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no default or Event of Default exists. Any such consolidation, merger, sale, lease or conveyance is subject to the condition that the Trustee receive an Officer's Certificate of the Guarantor and an Opinion of Counsel to the effect that the merger, sale, lease or conveyance, and the assumption by any successor entity, complies with the provisions of this Article and that all conditions precedent herein provided for relating to such transactions have been complied with. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Guarantee endorsed upon the Securities and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as the Guarantor. Such Guarantor's Guarantee shall in all respects have the same legal rank and benefit under this Indenture theretofore and thereafter issued in accordance with the terms of this Indenture as though such Guarantee had been issued at the date of the execution hereof. SECTION 1307. No Waiver; Cumulative Remedies. No failure on the part of the Trustee or any Holder to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. The Trustee and the Holders shall have all of the rights and remedies granted in this Indenture and available at law or in equity, and these same rights and remedies may be pursued separately, successively or concurrently against the Company or the Guarantor. SECTION 1308. Continuing Guarantee. The Guarantee is a continuing guarantee and, except as otherwise provided herein, shall (a) remain in full force and effect until the satisfaction of the Guaranteed Obligations, (b) be binding upon the Guarantor and (c) inure to the benefit of and be enforceable by the Trustee, the Holders and their successors, transferees and assigns. -73- ARTICLE FOURTEEN DEFEASANCE AND COVENANT DEFEASANCE SECTION 1401. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may elect, at its option at any time, to have Section 1402 or Section 1403 applied to any Securities or any series of Securities, as the case may be, designated pursuant to Section 301 as being defeasible pursuant to such Section 1402 or 1403, in accordance with any applicable requirements provided pursuant to Section 301 and upon compliance with the conditions set forth below in this Article. Any such election shall be evidenced by a Board Resolution or in another manner specified as contemplated by Section 301 for such Securities. SECTION 1402. Defeasance and Discharge. Upon the Company's exercise of its option (if any) to have this Section applied to any Securities or any series of Securities, as the case may be, the Company shall be deemed to have been discharged from its obligations with respect to such Securities as provided in this Section on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter called "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), subject to the following which shall survive until otherwise terminated or discharged hereunder: (1) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 1404 and as more fully set forth in such Section, payments in respect of the principal of and any premium and interest on such Securities when payments are due, (2) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (4) this Article. Subject to compliance with this Article, the Company may exercise its option (if any) to have this Section applied to any Securities notwithstanding the prior exercise of its option (if any) to have Section 1403 applied to such Securities. SECTION 1403. Covenant Defeasance. Upon the Company's exercise of its option (if any) to have this Section applied to any Securities or any series of Securities, as the case may be, (1) the Company and the Guarantor shall be released from their obligations under Sections 1004 and 1007 and any covenants provided pursuant to Section 301(17), 901(2) or 901(7) for the benefit of the Holders of such Securities, and (2) the occurrence of any event specified in Sections 501(4) (with respect to any of Sections 1004 and 1007 and any such covenants provided pursuant to Section 301(17), 901(2) or 901(7)), and 501(7) shall be deemed not to be or result in an Event of Default, in each case with respect to such Securities as provided in this Section on and after the date the conditions set forth in Section 1404 are satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that, with respect to such Securities, the Company and the Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such specified Section (to the extent so specified in the case of Section 501(4)), whether directly or indirectly by reason of any reference elsewhere herein to any -74- such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 1404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to the application of Section 1402 or Section 1403 to any Securities or any series of Securities, as the case may be: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee which satisfies the requirements contemplated by Section 609 and agrees to comply with the provisions of this Article applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefits of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, in each case sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or any such other qualifying trustee) to pay and discharge, the principal of and any premium and interest on such Securities on the respective Stated Maturities, in accordance with the terms of this Indenture and such Securities. As used herein, "U.S. Government Obligation" means (x) any security which is (i) a direct obligation of the United States of America for the payment of which the full faith and credit of the United States of America is pledged or (ii) an obligation of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case (i) or (ii), is not callable or redeemable at the option of the issuer thereof, and (y) any depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any U.S. Government Obligation which is specified in Clause (x) above and held by such bank for the account of the holder of such depositary receipt, or with respect to any specific payment of principal of or interest on any U.S. Government Obligation which is so specified and held, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal or interest evidenced by such depositary receipt. (2) In the event of an election to have Section 1402 apply to any Securities or any series of Securities, as the case may be, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this instrument, there has been a change in the applicable Federal income tax law, in either case (A) or (B) to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit, Defeasance and discharge to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same -75- manner and at the same times as would be the case if such deposit, Defeasance and discharge were not to occur. (3) In the event of an election to have Section 1403 apply to any Securities or any series of Securities, as the case may be, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities will not recognize gain or loss for Federal income tax purposes as a result of the deposit and Covenant Defeasance to be effected with respect to such Securities and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur. (4) The Company shall have delivered to the Trustee an Officer's Certificate to the effect that neither such Securities nor any other Securities of the same series, if then listed on any securities exchange, will be delisted as a result of such deposit. (5) No event which is, or after notice or lapse of time or both would become, an Event of Default with respect to such Securities or any other Securities shall have occurred and be continuing at the time of such deposit or, with regard to any such event specified in Sections 501(6) and (7), at any time on or prior to the 90th day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until after such 90th day). (6) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest within the meaning of the Trust Indenture Act (assuming all Securities are in default within the meaning of such Act). (7) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (8) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act unless such trust shall be registered under such Act or exempt from registration thereunder. (9) The Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent with respect to such Defeasance or Covenant Defeasance have been complied with. SECTION 1405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee or other qualifying trustee (solely for purposes of this Section and Section 1406, the Trustee and any such other trustee are referred to collectively as the "Trustee") pursuant to Section 1404 in respect of any Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any such Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to -76- the Holders of such Securities, of all sums due and to become due thereon in respect of principal and any premium and interest, but money so held in trust need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1404 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Securities. Anything in this Article to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1404 with respect to any Securities which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect the Defeasance or Covenant Defeasance, as the case may be, with respect to such Securities. SECTION 1406. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with this Article with respect to any Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to Section 1402 or 1403 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 1405 with respect to such Securities in accordance with this Article; provided, however, that if the Company makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in trust. -77- IN WITNESS Whereof, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. H.J. HEINZ FINANCE COMPANY, as Issuer By /s/ Leonard A. Cullo, Jr. ----------------------------- H. J. HEINZ COMPANY, as Guarantor By /s/ Leonard A. Cullo, Jr. ----------------------------- BANK ONE, NATIONAL ASSOCIATION, as Trustee By /s/ Keith Richardson ----------------------------- -78- ANNEX A - Form of Regulation S Certificate REGULATION S CERTIFICATE (For transfers pursuant toss.305(b)(i) and (v) of the Indenture) Bank One, National Association 1 Bank One Plaza Chicago, Illinois 60670-0126 Re: [Insert Title of Securities] of H.J. Heinz Finance Company (the "Securities") Reference is made to the Indenture, dated as of July 6, 2001 (the "Indenture"), between H.J. Heinz Finance Company (the "Company"), H. J. Heinz Company (the "Guarantor") and Bank One, National Association, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein as so defined. This certificate relates to U.S. $__________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s). ________________________ CERTIFICATE No(s). __________________ The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of a Regulation S Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule 904 or Rule 144 under the Securities Act and with all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: (1) Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904; (A) the Owner is not a distributor of the Securities, an affiliate of the Company or any such distributor or a person acting on behalf of any of the foregoing; (B) the offer of the Specified Securities was not made to a person in the United States; (C) either: (i) at the time the buy order was originated, the Transferee was outside the United States or the Owner and any person acting on its behalf reasonably believed that the Transferee was outside the United States, or (ii) the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; (D) no directed selling efforts have been made in the United States by or on behalf of the Owner or any affiliate thereof; (E) if the Owner is a dealer in securities or has received a selling concession, fee or other remuneration in respect of the Specified Securities, and the transfer is to occur during the Restricted Period, then the requirements of Rule 904(c)(1) have been satisfied; and (F) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. (2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (A) the transfer is occurring after a holding period of at least one year (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (B) the transfer is occurring after a holding period of at least two years has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company. A-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Purchasers. Dated: -------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: -------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) A-3 ANNEX B - Form of Restricted Securities Certificate RESTRICTED SECURITIES CERTIFICATE (For transfers pursuant toss.305(b)(ii), (iii) and (v) of the Indenture) Bank One, National Association 1 Bank One Plaza Chicago, Illinois 60670-0126 Re: [Insert Title of Securities] of H.J. Heinz Finance Company (the "Securities") Reference is made to the Indenture, dated as of July 6, 2001 (the "Indenture"), between H.J. Heinz Finance Company (the "Company"), H. J. Heinz Company (the "Guarantor") and Bank One, National Association, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein as so defined. This certificate relates to U.S. $ ___________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s). ________________________ CERTIFICATE No(s). __________________ The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by the Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of a Restricted Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule 144A or Rule 144 under the Securities Act and all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: (1) Rule 144A Transfers. If the transfer is being effected in accordance with Rule 144A: (A) the Specified Securities are being transferred to a person that the Owner and any person acting on its behalf reasonably believe is a "qualified institutional buyer" within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified institutional buyer; and B-1 (B) the Owner and any person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer; and (2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (A) the transfer is occurring after a holding period of at least one year (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (B) the transfer is occurring after a holding period of at least two years has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Purchasers. Dated: -------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: -------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) B-2 ANNEX C - Form of Unrestricted Securities Certificate UNRESTRICTED SECURITIES CERTIFICATE (For removal of Securities Act Legends pursuant toss.305(c) of the Indenture) Bank One, National Association 1 Bank One Plaza Chicago, Illinois 60670-0126 Re: [Insert Title of Securities] of H.J. Heinz Finance Company (the "Securities") Reference is made to the Indenture, dated as of July 6, 2001 (the "Indenture"), between H.J. Heinz Finance Company (the "Company"), H. J. Heinz Company (the "Guarantor") and Bank One, National Association, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933, as amended (the "Securities Act") are used herein as so defined. This certificate relates to U.S. $_____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s). ___________________________ CERTIFICATE No(s). _____________________ The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be exchanged for Securities bearing no Securities Act Legend pursuant to Section 305(c) of the Indenture. In connection with such exchange, the Owner hereby certifies that the exchange is occurring after a holding period of at least two years (computed in accordance with paragraph (d) of Rule 144) has elapsed since the Specified Securities were last acquired from the Company or from an affiliate of the Company, whichever is later, and the Owner is not, and during the preceding three months has not been, an affiliate of the Company. The Owner also acknowledges that any future transfers of the Specified Securities must comply with all applicable securities laws of the states of the United States and other jurisdictions. C-1 This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Purchasers. Dated: -------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: -------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) C-2 EX-4.4 9 mar2202_ex0404.txt EXHIBIT 4.4 EXECUTION COPY H. J. Heinz Finance Company 6.625% Guaranteed Notes due July 15, 2011 unconditionally and irrevocably by H. J. Heinz Company --------- Exchange and Registration Rights Agreement June 27, 2001 Goldman, Sachs & Co., J.P. Morgan Securities Inc. As representatives of the several Purchasers named in Schedule I to the Purchase Agreement c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: H. J. Heinz Finance Company, a Delaware corporation (the "Company"), proposes to issue and sell to the several Purchasers (as defined herein) upon the terms set forth in the Purchase Agreement (as defined herein) its 6.625% Guaranteed Notes due July 15, 2011, which are unconditionally and irrevocably guaranteed by H. J. Heinz Company (the "Guarantor"). As an inducement to the several Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the several Purchasers thereunder, each of the Company and the Guarantor agrees with the several Purchasers for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Certain Definitions. For purposes of this Exchange and Registration Rights Agreement, the following terms shall have the following respective meanings: "Base Interest" shall mean the interest that would otherwise accrue on the Securities under the terms thereof and the Indenture, without giving effect to the provisions of this Agreement. The term "broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act. "Closing Date" shall mean the date on which the Securities are initially issued. "Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "Effective Time," in the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Registration Statement effective 1 or as of which the Exchange Registration Statement otherwise becomes effective and (ii) a Shelf Registration, shall mean the time and date as of which the Commission declares the Shelf Registration Statement effective or as of which the Shelf Registration Statement otherwise becomes effective. "Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(ii) or 3(d)(iii) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time. "Exchange Offer" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Registration" shall have the meaning assigned thereto in Section 3(c) hereof. "Exchange Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Securities" shall have the meaning assigned thereto in Section 2(a) hereof. "Guarantor" shall have the meaning assigned thereto in the Indenture. The term "holder" shall mean each of the several Purchasers and other persons who acquire Registrable Securities from time to time (including any successors or assigns), in each case for so long as such person owns any Registrable Securities. "Indenture" shall mean the Indenture, dated as of July 6, 2001, between the Company, the Guarantor, and Bank One, National Association, as Trustee, as the same shall be amended from time to time. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. The term "person" shall mean a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency. "Purchase Agreement" shall mean the Purchase Agreement, dated as of June 27, 2001 between the several Purchasers, the Company and the Guarantor relating to the Securities. "Purchasers" shall mean the several Purchasers named in Schedule I to the Purchase Agreement. "Registrable Securities" shall mean the Securities; provided, however, that a Security shall cease to be a Registrable Security when (i) in the circumstances contemplated by Section 2(a) hereof, the Security has been exchanged for an Exchange Security in an Exchange Offer as contemplated in Section 2(a) hereof (provided that any Exchange Security that, pursuant to the last two sentences of Section 2(a), is included in a prospectus for use in connection with resales by broker-dealers shall be deemed to be a Registrable Security with respect to Sections 5, 6 and 9 until resale of such Registrable Security has been effected within the 330-day period referred to in Section 2(a); (ii) in the circumstances contemplated by Section 2(b) hereof, a Shelf Registration Statement registering such Security under the Securities Act has been declared or becomes effective and such Security 2 has been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Shelf Registration Statement; (iii) such Security is sold pursuant to Rule 144 under circumstances in which any legend borne by such Security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (v) such Security shall cease to be outstanding. "Registration Default" shall have the meaning assigned thereto in Section 2(c) hereof. "Registration Expenses" shall have the meaning assigned thereto in Section 4 hereof. "Resale Period" shall have the meaning assigned thereto in Section 2(a) hereof. "Restricted Holder" shall mean (i) a holder that is an affiliate of the Company within the meaning of Rule 405, (ii) a holder who acquires Exchange Securities outside the ordinary course of such holder's business, (iii) a holder who has arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing Exchange Securities and (iv) a holder that is a broker-dealer, but only with respect to Exchange Securities received by such broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Company. "Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time. "Securities" shall mean, collectively, the 6.625% Guaranteed Notes due July 15, 2011 of the Company, unconditionally and irrevocably guaranteed as to the payment of principal and interest by the Guarantor, to be issued and sold to the several Purchasers, and securities issued in exchange therefor or in lieu thereof pursuant to the Indenture. Each Security is entitled to the benefit of the guarantee provided for in the Indenture (the "Guarantee") and, unless the context otherwise requires, any reference herein to a "Security," an "Exchange Security" or a "Registrable Security" shall include a reference to the related Guarantee. "Securities Act" shall mean the Securities Act of 1933, or any successor thereto, as the same shall be amended from time to time. "Shelf Registration" shall have the meaning assigned thereto in Section 2(b) hereof. "Shelf Registration Statement" shall have the meaning assigned thereto in Section 2(b) hereof. "Special Interest" shall have the meaning assigned thereto in Section 2(c) hereof. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time. Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Exchange and Registration Rights Agreement, and the words "herein," "hereof" and "hereunder" and other words of similar import 3 refer to this Exchange and Registration Rights Agreement as a whole and not to any particular Section or other subdivision. 2. Registration Under the Securities Act. (a) Except as set forth in Section 2(b) below, the Company agrees to file under the Securities Act, no later than 270 days after the Closing Date, a registration statement relating to an offer to exchange (such registration statement, the "Exchange Registration Statement", and such offer, the "Exchange Offer") any and all of the Securities for a like aggregate principal amount of debt securities issued by the Company and guaranteed by the Guarantor, which debt securities and guarantee are substantially identical to the Securities and the related Guarantee, respectively (and are entitled to the benefits of a trust indenture which is substantially identical to the Indenture or is the Indenture and which has been qualified under the Trust Indenture Act), except that they have been registered pursuant to an effective registration statement under the Securities Act and do not contain provisions for the additional interest contemplated in Section 2(c) below (such new debt securities hereinafter called "Exchange Securities"). The Company and that Guarantor each agrees to use its reasonable best efforts to cause the Exchange Registration Statement to become effective under the Securities Act as soon as practicable, but no later than 330 days after the Closing Date. The Exchange Offer will be registered under the Securities Act on the appropriate form and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Company further agrees to use its reasonable best efforts to commence and complete the Exchange Offer promptly, but no later than 45 days after such registration statement has become effective, hold the Exchange Offer open for at least 30 days and exchange Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange Offer will be deemed to have been "completed" only if the debt securities and related guarantee received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are, upon receipt, transferable by each such holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of a substantial majority of the States of the United States of America. The Exchange Offer shall be deemed to have been completed upon the earlier to occur of (i) the Company having exchanged the Exchange Securities for all outstanding Registrable Securities pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer, which shall be on a date that is at least 30 days following the commencement of the Exchange Offer. The Company agrees (x) to include in the Exchange Registration Statement a prospectus for use in any resales by any holder of Exchange Securities that is a broker-dealer and (y) to keep such Exchange Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 180th day after the Exchange Offer has been completed or such time as such broker-dealers no longer own any Registrable Securities. With respect to such Exchange Registration Statement, such holders shall have the benefit of the rights of indemnification and contribution set forth in Sections 6(a), (c), (d) and (e) hereof. (b) If (i) on or prior to the time the Exchange Offer is completed existing Commission interpretations are changed such that the Exchange Securities received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are not or would not be, upon receipt, transferable by each such holder without restriction under the 4 Securities Act, (ii) the Exchange Offer has not been completed within 375 days following the Closing Date or (iii) the Exchange Offer is not available to any holder of the Securities, the Company shall, in lieu of (or, in the case of clause (iii), in addition to) conducting the Exchange Offer contemplated by Section 2(a), file under the Securities Act as soon as practicable, but no later than the later of 30 days after the time such obligation to file arises, a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (such filing, the "Shelf Registration" and such registration statement, the "Shelf Registration Statement"). The Company agrees to use its reasonable best efforts (x) to cause the Shelf Registration Statement to become or be declared effective no later than 60 days after such Shelf Registration Statement is filed and to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the Effective Time or such time as there are no longer any Registrable Securities outstanding, provided, however, that no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the prospectus forming a part thereof for resales of Registrable Securities unless such holder is an Electing Holder, and (y) after the Effective Time of the Shelf Registration Statement, promptly upon the request of any holder of Registrable Securities that is not then an Electing Holder, to take any action reasonably necessary to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such holder as a selling securityholder in the Shelf Registration Statement, provided, however, that nothing in this Clause (y) shall relieve any such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(ii) hereof. The Company further agrees to supplement or make amendments to the Shelf Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, and the Company agrees to furnish to each Electing Holder copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission. (c) In the event that (i) the Company has not filed the Exchange Registration Statement or Shelf Registration Statement on or before the date on which such registration statement is required to be filed pursuant to Section 2(a) or 2(b), respectively, or (ii) such Exchange Registration Statement or Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective pursuant to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed within 45 days after the initial effective date of the Exchange Registration Statement relating to the Exchange Offer (if the Exchange Offer is then required to be made) or (iv) any Exchange Registration Statement or Shelf Registration Statement required by Section 2(a) or 2(b) hereof is filed and declared effective but shall thereafter either be withdrawn by the Company or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement (except as specifically permitted herein) without being succeeded immediately by an additional registration statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default" and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then, as liquidated damages for such Registration Default, subject to the provisions of Section 9(b), special interest ("Special Interest"), in addition to the Base Interest, shall accrue at a per annum rate of 0.25% for the first 90 days of the Registration Default Period, at a per annum rate of 0.50% thereafter for 5 the remaining portion of the Default Period. Special Interest will cease to accrue at such time when there are no longer any Registrable Securities. (d) Each of the Company and the Guarantor shall take all actions necessary or advisable to be taken by it to ensure that the transactions contemplated herein are effected as so contemplated, including all actions necessary or desirable to register the Guarantee under the registration statement contemplated in Section 2(a) or 2(b) hereof, as applicable. (e) Any reference herein to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time and any reference herein to any post-effective amendment to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time. 3. Registration Procedures. If the Company files a registration statement pursuant to Section 2(a) or Section 2(b), the following provisions shall apply: (a) At or before the Effective Time of the Exchange Offer or the Shelf Registration, as the case may be, the Company shall qualify the Indenture under the Trust Indenture Act of 1939. (b) In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (c) In connection with the Company's obligations with respect to the registration of Exchange Securities as contemplated by Section 2(a) (the "Exchange Registration"), if applicable, the Company shall: (i) prepare and file with the Commission, no later than 270 days after the Closing Date, an Exchange Registration Statement on any form which may be utilized by the Company and which shall permit the Exchange Offer and resales of Exchange Securities by broker-dealers during the Resale Period to be effected as contemplated by Section 2(a), and use its reasonable best efforts to cause such Exchange Registration Statement to become effective as soon as practicable thereafter, but no later than 330 days after the Closing Date; (ii) as soon as practicable prepare and file with the Commission such amendments and supplements to such Exchange Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Exchange Registration Statement for the periods and purposes contemplated in Section 2(a) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Exchange Registration Statement, and promptly provide each broker-dealer holding Exchange Securities with such number of copies of the prospectus included therein (as then amended or supplemented), in conformity in all material respects with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, as such broker-dealer reasonably may request prior to the expiration of the Resale Period, for use in connection with resales of Exchange Securities; 6 (iii) promptly notify each broker-dealer that has requested or received copies of the prospectus included in such registration statement (A) when such Exchange Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Exchange Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Exchange Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Exchange Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) at any time during the Resale Period when a prospectus is required to be delivered under the Securities Act, that such Exchange Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (iv) in the event that the Company would be required, pursuant to Section 3(c)(iii)(F) above, to notify any broker-dealers holding Exchange Securities, without delay prepare and furnish to each such holder a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of such Exchange Securities during the Resale Period, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (v) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such Exchange Registration Statement or any post-effective amendment thereto at the earliest practicable date; (vi) use its reasonable best efforts to (A) register or qualify the Exchange Securities under the securities laws or blue sky laws of such jurisdictions as are contemplated by Section 2(a) no later than the commencement of the Exchange Offer, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions until the expiration of the Resale Period and (C) take any and all other actions as may be reasonably necessary or advisable to enable each broker-dealer holding Exchange Securities to consummate the disposition thereof in such jurisdictions; provided, however, that neither the Company nor the Guarantor shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the 7 requirements of this Section 3(c)(vi), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; (vii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Exchange Registration, the Exchange Offer and the offering and sale of Exchange Securities by broker-dealers during the Resale Period; (viii) provide a CUSIP number for all Exchange Securities, not later than the applicable Effective Time; (ix) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but no later than eighteen months after the effective date of such Exchange Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (d) In connection with the Company's obligations with respect to the Shelf Registration, if applicable, the Company shall: (i) prepare and file with the Commission, within the time periods specified in Section 2(b), a Shelf Registration Statement on any form which may be utilized by the Company and which shall register all of the Registrable Securities for resale by the holders thereof in accordance with such method or methods of disposition as may be specified by such of the holders as, from time to time, may be Electing Holders and use its reasonable best efforts to cause such Shelf Registration Statement to become effective as soon as practicable but in any case within the time periods specified in Section 2(b); (ii) after the Effective Time of the Shelf Registration Statement, upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder; provided that the Company shall not be required to take any action to name such holder as a selling securityholder in the Shelf Registration Statement or to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities until such holder has returned a completed and signed Notice and Questionnaire to the Company; (iii) as soon as practicable prepare and file with the Commission such amendments and supplements to such Shelf Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Shelf Registration Statement for the period specified in Section 2(b) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Shelf Registration Statement, and furnish to the Electing Holders copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission; (iv) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities covered by such Shelf Registration 8 Statement in accordance with the intended methods of disposition by the Electing Holders provided for in such Shelf Registration Statement; (v) provide (A) the Electing Holders, (B) the underwriters (which term, for purposes of this Exchange and Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act), if any, thereof, (C) any sales or placement agent therefor, (D) counsel for any such underwriter or agent and (E) not more than one counsel for all the Electing Holders the opportunity to participate in the preparation of such Shelf Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto; (vi) for a reasonable period prior to the filing of such Shelf Registration Statement, and throughout the period specified in Section 2(b), make available at reasonable times at the Company's principal place of business or such other reasonable place for inspection by the persons referred to in Section 3(d)(v) who shall certify to the Company that they have a current intention to sell the Registrable Securities pursuant to the Shelf Registration such financial and other information and books and records of the Company, and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary, in the judgment of the respective counsel referred to in such Section, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Company as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Company prompt prior written notice of such requirement), or (C) such information is required to be set forth in such Shelf Registration Statement or the prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such prospectus in order that such Shelf Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (vii) promptly notify each of the Electing Holders, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) (A) when such Shelf Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Shelf Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Shelf Registration Statement or prospectus or for additional 9 information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 3(d)(xvi) or Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) if at any time when a prospectus is required to be delivered under the Securities Act, that such Shelf Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (viii) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement or any post-effective amendment thereto at the earliest practicable date; (ix) if requested by any managing underwriter or underwriters, any placement or sales agent or any Electing Holder, promptly incorporate in a prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent or such Electing Holder specifies should be included therein relating to the terms of the sale of such Registrable Securities, including information with respect to the principal amount of Registrable Securities being sold by such Electing Holder or agent or to any underwriters, the name and description of such Electing Holder, agent or underwriter, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect thereof, the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Registrable Securities to be sold by such Electing Holder or agent or to such underwriters; and make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (x) furnish to each Electing Holder, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 3(d)(v) an executed copy (or, in the case of an Electing Holder, a conformed copy) of such Shelf Registration Statement, each such amendment and supplement thereto (in each case including all exhibits thereto (in the case of an Electing Holder of Registrable Securities, upon request) and documents incorporated by reference therein) and such number of copies of such Shelf Registration Statement (excluding exhibits thereto and documents incorporated by reference therein unless specifically so requested by such Electing Holder, agent or underwriter, as the case may be) and of the prospectus included in such Shelf Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, and such other documents, as such Electing Holder, agent, if any, and underwriter, if any, may 10 reasonably request in order to facilitate the offering and disposition of the Registrable Securities owned by such Electing Holder, offered or sold by such agent or underwritten by such underwriter and to permit such Electing Holder, agent and underwriter to satisfy the prospectus delivery requirements of the Securities Act; and the Company hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by each such Electing Holder and by any such agent and underwriter, in each case in the form most recently provided to such person by the Company, in connection with the offering and sale of the Registrable Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto; (xi) use reasonable best efforts to (A) register or qualify the Registrable Securities to be included in such Shelf Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder and each placement or sales agent, if any, therefor and underwriter, if any, thereof shall reasonably request, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Shelf Registration is required to remain effective under Section 2(b) above and for so long as may be necessary to enable any such Electing Holder, agent or underwriter to complete its distribution of Securities pursuant to such Shelf Registration Statement and (C) take any and all other actions as may be reasonably necessary or advisable to enable each such Electing Holder, agent, if any, and underwriter, if any, to consummate the disposition in such jurisdictions of such Registrable Securities; provided, however, that neither the Company nor the Guarantor shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(d)(xi), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; (xii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Shelf Registration or the offering or sale in connection therewith or to enable the selling holder or holders to offer, or to consummate the disposition of, their Registrable Securities; (xiii) Unless any Registrable Securities shall be in book-entry only form, cooperate with the Electing Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates, if so required by any securities exchange upon which any Registrable Securities are listed, shall be penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved borders, and which certificates shall not bear any restrictive legends; and, in the case of an underwritten offering, enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of the Registrable Securities; (xiv) provide a CUSIP number for all Registrable Securities, not later than the applicable Effective Time; 11 (xv) enter into one or more underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as any Electing Holders aggregating at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding shall request in order to expedite or facilitate the disposition of such Registrable Securities; (xvi) whether or not an agreement of the type referred to in Section 3(d)(xv) hereof is entered into and whether or not any portion of the offering contemplated by the Shelf Registration is an underwritten offering or is made through a placement or sales agent or any other entity, (A) make such representations and warranties to the Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made in connection with an offering of debt securities pursuant to any appropriate agreement or to a registration statement filed on the form applicable to the Shelf Registration; (B) obtain an opinion of counsel to the Company in customary form and covering such matters, of the type customarily covered by such an opinion, as the managing underwriters, if any, or as any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding may reasonably request, addressed to such Electing Holder or Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof and dated the effective date of such Shelf Registration Statement (and if such Shelf Registration Statement contemplates an underwritten offering of a part or all of the Registrable Securities, dated the date of the closing under the underwriting agreement relating thereto) (it being agreed that the matters to be covered by such opinion shall include the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(d)(xv) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Securities; the absence of material legal or governmental proceedings involving the Company; the absence of a breach by the Company or any of its subsidiaries of, or a default under, material agreements binding upon the Company or any subsidiary of the Company; the absence of governmental approvals required to be obtained in connection with the Shelf Registration, the offering and sale of the Registrable Securities, this Exchange and Registration 12 Rights Agreement or any agreement of the type referred to in Section 3(d)(xv) hereof, except such approvals as may be required under state securities or blue sky laws; the material compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, respectively; and, as of the date of the opinion and of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from the documents incorporated by reference therein (in each case other than the financial statements and other financial information contained therein) of an untrue statement of a material fact or the omission to state therein a material fact necessary to make the statements therein not misleading (in the case of such documents, in the light of the circumstances existing at the time that such documents were filed with the 12 Commission under the Exchange Act)); (C) obtain a "cold comfort" letter or letters from the independent certified public accountants of the Company addressed to the selling Electing Holders, the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such Shelf Registration Statement and (ii) the effective date of any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such Shelf Registration Statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering such matters of the type customarily covered by letters of such type; (D) deliver such documents and certificates, including officers' certificates, as may be reasonably requested by any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding or the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof to evidence the accuracy of the representations and warranties made pursuant to clause (A) above or those contained in Section 5(a) hereof and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantor; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Section 6 hereof; (xvii) notify in writing each holder of Registrable Securities of any proposal by the Company to amend or waive any provision of this Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (xviii) in the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Conduct Rules) of the National Association of Securities Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) thereof, whether as a holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Conduct Rules, including by (A) if such Conduct Rules shall so require, engaging a "qualified independent underwriter" (as defined in such Conduct Rules) to participate in the preparation of the Shelf Registration Statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Shelf Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Registrable Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof (or to such other customary extent as may be requested by such underwriter), and (C) providing such information to such broker-dealer as may be 13 required in order for such broker-dealer to comply with the requirements of the Conduct Rules; and (xix) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but in any event not later than eighteen months after the effective date of such Shelf Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (e) In the event that the Company would be required, pursuant to Section 3(d)(vii)(F) above, to notify the Electing Holders, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Company shall without delay prepare and furnish to each of the Electing Holders, to each placement or sales agent, if any, and to each such underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each Electing Holder agrees that upon receipt of any notice from the Company pursuant to Section 3(d)(vii)(F) hereof, such Electing Holder shall forthwith discontinue the disposition of Registrable Securities pursuant to the Shelf Registration Statement applicable to such Registrable Securities until such Electing Holder shall have received copies of such amended or supplemented prospectus, and if so directed by the Company, such Electing Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Electing Holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. (f) In the event of a Shelf Registration, in addition to the information required to be provided by each Electing Holder in its Notice Questionnaire, the Company may require such Electing Holder to furnish to the Company such additional information regarding such Electing Holder and such Electing Holder's intended method of distribution of Registrable Securities as may be required in order to comply with the Securities Act. Each such Electing Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder to the Company or of the occurrence of any event in either case as a result of which any prospectus relating to such Shelf Registration contains or would contain an untrue statement of a material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities or omits to state any material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. 14 (g) Until the expiration of two years after the Closing Date, the Company will not, and will not permit any of its "affiliates" (as defined in Rule 144) to, resell any of the Securities that have been reacquired by any of them except pursuant to an effective registration statement under the Securities Act. 4. Registration Expenses. The Company agrees to bear and to pay or cause to be paid promptly all expenses incident to the Company's performance of or compliance with this Exchange and Registration Rights Agreement, including (a) all Commission and any NASD registration, filing and review fees and expenses including fees and disbursements of counsel for the placement or sales agent or underwriters in connection with such registration, filing and review, (b) all fees and expenses in connection with the qualification of the Securities for offering and sale under the State securities and blue sky laws referred to in Section 3(d)(xi) hereof and determination of their eligibility for investment under the laws of such jurisdictions as any managing underwriters or the Electing Holders may designate, including any fees and disbursements of counsel for the Electing Holders or underwriters in connection with such qualification and determination, (c) all expenses relating to the preparation, printing, production, distribution and reproduction of each registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Securities for delivery and the expenses of printing or producing any underwriting agreements, agreements among underwriters, selling agreements and blue sky or legal investment memoranda and all other documents in connection with the offering, sale or delivery of Securities to be disposed of (including certificates representing the Securities), (d) messenger, telephone and delivery expenses relating to the offering, sale or delivery of Securities and the preparation of documents referred in clause (c) above, (e) fees and expenses of the Trustee under the Indenture, any agent of the Trustee and any counsel for the Trustee and of any collateral agent or custodian, (f) internal expenses (including all salaries and expenses of the Company's officers and employees performing legal or accounting duties), (g) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or "cold comfort" letters required by or incident to such performance and compliance), (h) fees, disbursements and expenses of any "qualified independent underwriter" engaged pursuant to Section 3(d)(xviii) hereof, (i) fees, disbursements and expenses of one counsel for the Electing Holders retained in connection with a Shelf Registration, as selected by the Electing Holders of at least a majority in aggregate principal amount of the Registrable Securities held by Electing Holders (which counsel shall be reasonably satisfactory to the Company), (j) any fees charged by securities rating services for rating the Securities, and (k) fees, expenses and disbursements of any other persons, including special experts, retained by the Company in connection with such registration (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any holder of Registrable Securities or any placement or sales agent therefor or underwriter thereof, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor. Notwithstanding the foregoing, the holders of the Registrable Securities being registered shall pay all agency fees and commissions and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above. 15 5. Representations and Warranties. Each of the Company and the Guarantor represents and warrants to, and agrees with, each Purchaser that: (a) The compliance by the Company with all of the provisions of this Exchange and Registration Rights Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any subsidiary of the Company is a party or by which the Company or any subsidiary of the Company is bound or to which any of the property or assets of the Company or any subsidiary of the Company is subject, nor will such action result in any violation of the provisions of the certificate of incorporation, as amended, or the by-laws of the Company or the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any subsidiary of the Company or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Company and the Guarantor of the transactions contemplated by this Exchange and Registration Rights Agreement, except the registration under the Securities Act of the Securities, qualification of the Indenture under the Trust Indenture Act and such consents, approvals, authorizations, registrations or qualifications as may be required under State securities or blue sky laws in connection with the offering and distribution of the Securities. (b) This Exchange and Registration Rights Agreement has been duly authorized, executed and delivered by the Company. 6. Indemnification. (a) Indemnification by the Company and the Guarantor. The Company and the Guarantor, jointly and severally, will indemnify and hold harmless each of the holders of Registrable Securities included in an Exchange Registration Statement, each of the Electing Holders of Registrable Securities included in a Shelf Registration Statement and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities against any losses, claims, damages or liabilities, joint or several, to which such holder, agent or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Exchange Registration Statement or Shelf Registration Statement, as the case may be, under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such holder, Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such holder, such Electing Holder, such agent and such underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Company nor the Guarantor shall be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary prospectus, or amendment or supplement 16 thereto, in reliance upon and in conformity with written information furnished to the Company by such person expressly for use therein. (b) Indemnification by the Holders and any Agents and Underwriters. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2(b) hereof and to entering into any underwriting agreement with respect thereto, that the Company shall have received an undertaking reasonably satisfactory to it from the Electing Holder of such Registrable Securities and from each underwriter named in any such underwriting agreement, severally and not jointly, to (i) indemnify and hold harmless the Company, the Guarantor, and all other holders of Registrable Securities, against any losses, claims, damages or liabilities to which the Company, the Guarantor or such other holders of Registrable Securities may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Electing Holder or underwriter expressly for use therein, and (ii) reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company and the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of or contemplated by this Section 6, notify such indemnifying party in writing of the commencement of such action; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under the indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement 17 as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Contribution. If for any reason the indemnification provisions contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party and the indemnified party from the transactions herein contemplated or, if the allocation provided by the preceding clause (i) is not permitted under applicable law, not only the relative benefits referred to in the preceding clause (i), but also (ii) the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were determined by pro rata allocation (even if the holders or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no holder shall be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such holder from the sale of any Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) exceeds the amount of any damages which such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The holders' and any underwriters' obligations in this Section 6(d) to contribute shall be several in proportion to the principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) The obligations of the Company and the Guarantor under this Section 6 shall be in addition to any liability which the Company or the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each officer, director and partner of each holder, agent and underwriter and each person, if any, who controls any holder, agent or underwriter within the meaning of the Securities Act; and the obligations of the holders and any agents or underwriters contemplated by this Section 6 shall be in addition to any liability 18 which the respective holder, agent or underwriter may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company or the Guarantor and to each person, if any, who controls the Company within the meaning of the Securities Act. 7. Underwritten Offerings. (a) Selection of Underwriters. If any of the Registrable Securities covered by the Shelf Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Electing Holders holding at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering, provided that such designated managing underwriter or underwriters is or are reasonably acceptable to the Company. (b) Participation by Holders. Each holder of Registrable Securities hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. Rule 144. The Company covenants to the holders of Registrable Securities that, to the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities in connection with that holder's sale pursuant to Rule 144, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements. The Guarantor covenants to the holders of Registrable Securities that, to the extent it shall be required to do so under the Exchange Act, the Guarantor shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. 19 9. Miscellaneous. (a) No Inconsistent Agreements. The Company represents, warrants, covenants and agrees that it has not granted, and shall not grant, registration rights with respect to Registrable Securities or any other securities which would be inconsistent with the terms contained in this Exchange and Registration Rights Agreement. (b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company or the Guarantor fails to perform any of its obligations hereunder and that the several Purchasers and the holders from time to time of the Registrable Securities may be irreparably harmed by any such failure, and accordingly agree that the several Purchasers and such holders, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of the Company under this Exchange and Registration Rights Agreement in accordance with the terms and conditions of this Exchange and Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction. (c) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: If to the Company, to it at 600 Grant Street, 60th Floor, Pittsburgh, PA 15219, Attention: President, and if to a holder, to the address of such holder set forth in the security register or other records of the Company, or to such other address as the Company or any such holder may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (d) Parties in Interest. All the terms and provisions of this Exchange and Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and the holders from time to time of the Registrable Securities and the respective successors and assigns of the parties hereto and such holders. In the event that any transferee of any holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Exchange and Registration Rights Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Exchange and Registration Rights Agreement. If the Company shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof. (e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Exchange and Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any holder of Registrable Securities, any director, officer or partner of such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities pursuant to the Purchase Agreement and the transfer and registration of Registrable Securities by such holder and the consummation of an Exchange Offer. 20 (f) Governing Law. This Exchange and Registration Rights Agreement shall be governed by and construed in accordance with the laws of the State of New York. (g) Headings. The descriptive headings of the several Sections and paragraphs of this Exchange and Registration Rights Agreement are inserted for convenience only, do not constitute a part of this Exchange and Registration Rights Agreement and shall not affect in any way the meaning or interpretation of this Exchange and Registration Rights Agreement. (h) Entire Agreement; Amendments. This Exchange and Registration Rights Agreement and the other writings referred to herein (including the Indenture and the form of Securities) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Exchange and Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Exchange and Registration Rights Agreement may be amended and the observance of any term of this Exchange and Registration Rights Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the holders of at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 9(h), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such holder. (i) Inspection. For so long as this Exchange and Registration Rights Agreement shall be in effect, this Exchange and Registration Rights Agreement and a complete list of the names and addresses of all the holders of Registrable Securities shall be made available for inspection and copying on any business day by any holder of Registrable Securities for proper purposes only (which shall include any purpose related to the rights of the holders of Registrable Securities under the Securities, the Indenture and this Agreement) at the offices of the Company at the address thereof set forth in Section 9(c) above, upon reasonable notice to the Company, and at the office of the Trustee under the Indenture. (j) Counterparts. This agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 21 If the foregoing is in accordance with your understanding, please sign and return to us one for the Company, the Guarantor and each of the Representatives plus one for each counsel, counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the several Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the several Purchasers, the Company and the Guarantor. It is understood that your acceptance of this letter on behalf of each of the several Purchasers is pursuant to the authority set forth in a form of Agreement among Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, H. J. Heinz Finance Company By: /s/ Leonard A. Cullo, Jr. .................................. Name: Leonard A. Cullo, Jr. Title: President H. J. Heinz Company By: /s/ Leonard A. Cullo, Jr. .................................. Name: Leonard A. Cullo, Jr. Title: Treasurer Accepted as of the date hereof: Goldman, Sachs & Co. J.P. Morgan Securities Inc. Banc of America Securities LLC HSBC Securities (USA) Inc. Banc One Capital Markets, Inc. BNP Paribas Securities Corp. Mellon Financial Markets, LLC PNC Capital Markets, Inc. UBS Warburg LLC By: /s/ Goldman, Sachs & Co. ......................................... Goldman, Sachs & Co. On behalf of each of the Purchasers 22 Exhibit A H. J. Heinz Finance Company INSTRUCTION TO DTC PARTICIPANTS (Date of Mailing) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: [DATE] * The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in the H. J. Heinz Finance Company (the "Company"), the 6.625% Guaranteed Notes due July 15, 2011 (the "Securities") are held. The Company is in the process of registering the Securities under the Securities Act of 1933 for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire. It is important that beneficial owners of the Securities receive a copy of the enclosed materials as soon as possible as their rights to have the Securities included in the registration statement depend upon their returning the Notice and Questionnaire by [Deadline For Response]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact H. J. Heinz Finance Company, 600 Grant Street, 60th Floor, Pittsburgh, PA 15219; Attention: President. - --------- *Not less than 28 calendar days from date of mailing. A-1 H. J. Heinz Finance Company Notice of Registration Statement and Selling Securityholder Questionnaire (Date) Reference is hereby made to the Exchange and Registration Rights Agreement (the "Exchange and Registration Rights Agreement") between H. J. Heinz Finance Company (the "Company"), H. J. Heinz Company (the "Guarantor") and the several Purchasers named therein. Pursuant to the Exchange and Registration Rights Agreement, the Company has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form [S-_] (File No. 333-____) (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's 6.625% Guaranteed Notes due July 15, 2011 (the "Securities"). A copy of the Exchange and Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Exchange and Registration Rights Agreement. Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. The term "Registrable Securities" is defined in the Exchange and Registration Rights Agreement. A-2 ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Exchange and Registration Rights Agreement, including, without limitation, Section 6 of the Exchange and Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto. Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder will be required to deliver to the Company and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: A-3 QUESTIONNAIRE (1)(a) Full Legal Name of Selling Securityholder: ________________________________________________________________________ (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in Item (3) below: ________________________________________________________________________ (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held: ________________________________________________________________________ (2) Address for Notices to Selling Securityholder: _____________________________ _____________________________ _____________________________ Telephone: _____________________________ Fax: _____________________________ Contact Person: _____________________________ (3) Beneficial Ownership of Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities. (a) Principal amount of Registrable Securities beneficially owned:__________ CUSIP No(s). of such Registrable Securities:____________________________ (b) Principal amount of Securities other than Registrable Securities beneficially owned: ________________________________________________________________________ CUSIP No(s). of such other Securities:__________________________________ (c) Principal amount of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement:______________ CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement:_________________________________________________ (4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any other securities of the Company, other than the Securities listed above in Item (3). State any exceptions here: A-4 (5) Relationships with the Company: Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: (6) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M. In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Exchange and Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Shelf Registration Statement and related Prospectus. A-5 In accordance with the Selling Securityholder's obligation under Section 3(d) of the Exchange and Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Exchange and Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: (i) To the Company: _____________________________ _____________________________ _____________________________ _____________________________ _____________________________ (ii) With a copy to: _____________________________ _____________________________ _____________________________ _____________________________ _____________________________ Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above. This Agreement shall be governed in all respects by the laws of the State of New York. A-6 IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated:___________________ _________________________________________________________________________ Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By:______________________________________________________________________ Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT: _____________________________ _____________________________ _____________________________ _____________________________ _____________________________ A-7 Exhibit B NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT Bank One, National Association H. J. Heinz Finance Company c/o Bank One, National Association 1 Bank One Plaza Chicago, IL 60670 Attention: Trust Officer Re: H. J. Heinz Finance Company (the "Company") 6.625% Guaranteed Notes due July 15, 2011 Dear Sirs: Please be advised that ____________ has transferred $__________ aggregate principal amount of the above-referenced Notes pursuant to an effective Registration Statement on Form [S-____] (File No. 333-_____) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus dated [date] or in supplements thereto, and that the aggregate principal amount of the Notes transferred are the Notes listed in such Prospectus opposite such owner's name. Dated: Very truly yours, _______________________ (Name) By:_______________________ (Authorized Signature) B-1 EX-4.5 10 mar2202_ex0405.txt EXHIBIT 4.5 Execution Copy H. J. Heinz Finance Company 6.00% Guaranteed Notes due March 15, 2012 unconditionally and irrevocably guaranteed by H. J. Heinz Company ------------ Exchange and Registration Rights Agreement ------------------------------------------ February 28, 2002 J.P. Morgan Securities Inc., As representative of the several Purchasers named in Schedule I to the Purchase Agreement, 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: H. J. Heinz Finance Company, a Delaware corporation (the "Company"), proposes to issue and sell to the several Purchasers (as defined herein) upon the terms set forth in the Purchase Agreement (as defined herein) its 6.00% Guaranteed Notes due March 15, 2012, which are unconditionally and irrevocably guaranteed by H. J. Heinz Company (the "Guarantor"). As an inducement to the several Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the several Purchasers thereunder, each of the Company and the Guarantor agrees with the several Purchasers for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Certain Definitions. For purposes of this Exchange and Registration Rights Agreement, the following terms shall have the following respective meanings: "Base Interest" shall mean the interest that would otherwise accrue on the Securities under the terms thereof and the Indenture, without giving effect to the provisions of this Agreement. The term "broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act. "Closing Date" shall mean the date on which the Securities are initially issued. "Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "Effective Time," in the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Registration Statement effective or as of which the Exchange Registration Statement otherwise becomes effective and (ii) a Shelf Registration, shall mean the time and date as of which the Commission declares the 1 Execution Copy Shelf Registration Statement effective or as of which the Shelf Registration Statement otherwise becomes effective. "Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(ii) or 3(d)(iii) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time. "Exchange Offer" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Registration" shall have the meaning assigned thereto in Section 3(c) hereof. "Exchange Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Securities" shall have the meaning assigned thereto in Section 2(a) hereof. "Guarantor" shall have the meaning assigned thereto in the Indenture. The term "holder" shall mean each of the several Purchasers and other persons who acquire Registrable Securities from time to time (including any successors or assigns), in each case for so long as such person owns any Registrable Securities. "Indenture" shall mean the Indenture, dated as of July 6, 2001, between the Company, the Guarantor, and Bank One, National Association, as Trustee, as the same shall be amended from time to time. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. The term "person" shall mean a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency. "Purchase Agreement" shall mean the Purchase Agreement, dated as of February 28, 2002 between J.P. Morgan Securities Inc., as representative of the several Purchasers named in Schedule I thereto, the Company and the Guarantor relating to the Securities. "Purchasers" shall mean the several Purchasers named in Schedule I to the Purchase Agreement. "Registrable Securities" shall mean the Securities; provided, however, that a Security shall cease to be a Registrable Security when (i) in the circumstances contemplated by Section 2(a) hereof, the Security has been exchanged for an Exchange Security in an Exchange Offer as contemplated in Section 2(a) hereof (provided that any Exchange Security that, pursuant to the last two sentences of Section 2(a), is included in a prospectus for use in connection with resales by broker-dealers shall be deemed to be a Registrable Security with respect to Sections 5, 6 and 9 until resale of such Registrable Security has been effected within the 180-day period referred to in Section 2(a); (ii) in the circumstances contemplated by Section 2(b) hereof, a Shelf Registration Statement registering such Security under the Securities Act has been declared or becomes effective and such Security has been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Shelf Registration Statement; (iii) such Security is sold 2 Execution Copy pursuant to Rule 144 under circumstances in which any legend borne by such Security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (v) such Security shall cease to be outstanding. "Registration Default" shall have the meaning assigned thereto in Section 2(c) hereof. "Registration Expenses" shall have the meaning assigned thereto in Section 4 hereof. "Resale Period" shall have the meaning assigned thereto in Section 2(a) hereof. "Restricted Holder" shall mean (i) a holder that is an affiliate of the Company within the meaning of Rule 405, (ii) a holder who acquires Exchange Securities outside the ordinary course of such holder's business, (iii) a holder who has arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing Exchange Securities and (iv) a holder that is a broker-dealer, but only with respect to Exchange Securities received by such broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Company. "Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time. "Securities" shall mean, collectively, the 6.00% Guaranteed Notes due March 15, 2012 of the Company, unconditionally and irrevocably guaranteed as to the payment of principal and interest by the Guarantor, to be issued and sold to the several Purchasers, and securities issued in exchange therefor or in lieu thereof pursuant to the Indenture. Each Security is entitled to the benefit of the guarantee provided for in the Indenture (the "Guarantee") and, unless the context otherwise requires, any reference herein to a "Security," an "Exchange Security" or a "Registrable Security" shall include a reference to the related Guarantee. "Securities Act" shall mean the Securities Act of 1933, or any successor thereto, as the same shall be amended from time to time. "Shelf Registration" shall have the meaning assigned thereto in Section 2(b) hereof. "Shelf Registration Statement" shall have the meaning assigned thereto in Section 2(b) hereof. "Special Interest" shall have the meaning assigned thereto in Section 2(c) hereof. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time. Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Exchange and Registration Rights Agreement, and the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Exchange and Registration Rights Agreement as a whole and not to any particular Section or other subdivision. 2. Registration Under the Securities Act. 3 Execution Copy (a) Except as set forth in Section 2(b) below, the Company agrees to file under the Securities Act, no later than 120 days after the Closing Date, a registration statement relating to an offer to exchange (such registration statement, the "Exchange Registration Statement", and such offer, the "Exchange Offer") any and all of the Securities for a like aggregate principal amount of debt securities issued by the Company and guaranteed by the Guarantor, which debt securities and guarantee are substantially identical to the Securities and the related Guarantee, respectively (and are entitled to the benefits of a trust indenture which is substantially identical to the Indenture or is the Indenture and which has been qualified under the Trust Indenture Act), except that they have been registered pursuant to an effective registration statement under the Securities Act and do not contain provisions for the additional interest contemplated in Section 2(c) below (such new debt securities hereinafter called "Exchange Securities"). The Company and the Guarantor each agrees to use its reasonable best efforts to cause the Exchange Registration Statement to become effective under the Securities Act as soon as practicable, but no later than 180 days after the Closing Date. The Exchange Offer will be registered under the Securities Act on the appropriate form and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Company further agrees to use its reasonable best efforts to commence and complete the Exchange Offer promptly, but no later than 45 days after such registration statement has become effective, hold the Exchange Offer open for at least 30 days and exchange Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange Offer will be deemed to have been "completed" only if the debt securities and related guarantee received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are, upon receipt, transferable by each such holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of a substantial majority of the States of the United States of America. The Exchange Offer shall be deemed to have been completed upon the earlier to occur of (i) the Company having exchanged the Exchange Securities for all outstanding Registrable Securities pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer, which shall be on a date that is at least 30 days following the commencement of the Exchange Offer. The Company agrees (x) to include in the Exchange Registration Statement a prospectus for use in any resales by any holder of Exchange Securities that is a broker-dealer and (y) to keep such Exchange Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 180th day after the Exchange Offer has been completed or such time as such broker-dealers no longer own any Registrable Securities. With respect to such Exchange Registration Statement, such holders shall have the benefit of the rights of indemnification and contribution set forth in Sections 6(a), (c), (d) and (e) hereof. (b) If (i) on or prior to the time the Exchange Offer is completed existing Commission interpretations are changed such that the Exchange Securities received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are not or would not be, upon receipt, transferable by each such holder without restriction under the Securities Act, (ii) the Exchange Offer has not been completed within 225 days following the Closing Date or (iii) the Exchange Offer is not available to any holder of the Securities, the Company shall, in lieu of (or, in the case of clause (iii), in addition to) conducting the Exchange Offer contemplated by Section 2(a), file under the Securities Act as soon as practicable, but no later than the later of 30 days after the time such obligation to file arises, a "shelf" registration statement providing for the registration of, and the sale on a continuous or 4 Execution Copy delayed basis by the holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (such filing, the "Shelf Registration" and such registration statement, the "Shelf Registration Statement"). The Company agrees to use its reasonable best efforts (x) to cause the Shelf Registration Statement to become or be declared effective no later than 60 days after such Shelf Registration Statement is filed and to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the Effective Time or such time as there are no longer any Registrable Securities outstanding, provided, however, that no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the prospectus forming a part thereof for resales of Registrable Securities unless such holder is an Electing Holder, and (y) after the Effective Time of the Shelf Registration Statement, promptly upon the request of any holder of Registrable Securities that is not then an Electing Holder, to take any action reasonably necessary to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such holder as a selling securityholder in the Shelf Registration Statement, provided, however, that nothing in this Clause (y) shall relieve any such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(iii) hereof. The Company further agrees to supplement or make amendments to the Shelf Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, and the Company agrees to furnish to each Electing Holder copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission. (c) In the event that (i) the Company has not filed the Exchange Registration Statement or Shelf Registration Statement on or before the date on which such registration statement is required to be filed pursuant to Section 2(a) or 2(b), respectively, or (ii) such Exchange Registration Statement or Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective pursuant to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed within 45 days after the initial effective date of the Exchange Registration Statement relating to the Exchange Offer (if the Exchange Offer is then required to be made) or (iv) any Exchange Registration Statement or Shelf Registration Statement required by Section 2(a) or 2(b) hereof is filed and declared effective but shall thereafter either be withdrawn by the Company or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement (except as specifically permitted herein) without being succeeded immediately by an additional registration statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default" and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then, as liquidated damages for such Registration Default, subject to the provisions of Section 9(b), special interest ("Special Interest"), in addition to the Base Interest, shall accrue at a per annum rate of 0.25% for the first 90 days of the Registration Default Period, at a per annum rate of 0.50% thereafter for the remaining portion of the Default Period. Special Interest will cease to accrue at such time when there are no longer any Registrable Securities. (d) Each of the Company and the Guarantor shall take all actions necessary or advisable to be taken by it to ensure that the transactions contemplated herein are effected as so contemplated, including all actions necessary or desirable to register the Guarantee under the registration statement contemplated in Section 2(a) or 2(b) hereof, as applicable. 5 Execution Copy (e) Any reference herein to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time and any reference herein to any post-effective amendment to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time. 3. Registration Procedures. If the Company files a registration statement pursuant to Section 2(a) or Section 2(b), the following provisions shall apply: (a) At or before the Effective Time of the Exchange Offer or the Shelf Registration, as the case may be, the Company shall qualify the Indenture under the Trust Indenture Act of 1939. (b) In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (c) In connection with the Company's obligations with respect to the registration of Exchange Securities as contemplated by Section 2(a) (the "Exchange Registration"), if applicable, the Company shall: (i) prepare and file with the Commission, no later than 120 days after the Closing Date, an Exchange Registration Statement on any form which may be utilized by the Company and which shall permit the Exchange Offer and resales of Exchange Securities by broker-dealers during the Resale Period to be effected as contemplated by Section 2(a), and use its reasonable best efforts to cause such Exchange Registration Statement to become effective as soon as practicable thereafter, but no later than 180 days after the Closing Date; (ii) as soon as practicable prepare and file with the Commission such amendments and supplements to such Exchange Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Exchange Registration Statement for the periods and purposes contemplated in Section 2(a) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Exchange Registration Statement, and promptly provide each broker-dealer holding Exchange Securities with such number of copies of the prospectus included therein (as then amended or supplemented), in conformity in all material respects with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, as such broker-dealer reasonably may request prior to the expiration of the Resale Period, for use in connection with resales of Exchange Securities; (iii) promptly notify each broker-dealer that has requested or received copies of the prospectus included in such registration statement (A) when such Exchange Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Exchange Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such 6 Execution Copy Exchange Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Exchange Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) at any time during the Resale Period when a prospectus is required to be delivered under the Securities Act, that such Exchange Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (iv) in the event that the Company would be required, pursuant to Section 3(c)(iii)(F) above, to notify any broker-dealers holding Exchange Securities, without delay prepare and furnish to each such holder a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of such Exchange Securities during the Resale Period, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (v) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such Exchange Registration Statement or any post-effective amendment thereto at the earliest practicable date; (vi) use its reasonable best efforts to (A) register or qualify the Exchange Securities under the securities laws or blue sky laws of such jurisdictions as are contemplated by Section 2(a) no later than the commencement of the Exchange Offer, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions until the expiration of the Resale Period and (C) take any and all other actions as may be reasonably necessary or advisable to enable each broker-dealer holding Exchange Securities to consummate the disposition thereof in such jurisdictions; provided, however, that neither the Company nor the Guarantor shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(c)(vi), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; (vii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Exchange Registration, the Exchange Offer and the offering and sale of Exchange Securities by broker-dealers during the Resale Period; 7 Execution Copy (viii) provide a CUSIP number for all Exchange Securities, not later than the applicable Effective Time; (ix) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but no later than eighteen months after the effective date of such Exchange Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (d) In connection with the Company's obligations with respect to the Shelf Registration, if applicable, the Company shall: (i) prepare and file with the Commission, within the time periods specified in Section 2(b), a Shelf Registration Statement on any form which may be utilized by the Company and which shall register all of the Registrable Securities for resale by the holders thereof in accordance with such method or methods of disposition as may be specified by such of the holders as, from time to time, may be Electing Holders and use its reasonable best efforts to cause such Shelf Registration Statement to become effective as soon as practicable but in any case within the time periods specified in Section 2(b); (ii) not less than 30 calendar days prior to the Effective Time of the Shelf Registration Statement, mail or cause to be mailed the Notice and Questionnaire to the holders of Registrable Securities; no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement as of the Effective Time, and no holder shall be entitled to use the prospectus forming a part thereof for resales of Registrable Securities at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, that holders of Registrable Securities shall have at least 28 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Company; (iii) after the Effective Time of the Shelf Registration Statement, upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder; provided that the Company shall not be required to take any action to name such holder as a selling securityholder in the Shelf Registration Statement or to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities until such holder has returned a completed and signed Notice and Questionnaire to the Company; (iv) as soon as practicable prepare and file with the Commission such amendments and supplements to such Shelf Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Shelf Registration Statement for the period specified in Section 2(b) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Shelf Registration Statement, and furnish to the Electing Holders copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission; 8 Execution Copy (v) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities covered by such Shelf Registration Statement in accordance with the intended methods of disposition by the Electing Holders provided for in such Shelf Registration Statement; (vi) provide (A) the Electing Holders, (B) the underwriters (which term, for purposes of this Exchange and Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act), if any, thereof, (C) any sales or placement agent therefor, (D) counsel for any such underwriter or agent and (E) not more than one counsel for all the Electing Holders the opportunity to participate in the preparation of such Shelf Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto; (vii) for a reasonable period prior to the filing of such Shelf Registration Statement, and throughout the period specified in Section 2(b), make available at reasonable times at the Company's principal place of business or such other reasonable place for inspection by the persons referred to in Section 3(d)(vi) who shall certify to the Company that they have a current intention to sell the Registrable Securities pursuant to the Shelf Registration such financial and other information and books and records of the Company, and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary, in the judgment of the respective counsel referred to in such Section, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Company as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Company prompt prior written notice of such requirement), or (C) such information is required to be set forth in such Shelf Registration Statement or the prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such prospectus in order that such Shelf Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (viii) promptly notify each of the Electing Holders, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) (A) when such Shelf Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Shelf Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or 9 Execution Copy supplements to such Shelf Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 3(d)(xvii) or Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) if at any time when a prospectus is required to be delivered under the Securities Act, that such Shelf Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (ix) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement or any post-effective amendment thereto at the earliest practicable date; (x) if requested by any managing underwriter or underwriters, any placement or sales agent or any Electing Holder, promptly incorporate in a prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent or such Electing Holder specifies should be included therein relating to the terms of the sale of such Registrable Securities, including information with respect to the principal amount of Registrable Securities being sold by such Electing Holder or agent or to any underwriters, the name and description of such Electing Holder, agent or underwriter, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect thereof, the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Registrable Securities to be sold by such Electing Holder or agent or to such underwriters; and make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (xi) furnish to each Electing Holder, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 3(d)(vi) an executed copy (or, in the case of an Electing Holder, a conformed copy) of such Shelf Registration Statement, each such amendment and supplement thereto (in each case including all exhibits thereto (in the case of an Electing Holder of Registrable Securities, upon request) and documents incorporated by reference therein) and such number of copies of such Shelf Registration Statement (excluding exhibits thereto and documents incorporated by reference therein unless specifically so requested by such Electing Holder, agent or underwriter, as the case may be) and of the prospectus included in such Shelf Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, and such other documents, as such Electing Holder, agent, if any, and underwriter, if any, may 10 Execution Copy reasonably request in order to facilitate the offering and disposition of the Registrable Securities owned by such Electing Holder, offered or sold by such agent or underwritten by such underwriter and to permit such Electing Holder, agent and underwriter to satisfy the prospectus delivery requirements of the Securities Act; and the Company hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by each such Electing Holder and by any such agent and underwriter, in each case in the form most recently provided to such person by the Company, in connection with the offering and sale of the Registrable Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto; (xii) use reasonable best efforts to (A) register or qualify the Registrable Securities to be included in such Shelf Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder and each placement or sales agent, if any, therefor and underwriter, if any, thereof shall reasonably request, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Shelf Registration is required to remain effective under Section 2(b) above and for so long as may be necessary to enable any such Electing Holder, agent or underwriter to complete its distribution of Securities pursuant to such Shelf Registration Statement and (C) take any and all other actions as may be reasonably necessary or advisable to enable each such Electing Holder, agent, if any, and underwriter, if any, to consummate the disposition in such jurisdictions of such Registrable Securities; provided, however, that neither the Company nor the Guarantor shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(d)(xii), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; (xiii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Shelf Registration or the offering or sale in connection therewith or to enable the selling holder or holders to offer, or to consummate the disposition of, their Registrable Securities; (xiv) Unless any Registrable Securities shall be in book-entry only form, cooperate with the Electing Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates, if so required by any securities exchange upon which any Registrable Securities are listed, shall be penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved borders, and which certificates shall not bear any restrictive legends; and, in the case of an underwritten offering, enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of the Registrable Securities; (xv) provide a CUSIP number for all Registrable Securities, not later than the applicable Effective Time; (xvi) enter into one or more underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, 11 Execution Copy as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as any Electing Holders aggregating at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding shall request in order to expedite or facilitate the disposition of such Registrable Securities; (xvii) whether or not an agreement of the type referred to in Section 3(d)(xvi) hereof is entered into and whether or not any portion of the offering contemplated by the Shelf Registration is an underwritten offering or is made through a placement or sales agent or any other entity, (A) make such representations and warranties to the Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made in connection with an offering of debt securities pursuant to any appropriate agreement or to a registration statement filed on the form applicable to the Shelf Registration; (B) obtain an opinion of counsel to the Company in customary form and covering such matters, of the type customarily covered by such an opinion, as the managing underwriters, if any, or as any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding may reasonably request, addressed to such Electing Holder or Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof and dated the effective date of such Shelf Registration Statement (and if such Shelf Registration Statement contemplates an underwritten offering of a part or all of the Registrable Securities, dated the date of the closing under the underwriting agreement relating thereto) (it being agreed that the matters to be covered by such opinion shall include the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(d)(xvi) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Securities; the absence of material legal or governmental proceedings involving the Company; the absence of a breach by the Company or any of its subsidiaries of, or a default under, material agreements binding upon the Company or any subsidiary of the Company; the absence of governmental approvals required to be obtained in connection with the Shelf Registration, the offering and sale of the Registrable Securities, this Exchange and Registration Rights Agreement or any agreement of the type referred to in Section 3(d)(xvi) hereof, except such approvals as may be required under state securities or blue sky laws; the material compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, respectively; and, as of the date of the opinion and of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from the documents incorporated by reference therein (in each case other than the financial statements and other financial information contained therein) of an untrue statement of a material fact or the omission to state therein a material fact necessary to make the statements therein not misleading (in the case of such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act)); (C) obtain a "cold comfort" letter or letters from the 12 Execution Copy independent certified public accountants of the Company addressed to the selling Electing Holders, the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such Shelf Registration Statement and (ii) the effective date of any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such Shelf Registration Statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering such matters of the type customarily covered by letters of such type; (D) deliver such documents and certificates, including officers' certificates, as may be reasonably requested by any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding or the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof to evidence the accuracy of the representations and warranties made pursuant to clause (A) above or those contained in Section 5(a) hereof and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantor; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Section 6 hereof; (xviii) notify in writing each holder of Registrable Securities of any proposal by the Company to amend or waive any provision of this Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (xix) in the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Conduct Rules) of the National Association of Securities Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) thereof, whether as a holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Conduct Rules, including by (A) if such Conduct Rules shall so require, engaging a "qualified independent underwriter" (as defined in such Conduct Rules) to participate in the preparation of the Shelf Registration Statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Shelf Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Registrable Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof (or to such other customary extent as may be requested by such underwriter), and (C) providing such information to such broker-dealer as may be 13 Execution Copy required in order for such broker-dealer to comply with the requirements of the Conduct Rules; and (xx) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but in any event not later than eighteen months after the effective date of such Shelf Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (e) In the event that the Company would be required, pursuant to Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Company shall without delay prepare and furnish to each of the Electing Holders, to each placement or sales agent, if any, and to each such underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each Electing Holder agrees that upon receipt of any notice from the Company pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder shall forthwith discontinue the disposition of Registrable Securities pursuant to the Shelf Registration Statement applicable to such Registrable Securities until such Electing Holder shall have received copies of such amended or supplemented prospectus, and if so directed by the Company, such Electing Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Electing Holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. (f) In the event of a Shelf Registration, in addition to the information required to be provided by each Electing Holder in its Notice Questionnaire, the Company may require such Electing Holder to furnish to the Company such additional information regarding such Electing Holder and such Electing Holder's intended method of distribution of Registrable Securities as may be required in order to comply with the Securities Act. Each such Electing Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder to the Company or of the occurrence of any event in either case as a result of which any prospectus relating to such Shelf Registration contains or would contain an untrue statement of a material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities or omits to state any material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. 14 Execution Copy (g) Until the expiration of two years after the Closing Date, the Company will not, and will not permit any of its "affiliates" (as defined in Rule 144) to, resell any of the Securities that have been reacquired by any of them except pursuant to an effective registration statement under the Securities Act. 4. Registration Expenses. The Company agrees to bear and to pay or cause to be paid promptly all expenses incident to the Company's performance of or compliance with this Exchange and Registration Rights Agreement, including (a) all Commission and any NASD registration, filing and review fees and expenses including fees and disbursements of counsel for the placement or sales agent or underwriters in connection with such registration, filing and review, (b) all fees and expenses in connection with the qualification of the Securities for offering and sale under the State securities and blue sky laws referred to in Section 3(d)(xii) hereof and determination of their eligibility for investment under the laws of such jurisdictions as any managing underwriters or the Electing Holders may designate, including any fees and disbursements of counsel for the Electing Holders or underwriters in connection with such qualification and determination, (c) all expenses relating to the preparation, printing, production, distribution and reproduction of each registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Securities for delivery and the expenses of printing or producing any underwriting agreements, agreements among underwriters, selling agreements and blue sky or legal investment memoranda and all other documents in connection with the offering, sale or delivery of Securities to be disposed of (including certificates representing the Securities), (d) messenger, telephone and delivery expenses relating to the offering, sale or delivery of Securities and the preparation of documents referred in clause (c) above, (e) fees and expenses of the Trustee under the Indenture, any agent of the Trustee and any counsel for the Trustee and of any collateral agent or custodian, (f) internal expenses (including all salaries and expenses of the Company's officers and employees performing legal or accounting duties), (g) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or "cold comfort" letters required by or incident to such performance and compliance), (h) fees, disbursements and expenses of any "qualified independent underwriter" engaged pursuant to Section 3(d)(xix) hereof, (i) fees, disbursements and expenses of one counsel for the Electing Holders retained in connection with a Shelf Registration, as selected by the Electing Holders of at least a majority in aggregate principal amount of the Registrable Securities held by Electing Holders (which counsel shall be reasonably satisfactory to the Company), (j) any fees charged by securities rating services for rating the Securities, and (k) fees, expenses and disbursements of any other persons, including special experts, retained by the Company in connection with such registration (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any holder of Registrable Securities or any placement or sales agent therefor or underwriter thereof, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor. Notwithstanding the foregoing, the holders of the Registrable Securities being registered shall pay all agency fees and commissions and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above. 5. Representations and Warranties. 15 Execution Copy Each of the Company and the Guarantor represents and warrants to, and agrees with, each Purchaser that: (a) The compliance by the Company with all of the provisions of this Exchange and Registration Rights Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any subsidiary of the Company is a party or by which the Company or any subsidiary of the Company is bound or to which any of the property or assets of the Company or any subsidiary of the Company is subject, nor will such action result in any violation of the provisions of the certificate of incorporation, as amended, or the by-laws of the Company or the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any subsidiary of the Company or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Company and the Guarantor of the transactions contemplated by this Exchange and Registration Rights Agreement, except the registration under the Securities Act of the Securities, qualification of the Indenture under the Trust Indenture Act and such consents, approvals, authorizations, registrations or qualifications as may be required under State securities or blue sky laws in connection with the offering and distribution of the Securities. (b) This Exchange and Registration Rights Agreement has been duly authorized, executed and delivered by the Company. 6. Indemnification. (a) Indemnification by the Company and the Guarantor. The Company and the Guarantor, jointly and severally, will indemnify and hold harmless each of the holders of Registrable Securities included in an Exchange Registration Statement, each of the Electing Holders of Registrable Securities included in a Shelf Registration Statement and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities against any losses, claims, damages or liabilities, joint or several, to which such holder, agent or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Exchange Registration Statement or Shelf Registration Statement, as the case may be, under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such holder, Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such holder, such Electing Holder, such agent and such underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Company nor the Guarantor shall be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary prospectus, or 16 Execution Copy amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by such person expressly for use therein. (b) Indemnification by the Holders and any Agents and Underwriters. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2(b) hereof and to entering into any underwriting agreement with respect thereto, that the Company shall have received an undertaking reasonably satisfactory to it from the Electing Holder of such Registrable Securities and from each underwriter named in any such underwriting agreement, severally and not jointly, to (i) indemnify and hold harmless the Company, the Guarantor, and all other holders of Registrable Securities, against any losses, claims, damages or liabilities to which the Company, the Guarantor or such other holders of Registrable Securities may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Electing Holder or underwriter expressly for use therein, and (ii) reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company and the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of or contemplated by this Section 6, notify such indemnifying party in writing of the commencement of such action; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under the indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the 17 Execution Copy indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Contribution. If for any reason the indemnification provisions contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party and the indemnified party from the transactions herein contemplated or, if the allocation provided by the preceding clause (i) is not permitted under applicable law, not only the relative benefits referred to in the preceding clause (i), but also (ii) the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were determined by pro rata allocation (even if the holders or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no holder shall be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such holder from the sale of any Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) exceeds the amount of any damages which such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The holders' and any underwriters' obligations in this Section 6(d) to contribute shall be several in proportion to the principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) The obligations of the Company and the Guarantor under this Section 6 shall be in addition to any liability which the Company or the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each officer, director and partner of each holder, agent and underwriter and each person, if any, who controls any holder, 18 Execution Copy agent or underwriter within the meaning of the Securities Act; and the obligations of the holders and any agents or underwriters contemplated by this Section 6 shall be in addition to any liability which the respective holder, agent or underwriter may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company or the Guarantor and to each person, if any, who controls the Company within the meaning of the Securities Act. 7. Underwritten Offerings. (a) Selection of Underwriters. If any of the Registrable Securities covered by the Shelf Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Electing Holders holding at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering, provided that such designated managing underwriter or underwriters is or are reasonably acceptable to the Company. (b) Participation by Holders. Each holder of Registrable Securities hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. Rule 144. The Company covenants to the holders of Registrable Securities that, to the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities in connection with that holder's sale pursuant to Rule 144, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements. The Guarantor covenants to the holders of Registrable Securities that, to the extent it shall be required to do so under the Exchange Act, the Guarantor shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. 19 Execution Copy 9. Miscellaneous. (a) No Inconsistent Agreements. The Company represents, warrants, covenants and agrees that it has not granted, and shall not grant, registration rights with respect to Registrable Securities or any other securities which would be inconsistent with the terms contained in this Exchange and Registration Rights Agreement. (b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company or the Guarantor fails to perform any of its obligations hereunder and that the several Purchasers and the holders from time to time of the Registrable Securities may be irreparably harmed by any such failure, and accordingly agree that the several Purchasers and such holders, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of the Company under this Exchange and Registration Rights Agreement in accordance with the terms and conditions of this Exchange and Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction. (c) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: If to the Company, to it at 600 Grant Street, 60th Floor, Pittsburgh, PA 15219, Attention: President, and if to a holder, to the address of such holder set forth in the security register or other records of the Company, or to such other address as the Company or any such holder may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (d) Parties in Interest. All the terms and provisions of this Exchange and Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and the holders from time to time of the Registrable Securities and the respective successors and assigns of the parties hereto and such holders. In the event that any transferee of any holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Exchange and Registration Rights Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Exchange and Registration Rights Agreement. If the Company shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof. (e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Exchange and Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any holder of Registrable Securities, any director, officer or partner of such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities 20 Execution Copy pursuant to the Purchase Agreement and the transfer and registration of Registrable Securities by such holder and the consummation of an Exchange Offer. (f) Governing Law. This Exchange and Registration Rights Agreement shall be governed by and construed in accordance with the laws of the State of New York. (g) Headings. The descriptive headings of the several Sections and paragraphs of this Exchange and Registration Rights Agreement are inserted for convenience only, do not constitute a part of this Exchange and Registration Rights Agreement and shall not affect in any way the meaning or interpretation of this Exchange and Registration Rights Agreement. (h) Entire Agreement; Amendments. This Exchange and Registration Rights Agreement and the other writings referred to herein (including the Indenture and the form of Securities) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Exchange and Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Exchange and Registration Rights Agreement may be amended and the observance of any term of this Exchange and Registration Rights Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the holders of at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 9(h), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such holder. (i) Inspection. For so long as this Exchange and Registration Rights Agreement shall be in effect, this Exchange and Registration Rights Agreement and a complete list of the names and addresses of all the holders of Registrable Securities shall be made available for inspection and copying on any business day by any holder of Registrable Securities for proper purposes only (which shall include any purpose related to the rights of the holders of Registrable Securities under the Securities, the Indenture and this Agreement) at the offices of the Company at the address thereof set forth in Section 9(c) above, upon reasonable notice to the Company, and at the office of the Trustee under the Indenture. (j) Counterparts. This agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 21 Execution Copy If the foregoing is in accordance with your understanding, please sign and return to us one for the Company, the Guarantor and each of the several Purchasers, plus one for each counsel, counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the several Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the several Purchasers, the Company and the Guarantor. It is understood that your acceptance of this letter on behalf of each of the several Purchasers is pursuant to the authority set forth in an agreement among the several Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, H. J. Heinz Finance Company By: /s/ Leonard A. Cullo, Jr. .................................. Leonard A. Cullo, Jr. President H. J. Heinz Company By: /s/ Leonard A. Cullo, Jr. .................................. Leonard A. Cullo, Jr. Treasurer Accepted as of the date hereof: J.P. Morgan Securities Inc. On behalf of each of the several Purchasers By: /s/ Maria Sramek ................................................. Maria Sramek Vice President 22 Exhibit A H. J. Heinz Finance Company INSTRUCTION TO DTC PARTICIPANTS ------------------------------- (Date of Mailing) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: [DATE] * ------------------------------- The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in the H. J. Heinz Finance Company (the "Company"), the 6.00% Guaranteed Notes due March 15, 2012 (the "Securities") are held. The Company is in the process of registering the Securities under the Securities Act of 1933 for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire. It is important that beneficial owners of the Securities receive a copy of the - ------------------------------------------------------------------------------ enclosed materials as soon as possible as their rights to have the Securities - -------------------------------------- included in the registration statement depend upon their returning the Notice and Questionnaire by [Deadline For Response]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact H. J. Heinz Finance Company, 600 Grant Street, 60th Floor, Pittsburgh, PA 15219; Attention: President. - --------- * Not less than 28 calendar days from date of mailing. A-1 Execution Copy H. J. Heinz Finance Company Notice of Registration Statement and Selling Securityholder Questionnaire ------------------------------------ (Date) Reference is hereby made to the Exchange and Registration Rights Agreement (the "Exchange and Registration Rights Agreement") between H. J. Heinz Finance Company (the "Company"), H. J. Heinz Company (the "Guarantor") and the several Purchasers named therein. Pursuant to the Exchange and Registration Rights Agreement, the Company has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form [S-_] (File No. 333-____) (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's 6.00% Guaranteed Notes due March 15, 2012 (the "Securities"). A copy of the Exchange and Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Exchange and Registration Rights Agreement. Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. The term "Registrable Securities" is defined in the Exchange and Registration ---------------------- Rights Agreement. A-2 Execution Copy ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Exchange and Registration Rights Agreement, including, without limitation, Section 6 of the Exchange and Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto. Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder will be required to deliver to the Company and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: A-3 Execution Copy QUESTIONNAIRE (1) (a) Full Legal Name of Selling Securityholder: (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in Item (3) below: (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held: (2) Address for Notices to Selling Securityholder: --------------------- --------------------- --------------------- Telephone: --------------------------------------- Fax: --------------------------------------- Contact Person: --------------------------------------- (3) Beneficial Ownership of Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities. (a) Principal amount of Registrable Securities beneficially owned:_______ CUSIP No(s). of such Registrable Securities:_________________________ (b) Principal amount of Securities other than Registrable Securities beneficially owned:__________________________________________________ CUSIP No(s). of such other Securities:_______________________________ (c) Principal amount of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement:___________ CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement:________________________________________ (4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any other securities of the Company, other than the Securities listed above in Item (3). State any exceptions here: (5) Relationships with the Company: A-4 Execution Copy Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: (6) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M. In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Exchange and Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Shelf Registration Statement and related Prospectus. In accordance with the Selling Securityholder's obligation under Section 3(d) of the Exchange and Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which A-5 Execution Copy may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Exchange and Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: (i) To the Company: ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- (ii) With a copy to: ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above. This Agreement shall be governed in all respects by the laws of the State of New York. A-6 Execution Copy IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: ---------------------------- ------------------------------------------------------------- Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By:---------------------------------------------------------- Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT: ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- A-7 Execution Copy Exhibit B NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT Bank One, National Association H. J. Heinz Finance Company c/o Bank One, National Association 1111 Polaris Parkway Suite 1K - Mail Code OH1-0181 Columbus, OH 43240 Attention: Trust Officer Re: H. J. Heinz Finance Company (the "Company") 6.00% Guaranteed Notes due March 15, 2012 Dear Sirs: Please be advised that ______________________ has transferred $___________ aggregate principal amount of the above-referenced Notes pursuant to an effective Registration Statement on Form [S-____] (File No. 333-_______) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus dated [date] or in supplements thereto, and that the aggregate principal amount of the Notes transferred are the Notes listed in such Prospectus opposite such owner's name. Dated: Very truly yours, ---------------------------------- (Name) By: ---------------------------------- (Authorized Signature) B-1 EX-4.6 11 mar2202_ex0406.txt EXHIBIT 4.6 Execution Copy H. J. Heinz Finance Company 6.75% Guaranteed Notes due March 15, 2032 unconditionally and irrevocably guaranteed by H. J. Heinz Company ------------ Exchange and Registration Rights Agreement ------------------------------------------ February 28, 2002 J.P. Morgan Securities Inc., As representative of the several Purchasers named in Schedule I to the Purchase Agreement, 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: H. J. Heinz Finance Company, a Delaware corporation (the "Company"), proposes to issue and sell to the several Purchasers (as defined herein) upon the terms set forth in the Purchase Agreement (as defined herein) its 6.75% Guaranteed Notes due March 15, 2032, which are unconditionally and irrevocably guaranteed by H. J. Heinz Company (the "Guarantor"). As an inducement to the several Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the several Purchasers thereunder, each of the Company and the Guarantor agrees with the several Purchasers for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Certain Definitions. For purposes of this Exchange and Registration Rights Agreement, the following terms shall have the following respective meanings: "Base Interest" shall mean the interest that would otherwise accrue on the Securities under the terms thereof and the Indenture, without giving effect to the provisions of this Agreement. The term "broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act. "Closing Date" shall mean the date on which the Securities are initially issued. "Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "Effective Time," in the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Registration Statement effective or as of which the Exchange Registration Statement otherwise becomes effective and (ii) a Shelf Registration, shall mean the time and date as of which the Commission declares the 1 Execution Copy Shelf Registration Statement effective or as of which the Shelf Registration Statement otherwise becomes effective. "Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(ii) or 3(d)(iii) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time. "Exchange Offer" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Registration" shall have the meaning assigned thereto in Section 3(c) hereof. "Exchange Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Securities" shall have the meaning assigned thereto in Section 2(a) hereof. "Guarantor" shall have the meaning assigned thereto in the Indenture. The term "holder" shall mean each of the several Purchasers and other persons who acquire Registrable Securities from time to time (including any successors or assigns), in each case for so long as such person owns any Registrable Securities. "Indenture" shall mean the Indenture, dated as of July 6, 2001, between the Company, the Guarantor, and Bank One, National Association, as Trustee, as the same shall be amended from time to time. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. The term "person" shall mean a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency. "Purchase Agreement" shall mean the Purchase Agreement, dated as of February 28, 2002 between J.P. Morgan Securities Inc., as representative of the several Purchasers named in Schedule I thereto, the Company and the Guarantor relating to the Securities. "Purchasers" shall mean the several Purchasers named in Schedule I to the Purchase Agreement. "Registrable Securities" shall mean the Securities; provided, however, that a Security shall cease to be a Registrable Security when (i) in the circumstances contemplated by Section 2(a) hereof, the Security has been exchanged for an Exchange Security in an Exchange Offer as contemplated in Section 2(a) hereof (provided that any Exchange Security that, pursuant to the last two sentences of Section 2(a), is included in a prospectus for use in connection with resales by broker-dealers shall be deemed to be a Registrable Security with respect to Sections 5, 6 and 9 until resale of such Registrable Security has been effected within the 180-day period referred to in Section 2(a); (ii) in the circumstances contemplated by Section 2(b) hereof, a Shelf Registration Statement registering such Security under the Securities Act has been declared or becomes effective and such Security has been sold or otherwise transferred by the holder thereof pursuant to and in a manner 2 Execution Copy contemplated by such effective Shelf Registration Statement; (iii) such Security is sold pursuant to Rule 144 under circumstances in which any legend borne by such Security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (v) such Security shall cease to be outstanding. "Registration Default" shall have the meaning assigned thereto in Section 2(c) hereof. "Registration Expenses" shall have the meaning assigned thereto in Section 4 hereof. "Resale Period" shall have the meaning assigned thereto in Section 2(a) hereof. "Restricted Holder" shall mean (i) a holder that is an affiliate of the Company within the meaning of Rule 405, (ii) a holder who acquires Exchange Securities outside the ordinary course of such holder's business, (iii) a holder who has arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing Exchange Securities and (iv) a holder that is a broker-dealer, but only with respect to Exchange Securities received by such broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Company. "Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time. "Securities" shall mean, collectively, the 6.75% Guaranteed Notes due March 15, 2032 of the Company, unconditionally and irrevocably guaranteed as to the payment of principal and interest by the Guarantor, to be issued and sold to the several Purchasers, and securities issued in exchange therefor or in lieu thereof pursuant to the Indenture. Each Security is entitled to the benefit of the guarantee provided for in the Indenture (the "Guarantee") and, unless the context otherwise requires, any reference herein to a "Security," an "Exchange Security" or a "Registrable Security" shall include a reference to the related Guarantee. "Securities Act" shall mean the Securities Act of 1933, or any successor thereto, as the same shall be amended from time to time. "Shelf Registration" shall have the meaning assigned thereto in Section 2(b) hereof. "Shelf Registration Statement" shall have the meaning assigned thereto in Section 2(b) hereof. "Special Interest" shall have the meaning assigned thereto in Section 2(c) hereof. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time. Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Exchange and Registration Rights Agreement, and the words "herein," "hereof" and "hereunder" and other words of similar import 3 Execution Copy refer to this Exchange and Registration Rights Agreement as a whole and not to any particular Section or other subdivision. 2. Registration Under the Securities Act. (a) Except as set forth in Section 2(b) below, the Company agrees to file under the Securities Act, no later than 120 days after the Closing Date, a registration statement relating to an offer to exchange (such registration statement, the "Exchange Registration Statement", and such offer, the "Exchange Offer") any and all of the Securities for a like aggregate principal amount of debt securities issued by the Company and guaranteed by the Guarantor, which debt securities and guarantee are substantially identical to the Securities and the related Guarantee, respectively (and are entitled to the benefits of a trust indenture which is substantially identical to the Indenture or is the Indenture and which has been qualified under the Trust Indenture Act), except that they have been registered pursuant to an effective registration statement under the Securities Act and do not contain provisions for the additional interest contemplated in Section 2(c) below (such new debt securities hereinafter called "Exchange Securities"). The Company and the Guarantor each agrees to use its reasonable best efforts to cause the Exchange Registration Statement to become effective under the Securities Act as soon as practicable, but no later than 180 days after the Closing Date. The Exchange Offer will be registered under the Securities Act on the appropriate form and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Company further agrees to use its reasonable best efforts to commence and complete the Exchange Offer promptly, but no later than 45 days after such registration statement has become effective, hold the Exchange Offer open for at least 30 days and exchange Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange Offer will be deemed to have been "completed" only if the debt securities and related guarantee received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are, upon receipt, transferable by each such holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of a substantial majority of the States of the United States of America. The Exchange Offer shall be deemed to have been completed upon the earlier to occur of (i) the Company having exchanged the Exchange Securities for all outstanding Registrable Securities pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer, which shall be on a date that is at least 30 days following the commencement of the Exchange Offer. The Company agrees (x) to include in the Exchange Registration Statement a prospectus for use in any resales by any holder of Exchange Securities that is a broker-dealer and (y) to keep such Exchange Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 180th day after the Exchange Offer has been completed or such time as such broker-dealers no longer own any Registrable Securities. With respect to such Exchange Registration Statement, such holders shall have the benefit of the rights of indemnification and contribution set forth in Sections 6(a), (c), (d) and (e) hereof. (b) If (i) on or prior to the time the Exchange Offer is completed existing Commission interpretations are changed such that the Exchange Securities received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are not or would not be, upon receipt, transferable by each such holder without restriction under the 4 Execution Copy Securities Act, (ii) the Exchange Offer has not been completed within 225 days following the Closing Date or (iii) the Exchange Offer is not available to any holder of the Securities, the Company shall, in lieu of (or, in the case of clause (iii), in addition to) conducting the Exchange Offer contemplated by Section 2(a), file under the Securities Act as soon as practicable, but no later than the later of 30 days after the time such obligation to file arises, a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (such filing, the "Shelf Registration" and such registration statement, the "Shelf Registration Statement"). The Company agrees to use its reasonable best efforts (x) to cause the Shelf Registration Statement to become or be declared effective no later than 60 days after such Shelf Registration Statement is filed and to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the Effective Time or such time as there are no longer any Registrable Securities outstanding, provided, however, that no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the prospectus forming a part thereof for resales of Registrable Securities unless such holder is an Electing Holder, and (y) after the Effective Time of the Shelf Registration Statement, promptly upon the request of any holder of Registrable Securities that is not then an Electing Holder, to take any action reasonably necessary to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such holder as a selling securityholder in the Shelf Registration Statement, provided, however, that nothing in this Clause (y) shall relieve any such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(iii) hereof. The Company further agrees to supplement or make amendments to the Shelf Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, and the Company agrees to furnish to each Electing Holder copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission. (c) In the event that (i) the Company has not filed the Exchange Registration Statement or Shelf Registration Statement on or before the date on which such registration statement is required to be filed pursuant to Section 2(a) or 2(b), respectively, or (ii) such Exchange Registration Statement or Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective pursuant to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed within 45 days after the initial effective date of the Exchange Registration Statement relating to the Exchange Offer (if the Exchange Offer is then required to be made) or (iv) any Exchange Registration Statement or Shelf Registration Statement required by Section 2(a) or 2(b) hereof is filed and declared effective but shall thereafter either be withdrawn by the Company or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement (except as specifically permitted herein) without being succeeded immediately by an additional registration statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default" and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then, as liquidated damages for such Registration Default, subject to the provisions of Section 9(b), special interest ("Special Interest"), in addition to the Base Interest, shall accrue at a per annum rate of 0.25% for the first 90 days of the Registration Default Period, at a per annum rate of 0.50% thereafter for 5 Execution Copy the remaining portion of the Default Period. Special Interest will cease to accrue at such time when there are no longer any Registrable Securities. (d) Each of the Company and the Guarantor shall take all actions necessary or advisable to be taken by it to ensure that the transactions contemplated herein are effected as so contemplated, including all actions necessary or desirable to register the Guarantee under the registration statement contemplated in Section 2(a) or 2(b) hereof, as applicable. (e) Any reference herein to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time and any reference herein to any post-effective amendment to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time. 3. Registration Procedures. If the Company files a registration statement pursuant to Section 2(a) or Section 2(b), the following provisions shall apply: (a) At or before the Effective Time of the Exchange Offer or the Shelf Registration, as the case may be, the Company shall qualify the Indenture under the Trust Indenture Act of 1939. (b) In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (c) In connection with the Company's obligations with respect to the registration of Exchange Securities as contemplated by Section 2(a) (the "Exchange Registration"), if applicable, the Company shall: (i) prepare and file with the Commission, no later than 120 days after the Closing Date, an Exchange Registration Statement on any form which may be utilized by the Company and which shall permit the Exchange Offer and resales of Exchange Securities by broker-dealers during the Resale Period to be effected as contemplated by Section 2(a), and use its reasonable best efforts to cause such Exchange Registration Statement to become effective as soon as practicable thereafter, but no later than 180 days after the Closing Date; (ii) as soon as practicable prepare and file with the Commission such amendments and supplements to such Exchange Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Exchange Registration Statement for the periods and purposes contemplated in Section 2(a) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Exchange Registration Statement, and promptly provide each broker-dealer holding Exchange Securities with such number of copies of the prospectus included therein (as then amended or supplemented), in conformity in all material respects with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, as such broker-dealer reasonably may request prior to the expiration of the Resale Period, for use in connection with resales of Exchange Securities; 6 Execution Copy (iii) promptly notify each broker-dealer that has requested or received copies of the prospectus included in such registration statement (A) when such Exchange Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Exchange Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Exchange Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Exchange Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) at any time during the Resale Period when a prospectus is required to be delivered under the Securities Act, that such Exchange Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (iv) in the event that the Company would be required, pursuant to Section 3(c)(iii)(F) above, to notify any broker-dealers holding Exchange Securities, without delay prepare and furnish to each such holder a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of such Exchange Securities during the Resale Period, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (v) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such Exchange Registration Statement or any post-effective amendment thereto at the earliest practicable date; (vi) use its reasonable best efforts to (A) register or qualify the Exchange Securities under the securities laws or blue sky laws of such jurisdictions as are contemplated by Section 2(a) no later than the commencement of the Exchange Offer, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions until the expiration of the Resale Period and (C) take any and all other actions as may be reasonably necessary or advisable to enable each broker-dealer holding Exchange Securities to consummate the disposition thereof in such jurisdictions; provided, however, that neither the Company nor the Guarantor shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the 7 Execution Copy requirements of this Section 3(c)(vi), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; (vii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Exchange Registration, the Exchange Offer and the offering and sale of Exchange Securities by broker-dealers during the Resale Period; (viii) provide a CUSIP number for all Exchange Securities, not later than the applicable Effective Time; (ix) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but no later than eighteen months after the effective date of such Exchange Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (d) In connection with the Company's obligations with respect to the Shelf Registration, if applicable, the Company shall: (i) prepare and file with the Commission, within the time periods specified in Section 2(b), a Shelf Registration Statement on any form which may be utilized by the Company and which shall register all of the Registrable Securities for resale by the holders thereof in accordance with such method or methods of disposition as may be specified by such of the holders as, from time to time, may be Electing Holders and use its reasonable best efforts to cause such Shelf Registration Statement to become effective as soon as practicable but in any case within the time periods specified in Section 2(b); (ii) not less than 30 calendar days prior to the Effective Time of the Shelf Registration Statement, mail or cause to be mailed the Notice and Questionnaire to the holders of Registrable Securities; no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement as of the Effective Time, and no holder shall be entitled to use the prospectus forming a part thereof for resales of Registrable Securities at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, that holders of Registrable Securities shall have at least 28 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Company; (iii) after the Effective Time of the Shelf Registration Statement, upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder; provided that the Company shall not be required to take any action to name such holder as a selling securityholder in the Shelf Registration Statement or to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities until such holder has returned a completed and signed Notice and Questionnaire to the Company; 8 Execution Copy (iv) as soon as practicable prepare and file with the Commission such amendments and supplements to such Shelf Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Shelf Registration Statement for the period specified in Section 2(b) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Shelf Registration Statement, and furnish to the Electing Holders copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission; (v) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities covered by such Shelf Registration Statement in accordance with the intended methods of disposition by the Electing Holders provided for in such Shelf Registration Statement; (vi) provide (A) the Electing Holders, (B) the underwriters (which term, for purposes of this Exchange and Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act), if any, thereof, (C) any sales or placement agent therefor, (D) counsel for any such underwriter or agent and (E) not more than one counsel for all the Electing Holders the opportunity to participate in the preparation of such Shelf Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto; (vii) for a reasonable period prior to the filing of such Shelf Registration Statement, and throughout the period specified in Section 2(b), make available at reasonable times at the Company's principal place of business or such other reasonable place for inspection by the persons referred to in Section 3(d)(vi) who shall certify to the Company that they have a current intention to sell the Registrable Securities pursuant to the Shelf Registration such financial and other information and books and records of the Company, and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary, in the judgment of the respective counsel referred to in such Section, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Company as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Company prompt prior written notice of such requirement), or (C) such information is required to be set forth in such Shelf Registration Statement or the prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such prospectus in order that such Shelf Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material 9 Execution Copy fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (viii) promptly notify each of the Electing Holders, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) (A) when such Shelf Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Shelf Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Shelf Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 3(d)(xvii) or Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) if at any time when a prospectus is required to be delivered under the Securities Act, that such Shelf Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (ix) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement or any post-effective amendment thereto at the earliest practicable date; (x) if requested by any managing underwriter or underwriters, any placement or sales agent or any Electing Holder, promptly incorporate in a prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent or such Electing Holder specifies should be included therein relating to the terms of the sale of such Registrable Securities, including information with respect to the principal amount of Registrable Securities being sold by such Electing Holder or agent or to any underwriters, the name and description of such Electing Holder, agent or underwriter, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect thereof, the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Registrable Securities to be sold by such Electing Holder or agent or to such underwriters; and make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; 10 Execution Copy (xi) furnish to each Electing Holder, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 3(d)(vi) an executed copy (or, in the case of an Electing Holder, a conformed copy) of such Shelf Registration Statement, each such amendment and supplement thereto (in each case including all exhibits thereto (in the case of an Electing Holder of Registrable Securities, upon request) and documents incorporated by reference therein) and such number of copies of such Shelf Registration Statement (excluding exhibits thereto and documents incorporated by reference therein unless specifically so requested by such Electing Holder, agent or underwriter, as the case may be) and of the prospectus included in such Shelf Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, and such other documents, as such Electing Holder, agent, if any, and underwriter, if any, may reasonably request in order to facilitate the offering and disposition of the Registrable Securities owned by such Electing Holder, offered or sold by such agent or underwritten by such underwriter and to permit such Electing Holder, agent and underwriter to satisfy the prospectus delivery requirements of the Securities Act; and the Company hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by each such Electing Holder and by any such agent and underwriter, in each case in the form most recently provided to such person by the Company, in connection with the offering and sale of the Registrable Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto; (xii) use reasonable best efforts to (A) register or qualify the Registrable Securities to be included in such Shelf Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder and each placement or sales agent, if any, therefor and underwriter, if any, thereof shall reasonably request, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Shelf Registration is required to remain effective under Section 2(b) above and for so long as may be necessary to enable any such Electing Holder, agent or underwriter to complete its distribution of Securities pursuant to such Shelf Registration Statement and (C) take any and all other actions as may be reasonably necessary or advisable to enable each such Electing Holder, agent, if any, and underwriter, if any, to consummate the disposition in such jurisdictions of such Registrable Securities; provided, however, that neither the Company nor the Guarantor shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(d)(xii), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; (xiii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Shelf Registration or the offering or sale in connection therewith or to enable the selling holder or holders to offer, or to consummate the disposition of, their Registrable Securities; 11 Execution Copy (xiv) Unless any Registrable Securities shall be in book-entry only form, cooperate with the Electing Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates, if so required by any securities exchange upon which any Registrable Securities are listed, shall be penned, lithographed or engraved, or produced by any combination of such methods, on steel engraved borders, and which certificates shall not bear any restrictive legends; and, in the case of an underwritten offering, enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of the Registrable Securities; (xv) provide a CUSIP number for all Registrable Securities, not later than the applicable Effective Time; (xvi) enter into one or more underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as any Electing Holders aggregating at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding shall request in order to expedite or facilitate the disposition of such Registrable Securities; (xvii) whether or not an agreement of the type referred to in Section 3(d)(xvi) hereof is entered into and whether or not any portion of the offering contemplated by the Shelf Registration is an underwritten offering or is made through a placement or sales agent or any other entity, (A) make such representations and warranties to the Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made in connection with an offering of debt securities pursuant to any appropriate agreement or to a registration statement filed on the form applicable to the Shelf Registration; (B) obtain an opinion of counsel to the Company in customary form and covering such matters, of the type customarily covered by such an opinion, as the managing underwriters, if any, or as any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding may reasonably request, addressed to such Electing Holder or Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof and dated the effective date of such Shelf Registration Statement (and if such Shelf Registration Statement contemplates an underwritten offering of a part or all of the Registrable Securities, dated the date of the closing under the underwriting agreement relating thereto) (it being agreed that the matters to be covered by such opinion shall include the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(d)(xvi) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Securities; the absence of material legal or governmental proceedings involving the Company; the absence of a breach by the Company or any of its subsidiaries of, or a default under, material agreements binding upon the Company or any subsidiary of the Company; the absence of governmental approvals required to be obtained in connection with the Shelf Registration, the offering and sale of the Registrable Securities, this Exchange and Registration Rights Agreement 12 Execution Copy or any agreement of the type referred to in Section 3(d)(xvi) hereof, except such approvals as may be required under state securities or blue sky laws; the material compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, respectively; and, as of the date of the opinion and of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from the documents incorporated by reference therein (in each case other than the financial statements and other financial information contained therein) of an untrue statement of a material fact or the omission to state therein a material fact necessary to make the statements therein not misleading (in the case of such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act)); (C) obtain a "cold comfort" letter or letters from the independent certified public accountants of the Company addressed to the selling Electing Holders, the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such Shelf Registration Statement and (ii) the effective date of any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such Shelf Registration Statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering such matters of the type customarily covered by letters of such type; (D) deliver such documents and certificates, including officers' certificates, as may be reasonably requested by any Electing Holders of at least 25% in aggregate principal amount of the Registrable Securities at the time outstanding or the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof to evidence the accuracy of the representations and warranties made pursuant to clause (A) above or those contained in Section 5(a) hereof and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantor; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Section 6 hereof; (xviii) notify in writing each holder of Registrable Securities of any proposal by the Company to amend or waive any provision of this Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (xix) in the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Conduct Rules) of the National Association of Securities 13 Execution Copy Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) thereof, whether as a holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Conduct Rules, including by (A) if such Conduct Rules shall so require, engaging a "qualified independent underwriter" (as defined in such Conduct Rules) to participate in the preparation of the Shelf Registration Statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Shelf Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Registrable Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof (or to such other customary extent as may be requested by such underwriter), and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Conduct Rules; and (xx) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but in any event not later than eighteen months after the effective date of such Shelf Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (e) In the event that the Company would be required, pursuant to Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Company shall without delay prepare and furnish to each of the Electing Holders, to each placement or sales agent, if any, and to each such underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each Electing Holder agrees that upon receipt of any notice from the Company pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder shall forthwith discontinue the disposition of Registrable Securities pursuant to the Shelf Registration Statement applicable to such Registrable Securities until such Electing Holder shall have received copies of such amended or supplemented prospectus, and if so directed by the Company, such Electing Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Electing Holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. (f) In the event of a Shelf Registration, in addition to the information required to be provided by each Electing Holder in its Notice Questionnaire, the Company may require such Electing Holder to furnish to the Company such additional information regarding such Electing Holder and such Electing Holder's intended method of distribution of Registrable Securities as may be required in order to comply with the Securities Act. Each such Electing Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder to the Company or of the 14 Execution Copy occurrence of any event in either case as a result of which any prospectus relating to such Shelf Registration contains or would contain an untrue statement of a material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities or omits to state any material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. (g) Until the expiration of two years after the Closing Date, the Company will not, and will not permit any of its "affiliates" (as defined in Rule 144) to, resell any of the Securities that have been reacquired by any of them except pursuant to an effective registration statement under the Securities Act. 4. Registration Expenses. The Company agrees to bear and to pay or cause to be paid promptly all expenses incident to the Company's performance of or compliance with this Exchange and Registration Rights Agreement, including (a) all Commission and any NASD registration, filing and review fees and expenses including fees and disbursements of counsel for the placement or sales agent or underwriters in connection with such registration, filing and review, (b) all fees and expenses in connection with the qualification of the Securities for offering and sale under the State securities and blue sky laws referred to in Section 3(d)(xii) hereof and determination of their eligibility for investment under the laws of such jurisdictions as any managing underwriters or the Electing Holders may designate, including any fees and disbursements of counsel for the Electing Holders or underwriters in connection with such qualification and determination, (c) all expenses relating to the preparation, printing, production, distribution and reproduction of each registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Securities for delivery and the expenses of printing or producing any underwriting agreements, agreements among underwriters, selling agreements and blue sky or legal investment memoranda and all other documents in connection with the offering, sale or delivery of Securities to be disposed of (including certificates representing the Securities), (d) messenger, telephone and delivery expenses relating to the offering, sale or delivery of Securities and the preparation of documents referred in clause (c) above, (e) fees and expenses of the Trustee under the Indenture, any agent of the Trustee and any counsel for the Trustee and of any collateral agent or custodian, (f) internal expenses (including all salaries and expenses of the Company's officers and employees performing legal or accounting duties), (g) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or "cold comfort" letters required by or incident to such performance and compliance), (h) fees, disbursements and expenses of any "qualified independent underwriter" engaged pursuant to Section 3(d)(xix) hereof, (i) fees, disbursements and expenses of one counsel for the Electing Holders retained in connection with a Shelf Registration, as selected by the Electing Holders of at least a majority in aggregate principal amount of the Registrable Securities held by Electing Holders (which counsel shall be reasonably satisfactory to the Company), (j) any fees charged by securities rating services for rating the Securities, and (k) fees, expenses and disbursements of any other persons, including 15 Execution Copy special experts, retained by the Company in connection with such registration (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any holder of Registrable Securities or any placement or sales agent therefor or underwriter thereof, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor. Notwithstanding the foregoing, the holders of the Registrable Securities being registered shall pay all agency fees and commissions and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above. 5. Representations and Warranties. Each of the Company and the Guarantor represents and warrants to, and agrees with, each Purchaser that: (a) The compliance by the Company with all of the provisions of this Exchange and Registration Rights Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any subsidiary of the Company is a party or by which the Company or any subsidiary of the Company is bound or to which any of the property or assets of the Company or any subsidiary of the Company is subject, nor will such action result in any violation of the provisions of the certificate of incorporation, as amended, or the by-laws of the Company or the Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any subsidiary of the Company or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Company and the Guarantor of the transactions contemplated by this Exchange and Registration Rights Agreement, except the registration under the Securities Act of the Securities, qualification of the Indenture under the Trust Indenture Act and such consents, approvals, authorizations, registrations or qualifications as may be required under State securities or blue sky laws in connection with the offering and distribution of the Securities. (b) This Exchange and Registration Rights Agreement has been duly authorized, executed and delivered by the Company. 6. Indemnification. (a) Indemnification by the Company and the Guarantor. The Company and the Guarantor, jointly and severally, will indemnify and hold harmless each of the holders of Registrable Securities included in an Exchange Registration Statement, each of the Electing Holders of Registrable Securities included in a Shelf Registration Statement and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities against any losses, claims, damages or liabilities, joint or several, to which such holder, agent or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Exchange Registration Statement or Shelf Registration Statement, as the case may be, under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary prospectus 16 Execution Copy contained therein or furnished by the Company to any such holder, Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such holder, such Electing Holder, such agent and such underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Company nor the Guarantor shall be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by such person expressly for use therein. (b) Indemnification by the Holders and any Agents and Underwriters. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2(b) hereof and to entering into any underwriting agreement with respect thereto, that the Company shall have received an undertaking reasonably satisfactory to it from the Electing Holder of such Registrable Securities and from each underwriter named in any such underwriting agreement, severally and not jointly, to (i) indemnify and hold harmless the Company, the Guarantor, and all other holders of Registrable Securities, against any losses, claims, damages or liabilities to which the Company, the Guarantor or such other holders of Registrable Securities may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Electing Holder or underwriter expressly for use therein, and (ii) reimburse the Company and the Guarantor for any legal or other expenses reasonably incurred by the Company and the Guarantor in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of or contemplated by this Section 6, notify such indemnifying party in writing of the commencement of such action; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under the indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, 17 Execution Copy after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Contribution. If for any reason the indemnification provisions contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party and the indemnified party from the transactions herein contemplated or, if the allocation provided by the preceding clause (i) is not permitted under applicable law, not only the relative benefits referred to in the preceding clause (i), but also (ii) the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were determined by pro rata allocation (even if the holders or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no holder shall be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such holder from the sale of any Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) exceeds the amount of any damages which such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 18 Execution Copy Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The holders' and any underwriters' obligations in this Section 6(d) to contribute shall be several in proportion to the principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) The obligations of the Company and the Guarantor under this Section 6 shall be in addition to any liability which the Company or the Guarantor may otherwise have and shall extend, upon the same terms and conditions, to each officer, director and partner of each holder, agent and underwriter and each person, if any, who controls any holder, agent or underwriter within the meaning of the Securities Act; and the obligations of the holders and any agents or underwriters contemplated by this Section 6 shall be in addition to any liability which the respective holder, agent or underwriter may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company or the Guarantor and to each person, if any, who controls the Company within the meaning of the Securities Act. 7. Underwritten Offerings. (a) Selection of Underwriters. If any of the Registrable Securities covered by the Shelf Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Electing Holders holding at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering, provided that such designated managing underwriter or underwriters is or are reasonably acceptable to the Company. (b) Participation by Holders. Each holder of Registrable Securities hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. Rule 144. The Company covenants to the holders of Registrable Securities that, to the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities in connection with that holder's sale pursuant to Rule 144, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements. The Guarantor covenants to the holders of Registrable Securities that, to the extent it shall be required to do so under the Exchange Act, the Guarantor shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports 19 Execution Copy under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. 9. Miscellaneous. (a) No Inconsistent Agreements. The Company represents, warrants, covenants and agrees that it has not granted, and shall not grant, registration rights with respect to Registrable Securities or any other securities which would be inconsistent with the terms contained in this Exchange and Registration Rights Agreement. (b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company or the Guarantor fails to perform any of its obligations hereunder and that the several Purchasers and the holders from time to time of the Registrable Securities may be irreparably harmed by any such failure, and accordingly agree that the several Purchasers and such holders, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of the Company under this Exchange and Registration Rights Agreement in accordance with the terms and conditions of this Exchange and Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction. (c) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: If to the Company, to it at 600 Grant Street, 60th Floor, Pittsburgh, PA 15219, Attention: President, and if to a holder, to the address of such holder set forth in the security register or other records of the Company, or to such other address as the Company or any such holder may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (d) Parties in Interest. All the terms and provisions of this Exchange and Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and the holders from time to time of the Registrable Securities and the respective successors and assigns of the parties hereto and such holders. In the event that any transferee of any holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Exchange and Registration Rights Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Exchange and Registration Rights Agreement. If the Company shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof. 20 Execution Copy (e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Exchange and Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any holder of Registrable Securities, any director, officer or partner of such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities pursuant to the Purchase Agreement and the transfer and registration of Registrable Securities by such holder and the consummation of an Exchange Offer. (f) Governing Law. This Exchange and Registration Rights Agreement shall be governed by and construed in accordance with the laws of the State of New York. (g) Headings. The descriptive headings of the several Sections and paragraphs of this Exchange and Registration Rights Agreement are inserted for convenience only, do not constitute a part of this Exchange and Registration Rights Agreement and shall not affect in any way the meaning or interpretation of this Exchange and Registration Rights Agreement. (h) Entire Agreement; Amendments. This Exchange and Registration Rights Agreement and the other writings referred to herein (including the Indenture and the form of Securities) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Exchange and Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Exchange and Registration Rights Agreement may be amended and the observance of any term of this Exchange and Registration Rights Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the holders of at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 9(h), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such holder. (i) Inspection. For so long as this Exchange and Registration Rights Agreement shall be in effect, this Exchange and Registration Rights Agreement and a complete list of the names and addresses of all the holders of Registrable Securities shall be made available for inspection and copying on any business day by any holder of Registrable Securities for proper purposes only (which shall include any purpose related to the rights of the holders of Registrable Securities under the Securities, the Indenture and this Agreement) at the offices of the Company at the address thereof set forth in Section 9(c) above, upon reasonable notice to the Company, and at the office of the Trustee under the Indenture. (j) Counterparts. This agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 21 Execution Copy If the foregoing is in accordance with your understanding, please sign and return to us one for the Company, the Guarantor and each of the several Purchasers, plus one for each counsel, counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the several Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the several Purchasers, the Company and the Guarantor. It is understood that your acceptance of this letter on behalf of each of the several Purchasers is pursuant to the authority set forth in an agreement among the several Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, H. J. Heinz Finance Company By: /s/ Leonard A. Cullo, Jr. .................................. Leonard A. Cullo, Jr. President H. J. Heinz Company By: /s/ Leonard A. Cullo, Jr. .................................. Leonard A. Cullo, Jr. Treasurer Accepted as of the date hereof: J.P. Morgan Securities Inc. On behalf of each of the several Purchasers By: /s/ Maria Sramek ................................................. Maria Sramek Vice President 22 Exhibit A H. J. Heinz Finance Company INSTRUCTION TO DTC PARTICIPANTS (Date of Mailing) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: [DATE] * The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in the H. J. Heinz Finance Company (the "Company"), the 6.75% Guaranteed Notes due March 15, 2032 (the "Securities") are held. The Company is in the process of registering the Securities under the Securities Act of 1933 for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire. It is important that beneficial owners of the Securities receive a copy of the - ------------------------------------------------------------------------------ enclosed materials as soon as possible as their rights to have the Securities - -------------------------------------- included in the registration statement depend upon their returning the Notice and Questionnaire by [Deadline For Response]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact H. J. Heinz Finance Company, 600 Grant Street, 60th Floor, Pittsburgh, PA 15219; Attention: President. - --------- * Not less than 28 calendar days from date of mailing. A-1 Execution Copy H. J. Heinz Finance Company Notice of Registration Statement and Selling Securityholder Questionnaire ------------------------------------ (Date) Reference is hereby made to the Exchange and Registration Rights Agreement (the "Exchange and Registration Rights Agreement") between H. J. Heinz Finance Company (the "Company"), H. J. Heinz Company (the "Guarantor") and the several Purchasers named therein. Pursuant to the Exchange and Registration Rights Agreement, the Company has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form [S-_] (File No. 333-____) (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's 6.75% Guaranteed Notes due March 15, 2032 (the "Securities"). A copy of the Exchange and Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Exchange and Registration Rights Agreement. Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. The term "Registrable Securities" is defined in the Exchange and Registration ---------------------- Rights Agreement. A-2 Execution Copy ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Exchange and Registration Rights Agreement, including, without limitation, Section 6 of the Exchange and Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto. Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder will be required to deliver to the Company and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: A-3 Execution Copy QUESTIONNAIRE (1) (a) Full Legal Name of Selling Securityholder: --------------------------------------------------------------------- (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in Item (3) below: --------------------------------------------------------------------- (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held: --------------------------------------------------------------------- (2) Address for Notices to Selling Securityholder: --------------------------------------- --------------------------------------- --------------------------------------- Telephone: --------------------------------------- Fax: --------------------------------------- Contact Person: --------------------------------------- (3) Beneficial Ownership of Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities. (a) Principal amount of Registrable Securities beneficially owned:_______ CUSIP No(s). of such Registrable Securities:_________________________ (b) Principal amount of Securities other than Registrable Securities beneficially owned:__________________________________________________ CUSIP No(s). of such other Securities:_______________________________ (c) Principal amount of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement:___________ CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement:________________________________________ (4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any other securities of the Company, other than the Securities listed above in Item (3). State any exceptions here: A-4 Execution Copy (5) Relationships with the Company: Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: (6) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M. In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Exchange and Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Shelf Registration Statement and related Prospectus. A-5 Execution Copy In accordance with the Selling Securityholder's obligation under Section 3(d) of the Exchange and Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Exchange and Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: (i) To the Company: ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- (ii) With a copy to: ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above. This Agreement shall be governed in all respects by the laws of the State of New York. A-6 Execution Copy IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: ---------------------------- ------------------------------------------------------------- Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By:---------------------------------------------------------- Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT: ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- A-7 Execution Copy Exhibit B NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT Bank One, National Association H. J. Heinz Finance Company c/o Bank One, National Association 1111 Polaris Parkway Suite 1K - Mail Code OH1-0181 Columbus, OH 43240 Attention: Trust Officer Re: H. J. Heinz Finance Company (the "Company") 6.75% Guaranteed Notes due March 15, 2032 Dear Sirs: Please be advised that __________________________ has transferred $__________ aggregate principal amount of the above-referenced Notes pursuant to an effective Registration Statement on Form [S-___] (File No. 333-_______) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus dated [date] or in supplements thereto, and that the aggregate principal amount of the Notes transferred are the Notes listed in such Prospectus opposite such owner's name. Dated: Very truly yours, ---------------------------------- (Name) By: ---------------------------------- (Authorized Signature) B-1 EX-5.1 12 mar2202_ex0501.txt EXHIBIT 5.1 DAVIS POLK & WARDWELL 450 LEXINGTON AVENUE NEW YORK, NY 10017 212-450-4000 March 27, 2002 H.J. Heinz Finance Company 600 Grant Street Pittsburgh, Pennsylvania, 15219 Ladies and Gentlemen: We have acted as special counsel to H. J. Heinz Finance Company, a Delaware corporation (the "Company"), in connection with the Company's offer (the "Exchange Offer") to exchange its 6.625% notes due July 15, 2011, its 6.00% notes due March 15, 2012 and its 6.75% notes due March 15, 2032 (the "New Notes") for any and all of its outstanding 6.625% notes due July 15, 2011, its outstanding 6.00% notes due March 15, 2012 and its outstanding 6.75% notes due (the"Old Notes"). The Old Notes were issued, and it is proposed that the New Notes be issued, under an indenture dated as of July 6, 2001 among the Company, H. J. Heinz Company as guarantor and Bank One, National Association, as trustee (the "Trustee") (as may be supplemented or amended from time to time, the "Indenture"). We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments as we have deemed necessary or advisable for the purpose of rendering this opinion. Upon the basis of the foregoing and assuming the due authorization, execution and delivery of the Indenture by the parties thereto, we are of the opinion that the New Notes, when authorized, executed, authenticated and delivered in exchange for the Old Notes in accordance with the terms of the H.J. Heinz Finance Company 2 March 27, 2002 Exchange Offer and the Indenture, will be valid and binding obligations of the Company enforceable in accordance with their terms, except (i) as such enforcement may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, (ii) as such enforcement may be limited by general principles of equity, regardless of whether enforcement is sought in a proceeding at law or in equity and (iii) to the extent that a waiver of rights under any usury or stay law may be unenforceable. We hereby confirm the opinion set forth under the caption "Taxation" in each prospectus that is part of the Registration Statement on Form S-4 filed by the Company with the Securities and Exchange Commission on March 27, 2002. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York and the federal laws of the United States of America. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement relating to the Exchange Offer. We also consent to the references to us under the caption "Validity of the New Notes" in each prospectus contained in such Registration Statement. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent except that Bank One Trust Company, N.A., as Exchange Agent for the Exchange Offer, may rely upon this opinion as if it were addressed directly to it. Very truly yours, /s/ Davis Polk & Wardwell EX-10.1 13 mar2202_ex1001.txt EXHIBIT 10.1 [CONFORMED COPY] LIQUIDITY AGREEMENT THIS LIQUIDITY AGREEMENT (this "Agreement"), dated as of June 26, 2001, by and between H. J. HEINZ COMPANY (the "Lender"), a Pennsylvania corporation, and H. J. HEINZ FINANCE COMPANY (the "Borrower"), a Delaware corporation, provides: WITNESSETH: WHEREAS, the Borrower may want to borrow funds in U.S. dollars from time to time to meet its obligations and the Lender is willing to make loans to the Borrower from time to time, up to a maximum aggregate principal amount of $400,000,000 at any one time outstanding, subject to the terms and conditions set forth below; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by each of the parties, the Lender and the Borrower, intending to be legally bound, agree as follows: 1. Loans. 1.1 Subject to the terms and conditions of this Agreement, the Lender agrees to make loans (each, a "Loan" and collectively, the "Loans") to the Borrower from time to time on and after the date hereof and before the Maturity Date (defined below) in an aggregate principal amount under this Agreement and under the Note (defined below), not to exceed $400,000,000 at any one time outstanding, or such other aggregate amount as may be agreed upon in writing by the Lender and the Borrower from time to time. -2- 1.2 The obligation of the Lender to make the Loans in such aggregate amount (as the same may from time to time be increased or reduced pursuant to the provisions of this Agreement) is called its "Commitment". The period during which the Commitment is outstanding is called the "Commitment Period". The date on which any Loan is made is called a "Borrowing Date". During the Commitment Period, the Borrower may utilize the Commitment (as then in effect) by borrowing in accordance with the terms and provisions of this Agreement. 1.3 Each Loan shall be in a minimum aggregate principal amount of $1,000,000 and integral multiples of $100,000. 2. Note. The obligation of the Borrower to repay the aggregate unpaid principal amount of the Loans, with interest as described below, shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A (the "Note"), with appropriate insertions, payable to the order of the Lender. The principal amount of each Loan, the date of making such Loan, each payment of principal and the unpaid interest accrued on each Loan, shall be determined from the records of the Lender. The Lender's records shall be presumptively conclusive as to the accuracy of such information. The Note shall be dated the date hereof, shall mature on the Maturity Date and shall bear interest from the Borrowing Date of the first Loan on the principal balance due from time to time on the Note at the rates and payable on the date provided in this Agreement. 3. Procedures. The Borrower may borrow under the Commitment during the Commitment Period on any Business Day. The Borrower shall give the Lender written notice by electronic mail at least two Business Days prior to the -3- Borrowing Date specifying the principal amount of the Loan and the Borrowing Date. On satisfaction of the condition set forth in Section 15 with respect to the initial Loan, and the conditions in Section 14 with respect to all Loans, the amount of each Loan shall be made available to the Borrower on the Borrowing Date by crediting such amount to an account designated by the Borrower in writing. 4. Interest on Loans. 4.1 Each Loan shall bear interest on the unpaid principal amount at a floating rate of interest per annum (the "Interest Rate") equal to the applicable London Interbank Rate plus 1.00%. "London Interbank Rate" shall mean, with respect to any Interest Period (defined below), (a) the London Interbank Offered Rate for U.S. dollar deposits for a period comparable to such Interest Period appearing on the Bloomberg screen page BBAM (or such other page as may replace such page on such service, or on another service designated by the British Bankers' Association, for the purpose of displaying the rates at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market) as of 11:00 a.m., London time, on the date that is two London Business Days prior to the first day of such Interest Period, (b) if such method for determining the London Interbank Offered Rate shall not be available, the parties shall agree on a substitute method for such determination on such day, or (c) if such agreement is not reached on such day, a rate, for such Interest Period reasonably determined by the Lender as the rate then being paid by first-class banking organizations in the London interbank market for deposits of an amount equal to the principal amount of the relevant Loan and with a maturity comparable to such Interest Period. -4- 4.2 Each Loan shall have consecutive Interest Periods of three months or such other period as may be agreed on in writing by the Lender and the Borrower, the first Interest Period for each Loan to begin on the applicable Borrowing Date and each succeeding Interest Period to begin on the date of expiration of the then current Interest Period for such Loan. Notwithstanding the foregoing: (a) If any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding day that is a Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day. (b) No Interest Period may extend beyond the Maturity Date. (c) Any Interest Period beginning on a day that has no numerically corresponding day in the calendar month during which such Interest Period is to end shall end on the last Business Day of such calendar month. 5. Payment of Interest. Interest on each Loan shall be paid on each January 15, April 15, July 15 and October 15 (or if not a Business Day on the next succeeding Business Day and interest shall be payable at the applicable rate during such extension), until the principal amount of the Loan has been repaid or prepaid, and shall be payable on the date of repayment or prepayment, as applicable, of the unpaid principal amount of such Loan. 6. Computation of Interest. Interest on Loans shall be calculated on the basis of a 360-day year for the actual number of days elapsed. -5- 7. Post Maturity Interest. After the Maturity Date or the date on which the Loans shall otherwise become due and payable, each Loan shall bear interest, payable on demand, at a rate per annum (on the basis of a 360-day year for the actual number of days elapsed) equal to the sum of (a) the Interest Rate as of the date on which the unpaid principal amount shall become due and payable and (b) 2.00%. 8. Optional Prepayments. The Borrower shall have the right at any time, on at least three Business Days' notice, to prepay the Loans, in whole or in part, without premium or penalty. The notice shall specify the Loans to be prepaid and the date and amount of the prepayment. Such notice shall be irrevocable and on such notice being given the payment amount shall be due and payable on the date specified, together with interest accrued to such date on the amount prepaid and the amounts required by Section 10, where applicable. Partial prepayments shall be in a minimum aggregate principal amount of $1,000,000 and integral multiples of $100,000. 9. Method of Payment. The payment or prepayment by the Borrower of the principal amount of and interest on each Loan shall be made to the Lender in lawful money of the United States and in immediately available funds, at the office and to an account designated by the Lender in writing. 10. Compensation for Losses. If the Borrower makes a prepayment under Section 8 on a day other than the last day of an Interest Period, the Borrower shall pay to the Lender, on the Lender's demand, an amount that will compensate the Lender for any loss or expense incurred as a result of any such prepayment in respect of funds obtained for the purpose of maintaining such Loan (but not for any loss of profit in respect of any such prepayment). -6- 11. Facility Fee. The Borrower shall pay a facility fee to the Lender in consideration for providing this liquidity facility. The fee shall be payable within 10 days of the beginning of each of the Borrower's fiscal quarters and shall be equal to 1/4 of 1.00% (.0025) of the greatest amount of the unused Commitment at any time during the Borrower's immediately preceding fiscal quarter. 12. Unavailability. If at any time the Lender shall have determined in good faith that the making or maintenance of the Loans has been made impracticable or unlawful because of compliance by the Lender in good faith with any law or the administration thereof by any official body charged with the interpretation or administration thereof or because U.S. dollar deposits in the amount and maturity of the Loans are not generally available in the London Eurodollar interbank market, then the Lender shall promptly give the Borrower notice thereof and the obligation to continue the Loans shall terminate. The Borrower shall then prepay the Loans, such prepayment to become due (a) in the case of impracticability on the last day of the Interest Period in effect at the time the notice of impracticability is given and (b) in the case of illegality, on the last day of the last Interest Period to end prior to the effectiveness of the applicable change in law or such earlier date as may be required by the relevant law or regulation. 13. Representations and Warranties. The Borrower represents and warrants to the Lender that: 13.1 The Borrower has been duly organized and is an existing corporation, in good standing under the laws of Delaware and has all requisite power and authority under such law to own its property and to carry on its business as now being conducted. -7- 13.2 The Borrower has full power and authority to enter into this Agreement, to issue the Note and to incur and perform the obligations provided for herein and therein, all of which have been duly authorized by all proper and necessary action, and do not contravene any provision of the Borrower's certificate of incorporation or bylaws. No consent or approval of any governmental or administrative authority, instrumentality or agency that has not been obtained is required as a condition to the validity of this Agreement or the Note. 13.3 This Agreement constitutes, and the Note when issued and delivered pursuant hereto for value received will constitute, the valid and legally binding obligations of the Borrower enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. 14. Conditions For All Loans. The obligation of the Lender to make each Loan is subject to the following conditions precedent being satisfied at the time of each such Loan: 14.1 There shall exist no Event of Default (defined below) provided that the Borrower need not have complied with or be in compliance with the covenant set forth in Section 16.5 with respect to any Loan if the proceeds of the Loan are to be used solely to pay taxes of the Borrower or any of its consolidated subsidiaries, as certified in writing by the Borrower to the Lender. -8- 14.2 The representations and warranties contained in Section 13 shall be true with the same effect as though such representations and warranties had been made at the time of the Loan. 14.3 The Lender shall have received a certificate dated the Borrowing Date of such Loan and signed by an officer of the Borrower confirming the satisfaction of the conditions set forth in this Section 14. 15. Additional Condition of Initial Loan. The obligation of the Lender to make its initial Loan is subject to the Lender having received the Note duly executed and delivered by the Borrower. 16. Borrower Covenants . Until payment in full of the Note and performance of all other obligations of the Borrower: 16.1 The Borrower will furnish to the Lender such financial information, reports or statements as the Lender may reasonably request. 16.2 The Borrower will preserve and keep in full force and effect its existence in its jurisdiction of organization and will not directly or indirectly sell, lease or otherwise dispose of all or substantially all of its properties or assets or consolidate with or merge or convert into any other person, or permit any other person to consolidate or merge with it except for other affiliates of H. J. Heinz Company. 16.3 The Borrower will permit the Lender to have one or more of its officers or employees, or any other persons designated by the Lender and acceptable to the Borrower, visit the Borrower's offices to discuss the Borrower's affairs, finances and accounts with appropriate officers of the Borrower. -9- 16.4 The Borrower will comply with all statutes, regulations, orders and other regulatory requirements the noncompliance with which would materially and adversely affect its ability to conduct its business. 16.5 The Borrower will not permit its Borrower Capital (defined below) at any time to be less than zero. 16.6 The Borrower shall not issue any preferred stock without the prior written consent of the Lender and shall comply with all the terms and conditions of any such preferred stock and any agreement pursuant to which such preferred stock is issued, sold or delivered; provided, however, it shall not be necessary to obtain the Lender's prior written consent to the Borrower's issuance of 3,250 shares of Voting Cumulative Preferred Stock, Series A, on or about the date hereof (the "Series A Preferred Stock"). 16.7 The Borrower shall not use the proceeds of any of the Loans to make distributions or redemption payments with respect to securities that rank junior to the Series A Preferred Stock. 17. Events Of Default. If any of the following events (each, an "Event of Default") shall have occurred and be continuing, Section 19 shall apply: 17.1 If default shall be made in the due and punctual payment of the principal amount of the Note, when and as the same shall become due and payable, whether at the maturity thereof, by acceleration, by notice of prepayment or otherwise, and such default shall have continued for three Business Days. 17.2 If default shall be made in the due and punctual payment of any other payment due hereunder and such default shall have continued for 15 Business Days following notice to the Borrower of non-payment. -10- 17.3 If any representation or warranty made by the Borrower in this Agreement or any certificate or financial information provided under this Agreement shall prove to have been false or misleading in any material respect on the date as of which made. 17.4 If default shall be made by the Borrower in the performance of or compliance with the covenants set forth in Section 16.5 and such default shall not have been remedied within 10 days after notice of the occurrence thereof. 17.5 If default shall be made by the Borrower in the performance of or compliance with any other material term contained in this Agreement and such default shall not have been remedied within 30 days after written notice thereof, specifying such default and requiring it to be remedied, shall have been given to the Borrower by the Lender. 17.6 If there shall occur any event or condition resulting in the acceleration of the maturity of any Material Debt (defined below) or if there is any failure to pay the aggregate principal amount of any Material Debt at final maturity (or within any period of grace or forbearance), provided, that such failure to pay at maturity (including any period of grace or forbearance) shall have continued for a period 30 days or more. 17.7 If an involuntary case or other proceeding shall be commenced against the Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any applicable Federal or State bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar law now or hereafter in effect or seeking the appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of it or any -11- substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed, or an order or decree approving or ordering any of the foregoing shall be entered and continued unstayed and in effect, in any such event, for a period of 60 days. 17.8 If the Borrower shall commence a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar law or any other case or proceeding to be adjudicated a bankrupt or insolvent, or shall consent to the entry of a decree or order for relief in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or if it shall file a petition or answer or consent seeking reorganization or relief under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or consent to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Borrower or any substantial part of its property, or shall make an assignment for the benefit of creditors, or admit in writing its inability to pay its debts generally as they become due, or shall take corporate action in furtherance of any such action. 18. Consequences. If there is an Event of Default, then and in any such event the Lender may at its option, exercised by written notice given at any time (unless all Events of Default shall have previously been remedied) to the Borrower, declare the Note to be due and payable. The Note shall then mature and become payable, together with interest accrued thereon, without the necessity of any presentment, demand, protest or further notice, all of which are hereby waived by the Borrower; provided, that on the happening of any event specified in Sections 17.7 and 17.8 above all amounts owing hereunder and -12- under the Note shall automatically become immediately due and payable, all without declaration or any notice to the Borrower. 19. No Set-off. The Borrower hereby waives, and agrees that it will not seek to avoid payment of the Note in whole or in part by exercising, any right of set-off it may assert or possess whether created by contract, statute or otherwise. Any agreement between the Borrower and the Lender shall be deemed amended hereby to the extent necessary so as not to be inconsistent with the provisions of this Agreement with respect to the obligations of the Borrower hereunder. 20. Certain Definitions. As used in this Agreement, the following terms shall have the following respective meanings. "Borrower Capital" means, on any date, the consolidated net worth of the Borrower and its consolidated subsidiaries as shown on the Borrower's consolidated financial statements prepared in accordance with generally accepted accounting principles at such date. "Borrowing Date" has the meaning specified in Section 1.2. "Business Day" means any day on which commercial banks are open for domestic and international business (including dealings in dollar deposits) in New York City. "Commitment" has the meaning specified in Section 1.2. "Commitment Period" has the meaning specified in Section 1.2. "Fixed Interest Rate" has the meaning specified in Section 4. -13- "Floating Interest Rate" has the meaning specified in Section 4. "Loan" has the meaning specified in Section 1. "London Business Day" means any day on which commercial banks are open for domestic and international business (including dealings in dollar deposits) in London. "Material Debt" means any loan, note, bond, debenture or other similar evidence of indebtedness for money borrowed (other than the Note) of the Borrower or a subsidiary, arising in one or more related or unrelated transactions in any aggregate principal amount exceeding $25,000,000. "Maturity Date" means July 31, 2009, or if such day is not a Business Day, the next succeeding day that is a Business Day. "Note" has the meaning specified in Section 2. "Person" means a corporation, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a governmental agency. 21. Expenses. The Borrower agrees, in the case of an Event of Default, to pay all reasonable expenses incurred by the Lender in connection with the enforcement of any provision of this Agreement and the collection of the Note. 22. Cumulative Rights and No Waiver. Each and every right granted to the Lender under this Agreement, or under any other document delivered in connection with this Agreement, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Lender to exercise, and no delay in exercising, any right will operate as a waiver, -14- nor will any single or partial exercise of any right preclude any other or future exercise of such right or the exercise of any other right. 23. Amendments. This Agreement may only be amended in a writing executed by the Lender and the Borrower. 24. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and permitted assigns. 25. Assignment. Neither the Borrower nor the Lender may assign any of its rights or delegate any of its obligations hereunder or under the Note without the prior written consent of the other party. Any assignment purported to be made in contravention of this Section shall be null and void. 26. Severability. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 27. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, and all the counterparts shall together constitute one and the same instrument. 28. Governing Law. This Agreement and the Note shall be governed by and construed in accordance with the laws of Pennsylvania, without giving effect to principles of conflict of laws. -15- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. H. J. HEINZ COMPANY H. J. HEINZ FINANCE COMPANY By: /s/ Edward J. McMenamin By: /s/ Leonard A. Cullo, Jr. Name: Edward J. McMenamin Name: Leonard A. Cullo, Jr. Title: Vice President -Finance Title: Treasurer Exhibit A NOTE June 26, 2001 H. J. Heinz Finance Company, a Delaware corporation (the "Borrower"), for value received, hereby promises to pay to the order of H. J. Heinz Company, (the "Lender"), at the office of the Lender at 600 Grant Street, 60th Floor, Pittsburgh, Pennsylvania, in lawful money of the United States, on the Maturity Date (as defined in the Agreement specified below), the unpaid principal amount of each Loan made by the Lender to the Borrower pursuant to the Agreement (defined below). The Borrower promises to pay interest on the unpaid principal amount of such Loan on the dates and at the rate or rates provided for in the Agreement. All Loans made by the Lender and all repayments of the principal shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence such information with respect to each such Loan then outstanding may be endorsed by the Lender on the attached schedule, or on a continuation of such schedule attached to and made a part hereof, provided that the failure of the Lender to make any such recordation or endorsement or any error in any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Agreement. Except as provided in the Agreement, if this Note becomes due and payable on a day which is not a Business Day (as defined in the Agreement), the -17- maturity hereof shall be extended to the next succeeding Business Day, and interest shall be payable at the applicable rate during such extension. Except as provided in the Agreement, the Borrower waives presentment, demand, protest or other notice of any kind. This Note is the Note referred to in a Liquidity Agreement dated as of the date hereof between the Borrower and the Lender (the "Agreement"), and is entitled to the benefits provided therein. This Note is subject to prepayment in whole or in part and its maturity is subject to acceleration upon the terms provided in the Agreement. This Note may not be transferred, assigned, sold or pledged without the prior written consent of the Borrower, except as provided for in the Agreement. H. J. HEINZ FINANCE COMPANY By:_____________________________ Name:___________________________ Title:__________________________ LOANS AND PAYMENTS OF PRINCIPAL - ------------------------------------------------------------------------------- Date Amount of Amount of Notation Loan Principal Made By Repaid - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- EX-10.2 14 mar2202_ex1002.txt EXHIBIT 10.2 [CONFORMED COPY] ADMINISTRATION SERVICES AGREEMENT This AGREEMENT effective on the 1st day of May, 2001 BETWEEN H.J. Heinz Company (Contractor) AND Heinz Finance Company (Operating Company) WITNESSETH: WHEREAS Operating company is engaged in the business of performing banking and treasury functions predominately in the U.S. and WHEREAS Contractor has established offices in U.S. with the object of rendering global management, financial and accounting services, to affiliated companies; and WHEREAS Contractor is operating on a cost basis under which Contractor is to recover the entire amount of its net expenses with respect to its services; and WHEREAS Contractor is willing to provide and the Operating Company wishes to recieve financial management services and the use of Contractors facilities; NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS: ARTICLE 1 As a result of its global experience and outlook on worldwide markets, Contractor shall provide to Operating Company advice and assistance needed by Operating Company in investment programs and finance. Such advice and assistance shall include, but shall not be limited to: a) Provision of advice and support the development and/or purchase of new investments, new machinery and equipment, and plant location studies, b) Provision of advice on regional investment incentives and developments that could affect Operating Company's long range planning c) Provision of advice and assistance in employee compensation and benefit policies, overseas and specialist recruitment and training appropriate to Operating Company's needs, d) Assistance in engaging and evaluating independent outside specialists, as may be available in Operating Company's home country or elsewhere, for particular requirements of Operating Company, e) Assistance in international financial and government negotiations in connection with financing of Operating Company, f) Assistance in appraisal of international financial matters such as currency risks, banking relationships, relative borrowing attractiveness, and alternative borrowing opportunities and, the Operating Company hereby authorizes Heinz to enter into any agreements in connection with the foregoing on behalf of in the name of, the Operating Company, including, without limitation, the power and authority to enter into various interest rate and currency hedging arrangements (including, without limitation, swaps, futures, options, caps, collars and foreign exchange contracts), g) Assistance with banking and financial markets...credit availability, etc. h) Assistance in consultation in the securing of insurance coverage for the plant equipment and business risks. All services set out in this Article are hereinafter referred to as "Administration Services". ARTICLE 2: Contractor will provide use of its office space and administrative facility to Operating Company . ARTICLE 3: At the end of each month, Contractor shall forward an invoice containing 1/12th (monthly amount) of the amount of Operating Company's budgeted prorata share of net expenses to be paid for the current fiscal year as determined under Article 4 below. As the payment of rent and associated charges, are payable one month in advance, payment for the first month of expenses upon impementation of this agreement will be adjusted accordingly. Within 30 days of the end of each month during the fiscal year, Operating Company shall pay to Contractor such monthly amount. As soon as practicable after the close of the fiscal year, any difference between the total monthly amount payments made by Operating Company and their prorata share of actual net expenses, as determined under Article 5 below, shall be adjusted and shall be settled by prompt payment to the appropriate party within 30 days of notice. ARTICLE 4: In determining the net expenses to be charged to Operating Company under this Agreement, the following methodologies shall be used: 1. Rent, building services, identifiable utilities and tennant requests shall be allocated on the pro-rated basis of square footage used by Operaing Company and square footage used by Contractor providing services to Operating Company. 2. Equipment charges of $100 per month for the rental of shared office equipment including but not limited to copy and printing equipment. 3. Co-mingled fees and other expenses invoiced by third parties benefiting both Operating Comapany and Contractor will be pro-rated on an agreed that has a direct relationship to the expense incurred. 4. Salary of Contractor's Corporate Treasurer will be allocated based upon the ratio of 50% of total salary and costs of employment. ARTICLE 5: All amounts due under this Agreement shall be paid in U.S. dollars unless otherwise agreed. ARTICLE 6: 6.1 Operating Company, or a mutually agreed public accountant at Contractor's discretion, shall have access at all reasonable times to the accounts and records maintained by Contractor that are relevant to the determination of the amounts charged for services rendered under this Agreement. 6.2 Contractor or a mutually agreed public accountant at the Operating Company's discretion, shall have access at all reasonable times to the accounts and records of Operating Company which are relevant to charges under this Agreement. 6.3 Any controversies arising with regard to the propriety of accounting practices and accounting treatment of cost allocation under this Agreement should be resolved in the first instance by mutual agreement of the parties hereto and in case of further disagreement by: ARTICLE 7: This Agreement shall remainin effect until terminated by either party. Such termination shall be given bynot less than 30 days notice in writing, expiring on the in any year. ARTICLE 8: The laws of the United States of America shall govern this Agreement. IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized representatives as follows: BY: /s/ Paul F. Renne Paul F. Renne H.J. Heinz Company BY: /s/ Leonard A. Cullo, Jr. Leonard A. Cullo Jr. Heinz Finance Company EX-10.3 15 mar2202_ex1003.txt EXHIBIT 10.3 [CONFORMED COPY] H.J. Heinz Finance Company 600 Grant Street - 60th Floor Pittsburgh, Pennsylvania 15219 May 3, 2001 H. J. Heinz Company P.O. Box 57 Pittsburgh, PA 15230-0057 Re: Guarantee Facility Agreement Ladies and Gentlemen: In connection with the corporate restructuring of the United States operations of H.J. Heinz Company ("Heinz") effective today, H.J. Heinz Finance Company ("Heinz Finance") has agreed to assume as co-obligor the responsibility to pay certain third party obligations (collectively, the "Co-Obligations") owed by Heinz as set forth in the Public Debt Co-Obligation Agreement and the Commercial Paper Co-Obligation Agreement, both dated the date hereof and both between Heinz and Heinz Finance (together, the "Co-Obligation Agreements"). We understand that Heinz will remain as an obligor with respect to the Co-Obligations and retain the responsibility to pay the applicable creditors if Heinz Finance fails to pay. We expect that future creditors of Heinz Finance will require guarantees or other forms of credit support with respect to obligations issued or owed to them by Heinz Finance. Heinz has agreed to provide such guarantees and credit support. Each such obligation entered into on or after the date hereof by Heinz Finance is 2 referred to individually as a "Third Party Obligation" and collectively as the "Third Party Obligations" and such creditors are referred to as the "Covered Parties" and each as a "Covered Party." Accordingly, Heinz Finance and Heinz agree as follows: 1. Guarantee. Heinz hereby guarantees the due, prompt and full performance by Heinz Finance of all Third Party Obligations, provided Heinz Finance provides the Covered Party with a certificate (a "Coverage Certificate") in substantially the form of Exhibit A or, if required, Heinz provides the Covered Party with a separate guarantee (a "Guarantee"). The guarantee provided by this agreement is a guarantee of payment and not of collection and, to the fullest extent permitted by law, Heinz hereby waives all defenses to enforcement of, or payment by it under, this guarantee. 2. Schedule. Heinz Finance shall maintain a schedule of the amounts and creditors covered by the Co-Obligations and the Third Party Obligations. Heinz Finance may provide a Coverage Certificate to Covered Parties with a copy to Heinz. If a separate Guarantee is required, Heinz will provide a copy of the Guarantee to Heinz Finance. 3. Rights. Any Covered Party receiving a Coverage Certificate shall have a direct claim against Heinz under this guarantee if Heinz Finance fails to meet its obligations under the applicable Third Party Obligation. In the case of a separate Guarantee, the terms of the Guarantee shall govern the rights and obligations of Heinz and the applicable creditor. 4. Fees. Heinz Finance shall pay a fee to Heinz in consideration for this guarantee facility. The fee shall be payable within 10 days of the beginning of each of Heinz Finance's fiscal quarters with respect to the immediately preceding fiscal quarter. 3 The fees shall be equal to 1/10 of 1% (.001) per year multiplied by the sum of (a) the highest balance at any time during Heinz Finance's immediately preceding fiscal quarter of the amount of the Co-Obligations assumed by Heinz Finance under the Co-Obligation Agreements, and (b) the highest balance at any time during Heinz Finance's immediately preceding fiscal quarter of the amount of outstanding Third Party Obligations. The provisions of this agreement and the guarantee contained herein shall be governed by the laws of the Commonwealth of Pennsylvania applicable to contracts made and to be performed therein. Please sign below on the enclosed copy of this letter to signify agreement with the foregoing and return such originally signed copy to the undersigned. Very truly yours, H. J. HEINZ FINANCE COMPANY By: /s/ Leonard A. Cullo, Jr. Name: Leonard A. Cullo, Jr. Title: Treasurer AGREED AS OF MAY 3, 2001: H. J. HEINZ COMPANY By: /s/ Paul F. Renne Name: Paul F. Renne Title: Executive Vice President and Chief Financial Officer EX-10.4 16 mar2202_ex1004.txt EXHIBIT 10.4 =============================================================================== SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF H. J. HEINZ COMPANY, L.P. (a Delaware limited partnership) Dated as of May 3, 2001 =============================================================================== SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF H. J. HEINZ COMPANY, L.P. TABLE OF CONTENTS Page ---- I. DEFINED TERMS...........................................................2 1.01. Defined Terms..................................................2 1.02. Other Defined Terms...........................................11 II. ORGANIZATION...........................................................11 2.01. Continuation of Partnership...................................11 2.02. Name and Principal Place of Business..........................12 2.03. Term..........................................................12 2.04. Registered Agent and Registered Office........................12 2.05. Purpose.......................................................12 2.06. Acquisition of Property and Debt Financing....................12 III. PARTNERS...............................................................13 3.01. Admission of Partners.........................................13 3.02. Limitation on Liability.......................................13 IV. CAPITAL................................................................13 4.01. Initial Capital Contributions.................................13 4.02. Additional Capital Contributions..............................14 4.03. Contributions of Additional Class A or Class B Interest Holders..............................................14 4.04. Additional Cash Contributions to Acquire Additional Properties....................................................14 4.05. Capital Accounts..............................................15 4.06. No Further Capital Contributions..............................15 4.07. Special Provision.............................................16 4.08. Reimbursement of Preformation Expenditures....................16 V. INTERESTS IN THE PARTNERSHIP...........................................16 5.01. Ownership.....................................................16 5.02. Waiver of Partition; Nature of Interests in the Partnership...16 VI. DISTRIBUTIONS..........................................................17 (i) TABLE OF CONTENTS (Continued) Page ---- 6.01. Distributions Of Operating Cash Flow..........................17 6.02. Distribution True Up..........................................17 6.03. Distribution of Capital Proceeds..............................18 6.04. Distributions in Liquidation..................................19 6.05. Allocation Among Partners.....................................19 6.06. Timing of Distributions.......................................20 VII. ALLOCATIONS............................................................20 7.01. Operating Income..............................................20 7.02. Investment Income.............................................20 7.03. Operating Loss................................................20 7.04. Capital Net Income............................................20 7.05. Capital Net Losses............................................21 7.06. Winding Up Income and Loss....................................21 7.07. Special Allocations and Compliance with Section 704(b)........21 7.08. Tax Matters...................................................22 7.09. Tax Matters Partner...........................................22 7.10. Special Allocation Rules......................................22 7.11. Section 704(c)................................................22 7.12. Sharing of Nonrecourse Debt...................................23 VIII. MANAGEMENT.............................................................23 8.01. Management....................................................23 8.02. Management Board..............................................26 8.03. Partnership Expenses..........................................28 IX. BOOKS AND RECORDS......................................................29 9.01. Books and Records.............................................29 9.02. Accounting and Fiscal Year....................................29 9.03. Reports.......................................................29 9.04. The Partnership Accountant....................................30 9.05. Reserves......................................................30 (ii) 1 TABLE OF CONTENTS (Continued) Page ---- X. TRANSFER OF INTERESTS..................................................30 10.01. No Transfer...................................................30 10.02. Permitted Transfers...........................................30 10.03. Transferees...................................................30 10.04. Section 754 Election..........................................31 10.05. Power of Attorney.............................................31 XI. EXCULPATION AND INDEMNIFICATION........................................33 11.01. Exculpation...................................................33 11.02. Indemnification...............................................33 11.03. Reliance......................................................34 XII. DISSOLUTION AND TERMINATION............................................35 12.01. Dissolution...................................................35 12.02. Termination...................................................35 12.03. Liquidating Partner...........................................36 XIII. DEFAULT BY PARTNER.....................................................37 13.01. Events of Default.............................................37 13.02. Effect of Event of Default....................................37 XIV. MISCELLANEOUS..........................................................37 14.01. Representations and Warranties of the Partners................37 14.02. Further Assurances............................................39 14.03. Notices.......................................................39 14.04. Governing Law.................................................39 14.05. Attorney Fees.................................................39 14.06. Captions......................................................40 14.07. Pronouns......................................................40 14.08. Successors and Assigns........................................40 14.09. Extension Not a Waiver........................................40 14.10. Creditors and Third Parties Not Benefited.....................40 14.11. Severability..................................................40 (iii) 2 TABLE OF CONTENTS (Continued) Page ---- 14.12. Entire Agreement and Amendments...............................40 14.13. Counterparts..................................................41 14.14. Confidentiality...............................................41 14.15. Venue.........................................................41 14.16. Waiver of Jury Trial..........................................41 14.17. Enforceability of Power of Attorney...........................41 Schedule A - Limited Partners.................................................1 Schedule B - Additional Limited Partners......................................1 Schedule C - Class A Interest Holders.........................................1 Schedule D - Class B Interest Holders.........................................1 Schedule E - Capital Contributions and Percentage Interests...................1 Schedules F1 to F6 - Assignment Agreements....................................1 Schedule G - Real Estate......................................................1 Schedule H - H. J. Heinz Finance Capital Contribution.........................1 Schedule I - Draft Sales Agency Agreement.....................................1 Addendum 1 Previous Limited Partners..........................................1 (iv) SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF H. J. HEINZ COMPANY, L.P. This SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT of H. J. Heinz Company, L.P. is made and entered into for all purposes except as expressly provided herein to the contrary, as of May 3, 2001 (the "Effective Date"), by, between and among Heinz Management Company, a Delaware corporation, as the general partner hereof, and the corporations named on Schedule A as the limited partners hereof. R E C I T A L S: - - - - - - - - WHEREAS, the Partnership was originally formed by the filing of a Certificate of Limited Partnership for the Partnership (the "Certificate of Limited Partnership") with the Secretary of State of the State of Delaware on October 6, 2000 and the Partnership is currently governed by that certain First Amended and Restated Limited Partnership Agreement of the Partnership made and entered into as of May 3, 2001 as the same has been amended to the date hereof (the "Original Partnership Agreement"); WHEREAS, pursuant to the terms of the Original Partnership Agreement, made and entered into as of May 3, 2001, the entities listed on Schedule B were admitted as additional Limited Partners of the Partnership; WHEREAS, as of May 3, 2001, the only Limited Partners of the Partnership were those entities listed under the heading "May 3, 2001 Limited Partners" on Addendum 1 attached hereto, and effective as of May 4, 2001, the entities named under the heading "Merged Limited Partners" on Addendum 1 were merged with and into CMH, Inc., and as a result thereof, the only Limited Partners of the Partnership immediately thereafter were, and the only Limited Partners on the date this Agreement is entered into continue to be, the entities listed under the heading "May 4, 2001 Limited Partners" on Addendum 1 attached hereto; WHEREAS, on January 29, 2002, H. J. Heinz Finance Company ("HFC" or "Heinz Finance") made a Capital Contribution in the amount of $500 million (the "HFC Contribution"); and WHEREAS, the parties hereto desire to enter into this Second Amended and Restated Limited Partnership Agreement upon the terms set forth herein and thereby amend, restate and supersede the Original Partnership Agreement in its entirety to (i) reflect the HFC Contribution (which, for purposes hereof, is effective on January 29, 2002 ("HFC Contribution Date"), (ii) incorporate the terms of previously adopted amendments, including amendments relating to the issuance to HFC as of July 16, 2001 (the "HFC First Prior Contribution Date"), of additional Class B Interests in exchange for the contribution of cash to the Partnership, as adjusted to the date hereof, in connection with the Borden's acquisition (the "HFC First Prior Contribution"), (iii) reflect the issuance to HFC as of September 24, 2001 (the "HFC Second Prior Contribution Date"), of additional Class B Interests in exchange for the contribution of cash to the Partnership, as adjusted to the date hereof, in connection with the Anchor acquisition (the "HFC Second Prior Contribution") (iv) amend Section 6.06 (and certain definitions used therein) as herein provided, and (v) correct certain typographical/scrivener errors and reflect non-substantive clarifications as of the Effective Date, consistent with the intent of the parties hereto on the Effective Date. NOW, THEREFORE, the parties hereto hereby agree to amend, restate and supersede the Original Partnership Agreement in its entirety as follows: I. DEFINED TERMS 1.01. DEFINED TERMS. As used in this Agreement, the following terms have the meanings set forth below: "Additional Admissions" means the admission of additional Class A Interest Holders and/or Class B Interest Holders as provided in Section 3.01 hereof. "Adjusted Capital Account Deficit" means, with respect to any Partner for any Taxable Year or other period, the deficit balance, if any, in such Partner's Capital Account as of the end of such Taxable Year or other period, after giving effect to the following adjustments: (a) credit to such Capital Account any amounts that such Partner is obligated to restore or is deemed obligated to restore as described in the penultimate sentences of Treasury Regulation Section 1.704-2(g)(1) and Treasury Regulation Section 1.704-2(i)(5); and (b) debit to such Capital Account the items described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). "Adjusted Unrecovered Capital" means, with respect to each Class B Interest Holder, 95% of the amount of the aggregate Capital Contributions made by such Class B Interest Holder (and any predecessor in interest), less all distributions theretofore made to such Class B Interest Holder (and any predecessor in interest) pursuant to Section 6.03(c) hereof. "Affiliate" means, with respect to any Person, any other Person directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with such Person. As used in this definition, the term "controlling", "controlled by" or "under common control with" means the possession, directly or indirectly, through one or more intermediaries, of the power to direct or cause the direction of the management and policies of a Person, whether through voting securities, by contract or otherwise. "Agreement" means this Second Amended and Restated Limited Partnership Agreement, including any exhibits, schedules or addendums attached hereto, as amended and in effect from time to time pursuant to the terms hereof. "Allocation Shortfall Amount" has the meaning set forth in Section 7.01(a) hereof. "Assumed Liabilities" has the meaning set forth in Section 4.07 hereof. 2 "Book Basis" means, with respect to any asset of the Partnership, the asset's adjusted basis for federal income tax purposes, except as follows: (a) The initial Book Basis of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as finally determined by the General Partner and the contributor; (b) The Book Basis of all Partnership assets shall be adjusted to equal their respective gross fair market values (taking Code Section 7701(g) into account), as determined by the General Partner as of the following times: (i) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership money or Property as consideration for an interest in the Partnership; and (iii) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), provided that an adjustment described in clauses (i) and (ii) of this paragraph shall be made only if the General Partner reasonably determines that such adjustment is necessary to reflect the relative economic interests of the Partners in the Partnership; (c) The Book Basis of any Partnership Property distributed to any Partner shall be adjusted to equal the gross fair market value (taking Code Section 7701(g) into account) of such Property on the date of distribution as determined by the General Partner; and (d) The Book Basis of all Partnership Properties shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such Properties pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Book Basis shall not be adjusted pursuant to this subparagraph (d) to the extent that an adjustment pursuant to subparagraph (b) is, in the General Partner's determination, necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d). If the Book Basis of an asset has been determined or adjusted pursuant to subparagraph (a), (b) or (d), such Book Basis shall thereafter be adjusted by the Depreciation taken into account with respect to such asset, for purposes of computing Income and Losses. "Business Day" means any day other than a Saturday or Sunday, a legal holiday in New York, New York or a day on which banking institutions located in the State of New York are authorized by law or other governmental action to close. "Capital Account" means the separate account maintained for each Partner pursuant to Section 4.05 hereof. "Capital Allocation Shortfall Amount" has the meaning set forth in Section 7.04(a) hereof. 3 "Capital Contributions" means with respect to any Partner the aggregate amount of cash plus the fair market value of property (other than cash) contributed to the Partnership (as determined by the General Partner) reduced by any liabilities of the Partner that are assumed by the Partnership and any liabilities to which any such property is subject. "Capital Event" means a sale, or other disposition, of Partnership Property (other than in the ordinary course of business) and any financing or refinancing of Partnership indebtedness not otherwise attributable, in the reasonable judgment of the General Partner, to the Partnership's ordinary business operations. "Capital Net Income" means for any Taxable Year or other period of determination, the excess of any Income from Capital Events over Losses from Capital Events for such Taxable Year or other period determined without regard to Income or Loss from Capital Events allocated pursuant to Section 7.07 and determined without regard to Investment Income. "Capital Net Loss" means for any Taxable Year or other period of determination, the excess of any Loss from Capital Events over Income from Capital Events for such Taxable Year or other period determined without regard to Income or Loss from Capital Events allocated pursuant to Section 7.07 and determined without regard to Investment Income. "Capital Proceeds" means with respect to any Capital Event, the excess of (i) proceeds from such Capital Event (including amounts available from any reserve account into which proceeds from Capital Events have been previously placed), over (ii) all cash expenditures related to the Capital Event, as determined in the reasonable judgment of the General Partner, including as a cash expenditure for this purpose amounts placed in reasonable reserves by the General Partner pursuant to Section 8.01(b)(iv). Capital Proceeds shall also include proceeds from the sale or disposition of inventory to the extent that, in the reasonable judgement of the General Partner, such proceeds, if distributed, would be more properly treated as a return of capital. Capital Proceeds does not include proceeds derived from sales or dispositions in connection with the liquidation of the Partnership. "Certificate of Limited Partnership" has the meaning set forth in the Recitals of this Agreement. "Class A Interests" means all the rights, title and interests in the Partnership (including to receive distributions) set forth in this Agreement and allocable or relating to the Class A Interest Holders. "Class A Interest Holders" means the entities named on Schedule C as the owners of the Class A Interests (as the same may be amended from time to time in accordance with this Agreement) and their respective successors and assigns, together with any additional entities admitted as Class A Interests Holders pursuant to the terms of this Agreement. "Class A Managers" has the meaning set forth in Section 8.02(a) hereof. "Class A Unrecovered Capital" means the aggregate amount of Capital Contributions made by the Class A Interest Holders (and any predecessor in interest), less all distributions 4 theretofore made to the Class A Interest Holders (and any predecessors in interest) pursuant to Sections 6.03(c) and 6.03(d) (other than distributions pursuant to such Sections that are made any time the Class A Unrecovered Capital is zero). "Class B Interests" means all the rights, title and interests in the Partnership (including to receive distributions) set forth in this Agreement and allocable or relating to the Class B Interest Holders. "Class B Interest Holders" means the entities listed on Schedule D as the owners of the Class B Interests (as the same may be amended from time to time in accordance with this Agreement) and their respective successors and assigns, together with any additional entities admitted as additional Class B Interests Holders pursuant to the terms of this Agreement. "Class B Managers" has the meaning set forth in Section 8.02(a) hereof. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. Any reference herein to any specific section or sections of the Code shall be deemed to include a reference to any corresponding provision of any future laws. "Deemed Tax Amount" means with respect to each Partner and each Capital Event for which Capital Proceeds are available for distribution to the Partners pursuant to Section 6.03, the product of 38% and the amount of net income and gain (taxable for federal income tax purposes) allocated to such Partner under Section 704 of the Code as a result of such Capital Event. Provided, that the 38% rate shall be adjusted up or down accordingly if the maximum rate of federal income tax applicable under the Code on the item of gain in question is greater or less than 35%. "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act, as amended from time to time. "Depreciation" means, for each Taxable Year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such Taxable Year, except that if the Book Basis of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Taxable Year, Depreciation shall be an amount which bears the same ratio to such beginning Book Basis as the federal income tax depreciation, amortization, or other cost recovery deduction for such Taxable Year bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Taxable Year is zero, Depreciation shall be determined with reference to such beginning Book Basis using any reasonable method selected by the General Partner. "Event of Default" has the meaning set forth in Section 13.01 hereof. "Fiscal Year" means the 52-53 week year ending on the Wednesday closest to April 30. "Forgoing Partner" has the meaning set forth in Section 6.03(e) hereof. 5 "GAAP" has the meaning set forth in Section 1.02 hereof. "General Partner" means, initially HMC, and its successors and assigns. "Heinz" means H. J. Heinz Company, a Pennsylvania corporation. "HFC" has the meaning set forth in the Recital paragraphs to this Agreement. "HFC Contribution" has the meaning set forth in the Recital paragraphs to this Agreement. "HFC Prior Contribution" has the meaning set forth in the Recital paragraphs to this Agreement. "HMC" means Heinz Management Company, a Delaware corporation. "Income" means, for each Taxable Year or other period, an amount equal to the Partnership's taxable income and gain for such year or other period, determined in accordance with Section 703(a) of the Code (including all items of income and gain required to be stated separately under Section 703(a)(1) of the Code), with the following adjustments: (a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Income or Loss will be considered an item of Income; (b) Gain resulting from any disposition of Partnership Property with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such property, notwithstanding that the adjusted tax basis of such property may differ from its Book Basis; (c) Any items specially allocated pursuant to Section 7.11 shall not be considered in determining Income; and (d) Any increase to the Book Basis of Partnership Property pursuant to clauses (b) or (c) of the definition of Book Basis shall be taken into account as gain from the disposition of such Property and shall constitute an item of Income. "Indemnitees" has the meaning set forth in Section 11.02 hereof. "Index Rate" means at any time of determination 8.0% plus (or minus) 50% of the excess (or shortfall) of 90 day LIBOR plus 200 basis points over 8.0%. "Individual Preferred Return Amount" means, at any time of determination, an amount calculated for each Class B Interest Holder determined in the same manner as Preferred Return Amount is calculated, but taking account only of such Class B Interest Holder's Unrecovered Capital and distributions for such Fiscal Year to such Class B Interest Holder pursuant to Sections 6.01(a), 6.01(b) and 6.03(a) hereof. 6 "Interest" means, with respect to any Partner at any time, the entire right, title and interest of such Partner in and to the Partnership at such time, including the right of such Partner to any and all of the benefits to which such Partner may be entitled as provided in this Agreement, together with the obligations of such Partner to comply with all of the terms and provisions of this Agreement. "Investment Income" means, an amount determined for each Taxable Year equal to the excess, if any, of all items and Income from Investments for such Taxable Year over all items of Loss from Investments for such Taxable Year. "Investment Income Account" means, an account maintained for each Partner equal to the excess, if any, of the aggregate amounts of Investment Income allocated to such Partner (and any predecessor in interest) for the current and all previous Taxable Years, over the aggregate amount theretofore distributed to such Partner (and any predecessor in interest) pursuant to Sections 6.01(c) and 6.03(b) during the current and all previous Taxable Years. "Investments" means all notes, bonds or other evidences of indebtedness and any stock in a corporation in which the Partnership owns less than 50% of the total voting power of the corporation. "LIBOR" means, for any Quarter, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Bloomberg screen BBAM - British Bankers' Association (or any successor page) as the London interbank offered rate for deposits in U.S. dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Quarter for a term of 90 days. "Limited Partner" or "Limited Partners" means, one or more (as the case may be) of the entities named on Schedule C as Class A Interest Holders, and one or more (as the case may be) of the entities named on Schedule D as Class B Interest Holders and/or their respective successors and assigns, together with any other Person who is admitted as a limited partner of the Partnership in accordance with this Agreement and applicable law, in each case, so long as the same shall continue as a limited partner of the Partnership. "Liquidating Partner" means the Partner designated as such by the General Partner; provided, however, that any Partner that causes the dissolution of the Partnership under Section 12.01(d) hereof or with respect to which an Event of Default has occurred shall not serve as the Liquidating Partner. "Loss" means, for each Taxable Year or other period, an amount equal to the Partnership's items of taxable deduction and loss for such year or other period, determined in accordance with Section 703(a) of the Code (including all items of loss or deduction required to be stated separately under Section 703(a)(1) of the Code), with the following adjustments: (a) Any expenditures of the Partnership described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures under Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Loss, will be considered an item of Loss; 7 (b) Loss resulting from any disposition of Partnership Property with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such property, notwithstanding that the adjusted tax basis of such property may differ from its Book Basis; (c) In lieu of depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there will be taken into account Depreciation for the Taxable Year or other period; (d) Any items of deduction and loss specially allocated pursuant to Section 7.11 shall not be considered in determining Loss; and (e) Any decrease to the Book Basis of Partnership Property pursuant to clauses (b) or (c) of the definition of Book Basis shall be taken into account as a loss from the disposition of such Property and shall constitute an item of Loss. "Management Board" means the management committee formed and operated pursuant to Section 8.02 hereof. "Managers" has the meaning set forth in Section 8.02(a) hereof. "Net Income" means, for any period, the excess of items of Income over items of Loss, if applicable, for such period determined without regard to any items of Income or Loss allocated pursuant to Section 7.07 hereof. "Net Loss" means, for any period, the excess of items of Loss over items of Income, if applicable, for such period determined without regard to any items of Income or Loss allocated pursuant to Section 7.07 hereof. "Nonrecourse Deductions" has the meaning set forth in Treasury Regulation Section 1.704-2. "Notices" has the meaning set forth in Section 14.03 hereof. "Operating Cash Flow" means, for any period of determination, the excess, if any, of (i) all cash proceeds received by the Partnership (including amounts released from reserves other than reserved amounts from Capital Events), but not including cash proceeds from Capital Events, over (ii) all cash expenditures related to the generation of such cash proceeds (or otherwise attributable to the Partnership's ordinary business operations), as reasonably determined by the General Partner, including as an expenditure for this purpose amounts of such cash proceeds placed into reserves pursuant to Section 8.01(b)(iv) hereof. "Operating Income" means, for any Taxable Year, the Net Income, if any, of the Partnership, determined without regard to (i) Investment Income, and (ii) Capital Net Income and Capital Net Loss. 8 "Operating Loss" means, for any Taxable Year, the Net Loss, if any, of the Partnership, determined without regard to (i) Investment Income, and (ii) Capital Net Income and Capital Net Loss. "Original Partnership Agreement" has the meaning set forth in the Recital paragraphs to this Agreement. "Partially Adjusted Capital Account" means, with respect to any Partner for any Taxable Year or other period of the Partnership, the Capital Account balance of such Partner at the beginning of such year or period, adjusted for all Capital Contributions and distributions during such year or period and all special allocations pursuant to Section 7.07 with respect to such year or period but before giving effect to any allocations pursuant to Section 7.06 hereof. "Partner" or "Partners" means, one or more (as the case may be) of the General Partner and/or the Limited Partners. "Partner Minimum Gain" means the Partnership's "partner nonrecourse debt minimum gain" as defined in Treasury Regulation Section 1.704-2(i)(2). "Partner Nonrecourse Deductions" means "partner nonrecourse deductions" as determined in Treasury Regulation Section 1.704-2(i)(2). "Partnership" means the Delaware limited partnership formed by the filing of the Certificate of Limited Partnership and operated pursuant to the terms of this Agreement and, for the avoidance of doubt, shall not be construed to mean any Partner. "Partnership Accountant" has the meaning set forth in Section 9.04 hereof. "Partnership Minimum Gain" means "partnership minimum gain" as determined in Treasury Regulation Section 1.704-2(d). "Percentage Interest" means, with respect to each Partner, the percentage shown opposite such Partner's name on Schedule E attached hereto (under the heading Percentage Interest), as the same may be amended from time to time pursuant to the terms of this Agreement. The General Partner is authorized to prepare and attach a revised Schedule E in accordance with the provisions of Section 4.01 and to amend Schedule E in accordance with Sections 4.03 and/or 4.04 hereof. "Person" means any individual, partnership, corporation, limited liability company, trust or other entity. "Preferred Return Amount" means, with regard to the Class B Interest Holders as a group, at any time of determination for a Fiscal Year, the cumulative Quarterly Preferred Return Amounts for all Quarters during such Fiscal Year. The Preferred Return Amount shall not be cumulative from one Fiscal Year to another and as a result thereof, with regard to each Fiscal Year of the Partnership, the Preferred Return Amount for such Fiscal Year shall automatically be zero at the beginning of each Fiscal Year. 9 "Proper Amount" has the meaning set forth in Section 6.02 hereof. "Property" or "Properties" means, all real, personal, tangible or intangible property owned by the Partnership or, as appropriate, an SPV. "Quarter" shall mean the period ending on the Wednesday closest to the last day of July, October, January and April. "Quarterly Preferred Return Amount" means an amount determined for each Quarter by multiplying (i) 25% of the Index Rate at the beginning of such Quarter and (ii) the sum of the average amount of aggregate Unrecovered Capital during such Quarter and the Undistributed Preferred Return Amount for the prior Quarter within the Fiscal Year. "Reasonable Period" has the meaning set forth in Section 13.01 hereof. "Recipient Partner" has the meaning set forth in Section 6.03(e) hereof. "Regulatory Allocation" has the meaning set forth in Section 7.07(e) hereof. "Securities Act" has the meaning set forth in Section 14.01(f) hereof. "Security Law" has the meaning set forth in Section 14.01(f) hereof. "Sharing Ratio" means 94% to the Class A Interest Holders, 5% for the Class B Interest Holders and 1% for the General Partner. "Shortfall" has the meaning set forth in Section 4.02 hereof. "Special Receipt Amount" has the meaning set forth in Section 6.03(e) hereof. "SPV" has the meaning set forth in Section 2.05 hereof. "SPV Agreement" has the meaning set forth in Section 2.05 hereof. "Target Account" means, with respect to any Partner for any Taxable Year of the Partnership or other period, the excess of (a) an amount (which may be either a positive balance or a negative balance) equal to the hypothetical distribution (or contribution) such Partner would receive (or contribute) if all assets of the Partnership, including cash, were sold for cash equal to their Book Basis (taking into account any adjustments to Book Basis for such year), all liabilities of the Partnership were then satisfied according to their terms (limited, with respect to each nonrecourse liability, to the Book Basis of the assets securing such liability) and all remaining proceeds from such sale were distributed pursuant to Sections 6.03(a), (b), (c) and (d) (taking account of the last sentence of Section 6.03(e)), over (b) the amount of Partnership Minimum Gain and Partner Minimum Gain that would be charged back to such Partner as determined pursuant to Treasury Regulation Section 1.704-2 immediately prior to such sale. "Taxable Year" means the taxable year of the Partnership for federal income tax purposes. 10 "Transfer" means any sale, exchange, assignment, gift, hypothecation, pledge, encumbrance or other transfer. "Treasury Regulation" or "Regulation" means, with respect to any referenced provision, such provision of the regulations of the United States Department of the Treasury or any successor provision. "Undistributed Preferred Return Amount" means an amount determined as of the end of each Quarter equal to the excess, if any, of (i) the Quarterly Preferred Return Amounts for all Quarters within the Fiscal Year, over (ii) all distributions to the Class B Interest Holders for such Fiscal Year pursuant to Sections 6.01(a), 6.01(b) and 6.03(a). The Preferred Return Amount and the Quarterly Preferred Return Amounts shall not be cumulative from one Fiscal Year to another and as a result thereof, with regard to each Fiscal Year of the Partnership, the Undistributed Preferred Return Amount for each Fiscal year shall automatically be zero at the beginning of such Fiscal Year. "Unrecovered Capital" means, with respect to each Class B Interest Holder, the aggregate amount of the Capital Contributions made by such Class B Interest Holder (and any predecessor in interest), less all distributions therefore made to such Class B Interest Holder (and any predecessor in interest) pursuant to Sections 6.03(c) and 6.03(d) (other than distributions pursuant to such sections that are made at any time Unrecovered Capital is zero). "Winding-Up Income and Loss" means the Net Income or Net Loss in the Winding-Up Year. "Winding-Up Year" means the Taxable Year of the Partnership in which all of its assets are disposed of or the Partnership liquidates and each succeeding Taxable Year. 1.02. OTHER DEFINED TERMS. As used in this Agreement, unless otherwise specified, (a) all references to Sections, Articles or Exhibits are to Sections, Articles or Exhibits of this Agreement, (b) each accounting term has the meaning assigned to it in accordance with United States generally accepted accounting principles, practices and procedures ("GAAP"), (c) all Exhibits, Schedules, Addenda and other attachments to this Agreement are specifically incorporated into and made a part of this Agreement by any reference thereto in this Agreement, (d) the terms "include" and "including" shall be construed as if followed by the phrase "without limitation", and (e) all terms used in this Agreement which are not defined in this Article I shall have the meaning set forth elsewhere in this Agreement. II. ORGANIZATION 2.01. CONTINUATION OF PARTNERSHIP. The Partners hereby agree (a) to continue the Partnership as a limited partnership under the Delaware Act, upon the terms and subject to the conditions set forth in this Agreement, (b) to reflect the issuance of additional Class B Interests to H. J. Heinz Finance Company in consideration for the HFC Prior Contribution, and (c) to issue additional Class B Interests to HFC in consideration for the HFC Contribution. The General Partner is hereby authorized to file and record any amendments to the Certificate of Limited Partnership and such other documents as may be required or appropriate under the 11 Delaware Act or the laws of any jurisdiction in which the Partnership may conduct business or own property in order to reflect the terms of this Agreement. 2.02. NAME AND PRINCIPAL PLACE OF BUSINESS. (a) The name of the Partnership is set forth on the cover page to this Agreement. The General Partner may change the name of the Partnership or adopt such trade or fictitious names for use by the Partnership as the General Partner may from time to time determine. All business of the Partnership shall be conducted under such name or the name of an SPV, and title to the Properties shall be held in such name or the name of an SPV. In the event the General Partner changes the name of the Partnership or adopts any other name for use by the Partnership, the Partnership shall promptly file or record with the proper offices in each jurisdiction and political subdivision in which the Partnership is conducting business such amendments or certificates, applications or other documents as are required or permitted by any applicable partnership, assumed or fictitious name statutes, or similar statutes or laws in effect in each such jurisdiction or political subdivision thereof. (b) The principal place of business and office of the Partnership shall be located at 1062 Progress Street, Pittsburgh, Pennsylvania. The General Partner may from time to time change such principal office and place of business or may change or establish such additional offices or places of business of the Partnership as it may deem necessary or appropriate. 2.03. TERM. The term of the Partnership commenced on October 6, 2000 and shall be perpetual, unless terminated pursuant to the provisions of this Agreement by the Partners. 2.04. REGISTERED AGENT AND REGISTERED OFFICE. The registered agent and office of the Partnership is Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. 2.05. PURPOSE. The purpose of the Partnership shall be to engage in the business of food and pet food manufacturing, selling, distribution and any other lawful business directly or indirectly related thereto. The Partnership may form one or more subsidiary entities (each an "SPV") to own all or any of the Properties or to conduct the Partnership's business, provided that the terms of the organizational documents relating to the formation of any such SPV ("SPV Agreement") shall contain such provisions as will together with the provisions of this Agreement have substantially the same effect as would be the case if such Property was held or all such business were conducted by the Partnership pursuant to the terms of this Agreement. Each SPV shall directly or indirectly, through one or more intermediaries, be wholly-owned by the Partnership. 2.06. ACQUISITION OF PROPERTY AND DEBT FINANCING. The Partners acknowledge and agree that the Partnership shall, and the Partnership is authorized (on its own behalf or on behalf of one or more SPV) to (a) acquire the Properties pursuant to the Assignment, Assumption and Bill of Sale Agreements attached hereto as Schedules F1 to F6, to acquire the real Property described in Schedule G, to acquire the Property described in Schedule H and to 12 enter into those certain Sales Agency Agreements substantially in the form attached hereto as Schedule I and (b) acquire such additional Property or Properties as determined appropriate by the General Partner and upon such terms, conditions and provisions as determined appropriate by the General Partner (and in connection therewith, to accept additional Capital Contributions as set forth in Section 4.04 hereof), without the consent, approval or other action of any other Partner, provided such terms and conditions have been approved by the Management Board. In addition, the Partners acknowledge and agree that in connection with the acquisition of the Properties, the General Partner, on behalf of the Partnership in its own legal capacity or on behalf of any one or more of the SPVs, is authorized to enter into, execute, deliver and perform all obligations under any and all agreements, instruments and documents necessary in connection with the acquisition of the Properties, and any and all amendments thereto. III. PARTNERS 3.01. ADMISSION OF PARTNERS. Except as expressly permitted by this Agreement, no other person shall be admitted as a partner of the Partnership, and no additional interest shall be issued, without the approval of the General Partner. The Partners acknowledge and agree that the General Partner is specifically authorized to admit either or both (a) additional Class A Interest Holders and/or (b) additional Class B Interest Holders, to the Partnership, without the consent, approval or other action of any other Partner, provided the terms and conditions of such admission have been approved by the Management Board. 3.02. LIMITATION ON LIABILITY. Except as expressly provided herein, no Limited Partner shall be liable or obligated personally for any of the debts, obligations or liabilities of the Partnership, and no Partner shall be required to contribute any capital other than the contributions required by the provisions of Article IV hereof. A negative or deficit balance in any Partner's Capital Account shall not be deemed to be an asset of the Partnership and no Partner with a negative or deficit balance in its Capital Account shall have any obligations to the Partnership, any other Partner, or any third party or creditor to restore said negative or deficit balance, except to the extent expressly provided for in this Agreement. No Partner shall be liable for the return of the Capital Contributions, Capital Account or any portion thereof, of any other Partner, it being expressly understood and agreed that such return shall be made solely from the assets of the Partnership in accordance with the terms of this Agreement. No Partner shall be entitled to demand and receive property other than cash in return for its Capital Contributions to the Partnership, its Capital Account or its Interests. IV. CAPITAL 4.01. INITIAL AND SUBSEQUENT CAPITAL CONTRIBUTIONS. Simultaneously with the full and complete execution of the Original Partnership Agreement, each of the Partners made the Capital Contributions to the Partnership set forth under its name on the relevant Schedules F, G or H. Schedule E sets forth the estimated fair market value of the assets contributed by each Partner as of the Effective Date which comprised such Partner's Capital Contribution, and which assets were contributed to the Partnership for its exclusive use and are not being retained by the Partners. The estimated fair market values shown on Schedule E are subject to adjustment to be based upon an independent appraisal. When the final appraisal is obtained, the General Partner shall notify each partner of the values indicated therein and of the corrected amount of each 13 Partner's Capital Contribution. Any Partner who disagrees with such corrected Capital Contribution shall notify the General Partner in writing within 15 days of receipt of the notice from the General Partner or be deemed to have irrevocably waived its right to object. As a result of the HFC First Prior Contribution, the HFC Second Prior Contribution, and the HFC Contribution, Schedule E also reflects the fair market value of the assets contributed by HFC as of the dates of such contributions. The parties hereto acknowledge that the Unrecovered Capital of HFC was increased, effective as of the HFC First Prior Contribution Date by the amount of the HFC First Prior Contribution, that the Unrecovered Capital of HFC was increased, effective as of the HFC Second Prior Contribution Date by the amount of the HFC Second Prior Contribution and the Unrecovered Capital of HFC was increased, effective as of the HFC Contribution Date by the amount of the HFC Contribution. 4.02. ADDITIONAL CAPITAL CONTRIBUTIONS. In addition to the Capital Contributions of the Partners as provided above in Section 4.01 hereof, if at any time or from time to time additional funds are required by the Partnership or any SPV in excess of Partnership available funds, for any reason other than as described in Section 4.04 hereof (each a "Shortfall"), including (i) to close any refinancing of a third-party loan (including third-party closing costs), (ii) to pay all costs and expenses (whether operating or capital in nature) in connection with the Partnership's investment in any Property or in connection with the operations of the Partnership or any SPV, and/or (iii) to fund the reasonable working capital needs of the Partnership and each SPV for both operating and capital expenditures of the Partnership or any SPV, the General Partner may (but shall not be obligated to) request that the Partners make further capital contributions in an amount sufficient to fund such Shortfall in return for an interest in the Partnership as reasonably determined by the General Partner. Alternatively, the General Partner may offer interests to Persons who are not Partners on such terms as the General Partner determines reasonable but shall first offer such interests to the Partners. 4.03. CONTRIBUTIONS OF ADDITIONAL CLASS A OR CLASS B INTEREST HOLDERS. In connection with any Additional Admissions (as provided in Section 3.01 hereof), the General Partner is authorized to accept on behalf of the Partnership (and on behalf of any one or more of the SPVs) contributions to the capital of the Partnership of all or any portion of the business operations and/or assets of such additional Class A Interest Holders and/or additional Class B Interest Holders, in exchange for either Class A Interests and/or Class B Interests in the Partnership (as the case may be), in each case upon such terms, conditions and provisions as determined appropriate by the General Partner and approved by the Management Board (including assumptions of liabilities of the type described in Section 4.07 hereof). In each such case, this Agreement may be amended in such form as reasonably approved by the General Partner for the purpose of (a) admitting such new Class A Interest Holders and/or Class B Interest Holders, (b) setting forth or describing in reasonable detail, accepting and valuing, the assets to be contributed by such new Class A Interest Holders and/or Class B Interest Holders, (c) amending Schedules A, C, D and E of this Agreement as necessary and (d) otherwise amending this Agreement (as determined appropriate by the General Partner) to reflect such Additional Admissions. In connection with any such Additional Admission, the General Partner is authorized (on behalf of the Partnership and any applicable SPV) to enter into any and all agreements, contracts, documents and other instruments relating to or to effectuate such Additional Admission and the related contribution of business operations and/or assets (in each 14 case, upon such terms, conditions and provisions as determined appropriate by the General Partner) and the General Partner is authorized to execute appropriate amendments to this Agreement on behalf of the other Limited Partners pursuant to Section 10.05 hereof. 4.04. ADDITIONAL CASH CONTRIBUTIONS TO ACQUIRE ADDITIONAL PROPERTIES. In connection with the acquisition of any additional Properties (as provided in Section 2.06(b) hereof), the General Partner is authorized to accept on behalf of the Partnership (and on behalf of any one or more SPVs) contributions to the capital of the Partnership from existing Partners, in exchange for either new or additional Class A Interests and/or Class B Interests in the Partnership (as the case may be), in each case upon such terms, conditions and provisions as determined appropriate by the General Partner and approved by the Management Board (including assumptions of liabilities of the type described in Section 4.07 hereof). In each such case, this Agreement may be amended in such form as reasonably approved by the General Partner for the purpose of (a) reflecting such new or additional Class A Interests and/or Class B Interests, (b) amending Schedules A, C, D and/or E of this Agreement as necessary and (c) otherwise amending this Agreement (as determined appropriate by the General Partner) to reflect such additional Capital Contributions and acquisitions of Properties. In connection with any such transaction, the General Partner is authorized (on behalf of the Partnership and any applicable SPV) to enter into any and all agreements, contracts, documents and other instruments relating to or to effectuate such additional Capital Contributions and Property acquisitions (in each case, upon such terms, conditions and provisions as determined appropriate by the General Partner) and the General Partner is authorized to execute appropriate amendments to this Agreement on behalf of the other Limited Partners pursuant to Section 10.05 hereof. 4.05. CAPITAL ACCOUNTS. A separate capital account ("Capital Account") will be maintained for each Partner in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv) and consistent therewith shall be increased by all increases required pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv) and shall be decreased by all decreases required by Treasury Regulation Section 1.704-1(b)(2)(iv) and any other elective adjustments to capital accounts under such Treasury Regulations deemed appropriate by the General Partner to properly reflect the economic interests of the Partners (unless such elective adjustment is otherwise required under this Agreement). The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed Property or which are assumed by the Partnership or any Partners), are computed in order to comply with such Treasury Regulations, the General Partner may make such modification, provided that it is not likely to have a material adverse effect on the amounts distributed to any person pursuant to Section 6.04 hereof. 4.06. NO FURTHER CAPITAL CONTRIBUTIONS. Except as expressly provided in this Agreement (including with regard to Additional Admissions, acquisitions of additional Properties) or with the prior written consent of all the Partners, no Partner shall be 15 required or entitled to contribute any other or further capital to the Partnership, nor shall any Partner be required or entitled to loan any funds to the Partnership. Notwithstanding any other provision of this Agreement to the contrary, nothing contained herein will, or is intended or will be deemed to benefit any creditor of the Partnership or any creditor of any Partner, and no such creditor will have any rights, interests or claims hereunder, be entitled to any benefits hereunder or be entitled to require the Partnership or any Partner to demand, solicit or accept any loan, advance or additional capital contribution for or to the Partnership or to enforce any right which the Partnership or any Partner may have against any other Partner or which any Partner may have against the Partnership, pursuant to this Agreement or otherwise. 4.07. SPECIAL PROVISION. The Partners are transferring their business operations to the Partnership which include liabilities incurred in connection with the conduct of the businesses such as trade payables and various other liabilities in connection with employment of personnel and product disposition. The Partnership agrees to assume (within the meaning of Section 752 of the Code) all of the liabilities of each such Partner as of the date hereof other than the excluded liabilities listed in the Assignment, Assumption and Bill of Sale Agreements attached hereto as Schedules F1 to F4 (each such Partner's "Assumed Liabilities"). Each Partner agrees to be secondarily liable for its Assumed Liabilities and to thereby satisfy its Assumed Liabilities when due if the Partnership is unable to do so (and for the avoidance of doubt, reference to the Partnership is reference to the assets of the Partnership and not any Partner). The Partner satisfying its Assumed Liabilities shall be entitled to reimbursement from the Partnership for any amount so paid by such Partner, but shall not be entitled to reimbursement from the other Partners (or a Person related to any such Partner for purposes of Treasury Regulation Section 1.752-2) in its or such other Partner's capacity as a partner herein or in any other capacity, and for the avoidance of doubt, if such Partner fails to satisfy its Assumed Liabilities, such Partner shall pay or reimburse any other Partner who has, in any capacity or through any means, made a payment or has suffered an economic loss with respect to such Partner's Assumed Liabilities as of a result of nonpayment by the Partnership or such Partner of its Assumed Liabilities. For purposes hereof, the Assumed Liabilities of a Partner shall include any liability incurred by the Partnership to refinance any Assumed Liability of such Partner. 4.08. REIMBURSEMENT OF PREFORMATION EXPENDITURES. The Partnership intends to reimburse certain of the Class A Interest Holders for certain capital expenditures made by such Class A Interest Holders incident to the formation of the Partnership and related to assets contributed to the Partnership. The amount of the reimbursement to each such Class A Interest Holder as well as the capital expenditures to which they relate shall be agreed upon by such Partner, the General Partner, and the Class B Interest Holders and shall be based upon sufficient documentation identifying the expenditures which shall be submitted to the Partnership as soon as reasonably practicable. V. INTERESTS IN THE PARTNERSHIP 5.01. OWNERSHIP. The Properties shall be owned, directly or indirectly (through one or more SPVs), by the Partnership, subject to the terms and provisions of this Agreement. 5.02. WAIVER OF PARTITION; NATURE OF INTERESTS IN THE PARTNERSHIP. Except as otherwise expressly provided for in this Agreement, each of the Partners hereby irrevocably waives any right or power that such Partner might have: 16 (a) To cause the Partnership or any of its assets to be partitioned; (b) To cause the appointment of a receiver for all or any portion of the assets of the Partnership; (c) To compel any sale of all or any portion of the assets of the Partnership pursuant to any applicable law; or (d) To file a complaint, or to institute any proceeding at law or in equity, to cause the termination, dissolution or liquidation of the Partnership. Each of the Partners has been induced to enter into this Agreement in reliance upon the waivers set forth in this Section 5.02, and without such waivers no Partner would have entered into this Agreement. No Partner shall have any interest in any specific Property. The interests of all Partners in this Partnership are personal property. VI. DISTRIBUTIONS 6.01. DISTRIBUTIONS OF OPERATING CASH FLOW. Operating Cash Flow for each Fiscal Year shall be distributed to the Partners in the following order of priority: (a) first, 95% to the Class B Interest Holders, 4% to the Class A Interest Holders and 1% to the General Partner until the Class B Interest Holders have received aggregate distributions for such Fiscal Year pursuant to this Section 6.01(a) and Section 6.03(a)(i) in an amount equal to 80% of the Preferred Return Amount for such Fiscal Year; (b) second, 25% to the Class B Interest Holders, 74% to the Class A Interest Holders and 1% to the General Partner until the Class B Interest Holders have received aggregate distributions pursuant to Section 6.03(a), Section 6.01(a) and this Section 6.01(b) for such Fiscal Year in an amount equal to the Preferred Return Amount for such Fiscal Year; (c) third, to the Partners pro rata in proportion to the balances in their respective Investment Income Accounts to the extent thereof; and (d) thereafter, to the Partners in accordance with their respective Sharing Ratios. 6.02. DISTRIBUTION TRUE UP. The Partners recognize that due to variations in the Index Rate and/or the amount of Operating Cash Flow and/or Capital Proceeds available for distribution during the Fiscal Year, and since distributions pursuant to Section 6.01 and Section 6.03 may be made more often than annually (as provided in Section 6.06 hereof), the aggregate amount of Operating Cash Flow and/or Capital Proceeds received by the Partners on a quarterly or other interim basis may not be the amount to which they would otherwise be entitled to on an annual basis under Section 6.01 and Section 6.03 for a Fiscal Year (the amount each such Partner is to receive on an annual basis pursuant to Sections 6.01 and 6.03 hereof for each Fiscal Year is 17 herein sometimes referred to as the "Proper Amount"), and as a result thereof, the General Partner may adjust any distributions to the Partners (including fourth Quarter distributions and annual distributions) and among the Partners for such Fiscal Year so as to cause the aggregate amount received by each Partner for such Fiscal Year to equal such Partner's Proper Amount. In the event such fourth Quarter or annual adjusting distributions are insufficient to cause the aggregate amounts received by each such Partner for such Fiscal Year to equal their respective Proper Amount, the General Partner may require the return of some or all of the amounts previously distributed to one or more of the Partners for such Fiscal Year, and if necessary, distribute such amounts to other Partners, so as to cause the aggregate amounts received by each of the Partners for such Fiscal Year (after such adjustments, returns and redistributions) to equal the applicable Proper Amount. The General Partner shall notify the Partners of the necessity for any such adjustment and the appropriate adjustment as to each Partner. Any Partner receiving a request for return of any quarterly or other interim distribution, as provided above, shall promptly return such amount to the Partnership, and if necessary to balance the Proper Amount for each Partner, the Partnership shall promptly thereafter distribute some or all of such amount to one or more of the other Partners, so as to cause the aggregate amounts received by each of the Partners to equal the applicable Proper Amount. 6.03. DISTRIBUTION OF CAPITAL PROCEEDS. Capital Proceeds shall be distributed in the following order of priority: (a) first, to the Partners in the following order of priority: (i) first, 95% to the Class B Interest Holders, 4% to the Class A Interest Holders and 1% to the General Partner until the Class B Interest Holders have received aggregate distributions for such Fiscal Year pursuant to this Section 6.03(a)(i) and Section 6.01(a) in an amount equal to 80% of the Preferred Return Amount for such Fiscal Year; (ii) thereafter, 25% to the Class B Interest Holders, 74% to the Class A Interest Holders and 1% to the General Partner until the Class B Interest Holders have received aggregate distributions for the Fiscal Year pursuant to Section 6.03(a), Section 6.01(a) and Section 6.01(b) for such Fiscal Year in an amount equal to the Preferred Return Amount for such Fiscal Year. (b) second, to the Partners pro rata in proportion to the balances in their respective Investment Income Accounts to the extent thereof; (c) third, 94% to the Class B Interest Holders, 1% to the General Partner and 5% to the Class A Interest Holders until the Adjusted Unrecovered Capital of each Class B Interest Holder is equal to zero; and (d) thereafter, to the Partners in proportion to their respective Sharing Ratios. (e) Notwithstanding the foregoing, in the event the distribution of Capital Proceeds to a Partner under Section 6.03(c) and Section 6.03(d) results in such Partner receiving Capital Proceeds in an amount that is less than such Partner's Deemed Tax 18 Amount, then amounts otherwise distributable under Sections 6.03(c) and 6.03(d) shall instead be redistributed among the Partners in such a manner so as to ensure (with the least amount of economic change possible) that to the greatest extent possible, each Partner receives an amount under Sections 6.03(c) and 6.03(d) that is no less than such Partner's Deemed Tax Amount. Any amounts otherwise distributable pursuant to Section 6.03(c) or Section 6.03(d) but instead distributed pursuant to this Section 6.03(e) (first as amounts otherwise distributable pursuant to Section 6.03(d) and then as to Section 6.03(c)) in favor of a Partner ("Recipient Partner") and away from another Partner ("Forgoing Partner") shall be referred to herein as such Forgoing Partner's "Special Receipt Amount." Special Receipt Amounts shall be considered as advances by the Partnership against future distributions to such Recipient Partner and shall be recovered as rapidly as possible such that all future distributions of Capital Proceeds to such Recipient Partner shall instead be distributed pro rata to the Forgoing Partners (in proportion to their respective Special Receipt Amounts) until the Special Receipt Amount of each Forgoing Partner has been fully recovered. 6.04. DISTRIBUTIONS IN LIQUIDATION. Upon the dissolution and winding-up of the Partnership, the proceeds of sale and other assets of the Partnership distributable to the Partners under Section 12.02(c)(iii) shall be distributed, not later than the latest time specified for such distributions pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2) to the Partners in proportion to and in accordance with their respective positive Capital Account balances (after adjustment to reflect all adjustments to Capital Accounts other than the distributions in liquidation). With the approval of the General Partner, a pro rata portion of the distributions that would otherwise be made to the Partners under the preceding sentence may be distributed to a trust established for the benefit of the Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership arising out of or in connection with the Partnership. The assets of any trust established under this Section 6.04 will be distributed to the Partners from time to time by the trustee of the trust, upon approval of the General Partner, in the same proportions as the amount distributed to the trust by the Partnership would otherwise have been distributed to the Partners under this Agreement. Upon the liquidation of an interest in the Partnership not otherwise in connection under the liquidation of the Partnership, the liquidating distribution to any such Partner shall be in accordance with such Partner's positive Capital Account balance after taking account of all adjustments to Capital Accounts for the Taxable Year of liquidation (other than the liquidating distribution). 6.05. ALLOCATION AMONG PARTNERS. For purposes of this Article VI and for purposes of Article VII: (a) Amounts distributed to the Class B Interest Holders pursuant to Sections 6.01(a), 6.01(b) and 6.03(a) shall be distributed among them based upon their relative Individual Preferred Return Amounts; (b) Amounts distributed to the Class B Interest Holders pursuant to Section 6.03(c) shall be distributed among them based upon their relative amounts of Unrecovered Capital; and 19 (c) Except as otherwise provided or unless the context otherwise requires, all other amounts allocated or distributed to the Class B Interest Holders shall be allocated or distributed among them in proportion to their respective Percentage Interests and all other amounts allocated or distributed to the Class A Interest Holders shall be allocated or distributed among them in proportion to their respective Percentage Interests. 6.06. TIMING OF DISTRIBUTIONS. As soon as reasonably practical after the end of each Quarter (as determined by the General Partner) and prior to making any distributions of Capital Proceeds arising from any Capital Event occurring during such Quarter, the General Partner shall endeavor to determine Operating Cash Flow for such Quarter and make distributions of Operating Cash Flow for such Quarter, with annual adjusting distributions as soon as reasonably practical after the end of the fourth Quarter of each Fiscal Year. The General Partner shall make distributions of Capital Proceeds as soon as reasonably practical after the receipt of the Capital Proceeds to be distributed and after distributions of Operating Cash Flow, if any, for the Quarter during which the Capital Event giving rise to such Capital Proceeds occurred. VII. ALLOCATIONS 7.01. OPERATING INCOME. For each Taxable Year, Operating Income shall be allocated in the following order of priority: (a) first, to each Partner until the aggregate amount allocated to each such Partner (and any predecessor in interest) under this Section 7.01(a) and under Section 7.04(a) for all prior and current periods is equal to the aggregate amount theretofore distributed for all prior and current periods to such Partner (and any predecessor in interest) pursuant to Sections 6.01(a), 6.01(b) and 6.03(a) hereof (as to each Partner the amount of such distributions in excess of such allocations being referred to herein as each such Partner's "Allocation Shortfall Amount") (and if there is insufficient Operating Income to make a full allocation under this Section 7.01(a), then pro rata to the Partners in proportion to their respective Allocation Shortfall Amounts); and (b) thereafter, to the Partners in accordance with their respective Sharing Ratios. 7.02. INVESTMENT INCOME. For each Taxable Year, Investment Income shall be allocated in the following order or priority: (a) first, 84% to the Class A Interest Holders, 1% to the General Partner and 15% to the Class B Interest Holders until the aggregate amount allocated under this Section 7.02(a) for such Taxable Year is equal to $10 million; and (b) thereafter, 89% to the Class A Interest Holders, 1% to the General Partner and 10% to the Class B Interest Holders. 7.03. OPERATING LOSS. For each Taxable Year, Operating Loss shall be allocated 94% to the Class A Interest Holder, 5% to the Class B Interest Holders and 1% to the General Partner. 20 7.04. CAPITAL NET INCOME. For each Taxable Year, Capital Net Income shall be allocated in the following order of priority: (a) first, to each Partner until the aggregate amount allocated to each such Partner (and any predecessor in interest) under this Section 7.04(a) and under Section 7.01(a) for all prior and current periods is equal to the aggregate amount theretofore distributed for all prior and current periods to such Partner (and any predecessor in interest) pursuant to Sections 6.01(a), 6.01(b) and 6.03(a) hereof (as to each Partner, the amount of such distributions in excess of such allocations being referred to herein as each such Partner's "Capital Allocation Shortfall Amount") (and if there is insufficient Capital Net Income to make a full allocation under this Section 7.04(a), then pro rata to the Partners in proportion to their respective Capital Allocation Shortfall Amounts); and (b) thereafter, to the Partners in accordance with their respective Sharing Ratios. 7.05. CAPITAL NET LOSSES. For each Taxable Year, Capital Net Losses shall be allocated to the Partners in accordance with their respective Sharing Ratios. 7.06. WINDING UP INCOME AND LOSS. Notwithstanding any other provision of this Agreement, Winding Up Income and Loss shall be allocated to make the Partially Adjusted Capital Accounts of the Partners equal, as nearly as possible, their respective Target Accounts. 7.07. SPECIAL ALLOCATIONS AND COMPLIANCE WITH SECTION 704(b). The following special allocations shall, except as otherwise provided, be made in the following order: (a) Notwithstanding anything to the contrary contained in this Article VII, if there is a net decrease in Partnership Minimum Gain or in any Partner Minimum Gain during any Taxable Year or other period, prior to any other allocation pursuant hereto, each Partner shall be specially allocated items of Partnership Income for such Taxable Year (and, if necessary, subsequent years) in an amount and manner required by Treasury Regulation Sections 1.704-2(f) or 1.704-2(i)(4). The items to be so allocated shall be determined in accordance with Treasury Regulation Section 1.704-2. (b) Nonrecourse Deductions for any Taxable Year or other period shall be allocated (as nearly as possible) under Treasury Regulation Section 1.704-2 to the Partners, pro rata in proportion to their respective Sharing Ratios. (c) Any Partner Nonrecourse Deductions for any Taxable Year or other period shall be allocated to the Partner that made, or guaranteed or is otherwise liable with respect to the loan to which such Partner Nonrecourse Deductions are attributable in accordance with principles under Treasury Regulation Section 1.704-2(i). (d) Any Partner who unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases a negative balance in his or its Capital Account shall be 21 allocated items of Income sufficient to eliminate such increase or negative balance caused thereby, as quickly as possible, to the extent required by such Treasury Regulation. (e) The allocations set forth in Sections 7.07(a), 7.07(b), 7.07(c) and 7.07(d) and Section 7.10(a) (the "Regulatory Allocations") are intended to comply with certain requirements of Treasury Regulation Sections 1.704-1 and 1.704-2. It is the intent of the Partners that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Partnership Income and Loss, pursuant to this Section 7.07(e). Therefore, notwithstanding any other provision of this Article VII (other than the Regulatory Allocations), the General Partner shall make such offsetting special allocations of Partnership Income or Loss in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Partner's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of the Agreement and all Partnership items were allocated pursuant to Sections 7.01, 7.02, 7.03, 7.04, 7.05 and 7.06. In exercising its discretion under this Section 7.07(e), the General Partner shall take into account future Regulatory Allocations under Section 7.07(a) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 7.07(b) and 7.07(c). 7.08. TAX MATTERS. The Partners intend for the Partnership to be treated as a partnership for federal income tax purposes. The General Partner shall make all applicable elections, determinations and other decisions under the Code and applicable Treasury Regulations, including, without limitation, the deductibility of a particular item of expense and the positions to be taken on the Partnership's tax return, and shall approve the settlement or compromise of all audit matters raised by the Internal Revenue Service affecting the Partners generally. The Partners shall each take reporting positions on their respective federal, state and local income tax returns consistent with the positions determined for the Partnership by the General Partner. The General Partner shall cause all federal, state and local income and other tax returns to be timely filed by the Partnership. 7.09. TAX MATTERS PARTNER. The General Partner shall be the tax matters partner within the meaning of Section 6231(a)(7) of the Code (and for purposes of any similar state, local or foreign law) and shall possess all rights, obligations and duties of a tax matters partner under the Code. If it determines that it is desirable to do so, the General Partner shall cause the Partnership to make such elections as are necessary to be subject to the unified partnership audit procedures set forth in Section 6221 et seq. of the Code. 7.10. SPECIAL ALLOCATION RULES. (a) No allocation of Net Loss, Loss or Capital Loss shall be made to any Partner if, as a result of such allocation, such Partner would have an Adjusted Capital Account Deficit. Any such disallowed allocation shall be made to the Partners entitled to receive such allocation in accordance with applicable Treasury Regulations under Section 704(b) of the Code in proportion to their respective Percentage Interests. 22 (b) For any Taxable Year, allocations shall be made first pursuant to Sections 7.01, 7.02 and 7.03 before any allocations are made to pursuant to Sections 7.04 and 7.05. 7.11. SECTION 704(c). In accordance with Section 704(c) of the Code and the applicable Treasury Regulations thereunder, income, gain, loss, deduction and tax depreciation with respect to any property contributed to the capital of the Partnership, shall, solely for federal income tax purposes, be allocated among the Partners so as to take into account any variation between the adjusted tax basis of such property to the Partnership and the initial Book Basis of such property under such method (allowable under Section 704(c)) as determined appropriate by the General Partner. In the event the Book Basis of any Partner asset is adjusted pursuant to subparagraph (b) of the definition of Book Basis, subsequent allocations of income, gain, loss deduction and tax depreciation with respect to such asset shall, solely for federal income tax purposes, be allocated among the Partners so as to take into account any variation between the adjusted tax basis of such asset and the Book Basis of such asset in the same manner as under Section 704(c) of the Code utilizing such method (allowable under Section 704(c)) as determined appropriate by the General Partner. All allocations pursuant to this Section 7.11 are solely for federal income tax purposes and shall not be taken into account in determining any Partner's Capital Account, or determining Income or Loss. 7.12. SHARING OF NONRECOURSE DEBT. For purposes of Treasury Regulation Section 1.752-3(a)(3) the Partners' shares of "partnership profits" shall be the Sharing Ratios as among the Class A Interest Holders, as a group, the Class B Interest Holders, as a group, and the General Partner and as among the Partners comprising a group in proportion to their respective Percentage Interests. VIII. MANAGEMENT 8.01. MANAGEMENT. (a) Except as otherwise expressly provided in this Agreement, including the provisions of Section 8.02, the business and affairs of the Partnership shall be vested in and controlled by the General Partner. (b) Subject to the provisions of Section 8.02, the General Partner shall have the sole authority to authorize and approve any matters pertaining to the Partnership's business and any matters pertaining to the business of any SPV, including, without limitation, the following matters: (i) The making of any decision and the implementing of any decision to acquire any Property, including any decision to admit (A) any additional Class B Interest Holders and/or any additional Class A Interest Holders and the terms and conditions upon which such admission will occur (including any decision to accept Capital Contributions from any such additional Class A Interest Holder and/or any additional Class B Interest Holder and any valuation thereof) and/or (B) accept additional Capital Contributions from any existing Partners for the purpose of acquiring one or more additional Properties; 23 (ii) Any financing, refinancing or securitization of any Property and the use of any proceeds thereof, including, without limitation, construction, interim and permanent financing, and any other financing or refinancing of the operations of the Partnership or any SPV and the execution and delivery of any documents, agreements or instruments evidencing, securing or relating to any such financing or any amendment, modification, extension or termination of (or making any material decision, taking any material action, providing any material consent or approval or waiving any material right under) any such documents, agreements or instruments; (iii) Any restructuring, improvement, rehabilitation, alteration, repair, or completion of construction or reconstruction of all or any portion of any Property; (iv) The establishment of reserves reasonably required in light of anticipated operational needs, acquisitions and contingent and non-contingent liabilities (or reserves retained for purposes of implementing Section 6.02 hereof), and the determination of the amount of available Operating Cash Flow and Capital Proceeds and the timing of any distributions of available Operating Cash Flow and Capital Proceeds or reserves retained for purposes of implementing Section 6.02 hereof; (v) The institution of any legal proceedings in the name of the Partnership or any SPV, settlement of any legal proceedings against the Partnership or any SPV and confession of any judgment against the Partnership, any SPV or any property of the Partnership or any SPV or making any decision, taking any action, providing any consent or approval or waiving any rights thereunder; (vi) All personnel matters involving the Partnership and any SPV, including, without limitation, the hiring or discharge of employees and contractors of the Partnership or any SPV, delegation of authority to any employees or contractors, establishment or amendment of employment policies and benefit plans, etc.; (vii) Determining the amount of overhead and other reimbursements or any salary, compensation or other remuneration payable to any Partner or any of their Affiliates pursuant to the terms hereof or any separate agreement between the Partnership or any SPV and a Partner, or any of their Affiliates; (viii) The appointment of the Partnership Accountant or any change in the Partnership Accountant or the selection of any other auditor or independent accounting firm for the Partnership or any SPV, or the making of any decision to change any other auditor or independent accounting firm of the Partnership or any SPV; 24 (ix) (A) The filing of any voluntary petition in bankruptcy on behalf of the Partnership or any SPV, (B) the consenting to the filing of any involuntary petition in bankruptcy against the Partnership or any SPV, (C) the filing of any petition seeking, or the consenting to, reorganization or relief under any applicable federal or state law relating to bankruptcy or insolvency by or on behalf of the Partnership or any SPV, (D) the consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Partnership, any SPV or a substantial part of its or their property, (E) the making of any assignment for the benefit of creditors by or on behalf of the Partnership or any SPV, (F) the admission in writing of the Partnership's or any SPV's inability to pay its debts generally as they become due or (G) the taking of any action by the Partnership or any SPV in furtherance of any such action; (x) The making of all material tax elections, determinations and other decisions under the Code and any decision to settle or compromise any matter raised by the Internal Revenue Service; (xi) Any sale, exchange, transfer or other disposition of all or any part of any Property, or any sale, transfer or other disposition of all or any part of the Partnership's interest in any SPV and the execution and delivery of any documents, agreements, contracts, binding letters of intent or other document or instrument relating thereto or any amendment, modification, extension or termination of (or making any material decision, taking any material action, providing any material consent or approval or waiving any material right under) any such agreement, contract, binding letter of intent or other document or instrument; (xii) The Partnership's or any SPV's incurrence of any liabilities or obligations with regard to any debt or loan guaranties, letters of credit, hedge or hedging agreements, or any similar contingent liabilities; (xiii) The making of any decision and the implementing of any decision to form an SPV and to assign, transfer or convey all or any portion of any Property or the rights to acquire any Property to such SPV and the execution and delivery of any documents, agreements or instruments implementing, evidencing or relating to any such decision or action (including any organizational documents relating to any SPV) or amending, modifying, extending or terminating of (or making any material decision, taking any material action, providing any material consent or approval or waiving any material rights under) any such document, agreement or other instrument; (xiv) Any decision to dissolve, windup and terminate the Partnership or any SPV and any decision to distribute all or any portion of any Property (or any other property of the Partnership or any SPV) in kind; and (xv) With regard to any SPV or any other Person in which the Partnership holds a direct or indirect equity interest, the making of any decision, 25 taking any action or providing any consent or approval with regard to any matter which might otherwise require an action by the Partnership. (c) For matters requiring approval of the Management Board, the General Partner shall prepare and submit any necessary materials to the Management Board for its approval prior to taking any final action with respect to such matters. (d) Subject to the terms of this Agreement and the limitations imposed by law, the General Partner shall have all of the same powers as a general partner of a general partnership under the laws of the State of Delaware. (e) The Limited Partners shall not have any right or power to participate in or have any control over the Partnership's or any SPV's business affairs or operations or to act for or to bind the Partnership or any SPV in any manner whatsoever, nor shall they be required or permitted to consent to, acquiesce in, vote on or approve any action or act taken or decision made by the General Partner except as otherwise specifically provided herein. 8.02. MANAGEMENT BOARD. (a) The Partnership shall have a "Management Board" (herein so called) which shall have the powers set forth in Section 8.02(k) hereof. The Management Board shall be comprised of five members (the "Managers"). The Class B Interest Holders shall appoint three Managers (the "Class B Managers") and the Class A Interest Holders shall appoint two Managers (the "Class A Managers"), provided that so long as Heinz Finance is a direct or indirect Partner, it shall appoint all of the Class B Managers. Any Class B Manager can be replaced at any time by the Class B Interest Holders (or so long as Heinz Finance is a direct or indirect Partner, by Heinz Finance) and the Class A Managers can be replaced at any time by the Class A Interest Holders. (b) The initial Class B Managers shall be Paul Renne, Leonard Cullo and Laura Stein and the initial Class A Managers shall be Joe Jimenez and Neil Harrison. (c) A majority (in number) of the Managers shall constitute a quorum for the transaction of business at any meeting of the Management Board. The act or affirmative vote of a majority (in number) of the Management Board present at a meeting at which a quorum is present shall be the act of the Management Board provided that at least one Class B Manager shall have consented to such action. (d) Any action required to be taken at a meeting of the Management Board or any other action which may be taken at a meeting of the Management Board may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by the number of Managers required to approve such action at a properly called and constituted meeting of the Management Board at which all of the Managers were present and voting. Any such consent signed by the number of the Managers indicated above in the immediately preceding sentence shall have the same effect as an act of a 26 majority (in number) of the Managers at a properly called and constituted meeting of the Management Board at which all of the Managers were present and voting. (e) The Managers may participate in and act at meetings of the Management Board through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance in person at the meeting of the person or persons so participating. (f) Regular meetings of the Management Board shall be held at such times and places as shall be designated from time to time by resolution of the Management Board, provided the Management Board shall meet no less frequently than quarterly and provided such regular meetings of the Management Board shall be as often as necessary or desirable to carry out its functions hereunder. (g) Special meetings of the Management Board may be called by or at the request of any Partner for any reasonable purpose. Special meetings of the Management Board shall be held at a location mutually agreed to by the Managers. (h) Notice of any meeting of the Management Board shall be given no fewer than five (5) Business Days and no more than twenty (20) Business Days prior to the date of the meeting. Notice of any meeting of the Management Board shall specify the date, time and place of the proposed meeting and the agenda for the meeting (unless such notice is waived in writing). Notice shall be delivered in the manner set forth in Section 14.03 hereof. The attendance of a Manager at a meeting of the Management Board shall constitute a waiver of notice of such meeting, except where a Manager attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not properly called or convened. (i) A written record of all meetings of the Management Board and all decisions made by it shall be made by such Manager or person appointed by the Management Board, and kept in the records of the Partnership and shall be initialed or signed by at least one Class B Manager. Minutes and/or resolutions of the Management Board when initialed or signed as indicated above shall be binding and conclusive evidence of the decisions reflected therein and any authorizations granted thereby. (j) Except as otherwise determined by the Management Board, no member thereof shall be entitled to receive any salary or other remuneration or expense reimbursement from the Partnership or any SPV for his/her services as a member of the Management Board. (k) Notwithstanding any other provisions of this Agreement, the Management Board shall have the sole power and authority to do the following: (i) transfer the powers and management authority (but not the economic interest) of the General Partner under this Agreement, to any other Person, with or without cause and for any reason; 27 (ii) approve any capital expenditure (including acquisitions and dispositions not in the ordinary course of business) exceeding $25 million; (iii) approve the issuance, incurrence or assumption of any debt or of any guarantee of an obligation of any person, each in an amount exceeding $25 million (or any debt or guarantee not in the ordinary course of business of the partnership irrespective of the amount), including the refinancing of any indebtedness previously issued, the material terms of which have not been previously approved by the Management Board; provided that the Management Board need not approve any such issuance, incurrence or assumption with respect to any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with any Partner (including, for the avoidance of doubt, the partnership and its subsidiaries and affiliates); (iv) approve the admission of additional Class A Interest Holders and/or Class B Interest Holders (in any case where the Capital Contribution of such additional Interest Holder exceeds $25 million) and the major terms and conditions of such Additional Admission (including the valuation and acceptance of assets and operations of the new Class A Interest Holder and/or Class B Interest Holder to be contributed to the Partnership and the assumption of liabilities similar in type to the Assumed Liabilities with regard to admission of such new Class A Interest Holder and/or Class B Interest Holder and their contribution of business assets to the Partnership; (v) approve the acceptance of additional Capital Contributions exceeding $25 million from any existing Partner for the purpose of acquiring one or more additional Properties and the major terms and conditions of such transaction (including the acceptance of such Capital Contributions, the acquisition of one or more Properties and the assumption of liabilities similar in type to the Assumed Liabilities with regard to such additional Property or Properties); (vi) approve the merger or consolidation of the Partnership with or into any entity or the sale, lease, mortgage or other disposition of all or substantially all of the assets of the Partnership; (vii) approve the amendment of any material term of the organization documents of the Partnership or any SPV (including, without limitation, the Agreement); (viii) approve the conduct by the Partnership of any business outside the ordinary course of its business and such other activities as are reasonably related to the ordinary course of its business or entering into any transaction, agreement or arrangement changing the nature of the Partnership's business; 28 (ix) approve any resolution or decision by the Partners regarding the dissolution, liquidation or winding up of the Partnership. 8.03. PARTNERSHIP EXPENSES. All third-party out-of-pocket costs and expenses incurred by any of the Partners or their respective Affiliates individually and associated with the formation of the Partnership, the SPVs or acquisition of or operation of any Property (other than legal fees and all other costs and expenses incurred by any of the Partners or their respective Affiliates individually and associated with or related to the negotiation and execution of this Agreement or any SPV Agreement) shall be paid or reimbursed by the Partnership. The Partnership shall reimburse the General Partner for all costs and expenses of the General Partner (including, without limitation, any and all salary expense and overhead expense of employees of or contractors hired by the General Partner) incurred in connection with the ongoing operation of the Partnership. IX. BOOKS AND RECORDS 9.01. BOOKS AND RECORDS. The General Partner shall maintain, or cause to be maintained, at the expense of the Partnership, in a manner customary and consistent with good accounting principles, practices and procedures, a comprehensive system of office records, books and accounts (which records, books and accounts shall be and remain the property of the Partnership) in which shall be entered fully and accurately each and every financial transaction with respect to the operations of the Partnership and each SPV and ownership and operation of the Properties. Bills, receipts and vouchers shall be maintained on file by the General Partner. The General Partner shall maintain said books and accounts in a safe manner and separate from any records not having to do directly with the Partnership, any SPV or the Properties. The General Partner shall cause audits to be performed and audited statements and income tax returns to be prepared as required by Section 9.03. Such books and records of account shall be prepared and maintained by the General Partner at the principal place of business of the Partnership or such other place or places as may from time to time be determined by the General Partner. Each Partner or its duly authorized representative shall have the right to inspect, examine and copy such books and records of account at the Partnership's office during reasonable business hours. A reasonable charge for copying books and records may be charged by the Partnership. 9.02. ACCOUNTING AND FISCAL YEAR. The books of the Partnership and each SPV shall be kept on the accrual basis in accordance with accounting principles, practices and procedures approved by the General Partner and on a tax basis, and the Partnership and each SPV shall report its operations for tax purposes on the accrual method. 9.03. REPORTS. (a) Operating Reports. The General Partner shall provide the Partners with operating reports on a quarterly basis showing the revenues and expenditures of the Partnership for such Quarter. (b) Other Reports. The General Partner will furnish to each Partner, at the expense of the Partnership, copies of all reports required to be furnished to any lender of the Partnership or any SPV. 29 (c) Tax Reports. Promptly after the end of each Taxable Year, the General Partner will insure the preparation and delivery to each Partner of a report setting forth in sufficient detail all such additional information and data with respect to business transactions effected by or involving the Partnership during the Taxable Year or year of assessment as will enable the Partnership and each Partner to timely prepare its federal, state and local income tax returns in accordance with applicable laws, rules and regulations. (d) Tax Returns. The General Partner will insure preparation of all federal, state and local tax returns required of the Partnership or any SPV in a timely manner and will file the tax returns. (e) Other. The General Partner shall prepare, at Partnership expense, such additional financial reports and other information as the General Partner may reasonably determine are appropriate. All decisions as to accounting principles shall be made by the General Partner subject to the provisions of this Agreement. 9.04. THE PARTNERSHIP ACCOUNTANT. The Partnership shall retain as the regular accountant and auditor for the Partnership and each SPV (the "Partnership Accountant") any nationally-recognized accounting firm designated by the General Partner. The fees and expenses of the Partnership Accountant shall be a Partnership expense. 9.05. RESERVES. The General Partner may, in its discretion and subject to such conditions as it shall determine, establish reserves for the purposes and requirements as it may deem appropriate. X. TRANSFER OF INTERESTS 10.01. NO TRANSFER. Except as expressly permitted or contemplated by this Agreement, no Partner may Transfer all or any portion of its Interest, without the written consent of the General Partner. 10.02. PERMITTED TRANSFERS. Any one or more Partners may, from time to time and in its or their sole and absolute discretion, without the consent of any other Partner, sell or assign its or their Interests in whole or in part to any of its or their Affiliates, provided that such sale or assignment does not cause the Partnership to (i) "terminate" pursuant to Section 708(b) of the Code, (ii) become a publicly traded partnership for purposes of Section 7704 of the Code, or (iii) be deemed an "investment company" under the Investment Company Act of 1940, as amended. 10.03. TRANSFEREES. Notwithstanding anything to the contrary contained in this Agreement, no transfer of an Interest of all or any portion of any Interest shall be recognized by the Partnership (and no transferee will be admitted as a Partner) unless (a) such Interest is transferred in compliance with the applicable provisions of this Agreement, (b) such Transfer shall have been approved in writing by each of the remaining Partners (which consent may be withheld in their sole and absolute discretion), unless such Transfer is made in accordance with the provisions of Section 10.02, (c) if applicable, such transferee shall have furnished evidence 30 of satisfaction of the requirements of Section 10.02 reasonably satisfactory to the remaining Partners, and (d) such transferee shall have executed and delivered to the Partnership such instruments as the remaining Partners reasonably deem necessary or desirable to effectuate the admission of such transferee as a Partner and to confirm the agreement of such transferee to be bound by all of the terms and provisions of this Agreement with respect to such Interest. At the request of any of the remaining Partners, each such transferee shall also cause to be delivered to the Partnership, at the transferee's sole cost and expense, a favorable opinion of legal counsel reasonably acceptable to such remaining Partners, to the effect that (i) such transferee has the legal right, power and capacity to own the Interest proposed to be transferred, (ii) such Transfer does not violate any provision of any loan commitment or any mortgage, deed of trust or other security instrument encumbering all or any portion of the Property, (iii) such Transfer does not violate the provisions of Section 10.02. As promptly as practicable after the admission of any Person as a Partner, the books and records of the Partnership shall be changed to reflect such admission. All reasonable costs and expenses incurred by the Partnership in connection with any Transfer of any Interest and, if applicable, the admission of any transferee as a Partner shall be paid by such transferee. 10.04. SECTION 754 ELECTION. In the event of a Transfer of all or part of the Interest of a Partner, at the request of the transferee or if in the best interests of the Partnership (as determined by the General Partner), the Partnership shall elect pursuant to Section 754 of the Code to adjust the basis of any Partnership Property as provided by Sections 734 and 743 of the Code, and any cost of such election or cost of administering or accounting for such election shall be at the sole cost and expense of the requesting transferee. 10.05. POWER OF ATTORNEY. (a) Each Limited Partner does hereby irrevocably make, constitute and appoint the General Partner as its true and lawful representative and attorney-in-fact, with full power of substitution and resubstitution, in its name, place and stead, to make, execute, sign, consent to, deliver, file and record with respect to the Partnership: (i) all amendments to this Agreement regarding a change in name of the Partnership, its address or that of its registered agent or office or that of a General Partner or any Limited Partner; (ii) any amendments to this Agreement regarding any transfer by any Partner of any Interest in the Partnership, but only if there has been compliance with the applicable provisions of this Agreement (including Sections 10.01 through 10.04 hereof); (iii) any amendments to this Agreement regarding (A) the admission of additional Class A Interest Holders and/or Class B Interest Holders as provided in Sections 3.01 and 4.03 hereof and/or (B) the acceptance of additional Capital Contributions as provided in Section 4.04 hereof, and in each case, all other agreements, contracts, instruments or other documents relating thereto, but only if the terms and conditions of such Additional Admission and/or additional Capital Contribution and acquisition of one or more additional Properties have been 31 approved by the Management Board and only if there has been compliance with the other applicable provisions of this Agreement; (iv) any and all agreements, contracts, documents and other instruments relating to or to effectuate the admission of any additional Class A Interest Holder and/or Class B Interest Holder (including any amendments to this Agreement), provided the terms and conditions of such admission have been approved by the Management Board and there has otherwise been compliance with the other applicable provisions of this Agreement; (v) any and all agreements, contracts, documents and other instruments relating to or to effectuate any additional Capital Contributions from existing Partners (including any amendments to this Agreement) for the purpose of acquiring one or more additional Properties (including any and all agreements, contracts, documents and other instruments relating to such acquisition), provided the terms and conditions of such additional Capital Contributions and acquisition of one or more additional Properties have been approved by the Management Board and there has otherwise been compliance with the other applicable provisions of this Agreement; (vi) any other amendments to this Agreement regarding a change in the terms or provisions of this Agreement; provided (i) such amendment has been otherwise agreed to, approved or consented to by the Limited Partners, (ii) such amendment is required to correct a false statement or error in this Agreement, if such correction will not adversely affect the rights and interests of the Limited Partners, nor decrease the obligations and duties of the General Partner, (iii) such amendment is required as a condition to maintaining the Partnership's tax status as a partnership for federal income tax purposes or (iv) such amendment is otherwise required to comply with the Code or the Delaware Act, as either may be amended from time to time (or the successor to either). (b) It is expressly understood, intended and agreed by each of the Partners for itself, its administrators, legal representatives, successors and assigns that (i) the grant of this power of attorney is irrevocable and is coupled with an interest by reason of the facts, among others, that the General Partner is relying and will be relying on its power as contemplated by these provisions, that the General Partner would not have entered into this Agreement were it not for the powers granted to it by these provisions and the General Partner has rights in the Partnership property which this power is needed to protect and (ii) the grant of this power of attorney shall survive the dissolution, insolvency, bankruptcy or withdrawal of any Limited Partner and the death, legal incompetency, disability, incapacity, dissolution, insolvency or bankruptcy of any partner, beneficiary, trustee, shareholder or other beneficial owner of any Limited Partner or the assignment of its or their interests in the Partnership or such Limited Partner, as the case may be, and the insolvency, bankruptcy or dissolution of the Partnership. The foregoing power of attorney may be exercised by the General Partner separately on behalf of each Limited Partner by its signature so indicating or on behalf of all or any group of the Limited Partners by indicating that the signature of the General Partner is 32 given on behalf of all or such group of Limited Partners and executing any such instrument with a single signature as attorney-in-fact for all or such group of the Limited Partners. XI. EXCULPATION AND INDEMNIFICATION 11.01. EXCULPATION. No Partner shall be liable to the Partnership, any SPV or to any other Partner for monetary damages for any losses, claims, damages or liabilities arising from any act or omission performed or omitted by it and arising out of or in connection with this Agreement or the Partnership's or any SPV's business or affairs, including any action or omission constituting a breach of any fiduciary duty; provided, however, such act or omission was within the scope of authority granted to such Partner and was not attributable in whole or in part to such Partner's fraud, bad faith, or willful misconduct or gross negligence. THE FOREGOING EXCULPATION PROVISION OF THIS SECTION 11.01 SHALL SPECIFICALLY INCLUDE ANY LOSSES, CLAIMS, DAMAGES OR LIABILITIES ARISING FROM ANY ACT OR FAILURE TO ACT WHICH IS ATTRIBUTABLE, IN WHOLE OR IN PART, TO THE ORDINARY NEGLIGENCE OF THE EXCULPATED PARTY. No general or limited partner of any Partner, member, shareholder or other holder of an equity interest in any Partner or officer, director or employee of any of the foregoing shall be personally liable to the Partnership, any SPV or any Partner in connection with this Agreement or the Partnership's or any SPV's business and affairs (including for the performance of any such Partner's obligations under this Agreement), but the foregoing shall not relieve any partner of any Partner from its obligations to such Partner. 11.02. INDEMNIFICATION. (a) The Partnership shall, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless each Partner, and each general or limited partner of any Partner, member, shareholder or other holder of any equity interest in such Partner or any officer, director or employee of any of the foregoing (collectively, the "Indemnitees"), against any losses, claims, damages or liabilities to which such Indemnitee may become subject in connection with any matter arising out of or incidental to any act performed or omitted to be performed by any such Indemnitee in connection with this Agreement or the Partnership's or any SPV's business or affairs, including any action or omission constituting a breach of any fiduciary duty; provided, however, that such act or omission was within the scope of authority granted to such Partner or applicable Indemnitee and was not attributable in whole or in part to such Indemnitee's fraud, bad faith, willful misconduct or gross negligence. THE FOREGOING INDEMNIFICATION PROVISIONS OF THIS SECTION 11.02 SHALL SPECIFICALLY INCLUDE ANY LOSSES, CLAIMS, DAMAGES OR LIABILITIES TO WHICH SUCH INDEMNITEE MAY BECOME SUBJECT AS A RESULT OF ANY ACT OR FAILURE TO ACT BY SUCH INDEMNITEE WHICH IS ATTRIBUTABLE, IN WHOLE OR IN PART, TO THE ORDINARY NEGLIGENCE OF SUCH INDEMNITEE OR ANY OF ITS AFFILIATES. If any Indemnitee becomes involved in any capacity in any action, proceeding or investigation in connection with any matter arising out of or in connection with this Agreement or the Partnership's or any SPV's business or affairs, the Partnership shall reimburse such 33 Indemnitee for its reasonable legal and other reasonable out-of-pocket expenses (including the cost of any investigation and preparation) as they are incurred in connection therewith, provided that such Indemnitee shall promptly repay to the Partnership the amount of any such reimbursed expenses paid to it if it shall ultimately be determined that such Indemnitee was not entitled to be indemnified by the Partnership in connection with such action, proceeding or investigation. If for any reason (other than the fraud, bad faith, willful misconduct or the ordinary or gross negligence, as the case may be, of such Indemnitee) the foregoing indemnification is unavailable to such Indemnitee, or insufficient to hold it harmless, then the Partnership shall contribute to the amount paid or payable by such Indemnitee as a result of such loss, claim, damage, liability or expense in such proportion as is appropriate to reflect the relative benefits received by the Partnership on the one hand and such Indemnitee on the other hand or, if such allocation is not permitted by applicable law, to reflect not only the relative benefits referred to above but also any other relevant equitable considerations. Any indemnity under this Section 11.02(a) shall be paid solely out of and to the extent of Partnership assets and shall not be a personal obligation of any Partner and in no event will any Partner be required, or permitted without the consent of all of the Partners, to contribute additional capital under Article IV to enable the Partnership to satisfy any obligation under this Section 11.02(a). (b) Each Partner shall indemnify and hold harmless the Partnership, each SPV and each of the other Partners from and against any and all claims, demands, liabilities, costs, damages, expenses and causes of action of any nature whatsoever arising out of (i) any act performed by or on behalf of such Partner which was not within the scope of authority conferred upon such Partner under this Agreement, or (ii) the fraud, bad faith, willful misconduct or gross negligence of such Partner. The provisions of this Section 11.02(b) shall survive for a period of four years from the date of dissolution of the Partnership, provided that if at the end of such period there are any actions, proceedings or investigations then pending, any Indemnitee may so notify the Partnership and the other Partners at such time (which notice shall include a brief description of each such action, proceeding or investigation and the liabilities asserted therein) and the provisions of this Section 11.02(b) shall survive with respect to each such action, proceeding or investigation set forth in such notice (or any related action, proceeding or investigation based upon the same or similar claim) until such date that such action, proceeding or investigation is finally resolved. (c) Notwithstanding anything to the contrary contained in this Agreement, the obligations of the Partnership or any Partner under this Section 11.02 shall inure to the benefit of such Indemnitee, its Affiliates and their respective directors, officers, employees, agents and Affiliates and any successors, assigns, heirs and personal representatives of such Persons. (d) Except as may otherwise be expressly and specifically provided herein or in any other agreement to the contrary, in no event shall any general or limited partner of any Partner, shareholder, member or other holder of any equity interests in any Partner or any officer or director of any of the foregoing be liable for any obligations of any Partner. 34 11.03. RELIANCE. Any Partner or other Indemnitee may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisors selected by such Partner or Indemnitee with respect to Partnership or SPV affairs (including interpretations of this Agreement or any SPV Agreement), and shall be fully protected and justified in any action or inaction which is taken or omitted in good faith, in reliance upon and in accordance with the opinion or advice of such counsel, accountant or other consultant, appraiser or advisor as to matters reasonably believed by such Partner or Indemnitee to be within such person's experience level and professional or expert competence. In determining whether a Partner or other Indemnitee acted with the requisite degree of care or otherwise in accordance with this Agreement or any SPV Agreement, such Partner or other Indemnitee shall be entitled to rely on written or oral reports, statements, resolutions, certificates, instruments, opinions, appraisals or other documents or agreements believed by such Partner or such Indemnitee to be genuine and to have been signed or presented by the proper party or parties; provided, however, no Partner or Indemnitee may rely upon any such reports, statements, resolutions, certificates, instruments, opinions, appraisals or other documents or agreements if it believed that the same were materially false. XII. DISSOLUTION AND TERMINATION 12.01. DISSOLUTION. The Partnership shall be dissolved and its business wound up upon the earliest to occur of any of the following events: (a) The sale, condemnation or other disposition of all of the Properties (or the SPVs) and the receipt of all cash consideration therefor; (b) The exercise of the election pursuant to Section 13.02(a) hereof; (c) The written determination of the General Partner to terminate the Partnership; (d) The resignation, expulsion, bankruptcy or dissolution of the last remaining General Partner or the occurrence of any other event of withdrawal with regard to the last remaining General Partner, unless, within 90 days after such event, the Management Board elects in writing (i) to continue the business of the Partnership, and (ii) effective as of the date of such event, to admit at least one additional general partner to the Partnership. Without limitation on, but subject to, the other provisions hereof, the assignment of all or any part of a Partner's Interest permitted hereunder will not result in the dissolution of the Partnership. Except as otherwise specifically provided in this Agreement, each Partner agrees that, without the consent of the other Partners, no Partner may withdraw from or cause a voluntary dissolution of the Partnership. In the event any Partner withdraws from or causes a voluntary dissolution of the Partnership in contravention of this Agreement, such withdrawal or the causing of a voluntary dissolution shall not affect such Partner's liability for obligations of the Partnership. 35 12.02. TERMINATION. In all cases of dissolution of the Partnership, the business of the Partnership shall be wound up and the Partnership terminated as promptly as practicable thereafter, and each of the following shall be accomplished: (a) The Liquidating Partner shall cause to be prepared a statement setting forth the assets and liabilities of the Partnership as of the date of dissolution, a copy of which statement shall be furnished to all of the Partners. (b) The Properties shall be liquidated by the Liquidating Partner as promptly as possible, but in an orderly and businesslike and commercially reasonable manner. (c) The proceeds of sale and all other assets of the Partnership shall be applied and distributed as follows and in the following order of priority: (i) To the payment of (A) the debts and liabilities of the Partnership, including debts and liabilities to any Partner and (B) the expenses of liquidation. (ii) To the setting up of any reserves which the Liquidating Partner shall determine to be reasonably necessary for contingent, unliquidated or unforeseen liabilities or obligations of the Partnership or any Partner arising out of or in connection with the Partnership. Such reserves may, in the discretion of the Liquidating Partner, be paid over to a national bank or national title company selected by it and authorized to conduct business as an escrow agent to be held by such bank or title company as escrow agent for the purposes of disbursing such reserves to satisfy the liabilities and obligations described above, and at the expiration of such period as the Liquidating Partner may reasonably deem advisable, distributing any remaining balance as provided in Section 12.02(c)(iii) hereof; provided, however, that, to the extent that it shall have been necessary, by reason of applicable law or regulation, to create any reserves prior to any and all distributions which would otherwise have been made under Section 12.02(c)(i) hereof and, by reason thereof, a distribution under Section 12.02(c)(i) hereof has not been made, then any balance remaining shall first be distributed pursuant to Section 12.02(c)(i) hereof. (iii) The balance, if any, to the Partners in accordance with Section 6.04 hereof. 12.03. LIQUIDATING PARTNER. The Liquidating Partner is hereby irrevocably appointed as the true and lawful attorney in the name, place and stead of each of the Partners, such appointment being coupled with an interest, to make, execute, sign, acknowledge and file with respect to the Partnership all papers which shall be necessary or desirable to effect the dissolution and termination of the Partnership in accordance with the provisions of this Article XII hereof. Notwithstanding the foregoing, each Partner, upon the request of the Liquidating Partner shall promptly execute, acknowledge and deliver all such documents, certificates and other instruments as the Liquidating Partner shall reasonably request to effectuate the proper dissolution and termination of the Partnership, including the winding up of the business of the Partnership. 36 XIII. DEFAULT BY PARTNER 13.01. EVENTS OF DEFAULT. If a Partner commits a material violation or breach of any of the provisions of this Agreement or any SPV Agreement causing material damage or loss to the Partnership or any SPV which is not cured within a Reasonable Period, such Partner having committed such material violation or breach shall have committed an "Event of Default." For this purpose, "Reasonable Period" shall mean 20 calendar days after the breaching party is notified in writing by a non-defaulting Partner. 13.02. EFFECT OF EVENT OF DEFAULT. Upon the occurrence of an Event of Default by any Partner, the non-defaulting Partners shall have the right, at any time within 180 calendar days from the date of such Event of Default and upon giving the defaulting Partners five (5) Business Days' written notice of such election (and provided such Event of Default is continuing through the end of such five (5) business-day period) to take any of the following actions (in addition to any other rights, remedies or actions permitted pursuant to any other provision of this Agreement): (a) Dissolve the Partnership and all the SPVs; (b) Pursue any other right or remedy available at law or in equity, including punitive, exemplary and consequential damages. The default of any Partner hereunder shall not relieve any Partner from its agreements, liabilities, and obligations hereunder (subject to the terms of this Agreement). XIV. MISCELLANEOUS 14.01. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS. Each Partner represents and warrants to the other Partners as follows: (a) It is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation with all requisite power and authority to enter into this Agreement and to conduct the business of the Partnership. (b) This Agreement constitutes the legal, valid and binding obligation of the Partner enforceable in accordance with its terms. (c) No consents or approvals are required from any governmental authority or other person or entity for the Partner to enter into this Agreement and the Partnership. All limited liability company, corporate or partnership action on the part of the Partner necessary for the authorization, execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, have been duly taken. (d) The execution and delivery of this Agreement by the Partner, and the consummation of the transactions contemplated hereby, does not conflict with or contravene the provisions of its organizational documents or any agreement or instrument 37 by which it or its properties are bound or any law, rule, regulation, order or decree to which it or its properties are subject. (e) No Partner has retained any broker, finder or other commission or fee agent, and no such person has acted on its behalf in connection with the execution and delivery of this Agreement or the acquisition of the Property. (f) Each Partner is acquiring its interest in the Partnership for investment, solely for its own account, with the intention of holding such interest for investment and not with a view to, or for resale in connection with, any distribution or public offering or resale of any portion of such interest within the meaning of the Securities Act of 1933 (the "Securities Act") or any other applicable federal or state security law, rule or regulation ("Security Law"). (g) Each Partner acknowledges that it is aware that its interests in the Partnership has not been registered under the Securities Act or under any other Security Law in reliance upon exemptions contained therein. Each Partner understands and acknowledges that its representations and warranties contained herein are being relied upon by the Partnership, the other Partners and the constituent owners of such other Partners as the basis for exemption of the issuance of interest in the Partnership from registration requirements of the Securities Act and other Security Law. Each Partner acknowledges that the Partnership will not and has no obligation to register any interest in the Partnership under the Securities Act or other Security Law. (h) Each Partner acknowledges that prior to its execution of this Agreement, it received a copy of this Agreement and that it examined this document or caused this document to be examined by its representative or attorney. Each Partner does hereby further acknowledge that it or its representative or attorney is familiar with this Agreement, and with the business and affairs of the Partnership, and that except as otherwise specifically provided in this Agreement, it does not desire any further information or data relating to the Partnership, the property or assets of the Partnership or to the other Partners. Each Partner does hereby acknowledge that it understands that the acquisition of its interest in the Partnership is a speculative investment involving a high degree of risk and does hereby represent that it has a net worth sufficient to bear the economic risk of its investment in the Partnership and to justify its investing in a highly speculative venture of this type. (i) Each Partner agrees to indemnify and hold harmless the Partnership and each other Partner and their officers, directors, shareholders, partners, employees, successors and assigns from and against any and all loss, damage, liability or expense (including reasonable out of pocket costs and attorneys' fees) which they may incur by reason, or in connection with, any breach of the foregoing representations and warranties by such Partner and all such representations and warranties shall survive the execution and delivery of this Agreement and the termination and dissolution of any Partner and/or the Partnership (nothing herein shall constitute a waiver or extension of any applicable statute of limitations). 38 14.02. FURTHER ASSURANCES. Each Partner agrees to execute, acknowledge, deliver, file, record and publish such further instruments and documents, and do all such other acts and things as may be required by law, or as may be required to carry out the intent and purposes of this Agreement; provided the same does not subject any Partner to additional liability and the same is consistent with and does not vary the terms and conditions of this Agreement without the consent of the affected Partner. 14.03. NOTICES. All notices, demands, consents, approvals, requests or other communications which any of the parties to this Agreement may desire or be required to give hereunder (collectively, "Notices") shall be in writing and shall be given by (a) personal delivery, (b) facsimile transmission or (c) a nationally recognized overnight courier service, fees prepaid, addressed as follows: General Partner Heinz Management Company 600 Grant Street, 60th Floor Pittsburgh, PA 15219 Attn: Corporate Secretary Class A Interest Holders H. J. Heinz Company 600 Grant Street, 60th Floor Pittsburgh, PA 15219 Attn: Corporate Secretary Class B Interest Holders H. J. Heinz Finance Company 600 Grant Street, 60th Floor Pittsburgh, PA 15219 Attn: Corporate Secretary Any Partner may designate another addressee (and/or change its address) for Notices hereunder by a Notice given pursuant to this Section 14.03. A Notice sent in compliance with the provisions of this Section 14.03 shall be deemed given on the date of receipt, except if delivery is refused, such notice shall be given on the date delivery is first attempted. 14.04. GOVERNING LAW. Any provisions of this Agreement dealing with or related to or affecting any loan or advance by any Partner to the Partnership or any other debt obligation of the Partnership to any Partner shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed wholly within that State. Otherwise, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be performed wholly within that State. 14.05. ATTORNEY FEES. If the Partnership or any Partner obtains a judgment against any Partner by reason of the breach of this Agreement or the failure to comply with the terms hereof, reasonable attorneys' fees and costs as fixed by the court shall be included in such judgment. 39 14.06. CAPTIONS. All titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provision in this Agreement. 14.07. PRONOUNS. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, and neuter, singular and plural, as the identity of the party or parties may require. 14.08. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective executors, administrators, legal representatives, heirs, successors and assigns, and shall inure to the benefit of the parties hereto and, except as otherwise provided herein, their respective executors, administrators, legal representatives, heirs, successors and assigns. 14.09. EXTENSION NOT A WAIVER. No delay or omission in the exercise of any power, remedy or right herein provided or otherwise available to a Partner or the Partnership shall impair or affect the right of such Partner or the Partnership thereafter to exercise the same. Any extension of time or other indulgence granted to a Partner hereunder shall not otherwise alter or affect any power, remedy or right of any other Partner or of the Partnership, or the obligations of the Partner to whom such extension or indulgence is granted. 14.10. CREDITORS AND THIRD PARTIES NOT BENEFITED. Nothing contained in this Agreement is intended or shall be deemed to benefit any third party or creditor of the Partnership or any Partner, and no third party or creditor of the Partnership shall be entitled to require the Partnership or the Partners to solicit or accept any additional Capital Contribution for the Partnership or to enforce any right which the Partnership or any Partner may have against any Partner under this Agreement. 14.11. SEVERABILITY. In case any one or more of the provisions contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and other application thereof shall not in any way be affected or impaired thereby; provided, however, the limitation of liability and exculpation provisions of this Agreement are an integral part hereof. 14.12. ENTIRE AGREEMENT AND AMENDMENTS. Subject to the provisions of Section 4.01 hereof, this Agreement contains the entire agreement between the parties relating to the subject matter hereof and all prior agreements relative hereto which are not contained herein are terminated. Amendments, variations, modifications or changes herein may be made effective and binding upon the Partners by, and only by, the setting forth of same in a document duly executed by or on behalf of each Partner, and any alleged amendment, variation, modification or change herein which is not so documented shall not be effective as to any Partner; provided, however, in the circumstances described in Sections 3.01, 4.03, 4.04 and 8.02 hereof, any such amendment may be signed and executed on behalf of one or more Limited Partners by the General Partner acting in accordance with the provisions of Section 10.05 hereof. 40 14.13. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute but one and the same agreement. 14.14. CONFIDENTIALITY. Each Partner agrees to take reasonable steps to maintain the confidentiality of all proprietary, nonpublic information, documents and materials relating to the business of the Partnership, any SPV and any of their Affiliates (including, but not limited to business plans, pricing and costs of specific product, customer lists and sales data, proprietary customer data, the identity and other information about product and service sources and quality, performance and management or manufacturing processes and any product development ideas or plans) or any Partner, which such Partner now or in the future may possess, except to the extent disclosure of any such information is required by law or authorized by the General Partner. 14.15. VENUE. Each of the Partners consents to the jurisdiction of any state or federal court sitting in Wilmington County, Delaware for any action arising out of matters related to this Agreement. Each of the Partners waives the right to commence an action in connection with this Agreement in any court outside of Wilmington County, Delaware. 14.16. WAIVER OF JURY TRIAL. EACH OF THE PARTNERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH WAIVER IS INFORMED AND VOLUNTARY. 14.17. ENFORCEABILITY OF POWER OF ATTORNEY. In the event it is subsequently determined that any power of attorney provision in this Agreement is unenforceable, the parties hereto agree to execute, acknowledge, deliver, file, record and publish such other instruments and documents (including separate powers of attorney), and do all such other acts and things as may be required by law, or as may be required to carry out the intent and purposes of such power of attorney provisions. [THIS SPACE INTENTIONALLY LEFT BLANK] [SIGNATURES BEGIN ON NEXT PAGE] 41 In witness whereof, the parties have executed this Agreement on February 12, 2002 to be effective as of the Effective Date for all purposes except as expressly provided herein to the contrary. GENERAL PARTNER: Heinz Management Company By: /s/ Arthur Winkleblack ---------------------------------- Name: Arthur Winkleblack ---------------------------- Title: President ---------------------------- LIMITED PARTNERS: H. J. Heinz Company H. J. Heinz Finance Company By: /s/ Arthur Winkleblack By: /s/ Leonard A. Cullo, Jr. ----------------------------------- ------------------------------ Name: Arthur Winkleblack Name: Leonard A. Cullo, Jr. ------------------------------ ------------------------- Title: Executive Vice President and Title: President ----------------------------- ------------------------ Chief Financial Officer ----------------------------- Star- Kist Foods, Inc. CMH, Inc. By: /s/ Michael D. Milone By: /s/ Leonard A. Cullo, Jr. ----------------------------------- ------------------------------ Name: Michael D. Milone Name: Leonard A. Cullo, Jr. --------------------------------- ------------------------- Title: President and Chief Executive Title: President -------------------------------- ------------------------ Officer -------------------------------- Heinz Frozen Foods Company By: /s/ Christopher J. Puma ----------------------------------- Name: Christopher J. Puma ------------------------------ Title: Vice President ----------------------------- By its signature below, CMH, Inc. joins in the execution of this Agreement for the additional purpose of agreeing to the terms hereof on behalf of and as successor to (i) Portion Pac, Inc., (ii) Escalon Premier Brands, Inc., (iii) IDF Holdings, Inc., (iv) Quality Chef Foods, Inc., (vi) Thermo Pac, Inc., (vii) Boulder, Inc. and (c) Central Commissary, Inc., each of which were Limited Partners of the Partnership on the Effective Date of this Agreement and each of which was merged with and into CMH, Inc. prior to the date this Agreement was entered into. CMH, INC. By: /s/ Leonard A. Cullo, Jr. ----------------------------------- Name: Leonard A. Cullo, Jr. ------------------------------ Title: President ----------------------------- Schedule A - Limited Partners The following entities are the Limited Partners on the date this Agreement is entered into: H. J. Heinz Company, a Pennsylvania corporation Star-Kist Foods, Inc., a California corporation Heinz Frozen Foods Company, a Delaware corporation H. J. Heinz Finance Company, a Delaware corporation CMH, Inc., an Idaho corporation Schedule B - Additional Limited Partners The following corporations were additional Limited Partners as of the date of the Original Partnership Agreement: Star-Kist Foods, Inc., a California corporation Heinz Frozen Foods Company, a Delaware corporation H. J. Heinz Finance Company, a Delaware corporation Portion Pac, Inc., an Ohio corporation Escalon Premier Brands, Inc. a Delaware corporation IDF Holdings, Inc., a Tennessee corporation Quality Chef Foods, Inc., an Iowa corporation Thermo Pac, Inc., a Georgia corporation Boulder, Inc., an Idaho corporation CMH, Inc., an Idaho corporation Central Commissary, Inc., an Arizona corporation Schedule C - Class A Interest Holders The following entities are the Class A Interest Holders on the date this Agreement is entered into: H. J. Heinz Company, a Pennsylvania corporation Star-Kist Foods, Inc., a California corporation Heinz Frozen Foods Company, a Delaware corporation Schedule D - Class B Interest Holders The following entities are the Class B Interest Holders on the date this Agreement is entered into: H. J. Heinz Finance Company, a Delaware corporation CMH, Inc., an Idaho corporation The entities named under the heading "Merged Limited Partners" on Addendum 2 to this Agreement were, as of May 3, 2001, Class B Interest Holders, and as a result of their merger with and into CMH, Inc., CMH, Inc. succeeded to the Class B Interests of such Merged Limited Partners and the only Class B Interest Holders of the Partnership immediately thereafter were those entities set forth above. Schedule E1 - Capital Contributions and Percentage Interests The estimated fair market value of the Capital Contribution of each Partner and the relative Percentage Interest in the Partnership represented by each Capital Contribution as of May 3, 2001 is as shown below. Percentage Partner Capital Contribution Interests ------- -------------------- --------- Heinz Management Company 500,000 .004% H. J. Heinz Company, 4,893,000,000 42.1% Star-Kist Foods, Inc 1,608.000,000 13.8% Heinz Frozen Foods Company, 2,034,000,000 17.5% H. J. Heinz Finance Company 4,600,000 .04% Portion Pac, Inc 714,000,000 6.1% Escalon Premier Brands 128,000,000 1.1% IDF Holdings, Inc 129,000,000 1.1% Quality Chef Foods, Inc 33,900,000 .3% Thermo Pac, Inc 8,000,000 .1% Boulder, Inc., 157,000,000 1.3% CMH, Inc 1,895,245,000 16.3% Central Commissary, Inc 23,000,000 .2% Total 11,628,245,000 Schedule E2 - Capital Contributions and Percentage Interests The estimated fair market value of the Capital Contribution of each Partner and the relative Percentage Interest in the Partnership represented by each Capital Contribution as of the date of this Agreement is as shown below. Percentage Partner Capital Contribution Interests ------- -------------------- --------- Heinz Management Company 500,000 .004% H. J. Heinz Company, 4,893.000,000 38.979% Star-Kist Foods, Inc 1,608,000,000 12.810% Heinz Frozen Foods Company, 2,034,000,000 16.203% H. J. Heinz Finance Company 929,220,000 7.402% CMH, Inc 3,088,145,000 24.601% Total 12,552,865,000 100.000% The estimated Capital Contribution of H. J. Heinz Finance Company is the sum of the initial capital contribution shown on Schedule E1 plus the following contributions of cash: First Prior Contribution $186,400,000.00 July 16, 2001 Second Prior Contribution $238,220,000.00 September 24, 2001 HFC Contribution $500,000,000.00 January 29, 2002 Schedule F-1 H. J. HEINZ COMPANY ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT THIS ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT (this "Agreement"), made as of this 3rd day of May, 2001 by and between H. J. Heinz Company, for itself and on behalf of its divisions Heinz USA, Heinz North America, and Chef Francisco and as successor-in-interest to Alden Merrell, Inc., Heinz Service Company and Cornucopia, Inc. ("Assignor"); and H. J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, pursuant to a consolidation of its United States manufacturing operations, Heinz, and its wholly owned subsidiary, Heinz Management Company, have formed and organized the Assignee with the intent that, following such reorganization and restructuring, the Assignee will be the sole United States operating affiliate of Heinz; and WHEREAS, pursuant to such consolidation, Assignor desires to assign, transfer and convey all of the Included Assets (as such term is defined in Section 1.1 below) to Assignee, and Assignee wishes to accept the assignment of such Included Assets, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I ASSIGNMENT Section 1.1. Assigned Assets. Assignor hereby assigns, transfers and conveys to the Assignee all of Assignor's right, title and interest in and to each and every asset, right and interest of every kind, nature or character whatsoever, wherever located, and whether direct or indirect, that are owned, used or held for use by, or for the benefit of or on the behalf of, in whole or in part, Assignor and used in connection with the manufacturing, marketing, distribution and sale of food products in the United States (the "Manufacturing Operations") including, without limitation, the following (but specifically excluding the Excluded Assets, as such term is defined in Section 1.2 below): (a) all machinery; tools; dies; molds; appliances; motorized and non-motorized vehicles; trailers, attachments and accessories; marine vessels; aircraft; railway rolling stock; furnishings; equipment (including, but not limited to, all spare and replacement parts); computer hardware; computer software; fuel stocks; plants; materials, stores, supplies, packaging and labeling; documents, records and other similar and dissimilar tangible records; and all other tangible personal property of every conceivable nature, kind, character and description associated with the Manufacturing Operations of the Assignor (the "Property"); (b) all packaging materials, raw materials and work-in-progress of the Assignor (the "Inventories"); (c) all real property leases (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect lessor or lessee of land, structures, fixtures and premises (the "Real Property Leases"); (d) all leases, subleases and assignments (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect lessor or lessee of machinery, equipment or any other personal property (the "Personal Property Leases"); (e) all easements, profits, licenses pertaining to real property, rights of access, rights of way and other similar or dissimilar rights in real property (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect grantor or grantee (the "Real Property Licenses"); (f) all written and oral contracts (together with all modifications and amendments thereof and supplements thereto) (the "Contracts"); (g) all licenses not pertaining to real property (including, but not limited to, computer software licenses and trademark licenses), together with all modifications and amendments thereof and supplements thereto (the "Personal Property Licenses"); (h) all accounts receivable and all other similar or dissimilar receivables (the "Receivables"); (i) all prepaid expenses (the "Prepaid Expenses"); (j) all goodwill, going concern value and other intangible assets associated with the Manufacturing Operations of the Assignor (the "Goodwill"); (k) all transferable or otherwise assignable approvals, permits, authorizations, licenses, orders, registrations, certificates, variances and other similar or dissimilar permits obtained from any governmental or quasi-governmental authority and pending applications (the "Permits"); (l) all patents, patent applications and patent claims, whether foreign or domestic, owned or licensed by the Assignor; all copyrights, copyright applications or copyright claims, whether foreign or domestic, owned or licensed by the Assignor; all trade secrets, business privileged materials, proprietary information and all other confidential information of the Assignor, whether or not such information is related to the Manufacturing Operations of the Assignor, including, without limitation, all information relating to sales, sales volume, sales 2 methods, sales proposals, customers, suppliers, prospective customers, financial and accounting records, manuals, formulae, processes, methods, compositions, ideas, improvements, inventions, know-how, research and all other confidential and proprietary information (collectively, the "Proprietary Information"); (m) all cash, bank and other accounts, bank and other balances, term or time deposits, lock box receipts and similar cash items (the "Accounts"); and (n) any claims, demands, judgments, actions, causes of action, joinders, contributions, indemnities, losses, damages, suits, inquiries, proceedings, grievances, arbitrations, judgments or other similar or dissimilar rights of the Assignor (the "Claims"), whether such Claims are known or unknown, suspected or unsuspected, foreseen or unforeseen, real or imaginary, actual or potential, vested or contingent; whether arising at law, in equity or otherwise, under common or statutory law, state or federal law, or natural or any other law; whether as a result of active or passive negligence, strict liability in tort, breach of warranty (express or implied), breach of contract, duty to indemnify or any other theory of recovery, basis or cause whatsoever. Collectively, the assets, properties, rights and interests identified in subsections 1.1(a) through (n) above, together with all other assets, properties, rights and interests of the Assignor not excluded in Section 1.2 below, are referred to in this Agreement as "Included Assets." Section 1.2. Excluded Assets. The following assets, properties, rights and interests, whether real or personal, tangible or intangible shall not be included as an Included Asset, and shall specifically be excluded from the assignment and transfer set forth in Section 1.1 above: (a) all trademarks, trade names, corporate names and logos of the Assignor; (b) the real property owned by Assignor in the County of Allegheny, Pennsylvania; (c) all inventory of finished goods on hand at the close of business on May 2, 2001; (d) the property and related lease rights and obligations subject to the Equipment Lease Assignment Agreement dated as of May 3, 2001 between Assignor, Star-Kist Foods, Inc. and H. J. Heinz Finance Company; (e) all equity interests (however evidenced) or other investments in corporations, partnerships or other entities; (f) all assets and liabilities, of whatever nature that are owned by, recorded in the accounts of or otherwise attributable to the World Headquarters division of Assignor including, but not limited to, the Public Debt Obligations, the Commercial Paper and the Equipment Lease Obligations as such terms are defined in the Contribution Agreement dated May 3, 2001 among Assignor, Star-Kist Foods, Inc. and H. J. Heinz Finance Company; 3 (g) all assets and liabilities, of whatever nature, relating to income taxes; (h) all assets and liabilities, of whatever nature, relating to the activities of Assignor's salaried employees that are transferred from Assignor to Heinz Management Company; (i) all intercompany receivables and/or payables from and/or to Central Commissary, Inc., Escalon Premier Brands, Inc., IDF Holdings, Inc., Portion Pac, Inc., Quality Chef Foods, Inc. and Thermo Pac, Inc.; (j) that certain real property that is subject to a lease agreement dated July 21, 2000 by and between Assignor and BNP Paribas Leasing Corporation; and (k) all corporate records of the Assignor including, without limitation, the corporate financial records, stock, registry and minute books. Collectively, the assets, properties, rights and interests identified in subsections 1.2(a) - (k) above are referred to in this Agreement as "Excluded Assets." ARTICLE II ASSUMPTION Section 2.1 Assumed and Excluded Liabilities. Assignee hereby accepts all right, title and interest of Assignor in, to and under the Included Assets and agrees to fully assume, pay, discharge, perform and fulfill, or cause to be assumed, paid, discharged, performed or fulfilled, all duties, liabilities and obligations in connection with, or arising from, such Included Assets from and after the date hereof. Assignee assumes no obligation with respect to the following: (a) all liabilities relating to the Excluded Assets; (b) all notes payable (including accrued interest) to PM Holding Company; and (c) any other liabilities identified in writing by Assignor and Assignee no later than July 31, 2001 as not pertaining to the Manufacturing Operations. ARTICLE III DISCLAIMERS Section 3.1 AS IS, WHERE IS; Disclaimer. The Included Assets are being sold, transferred, conveyed, assigned and delivered to Assignee in an "AS IS, WHERE IS" condition. Assignor warrants that the Included Assets conveyed by Assignor is owned by Assignor and that Assignor has the legal right, and is properly authorized and empowered, to sell, transfer, convey, 4 assign and deliver all of its right, title and interest in and to the Included Assets to Assignee. EXCEPT AS OTHERWISE SET FORTH HEREIN, ASSIGNOR MAKES NO WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY REGARDING THE INCLUDED ASSETS, AND ASSIGNOR DISCLAIMS ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL ASSIGNOR BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES RELATING TO OR CAUSED BY THE INCLUDED ASSETS. ARTICLE IV GENERAL Section 4.1. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Section 4.2. Controlling Law. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions. Section 4.3. Further Assurances. Assignor and Assignee shall cooperate with each other with respect to the subject matter of this Agreement, and each party shall take such further actions and execute such further instruments or documents as the other party reasonably shall request from time to time to implement the purposes of this Agreement. Section 4.4. Severability. If any provision of this Agreement shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. Section 4.5. Entire Agreement.This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions whether oral or written. There are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party thereto to be bound. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. ASSIGNOR: H. J. HEINZ COMPANY By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ ASSIGNEE: H. J. HEINZ COMPANY, L.P. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 6 Schedule F-2 HEINZ FROZEN FOODS COMPANY ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT THIS ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT (this "Agreement"), made as of this 3rd day of May, 2001 by and between Heinz Frozen Foods Company (f/k/a/ Weight Watchers Gourmet Food Company), for itself and as successor- in-interest to Ore-Ida Foods, Inc. ("Assignor"); and H. J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, Assignor is a wholly owned subsidiary of H. J. Heinz Company, a Pennsylvania corporation ("Heinz"); and WHEREAS, pursuant to a consolidation of its United States manufacturing operations, Heinz, and its wholly owned subsidiary, Heinz Management Company, have formed and organized the Assignee with the intent that, following such reorganization and restructuring, the Assignee will be the sole United States operating affiliate of Heinz; and WHEREAS, pursuant to such consolidation, Assignor desires to assign, transfer and convey all of the Included Assets (as such term is defined in Section 1.1 below) to Assignee, and Assignee wishes to accept the assignment of such Included Assets, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I ASSIGNMENT Section 1.1. Assigned Assets. Assignor hereby assigns, transfers and conveys to the Assignee all of Assignor's right, title and interest in and to each and every asset, right and interest of every kind, nature or character whatsoever, wherever located, and whether direct or indirect, that are owned, used or held for use by, or for the benefit of or on the behalf of, in whole or in part, Assignor and used in connection with the manufacturing, marketing, distribution and sale of food products in the United States (the "Manufacturing Operations") including, without limitation, the following (but specifically excluding the Excluded Assets, as such term is defined in Section 1.2 below): (a) all machinery; tools; dies; molds; appliances; motorized and non-motorized vehicles; trailers, attachments and accessories; marine vessels; aircraft; railway rolling stock; furnishings; equipment (including, but not limited to, all spare and replacement parts); computer hardware; computer software; fuel stocks; plants; materials, stores, supplies, packaging and labeling; documents, records and other similar and dissimilar tangible records; and all other tangible personal property of every conceivable nature, kind, character and description associated with the Manufacturing Operations of the Assignor (the "Property"); (b) all packaging materials, raw materials and work-in-progress of the Assignor (the "Inventories"); (c) all real property leases (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect lessor or lessee of land, structures, fixtures and premises (the "Real Property Leases"); (d) all leases, subleases and assignments (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect lessor or lessee of machinery, equipment or any other personal property (the "Personal Property Leases"); (e) all easements, profits, licenses pertaining to real property, rights of access, rights of way and other similar or dissimilar rights in real property (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect grantor or grantee (the "Real Property Licenses"); (f) all written and oral contracts (together with all modifications and amendments thereof and supplements thereto) (the "Contracts"); (g) all licenses not pertaining to real property (including, but not limited to, computer software licenses and trademark licenses), together with all modifications and amendments thereof and supplements thereto (the "Personal Property Licenses"); (h) all accounts receivable and all other similar or dissimilar receivables (the "Receivables"); (i) all prepaid expenses (the "Prepaid Expenses"); (j) all goodwill, going concern value and other intangible assets associated with the Manufacturing Operations of the Assignor (the "Goodwill"); (k) all transferable or otherwise assignable approvals, permits, authorizations, licenses, orders, registrations, certificates, variances and other similar or dissimilar permits obtained from any governmental or quasi-governmental authority and pending applications (the "Permits"); (l) all patents, patent applications and patent claims, whether foreign or domestic, owned or licensed by the Assignor; all copyrights, copyright applications or copyright 2 claims, whether foreign or domestic, owned or licensed by the Assignor; all trade secrets, business privileged materials, proprietary information and all other confidential information of the Assignor, whether or not such information is related to the Manufacturing Operations of the Assignor, including, without limitation, all information relating to sales, sales volume, sales methods, sales proposals, customers, suppliers, prospective customers, financial and accounting records, manuals, formulae, processes, methods, compositions, ideas, improvements, inventions, know-how, research and all other confidential and proprietary information (collectively, the "Proprietary Information"); (m) all cash, bank and other accounts, bank and other balances, term or time deposits, lock box receipts and similar cash items (the "Accounts"); and (n) any claims, demands, judgments, actions, causes of action, joinders, contributions, indemnities, losses, damages, suits, inquiries, proceedings, grievances, arbitrations, judgments or other similar or dissimilar rights of the Assignor (the "Claims"), whether such Claims are known or unknown, suspected or unsuspected, foreseen or unforeseen, real or imaginary, actual or potential, vested or contingent; whether arising at law, in equity or otherwise, under common or statutory law, state or federal law, or natural or any other law; whether as a result of active or passive negligence, strict liability in tort, breach of warranty (express or implied), breach of contract, duty to indemnify or any other theory of recovery, basis or cause whatsoever; Collectively, the assets, properties, rights and interests identified in subsections 1.1(a) through (n) above, together with all other assets, properties, rights and interests of the Assignor not excluded in Section 1.2 below, are referred to in this Agreement as "Included Assets." Section 1.2. Excluded Assets. The following assets, properties, rights and interests, whether real or personal, tangible or intangible shall not be included as an Included Asset, and shall specifically be excluded from the assignment and transfer set forth in Section 1.1 above: (a) all trademarks, trade names, corporate names and logos of the Assignor; (b) all inventory of finished goods on hand at the close of business on May 2, 2001; (c) all equity interests (however evidenced) or other investments in corporations, partnerships or other entities; (d) all assets and liabilities, of whatever nature, relating to income taxes; (e) all assets and liabilities, of whatever nature, relating to the activities of Assignor's salaried employees that are being transferred to Heinz Management Company; (f) all corporate records of the Assignor including, without limitation, the corporate financial records, stock registry and minute books; and 3 (g) that certain intercompany receivable due from H. J. Heinz Company. Collectively, the assets, properties, rights and interests identified in subsections 1.2(a) - (g) above are referred to in this Agreement as "Excluded Assets." ARTICLE II ASSUMPTION Section 2.1 Assumed and Excluded Liabilities. Assignee hereby accepts all right, title and interest of Assignor in, to and under the Included Assets and agrees to fully assume, pay, discharge, perform and fulfill, or cause to be assumed, paid, discharged, performed or fulfilled, all duties, liabilities and obligations in connection with, or arising from, such Included Assets from and after the date hereof. Assignee assumes no obligation with respect to the following: (a) all liabilities relating to the Excluded Assets; (b) all notes payable (including accrued interest) to PM Holding Company; and (c) any other liabilities identified in writing by Assignor and Assignee no later than July 31, 2001 as not pertaining to the Manufacturing Operations. ARTICLE III DISCLAIMERS Section 3.1 AS IS, WHERE IS; Disclaimer. The Included Assets are being sold, transferred, conveyed, assigned and delivered to Assignee in an "AS IS, WHERE IS" condition. Assignor warrants that the Included Assets conveyed by Assignor is owned by Assignor and that Assignor has the legal right, and is properly authorized and empowered, to sell, transfer, convey, assign and deliver all of its right, title and interest in and to the Included Assets to Assignee. EXCEPT AS OTHERWISE SET FORTH HEREIN, ASSIGNOR MAKES NO WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY REGARDING THE INCLUDED ASSETS, AND ASSIGNOR DISCLAIMS ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL ASSIGNOR BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES RELATING TO OR CAUSED BY THE INCLUDED ASSETS. 4 ARTICLE IV GENERAL Section 4.1. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Section 4.2. Controlling Law. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions. Section 4.3. Further Assurances. Assignor and Assignee shall cooperate with each other with respect to the subject matter of this Agreement, and each party shall take such further actions and execute such further instruments or documents as the other party reasonably shall request from time to time to implement the purposes of this Agreement. Section 4.4. Severability. If any provision of this Agreement shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. Section 4.5. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions whether oral or written. There are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party thereto to be bound. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. ASSIGNOR: HEINZ FROZEN FOODS COMPANY By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- ASSIGNEE: H. J. HEINZ COMPANY, L.P. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 6 Schedule F-3 STAR-KIST FOODS, INC. ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT THIS ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT (this "Agreement"), made as of this 3rd day of May, 2001 by and between Star-Kist Foods, Inc. for itself and on behalf of its divisions Star-Kist Seafood Company and Heinz Pet Products, and as successor-in-interest to HPP Specialty Pet Products, Inc. and Nature's Recipe ("Assignor"); and H. J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, Assignor is a wholly owned subsidiary of H. J. Heinz Company, a Pennsylvania corporation ("Heinz"); and WHEREAS, pursuant to a consolidation of its United States manufacturing operations, Heinz, and its wholly owned subsidiary, Heinz Management Company, have formed and organized the Assignee with the intent that, following such reorganization and restructuring, the Assignee will be the sole United States operating affiliate of Heinz; and WHEREAS, pursuant to such consolidation, Assignor desires to assign, transfer and convey all of the Included Assets (as such term is defined in Section 1.1 below) to Assignee, and Assignee wishes to accept the assignment of such Included Assets, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I ASSIGNMENT Section 1.1. Assigned Assets. Assignor hereby assigns, transfers and conveys to the Assignee all of Assignor's right, title and interest in and to each and every asset, right and interest of every kind, nature or character whatsoever, wherever located, and whether direct or indirect, that are owned, used or held for use by, or for the benefit of or on the behalf of, in whole or in part, Assignor and used in connection with the manufacturing, marketing, distribution and sale of food and pet food products in the United States (the "Manufacturing Operations") including, without limitation, the following (but specifically excluding the Excluded Assets, as such term is defined in Section 1.2 below): (a) all machinery; tools; dies; molds; appliances; motorized and non-motorized vehicles; trailers, attachments and accessories; marine vessels; aircraft; railway rolling stock; furnishings; equipment (including, but not limited to, all spare and replacement parts); computer hardware; computer software; fuel stocks; plants; materials, stores, supplies, packaging and labeling; documents, records and other similar and dissimilar tangible records; and all other tangible personal property of every conceivable nature, kind, character and description associated with the Manufacturing Operations of the Assignor (the "Property"); (b) all packaging materials, raw materials and work-in-progress of the Assignor (the "Inventories"); (c) all real property leases (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect lessor or lessee of land, structures, fixtures and premises (the "Real Property Leases"); (d) all leases, subleases and assignments (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect lessor or lessee of machinery, equipment or any other personal property (the "Personal Property Leases"); (e) all easements, profits, licenses pertaining to real property, rights of access, rights of way and other similar or dissimilar rights in real property (together with all modifications and amendments thereof and supplements thereto), where the Assignor is the direct or indirect grantor or grantee (the "Real Property Licenses"); (f) all written and oral contracts (together with all modifications and amendments thereof and supplements thereto) (the "Contracts"); (g) all licenses not pertaining to real property (including, but not limited to, computer software licenses and trademark licenses), together with all modifications and amendments thereof and supplements thereto (the "Personal Property Licenses"); (h) all accounts receivable and all other similar or dissimilar receivables (the "Receivables"); (i) all prepaid expenses (the "Prepaid Expenses"); (j) all goodwill, going concern value and other intangible assets associated with the Manufacturing Operations of the Assignor (the "Goodwill"); (k) all transferable or otherwise assignable approvals, permits, authorizations, licenses, orders, registrations, certificates, variances and other similar or dissimilar permits obtained from any governmental or quasi-governmental authority and pending applications (the "Permits"); (l) all patents, patent applications and patent claims, whether foreign or domestic, owned or licensed by the Assignor; all copyrights, copyright applications or copyright 2 claims, whether foreign or domestic, owned or licensed by the Assignor; all trade secrets, business privileged materials, proprietary information and all other confidential information of the Assignor, whether or not such information is related to the Manufacturing Operations of the Assignor, including, without limitation, all information relating to sales, sales volume, sales methods, sales proposals, customers, suppliers, prospective customers, financial and accounting records, manuals, formulae, processes, methods, compositions, ideas, improvements, inventions, know-how, research and all other confidential and proprietary information (collectively, the "Proprietary Information"); (m) all cash, bank and other accounts, bank and other balances, term or time deposits, lock box receipts and similar cash items (the "Accounts"); and (n) any claims, demands, judgments, actions, causes of action, joinders, contributions, indemnities, losses, damages, suits, inquiries, proceedings, grievances, arbitrations, judgments or other similar or dissimilar rights of the Assignor (the "Claims"), whether such Claims are known or unknown, suspected or unsuspected, foreseen or unforeseen, real or imaginary, actual or potential, vested or contingent; whether arising at law, in equity or otherwise, under common or statutory law, state or federal law, or natural or any other law; whether as a result of active or passive negligence, strict liability in tort, breach of warranty (express or implied), breach of contract, duty to indemnify or any other theory of recovery, basis or cause whatsoever. Collectively, the assets, properties, rights and interests identified in subsections 1.1(a) through (n) above, together with all other assets, properties, rights and interests of the Assignor not excluded in Section 1.2 below, are referred to in this Agreement as "Included Assets." Section 1.2. Excluded Assets. The following assets, properties, rights and interests, whether real or personal, tangible or intangible shall not be included as an Included Asset, and shall specifically be excluded from the assignment and transfer set forth in Section 1.1 above: (a) all trademarks, trade names, corporate names and logos of the Assignor; (b) all inventory of finished goods on hand at the close of business on May 2, 2001; (c) all equity interests (however evidenced) or other investments in corporations, partnerships or other entities; (d) that certain property and related lease rights and obligations subject to the Equipment Lease Assignment Agreement dated May 3, 2001 between Assignor, H. J. Heinz Company and H. J. Heinz Finance Company; (e) all assets and liabilities, of whatever nature, relating to income taxes; (f) all assets and liabilities, of whatever nature, relating to the activities of Assignor's salaried employees that are being transferred to Heinz Management Company; 3 (g) all corporate records of the Assignors including, without limitation, the corporate financial records, stock registry and minute books; (h) that certain intercompany receivable due from H. J. Heinz Company; and (i) that certain note of the H. J. Heinz Company dated May 2, 2001 in the principal amount of Thirty-Five Million Dollars ($35,000,000.00). Collectively, the assets, properties, rights and interests identified in subsections 1.2(a) - (i) above are referred to in this Agreement as "Excluded Assets." ARTICLE II ASSUMPTION Section 2.1 Assumed and Excluded Liabilities. Assignee hereby accepts all right, title and interest of Assignor in, to and under the Included Assets and agrees to fully assume, pay, discharge, perform and fulfill, or cause to be assumed, paid, discharged, performed or fulfilled, all duties, liabilities and obligations in connection with, or arising from, such Included Assets from and after the date hereof. Assignee assumes no obligation with respect to the following: (a) all liabilities relating to the Excluded Assets; (b) all notes payable (including accrued interest) to PM Holding Company; and (c) any other liabilities identified in writing by Assignor and Assignee no later than July 31, 2001 as not pertaining to the Manufacturing Operations. ARTICLE III DISCLAIMERS Section 3.1 AS IS, WHERE IS; Disclaimer. The Included Assets are being sold, transferred, conveyed, assigned and delivered to Assignee in an "AS IS, WHERE IS" condition. Assignor warrants that the Included Assets conveyed by Assignor is owned by Assignor and that Assignor has the legal right, and is properly authorized and empowered, to sell, transfer, convey, assign and deliver all of its right, title and interest in and to the Included Assets to Assignee. EXCEPT AS OTHERWISE SET FORTH HEREIN, ASSIGNOR MAKES NO WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY REGARDING THE INCLUDED ASSETS, AND ASSIGNOR DISCLAIMS ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL ASSIGNOR BE LIABLE FOR 4 CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES RELATING TO OR CAUSED BY THE INCLUDED ASSETS. ARTICLE IV GENERAL Section 4.1. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Section 4.2. Controlling Law. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions. Section 4.3. Further Assurances. Assignor and Assignee shall cooperate with each other with respect to the subject matter of this Agreement, and each party shall take such further actions and execute such further instruments or documents as the other party reasonably shall request from time to time to implement the purposes of this Agreement. Section 4.4. Severability. If any provision of this Agreement shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. Section 4.5. Entire Agreement.This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions whether oral or written. There are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party thereto to be bound. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. ASSIGNOR: STAR-KIST FOODS, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- ASSIGNEE: H. J. HEINZ COMPANY, L.P. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 6 Schedule F-3 (A) STAR-KIST FOODS, INC. FIRST AMENDMENT TO ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT THIS AMENDMENT, made as of May 3, 2001 by and between Star-Kist Foods, Inc. for itself and on behalf of its divisions Star-Kist Seafood Company and Heinz Pet Products, and as successor-in-interest to HPP Specialty Pet Products, Inc. and Nature's Recipe ("Assignor"); and H.J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, pursuant to an Assignment, Assumption and Bill of Sale Agreement dated May 3, 2001 Assignor assigned and transferred to Assignee certain assets described in such Agreement; and WHEREAS, the Assignor desires to amend such Agreement, effective May 3, 2001, to correct an error of fact with respect to certain real property and the Assignee consents to such amendment. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: AMENDMENT Section 1.1. Excluded Asset. Section 1.2 of the Agreement is hereby amended, effective May 3, 2001, to add to the list of Excluded Assets new item (j) as follows: (j) the real property owned by Assignor in the Township of South Centre, County of Columbia, Pennsylvania; Section 1.2. No Other Effects. All other terms and conditions of the Agreement shall remain in full force and shall not be affected by this amendment. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. ASSIGNOR: STAR-KIST FOODS, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- ASSIGNEE: H. J. HEINZ COMPANY, L.P. By: HEINZ MANAGEMENT COMPANY General Partner By: ---------------------------- Name: -------------------------- Title: ------------------------- 2 Schedule F-4 FOOD SERVICE COMPANIES ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT THIS ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT (this "Agreement"), made as of this 3rd day of May, 2001 by and among Central Commissary, Inc.; Escalon Premier Brands, Inc. (f/k/a Escalon Packers, Inc.); IDF Holdings, Inc., for itself and as successor-in-interest to International Diverse Foods, Inc., Green Boys Foods Inc. and Mike Rose Foods, Inc.; Portion Pac, Inc., for itself and as successor-in-interest to Crestar Food Products, Inc.; Quality Chef Foods, Inc., for itself and as successor-in-interest to Midwest Related Food Products, Inc.; and Thermo Pac, Inc; (each individually referred to herein as an "Assignor" and collectively as the "Assignors"); and H. J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, Assignors are wholly owned subsidiaries of H. J. Heinz Company, a Pennsylvania corporation ("Heinz"); and WHEREAS, pursuant to a consolidation of its United States manufacturing operations, Heinz, and its wholly owned subsidiary, Heinz Management Company, have formed and organized the Assignee with the intent that, following such reorganization and restructuring, the Assignee will be the sole United States operating affiliate of Heinz; and WHEREAS, pursuant to such consolidation, each of the Assignors desires to assign, transfer and convey all of the Included Assets (as such term is defined in Section 1.1 below) to Assignee, and Assignee wishes to accept the assignment of such Included Assets, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I ASSIGNMENT Section 1.1. Assigned Assets. Assignors hereby assign, transfer and convey to the Assignee all of Assignors' right, title and interest in and to each and every asset, right and interest of every kind, nature or character whatsoever, wherever located, and whether direct or indirect, that are owned, used or held for use by, or for the benefit of or on the behalf of, in whole or in part, Assignors and used in connection with the manufacturing, marketing, distribution and sale of food products in the United States (the "Manufacturing Operations") including, without limitation, the following (but specifically excluding the Excluded Assets, as such term is defined in Section 1.2 below): (a) all machinery; tools; dies; molds; packaging materials; appliances; motorized and non-motorized vehicles; trailers, attachments and accessories; marine vessels; aircraft; railway rolling stock; furnishings; equipment (including, but not limited to, all spare and replacement parts); computer hardware; computer software; fuel stocks; plants; materials, stores, supplies, packaging and labeling; documents, records and other similar and dissimilar tangible records; and all other tangible personal property of every conceivable nature, kind, character and description associated with the Manufacturing Operations of the Assignors (the "Property"); (b) all inventory, raw materials, finished products and work-in-progress of the Assignors (the "Inventories"); (c) all real property leases (together with all modifications and amendments thereof and supplements thereto), where any Assignor is the direct or indirect lessor or lessee of land, structures, fixtures and premises (the "Real Property Leases"); (d) all leases, subleases and assignments (together with all modifications and amendments thereof and supplements thereto), where any Assignor is the direct or indirect lessor or lessee of machinery, equipment or any other personal property (the "Personal Property Leases"); (e) all easements, profits, licenses pertaining to real property, rights of access, rights of way and other similar or dissimilar rights in real property (together with all modifications and amendments thereof and supplements thereto), where any Assignor is the direct or indirect grantor or grantee (the "Real Property Licenses"); (f) all written and oral contracts (together with all modifications and amendments thereof and supplements thereto) (the "Contracts"); (g) all licenses not pertaining to real property (including, but not limited to, computer software licenses) (together with all modifications and amendments thereof and supplements thereto) (the "Personal Property Licenses"); (h) all accounts receivable and all other similar or dissimilar receivables (the "Receivables"); (i) all prepaid expenses (the "Prepaid Expenses"); (j) all goodwill, going concern value and other intangible assets associated with the Manufacturing Operations of the Assignors (the "Goodwill"); (k) all transferable or otherwise assignable approvals, permits, authorizations, licenses, orders, registrations, certificates, variances and other similar or dissimilar permits 2 obtained from any governmental or quasi-governmental authority and pending applications (the "Permits"); (l) all patents, patent applications and patent claims, whether foreign or domestic, owned or licensed by the Assignors; all copyrights, copyright applications or copyright claims, whether foreign or domestic, owned or licensed by the Assignors; all trade secrets, business privileged materials, proprietary information and all other confidential information of the Assignors, whether or not such information is related to the Manufacturing Operations of the Assignors, including, without limitation, all information relating to sales, sales volume, sales methods, sales proposals, customers, suppliers, prospective customers, financial and accounting records, manuals, formulae, processes, methods, compositions, ideas, improvements, inventions, know-how, research and all other confidential and proprietary information (collectively, the "Proprietary Information"); (m) all cash, bank and other accounts, bank and other balances, term or time deposits, lock box receipts and similar cash items (the "Accounts"); and (n) any claims, demands, judgments, actions, causes of action, joinders, contributions, indemnities, losses, damages, suits, inquiries, proceedings, grievances, arbitrations, judgments or other similar or dissimilar rights of each Assignor (the "Claims"), whether such Claims are known or unknown, suspected or unsuspected, foreseen or unforeseen, real or imaginary, actual or potential, vested or contingent; whether arising at law, in equity or otherwise, under common or statutory law, state or federal law, or natural or any other law; whether as a result of active or passive negligence, strict liability in tort, breach of warranty (express or implied), breach of contract, duty to indemnify or any other theory of recovery, basis or cause whatsoever. Collectively, the assets, properties, rights and interests identified in subsections 1.1(a) through (n) above, together with all other assets, properties, rights and interests of the Assignors not excluded in Section 1.2 below, are referred to in this Agreement as "Included Assets." Section 1.2. Excluded Assets. The following assets, properties, rights and interests, whether real or personal, tangible or intangible shall not be included as an Included Asset, and shall specifically be excluded from the assignment and transfer set forth in Section 1.1 above: (a) all trademarks, trade names, corporate names and logos of the Assignors; (b) the leased property located at 14320-22 and 14426 Bonelli Street in the City of Industry, California; (c) all intercompany receivables and/or payables from and/or to Assignors and H. J. Heinz Company; (d) the personal property leased under the lease agreement dated March 30, 2001 with BNP Paribas Leasing Corporation and subleased to Assignee under a sublease 3 agreement dated May 3, 2001 except for the property subject to such lease that is located in Escalon, California and Jacksonville, Florida which shall continue to be Included Assets; (e) all assets and liabilities, of whatever nature, relating to income taxes; and (f) all corporate records of the Assignors including, without limitation, the corporate financial records, stock registry and minute books. Collectively, the assets, properties, rights and interests identified in subsections 1.2(a) - (f) above are referred to in this Agreement as "Excluded Assets." ARTICLE II ASSUMPTION Section 2.1 Assumed and Excluded Liabilities. Assignee hereby accepts all right, title and interest of Assignors in, to and under the Included Assets and agrees to fully assume, pay, discharge, perform and fulfill, or cause to be assumed, paid, discharged, performed or fulfilled, all duties, liabilities and obligations in connection with, or arising from, such Included Assets from and after the date hereof. Assignee assumes no obligation with respect to the following: (a) all liabilities relating to the Excluded Assets; and (b) any other liabilities identified in writing by any one of the Assignors and Assignee no later than July 31, 2001 as not pertaining to the Manufacturing Operations. ARTICLE III DISCLAIMERS Section 3.1 AS IS, WHERE IS; Disclaimer. The Included Assets are being sold, transferred, conveyed, assigned and delivered to Assignee in an "AS IS, WHERE IS" condition. Each Assignor warrants that the Included Assets conveyed by such Assignor is owned by such Assignor and that each such Assignor has the legal right, and is properly authorized and empowered, to sell, transfer, convey, assign and deliver all of its right, title and interest in and to the Included Assets to Assignee. EXCEPT AS OTHERWISE SET FORTH HEREIN, ASSIGNORS MAKE NO WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY REGARDING THE INCLUDED ASSETS, AND ASSIGNORS EACH DISCLAIM ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL ASSIGNORS, OR ANY OF THEM, BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES RELATING TO OR CAUSED BY THE INCLUDED ASSETS. 4 Section 3.2 Individual Action; Misstatements; Failure to Act. Each statement, representation, warranty, covenant and act made and undertaken by Assignors herein and hereunder shall be deemed to be that of each Assignor individually, and shall not be dependent for its validity upon the statements, representations, warranties, covenants or acts of Assignors collectively or of any other Assignor individually. No misstatement, misrepresentation, act or failure to act of any Assignor shall be deemed a misstatement, misrepresentation, act or failure to act of Assignors collectively or of any other Assignor individually, or affect or invalidate the sale, transfer, conveyance, assignment and/or delivery of any Included Assets sold, transferred, conveyed, assigned and delivered to Assignor by any other Assignor pursuant to this Agreement. ARTICLE IV GENERAL Section 4.1. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Section 4.2. Controlling Law. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions. Section 4.3. Further Assurances. Assignors and Assignee shall cooperate with each other with respect to the subject matter of this Agreement, and each party shall take such further actions and execute such further instruments or documents as the other party reasonably shall request from time to time to implement the purposes of this Agreement. Section 4.4. Severability. If any provision of this Agreement shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. Section 4.5. Entire Agreement.This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions whether oral or written. There are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party thereto to be bound. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. ASSIGNORS: CENTRAL COMMISSARY, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- ESCALON PREMIER BRANDS, INC., By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- IDF HOLDINGS, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- PORTION PAC, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- QUALITY CHEF FOODS, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 6 THERMO PAC, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- ASSIGNEE: H. J. HEINZ COMPANY, L.P. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 7 Schedule F-5 CMH, INC. ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT (this "Agreement"), made as of this 3rd day of May, 2001 by and between CMH, Inc. and H.J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, Assignor is a wholly owned subsidiary of H.J. Heinz Company, a Pennsylvania corporation ("Heinz"); and WHEREAS, pursuant to a consolidation of its United States manufacturing operations, Heinz, and its wholly owned subsidiary, Heinz Management Company, have formed and organized the Assignee with the intent that, following such reorganization and restructuring, the Assignee will be the sole United States operating affiliate of Heinz; and WHEREAS, pursuant to such consolidation, Assignor desires to assign, transfer and convey the asset described in Section 1.1 below to Assignee, and Assignee wishes to accept the assignment of such asset, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I ASSIGNMENT Section 1.1. Assigned Asset. Assignor hereby assigns, transfers and conveys to the Assignee all of Assignor's right, title and interest in and to all of the 6.5% cumulative, non-voting preferred stock, redemption value $1,895,245,000 of PM Holding Company, a Delaware corporation, owned by Assignor ARTICLE II GENERAL Section 2.1. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Section 2.2. Controlling Law. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions. Section 2.3. Further Assurances. Assignor and Assignee shall cooperate with each other with respect to the subject matter of this Agreement, and each party shall take such further actions and execute such further instruments or documents as the other party reasonably shall request from time to time to implement the purposes of this Agreement. Section 2.4. Severability. If any provision of this Agreement shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. Section 2.5. Entire Agreement.This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions whether oral or written. There are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party thereto to be bound. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. ASSIGNOR: CMH, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- ASSIGNEE: H.J. HEINZ COMPANY, L.P. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 3 Schedule F-6 BOULDER, INC. ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT (this "Agreement"), made as of this 3rd day of May, 2001 by and between Boulder, Inc. and H.J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, Assignor is a wholly owned subsidiary of H.J. Heinz Company, a Pennsylvania corporation ("Heinz"); and WHEREAS, pursuant to a consolidation of its United States manufacturing operations, Heinz, and its wholly owned subsidiary, Heinz Management Company, have formed and organized the Assignee with the intent that, following such reorganization and restructuring, the Assignee will be the sole United States operating affiliate of Heinz; and WHEREAS, pursuant to such consolidation, Assignor desires to assign, transfer and convey the asset described in Section 1.1 below to Assignee, and Assignee wishes to accept the assignment of such asset, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I ASSIGNMENT Section 1.1. Assigned Asset. Assignor hereby assigns, transfers and conveys to the Assignee all of Assignor's right, title and interest in and to all of common shares of The Hain Celestial Group, Inc. owned by Assignor on the date of this agreement. ARTICLE II GENERAL Section 2.1. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Section 2.2. Controlling Law. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions. Section 2.3. Further Assurances. Assignor and Assignee shall cooperate with each other with respect to the subject matter of this Agreement, and each party shall take such further actions and execute such further instruments or documents as the other party reasonably shall request from time to time to implement the purposes of this Agreement. Section 2.4. Severability. If any provision of this Agreement shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. Section 2.5. Entire Agreement.This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions whether oral or written. There are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party thereto to be bound. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 2 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. ASSIGNOR: BOULDER, INC. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- ASSIGNEE: H.J. HEINZ COMPANY, L.P. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- SCHEDULE G REAL PROPERTIES TRANSFERRED - ---------------------------- -------------------------------------------------- 1. Fremont, OH (Heinz) Route 6, No. 5th St., Fremont, OH 43420 - ---------------------------- -------------------------------------------------- 2. Holland, MI (Heinz 41 West 16th Street, Holland, MI 49423 - ---------------------------- -------------------------------------------------- 3. Muscatine, IA (Heinz) 1357 Isett Ave., Muscatine, IA 52761-4599 - ---------------------------- -------------------------------------------------- 4. Stockton, CA (Heinz) 2800 S. California Street, Stockton, CA 95206 - ---------------------------- -------------------------------------------------- 5. Escalon, CA (Escalon Premier Brands, Inc.) 1905 Mchenry Ave., Escalon, CA 95320-9601 - ---------------------------- -------------------------------------------------- 6. King of Prussia, PA (Heinz) 250 Hansen Access Road, King of Prussia, PA 19406 - ---------------------------- -------------------------------------------------- 7. Jacksonville, FL (Portion Pac, Inc.) 7500 Forshee Dr. Jacksonville, FL 32219 - ---------------------------- -------------------------------------------------- 8. Nashville, TN (International Diverse Foods, Inc.) 189 Spence Lane, Nashville, TN 37210-2507 - ---------------------------- -------------------------------------------------- 9. Phoenix AZ (Heinz 610 S. 56th Ave., Phoenix, AZ 85093 - ---------------------------- -------------------------------------------------- 10. Newburyport, MA (Heinz 4 Henry Graf Road, Newbury, MA 01950 - ---------------------------- -------------------------------------------------- 11. Ontario, OR (HFF) 175 N.E. 6th Avenue, Ontario, OR 97914 - ---------------------------- -------------------------------------------------- 12. West Chester, PA(HFF) 700 Old Fernhill Road, West Chester, PA 19380 - ---------------------------- -------------------------------------------------- 13. Ft. Myers, FL (HFF) 5521 Division Drive, Fort Meyers, FL 33905 - ---------------------------- -------------------------------------------------- 14. Massillon, OH (HFF) 1301 Oberlin Road S.W., Massillon, OH 44647 - ---------------------------- -------------------------------------------------- 15. Pocatello, ID (HFF) 221 Ore-Ida Court, Pocatello, ID 83202-1996 - ---------------------------- -------------------------------------------------- 16. Bloomsburg, PA (Star-Kist) 6670 Low Street, Bloomsburg, PA 17815 - ---------------------------- -------------------------------------------------- 17. Topeka, KS (Star-Kist) 6670 Low Street, Bloomsburg, PA 17815 - ---------------------------- -------------------------------------------------- 18. Lawrence, KS (Star-Kist) 727 N. Iowa, Lawrence, KS 66044 - ---------------------------- -------------------------------------------------- 1 Schedule H - H. J. Heinz Finance Capital Contribution As of the date of the Original Partnership Agreement, H. J. Heinz Finance Company contributed the following Property in exchange for Class B Interests: 1. $500,000 of cash 2. The equipment located in Stockton, California that was acquired pursuant to the Equipment Lease Assignment Agreement dated May 3, 2001. Schedule I - ------------------------------------------------------------------------------- SALES AGENCY AGREEMENT - ------------------------------------------------------------------------------- between [Owner] and H. J. Heinz Company, L. P. Dated: May 3, 2001 SALES AGENCY AGREEMENT THIS SALES AGENCY AGREEMENT (this "Agreement"), made and entered into this third day of May, 2001 by and between _____________, ("Owner") and H. J. Heinz Company, L.P. ("LP") (each of Owner and LP are herein referred to as a "Party" and collectively as the "Parties"). WITNESSETH: WHEREAS, Owner and certain affiliated companies have transferred their U. S. business operations to LP by forming LP as a partnership and becoming limited partners thereof; WHEREAS, Owner desires to retain for its own account the inventories of finished goods on hand at the close of business on May 2d, 2001 (the "Inventories") and to profit from the sale of same; and WHEREAS, LP possesses the employees and assets needed to sell and distribute the finished goods and is willing to carry out this activity for the fee herein agreed; NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement and other good and valuable consideration, receipt of which the Parties acknowledge, the Parties, intending to be bound legally, agree as follows: 1. Sale and Delivery of the Inventories. LP shall sell and dispose of the Inventories on behalf of and as agent for Owner in accordance with the sales and marketing plans established by Owner as of the date of this agreement and as may be modified by Owner from time to time and shall cause delivery of same to the purchaser. 2 2. Term. The term of this Agreement shall commence on May 3, 2001 and ---- shall continue in full force and effect until the date the Inventories are sold or otherwise disposed of, unless otherwise earlier terminated as provided in Section 12 hereof. 3. Fee. Owner shall pay to LP in full and complete consideration for the --- sale and disposition of the Inventories a fee equal to 105% of the Costs incurred by LP with respect to the Inventories. The term "Costs" shall include the expenses attributable under the accounting practices of LP to the storage, handling, distribution, marketing and selling of the Inventories including, but not limited to, a reasonable allocation of general overhead expenses. 4. Owner Retained Risk. Until title passes to customers, Owner shall bear ------------------- all risk of loss arising from the sale, transportation, storage, handling or other use of the Inventories from any cause whatsoever, other than any loss solely resulting from the gross negligence or willful misconduct of LP. Without limiting the generality of the foregoing, Owner shall bear all risk of loss relating to delinquencies, defaults and insolvencies of customers and third party claims relating to the Inventories and sales thereof and shall be solely responsible for defective products, all liability for the costs of product recalls, slow moving or unsaleable products or other costs of an unusual nature or amount including strikes, acts of God, or damage or destruction of the Inventories - other than loss, damage or destruction attributable to the gross negligence or willful misconduct of LP. 5. Indemnity By Owner. The Parties agree that Owner is the owner of the ------------------ Inventory and LP is acting as an agent for the sale and distribution of the Inventory. As such, Owner shall 3 indemnify and hold harmless LP from and against any and all claims, demands, actions, suits, causes of action, damages, and expenses that any person or entity makes, sustains, or brings against LP for the recovery of damages for the injury, illness, or death of any person caused or alleged to be caused by the consumption or use by such person of any of the Inventories that LP sells pursuant to this Agreement except to the extent such injury, illness, or death results from the gross negligence or willful misconduct of LP or its agents or employees. If any person or entity asserts any claim or brings any suit or action against LP for which Owner may be required to indemnify LP, LP promptly shall notify Owner of such claim or suit. LP shall comply with any reasonable request of Owner with respect the assisting in the defense or settlement of any such claim. Owner shall reimburse LP for any costs directly incurred by LP in connection with providing such assistance to Owner. 6. Accounting, Collections and Payments. ------------------------------------ (a) As successor to the businesses previously conducted by Owner and its affiliates in the United States, LP has assumed the books, records, accounting and information technology software and systems of the predecessor businesses. The Parties acknowledge and agree that the requirements of these integrated manufacturing and sales systems are such that it is not feasible or desirable for LP to attempt to segregate the beginning balances for the Inventories or to account for sales other than through the inherited systems. The Parties expressly agree that the initial recording of the sale of the Inventories within the accounting systems of LP shall in no way impair the title of Owner in the Inventories or the proceeds from the disposition thereof. All accounting by LP with respect to the Inventories shall be undertaken in the capacity of agent of Owner. 4 (b) Proceeds from the sale of the Inventories shall be collected by LP as agent of Owner and may not be utilized or invested by LP for its own account and shall not be invested in any non-liquid investments by LP. No less frequently than every 30 days LP shall calculate the amounts due to Owner under this Agreement and shall remit same, less LP's fee to the account specified by Owner. The calculations made by LP shall be accompanied by such additional data as Owner may reasonably request in order to verify the accuracy of the calculations. In the event of a disagreement between the parties as to any calculation, the accounting firm of PricewaterhouseCoopers shall mediate. 7. Inspection of Records. LP shall maintain such records and accounts as --------------------- are requested by Owner relating to the performance of LP's obligations under this Agreement. Owner shall have access to LP's premises for inspection during normal business hours. LP shall also comply with all other reporting requirements imposed by Owner under this Agreement. LP agrees to permit an auditor appointed by Owner to inspect the LP's records upon reasonable notice during normal and customary working hours. 8. Insurance. Owner shall obtain and maintain during the term of this --------- Agreement, product liability insurance with respect to all liabilities, including but not limited to bodily harm and death, caused by any defective Products. Owner shall obtain and maintain insurance covering any claims, demands, suite, losses, damages and liabilities including without limitation interest and reasonable attorney's fees arising out of, relating to, or resulting from the activities of LP 5 under this Agreement. Such insurance shall be adequate in scope and coverage considering the potential liability exposure, and shall include LP as an additional insured. 9. Severability. If any paragraph or portion of this Agreement violates ------------ any applicable law, such paragraph or portion shall be inoperative. If a court of competent jurisdiction rules that any provision set forth in this Agreement is unenforceable, then such provision shall be deemed modified to the extent that, in the court's opinion, is necessary to make it enforceable. The remainder of the Agreement shall remain valid and shall continue to bind the Parties. 10. Successors and Assigns. This Agreement shall be binding and inure to ---------------------- the benefit of each of the Parties and its successors and assigns. However, neither Party may transfer or assign this Agreement without the prior written consent of the other Party. 11. Waiver. No waiver by either Party of any breach, default, or violation ------ of any term, warranty, representation, agreement, covenant, condition, or provision of this Agreement shall constitute a waiver of any subsequent breach, default, or violation of the same or other term, warranty, representation, agreement, covenant, condition, or provision. 12. Early Termination of Agreement. This Agreement may be terminated by ------------------------------ either party by written notice dated no less than 30 days before the identified termination date at any time after November 15, 2001 with respect to any Inventories that remain unsold on the termination date. LP will provide, at Owner's cost, warehousing for such Inventories for a period not to exceed 30 days after the termination date 6 13. Entire Agreement. This Agreement contains all of the terms, ---------------- warranties, representations, agreements, covenants, conditions, and provisions the Parties have agreed upon with respect to the subject matter of this Agreement and merges and supersedes all prior agreements, understandings, and representations relating to such subject matter. 14. Governing Law. This Agreement shall be governed by and construed ------------- according to the laws of the Commonwealth of Pennsylvania, without effect to conflict of law rules. 15. Interpretation. This Agreement shall be construed as a whole in -------------- accordance with its fair meaning and its language and, regardless of who is responsible for its original drafting, shall not be construed for or against either Party. The captions of the various sections of this Agreement are included for convenience of reference only and shall in no way affect the construction or interpretation of this Agreement. Signature page follows. 7 IN WITNESS WHEREOF, each Party has executed this Agreement on the day and year first above written. Owner By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- H. J. Heinz Company, L.P. Heinz Management Company, General Partner By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 8 Addendum 1 - Previous Limited Partners As of May 3, 2001, the only Limited Partners of the Partnership were those entities listed below: May 3, 2001 Limited Partners ---------------------------- H. J. Heinz Company Star-Kist Foods, Inc. Heinz Frozen Foods Company H. J. Heinz Finance Company Portion Pac, Inc. Escalon Premier Brands, Inc. IDF Holdings, Inc. Quality Chef Foods, Inc. Thermo Pac, Inc. Boulder, Inc. CMH, Inc. Central Commissary, Inc. Effective as of May 4, 2001, the entities listed below were merged with and into CMH, Inc.: Merged Limited Partners ----------------------- Portion Pac, Inc., Escalon Premier Brands, Inc. IDF Holdings, Inc. Quality Chef Foods, Inc. Thermo Pac, Inc. Boulder, Inc. Central Commissary, Inc. As a result thereof, as of May 4, 2001, the only Limited Partners of the Partnership were those listed below: May 4, 2001 Limited Partners ---------------------------- H. J. Heinz Company Star-Kist Foods, Inc. Heinz Frozen Foods Company H. J. Heinz Finance Company CMH, Inc. H. J. Heinz Company, Star-Kist Foods, Inc. and Heinz Frozen Foods Company are and continue to be the only Class A Interest Holders, and the remainder of the entities listed above under the heading "May 4, 2001 Limited Partners" are and continue to be the only Class B Interest Holders. EX-10.5 17 mar2202_ex1005.txt EXHIBIT 10.5 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT OF H. J. HEINZ COMPANY, L.P. This First Amendment to Second Amended and Restated Limited Partnership Agreement (this "Amendment") of H. J. Heinz Company, L.P. (the "Partnership"), is entered into to be effective as of February 28, 2002 (the "Effective Date"), by, between and among Heinz Management Company, a Delaware corporation ("HMC"), as the General Partner hereof, and the entities named on Schedule A, as the Limited Partners hereof. Capitalized terms used and defined in this Amendment shall have the meanings assigned to them in this Amendment (including those in the recital paragraphs hereof), and capitalized terms used herein in this Amendment and not defined herein shall have the meanings assigned to them in the Current LP Agreement (as defined below), in each case, unless the context clearly requires otherwise. R E C I T A L S: WHEREAS, the Partnership was originally formed by the filing of a Certificate of Limited Partnership for the Partnership with the Secretary of State of the State of Delaware on October 6, 2000, and the Partnership is currently governed pursuant to that certain Second Amended and Restated Limited Partnership Agreement of the Partnership made and entered into as of May 3, 2001, as the same has been previously amended pursuant to the documents listed on Addendum 1 attached hereto (the "Current LP Agreement"); and WHEREAS, as of May 3, 2001, the only Limited Partners of the Partnership were those entities listed under the heading "May 3, 2001 Limited Partners" on Addendum 2 attached hereto, and effective as of May 4, 2001, the entities named under the heading "Merged Limited Partners" on Addendum 2 were merged with and into CMH, Inc., and as a result thereof, the only Limited Partners of the Partnership immediately thereafter were the entities listed under the heading "May 4, 2001 Limited Partners" on Addendum 2 attached hereto; and WHEREAS, in exchange for its contribution of certain assets to the Partnership (as hereinafter set forth), O. R. A. Corporation, a California corporation (the "New Limited Partner") desires to be admitted to the Partnership as a Limited Partner and additional Class B Interest Holder; and WHEREAS, the parties hereto desire to enter into this Amendment for the purpose of (a) amending the Current LP Agreement to reflect the admission of New Limited Partner into the Partnership as a limited partner and Class B Interest Holder hereof, (b) reallocating the relative interests of the Partners in the Partnership as hereinafter set forth, and (c) further amending the Current LP Agreement as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partners, intending to be legally bound, hereby agree as follows: 1. Admission of New Limited Partner. From and after the Effective Date of this Amendment, New Limited Partner is hereby admitted to the Partnership as a limited partner hereof, with such Class B Interest as hereinafter set forth, and in such capacity shall be a Class B Interest Holder, as hereinafter set forth (the "Admission"). In connection with such Admission, the Current LP Agreement is further amended as set forth below: (a) Additional Capital Contribution. Simultaneously with the full and complete execution of this Amendment, and in exchange for its admission as a Class B Interest Holder, New Limited Partner has made the Capital Contributions to the Partnership set forth on Schedule B attached to this Amendment (the "Contribution"), and the parties hereto acknowledge and agree that the fair market value of such assets on the date of their contribution, net of any liabilities assumed or taken subject to, is equal to the amount set forth on Schedule B attached hereto (the "Net Value"). The parties hereto acknowledge and agree that as of the Effective Date, the Unrecovered Capital of the New Limited Partner is equal to such Net Value. (b) Approvals. As required by and in accordance with Section 3.01 of the Current LP Agreement, the General Partner hereby specifically approves the issuance of such additional Class B Interests and the General Partner hereby agrees to such Net Value. The terms and conditions of the Admission have been approved by the Management Board of the Partnership, as set forth on Addendum 3 attached hereto. (c) Schedule A - Limited Partners. From and after the Effective Date, Schedule A attached to the Current LP Agreement is hereby deleted and superseded in its entirety and in its place and stead is substituted the Schedule A attached to this Amendment. (d) Schedule D - Class B Interest Holders. From and after the Effective Date, Schedule D attached to the Current LP Agreement is hereby deleted and superseded in its entirety and in its place and stead is substituted the Schedule D attached to this Amendment. (e) Schedule E - Net Equity Value and Percentage Interests. Subject to the provisions of Section 4.01 of the Current LP Agreement, from and after the Effective Date, the Schedule E attached to the Current LP Agreement is hereby deleted and superseded in its entirety and in its place and stead is substituted the Schedule E attached to this Amendment, and as a result thereof, from and after the Effective Date, the Partners shall be those persons and entities set forth on Schedule E to this Amendment and their relative Percentage Interests in the Partnership shall be as set forth on Schedule E to this Amendment. (f) Assumption of Liabilities. New Limited Partner is transferring all of its business operations to the Partnership, which includes liabilities incurred in connection with the conduct of such business (such as trade payables and various other liabilities in connection with employment of personnel and product disposition), and in that regard the Partnership agrees to assume (within the meaning of Section 752 of the Code) all of those liabilities of New Limited Partner other than the liabilities identified as Excluded 2 Liabilities in the ORA Assignment, Assumption and Bill of Sale Agreement attached hereto as Schedule F. As to New Limited Partner, the liabilities assumed by the Partnership shall constitute "Assumed Liabilities" as defined in the Current LP Agreement and the provisions of Section 4.07 of the Current LP Agreement will specifically apply . (g) Agreement to be Bound by Current LP Agreement. New Limited Partner agrees to be bound by all of the terms and provisions of the Current LP Agreement (including, without limitation, Section 4.07). The New Limited Partner does hereby irrevocably make, constitute and appoint the General Partner as its true and lawful representative and attorney-in-fact, as provided in Section 10.05 of the Current LP Agreement, and in connection therewith, the terms, conditions and provisions of Section 10.05 of the Current LP Agreement are hereby incorporated in this Amendment by reference and the same shall be effective as fully as if such terms, conditions and provisions had been included in this Amendment verbatim. 2. Representations and Warranties. Each of the Partners hereby represents and warrants to the other Partners the following: (a) It is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation with all requisite power and authority to enter into this Amendment and to conduct the business of the Partnership. (b) The Current LP Agreement, as amended by this Amendment, constitutes the legal, valid and binding obligation of such Partner enforceable in accordance with its terms. (c) No consents or approvals are required from any governmental authority or other person or entity for such Partner to enter into this Amendment. All corporate or partnership action on the part of such Partner necessary for the authorization, execution and delivery of this Amendment, and the consummation of the transactions contemplated hereby, have been duly taken. (d) The execution and delivery of this Amendment by such Partner, and the consummation of the transactions contemplated hereby, does not conflict with or contravene the provisions of its organizational documents or any agreement or instrument by which it or its properties are bound or any law, rule, regulation, order or decree to which it or its properties are subject. (e) Each Partner agrees to indemnify and hold harmless the Partnership and each other Partner and their officers, directors, shareholders, partners, employees, successors and assigns from and against any and all loss, damage, liability or expense (including reasonable out of pocket costs and attorneys' fees) which they may incur by reason, or in connection with, any breach of the foregoing representations and warranties by such Partner and all such representations and warranties shall survive the execution and delivery of this Amendment and the termination and dissolution of any Partner 3 and/or the Partnership (nothing herein shall constitute a waiver or extension of any applicable statute of limitations). 3. Consent. Notwithstanding any contrary right or privilege which may be contained in the Current LP Agreement, all Partners consent to the Admission and the Contribution and consent to and ratify this Amendment and the Current LP Agreement (as amended by this Amendment) and each of the Partners agrees to be bound by all the terms, conditions and provisions of the Current LP Agreement as amended by this Amendment. 4. Power of Attorney. Pursuant to Section 10.05 of the Current LP Agreement, the General Partner is executing this Amendment as attorney-in-fact for the Limited Partners. 5. No Dissolution/Continuation of the Partnership. The Partners agree to continue to serve as the partners of the Partnership and each agrees to continue the Partnership until the Partnership is terminated without reconstitution. Further, each of the Partners agrees (a) the business of the Partnership shall be deemed to have continued and (b) the Partnership has not been dissolved, terminated and shall not be wound up, as a result of the Admission and Contribution, notwithstanding any contrary rights and privileges which may be contained in the Current LP Agreement. 6. Ratification and Confirmation. Except to the extent specifically amended by this Amendment, the parties hereto do hereby ratify and confirm the terms and provisions of the Current LP Agreement, as previously amended. 7. Effective Date. This Amendment is effective as of the date first above mentioned. 8. Binding Effect. Except as herein otherwise provided to the contrary, this Amendment shall be binding upon and inure to the benefit of the parties hereto, their legal and personal representatives, successors and assigns; provided, however, that neither party shall have any right, power and authority to assign any rights, powers, duties or obligations hereunder. 9. Amendments. No amendment, alteration, modification or waiver of this Amendment, or any part hereof, shall be valid or effective unless in writing and signed by all the parties hereto. 10. Applicable Laws. The substantive laws of the State of Delaware and the applicable federal laws of the United States shall govern the validity, construction, enforcement and interpretation of this Amendment, and this Amendment shall be governed by and construed in accordance with the laws of the State of Delaware and the applicable federal laws of the United States. 11. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute but one and the same instrument which may be sufficiently evidenced by one counterpart, and any of the parties hereto may execute this Amendment by signing any such counterpart. 4 12. Headings and Titles. The headings and titles of Articles, Sections, Sub-sections and Paragraphs herein have been inserted as a matter of convenience of reference only and shall not control or affect the meaning or construction of any of the operative terms or provisions hereof or therein. 13. Gender. Whenever the context shall so require, all words herein in any gender shall be deemed to include the masculine, feminine, or neuter gender, and all singular words shall include the plural, and all plural words shall include the singular. 14. Construction. In case any one or more of the provisions contained in this Amendment shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalid, illegal or unenforceable provision or provisions shall be fully severable and shall not affect any other provision hereof and this Amendment shall be construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. Furthermore, in lieu of each such illegal, invalid or unenforceable provision there shall be added automatically as part of this Amendment a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 15. This Amendment. The words "herein," "hereof," "hereunder," "hereby," "this Amendment" and other similar reference shall be construed to mean and include this Amendment and all amendments thereof and supplements thereto unless the context should clearly indicate or require otherwise. 16. No Third Party Beneficiary Rights. This Amendment is made solely and specifically between and for the benefit of the parties hereto, and their respective successors and assigns, subject to the express provisions hereof relating to successors and assigns, and no other person, individual, corporation or entity, whatsoever, shall have any rights, interests, or claims hereunder or be entitled to any benefits under or on account of this Amendment as a third party beneficiary or otherwise. 17. Waiver. No consent or waiver, either expressed or implied, by any party to or of any breach or default by any other party, in the performance by such other party of the obligations thereof under this Amendment shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other party of the same or any other obligations of such other party under this Amendment. Failure on the part of any party to complain or to pursue complaints with respect to any acts or failure to act of any other party, or failure on the part of any party to declare any other party in default, irrespective of how long such default continues, shall not constitute a waiver by such party of the rights and remedies thereof under this Amendment or otherwise at law or in equity. 18. Exhibits. All exhibits, schedules, attachments, annexed instruments and addenda referred to herein shall be considered a part of this Amendment as fully as if and with the same force and effect as if such exhibit, schedule, attachment, annex or addendum had been included herein in full. [SIGNATURES BEGIN ON NEXT PAGE] 5 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date set forth in the introductory paragraph hereof. GENERAL PARTNER: HEINZ MANAGEMENT COMPANY, a Delaware corporation By: /s/ Leonard A. Cullo, Jr. -------------------------------------- Name: Leonard A. Cullo, Jr. ------------------------------------ Title: Vice President ----------------------------------- LIMITED PARTNERS: H. J. HEINZ COMPANY STAR-KIST FOODS, INC. HEINZ FROZEN FOODS COMPANY CMH, INC. H. J. HEINZ FINANCE COMPANY By: Heinz Management Company, attorney-in-fact pursuant to the power of attorney granted in Section 10.05 of the Current LP Agreement By: /s/ Leonard A. Cullo, Jr. ---------------------------------- Name: Leonard A. Cullo, Jr. -------------------------------- Title: Vice President ------------------------------- NEW CLASS A/B INTEREST HOLDER: O. R. A. Corporation, a California corporation By: /s/ Christopher J. Puma -------------------------------------- Name: Christopher J. Puma ------------------------------------ Title: Vice President ----------------------------------- Schedule A - Limited Partners The following entities are the Limited Partners of the Partnership as of the Effective Date: Class A Interest Holders: ------------------------ 1. H. J. Heinz Company, a Pennsylvania corporation 2. Star-Kist Foods, Inc., a California corporation 3. Heinz Frozen Foods Company, a Delaware corporation Class B Interest Holders: ------------------------ 1. H. J. Heinz Finance Company, a Delaware corporation 2. CMH, Inc., an Idaho corporation 3. O. R. A. Corporation, a California corporation. Schedule B - New Capital Contributions Simultaneously with the full and complete execution of this Amendment, and in exchange for its admission as a Class B Interest Holder, New Limited Partner has contributed the following assets to the capital of the Partnership: All those assets described in the ORA Assignment, Assumption and Bill of Sale Agreement attached hereto as Schedule F. In connection with the New Limited Partner's contribution to the capital of the Partnership of the assets set forth above, the Partnership agrees to assume (within the meaning of Section 752 of the Code) the following liabilities of the New Limited Partner: All those liabilities described in the ORA Assignment, Assumption and Bill of Sale Agreement attached hereto as Schedule F, other than Excluded Liabilities. Subject to the provisions of Section 4.01 of the Current LP Agreement, the parties hereto acknowledge and agree that the estimated fair market value of such contributed assets, on the date of their contribution, net of any liabilities assumed or taken subject to, is equal to $220.000.000.00. Schedule D - Class B Interest Holders As of the Effective Date, the following entities are the Class B Interest Holders: 1. H. J. Heinz Finance Company, a Delaware corporation 2. CMH, Inc., an Idaho corporation 3. O. R. A. Corporation, a California corporation. Schedule E - Net Equity Value and Percentage Interests As of the Effective Date, the net equity value of each Partner's Interest in the Partnership and the relative Percentage Interest of each Partner is as shown below: - -------------------------------------------------------------------------------------------------------- Partner Capital Contribution Percentage Interests - -------------------------------------------------------------------------------------------------------- Heinz Management Company 500,000 .004% - -------------------------------------------------------------------------------------------------------- H. J. Heinz Company, 4,893.000,000 38.308% - -------------------------------------------------------------------------------------------------------- Star-Kist Foods, Inc 1,608,000,000 12.589% - -------------------------------------------------------------------------------------------------------- Heinz Frozen Foods Company, 2,034,000,000 15.924% - -------------------------------------------------------------------------------------------------------- H. J. Heinz Finance Company 929,220,000 7.275% - -------------------------------------------------------------------------------------------------------- CMH, Inc 3,088,145,000 24.177% - -------------------------------------------------------------------------------------------------------- O. R. A. Corporation 220,000,000 1.722% - -------------------------------------------------------------------------------------------------------- Total 12,772,865,000 100.000%
Schedule F O.R.A. CORPORATION ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT THIS O.R.A. CORPORATION ASSIGNMENT, ASSUMPTION AND BILL OF SALE AGREEMENT (this "Agreement"), made as of this 28th day of February, 2002, by and among O.R.A. Corporation, a California corporation ("Assignor") and H. J. Heinz Company, L.P., a Delaware limited partnership ("Assignee"). RECITALS: WHEREAS, Assignor is a wholly owned subsidiary of Delimex Holdings, Inc., a Delaware corporation ("Delimex"); and WHEREAS, Assignor desires to assign, transfer and convey all of the Included Assets (as such term is defined in Section 1.1 below) to Assignee in exchange for a limited partnership interest in Assignee, and Assignee wishes to accept the assignment of such Included Assets, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I ASSIGNMENT Section 1.1. Assigned Assets. Assignor hereby assigns, transfers and conveys to the Assignee all of Assignor's right, title and interest in and to each and every asset, right and interest of every kind, nature or character whatsoever, wherever located, and whether direct or indirect, that are owned, used or held for use by, or for the benefit of or on the behalf of, in whole or in part, Assignor and used in connection with the manufacturing, marketing, distribution and sale of food products in the United States (the "Manufacturing Operations") including, without limitation, the following (but specifically excluding the Excluded Assets, as such term is defined in Section 1.2 below): (a) all machinery; tools; dies; molds; packaging materials; appliances; motorized and non-motorized vehicles; trailers, attachments and accessories; marine vessels; aircraft; railway rolling stock; furnishings; equipment (including, but not limited to, all spare and replacement parts); computer hardware; computer software; fuel stocks; plants; materials, stores, supplies, packaging and labeling; documents, records and other similar and dissimilar tangible records; and all other tangible personal property of every conceivable nature, kind, character and description associated with the Manufacturing Operations of Assignor (the "Property"); (b) all inventory, raw materials, finished products and work-in-progress of Assignor (the "Inventories"); (c) all real property leases (together with all modifications and amendments thereof and supplements thereto), where Assignor is the direct or indirect lessor or lessee of land, structures, fixtures and premises (the "Real Property Leases"); (d) all leases, subleases and assignments (together with all modifications and amendments thereof and supplements thereto), where Assignor is the direct or indirect lessor or lessee of machinery, equipment or any other personal property (the "Personal Property Leases"); (e) all easements, profits, licenses pertaining to real property, rights of access, rights of way and other similar or dissimilar rights in real property (together with all modifications and amendments thereof and supplements thereto), where Assignor is the direct or indirect grantor or grantee (the "Real Property Licenses"); (f) all written and oral contracts (together with all modifications and amendments thereof and supplements thereto) (the "Contracts"); (g) all licenses not pertaining to real property (including, but not limited to, computer software licenses) (together with all modifications and amendments thereof and supplements thereto) (the "Personal Property Licenses"); (h) all trade accounts receivable and all other similar or dissimilar receivables (the "Receivables"); (i) all prepaid expenses, other than prepaid taxes (the "Prepaid Expenses"); (j) all goodwill, going concern value and other intangible assets associated with the Manufacturing Operations of Assignor (the "Goodwill"); (k) all transferable or otherwise assignable approvals, permits, authorizations, licenses, orders, registrations, certificates, variances and other similar or dissimilar permits obtained from any governmental or quasi-governmental authority and pending applications (the "Permits"); (l) all patents, patent applications and patent claims, whether foreign or domestic, owned or licensed by Assignor; all copyrights, copyright applications or copyright claims, whether foreign or domestic, owned or licensed by Assignor; all trade secrets, business privileged materials, proprietary information and all other confidential information of Assignor, whether or not such information is related to the Manufacturing Operations of Assignor, including, without limitation, all information relating to sales, sales volume, sales methods, sales proposals, customers, suppliers, prospective customers, financial and accounting records, manuals, formulae, processes, methods, compositions, ideas, improvements, inventions, know-how, research and all other confidential and proprietary information (collectively, the "Proprietary Information"); 2 (m) all cash, bank and other accounts, bank and other balances, term or time deposits, lock box receipts and similar cash items (the "Accounts"); and (n) any claims, demands, judgments, actions, causes of action, joinders, contributions, indemnities, losses, damages, suits, inquiries, proceedings, grievances, arbitrations, judgments or other similar or dissimilar rights of Assignor (the "Claims"), whether such Claims are known or unknown, suspected or unsuspected, foreseen or unforeseen, real or imaginary, actual or potential, vested or contingent; whether arising at law, in equity or otherwise, under common or statutory law, state or federal law, or natural or any other law; whether as a result of active or passive negligence, strict liability in tort, breach of warranty (express or implied), breach of contract, duty to indemnify or any other theory of recovery, basis or cause whatsoever. Collectively, the assets, properties, rights and interests identified in subsections 1.1(a) through (n) above, together with all other assets, properties, rights and interests of Assignor not excluded in Section 1.2 below, are referred to in this Agreement as "Included Assets." Section 1.2. Excluded Assets. The following assets, properties, rights and interests, whether real or personal, tangible or intangible shall not be included as an Included Asset, and shall specifically be excluded from the assignment and transfer set forth in Section 1.1 above: (a) all trademarks, recipes (including formulae and process sheets), trade names, corporate names, trade dress, label designs and logos of the Assignor; (b) all intercompany receivables from Delimex Holdings, Inc.; (c) all assets, of whatever nature, relating to income taxes; and (d) all corporate records of Assignor including, without limitation, the corporate financial records, stock registry and minute books; (e) all shares of each of the following Mexican subsidiaries of Assignee: Delimex Mexicana, S.A. De C.V. Ancidur, S.A. De C.V. Delimex de Mexico, S.A. De C.V. Collectively, the assets, properties, rights and interests identified in subsections 1.2(a) - (e) above are referred to in this Agreement as "Excluded Assets." ARTICLE II ASSUMPTION Section 2.1 Assumed and Excluded Liabilities. Assignee hereby accepts all right, title and interest of Assignor in, to and under the Included Assets and agrees to fully assume, pay, discharge, perform and fulfill, or cause to be assumed, paid, discharged, performed or fulfilled, all 3 duties, liabilities and obligations in connection with, or arising from, such Included Assets from and after the date hereof. Assignee assumes no obligation with respect to the following: (a) all liabilities relating to the Excluded Assets; (b) all liabilities, of whatever nature, relating to income taxes; and (b) all intercompany payables to Delimex Holdings, Inc. or Heinz Finance Company; and (c) any other liabilities identified in writing by Assignor and Assignee no later than May 31, 2002 as not pertaining to the Manufacturing Operations. ARTICLE III DISCLAIMERS Section 3.1 AS IS, WHERE IS; Disclaimer. The Included Assets are being sold, transferred, conveyed, assigned and delivered to Assignee in an "AS IS, WHERE IS" condition. Assignor warrants that the Included Assets conveyed by Assignor are owned by such Assignor and that Assignor has the legal right, and is properly authorized and empowered, to sell, transfer, convey, assign and deliver all of its right, title and interest in and to the Included Assets to Assignee. EXCEPT AS OTHERWISE SET FORTH HEREIN, ASSIGNOR MAKES NO WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY REGARDING THE INCLUDED ASSETS, AND ASSIGNOR DISCLAIMS ALL OTHER WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL ASSIGNOR BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES RELATING TO OR CAUSED BY THE INCLUDED ASSETS. ARTICLE IV GENERAL Section 4.1. Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto. Section 4.2. Controlling Law. This Agreement shall be construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law provisions. Section 4.3. Further Assurances. Assignor and Assignee shall cooperate with each other with respect to the subject matter of this Agreement, and each party shall take such further actions and execute such further instruments or documents as the other party reasonably shall 4 request from time to time to implement the purposes of this Agreement. This Agreement shall not require the Assignor to assign to Assignee any Contract, Permit or other right if the assignment of same without the consent of any other party thereto would constitute a breach or a violation thereof or in any way impair the rights sought to be transferred to Assignee. Except as otherwise expressly provided herein, with respect to any Contract, Permit or other right to be assigned to Assignee hereunder, Assignor and Assignee, both prior to and after the date of this Agreement, shall use commercially reasonable efforts to obtain the consent to the assignment thereof promptly; provided however that Assignor shall not be required to make payments or to agree to any undertaking in connection with obtaining such consent. If any consent shall be unobtainable, Assignor shall use commercially reasonable efforts to assure to Assignee the benefits of such Contract, Permit or other right, as the case may be, and shall cooperate with Assignee in any reasonable arrangement designed to provide such benefits to Assignee (including, without limitation, (a) enforcement for the benefit of Assignee, of the rights of Assignor against a third party arising out of a breach or cancellation by such third party, (b) entering into appropriate subcontracting or agency arrangements or (c) holding such Contract, Permit or other right and any monies received therefrom in trust for Assignee); provided, that (i) Assignor shall not without the consent of Assignee, agree to any modification of any such Contract, Permit or other right in the course of obtaining any consents, or pay or commit to pay any consideration payable from the Included Assets, and (ii) Assignee shall (A) perform the obligations of Assignor arising under such Contract, Permit or other right after the date of this Agreement and (B) reimburse Assignor and hold Assignor harmless from and against all liabilities incurred or asserted as a result of Assignee's performance of such obligations. Section 4.4. Severability. If any provision of this Agreement shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect. Section 4.5. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute but one and the same instrument which may be sufficiently evidenced by one counterpart, and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 4.6. Entire Agreement.This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions whether oral or written. There are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party thereto to be bound. 5 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. ASSIGNOR : O.R.A. Corporation By:/s/ Christopher J. Puma ---------------------------------- Name: Christopher J. Puma -------------------------------- Title: Vice President ------------------------------- ASSIGNEE: H. J. HEINZ COMPANY, L.P. By: Heinz Management Company, its General Partner By: /s/ Leonard A. Cullo, Jr. ---------------------------------- Name: Leonard A. Cullo, Jr. -------------------------------- Title: Vice President ------------------------------- 6 Addendum 1 - Previous Amendment(s) to the Limited Partnership Agreement The Second Amended and Restated Limited Partnership Agreement of the Partnership, made and entered into as of May 3, 2001, has been previously amended pursuant to the documents listed below: No prior amendments. Addendum 2 - Previous Limited Partners As of May 3, 2001, the only Limited Partners of the Partnership were those entities listed below: May 3, 2001 Limited Partners ---------------------------- H. J. Heinz Company Star-Kist Foods, Inc. Heinz Frozen Foods Company H. J. Heinz Finance Company Portion Pac, Inc. Escalon Premier Brands, Inc. IDF Holdings, Inc. Quality Chef Foods, Inc. Thermo Pac, Inc. Boulder, Inc. CMH, Inc. Central Commissary, Inc. Effective as of May 4, 2001, the entities listed below were merged with and into CMH, Inc.: Merged Limited Partners ----------------------- Portion Pac, Inc., Escalon Premier Brands, Inc. IDF Holdings, Inc. Quality Chef Foods, Inc. Thermo Pac, Inc. Boulder, Inc. Central Commissary, Inc. As a result thereof, as of May 4, 2001, the only Limited Partners of the Partnership were those listed below: May 4, 2001 Limited Partners ---------------------------- H. J. Heinz Company Star-Kist Foods, Inc. Heinz Frozen Foods Company H. J. Heinz Finance Company CMH, Inc. H. J. Heinz Company, Star-Kist Foods, Inc. and Heinz Frozen Foods Company are and continue to be the only Class A Interest Holders, and the remainder of the entities listed above under the heading "May 4, 2001 Limited Partners", together with the New Limited Partner, are and continue to be the only Class B Interest Holders. Addendum 3 - Management Board Approval WRITTEN CONSENT AND AUTHORIZATION OF MANAGERS The undersigned, all being Managers of the Management Board of H. J. Heinz Company, L.P., a Delaware limited partnership (the "Partnership"), waive notice of the time, place and purpose of a special meeting of the Managers of the Management Board and hereby consent to and adopt the resolutions set forth below, with the same force and effect as if such resolutions had been duly adopted at a meeting of the Managers of the Partnership duly called and held. This Written Consent and Authorization and the following resolutions are being made in accordance with Section 8.02 of the First Amended and Restated Limited Partnership Agreement (as previously amended, the "Current Partnership Agreement") of the Partnership, dated as of May 3, 2001. The only Managers of the Management Board of the Partnership are Arthur Winkleblack, Leonard Cullo and Laura Stein, appointed by the Class B Interest Holders, and Joseph Jimenez and Neil Harrison, appointed by the Class A Interest Holders. In accordance with Section 8.02(c) of the Current Partnership Agreement, a majority in number of the Managers shall constitute a quorum for the transaction of business. Further, Section 8.02(d) of the Current Partnership Agreement provides that any action required to be taken at a meeting of the Management Board may instead be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by the number of Managers required to approve such action in a properly called and constituted meeting of the Management Board at which all of the Managers were present and voting. Capitalized terms used and defined in this Written Consent and Authorization shall have the meanings assigned to them herein, and capitalized terms used but not defined in this Written Consent and Authorization shall have the meanings assigned to them in the Current Partnership Agreement. The signature, consent and authorization of any Manager shall not be conditioned upon any of the other Managers signing this Written Consent and Authorization, and the failure of one or more of the Managers to execute this Written Consent and Authorization shall not have any effect upon the Written Consent and Authorization of the Managers who have signed and executed this Written Consent and Authorization. This Written Consent and Authorization may be signed in multiple counterparts and the signature pages of the various counterparts may be combined together in one document. RESOLUTIONS: RESOLVED, the Management Board of the Partnership hereby (a) consents to and authorizes the Partnership to admit O. R. A. Corporation, a California corporation, (the "New Limited Partner") as an additional Class B Interest Holder (the "Admission"), in exchange for the capital contribution (the "Capital Contribution") to the Partnership by such New Limited Partner of the business operations and assets set forth on Schedule B attached to that certain First Amendment to the Second Amended and Restated Limited Partnership Agreement of H. J. Heinz Company, L.P., entered into effective as of February 28, 2002 (the "First Amendment"), (b) agrees to the Net Value set forth on Schedule B to the First Amendment, and (c) agrees to the adjustments made in the booked-up equity value and Percentage Interests set forth on Schedule E to the First Amendment; FURTHER RESOLVED, the General Partner is authorized to enter into such First Amendment (both on its own behalf and in its capacity as attorney-in-fact on behalf of the Limited Partners in accordance with Section 10.05 of the Current Partnership Agreement) and the General Partner is authorized and directed to do or take all acts, actions and things and to pay such costs and expenses and taxes as the General Partner may determine to be necessary or appropriate in connection with or incidental to the matters set forth in this Resolution and to enter into, execute, deliver and perform in accordance with such other agreements, contracts, documents and other instruments (both on its own behalf, on behalf of the Limited Partners and on behalf of the Partnership) as the General Partner may determine to be necessary or appropriate in connection with or incidental to the completion of the Admission and the capital Contribution (collectively, the "Admission Documents"), such approval to be evidenced conclusively by the General Partner's execution and delivery of those documents, and the Partnership and the General Partner is authorized and directed to take all actions required of each pursuant to the First Amendment and the Admission Documents and take such actions as may be necessary or convenient to implement completion of the Admission or the performance by the Partnership of its obligations under and pursuant to the Admission Documents or in connection with the completion of transactions contemplated therein or herein, and such documents are hereby approved; and FURTHER RESOLVED, the Management Board and the Managers executing this Written Consent and Authorization, on behalf of the Partnership, hereby consent to all actions previously taken or to be taken on behalf of the Partnership in connection with or related to the Admission or any of the Admission Documents and the consummation of the Admission and the Admissions Documents or the transactions contemplated therein or herein. [THIS SPACE INTENTIONALLY LEFT BLANK] [SIGNATURES BEGIN ON NEXT PAGE] 2 EXECUTED by the undersigned as of, but not necessarily on, February 28, 2002. ------------------------------------ ARTHUR WINKLEBLACK ------------------------------------ LEONARD CULLO ------------------------------------ LAURA STEIN ------------------------------------ JOSEPH JIMENEZ ------------------------------------ NEIL HARRISON 3 EX-21.1 18 mar2202_ex2101.txt EXHIBIT 21.1 Subsidiaries of H.J. Heinz Finance Company Subsidiary State of Organization ---------- --------------------- 1. CMH, Inc. Idaho 2. Trademark Management Company Idaho 3. H.J. Heinz Company, L.P. Delaware EX-23.1 19 mar2202_ex2301.txt EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-4 of the H.J. Heinz Finance Company of our report dated August 27, 2001 relating to the financial statements of the U.S. Group of H.J. Heinz Company, which appears in such Registration Statement. We also consent to the references to us under the headings "Experts" and "Selected Historical Consolidated and Combined Financial Data" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Pittsburgh, PA March 26, 2002 EX-23.2 20 mar2202_ex2302.txt EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-4 of the H.J. Heinz Finance Company of our report dated June 14, 2001, except for footnote 18, for which the date is July 6, 2001 relating to the financial statements, which appears in the H.J. Heinz Company's 2001 Annual Report to Shareholders, which is incorporated by reference in its Annual Report on Form 10-K for the year ended May 2, 2001. We also consent to the incorporation by reference of our report dated June 14, 2001 relating to the financial statement schedules, which appears in such Annual Report on Form 10-K. We also consent to the references to us under the headings "Experts" and "Heinz Selected Consolidated Financial Data" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Pittsburgh, PA March 26, 2002 EX-24.1 21 mar2202_ex2401.txt EXHIBIT 24.1 POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Arthur B. Winkleblack, Laura Stein and Leonard A. Cullo, Jr., and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and supplements to a registration statement on Form S-4, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Signature Capacity Date --------- -------- ---- /s/ Leonard A. Cullo, Jr. Director and President March 13, 2002 - ---------------------------------- Leonard A. Cullo, Jr. /s/ Arthur Winkleblack Director Chief Financial and - ---------------------------------- Accounting Officer March 13, 2002 Arthur Winkleblack /s/ Laura Stein Director, Vice President and Secretary March 13, 2002 - ---------------------------------- Laura Stein /s/ Andrew L. Stidd Director March 13, 2002 - ---------------------------------- Andrew L. Stidd
EX-24.2 22 mar2202_ex2402.txt EXHIBIT 24.2 POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Arthur B. Winkleblack, Laura Stein and Leonard A. Cullo, Jr., and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and supplements to a registration statement on Form S-4, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Signature Capacity Date --------- -------- ---- /s/ William R. Johnson Chairman of the Board of Directors, March 13, 2002 - -------------------------------- President and Chief Executive Officer William R. Johnson /s/ Nicholas F. Brady Director March 13, 2002 - -------------------------------- Nicholas F. Brady /s/ Mary C. Choksi Director March 13, 2002 - -------------------------------- Mary C. Choksi /s/ Leonard S. Coleman, Jr. Director March 13, 2002 - -------------------------------- Leonard S. Coleman, Jr. /s/ Peter Coors Director March 13, 2002 - -------------------------------- Peter Coors /s/ Edith E. Holiday Director March 13, 2002 - -------------------------------- Edith E. Holiday /s/ Samuel C. Johnson Director March 13, 2002 - -------------------------------- Samuel C. Johnson /s/ Candace Kendle Director March 13, 2002 - -------------------------------- Candace Kendle /s/ Dean R. O'Hare Director March 13, 2002 - -------------------------------- Dean R. O'Hare /s/ Thomas J. Usher Director March 13, 2002 - -------------------------------- Thomas J. Usher /s/ David R. Williams Director March 13, 2002 - -------------------------------- David R. Williams Signature Capacity Date --------- -------- ---- /s/ James M. Zimmerman Director March 13, 2002 - -------------------------------- James M. Zimmerman /s/ Arthur Winkleblack Executive Vice President and Chief March 13, 2002 - -------------------------------- Financial Officer (Principal Arthur Winkleblack Financial Officer) /s/ Bruna Gambino Corporate Controller March 13, 2002 - -------------------------------- (Principal Accounting Officer) Bruna Gambino
EX-25.1 23 mar2202_ex2501.txt EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ---------------------------- Bank One, National Association (Exact name of trustee as specified in its charter) A National Banking Association 36-0899825 (I.R.S. employer identification number) 1 Bank One Plaza, Chicago, Illinois 60670-0120 (Address of principal executive offices) (Zip Code) Bank One, National Association 1 Bank One Plaza, Suite IL1-0120 Chicago, Illinois 60670-0120 Attn: Steven M. Wagner, Law, Compliance, and Government Relations Department, (312) 732-3163 (Name, address and telephone number of agent for service) ----------------------------- H.J. Heinz Finance Company (Exact name of obligor as specified in its charter) Delaware 82-0382406 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 600 Grant Street Pittsburgh, Pennsylvania 15219 (Address of principal executive offices) (Zip Code) 6.625% Guaranteed Notes due 2011 6.00% Guaranteed Notes due 2012 6.75% Guaranteed Notes due 2032 (Title of Indenture Securities) H.J. Heinz Company (Exact name of obligor as specified in its charter) Delaware (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 600 Grant Street Pittsburgh, Pennsylvania 15219 (Address of principal executive offices) (Zip Code) Guarantee of 6.625% Guaranteed Notes due 2011 Guarantee of 6.00% Guaranteed Notes due 2012 Guarantee of 6.75% Guaranteed Notes due 2032 (Title of Indenture Securities) Item 1. General Information. Furnish the following information as to the -------------------- trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of Currency, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C., The Board of Governors of the Federal Reserve System, Washington D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations With the Obligor. If the obligor is an affiliate of the ------------------------------ trustee, describe each such affiliation. No such affiliation exists with the trustee. Item 16. List of exhibits. List below all exhibits filed as a part of this ----------------- Statement of Eligibility. 1. A copy of the articles of association of the trustee now in effect.* 2. A copy of the certificates of authority of the trustee to commence business.* 3. A copy of the authorization of the trustee to exercise corporate trust powers.* 4. A copy of the existing by-laws of the trustee.* 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 8. Not Applicable. 9. Not Applicable. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bank One, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago and the State of Illinois, on this 15th day of March, 2002. Bank One, National Association, Trustee By /s/ Steven M. Wagner Steven M. Wagner First Vice President * Exhibits 1, 2, 3, and 4 are herein incorporated by reference to Exhibits bearing identical numbers in Item 16 of the Form T-1 of Bank One, National Association, filed as Exhibit 25 to the Registration Statement on Form S-3 of Household Finance Corporation filed with the Securities and Exchange Commission on March 24, 2000 (Registration No. 333-33240). EXHIBIT 6 THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT March 15, 2002 Securities and Exchange Commission Washington, D.C. 20549 In connection with the qualification of an indenture among H.J. Heinz Finance Company, H.J. Heinz Company, and Bank One, National Association, as Trustee, the undersigned, in accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the reports of examinations of the undersigned, made by Federal or State authorities authorized to make such examinations, may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, Bank One, National Association By /s/ Steven M. Wagner Steven M. Wagner First Vice President EXHIBIT 7 Bank One, NA - ----------------------------------------------------------- FFIEC 031 Legal Title of Bank RC-1 Chicago - ----------------------------------------------------------- 11 City IL 60670 - ----------------------------------------------------------- State Zip Code Transmitted to EDS as 0172473 on 02/14/02 at 11:02:09 CST FDIC Certificate Number - 03618 Consolidated Report of Condition for Insured Commercial and State-Chartered Savings Banks for December 31, 2001 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. Schedule RC-Balance Sheet Dollar Amounts in Thousands RCFD Bil/Mil/Thou - --------------------------------------------------- ASSETS 1. Cash and balances due from depository Institutions (from Schedule RC-A): a. Noninterest-bearing balances and currency and coin (1) ________________________________ 0081 12,684,893 1.a b. Interest-bearing balances(2)_________________ 0071 953,557 1.b 2. Securities: a. Held-to-maturity securities (from Schedule RC-B, column A) _____________________________ 1754 0 2.a b. Available-for-sale securities (from Schedule RC-B, column D) _____________________________ 1773 35,870,041 2.b 3. Federal funds sold and securities purchased under agreements to resell _____________________ 1350 20,257,107 3 4. Loans and lease financing receivables (from Schedule RC-C): a. Loans and leases held for sale_______________ 5369 473,360 4.a b. Loans and leases, net of unearned income______________________ B528 83,166,314 4.b c. LESS: Allowance for loan and lease losses____________ 3123 2,209,028 4.c d. Loans and leases, net of unearned Income and allowance (item 4.b minus 4.c) B529 80,957,286 4.d 5. Trading assets (from Schedule RC-D)_____________ 3545 3,543,926 5 6. Premises and fixed assets (including capitalized leases)_____________________________ 2145 880,464 6 7. Other real estate owned (from Schedule RC-M)____ 2150 26,445 7 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)___________________________________________ 2130 266,554 8 9. Customers' liability to this bank on acceptances outstanding ____________________________________ 2155 208,471 9 10. Intangible assets: a. Goodwill ____________________________________ 3163 448,690 10.a b. Other Intangible assets (from Schedule RC-M)________________________________________ 0426 3,627 10.b 11. Other assets (from Schedule RC-F)_______________ 2160 4,448,151 11 12. Total assets (sum of items 1 through 11)________ 2170 161,022,572 12 - ---------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. Bank One, NA - ----------------------------------------------------------- FFIEC 031 Legal Title of Bank RC-2 Transmitted to EDS as 0172473 on 02/14/02 at 11:02:09 CST FDIC Certificate Number - 03618 12 Schedule RC-Continued Dollar Amounts in Thousands Bil/Mil/Thou - --------------------------------------------------- LIABILITIES 13. Deposits: a. In domestic offices (sum of totals of RCON columns A and C from Schedule RC-E, part I) 2200 81,019,724 13.a (1) Noninterest-bearing (1)__6631 34,308,625 13.a.1 (2) Interest-bearing ________6636 46,711,099 13.a.2 b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RCFN RC-E, part II) 2200 26,357,544 13.b (1) Noninterest-bearing_____ 6631 640,616 13.b.1 (2) Interest-bearing________ 6636 25,716,928 RCFD 13.b.2 14. Federal funds purchased and securities sold under agreements to repurchase 2800 8,206,199 14 15. Trading liabilities (from Schedule RC-D)________ 3548 3,131,652 15 16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases) (from Schedule RC-M):_ 3190 21,671,080 16 17. Not applicable 18. Bank's liability on acceptances executed and outstanding_____________________________________ 2920 208,471 18 19. Subordinated notes and debentures(2)____________ 3200 4,000,516 19 20. Other liabilities (from Schedule RC-G)__________ 2930 5,386,964 20 21. Total liabilities (sum of items 13 through 20)__ 2948 149,982,150 21 22. Minority interest in consolidated subsidiaries__ 3000 50,200 22 EQUITY CAPITAL 23. Perpetual preferred stock and related surplus___ 3838 0 23 24. Common stock____________________________________ 3230 200,858 24 25. Surplus (exclude all surplus related to preferred stock)________________________________ 3839 6,661,081 25 26. a. Retained earnings____________________________ 3632 4,134,252 26.a b. Accumulated other comprehensive Income (3)___ B530 (5,969) 26.b 27. Other equity capital components (4)_____________ A130 0 27 28. Total equity capital (sum of items 23 through 27) ____________________________________ 3210 10,990,222 28 29. Total liabilities, minority interest, and equity capital (sum of Items 21, 22, and 28)____ 3300 161,022,572 29 Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank by independent external auditors as RCFD Number of any date during 2000__________________________ 6724 N/A M.1
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 = Attestation on bank management's assertion on the effectiveness of the banks internal control over financial reporting by a certified public accounting firm 4 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 5 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 6 = Review of the bank's financial statements by external auditors 7 = Compilation of the bank's financial statements by external auditors 8 = Other audit procedures (excluding tax preparation work) 9 = No external audit work - ------------- (1) Includes total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus. (3) Includes net unrealized holding gains (losses) on available-for-sale securities, accumulated net gains (losses) on cash flow hedges, cumulative foreign currency translation adjustments, and minimum pension liability adjustments. (4) Includes treasury stock and unearned Employee Stock Ownership Plan shares. EX-99.1 24 mar2202_ex9901.txt EXHIBIT 99.1 LETTER OF TRANSMITTAL for o% Guaranteed Notes Due 20__ of H.J. HEINZ FINANCE COMPANY Pursuant to the EXCHANGE OFFER in Respect of All of Its Outstanding o% Guaranteed Notes due 20__ for o% Guaranteed New Notes due 20__ --------------------------- Pursuant to the Prospectus Dated o, 2002 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON o, 2002 UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE"). To: Bank One Trust Company, N.A., as Exchange Agent By Mail or Hand/Overnight Delivery: By Facsimile: Bank One Trust Company, N.A. 312 407-8853 One North State Street Attention: Exchanges Ninth Floor Confirm by Telephone: Chicago, Illinois 60602 Attention: Exchanges 800 524-9472 --------------------------- DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below). As used herein, the term "holder" means a holder of Old Notes (as defined below), including any participant ("DTC Participant") in the book-entry transfer facility system of The Depository Trust Company ("DTC"), whose name appears on a security position listing as the owner of the Old Notes. As used herein, the term "certificates" means physical certificates representing Old Notes. To participate in the Exchange Offer (as defined below), holders must tender by (a) book-entry transfer pursuant to the procedures set forth in the Prospectus under "The Exchange Offer--Book-Entry Transfer" or (b) forwarding certificates herewith. Holders who are DTC Participants tendering by book-entry transfer may execute such tender through the Automated Tender Offer Program ("ATOP") of DTC. A holder using ATOP should transmit its acceptance to DTC on or prior to the Expiration Date. DTC will verify such acceptance, execute a book-entry transfer of the tendered Old Notes into the account of Bank One Trust Company (the "Exchange Agent") at DTC and then send to the Exchange Agent a Book-Entry Confirmation (as defined below), including an agent's message (as defined below) confirming that DTC has received an express acknowledgment from such holder that such holder has received and agrees to be bound by this Letter of Transmittal and that the Company (as defined below) may enforce this Letter of Transmittal against such holder. The Book-Entry Confirmation must be received by the Exchange Agent in order for the tender relating thereto to be effective. Book-entry transfer to DTC in accordance with DTC's procedures does not constitute delivery of the Book-Entry Confirmation to the Exchange Agent. If the tender is not made pursuant to the book-entry transfer procedures, certificates, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date in order for such tender to be effective. Holders of Old Notes whose certificates for such Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date or who cannot complete the procedures for book-entry transfer on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus. The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its sole discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall notify the holders of the Old Notes of any extension by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. 2 List below the Old Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, list the certificate numbers, principal amounts and number of beneficial holders on a separately executed schedule and affix the schedule to this Letter of Transmittal. See Instruction 3.
- ------------------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OLD NOTES TENDERED - ------------------------------------------------------------------------------------------------------------------------------------ Name(s) and Address(es) of Registered Holder(s) Description of Certificate Principal Amount of Number of (Please Fill In, If Blank) Old Notes Number(s)* Old Notes Tendered Beneficial Holders Tendered (If Less Than All Are for which Old Tendered)** Notes are Held - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- $ - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL PRINCIPAL AMOUNT OF OLD NOTES $ - ----------------------------------------------------------------------------------------------------------------------------------- TENDERED * Need not be completed by holders tendering by book-entry transfer. ** Old Notes may be tendered in whole or in part in denominations of $1,000 and integral multiples thereof, provided that if fewer than all of the Old Notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining Old Notes must be $1,000 or any integral multiple of $1,000 in excess thereof. All Old Notes held shall be deemed tendered unless a lesser number is specified in this column. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------------------
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (defined in Instruction 1) ONLY) [ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ____________________________________________ DTC Account Number: _______________________________________________________ Transaction Code Number:___________________________________________________ [ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) of Old Notes:______________________________ Window Ticket Number (if any):_____________________________________________ Date of Execution of Notice of Guaranteed Delivery:________________________ Name of Institution which Guaranteed Delivery:_____________________________ If Guaranteed Delivery is to be made by Book-Entry Transfer: Name of Tendering Institution:_____________________________________________ DTC Account Number:_______________________________________________________ Transaction Code Number:___________________________________________________ [ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OR UNTENDERED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. [ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO HOLDS OLD NOTES ACQUIRED FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND 3 WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO FOR USE IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED FOR YOUR OWN ACCOUNT IN EXCHANGE FOR SUCH OLD NOTES. Name:______________________________________________________________________ Address:___________________________________________________________________ Area Code and Telephone Number:____________Contact Person:_________________ Principal Amount of Old Notes so Held: $___________________________________ 4 Ladies and Gentlemen: The undersigned hereby tenders to H.J. Heinz Finance Company, a Delaware corporation (the "Company"), the aggregate principal amount of Old Notes of each series indicated in this Letter of Transmittal, upon the terms and subject to the conditions set forth in the Company's Prospectus dated o, 2002 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is hereby acknowledged, and in this Letter of Transmittal, which together constitute the Company's offer (the "Exchange Offer") to exchange $o million principal amount of its o% notes due 20__, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for $o million principal amount of its issued and outstanding o% notes due 20__ (the "Old Notes" and, together with the New Notes, the "Notes"). Subject to, and effective upon, the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Old Notes as are being tendered hereby and hereby irrevocably constitutes and appoints the Exchange Agent as attorney-in-fact of the undersigned with respect to such Old Notes (with full knowledge that the Exchange Agent is also acting as agent of the Company in connection with the Exchange Offer), with full power of substitution (such power of attorney being an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver certificates for Old Notes to the Company together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes to be issued in exchange for such Old Notes, (ii) present certificates for such Old Notes for transfer, and to transfer the Old Notes on the books of the Company, and (iii) receive for the account of the Company all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and conditions of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Notes tendered hereby and to acquire New Notes issuable upon exchange of such tendered Old Notes, and that, when the Old Notes are accepted for exchange, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sale agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim when the same are accepted by the Company. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, assignment and transfer of the Old Notes tendered hereby, and the undersigned will comply with any obligations it may have under the exchange and registration rights agreement (as set forth in the Prospectus). The undersigned further agrees that acceptance of any tendered Old Notes by the Company and the issuance of New Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the exchange and registration rights agreement and that the Company shall have no further obligations or liabilities thereunder (except in certain limited circumstances). The undersigned hereby further represents that any New Notes acquired in exchange for Old Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Notes, whether or not such person is the undersigned, that neither the holder of such Old Notes nor any such other person is participating, or intends to participate, or has an arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act of 1933 (as amended, the "Securities Act")) of such New Notes and that neither the holder of such Old Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. The undersigned also acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the provisions of the Securities Act), provided that such New Notes are acquired in the ordinary course of such holders' business and such holders are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate in the distribution of such New Notes. However, the Company does not intend to request the SEC to consider, and the SEC has not considered, the Exchange Offer in the context of a no-action letter, and there can be no assurance that the staff of the SEC would make a similar determination 5 with respect to the Exchange Offer as in other circumstances. If any holder is an affiliate of the Company, or is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Notes for its own account in exchange for Old Notes acquired as a result of market-making or other trading activities (a "Participating Broker-Dealer"), it represents that the Old Notes to be exchanged for the New Notes were acquired by it as a result of market-making or other trading activities and acknowledges that it will deliver a Prospectus in connection with any resale of such New Notes; however, by so acknowledging and by delivering a Prospectus, such Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company has agreed that, subject to the provisions of the exchange and registration rights agreement, the Prospectus may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes which were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities, for a period ending 180 days after the Expiration Date or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. Any person, including any Participating Broker-Dealer, who is an "affiliate" may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each Participating Broker-Dealer by tendering such Old Notes and executing this Letter of Transmittal, agrees that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference therein, in the light of the circumstances under which they were made, not misleading, such Participating Broker-Dealer will suspend the sale of New Notes pursuant to the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to the Participating Broker-Dealer or the Company has given notice that the sale of the New Notes may be resumed, as the case may be. If the Company gives such notice to suspend the sale of the New Notes, it shall extend the 180-day period referred to above during which Participating Broker-Dealers are entitled to use the Prospectus in connection with the resale of New Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the supplemental or amended Prospectus necessary to permit resales of the New Notes or to and including the date on which the Company has given notice that the sale of New Notes may be resumed, as the case may be. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal of Tenders" section of the Prospectus. Holders of Old Notes whose Old Notes are accepted for exchange will not receive any interest on such Old Notes, and the undersigned hereby waives the right to receive any interest on such Old Notes in connection with the Exchange Offer. The name(s) and address(es) of the registered holder(s) of the Old Notes tendered hereby should be printed above in the box entitled "Description of Old Notes Tendered," if they are not already set forth in such box, as they appear on the certificates representing such Old Notes. The certificate number(s) of the Old Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. If tendered Old Notes are not exchanged pursuant to the Exchange Offer for any reason, or if certificates are submitted for more Old Notes than are tendered or accepted for exchange, certificates of such unexchanged or untendered Old Notes will be returned (or, in the case of Old Notes tendered by book-entry transfer, such Old Notes will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer. 6 The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Old Notes tendered hereby. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the New Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Old Notes, that such New Notes be credited to the account indicated above maintained at DTC. If applicable, substitute certificates representing Old Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Old Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions" below, the undersigned hereby directs that the New Notes be delivered to the undersigned at the address shown above in the box entitled "Description of Old Notes Tendered." 7 HOLDER(S) SIGN HERE (See Instructions 2, 5 and 6) (Please Complete Substitute Form W-9 on Page 14) (Note: Signature(s) Must be Guaranteed if Required by Instruction 2) Must be signed by registered holders exactly as name(s) appear(s) on certificates for the Old Notes hereby tendered or on a security position listing, or by any persons authorized to become the registered holders by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by the Company, the Trustee for the Old Notes, or the Exchange Agent to comply with the restrictions on transfer applicable to the Old Notes). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary or representative capacity, please set forth the signer's full title. See Instruction 5. ________________________________________________________________________________ (Signatures of Holders) Date: ___________________ Name: __________________________________________________________________________ (Please Print) Capacity (full title): _________________________________________________________ Address:________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number:_________________________________________________ Taxpayer Identification or Social Security No.:_________________________________ GUARANTEE OF SIGNATURE (See Instructions 2 and 5) Authorized Signature: __________________________________________________________ Date:______________________ Name of Firm:___________________________________________________________________ (Please Print) Capacity (full title):__________________________________________________________ Address:________________________________________________________________________ ________________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number: ________________________________________________ SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 4, 5 and 6) To be completed ONLY if the New Notes and/or any Old To be completed ONLY if the New Notes and/or any Old Notes that are not tendered are to be issued in the name of Notes that are not tendered are to be sent to someone other than someone other than the registered holder of the Old Notes whose the registered holder of the Old Notes whose name appears name appears above. above, or to such registered holder at an address other than that Issue [ ] New Notes [ ] Old Notes not Tendered to: Name: --------------------------------------------------------------------------- (Please Print) Address: - -------------------------------------------------------------------------------- (Include Zip Code) - -------------------------------------------------------------------------------- (Area Code and Telephone Number) - -------------------------------------------------------------------------------- (Taxpayer Identification or Social Security Number) SPECIAL DELIVERY INSTRUCTIONS (See Instructions 4, 5 and To be completed ONLY if the New Notes and/or any Old Notes that are not tendered are to be sent to someone other than the registered holder of the Old Notes whose name appears above, or to such registered holder at an address other than that shown above. Mail [ ] New Notes [ ] Old Notes not Tendered to: Name: --------------------------------------------------------------------------- (Please Print) Address: - -------------------------------------------------------------------------------- (Include Zip Code) - -------------------------------------------------------------------------------- (Area Code and Telephone Number) - -------------------------------------------------------------------------------- (Taxpayer Identification or Social Security Number) 8 INSTRUCTIONS Forming Part of the Terms and Conditions of the Offer of H.J. Heinz Finance Company to Exchange its o% New Notes Due 20__ for All of its Outstanding o% Notes Due 20__. 1. Book-Entry Transfer; Delivery of this Letter of Transmittal and Notes; Guaranteed Delivery Procedures. To tender in the Exchange Offer, holders must tender by (a) forwarding certificates herewith or (b) book-entry transfer, pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering" and "--Book-Entry Transfer" in the Prospectus. Holders who are DTC Participants tendering by book-entry transfer may execute such tender through DTC's ATOP system. A holder using ATOP should transmit its acceptance to DTC on or prior to the Expiration Date. DTC will verify such acceptance, execute a book-entry transfer of the tendered Old Notes into the Exchange Agent's account at DTC and then send to the Exchange Agent a Book-Entry Confirmation, including an agent's message confirming that DTC has received an express acknowledgment from such holder that such holder has received and agrees to be bound by this Letter of Transmittal and that the Company may enforce this Letter of Transmittal against such holder. The Book-Entry Confirmation must be received by the Exchange Agent in order for the tender relating thereto to be effective. Book-entry transfer to DTC in accordance with DTC's procedures does not constitute delivery of the Book-Entry Confirmation to the Exchange Agent. The term "Book-Entry Confirmation" means a timely confirmation of a book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The term "agent's message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal (including the representations contained herein) and that the Company may enforce the Letter of Transmittal against such participant. If the tender is not made pursuant to the book-entry transfer procedures, certificates, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date in order for such tender to be effective. Old Notes may be tendered in whole or in part in denominations of $1,000 and integral multiples thereof, provided that if fewer than all of the Old Notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining Old Notes must be $1,000 or any integral multiple of $1,000 in excess thereof. Holders of Old Notes whose certificates for Old Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution (by facsimile transmission, mail or hand delivery) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company, setting forth the name and address of the holder of Old Notes and the amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the Expiration Date, the certificates for all physically tendered Old Notes, or a Book-Entry Confirmation, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) a properly executed Letter of Transmittal, or an agent's message in lieu thereof, as well as the certificates for all physically tendered Old Notes in proper form for transfer or Book-Entry Confirmation, as the case may be, and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three NYSE trading days after the Expiration Date. The Notice of Guaranteed Delivery must be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent on or prior to the Expiration Date, and must include a guarantee by an Eligible Institution in the form set forth in such notice. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934 as an "Eligible Guarantor Institution," including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; 9 (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS LETTER OF TRANSMITTAL OR ANY OLD NOTES TO THE COMPANY. The Company will not accept any alternative, conditional or contingent tenders. Each tendering holder, by book- entry transfer through ATOP or execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Notes) of Old Notes tendered herewith, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above; or (ii) such Old Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature on this Letter of Transmittal. See Instruction 5. 3. Inadequate Space. If the space provided in the box captioned "Description of Old Notes Tendered" is inadequate, the certificate number(s) and/or the principal amount of Old Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. Partial Tenders (Not Applicable to Holders of Old Notes Who Tender by Book-Entry Transfer); Withdrawal Rights. Tenders of Old Notes will be accepted only in the principal amount of $1,000 and integral multiples thereof, provided that if fewer than all of the Old Notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining Old Notes must be $1,000 or any integral multiple of $1,000 in excess thereof. If less than all of the Old Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Notes to be tendered in the box above entitled "Description of Old Notes Tendered--Principal Amount of Old Notes Tendered (If Less Than All Are Tendered)." A reissued certificate representing the balance of untendered Old Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. ALL OF THE OLD NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to the Expiration Date. In order for a withdrawal to be effective prior to that time, a written or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person having deposited the Old Notes to be withdrawn, the aggregate principal amount of Old Notes of each series to be withdrawn and (if certificates for such Old Notes have been tendered) the name of the registered holder of the Old Notes as set forth on the certificate for the Old Notes, if different from that of the person who tendered such Old Notes. If certificates for the Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such certificates for the Old Notes, the tendering holder must submit the serial numbers shown on the particular certificates for the Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book- 10 entry transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus, the notice of withdrawal must specify the name and number of the account at the book-entry transfer facility system of DTC to be credited with the withdrawal of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written or facsimile transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed to have been validly tendered for purposes of the Exchange Offer, and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may be retendered at any subsequent time on or prior to the Expiration Date by following the procedures described in the Prospectus under "The Exchange Offer-- Procedures for Tendering." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any employees, agents, affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder as promptly as practicable after withdrawal. 5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on a securities position listing without any change whatsoever. If any tendered Old Notes are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different names on several certificates or securities position listings, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations. When this Letter of Transmittal is signed by the holder or holders of the Old Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the New Notes are to be issued, or any untendered Old Notes are to be reissued, to a person other than the holder, then endorsements on any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. In connection with any tender of Old Notes in definitive certificated form, if this Letter of Transmittal is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s), and the signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Old Notes or signatures on bond powers required by this Instruction 5 must be guaranteed by an Eligible Institution. 6. Special Issuance and Delivery Instructions. If New Notes are to be issued in the name of a person other than the registered holder, or if New Notes are to be sent to someone other than the registered holder or to the registered holder at an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC unless the appropriate boxes on this Letter of Transmittal are completed. See Instruction 4. 11 7. Tax Identification Number. Under U.S. federal income tax law, a holder whose tendered Old Notes are accepted for exchange is required to provide the Exchange Agent (as payor) with such holder's correct taxpayer identification number ("TIN") on the Substitute Form W-9 below which, in the case of a tendering holder who is an individual, is his or her Social Security Number. In the case of a tendering holder who is an individual who does not have and is not eligible to obtain a Social Security Number (e.g., a resident alien), the correct TIN is such holder's IRS individual taxpayer identification number ("ITIN"). If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In addition, payments to such holders or other payees with respect to Old Notes exchanged pursuant to the Exchange Offer may be subject to 31% backup withholding. The box in Part 3 of the Substitute Form W-9 should be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number, employer identification number or IRS individual taxpayer identification number) of the registered owner of the Old Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Old Notes. If the Old Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8BEN (Certificate of Foreign Status), or an appropriate successor form, signed under penalties of perjury, attesting to that holder's exempt status. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. 8. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New Notes and/or substitute Old Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the holder of the Old Notes tendered hereby, or if tendered Old Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Old Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. 9. Determination of Validity. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for which, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under the caption "The Exchange Offer" or any conditions or irregularity in any tender of Old Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. 12 The Company's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Although the Company intends to notify holders of defects or irregularities with respect to tenders of Old Notes, neither the Company, any employees, agents, affiliates or assigns of the Company, the Exchange Agent, nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 10. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Old Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Notes nor shall any of them incur any liability for failure to give any such notice. 11. Lost, Stolen or Destroyed Old Notes. If any certificates representing Old Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the certificates. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. 12. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus, the Notice of Guaranteed Delivery and this Letter of Transmittal, may be directed to the Exchange Agent, at the address and telephone number indicated on the front of this Letter of Transmittal. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 13 TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 7) Payer's Name: Bank One Trust Company SUBSTITUTE PART I - Enter your TIN in the appropriate box. Social security For individuals, this is your social security employer identif number (SSN). For individuals who do not have and number OR IRS FORM W-9 are not eligible to obtain a SSN, this is your IRS individual taxpa individual taxpayer identification number (ITIN). identification n DEPARTMENT OF For other entities, it is your employer If exempt THE TREASURY identification number (EIN). recipient, INTERNAL write "EXEMPT" REVENUE SERVIC PART 2 - CERTIFICATION - Under penalties of in the space perjury, I certify that: (1) The number shown on below. See the PAYER'S REQUES this form is my correct TIN (or I am waiting for a accompanying FOR TAXPAYER number to be issued to me) and (2) I am not Guidelines for IDENTIFICATION subject to backup withholding either because (a) I Certification NUMBER (TIN) am exempt from backup withholding, or (b) I have of Taxpayer not been notified by the Internal Revenue Service Identification ("IRS") that I am subject to backup withholding as Number on a result of a failure to report all interest or Substitute Form dividends, or (c) the IRS has notified me that I W-9. am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS - You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report PART 3 - interest or dividends on your tax return. However, if after being notified by the IRS that you are Awaiting TIN [ ] subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding do no cross out such item (2). THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. SIGNATURE_____________________DATE______________ NAME____________________________________________ (Please Print) BUSINESS NAME___________________________________ (If different) (Please Print) ADDRESS_________________________________________ (Please Print) ________________________________________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
14 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a taxpayer identification number within sixty (60) days. Signature____________________________________________Date_______________________ Name ___________________________________________________________________________ (Please Print) Address_________________________________________________________________________ (Please Print) 15 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 How to Get a TIN If you don't have a taxpayer identification number (a "TIN"), apply for one immediately. To apply, get Form SS-5, Application for a Social Security Number Card (for individuals), from your local office of the Social Security Administration, or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), from your local IRS office. For individuals who do not have and are not eligible to obtain a Social Security Number, apply for an IRS taxpayer identification number on Form W-7 which is available from your local IRS office. If you do not have a TIN, write "Applied For" in the space for the TIN in Part 1, sign and date the form, and give it to the requester. Generally, you will then have 60 days to get a TIN and give it to the requester. If the requester does not receive your TIN within 60 days, backup withholding, if applicable, will begin and continue until you furnish your TIN. NOTE: Writing "Applied For" on the form means that you have already applied for a TIN or that you intend to apply for one soon. As soon as you receive your TIN, complete a Form W-9, include your TIN, sign and date the form, and give it to the requester. Specific Instructions Name. If you are an individual, you must generally enter the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage, without informing the Social Security Administration of the name change, please enter you first name, the last name shown on your social security card, and your new last name. Sole Proprietor. You must enter your individual name (enter either your social security number ("SSN") or your employer identification number ("EIN") in Part 1). You may also enter your business name or "doing business as" name on the business name line. Enter your name as shown on your social security card and business name as it was used to apply for your EIN on Form SS-4. Part I -- TIN You must enter your TIN in the appropriate box. If you are a sole proprietor, you may enter either your SSN or your EIN. Also see the chart on the attached page for further clarification of name and TIN combinations. If you do not have a TIN, follow the instructions under "How to Get a TIN" above. Part II -- For Payees Exempt from Backup Withholding Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments. If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "Exempt" in the space provided, and sign and date the form. If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester a completed Form W-8, Certificate of Foreign Status. The following is a list of payees exempt from backup withholding. For interest and dividends, all listed payees are exempt except the payee in item (ix). For broker transactions, payees listed in items (i) through (xiii), and a person registered under the Investment Advisors Act of 1940 who regularly acts as a broker are exempt. (i) a corporation; (ii) an organization exempt from tax under Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement account, or a custodial account under Section 403(b)(7) of the Code if the account satisfies the requirements of Section 401(f)(2) of the Code; (iii) the United States or any of its agencies or instrumentalities; (iv) a state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities; (v) a foreign government or any of its political subdivisions, agencies or instrumentalities; (vi) an international organization or any of its agencies or instrumentalities; (vii) a foreign central bank of issue; (viii) a dealer in securities or commodities required to register in the United States or a possession of the United States; (ix) a futures commission merchant registered with the Commodity Futures Trading Commission; (x) a real estate investment trust; (xi) an entity registered at all times during the tax year under the Investment Company Act of 1940; (xii) a common trust fund operated by a bank under Section 584(a) of the Code; (xiii) a financial institution; (xiv) a middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List; or (xv) a trust exempt from tax under Section 664 or described in Section 4947. Privacy Act Notice -- Section 6109 requires you to give your TIN to persons who must report certain payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. Penalties (1) Penalty for Failure to Furnish Taxpayer Identification Number. If you fail to furnish your TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Information with Respect to Withholding. If you make a false statement with no reasonable basis which results in no backup withholding, you are subject to a penalty of $500. (3) Criminal Penalty for Falsifying Information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Name and Identification Number to Give the Requester.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the requester. For this type of account: Give the SOCIAL SECURITY NUMBER of-- - ------------------------------------ ----------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint The actual owner of the account) account or, if joint funds, the first individual on the account(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, or guardian or committee for a incompetent person(3) designated ward, minor, or incompetent person 7. a. The usual revocable The grantor-trustee(1) savings trust account (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under State law 8. Sole proprietorship account The owner(4) 9. A valid trust, estate, or The legal entity (Do not pension trust furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) (5) - ------------------------------------ ----------------------------- For this type of account: Give the TAXPAYER IDENTIFICATION NUMBER of-- - ------------------------------------ ----------------------------- 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held The partnership in the name of the business 13. Association, club, or other The organization tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show your individual name. You may also enter your business name. You may use either your Social Security Number or Employer Identification Number. ( 5) List first and circle the name of the legal trust, estate, or pension trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. EX-99.2 25 mar2202_ex9902.txt EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY for o% NOTES DUE 20__ of H.J. HEINZ FINANCE COMPANY This form or one substantially equivalent hereto must be used to accept the Exchange Offer of H.J. Heinz Finance Company, a Delaware corporation (the "Company"), made pursuant to the Prospectus, dated [o], 200_ (as the same may be amended or supplemented from time to time, the "Prospectus"), if certificates for the outstanding o% notes due 20__of the Company (the "Old Notes") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit the Old Notes, the Letter of Transmittal and all other required documents to reach Bank One Trust Company (the "Exchange Agent") on or prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. This Notice of Guaranteed Delivery may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent as set forth below. See "The Exchange Offer--Procedures for Tendering" in the Prospectus. Capitalized terms used herein but not defined herein have the respective meanings given to them in the Prospectus. - ------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [o], 2002 UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). - ------------------------------------------------------------------------------- To: Bank One Trust Company, N.A., as Exchange Agent By Mail or Hand/Overnight Delivery: By Facsimile: Bank One Trust Company, N.A. 312 407-8853 One North State Street Attention: Exchanges Ninth Floor Chicago, Illinois 60602 Confirm by Telephone: Attention: Exchanges 800 524-9472 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON THE LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tender(s) to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. - --------------------------------------------------- ------------------------------------------------------ PLEASE SIGN AND COMPLETE Certificate No(s). of Old Notes (if available): ____________________________________________________ Signature(s) of Owner(s) or ____________________________________________________ Authorized Signatory:______________________________ Date:_______________________________________________ ___________________________________________________ Name(s) of Registered Holder(s): Principal Amount of Old C% Notes Due 20__ ____________________________________________________ Tendered:* ____________________________________________________ ___________________________________________________ Address:____________________________________________ ___________________________________________________ ____________________________________________________ Area Code and Telephone No.:________________________ If Old Notes will be tendered by book-entry transfer provide the following information: Signature:_________________________________________ DTC Account Number:________________________________ Date:______________________________________________ - --------------------------------------------------- ------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for Old Notes or on a security position listing as the owner of Old Notes, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): _______________________________________________________________________ _______________________________________________________________________________ Capacity:______________________________________________________________________ _______________________________________________________________________________ Address(es): _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ 2 DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. THE GUARANTEE ON PAGE 4 MUST BE COMPLETED. - --------- * Must be in denominations of $1,000 and integral multiples thereof, provided that if fewer than all of the Old Notes of a holder are tendered for exchange, the untendered principal amount of the holder's remaining Old Notes must be $1,000 or any integral multiple of $1,000 in excess thereof. 3 GUARANTEE (Not to Be Used for Signature Guarantee) The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker or government securities dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association recognized program (each of the foregoing being referred to as an "Eligible Institution"), hereby guarantees to deliver to the Exchange Agent at the address set forth above, either the Old Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Old Notes to the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letters of Transmittal (or facsimile thereof or agent's message in lieu thereof) and any other required documents within three New York Stock Exchange trading days after the Expiration Date. The undersigned acknowledges that it must deliver the Letter of Transmittal (or agent's message in lieu thereof) and Old Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in financial loss to the undersigned. - ------------------------------------- ------------------------------------- Name of Firm:_______________________ ___________________________________ Address:____________________________ (Authorized Signature) ____________________________________ Name:______________________________ (Include Zip Code) Title:_____________________________ Date: _____________________________ Area Code and Telephone No.:______________________ - ------------------------------------- ------------------------------------- DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. 4 EX-99.3 26 mar2202_ex9903.txt EXHIBIT 99.3 o, 2002 EXCHANGE AGENT AGREEMENT Bank One Trust Company, N.A. One North State Street Ninth Floor Chicago, Illinois 60602 Attention: Exchanges Ladies and Gentlemen: H. J. Heinz Finance Company, a Delaware corporation (the "Company"), proposes to make an offer (the "Exchange Offer") to exchange up to $o,000,000 principal amount of its o% guaranteed notes due 20__, (the "New Notes") for a like principal amount of its outstanding o% guaranteed notes due 20__ (the "Old Notes"). The terms and conditions of the Exchange Offer are set forth in a prospectus (the "Prospectus") included in the Company's registration statement on Form S-4 (File No. 333- ), as it may be amended from time to time (the "Registration Statement"), filed with the Securities and Exchange Commission, and proposed to be distributed to all record holders of the Old Notes. The Old Notes and the New Notes are collectively referred to herein as the "Notes." Capitalized terms used herein and not defined shall have the respective meanings ascribed to them in the Prospectus or accompanying Letter of Transmittal. The Company hereby appoints Bank One Trust Company, N.A. to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "you" shall refer to Bank One Trust Company, N.A.. The Exchange Offer is expected to be commenced by the Company on or about o, 2002. The Letter of Transmittal accompanying the Prospectus (or in the case of book entry securities, either the Letter of Transmittal or the Automated Tender Offer Program ("ATOP") system) is to be used by the holders of the Old Notes to accept the Exchange Offer and contains instructions with respect to the delivery of certificates for Old Notes tendered. The Exchange Offer shall expire at 5:00 P.M., New York City time, on o, 2002, or on such later date or time to which the Company may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Company expressly reserves the right to extend the Exchange Offer from time to time and may extend the Exchange Offer by giving oral (confirmed in writing) or written notice to you at or before 5:00 P.M., New York City time, on the previously scheduled Expiration Date. The Company expressly reserves the right, in its sole discretion, to amend or terminate the Exchange Offer, and not to accept for exchange any Old Notes not theretofore accepted for exchange. The Company will give oral (confirmed in writing) or written notice of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth to be performed by the Exchange Agent in the section of the Prospectus captioned "The Exchange Offer," in the Letter of Transmittal accompanying the Prospectus or as specifically set forth herein; provided, however, that in no way will your general duty to act in good faith and without gross negligence or willful misconduct be limited by the foregoing. As soon as practicable after commencement of the Exchange Offer, the Exchange Agent will mail to each Holder (as defined in the Indenture), and to each DTC participant identified by DTC as a holder of any Old Notes (i) a Letter of Transmittal with instructions (including instructions for completing a substitute Form W-9, (ii) a Prospectus and (iii) a Notice of Guaranteed Delivery all in accordance with the procedures described in the Prospectus. The Company shall supply the Exchange Agent with sufficient copies of the Prospectus, the Letter of Transmittal and the Notice of Guaranteed Delivery to enable Exchange Agent to perform its duties hereunder. Company shall also furnish or cause to be furnished to the Exchange Agent a list of holders of the Old Notes (including a beneficial holder list from DTC, certified Old Notes numbers and amounts, mailing addresses, and social security numbers), unless waived by the Exchange Agent. 2. You will establish an account with respect to the Old Notes at The Depository Trust Company ("DTC") for purposes of the Exchange Offer within two business days after the date of the Prospectus, and any financial institution that is a participant in DTC's systems may, until the Expiration Date, make book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes into your account in accordance with DTC's procedures for such transfer. In every case, however, a Letter of Transmittal (or a manually executed facsimile thereof) or an agent's message, properly completed and duly executed or authenticated, with any required signature guarantees and any other required documents must be transmitted to and received by you prior to the Expiration Date or the guaranteed delivery procedures described in the Letter of Transmittal must be complied with. 3. You are to examine each of the Letters of Transmittal and certificates for Old Notes (and confirmation of book-entry transfers of Old Notes into your account at DTC) and any other documents delivered or mailed to you by or for holders of the Old Notes, to ascertain whether: (i) the Letters of Transmittal, certificates and any such other documents are duly executed and properly completed in accordance with instructions set forth therein and that such Book-Entry Confirmations are in due and proper form and contain the information required to be set forth therein, (ii) the Old Notes have otherwise been properly tendered, (iii) the Old Notes tendered in part are tendered in denominations of $1,000 and integral multiples thereof, and (iv) holders have provided their taxpayer identification number ("TIN") or required certification. In each case where the Letter of Transmittal or any other document has been improperly completed or executed, or where Book-Entry Confirmations are not in due and proper form or omit certain information, or where any of the certificates for Old Notes are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will endeavor to inform the presenters of the need for fulfillment of all requirements and to take any other action as may be necessary or advisable to cause such irregularity to be corrected. 4. With the approval of the President, any Vice President or the Secretary of the Company (such approval, if given orally, to be confirmed in writing) or any other person designated by such an officer in writing, you are authorized to waive any irregularities in connection with any tender of Old Notes pursuant to the Exchange Offer. You are authorized to process withdrawals to the extent permitted by the Exchange Offer. 5. At the written request of the Company or its counsel, you shall notify tendering holders of Old Notes in the event of any extension, termination or amendment of the Exchange Offer. In the event of any such termination, you will return all tendered Old Notes to the persons entitled thereto, at the request and expense of the Company. 6. Tenders of Old Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer," and Old Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 6, Old Notes which the President, any Vice President or the Secretary of the Company or any other person designated by any such person shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be confirmed in writing). New Notes are to be issued in exchange for Old Notes pursuant to the Exchange Offer only (i) against deposit with you prior to the Expiration Date or, in the case of a tender in accordance with the guaranteed delivery procedures outlined in Instruction 1 of the Letter of Transmittal, within three New York Stock Exchange trading days after the Expiration Date of the Exchange Offer, together with 2 executed Letters of Transmittal and any other documents required by the Exchange Offer or (ii) in the event that the holder is a participant in DTC's system, by the utilization of DTC's ATOP and receipt of any evidence required by the Exchange Offer. 7. You shall advise the Company with respect to any Old Notes received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Old Notes. 8. You shall accept tenders: (a) in cases where the Old Notes are registered in two or more names only if signed by all named holders; (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and (c) from persons other than the registered holder of Old Notes provided that customary transfer requirements, including those regarding any applicable transfer taxes, are fulfilled. You shall accept partial tenders of Old Notes when so indicated and as permitted in the Letter of Transmittal and deliver certificates for Old Notes to the registrar for the Old Notes (the "Security Registrar") for split-up and return any untendered Old Notes to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. 9. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Company will notify you (such notice, if given orally, to be confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Old Notes properly tendered and you, on behalf of the Company, will exchange such Old Notes for New Notes and cause such Old Notes to be canceled. Delivery of New Notes will be made on behalf of the Company by you at the rate of $1,000 principal amount of New Notes for each $1,000 principal amount of the Old Notes tendered promptly after notice (such notice, if given orally, to be confirmed in writing) of acceptance of said Old Notes by the Company; provided, however, that in all cases, Old Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Old Notes (or confirmation of book-entry transfer into your account at DTC), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (except as described in the section of the Prospectus captioned "The Exchange Offer--Procedures for Tendering") and any other required documents. Unless otherwise instructed by the Company, you shall issue New Notes only in denominations of $1,000 or any integral multiple thereof. 10. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time on or prior to the Expiration Date in accordance with the terms of the Exchange Offer. 11. The Company shall not be required to accept for exchange any Old Notes tendered if any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Company not to accept for exchange any Old Notes tendered shall be given (and confirmed in writing) by the Company to you. 12. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Old Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return the certificates for those unaccepted Old Notes (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them (or effected such book-entry transfer). 3 13. All certificates for reissued Old Notes, unaccepted Old Notes or for New Notes (other than those effected by book-entry transfer) shall be forwarded by (a) first-class certified mail, return receipt requested, under a blanket surety bond obtained by you protecting you and the Company from loss or liability arising out of the nonreceipt or nondelivery of such certificates or (b) by registered mail insured by you separately for the replacement value of each of such certificates. 14. As soon as practicable after the Expiration Date, you shall arrange for cancellation of the Old Notes submitted to you or returned by DTC in connection with the ATOP. Such Old Notes shall be cancelled and retired by you pursuant to your standard procedures unless otherwise instructed by the Company (or a representative designated by the Company) in writing. 15. You are not authorized to pay or offer to pay any concessions, commissions or other solicitation fees to any broker, dealer, commercial bank, trust company or other nominee or to engage or use any person to solicit tenders. 16. As Exchange Agent hereunder, you: (a) shall have no duties or obligations other than those specifically set forth or incorporated specifically by reference in this Agreement or as may be subsequently agreed to in writing by you and the Company; (b) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates for the Old Notes deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer or the New Notes; (c) shall not be obligated to take any legal action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with reasonable indemnity; (d) may reasonably rely upon and shall be protected in acting in reliance upon any written or electronic certificate, instrument, opinion, notice, letter or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed or authenticated by the proper party or parties; (e) may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and the effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or represented by a proper person or persons; (f) may rely upon and shall be protected in acting upon written or oral instructions from any officer of the Company as set forth herein; (g) may consult with your counsel with respect to any questions relating to your duties and responsibilities, and the written advice of such counsel, or the written opinion of counsel to the Company, shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the written advice or opinion of such counsel; and (h) shall not advise any person tendering Old Notes pursuant to the Exchange Offer as to whether to tender or refrain from tendering all or any portion of Old Notes or as to the market value of, or the decline or appreciation in market value of, any Old Notes that may or may not occur as a result of the Exchange Offer or as to the market value of the New Notes; 4 provided, however, that in no way will your general duty to act in good faith and without gross negligence or willful misconduct be limited by the foregoing. 17. You shall take such action as may from time to time be requested by the Company or its counsel (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as described in the Prospectus) or such other forms as may be approved from time to time by the Company to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided, that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. 18. You shall advise by facsimile transmission or telephone, and promptly thereafter confirm in writing to Leonard A. Cullo, Jr., President of the Company (telephone number 412-456-7856, facsimile number 412-456-6015) and such other person or persons as the Company may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested), up to and including the Expiration Date, as to the number and aggregate principal amount of Old Notes which have been duly tendered pursuant to the Exchange Offer and the items received by you pursuant to the Exchange Offer and this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. Such reporting shall be substantially in the form of Exhibit A hereto. In addition, you will also inform, and cooperate in making available to, the Company or any such other person or persons designated by the Company upon oral request made from time to time prior to the Expiration Date of such other information as it or he or she reasonably requests. Such cooperation shall include, without limitation, the granting by you to the Company and such person as the Company may request of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company shall have received information in sufficient detail to enable it to decide whether to extend the Exchange Offer, including the identity of the holders of Old Notes who have not tendered such Old Notes as of the date such request was made. You shall prepare a final list of all persons whose tenders were accepted, the number and aggregate principal amount of Old Notes tendered, the number and aggregate principal amount of Old Notes accepted and the identity of any Participating Broker-Dealers and the number and aggregate principal amount of New Notes delivered to each, and deliver said list to the Company. Within five Business Days after the Expiration Date. 19. Letters of Transmittal, Book-Entry Confirmations and Notices of Guaranteed Delivery received by you shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities, or one year, whichever is longer, and thereafter shall be disposed by you in accordance with your standard procedures unless required to be delivered by you to the Company. You shall dispose of unused Letters of Transmittal and other surplus materials, upon consultation with the Company, in accordance with your customary procedures. 20. You hereby expressly waive any lien, encumbrance or right of set-off whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Company, or any of its subsidiaries or affiliates pursuant to any loan, credit or other agreement with you or for compensation owed to you hereunder or under any other agreement. 21. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation, and reimbursement of your expenses, including counsel fees and disbursements, as separately agreed in writing with the Company as set forth on the Schedule attached hereto. 22. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, shall be resolved in favor of the latter two documents, except with respect to the duties, liabilities and indemnification of you as Exchange Agent, which shall be controlled by this Agreement. 5 23. The Company covenants and agrees to indemnify and hold you harmless in your capacity as Exchange Agent hereunder against any loss, liability, cost or expense, including reasonable attorneys' fees and expenses arising out of or in connection with your appointment as Exchange Agent hereunder, including but not limited to any act, omission, delay or refusal made by you in reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting any transfer of Old Notes reasonably believed by you in good faith to be authorized, and in delaying or refusing in good faith to accept any tenders or effect any transfer of Old Notes; provided, however, that anything in this Agreement to the contrary notwithstanding, the Company shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of your gross negligence or willful misconduct. In no case shall the Company be liable under this indemnity with respect to any claim against you unless the Company shall be notified by you, by letter or by facsimile which is confirmed by letter, of the written assertion of a claim against you or of any other action commenced against you, promptly after you shall have received any such written assertion or notice of commencement of action. The Company shall be entitled to participate, at its own expense, in the defense of any such claim or other action, and, if the Company so elects, the Company may assume the defense of any pending or threatened action against you in respect of which indemnification may be sought hereunder, in which case the Company shall not thereafter be responsible for the subsequently incurred fees and disbursements of legal counsel for you under this paragraph so long as the Company shall retain counsel reasonably satisfactory to you to defend such suit; provided, however, that the Company shall not be entitled to assume the defense of any such action if the named parties to such action include both you and the Company and representation of both parties by the same legal counsel would, in the written opinion of your counsel, be inappropriate due to actual or potential conflicting interests between you and the Company. You understand and agree that the Company shall not be liable under this paragraph for the fees and expenses of more than one legal counsel for you. 24. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing TINs, and shall file any appropriate reports with the Internal Revenue Service. The Company understands that you are required, in certain instances, to make deductions of thirty-one percent (31%) with respect to interest paid on the New Notes and proceeds from the sale, exchange, redemption or retirement of the New Notes at the rates specified in the Internal Revenue Code of 1986, as amended, from holders who have not supplied their correct TINs or required certification. Such funds will be turned over to the Internal Revenue Service in accordance with applicable regulations. 25. You shall notify the Company of the amount of any transfer taxes payable in respect of the exchange of Old Notes and, upon receipt of a written approval from the Company, shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Old Notes, your check in the amount of all transfer taxes so payable, and the Company shall reimburse you for the amount of any and all transfer taxes payable in respect of the exchange of Old Notes; provided, however, that you shall reimburse the Company for amounts refunded to you in respect of your payment of any such transfer taxes, at such time as such refund is received by you. 26. THIS AGREEMENT AND YOUR APPOINTMENT AS EXCHANGE AGENT HEREUNDER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, AND WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 27. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and its successor and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Without limitation of the foregoing, the parties hereto expressly agree that no holder of Old Notes or New Notes shall have any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 6 28. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. 29. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 30. This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. 31. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Company, to: H.J. Heinz Finance Company 600 Grant Street Pittsburgh, Pennsylvania, 15219 Telephone: (412) 456-5700 Telecopy: (412) 456-6102 Attention: Loretta Lobes with a copy to: Sarah Beshar, Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Telecopy (212) 450-4800 If to the Exchange Agent, to: Bank One Trust Company, N.A. One North State Street Ninth Floor Chicago, Illinois 60602 Telephone: 800-524-9472 Telecopy: 312-407-8853 Attention: Exchanges 32. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, paragraphs 19, 21, 23 and 25 shall survive the termination of this Agreement. Upon any termination of this Agreement, you shall promptly deliver to the Company any certificates for New Notes, funds or property then held by you as Exchange Agent under this Agreement. 33. This Agreement shall be binding and effective as of the date hereof. 7 Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. H.J. HEINZ FINANCE COMPANY By: ------------------------------- Name: Title: Accepted as of the date first above written: BANK ONE TRUST COMPANY, N.A., AS EXCHANGE AGENT By: ------------------------------------------ Name: Title: 8 Exhibit A Date:____________________ H. J. Heinz Finance Company 600 Grant Street Pittsburgh, PA 15219 BY FAX: (412) 456-[ ] Re: Notice of Tenders - ___% Guaranteed Notes due 20__ (the "Old Notes") With respect to Section 18 of the Exchange Agent Agreement, dated as of _________ __, 200_, we confirm the following information as of the date hereof: 1. Principal amount of Old Notes tendered during Principal amount of Old Notes tendered during the past week: $____________________ 2. Principal amount of Old Notes referred to in paragraph 1. above regarding which Exchange Agent questions validity of the tender: $____________________ 3. Aggregate principal amount of Old Notes tendered since the Effective Date as to which Exchange Agent questions the validity of the tender: $___________________. 4. Principal amount of Old Notes remaining unpresented (based on $___,000,000 total Old Notes): $__________________ 5. Total aggregate principal amount of Old Notes validly tendered since the Effective Date: $_____________________ Bank One Trust Company, National Association, as Exchange Agent By: _________________________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----