Exh 10.34
ASSET PURCHASE AGREEMENT
Dated as of August 18, 2003
by and among
PORT STOCKTON FOOD DISTRIBUTORS, INC.,
a California Corporation
and
AMERICAN FOODSERVICE DISTRIBUTORS,
a California Corporation
and
SMART & FINAL INC.,
a Delaware Corporation
and
SYSCO CORPORATION,
a Delaware Corporation
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF PURCHASED ASSETS...........................2
1.1 Purchased Assets................................................2
1.2 Excluded Assets.................................................2
1.3 No Liens or Encumbrances........................................4
ARTICLE II PURCHASE PRICE; ASSUMPTION OF LIABILITIES.......................4
2.1 Purchase Price..................................................4
2.2 Assumed Liabilities.............................................4
2.3 Closing.........................................................6
2.4 Estimated Purchase Price and Purchase Price True-Up.............6
ARTICLE III OTHER COVENANTS AND AGREEMENTS..................................8
3.1 Employee Matters................................................8
3.2 Consents.......................................................10
3.3 Business Information...........................................11
3.4 Noncompetition/Non-Solicitation Agreements.....................11
3.5 Conduct of Business by Seller Pending the Closing..............11
3.6 No Negotiations................................................12
3.7 Expenses.......................................................12
3.8 Notification of Certain Matters................................13
3.9 Confidentiality and Public Announcements.......................13
3.10 Tax Matters....................................................14
3.11 Collection of Accounts Receivables.............................15
3.12 Purchase Price Allocation......................................15
3.13 Transition Services Agreement..................................16
3.14 Vendor Receivables.............................................16
3.15 Preservation of Minute Books and Corporate Records.............16
3.16 Bulk Sales.....................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES...............16
4.1 Organization and Authority of Seller...........................17
4.2 Corporate Power and Authority; Due Authorization...............17
4.3 Title to Purchased Assets......................................17
4.4 No Conflict; Required Consents.................................17
4.5 Ownership of Stock.............................................18
4.6 Compliance with Law............................................18
4.7 Accounts Receivable............................................18
4.8 Taxes..........................................................18
4.9 Inventory......................................................19
4.10 Assumed Contracts..............................................20
4.11 Litigation; Judgments..........................................20
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4.12 Insurance......................................................21
4.13 Employees; Union; Labor........................................21
4.14 Brokers Fees and Expenses......................................21
4.15 Absence of Material Changes....................................21
4.16 Liens..........................................................22
4.17 Cost-Plus Contract Claims; Most Favored Nation.................22
4.18 Certain Transfers; Preferences.................................22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF..............................23
5.1 Organization of Purchaser......................................23
5.2 Corporate Power and Authority; Due Authorization...............23
5.3 No Conflict; Consents..........................................23
ARTICLE VI INDEMNIFICATION................................................24
6.1 Indemnification by Seller and the Shareholders.................24
6.2 Indemnification by Purchaser...................................24
6.3 Provisions Regarding Indemnification...........................25
6.4 Survival.......................................................25
6.5 Limitations....................................................25
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PURCHASER TO CLOSE................26
7.1 Representations and Warranties True............................26
7.2 Obligations Performed..........................................26
7.3 Consents.......................................................26
7.4 Closing Deliveries.............................................26
7.5 No Investigations..............................................27
7.6 No Material Adverse Effect.....................................27
7.7 Revised Schedules..............................................27
7.8 Regulatory Matters.............................................27
7.9 Marketing Associates...........................................27
7.10 Payment of Retention Bonuses...................................28
7.11 No Challenge...................................................28
7.12 Legality.......................................................28
ARTICLE VIII CONDITIONS TO SELLER'S AND SHAREHOLDERS' OBLIGATIONS...........28
8.1 Representations and Warranties True............................28
8.2 Obligations Performed..........................................28
8.3 Closing Deliveries.............................................28
8.4 No Challenge...................................................29
8.5 Regulatory Matters.............................................29
8.6 Legality.......................................................29
ARTICLE IX TERMINATION....................................................30
9.1 Termination....................................................30
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9.2 Effects of Termination.........................................30
ARTICLE X DEFINITIONS....................................................30
ARTICLE XI MISCELLANEOUS PROVISIONS.......................................31
11.1 Risk of Loss...................................................31
11.2 Severability...................................................31
11.3 Modification and Waiver........................................31
11.4 Assignment, Survival and Binding Agreement.....................31
11.5 Counterparts...................................................31
11.6 Notices........................................................32
11.7 Entire Agreement; No Third Party Beneficiaries.................33
11.8 Further Assurances.............................................33
11.9 Construction...................................................33
11.10 Choice of Law..................................................33
11.11 Dispute Resolution.............................................33
11.12 Definition of Days.............................................34
11.13 Schedules, Revised Schedules and Exhibits......................34
11.14 Time of Essence................................................34
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SCHEDULES
Schedule 1.1(b) C&H Common Customers
Schedule 1.1(d) Assumed Contracts
Schedule 1.2 Selected Excluded Assets
Schedule 3.1(h) Absent Employees
Schedule 3.11 Account Receivable Practices
Schedule 3.12 Allocation
Schedule 4.1 Qualified to do Business
Schedule 4.4 Consents; No Conflicts
Schedule 4.8 Taxes
Schedule 4.9 Methodology for Determining "Obsolete" Inventory
Schedule 4.11 Litigation
Schedule 4.13 Employee Matters
Schedule 4.15 Absence of Material Changes
Schedule 4.17 Cost-Plus Contract Claims
Schedule 5.3 Purchaser Consents; No Conflicts
Schedule 7.9(a) Certain Marketing Associates
Schedule 7.9(b) Certain Marketing Associates and Sales Management
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EXHIBITS
Exhibit 2.1(b) Holdback Escrow Agreement
Exhibit 3.1(f)(i) MA Retention Bonus Plan
Exhibit 3.1(f)(ii) Non-MA Retention Bonus Plan
Exhibit 3.1(g) Marketing Associate Non-Solicitation Agreement
Exhibit 3.4 Noncompetition/Non-solicitation Agreement
Exhibit 3.13 Transition Services Agreement
Exhibit 7.4(a)(i) ▇▇▇▇ of Sale
Exhibit 7.4(a)(ii) Assumption Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is dated as of August 18, 2003,
by and among PORT STOCKTON FOOD DISTRIBUTORS, INC., a California corporation
d/b/a "Smart & Final Foodservice Distributors" ("Seller"), AMERICAN FOODSERVICE
DISTRIBUTORS, a California corporation and the sole shareholder of Seller
("AFD"), SMART & FINAL INC., a Delaware corporation and the sole shareholder of
AFD ("S&F", together with AFD, referred to as the "Shareholders" and, together
with AFD and Seller, the "Seller Parties" ), and SYSCO CORPORATION, a Delaware
corporation ("Purchaser"). Capitalized terms used but not otherwise defined
herein, shall have the meanings set forth in Article X hereof.
W I T N E S S E T H:
WHEREAS, S&F is in the business of selling food, foodservice products and
professional quality culinary equipment through warehouse stores, wholesale
stores and broadline foodservice distribution businesses (the "S&F Business");
WHEREAS, AFD, through various subsidiaries and divisions, operates the
broadline foodservice distribution business in northern California and Florida
(the "Foodservice Segment") of the S&F Business;
WHEREAS, Seller operates the Foodservice Segment within northern California
(the "California Foodservice Business");
WHEREAS, Seller is also engaged in the business of produce processing
through its "Davis Lay" division (the "Produce Processing Division") and meat
processing through its "▇▇▇▇▇ and ▇▇▇▇▇▇▇▇" division (the "Meat Processing
Division"); and
WHEREAS, Purchaser desires to purchase from Seller and Seller desires to
sell to Purchaser, all right, title and interest in and to certain of the assets
of Seller used solely in connection with the California Foodservice Business and
certain of the assets of Seller used solely in connection with the Meat
Processing Division (together, the California Foodservice Business and the Meat
Processing Division are referred to herein as the "Purchased Business"); and
WHEREAS, Purchaser is willing to assume, and Seller desires to assign to
Purchaser, all of the Assumed Liabilities.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF PURCHASED ASSETS
1.1 Purchased Assets. Subject to and upon the terms and conditions set
forth herein, Seller agrees to sell to Purchaser and Purchaser agrees to
purchase from Seller at the Closing (as hereinafter defined), all right, title
and interest in and to the following tangible and intangible assets of Seller
used or held for use solely in the Purchased Business, excluding the Excluded
Assets (defined in Section 1.2 below) (collectively, the "Purchased Assets"):
(a) Inventory. All Salable (as defined in Section 4.9 below) inventory
held for sale in the Purchased Business as of the Closing (the "Inventory");
(b) Accounts Receivable. Subject to Sections 2.4 and 3.11 hereof, all
trade accounts receivable with respect to (i) the California Foodservice
Business and (ii) those customers of the Meat Processing Division that are
listed on Schedule 1.1(b) attached hereto ("Common Customers"), all of which are
customers of both the California Foodservice Business and the Meat Processing
Division, both as reflected on the Final Accounts Receivable Statement
(excluding all intercompany receivables, and all receivables from Seller's
employees or the Shareholders or other affiliates of Seller) ("Accounts
Receivable") as of the Closing;
(c) Books and Records. Originals or true and correct duplicate copies
of all written financial, accounting and operating data and records of Seller
with respect to the Purchased Business, including without limitation all books,
records, sales and sales promotional data, advertising materials, pricing
information, customer and supplier lists, projections, reference catalogs,
payroll and personnel records and other similar property, rights and information
with respect to the Purchased Business (collectively, the "Books and Records");
(d) Assumed Contracts. All employee confidentiality and
non-competition agreements, and other agreements which are set forth on Schedule
1.1(d) (collectively, the "Assumed Contracts"); and
(e) Customer Lists and Related Goodwill. Seller's customer lists with
respect to the Purchased Business and the goodwill related thereto.
1.2 Excluded Assets. Notwithstanding anything to the contrary contained in
Section 1.1 hereof, the Purchased Assets shall exclude the following (the
"Excluded Assets"):
(a) Minute Books. The corporate minute books and records and stock
ledgers of Seller;
(b) Employee Benefit Plans. Any interest or right to any assets held
under any pension, profit sharing or other Employee Benefit Plan (as defined in
Section 2.2);
(c) Stock of Subsidiaries. Any capital stock of any subsidiaries of
Seller or equity or other interest in any other entities, including those listed
on Schedule 4.1 attached hereto;
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(d) Certain Contract Rights. Any rights, claims or causes of action
arising solely in respect of contracts that are not Assumed Contracts, including
without limitation, that certain agreement between Smart & Final Foodservice
Distributors and Food Distributors Employees Association, dated June 5, 2002
(the "Association Agreement");
(e) Produce Processing Division. Any assets that are used primarily or
held for use by any of the Seller Parties in the operation of the Produce
Processing Division;
(f) Florida Foodservice Segment. Any assets that are used primarily or
held for use by any of the Seller Parties in the operation of the Foodservice
Segment operated in the state of Florida;
(g) Facilities. Any interest (owned, leased or otherwise) in respect
of any real property facility in which the California Foodservice Business or
the Meat Processing Division is conducted (collectively, the "Facilities");
(h) Fixed Assets. Any furniture, fixtures, warehouse and other
equipment, machinery, appliances, computer hardware and software, tools,
supplies, leasehold improvements, and construction in progress in respect of the
Purchased Business (the "Fixed Assets");
(i) Cash. Seller's cash and cash equivalents in respect of the
Purchased Business;
(j) Ordinary Course Usage. Supplies and other tangible personal
property consumed by any of the Seller Parties with respect to the Purchased
Business in the ordinary course of business between the date of this Agreement
and the Closing Date;
(k) Tax Refunds. Any Tax refunds or credits attributable to the Assets
or the Purchased Business, relating to any taxable period, or any portion
thereof, ending on or prior to the Closing Date. Notwithstanding the foregoing,
any refund of Taxes which are Assumed Liabilities and relate to any taxable
period, or portion thereof, beginning after the Closing Date shall belong to the
Purchaser;
(l) Insurance Policies. Any insurance policies in respect of the
Purchased Business and the Assets;
(m) Unrelated Assets. All right, title and interest of any of the
Seller Parties in and to all the assets and properties that are not used
primarily in the operation of the Meat Processing Division or the California
Foodservice Business;
(n) Excluded Assets and Liabilities. All rights in respect of the
Excluded Assets, unless otherwise specifically provided for herein, and the
Excluded Liabilities;
(o) Truck Leases. Any truck lease with Penske, Ryder or any other
lessor;
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(p) Certain Meat Processing Division Receivables. All of Seller's
trade accounts receivable with respect to the Meat Processing Division other
than trade accounts receivable with respect to Common Customers;
(q) Tax Records. All of Seller's Tax (as defined below) records; and
(r) Selected Items. Those assets set forth on Schedule 1.2.
1.3 No Liens or Encumbrances. Seller Parties hereby covenant and agree with
Purchaser that the Purchased Assets will be transferred and conveyed to
Purchaser at Closing free and clear of all Encumbrances, other than Permitted
Encumbrances, and Encumbrances arising solely for reasons associated with
ownership by Purchaser.
ARTICLE II
PURCHASE PRICE; ASSUMPTION OF LIABILITIES
2.1 Purchase Price. The aggregate purchase price (the "Purchase Price") for
the Purchased Assets shall be the sum of (i) the Final Accounts Receivable
Amount (as defined in Section 2.4 hereof), up to a maximum amount of Twenty Two
Million Five Hundred Thousand Dollars ($22,500,000) plus (ii) the Final
Inventory Amount (as defined in Section 2.4 hereof), up to a maximum amount of
Twelve Million Five Hundred Thousand Dollars ($12,500,000) plus (iii) Eight
Million Seven Hundred Fifty Thousand Dollars ($8,750,000) (the "Fixed Amount").
The Purchase Price shall be paid by Purchaser to Seller as follows:
(a) Cash. At the Closing, Purchaser shall pay to Seller ninety-five
percent (95%) of the Estimated Purchase Price determined pursuant to Section 2.4
hereof, by wire transfer of immediately available funds to an account that has
been designated by Seller at least two days prior to the Closing Date (the "Cash
at Closing").
(b) Holdback Escrow. At the Closing, Purchaser shall wire to ▇▇▇▇▇
Fargo (the "Escrow Agent") five percent (5%) of the Estimated Purchase Price
determined pursuant to Section 2.4 hereof (the "Holdback Escrow Amount") which
amount will be held in escrow (the "Holdback Escrow") by the Escrow Agent
pursuant to an escrow agreement substantially in the form of Exhibit 2.1(b)
attached hereto (the "Holdback Escrow Agreement"), and either paid to Seller or
Purchaser by Escrow Agent as provided in Section 2.4 below.
2.2 Assumed Liabilities.
(a) Assumption of Certain Liabilities. At the Closing, Purchaser shall
assume and become responsible for any and all of the Assumed Liabilities.
Purchaser shall not assume or have any responsibility, however, with respect to
any other obligation or liability of any of the Seller Parties not included
within the Assumed Liabilities, including the Excluded Liabilities, as defined
in Section 2.2(b).
(b) Excluded Liabilities. Except for the Assumed Liabilities, it is
expressly understood and agreed that notwithstanding anything to the contrary
contained herein, Purchaser will not assume or have any liability with respect
to any obligation or liability of the Seller Parties
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(the "Excluded Liabilities"). Without in any way limiting the immediately
preceding sentence, it is understood and agreed that any losses, costs, expenses
or liabilities arising from the following shall constitute an Excluded
Liability:
(i) all obligations or liabilities whatsoever arising from,
incurred in, or with respect to the Facilities (including the leases thereof),
the Fixed Assets, and all other Excluded Assets;
(ii) all trade payables of the Purchased Business outstanding as
of Closing;
(iii) all liabilities of the Seller relating to any indebtedness
for borrowed money;
(iv) all obligations or liabilities whatsoever arising from,
incurred in, or with respect to, all periods through the Closing in respect of
severance, vacation pay, sick pay, WARN Act (as defined in Section 3.1 hereof),
income tax withholding, payroll and/or unemployment tax, workers' compensation,
pension, profit-sharing, health insurance, COBRA (as defined in Section 3.1
hereof) or any other employee or other benefit liabilities in respect of any
Current Employees (as defined in Section 3.1 hereof) or in respect of any
Employee Benefit Plans, including, without limitation any contribution, tax,
lien, penalty, cost, interest, claim, loss, action, suit, damage, cost
assessment, withdrawal liability, liability to the Pension Benefit Guaranty
Corporation (the "PBGC"), liability under Section 412 of the Code (as defined in
Section 3.1 hereof) or Section 302(a)(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or other similar liability or expense
of Seller or any ERISA Affiliate;
(v) all liabilities related to failure to comply with the
Immigration Reform and Control Act of 1986, as amended, and all regulations
promulgated thereunder (collectively, "IRCA");
(vi) any obligations or liabilities for Taxes (as defined in
Section 3.10) arising out of the operation of the Purchased Business or the
ownership of the Purchased Assets prior to Closing other than personal property
taxes and other similar taxes relating to the Purchased Assets in respect of
taxable periods that begin before and end after the Closing Date, the liability
for which shall be prorated pursuant to Section 3.10(c); and
(vii) any liability of Seller for Income Taxes and any liability
of Seller for the unpaid taxes of any Person under Treas. Reg. (S)1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise. As used in this Agreement, "Income Taxes"
shall mean any federal, state, local, or foreign income tax, including any
interest, penalty, or addition thereto, whether disputed or not.
As used in this Agreement "Employee Benefit Plan" means each "employee
benefit plan" (as defined by Section 3(3) of ERISA), and any other bonus, profit
sharing, pension, compensation, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, disability,
sick leave, vacation, individual employment, commission,
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bonus, payroll practice, retention, or other plan, agreement, policy, trust fund
or arrangement that is currently in effect, was maintained since December 31,
1996 or that has been approved before the date hereof but is not yet effective,
for the benefit of:
(i) directors or employees of Seller working in the Purchased
Business, or any other persons performing services for Seller in the
Purchased Business;
(ii) former directors or employees of Seller working in the Purchased
Business, or any other persons formerly performing services for Seller in
the Purchased Business; and/or
(iii) beneficiaries of anyone described in (i) or (ii)
(collectively, "Purchased Business Employees") or with respect to which Seller
or any ERISA Affiliate has or has had any obligation on behalf of any Purchased
Business Employee. ("ERISA Affiliate" is hereby defined to include any trade or
business, whether or not incorporated, other than Seller, which has employees
who are or have been at any date of determination occurring within the preceding
six (6) years, treated pursuant to Section 4001(a)(14) of ERISA and/or Section
414 of the Code as employees of a single employer that includes Seller.)
2.3 Closing. The closing of the transactions contemplated herein (the
"Closing") shall take place as soon as practicable, but no later than five (5)
business days, following the satisfaction or waiver of the conditions to Closing
set forth in Articles VII and VIII (with September 15, 2003 being the currently
anticipated date) or on such business day as is mutually agreed to by the
parties hereto ("Closing Date"), at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. All computations,
adjustments, and transfers for the purposes hereof shall be effective as of
12:01 a.m. Pacific Daylight Savings Time on the Closing Date.
2.4 Estimated Purchase Price and Purchase Price True-Up.
(a) Preliminary Accounts Receivable and Preliminary Inventory.
Promptly following the close of business of the business day immediately
preceding the Closing Date, Seller shall prepare and deliver to Purchaser:
(i) a schedule setting forth Seller's reasonable good faith
calculation of all Accounts Receivable as of the Closing Date, showing the
customer name and a reasonable good faith estimate of the face amount of each
Accounts Receivable, which are outstanding as of such date, net of a reasonable
reserve for doubtful accounts, determined in accordance with generally accepted
accounting principles ("GAAP") and the methodology described on Schedule 3.11
attached hereto, consistently applied (the total net Accounts Receivable amount
that is reflected on the Accounts Receivable schedule is referred to herein as
the "Preliminary Accounts Receivable Amount"); and
(ii) perpetual and other inventory reports that contain Seller's
reasonable good faith calculation of the type and number of each Inventory item
on hand as of the Closing Date and a reasonable good faith estimate of net book
value of each Inventory item,
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determined in accordance with GAAP, consistently applied (the total Inventory
amount that is reflected on such perpetual and other inventory reports, net of a
reserve for slow-moving and obsolete inventory, determined consistent with
Seller's past practice in respect of the Purchased Business, is referred to
herein as the "Preliminary Inventory Amount").
"Estimated Purchase Price" means the sum of the Preliminary Accounts
Receivable Amount (up to a maximum of $22,500,000), the Preliminary Inventory
Amount (up to a maximum of $12,500,000) plus the Fixed Amount.
(b) Final Accounts Receivable and Final Inventory. Within ninety (90)
days after the Closing Date, Purchaser and/or its agents shall complete a review
of the Preliminary Accounts Receivable Amount and the Preliminary Inventory
Amount, which review shall include, but not be limited to a physical count.
(i) Seller shall provide Purchaser with a detailed listing of the
final Inventory as of the Closing Date that will include, but not be limited to,
detail of the reserve for slow-moving and obsolete Inventory. The Inventory and
the reserve for slow-moving and obsolete Inventory shall be determined on a
basis consistent with that utilized in determining the Preliminary Inventory
Amount. Seller shall provide Purchaser with reasonable access to Seller's books
and records to facilitate Purchaser's review of the costs and methods used to
value the Inventory and the reserve for slow-moving and obsolete Inventory.
(ii) Purchaser will provide Seller with the most recent weekly
aged listing of the Preliminary Accounts Receivable Amount still outstanding. An
allowance for doubtful accounts will be calculated, using a method consistent
with that used to determine the Preliminary Accounts Receivable Amount (the
"Final Allowance for Doubtful Accounts"). Purchaser shall provide Seller with
reasonable access to Purchaser's books and records to facilitate Seller's review
of the accounts and the methods used to determine the Final Allowance for
Doubtful Accounts. The Final Accounts Receivable Amount shall be the total of
the Preliminary Accounts Receivable Amount, as adjusted for the Final Allowance
for Doubtful Accounts.
(iii) After Purchaser's review, if Seller and Purchaser reach
agreement on the Preliminary Accounts Receivable Amount and the Preliminary
Inventory Amount, such amounts shall, respectively, be the "Final Accounts
Receivable Amount" and the "Final Inventory Amount" and any amounts due shall be
distributed in accordance with the terms of Section 2.4(c) below, as
appropriate, within one calendar week of the parties reaching such agreement.
If, however, Seller and Purchaser are unable to reach agreement on the
Preliminary Accounts Receivable Amount and/or the Preliminary Inventory Amount
within thirty (30) days after the completion of Purchaser's review, then the
parties shall submit the matter to PricewaterhouseCoopers, LLP, or such other
nationally recognized public accounting firm mutually acceptable to the parties
hereto (the "Accountants") for resolution. Such resolution by the Accountants
shall be set forth in a written report ("Accountants Report") delivered by the
Accountants to the parties hereto within fifteen (15) days following the
submission of such dispute to the Accountants and shall be the "Final Accounts
Receivable Amount" and/or the "Final Inventory Amount", as the case may be, and
shall be final and binding upon the parties
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hereto and any amounts due shall be distributed in accordance with the terms of
Section 2.4(c) below, as appropriate, within one calendar week following the
delivery of the Accountants Report to the parties hereto. The fees charged by
the Accountants shall be paid 50% by the Seller and 50% by Purchaser. Promptly
following determination of the Final Accounts Receivable Amount and the Final
Inventory Amount, the parties shall send to the Escrow Agent the disbursement
notice described in the Holdback Escrow Agreement.
(c) True-Up.
(i) If the Purchase Price is less than the Estimated Purchase
Price, the amount of such deficiency (the "Shortfall"), shall be paid to
Purchaser by the Escrow Agent from the Holdback Escrow. The amount of any
Shortfall in excess of the Holdback Escrow Amount shall be paid, with interest
earned thereon, by Seller to Purchaser within one calendar week following the
determination of the Final Accounts Receivable Amount and the Final Inventory
Amount, as provided for herein. Any Holdback Escrow Amount remaining after
retention by Purchaser as provided for herein shall be released to Seller by the
Escrow Agent, with accrued interest, within one calendar week of such
determination.
(ii) If the Purchase Price is equal to or greater than the
Estimated Purchase Price (the "Excess Amount"), then Seller shall have the right
to receive the entire Holdback Amount and the Escrow Agent shall pay to Seller
such amount, with accrued interest, within one calendar week following the
determination of the Final Accounts Receivable Amount and the Final Inventory
Amount, as provided for herein. If the Excess Amount is greater than the
Holdback Escrow Amount, such difference shall be paid, with interest earned
thereon, by Purchaser to Seller within one calendar week following the
determination of the Final Accounts Receivable Amount and the Final Inventory
Amount, as provided for herein.
ARTICLE III
OTHER COVENANTS AND AGREEMENTS
3.1 Employee Matters.
(a) Offer of Employment. As of the Closing, Purchaser will be
entitled, but shall not be obligated, to offer employment to employees of Seller
who provide, as of Closing, services to the Purchased Business ("Current
Employees") and who satisfy Purchaser's requirements for new employees including
Purchaser's pre-employment screening process, subject to the following
conditions: (i) nothing contained herein shall preclude Purchaser from revising
conditions of employment after the Closing or effecting the termination of any
Current Employees after the Closing; and (ii) Purchaser shall have no liability
or obligation in respect of any Current Employees of the Seller who reject
Purchaser's offer of employment. Seller shall not make any offers of employment
to any Current Employees. Notwithstanding Section 3.1(c), Purchaser may
interview for employment Present Employees (as defined in Section 3.5). If
Purchaser decides not to offer employment to a Marketing Associate (and such
Marketing Associate is otherwise willing and able to be employed by Purchaser),
for purposes of the condition described in Section 7.9, such Marketing Associate
shall be deemed to have been continuously employed by Seller from the date
hereof through the Closing.
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(b) COBRA. Seller shall provide at its sole cost and expense
"Continuation Coverage" (within the meaning of Section 4980B of the Internal
Revenue Code of 1986, as amended (the "Code") and Part 6 of Subtitle B of Title
I of ERISA) (such statutory provisions are referred to herein collectively as
"COBRA") to all Purchased Business Employees and their covered dependents who
(i) have experienced a "Qualifying Event" (within the meaning of COBRA) prior to
the Closing Date and for whom the period of Continuation Coverage required by
COBRA has not, as of the Closing Date, expired, or (ii) are covered under a
"group health plan" (as defined in Code Section 5000(b)(1)) of the Seller as of
the Closing Date and experience a Qualifying Event as a result of the
transactions contemplated by this Agreement (and regardless of whether a
Purchased Business Employee becomes an employee of Purchaser). In addition,
Seller shall provide group health coverage to Purchased Business Employees (and
their eligible dependents) who are, as of the Closing Date, on a leave of
absence governed by the Family and Medical Leave Act of 1993, as amended
("FMLA"), in accordance with the requirements of FMLA and COBRA. Seller shall
provide, or cause to be provided by an ERISA Affiliate, all applicable
notifications of any conversion rights or privileges available under any of
Seller's Employee Benefit Plans.
(c) Nonsolicitation of Marketing Associates. Subject to Section
3.1(a), Purchaser agrees that from and after the date hereof through Closing,
neither Purchaser nor any of its affiliates will solicit for hire any Marketing
Associates (defined in Section 3.1(f)); provided, however, if any Marketing
Associates are hired by Purchaser or any of its affiliates prior to Closing, for
purposes of the condition described in Section 7.9, such Marketing Associates
shall be deemed to have been continuously employed by Seller from the date
hereof through the Closing.
(d) Notice to Employees. Seller shall be responsible for providing,
and shall be entitled to provide at anytime, all notices and other
communications to employees which may be required on or prior to Closing under
the Worker Adjustment and Retraining Act or any similar state statute
(collectively, the "WARN Act"), and in no event shall Purchaser be liable for
claims arising prior to employment by Purchaser.
(e) Form I-9. Seller shall obtain Forms I-9 (defined below) from all
of its Current Employees prior to Closing, and shall use its commercially
reasonable efforts to ensure that, to the knowledge of each of the Seller
Parties, the information reflected thereon shall be true and correct. Seller
shall prepare all required Forms W-2 for filing with the United States Internal
Revenue Service for the Purchased Business Employees as of the Closing Date.
(f) Retention Bonuses. In addition to any severance or other benefits
that Seller may provide to Current Employees, Seller agrees that it shall
provide retention bonuses to certain of its employees, in accordance with the
following:
(i) Seller shall pay a retention bonus to (A) each of its
employees who is a marketing associate for the California Foodservice Business
("Marketing Associates") and (B) ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇ (collectively "Sales Management"), if
such employees are continuously employed by Seller from
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the date hereof until the Closing. Such retention bonuses shall be paid
substantially at Closing and the balance thereof shall be paid within ninety
(90) days of the Closing by Seller in accordance with the plan attached hereto
as Exhibit 3.1(f)(i) (the "MA Retention Bonus Plan"). The aggregate amount of
such retention bonuses made available by Seller to the Marketing Associates and
the Sales Management shall not be less than $500,000 and the average amount of
such retention bonuses with respect to the Marketing Associates and Sales
Management made available shall not be less than $1,000. Seller shall provide
Purchaser with reasonably detailed information relating to the MA Retention
Bonus Plan upon receiving a written request from Purchaser.
(ii) Seller shall pay a retention bonus to each of its California
Foodservice Business employees who is neither a Marketing Associate nor part of
Sales Management (each, a "Non-Marketing Employee"), and that is continuously
employed by Seller from the date hereof until the Closing. Such retention
bonuses shall be paid substantially at Closing and the balance thereof shall be
paid within ninety (90) days of the Closing by Seller in accordance with the
plan that is attached hereto as Exhibit 3.1(f)(ii) (the "Non-MA Retention Bonus
Plan"), and the average retention bonus paid to Non-Marketing Employees shall be
not less than $1,000. Seller shall provide Purchaser with reasonably detailed
information relating to the Non-MA Retention Bonus Plan upon receiving a written
request from Purchaser.
(iii) The Retention Bonus Plan and the Non-MA Retention Bonus
Plan shall be implemented by Seller as soon as practicable following the Initial
Public Announcement (defined in Section 3.9 hereof) and Seller shall coordinate
the Retention Bonus Plan and the Non-MA Retention Bonus Plan with Purchaser's
post-Closing incentive plan described in Section 3.1(g) hereof.
(g) Bonus Pool for Marketing Associates. At Closing, Purchaser shall
adopt a bonus pool, which in the aggregate shall be not less than $500,000 and
the participants of which shall be each Marketing Associate that is offered
employment by, and accepts employment with, Purchaser. Such bonus pool shall be
paid by Purchaser after the Closing Date to each Marketing Associate who meets
the terms and conditions established by Purchaser, which shall include, but not
be limited to, the execution and delivery by the Marketing Associate of a
Nondisclosure Nonsolicitation Agreement that shall be entered into prior to the
Closing Date, the form of which is attached hereto as Exhibit 3.1(g) (the
"Marketing Associate Nonsolicitation Agreement"). Purchaser shall provide S&F
with reasonably detailed information relating to such bonus pool upon receiving
a written request from S&F.
(h) Employees on Leave. Schedule 3.1(h) attached hereto lists the name
of each Purchased Business Employee who is on a leave of absence whether
pursuant to FMLA, workers compensation or otherwise.
3.2 Consents. Promptly after execution of this Agreement, Seller will apply
for or otherwise seek, and use its commercially reasonable efforts to obtain,
all consents and approvals required with respect to Seller Parties in order to
consummate the transactions contemplated hereby, including without limitation,
those consents listed in Schedule 4.4 hereof and consents in respect of the
Assumed Contracts. Any charges imposed by the other parties in respect of such
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consents shall be borne by Seller. Purchaser shall provide Seller with such
information as may reasonably requested by Seller in connection with obtaining
such consents.
3.3 Business Information. Subject to the Confidentiality Agreement (as
defined in Section 3.9), Seller, its employees, agents and representatives shall
provide Purchaser, its respective employees, agents, counsel, accountants and
financial consultants access to all suppliers and employees of the Purchased
Business and reasonable access during normal business hours, to the offices,
properties, records, files and other documents and information of or relating to
the Purchased Business and the Purchased Assets as Purchaser, their respective
employees, agents, counsel, accountants or financial consultants may request;
provided that access to the personnel records of any of Seller's employees shall
only be allowed if such employee has consented to such access.
(a) No Waiver. Purchaser's due diligence review and any inspections
pursuant hereto shall not waive or release the Seller Parties from any of their
representations, warranties or covenants under this Agreement.
3.4 Noncompetition/Non-Solicitation Agreements. Concurrently with the
Closing, Seller and the Seller Parties shall enter into a
Noncompetition/Non-Solicitation Agreement with Purchaser for a term ending on
the second (2nd) anniversary of the Closing Date in substantially the form
attached as Exhibit 3.4 (the "Noncompetition/Non-Solicitation Agreement").
3.5 Conduct of Business by Seller Pending the Closing. The Seller Parties
covenant and agree that, unless Purchaser shall otherwise consent in writing and
except as otherwise set forth herein, between the date hereof and the Closing,
the Purchased Business shall be conducted only in, and Seller shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice or as otherwise required by this Agreement or with respect to
the transactions contemplated herein; and Seller will use its commercially
reasonable efforts to preserve substantially intact the business organization
and the Purchased Business, to keep available the services of the present
employees and consultants who provide any services to the Purchased Business
(collectively, the "Present Employees") and to preserve the present
relationships of Seller with customers, suppliers and other persons with which
Seller has significant business relations in respect of the Purchased Business.
(a) Certain Actions. By way of amplification and not limitation,
except as expressly provided for in this Agreement, Seller Parties shall not,
between the date hereof and the Closing, directly or indirectly, do any of the
following in respect of Seller or the Purchased Business, as applicable, without
the prior written consent of Purchaser:
(i) (A) merge or consolidate with or into another company; (B)
except in the ordinary course of business and in a manner consistent with past
practices, sell, pledge, dispose of, or encumber or authorize or propose the
sale, pledge, disposition or encumbrance of any material assets of Seller used
or held for use by the Purchased Business; (C) enter into any material contract
or agreement, except in the ordinary course of the Purchased Business; or (D)
enter into or amend any material contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this Section 3.5(a)(i);
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(ii) take any material action except in the ordinary course of
business and in a manner consistent with past practice or as otherwise required
by this Agreement or with respect to the transactions contemplated herein, or
make any material change in, its methods of management, purchasing,
distribution, marketing, accounting or operating (or practices relating to
payment of trade accounts or to other payments); or
(iii) do any act or omit to do any material act that would cause
a breach of any contract, commitment or obligation of Seller that is an Assumed
Liability hereunder.
(b) Maintenance of Inventory. Seller shall, between the date hereof
and the Closing Date (i) maintain the Inventory in amounts which will permit the
California Foodservice Business to be operated in its ordinary course; (ii) not
purchase any material amount of Inventory at a cost exceeding market prices
prevailing at the time of purchase; and (iii) coordinate with a merchandiser
designated by Purchaser prior to purchasing Inventory for the Meat Processing
Division and, to the extent practicable, Seller will purchase Inventory for the
Meat Processing Division from Purchaser.
(c) Collection of Accounts Receivable. Seller shall, between the date
hereof and the Closing Date, in the ordinary course of business and in a manner
consistent with past practice, continue efforts to collect its Accounts
Receivable.
3.6 No Negotiations. Seller Parties covenant and agree that, from and after
the date hereof until the Closing (or the earlier termination of this Agreement
pursuant to Article IX), neither Seller nor its officers or directors nor anyone
acting on behalf of Seller or such persons, nor any Shareholder shall, directly
or indirectly, solicit, engage in discussions or negotiations with, or provide
any information to, any person, firm or other entity or group (other than
Purchaser or its representatives) concerning any merger, sale of substantial
assets, purchase or sale of shares of capital stock or similar transaction
involving the Purchased Business and/or the Purchased Assets ("Acquisition
Proposal"). The Seller Parties agree to notify Purchaser immediately if Seller
or any of Seller's shareholders, directors, officers, employees, or agents
receive any indication of interest, request for information or offers in
connection with an Acquisition Proposal.
3.7 Expenses.
(a) Expenses of Purchaser. All of the expenses incurred by Purchaser
in connection with the authorization, negotiation, preparation, execution and
performance of this Agreement and other agreements referred to herein,
including, without limitation, all fees and expenses of agents, representatives,
brokers, counsel and accountants for Purchaser, shall be paid by Purchaser.
(b) Expenses of Seller and Shareholders. All expenses incurred by the
Seller Parties in connection with the authorization, negotiation, preparation,
execution and performance of this Agreement and the other agreements referred to
herein, including without limitation, all fees and expenses of agents,
representatives, brokers, counsel and accountants for the Seller Parties shall
be paid by the Seller Parties.
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3.8 Notification of Certain Matters. Seller shall give prompt notice to
Purchaser of the following:
(a) Material Adverse Effect. The occurrence or nonoccurrence of any
event whose occurrence or nonoccurrence would be reasonably likely to cause
either (A) any representation or warranty of Seller Parties contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Closing, or (B) any Material Adverse Effect. The term
"Material Adverse Effect" means any change in or effect on the Purchased
Business or the Purchased Assets, whether discovered by Purchaser or disclosed
hereunder to Purchaser, that is or may reasonably be expected to be materially
adverse to the operations, properties (including intangible properties),
condition (financial or otherwise), assets, liabilities or regulatory status of
Seller, the Purchased Business or the Purchased Assets; provided, however, for
purposes of this Agreement, that in determining whether a Material Adverse
Effect has occurred, any event, change or development attributable to the
following shall not be considered: any adverse event, change or development
arising from or relating to (1) general business or economic conditions or (2)
the taking of any action contemplated by this Agreement and the other agreements
contemplated hereby, including any public announcement in connection herewith.
(b) Material Non-Compliance. Any material failure of any of the Seller
Parties, or any officer, director, employee or agent of any of the Seller
Parties, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
Notwithstanding the foregoing, the delivery of any notice pursuant to this
Section 3.10 shall not limit or otherwise affect the remedies available
hereunder to Purchaser upon receiving such notice.
3.9 Confidentiality and Public Announcements. The parties hereto agree to
announce the execution of this Agreement (the "Initial Public Announcement") and
the consummation of the transaction contemplated by this Agreement
simultaneously at mutually agreeable times. The content of all announcements and
publicity relating to the subject matter of this Agreement will be subject to
the mutual approval of Seller and Purchaser (except as otherwise required by
law). The parties hereto shall, and shall cause their representatives to,
maintain the confidentiality of all non-public information concerning the other
parties hereto (other than such information which becomes generally available to
the public other than as a result of disclosure by the other party) which
becomes known by a party hereto or such representatives solely as a result of
the negotiation or consummation of the transactions contemplated by this
Agreement, and shall promptly return and cause its agents and representatives to
return to the other party all written materials containing such information in
the event that the Closing does not occur within the time limit herein provided
for. That certain Confidentiality Agreement, dated June 4, 2003, between Seller
and Purchaser shall survive the execution of this Agreement and remain in full
force and effect in accordance with its terms. Notwithstanding the foregoing,
the Seller Parties and Purchaser (and each of their respective employees,
representatives, or other agents) may disclose to any and all persons, without
limitation of any kind, the tax treatment and any facts that may be relevant to
the tax structure of the transactions contemplated by this Agreement beginning
on the earliest of (i) the date of the public announcement of discussions
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relating to the transactions contemplated by this Agreement, (ii) the date of
public announcement of the transactions contemplated by this Agreement, or (iii)
the date of the execution of an agreement (with or without conditions) to enter
into the transactions contemplated by this Agreement; provided, however, that
neither the Seller Parties nor Purchaser (nor any of their respective
representatives) may disclose any other information that is not relevant to
understanding the tax treatment and tax structure of the transactions
contemplated by this Agreement (including the identity of any party and any
information that could lead another to determine the identity of any party), or
any other information to the extent that such disclosure could result in a
violation of any federal or state securities law.
3.10 Tax Matters.
(a) Definitions. As used in this Agreement, the following terms have
the specified meanings:
(i) "Affiliated Group" shall mean any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group defined under a
similar provision of state, local, or foreign law.
(ii) "Tax Authority" shall mean any U.S. federal, foreign,
national, state, county or municipal or other local government, any subdivision,
agency, commission or authority thereof, or any quasi-governmental body
exercising any taxing authority or any other authority exercising tax regulatory
authority.
(iii) "Tax Return" shall mean any return, report, statement, form
or other documentation (including any additional or supporting material and any
amendments or supplements) filed or maintained, or required to be filed or
maintained, with respect to or in connection with the calculation,
determination, assessment, collection or administration of any Taxes.
(iv) "Tax" or "Taxes" shall mean (A) any and all taxes, fees,
assessment, levies, duties, tariffs, imposts and other charges of any kind,
imposed by any Tax Authority, including, without limitation, taxes or other
charges on, measured by, or with respect to income, franchise, windfall, or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value-added or gains taxes; license, registration and
documentation fees; and custom's duties, tariffs and similar charges; (B) any
liability for the payment of any amounts of the type described in (A) as a
result of being a member of an Affiliated Group for any taxable period; (C) any
liability for the payment of any amounts of the type described in (A) as a
result of being a person required by law to withhold or collect taxes imposed on
another person; (D) any liability for the payment of amounts of the type
described in (A), (B) or (C) as a result of being a transferee of, or a
successor in interest to, any person or as a result of an express or implied
obligation to indemnify any person; and (E) any and all interest, penalties,
additions to tax and additional amounts imposed in connection with or with
respect to any amounts described in (A), (B), (C), or (D).
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(v) "Transfer Taxes" shall mean all foreign, federal, state and
local sales, use, transfer, stamp, documentary, registration, and similar Taxes
(including any penalties or interest) arising in connection with the
consummation of the transactions contemplated hereby.
(b) Transfer Taxes. Seller shall properly and timely file all
necessary Tax Returns with respect to all Transfer Taxes and shall pay all
Transfer Taxes.
(c) Proration of Certain Taxes. Seller and Purchaser agree that all
personal property Taxes and other similar Taxes relating to the Purchased Assets
that cover periods both before and after the Closing Date will be prorated.
Purchaser will reimburse Seller for the post-Closing portion of any such Taxes
that have been pre-paid by Seller to the extent that Purchaser will receive the
benefit of such prepayment after the Closing. Seller and the Stockholders will
reimburse Purchaser for the pre-Closing portion of any such Taxes that are to be
paid by Purchaser on or after the Closing Date. For purposes of this Section
3.10(c), (i) the pre-Closing portion of any Tax shall be deemed to be an amount
of such Tax for the number of days in the entire taxable period multiplied by a
fraction, the numerator of which is the number of days in the taxable period
ending on the Closing Date, and the denominator is the number of days in the
entire taxable period; and (ii) the post-Closing portion of any Tax shall be
deemed to be an amount of such Tax for the number of days in the entire taxable
period multiplied by a fraction, the numerator of which is the number of days in
the taxable period beginning after the Closing Date, and the denominator is the
number of days in the entire taxable period.
3.11 Collection of Accounts Receivables. After Closing, Purchaser shall
have the sole right to collect the Accounts Receivable. All amounts which are
collected from an account debtor after the Closing Date shall be first applied
against the oldest outstanding balance on such account, unless said account
debtor expressly directs otherwise in writing. Subject to the immediately
preceding sentence, with respect to Seller's customers acquired pursuant hereto,
for the initial 90 days after Closing or, with respect to a customer, until such
customer's Accounts Receivable have been fully collected, whichever is shorter,
Purchaser shall substantially adhere to Seller's practices and procedures
regarding collections, write-offs and servicing of accounts, as such practices
and procedures are described on Schedule 3.11 attached hereto. If Seller or the
Shareholders receive payment from customers of any amounts in respect of any
Accounts Receivable, Seller, or Shareholders, as the case may be, will remit
such payments to Purchaser within five (5) business days of receipt thereof. If
requested by Purchaser in writing, Seller will provide reasonable assistance in
connection with the collection of Accounts Receivable.
3.12 Purchase Price Allocation. The parties agree that Purchase Price and
Assumed Liabilities (plus other relevant items) will be allocated to the assets
of the Purchased Business in the manner described in Schedule 3.12. The parties
agree that such allocation was arrived at by arms-length negotiation and in the
judgment of the parties properly reflects the fair market value of the Purchased
Assets. The parties further agree to (i) be bound by the Purchase Price
Allocation, (ii) act in accordance with the Purchase Price Allocation in the
preparation and filing of all Tax Returns and in the course of any Tax audit or
Tax litigation relating thereto, and (iii) take no position inconsistent with
the Purchase Price Allocation for any Tax purpose, except, in each case, to the
extent that there has been a "determination" within the meaning of Section 1313
of the Code contrary to such position. If any Tax Authority disputes any
allocation made
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pursuant to Schedule 3.12, the party receiving notice of the dispute will
promptly inform the other party concerning the resolution of the dispute.
3.13 Transition Services Agreement. At Closing, Purchaser and Seller shall
enter into a Transition Services Agreement in substantially the form of Exhibit
3.13 attached hereto (the "Transition Services Agreement"), pursuant to which
Purchaser will have sixty (60) days following Closing to remove the Inventory
from the Facilities and during such sixty (60) day period Seller will continue
to maintain the Facilities in the ordinary course of business consistent with
its past practice, including without limitation, the maintenance of commercially
reasonable security over and insurance on the Inventory located at the
Facilities. In addition, Seller Parties will cooperate with Purchaser in the
transition of customers of the Purchased Business from Seller to Purchaser and
shall, for a six month period following Closing, subject to such renewal terms
as may be agreed upon by the parties, grant a royalty free license to Purchaser
to sell any proprietary inventory of Seller that Purchaser acquires pursuant
hereto. Upon expiration of such license, the parties will cooperate to dispose
of any such unsold proprietary inventory. Purchaser shall reimburse Seller for
the reasonable costs incurred by Seller to provide the foregoing services as set
forth in the Transition Services Agreement during such specified period.
3.14 Vendor Receivables. Purchaser shall remit to S&F any monies that it
receives after the Closing Date relating to trade accounts receivable, other
than the trade accounts receivable set forth on the Final Accounts Receivable
Statement, within five (5) business days of the receipt of such monies.
3.15 Preservation of Minute Books and Corporate Records. Seller agrees to
preserve all of its (i) minute books and stock and corporate records (other than
Tax records) until the first (1st) anniversary of the Closing Date, and (ii)
relevant Tax records until the end of the applicable statute of limitations for
Tax claims related to the Purchased Assets, and, until such times, to make them
available during normal business hours, to Purchaser, its counsel, accountants
and others authorized by it for inspection and the making of photocopied
extracts therefrom at Purchaser's sole expense.
3.16 Bulk Sales. Purchaser hereby waives compliance by the Seller Parties
with the provisions of any applicable state bulk transfer statutes. The Seller
Parties hereby, jointly and severally, covenant and agree to indemnify and hold
Purchaser harmless from and against any and all claims of Seller's creditors or
others asserted against Purchaser resulting from such non-compliance.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
In order to induce Purchaser to enter into this Agreement and consummate
the transactions contemplated hereby, Seller Parties, jointly and severally,
hereby make the following representations and warranties, as qualified herein
(including by virtue of any applicable schedule or Revised Schedule), to
Purchaser.
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4.1 Organization and Authority of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Seller is duly qualified as a foreign corporation in all
jurisdictions in which the conduct of Seller's business or the ownership of the
Purchased Assets requires such qualification and Schedule 4.1 lists all the
states where Seller is so qualified. Seller has all necessary corporate power
and authority to own, lease and operate its properties and conduct its business
with respect to the Purchased Assets as it is currently being conducted. Except
as disclosed on Schedule 4.1, Seller does not own, directly or indirectly, any
interest in any corporation, partnership, joint venture or other entity.
4.2 Corporate Power and Authority; Due Authorization. Each of the Seller
Parties has full power, capacity and authority, to execute and deliver this
Agreement and each of the Transaction Documents to which such Seller Party is or
will be a party and to consummate the transactions contemplated hereby and
thereby. "Transaction Documents" means each of the agreements, documents and
instruments referenced in this Agreement to be executed and delivered by any of
the Seller Parties. The board of directors of Seller and AFD (the sole
shareholder of Seller), have duly approved and authorized the execution and
delivery of this Agreement and each of the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, and no other
corporate proceedings on behalf of Seller are necessary. The board of directors
of AFD and S&F (in its capacity as the sole shareholder of AFD), have duly
approved and authorized the execution and delivery of this Agreement and each of
the Transaction Documents and the consummation of the transactions contemplated
hereby and thereby, and no other corporate proceedings on behalf of AFD are
necessary. The board of directors of S&F have duly approved and authorized the
execution and delivery of this Agreement and each of the Transaction Documents
and the consummation of the transactions contemplated hereby and thereby, and no
other corporate proceedings on behalf of S&F are necessary. Assuming that this
Agreement and each of the Transaction Documents which are also Purchaser
Transaction Documents (as defined below) constitutes a valid and binding
agreement of Purchaser, this Agreement and each of the Transaction Documents to
which the Seller and/or any Seller Party, as the case may be, is a party
constitutes, or will constitute when executed and delivered, a valid and binding
agreement of Seller and/or any Seller Party, as the case may be, in each case
enforceable by Purchaser in accordance with its terms, subject to laws of
general application in effect affecting creditors' rights and subject to the
exercise of judicial discretion in accordance with general equity principles.
4.3 Title to Purchased Assets. Seller has, good and valid marketable title
to all of the Purchased Assets (and a valid and enforceable leasehold interest
in the leased personal property), free and clear of all Encumbrances, other than
Permitted Encumbrances. At the Closing, Seller will transfer to Purchaser good
and valid marketable title to all of its Purchased Assets (and a valid and
enforceable leasehold interest in the leased personal property), free and clear
of all Encumbrances, other than Permitted Encumbrances.
4.4 No Conflict; Required Consents. Except for the consents, approvals,
authorizations and other actions listed on Schedule 4.4 attached hereto, which
shall have been obtained or taken prior to Closing, the execution and delivery
by Seller Parties of this Agreement and the Transaction Documents and the
consummation by Seller Parties of the transactions contemplated hereby and
thereby do not and will not (a) require the consent, approval or action
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of, or any filing or notice to, any corporation, firm, person or other entity or
any public, governmental or judicial authority; (b) violate the terms of any
instrument, document or agreement to which any of the Seller Parties is a party,
or by which any of the Seller Parties or the property of any of the Seller
Parties (including the Purchased Assets) is bound, or be in conflict with,
result in a breach of or constitute (upon the giving of notice or lapse of time
or both) a default under any such instrument, document or agreement, or result
in the creation of any lien upon any of the property or assets of any of the
Seller Parties (including the Purchased Assets); (c) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any federal,
state, county, municipal, or foreign court or governmental authority applicable
to any of the Seller Parties or relating to the Purchased Assets or to the
Purchased Business; or (d) violate the Articles of Incorporation or Bylaws of
Seller. Neither Seller nor the Purchased Assets are subject to, or a party to,
any mortgage, lien, lease, agreement, contract, instrument, order, judgment or
decree or other restriction of any kind or character which would prevent or
hinder the continued operation of the Purchased Business by Purchaser after the
Closing on substantially the same basis as theretofore operated.
4.5 Ownership of Stock. AFD is the sole record and beneficial owner of all
of the issued and outstanding capital stock of Seller. No person or entity other
than AFD has, or has any right to obtain, any beneficial or record interest in
the capital stock of Seller or any interest convertible thereto. S&F is the sole
record and beneficial owner of all of the issued and outstanding capital stock
of AFD. No person or entity other than S&F has, or has any right to obtain, any
beneficial or record interest in the capital stock of AFD or any interest
convertible thereto.
4.6 Compliance with Law. Seller, with respect to the Purchased Assets is in
material compliance with all applicable laws, orders, rules and regulations of
all governmental bodies and agencies. None of the Seller Parties has received
written notice of, and neither ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, nor ▇▇▇▇ ▇▇▇▇▇▇ has
knowledge of, any noncompliance with the foregoing or of any notice thereof.
4.7 Accounts Receivable. On the date hereof Seller delivered to Purchaser a
true, correct and complete schedule of all Accounts Receivable as of August 10,
2003 of Seller in respect of the Purchased Business outstanding as of the date
hereof showing the ageing thereof, and all such accounts receivable listed
thereon are bona fide, arose in the ordinary course of business, and are not
subject to any disputes or offsets except such disputes or offsets that arise in
the ordinary course of business. None of the Accounts Receivable is intercompany
receivables, nor are any of the Accounts Receivable due from any of Seller's
affiliates, including the Shareholders and the employees of Seller.
4.8 Taxes.
(a) Tax Returns and Payments. Except as otherwise disclosed in
Schedule 4.8 attached hereto: (i) all income and other material Tax Returns
relating to the Purchased Assets and the Purchased Business required to be filed
by or on behalf of Seller or any Affiliated Group of which the Seller is a
member have been properly prepared and duly and timely filed with the
appropriate Tax Authorities in all jurisdictions in which such Tax Returns are
required to be filed
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(after giving effect to any valid extensions of time in which to make such
filings), all such Tax Returns were true, complete and correct in all material
respects and all Taxes reflected as due thereon have been paid in full; and (ii)
no agreement, waiver or other document or arrangement extending or having the
effect of extending the period for assessment or collection of Taxes (including,
but not limited to, any applicable statute of limitation), has been executed or
filed with the IRS or any other Tax Authority by or on behalf of Seller and no
power of attorney with respect to any Tax matter is currently in force.
(b) Withholding Taxes. Seller has complied in all respects with
respect to the Purchased Assets and the Purchased Business with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes and
has duly and timely withheld from employee salaries, wages and other
compensation and has paid over to the appropriate Tax Authorities all amounts
required to be so withheld and paid over for all periods under all applicable
laws.
(c) Tax Liens. There are no liens as a result of any unpaid Taxes upon
any Purchased Assets of the Purchased Business except for Taxes not yet due and
payable.
(d) Examinations. Except as set forth on Schedule 4.8, all
deficiencies asserted or assessments made as a result of any examinations by the
IRS or any other Tax Authority of the Tax Returns relating to the Purchased
Assets and the Purchased Business have been fully paid, and there are no other
audits or investigations by any Tax Authority in progress, nor has Seller
received any notice from any Tax Authority that it intends to conduct such an
audit or investigation. No issue has been raised by a Tax Authority in any prior
examination which, by application of the same or similar principles, could
reasonably be expected to result in a proposed deficiency for any subsequent
taxable period.
(e) U.S. Person. Seller is not a foreign person within the meaning of
Section 1445 of the Code.
(f) Tax Rulings. Seller is not subject to any private letter ruling of
the IRS or comparable rulings of other taxing authorities.
4.9 Inventory. The inventory held for sale in the Purchased Business, net
of reasonable (in accordance with past practices of Seller and industry
standards) reserves, consists only of Salable inventory of a quality and
quantity generally maintained and sold in the ordinary course of the Purchased
Business. For purposes hereof, inventory is "Salable" only if it (including its
packaging) is in the physical condition to be sold to customers in the ordinary
course of the Purchased Business and in accordance with industry standards and
applicable government regulations; provided, however, that "Salable" inventory
does not include
(i) any item whose supplier notifies any of the parties hereto prior
to the Closing that such item may not be distributed following
Closing;
(ii) any items which are private label products for customers who
immediately prior to the Closing are no longer customers of
Seller;
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(iii) items which are, pursuant to industry or government standards,
including, without limitation, United States Department of
Agriculture standards, out-of-date (or perishable product in
excess, in days supply, of the normal shelf life of such
product);
(iv) items of obsolete Inventory (determined pursuant to the report
and methodology attached hereto as Schedule 4.9); or
(v) any item that is not owned by Seller, including goods already
sold.
As of Closing, there will be on hand Inventory levels in amounts consistent
with Seller's ordinary business practices and at levels sufficient for Purchaser
to operate the Purchased Business consistent with Seller's operation thereof
prior to Closing. In addition, the schedule of Inventory that will be delivered
pursuant to Section 2.4(a) hereof shall only consist of inventory that is
Salable and that is valued at the lower of cost or market on a first in first
out, first out basis, consistent with past practices.
4.10 Assumed Contracts. Prior to execution of this Agreement, Seller has
provided to Purchaser true, correct and complete copies of the Assumed
Contracts, including any and all amendments thereto. The Assumed Contracts are
valid, legally binding and enforceable against the Seller and the other parties
thereto, subject to laws of general application in effect affecting creditors'
rights and subject to the exercise of judicial discretion in accordance with
general equitable principles. Neither Seller nor, to the knowledge of any of the
Seller Parties, any other party to any of the Assumed Contracts is in breach of,
or in default under, any of the Assumed Contracts and no event has occurred
which, with the notice or lapse of time, or both, would constitute a default by
Seller or, to the knowledge of any of the Seller Parties, any other party to any
of the Assumed Contracts. The assignment of any of the Assumed Contracts to
Purchaser in accordance with this Agreement will not constitute a breach or
violation of such Assumed Contract. There are no negotiations pending or, to the
knowledge of any of the Seller Parties, threatened or requested, nor any
outstanding rights to renegotiate, any Assumed Contracts.
4.11 Litigation; Judgments. Except as disclosed on Schedule 4.11, there is
no action, proceeding or, to the knowledge of Seller Parties, investigation,
pending, or to Seller's knowledge, threatened against or involving Seller, any
Seller Party, the Purchased Assets or the operation of the Purchased Business,
nor is there any action or proceeding pending or, to the knowledge of any of the
Seller Parties, threatened before any court, tribunal or governmental body
seeking to restrain or prohibit or to obtain damages or other relief in
connection with the consummation of transactions contemplated by this Agreement,
or which would be reasonably likely to adversely affect the Purchased Business
or Purchased Assets, or any Seller Party's ability to consummate the
transactions contemplated by this Agreement and the Transaction Documents, nor
any event or circumstance that is reasonably likely to constitute the basis of
any such action or proceeding referenced above. None of the Seller Parties is
subject to any judgment, order or decree entered in any lawsuit or proceeding
relating to the Purchased Assets or the operation of the Purchased Business.
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4.12 Insurance. Seller will keep its property, fire, casualty, ▇▇▇▇▇▇▇'▇
compensation, general liability insurance and other forms of insurance
maintained by it on the date hereof with respect to the Purchased Assets and the
operation of the Purchased Business in full force and effect up until sixty (60)
days after the Closing Date.
4.13 Employees; Union; Labor. Except for the Association Agreement, Seller
is not a party to any collective bargaining agreement or any other contract,
written or oral, with any trade or labor union, employees' association or
similar organization. There are no strikes or labor disputes pending or, to the
knowledge of any of the Seller Parties, threatened, or to the knowledge of any
Seller Parties, any attempts at union organization of the employees of Seller.
All Current Employees of Seller in respect of the Purchased Business are
employees-at-will except as disclosed on Schedule 4.13. To Seller's knowledge,
all salaries and wages paid and withheld by Seller are and have been in
compliance with all applicable federal, state and local laws. Schedule 4.13
lists each Current Employee of Seller and the current title and compensation of
each such employee.
4.14 Brokers Fees and Expenses. No agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.
4.15 Absence of Material Changes. Except as set forth in Schedule 4.15
attached hereto, from July 13, 2003 to the date of this Agreement:
(a) there has not been any Material Adverse Effect in respect of the
Purchased Assets or Purchased Business and no event has occurred or circumstance
exists that may result in such a Material Adverse Effect;
(b) the Purchased Business has not lost (or received written notice
that it may lose) any distributors, customers or suppliers with which the Seller
has material business relations;
(c) the Seller has operated the Purchased Business in the ordinary
course and has not sold, assigned, or transferred any of its assets, except in
the ordinary course of business consistent with past practice;
(d) Seller has not mortgaged, pledged or subjected to any lien,
pledge, mortgage, security interest, conditional sales contract, or other
encumbrance of any nature whatsoever, any material portion of the Purchased
Assets, except in the ordinary course of business;
(e) there has been no amendment, termination, or waiver of any right
of the Seller under any contract, governmental license or permit that may have a
Material Adverse Effect on the Purchased Assets or the Purchased Business;
(f) The Seller has not:
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(i) paid any judgment resulting from any suit, proceeding,
arbitration, claim or counterclaim in respect of Purchased Assets or the
Purchased Business;
(ii) made any such payment to any party in settlement of any such
suit, proceeding, arbitration, claim or counterclaim;
(iii) written down or failed to write down, or written up the
value of any inventory or assets of the Purchased Business except in accordance
with GAAP;
(iv) made any material changes in the customary methods of
operation of the Purchased Business, including practices and policies relating
to accounting, purchasing, marketing, selling or payment of trade creditors;
(v) except in respect of ordinary trade payables incurred any
indebtedness or guaranteed any indebtedness, except for borrowings under
existing loans or lines of credit in the ordinary course of business consistent
with past practice;
(vi) taken any action other than in the ordinary course of
Seller's business and in a manner consistent with past practices (none of which
actions has been unreasonable or unusual) or as a result of entering into this
Agreement or the transactions contemplated herein with respect to increasing the
compensation of any employee of Seller in the Purchased Business or with respect
to the grant or increase of any severance or termination pay to any such person
(otherwise than as disclosed to Purchaser in writing prior to the date hereof);
or
(vii) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 4.15.
4.16 Liens. No labor has been performed or material furnished for or on
behalf of Seller with respect to the Purchased Assets which has not heretofore
been fully paid, or for which any mechanics' or materialmen's lien or liens, or
any other lien, can be claimed by any person, party or entity, except in the
ordinary course of business consistent with past practice.
4.17 Cost-Plus Contract Claims; Most Favored Nation. Schedule 4.17
identifies all agreements with customers pursuant to which the price of products
sold to such customers are in any manner determined based upon Seller's cost
("Cost-Plus Contract"). Except as set forth on Schedule 4.17, there is not, with
respect to any Cost-Plus Contract, any action or proceeding pending or, to the
knowledge of any of the Seller Parties, threatened, related to a claim by the
customer with respect to how the cost of products is calculated thereunder or
with respect to the pricing of products sold to such customer thereunder
("Cost-Plus Contract Claims"). Seller is not a party to any agreement or
arrangement with any customer of the Purchased Business which provides that such
customer shall be sold products or services at the lowest price Seller charges
its customers for any such products or services or which contains any other
'most favored nation' or similar clause.
4.18 Certain Transfers; Preferences. To the knowledge of Seller and Seller
Parties, neither Seller nor any subsidiary or affiliate thereof (a) has received
any transfer which would constitute a fraudulent transfer or fraudulent
conveyance under applicable federal or state law or
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(b) has received a preference under applicable federal law which it has an
obligation to repay in whole or in part.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PURCHASER
In order to induce the Seller Parties to enter into this Agreement and
consummate the transactions contemplated hereby, Purchaser hereby makes the
following representations and warranties, as qualified herein (including by
virtue of any applicable schedule or Revised Schedule), to the Seller Parties:
5.1 Organization of Purchaser. Purchaser is a corporation duly organized
and validly existing under the laws of the State of Delaware and has the
corporate power and authority to own its property and to carry on its business
as now being conducted by it. At Closing, Purchaser will be duly qualified to
transact business as a foreign corporation in the State of California.
5.2 Corporate Power and Authority; Due Authorization. Purchaser has full
corporate power and authority to execute and deliver this Agreement and each of
the agreements, documents and instruments referenced in this Agreement to which
Purchaser is or will be a party (the "Purchaser Transaction Documents") and to
consummate the transactions contemplated hereby and thereby. The Board of
Directors of Purchaser has duly approved and authorized the execution and
delivery of this Agreement and each of the Purchaser Transaction Documents and
the consummation of the transactions contemplated hereby and thereby, and no
other corporate proceedings on the part of Purchaser are necessary to approve
and authorize the execution and delivery of this Agreement and such Purchaser
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby. Assuming that this Agreement and each of the Purchaser
Transaction Documents constitutes a valid and binding agreement of Seller and/or
Shareholders, as the case may be, this Agreement and each of the Purchaser
Transaction Documents constitute, or will constitute when executed and
delivered, a valid and binding agreement of Purchaser, in each case enforceable
against Purchaser in accordance with its terms, subject to laws of general
application in effect affecting creditors' rights and subject to the exercise of
judicial discretion in accordance with general equitable principles.
5.3 No Conflict; Consents. Other than the actions listed on Schedule 5.3,
the execution and delivery by Purchaser of this Agreement, the Purchaser
Transaction Documents and the consummation by Purchaser of the transactions
contemplated hereby and thereby do not and will not (a) require the consent,
approval or action of, or any filing or notice to, any corporation, firm, person
or other entity or any public, governmental or judicial authority; (b) violate
the terms of any instrument, document or agreement to which Purchaser is a
party, or by which Purchaser or the property of Purchaser is bound, or be in
conflict with, result in a breach of or constitute (upon the giving of notice or
lapse of time, or both) a default under any such instrument, document or
agreement; (c) violate Purchaser's Certificate of Incorporation or bylaws; or
(d) violate any order, writ, injunction, decree, judgment, ruling, law or
regulation of any federal, state, county, municipal, or foreign court or
governmental authority applicable to Purchaser, or the business or assets of
Purchaser, and relating to the purchase of the Purchased Assets other
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than, in the case of immediately preceding clause (a), (b) or (d), any such
breaches, conflicts, violations or restrictions that, individually or in the
aggregate, would not have Material Adverse Effect on Purchaser, as applicable.
5.4 Brokers Fees and Expenses. No agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.
5.5 Sufficiency of Funds. Purchaser has and at Closing will have sufficient
immediately available funds to pay the Purchase Price and perform its other
obligations under this Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller and the Shareholders. Each of the Seller
Parties hereby, jointly and severally, agrees to indemnify Purchaser and its
agents, employees, owners, officers, directors, successors and assigns and hold
them harmless from and against all claims, liabilities, damages, losses, costs
and expenses (including reasonable attorneys' fees) incurred or suffered by any
of them and arising out of any of the following:
(i) any breach of any representation, warranty or covenant of any
of the Seller Parties contained herein or in any Exhibit, schedule or Revised
Schedule hereto or any instrument or document entered into pursuant hereto,
which breach shall be determined giving effect to any and all amendments and
supplements of the schedules by the Seller Parties pursuant to and in accordance
with Section 7.7; and
(ii) any Excluded Liability, including without limitation, any
loss, cost or expense arising out of: (A) failure by Seller to fulfill its
obligations under the MA Retention Bonus Plan or the Non-MA Retention Plan or
under those certain retention incentive memoranda dated June 11, 2003 sent to
each of the Sales Management; (B) the sales tax audit described on Schedule 4.8;
(C) any of the litigation matters described on Schedule 4.11; or (D) the
Association Agreement; (collectively, with all other indemnification obligations
of the Seller Parties under any other provisions hereof or pursuant hereto, the
"Section 6.1 Indemnified Claims").
6.2 Indemnification by Purchaser. Purchaser hereby agrees to indemnify the
Seller Parties and their agents, employees, officers, directors, successors and
assigns and hold them harmless from and against all claims, liabilities,
damages, losses, costs and expenses (including reasonable attorneys' fees)
incurred or suffered by any of them and arising out of any of the following:
(i) any breach of any representation, warranty or covenant of
Purchaser contained herein or in any Exhibit, schedule or Revised Schedule
hereto or any instrument or document entered into pursuant hereto, which breach
shall be determined giving
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effect to any and all amendments and supplements of the schedules by the
Purchaser pursuant to and in accordance with Section 7.7; and
(ii) any Assumed Liabilities.
6.3 Provisions Regarding Indemnification. The indemnified party (or
parties) shall promptly notify the indemnifying party (or parties) of any claim,
demand, action or proceeding for which indemnification will or may be sought
under this Agreement and, if such claim, demand, action or proceeding is a third
party claim, demand, action or proceeding, the indemnifying party will have the
right, at its expense, to assume the defense thereof using counsel reasonably
acceptable to the indemnified party. The indemnified party shall have the right
to participate in at its own expense, but not control, the defense of any such
third party claim, demand, action or proceeding. In connection with any such
third party claim, demand, action or proceeding, The Seller Parties and
Purchaser shall cooperate with each other. No such third party claim, demand,
action or proceeding shall be settled without the prior written consent of the
indemnified party; provided, however, that if a firm, written offer is made to
settle any such third party claim, demand, action or proceeding and the
indemnifying party proposes to accept such settlement and the indemnified party
refuses to consent to such settlement, then the indemnifying party shall be
excused from, and the indemnified party shall be solely responsible for, all
further defense of such third party claim, demand, action or proceeding; and the
maximum liability of the indemnifying party relating to such third party claim,
demand, action or proceeding shall be the amount of the proposed settlement if
the amount thereafter recovered from the indemnified party on such third party
claim, demand, action or proceeding is greater than the amount of the proposed
settlement.
6.4 Survival. The representations and warranties contained in this
Agreement and in the Transaction Documents delivered at the Closing shall
survive the Closing through the first (1st) anniversary of the Closing Date
(provided that the warranties and representations set forth in Section 4.8
hereof shall survive until the expiration of any statute of limitations
applicable to the underlying claim, as the same may be extended), and the
warranties and representations in Sections 4.1 through 4.5, inclusive, shall
survive the Closing without limitation. All indemnification obligations of
either party herein shall expressly survive the Closing.
6.5 Limitations.
(a) Base Amount. Notwithstanding anything to the contrary contained
herein, other than claims in respect of Sections 3.10 and 3.11, Sections 4.1
through 4.5, Sections 4.7 through 4.9 and Section 4.17 or for claims for
indemnification under Sections 6.1(ii), Purchaser will not assert a claim
against Seller or the Seller Parties under this Article VI until such time that
the total of all Section 6.1 Indemnified Claims equals or exceeds in the
aggregate One Million Dollars ($1,000,000) (the "Threshold Amount"), from and
after which time the full extent of all Section 6.1 Indemnified Claims, shall be
indemnifiable at the first dollar of losses in excess of the Threshold Amount,
subject to (S)6.5(b).
(b) Cap. The aggregate limit of joint and several liability of the
Seller Parties on the one hand, and Purchaser on the other hand, under this
Article VI shall be one-half of (i) the Purchase Price plus (ii) Assumed
Liabilities.
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PURCHASER TO CLOSE
The obligations of Purchaser to consummate the transaction contemplated
hereby shall be subject to the fulfillment or waiver, to the extent permitted by
applicable law, on or prior to the Closing, of each of the following conditions:
7.1 Representations and Warranties True. The representations and warranties
made by each of the Seller Parties in or pursuant to this Agreement shall be
true and correct on and as of the signing of this Agreement and shall be true
and correct on and as of the Closing Date, with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date, except to the extent that such representations and warranties are made as
of a specified date, in which case such representations and warranties shall be
true and correct as of such date, and except as would not have a Material
Adverse Effect.
7.2 Obligations Performed. Each of the Seller Parties shall have performed
and complied with all agreements, conditions and obligations required by this
Agreement to be performed or complied with by them prior to or at the Closing,
except as would not have a Material Adverse Effect.
7.3 Consents. Seller shall have obtained and delivered to Purchaser written
consents of all persons or entities whose consent is required to consummate the
transactions contemplated herein, if any, and all of such consents shall remain
in full force and effect at and as of the Closing including, without limitation,
those listed on Schedule 4.4.
7.4 Closing Deliveries. The Seller Parties shall have executed (where
applicable) and delivered to Purchaser each of the following, together with any
additional items that Purchaser may reasonably request to effect the
transactions contemplated herein:
(a) the Transaction Documents, including, without limitation, a ▇▇▇▇
of Sale, in substantially the same form as attached hereto as Exhibit 7.4(a)(i),
an Assignment and Assumption Agreement, in substantially the same form as
attached hereto as Exhibit 7.4(a)(ii), and such additional instruments of sale,
transfer, conveyance, and assignment duly executed by the Seller as of the
Closing Date as reasonably requested by Purchaser to consummate the transactions
described herein;
(b) a certified copy of the corporate resolutions of the Board of
Directors of Seller and of the Shareholders authorizing the transactions
contemplated hereby and the execution, delivery and performance by Seller of
this Agreement and the Transaction Documents and an incumbency certificate with
respect to officers of the Seller Parties executing documents or instruments on
behalf of Seller Parties;
(c) a certificate of a duly authorized officer of each of the Seller
Parties certifying as to the matters set forth in Sections 7.1 and 7.2 hereof;
(d) the Holdback Escrow Agreement duly executed by Seller;
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(e) the Transition Services Agreement and
Noncompetition/Non-Solicitation Agreement, each duly executed by the Seller
Parties, as applicable;
(f) an opinion of counsel to Seller Parties as to due authorization of
the transactions contemplated hereby;
(g) releases and termination statements in respect of all Encumbrance
with respect to the Purchased Assets other than Permitted Encumbrances, in form
and substance satisfactory to Purchaser;
(h) a good standing certificate issued by the Secretary of State for
the State of California for Seller; and
(i) a closing statement, duly executed by each of the Seller Parties,
setting forth in reasonable detail the financial transaction contemplated by
this Agreement.
7.5 Investigations. As of the Closing Date, there shall be no, and none of
the Seller Parties shall have any knowledge of any material pending or
threatened, investigation by any municipal, state or federal government agency
or regulatory body with respect to the Purchased Assets or the Purchased
Business, except as would not have a Material Adverse Effect.
7.6 No Material Adverse Effect. Since the date of this Agreement, there
shall have been no Material Adverse Effect in the Purchased Business and/or the
Purchased Assets (without giving effect to the consequences of the transactions
contemplated by this Agreement).
7.7 Revised Schedules. The Seller Parties shall have tendered to Purchaser
revised Schedules dated as of the Closing Date (the "Revised Schedules"), with
all changes through such date duly noted thereon, provided that if the Revised
Schedules contain any disclosures which should have been but were not disclosed
on the Schedules attached hereto at the date hereof or set forth changes which,
individually or in the aggregate, are material to any representation and
warranty contained herein then the condition contained in this Section 7.7 shall
be deemed unsatisfied unless such disclosures are approved in writing by
Purchaser and such Revised Schedules are attached hereto by Seller and
Purchaser.
7.8 Regulatory Matters. All filings shall have been made and all approvals
shall have been obtained as may be legally required pursuant to federal and
state laws prior to the consummation of the transactions contemplated by this
Agreement, including, without limitation, all actions by or in respect of, or
filings with, any governmental body, agency or official or any other person
required to permit the consummation of the transactions contemplated by this
Agreement so that the Purchaser shall be able to continue to carry on the
Purchased Business substantially in the manner now conducted by Seller.
7.9 Marketing Associates. Subject to Section 3.1(c), no less than 75% of
the Marketing Associates that are listed on Schedule 7.9(a) attached hereto
shall have been continuously employed in their current position by Seller from
the date hereof through Closing and no less than 70% of the Marketing Associates
and Sales Management that are listed on
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Schedule 7.9(b) shall have been continuously employed in their current position
by Seller from the date hereof through Closing.
7.10 Payment of Retention Bonuses. Seller shall have provided evidence
reasonably satisfactory to Purchaser that Seller has paid substantially all of
the retention bonuses described in and pursuant to Section 3.1(f) hereof.
7.11 No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by any
government agency, or be any pending action by any other person, in which it is
sought to restrain or prohibit (through injunction or otherwise) or obtain
material damages in connection with, the sale by Seller or the acquisition by
Purchaser of the Purchased Assets pursuant to the transactions contemplated by
this Agreement or the ability of Purchaser or any of its affiliates to own and
operate the Purchased Assets or otherwise materially adversely affecting the
prospects, financial condition or results of operations of the Purchased
Business, which action or proceeding has a reasonable likelihood of success. In
the event of such an action or proceeding, the parties agree to use commercially
reasonable efforts to defend against such action or proceeding.
7.12 Legality. No federal or state statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which is in effect and has the
effect of making the transactions contemplated hereby illegal or otherwise
prohibiting the consummation of the transactions contemplated hereby.
ARTICLE III
CONDITIONS TO SELLER'S AND SHAREHOLDERS' OBLIGATIONS
The obligations of the Seller Parties under this Agreement to be performed
on or prior to the Closing shall be subject to the fulfillment, or waiver, to
the extent permitted by applicable law, on or prior to the Closing, of each of
the following conditions:
8.1 Representations and Warranties True. The representations and warranties
made by Purchaser in or pursuant to this Agreement or given on its behalf
hereunder shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made or given on
and as of the Closing Date, except to the extent that such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be true and correct as of such date, and except as would
not have a material adverse effect in the ability of Purchaser to consummate the
transactions contemplated herein.
8.2 Obligations Performed. Purchaser shall have performed and complied with
all of the agreements, conditions and obligations required by this Agreement
which are to be performed or complied with by it prior to or at the Closing.
8.3 Closing Deliveries. Purchaser shall have delivered to Seller, each of
the following, together with any additional items that Seller may reasonably
request to effect the transactions contemplated herein:
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(a) the Cash at Closing, less the Holdback Escrow Amount (which shall
be delivered to the Escrow Agent);
(b) the Transition Service Agreement and the Holdback Escrow Agreement
duly executed by Purchaser;
(c) certified copies of the corporate resolutions of the Board of
Directors of Purchaser or an authorized committee thereof authorizing the
execution, delivery and performance of this Agreement and the Purchaser
Transaction Documents by Purchaser, and incumbency certificates with respect to
the officers of Purchaser executing documents or instruments on behalf of
Purchaser;
(d) a certificate of a duly authorized officer of Purchaser certifying
as to the matters set forth in Sections 8.1 and 8.2 hereof;
(e) the Assignment and Assumption Agreement duly executed by Purchaser
and such additional instruments as counsel to Purchaser and counsel to Seller
shall mutually deem necessary or appropriate;
(f) an opinion of counsel to Purchaser as to due authorization of the
transactions contemplated hereby;
(g) valid resale certificate signed by Purchaser with respect to the
Inventory and other Purchased Assets intended for resale by Purchaser in the
state of California or elsewhere; and
(h) any other documents or agreements contemplated hereby and/or
necessary or appropriate to consummate the transactions contemplated hereby.
8.4 No Challenge. There shall not be pending any action, proceeding or
investigation before any court or administrative agency by any government agency
or, be any pending action by any other person, in which it is sought to restrain
or prohibit (through injunction or otherwise), or obtain material damages in
connection with, the acquisition by Purchaser of the Purchased Assets pursuant
to this Agreement, which action or proceeding has a reasonable likelihood of
success. In the event of such an action or proceeding, the parties agree to use
commercially reasonable efforts to defend against such action or proceeding.
8.5 Regulatory Matters. All filings shall have been made and all approvals
shall have been obtained as may be legally required pursuant to federal and
state laws prior to the consummation of the transactions contemplated by this
Agreement, including, without limitation, all actions by or in respect of, or
filings with, any governmental body, agency or official or any other person
required to permit the consummation of the transactions contemplated by this
Agreement.
8.6 Legality. No federal or state statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which is in effect and has the
effect of making the transactions
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contemplated herein illegal or otherwise prohibiting the consummation of the
transactions contemplated herein.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time before the
Closing Date:
(a) by mutual written consent of Purchaser and Seller;
(b) by Purchaser if there occurs in respect of the Seller a Material
Adverse Effect;
(c) by any nonbreaching party hereto if there has been a material
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of any nonterminating party hereto; or
(d) by either Purchaser or Seller if the Closing is not consummated on
or before September 30, 2003 (or if an injunction seeking to prohibit this
transaction has been obtained, October 15, 2003), through no fault of the
terminating party.
9.2 Effects of Termination. In the event this Agreement is terminated
pursuant to Section 9.1(a) or (b), no party shall have any further obligations
to the others hereunder, except that the terms and provisions of Sections 3.7
and 3.9 shall survive any such termination. In the event of a termination of
this Agreement pursuant to Sections 9.1(c) above, the terminating party shall
retain all of its rights and remedies under this Agreement and those available
at law or in equity. In the event of a termination of this Agreement pursuant to
Sections 9.1(d) above, the terminating party shall retain all of its rights and
remedies under this Agreement and those available at law or in equity provided
the terminating party is not in breach or in violation of the terms of this
Agreement.
ARTICLE X
DEFINITIONS
"Assumed Contract" means any contract set forth on Schedule 1.1(d).
"Assumed Liabilities" means, any direct or indirect debt, obligation or
liability of any nature or kind, other than the Excluded Liabilities, whether
based in common law or statute or arising under written contract or otherwise,
known or unknown, fixed or contingent, accrued or unaccrued, liquidated or
unliquidated, related directly to the Purchased Assets and arising out of acts,
omissions, occurrences or conditions existing solely in respect of time periods
commencing after the Closing.
"Encumbrances" means any claim, lien, encumbrance, condition, easement,
restriction, security interest and similar interest of any kind or nature.
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"Permitted Encumbrances" means (i) any statutory liens for current Taxes not yet
due and payable and (ii) only in respect of time periods prior to Closing, any
Encumbrances on the Accounts Receivable or the Inventory that secures any debt
for borrowed money.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Risk of Loss. The risk of loss prior to the Closing shall be with
Seller. In the event that a Material Adverse Effect occurs between the date
hereof and Closing, then Purchaser shall have the option of either (i)
proceeding to close the transactions contemplated by this Agreement with an
assignment of any insurance proceeds which may be paid to reflect such loss or
damage, or (ii) terminating this Agreement without further liability to Seller.
11.2 Severability. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and/or shall be modified
to conform with such laws, without invalidating the remaining provisions hereof.
11.3 Modification and Waiver. This Agreement may not be changed or modified
except in writing specifically referring to this Agreement and signed by
Purchaser and the Seller Parties. No attempted waiver of any provision hereof
shall be binding on the other parties unless reduced to writing and signed the
waiving party. Unless specifically provided otherwise herein or agreed to by
Purchaser and the Seller Parties in writing, no modification, waiver,
termination, rescission, discharge or cancellation of this Agreement shall
affect the right of the parties hereto to enforce any claim, whether or not
liquidated, which accrued prior to the date of such modification, waiver,
termination, rescission, discharge, or cancellation of this Agreement, and no
waiver of any provision or of any default under this Agreement shall affect the
right of any party to enforce such provision or to exercise any right or remedy
in the event of any other default, whether or not similar.
11.4 Assignment, Survival and Binding Agreement. This Agreement, the
Transaction Documents and the Purchaser Transaction Documents may not be
assigned by any party hereto without the prior written consent of the other
parties, provided that Purchaser may assign this Agreement and the Purchaser
Transaction Documents in whole or in part to one or more wholly-owned
subsidiaries of Purchaser without the consent of Seller or Shareholders. The
terms and conditions hereof shall survive the Closing as provided in Section 6.4
hereof and shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, personal representatives, successors and assigns.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, with the same effect as
if the signatures thereto were in the same instrument. This Agreement shall be
effective and binding on all parties when all parties have executed and
delivered a counterpart of this Agreement.
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11.6 Notices. All notices, requests, demands, claims or other
communications hereunder will be in writing and shall be deemed duly given if
personally delivered, sent by telefax, or sent by a recognized overnight
delivery service which guarantees next day delivery ("Overnight Delivery") or
mailed registered or certified mail, return receipt requested, postage prepaid,
transmitted or addressed to the intended recipient as set forth below:
If to Seller or Shareholders: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Smart & Final, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax:
With a copy to: Legal Department
Smart & Final, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax:
And a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telefax: ▇▇▇-▇▇▇-▇▇▇▇
And a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
If to the Purchaser: Sysco Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as any party hereto notifies the other parties hereof
in writing. The parties hereto agree that notices or other communications that
are sent in accordance herewith (i) by personal delivery or telefax, will be
deemed received on the day sent or on the first business
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day thereafter if not sent on a business day, (ii) by Overnight Delivery, will
be deemed received on the first business day immediately following the date
sent, and (ii) by U.S. mail, will be deemed received upon receipt.
11.7 Entire Agreement; No Third Party Beneficiaries. This Agreement,
together with the Exhibits, schedules and Revised Schedules attached hereto,
constitute the entire agreement and supersede any and all other prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and, except as otherwise expressly provided
herein, is not intended to confer upon any person other than Purchaser and the
Seller Parties, any rights or remedies hereunder.
11.8 Further Assurances. The parties to this Agreement agree to execute
and/or deliver, both before and after Closing, any additional information,
documents or agreements contemplated hereby and/or necessary or appropriate to
effect and consummate the transactions contemplated hereby. Subject to the
Confidentiality Agreement, Seller Parties agree to provide to Purchaser, both
before and after the Closing, such information as Purchaser may reasonably
request in order to consummate the transactions contemplated hereby and to
effect an orderly transition of the Purchased Business following Closing.
11.9 Construction. Within this Agreement the singular shall include the
plural and the plural shall include the singular and any gender shall include
all other genders, all as the meaning and context of this Agreement shall
require. In connection with any action or event which by the terms hereof
requires consent of a party hereto, such consent shall not be unreasonably
withheld or delayed. For purposes hereof, the knowledge of Seller and the
Shareholders shall consist of the actual knowledge of the Shareholders together
with such information as any of them, in light of their positions as
shareholders and the capacities in which they serve Seller, should have known.
The section headings as herein used are for convenience only and shall not be
deemed to vary the content of this Agreement or limit the scope of any provision
hereof. Unless otherwise specified, a reference herein to a schedule or an
exhibit refers to a schedule or exhibit hereof.
11.10 Choice of Law. This Agreement and all documents executed in
connection therewith shall be governed by, and construed in accordance with, the
laws of the State of California, regardless of the laws that might otherwise
govern under applicable principles of conflict of laws thereof.
11.11 Dispute Resolution. All disputes, controversies or claims arising out
of or relating to this Agreement and the transactions contemplated hereby (other
than disputes to be resolved in accordance with Section 2.4(b) hereof) shall be
resolved by agreement among the parties, or, if not so resolved within
forty-five (45) days following written notice of dispute given by either party
hereto to the other, and if written notice of desire to arbitrate is given by
either of the parties as provided below and the matter is not then otherwise
resolved by the parties hereto, by resort to arbitration in accordance with
Title 9 of the United States Code (the United States Arbitration Act), the
Commercial Arbitration Rules, and the Optional Rules for Emergency Measures of
Protection, all as amended from time to time (the "Rules") of the American
Arbitration Association and the provisions of this Section; provided, however,
that the provisions of this Section shall prevail in the event of any conflict
with such Rules. The parties agree that
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they shall use their reasonable efforts to cause the matter to be presented to a
panel of three arbitrators (at least one of whom shall have at least ten years
of industry experience relating to the subject matter of the dispute) within
thirty (30) days after the establishment of such panel. Such selection of
arbitrators shall be made in accordance with the Rules. There shall be no
discovery. Pending the arbitration hearing, any provisional remedy that would be
available to a party from a court of law shall be available from the arbitration
panel. The decision of a majority of the arbitration panel with respect to the
matters referred to them pursuant hereto shall be final and binding upon the
parties to the dispute, and confirmation and enforcement thereof may be rendered
thereon by any court having jurisdiction upon application of any person who is a
party to the arbitration proceeding. The costs and expenses incurred in the
course of such arbitration shall be borne by the party or parties against whose
favor the decisions and conclusions of the arbitration panel are rendered;
provided, however, that if the arbitration panel determines that its decisions
are not rendered wholly against the favor of one party or parties or the other,
the arbitration panel shall be authorized to apportion such costs and expenses
in the manner that it deems fair and just in light of the merits of the dispute
and its resolution. The arbitration panel shall have no power or authority under
this Agreement or otherwise to award or provide for the award of punitive or
consequential damages against any party.
11.12 Definition of Days. For purposes of this Agreement, a "business day"
is a day on which Purchaser is open for business but shall not include a
Saturday or Sunday or legal holiday. Notwithstanding anything to the contrary in
this Agreement, no action shall be required of the parties hereto except on a
business day and in the event an action is required on a day which is not a
business day, such action shall be required to be performed on the next
succeeding day which is a business day. All references to "day" or "days" shall
mean calendar days unless specified as a "business day."
11.13 Schedules, Revised Schedules and Exhibits. All schedules, Revised
Schedules and Exhibits referenced in this Agreement, whether attached hereto on
or after the date hereof or not, shall be deemed to be incorporated herein, and
this Agreement shall be construed in accordance therewith.
11.14 Time of Essence. TIME IS OF THE ESSENCE OF THIS AGREEMENT.
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IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement under seal as of the date first written above.
SELLER:
PORT STOCKTON FOOD DISTRIBUTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Its: EVP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Its: SVP
SELLER PARTIES:
AMERICAN FOODSERVICE DISTRIBUTORS
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Its: EVP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Its: SVP
SMART & FINAL INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
Its: EVP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Its: SVP
PURCHASER:
SYSCO CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Its: V.P. & Gen Counsel
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Exhibit 2.1(b)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is dated as of September ,
--
2003 (the "Effective Date"), by and between PORT STOCKTON FOOD DISTRIBUTORS,
INC., a California corporation, (the "Seller"), SYSCO CORPORATION, a Delaware
corporation (the "Purchaser"), and ▇▇▇▇▇ FARGO BANK, N.A., solely in its
capacity as Escrow Agent as is set forth herein (the "Escrow Agent").
Capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Asset Purchase Agreement (as defined below).
R E C I T A L S
A. WHEREAS, pursuant to that certain Asset Purchase Agreement (the
"Asset Purchase Agreement") dated as of August 18, 2003, by and among Seller,
Purchaser and others, Purchaser will, directly or indirectly, acquire from
Seller certain assets of Seller; and
B. WHEREAS, Section 2.1(b) of the Asset Purchase Agreement requires
that Purchaser deposit with the Escrow Agent an amount equal to $
-------------
(the "Escrow Fund"), to be held by Escrow Agreement and distributed as provided
in the Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Purchaser, the Seller and the Escrow Agent agree as follows:
1. Appointment of Escrow Agent.
(a) The Escrow Agent is hereby appointed escrow agent in accordance
with the instructions set forth in this Agreement and hereby agrees to act as
the Escrow Agent under this Agreement. The Escrow Agent shall have no duty to
enforce any provision hereof requiring performance by any other party hereunder.
(b) The Escrow Agent hereby acknowledges receipt of the Escrow Fund.
(c) The Escrow Agent shall not have any interest in the Escrow Fund,
but shall serve as escrow holder only and have only possession thereof. The
Escrow Agent expressly waives any right to set off and appropriate any amounts
under the Escrow Fund.
2. Distribution of Escrow Fund. The Purchaser and the Seller shall, not
more than one (1) calendar week after the final determination of the Final
Accounts Receivable Amount and the Final Inventory Amount, as agreed to by the
parties or as set forth in the Accountants Report pursuant to Section 2.4(b) of
the Asset Purchase Agreement, provide the Escrow Agent with a written notice
(the "Distribution Notice") with respect to the disposition of the Escrow Fund.
The Distribution Notice shall be signed by authorized officers of the Purchaser
and the Seller, and shall describe the portions of the Escrow Fund to be
distributed to the Purchaser or to
1
the Seller, as the case may be. Not more than one (1) calendar week after the
delivery of the Distribution Notice, the Escrow Agent shall distribute the
Escrow Fund in the manner described in the Distribution Notice, together with
any interest and income earned on the portion so distributed.
3. Administration of Escrow.
(a) So long as the Escrow Fund is held in escrow, it shall be invested
and reinvested by the Escrow Agent solely in Investments, pursuant to written
instructions signed by the Purchaser and the Seller. Neither the Escrow Agent,
the Purchaser, nor the Seller shall be liable or responsible for any loss
resulting from any investment or reinvestment made pursuant to this Section
3(a). All investments of the Escrow Fund shall be held by, or registered in the
name of, Escrow Agent or its nominee.
As used herein "Investments" means:
(i) direct obligations of, or obligations fully guaranteed by,
the United States of America or any agency thereof with any residual amount
being invested in the Federal Treasury Obligations Money Market Fund;
(ii) any taxable publicly traded money market fund; or
(iii) certificates of deposit whether negotiable or
nonnegotiable, issued by any bank, trust company or national banking
association, including the Escrow Agent, provided that such certificates of
deposit shall (A) be issued by a bank, trust company or national banking
association having a capital stock and surplus of more than Five Hundred
Million Dollars ($500,000,000), (B) be fully insured by the Federal Deposit
Insurance Corporation or (C) be fully and continuously secured by direct
obligations of, or obligations unconditionally guaranteed by, the United
States of America, which (1) shall have a market value (exclusive of
accrued interest) at all times at least equal to the principal amount of
such certificates of deposit, (2) shall be lodged with the Escrow Agent (or
any correspondent bank or trust company designated by the Escrow Agent), as
custodian, by the bank, trust company or national banking association
issuing such certificate of deposit, and (3) the bank, trust company or
national banking association issuing each certificate of deposit required
to be so secured shall furnish the Escrow Agent with an undertaking
satisfactory to it that the aggregate market value of such obligations
securing each such certificate of deposit will at all times be an amount
equal to the principal amount of each such certificate of deposit (and the
Escrow Agent shall be entitled to rely on each such undertaking).
(b) Maturities or unexpired terms of maturities of instruments in
which the Escrow Fund is invested shall not exceed sixty (60) days. The Escrow
Agent is authorized to sell any such Investments as may be required to make any
payment required to be made under this Agreement, and the Escrow Agent shall not
be liable for any loss due to early redemption. In the event that no written
instructions are given by the Purchaser and the Seller as to any uninvested
portion of the Escrow Fund, such portion shall be invested by the Escrow Agent
in United States
2
treasury bills for a thirty (30) day period; provided, however, that, if such
period is not available, such portion shall be invested for the closest period
of shorter duration.
(c) Not less than ten (10) nor more than fifteen (15) business days
prior to the termination of this Agreement, the Escrow Agent shall deliver to
the Purchaser and the Seller a report outlining the total amount of the Escrow
Fund as of such date and the total amount of interest earned on the Escrow Fund
prior thereto and not distributed pursuant to the terms of this Agreement.
(d) At the prior written request of either the Purchaser or the Seller
at any time, the Escrow Agent shall deliver to the Purchaser and the Seller such
information as shall be reasonably requested with respect to the Escrow Fund and
any interest earned thereon or payments made therefrom.
(e) Net profits resulting from, and interest and income produced by
investments of, the Escrow Fund shall be deemed a part of the Escrow Fund and
reinvested by Escrow Agent.
4. Reliance. Escrow Agent may act upon any instrument or other writing
believed by it in good faith to be genuine and to be signed or presented by the
proper person or persons and shall not be liable in connection with the
performance by it of its duties pursuant to the provisions hereof, except for
its own bad faith, fraud, willful misconduct or gross negligence. The Purchaser,
on the one hand, and the Seller, on the other hand, shall indemnify and hold
harmless the Escrow Agent for one half (1/2) of all losses, costs and expenses
which may be incurred by it without bad faith, fraud, gross negligence or
willful misconduct on the part of the Escrow Agent, arising out of or in
connection with its entering into this Agreement and carrying out its duties
hereunder. Such indemnification provisions shall survive the termination of this
Agreement or the removal or resignation of the Escrow Agent.
5. Fees and Expenses. The Escrow Agent shall be entitled to compensation
for its services as stated in the schedule attached as Annex I, which
compensation shall be by the Seller. The fee agreed upon for the services
rendered hereunder is intended as full compensation for the Escrow Agent's
services as contemplated by this Agreement; provided, however, that, in the
event that the conditions for the disbursement of funds under this Agreement are
not fulfilled, or the Escrow Agent tenders any material service not contemplated
in this Agreement or there is any assignment of interest in the subject matter
of this Agreement not contemplated herein, or any material modification hereof,
or if any material controversy arises hereunder, or the Escrow Agent is made a
party to any litigation pertaining to this Agreement, or the subject matter
hereof, then the Escrow Agent shall be reasonably compensated for such
extraordinary services and reimbursed for all costs and expenses, including
reasonable attorneys' fees, occasioned by any delay, controversy, litigation or
event, and the same shall be recoverable one-half (1/2) from the Seller and
one-half (1/2) from the Purchaser.
6. Liability of the Escrow Agent.
(a) The Escrow Agent shall hold, invest and disburse the Escrow Fund
and any interest, dividends, or other income accrued thereon only in accordance
with (i) this
3
Agreement or (ii) written instructions accompanied by a certificate signed by
the Purchaser and the Seller confirming that such written instructions are being
given in conformity with this Agreement. The Escrow Agent shall not be bound in
any way by, or be deemed to have knowledge of, the Asset Purchase Agreement or
any other agreement between or among the parties hereto, other than this
Agreement. The Escrow Agent shall have no duties other than those expressly
imposed on it herein and shall not be liable with respect to any action taken by
it, or any failure on its part to act, except to the extent that such actions
constitute a breach of this Agreement, bad faith, fraud, gross negligence or
willful misconduct.
(b) The Escrow Agent makes no representations and has no
responsibility as to the validity, genuineness or sufficiency of any of the
documents or instruments delivered to it hereunder. Subject to Section 6(a)
hereof, the Escrow Agent (i) shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof and (ii) may act in reliance upon any instrument or signature
reasonably believed by it to be genuine and may assume that any person
purporting to give notice, receipt or advice or make any statement or execute
any document in connection with the provisions hereof has been duly authorized
to do so. The Escrow Agent may act in reliance upon the written advice of
counsel satisfactory to it in reference to any matter in connection with this
Agreement and shall not incur any liability for any action taken in good faith
in accordance with such written advice.
(c) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund, or in the event that the Escrow Agent in good faith is in doubt as to what
action it should take hereunder, the Escrow Agent shall be entitled to refrain
from acting until the Escrow Agent shall have received (i) a final nonappealable
order of a court of competent jurisdiction directing delivery of the amount of
the Escrow Fund in dispute or (ii) written instructions jointly executed by the
Seller and the Purchaser directing delivery of the amount of the Escrow Fund in
dispute, in which event the Escrow Agent shall deliver the amount of the Escrow
Fund in dispute in accordance with such order or instructions. Any court order
referred to in clause (i) above shall be accompanied by a legal opinion by
counsel for the presenting party reasonably satisfactory to the Escrow Agent to
the effect that said order or determination is final and nonappealable. The
Escrow Agent shall act on such court order and legal opinion without further
questions.
7. Resignation; Removal.
(a) The Escrow Agent may resign upon thirty (30) days advance written
notice to the parties. If a successor escrow agent is not appointed by the
mutual agreement of the Purchaser and the Seller within the thirty (30) day
period following such notice, the Escrow Agent may tender into the registry or
custody of any court of competent jurisdiction any part or all of the Escrow
Fund.
(b) The Escrow Agent shall be entitled to its compensation earned
prior to its resignation hereunder.
4
(c) The Purchaser and the Seller may, at any time substitute a new
escrow agent by giving thirty (30) days notice thereof to the existing Escrow
Agent and paying all fees and expenses of such Escrow Agent incurred to the date
of the substitution. Upon the effective date of the substitution of a successor
escrow agent, the Escrow Agent shall deposit all of the Escrow Fund with such
successor.
8. Tax Reporting. Any payments of income from the Escrow Fund shall be
subject to withholding regulations then in force with respect to United States
taxes. For federal and state income tax purposes, all interest earned on the
Escrow Fund shall be considered the currently reportable income of the party who
receives the distribution with respect thereto. The Escrow Agent shall file
annually all information returns with the Internal Revenue Service and other
governmental authorities documenting such interest income.
9. Miscellaneous Provisions.
(a) Severability. If any provision of this Agreement is prohibited by
the laws of any jurisdiction as those laws apply to this Agreement, that
provision shall be ineffective to the extent of such prohibition and/or shall be
modified to conform with such laws, without invalidating the remaining
provisions hereof.
(b) Modification and Waiver. This Agreement may not be changed or
modified except in writing specifically referring to this Agreement and signed
by Purchaser, Seller and the Escrow Agent. No attempted waiver of any provision
hereof shall be binding on the other parties unless reduced to writing and
signed by the waiving party. Unless specifically provided otherwise herein or
agreed to by Purchaser, Seller and the Escrow Agent in writing, no modification,
waiver, termination, rescission, discharge or cancellation of this Agreement
shall affect the right of the parties hereto to enforce any claim, whether or
not liquidated, which accrued prior to the date of such modification, waiver,
termination, rescission, discharge, or cancellation of this Agreement, and no
waiver of any provision or of any default under this Agreement shall affect the
right of any party to enforce such provision or to exercise any right or remedy
in the event of any other default, whether or not similar.
(c) Assignment, Survival and Binding Agreement. This Agreement may not
be assigned by any party hereto without the prior written consent of the other
parties, provided that Purchaser may assign this Agreement in whole or in part
to one or more wholly-owned subsidiaries of Purchaser without the consent of
Seller. The terms and conditions hereof shall survive the Closing of the Asset
Purchase Agreement and shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, with the same effect as
if the signatures thereto were in the same instrument. This Agreement shall be
effective and binding on all parties when all parties have executed and
delivered a counterpart of this Agreement.
5
(e) Notices. All notices, requests, demands, claims or other
communications hereunder will be in writing and shall be deemed duly given if
delivered personally, if sent by telefax, or sent by a recognized overnight
delivery service, which guarantees next day delivery ("Overnight Delivery") or
mailed registered or certified mail, return receipt requested, postage prepaid,
transmitted or addressed to the intended recipient as set forth below:
If to Purchaser: Sysco Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Arnall Golden Company LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Smart & Final Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Legal Department
Smart & Final Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
And a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as any party hereto notifies the other parties hereof in
writing. The parties hereto agree that notices or other communications that are
sent in accordance herewith (i) by personal delivery or telefax, will be deemed
received on the day sent or on the first business day
6
thereafter if not sent on a business day, (ii) by Overnight Delivery, will be
deemed received on the first business day immediately following the date sent,
and (iii) by U.S. mail, will be deemed received upon receipt.
(f) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersede any and all other prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, is not intended to confer upon any person other than
Purchaser and Seller any rights or remedies hereunder.
(g) Construction. Within this Agreement the singular shall include the
plural and the plural shall include the singular and any gender shall include
all other genders, all as the meaning and context of this Agreement shall
require. In connection with any action or event which by the terms hereof
requires consent of a party hereto, such consent shall not be unreasonably
withheld or delayed. The section headings as herein used are for convenience
only and shall not be deemed to vary the content of this Agreement or limit the
scope of any provision hereof. Unless otherwise specified, a reference herein to
a schedule, an annex or an exhibit refers to a schedule, annex or exhibit
hereof.
(h) Choice of Law. This Agreement and all documents executed in
connection herewith shall be governed by, and construed in accordance with, the
laws of the State of California, regardless of the laws that might otherwise
govern under applicable principles of conflict of laws thereof.
(i) Dispute Resolution. All disputes, controversies or claims arising
out of or relating to this Agreement shall be resolved by agreement among the
parties, or, if not so resolved within forty-five (45) days following written
notice of dispute given by either party hereto to the other, and if written
notice of desire to arbitrate is given by either of the parties as provided
below and the matter is not then otherwise resolved by the parties hereto, by
resort to arbitration in accordance with Title 9 of the United States Code (the
United States Arbitration Act), the Commercial Arbitration Rules, and the
Optional Rules for Emergency Measures of Protection, all as amended from time to
time (the "Rules") of the American Arbitration Association and the provisions of
this Section; provided, however, that the provisions of this Section shall
prevail in the event of any conflict with such Rules. The parties agree that
they shall use their reasonable efforts to cause the matter to be presented to a
panel of three arbitrators (at least one of whom shall have at least ten (10)
years of industry experience relating to the subject matter of the dispute)
within thirty (30) days after the establishment of such panel. Such selection of
arbitrators shall be made in accordance with the Rules. There shall be no
discovery. Pending the arbitration hearing, any provisional remedy that would be
available to a party from a court of law shall be available from the arbitration
panel. The decision of a majority of the arbitration panel with respect to the
matters referred to them pursuant hereto shall be final and binding upon the
parties to the dispute, and confirmation and enforcement thereof may be rendered
thereon by any court having jurisdiction upon application of any person who is a
party to the arbitration proceeding. The costs and expenses incurred in the
course of such arbitration shall be borne by the party or parties against whose
favor the decisions and conclusions of the arbitration panel are rendered;
provided, however, that if the arbitration panel determines that its decisions
are not rendered wholly against the favor of one party or parties or the other,
the
7
arbitration panel shall be authorized to apportion such costs and expenses in
the manner that it deems fair and just in light of the merits of the dispute and
its resolution. The arbitration panel shall have no power or authority under
this Agreement or otherwise to award or provide for the award of punitive or
consequential damages against any party.
IN WITNESS WHEREOF, the Seller, the Purchaser, and the Escrow Agent
have executed and delivered this Agreement as of the date first written above.
SELLER:
PORT STOCKTON FOOD DISTRIBUTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Its: SVP
--------------------------------
PURCHASER:
SYSCO CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Its: V.P & Gen Counsel
--------------------------------
ESCROW AGENT:
▇▇▇▇▇ FARGO BANK, N.A.
By: /s/ [Signature Illegible]
---------------------------------
Its: Vice President
--------------------------------
8
ANNEX I
FEE SCHEDULE
1. Annual escrow fee $2,000
2. Reimbursement of expenses $1,000 advance
A-1
Exhibit 3.1(f)(i)
SELLER'S RETENTION BONUSES
FOR MARKETING ASSOCIATES AND SALES MANAGEMENT
AMOUNT OF BONUS
---------------------------
ASSOC. AT 60 DAYS
& MGRS. CLOSING AFTER TOTAL
------- ------- ------- -------
Chairman's Club 5 55,000 25,000 80,000
President's Club 18 90,000 18,000 108,000
Executive Vice Presidents 15 30,000 7,500 37,500
Vice Presidents 28 56,000 14,000 70,000
Unallocated 35,000 35,000
--- ------- ------- -------
Total Marketing Associates 66 266,000 64,500 330,500
--- ------- ------- -------
District Sales Managers 7 52,500 17,500 70,000
Other Sales Managers 3 30,000 70,000 100,000
--- ------- ------- -------
Total Sales Management 10 82,500 87,500 170,000
--- ------- ------- -------
Total 76 348,500 152,000 500,500
=== ======= ======= =======
Average per Associate/Manager 6,586
=======
Exhibit 3.1(f)(ii)
SELLER'S RETENTION BONUSES
FOR NON-MARKETING EMPLOYEES
AMOUNT OF BONUS
---------------------------
30-60
ASSOC- AT DAYS
IATES CLOSING AFTER TOTAL
------ ------- ------- -------
Warehouse Associates 53 118,631 118,631
Transportation Associates 102 200,032 200,032
General and Administrative Associates 62 17,000 460,673 477,673
--- ------ ------- -------
217 17,000 779,336 796,336
=== ====== ======= =======
Average per associate 3,670
=======
Exhibit 3.1(g)
CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT
This Confidentiality And Non-Disclosure Agreement (the "Agreement") is
between ("Employee") and Sysco Food Services of , Inc.
---------- -----------
(the "Company" or "Sysco"), effective as of September 15, 2003.
1. Purpose of the Agreement. The Company is purchasing the assets,
including the customers and goodwill of Port Stockton's foodservice operations
located in Stockton, California ("Port Stockton"), and considers it essential to
the operation of the Company that its existing employees and customer base be
retained through certain potential transactions and for a reasonable period of
time thereafter. The purpose of the Agreement is to provide a stable workforce
and customer base through the Performances provided in Schedule A to Employee to
continue in the service of the Company.
2. At-Will Employment. The employment of Employee shall continue to be
at-will, as defined under applicable law, and such Employee's employment with
the Company may be terminated by either party at any time for any or no reason,
subject to the notice provisions set forth in paragraph . If Employee's
---
employment terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided under
the Agreement, or as may otherwise be available in accordance with the terms of
the Company's established employee plans and written policies at the time of
termination. The termination of employment shall not release Employee from the
obligations respecting the subject matter of any invention, trade secrets, and
other confidential business information.
3. Performance Bonus and Compensation. Employee shall be eligible to
receive a performance bonus (the "Performance Bonus") in the amount set forth in
Schedule A ("Performance Bonus Amount") based upon achieving the goals set forth
in Schedule A. In addition, Employee will be compensated in accordance with
Schedule B (the "W-2 Match")
4. Eligibility to Receive Performance Bonus. Employee shall be eligible to
receive a Performance Bonus under this Agreement, under the following
conditions:
(a) Employee must execute this Agreement, and abide by its terms.
(b) Employee must be employed by Sysco on the date the Performance
Bonus is determined.
5. Payment of Performance Bonus. The Performance Bonus payments shall be
paid with the next regularly scheduled payroll process following the date the
Employee meets the requirements of Schedule A.
6. Confidential Information and Goodwill. This intent of this Agreement is
to facilitate the purchase of Port Stockton's Stockton operations by Sysco, and
the transfer of Confidential Information (defined below) and customer goodwill
from Port Stockton to Sysco. Employee has helped develop and has been entrusted
with customer goodwill and Confidential
Information regarding customers that are an important part of the value of the
business being sold. In order to avoid any dispute over ownership of
Confidential Information and goodwill with Covered Customers (defined as
customers that Employee handled Confidential Information about or had
business-related contact within the last two years of employment with Port
Stockton, and any customers that Employee handled Confidential Information about
or had business-related contact with during Employee's employment with Sysco),
Employee is eligible to receive the Performance Bonus as set forth in Schedule A
and the W-2 Match described on Schedule B. In return, Employee (a) agrees that
all ownership rights regarding the Confidential Information and goodwill with
Covered Customers that Employee handled or developed while associated with Port
Stockton are transferred and are now the exclusive property of Sysco and an
asset being purchased by Sysco and (b) waives any claim to the contrary. During
employment with the Company, and one year thereafter (the "Protection Period"),
Employee will not participate in any efforts to divert any Covered Customers
away from Sysco. This commitment and the commitments set forth in section 7
below are protections for the Confidential Information and goodwill purchased by
Sysco or its affiliates.
7. Protection of Confidential Information. The parties agree that Employee
has been and will be provided authorization to access Confidential Information
of the Company and/or will be provided authority to assist in the development of
goodwill for the benefit of the Company. This access is not contingent upon
continued employment for any particular length of time but is contingent upon
Employee's complete compliance with the restrictions provided for in this
agreement. Employee agrees and acknowledges that during the performance of his
or her duties with the Company, Employee will receive and have access to
confidential, proprietary and/or trade secret information concerning the
Company, and therefore agrees as follows:
(a) Confidential Information shall include but is not limited to the
following Company information: (i) the names, lists, buying habits and practices
of Covered Customers, or vendors, (ii) relationships between Covered Customers
and the persons and entities with whom they have contracted and other customer
goodwill developed through the customer relationship, (iii) Company marketing
plans and related information, (iv) services, products, developments,
improvements and methods of operation, (v) profit, performance and financial
requirements, (vi) business plans and the information contained therein, and
(vii) all other confidential information of, about or concerning the Company or
Covered Customers, and other confidential data of any kind, nature or
description relating to the Company or the business with Covered Customers
(collectively the "Confidential Information").
(b) During Employee's employment and after the termination of
employment, Employee shall not, without written consent of the Company, publish
or use or disclose to anyone other than authorized Company personnel any
Confidential Information. Employee agrees to abide by the policies and
regulations for the protection of Confidential Information and understands and
agrees that the unauthorized disclosure or misuse of such confidential,
proprietary or trade secret information could irreparably damage the Company
and/or third parties dealing with the Company
-2-
(c) Employee agrees that the Company has invested substantial time,
effort and expense in compiling its Confidential Information and in assembling
its present staff of personnel, and that the Confidential Information is a
substantial asset being purchased by Sysco. In order to protect against the
disclosure and misappropriation of the Company's Confidential Information,
Employee agrees that, during his or her employment with the Company and for one
year thereafter, Employee shall not do the following:
(1) approach, solicit business from, or contact or otherwise
communicate in any way with any Covered Customer of the Company with the use or
assistance of Confidential Information of the Company that Employee obtained
during his or her employment for the purpose of engaging in or assisting others
in engaging in Competition (as defined herein);
(2) approach, counsel or attempt to induce any person who is then
employed to leave the employ of the Company; or
(3) aid, assist or counsel any other person, firm or corporation
to do any of the above.
For the purpose of this Agreement, a person or business is in Competition with
the business of the Company if the business provides the same or substantially
similar products or services that are being provided by Sysco to Covered
Customers.
8. Return Of Company Property. All correspondence, memoranda, notes,
records, databases, reports, plans, documents, equipment, digitally-stored
information or other property received or made by Employee in connection with
employment with either Port Stockton and/or Sysco, shall be the exclusive
property of Sysco and must not be removed from Company premises, except as
required in the course of employment. Employee agrees to return promptly and
deliver all copies thereof to the Company on the termination of employment or
upon request.
9. Assignment of Inventions. Employee agrees that any and all inventions,
discoveries or improvements that Employee has conceived or may conceive or make
during his or her employment relating to or in any way pertaining to or
connected with the products or services sold by Company shall be the sole and
exclusive property of the Company to the extent permitted by California Labor
Code section 2870. The Company shall be the sole owner of all intellectual
property rights in connection with such Inventions. Employee hereby assigns to
the Company any rights Employee may have or acquire in such Inventions, and
shall assign, and hereby does assign to the Company all rights, title and
interest in and to all such inventions, discoveries or improvements as well as
any modifications or improvements thereto that may be made, to the maximum
extent allowed by California Labor Code section 2870. Employee will promptly
disclose in writing to any persons designated by the Company, all "Inventions,"
which includes all improvements, inventions, formulas, ideas, processes,
techniques, know-how and data, whether or not patentable, made or conceived or
reduced to practice or developed by me, either alone or jointly with others
during the term of Employee's employment.
-3-
10. Notice Period. Employee's employment may be terminated by either the
Employee or the Company at any time so long as the Company and/or Employee
provides fourteen days (14) days' advance notice ("Notice Period") in writing.
During the Notice Period, Employee will remain employed by the Company and have
a continuing duty of loyalty and shall be available to consult with the Company
concerning any and all pending matters and aid in the transition of information
concerning customers, trade secrets, business plans and other Confidential
Information. This Notice Period is intended to help the Company protect its
business interests, preserve customer good will, give the Company time to find a
replacement, facilitate the transfer of Confidential Information that is
necessary for the Company to maintain its customer base. During this Notice
Period, Employee shall provide to Sysco a full accounting of all actual or
potential transactions with Covered Customers, all Confidential Information
concerning Covered Customers, all Inventions that he or she may have developed,
and aid Sysco in the transition of Covered Customers to Employee's replacement.
Termination of Employment will be effective at the end of the Notice Period.
Employee acknowledges that the duties under the Notice Period are vital to the
Company, and that it shall be entitled to specific enforcement of such duties
and /or injunctive relief to prevent interference with the performance of such
duties.
11. Successors. Any successor to the Company to all or substantially all of
the Company's business and/or assets shall assume all obligations and rights of
the Company under this Agreement, and shall be the direct beneficiary of the
terms of this Agreement. Employee agrees expressly to perform the obligations
under this Agreement for any successor in the same manner and to the same extent
as Employee would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and of each Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
12. Governing Law. The validity, interpretation, construction and
performance of this Plan shall be governed by the laws of the State of
California, without regard to its or any other jurisdiction's conflicts of laws
principles.
13. Severability And Waiver Should any provision of this Agreement be
declared or be determined by any court of competent jurisdiction to be wholly or
partially illegal, invalid, or unenforceable, the legality, validity, and
enforceability of the remaining parts, terms, or provisions shall not be
affected thereby, and said illegal, unenforceable, or invalid part, term, or
provision shall be deemed not to be a part of this Agreement.
14. Entire Agreement. This Agreement represents Employee's entire
understanding with the Company with respect to the subject matter of this
Agreement and supersedes all previous understandings, written or oral. This
Agreement may be amended or modified only by an agreement in writing signed by
both Employee and the Company. No oral waiver, amendment or modification shall
be effective under any circumstances whatsoever.
Employee acknowledges and agrees that Employee has reviewed all aspects of this
Agreement, has carefully read and fully understands all the provisions of this
Agreement, and am voluntarily entering into this Agreement.
-4-
EMPLOYEE
Dated:
------------------------------------------ -------------------------
[NAME]
Sysco Food Services of , Inc. Dated:
--------------- -------------------------
By:
----------------------------------
Its:
---------------------------------
-5-
Exhibit 3.4
NONCOMPETITION NONSOLICITATION AGREEMENT
(SELLER FORM)
THIS NONCOMPETITION NONSOLICITATION AGREEMENT ("Agreement"), dated this
day of September, 2003, is made by and between SYSCO CORPORATION, a
----
Delaware corporation, together with its affiliates, successors and assigns
("Purchaser") and PORT STOCKTON FOOD DISTRIBUTORS, INC., a California
corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of (i) selling food and
foodservice products to foodservice industry customers (the "Foodservice
Business"); (ii) produce processing; and (iii) meat processing (the "Meat
Processing Business" and, together the Meat Processing Business and the
Foodservice Business are referred to herein as the "Purchased Business");
WHEREAS, Purchaser, pursuant to that certain Asset Purchase Agreement
("Purchase Agreement") dated August 18, 2003, among Seller, the sole shareholder
of Seller, the Purchaser and Smart & Final Inc., the parent of Seller's sole
shareholder, as of the date hereof, acquired (the "Acquisition") from Seller,
certain of the assets of Seller used solely in connection with the Purchased
Business, including among other assets, customers lists and goodwill related
thereto;
WHEREAS, the business connections, customers, products, techniques,
goodwill and other aspects of the Purchased Business are maintained at great
expense, are of great value to Purchaser and provide it with a substantial
competitive advantage;
WHEREAS, in order to induce Purchaser to enter into the Purchase Agreement
and to consummate the Acquisition, which Seller hereby acknowledges will benefit
Seller, Seller has agreed to accept certain restrictions as set forth herein;
and
WHEREAS, this Agreement is ancillary to and an integral part of the
Purchase Agreement and the transactions contemplated therein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. For the purposes of this Agreement, the following
definitions shall apply:
(a) "Competing Business" shall mean any person, concern or entity
which is engaged in or conducts a business in the Territory substantially the
same as the Purchased Business as of the date hereof.
(b) "Confidential Information" shall mean business information (other
than business information that is a Trade Secret) of Purchaser, not generally
known or available to the public or competitors in the trade and that Purchaser
keeps confidential.
(c) "Noncompetition Period" means the period beginning on the Closing
Date (as defined in the Purchase Agreement) and expiring on the second (2nd)
anniversary of the Closing Date.
(d) "Territory" shall mean the State of California, which the parties
acknowledge is the market in which Seller conducts the Purchased Business prior
to the date hereof.
(e) "Trade Secrets" shall mean information not generally known about
the Purchased Business or Purchaser which is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or confidentiality
and from which Purchaser derives economic value from the fact that the
information is not generally known to other persons who can obtain economic
value from its disclosure or use. Trade Secrets include, but are not limited to,
technical or non-technical data, compilations, programs and methods, techniques,
drawings, processes, financial data, research, pricing, information as to sales
representatives and suppliers, lists of actual and potential customers, customer
route books, cards or lists containing the names, addresses, buying habits and
business locations of past, present and prospective customers, sales reports,
service reports, price lists, product formulae and methods and procedures
relating to services, in each case to the extent not generally known or
available to the public, persons who can obtain economic value from its
disclosure or use, or competitors in the trade.
2. Covenants of Seller. The covenants in this Section 2 are a material
inducement to Purchaser to enter into the Purchase Agreement, and certain of the
amounts payable to Seller under the Purchase Agreement are in consideration for
the covenants in this Section 2. The parties hereto acknowledge that: (i) the
assets being purchased by Purchaser are the principal assets of the Purchased
Business; (ii) the restrictions imposed in this Section 2 are fair and
reasonable; and (iii) the time, scope, geographic area, and other provisions of
this Section 2 have been specifically negotiated by sophisticated commercial
parties, represented by legal counsel.
(a) Nondisclosure of Trade Secrets and Confidential Information.
(i) Seller will not at any time communicate or disclose to any
person, firm or business entity, other than Purchaser, directly or indirectly,
any Trade Secrets or Confidential Information; provided, however, that Seller
may disclose such information (A) as has become generally available to the
public or known by or available to competitors in the trade (other than by
virtue of any disclosure by Seller in violation of this Agreement), (B) as may
be required in any report, statement or testimony submitted to any municipal,
state, federal or other governmental regulatory body, (C) as may be required to
enforce rights of Seller under the Purchase Agreement or any agreement entered
into in connection with the Purchase Agreement, (D) as may be required in
response to any summons or subpoena or in connection with any litigation, or any
administrative or other legal proceeding, or (E) as may be required in order to
comply with any law, order, regulation or ruling applicable to Seller or
Purchaser; provided that Seller shall give Purchaser reasonable prior notice of
any disclosure under the immediately
-2-
preceding clauses (D) and (E) in order to permit Purchaser to seek an
appropriate protective order.
(ii) Subject to the provision set forth in the immediately
preceding subsection (ii), the disclosure of Trade Secrets by Seller is
prohibited until such information loses its character as a Trade Secret through
no fault or action of Seller.
(b) Noncompetition. Seller covenants and agrees that Seller shall not,
during the Noncompetition Period, either directly or indirectly, within the
Territory (i) for itself, (ii) as a consultant, manager, owner, partner, joint
venturer, investor, or lender, or (iii) as an independent contractor for, or
while acting in any other capacity, own, engage in, conduct, manage, operate or
participate in or in any other way provide services to a Competing Business.
(c) Nonsolicitation of Customers. Seller covenants and agrees that
Seller shall not, during the Noncompetition Period, either directly or
indirectly, on its own behalf or in the service or on behalf of any Competing
Business, solicit or attempt to divert any customer of Purchaser to whom Seller
sold or provided any products or services through the Purchased Business at any
time within the twelve (12) month period prior to the date hereof.
(d) Nonsolicitation of Employees. Seller covenants and agrees that
Seller shall not, during the Noncompetition Period, directly or indirectly,
solicit, divert or recruit any employee of Purchaser who was employed by Seller
prior to Closing, to leave such employment, whether or not such employment is
pursuant to a written contract with Purchaser or at will.
3. Reformation by Court. In the event any court of competent jurisdiction
should determine that any of the terms of this Agreement are unreasonable or
unenforceable in scope, Seller and Purchaser consent to the exercise by such
court of its equitable jurisdiction to reform such terms in accordance with
applicable law.
4. Severability. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and/or shall be modified
to conform with such laws, without invalidating the remaining provisions hereof.
5. Injunctive Relief. Both Seller and Purchaser expressly recognize that
the subject matter of this Agreement is unique, and that any breach of Seller's
obligations under this Agreement is likely to result in irreparable injury to
Purchaser which cannot be adequately or solely measured or compensated by the
rules of law and legal remedies. Therefore, in the event of a breach of this
Agreement by Seller, Purchaser shall be entitled to obtain specific performance
of this Agreement through injunctive relief and such ancillary remedies of an
equitable nature as a court may deem appropriate. Such equitable relief shall be
in addition to, and the availability of such equitable relief shall not serve to
preclude, any legal remedies which might be available to Purchaser.
6. Governing Law; Jurisdiction. This Agreement is governed by and subject
to the laws of the State of California (without giving effect to its conflict of
law provisions) irrespective of the fact that a party hereto may be a resident
of another state or jurisdiction. Each of the
-3-
parties hereby irrevocably submits in any suit, action or proceeding arising out
of or related to this Agreement to the exclusive jurisdiction of the courts of
the State of California and waives any and all objections to jurisdiction that
it may have under the laws of California or the United States.
7. Modification. This Agreement may not be changed or modified except in
writing specifically referring to this Agreement and signed by Purchaser and the
Seller. No attempted waiver of any provision hereof shall be binding on the
other parties unless reduced to writing and signed the waiving party. Unless
specifically provided otherwise herein or agreed to by Purchaser and the Seller
in writing, no modification, waiver, termination, rescission, discharge or
cancellation of this Agreement shall affect the right of the parties hereto to
enforce any claim, whether or not liquidated, which accrued prior to the date of
such modification, waiver, termination, rescission, discharge, or cancellation
of this Agreement, and no waiver of any provision or of any default under this
Agreement shall affect the right of any party to enforce such provision or to
exercise any right or remedy in the event of any other default, whether or not
similar.
8. Benefit; Assignment. This Agreement shall be binding upon and inure to
the benefit of and shall be enforceable by Purchaser, the Seller and their
respective successors and assigns. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties, provided
that Purchaser may assign this Agreement, in whole or in part, to one or more
wholly-owned subsidiaries of Purchaser without the consent of the Seller.
9. Time of Essence. The parties agree that time is of the essence with
respect to each provision of this Agreement.
10. Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
11. Notices. Any notice to be given hereunder shall be deemed given and
sufficient if in writing and delivered personally or sent for next day delivery
by a recognized overnight delivery service (e.g. Federal Express) which
guarantees next day delivery ("Overnight Delivery") or by telefax with
confirmation of receipt (with a copy sent by registered or certified mail,
return receipt requested, postage prepaid or Overnight Delivery),
If to Seller: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Smart & Final, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
-4-
With a copy to: Legal Department
Smart & Final, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
And a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
And a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser: Sysco Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
or such address as shall be furnished by such notice to the other parties
hereto.
12. Expenses of Enforcement. The non-prevailing party shall be liable to,
and will pay the prevailing party, for all costs and expenses, including, but
not limited to, reasonable attorneys' fees incurred by the prevailing party in
the enforcement, defense or interpretation in any respect of any of its rights
under this Agreement, whether in litigation or otherwise. The existence of any
claim, demand, action, or cause of action of Seller against Purchaser shall not
operate as an offset against any liability of Seller hereunder, nor shall it
preclude Purchaser from pursuing any remedy hereunder.
-5-
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed and delivered this Agreement as of the day and year first above
written.
PURCHASER:
SYSCO CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SELLER:
PORT STOCKTON FOOD DISTRIBUTORS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-6-
Exhibit 3.4
NONCOMPETITION NONSOLICITATION AGREEMENT
(SHAREHOLDERS' FORM)
THIS NONCOMPETITION NONSOLICITATION AGREEMENT ("Agreement"), dated this
day of September, 2003, is made by and among SYSCO CORPORATION, a Delaware
----
corporation, together with its affiliates, successors and assigns ("Purchaser"),
AMERCIAN FOODSERVICE DISTRIBUTORS, INC., a California corporation ("AFD"), and
SMART & FINAL INC., a Delaware corporation ("S&F", together with AFD, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, S&F is the sole shareholder of AFD;
WHEREAS, AFD is the sole shareholder of Port Stockton Food Distributors,
Inc., a California corporation ("Seller"), and whereas Seller is engaged in the
business of (i) selling food and foodservice products to foodservice industry
customers (the "Foodservice Business"); (ii) produce processing; and (iii) meat
processing (the "Meat Processing Business" and, together, the Meat Processing
Business and the Foodservice Business are referred to herein as the "Purchased
Business");
WHEREAS, Purchaser, pursuant to that certain Asset Purchase Agreement (the
"Purchase Agreement") dated August 18, 2003, among Seller, Purchaser, AFD and
S&F, as of the date hereof, acquired (the "Acquisition") from Seller, certain of
the assets of Seller used solely in connection with the Purchased Business,
including among other assets, customer lists and goodwill related thereto;
WHEREAS, the business connections, customers, products, techniques,
goodwill and other aspects of the Purchased Business are maintained at great
expense, are of great value to Purchaser and provide it with a substantial
competitive advantage;
WHEREAS, each of the Shareholders has been entrusted with the knowledge and
possession of Trade Secrets (defined below) and Confidential Information
(defined below);
WHEREAS, in order to induce Purchaser to enter into the Purchase Agreement
and to consummate the Acquisition, which each of the Shareholders hereby
acknowledges will benefit them, each of the Shareholders has agreed to accept
certain restrictions as set forth herein; and
WHEREAS, this Agreement is ancillary to and an integral part of the
Purchase Agreement and the transactions contemplated therein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. For the purposes of this Agreement, the following
definitions shall apply:
(a) "Competing Business" shall mean any person, concern or entity,
which is engaged in or conducts a business in the Territory substantially the
same as the Purchased Business as of the date hereof.
(b) "Confidential Information" shall mean business information (other
than business information that is a Trade Secret) of Purchaser, not generally
known or available to the public or competitors in the trade and that Purchaser
keeps confidential.
(c) "Noncompetition Period" means the period beginning on the Closing
Date (as defined in the Purchase Agreement) and expiring on the second (2nd)
anniversary of the Closing Date.
(d) "Territory" shall mean the State of California, which the parties
acknowledge is the market in which Seller conducts the Purchased Business prior
to the date hereof.
(e) "Trade Secrets" shall mean information not generally known about
the Purchased Business or Purchaser that is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy or confidentiality
and from which Purchaser derives economic value from the fact that the
information is not generally known to other persons who can obtain economic
value from its disclosure or use. Trade Secrets include, but are not limited to,
technical or non-technical data, compilations, programs and methods, techniques,
drawings, processes, financial data, research, pricing, information as to sales
representatives and suppliers, lists of actual and potential customers, customer
route books, cards or lists containing the names, addresses, buying habits and
business locations of past, present and prospective customers, sales reports,
service reports, price lists, product formulae and methods and procedures
relating to services, in each case to the extent not generally known or
available to the public, persons who can obtain economic value from its
disclosure or use, or competitors in the trade.
2. Covenants of the Shareholders. The covenants in this Section 2 are a
material inducement to Purchaser to enter into the Purchase Agreement, and
certain of the amounts payable to Seller under the Purchase Agreement are in
consideration for the covenants in this Section 2. The parties hereto
acknowledge that: (i) the assets being purchased by Purchaser are the principal
assets of the Purchased Business; (ii) the restrictions imposed in this Section
2 are fair and reasonable; and (iii) the time, scope, geographic area and other
provisions of this Section 2 have been specifically negotiated by sophisticated
commercial parties, represented by legal counsel.
(a) Nondisclosure of Trade Secrets and Confidential Information.
(i) Neither of the Shareholders will at any time communicate or
disclose to any person, firm or business entity, other than Purchaser, directly
or indirectly, any Trade Secrets or Confidential Information; provided, however,
that each of the Shareholders may disclose such information (A) as has become
generally available to the public or known by or
-2-
available to competitors in the trade (other than by virtue of any disclosure by
either of the Shareholders in violation of this Agreement), (B) as may be
required in any report, statement or testimony submitted to any municipal,
state, federal or other governmental regulatory body, (C) as may be required to
enforce rights of either Shareholder under the Purchase Agreement or any
agreement entered into in connection with the Purchase Agreement, (D) as may be
required in response to any summons or subpoena or in connection with any
litigation, or any administrative or other legal proceeding, or (E) as may be
required in order to comply with any law, order, regulation or ruling applicable
to the Shareholders or Purchaser; provided, that, each of the Shareholders shall
give Purchaser reasonable prior notice of any disclosure under the immediately
preceding clauses (D) and (E) in order to permit Purchaser to seek an
appropriate protective order.
(ii) Subject to the provision set forth in the immediately
preceding subsection (i), the disclosure of Trade Secrets by each of the
Shareholders is prohibited until such information loses its character as a Trade
Secret through no fault or action of either of the Shareholders.
(b) Noncompetition. Each of the Shareholders covenants and agrees that
it shall not, during the Noncompetition Period, either directly or indirectly,
within the Territory (i) for itself, (ii) as a consultant, manager, owner,
partner, joint venturer, investor or lender, or (iii) as an independent
contractor for, or while acting in any other capacity, own, engage in, conduct,
manage, operate or participate in or in any other way provide services to a
Competing Business; provided, however, that nothing in this Agreement shall be
deemed to affect or in any way restrict S&F from conducting its retail store
operations.
(c) Nonsolicitation of Customers. Each of the Shareholders covenants
and agrees that it shall not, during the Noncompetition Period, either directly
or indirectly, on its own behalf or in the service or on behalf of any Competing
Business, solicit or attempt to divert any customer of Purchaser to whom Seller
sold or provided any products or services through the Purchased Business at any
time within the twelve (12) month period prior to the date hereof; provided,
however, that nothing in this Agreement shall be deemed to affect or in any way
restrict S&F from conducting its retail store operations.
(d) Nonsolicitation of Employees. Each of the Shareholders covenants
and agrees that it shall not, during the Noncompetition Period, directly or
indirectly, solicit, divert or recruit any employee of Purchaser who was
employed by Seller prior to Closing, to leave such employment, whether or not
such employment is pursuant to a written contract with Purchaser or at-will.
3. Reformation by Court. In the event any court of competent jurisdiction
should determine that any of the terms of this Agreement are unreasonable or
unenforceable in scope, each of the Shareholders and Purchaser consent to the
exercise by such court of its equitable jurisdiction to reform such terms in
accordance with applicable law.
4. Severability. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the
-3-
extent of such prohibition and/or shall be modified to conform with such laws,
without invalidating the remaining provisions hereof.
5. Injunctive Relief. Each of the Shareholders and Purchaser expressly
recognize that the subject matter of this Agreement is unique, and that any
breach of the Shareholders' obligations under this Agreement is likely to result
in irreparable injury to Purchaser, which cannot be adequately or solely
measured or compensated by the rules of law and legal remedies. Therefore, in
the event of a breach of this Agreement by either of the Shareholders, Purchaser
shall be entitled to obtain specific performance of this Agreement through
injunctive relief and such ancillary remedies of an equitable nature as a court
may deem appropriate. Such equitable relief shall be in addition to, and the
availability of such equitable relief shall not serve to preclude, any legal
remedies that might be available to Purchaser.
6. Governing Law; Jurisdiction. This Agreement is governed by and subject
to the laws of the State of California (without giving effect to its conflict of
law provisions) irrespective of the fact that a party hereto may be a resident
of another state or jurisdiction. Each of the parties hereby irrevocably submits
in any suit, action or proceeding arising out of or related to this Agreement to
the exclusive jurisdiction of the courts of the State of California and waives
any and all objections to jurisdiction that it may have under the laws of
California or the United States.
7. Modification and Waiver. This Agreement may not be changed or modified
except in writing specifically referring to this Agreement and signed by
Purchaser and the Shareholders. No attempted waiver of any provision hereof
shall be binding on the other parties unless reduced to writing and signed the
waiving party. Unless specifically provided otherwise herein or agreed to by
Purchaser and the Shareholders in writing, no modification, waiver, termination,
rescission, discharge or cancellation of this Agreement shall affect the right
of the parties hereto to enforce any claim, whether or not liquidated, which
accrued prior to the date of such modification, waiver, termination, rescission,
discharge, or cancellation of this Agreement, and no waiver of any provision or
of any default under this Agreement shall affect the right of any party to
enforce such provision or to exercise any right or remedy in the event of any
other default, whether or not similar.
8. Benefit; Assignment. This Agreement shall be binding upon and inure to
the benefit of and shall be enforceable by Purchaser, the Shareholders and their
respective successors and assigns. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties, provided
that Purchaser may assign this Agreement, in whole or in part, to one or more
wholly-owned subsidiaries of Purchaser without the consent of the Shareholders.
9. Time of Essence. The parties agree that time is of the essence with
respect to each provision of this Agreement.
10. Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
-4-
11. Notices. Any notice to be given hereunder shall be deemed given and
sufficient if in writing and delivered personally or sent for next day delivery
by a recognized overnight delivery service (e.g. Federal Express) which
guarantees next day delivery ("Overnight Delivery") or by telefax with
confirmation of receipt (with a copy sent by registered or certified mail,
return receipt requested, postage prepaid or Overnight Delivery),
If to Shareholders: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Smart & Final, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Legal Department
Smart & Final, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
And a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
And a copy to: ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser: Sysco Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: General Counsel
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
or such address as shall be furnished by such notice to the other parties
hereto.
12. Expenses of Enforcement; Enforcement. The non-prevailing party shall be
liable to, and will pay the prevailing party, for all costs and expenses,
including, but not limited to,
-5-
reasonable attorneys' fees incurred by the prevailing party in the enforcement,
defense or interpretation in any respect of any of its rights under this
Agreement, whether in litigation or otherwise. The existence of any claim,
demand, action, or cause of action of either of the Shareholders against
Purchaser shall not operate as an offset against any liability of the
Shareholders hereunder, nor shall it preclude Purchaser from pursuing any remedy
hereunder.
-6-
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
executed and delivered this Agreement as of the day and year first above
written.
PURCHASER:
SYSCO CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SHAREHOLDERS:
AMERICAN FOODSERVICE DISTRIBUTORS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SMART & FINAL INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-7-
Exhibit 3.13
TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT (the "Agreement") is entered this
---
day of , 2003, by and among PORT STOCKTON FOOD DISTRIBUTORS,
---------------
INC., a California corporation ("Seller"), AMERICAN FOODSERVICE DISTRIBUTORS, a
California corporation and the sole shareholder of Seller ("AFD"), SMART & FINAL
INC., a Delaware corporation and the sole shareholder of AFD ("S&F",
collectively, with AFD, referred to as "Shareholders"), and SYSCO CORPORATION, a
Delaware corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is engaged in the business of (i) selling food and
foodservice products to foodservice industry customers (the "Foodservice
Business"); (ii) produce processing; and (iii) meat processing (the "Meat
Processing Business") (together the Meat Processing Business and the Foodservice
Business are referred to as the "Purchased Business");
WHEREAS, Purchaser, pursuant to that certain Asset Purchase Agreement
("Asset Purchase Agreement") dated August 18, 2003, among Seller, AFD, S&F and
Purchaser, as of the date hereof, acquired (the "Acquisition") from Seller,
certain of the assets of Seller used solely in connection with the Purchased
Business; and
WHEREAS, this Agreement is executed and delivered by the parties hereto
pursuant to Section 3.13 of the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used herein
have the following meaning:
"Facilities" has the meaning given to such term in the Asset Purchase
Agreement.
"Inventory" has the meaning given to such term in the Asset Purchase
Agreement.
"Transition Period" means the period beginning on the date hereof and
ending at the earlier of: (i) the mutual agreement of Purchaser and Seller; (ii)
the date upon which the last item of Inventory has been removed by Purchaser
from Seller's Facilities; or (iii) the date that is sixty (60) days following
the date hereof.
2. Transition Services. Upon and subject to the terms and conditions of this
Agreement, during the Transition Period the Seller and the Shareholders hereby
agree that:
1
(a) employees of Seller or the Shareholders shall, as reasonably requested
by Purchaser, assist Purchaser with the smooth transition and integration of the
customers of the Purchased Business into Purchaser's business;
(b) Seller shall continue to maintain the Facilities in the ordinary course
of business consistent with its past practice, including without limitation, the
maintenance of reasonable security over and insurance on the Inventory located
at the Facilities; and
(c) At the request of Purchaser, Seller's employees will assist Purchaser
in moving the Inventory to the dock at the Facilities and loading the Inventory
on Purchaser's trucks. All risk of loss with respect to the Inventory shall pass
to Purchaser as soon as the Inventory has been loaded on Purchaser's trucks and
until such time shall remain with Seller.
3. Access to Facilities. During the Transition Period, Seller shall provide
Purchaser and its employees with reasonable access (when and as requested by
Purchaser) to the Facilities and Purchaser shall be entitled to have its
employees conduct, at the facilities, loading, unloading and other warehousing
activities with respect to the Inventory and Purchaser shall indemnify Seller
for any loss, cost or expense incurred by Seller in connection with such
activities of Purchaser's employees.
4. License. Seller hereby grants to Purchaser a royalty-free license to sell any
Inventory that is proprietary to Seller and any Inventory that is contained in
packaging with any proprietary marks of Seller (collectively "Proprietary
Inventory").
5. Term. The term of this Agreement ("Term") shall be for the Transition Period,
except for the term of the license granted in Section 4 hereof which shall not
terminate or be revoked until all Proprietary Inventory has been sold by
Purchaser or six months following the date hereof, whichever occurs first.
6. Expenses. Purchaser shall, within thirty days following receipt of an invoice
and related supporting documentation from Seller, reimburse Seller for the
reasonable, actual, direct, out-of-pocket costs and expenses incurred by Seller
during the Term (i) for utilities at the Facilities, (ii) to maintain security
over the Inventory, (iii) to maintain insurance on the Inventory, and (iv) for
payroll costs of employees used solely for warehousing activities related to the
Inventory. In addition, during the Term, Purchaser shall reimburse Seller for
one-half of the monthly rental on the Facilities, such reimbursement not to
exceed $61,816 per month. The foregoing costs and expenses shall be
appropriately pro-rated to the extent that any part of such costs and expenses
relate to time periods that are both during the Term and either before or after
the Term.
7. Independent Contractors. Nothing contained in this Agreement is intended to
create nor shall it be deemed or construed to create any partnership or joint
venture relationship between Purchaser and Seller. The relationship of Purchaser
to Seller shall be that of an independent contractor.
8. Cooperation; Dispute Resolution. Purchaser and Seller agree to cooperate in
good faith in connection with the provision of the transition services, and
matters relating thereto or otherwise arising hereunder. In addition, the
parties will cooperate to dispose of Proprietary Inventory that has not been
sold by Purchaser within six months following the date hereof. Any dispute,
claim
2
or controversy in respect of this Agreement shall be subject to the dispute
resolution procedures set forth in Section 10.11 of the Asset Purchase
Agreement.
9. Miscellaneous.
(a) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed in writing) or
sent by overnight courier (providing proof of delivery) to the parties at the
addresses specified in the Asset Purchase Agreement.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall be deemed one original.
(c) Entire Agreement. This Agreement contains the entire agreement among
the parties hereto and thereto with respect to the subject matter hereof. This
Agreement may not be amended or supplemented, and no provision hereof may be
waived, except by an instrument in writing signed by all of the parties hereto.
No waiver of any provision hereof by any party shall be deemed a continuing
waiver of any matter by such party.
(d) Amendment. No amendment or modification to this Agreement shall be
effective unless it is in writing and signed by both Purchaser and Seller.
(e) Assignment. The rights and obligations of each party under this
Agreement may not be assigned without the prior written consent of the other
party, provided that Purchaser may assign this Agreement in whole or in part to
one or more wholly-owned subsidiaries of Purchaser without the consent of Seller
or Shareholders. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective permitted successors and assigns.
(f) Rights Cumulative. The rights, powers and remedies given to each party
by this Agreement shall be in addition to all rights, powers and remedies given
to such party by virtue of any statute or rule of law and all such rights,
powers and remedies are cumulative and not alternative, and may be exercised and
enforced successively or concurrently. Any forbearance or failure or delay by a
party in exercising any right, power or remedy hereunder shall not be deemed to
be a waiver of such right, power or remedy, and any single or partial exercise
of any right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of a party hereunder shall continue
in full force and effect until such right, power or remedy is specifically
waived by an instrument in writing executed by such party.
(g) Governing Law. This Agreement shall be governed by and construed under
the laws of the State of California, without regard to principles of conflict of
laws.
(h) Further Assurances. The parties to this Agreement agree to execute and
deliver any additional information, documents or agreements contemplated hereby
and/or necessary or appropriate to effect and perform the actions contemplated
hereby.
(i) Time of Essence. The parties agree that time is of the essence with
respect to each provision of this Agreement.
3
(j) Headings. The headings set forth in this Agreement are for convenience
only and will not control or affect the meaning or construction of the
provisions of this Agreement.
(k) Survival. Section 8 shall survive the termination of this Agreement.
4
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement under seal on the date first hereinabove set forth.
SELLER:
PORT STOCKTON FOOD DISTRIBUTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Its: SVP
-----------------------------------
SHAREHOLDERS:
AMERICAN FOODSERVICE DISTRIBUTORS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Its: SVP
-----------------------------------
SMART & FINAL INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Its: SVP
-----------------------------------
PURCHASER:
SYSCO CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Its: VP & Gen Counsel
-----------------------------------
5
Exhibit 7.4(a)(i)
▇▇▇▇ OF SALE
KNOW ALL MEN BY THESE PRESENTS that Port Stockton Food Distributors, Inc.,
a California corporation ("Seller"), in accordance with the terms of that
certain Asset Purchase Agreement dated as of August , 2003 (the "Agreement"),
---
by and among Seller, American Food Distributors, a California corporation and
the sole shareholder of Seller ("AFD"), Smart & Final Inc., a Delaware
corporation and the sole shareholder of AFD, and SYSCO Corporation, a Delaware
corporation ("Purchaser"), for good and valuable consideration, hereby sells,
transfers, assigns, conveys, grants, delivers, alienates, and sets over to
Purchaser, and its successors and assigns, forever, all legal, beneficial and
other rights, title and interest in and to the Purchased Assets (as defined in
the Agreement), free and clear of all claims, liens, encumbrances, conditions,
easements, restrictions, leases, security interests, or similar interests of any
kind or nature whatsoever, to have and to hold the same unto Purchaser and its
successors and assigns, for its or their use forever.
Seller agrees it will, at any time and from time to time from the date
hereof, upon the request of Purchaser, do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged or delivered, all such further acts,
deeds, assignments, transfers, conveyances and assurances as may be reasonably
required for the better assigning, transferring, granting, conveying, assuring
and confirming to Purchaser or for aiding in assigning and reducing to the
possession of Purchaser, title to and possession of any and all of such
Purchased Assets transferred and assigned hereby.
Nothing in this ▇▇▇▇ of Sale, express or implied, is intended or shall be
construed to confer upon or give to any person, firm or corporation other than
Purchaser and its successors and permitted assigns, any remedy or claim under or
by reason of this ▇▇▇▇ of Sale or any term hereof, and all the terms, promises
and agreements contained in this ▇▇▇▇ of Sale shall be for the sole and
exclusive benefit of Purchaser and its successors and permitted assigns. This
▇▇▇▇ of Sale does not, nor shall it be deemed to, supersede, extinguish or merge
any of the representations, warranties, indemnities and limitations set forth in
the Agreement, including, without limitation, all representations, warranties,
indemnities and limitations therein made with respect to the Purchased Assets,
all of which are incorporated herein by reference and which provisions shall
remain in full force and effect as provided therein.
IN WITNESS WHEREOF, Seller has caused this instrument to be executed by its
duly authorized corporate representative as of the day of September, 2003.
-----
PORT STOCKTON FOOD DISTRIBUTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Its: SVP
-----------------------------------
Exhibit 7.4(a)(ii)
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement") is made and
entered into as of the day of , 2003, by and between SYSCO
---- -----------
CORPORATION, a Delaware corporation ("Assignee") and PORT STOCKTON FOOD
DISTRIBUTORS, INC., a California corporation ("Assignor").
W I T N E S S E T H:
WHEREAS, Assignor, Assignee, American Foodservice Distributors, the parent
of Assignor ("AFD"), and Smart & Final Inc., the parent of AFD ("S&F"), have
entered into that certain Asset Purchase Agreement dated as of August , 2003
--
("Asset Purchase Agreement"), pursuant to which Assignee agreed to purchase
certain assets of Assignor and to assume certain contracts of Assignor;
WHEREAS, this Agreement is being entered into pursuant to Sections
7.4(b)(ii) and 8.3(e) of the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Capitalized Terms. Capitalized terms not otherwise defined herein have
the meaning ascribed to them in the Asset Purchase Agreement.
2. Assignment and Assumption of the Assigned Contracts. Assignor hereby
transfers and assigns to Assignee, and Assignee hereby accepts, assumes and
agrees to pay when due, perform and discharge in accordance with the terms
thereof, all of Assignor's duties and obligations under the Assigned Contracts
arising from and after the date hereof, subject to and in accordance with the
terms and provisions of the Asset Purchase Agreement.
3. Further Assurances. Each of Assignor and Assignee shall execute such
additional documents and instruments and take such further action as may be
reasonably required or desirable to carry out the provisions hereof.
4. Integration with Asset Purchase Agreement Provisions. Nothing contained
in this Agreement shall expand, reduce, modify or waive any rights or
obligations of the parties under the Asset Purchase Agreement, including,
without limitation, the rights and obligations of the parties under Article 6
thereof. In the event that any of the provisions of this Agreement are
determined to conflict with the terms of the Asset Purchase Agreement, the terms
of the Asset Purchase Agreement shall control.
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5. Multiple Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without regard to
the choice of law provisions thereof.
7. Severability. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8. Headings. The section headings herein have been inserted for convenience
or reference only, and are not intended to be considered a part hereof and shall
not modify or restrict any of the terms or provisions hereof.
9. Amendments. This Agreement may be amended, extended, superseded,
canceled, renewed, or the terms hereof may be waived, only by a written
instrument signed by the parties, or, in the case of a waiver, by the party
waiving compliance.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment and
Assumption Agreement as of the date first above written.
"Assignee"
SYSCO CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: VP & Gen Counsel
---------------------------------
"Assignor"
PORT STOCKTON FOOD DISTRIBUTORS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: SVP
---------------------------------
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