1
Exhibit 10(i)
STOCK PURCHASE AND MERGER AGREEMENT
DATED AS OF MAY 22, 1997
AMONG
MID-AMERICA DAIRYMEN, INC.,
▇▇▇▇▇▇/MEADOW GOLD DAIRIES HOLDINGS, INC.,
BDH TWO, INC.
AND
▇▇▇▇▇▇, INC.
2
TABLE OF CONTENTS
Page
ARTICLE I
THE STOCK PURCHASE AND MERGER....................................2
1.1 Stock Purchase...................................................2
1.2 The Merger.......................................................3
1.3 Surviving Entity.................................................4
1.4 Closing..........................................................4
1.5 Effective Time...................................................5
1.6 Certificate of Incorporation and By-Laws.........................5
1.7 Directors........................................................6
1.8 Officers.........................................................6
ARTICLE II
STATUS AND CONVERSION OF SECURITIES..............................6
2.1 Conversion of Securities.........................................6
2.2 Stock Options and Related Matters................................7
2.3 Exchange of Certificates.........................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................. 11
3.1 Representation and Warranties of ▇▇▇▇▇▇.........................11
3.2 Representations and Warranties of Holdings......................13
3.3 Representations and Warranties of Parent........................43
3.4 Representations and Warranties of the Parties...................46
3.5 Survival of Representations and Warranties......................46
3.6 Schedules and Exhibits..........................................47
ARTICLE IV
COVENANTS...................................................... 47
4.1 Access; Information and Records; Confidentiality............... 47
4.2 Conduct of the Businesses of Holdings Prior to
the Closing Date............................................ 49
4.3 Antitrust Laws................................................. 50
4.4 Non-Solicitation............................................... 55
4.5 Equipment...................................................... 57
4.6 Earnings....................................................... 58
4.7 Termination of Affiliate Relations............................. 63
4.8 Further Actions................................................ 64
4.9 Preparation of Returns and Payment of Taxes.................... 66
4.10 No Shopping.................................................... 67
4.11 USDA Compliance Agreement...................................... 67
4.12 Post-Closing Services.......................................... 68
4.13 Financing Best Efforts......................................... 68
ARTICLE V
CONDITIONS PRECEDENT........................................... 69
5.1 Conditions Precedent to Obligations of Parties................. 69
5.2 Conditions Precedent to Obligation of Parent................... 69
5.3 Conditions Precedent to the Obligation of
Holdings and ▇▇▇▇▇▇......................................... 72
3
Page
ARTICLE VI
PROVISIONS AS TO TAXES......................................... 73
6.1 Access to Records Following Closing.............................73
6.2 Section 338 Elections...........................................74
6.3 Post-Closing Cooperation........................................77
6.4 Tax Indemnification.............................................79
6.5 Other Tax Matters...............................................85
ARTICLE VII
LABOR MATTERS, EMPLOYEE
RELATIONS AND BENEFITS......................................... 86
7.1 Conduct Prior to the Closing................................... 86
7.2 Continuity of Employment....................................... 87
7.3 Collective Bargaining Agreements............................... 87
7.4 Comparable Benefits............................................ 88
7.5 Business Plan Participation.................................... 88
7.6 Business Plan Liabilities...................................... 89
7.7 Defined Benefit Plan........................................... 90
7.8 Defined Contribution Plans..................................... 92
7.9 Withdrawal Liability........................................... 96
7.10 Post-Retirement Benefits....................................... 96
7.11 Welfare Plans.................................................. 96
7.12 Accrued Vacation............................................... 97
7.13 Severance...................................................... 97
7.14 Service Credit................................................. 98
7.15 WARN Act....................................................... 98
7.16 COBRA.......................................................... 98
7.17 No Rights Conferred on Employees............................... 98
ARTICLE VIII
ASSUMPTION OF CERTAIN OBLIGATIONS
AND LIABILITIES; INDEMNIFICATION............................... 99
8.1 Assumption and Indemnification................................. 99
8.2 Procedure......................................................102
ARTICLE IX
MISCELLANEOUS..................................................104
9.1 Termination and Abandonment....................................104
9.2 Fees and Expenses..............................................108
9.3 Notices........................................................108
9.4 Entire Agreement...............................................110
9.5 No Third Party Beneficiaries...................................110
9.6 Assignability..................................................110
9.7 Amendment and Modification; Waiver.............................112
9.8 Public Announcements...........................................112
9.9 Section Headings...............................................113
9.10 Counterparts...................................................113
9.11 Enforcement....................................................113
9.12 Governing Law..................................................115
4
INDEX OF DEFINED TERMS
Term Page
Accounting Period .........................................................58
Acquisition ................................................................1
Aggregate Earnings Payment.................................................62
Antitrust Authorities......................................................54
Antitrust Division ........................................................50
Antitrust Improvements Act.................................................12
Antitrust Law .......................................................55
Applicable Antitrust Conditions...........................................107
Applicable Funding Conditions.............................................107
BDH ........................................................................1
BMGD .....................................................................111
▇▇▇▇▇▇ ..................................................................1, 4
▇▇▇▇▇▇ Corporation .......................................................25
▇▇▇▇▇▇ Indemnified Liabilities............................................100
▇▇▇▇▇▇ Indemnified Parties.................................................99
▇▇▇▇▇▇ Names ..............................................................65
▇▇▇▇▇▇ Pension Plan .......................................................90
▇▇▇▇▇▇ Shares ..............................................................1
▇▇▇▇▇▇, Inc. ...............................................................1
▇▇▇▇▇▇'▇ Actuary ..........................................................90
Business Employees ........................................................38
Business Plans ............................................................38
Certificate of Merger.......................................................5
Clause (iv) Termination Date..............................................106
Closing ....................................................................4
Closing Date ...............................................................5
Closing Date Statement.....................................................58
Closing Payment Amount.....................................................59
Closing Period ............................................................60
COBRA .....................................................................98
Code ......................................................................29
Collective Bargaining Agreements...........................................87
Common Share ...............................................................3
Common Share Consideration..................................................3
Common Stock ...............................................................1
Company Intellectual Property..............................................37
Conclusive Earnings Statement..............................................62
Contemplated Assignment...................................................110
Controlled Group ..........................................................40
Damages ...................................................................80
December 31, 1996 Balance Sheet............................................22
Dissenting Shares ..........................................................7
Earliest ▇▇▇▇▇▇ Antitrust Termination Date.................................53
Earnings ..................................................................59
Earnings Statement ........................................................60
Effective Time .............................................................5
Electing Subsidiaries......................................................74
Elections .................................................................74
5
Term Page
Employee Pension Benefit Plan..............................................38
Equipment .................................................................57
ERISA .....................................................................38
Establishment Date .......................................................62
Exchange Act ..............................................................12
Final Determination .......................................................74
Final Payment Amount.......................................................62
Financial Statements.......................................................17
FTC .......................................................................50
GCL ........................................................................1
Governmental Authority.....................................................33
Group .....................................................................25
Health and Environmental Laws..............................................35
Holdings ...................................................................1
Indemnified Liabilities...................................................102
Indemnified Parties ......................................................100
Insurance Matters Agreement................................................71
Interim Period ............................................................79
IRS .......................................................................39
Leases ....................................................................24
Licenses and Permits.......................................................34
Master Lease Agreement.....................................................57
Master Services Agreement Amendment........................................71
Material Adverse Effect....................................................14
Material Contracts ........................................................32
Meadow Gold Trademark License Agreement....................................72
Merger .....................................................................1
Merger Consideration........................................................6
Neutral Auditors ..........................................................61
Newco ....................................................................111
Option .....................................................................8
Option Plan ................................................................8
Option Settlement Amount....................................................8
Parcel ....................................................................22
Parent .....................................................................1
Parent Indemnified Liabilities............................................102
Parent Indemnified Parties................................................100
Parent Indemnitees .......................................................80
Parent Pension Plan .......................................................90
Parent Savings Plan .......................................................93
Parent Termination Notice.................................................105
PBGC ......................................................................40
Permitted Assignee ......................................................111
Post-Closing Period .......................................................79
Post-Retirement Benefits...................................................96
Pre-Closing Period ........................................................78
Preferred Share ............................................................2
Preferred Stock ............................................................1
Real Estate Transfer Tax...................................................85
Real Property Gains Tax....................................................85
Related Transaction Parties................................................51
6
Term Page
Required Consents .........................................................69
Resolution Period .........................................................61
Returns ...................................................................26
Savings Plans .............................................................93
Section 338 Allocation.....................................................76
Section 338 Forms .........................................................75
Shares .....................................................................7
Short Period ..............................................................78
Stock Purchase .............................................................1
Subsidiaries ..............................................................14
Surviving Entity ...........................................................3
Tax Claim .................................................................81
Tax Sharing Agreement......................................................28
Taxes .....................................................................26
Terminated Services .......................................................68
Total Transfer Amount......................................................94
Trademark License Agreement................................................71
Transaction-Based Taxes....................................................78
Transfer Date .............................................................94
Transfer Taxes ............................................................85
Vacation Policy ...........................................................97
WARN ......................................................................98
7
STOCK PURCHASE AND MERGER AGREEMENT
STOCK PURCHASE AND MERGER AGREEMENT dated as of May 22, 1997 among
MID-AMERICA DAIRYMEN, INC., a Kansas cooperative marketing association
("Parent"), ▇▇▇▇▇▇/MEADOW GOLD DAIRIES HOLDINGS, INC., a Delaware corporation
("Holdings"), BDH TWO, INC., a Delaware corporation ("BDH"), and ▇▇▇▇▇▇, INC.,
a New Jersey corporation ("▇▇▇▇▇▇, Inc."; together with BDH, "▇▇▇▇▇▇").
W I T N E S S E T H :
WHEREAS, ▇▇▇▇▇▇ owns 14,754,429 shares of Holdings' Common Stock, par
value $0.01 per share (the "Common Stock"), and 3,400,000 shares of Holdings'
Preferred Stock, par value $0.01 per share (the "Preferred Stock"), and Parent
desires to purchase (the "Stock Purchase") from ▇▇▇▇▇▇ such shares (the "▇▇▇▇▇▇
Shares") pursuant to this Agreement;
WHEREAS, immediately after the Stock Purchase, Parent intends to
effect the merger of a newly formed wholly owned subsidiary of Parent (referred
to herein as "Acquisition") with and into Holdings in accordance with the
General Corporation Law of the State of Delaware (the "GCL") and the provisions
of this Agreement (the "Merger"), pursuant to which the other holders of shares
of Common Stock shall receive the merger consideration set forth herein and
Holdings will become a wholly owned subsidiary of Parent;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1
8
ARTICLE I
THE STOCK PURCHASE AND MERGER
1.1 Stock Purchase. (a) In consideration of ▇▇▇▇▇▇, Inc. entering into
this Agreement, on the date hereof, Parent shall pay to ▇▇▇▇▇▇, Inc. by wire
transfer in immediately available funds $40,000,000. Except as provided in
Section 9.11(b), such amount shall be non-refundable regardless of whether or
not any of the transactions contemplated by this Agreement is consummated but,
upon the consummation of the Stock Purchase, shall be credited towards the
amounts payable to ▇▇▇▇▇▇, Inc. pursuant to Section 1.1(b).
(b) Upon the terms and subject to the conditions of this Agreement, at
the Closing (as defined below) and prior to the Effective Time (as defined
below), ▇▇▇▇▇▇ shall sell to Parent, and Parent shall purchase from ▇▇▇▇▇▇, the
▇▇▇▇▇▇ Shares. In consideration for the sale and transfer of the ▇▇▇▇▇▇ Shares
and, in part, for the right to license certain trademarks from ▇▇▇▇▇▇ pursuant
to the Trademark License Agreement (as defined herein), and upon the terms and
subject to the conditions of this Agreement, on the Closing Date, Parent shall
pay or cause to be paid to ▇▇▇▇▇▇ by wire transfer in immediately available
funds (in full satisfaction of Parent's obligations to ▇▇▇▇▇▇, Inc. and BDH
Two, Inc. under this Section 1.1) (subject to the credit described in Sections
1.1(a) and 4.3(f)), (x) for each share of Preferred Stock (a "Preferred
Share"), an amount equal to $25, plus the amount of accrued and unpaid
dividends on such share to and including the Closing Date, and (y) for each
share of Common
2
9
Stock (a "Common Share") owned by ▇▇▇▇▇▇, an amount equal to the Common Share
Consideration (as defined below). On the Closing Date, upon the terms and
subject to the conditions of this Agreement, ▇▇▇▇▇▇ shall deliver to Parent
certificates representing the ▇▇▇▇▇▇ Shares, duly endorsed, or accompanied by
stock powers duly executed, with all necessary stock transfer stamps attached
thereto and cancelled. The "Common Share Consideration" shall be determined in
accordance with the following formula:
CSC = $435,000,000 - ($25 x PS) - [(CSC x OPT) - ($5 x OPT)]
------------------------------------------------------
CS
where CS = Number of Common Shares outstanding on the
Closing Date
CSC = Common Share Consideration
OPT = Number of Options outstanding on the Closing
Date
PS = Number of Preferred Shares outstanding on the
Closing Date
1.2 The Merger. At the Effective Time, and subject to the terms and
conditions of this Agreement and the GCL, Parent shall cause the Merger of
Acquisition with and into Holdings to occur, the separate corporate existence
of Acquisition shall thereupon cease, and Holdings shall be the surviving
corporation in the Merger. Holdings hereinafter sometimes is referred to as the
"Surviving Entity". Notwithstanding anything to the contrary in this Agreement,
but subject to Section 8.1(a) and the receipt of ▇▇▇▇▇▇, Inc.'s prior written
consent, which consent shall not be unreasonably withheld, the Merger may be
structured so that Acquisition is the Surviving Entity, and ▇▇▇▇▇▇, Inc. and
BDH
3
10
agree to enter into such amendment to this Agreement as shall be required to
effect such change to the structure of the Merger; provided that ▇▇▇▇▇▇, Inc.
may withhold its consent to any such change to the structure of the Merger if
such change would have an adverse tax or other consequence to ▇▇▇▇▇▇, Inc. or
any of its affiliates.
1.3 Surviving Entity. At the Effective Time, the Surviving Entity
shall continue its corporate existence under the laws of the State of Delaware.
The Merger shall have the effects set forth in the GCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all
the properties, rights, privileges, powers and franchises of a public as well
as of a private nature of Holdings and Acquisition shall vest in the Surviving
Entity, and all debts, liabilities and duties of Holdings and Acquisition shall
become the debts, liabilities and duties of the Surviving Entity. The name of
the Surviving Entity shall be such name as shall be set forth in the
Certificate of Merger (as defined below) by Parent, with the prior written
consent of ▇▇▇▇▇▇, Inc., which consent shall not be unreasonably withheld if
such name does not include the word "▇▇▇▇▇▇" or any name similar thereto or
derivative thereof.
1.4 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
9.1, and subject to the satisfaction or waiver of the conditions set forth in
Article V, the closing of the Stock Purchase and the Merger (the "Closing")
will take place at 10:00 a.m. on the 28th day (or, if such day is
4
11
not a business day, the immediately succeeding business day) following the date
on which the last to be satisfied or waived of the conditions set forth in
Article V hereof shall be satisfied or waived in accordance with this Agreement
(the "Closing Date"), at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, New York,
New York, unless another date, time or place is agreed to in writing by the
parties hereto.
1.5 Effective Time. On the Closing Date, immediately after the
consummation of the Stock Purchase, Parent shall file, or shall cause the
filing of, a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, and shall make or cause to be made
all other filings or recordings required by the GCL in connection with the
Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware, or
at such later time as shall be specified in the Certificate of Merger with the
prior written consent of ▇▇▇▇▇▇, Inc. (the "Effective Time").
1.6 Certificate of Incorporation and By-Laws. (a) The Certificate of
Incorporation of Acquisition in effect at the Effective Time shall be attached
to the Certificate of Merger as an amendment to the Certificate of
Incorporation of Holdings, with the effect that such Certificate of
Incorporation shall become the Certificate of Incorporation of the Surviving
Entity, until thereafter amended as provided therein and under the GCL.
5
12
(b) The By-laws of Acquisition in effect at the Effective Time shall
be the By-laws of the Surviving Entity until thereafter amended in accordance
with applicable law.
1.7 Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Entity, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Entity and until his or her successor is duly elected and qualified.
1.8 Officers. The officers of Acquisition at the Effective Time shall
be the initial officers of the Surviving Entity, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Entity and until his or her successor is duly appointed and qualified.
ARTICLE II
STATUS AND CONVERSION OF SECURITIES
2.1 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition, Holdings or the
holders of any of the following securities:
(a) Each Common Share issued and outstanding immediately prior to the
Effective Time (other than Common Shares to be cancelled pursuant to Section
2.1(b) hereof and Dissenting Shares (as hereinafter defined)) shall be
converted into the right to receive in cash an amount equal to the Common Share
Consideration (the "Merger Consideration"), without any interest thereon, upon
the surrender of the certificate representing such Common Share.
6
13
(b) Each Share (as defined below) which is held in the treasury of
Holdings or its Subsidiaries (as defined below) or which is held by Parent or
any of its subsidiaries (including the ▇▇▇▇▇▇ Shares purchased by Parent
pursuant to Section 1.1(b)) shall be cancelled and retired and no payment shall
be made with respect thereto. Preferred Shares and Common Shares are herein
together referred to as the "Shares".
(c) Each share of common stock of Acquisition issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock, par value $0.01 per share, of the Surviving Entity.
(d) Notwithstanding anything in this Agreement to the contrary, Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger and who has demanded appraisal for such
Shares in accordance with the GCL, if the GCL provides for appraisal rights for
such Shares in the Merger ("Dissenting Shares"), shall not be converted into a
right to receive the Merger Consideration unless such holder fails to perfect
or withdraws or otherwise loses such holder's right to appraisal. If, after the
Effective Time, such holder fails to perfect or withdraws or loses such
holder's right to appraisal, such Dissenting Shares shall be treated as if they
had been converted as of the Effective Time into the right to receive the
Merger Consideration without interest thereon.
2.2 Stock Options and Related Matters. On the Closing Date,
immediately prior to the Effective Time, Holdings shall notify Parent of the
amount of, and Parent shall pay to Holdings,
7
14
the Option Settlement Amount (as defined below) and immediately thereafter each
holder of a then outstanding option (an "Option") to purchase Common Shares
granted under the 1996 Stock Purchase and Option Plan of Holdings (the "Option
Plan") will be entitled (whether such Option is immediately exercisable or not)
to receive in settlement thereof a cash payment from Holdings in an amount
equal to the excess of the Common Share Consideration (as determined pursuant
to Section 1.1(b)) over the exercise price of $5.00 per Share for each such
Option, multiplied by the number of Common Shares covered by such Option (the
"Option Settlement Amount"), net of any applicable withholding Taxes (as
defined below). Holdings, acting through its Board of Directors or a duly
authorized committee thereof, shall take all required action under each Option
and the Option Plan so that, at the Effective Time, any Options with respect to
which the holder thereof has not consented to cancellation in exchange for the
receipt of the Option Settlement Amount will be converted into, and thereafter
represent only the right to receive, the Option Settlement Amount. All such
Options shall be cancelled upon the payment of such cash in settlement thereof.
Immediately following the Effective Time, the Option Plan will be terminated
and no further stock awards, stock options or stock appreciation rights will be
granted thereunder subsequent to the Effective Time.
2.3 Exchange of Certificates. (a) Promptly upon the surrender of any
certificate representing Common Shares entitled to payment pursuant to Section
2.1, Parent shall pay the holder of such certificate the Merger Consideration
multiplied by the
8
15
number of Common Shares formerly represented by such certificate, in exchange
therefor, and such Share certificate shall forthwith be cancelled. Until so
surrendered and exchanged, each such certificate (other than certificates
representing Dissenting Shares or shares held by Parent, Acquisition or
Holdings, or any direct or indirect subsidiary thereof) shall represent solely
the right to receive the Merger Consideration. If the Merger Consideration (or
any portion thereof) is to be paid to a person other than the holder in whose
name the certificate representing Common Shares surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such exchange shall pay to
Parent any transfer or other Taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the Common
Shares formerly represented by the certificate surrendered, or shall establish
to the satisfaction of Parent that such Tax has been paid or is not applicable.
Notwithstanding the foregoing, neither Parent nor any party hereto shall be
liable to a holder of Shares for any Merger Consideration delivered pursuant
hereto to a public official pursuant to applicable abandoned property laws.
(b) Promptly following the date which is six months after the
Effective Time, Parent shall return to the Surviving Entity all cash,
certificates and other instruments in its possession relating to the
transactions described in this Agreement, and Parent's duties under this
Section 2.3 shall
9
16
terminate. Thereafter, each holder of a certificate formerly representing a
Common Share may surrender such certificate to the Surviving Entity and
(subject to applicable abandoned property, escheat and similar laws) receive in
exchange therefor the Merger Consideration, without any interest thereon, but
shall have no greater rights against the Surviving Entity than may be accorded
to general creditors of the Surviving Entity under Delaware law.
(c) The right of any holder of a certificate representing Common
Shares to receive the Merger Consideration shall be subject to and reduced by
the amount of any required Tax withholding obligation.
(d) Promptly after the Effective Time, Parent shall mail or deliver to
each record holder of certificates which immediately prior to the Effective
Time represented Common Shares a form of letter of transmittal and instructions
for use in surrendering such certificates and receiving the Merger
Consideration in exchange therefor.
(e) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Entity of any Common Shares. If, after the
Effective Time, certificates previously representing Common Shares are
presented to the Surviving Entity or Parent, they shall be cancelled and
exchanged for the Merger Consideration as provided in this Article II, subject
to applicable law in the case of Dissenting Shares.
(f) Notwithstanding any other provision in this Section 2.3 to the
contrary, Parent shall cause the Merger Consideration to be paid in immediately
available funds on the
10
17
date of the Effective Time with respect to any certificates representing Common
Shares which are surrendered to Parent prior to or at the Effective Time, and
Parent will not be required to comply with Section 2.3(d) with respect to such
Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representation and Warranties of ▇▇▇▇▇▇. ▇▇▇▇▇▇ represents and
warrants to Parent as follows:
(a) Due Organization and Power of ▇▇▇▇▇▇. Each of ▇▇▇▇▇▇, Inc. and BDH
is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder.
(b) Authorization and Validity of Agreement. The execution, delivery
and performance by ▇▇▇▇▇▇ of this Agreement and the consummation by them of the
transactions contemplated hereby have been duly authorized by their respective
Boards of Directors, and no other corporate action on the part of ▇▇▇▇▇▇ is
necessary for the execution, delivery and performance by ▇▇▇▇▇▇ of this
Agreement and the consummation by them of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by ▇▇▇▇▇▇ and is a legal,
valid and binding obligation of ▇▇▇▇▇▇, enforceable against ▇▇▇▇▇▇ in
accordance with its terms, except to the extent that its enforceability may be
limited by bankruptcy, insolvency,
11
18
reorganization, moratorium or other laws relating or affecting creditors'
rights generally and by general equity principles.
(c) No Conflict. Except as set forth on Schedule 3.1(c) hereto, except
as would not have a Material Adverse Effect (as defined in Section 3.2(a)) and
except as would not prevent, materially hinder or materially delay the ability
of ▇▇▇▇▇▇ to perform their obligations under this Agreement or to consummate
the transactions contemplated hereby, the execution, delivery and performance
by ▇▇▇▇▇▇ of this Agreement and the consummation by them of the transactions
contemplated hereby: (i) will not violate any provision of law, rule or
regulation, order, judgment or decree applicable to ▇▇▇▇▇▇; (ii) will not
require any consent or approval of, or filing with or notice to, any
governmental or regulatory authority under any provision of law applicable to
▇▇▇▇▇▇, except for the requirements of Title II of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "Antitrust Improvements
Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and except for any consent, approval, filing or notice requirements
which become applicable solely as a result of the specific regulatory status of
Parent or its affiliates or which Parent or its affiliates are otherwise
required to obtain; (iii) will not violate any provision of the Certificate of
Incorporation or Bylaws of ▇▇▇▇▇▇; and (iv) will not require any consent,
approval or notice under, and will not conflict with, or result in the breach
or termination of, or constitute a default under, or result in the acceleration
of the performance by ▇▇▇▇▇▇ under, any indenture,
12
19
mortgage, deed of trust, lease, license, franchise, contract, agreement or
other instrument to which ▇▇▇▇▇▇ is a party or by which any of them, or any of
their assets are bound or encumbered.
(d) Ownership of the ▇▇▇▇▇▇ Shares. ▇▇▇▇▇▇ is and will be on the
Closing Date the record and beneficial owner and holder of the ▇▇▇▇▇▇ Shares,
free and clear of all liens, claims, charges, security interests, options,
other legal or equitable encumbrances, agreements, voting trusts, proxies or
other arrangements or restrictions whatsoever. All of the ▇▇▇▇▇▇ Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
Upon transfer of the ▇▇▇▇▇▇ Shares to Parent on the Closing Date in accordance
with Section 1.1(b), Parent will receive good and marketable title to the
▇▇▇▇▇▇ Shares, free and clear of all liens, claims, charges, security
interests, options or other legal or equitable encumbrances.
3.2 Representations and Warranties of Holdings. Holdings represents
and warrants to Parent as follows:
(a) Due Organization of Holdings and Subsidiaries. Each of Holdings
and its Subsidiaries (as defined in Section 3.2(c)) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. Holdings has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. Each of Holdings
and its Subsidiaries (i) has all requisite corporate power and authority to own
its properties and assets and to carry on its business as it is now being
conducted and (ii) is in good
13
20
standing and is duly qualified to transact business in each jurisdiction set
forth on Schedule 3.2(a)(ii), which are all of the jurisdictions in which the
failure to so qualify would have a material adverse effect on the business or
financial condition of Holdings and its Subsidiaries taken as a whole (a
"Material Adverse Effect"). Complete and correct copies of Holdings'
Certificate of Incorporation and Bylaws, as amended to date, have been made
available to Parent.
(b) Authorization and Validity of Agreement. The execution, delivery
and performance by Holdings of this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by its Board of
Directors, and no other corporate action on the part of Holdings or its
stockholders is necessary for the execution, delivery and performance by
Holdings of this Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Holdings and is a legal, valid and binding obligation of Holdings, enforceable
against Holdings in accordance with its terms, except to the extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally
and by general equity principles.
(c) Subsidiaries. Holdings has no entities in which it directly or
indirectly owns 50% or more of the effective voting power or equity interest
except as set forth in Schedule 3.2(c) hereto (the "Subsidiaries"). Complete
and correct copies of the Certificate of Incorporation and Bylaws of each
Subsidiary
14
21
of Holdings, as amended to date, have been made available to Parent. None of
Holdings or its Subsidiaries is a party to any partnership agreement or joint
venture agreement with any other person.
(d) Capitalization. The authorized capital stock of Holdings consists
of 30,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock,
of which 14,995,000 Common Shares and 3,400,000 Preferred Shares are
outstanding as of the date hereof. Except as set forth on Schedule 3.2(d)(i)
hereto, all of the outstanding shares of capital stock or other equity
interests of each of the Subsidiaries have been validly issued and are fully
paid and nonassessable and are owned by Holdings and/or one or more of its
Subsidiaries free and clear of all liens, claims, charges, security interests,
options or other legal or equitable encumbrances. Except as indicated in
Schedule 3.2(d)(ii) hereto, (i) there are no outstanding options, warrants or
other rights of any kind relating to the sale, issuance or voting of any shares
of capital stock of any class of, or other ownership interests in, Holdings or
of any of its Subsidiaries which have been issued, granted or entered into by
Holdings or any of its Subsidiaries or any securities convertible into or
evidencing the right to purchase any shares of capital stock of any class of,
or other ownership interests in, Holdings or any of its Subsidiaries; (ii) no
shares of the capital stock of Holdings or any of its Subsidiaries are reserved
for any purpose other than for the issuance of shares upon the exercise of the
Options; (iii) there are no preemptive or similar rights with respect to
15
22
the issuance, sale or other transfer (whether present, past or future) of the
capital stock of Holdings or its Subsidiaries; and (iv) there are no agreements
or other obligations (contingent or otherwise) which may require Holdings or
its Subsidiaries to repurchase or otherwise acquire any shares of its capital
stock other than as described in Section 2.2. All dividends on the Preferred
Shares have been declared and paid on or as of the dates when such dividends
are required to be declared and paid in accordance with the terms of the
Preferred Shares.
(e) No Conflict. Except as set forth on Schedule 3.2(e) hereto, except
as specifically contemplated in this Agreement and except as would not have a
Material Adverse Effect, the execution, delivery and performance by Holdings of
this Agreement and the consummation by it of the transactions contemplated
hereby: (i) will not violate any provision of law, rule or regulation, order,
judgment or decree applicable to Holdings or any of its Subsidiaries; (ii) will
not require any consent or approval of, or filing with or notice to, any
governmental or regulatory authority under any provision of law applicable to
Holdings or its Subsidiaries, except for the Antitrust Improvements Act and the
Exchange Act and except for any consent, approval, filing or notice
requirements which become applicable solely as a result of the specific
regulatory status of Parent or its affiliates or which Parent or its affiliates
are otherwise required to obtain; (iii) will not violate any provision of the
Certificate of Incorporation or Bylaws of Holdings or any of its Subsidiaries;
(iv) will not require any
16
23
consent, approval or notice under, and will not conflict with, or result in the
breach or termination of, or constitute a default under, or result in the
acceleration of the performance by Holdings or any of its Subsidiaries under,
any indenture, mortgage, deed of trust, lease, license, franchise, contract,
agreement or other instrument to which Holdings or any of its Subsidiaries is a
party or by which any of them, or any of their assets are bound or encumbered;
or (v) will not entitle any employee of Holdings or its Subsidiaries to
severance or other related payments, or create any other material change in
control related obligations to employees.
(f) Financial Statements. Attached as Schedule 3.2(f)(i) are an
unaudited balance sheet of Holdings and its Subsidiaries at December 31, 1996
and a statement of Holdings' and its Subsidiaries' earnings before income taxes
for the year ended December 31, 1996, together with the notes thereto
(collectively, the "Financial Statements"). The Financial Statements were
prepared in accordance with Holdings' accounting practices and present fairly
in all material respects the financial position and earnings before income
taxes of Holdings and its Subsidiaries at and for the year ended December 31,
1996. Set forth on Schedule 3.2(f)(ii) hereto are the material differences
between generally accepted accounting principles and Holdings' accounting
practices. Except as set forth on the Financial Statements or in Schedule
3.2(f)(iii), except for those that would not have a Material Adverse Effect and
except for liabilities and obligations incurred in the ordinary course of
17
24
business since December 31, 1996, neither Holdings nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required to be set forth on the Financial Statements
under Holdings' accounting practices.
(g) Books and Records. The minute books of Holdings and each of its
Subsidiaries contain substantially accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Boards
of Directors and the committees of the Boards of Directors of Holdings and each
of its Subsidiaries, and no meeting of any such stockholders, Board of
Directors or committee has been held in which substantive corporate action was
taken and for which minutes have not been prepared and are not contained in
such minute books. At the Closing, all of those books and records will be in
the possession of Holdings and its Subsidiaries.
(h) Absence of Material Adverse Change. Except as a result of the
execution and delivery of this Agreement or as expressly contemplated hereby
(including, without limitation, by clause (iii) of Section 4.6(a) or by clause
(C) of Section 4.6(d)(ii)) and except as set forth on Schedule 3.2(h), from
December 31, 1996 to the date of this Agreement, and from December 31, 1996 to
the Closing Date, Holdings and its Subsidiaries have conducted or will conduct
business only in the ordinary course, and except as would not, individually or
in the aggregate, have a Material Adverse Effect, none of Holdings or any of
its Subsidiaries has or will have:
18
25
(i) redeemed or purchased, directly or indirectly, any shares
of its capital stock or declared or paid any dividends or distributions
with respect to any shares of its capital stock, except for dividends
due during such period with respect to the Preferred Shares, except for
other dividends the amount of which is referred to in clause (i) of
Section 4.6(a) or clause (A) of Section 4.6(d)(ii) and except for
repurchases of Common Shares held by employees of Holdings or its
Subsidiaries pursuant to the respective Management Stockholder's
Agreements between Holdings and such employees;
(ii) except for issuances of Shares of Common Stock upon the
exercise of outstanding Options, issued, sold or transferred any of its
equity securities, securities convertible into its equity securities or
warrants, options or other rights to acquire its equity securities, or
any bonds or other securities issued by it;
(iii) borrowed or become liable as a guarantor for any amount
in excess of $1,000,000 in the aggregate, except for current
liabilities incurred in the ordinary course of business and liabilities
under contracts entered into in the ordinary course of business;
(iv) discharged or satisfied any lien or encumbrance in excess
of $1,000,000, other than in the ordinary course of business;
(v) mortgaged, pledged or subjected to any lien, charge or any
other encumbrance, any of its properties or
19
26
assets, except liens for current property taxes or assessments not yet
due and payable and those arising in the ordinary course of business;
(vi) sold, assigned or transferred any of its material
tangible assets, except in the ordinary course of business, or canceled
without reasonable consideration any material debts owing to or held by
it;
(vii) sold, assigned or transferred any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets,
other than any of the foregoing which is not material; provided that
neither ▇▇▇▇▇▇, Holdings nor any of its Subsidiaries has sold, assigned
or transferred, for use in connection with the Products (as defined in
the Trademark License Agreement (as defined below)) or in connection
with any of the other products of Holdings or its Subsidiaries, any of
the intangible assets subject to the Trademark License Agreement or
otherwise used in connection with the products of Holdings or its
Subsidiaries;
(viii) made or granted any bonus or any wage or salary
increase to any employee or group of employees other than in the
ordinary course of business in accordance with past practice, or made
or granted any increase in any employee benefit plan or arrangement, or
amended or terminated any existing employee benefit plan or arrangement
or adopted any new employee benefit plan or arrangement;
(ix) other than as reflected in Holdings' 1997 capital budget
(a copy of which has been furnished to
20
27
Parent), made capital expenditures or commitments therefor that
aggregate in excess of $500,000;
(x) made any loans or advances to, or guarantees for the
benefit of, any person, including ▇▇▇▇▇▇ and its affiliates (other than
loans or advances made to employees in the ordinary course or made to
▇▇▇▇▇▇, Inc. and for which Holdings or its Subsidiaries are entitled to
repayment);
(xi) amended or otherwise altered any contracts or other
agreements to which it is a party or waived any rights or obligations
thereunder, except in the ordinary course of business in accordance
with past practice;
(xii) entered into any other transaction or agreement in
excess of $100,000 other than in the ordinary course of business; or
(xiii) suffered any material adverse change in the financial
condition or business of Holdings and its Subsidiaries taken as a whole
(except as may be disclosed in this Agreement or in the Schedules
hereto and except for changes affecting the economy generally, the
dairy industry generally or the dairy industry within any of the
jurisdictions in which Holdings or its Subsidiaries is operating).
(i) Absence of Undisclosed Liabilities. As of the Closing, none of
Holdings or its Subsidiaries will have any obligations or liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise, whether due or to
become due and regardless of when or by whom asserted) arising out of
21
28
transactions entered into prior to the Closing Date, or any action or inaction
prior to the Closing Date, except (i) obligations under Material Contracts (as
hereinafter defined) or under contracts and commitments entered into in the
ordinary course of business as permitted by Section 3.2(h), (ii) liabilities
reflected on the balance sheet of Holdings and its Subsidiaries at December 31,
1996 and the notes thereto, included in the Financial Statements (the "December
31, 1996 Balance Sheet"), (iii) liabilities which in the aggregate would not
have a Material Adverse Effect and (iv) obligations and liabilities otherwise
expressly disclosed (or within any materiality threshold contained in any other
representation) in this Agreement or the Schedules hereto.
(j) Real Property Ownership. Schedule 3.2(j) lists all real property
(by street address) owned by each of Holdings and its Subsidiaries as of the
date hereof. With respect to each parcel of real property (a "Parcel") listed
in Schedule 3.2(j), except as would not, individually or in the aggregate, have
a Material Adverse Effect:
(i) except as disclosed on Schedule 3.2(j) hereto, the entity
owning such Parcel has marketable title to such Parcel, free and clear
of all mortgages, pledges, security interests, encumbrances, charges or
other liens, easements and other restrictions, other than (A)
installments of special assessments not yet delinquent, (B) Taxes not
yet due and payable, or (C) encumbrances, encroachments and recorded
easements, covenants and restrictions, including
22
29
exceptions listed on any title insurance policy, or deeds or other
documents of record relating to such Parcel, copies of which have been
delivered to Parent prior to the date hereof, which do not impair the
current use, occupancy or value of the property subject thereto;
(ii) except as disclosed on Schedule 3.2(j) hereto, there are
no pending or, to the knowledge of Holdings or its Subsidiaries,
threatened condemnation proceedings or litigation or administrative
actions relating to any Parcel;
(iii) except as disclosed on Schedule 3.2(j) hereto, there are
no subleases, licenses, concessions or other agreements, written or
oral, granting to any party the right of use or occupancy of any
portion of any Parcel;
(iv) except as disclosed on Schedule 3.2(j) hereto, there are
no outstanding options or rights of refusal to purchase any Parcel, any
portion thereof or interest therein;
(v) there are no parties (other than one or more of Holdings
and any of its Subsidiaries) in possession of any Parcel, other than
tenants under any leases disclosed on Schedule 3.2(j) who are in
possession of space to which they are entitled; and
(vi) Holdings and its Subsidiaries have sufficient title to
such easements or rights of way or other rights appurtenant to each
Parcel to access public roads or rights of way.
23
30
(k) Real Property Leases. Schedule 3.2(k) contains a complete and
accurate list of all real property leased by Holdings and its Subsidiaries as
of the date hereof pursuant to any real property leases (the "Leases"). Except
as would not, individually or in the aggregate, have a Material Adverse Effect,
with respect to each Lease: (i) such Lease is pursuant to a written Lease which
has been executed and is in full force and effect; (ii) neither Holdings or any
of its Subsidiaries, as applicable, which is a party to such Lease nor, to the
knowledge of Holdings or its Subsidiaries, any other party to such Lease, is in
breach or default, and no event has occurred which, with notice or lapse of
time or both, would constitute such a breach or default or permit termination,
modification or acceleration, under such Lease; (iii) such Lease will continue
to be binding in accordance with its terms following the Closing, except as may
result from actions that may be taken by Parent or its affiliates following the
Closing; (iv) to Holdings or any of its Subsidiaries' knowledge, no party to
such Lease has repudiated any provision thereof; and (v) to Holdings or its
Subsidiaries' knowledge, there are no oral agreements or delayed payment
programs in effect as to such Lease.
(l) Condition of Properties. Except as would not, individually or in
the aggregate, have a Material Adverse Effect, (i) Holdings and its
Subsidiaries own or lease under valid leases all buildings, machinery,
equipment and other tangible assets used in or necessary for the conduct of
their business as presently conducted (except for assets and properties of
▇▇▇▇▇▇
▇▇
▇▇
and its affiliates (other than Holdings and its Subsidiaries) used to provide
services to Holdings and its Subsidiaries) and (ii) the buildings, fixtures and
equipment owned or leased by Holdings or its Subsidiaries are in sufficiently
good operating condition and repair to permit their use in the continuing
operations of Holdings or its Subsidiaries as such operations are presently
conducted, subject to normal wear and tear, and are not in need of maintenance
or repairs except for ordinary, routine maintenance.
(m) Tax Matters. (i) Certain Defined Terms. For purposes of this
Agreement, the following definitions shall apply:
(A) The term "▇▇▇▇▇▇ Corporation" shall mean one of the group of
corporations consisting of Holdings and its Subsidiaries. Any reference to
a ▇▇▇▇▇▇ Corporation refers to that entity only and does not refer to the
group of corporations of which such ▇▇▇▇▇▇ Corporation is a member.
(B) The term "Group" shall mean, individually and collectively, (1)
Holdings, (2) its Subsidiaries and (3) any individual, trust, corporation,
partnership or any other entity as to which Holdings or any of its
Subsidiaries are liable for Taxes incurred by such individual or entity
either as a transferee, pursuant to Treasury Regulations Section 1.1502-6
or pursuant to any other provision of federal, territorial, state, local
or foreign law or regulations.
25
32
(C) The term "Taxes" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may
become payable in respect thereof, imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision
of any such government, which taxes shall include, without limiting the
generality of the foregoing, all income or profits taxes (including, but
not limited to, federal income taxes and state income taxes), real
property gains taxes, payroll and employee withholding taxes, unemployment
insurance taxes, social security taxes, sales and use taxes, ad valorem
taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp
taxes, environmental taxes, transfer taxes, workers' compensation,
governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which the ▇▇▇▇▇▇ Corporations are required
to pay, withhold or collect.
(D) The term "Returns" shall mean all reports, estimates, declarations
of estimated Tax, information statements and returns relating to, or
required to be filed in connection with, any Taxes, including information
returns or reports with respect to backup withholding and other payments
to third parties.
(ii) Returns Filed and Taxes Paid. All material Returns required to be
filed by or on behalf of the ▇▇▇▇▇▇ Corporations have been duly filed on a
timely basis and such
26
33
Returns are true, complete and correct in all material respects. All Taxes
shown to be payable on the Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and no other Taxes are
payable by the ▇▇▇▇▇▇ Corporations with respect to items or periods covered by
such Returns (whether or not shown on or reportable on such Returns) or with
respect to any period prior to the date of this Agreement. Each of the ▇▇▇▇▇▇
Corporations has withheld and paid over all material Taxes required to have
been withheld and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto, in connection with material amounts paid or owing to any
employee, creditor, independent contractor or other third party. There are no
liens on any of the assets of any of the ▇▇▇▇▇▇ Corporations with respect to
Taxes, other than liens for Taxes not yet due and payable or for Taxes that a
member of the Group is contesting in good faith through appropriate proceedings
and for which appropriate reserves have been established.
(iii) Returns Furnished. Parent has been provided access by ▇▇▇▇▇▇ or
Holdings to true and complete copies of (A) relevant portions of any separate
federal and state income or franchise tax Returns relating to the ▇▇▇▇▇▇
Corporations for periods ending on and after December 31, 1991; provided,
however, that no such Return will be provided if it relates to or includes any
corporation or group of corporations other than the ▇▇▇▇▇▇ Corporations.
27
34
(iv) Tax Deficiencies; Audits; Statutes of Limitations. Except as set
forth on Schedule 3.2(m)(iv) and except as would not have a Material Adverse
Effect: (A) there is no audit by a governmental or Taxing authority in process
or pending with respect to the Returns of the ▇▇▇▇▇▇ Corporations; (B) no
deficiencies exist or have been asserted (either in writing or verbally,
formally or informally) with respect to Taxes of the ▇▇▇▇▇▇ Corporations and
none of the ▇▇▇▇▇▇ Corporations has received notice (either in writing or
verbally, formally or informally) that it has not filed a Return or paid Taxes
required to be filed or paid by it; (C) the ▇▇▇▇▇▇ Corporations are neither
parties to any action or proceeding for assessment or collection of Taxes, nor
has such event been asserted (either in writing or verbally, formally or
informally) against the ▇▇▇▇▇▇ Corporations or any of their assets; and (D) no
waiver or extension of any statute of limitations is in effect with respect to
Taxes or Returns of the ▇▇▇▇▇▇ Corporations.
(v) Tax Sharing. Except as set forth in Schedule 3.2(m)(v) and with
respect to the tax sharing agreement dated as of January 1, 1996 between ▇▇▇▇▇▇
Holdings, Inc. and Holdings (the "Tax Sharing Agreement"), Holdings and its
Subsidiaries are not parties to any tax sharing agreement and have not assumed
the liability for taxes of any other person under contract, and, except as
provided in this Agreement, any payments to be made by Holdings to ▇▇▇▇▇▇, Inc.
prior to the Closing Date with respect to Taxes for the period ended on
December 31, 1996 or for the Short Period and any accruals of amounts with
respect to Taxes
28
35
for the period ended on December 31, 1996 or for, only with respect to Taxes
other than income Taxes, the Short Period will be made in accordance with the
Tax Sharing Agreement.
(vi) Tax Elections and Special Tax Status. Except as set forth in
Schedule 3.2(m)(vi) or except as would not have a Material Adverse Effect: (A)
none of the ▇▇▇▇▇▇ Corporations is a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Internal Revenue Code of 1986, as amended
(the "Code"), as in effect prior to amendment by the Tax Equity and Fiscal
Responsibility Act of 1982; (B) none of the ▇▇▇▇▇▇ Corporations has entered
into any compensatory agreements with respect to the performance of services
which payment thereunder would result in a nondeductible expense to the ▇▇▇▇▇▇
Corporations pursuant to Section 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code; (C) none of the
▇▇▇▇▇▇ Corporations is a "consenting corporation" under Section 341(f) of the
Code; (D) none of the ▇▇▇▇▇▇ Corporations has participated in an international
boycott as defined in Section 999 of the Code; (E) none of the ▇▇▇▇▇▇
Corporations has agreed to make, nor is any ▇▇▇▇▇▇ Corporation required to
make, any adjustment under Code Section 481(a) of the Code by reason of a
change in accounting method or otherwise; (F) none of the assets of any of the
▇▇▇▇▇▇ Corporations is "tax exempt use property" within the meaning of Section
168(h) of the Code; (G) Holdings has not made and will not make a deemed
dividend election under Treasury Regulations Section 1.1502-32(f)(2) or a
consent dividend election under Section 565
29
36
of the Code; (H) none of the ▇▇▇▇▇▇ Corporations has had a permanent
establishment in any foreign country, as defined in any applicable tax treaty
or convention between the United States of America and such foreign country;
(I) none of the ▇▇▇▇▇▇ Corporations is a party to any joint venture,
partnership, or other arrangement or contract which could be treated as a
partnership for federal income tax purposes; and (J) none of the ▇▇▇▇▇▇
Corporations is or was "25-percent foreign owned" within the meaning of Section
6038A of the Code at any time during any taxable period which remains open
under the statute of limitations applicable for federal income tax purposes.
(n) Material Contracts. (i) Except as set forth on Schedule 3.2(n)
hereto, except as would not, individually or in the aggregate, have a Material
Adverse Effect, except for agreements entered into in the ordinary course of
business or as permitted by Section 3.2(h) and except for licenses of, and
other agreements with respect to, Company Intellectual Property (as defined in
Section 3.2(r)) and Leases, as to which no representations or warranties are
made other than as set forth in Sections 3.2(r) and 3.2(k), respectively, none
of Holdings or its Subsidiaries is a party to or bound by, nor are any of their
assets affected by, as of the date of this Agreement, any:
(A) agreement or indenture relating to the borrowing of money or to
the mortgaging or pledging any of its assets;
(B) agreement with respect to the lending or investing of funds;
30
37
(C) guaranty of any obligation for borrowed money or otherwise, other
than endorsements made for collection in the ordinary course of business;
(D) indemnification or other reimbursement obligations, except for
indemnities and other reimbursement obligations in the ordinary course of
business;
(E) license or royalty agreements involving more than $100,000;
(F) lease or agreement under which it is lessee of or holds or
operates any personal property owned by any other party for which the
annual payment exceeds $100,000;
(G) lease or agreement under which it is lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by it for which the annual payment exceeds $100,000;
(H) contract or group of related contracts with the same party for the
purchase or sale of products or services under which the undelivered
balance of such products and services has a selling price in excess of
$100,000;
(I) other contract or group of related contracts with the same party
continuing over a period of more than thirty days from the date or dates
thereof involving more than $100,000;
(J) contract which prohibits it from freely engaging in business
anywhere in the world;
(K) contract with distributors of its products involving payments of
more than $100,000 per annum;
31
38
(L) contract with any officer, director, shareholder or other
affiliate;
(M) contract with any labor union or any bonus or any other form of
deferred compensation plan or any stock purchase, stock option, or similar
written plan or practice, or any severance agreements;
(N) contract for the employment or retention of any officer, employee
or consultant on a full-time or part-time basis (except for consultants in
the ordinary course of business); or
(O) any other contracts not described above which involve the payment
by Holdings or its Subsidiaries of $100,000 or more in any 12 month
period.
(ii) Except as specifically disclosed on Schedule 3.2(n) and except as
would not, individually or in the aggregate, have a Material Adverse Effect:
(A) each contract or commitment listed on Schedule 3.2(n) (the "Material
Contracts") is valid, binding and enforceable against Holdings or, if a
Subsidiary of Holdings is the party to such Material Contract, such Subsidiary;
(B) each of Holdings and its Subsidiaries has performed all obligations under
the Material Contracts required to be performed by it and Holdings and its
Subsidiaries have not received any claim of default under any Material
Contract; and (C) Holdings and its Subsidiaries do not have knowledge of any
breach or anticipated breach by any other party to any Material Contract.
(iii) A true and correct copy of each Material Contract as of the date
of this Agreement (other than those which are not
32
39
located at the executive offices of Holdings in Ogden, Utah or of ▇▇▇▇▇▇, Inc.
in Columbus, Ohio and those which are not written) has been supplied or made
available to Parent, together with all amendments, waivers or other changes
thereto.
(o) Legal Proceedings. Except as set forth on Schedule 3.2(o) and
except as would not, individually or in the aggregate, have a Material Adverse
Effect:
(i) there are no actions, suits, proceedings (including debarment
proceedings) or orders pending or (to the knowledge of Holdings and its
Subsidiaries, after reasonable review) threatened or (to the knowledge of
Holdings and its Subsidiaries after reasonable review) investigations
pending or threatened against or affecting Holdings and its Subsidiaries
at law or in equity, or before or by any federal, state, municipal,
foreign or other governmental department, commission, board, bureau,
agency, court or instrumentality, domestic or foreign ("Governmental
Authority");
(ii) Holdings and its Subsidiaries are not subject to any order
(including debarment orders), writ, injunction, judgment or decree of any
court or any Governmental Authority;
(iii) there are no inquiries of any Governmental Authority pending, or
to the knowledge of Holdings and its Subsidiaries, threatened (including
inquiries as to the qualifications of Holdings and its Subsidiaries to
hold or receive any license or permit); and
33
40
(iv) neither Holdings nor any of its Subsidiaries is in violation of
any term of any judgment, decree, injunction, or order entered by any
Governmental Authority or court and outstanding against Holdings or any of
its Subsidiaries.
(p) Government Licenses, Permits and Related Approvals. Except as set
forth on Schedule 3.2(p) hereto and except as would not, individually or in the
aggregate, have a Material Adverse Effect:
(i) Holdings and its Subsidiaries own or possess all permits,
licenses, franchises, certificates, approvals and other authorizations
which are required under foreign, federal, state and local laws and
regulations by such entity in the conduct of its business as it is
presently conducted (collectively, the "Licenses and Permits"), including,
without limitation, all Licenses and Permits required to operate each of
Holdings and its Subsidiaries' dairies and all Licenses and Permits
required under current public health and safety, worker health and safety
and pollution or environmental protection laws, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any pollutant, contaminant or hazardous or toxic
substance, material or waste or any regulation, code, plan, order, decree,
judgment or notice or demand letter
34
41
issued, entered, promulgated or approved thereunder ("Health and
Environmental Laws").
(ii) No loss of any License or Permit is pending, or, to the knowledge
of Holdings or its Subsidiaries, threatened or reasonably foreseeable as a
result of the transaction contemplated by this Agreement or otherwise,
except for normal expiration in accordance with the terms thereof.
(iii) Holdings and its Subsidiaries have complied, and are in
compliance, in all material respects with all terms and conditions of all
required Licenses and Permits and with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Health
and Environmental Laws.
(iv) Holdings and its Subsidiaries have complied, and are in
compliance, in all material respects with all applicable laws and
regulations of all Governmental Authorities which affect the businesses or
any owned or leased properties of Holdings and its Subsidiaries and to
which Holdings and its Subsidiaries may be subject (including, without
limitation, all Health and Environmental Laws), and no claims have been
filed against Holdings and its Subsidiaries alleging a violation of any
such laws or regulations.
(v) Neither Holdings nor its Subsidiaries has received any notice or
claim to the effect that it is or may be liable to any person as a result
of a release or
35
42
threatened release of any hazardous or non-hazardous substance, material
or waste at any location nor has it filed any notice required under
applicable law of any such release or threatened release.
(vi) Neither Holdings nor any of its Subsidiaries is presently subject
to (A) any outstanding order from or agreement with any Governmental
Authority or person respecting environmental or health matters under any
Health and Environmental Laws or (B) any outstanding claims, liens,
judicial or administrative proceedings or investigations arising under any
Health and Environmental Laws.
(q) Employee Matters. (i) Schedule 3.2(q)(i) contains a list of (A)
any persons on leave of absence who are currently collecting disability
payments; and (B) all employment, consulting or similar compensation agreements
of Holdings or its Subsidiaries which may not be terminated by Holdings or its
Subsidiaries without penalty within thirty days after the Closing.
(ii) Except as disclosed in this Agreement or the Schedules hereto,
except as would not have a Material Adverse Effect and except for the
provisions of the Management Stockholder's Agreements between Holdings and
certain of its or its Subsidiaries' employees, none of the employees of
Holdings and its Subsidiaries is subject to any non-compete, nondisclosure,
confidentiality, employment, consulting or similar agreement relating to or
affecting the present or proposed business activities of Holdings and its
Subsidiaries.
36
43
(r) Intellectual Property. Schedule 3.2(r)(i) hereof lists all United
States, state and foreign patents and patent applications, United States, state
and foreign trademark and service ▇▇▇▇ registrations and applications and
United States, state and foreign copyright registrations and applications
therefor owned by or licensed to Holdings or any of its Subsidiaries (herein
collectively referred to as the "Company Intellectual Property"). Except as set
forth on Schedule 3.2(r)(ii) hereto and except as would not have a Material
Adverse Effect, Holdings and its Subsidiaries own or have the right to use all
listed patents, patent applications, trademark and service ▇▇▇▇ registrations
and applications, and copyright registrations and applications and hold
unexpired licenses or other rights to use all other intellectual property
necessary to the conduct of the business of Holdings and its Subsidiaries.
Except as set forth on Schedule 3.2(r)(iii) hereto and except as would not have
a Material Adverse Effect, there are no existing or, to Holdings' or its
Subsidiaries' knowledge, threatened claims of any third party based on the use
by, or challenging the ownership of, Holdings or any of its Subsidiaries of any
of the Company Intellectual Property and none of ▇▇▇▇▇▇, Holdings or its
Subsidiaries has received a notice of conflict between the Company Intellectual
Property and the asserted rights of others within the last five years. Except
as set forth on Schedule 3.2(r)(iv) hereto and except as would not have a
Material Adverse Effect, to Holdings' and its Subsidiaries' knowledge, there is
no infringing use or contrary claim of ownership by any third person
37
44
of the Company Intellectual Property and all other intellectual property
necessary to the conduct of the business of Holdings and its Subsidiaries as
presently conducted.
(s) Employee Benefit Plans. (i) For purposes of this Agreement,
"Business Plans" shall mean all "employee benefit plans" (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, without limitation, "multiemployer plans" (within the
meaning of Sections 3(37) and 4001(a)(3) of ERISA)), retirement, savings, stock
purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements (A) under which any employee or former employee of Holdings or its
Subsidiaries (collectively, the "Business Employees") has any present or future
right to benefits and (B) under which ▇▇▇▇▇▇, Holdings or its Subsidiaries has
any present or future liability.
(ii) Schedule 3.2(s)(ii) sets forth a list of (A) each Business Plan
that is an employee pension benefit plan, as defined in Section 3(2) of ERISA
(an "Employee Pension Benefit Plan"), (B) each Business Plan that is a
multiemployer plan and (C) each other material Business Plan.
(iii) Except where a breach of the following, individually or in the
aggregate, would not have a Material Adverse Effect:
(A) each Business Plan sponsored by ▇▇▇▇▇▇, Holdings or its
Subsidiaries has been established and administered in
38
45
accordance with its terms and in compliance with ERISA, the Code and all
other applicable laws, rules and regulations; provided, however, that
"compliance" shall not be achieved for purposes of this Section
3.2(s)(iii)(A) if an act or failure to act with respect to a Business Plan
has resulted in or could reasonably be expected to result in unpaid excise
taxes, penalties or fines under ERISA, the Code or other applicable laws,
rules or regulations;
(B) a favorable determination letter as to the qualification under
Section 401(a) or Section 505(c) of the Code of each Business Plan
designed or intended to be a plan qualified under such sections has been
issued by the Internal Revenue Service (the "IRS"), and nothing has
occurred, to ▇▇▇▇▇▇'▇ knowledge, which would cause the loss of such
qualification or tax-exempt status;
(C) there are no actions, suits or claims to ▇▇▇▇▇▇'▇ knowledge (other
than routine claims for benefits in the ordinary course) that are pending,
threatened, ▇▇▇▇▇▇ or inchoate with respect to Business Employees covered
by any Business Plan (including, without limitation, claims by
governmental regulatory agencies);
(D) no "prohibited transaction" (as defined in Section 4975 of the
Code and for which no exemption exists under the Code) exists with respect
to any Business Plan;
(E) no "reportable event" (as defined in Section 4043 of ERISA and the
regulations thereunder and with respect to
39
46
which the 30 day notice requirement has not been waived) exists with
respect to any Business Plan;
(F) each member of a controlled group of organizations (within the
meaning of Section 414(b), (c), (m) or (o) of the Code) of which ▇▇▇▇▇▇,
Holdings or any of its Subsidiaries is also a member (the "Controlled
Group") has paid all premiums (and interest charges and penalties for late
payment, if applicable) due the Pension Benefit Guaranty Corporation (the
"PBGC") with respect to each Employee Pension Benefit Plan during the last
five plan years; and as of the Closing, all members of the Controlled
Group will have made all required premium payments to the PBGC that are
due on or prior to such date with respect to such plans; and none of
▇▇▇▇▇▇, Holdings, its Subsidiaries or any Controlled Group member has
engaged in a transaction that has subjected them to liability under
Section 4069 of ERISA;
(G) true, correct and complete copies of the following have been
delivered to Parent: (I) each Business Plan (but excluding any
"multiemployer plans") listed on Schedule 3.2(s)(ii); (II) current summary
plan descriptions that are routinely delivered to the Business Employees
with respect to the Business Plans (but excluding any "multiemployer
plans") listed on Schedule 3.2(s)(ii); and (III) to the extent applicable,
the most recent determination letters issued by the IRS with respect to
each Pension Benefit Plan; and
40
47
(H) no amounts have been contributed to any voluntary employees'
beneficiary association maintained by ▇▇▇▇▇▇, Holdings or its Subsidiaries
that was intended to fund any Business Plan providing benefits other than
disability income benefits.
(t) Insurance. As of the date of this Agreement, none of ▇▇▇▇▇▇,
Holdings or its Subsidiaries has received any notice of cancellation of any
insurance policy maintained in favor of Holdings or its Subsidiaries or been
denied insurance coverage, which, in either case, would have a Material Adverse
Effect.
(u) Brokers, Finders, etc. None of ▇▇▇▇▇▇, Holdings or its
Subsidiaries has employed, or is subject to any valid claim of, any broker,
finder, consultant or other intermediary in connection with the transactions
contemplated by this Agreement who might be or is entitled to a fee or
commission in connection with such transactions.
(v) Transactions with Affiliates. Except as set forth herein,
including, without limitation, as set forth in Article IV hereof, in Schedule
3.2(v) hereto or as contemplated or permitted by Schedule 4.2 hereto, or as set
forth in the Financial Statements, Holdings and its Subsidiaries have not
engaged in any transaction, other than the movement of monetary assets, outside
the ordinary course of business consistent with past practice with ▇▇▇▇▇▇ or
its affiliates (other than Holdings and its Subsidiaries) since December 31,
1996, which was (i) material to the business of Holdings and its Subsidiaries
taken as a whole or (ii) undertaken in contemplation of the sale of Holdings.
41
48
(w) Bank Accounts. Schedule 3.2(w) lists all of the concentration bank
accounts of each of Holdings and its Subsidiaries. None of Holdings or its
Subsidiaries has granted a power of attorney to any person or entity which will
not be terminated as of the Closing Date.
(x) Product Warranty; Product Recall; Product Liability. Except as set
forth on Schedule 3.2(x) and except as would not, individually or in the
aggregate, have a Material Adverse Effect, (i) all products, and the delivery
thereof, processed, manufactured, distributed or sold by Holdings and its
Subsidiaries have been in conformity with all applicable contractual
commitments and all express or implied warranties, (ii) in the last year, none
of Holdings nor its Subsidiaries has recalled any products manufactured,
distributed or sold by it and (iii) none of Holdings nor its Subsidiaries has,
or at Closing will have, any liability to any person or entity relating to
damage to property, personal injury or death caused by or relating to products
processed, manufactured, distributed or sold by Holdings or its Subsidiaries
prior to the Closing, to the extent such damage to property, personal injury or
death arose or arises out of actions by or the inaction of ▇▇▇▇▇▇, Holdings or
its Subsidiaries prior to the Closing.
(y) No Losses of Significant Customers. Except as set forth on
Schedule 3.2(y), no customer of Holdings and its Subsidiaries which accounted
for more than $17,000,000 of Holdings and its Subsidiaries' gross sales during
the fiscal year of Holdings ended December 31, 1996 ceased purchasing all dairy
42
49
products of the types theretofore purchased by such customer from Holdings or
its Subsidiaries during the fiscal year of Holdings ended December 31, 1996.
Except as set forth on Schedule 3.2(y), no customer of Holdings and its
Subsidiaries which accounted for more than $4,000,000 of Holdings and its
Subsidiaries' gross sales during the fiscal year of Holdings ended December 31,
1996 has, during the period from January 1, 1997 through the date of this
Agreement, ceased purchasing all dairy products of the types theretofore
purchased by such customer from Holdings or its Subsidiaries during the fiscal
year of Holdings ended December 31, 1996.
3.3 Representations and Warranties of Parent. Parent represents and
warrants to Holdings and ▇▇▇▇▇▇ as follows:
(a) Due Organization and Power. Parent is a cooperative association
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to enter into this Agreement and perform its obligations hereunder.
Complete and correct copies of the Certificate of Incorporation and By-Laws of
Parent, as amended to date, have been delivered to Holdings. At the time of the
Closing, Acquisition will be a duly organized corporation, limited liability
company or limited partnership, validly existing and in good standing under the
laws of Delaware, will have all requisite power and authority to consummate the
Merger and will not have engaged in any transaction or business, except
incident to its formation and the consummation of the Merger.
43
50
(b) Authorization and Validity of Agreement. The execution, delivery
and performance by Parent of this Agreement and the consummation by Parent of
the transactions contemplated hereby have been, and, at the time of the
Closing, the performance by Acquisition of this Agreement and the consummation
by Acquisition of the transactions contemplated hereby will have been, duly
authorized by the Board of Directors of Parent and Acquisition, and no other
corporate action on the part of Parent or Acquisition is or will be necessary
for the execution, delivery and performance by Parent of this Agreement and the
consummation by Parent or Acquisition of the transactions contemplated hereby.
After the Stock Purchase, the Merger will be duly authorized by Acquisition
pursuant to Section 253 of the GCL, and no other corporate action on the part
of Acquisition, Holdings or their respective stockholders will be necessary for
the consummation of the Merger. This Agreement has been duly executed and
delivered by Parent and is a legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting creditors' rights generally
and by general equity principles.
(c) No Conflict. Except as set forth in Schedule 3.3(c) hereto and
except for any consent, approval, filing or notice that would not, if not given
or made, or any violation, conflict, breach, termination, default or
acceleration which does not, materially impair the ability of Parent to
consummate the
44
51
transactions contemplated hereby, the execution, delivery and performance by
Parent of this Agreement and the consummation by Parent of the transactions
contemplated hereby: (i) will not violate any provision of law, rule or
regulation, order, judgment or decree applicable to Parent; (ii) will not
require any consent or approval of, or filing or notice to, any Governmental
Authority under any provision of law applicable to Parent, except for the
requirements of the Antitrust Improvements Act and the Exchange Act and except
for any consent, approval, filing or notice requirements which become
applicable solely as a result of the specific regulatory status of ▇▇▇▇▇▇ or
which ▇▇▇▇▇▇ or any of its affiliates are otherwise required to obtain; (iii)
will not violate any provision of the Certificate of Incorporation or By-Laws
of Parent; and (iv) will not require any consent, approval or notice under, and
will not conflict with, or result in the breach or termination of, or
constitute a default under, or result in the acceleration of the performance by
Parent under, any indenture, mortgage, deed of trust, lease, license,
franchise, contract, agreement or other instrument to which Parent is a party
or by which it or any of its assets is bound or encumbered.
(d) Brokers, Finders, etc. Parent has not employed, nor is subject to
the valid claim of, any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a fee or commission from ▇▇▇▇▇▇ or Holdings in connection with such
transactions.
45
52
(e) Available Funds. Parent, together with any Permitted Assignees,
will have sufficient funds available at the Closing to pay all amounts payable
pursuant to Articles I and II.
(f) USDA Suspension or Debarment. Except as set forth on Schedule
3.3(f), neither Parent nor any of its affiliates has been suspended or debarred
from Federal procurement or non- procurement programs, no cause for any such
suspension or debarment of Parent exists and, to Parent's knowledge, no cause
for any such suspension or debarment of any of Parent's affiliates exists.
3.4 Representations and Warranties of the Parties. Each party hereto
represents and warrants to the other that it is the explicit intent of each
party hereto that, except for the express representations and warranties
contained in this Article III, ▇▇▇▇▇▇ is making no representation or warranty
whatsoever, express or implied, including but not limited to any implied
warranty or representation as to condition, merchantability or suitability as
to any of the properties or assets of Holdings and its Subsidiaries and that
Parent takes Holdings and its Subsidiaries "as is" and "where is." It is
understood that any cost estimates, projections or other predictions, any data,
any financial information or any memoranda or offering materials or
presentations provided or addressed to Parent are not and shall not be deemed
to be or to include representations or warranties of ▇▇▇▇▇▇.
3.5 Survival of Representations and Warranties. The respective
representations and warranties of ▇▇▇▇▇▇, Holdings and
46
53
Parent contained in this Article III shall not survive the Closing, and no
party shall have any liability or obligation in connection with any such
representation or warranty following the Closing, except that the
representations and warranties contained in Sections 3.1(b), 3.1(d), 3.2(b),
3.3(b) and 3.4 shall survive the Closing.
3.6 Schedules and Exhibits. Disclosure of any fact or item in any
Schedule or Exhibit hereto referenced by a particular paragraph or section in
this Agreement shall, should the existence of the fact or item or its contents
be relevant to any other paragraph or section, be deemed to be disclosed with
respect to that other paragraph or section whether or not a specific cross
reference appears. Disclosure of any fact or item in any Schedule or Exhibit
hereto shall not necessarily mean that such item or fact individually is
material to the business or financial condition of any of Holdings and its
Subsidiaries individually or of Holdings and its Subsidiaries taken as a whole.
ARTICLE IV
COVENANTS
4.1 Access; Information and Records; Confidentiality. (a) During the
period commencing on the date hereof and ending on the Closing Date, ▇▇▇▇▇▇,
Inc. shall, and Holdings shall and shall cause its Subsidiaries to, upon
reasonable request and notice, afford to Parent, its counsel, accountants and
other authorized representatives reasonable access during normal business hours
to the plants, properties, senior management,
47
54
books and records of Holdings and its Subsidiaries, in order that Parent may
have the opportunity to make such reasonable investigations as it shall desire
to make of the affairs of Holdings and its Subsidiaries; provided that, any
contacts with such senior management shall be approved in advance by ▇▇▇▇▇▇.
Each of ▇▇▇▇▇▇, Inc. and Holdings will cause its officers, employees,
accountants and other agents to furnish to Parent such additional financial and
operating data and information with respect to Holdings and its Subsidiaries
(including information relating to the liabilities and obligations referred to
in Sections 8.1(a)(i) and 8.1(a)(iii)) as Parent may from time to time
reasonably request.
(b) (i) Prior to the Closing, ▇▇▇▇▇▇, Inc. shall deliver, or shall
cause Holdings to deliver, to Parent a statement setting forth, as of a date
not more than 10 days prior to the Closing Date, any changes that would be
required to Schedules 3.2(j), 3.2(k) and 3.2(m) if such Schedules were being
delivered for purposes of Sections 3.2(j), 3.2(k) and 3.2(m), respectively, as
of such date; provided that none of ▇▇▇▇▇▇ or Holdings makes or will be deemed
to have made any representation or warranty with respect to such information
and only the representations and warranties contained in Article III hereof
shall have any legal effect.
(ii) Promptly after they become available following each Accounting
Period (as defined in Section 4.6) ending after the date hereof and prior to
the Closing Date, Holdings shall deliver to Parent a copy of Holdings' and its
Subsidiaries'
48
55
balance sheet and statement of earnings before income taxes for such Accounting
Period to the extent that, and in such form as, such information is prepared in
the ordinary course of business; provided that none of ▇▇▇▇▇▇ or Holdings makes
or will be deemed to have made any representation or warranty with respect to
such information and only the representations and warranties contained in
Article III hereof shall have any legal effect.
(c) Parent will hold, and will cause its respective directors,
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information in confidence
to the extent required by, and in accordance with, the provisions of the letter
dated February 7, 1997, between Parent and ▇▇▇▇▇▇, Inc.
4.2 Conduct of the Businesses of Holdings Prior to the Closing Date.
▇▇▇▇▇▇, Inc. and Holdings agree that, except as permitted, required or
specifically contemplated by this Agreement, including, without limitation,
those actions contemplated on Schedule 4.2 or in this Article IV, or as
otherwise consented to or approved in writing by Parent, during the period
commencing on the date hereof and ending at the Closing Date:
(a) the businesses of Holdings and its Subsidiaries shall be conducted
only in the ordinary course of business;
(b) neither Holdings nor any of its Subsidiaries will amend its
Certificate of Incorporation or By-Laws;
(c) Holdings and its Subsidiaries will use their reasonable efforts to
preserve intact their business
49
56
organization, to keep available the services of their present officers and
key employees, and to preserve the good will of those having business
relationships with them; and
(d) neither Holdings nor any of its Subsidiaries will take any other
action which would result in the representation and warranty contained in
Section 3.2(h) being untrue at and as of the Closing Date.
4.3 Antitrust Laws. (a) Each party hereto shall (i) take promptly all
actions necessary to make the filings required of it or any of its affiliates
under the applicable Antitrust Laws (as defined in Section 4.3(e) hereof) in
connection with this Agreement and the transactions contemplated hereby, (ii)
comply at the earliest practicable date with any request for additional
information or documentary material received by it or any of its affiliates
from the Federal Trade Commission (the "FTC") or the Antitrust Division of the
Department of Justice (the "Antitrust Division") and (iii) cooperate with one
another in connection with any filing under applicable Antitrust Laws and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement initiated by any Antitrust
Authority (as defined in Section 4.3(e) hereof).
(b) Each party hereto shall use all best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated by this Agreement under any Antitrust Law. Without limiting the
generality of the foregoing, "best efforts" shall include, without limitation:
50
57
(i) in the case of each of Parent and ▇▇▇▇▇▇:
(A) filing with the appropriate Antitrust Authorities no later than
the business day following the date hereof a Notification and Report Form
with respect to the transactions contemplated by this Agreement; and
(B) if Parent or ▇▇▇▇▇▇ receives a second request for information and
documents from an Antitrust Authority, substantially complying with such
second request within 21 days following the date of its receipt thereof;
(ii) in the case of Parent only:
(A) (1) filing with the appropriate Antitrust Authorities, and causing
each of Parent's Affiliates and/or Permitted Assignees and/or other
Persons with whom Parent or any of its Permitted Assignees intends to
consummate any transaction related to any of the assets or businesses of
Holdings or its Subsidiaries or related to any assets or businesses of
Parent, Parent's Affiliates and/or Permitted Assignees, in either case in
connection with, or in order to permit the consummation of, the
transactions contemplated hereby (such Affiliates of Parent, Permitted
Assignees and other Persons, collectively, "Related Transaction Parties")
to file with the appropriate Antitrust Authorities, no later than five
business days following the date hereof a Notification and Report Form
with
51
58
respect to any and all such transactions (including without limitation any
and all such transactions contemplated by Parent's filing under Section
4.3(b)(i)(A)) for which such a filing with the appropriate Antitrust
Authorities is required and (2) if Parent or Related Transaction Party
receives a second request for information and documents from an Antitrust
Authority, substantially complying (and causing each applicable Related
Transaction Party to substantially comply) with such second request within
21 days following the date of its receipt thereof; and
(B) taking any and all actions and doing any and all other things
necessary, proper or advisable to cause the condition contained in Section
5.1(b)(ii) hereof to be satisfied and to permit the Closing to occur as
soon as possible but in any event on or prior to the Earliest ▇▇▇▇▇▇
Antitrust Termination Date (as defined below) (it being understood that,
without limiting Parent's obligations hereunder, the timing of the Closing
shall be as set forth in Section 1.4); and
(iii) in the case of ▇▇▇▇▇▇ only, subject to Parent's compliance with
clauses (i) and (ii) above, not frustrating or impeding Parent's strategy or
negotiating positions with any Antitrust Authority, except to the extent such
strategy would cause ▇▇▇▇▇▇ or any of its Affiliates to take any action with
respect to their assets or businesses, other than actions required by this
Agreement with respect to
52
59
Holdings and its Subsidiaries and their assets and businesses.
For purposes of this Agreement, the term "Earliest ▇▇▇▇▇▇ Antitrust Termination
Date" shall mean, at any time, the earliest date when ▇▇▇▇▇▇ would then be
permitted to terminate this Agreement pursuant to Section 9.1(a)(iii) hereof.
(c) If any administrative, judicial or legislative action or
proceeding is instituted (or threatened to be instituted) challenging the
transactions contemplated by this Agreement as violative of any Antitrust Law,
each party hereto shall cooperate with one another to contest and resist any
such action or proceeding, and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order (whether temporary, preliminary
or permanent) that is in effect and that restricts, prevents or prohibits
consummation of the transactions contemplated by this Agreement, including,
without limitation, by pursuing all reasonable avenues of administrative and
judicial appeal. Without limiting the generality of the foregoing, Parent's
obligations pursuant to Section 4.3(b)(ii)(B) above shall include litigating
against any Antitrust Authority or other person necessary, proper or advisable
in order that the condition contained in Section 5.1(b)(ii) hereof may be
satisfied and any and all objections raised by any Antitrust Authority will not
prevent the Closing from occurring on or prior to the Earliest ▇▇▇▇▇▇ Antitrust
Termination Date (it being understood that, without limiting Parent's
obligations hereunder, the timing of the Closing shall be as set forth in
Section 1.4).
53
60
(d) Each party hereto shall promptly inform the other parties of any
material communication made to, or received by such party from, any Antitrust
Authority or any other Governmental Authority regarding any of the transactions
contemplated hereby. In addition, and without limiting the generality of the
foregoing, Parent and ▇▇▇▇▇▇, Inc. each shall cause its counsel to (i) afford
to the other party's counsel the opportunity to receive and to review for a
reasonable period in advance of filing or submission to any Antitrust Authority
all forms, documents, letters, memoranda and other materials proposed to be
filed or submitted to any Antitrust Authority regarding the transactions
contemplated hereby, and give reasonable consideration to any comments or
proposals such counsel may make with respect to any such forms, documents,
letters, memoranda or other materials, (ii) give reasonable advance notice to
the other party's counsel of each meeting, pre-arranged telephone call or
telephone call initiated by a party or its counsel with any Antitrust Authority
regarding the transactions contemplated hereby, so that such counsel may attend
or otherwise participate therein, and permit the other party's counsel to
attend or otherwise participate therein, and (iii) promptly inform the other
party's counsel of the substance of each other communication (written or oral,
in person or by telephone) with any Antitrust Authority regarding the
transactions contemplated hereby.
(e) For purposes hereof, (i) "Antitrust Authorities" means the FTC,
the Antitrust Division and the attorneys general
54
61
of the several states of the United States and (ii) "Antitrust Law" means the
▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended, the Antitrust
Improvements Act, the Federal Trade Commission Act, as amended, and all other
federal and state statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines, and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
(f) Parent shall pay to ▇▇▇▇▇▇, Inc. by wire transfer in immediately
available funds $10,000,000 within one business day following the satisfaction
of the condition contained in Section 5.1(b)(ii). Except as provided in Section
9.11(b), such amount shall be non-refundable regardless of whether or not any
of the transactions contemplated by this Agreement is consummated but, upon the
consummation of the Stock Purchase, shall be credited towards the amounts
payable to ▇▇▇▇▇▇, Inc. pursuant to Section 1.1(b).
4.4 Non-Solicitation. (a) Parent will not, from and after the date
hereof and for a period of three years following the earlier of the termination
of this Agreement and the Closing Date, without the prior written approval of
▇▇▇▇▇▇, directly or indirectly, solicit, encourage, entice or induce any person
who is an employee of ▇▇▇▇▇▇ or any of its Subsidiaries, at the date hereof or
at any time hereafter until the earlier of the termination of this Agreement
and the Closing Date, to terminate his or her employment with ▇▇▇▇▇▇ or any of
its Subsidiaries; provided that the foregoing shall not prohibit Parent from,
after
55
62
the Closing Date, soliciting, encouraging, enticing or inducing any such person
who is an employee of Holdings or its Subsidiaries on the Closing Date. Parent
agrees that any remedy at law for any breach by it of this Section 4.4(a) would
be inadequate, and ▇▇▇▇▇▇ would be entitled to injunctive relief in such a
case. If it is ever held that the restriction placed on Parent by this Section
4.4(a) is too broad to permit enforcement of such restriction to its fullest
extent, Parent agrees that a court of competent jurisdiction may enforce such
restriction to the maximum extent permitted by law, and Parent hereby consents
and agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
(b) ▇▇▇▇▇▇ will not, from and after the date hereof and for a period
of three years following the earlier of the termination of this Agreement and
the Closing Date, without the prior written approval of Parent, directly or
indirectly, solicit, encourage, entice or induce any person who is an employee
of Parent or any of its affiliates known to ▇▇▇▇▇▇ at the date hereof or at any
time hereafter until the earlier of the termination of this Agreement and the
Closing Date and with whom ▇▇▇▇▇▇ or its affiliates has had contact in the
course of the negotiation of the transactions contemplated hereby, to terminate
his or her employment with Parent or any of such affiliates. In addition,
▇▇▇▇▇▇ will not, for a period of three years following the Closing Date,
without the prior written approval of Parent, directly or indirectly, solicit,
encourage, entice or induce any person who is an employee of Holdings or
Subsidiaries at the
56
63
Closing Date to terminate his or her employment with Parent or any of its
affiliates known to ▇▇▇▇▇▇, including Holdings or its Subsidiaries. ▇▇▇▇▇▇
agrees that any remedy at law for any breach by it of this Section 4.4(b) would
be inadequate, and Parent would be entitled to injunctive relief in such a
case. If it is ever held that the restriction placed on ▇▇▇▇▇▇ by this Section
4.4(b) is too broad to permit enforcement of such restriction to its fullest
extent, ▇▇▇▇▇▇ agrees that a court of competent jurisdiction may enforce such
restriction to the maximum extent permitted by law, and ▇▇▇▇▇▇ hereby consents
and agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
4.5 Equipment. ▇▇▇▇▇▇, Inc. shall use its reasonable efforts to obtain
Bankers Leasing Corporation's consent to the assignment of that portion of the
Master Lease Agreement (the "Master Lease Agreement") between ▇▇▇▇▇▇, Inc. and
Bankers Leasing Corporation relating to the equipment subject thereto that is
used in the operation of Holdings' and its Subsidiaries' business (the
"Equipment"); provided that, in connection with any such assignment, unless
▇▇▇▇▇▇, Inc. otherwise consents thereto in writing, Holdings or its Subsidiary
or Subsidiaries shall assume all of ▇▇▇▇▇▇, Inc.'s obligations under the Master
Lease Agreement with respect to such Equipment. Upon reasonable request and
notice, Parent shall, and shall cause its counsel, accountants and other
representatives to, cooperate with ▇▇▇▇▇▇, Inc. in connection with obtaining
such consent and in connection with any such assignment, including without
limitation by
57
64
providing such financial and other information with respect to Parent and its
Subsidiaries as ▇▇▇▇▇▇, Inc. or Bankers Leasing Corporation may from time to
time reasonably request; provided that neither Parent nor any of its
Subsidiaries shall be required to pay any amount to Bankers Leasing Corporation
in order to obtain such consent from Bankers Leasing Corporation. If such
consent is not obtained prior to the 40th day after the date hereof, then,
subject to ▇▇▇▇▇▇'▇ obligations under Section 6.5(a), Parent shall purchase or
cause the purchase of the Equipment on or prior to the Closing Date. Schedule
4.5 hereto sets forth a list of the Equipment as of the date hereof.
4.6 Earnings. (a) Holdings shall prepare and deliver to Parent on the
Closing Date a statement, prepared in accordance with Holdings' accounting
practices applied consistently (subject to normal year-end adjustments) with
Holdings' accounting practices used in the preparation of the Financial
Statements (the "Closing Date Statement"), of the Earnings (as defined below)
for the period from and including January 1, 1997 through the close of business
of the last full accounting period of Holdings (which consists, for each fiscal
quarter of Holdings, of two four-week periods followed by one five-week period
(each, an "Accounting Period")) preceding the Closing for which Holdings has
closed its accounting records in accordance with its normal practices. If the
Earnings set forth on the Closing Date Statement exceed the sum of (i) the
amount of dividends, if any (including, without limitation, dividends on the
Common Stock and any special or regular quarterly dividends on the Preferred
58
65
Stock), paid by Holdings during the period covered by the Closing Date
Statement (less the amount of any cash contributions received by Holdings
during such period), plus (ii) the amount of accrued and unpaid dividends on
the Preferred Stock as of the last day covered by such Closing Date Statement,
plus (iii) the aggregate amount of tax sharing payments (including advances
thereof) made by Holdings pursuant to the Tax Sharing Agreement for and during
the period covered by the Closing Date Statement (the amount of such excess, if
any, the "Closing Payment Amount"), then, on the Closing Date, Parent shall pay
to ▇▇▇▇▇▇, Inc. by intra-bank transfer at The Chase Manhattan Bank, New York,
New York (ABA #▇▇▇▇▇▇▇▇▇) (Credit to ▇▇▇▇▇▇, Inc. 015-1- 013521) cash in U.S.
dollars and in immediately available funds in an amount equal to the Closing
Payment Amount.
"Earnings" means the consolidated earnings before income taxes (but
net of all other Taxes) of Holdings and its Subsidiaries as reported by
Holdings using Holdings' accounting practices applied consistently (subject to
normal year-end adjustments) with Holdings' accounting practices used in the
preparation of the Financial Statements, determined without giving effect to
(i) any extraordinary charges or (ii) any fees or expenses incurred by Holdings
and its Subsidiaries in connection with the transactions contemplated by this
Agreement, but only to the extent such fees and expenses were incurred
specifically at the request of Parent or its affiliates or in connection with
Parent obtaining financing for the transactions contemplated by this Agreement.
59
66
(b) Not later than 20 business days after Holdings would close its
accounting records in accordance with its normal practices (as in effect prior
to the Closing) for the full Accounting Period in which the Closing occurs
(such Accounting Period, the "Closing Period"), Parent shall, or shall cause
the Surviving Entity to, prepare and deliver to ▇▇▇▇▇▇, Inc. a statement,
prepared in accordance with the same accounting practices as are used for
purposes of the Closing Date Statement (the "Earnings Statement") of the
Earnings for the period from and including January 1, 1997 through the last day
of the Closing Period. The Earnings Statement shall include separate
calculations of (i) the Earnings for the period covered by the Closing Date
Statement, together with a reconciliation of any amounts that differ from the
amounts contained in the Closing Date Statement and a reasonably detailed
statement of the reasons for each such difference, (ii) the Earnings for each
full Accounting Period beginning immediately following the period covered by
the Closing Date Statement and ending before the Closing Period, (iii) the
Earnings for the Closing Period and (iv) the Earnings for the Closing Period,
multiplied by a fraction, the numerator of which is the number of days from and
including the first day of the Closing Period through the Closing Date and the
denominator of which is the number of days in the Closing Period.
(c) ▇▇▇▇▇▇, Inc. will have 20 business days to review the Earnings
Statement, together with the workpapers used in its preparation. Parent shall
make the books and records of
60
67
Holdings, the Surviving Entity and the Subsidiaries available to ▇▇▇▇▇▇, Inc.
for purposes of its review of the Earnings Statement. Unless ▇▇▇▇▇▇, Inc.
delivers written notice to Parent on or prior to the 20th business day after
its receipt of the Earnings Statement of its objection to the Earnings
Statement, the parties hereto will be deemed to have accepted and agreed to the
Earnings Statement, and such agreement will be final and binding. If ▇▇▇▇▇▇,
Inc. so notifies Parent of its objection to the Earnings Statement and delivers
to Parent a reasonably detailed itemized basis for such objection, Parent shall
have 20 business days to prepare and deliver a revised Earnings Statement to
▇▇▇▇▇▇, Inc. or to notify ▇▇▇▇▇▇, Inc. in writing that it does not intend to do
so. Thereafter, Parent and ▇▇▇▇▇▇, Inc. will, within 20 business days following
the delivery of such revised Earnings Statement or written notice (the
"Resolution Period"), attempt to resolve their differences. Any resolution by
Parent and ▇▇▇▇▇▇, Inc. during the Resolution Period as to any disputed amounts
will be final, binding and conclusive. If Parent and ▇▇▇▇▇▇, Inc. do not
resolve all disputed items by the end of the Resolution Period, then all items
remaining in dispute will be submitted within ten days after the expiration of
the Resolution Period to an independent accounting firm of national reputation
mutually acceptable to Parent and ▇▇▇▇▇▇, Inc. (the "Neutral Auditors"). All
fees and expenses relating to the work, if any, to be performed by the Neutral
Auditors will be borne equally by Parent and ▇▇▇▇▇▇, Inc. The Neutral Auditors
will deliver to Parent and ▇▇▇▇▇▇, Inc. a written determination (such
61
68
determination to include a worksheet setting forth all material calculations
used in arriving at such determination and to be based solely on information
provided to the Neutral Auditors by Parent and ▇▇▇▇▇▇, Inc.) of the disputed
items within 30 days of receipt of the disputed items, which determination will
be final, binding and conclusive. The final, binding and conclusive Earnings
Statement, which either is agreed upon by Parent and ▇▇▇▇▇▇, Inc. or is
delivered by the Neutral Auditors in accordance with this Section, will be the
"Conclusive Earnings Statement" and the date on which an Earnings Statement
becomes a Conclusive Earnings Statement will be the "Establishment Date".
(d) If the amount of Earnings set forth on the Conclusive Earnings
Statement is different from the amount of the amount of Earnings set forth on
the Closing Date Statement, Parent or ▇▇▇▇▇▇, Inc., as the case may be, shall
pay to the other, by wire transfer in immediately available funds on the second
business day following the Establishment Date, an amount in cash equal to the
difference between the Aggregate Earnings Payment (as defined below) and the
Closing Payment Amount (the amount of such difference is referred to herein as
the "Final Payment Amount"). For purposes of this Agreement, "Aggregate
Earnings Payment" means:
(i) the sum of (A) the Earnings for the period from and including
January 1, 1997 through the last day of the full Accounting Period
immediately preceding the Closing Period, plus (B) the Earnings for the
Closing Period, multiplied, in the case of this clause (B) only, by a
62
69
fraction, the numerator of which is the number of days from and including
the first day of the Closing Period through the Closing Date and the
denominator of which is the number of days in the Closing Period; minus
(ii) the sum of (A) the amount of dividends, if any (including,
without limitation, dividends on the Common Stock and any special or
regular quarterly dividends on the Preferred Stock), paid by Holdings
during the period from and including January 1, 1997 through the Closing
Date (less the amount of any cash contributions received by Holdings
during such period), plus (B) the amount of accrued and unpaid dividends
on the Preferred Stock as of the Closing Date, plus (C) the aggregate
amount of tax sharing payments (including advances thereof) made by
Holdings pursuant to the Tax Sharing Agreement for and during the period
covered by the Closing Date Statement.
The Final Payment Amount payable by Parent or ▇▇▇▇▇▇, Inc. pursuant to this
Section 4.6(d) shall bear interest for the period from and including the
Closing Date to the date of payment (calculated on the basis of a 365-day year)
at the rate per annum equal to the prime rate publicly announced on the Closing
Date by The Chase Manhattan Bank in New York, New York minus 1%, which interest
shall be payable together with the payment of the Final Payment Amount.
4.7 Termination of Affiliate Relations. Except as contemplated by this
Agreement or as set forth on Schedule 4.7 hereto, on or prior to the Closing
Date, Holdings and its
63
70
Subsidiaries shall have repaid all of their outstanding indebtedness (including
interest thereon) and satisfied all of their other liabilities owed to ▇▇▇▇▇▇
or ▇▇▇▇▇▇'▇ affiliates (other than Holdings and its Subsidiaries) and ▇▇▇▇▇▇
and its affiliates (other than Holdings and its Subsidiaries) shall have repaid
all of their outstanding indebtedness (including interest thereon) and
satisfied all of their other liabilities owed to Holdings and its Subsidiaries.
All agreements between Holdings and its Subsidiaries and ▇▇▇▇▇▇ and its
affiliates (other than agreements solely between Holdings and its Subsidiaries,
agreements contemplated by this Agreement and agreements listed on Schedule
4.7) shall be terminated as of the Closing, and all obligations and liabilities
thereunder shall have been satisfied.
4.8 Further Actions. (a) Subject to the terms and conditions of this
Agreement, and without limiting (or, with respect to the matters covered by
Section 4.3, expanding) the obligations of the parties contained in Section
4.3, each of the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, including using its reasonable
best efforts: (i) to obtain, in addition to approvals discussed in Section 4.3
hereof, any licenses, permits, consents, approvals, authorizations,
qualifications and orders of federal, state, local and foreign Governmental
Authorities and parties to contracts with Holdings or any of its Subsidiaries
as are required in connection with the
64
71
consummation of the transactions contemplated hereby; (ii) to effect, in
addition to filings discussed in Section 4.3 hereof, all necessary
registrations and filings; (iii) to defend any lawsuits or other legal
proceedings, whether judicial or administrative, whether brought derivatively
or on behalf of third parties (including Governmental Authorities or
officials), challenging this Agreement or the consummation of the Stock
Purchase, the Merger or the other transactions contemplated hereby; (iv) in the
case of Parent, to obtain the funds necessary to consummate the transactions
contemplated by this Agreement on the Closing Date; and (v) to furnish to each
other such information and assistance and to consult with respect to the terms
of any registration, filing, application or undertaking as reasonably may be
requested in connection with the foregoing.
(b) Except as permitted in the Trademark License Agreement, neither
Holdings nor any of its Subsidiaries shall in any way use, after the end of the
three month period beginning on the Closing Date, any trademark, tradename,
brandmark, brandname, tradedress or logo owned or used in the continuing
business of ▇▇▇▇▇▇ or any of its affiliates (collectively, the "▇▇▇▇▇▇ Names"),
or use any trademark, tradename, brandmark, brandname, tradedress or logo which
is likely to cause confusion with any ▇▇▇▇▇▇ Name or be associated with ▇▇▇▇▇▇
or any of its affiliates, on or as of the Closing Date. If this Section 4.8(b)
is breached or threatened to be breached, Parent expressly consents that in
addition to any other remedy ▇▇▇▇▇▇ and its affiliates may have, ▇▇▇▇▇▇ or such
affiliate shall be entitled
65
72
to apply for and receive injunctive relief in order to prevent the continuation
of any existing breach or the occurrence of any threatened breach.
(c) Promptly after the Closing, ▇▇▇▇▇▇, Inc. shall cause all books of
account, minute books, stock record books and other records of Holdings and its
Subsidiaries to be delivered to Holdings; provided that ▇▇▇▇▇▇, Inc. may
deliver copies of, or relevant extracts from, any such documents which contain
information with respect to ▇▇▇▇▇▇ or affiliates of ▇▇▇▇▇▇, Inc. other than
Holdings or its Subsidiaries.
4.9 Preparation of Returns and Payment of Taxes. Holdings shall
prepare and timely file all Returns and amendments thereto required to be filed
by the ▇▇▇▇▇▇ Corporations on or before the Closing Date. Parent shall have a
reasonable opportunity to review any such Returns to the extent that such
Returns do not include or relate to any corporation or group of corporations
other than the ▇▇▇▇▇▇ Corporations. ▇▇▇▇▇▇ and each of the ▇▇▇▇▇▇ Corporations
shall pay and discharge all Taxes, assessments and governmental charges upon or
against it or any of its properties or assets, and all liabilities at any time
existing, before the same shall become delinquent and before penalties accrue
thereon prior to the Closing Date, except to the extent and as long as: (a) the
same are being contested in good faith and by appropriate proceedings pursued
diligently and in such a manner as not to cause any Material Adverse Effect;
and (b) Holdings shall have set aside on its books reserves (segregated to the
extent required by sound accounting practice)
66
73
in the amount of the demanded principal imposition (together with interest and
penalties relating thereto, if any).
4.10 No Shopping. Until the earlier of the Closing and the termination
of this Agreement, ▇▇▇▇▇▇ and Holdings and those acting on behalf of them will
not (and ▇▇▇▇▇▇ will use its best efforts to cause its officers, employees,
shareholders, agents and representatives not to), directly or indirectly,
solicit, encourage or initiate any discussions with, or negotiate with or
provide any information to, any person or entity other than Parent and Parent's
officers, employees and agents concerning any merger, sale of material assets
or similar transaction involving Holdings and its Subsidiaries or any sale of
any capital stock of Holdings and its Subsidiaries (other than sales of common
stock pursuant to the exercise of outstanding Options). Without the prior
written consent of Parent during such period, neither ▇▇▇▇▇▇ nor Holdings will
furnish to any person or entity (other than Parent) any non-public information
concerning Holdings and its Subsidiaries or their respective businesses,
financial affairs or prospects for the purpose of or with the intent of
permitting such person or entity to evaluate a possible acquisition of any
capital stock or (other than in the ordinary course of business) assets of
Holdings and its Subsidiaries.
4.11 USDA Compliance Agreement. Parent agrees that it will assume the
obligations of ▇▇▇▇▇▇, Inc. and/or ▇▇▇▇▇▇/Meadow Gold Dairies, Inc. under the
Compliance Agreement in Lieu of Debarment among ▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇/Meadow
Gold Dairies, Inc.
67
74
and the Food and Consumer Service of the United States Department of
Agriculture if Parent is requested to assume such obligations by the Food and
Consumer Service pursuant to Section 7(a) of such Compliance Agreement.
4.12 Post-Closing Services. No later than 30 days after the date of
this Agreement, Parent shall notify ▇▇▇▇▇▇, Inc. in writing of the services
under the Master Customer Services Agreement currently in effect that Parent
desires to terminate as of the Closing Date (the "Terminated Services"). Unless
▇▇▇▇▇▇ Services Company and Parent otherwise agree in writing prior to the
Closing Date, ▇▇▇▇▇▇, Inc. agrees to cause ▇▇▇▇▇▇ Services Company to terminate
the Terminated Services effective as of the Closing Date.
4.13 Financing Best Efforts. Parent shall use all best efforts to
obtain the funds needed to permit the Closing to occur as soon as possible but
in any event no later than the Clause (iv) Termination Date (as defined in
Section 9.1). Without limiting the generality of the foregoing, "best efforts"
shall include, without limitation, taking any and all actions and doing any and
all other things necessary, proper or advisable to obtain such funds and to
permit the Closing to occur as soon as possible but in any event on or prior to
the Clause (iv) Termination Date.
68
75
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions Precedent to Obligations of Parties. The respective
obligations of each of the parties hereto hereunder are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions:
(a) No Injunction. At the Closing Date, there shall be no injunction,
restraining order or decree of any nature of any court or Governmental
Authority of competent jurisdiction that is in effect that restrains or
prohibits the consummation of the Stock Purchase or the Merger; provided,
however, that the parties invoking this condition shall use their best efforts
to have such injunction, order or decree vacated or denied.
(b) Regulatory Authorizations. All (i) consents, approvals,
authorizations and orders of federal and state Governmental Authorities as are
required to be obtained prior to the Closing in connection with the
transactions contemplated by this Agreement (the "Required Consents") shall
have been obtained, except for Required Consents the failure to obtain which,
individually or in the aggregate, would not have a Material Adverse Effect; and
(ii) applicable waiting periods specified under the Antitrust Improvements Act
with respect to the transactions contemplated by this Agreement shall have
lapsed or been terminated.
5.2 Conditions Precedent to Obligation of Parent. The obligation of
Parent to consummate the transactions contemplated
69
76
by this Agreement is subject to the satisfaction at or prior to the Closing
Date of each of the following additional conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of ▇▇▇▇▇▇, Inc. and Holdings contained in this Agreement shall
be true and accurate as of the Closing Date as if made at and as of such date
(except for changes permitted or contemplated by this Agreement and except
those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time, which need
only be true and accurate as of such date or with respect to such period),
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any exception contained therein for
matters that would or would not, as the case may be, have a Material Adverse
Effect), would not, individually or in the aggregate, have Material Adverse
Effect.
(b) Performance of Agreement. Each of ▇▇▇▇▇▇ and Holdings shall have
performed in all material respects all obligations and agreements, and complied
in all material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
(c) Absence of Material Adverse Change. Since the date of this
Agreement, there shall not have been any material adverse change, individually
or in the aggregate, in the financial condition or business of Holdings and its
Subsidiaries taken as a whole (except for changes affecting the economy
70
77
generally, the dairy industry generally or the dairy industry within any of the
jurisdictions in which Holdings or its Subsidiaries is operating).
(d) Certificate. Parent shall have received a certificate of Holdings,
dated the Closing Date, executed on behalf of Holdings by its President or any
Vice President, to the effect that the conditions specified in paragraphs (a),
(b) and (c) above have been satisfied.
(e) Delivery of the ▇▇▇▇▇▇ Shares. ▇▇▇▇▇▇ shall have delivered to
Parent certificates representing all of the ▇▇▇▇▇▇ Shares owned by such
corporation, each of which shall have been duly endorsed or accompanied by
stock powers duly executed, with all necessary stock transfer stamps attached
thereto.
(f) Ancillary Agreements. ▇▇▇▇▇▇ Services Company shall have executed
and delivered to Parent or Holdings the Amendment to the Master Customer
Services Agreement, substantially in the form of Exhibit A hereto (the "Master
Services Agreement Amendment"), ▇▇▇▇▇▇ shall have executed and delivered to
Parent or Holdings the Trademark License Agreement, substantially in the form
of Exhibit B hereto (the "Trademark License Agreement"), ▇▇▇▇▇▇, Inc. shall
have executed and delivered to Parent the Insurance Matters Agreement,
substantially in the form of Exhibit C hereto (the "Insurance Matters
Agreement"), and ▇▇▇▇▇▇ Foods Corporation or another affiliate of ▇▇▇▇▇▇, Inc.
shall have executed and delivered to Holdings or its subsidiary the Trademark
License Agreement,
71
78
substantially in the form of Exhibit D hereto (the "Meadow Gold Trademark
License Agreement").
5.3 Conditions Precedent to the Obligation of Holdings and ▇▇▇▇▇▇. The
obligation of Holdings and ▇▇▇▇▇▇ to consummate the transactions contemplated
by this Agreement is subject to the satisfaction at or prior to the Closing
Date of each of the following additional conditions:
(a) Accuracy of Representations and Warranties. The representations
and warranties of Parent contained in this Agreement shall be true and accurate
as of the Closing Date as if made at and as of such date (except for changes
permitted or contemplated by this Agreement and except those representations
and warranties that address matters only as of a particular date or only with
respect to a specific period of time, which need only be true and accurate as
of such date or with respect to such period), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any exception or threshold with respect to materiality contained therein),
would not, individually or in the aggregate, prevent, materially hinder or
materially delay the ability of Parent to perform its obligations under this
Agreement or to consummate the transactions contemplated hereby.
(b) Performance of Agreements. Parent shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to or at the Closing Date.
72
79
(c) Certificate. ▇▇▇▇▇▇ shall have received a certificate of Parent,
dated the Closing Date, executed on behalf of Parent by its President or any
Vice President, to the effect that the conditions specified in paragraphs (a)
and (b) above have been satisfied.
(d) PBGC Actions. The PBGC shall not have (i) threatened to terminate
or terminated any Employee Pension Benefit Plan, (ii) imposed any lien on any
assets of ▇▇▇▇▇▇ or any of their affiliates or (iii) required any agreement or
guarantee by ▇▇▇▇▇▇ or any of their affiliates of any obligations in respect of
pension plans of ▇▇▇▇▇▇ or any of their affiliates as a condition to
withdrawing any threat to terminate any Employee Pension Benefit Plan.
(e) Ancillary Agreements. Parent or Holdings shall have executed and
delivered to ▇▇▇▇▇▇ Services Company the Master Services Agreement Amendment,
to ▇▇▇▇▇▇, Inc. the Insurance Matters Agreement and to ▇▇▇▇▇▇ the Trademark
License Agreement, and Holdings or its subsidiary shall have executed and
delivered to ▇▇▇▇▇▇ Foods Corporation or another affiliate of ▇▇▇▇▇▇, Inc. the
Meadow Gold Trademark License Agreement.
ARTICLE VI
PROVISIONS AS TO TAXES
6.1 Access to Records Following Closing. Parent and ▇▇▇▇▇▇ agree that
so long as any books, records and files retained by ▇▇▇▇▇▇ relating to the
business of the ▇▇▇▇▇▇ Corporations, or the books, records and files delivered
to the control of Parent pursuant to this Agreement to the extent they
73
80
relate to the operations of the ▇▇▇▇▇▇ Corporations prior to the Closing Date,
remain in existence and available, each party (at its expense) shall have the
right upon prior notice to inspect and to make copies of the same at any time
during business hours for any proper purpose. Parent and ▇▇▇▇▇▇ shall use
reasonable efforts not to destroy or allow the destruction of any such books,
records and files without first offering in writing to deliver them to the
other.
6.2 Section 338 Elections. (a) If requested by Parent, ▇▇▇▇▇▇ and
Parent shall jointly make timely and irrevocable elections under Section
338(h)(10) of the Code (the "Elections"), and, if permissible, similar
Elections under any applicable state or local income tax laws with respect to
Holdings and those Subsidiaries set forth on Schedule 6.2 ("Electing
Subsidiaries"). ▇▇▇▇▇▇, Parent and Holdings and the Electing Subsidiaries shall
report the transaction consistent with such Elections under Section 338(h)(10)
of the Code or any similar state or local tax provision and agree not to take
any action that could cause such Elections to be invalid, and shall take no
position contrary thereto unless required to do so pursuant to a Final
Determination (as hereinafter defined). For purposes of this Agreement, "Final
Determination" shall mean final resolution by (i) a decision of the Tax Court
or judgment, decree, or other order by a court of competent jurisdiction, which
has become final and unappealable; (ii) IRS Form 870, 870- AD, 870-L,
870-L(AD), 870-P, 870-P(AD), 870-S, 870-S(AD) (or any successor forms thereto),
on the date of acceptance by or on
74
81
behalf of the Internal Revenue Service, or by comparable agreement form under
the laws of other jurisdictions; except that a Form 870, 870-AD, 870-L,
870-L(AD), 870-P, 870-P(AD), 870-S, 870-S(AD) or comparable form that reserves
the right of the taxpayer to file a claim for refund and/or the right of the
taxing authority to assert a further deficiency shall not constitute a Final
Determination; (iii) a closing agreement or compromise under Sections 7121 or
7122 of Code or under corresponding provisions of any subsequently enacted
Federal tax laws, or comparable agreements under the laws of other
jurisdictions; (iv) any allowance of a refund or credit in respect of any
overpayment of Tax, including any related interest or penalties, but only after
the expiration of all periods during which such refund may be recovered
(including by the way of offset) by the Tax imposing jurisdiction; or (v) any
other final disposition by reason of the expiration of the applicable statute
of limitations or the expiration of the period during which a protest may be
filed.
(b) To the extent possible, Parent, ▇▇▇▇▇▇, Holdings and the Electing
Subsidiaries shall execute as of the Closing Date any and all forms necessary
to effectuate the Elections (including, without limitation, Internal Revenue
Service Form 8023 and any similar forms under applicable state and local income
tax laws (the "Section 338 Forms")). To the extent, however, that any Section
338 Forms are not executed by the Closing Date, Parent, ▇▇▇▇▇▇, Holdings and
the Electing Subsidiaries shall prepare and complete each such Section 338
75
82
Form no later than 15 days prior to the date such Section 338 Form is required
to be filed. Parent, ▇▇▇▇▇▇, Holdings and each of the Electing Subsidiaries
each agree to cause the Section 338 Forms to be duly executed by an authorized
person for such entity and each shall duly and timely file the Section 338
Forms in accordance with applicable tax laws and the terms of this Agreement.
(c) As soon as practicable after the Closing Date, Parent shall
reasonably determine the fair market value of the assets of Holdings and the
Electing Subsidiaries and the allocation of the deemed sales price of the
assets of Holdings and the Electing Subsidiaries resulting from the Elections
(as required pursuant to Section 338(h)(10) of the Code and regulations
promulgated thereunder) among such assets (the "Section 338 Allocation").
Parent shall deliver to ▇▇▇▇▇▇ a schedule setting forth the Section 338
Allocation within 120 days after the Closing. If the Section 338 Allocation
would have a material adverse effect on ▇▇▇▇▇▇ as reasonably demonstrated to
Parent by ▇▇▇▇▇▇, then ▇▇▇▇▇▇ shall be entitled to have ▇▇▇▇▇▇'▇ comments
incorporated into the Allocation Schedule. Parent, ▇▇▇▇▇▇, Holdings and the
Electing Subsidiaries shall file all Returns consistently with the Section 338
Allocation.
(d) ▇▇▇▇▇▇ shall be responsible for and shall pay any income,
franchise or similar Taxes arising as a result of any Section 338(h)(10)
Election or any comparable or resulting election under state law filed by
Parent or ▇▇▇▇▇▇. Notwithstanding the preceding sentence, Parent shall be
76
83
responsible for and shall pay any income, franchise or similar Taxes imposed by
any state or local taxing authority as a result of any resulting mandatory
Section 338(g) election (or any comparable election under state law) if such
state or local taxing authority does not allow or respect a Section 338(h)(10)
Election (or any comparable or resulting election under state law) with respect
to the purchase and sale of the ▇▇▇▇▇▇ Shares contemplated hereby.
6.3 Post-Closing Cooperation. (a) ▇▇▇▇▇▇, Parent and each of the
▇▇▇▇▇▇ Corporations shall reasonably cooperate, and shall cause their
respective affiliates, officers, employees, agents, auditors and other
representatives reasonably to cooperate, in preparing and filing all Returns,
including maintaining and making available to each other all records necessary
in connection with Taxes and in resolving all disputes and audits with respect
to all taxable periods relating to Taxes.
(b) ▇▇▇▇▇▇ shall be responsible for and shall pay all Taxes for the
▇▇▇▇▇▇ Corporations that become due before or after the Closing Date that are
properly allocable under this Section to the period prior to and including the
Closing Date, except that the ▇▇▇▇▇▇ Corporations and Parent, and not ▇▇▇▇▇▇,
shall be responsible for and shall pay either to ▇▇▇▇▇▇ or to the appropriate
taxing authorities (a) the amounts accrued therefor in the Financial Statements
(including amounts accrued with respect to the Tax Sharing Agreement
notwithstanding the fact that such Tax Sharing Agreement has been terminated
pursuant to Section 6.5(d) hereof) but not paid on or before the Closing
77
84
Date, and (b) the amounts (other than income Taxes) accrued therefor but not
paid on or before the Closing Date which are reflected as expenses in
determining the Earnings for the period from and including January 1, 1997
through the last day of the Closing Period. In order to appropriately apportion
any of these Taxes relating to a period that includes (but that would not, but
for this section, close on) the Closing Date, the parties hereto will, to the
extent permitted by applicable law, elect with the relevant taxing authorities
to treat for all purposes the Closing Date as the last day of a taxable period
of Holdings, and such period shall be treated as a "Short Period" and a
"Pre-Closing Period" for purposes of this Agreement.
In any case where applicable law does not permit Holdings to treat the
Closing Date as the last day of a taxable period, then for purposes of this
Agreement, the Taxes attributable to the operations of Holdings or its
Subsidiaries for such Interim Period (as defined below) shall be (i) in the
case of any transaction-based Tax (such as sales, transfer and other similar
Taxes) ("Transaction-Based Taxes"), any such Tax attributable to a transaction
occurring in such Interim Period; (ii) in the case of Taxes other than
Transaction-Based Taxes that are not based on income or gross receipts, the
total amount of such Taxes for the period in question multiplied by a fraction,
the numerator of which is the number of days in the Interim Period, and the
denominator of which is the total number of days in the entire period in
question, and (iii) in the case of Taxes that are based on income or gross
receipts, the Taxes other than
78
85
Transaction-Based Taxes that would be due with respect to the Interim Period,
if such Interim Period were a Short Period. "Interim Period" means with respect
to any Taxes imposed on Holdings or its Subsidiaries on a periodic basis for
which the Closing Date is not the last day of a Short Period, the period of
time beginning on the first day of the actual taxable period that includes (but
does not end on) the Closing Date and ending on and including the Closing Date.
An Interim Period shall be treated as a Pre-Closing Period for purposes of this
Agreement. "Post- Closing Period" means with respect to any Taxes imposed on
Holdings or its Subsidiaries on a periodic basis for which the Closing Date is
not the last day of a Short Period, the period of time beginning on the day
immediately following the Closing Date and ending on and including the last day
of the actual taxable period that includes (but does not end on) the Closing
Date. Any Taxes relating to a period that includes (but does not end on) the
Closing Date which are not attributed to the Interim Period pursuant to this
paragraph shall be attributed to the Post- Closing Period.
(c) If in any period ending after the Closing Date Holdings earns any
credit or recognizes any loss which cannot be applied against its Tax liability
for such period, such loss or credit shall not be carried back to any period
prior to the Closing Date.
6.4 Tax Indemnification. (a) ▇▇▇▇▇▇'▇ Indemnification. From and after
the Closing Date, ▇▇▇▇▇▇ shall protect, defend and indemnify Parent and its
affiliates
79
86
(including Holdings and its Subsidiaries) and each of their respective
officers, directors, employees, agents and other representatives (collectively,
the "Parent Indemnitees"), and hold each Parent Indemnitee harmless, from any
diminution in value, demand, damage, claim, action, cause of action,
deficiency, fine, liability, Tax or other loss or expense including, without
limitation, interest, penalties and attorneys' fees and expenses (collectively,
"Damages") arising out of or resulting from any and all Taxes which are (i)
imposed on ▇▇▇▇▇▇ or any member (other than the ▇▇▇▇▇▇ Corporations) of the
consolidated, unitary or combined group which includes or included any one or
more of the ▇▇▇▇▇▇ Corporations that (a) Parent or any one or more of the
▇▇▇▇▇▇ Corporations pays or otherwise satisfies in whole or in part, or (b)
results in liens or encumbrances on any assets of any one or more of the ▇▇▇▇▇▇
Corporations or Parent, or (ii) imposed on any one or more of the ▇▇▇▇▇▇
Corporations in respect of its income, business, property or operations or for
which any one or more of the ▇▇▇▇▇▇ Corporations may otherwise be liable (A)
for any taxable period ending prior to the Closing Date and for any Pre-Closing
Period, (B) resulting by reason of the several liability of any one or more of
the ▇▇▇▇▇▇ Corporations pursuant to Treasury Regulations Section 1.1502-6 or
any analogous state, local or foreign law or regulation or by reason of any one
or more of the ▇▇▇▇▇▇ Corporations having been a member of any consolidated,
combined or unitary group on or prior to the Closing Date, (C) resulting from
any one or more of the ▇▇▇▇▇▇ Corporations ceasing to be a
80
87
member of the affiliated group (within the meaning of Section 1504(a) of the
Code) that includes ▇▇▇▇▇▇, (D) attributable to any discharge of indebtedness
that may result from any capital contributions by ▇▇▇▇▇▇ (or an affiliate of
▇▇▇▇▇▇) prior to the Closing Date to any one or more of the ▇▇▇▇▇▇ Corporations
of any intercompany indebtedness owed by such ▇▇▇▇▇▇ Corporation or
Corporations to ▇▇▇▇▇▇ (or an affiliate of ▇▇▇▇▇▇), or (E) resulting from the
making of the Elections except as provided in Section 6.2(d); provided,
however, that ▇▇▇▇▇▇'▇ liability for Damages under the foregoing provisions of
this paragraph shall be reduced to the extent that, as of the time of the
payment of the indemnity claim by ▇▇▇▇▇▇, the ▇▇▇▇▇▇ Corporations and/or Parent
have not satisfied the obligation, if any, imposed on them in the first
sentence of Section 6.3(b) hereof.
(b) Parent's Indemnification. Following the Closing Date, Parent
shall, and shall cause Holdings and each of its Subsidiaries to, indemnify
▇▇▇▇▇▇ and its affiliates and each of their respective officers, directors,
employees, and agents and hold them harmless from: (i) all liability for Taxes
of Holdings and any of its Subsidiaries for any period beginning after the
Closing Date and any Post-Closing Period; and (ii) all liability for Taxes of
Holdings or any of its Subsidiaries for the Pre- Closing Period to the extent
of the obligation imposed on the ▇▇▇▇▇▇ Corporations to pay such Taxes in the
first sentence of Section 6.3(b) hereof.
(c) Tax Audits. With respect to any claim made by any taxing authority
relating to the ▇▇▇▇▇▇ Corporations (a "Tax
81
88
Claim") relating to any taxable period ending on or before the Closing Date,
▇▇▇▇▇▇ shall, at its expense, control all proceedings and may make all
decisions taken in connection with such Tax Claim (including selection of
counsel) and, without limiting the foregoing, may in its sole discretion pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with any taxing authority with respect thereto, and may, in its
sole discretion, either pay the Tax claimed and ▇▇▇ for a refund where
applicable law permits such refund suits or contest the Tax Claim in any
permissible manner, provided, however, that if the results of such proceeding
could reasonably be expected to have a Material Adverse Effect on the business,
financial condition or results of operations of Parent or the ▇▇▇▇▇▇
Corporations for any taxable period including or ending after the Closing Date,
there shall be no settlement or closing or other agreement with respect thereto
without the consent of Parent, which consent will not be unreasonably withheld.
Parent shall, at its expense, control all proceedings and make all decisions
taken in connection with any Tax Claim relating solely to Taxes of Holdings or
any of its Subsidiaries for any taxable period beginning after the Closing Date
(including selection of counsel) and, without limiting the foregoing, may in
its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and ▇▇▇
for a refund where applicable law permits such refund suits or contest the Tax
Claim in any permissible
82
89
manner; provided, however, that if the results of such proceeding could
reasonably be expected to have a Material Adverse Effect on the business,
financial condition or results of operations of ▇▇▇▇▇▇ (or any member of the
group of which it is the common parent) for any taxable period including or
ending after the Closing Date, there shall be no settlement or closing or other
agreement with respect thereto without the consent of ▇▇▇▇▇▇, which consent
will not be unreasonably withheld.
With respect to any taxable period of the ▇▇▇▇▇▇ Corporations
beginning before and ending after the Closing Date, ▇▇▇▇▇▇ and Parent shall
jointly control the defense and settlement of any Tax audit or administrative
or court proceeding relating to any Tax covered by Section 6.4(a) or (b) and
each party shall cooperate with the other party at its own expense and there
shall be no settlement or closing or other agreement with respect thereto
without the consent of the other party, which consent will not be unreasonably
withheld.
In no case shall any of Parent, Holdings or any of Holdings'
Subsidiaries settle or otherwise compromise any Tax Claim relating to a
Pre-Closing Period without ▇▇▇▇▇▇'▇ prior written consent. None of ▇▇▇▇▇▇,
Parent, Holdings or any of Holdings' Subsidiaries shall settle a Tax Claim
relating to a Post-Closing Period without Parent's prior written consent. In
the event that any party violates the provisions of this paragraph (relating to
the settlement of Tax Claims), such party shall not be entitled to any
indemnity payments with respect to
83
90
any indemnifiable claim (relating to such Tax Claims) pursuant to this Section
6.4.
(d) Tax Refunds. Parent agrees to pay (and to cause each ▇▇▇▇▇▇
Corporation to pay) to ▇▇▇▇▇▇ all refunds of any Taxes for which ▇▇▇▇▇▇ is
liable under Sections 6.3 and 6.4 hereof, but only to the extent such refund
has not been specifically included as a receivable in the Financial Statements.
▇▇▇▇▇▇ agrees to pay to Parent all refunds of any Taxes for which Parent is
liable under Sections 6.3 and 6.4 hereof. The parties shall cooperate in order
to take all reasonably necessary steps to claim any such refund. Any such
refund received by a party (considering, for purposes of this sentence, Parent
and the ▇▇▇▇▇▇ Corporations as one party and ▇▇▇▇▇▇ as the other party) or its
affiliates for the account of the other party shall be paid to such other party
within thirty (30) days after such refund is received. For purposes of this
Agreement, a refund of Tax includes the application of an amount otherwise
refundable as a reduction of amounts owed or to be owed.
(e) Computation of Indemnifiable Losses. Subject to Section 6.5(c)
hereof, any amount payable pursuant to this Section 6.4 shall be decreased to
the extent of (i) any net Tax benefit actually recognized and utilized to
offset or reduce the Tax liability of the indemnified party as a result of the
adjustment to Taxes giving rise to the indemnifiable loss and (ii) any
insurance proceeds received or receivable by the indemnified party in respect
of an indemnifiable loss. The
84
91
indemnification provisions set forth in this Section 6.4 shall survive the
Closing until ninety days after the expiration of the applicable statute of
limitations (and any extensions thereof). Anything to the contrary
notwithstanding, the termination or expiration of any indemnification
obligation hereunder shall not affect any claims made in writing prior to such
expiration or termination.
6.5 Other Tax Matters. (a) Except for stock transfer taxes
and other Taxes referred to in Articles I and II hereof and except for any
Transfer Taxes, as hereinafter defined, imposed in connection with any purchase
by Parent or Parent's designee of the Equipment pursuant to Section 4.5, which
shall be paid by ▇▇▇▇▇▇, Inc., all Transfer Taxes incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by
Parent, and ▇▇▇▇▇▇ and Parent shall cooperate in timely making all filings,
returns, reports and forms as may be required to comply with the provisions of
such tax laws. For purposes of this Agreement, (i) "Transfer Taxes" shall mean
transfer, documentary, sales, use, registration and other such taxes (including
all applicable Real Estate Transfer Taxes, as hereinafter defined, and Real
Property Gains Taxes, as hereinafter defined) and related fees (including any
penalties, interest and additions to tax) incurred with respect to such taxes,
(ii) "Real Estate Transfer Tax" shall mean the New York Real Estate Transfer
Tax and any other similar state or local taxes imposed by New York State or any
other state or local jurisdiction, and (iii) "Real Property Gains Tax" shall
mean any
85
92
state or local taxes similar to the New York Real Property Gains Tax prior to
its repeal.
(b) There shall be no withholding pursuant to Section 1445 of
the Code; provided that ▇▇▇▇▇▇ delivers to Parent at the Closing a certificate
complying with the Code and Treasury Regulations, in form and substance
satisfactory to Parent, duly executed and acknowledged, certifying that the
transactions contemplated hereby are exempt from withholding under Section 1445
of the Code.
(c) ▇▇▇▇▇▇ and Parent agree to treat any amounts payable
pursuant to this Article VI as an adjustment to the purchase price of the
▇▇▇▇▇▇ Shares.
(d) Except as provided in Section 6.3(b), ▇▇▇▇▇▇ shall cause
all tax allocation agreements or tax sharing agreements with respect to each of
the ▇▇▇▇▇▇ Corporations (including without limitation the Tax Sharing
Agreement) to be terminated as of the Closing Date, and shall ensure that such
agreements are of no further force or effect as to any of the ▇▇▇▇▇▇
Corporations on and after the Closing Date and that there shall be no further
liabilities or obligations imposed on any of the ▇▇▇▇▇▇ Corporations under any
such agreements.
ARTICLE VII
LABOR MATTERS, EMPLOYEE
RELATIONS AND BENEFITS
7.1 Conduct Prior to the Closing. Prior to the Closing,
Parent shall take no action to cause ▇▇▇▇▇▇, Holdings or their Subsidiaries to
terminate the employment of any Business
86
93
Employee, and neither ▇▇▇▇▇▇, Holdings nor their Subsidiaries shall be under
any obligation to terminate any Business Employee prior to or at the Closing.
7.2 Continuity of Employment. The parties hereto intend that
there shall be continuity of employment with respect to all Business Employees;
provided that nothing contained herein to the contrary shall prohibit Parent,
Holdings or its Subsidiaries from terminating any non-union employee following
the Closing, and nothing contained herein to the contrary shall prohibit
Parent, Holdings or its Subsidiaries from terminating any union employee
following the Closing pursuant to the terms of an valid Collective Bargaining
Agreement (as defined in Section 7.3 below).
7.3 Collective Bargaining Agreements. Parent shall continue
to employ all Business Employees covered by any of the collective bargaining
agreements listed on Schedule 7.3 (the "Collective Bargaining Agreements") as
of the Closing. For each Collective Bargaining Agreement in effect as of the
Closing, Parent agrees to (a) recognize the union which is a party to such
Collective Bargaining Agreement as the exclusive collective bargaining
representative for the Business Employees covered under the terms of the
Collective Bargaining Agreement and (b) negotiate with the union over the terms
of a new collective bargaining agreement upon timely demand by the union.
Nothing contained herein to the contrary shall prohibit Parent, Holdings or its
Subsidiaries from terminating any Business Employee
87
94
covered under an existing Collective Bargaining Agreement pursuant to the terms
of that agreement.
7.4 Comparable Benefits. For one year following the Closing,
Parent shall, or shall cause an affiliate to, offer employee benefits,
effective as of the Closing (including, but not limited to, health, welfare,
pension, vacation, savings and severance benefits) to the Business Employees
that are comparable in the aggregate to the employee benefits that are in
effect for such employees immediately prior to the Closing. Prior to Closing,
Parent and ▇▇▇▇▇▇ shall mutually agree upon what employee benefits shall be
offered to non-union Business Employees during the one-year period following
the Closing, in order to provide comparable benefits within the meaning of this
Section 7.4. If the parties are unable to agree as to what employee benefits
offered by Parent are "comparable," the decision of an independent third-party
actuary (the selection of which shall be acceptable to both parties) shall be
binding. With respect to Business Employees who are covered by Collective
Bargaining Agreements, Parent agrees to negotiate with the certified bargaining
representative(s) for such Business Employees over the employee benefits to be
offered following the Closing.
7.5 Business Plan Participation. Except as expressly provided
in this Section 7.5 or except as otherwise required by applicable law, Business
Employees shall cease active participation in (and accrual of additional
benefits under) all ▇▇▇▇▇▇-sponsored Business Plans as of the Closing.
88
95
7.6 Business Plan Liabilities. Except as otherwise
specifically provided in this Article VII, Parent shall be responsible and
liable for all liabilities and obligations (a) relating to the participation of
the Business Employees under the Business Plans and the Parent Business Plans
before, on or after the Closing (including, but not limited to, medical, dental
and life insurance benefits for the benefit of Business Employees who are
receiving disability income payments under any Business Plan, but excluding
long-term disability income benefits payable to Business Employees for
long-term disability claims (i) in pay status prior to Closing or (ii)
converted directly from short-term disability claims in pay status prior to
Closing, without any intervening period between short-term disability status
and long-term disability status) and (b) in connection with the employment (or
termination of employment) of the Business Employees before, on or after the
Closing. Other than the liabilities and obligations expressly assumed by Parent
pursuant to this Agreement relating to the participation of Business Employees
in the Business Plans and in the Parent Business Plans (including, without
limitation, the liabilities and obligations assumed by Parent in the
immediately preceding sentence), ▇▇▇▇▇▇ shall be responsible and liable for all
liabilities and obligations relating to the Business Plans accruing prior to
Closing. Parent shall have no liabilities or obligations under any Business
Plans that are welfare benefit plans (as defined in Section 3(1) of ERISA)
under which Business Employees have ceased active participation pursuant to
Section 7.5 of this Agreement,
89
96
except that Parent shall be responsible and liable for all accruals or claims
relating to the participation of Business Employees for all periods of time
prior to such cessation with respect to such welfare benefit plans.
7.7 Defined Benefit Plan. (a) As of the Closing, ▇▇▇▇▇▇ shall
cause the participation by the Business Employees in the ▇▇▇▇▇▇, Inc. Employees
Retirement Income Plan (the "▇▇▇▇▇▇ Pension Plan") to cease. Assets shall be
transferred in cash or other marketable assets as determined by ▇▇▇▇▇▇ (valued
at their fair market value as of the date or dates of transfer) as soon as
practicable (but in no event later than nine months) after the Closing to such
defined benefit plan designated by Parent (the "Parent Pension Plan");
provided, however, that unless Parent agrees otherwise, all assets so
transferred shall be a pro rata portion of plan assets on hand at Closing in
approximately the same ratio that liabilities transferred bear to total plan
liabilities. The amount of assets to be transferred shall be equal to:
(i) the funded percentage of "current liability" under
the ▇▇▇▇▇▇ Pension Plan of the Business Employees as of the Closing
(with assets valued at fair market value as of such date), using an
interest rate equal to the highest permissible rate under Section
412(l)(7) of the Code at the Closing. Current liability shall be
determined as of January 1, 1997 and actuarially rolled forward from
January 1, 1997 to the Closing, determined by an actuary retained by
▇▇▇▇▇▇ ("▇▇▇▇▇▇'▇ Actuary"), utilizing the actuarial methods
90
97
and assumptions (other than the aforementioned interest rate) used for
determining the minimum funding requirements for the ▇▇▇▇▇▇ Plan for
1996, minus
(ii) any benefit payments made to or in respect of a
Business Employee during the period from the Closing to the date of
transfer, plus
(iii) interest on the net amount described in clauses (i)
and (ii) above at the same interest rate used to determine the amount
in clause (i) above from the Closing Date to the date of transfer.
The foregoing method is accepted by the parties to this Agreement as a
reasonable basis on which to determine the present value of accrued benefits in
compliance with the provisions of Section 414(l) of the Code. Parent's actuary
may review ▇▇▇▇▇▇'▇ Actuary's calculations for accuracy in the application of
the agreed actuarial methods, assumptions and interest rates specified in
clause (i) above as well as the calculations pursuant to clauses (ii) and (iii)
above. Should the actuaries be unable to agree upon the calculations, the
matter shall be submitted to an independent third-party actuary (the selection
of which shall be acceptable to both parties) for final resolution. Prior to
the transfer date, all benefit payments shall be made from the ▇▇▇▇▇▇ Pension
Plan. In consideration of the transfer of assets described herein, the Parent
Pension Plan shall, as of the Closing, assume all liabilities in respect of
participants for whom assets are transferred.
91
98
(b) Parent shall (i) give ▇▇▇▇▇▇ written notice of the name
of the trustee of the Parent Pension Plan, accompanied by a copy of the most
recent favorable IRS determination letter for such plan received by Parent, as
promptly as possible after the Closing, but in any event prior to the date on
which such transfer is to occur; and (ii) as soon as practicable (but in no
event later than nine months) after the Closing, make all required filings and
submissions to appropriate Governmental Authorities. As soon as practicable
after the Closing, ▇▇▇▇▇▇ shall cause the trustee of the ▇▇▇▇▇▇ Pension Plan to
transfer to the trustee of the Parent Pension Plan the amount of assets
described in Section 7.7(a) above. ▇▇▇▇▇▇, Parent and each of the ▇▇▇▇▇▇
Corporations shall reasonably cooperate, and shall cause their respective
affiliates, officers, employees, agents and other representatives reasonably to
cooperate, in preparing and filing all returns, reports and other documents
with governmental regulatory agencies, including maintaining and making
available to each other all records necessary in connection with such filings
or reasonably necessary to resolve disputes or audits with respect to Business
Employees covered by Business Plans (other than those records that, absent a
specific judicial order or decree requiring disclosure, are privileged or that
otherwise may not be disclosed pursuant to contract, judicial order or other
similar circumstances).
7.8 Defined Contribution Plans. (a) As of the Closing,
▇▇▇▇▇▇ shall cause the active participation by the Business Employees in the
▇▇▇▇▇▇, Inc. Retirement Savings Plan,
92
99
the ▇▇▇▇▇▇, Inc. Union Savings Plan and the ▇▇▇▇▇▇, Inc. Associate Savings Plan
(collectively, the "Savings Plans") to cease. ▇▇▇▇▇▇ shall (i) as of the
Closing cause the trustees of the Savings Plans to identify, in accordance with
the applicable spinoff provisions set forth under Section 414(l) of the Code,
the assets of the Savings Plans representing the full account balances of the
Business Employees for all periods of participation through the Closing
(including, as applicable, all employee contributions, employer contributions
and all earnings attributable thereto); and (ii) as soon as practicable (but in
no event later than nine months) after the Closing, make all required filings
and submissions to appropriate Governmental Authorities and all required
amendments to the Savings Plans and related trust agreements necessary to
provide for the transfer of assets described in this Section 7.8. The Savings
Plans shall be amended to provide that (i) there shall be no contributions
thereto with respect to the Business Employees for periods after the Closing
and (ii) all transferred employer contributions shall be fully vested.
(b) Parent shall (i) give ▇▇▇▇▇▇ written notice of the name
of the trustee of the defined contribution plan designated by Parent to which
the assets and liabilities for benefits of the Savings Plans are to be
transferred (the "Parent Savings Plan"), accompanied by a copy of the most
recent favorable IRS determination letter for such plan received by Parent, as
promptly as possible after the Closing, but in any event prior to the date on
which such transfer is to occur; and (ii) as soon as
93
100
practicable (but in no event later than nine months) after the Closing, make
all required filings and submissions to appropriate Governmental Authorities.
As soon as practicable after the Closing, and pursuant to the procedures set
forth below, ▇▇▇▇▇▇ shall cause the trustees of the Savings Plans to transfer
to the trustee of the Parent Savings Plan the following amount (the "Total
Transfer Amount"): (A) the full account balances (in kind or in cash as
determined by ▇▇▇▇▇▇, and notes for any loans to the Business Employees) of all
Business Employees, whose account balances shall have been credited with
appropriate earnings and contributions, if any, attributable to the period
ending on the close of business on the day preceding the Closing, plus (B)
earnings on such account balances attributable to the period from the Closing
to the Transfer Date, reduced by (C) any benefit or withdrawal payments in
respect of the Business Employees prior to the Transfer Dates. The "Transfer
Date" shall be the first day of the month following a 15th day of a month by
which Parent has requested the transfer and ▇▇▇▇▇▇ has received copies of the
applicable favorable IRS determination letters. On the Transfer Date, ▇▇▇▇▇▇
shall transfer 90% of its good faith estimate of the Total Transfer Amount.
Upon the completion of a calculation of the Total Transfer Amount by the
recordkeeper for the Savings Plans (such calculation to occur no later than 120
days after the Transfer Date and such calculation to be binding on Parent), the
Savings Plans shall transfer to the Parent Savings Plan an amount equal to the
difference between the Total Transfer Amount and any amounts previously
transferred to the Parent Savings Plan or, if
94
101
applicable, the Parent Savings Plan shall transfer to the Savings Plans an
amount equal to the difference between any amounts previously transferred to
the Parent Savings Plan and the Total Transfer Amount. In consideration of the
transfer of assets hereunder, Parent shall, as of the Transfer Date, cause the
Parent Savings Plan to assume the liabilities for benefits payable to plan
participants and beneficiaries in respect of participants for whom assets
(including notes) are transferred.
(c) Periods of employment by the Business Employees with
▇▇▇▇▇▇ for which credit was given under the Savings Plans shall be taken into
account for all purposes under the Parent Savings Plan to the same extent they
were taken into account under the Savings Plans.
(d) Parent shall (i) permit repayment to the Parent Savings
Plan of the outstanding loans of the Business Employees (under the Savings
Plans) by way of regular paycheck deductions and (ii) take all steps required
to effectuate such repayment (including amending its plans).
(e) Any transfer of plan assets shall consist of (i) cash,
(ii) the loan balances described below in this Section 7.8(e) and (iii) fixed
investment contracts as determined by ▇▇▇▇▇▇ (valued at their fair market value
as of the date or dates of transfer); provided, however, that unless Parent
agrees otherwise, all fixed investment contracts so transferred shall be a pro
rata portion of such contracts on hand at Closing in approximately the same
ratio as the account balances transferred bear to total account balances.
Should any outstanding loans of
95
102
Business Employees (under the Savings Plans) be transferred to the trustee or
trustees of the Parent's Savings Plan, ▇▇▇▇▇▇ shall cause such loans to be
transferred only with respect to such Business Employees who are identified in
writing to Parent by the Transfer Date as having executed new notes in favor of
Parent's Savings Plan.
7.9 Withdrawal Liability. As of the Closing, Parent shall
assume the liability for any pension withdrawal liability to the Central States
Southeast and Southwest Areas Pension Fund thereafter due resulting from
participation in the pension fund of employees or former employees of Holdings
or its Subsidiaries. Claims for multiemployer plan withdrawal liability
triggered by events occurring prior to the Closing shall be the responsibility
of ▇▇▇▇▇▇.
7.10 Post-Retirement Benefits. Subject to Sections 7.7 and
7.8 above, as of the Closing, no Business Employee shall be eligible to receive
"Post-Retirement Benefits" from ▇▇▇▇▇▇ (including, but not limited to, pension,
retiree medical and retiree life benefits). To the extent that Business
Employees receive (or are eligible to receive) Post-Retirement Benefits from
▇▇▇▇▇▇ immediately prior to the Closing, such Business Employees shall receive
Post-Retirement Benefits from Parent following the Closing.
7.11 Welfare Plans. With respect to any Parent Business
Plan that is a "welfare benefit plan" (as defined in Section 3(1) of ERISA)
maintained for the benefit of Business Employees on and after the Closing,
Parent shall (a) cause there
96
103
to be waived any pre-existing condition limitations and (b) give effect, in
determining any deductible and maximum out-of-pocket limitations, to claims
incurred and amounts paid by, and amounts reimbursed to, such employees with
respect to similar plans maintained by ▇▇▇▇▇▇ immediately prior to the Closing.
7.12 Accrued Vacation. With respect to any accrued but unused
vacation time to which any Business Employee is entitled pursuant to the
vacation policy applicable to such employee immediately prior to the Closing
(the "Vacation Policy"), Parent shall allow such Business Employee to use such
accrued vacation; provided, however, that if Parent deems it necessary to
disallow such employee from taking such accrued vacation, Parent shall be
liable for and pay in cash to such employee an amount equal to such vacation
time in accordance with terms of the Vacation Policy; provided, further, that
Parent shall be liable for and pay in cash an amount equal to such accrued
vacation time to any Business Employee whose employment terminates for any
reason subsequent to the Closing; provided, further, that Parent shall be under
no obligation to recognize any unused vacation time accrued prior to the year
in which the Closing occurs.
7.13 Severance. Parent shall provide severance benefits in
accordance with Schedule 7.13 to Business Employees (who are either salaried or
non-union hourly employees) terminated within 12 months of the Closing under
the same terms as the Business Plans that are severance plans.
97
104
7.14 Service Credit. With respect to the Business
Employees, Parent shall recognize all service with ▇▇▇▇▇▇ for purposes of
eligibility and vesting under the Parent Business Plans.
7.15 WARN Act. Parent agrees to provide any required notice
under the Worker Adjustment and Retraining Notification Act ("WARN") and any
other applicable law and to otherwise comply with any such statute with respect
to any "plant closing" or "mass layoff" (as defined in WARN) or similar event
affecting employees and occurring on or after the Closing or arising as a
result of the transactions contemplated hereby.
7.16 COBRA. Parent agrees to provide any required notice
under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended
("COBRA"), and any other applicable law on or after the Closing.
7.17 No Rights Conferred on Employees. Nothing herein,
expressed or implied, shall confer upon any employee or former employee of
▇▇▇▇▇▇, Parent, Holdings and its Subsidiaries, or any of their affiliates
(including, without limitation, the Business Employees), any rights or remedies
(including, without limitation, any right to employment or continued employment
for any specified period) of any nature or kind whatsoever, under or by reason
of this Agreement.
98
105
ARTICLE VIII
ASSUMPTION OF CERTAIN OBLIGATIONS
AND LIABILITIES; INDEMNIFICATION
8.1 Assumption and Indemnification. (a) Parent hereby agrees
to assume all obligations and liabilities of ▇▇▇▇▇▇ and its affiliates
(collectively, the "▇▇▇▇▇▇ Indemnified Parties"), and to indemnify, defend and
hold the ▇▇▇▇▇▇ Indemnified Parties harmless from and against and in respect of
any and all claims, losses, damages, expenses, obligations and liabilities
(including costs of collection, attorney's fees and other costs of defense)
incurred by them in respect of or arising out of:
(i) except for liabilities and obligations expressly
assumed by ▇▇▇▇▇▇ under this Agreement, any liabilities or obligations
of or related to Holdings or any of its Subsidiaries, whether arising
prior to, on or after the Closing Date;
(ii) any breach (A) by Parent or the Surviving Entity of
any of its agreements or covenants contained in this Agreement, the
Master Customer Services Agreement, as amended by the Master Services
Agreement Amendment, the Insurance Matters Agreement, the Trademark
License Agreement or the Meadow Gold Trademark License Agreement, or
(B) by Parent of the representation and warranty contained in Section
3.3(b); and
(iii) (A) any assignment of Parent's rights or
obligations pursuant to Section 9.6, any modification of any
99
106
of the provisions of this Agreement, the Master Customer Services
Agreement, as amended by the Master Services Agreement Amendment, the
Trademark License Agreement or the Meadow Gold Trademark License
Agreement made in connection with such assignment and any filing,
notice, waiver, agreement, document or other action made or required
in connection with such assignment and (B) any change to the structure
of the Merger referred to in the last sentence of Section 1.2.
All such claims, losses, damages, expenses, obligations and liabilities are
collectively referred to as "▇▇▇▇▇▇ Indemnified Liabilities".
Notwithstanding any other provision of this Agreement, Parent
agrees that it shall have no cause of action against any Indemnified Party
under Section 107 of the Comprehensive Environmental Response, Compensation and
Liability Act, as the same has been or may be amended from time to time, or any
other cause of action with respect to chemicals in the soil or groundwater at,
near or from any property or facility owned or operated by any of Holdings and
its Subsidiaries.
(b) ▇▇▇▇▇▇, Inc. hereby agrees to assume all obligations and
liabilities of Parent, Holdings, the Surviving Entity and their affiliates
(collectively, the "Parent Indemnified Parties" and, together with the ▇▇▇▇▇▇
Indemnified Parties, the "Indemnified Parties"), and to indemnify, defend and
hold the Parent Indemnified Parties harmless from and against and in respect of
any and all claims, losses, damages, expenses,
100
107
obligations and liabilities (including costs of collection, attorney's fees and
other costs of defense) incurred by them in respect of or arising out of:
(i) any demand for appraisal of Shares made by a holder
of Common Shares who has not voted in favor of the Merger, or any
other claim by a holder of Common Shares that such holder is entitled
to additional consideration as a holder of Common Shares as a result
of the transactions contemplated by this Agreement;
(ii) any breach (A) by ▇▇▇▇▇▇ of any of their agreements
or covenants contained in this Agreement (but expressly excluding,
notwithstanding anything to the contrary that may be contained herein,
Sections 3.1 and 3.2 hereof, except as expressly provided in clause
(C), (D) or (E) below), (B) after the Closing, by ▇▇▇▇▇▇ or their
affiliates of the Master Customer Services Agreement, as amended by
the Master Services Agreement Amendment, the Insurance Matters
Agreement, the Trademark License Agreement or the Meadow Gold
Trademark License Agreement, (C) by ▇▇▇▇▇▇ of the representation and
warranty contained in Section 3.1(b) or 3.1(d), (D) by Holdings of the
representation and warranty contained in Section 3.2(b) or (E) by
Holdings of the representation and warranty contained in the second
sentence of Section 3.2(d) insofar as it pertains to Holdings' or its
Subsidiaries' ownership of all of the outstanding shares of capital
stock or other equity interests of each of the Subsidiaries;
101
108
(iii) any claim by any holder of shares of Common Stock on
the date hereof that the original offer and sale by Holdings of shares
of its Common Stock to such holder violated applicable federal or
state securities laws;
(iv) any shares of capital stock or options outstanding
immediately prior to the Closing which are not taken into account in
determining the Common Share Consideration pursuant to Section 1.1 or
otherwise settled pursuant to Section 2.2; and
(v) any liability for long-term disability income
benefits payable to Business Employees, but only to the extent
retained by ▇▇▇▇▇▇ after the Closing pursuant to Section 7.6(a) of
this Agreement.
All such claims, losses, damages, expenses, obligations and liabilities are
collectively referred to as "Parent Indemnified Liabilities" and, together with
the ▇▇▇▇▇▇ Indemnified Liabilities, as "Indemnified Liabilities". Parent hereby
agrees, on behalf of each Parent Indemnified Party, that, if the consideration
to be paid to any holder of Dissenting Shares is less than the Common Share
Consideration, then Parent shall pay to ▇▇▇▇▇▇, Inc., in cash and immediately
available funds, an amount equal to the excess of the Common Share
Consideration over the amount required to be paid to such holder of a
Dissenting Share.
8.2 Procedure. If a claim by a third party (which term shall
include a holder of Dissenting Shares) is made against an Indemnified Party,
and if such party intends to seek indemnity
102
109
with respect thereto under this Article VIII, such Indemnified Party shall
promptly notify the indemnifying party in writing of such claims setting forth
such claims in reasonable detail. The indemnifying party shall have 10 days
after receipt of such notice to undertake, conduct and control, through counsel
of its own choosing and at its own expense, the settlement or defense thereof,
and the Indemnified Party shall cooperate with it in connection therewith;
provided that the Indemnified Party may participate in such settlement or
defense through counsel chosen by such Indemnified Party if the fees and
expenses of such counsel shall be borne by such Indemnified Party. So long as
the indemnifying party is reasonably contesting any such claim in good faith,
the Indemnified Party shall not pay or settle any such claim. Notwithstanding
the foregoing, the Indemnified Party shall have the right to pay or settle any
such claim; provided that in such event it shall waive any right to indemnity
therefor by the indemnifying party. If the indemnifying party does not notify
the Indemnified Party within 10 days after the receipt of the Indemnified
Party's notice of a claim of indemnity hereunder that it elects to undertake
the defense thereof, the Indemnified Party shall have the right to contest,
settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement. The indemnifying party shall
not, except with the consent of the Indemnified Party, enter into any
settlement that does not include as an unconditional term thereof the giving by
the person or persons asserting such claim to all Indemnified Parties an
unconditional release from all liability
103
110
with respect to such claim or consent to entry of any judgment. Notwithstanding
the foregoing, following the Closing, each party hereto will afford to the
other parties hereto, and cause its counsel and its accountants, during normal
business hours, reasonable access to the books, records and other data with
respect to Holdings and its Subsidiaries, to the extent that such access may be
reasonably required by such other parties to facilitate the investigation,
litigation and final disposition of any claims which may have been or may be
made against them in connection with Holdings and its Subsidiaries.
ARTICLE IX
MISCELLANEOUS
9.1 Termination and Abandonment. (a) General. This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time, but not later than the Closing Date:
(i) by mutual written consent of Parent and ▇▇▇▇▇▇; or
(ii) by Parent or ▇▇▇▇▇▇ if an injunction, restraining
order or decree of any nature of any Governmental Authority of
competent jurisdiction is issued that prohibits the consummation of
the Stock Purchase or the Merger and such injunction, restraining
order or decree is final and non-appealable; provided, however, that
the party seeking to terminate this Agreement pursuant to this clause
(ii) shall have used its best efforts to have such injunction, order
or decree vacated or denied; or
104
111
(iii) by ▇▇▇▇▇▇ at any time on or after the 110th day from
the date hereof if the conditions contained in Sections 5.1(a) and
5.1(b) hereof shall not have been satisfied with respect to all
matters under or with respect to Antitrust Laws, or the Closing
otherwise could not occur for any reason relating to Antitrust Laws;
provided that, if Parent has fulfilled its obligations under Section
4.3, such 110th day shall be extended by one additional day for each
day following the 21st day after receipt by ▇▇▇▇▇▇ of a second request
for information and documents under the Antitrust Improvements Act and
the regulations thereunder in connection with the transactions
contemplated hereby that ▇▇▇▇▇▇ shall not have substantially complied
with such second request; or
(iv) by ▇▇▇▇▇▇ at any time on or after the Clause (iv)
Termination Date (as defined below) if the Closing shall not have
occurred by the Clause (iv) Termination Date; or
(v) by ▇▇▇▇▇▇ if ▇▇▇▇▇▇ shall not have received the
payment referred to in Section 4.3(f) on the date such payment becomes
due and payable under such Section 4.3(f); or
(vi) by Parent at any time after the 30th day following
receipt by ▇▇▇▇▇▇, Inc. of written notice from Parent (the "Parent
Termination Notice") that any of the conditions contained in Sections
5.2(a), 5.2(b) and 5.2(c) has not been satisfied unless on or prior to
such 30th day ▇▇▇▇▇▇, Inc. shall have caused each such condition to be
satisfied;
105
112
provided that Parent shall not be permitted to deliver the Parent
Termination Notice or to terminate this Agreement pursuant to this
clause (vi) unless each of the conditions contained in Sections 5.1,
5.3(a), 5.3(b) and 5.3(d) shall have been satisfied or waived by
▇▇▇▇▇▇ and Parent otherwise is ready, willing and able to perform the
obligations to be performed by it at the Closing and to consummate the
transactions contemplated hereby.
For purposes of this Agreement, the "Clause (iv) Termination
Date" means the earlier of (i) the 28th day after the satisfaction of the
condition contained in Section 5.1(b)(ii) and (ii) the 138th day after the date
of this Agreement; provided that, if Parent has fulfilled its obligations under
Section 4.3, then the Clause (iv) Termination Date shall be extended by one
additional day for each day following the 21st day after receipt by ▇▇▇▇▇▇ of a
second request for information and documents under the Antitrust Improvements
Act and the regulations thereunder in connection with the transactions
contemplated hereby that ▇▇▇▇▇▇ shall not have substantially complied with such
second request.
(b) Procedure Upon Termination. (i) In the event of the
termination and abandonment of this Agreement, written notice thereof shall
promptly be given to the other parties hereto and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned without
further action by any of the parties hereto; provided, however, that nothing
herein shall relieve any party from liability for any breach hereof, except as
otherwise provided in Sections 9.1(b)(ii) and 9.1(b)(iii).
106
113
(ii) If ▇▇▇▇▇▇ shall terminate this Agreement at any time
when both of the Applicable Antitrust Conditions (as defined in the immediately
succeeding sentence) shall have been satisfied, then none of Parent, ▇▇▇▇▇▇ or
Holdings shall have any further liability hereunder for breach of this
Agreement (other than for the payment by Parent to ▇▇▇▇▇▇ of non-refundable
amounts due under this Agreement) and all non-refundable amounts paid by Parent
to ▇▇▇▇▇▇ hereunder shall be retained by ▇▇▇▇▇▇ (notwithstanding the provisions
of Section 9.11(b)). For purposes of this Agreement, "Applicable Antitrust
Conditions" means (A) Parent shall have complied in all respects with Section
4.3 hereof and (B) either (1) the condition set forth in Section 5.1(a) shall
not have been satisfied with respect to all matters under or with respect to
Antitrust Laws or (2) the condition set forth in Section 5.1(b) shall not have
been satisfied with respect to all matters under or with respect to Antitrust
Laws.
(iii) If ▇▇▇▇▇▇ shall terminate this Agreement at any time
when all of the Applicable Funding Conditions (as defined in the immediately
succeeding sentence) shall have been satisfied, then none of Parent, ▇▇▇▇▇▇ or
Holdings shall have any further liability hereunder for breach of this
Agreement (other than for the payment by Parent to ▇▇▇▇▇▇ of non-refundable
amounts due under this Agreement) and all non-refundable amounts paid by Parent
to ▇▇▇▇▇▇ hereunder shall be retained by ▇▇▇▇▇▇ (notwithstanding the provisions
of Section 9.11(b)). For purposes of this Agreement, "Applicable Funding
Conditions" means (A) Parent shall have complied in all respects with Sections
107
114
4.3(f) and 4.13 hereof, (B) all conditions contained in Section 5.1 hereof
shall have been satisfied, (C) the conditions contained in Sections 5.3(a) and
5.3(b) shall have been satisfied and (D) Parent shall be ready, willing and
able to consummate the Closing, including by satisfying all other conditions to
be satisfied by Parent at or prior to the Closing, except only that Parent is
unable to make the required payments under Articles I and II hereof because it
does not have the required funds.
(c) Survival of Certain Provisions. The respective
obligations of the parties hereto pursuant to Sections 4.1(c), 4.4 and this
Article IX shall survive any termination of this Agreement.
9.2 Fees and Expenses. Whether or not the transactions
contemplated hereby are consummated, each of the parties hereto shall pay its
own fees and expenses incident to the negotiation, preparation and execution of
this Agreement, including attorneys', accountants' and other advisors' fees and
the fees and expenses of any broker, finder or agent retained by such party in
connection with the transactions contemplated by the Agreement; provided,
however, that ▇▇▇▇▇▇ shall pay all fees and expenses incurred by Holdings and
its Subsidiaries in connection with the transactions contemplated by this
Agreement except to the extent such fees and expenses were incurred
specifically at the request of Parent or its affiliates or in connection with
Parent obtaining financing for the transactions contemplated by this Agreement.
108
115
9.3 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered
personally or mailed, certified or registered mail with postage prepaid, or
sent by telex, telegram or telecopy, as follows:
(a) if to ▇▇▇▇▇▇ or, prior to the Closing, Holdings, to it
at:
▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq., Senior
Vice President and General Counsel
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with copies to:
Kohlberg Kravis ▇▇▇▇▇▇▇ & Co.
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
-and-
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to Parent, to it at:
Mid-America Dairymen, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇, Vice President and
Chief Financial Officer
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Mid-America Dairymen, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
109
116
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Vice
President--Legal
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
or to such other person or address as a party shall specify by notice in
writing to the other parties. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of personal
delivery or on the third business day after the mailing thereof or, in the case
of notice by telecopier, when receipt thereof is confirmed by telephone.
9.4 Entire Agreement. This Agreement (including the Exhibits
hereto and the documents referred to herein) constitutes the entire agreement
between the parties hereto and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to
the subject matter hereof.
9.5 No Third Party Beneficiaries. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.6 Assignability. This Agreement shall not be assigned by
any of the parties hereto without the prior written consent of the other
parties hereto. Notwithstanding the foregoing, ▇▇▇▇▇▇ shall not unreasonably
withhold its consent to any of the following assignments by Parent (each a
"Contemplated
110
117
Assignment"), unless (x) the Contemplated Assignment would have an adverse tax
or other consequence to ▇▇▇▇▇▇, Inc. or any of its affiliates, or (ii) in the
case of a Contemplated Assignment referred to in clause (b) or (c) below, the
request for consent to such Contemplated Assignment is not received by ▇▇▇▇▇▇
within five business days after the date hereof:
(a) an assignment by Parent of all or any part of its rights
and obligations to a direct or indirect wholly owned subsidiary of
Parent;
(b) an assignment by Parent of all or any part of its rights
and obligations under this Agreement to Southern Foods Group, L.P. or
a direct or indirect wholly owned subsidiary of Southern Foods Group,
L.P.; or
(c) an assignment by Parent of its indirect right under this
Agreement to purchase all the outstanding shares of common stock of
▇▇▇▇▇▇/Meadow Gold Dairies, Inc. ("BMGD") to a newly formed entity
controlled by ▇▇. ▇▇▇▇▇ ▇▇▇▇▇ ("Newco"), provided that, as part of
such assignment, Parent directs Newco to pay, and Newco agrees to pay
the consideration to be paid by Newco for BMGD directly to ▇▇▇▇▇▇ in
accordance with the provisions of Section 1.1;
provided that, with respect to each Contemplated Assignment, (i) the assignee
(to the extent ▇▇▇▇▇▇ consents to a Contemplated Assignment as set forth
herein, a "Permitted Assignee") shall enter into a written agreement with
▇▇▇▇▇▇, in form and substance satisfactory to ▇▇▇▇▇▇, pursuant to which the
Permitted Assignee agrees to be bound by, and to comply with, all of Parent's
111
118
obligations under this Agreement (other than those obligations which relate
solely to Parent's rights under this Agreement which have not been assigned to
such Permitted Assignee) as if such Permitted Assignee were "Parent" for
purposes of this Agreement (it being understood that, in connection with a
Contemplated Assignment to Newco, Newco shall agree, with respect to BMGD, to
be bound by, and to comply with, all of Parent's obligations relating to
Holdings). No assignment permitted by this Section 9.6, including without
limitation any Contemplated Assignment, shall relieve Parent of any of its
obligations under this Agreement, including without limitation the obligations
to pay to ▇▇▇▇▇▇ the full amount of consideration set forth in Section 1.1
hereof and to pay the Merger Consideration.
9.7 Amendment and Modification; Waiver. Subject to applicable
law, this Agreement may be amended, modified and supplemented by a written
instrument authorized and executed on behalf of the parties hereto at any time
prior to the Closing Date with respect to any of the terms contained herein. No
waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, or agreements
contained herein, and in any documents delivered or to be delivered pursuant to
this Agreement and in
112
119
connection with the Closing hereunder. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any other or subsequent breach.
9.8 Public Announcements. Unless otherwise required by law,
prior to the Closing Date, no news release or other public announcement
pertaining to the transactions contemplated by this Agreement will be made by
or on behalf of any party without the prior approval of the other party. Prior
to issuing a press release or other public announcement with respect to the
execution and delivery of this Agreement, Parent and ▇▇▇▇▇▇, Inc. shall agree
on the form of such press release or other public announcement.
9.9 Section Headings. The section headings contained in
this Agreement are inserted for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
9.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9.11 Enforcement. (a) The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this
113
120
Agreement in any court of the United States located in the State of Delaware,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of the United States District Court for the
District of Delaware or any court of the State of Delaware located in such
district in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction or venue by motion or
other request for leave from any such court and (iii) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than such courts sitting in
the State of Delaware.
(b) Notwithstanding any statement herein that an amount paid
by Parent to ▇▇▇▇▇▇ is non-refundable, Parent shall be entitled, in the event
that this Agreement shall be terminated without the Closing having occurred, to
a refund of such amounts actually paid by Parent to ▇▇▇▇▇▇ if and to the extent
that a court of competent jurisdiction determines in a final and non-appealable
judgment that ▇▇▇▇▇▇, Holdings or any of its Subsidiaries has breached this
Agreement and that the aggregate amount of such payments by Parent constitutes
all or a portion of Parent's damages for such breach; provided that Parent
shall not be entitled to any such refund if the provisions of Section
9.1(b)(ii) or 9.1(b)(iii) shall have been applicable to such termination of
this Agreement.
114
121
9.12 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MID-AMERICA DAIRYMEN, INC.
By:
--------------------------------
Name:
Title:
▇▇▇▇▇▇/MEADOW GOLD DAIRIES
HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
BDH TWO, INC.
By:
--------------------------------
Name:
Title:
▇▇▇▇▇▇, INC.
By:
--------------------------------
Name:
Title:
115