EX-2.2
Asset Purchase Agreement
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ASSET PURCHASE AGREEMENT
by and between
KRAFT FOODS, INC.
and
MBW FOODS INC.
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Dated as of May 7, 1997
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TABLE OF CONTENTS
Page
1. Definitions; Purchase and Sale of Assets;
Assumption of Liabilities.......................................1
(a) Certain Definitions.......................................1
(b) Purchase and Sale of Assets...............................2
(c) Assets....................................................2
(d) Excluded Assets...........................................3
(e) Assumed Liabilities.......................................4
(f) Excluded Liabilities......................................5
(g) Allocation of Purchase Price..............................6
2. Closing; Purchase Price Adjustment..............................6
(a) Closing...................................................6
(b) Purchase Price Adjustment.................................9
(c) Inventory Transfer.......................................10
(d) Personal Property Tax Apportionment......................10
3. Conditions to Closing..........................................11
(a) Buyer's Obligation.......................................11
(b) Seller's Obligation......................................12
4. Representations and Warranties of Seller.......................12
(a) Authority; No Conflicts..................................12
(b) Financial Schedules......................................13
(c) Title to Assets..........................................13
(d) Intellectual Property....................................14
(e) Contracts................................................14
(f) Litigation; Decrees......................................15
(g) Absence of Changes or Events.............................16
(h) Compliance with Applicable Laws..........................16
(i) Taxes....................................................16
(j) Trade Deals and Promotions...............................16
(k) Major Customers..........................................17
(l) Tangible Personal Property...............................17
(m) Permits..................................................17
(n) Equipment................................................17
(o) Ingredients..............................................17
5. Covenants of Seller............................................17
(a) Access...................................................17
(b) Ordinary Conduct.........................................17
(c) Confidentiality..........................................18
(d) Covenant Not To Compete..................................18
(e) Board Approval...........................................19
(f) Exclusivity..............................................19
(g) License..................................................19
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(h) Accounts Receivable......................................20
(i) Delivery of Financial Information........................20
(j) Right of First Refusal...................................20
6. Representations and Warranties of Buyer........................20
(a) Authority; No Conflicts..................................20
(b) Actions and Proceedings, etc.............................21
(c) Availability of Funds....................................21
7. Covenants of Buyer.............................................21
(a) Confidentiality..........................................21
(b) No Additional Representations............................22
(c) Notification.............................................22
(d) Customer and Supplier Notification; UPC
Codes....................................................22
(e) Litigation...............................................23
(f) Company Stores...........................................23
(g) Reservation of Rights....................................23
(h) Accounts Receivable......................................23
8. Mutual Covenants...............................................23
(a) Consents.................................................23
(b) Cooperation..............................................24
(c) Publicity................................................24
(d) Best Efforts.............................................25
(e) HSR Act Compliance.......................................25
(f) Sales and Transfer Taxes.................................25
(g) Promotional Materials and Customer
Information; Records.....................................25
(h) Use of Trademarks........................................27
(i) Transitional Co-Pack Agreement...........................27
(j) Excluded Business Co-Pack Agreement......................27
(k) Transition Services Agreement............................27
(l) Employees................................................27
(m) Off-Invoice Trade Promotions.............................27
(n) Variable (Post-Paid) Promotions..........................28
(o) Fixed Trade Promotions...................................29
(p) Customer Deductions......................................30
(q) Coupons..................................................31
(r) Audited Financials.......................................31
9. Further Assurances.............................................32
10. Indemnification................................................32
(a) Indemnification by Seller................................32
(b) Exclusive Remedy.........................................32
(c) Indemnification by Buyer.................................33
(d) Losses Net of Insurance..................................33
(e) Termination of Indemnification...........................33
(f) Procedures Relating to Indemnification...................34
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11. Assignment.....................................................34
12. No Third-Party Beneficiaries...................................35
13. Termination; Break-Up Fees.....................................35
14. Survival of Representations....................................36
15. Expenses.......................................................36
16. Amendment and Waiver...........................................36
17. Notices........................................................37
18. Interpretation.................................................38
19. No Strict Construction.........................................38
20. Counterparts...................................................38
21. Entire Agreement...............................................38
22. Brokerage......................................................38
23. Disclaimer Regarding Estimates and Projections.................39
24. Schedules......................................................39
25. Representation by Counsel; Interpretation......................39
26. Severability...................................................39
27. Bulk Transfer Laws.............................................39
28. Governing Law..................................................39
29. Exhibits and Schedules.........................................40
30. Dispute Resolution.............................................40
(a) Negotiation..............................................40
(b) Arbitration..............................................40
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LIST OF DEFINED TERMS
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Accounting Firm.......................................................9
Adjustment Date......................................................10
Adjustment Principles.................................................9
affiliate............................................................19
Agreement.............................................................1
Alliant Business......................................................1
Alliant Distribution Agreement........................................1
Ancillary Agreements.................................................12
Applicable Accounting Principles.....................................13
Applicable Rate......................................................10
Assets................................................................2
Assumed Liabilities...................................................4
Audited Financials...................................................31
Business..............................................................1
Buyer.................................................................1
Buyer's Fixed Trade Sales............................................30
Buyer's Straddle Sales...............................................28
C&L..................................................................31
Closing...............................................................6
Closing Date..........................................................6
Closing Inventory Amount..............................................9
Closing Statement.....................................................9
Code..................................................................6
Confidentiality Agreement............................................21
Contracts.............................................................2
Customer Information.................................................26
Deduction Notice.....................................................30
Equipment ..........................................................2
equitable manner.....................................................10
Estimated Final Purchase Price........................................7
Excluded Assets.......................................................3
Excluded Business.....................................................1
Excluded Business Co-Pack Agreement..................................27
Excluded Liabilities..................................................5
File Plan............................................................26
Final Purchase Price.................................................10
Final Straddle Date..................................................28
Financial Schedules..................................................13
Fiscal Half..........................................................29
Fixed Trade Promotions...............................................29
Fixed Trade Schedule.................................................29
HSR Act..............................................................11
indemnified party....................................................34
Information .........................................................18
Initial Inventory Amount.............................................13
Initial Inventory Amount Statement...................................13
Initial Purchase Price................................................2
Initial Straddle Date................................................28
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Institute............................................................40
Intellectual Property.................................................2
Interim Period.......................................................17
Inventory.............................................................2
Inventory Amount.....................................................10
knowledge.............................................................1
Kraft Materials......................................................26
Losses...............................................................32
Mexican Business......................................................1
Nontransferred Assets.................................................8
Notice of Disagreement................................................9
Off-Invoice Trade Promotions.........................................27
Offering Memorandum..................................................22
Other Intellectual Property...........................................2
Permitted Liens......................................................14
Person................................................................1
Products..............................................................2
Promotional Materials................................................26
Proprietary Information...............................................2
Prorated Amounts.....................................................10
Public Filings.......................................................31
Purchase Orders.......................................................2
Records..............................................................26
Representatives......................................................40
Restricted Business..................................................18
Seller................................................................1
Seller Information...................................................22
Seller's Fixed Trade Sales...........................................29
Seller's Straddle Sales..............................................28
Shared Contracts.....................................................24
Statement of Operations..............................................31
Straddle Deductions..................................................28
Straddle Promotions..................................................28
Third Party Claim....................................................34
Transition Services Agreement........................................27
Transitional Co-Pack Agreement.......................................27
Variable (Post-Paid) Promotions......................................28
Variable Share.......................................................29
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of May 7,
1997, by and between KRAFT FOODS, INC., a Delaware corporation ("Seller"), and
MBW FOODS INC., a Delaware corporation ("Buyer");
W I T N E S S E T H:
WHEREAS, Seller desires to sell all of the Assets, and Buyer desires
to purchase the Assets and to assume all of the Assumed Liabilities, upon the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. Definitions; Purchase and Sale of Assets; Assumption of
Liabilities.
A. Certain Definitions. As used in this Agreement (including the
Schedules and Exhibits hereto), the following definitions shall apply:
1. "Alliant Distribution Agreement" shall mean the Distribution
Agreement, dated as of February 13, 1995, by and among Seller, Kraft Food
Service, Inc. and CDRF Acquisition Corporation, as amended.
2. "Business" shall mean the business currently conducted by
Seller relating to the manufacture, marketing, distribution and sale of the
Products, including export sales, but specifically excluding (A) the
manufacturing, marketing, distribution and sale of maple-flavored syrups in
Mexico (the "Mexican Business") and (B) the manufacturing, marketing,
distribution and sale of maple-flavored syrups under the Kraft brand name
pursuant to the Alliant Distribution Agreement (the "Alliant Business").
3. "Excluded Business" shall mean any business currently or
hereafter conducted by Seller, its affiliates and/or their licensees other than
the Business, including the Mexican Business and the Alliant Business.
4. The term "knowledge," when used in the phrase "to the
knowledge of Seller," shall mean, and shall be limited to, the actual knowledge
of any one or more of the following individuals: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Director of the
Business); ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Financial Director of the Business); ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(Process Team Leader); ▇▇▇▇ ▇▇▇▇▇ (Counsel to Seller's Enhancer's Division);
▇▇▇▇▇▇ ▇▇▇▇ (Chief Litigation Counsel of Seller); and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (Chief
Food and Drug Counsel of Seller).
5. "Person" shall mean any individual, corporation, partnership,
limited liability company, business trust, joint stock company, trust,
unincorporated organization, joint venture, firm or other entity, or a
government or any political subdivision or agency, department or instrumentality
thereof.
6. "Products" shall mean maple-flavored syrups that are
manufactured or processed with the Equipment or by third party contract
manufacturers or co-packers pursuant to any of the Contracts or are marketed
under the "Log Cabin", "Country Kitchen" or "Wigwam" trademarks in the United
States or exported from the United States.
B. Purchase and Sale of Assets. On the terms and subject to the
conditions of this Agreement, at the Closing Seller shall sell, convey, transfer
and assign to Buyer, and Buyer shall purchase from Seller, the Assets, which
Seller covenants shall be free and clear of any liens (other than Permitted
Liens), for an aggregate cash purchase price of $220,000,000.00 (the "Initial
Purchase Price"), payable and subject to adjustment as set forth in Section 2.
C. Assets. The term "Assets" shall mean all right, title and interest
of Seller in the following assets relating to the Business:
1. all inventories of finished Products (including warehoused
inventories) and, as provided in Section 2(c) below, $2.9 million of raw
materials, packaging materials and work in process, in each case, to the extent
used exclusively in connection with the conduct of the Business as of the
Closing (the "Inventory");
2. all machinery, equipment, spare parts, furniture, fixtures,
supplies and other tangible assets (other than the items excluded pursuant to
Section 1(d)) listed or described on Schedule 1(c)(ii) attached hereto (the
"Equipment"); provided that Equipment leased by Seller shall be included in the
Assets only if the lease agreement relating thereto constitutes a Contract;
3. all contracts, agreements, licenses, leases and other legally
binding arrangements, whether oral or written, (A) that are listed or described
on Schedule 1(c)(iii) attached hereto, and (B) if not so listed or described,
that relate exclusively to the Business and (x) are in existence on the date
hereof or
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(y) are entered into in the ordinary course of business on or prior to the
Closing Date (collectively, the "Contracts"), and all commitments and orders for
the purchase and sale of goods and equipment (including Inventory and supplies)
and services (including advertising, maintenance and other incidental services)
to the extent relating exclusively to the Business (collectively, the "Purchase
Orders");
4. all copyrights, trademarks, trade names and service marks,
trade dress and any applications and registrations therefor, that (A) are listed
or described on Schedule 1(c)(iv)-1 attached hereto, and any goodwill associated
therewith (collectively, the "Intellectual Property"), (B) are listed or
described on Schedule 1(c)(iv)-2 attached hereto, and any goodwill associated
therewith or (C) if not so listed or described, relate exclusively to the
Business (the items included in (B) and (C) collectively referred to as the
"Other Intellectual Property");
5. all existing trade secrets, know-how, flavors, processing
procedures and finished product specifications relating exclusively to the
Business and all recipes and product formulations used to produce the Products
sold or distributed by the Business (collectively, the "Proprietary
Information");
6. subject to Section 8(g), all existing promotional materials,
point-of-sale materials and advertising copy used by Seller exclusively in
connection with the Business, all existing customer and vendor lists and price
lists to the extent relating exclusively to the Business and, subject to Section
2(a)(iii), all archival materials relating exclusively to the Products that are
manufactured, marketed, distributed and sold by the Business;
7. to the extent transferable, any permits or licenses issued by
any governmental agency that are used exclusively in the Business;
8. all goodwill relating exclusively to the Business;
9. any warranty claims relating to the Inventory or Equipment;
10. any claims under the Contracts relating to periods on or
after Closing;
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11. infringement claims relating to the Intellectual Property
relating to periods on or after the Closing; and
12. subject to Section 1(d) and Section 8(g), all books and
records relating exclusively to the Business, including books of account.
Prior to the Closing, Seller shall have the right to update the
description of the Assets (including the Schedules referred to above) to reflect
changes in the ordinary course of the Business prior to the Closing or items of
the type referred to in Section 4(f); provided that such changes shall not, in
the aggregate, reflect a material adverse effect on the Business taken as a
whole or reflect a sale, license or other disposition or agreement to sell,
license or dispose of any of the Intellectual Property, any material item of the
Other Intellectual Property or any material item of the Equipment.
D. Excluded Assets. The Assets shall not include any assets other
than the assets specifically listed or described in Section 1(c), and, without
limiting the generality of the foregoing, shall expressly exclude the following
(collectively, the "Excluded Assets"):
1. all cash and cash equivalents of Seller;
2. all accounts and notes receivable and prepaid expenses of
Seller;
3. all insurance policies and claims thereunder of Seller, claims
for and rights to receive tax refunds relating to the Business, all of Seller's
tax returns relating to the Business and any notes, worksheets, files or
documents relating thereto, and any legal files or other documents covered by an
evidentiary privilege that are not exclusively related to the Assumed
Liabilities;
4. all books, documents, records and files prepared in connection
with or relating to the transactions contemplated by this Agreement, including
bids received from other parties and analyses relating to the Assets, the
Assumed Liabilities and the Business;
5. all of Seller's rights under or pursuant to this Agreement and
the other agreements between Buyer and Seller contemplated hereby;
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6. all minute books and stockholder and stock transfer records
and similar corporate records of Seller;
7. the trademarks "KRAFT", "KRAFT FOODS", "KRAFT GENERAL FOODS"
and "KRAFT IN ELONGATED HEXAGON" and all other trademarks and service marks of
Seller not included in the Intellectual Property or the Other Intellectual
Property and all logos, designs and goodwill associated therewith, and all
Universal Product Codes relating to the Products;
8. all patents, patent applications and invention disclosures of
Seller and all trade secrets, know-how, recipes, product formulations,
processing procedures, and finished product specifications other than the
Proprietary Information;
9. all computer software and systems, including electronic mail
applications; and
10. the assets listed or described on Schedule 1(d)(x) attached
hereto and any other assets which are not exclusively related to the Business
(together with any and all claims relating to any of the foregoing described in
this Section 1(d)).
E. Assumed Liabilities. Buyer shall assume on the Closing Date and
shall pay, perform and discharge when due the following obligations and
liabilities of Seller relating to the Business of whatever kind and nature,
primary or secondary, direct or indirect, absolute or contingent, known or
unknown, whether or not accrued (collectively, together with all other
obligations and liabilities of Seller assumed by Buyer pursuant to this
Agreement and the Schedules hereto, the "Assumed Liabilities"):
1. all obligations and liabilities of Seller under the Contracts
arising on or after the Closing Date;
2. all obligations, liabilities and commitments in respect of any
and all Products manufactured at any time on or after the Closing Date
(including all obligations, liabilities and commitments in connection with the
manufacture thereof) in connection with the Business, including product
liability and infringement claims, and obligations and liabilities arising out
of or relating to the activities and operations of third-party contract
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manufacturers and co-packers, other than as set forth in the Transitional
Co-Pack Agreement or Excluded Business Co-Pack Agreement;
3. all obligations and liabilities in respect of Inventory sold
on or after the Closing Date, including (except with respect to Excluded Assets)
with respect to product liability and infringement claims;
4. liabilities for refunds, adjustments, exchanges, returns and
warranty and merchantability claims; provided, however, that Buyer shall have no
liability for returns of defective products sold prior to the Closing and
returned within 60 days after the Closing Date to the extent the value of such
products exceeds $100,000;
5. liabilities for advertising, trade promotion and trade
allowance programs and consumer promotions (including coupons and free-standing
inserts), as provided in Sections 8(m), 8(n), 8(o), 8(p) and 8(q);
6. all obligations and liabilities of Seller under Purchase
Orders that are outstanding as of the Closing Date (it being understood that any
Inventory covered by such Purchase Orders shall not be included in the Inventory
Amount or the calculation of raw materials or packaging supplies to be
transferred pursuant to Section 2(c) below to the extent that Buyer must pay for
such Inventory after the Closing);
7. the obligations and liabilities listed or described on
Schedule 1(e)(vii) attached hereto; and
8. all other obligations and liabilities relating to the Business
or the Assets which arise out of the conduct of the Business on or after the
Closing Date.
Buyer's obligations under this Section 1(e) shall not be subject to
offset or reduction by reason of any actual or alleged breach of any
representation, warranty or covenant contained in this Agreement or any
agreement or document delivered in connection herewith or any right or alleged
right to indemnification hereunder.
F. Excluded Liabilities. Except as specifically provided in this
Agreement and the Schedules hereto, Buyer shall not assume any obligations or
liabilities of Seller (the obligations and liabilities of Seller not
specifically assumed by Buyer being referred to collectively herein as the
"Excluded Liabilities").
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Without limiting the generality of the foregoing, Buyer shall not assume or be
liable for any of the following obligations or liabilities:
1. any of Seller's obligations or liabilities under this
Agreement and the other agreements with Buyer contemplated hereby;
2. any of Seller's obligations or liabilities for expenses or
fees incident to or arising out of the negotiation, preparation, approval or
authorization of this Agreement and the other agreements contemplated hereby or
the consummation (or preparation for the consummation) of the transactions
contemplated hereby and thereby, including attorneys' and (except as otherwise
provided in Section 2(b)(i) and 8(r)) accountants' fees;
3. subject to Section 1(e)(iv) and (v), any of Seller's accounts
payable arising before the Closing Date;
4. all of Seller's obligations and liabilities with respect to
any and all products sold or distributed prior to the Closing Date for product
liability and infringement;
5. any of Seller's obligations or liabilities with respect to
federal, state, local or foreign taxes and any liabilities for interest,
penalties or additions to any such taxes (except taxes specifically allocated
to, prorated to or assumed by Buyer under this Agreement);
6. any liabilities arising out of or relating to the Excluded
Assets; and
7. any suit, action or other legal proceeding pending as of the
Closing Date.
G. Allocation of Purchase Price. As promptly as practicable following
the date hereof, but in any event within 30 days after the Closing Date, Buyer
shall deliver to Seller copies of all appraisals of the Assets prepared for
Buyer and Buyer's reasonable, good faith determination of the fair market value
of the Assets, which determination shall be made in accordance with applicable
tax laws and shall be subject to Seller's consent (which consent shall not be
unreasonably withheld or delayed). Buyer and Seller shall then mutually agree
upon the fair market value of the Assets. For tax purposes, the Final Purchase
Price and
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Assumed (noncontingent) Liabilities shall be allocated among the Assets based
upon such determination of fair market value and in accordance with Section 1060
of the Code. Neither Buyer nor Seller, nor any of their respective affiliates,
shall take any position for income tax purposes which is inconsistent with the
allocation of the Final Purchase Price and Assumed (noncontingent) Liabilities
unless required to do so by applicable law. The parties shall exchange drafts of
any information returns required by Section 1060 of the Code and any similar
state statute at least 60 days prior to filing such returns and shall discuss in
good faith any modifications suggested by the receiving party. For purposes of
this Agreement, the term "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to any particular Code provision shall be interpreted
to include any revision of or successor to such provision regardless of how
numbered or classified.
II. Closing; Purchase Price Adjustment.
A. Closing. The closing (the "Closing") of the purchase and sale of
the Assets and the assumption of the Assumed Liabilities shall be held at the
offices of ▇▇▇▇▇▇▇▇ & ▇'▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00
a.m., local time, on July 1, 1997, or, if later, on the first Monday that is at
least 22 days following satisfaction of the conditions set forth in Sections
3(a)(iii) and (iv) and 3(b)(iii) or such other Monday that the parties mutually
agree (it being understood that Buyer will not unreasonably withhold its consent
to close on a fiscal month end (determined with reference to Seller's accounting
policies)). The date on which the Closing shall occur is hereinafter referred to
as the "Closing Date," and the Closing shall be deemed effective as of the
opening of business on the Closing Date. On the business day immediately
preceding the Closing Date, Buyer and Seller shall conduct a pre-Closing at the
same location as the Closing, commencing at 10:00 a.m., local time, at which
each party shall present for review by the other party copies in execution form
of all documents and all other instruments required to be delivered by such
party at the Closing.
1. At the Closing, subject to and on the terms and conditions set
forth in this Agreement, Buyer shall deliver to Seller (A) by wire transfer to a
bank account designated in writing by Seller immediately available funds in an
amount equal to the Initial Purchase Price, plus or minus an estimate, prepared
in good faith by
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Seller and delivered to Buyer at least three business days prior to the Closing
Date, of any adjustment to the Initial Purchase Price required pursuant to
Section 2(b) (the Initial Purchase Price, plus or minus any estimated
adjustments thereto, being referred to herein as the "Estimated Final Purchase
Price"), (B) instruments of assumption in form and substance reasonably
satisfactory to Seller and its counsel evidencing and effecting the assumption
by Buyer of the Assumed Liabilities (it being understood, however, that such
instruments shall not require Seller or any other Person to make any additional
representations, warranties or covenants, express or implied, not contained in
this Agreement) and such other documents as are specifically required by this
Agreement, (C) certified copies of resolutions duly adopted by Buyer's board of
directors authorizing the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby, (D) certified copies of Buyer's
certificate of incorporation and bylaws, (E) a certificate of the Secretary or
an Assistant Secretary of Buyer as to the incumbency of the officer(s) of Buyer
(who shall not be such Secretary or Assistant Secretary) executing this
Agreement or any Ancillary Agreement, (F) a short-form certificate of good
standing of Buyer, certified by the Secretary of State of Buyer's state of
incorporation as of a date not more than three business days prior to the
Closing Date and (G) an opinion of Buyer's counsel with respect to the due
authorization, execution and delivery of this Agreement by Buyer and matters of
similar import.
2. At the Closing, subject to and on the terms and conditions set
forth in this Agreement, Seller shall deliver or cause to be delivered to Buyer
(A) such appropriately executed instruments of sale, assignment, transfer and
conveyance in form and substance reasonably satisfactory to Buyer and its
counsel evidencing and effecting the sale and transfer to Buyer of the Assets
(it being understood, however, that such instruments shall not require Seller or
any other Person to make any additional representations, warranties or
covenants, express or implied, not contained in this Agreement), (B) certified
copies of resolutions duly adopted by Seller's board of directors authorizing
the execution, delivery and performance of this Agreement and the other
agreements contemplated hereby, (C) certified copies of Seller's certificate of
incorporation and bylaws, (D) a certificate of the Secretary or an Assistant
Secretary of Seller as to the incumbency of the officer(s) of Seller (who shall
not be such Secretary or Assistant Secretary) executing this Agreement or any
Ancillary Agreement, (E) a short-form
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certificate of good standing of Seller, in each case certified by the Secretary
of State of the State of Delaware as of a date not more than three business days
prior to the Closing Date and (F) an opinion of Seller's inside counsel upon
which Buyer's lenders will be expressly entitled to rely with respect to the due
authorization, execution and delivery of this Agreement by Seller and matters of
similar import. With respect to the Intellectual Property and the Other
Intellectual Property included in the Assets, such instruments to be delivered
at the Closing shall consist of assignments of such Intellectual Property and
Other Intellectual Property in form appropriate for recordation with
governmental agencies or authorities responsible for intellectual property in
the countries listed on Schedule 1(c)(iv)-1 and Schedule 1(c)(iv)-2 attached
hereto, it being understood that the cost of recording any such documents shall
be borne by Buyer.
3. Prior to the Closing, Seller and Buyer shall agree on
reasonable procedures to transfer possession of the Assets to Buyer as soon as
practicable after the Closing Date, and Seller shall provide commercially
reasonable assistance to Buyer in connection with the transfer thereof. Except
as otherwise provided below, all out-of-pocket costs incurred by Seller and
Buyer in connection with transferring such Assets shall be borne by Buyer. Prior
to the Closing representatives of Buyer and Seller shall jointly review all
archival materials relating exclusively to the Products, and the representative
of Buyer shall determine which materials shall be included in the Assets and
transferred to Buyer after the Closing Date. Any such materials that are not
included in the Assets may be retained by Seller following the Closing or, at
Seller's option, destroyed following the Closing. Seller shall, at Seller's cost
and expense, prepare the Assets for shipping to Buyer (including removing and
packing or crating and making such packaged or crated Assets available for
pick-up by Buyer's shipper) within a reasonable period after the Closing Date
or, in the case of Assets to be used by Seller under the Transitional Co-Pack
Agreement, within the period provided in such agreement. Buyer shall promptly
take delivery of and ship such Assets at its own cost, risk and expense and
without interference to Seller's normal operations. Seller shall provide Buyer
reasonable access to Seller's facilities for such purpose at reasonable times
and upon reasonable notice and will otherwise cooperate with Buyer to permit
such prompt removal. Notwithstanding the foregoing, title and risk of loss with
respect to all of the Assets (excluding any archival materials not
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selected by Buyer) shall pass from Seller to Buyer at the Closing.
4. Notwithstanding any other provision of this Agreement to the
contrary (other than the provisions of Sections 8(a), 8(d) and 8(e)), the
purchase and sale of the Assets as contemplated by this Agreement shall be
subject to the additional provisions of this paragraph (iv). Seller and Buyer
shall cooperate with each other regarding, and shall use their respective best
efforts to cause, the sale to Buyer of all of the Assets on the Closing Date on
the terms and conditions set forth in this Agreement; provided, however, that
such cooperation and best efforts shall not include any requirement to expend
money, commence any litigation or offer or grant any accommodation (financial or
otherwise) to any third party. If, notwithstanding such cooperation and best
efforts, for any reason (including any legal impediment or the failure to obtain
any necessary consent or approval) the sale of any Assets (any such Assets being
referred to herein as the "Nontransferred Assets") cannot be effected on the
Closing Date, Buyer and Seller shall (A) on the Closing Date, consummate the
sale and purchase of the Assets (other than the Nontransferred Assets) on the
terms and conditions set forth in this Agreement, provided such Assets represent
all of the Intellectual Property and material Other Intellectual Property, all
material items of Equipment and all other material assets of the Business, and
(B) as soon as reasonably practicable after the Closing Date, consummate the
sale and purchase of the Nontransferred Assets. Neither the Initial Purchase
Price nor the Final Purchase Price shall be subject to adjustment by reason of
any Nontransferred Assets. In the event of any Nontransferred Assets, (x) prior
to the Closing Date, Seller and Buyer shall, to the extent feasible, negotiate
in good faith and agree upon reasonable interim arrangements relating to the
ownership and operation of the Nontransferred Assets between the Closing Date
and the date such assets are actually sold by Seller to Buyer and (y) following
the Closing Date, Seller and Buyer shall cooperate with each other regarding,
and shall use their respective best efforts to cause, the sale of the
Nontransferred Assets as soon as reasonably practicable after the Closing Date;
provided, however, that such cooperation and best efforts shall not include any
requirement to expend money, commence any litigation or offer or grant any
accommodation (financial or otherwise) to any third party.
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B. Purchase Price Adjustment. 1. Within 45 days after the Closing
Date, Seller shall prepare and deliver to Buyer a statement (in its final and
binding form, the "Closing Statement") setting forth the Inventory Amount as of
the opening of business on the Closing Date (the "Closing Inventory Amount").
Upon Seller's request, Buyer shall assist Seller in the preparation of the
Closing Statement and shall provide Seller and its representatives access at all
reasonable times to the personnel, properties, inventories, books and records of
Buyer for such purpose and during the period of any dispute with respect
thereto. In connection with the preparation of the Closing Statement, Seller
shall take and prepare a physical count of the finished goods Inventory as of
the opening of business on the Closing Date. Buyer and Seller shall engage
Coopers & ▇▇▇▇▇▇▇ L.L.P. to observe the physical count of the finished goods
Inventory, and the fees and expenses of Coopers & ▇▇▇▇▇▇▇ L.L.P. in connection
therewith shall be borne 50% by Buyer and 50% by Seller. Representatives of
Buyer shall be entitled to observe such physical count. The Closing Inventory
Amount shall be calculated in accordance with the Applicable Accounting
Principles set forth in Schedule 4(b) in a manner consistent with the
calculation of the Initial Inventory Amount and the principles set forth on
Schedule 2(b) attached hereto (the "Adjustment Principles") which, in a conflict
with the Applicable Accounting Principles, shall control. The Closing Statement
shall be accompanied by a special purpose report by Coopers & ▇▇▇▇▇▇▇ L.L.P. to
the effect that the Closing Inventory Amount has been calculated in accordance
with the immediately preceding sentence. During the 30 days immediately
following Buyer's receipt of the Statement, Buyer shall be permitted to review
Seller's and Coopers & ▇▇▇▇▇▇▇ L.L.P.'s working papers relating to the Closing
Statement. The Statement shall become final and binding upon the parties on the
thirtieth day following receipt thereof by Buyer unless Buyer gives written
notice of its disagreement (a "Notice of Disagreement") to Seller prior to such
date. Any Notice of Disagreement shall (A) specify in reasonable detail the
nature and amount of any disagreement so asserted and (B) be accompanied by a
certificate of Buyer that it has complied with the covenants set forth in
paragraph (iv) of this Section 2(b). If a timely Notice of Disagreement is
received by Seller, then the Closing Statement (as revised in accordance with
clause (x) or (y) below) shall become final and binding upon the parties on the
earlier of (x) the date the parties hereto resolve in writing any differences
they have with respect to any matter specified in the Notice of Disagreement or
(y) the date any matters
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properly in dispute are finally resolved in writing by the Accounting Firm.
During the 30 days immediately following the delivery of a Notice of
Disagreement, Seller and Buyer shall seek in good faith to resolve in writing
any differences which they may have with respect to any matter specified in the
Notice of Disagreement. During such period, Seller shall have full access to the
working papers of Buyer prepared in connection with Buyer's preparation of the
Notice of Disagreement. At the end of such 30-day period, Seller and Buyer shall
submit to a "Big Six" accounting firm mutually agreed upon (the "Accounting
Firm") for review and resolution of any and all matters which remain in dispute
and which were properly included in the Notice of Disagreement, and the
Accounting Firm shall make a final determination of the Closing Inventory Amount
in accordance with this Section 2(b), which determination shall be binding on
the parties (it being understood, however, that the Accounting Firm shall act as
an arbitrator to determine, based solely on presentations by Buyer and Seller
(and not by independent review), only those matters which remain in dispute and
which were properly included in the Notice of Disagreement). The Closing
Statement shall become final and binding on Buyer and Seller on the date the
Accounting Firm delivers its final resolution to the parties (which final
resolution shall be delivered as soon as practicable following the selection of
the Accounting Firm). The Accounting Firm shall be selected by Seller and Buyer
or, if the parties are unable to agree, by Seller's and Buyer's independent
accountants. The fees and expenses of the Accounting Firm pursuant to this
Section 2(b) shall be borne 50% by Buyer and 50% by Seller.
2. The Initial Purchase Price shall be either increased by the
amount by which the Closing Inventory Amount exceeds the Initial Inventory
Amount or decreased by the amount by which the Initial Inventory Amount exceeds
the Closing Inventory Amount (the Initial Purchase Price, as so increased or
decreased, being referred to herein as the "Final Purchase Price"). If the
Estimated Final Purchase Price is less than the Final Purchase Price, Buyer
shall, and if the Estimated Final Purchase Price is greater than the Final
Purchase Price, Seller shall, within five business days after the Statement
becomes final and binding on the parties, make payment to the other party by
wire transfer in immediately available funds of the amount of such difference,
together with interest thereon at an annual rate of 8.5% (the "Applicable Rate")
calculated on the basis of the number of days elapsed from the Closing Date to
the date of payment.
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3. The term "Inventory Amount" shall mean the total book value of
the finished goods Inventory calculated in accordance with paragraph (i) of this
Section 2(b) and computed without regard to any purchase accounting adjustments
arising out of the consummation of the transactions contemplated hereby.
4. Buyer agrees that following the Closing it will not take any
actions with respect to Buyer's accounting books, records, policies and
procedures or the Inventory that would obstruct or prevent the preparation of
the Closing Statement and the determination of the Closing Inventory Amount as
provided in this Section 2(b). Buyer and Seller will cooperate in the
preparation of the Closing Statement, including providing customary
certifications, if requested, to Seller's auditors or the Accounting Firm.
C. Inventory Transfer. Seller agrees to transfer to Buyer as of the
Closing raw materials and packaging supplies having an aggregate book value of
$2.9 million, computed in accordance with Section 2(b)(i), to be used in
accordance with the terms of the Transitional Co-Pack Agreement.
D. Personal Property Tax Apportionment. The following items (the
"Prorated Amounts") relating to the Assets constituting personal property shall
be apportioned at the Closing in an equitable manner as of the close of business
on the day immediately preceding the Closing Date (the "Adjustment Date") so
that the income and expense items with respect to the period up to and including
the Adjustment Date shall be for Seller's account and the income and expense
items with respect to the period after the Adjustment Date shall be for Buyer's
account. For purposes of this Section, the term "equitable manner" shall mean
that Seller shall be allocated such items based on a fraction, the numerator of
which is the number of days in the applicable taxable period ending on the
Adjustment Date and the denominator of which is the total number of days in such
taxable period, and Buyer shall be allocated the remainder.
1. Personal property taxes, if any, on the basis of the fiscal
year for which assessed. If the Closing Date shall occur before the tax rate or
assessment is fixed for any fiscal year, the apportionment of such taxes at the
Closing shall be based upon a reasonable estimate mutually agreed upon by Buyer
and Seller; provided that Buyer and Seller shall recalculate and reprorate said
taxes and make the necessary cash adjustments promptly upon
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the issuance, and on the basis, of the actual tax bills received for any such
fiscal year.
2. To the extent any taxes described in subparagraph (i) above are
adjusted as a result of any governmental tax audit or administrative or court
proceeding initiated by a governmental entity or agency with jurisdiction over
the Properties, Buyer and Seller shall recalculate and reprorate such taxes and
make the necessary cash adjustments promptly upon the resolution of such audit
or proceeding.
III. Conditions to Closing.
A. Buyer's Obligation. The obligation of Buyer to purchase and pay for
the Assets and assume the Assumed Liabilities is subject to the satisfaction (or
waiver by Buyer) as of the Closing of the following conditions:
1. The representations and warranties of Seller made in this
Agreement shall be true and correct as of the date hereof and, except to the
extent of changes or developments expressly contemplated by the terms of this
Agreement, on and as of the Closing Date, as though made on and as of the
Closing Date, except to the extent of changes caused by the transactions
expressly contemplated hereby and except for representations and warranties that
speak as of a specific date or time (which need only be true and correct as of
such date or time), and Seller shall have performed or complied with all
obligations and covenants required by this Agreement to be performed or complied
with by Seller by the time of the Closing, except for breaches of such
representations and warranties and covenants that, in the aggregate (without
giving effect to any supplements, modifications and updates to the Schedules by
Seller prior to the Closing as permitted by this Agreement) would not have a
material adverse effect on the Business taken as a whole; and Seller shall have
delivered to Buyer a certificate dated the Closing Date and signed by a Vice
President of Seller confirming the foregoing.
2. No injunction or order of any court or administrative agency
of competent jurisdiction shall be in effect as of the Closing which restrains
or prohibits the purchase and sale of the Assets or the exercise by Buyer of
control over the Assets.
3. The waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been
terminated.
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4. No judicial or administrative proceeding shall be pending or
overtly threatened by the DOJ or FTC which seeks to challenge or enjoin the
transactions contemplated hereunder under the antitrust laws, which proceeding
presents a reasonable likelihood that Buyer will be required to hold separate or
divest any material products or assets; provided that, prior to any denial of a
request for a preliminary injunction, no such proceeding shall be pending or
overtly threatened, irrespective of the likelihood of success.
5. Seller shall have executed and delivered the Transitional
Co-Pack Agreement, the Excluded Business Co-Pack Agreement and the Transition
Services Agreement (collectively, the "Ancillary Agreements").
6. Coopers & ▇▇▇▇▇▇▇, LLP shall have signed and delivered its
audit report with respect to the Audited Financials (as defined below), and
there shall be no material differences between the information reflected in the
Financial Schedules and the corresponding information reflected in the Audited
Financials except as described in the Financial Schedules (including the notes
thereto).
B. Seller's Obligation. The obligation of Seller to sell and deliver
the Assets to Buyer is subject to the satisfaction (or waiver by Seller) as of
the Closing of the following conditions:
1. The representations and warranties of Buyer made in this
Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Closing Date, as though made on and as of the
Closing Date, except for representations and warranties that speak as of a
specific date or time (which need only be true and correct as of such date or
time), and Buyer shall have performed or complied in all material respects with
the obligations and covenants required by this Agreement to be performed or
complied with by Buyer by the time of the Closing; and Buyer shall have
delivered to Seller a certificate dated the Closing Date and signed by the
President or a Vice President of Buyer confirming the foregoing.
2. No injunction or order of any court or administrative agency
of competent jurisdiction shall be in effect as of the Closing which restrains
or prohibits the purchase and sale of the Assets.
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3. The waiting period under the HSR Act shall have expired or
been terminated.
4. Buyer shall have executed and delivered each of the Ancillary
Agreements.
5. The board of directors of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Companies, Inc., a
Virginia corporation ("▇▇▇▇▇▇ ▇▇▇▇▇▇"), shall have approved the consummation of
the transactions contemplated by this Agreement.
IV. Representations and Warranties of Seller. Seller hereby represents
and warrants to Buyer as follows:
A. Authority; No Conflicts. 1. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller has all requisite corporate power and authority to enter into this
Agreement and such Ancillary Agreements as are contemplated hereby to be
executed and delivered by it and to consummate the transactions contemplated
hereby and thereby. All corporate acts and other proceedings required to be
taken by Seller to authorize the execution, delivery and performance of this
Agreement and such Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and properly taken. This
Agreement has been duly executed and delivered by Seller, and such Ancillary
Agreements as are contemplated hereby to be executed and delivered by Seller
shall be duly and validly executed and delivered by Seller. This Agreement and
such Ancillary Agreements constitute, or will constitute, as the case may be,
valid and binding obligations of Seller, enforceable against Seller in
accordance with their respective terms.
2. Subject to the matters disclosed on Schedule 1(c)(iii)
attached hereto, the execution and delivery by Seller of this Agreement and such
Ancillary Agreements as are contemplated hereby to be executed and delivered by
Seller do not, and the consummation by Seller of the transactions contemplated
hereby and thereby and compliance by Seller with the terms hereof and thereof
will not, conflict with, or result in any violation of or default under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a benefit under, or result in the creation of any lien, claim,
encumbrance, security interest, option, charge or restriction of any kind upon
any of the Assets under, or require any consent, authorization or approval under
(A) any provision of the certificate of incorporation or bylaws
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of Seller, (B) any Contract or (C) any material judgment, order or decree or any
material statute, law, rule or regulation applicable to the Business or the
Assets, other than, in the case of clauses (B) and (C) above, any such
conflicts, violations, defaults, rights or liens, claims, encumbrances, security
interests, options, charges or restrictions that, individually or in the
aggregate, would not have a material adverse effect on the Business taken as a
whole or on the ability of Seller to consummate the transactions contemplated
hereby, and other than any such consents, authorizations or approvals required
under the HSR Act or that may be required solely by reason of Buyer's
participation in the transactions contemplated hereby.
B. Financial Schedules. Schedule 4(b) attached hereto sets forth pro
forma schedules of net revenue, marginal contribution and marginal contribution
less advertising and promotion for the Business for the 52-week period ended
December 30, 1995, the 52-week period ended December 28, 1996, and the 13-week
period ended March 29, 1997 and a statement (the "Initial Inventory Amount
Statement") setting forth the Inventory Amount as of December 28, 1996 (the
"Initial Inventory Amount"), and book value of the Inventory and Equipment as of
December 28, 1996 in accordance with Seller's historical practices, in each case
together with the notes thereto (such schedules, together with the Initial
Inventory Amount Statement, being referred to herein as the "Financial
Schedules"). The Financial Schedules have been derived from the accounting books
and records of Seller and its affiliates used as a basis for the preparation of
the consolidated financial statements of ▇▇▇▇▇▇ ▇▇▇▇▇▇ and present fairly in all
material respects the net revenue, marginal contribution and marginal
contribution less advertising and promotion for the Business on the basis
described in the notes thereto for the respective periods covered thereby and
the Initial Inventory Amount on the basis described in the notes thereto, in
each case in accordance with United States generally accepted accounting
principles, consistently applied, except as otherwise provided in Schedule 4(b)
attached hereto or in the Financial Schedules (such accounting principles,
together with the exceptions thereto, being referred to herein as the
"Applicable Accounting Principles").
C. Title to Assets. Seller has good and valid title to all the
material assets included in the Assets, except those sold or otherwise disposed
of since the date hereof in the ordinary course of business and except for
Intellectual Property, Other Intellectual Property and
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Proprietary Information (which are covered in Section 4(d) below), free and
clear of all liens, security interests or encumbrances of any nature whatsoever,
except (i) such as are disclosed on Schedule 4(c) attached hereto or the other
Schedules attached hereto, (ii) mechanics', carriers', workmen's, repairmen's or
other like liens arising or incurred in the ordinary course of business, liens
arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business, liens
for taxes and other governmental charges which are not due and payable or which
may thereafter be paid without penalty and (iii) other imperfections of title,
restrictions or encumbrances, if any, which imperfections of title, restrictions
or encumbrances do not, individually or in the aggregate, materially impair the
continued use and operation of the Assets to which they relate in the operation
of the Business as currently conducted (collectively, the "Permitted Liens").
D. Intellectual Property. Except as set forth on Schedule 4(d)
attached hereto, Seller owns the Intellectual Property and owns or has the right
to use, without payment to, or the consent of, any other party, all material
Proprietary Information. To Seller's knowledge, except as indicated on Schedule
1(c)(iv)-2, Seller has filed or been assigned the trademark application and
trademark registrations set forth on Schedule 1(c)(iv)-2, and Seller has not
transferred any such trademark application or trademark registration to any
unrelated third party. Except as set forth on Schedule 4(d), no material claims
are pending in writing or, to the knowledge of Seller, threatened in writing
against Seller by any Person with respect to the ownership or use of any of the
Intellectual Property and, to the knowledge of Seller there are no grounds for
the same. Except as set forth on Schedule 4(d), no material claims are pending
in writing or, to the knowledge of Seller, threatened in writing against Seller
by any Person with respect to the ownership or use of any of the Other
Intellectual Property. Except as set forth in the footnotes on Schedule
1(c)(iv), to the knowledge of the Seller, the Intellectual Property is valid and
enforceable. Except as set forth on Schedule 1(c)(iii) or on Schedule 4(d), to
the knowledge of the Seller, there are no licenses, sublicenses or agreements
pertaining to any of the Intellectual Property or Other Intellectual Property to
which Seller is a party and which are currently in effect, other than any
intercompany licenses which shall be terminated as of the Closing Date. Except
as set forth on Schedule 4(d) or in the footnotes on Schedule 1(c)(iv),
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to the knowledge of Seller, Seller has taken all reasonable steps in accordance
with customary industry standards to maintain the confidentiality of the
material Proprietary Information and to maintain and protect the Intellectual
Property. Except as set forth on Schedule 4(d) or Schedule 1(c)(iii), and except
for the Excluded Assets, the Intellectual Property, Other Intellectual Property
and Proprietary Information, together with Buyer's rights under Section 5(g),
the Transition Services Agreement and the Transitional Co-Pack Agreement,
include all of the material intellectual property assets that would enable the
Buyer to conduct the Business in substantially the same manner as conducted
prior to Closing.
E. Contracts. Schedule 1(c)(iii) attached hereto includes the
following types of written contracts relating exclusively to the Business:
1. all covenants not to compete that materially impair the
Business;
2. all leases under which (A) Seller is lessee of, or holds or
uses, any machinery, equipment, or other tangible personal property owned by a
third party or (B) Seller is a lessor or sublessor of, or makes available for
use by any third party, any tangible personal property owned or leased by
Seller, in each case which has future liability in excess of $50,000 per annum
and is not terminable by notice of not more than 60 calendar days for a cost of
less than $50,000; and
3. all other agreements, contracts and leases (other than
purchase contracts and orders for inventory in the ordinary course of business,
food service bids that have been accepted and trade deals and other liabilities
covered by Section 8(m), (n), (o), (p) and (q)) (collectively, the "Other
Agreements"), in each case not included in clauses (i) and (ii) above, to which
Seller is a party or by or to which any of its assets is bound or subject, which
has future liability in excess of $50,000 per annum and is not terminable by
notice of not more than 60 calendar days for a cost of less than $50,000;
provided, however, that the future liabilities for all Other Agreements not
required to be listed pursuant to this clause (iii) shall not exceed $250,000 in
the aggregate.
The list of contracts constitutes all of the Contracts in effect on
the date hereof, except for those which do not meet the applicable disclosure
threshold. Seller has delivered true and correct copies of all of the
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listed Contracts to Buyer. Except as disclosed on Schedule 1(c)(iii) or Schedule
4(e), each Contract is a valid and binding obligation of Seller and, to the
knowledge of Seller, is in full force and effect and is enforceable by Seller in
accordance with its terms. Except as disclosed on Schedule 1(c)(iii) or Schedule
4(e), Seller has performed all material obligations required to be performed by
it to date under the Contracts and is not, nor, to the knowledge of Seller, is
any other party to any of the Contracts (with or without the lapse of time or
the giving of notice, or both) in breach or default in any material respect
thereunder.
F. Litigation; Decrees. Schedule 4(f) attached hereto sets forth a
list of all pending lawsuits or claims relating to the Business with respect to
which Seller has received service of process or, to the knowledge of Seller, is
threatened in writing and which (i) involve a claim against Seller of, or which
involve an unspecified amount which could reasonably be expected to result in
liability of, more than $100,000, (ii) seek any material injunctive relief which
would affect Buyer's acquisition, ownership or operation of the Assets or (iii)
directly relate to the transactions contemplated by this Agreement. Except as
may be set forth on Schedule 4(f), there are no (i) outstanding judgments,
orders, writs, injunctions or decrees of any court, governmental agency or
arbitration tribunal against Seller which have or could have a material adverse
effect on the ability of Seller to consummate the transactions contemplated
hereby or (ii) actions, suits, claims or legal, administrative or arbitration
proceedings or investigations pending or, to the knowledge of Seller, threatened
against Seller, which have or could have a material adverse effect on the
ability of Seller to consummate the transactions contemplated hereby. To the
knowledge of Seller, except as disclosed on Schedule 4(f), Seller, with respect
to the Business, is not in default under any material judgment, order or decree
of any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, applicable to the Business or
the Assets.
G. Absence of Changes or Events. Except as set forth on Schedule 4(g)
attached hereto or the other Schedules hereto, since December 28, 1996, there
has been no material adverse change in the Business taken as a whole, other than
changes relating to United States or foreign economies in general or the
Business's industry in general and not specifically relating to the Business,
and other than changes that are the result of actions taken by
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Buyer prior to the Closing Date that have an effect on the Business. Since
December 28, 1996, Seller has operated the Business substantially in the
ordinary course and has not, with respect to the Business, (i) mortgaged,
pledged or subject to or permitted the imposition of any encumbrance upon any
items of Intellectual Property or Other Intellectual Property, any material
items of Equipment or any other material Assets, (ii) sold or otherwise disposed
of any items of Intellectual Property or Other Intellectual Property, any
material items of Equipment or any other material Assets, except for sales of
Inventory in the ordinary course, (iii) disposed of or permitted to lapse any
rights to the use of any Intellectual Property or Other Intellectual Property or
(iv) agreed to any of the foregoing.
H. Compliance with Applicable Laws. Except as set forth on Schedule
4(h) attached hereto or the other Schedules hereto or as previously disclosed to
Buyer in writing, to the knowledge of Seller, the Business is being conducted in
compliance in all material respects with all material statutes, laws,
ordinances, rules, orders and regulations of any governmental authority or
instrumentality. Notwithstanding the disclosure in Schedule 4(h), to the
knowledge of the Seller, the products, packaging and labels with respect to the
Business are in all material respects in compliance with the Federal Food, Drug
and Cosmetic Act, including the Nutrition Labeling and Education Act of 1990 and
the regulations issued thereunder. Except as set forth on Schedule 4(h) or the
other Schedules hereto or as previously disclosed to Buyer in writing, since
December 31, 1995, Seller has not received any written communication from a
governmental authority that alleges that the Business is not in compliance, in
all material respects, with any material federal, state or local laws, rules and
regulations.
I. Taxes. All returns, reports and declarations of every nature
required to be filed with respect to federal, state or foreign taxes by or on
behalf of Seller (either separately or as part of a consolidated group) prior to
the Closing Date with respect to the Business have been timely filed (taking
into account any extensions) and such returns, reports and declarations as so
filed are complete and accurate and disclose all taxes required to be paid for
the periods covered thereby, except for any such failures to file and such
errors which would not have a material adverse effect on the Business taken as a
whole. All taxes relating to any period ending prior to the Closing Date and due
and payable prior to the Closing
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Date (taking into account any extensions) with respect to the Business shall be
paid by Seller as of or prior to the Closing Date.
J. Trade Deals and Promotions. Seller has not, with respect to the
Business, offered, become bound by and/or is not a party to any trade deals,
trade promotions or programs, trade refunds or cooperative programs or consumer
promotions and programs (including, without limitation, coupon, premiums and
rebate programs), with respect to the period from July 1, 1997 to December 31,
1997, whether oral or written, except for those items into which Seller has
entered in the ordinary course of business substantially consistent with past
practice and the historic relationship of such items to sales volume of the
Products.
K. Major Customers. Since December 31, 1996, to the knowledge of
Seller, Seller has not received oral or written notice from any of the top ten
customers of the Business (as measured by sales volume during the preceding
fiscal year) expressing its current intention to terminate 25% or more of its
purchases from the Business.
L. Tangible Personal Property. To the knowledge of Seller, all items
of tangible personal property material to the conduct of the Business are in
normal condition and repair in all material respects (normal wear and tear
excepted) and are adequate in all material respects for the uses to which they
are being put in the ordinary course of the Business.
M. Permits. To the knowledge of Seller, Seller possesses all licenses,
permits and other governmental approvals necessary to enable it to carry on the
Business as currently conducted, except where the lack of such license, permit
or other approval would not materially adversely affect Seller's ability to
conduct the Business or would not have a material adverse effect on the Business
taken as a whole.
N. Equipment. The Equipment includes all material equipment used in
the Business to produce the Products, other than equipment included in the
Excluded Assets.
O. Ingredients. No ingredient, including, but not limited to, a flavor
used in the recipes of the Business is owned or procurable exclusively through
Seller and/or its affiliates.
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V. Covenants of Seller. Seller covenants and agrees as follows:
A. Access. For the period from the date hereof through the Closing
(the "Interim Period"), Seller shall grant to Buyer or cause to be granted to
Buyer and its representatives, financing sources, employees, counsel and
accountants reasonable access, during normal business hours and upon reasonable
notice, to the personnel, properties, books and records of Seller relating to
the transition of the Business to Buyer; provided, however, that such access
does not unreasonably interfere with the normal operations of Seller or the
Business; and provided further, that all requests for access shall be directed
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Vice President, Mergers and Acquisitions of Seller), or
such other person as Seller may designate from time to time. Notwithstanding
anything to the contrary in this Section 5(a), during the Interim Period Buyer
shall not contact or communicate with any customers, suppliers or distributors
of the Business without Seller's prior written consent. Buyer shall indemnify
and hold Seller and its affiliates, officers, shareholders, directors and
employees harmless against any and all Losses suffered or incurred by Seller and
any of its affiliates, officers, shareholders, directors and employees for
personal injury or property damage arising out of or with respect to Buyer's or
its representatives', agents', financing sources' or employees' exercise of
Buyer's rights to reasonable access under this Section 5(a). Notwithstanding any
provision in this Agreement to the contrary, Buyer's obligations under this
Section 5(a) shall survive the termination of this Agreement and the
consummation of the transactions contemplated hereby.
B. Ordinary Conduct. Except as permitted by the terms of this
Agreement or as set forth in Schedule 5(b) attached hereto, during the Interim
Period, Seller shall cause the Business to be conducted in the ordinary course
and shall make all reasonable efforts consistent with past practices to preserve
its relationships with customers and suppliers with whom Seller deals in
connection with the Business. Except as provided in this Agreement or Schedule
5(b), during the Interim Period, Seller shall not do any of the following
without the prior written consent of Buyer:
1. make any material change in the conduct of the Business,
except as specifically contemplated by this Agreement;
2. sell, lease, license or otherwise dispose of, or agree to
sell, lease, license or otherwise dispose of, any interest in any items of
Intellectual Property or Other Intellectual Property, any material items of
Equipment or any
-24-
other Assets that are material, individually or in the aggregate, to the
Business, except for sales of inventory in the ordinary course of business;
3. permit, allow or subject any items of Intellectual Property or
Other Intellectual Property or Proprietary Information, any material items of
Equipment or any other material Assets or any part thereof to any material
pledge, security interest, encumbrance or lien or suffer such to be imposed,
except for Permitted Liens; or
4. amend or terminate any Contracts, other than in the ordinary
course of business or as necessary for the maintenance of property relating to
the Business.
C. Confidentiality. Seller agrees to use all reasonable efforts after
the Closing Date to cause its directors, officers, employees, advisors and
affiliates to keep the Information confidential for a period of five years from
the Closing Date, except that any Information required by law or legal or
administrative process to be disclosed may be disclosed without violating the
provisions of this Section 5(c), and except that any Information may be used and
disclosed (i) in connection with the performance by Seller of its obligations
under the Ancillary Agreements, (ii) in connection with any Excluded Business,
(iii) as provided in Section 7(h) and (iv) in Mexico, in each case without
violating the provisions of this Section 5(c). For purposes hereof, the term
"Information" means all information exclusively concerning the Business, the
Assets and the Assumed Liabilities, other than any such information that is
available to the public on the Closing Date, or thereafter becomes available to
the public other than as a result of a breach of this Section 5(c), or is
developed independently by Seller or its affiliates or is obtained from third
parties.
D. Covenant Not To Compete. Seller agrees that for a period of three
years following the Closing Date, it shall not, either for itself or for any
other Person controlled by it, engage in any enterprise engaged in, the business
of manufacturing, marketing or selling maple-flavored syrups anywhere in the
United States and Canada (the "Restricted Business"); provided that,
notwithstanding the foregoing, Seller and its affiliates may (i) hereafter
purchase, or otherwise become affiliated with or participate in, any enterprise
engaged in the Restricted Business if less than 25% of the aggregate gross
revenues of such enterprise for its most recently completed fiscal year were
derived from the Restricted Business (and Seller and its affiliates may
hereafter acquire a controlling interest in any enterprise that is engaged in
the Restricted Business, even if more than 25% of the aggregate gross revenues
of such enterprise for its most recently completed fiscal year were derived from
the Restricted Business, so long as Seller shall use reasonable efforts to
divest, as soon as reasonably practicable, a portion of its interest in such
enterprise relating
-25-
to the Restricted Business such that the 25% gross revenues test set forth above
would not be exceeded after giving effect to such divestiture), (ii) engage in
any Excluded Business currently conducted by Seller or manufacture, directly or
through any co-packing arrangement, product for export to Mexico, (iii) continue
to own and operate or hereafter own, operate, acquire or otherwise become
affiliated with or participate in any wholesale or retail grocery business, any
grocery distribution business or any foodservice distribution business which is
not engaged in the manufacture of maple-flavored syrups, (iv) manufacture,
market and sell products which contain syrups as an ingredient thereof, (v)
engage in any joint marketing, promotion or in-store merchandizing program for
any of Seller's or its affiliate's products and any products produced by or for
any Person not bound by this Section 5(d), and (vi) perform their respective
obligations under the Ancillary Agreements. For purposes hereof, the term
"affiliate" means, with respect to any entity, any other entity controlling,
controlled by or under common control with such entity.
E. Board Approval. Seller shall present this Agreement, together with
the Schedules and Exhibits attached hereto, to the board of directors of ▇▇▇▇▇▇
▇▇▇▇▇▇ (or an appropriate committee thereof) for approval of the consummation of
the transactions contemplated hereby on or prior to May 28, 1997. Seller's
senior management shall recommend that such board (or appropriate committee
thereof) authorize the consummation of the transactions contemplated hereby. If
(i) the board of directors of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall fail to approve the
transaction contemplated hereby, (ii) the Closing shall not occur solely as a
result of such failure, and (iii) the Buyer shall be ready, willing and able to
close, then Seller agrees to promptly reimburse Buyer for its reasonable fees
and expenses (including reasonable attorneys' and accountants' fees) incurred in
connection with the transaction, upon the written request of Buyer (which
request shall include appropriate supporting documentation in connection
therewith); provided, however, that in no event shall Seller have any obligation
to reimburse Buyer for any such fees and expenses in excess of $500,000.
F. Exclusivity. From the date of this Agreement until the earlier of
(i) the termination of this Agreement pursuant to Section 13 and (ii) the
Closing Date, Seller shall not, and shall cause its subsidiaries, affiliates,
representatives and any other Person acting on behalf of Seller not to, directly
or indirectly, solicit, negotiate with respect to, actively facilitate or accept
any offers for the purchase or sale of or otherwise transfer the Business or all
or substantially all of the Assets or agree to do any of the foregoing, and
Seller shall terminate any existing activities or discussions with any party
other than Buyer and its representatives.
G. License. Pursuant to a mutually-agreeable license agreement to be
executed at Closing, Seller shall grant to Buyer, as of the Closing, a
royalty-free,
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perpetual license to use in the Business any patents, trade secrets, know-how,
processes and other technology used as of the Closing in the Business and that
are not Proprietary Information, which license may be assigned in whole or in
part in connection with a sale or transfer of all or any portion of the
Business, without the consent of the Seller. Such license agreement will contain
provisions relating to the protection of confidential information and other
provisions customary in an agreement of this type.
H. Accounts Receivable. Seller shall promptly forward or cause to be
forwarded to Buyer any and all proceeds from accounts receivable relating to
sales of the Business occurring after the Closing that are received by Seller or
its affiliates after the Closing Date, except as provided in the Transition
Services Agreement.
I. Delivery of Financial Information. Seller shall, prior to the
Closing, furnish or cause to be furnished to Buyer monthly statements of net
revenue, marginal contribution and marginal contribution less advertising and
promotion for the Business similar in form and content to those contained in the
Financial Schedules and any other financial and operating data and other
information readily available to Seller with respect to the Business as Buyer
shall from time to time reasonably request. After the Closing, Seller agrees to
provide Buyer with unaudited quarterly financial information for each fiscal
quarter in 1996 not previously provided to Buyer for use in Buyer's Public
Filings. Such information shall be similar in form and content to the
corresponding financial information included in the Audited Financials.
J. Right of First Refusal. Seller agrees to negotiate in good faith
with Buyer with respect to the possible sale to Buyer of the "LOG CABIN"
trademark registration and related Mexican trademark rights relating exclusively
to the Mexican Business (the "Mexican IP"). Notwithstanding the foregoing, at
least 60 days prior to effecting any sale, transfer or other disposition (a
"Transfer") of the Mexican IP, Seller agrees to deliver written notice to Buyer
describing in reasonable detail the terms of the proposed Transfer, including
the form and amount of consideration, the identity of the prospective purchaser
and the anticipated date of the consummation of the proposed Transfer (the
"Seller Notice"). At any time more than 30 days prior to the anticipated date of
consummation set forth in the Seller Notice, Buyer may notify Seller in writing
of its desire to purchase the Mexican IP on terms no less favorable than those
identified in the Seller Notice, and shall have the right for a period of 60
days thereafter to purchase the Mexican IP from Seller or its affiliates on such
terms. If Buyer shall fail to purchase the Mexican IP during such 60-day period,
Seller may thereafter Transfer the Mexican IP to the prospective purchaser set
forth in the Seller Notice on terms no less favorable than those set
-27-
forth in the Seller Notice. The rights of first refusal of Buyer under this
Section 5(j) shall not apply to any Transfer involving the sale or transfer to a
third party, in one transaction or any related series of transactions, of all or
substantially all of the Latin American food business of Seller or its
affiliates (regardless of the form of the transaction or transactions), and
shall in any event terminate upon the tenth anniversary of the Closing Date.
VI. Representations and Warranties of Buyer. Buyer hereby represents
and warrants to Seller as follows:
A. Authority; No Conflicts. 1. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has all requisite corporate power and authority to enter into this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. All corporate acts and other proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby have been duly and properly
taken. This Agreement has been duly executed and delivered by Buyer, and the
Ancillary Agreements to be executed and delivered by Buyer shall be duly and
validly executed and delivered by Buyer. This Agreement and the Ancillary
Agreements constitute, or will constitute, as the case may be, valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their terms.
2. The execution and delivery by Buyer of this Agreement and the
Ancillary Agreements do not, and the consummation by Buyer of the transactions
contemplated hereby and thereby and compliance by Buyer with the terms hereof
and thereof will not, conflict with, or result in any violation of or default
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a benefit under, or result in the creation of any
lien, claim, encumbrance, security interest, option, charge or restriction of
any kind upon any of the properties or assets of Buyer under, or require any
consent, authorization or approval under any provision of (A) the certificate of
incorporation or bylaws of Buyer, (B) any material note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which Buyer is a party or by which any of its properties or
assets are bound, or (C) any material judgment, order or decree, or any material
statute, law, rule or regulation applicable to Buyer or its property or assets,
other than any such consent, authorization or approval required under the HSR
Act.
B. Actions and Proceedings, etc. There are no (i) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency
-28-
or arbitration tribunal against Buyer which have or could have a material
adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or (ii) actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or, to the knowledge of Buyer,
threatened against Buyer, which have or could have a material adverse effect on
the ability of Buyer to consummate the transactions contemplated hereby.
C. Availability of Funds. Buyer has cash available, or irrevocable
debt and equity financing commitments (true and correct copies of which have
been delivered to Seller), to enable it to consummate the transactions
contemplated by this Agreement. Buyer has no reason to believe that the
financing will not be completed.
VII. Covenants of Buyer. Buyer covenants as follows:
A. Confidentiality. 1. Buyer acknowledges that all information
provided to any of it and its affiliates, agents and representatives by Seller
and its affiliates, agents and representatives is subject to the terms of a
confidentiality agreement between or on behalf of Seller and Buyer or one or
more of its affiliates or other beneficial owners (the "Confidentiality
Agreement"), the terms of which are hereby incorporated herein by reference.
Notwithstanding the terms of such agreement, Buyer may use information subject
to the Confidential Agreement as reasonably required by Buyer to obtain private
or public financing, including the use of such information in any related
offering memorandum or similar marketing materials, provided, that Seller shall
have the opportunity to review any such materials prior to their use. Effective
upon, and only upon, the Closing, the Confidentiality Agreement shall terminate;
provided, however, that Buyer acknowledges that the Confidentiality Agreement
shall terminate only with respect to information provided to any of Buyer and
its affiliates, agents or representatives that relates solely to the Business,
the Assets and the Assumed Liabilities; and provided further, however, that
Buyer acknowledges that any and all information provided or made available to
any of it and its affiliates, agents and representatives by or on behalf of
Seller (other than information relating solely to the Business, the Assets and
the Assumed Liabilities) shall remain subject to the terms and conditions of the
Confidentiality Agreement after the Closing Date.
2. Buyer agrees that, after the Closing Date, Buyer shall, and
shall use all reasonable efforts to cause its directors, officers, employees,
advisors and affiliates to, keep the Seller Information confidential following
the Closing Date, except that any such Seller Information required by law or
legal or administrative process to be disclosed may be disclosed without
violating the provisions of this Section 7(a)(ii). For purposes of this
Agreement, the term "Seller
-29-
Information" shall mean all information concerning Seller, other than
information that relates exclusively to the Business, the Assets and the Assumed
Liabilities and other than any such information that is available to the public
on the Closing Date, or thereafter becomes available to the public other than as
a result of a breach of this Section 7(a)(ii).
B. No Additional Representations. Buyer acknowledges that neither
Seller nor any other Person has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information regarding the
Assets, the Assumed Liabilities or the Business, except as expressly set forth
in this Agreement or the Schedules hereto, and Buyer further agrees that neither
Seller nor any other Person will have or be subject to any liability to Buyer or
any other Person resulting from the distribution to Buyer, or Buyer's use of,
any such information, including the Information Memorandum prepared by Credit
Suisse First Boston Corporation, dated April 1997 (the "Offering Memorandum"),
and any information, document or material made available to Buyer in certain
"data rooms," management presentations or any other form in expectation of the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, Seller makes no representation or warranty with respect to the
Assets, express or implied, beyond those expressly made in Section 4, including
any implied representation or warranty as to the condition, merchantability,
suitability or fitness for a particular purpose of any of the Assets, and it is
understood that, except for the express representations and warranties of Seller
contained in Section 4, Buyer takes the Assets on an "as is" and "where is"
basis.
C. Notification. Prior to the Closing, Buyer shall promptly notify
Seller if Buyer obtains knowledge that any representation or warranty of Seller
in this Agreement or the Schedules hereto is not true and correct in all
material respects, or if Buyer obtains knowledge of any material errors in, or
omissions from, the Schedules to this Agreement (and in any event shall notify
Seller no later than one week prior to Closing with respect to any knowledge of
Buyer obtained by Buyer at or prior to such time). Notwithstanding the
foregoing, Buyer will have no monetary liability to Seller for failure to
provide such notice.
D. Customer and Supplier Notification; UPC Codes. Promptly following
the Closing, Buyer shall (i) notify all customers and suppliers of the Business
in writing of the consummation of the transactions contemplated hereby and
request that all such customers and suppliers change their respective billing
and invoicing codes as appropriate to reflect the change in ownership of the
Business and (ii) change all Uniform Product Codes relating to the Products.
-▇▇-
▇. ▇▇▇▇▇▇▇▇▇▇. With respect to all litigation matters, including any
disclosed on Schedule 4(f) attached hereto, that constitute Excluded
Liabilities, Buyer will cooperate with Seller in its efforts to conduct or
resolve such litigation, including by making available to Seller such documents
and witnesses as may be deemed necessary or useful therefor in Seller's sole but
reasonable discretion. Seller shall reimburse Buyer for all material
out-of-pocket expenses reasonably incurred by Buyer in connection therewith.
F. Company Stores. Buyer agrees to supply, for a period of two years
after the Closing Date, the Products listed on Schedule 7(f) attached hereto to
the company stores located at facilities of Seller and its affiliates on the
terms set forth on Schedule 7(f).
G. Reservation of Rights. Notwithstanding anything to the contrary
contained herein or in any other agreement to be entered into in connection
herewith, Buyer hereby acknowledges and agrees that Seller and its affiliates
hereby retain a nonexclusive, perpetual, irrevocable, worldwide, royalty-free
right and license to use the Proprietary Information included in the Assets
(other than the recipes and formulations used exclusively in the Business) in
connection with (i) any Excluded Business currently conducted by Seller and (ii)
subject to the provisions of Section 5(d), the manufacture, packaging,
distribution, marketing and sale of syrup and syrup products as part of any food
service distribution business. Seller and its affiliates may assign, transfer or
grant sublicenses to all or any portion of the rights retained pursuant to this
Section 7(g). Buyer hereby covenants not to ▇▇▇, or take any action, legal or
otherwise, against Seller or its affiliates or any of their respective
stockholders, directors, officers, employees, agents, assignees, sublicensees
and transferees for exercising any of the rights retained pursuant to this
Section 7(g). This reservation of rights shall be included in any subsequent
documentation executed by the parties for recordation or perfection purposes.
H. Accounts Receivable. Buyer shall promptly forward or cause to be
forwarded to Seller any and all proceeds from accounts receivable relating to
pre-Closing sales of the Business that are received by Buyer or its affiliates
after the Closing Date.
VIII. Mutual Covenants. Seller and Buyer covenant and agree as
follows:
A. Consents. 1. Buyer acknowledges that certain consents to the
transactions contemplated by this Agreement may be required from parties to the
Contracts and such consents have not been obtained. Buyer agrees Seller and its
affiliates shall not have any liability whatsoever to Buyer arising out of or
relating to
-31-
the failure to obtain any such consents that may have been or may be required in
connection with the transactions contemplated by this Agreement or because of
the default, acceleration or termination of any Contract as a result thereof.
Buyer further agrees that no representation, warranty or covenant of Seller
contained herein shall be breached or deemed breached and no condition of Buyer
shall be deemed not to be satisfied as a result of (A) the failure to obtain any
such consent or as a result of any such default, acceleration or termination or
(B) any lawsuit, action, claim, proceeding or investigation commenced or
threatened by or on behalf of any Person arising out of or relating to the
failure to obtain any such consent or any such default, acceleration or
termination. At Buyer's written request prior to the Closing, Seller shall
cooperate with Buyer in any reasonable manner in connection with Buyer's
obtaining any such consents; provided, however, that such cooperation shall not
include any requirement of Seller to expend money, commence any litigation or
offer or grant any accommodation (financial or otherwise) to any Person.
2. Buyer acknowledges that the contracts and arrangements that
are listed or described on Schedule 1(c)(iii) attached hereto under the heading
"Shared Contracts" shall not constitute Assets and shall not be assigned by
Seller to Buyer (such contracts and arrangements being referred to herein as the
"Shared Contracts"). All liabilities under the Shared Contracts shall constitute
Excluded Liabilities. With respect to any Shared Contract, at Buyer's written
request prior to the Closing, Seller shall cooperate with Buyer in any
reasonable manner in connection with Buyer's efforts to obtain the agreement of
the other party or parties to any such Shared Contract to enter into a separate
agreement with Buyer with respect to the matters covered by such Shared Contract
as they relate to the Business; provided, however, that such cooperation shall
not include any requirement of Seller or any of its affiliates to expend money,
commence any litigation or offer or grant any accommodation (financial or
otherwise) to any Person. Buyer agrees that Seller and its affiliates shall not
have any liability whatsoever to Buyer arising out of or relating to the failure
to obtain any such separate agreement. Buyer further agrees that no
representation, warranty or covenant of Seller contained herein shall be
breached or deemed breached, and no condition of Buyer shall be deemed not
satisfied, as a result of the failure to obtain any such separate agreement or
as a result of any facts relating to the Shared Contracts.
B. Cooperation. Except as provided in the Transition Services
Agreement, Buyer and Seller shall cooperate with each other and shall cause
their respective officers, employees, agents and representatives to cooperate
with each other for a period of 60 days after the Closing or, in the case of
Assets to be used by Seller under the Transitional Co-Pack Agreement, within the
period provided in
-32-
such agreement, to provide for an orderly transition of the Assets and the
Assumed Liabilities to Buyer and to minimize the disruption to the respective
businesses of the parties hereto resulting from the transactions contemplated
hereby. Each party shall reimburse the other for reasonable out-of-pocket costs
and expenses incurred in assisting the other pursuant to this Section 8(b),
except as provided in the Transition Services Agreement. No party shall be
required by this Section 8(b) to take any action that would unreasonably
interfere with the conduct of its business.
C. Publicity. Seller and Buyer agree that, from the date hereof
through the Closing Date, no public release or announcement concerning the
transactions contemplated hereby shall be issued or made by any party without
the prior consent of the other party (which consent shall not be unreasonably
withheld), except (i) as such release or announcement may be required by law or
the rules or regulations of any United States securities exchange, in which case
the party required to make the release or announcement shall allow the other
party reasonable time to comment on such release or announcement in advance of
such issuance, and (ii) that Seller may make such an announcement to its
employees. Notwithstanding the foregoing, Buyer and Seller shall cooperate to
prepare joint press releases to be issued on May 8, 1997 and on the Closing
Date.
D. Best Efforts. Subject to the terms of this Agreement (including the
limitations set forth in Section 8(a)), each party will use its best efforts to
cause the Closing to occur; provided, however, that Buyer shall not be required
to hold separate or divest any material products or assets to obtain the
agreement of any governmental agency or authority not to seek an injunction
against or otherwise oppose the transactions contemplated hereby, or to have
vacated or terminated any such injunction or opposition.
E. HSR Act Compliance. Buyer and Seller shall each file or cause to be
filed with the Federal Trade Commission ("FTC") and the United States Department
of Justice ("DOJ") any notifications required to be filed under the HSR Act with
respect to the transactions contemplated hereby, and Buyer and Seller shall bear
the costs and expenses of their respective filings; provided that Buyer shall
pay the filing fee in connection therewith. Buyer and Seller shall use their
respective best efforts to make such filings promptly (and in any event by May
9, 1997) following the date hereof, to arrange a meeting or other presentation
with the appropriate agency with regard to such filings, to respond to any
requests for additional information made by either of such agencies and to cause
the waiting periods under the HSR Act to terminate or expire at the earliest
possible date and to resist in good faith, at each of their respective cost and
expense (including the institution or defense of legal proceedings), any
assertion that the transactions contemplated hereby constitute a violation of
the antitrust laws, all to the end of
-33-
expediting consummation of the transactions contemplated hereby. Such filings
and any additional information required to be furnished shall be in substantial
compliance with the requirements of the HSR Act. Buyer and Seller shall keep
each other fully apprised of any communications with, and inquiries or requests
for additional information from, the FTC and the DOJ and any other governmental
authorities, and shall comply promptly with any such inquiry or request. In
addition, Buyer and Seller shall give each other notice in advance of any
meetings (including telephonic meetings) with the FTC or the DOJ or any other
governmental authorities and shall permit the other party to participate
therein.
F. Sales and Transfer Taxes. Buyer and Seller shall each pay one
half of all sales, use, excise, value-added, business, goods and services,
transfer, stamp, recording, documentary, registration, conveyancing or similar
taxes, duties or expenses that may be imposed as a result of the sale and
transfer of the Assets (including any taxes, filing fees or expenses payable in
connection with the sale and transfer of the Intellectual Property and the Other
Intellectual Property, and any stamp, duty or other tax chargeable in respect of
any instrument transferring assets, together with any and all penalties,
interest and additions to tax with respect thereto, and Seller and Buyer shall
cooperate in timely making all filings, returns, reports and forms as may be
required to comply with the provisions of such tax laws. Buyer and Seller shall
also cooperate in providing each other with appropriate resale exemption
certifications and other similar tax and fee documentation.
G. Promotional Materials and Customer Information; Records. 1. On or
as soon as reasonably practicable following the Closing Date, Seller shall use
best efforts to deliver or cause to be delivered to Buyer all existing print
materials (excluding any letterhead, stationery or business cards bearing the
words "KRAFT", "KRAFT FOODS" or "KRAFT GENERAL FOODS"), promotional materials,
point of sale materials and advertising copy used by Seller exclusively in
connection with the Business (collectively, the "Promotional Materials"), and
all existing customer and vendor lists and price lists to the extent relating
exclusively to the Business (collectively, the "Customer Information"), in each
case to the extent that such Promotional Materials and Customer Information are
in the possession of Seller and not then in the possession of Buyer (it being
understood, however, that any failure of Seller to deliver or cause to be
delivered any of the foregoing shall not constitute a breach of any provision of
this Agreement except to the extent that such failure shall be knowing or
willful). After the Closing, Seller shall have the continuing obligation to
deliver or cause to be delivered to Buyer items in the possession of Seller that
are identified by Seller or Buyer after the Closing as constituting Promotional
Materials or Customer Information and Seller shall deliver or cause to be
delivered to Buyer such items as soon as reasonably practicable after such
identification to the extent such items are not then in possession of Buyer.
-34-
Notwithstanding the foregoing, Buyer acknowledges that (A) Seller shall have the
right to use any existing print materials, promotional materials, point of sale
materials and advertising copy used by Seller on or prior to the Closing Date in
connection with the Business, to the extent such print materials, promotional
materials, point of sale materials and advertising copy do not relate
exclusively to the Business ("Kraft Materials"), until such time, which in no
event shall be more than one year after the Closing Date, as Seller shall
generate Kraft Materials that do not refer or relate to the Business; and (B)
certain books and records and other materials in the possession of Seller may
contain incidental information relating to the Assets, the Assumed Liabilities
and the Business or may relate to other subsidiaries or divisions of Seller, and
that Seller may retain such books and records and other materials, except that
Seller shall use reasonable efforts to provide or cause to be provided to Buyer
copies (which may be redacted) of the portions of such books, records and other
materials that contain Promotional Materials or Customer Information, and Buyer
further acknowledges that Seller shall have no obligation to deliver to Buyer
(or provide Buyer with access to or copies of) any legal files or other
documents covered by an evidentiary privilege exercisable by Seller or any of
its affiliates, unless such legal files or documents relate exclusively to an
Assumed Liability.
2. Buyer shall be permitted, for a period of one year
following the Closing Date, to use in commerce or publicly display the
Promotional Materials that bear the words "KRAFT", "KRAFT FOODS" or "KRAFT
GENERAL FOODS". From and after such date, Buyer shall not use in commerce (or
otherwise) or publicly display any such Promotional Materials.
3. Seller may maintain copies of any books and records and
other financial data (collectively, the "Records") that are included in the
Assets and that are delivered to Buyer hereunder and Seller may prepare a
comprehensive index and file plan of such Records (the "File Plan"). Buyer
agrees to retain and maintain such Records in a manner consistent with the File
Plan for a period of not less than ten years from the Closing Date (plus any
additional time during which a party has been advised that (A) there is an
ongoing tax audit with respect to periods prior to the Closing Date, or (B) such
period is otherwise open to assessment). During such period, Buyer agrees to
give Seller and its representatives reasonable cooperation, access (including
copies) and staff assistance, as needed, during normal business hours and upon
reasonable notice, with respect to the Records delivered to Buyer hereunder, and
Seller agrees to give Buyer and its representatives reasonable cooperation,
access and staff assistance, as needed, during normal business hours and upon
reasonable notice, with respect to the books and records and other financial
data relating to the Business and retained by Seller, in each case as may be
necessary for general business purposes, including the preparation of tax
returns and
-35-
financial statements and the management and handling of tax audits; provided
that such cooperation, access and assistance does not unreasonably disrupt the
normal operations of Buyer or Seller. Buyer shall not destroy or otherwise
dispose of the Records for the period set forth in the immediately preceding
sentence without the written consent of Seller.
H. Use of Trademarks. Buyer shall be permitted, for a period of one
year following the Closing Date, to use exclusively on and in connection with
the manufacture, packaging, distribution, marketing and sale of the Products,
the existing packaging materials included in the Inventory that bear the words
"KRAFT", "KRAFT FOODS" or "KRAFT GENERAL FOODS" or any of the trademarks listed
in Section 1(d)(vii). From and after such date, Buyer shall not use any such
packaging materials for any purpose and shall destroy such packaging materials
upon Seller's request.
I. Transitional Co-Pack Agreement. At the Closing, Buyer and Seller
shall negotiate, execute and deliver a Transitional Co-Pack Agreement which
shall include the terms attached hereto as Exhibit A and such other terms as the
parties shall mutually agree upon (the "Transitional Co-Pack Agreement"), which
Buyer and Seller shall, as soon as practicable following the date hereof,
negotiate in good faith.
J. Excluded Business Co-Pack Agreement. At the Closing, Buyer and
Seller shall negotiate, execute and deliver an Excluded Business Co-Pack
Agreement which shall include the terms attached hereto as Exhibit B and such
other terms as the parties shall mutually agree upon (the "Excluded Business
Co-Pack Agreement"), which Buyer and Seller shall, as soon as practicable
following the date hereof, negotiate in good faith.
K. Transition Services Agreement. At the Closing, Buyer and Seller
shall execute and deliver the form of Transition Services Agreement attached
hereto as Exhibit C (the "Transition Services Agreement"). Promptly following
the execution of this Agreement, representatives of Buyer and Seller shall meet
to develop a transition plan which will identify services, service periods and
service charges to be provided pursuant to the Transition Service Agreement and
which will, to the extent practicable, be completed prior to the Closing.
L. Employees. No employees of Seller shall be transferred to Buyer
pursuant to the transactions contemplated by this Agreement.
M. Off-Invoice Trade Promotions. Following the Closing Date, except as
otherwise provided in the following sentence, all deductions taken or made
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against Buyer's accounts receivable or against Buyer's invoices in connection
with any off-invoice trade promotion or trade allowance programs relating to the
Business (collectively, "Off-Invoice Trade Promotions") shall be for the account
of Buyer, and, except as otherwise provided in the following sentence, Seller
shall have no obligation to reimburse Buyer for any such deductions, and, except
as otherwise provided in the following sentence, all deductions taken or made
against Seller's accounts receivable or against Seller's invoices in connection
with any Off-Invoice Trade Promotions shall be for the account of Seller, and,
except as otherwise provided in the following sentence, Buyer shall have no
obligation to reimburse Seller for any such deductions. Notwithstanding the
foregoing, if any customer of Seller deducts from Seller's accounts receivable
or against Seller's invoices any amount on account of Off-Invoice Trade
Promotions that relate to sales of the Business on or after the Closing Date,
Buyer shall promptly reimburse Seller for such amounts upon request (which
request shall be accompanied by reasonable supporting documentation in
connection therewith), and if any customer of Buyer deducts from Buyer's
accounts receivable or against Buyer's invoices any amount on account of
Off-Invoice Trade Promotions that relate to sales of the Business for periods
prior to the Closing Date, Seller shall promptly reimburse Buyer for such
amounts upon request (which request shall be accompanied by reasonable
supporting documentation in connection therewith). This Section 8(m) does not
relate to Variable (Post-Paid) Promotions, such Promotions being the subject of
Section 8(n).
N. Variable (Post-Paid) Promotions. 1. The aggregate amount of all
variable (post-paid) trade promotion and trade allowance programs (including
in-ad coupons) relating to the Business (collectively, "Variable (Post-Paid)
Promotions") shall be allocated between Buyer and Seller as follows: (A) all
Variable (Post-Paid) Promotions relating to periods ending prior to the Closing
Date shall be for the account of Seller; (B) all Variable (Post-Paid) Promotions
authorized by Seller that relate to periods that begin prior to the Closing Date
and end after the Closing Date shall be paid by Seller and shall then be
allocated between Buyer and Seller based upon their respective volume of sales
of the Products into the retail channel during the period that each such
Variable (Post-Paid) Promotion is in effect (such Variable (Post-Paid)
Promotions being referred to herein as "Straddle Promotions," the date on which
each such Straddle Promotion begins being referred to herein as the "Initial
Straddle Date" for such Straddle Promotion, and the date on which each such
Straddle Promotion ends being referred to herein as the "Final Straddle Date"
for such Straddle Promotion); and (C) all Variable (Post-Paid) Promotions
relating to periods beginning on or subsequent to the Closing Date shall be for
the account of Buyer. As soon as reasonably practicable following the Closing,
Seller shall deliver to Buyer a list (including deal numbers and scheduled
dates) of all Variable (Post-Paid) Promotions relating to periods beginning on
or
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after January 1, 1997 and ending prior to the Closing Date and all Straddle
Promotions.
2. Promptly following the close of Seller's books for the month
which includes the last to end of the Straddle Promotions, Seller shall deliver
to Buyer a statement (certified by a financial officer of Seller) setting forth
the aggregate amount of retail sales of Products by Seller beginning on the
Initial Straddle Date for such Straddle Promotion and ending on the day
immediately prior to the Closing Date (such retail sales for each such Straddle
Promotion being referred to herein as "Seller's Straddle Sales"), and Buyer
shall deliver to Seller a statement (certified by a financial officer of Buyer)
setting forth the aggregate amount of retail sales of Products by Buyer and its
affiliates beginning on the Closing Date and ending on the Final Straddle Date
for such Straddle Promotion (such retail sales for each such Straddle Promotion
being referred to herein as "Buyer's Straddle Sales"). As soon as reasonably
practicable following the end of each fiscal quarter of Seller following the
Closing Date, Seller shall deliver to Buyer a statement (which statement shall
be certified by a financial officer of Seller) setting forth (A) all amounts
deducted from Seller accounts receivable or against Seller invoices or invoiced
to Seller by customers on account of each Straddle Promotion (such amounts being
referred to herein as "Straddle Deductions") and (B) Buyer's Variable Share of
each such Straddle Deduction set forth in Seller's statement. For purposes of
this Agreement, Buyer's "Variable Share" of each Straddle Deduction shall be
equal to the amount determined by multiplying the amount of each such Straddle
Deduction by a fraction, the numerator of which is Buyer's Straddle Sales with
respect to the Straddle Promotion relating to such Straddle Deduction and the
denominator of which is the sum of Buyer's Straddle Sales and Seller's Straddle
Sales with respect to the Straddle Promotion relating to such Straddle
Deduction. Promptly following receipt of Seller's statement, Buyer shall deliver
to Seller by wire transfer of immediately available funds an aggregate amount
equal to Buyer's Variable Share of each such Straddle Deduction.
3. Following the Closing, Seller shall pay to Buyer, promptly
upon request (which request shall be accompanied by reasonable supporting
documentation in connection therewith), any amounts deducted from Buyer's
accounts receivable or against Buyer's invoices or invoiced to Buyer by
customers on account of any Variable (Post-Paid) Promotions relating to periods
ending prior to the Closing Date, and Buyer shall pay to Seller promptly upon
request (which request shall be accompanied by reasonable supporting
documentation in connection therewith), any amounts deducted from Seller's
accounts receivable or against Seller's invoices or invoiced to Seller by
customers on account of any Variable (Post-Paid) Promotions relating to periods
beginning on or subsequent to the Closing Date.
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O. Fixed Trade Promotions. 1. The aggregate amount of the liabilities
for all fixed trade promotion and trade allowance programs relating to the
Business (collectively, "Fixed Trade Promotions") shall be allocated between
Buyer and Seller as follows: (A) all liabilities for merchandising activities
relating to Fixed Trade Promotions that take place during periods ending prior
to the beginning of the fiscal half of Seller which includes the Closing Date
(the fiscal half including the Closing Date hereinafter referred to as the
"Fiscal Half") shall be for the account of Seller; (B) all liabilities for
merchandising activities relating to Fixed Trade Promotions that take place
during the Fiscal Half shall be allocated between Buyer and Seller based upon
their respective sales of the Products during the Fiscal Half as provided below
in this Section 8(o); and (C) all liabilities for merchandising activities
relating to Fixed Trade Promotions that take place during periods subsequent to
the end of the Fiscal Half shall be for the account of Buyer. As soon as
reasonably practicable following the Closing, Seller shall deliver to Buyer a
schedule (the "Fixed Trade Schedule") setting forth the aggregate amount of all
Fixed Trade Promotions authorized by Seller for the Fiscal Half and for the
fiscal half of Seller immediately following the Fiscal Half. Buyer shall pay
Seller one-sixth of the amount due under (B) and (C) above with respect to such
aggregate amount of all Fixed Trade Promotions on the last day of each month for
each month beginning in the month in which the Closing occurs and ending on the
sixth month thereafter.
2. As soon as reasonably practicable (and in any event within 30
days) following the end of the Fiscal Half, Seller shall deliver to Buyer a
statement (certified by a financial officer of Seller) setting forth the
aggregate amount of all sales of the Products by Seller into the retail channel
during the period beginning on the first day of the Fiscal Half and ending on
the day immediately prior to the Closing Date ("Seller's Fixed Trade Sales"),
and Buyer shall deliver to Seller a statement (certified by a financial officer
of Buyer) setting forth the aggregate amount of all sales of the Products by
Buyer and its affiliates into the retail channel during the period beginning on
the Closing Date and ending on the last day of the Fiscal Half ("Buyer's Fixed
Trade Sales"). Promptly following receipt of the statement setting forth
Seller's Fixed Trade Sales, Buyer shall pay to Seller an amount equal to the
amount determined by multiplying (A) the aggregate amount of all Fixed Trade
Promotions authorized by Seller but not paid by Buyer and in effect with respect
to the Fiscal Half (as set forth on the Fixed Trade Schedule) by (B) a fraction,
the numerator of which is the aggregate amount of Buyer's Fixed Trade Sales
during the Fiscal Half and the denominator of which is the aggregate amount of
Buyer's Fixed Trade Sales and Seller's Fixed Trade Sales during the Fiscal Half,
reduced by the payments made by Buyer to Seller under clause (i) above. Seller
shall promptly reimburse Buyer for any amounts paid directly by Buyer with
respect to any Fixed Trade Promotions set forth on the Fixed
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Trade Schedule upon provision by Buyer of reasonable documentation in support of
such payment, and shall pay to Buyer the amount, if any, by which the amount of
the payments made by Buyer to Seller under clause (i) above exceed the amount to
be paid by Buyer pursuant to the preceding sentence (without giving effect to
the payment under clause (i) above).
P. Customer Deductions. 1. Following the Closing, but subject to
Section 8(m), (n), (o) and (q), Buyer shall reimburse Seller for all deductions
taken or made by customers or other third parties against any accounts
receivable or invoices of Seller and its affiliates or otherwise charged to the
account of Seller or its affiliates to the extent relating to the Business after
the Closing, including any of the foregoing, which arise out of any trade
promotion or trade allowance programs or consumer promotion programs of the type
described in Sections 8(m), (n), (o) and (q) (including coupons and
free-standing inserts) relating to the Business.
2. Each party shall comply with the following procedures in
dealing with such deductions and other charges to the account of Seller or its
affiliates for which Seller seeks reimbursement from Buyer:
a. Seller shall give written notice (the "Deduction Notice")
to Buyer of any such deductions and other charges to the account of Seller
or its affiliates within 90 days following Seller's (or its applicable
affiliate's) receipt and identification thereof; provided that the failure
to give such notice within 90 days shall not affect Seller's rights
hereunder, except to the extent that Buyer is actually prejudiced thereby;
and
b. Within ten (10) business days following delivery of a
Deduction Notice, Buyer shall tender to Seller a check or wire transfer in
the aggregate amount of such deductions or other charges to the account of
Seller or its affiliates that are set forth therein. Late payments of any
such amounts shall bear interest at the Applicable Rate.
3. Nothing in this Section 8(p) shall restrict Buyer from
contesting any deductions or charges that a customer or third party has taken or
made; provided that Buyer reimburses Seller for the deductions or charges so
made or taken and seeks to recover the alleged wrongful deductions or charges
directly from the customer or third party.
Q. Coupons. Coupons relating to the Business (collectively, "Coupons")
that are presented to clearinghouses by retailers within 45 days following the
Closing Date shall be for the account of Seller and Coupons that are presented
to clearinghouses by retailers more than 45 days after the Closing Date
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shall be for the account of Buyer. Promptly following the Closing, Buyer and
Seller shall jointly notify CMS, Inc. ("CMS") in writing of the consummation of
the transactions contemplated hereby and shall request that CMS deliver to Buyer
all invoices for Coupons that are presented to CMS more than 45 days after the
Closing Date. Buyer shall pay all such invoices in accordance with the terms
thereof. Seller shall promptly upon written notice of Buyer reimburse Buyer for
all Coupons that are charged to the account of Buyer that are for the account of
Seller pursuant to this Section 8(q) (which request shall be accompanied by
reasonable supporting documentation in connection therewith), and Buyer shall
promptly upon the written request of Seller reimburse Seller for all Coupons
that are charged to the account of Seller that are for the account of Buyer
pursuant to this Section 8(q) (which request shall be accompanied by reasonable
supporting documentation in connection therewith).
R. Audited Financials. Seller shall use commercially reasonable
efforts to prepare and deliver, as promptly as reasonably practicable but in any
event on or prior to the Closing Date, Statements of Operations of the Business
on a fully allocated basis through and including net income (each, a "Statement
of Operations") for the years ended December 31, 1994, December 30, 1995 and
December 28, 1996 and for the three month period ended March 31, 1997, and a
Statement of Assets as of December 28, 1996, in each case prepared from the
books and records of Seller relating to the Business in accordance with
generally accepted accounting principles, together with a report thereon
prepared and certified by Coopers & ▇▇▇▇▇▇▇ LLP ("C&L") and appropriate C&L
consents and comfort letters, when required, with respect to each such statement
other than the Statement of Operations for the three month period March 31, 1997
(such statements, collectively, the "Audited Financials"), at Buyer's sole cost
and expense, so that the Audited Financials can be used in Rule 144A offering
memoranda and registration statements filed under the Securities Act of 1933, as
amended, and reports under the Securities Exchange Act of 1934, as amended (the
"Public Filings") issued or filed by Buyer. Seller shall also cooperate in a
commercially reasonable manner with Buyer so Buyer can obtain information
sufficient for Buyer to comply with the requirements for the Management's
Discussion and Analysis portion of the Public Filings. The foregoing cooperation
of Seller shall include (i) compiling the requisite financial information,
including supplying financial information for purposes of comfort letters to be
issued in connection with Public Filings, (ii) granting Buyer or C&L full and
complete access to the books and records of Seller with respect to the Business
and any relevant books and records of affiliated entities and to personnel
knowledgeable about such books and records, in each case, to the extent
reasonably required by C&L, (iii) using commercially reasonable efforts to cause
C&L to give full and complete access to Buyer to its work papers and any other
supporting information relating to the Audited Financials, and (iv) signing
customary
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management representation letters relating to the Audited Financials and any
comfort letters. In the event Buyer requires audited and unaudited financial
information for additional periods subsequent to March 31, 1997 and prior to
Closing in connection with financings necessary to consummate the Closing,
Seller shall use commercially reasonable efforts of the type described above to
furnish such financials and cause C&L, at Buyer's sole cost and expense, to
prepare a report and certification thereon.
IX. Further Assurances. From time to time, as and when requested by
any party hereto, the other party hereto shall execute and deliver, or cause to
be executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions (subject to the limitations
set forth in Section 8(a) and Section 8(b)), as such other party may reasonably
deem necessary or desirable to consummate the transactions contemplated by this
Agreement.
X. Indemnification.
A. Indemnification by Seller. From and after the Closing, Seller
shall indemnify Buyer, its affiliates and each of their respective officers,
directors, employees and agents and hold them harmless from any loss, liability,
damage or expense (including reasonable legal fees and expenses) ("Losses")
suffered or incurred by any such indemnified party to the extent arising from
(i) any breach of any representation or warranty of Seller contained in this
Agreement or the other agreements contemplated hereby which survives the
Closing, (ii) any breach of any covenant of Seller contained in this Agreement
or the other agreements contemplated hereby requiring performance after the
Closing Date and (iii) any of the Excluded Liabilities; provided, however, that
Seller shall not have any liability under clause (i) above unless the aggregate
of all Losses relating thereto for which Seller would, but for this proviso, be
liable exceeds on a cumulative basis an amount equal to $1,000,000 and then only
to the extent of any such excess; provided further, however, that Seller shall
not have any liability under clause (i) above for any breach of a representation
or warranty contained in this Agreement or the other agreements contemplated
hereby if Seller can demonstrate that Buyer had actual knowledge of such breach
at the time of Closing and failed to notify Seller of such breach in accordance
with Section 7(c), and no Losses related thereto shall be aggregated for
purposes of the first proviso to this Section 10(a); and provided further,
however, that Seller's aggregate liability under this Section 10(a) shall in no
event exceed 25% of the Final Purchase Price.
B. Exclusive Remedy. Except as otherwise expressly provided in
Sections 22 and 27, Buyer acknowledges and agrees that, from and after the
Closing, its sole and exclusive remedy with respect to any and all claims
relating to
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the subject matter of this Agreement shall be pursuant to the indemnification
provisions set forth in this Section 10; provided, however, that Buyer shall not
be precluded from seeking injunctive relief. In furtherance of the foregoing,
Buyer hereby waives, from and after the Closing, to the fullest extent permitted
under applicable law, any and all rights, claims and causes of action (other
than tort claims of, or causes of action arising from, fraudulent
misrepresentation) it may have against Seller relating to the subject matter of
this Agreement and the other agreements contemplated hereby arising under or
based upon any federal, state, local or foreign statute, law, ordinance, rule or
regulation or otherwise. Buyer further acknowledges and agrees that, other than
the representations and warranties of Seller specifically contained in this
Agreement, there are no representations or warranties of Seller or its
representatives or any other Person either express or implied with respect to
the Business, the Assets or the Assumed Liabilities and it shall have no claim
or right to indemnification with respect to any information, documents or
materials furnished by Seller or its representatives or any other Person or any
of their officers, directors, employees, agents or advisors, including the
Offering Memorandum, the Supplemental Information Package and any information,
documents or material made available to Buyer in certain "data rooms,"
management presentations or any other form in expectation of the transactions
contemplated by this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, Buyer shall have no right to indemnification under
Section 10(a) with respect to any Loss or alleged Loss if (A) Buyer shall have
requested a reduction in the Inventory Amount reflected on the Closing Statement
on account of any matter forming the basis for such Loss or alleged Loss and
shall have agreed, or the Accounting Firm shall have determined, that no such
reduction is appropriate or (B) any matter forming the basis for such Loss or
alleged Loss could have been asserted as a reduction in the Inventory Amount
reflected on the Closing Statement pursuant to the provisions of Section 2(b)
and Buyer failed on a timely basis to assert the same.
C. Indemnification by Buyer. From and after the Closing, Buyer shall
indemnify Seller and its affiliates and each of their respective officers,
directors, employees and agents against and hold them harmless from any Losses
suffered or incurred by any such indemnified party to the extent arising from
(i) any breach of any representation or warranty of Buyer contained in this
Agreement or the other agreements contemplated hereby which survives the
Closing, (ii) any breach of any covenant of Buyer contained in this Agreement or
the other agreements contemplated hereby requiring performance after the Closing
Date, (iii) any failure of Buyer to pay, discharge or perform any of the Assumed
Liabilities, (iv) any guarantee or obligation to assure performance given or
made by Seller or any of its affiliates with respect to any of the Assumed
Liabilities, (v) any obligation, liability, commitment, action, suit, claim or
other proceeding which
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arises directly or indirectly out of the operation of the Business or use of the
Assets after the Closing or the manufacture, distribution, marketing or sale of
the Products at any time after the Closing and (vi) subject to Buyer's rights
under Section 10(a), any liability, action, suit, claim or other proceeding
which arises directly or indirectly in connection with Buyer's financing or
refinancing of the Initial Purchase Price or Final Purchase Price, including as
a result of the use of the Audited Financials by Buyer in any Public Filing or
otherwise.
D. Losses Net of Insurance. The amount of any and all Losses under
this Section 10 shall be determined net of any amounts recovered or recoverable
by the indemnified party under insurance policies with respect to such Losses,
less the reasonably anticipated present value of any increase in insurance
premiums to be incurred by the indemnified party on account thereof, as
determined in good faith by such indemnified party. Each party hereby waives, to
the extent permitted under its applicable insurance policies, any subrogation
rights that its insurer may have with respect to any indemnifiable Losses. Any
indemnity payment under this Agreement shall be treated as an adjustment to the
Final Purchase Price for tax purposes.
E. Termination of Indemnification. The obligations to indemnify and
hold harmless a Person pursuant to Sections 10(a)(i) and 10(c)(i) shall
terminate when the applicable representation or warranty terminates pursuant to
Section 14; provided, however, that such obligations to indemnify and hold
harmless shall not terminate with respect to any item as to which the Person to
be indemnified or the related party thereto shall have, prior to the expiration
of the applicable period, previously made a claim by delivering a written notice
(stating in reasonable detail the nature of, and factual and legal basis for,
any such claim for indemnification, and the provisions of this Agreement upon
which such claim for indemnification is made) to the indemnifying party. The
obligation to indemnify and hold harmless any Person pursuant to the other
clauses of Sections 10(a) and 10(c) shall not terminate.
F. Procedures Relating to Indemnification. 1. In order for a Person
(the "indemnified party") to be entitled to any indemnification provided for
under this Agreement in respect of, arising out of or involving a claim or
demand made by any Person against the indemnified party (a "Third Party Claim"),
such indemnified party must notify the indemnifying party in writing, and in
reasonable detail, of the Third Party Claim as promptly as reasonably possible
after receipt by such indemnified party of notice of the Third Party Claim;
provided, however, that failure to give such notification on a timely basis
shall not affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure. Thereafter, the indemnified party
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shall deliver to the indemnifying party, within five business days after the
indemnified party's receipt thereof, copies of all notices and documents
(including court papers) received by the indemnified party relating to the Third
Party Claim.
2. If a Third Party Claim is made against an indemnified party,
the indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses and acknowledges its obligation to indemnify the
indemnified party therefor, to assume the defense thereof with counsel selected
by the indemnifying party and reasonably satisfactory to the indemnified party.
Notwithstanding any acknowledgment made pursuant to the immediately preceding
sentence, the indemnifying party shall continue to be entitled to assert any
limitation on its indemnification responsibility contained in the provisos to
Section 10(a). Should the indemnifying party so elect to assume the defense of a
Third Party Claim, the indemnifying party shall not be liable to the indemnified
party for legal expenses subsequently incurred by the indemnified party in
connection with the defense thereof. If the indemnifying party assumes such
defense, the indemnified party shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the indemnifying party, it being understood, however, that
the indemnifying party shall control such defense. The indemnifying party shall
be liable for the fees and expenses of counsel employed by the indemnified party
for any period during which the indemnifying party has not assumed the defense
thereof. If the indemnifying party chooses to defend any Third Party Claim, all
the parties hereto shall cooperate in the defense or prosecution of such Third
Party Claim. Such cooperation shall include the retention and (upon the
indemnifying party's request) the provision to the indemnifying party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Whether or not
the indemnifying party shall have assumed the defense of a Third Party Claim,
the indemnified party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying party's
prior written consent (which consent shall not be unreasonably withheld).
XI. Assignment. Except as set forth below, this Agreement and any
rights and obligations hereunder shall not be assignable or transferable by
Buyer or Seller (including by operation of law in connection with a merger or
sale of stock, or sale of substantially all the assets, of Buyer or Seller)
without the prior written consent of the other party and any purported
assignment without such consent shall be void and without effect; provided,
however, that without the consent of Seller, Buyer may assign its rights
hereunder (i) to one or more wholly-owned subsidiaries of Buyer upon written
notice of such assignment to Seller (ii) to Buyer's secured lenders as
collateral to secure indebtedness of Buyer, or (iii) in
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connection with the sale of all or substantially all of the assets of the
Business to any unaffiliated third party (regardless of the form of transaction)
(it being understood, however, that no such assignment shall limit or otherwise
affect Buyer's obligations hereunder).
XII. No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns and nothing herein
express or implied (including Section 10) shall give or be construed to give to
any Person, other than the parties hereto and such permitted assigns, any legal
or equitable rights hereunder.
XIII. Termination; Break-Up Fees.
A. Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing Date:
1. by the mutual written consent of Seller and Buyer;
2. by Buyer if any of the conditions set forth in Section 3(a)
shall have become incapable of fulfillment, and shall not have been waived by
Buyer;
3. by Seller if any of the conditions set forth in Section 3(b)
shall have become incapable of fulfillment, and shall not have been waived by
Seller;
4. by Seller if the Closing does not occur on or prior to August
31, 1997; or
5. by Buyer if the Closing does not occur on or prior to August
31, 1997, unless the Closing shall not have occurred as a result of the failure
of satisfaction of the conditions set forth in Section 3(a)(iii) or (iv), in
which case the Buyer shall not be permitted to terminate under this clause (v)
until December 31, 1997;
provided, however, that the party seeking termination pursuant to clause (ii),
(iii), (iv) or (v) above is not in material breach of its representations,
warranties, covenants or agreements contained in this Agreement.
B. Notwithstanding any other provisions of this Agreement to the
contrary, if, as of the scheduled Closing Date, all of the conditions set forth
in
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Section 3(a) shall have been satisfied (or shall be capable of performance) and
the Closing shall have failed to occur primarily as a result of the Buyer's
inability to secure the financing required to consummate the transactions
contemplated hereunder (a "Financing Breach"), (i) Buyer shall promptly pay to
Seller upon demand a break-up fee of $2,500,000 (the "Break-up Fee"), (ii)
Seller shall have the right to immediately terminate this Agreement, and (iii)
Buyer shall indemnify Seller for any Losses resulting from a Financing Breach
(including, without limitation, losses based upon a subsequent sale of the
Business at a reduced purchase price) in an amount not to exceed $2,500,000. In
the event Seller elects not to terminate this Agreement pursuant to the
preceding sentence and Buyer subsequently acquires the Business pursuant to or
in accordance with the terms of this Agreement, any Break-up Fee previously paid
to Seller shall be credited against the Initial Purchase Price.
C. In the event of termination by Seller or Buyer pursuant to this
Section 13, written notice thereof shall forthwith be given to the other party
and the transactions contemplated by this Agreement shall be terminated, without
further action by any party. If the transactions contemplated by this Agreement
are terminated as provided herein:
1. Buyer shall return all documents and copies and other
materials received from or on behalf of Seller relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to Seller; and
2. all confidential information received by Buyer with respect to
the Assets, the Assumed Liabilities and the Business shall be treated in
accordance with the Confidentiality Agreement, which shall remain in full force
and effect in accordance with its terms notwithstanding the termination of this
Agreement.
D. If this Agreement is terminated and the transactions contemplated
hereby are abandoned as described in this Section 13, this Agreement shall
become void and of no further force and effect, except for the provisions of (i)
Section 7(a) relating to the obligation of Buyer to keep confidential certain
information and data obtained by it, (ii) Section 8(c) relating to publicity,
(iii) Section 5(a) relating to indemnification in connection with the matters
contemplated thereby, (iv) Section 15 relating to certain expenses, (v) Section
22 relating to finder's fees and broker's fees and (vi) this Section 13. Nothing
in this Section 13 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to
impair the right of any party to compel specific performance by another party of
its obligations under this Agreement.
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XIV. Survival of Representations. The representations and warranties
in this Agreement and in any other document delivered in connection herewith
shall survive the Closing solely for purposes of Sections 10(a) and 10(c) and
shall terminate at the close of business on the 18-month anniversary of the
Closing Date; provided, however, that the representations and warranties set
forth in Section 4(d) shall not terminate until the third anniversary of the
Closing Date.
XV. Expenses. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise specifically provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
or expenses.
XVI. Amendment and Waiver. This Agreement may be amended, or any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding upon Seller only if set forth in a writing executed by
Seller and referring specifically to the provision alleged to have been amended
or waived, and any such amendment or waiver shall be binding upon Buyer only if
set forth in a writing executed by Buyer and referring specifically to the
provision alleged to have been amended or waived. No course of dealing between
or among any Persons having any interest in this Agreement shall be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any Person under or by reason of this Agreement.
XVII. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy, or sent, postage prepaid, by
registered, certified or express mail, or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows:
1. if to Buyer,
MBW Foods, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
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with a copy to:
Dartford Partnership, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
2. if to Seller,
Kraft Foods, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Kraft Foods, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Associate General
Counsel
XVIII. Interpretation. The headings and captions contained in this
Agreement, in any Exhibit or Schedule hereto and in the table of contents to
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any capitalized terms used in
any Schedule or Exhibit and not otherwise defined therein shall have the
meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation."
XIX. No Strict Construction. Notwithstanding the fact that this
Agreement has been drafted or prepared by one of the parties, Buyer and Seller
confirm that both they and their respective counsel have reviewed, negotiated
and adopted this Agreement as the joint agreement and understanding of the
parties, and the language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any Person.
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XX. Counterparts. This Agreement may be executed in one or more
counterparts (including by means of telecopied signature pages), all of which
shall be considered one and the same agreement, and shall become effective when
one or more such counterparts have been signed by each of the parties and
delivered to the other party.
XXI. Entire Agreement. This Agreement and the other agreements
referred to herein (including the Confidentiality Agreement) contain the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, whether written or oral, relating to such subject matter.
XXII. Brokerage. Buyer has not used a broker or finder in connection
with the transactions contemplated by this Agreement, and there are no claims
for brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement or
agreement by or on behalf of Buyer, except pursuant to any arrangement for which
Buyer is solely responsible. Seller has not retained any broker or finder or
incurred any liability or obligation for any brokerage fees, commissions or
finder's fees with respect to this Agreement or the transactions contemplated
hereby, except pursuant to an arrangement with Credit Suisse First Boston
Corporation, for which Seller is solely responsible. Notwithstanding anything to
the contrary in Section 10, Buyer shall indemnify and hold Seller harmless for
any breach of its representation in this Section 22, and Seller shall indemnify
and hold Buyer harmless for any breach of its representation in this Section 22.
XXIII. Disclaimer Regarding Estimates and Projections. In connection
with Buyer's investigation of the Business, Buyer has received from or on behalf
of Seller certain projections, including projected statements of operating
results of the Business for the fiscal year ending in December 1997 and for
subsequent fiscal years and certain business plan information for such fiscal
year and succeeding fiscal years. Buyer acknowledges that there are
uncertainties inherent in attempting to make such estimates, projections and
other forecasts and plans, that Buyer is familiar with such uncertainties, that
Buyer is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all estimates, projections and other forecasts and
plans so furnished to it (including the reasonableness of the assumptions
underlying such estimates, projections and forecasts), and that Buyer shall have
no claim against Seller with respect thereto. Accordingly, Seller makes no
representation or warranty with respect to such estimates, projections and other
forecasts and plans (including the reasonableness of the assumptions underlying
such estimates, projections and forecasts).
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XXIV. Schedules. The disclosures in the Schedules hereto are to be
taken as relating to the representations and warranties of Seller as a whole.
The inclusion of information in the Schedules hereto shall not be construed as
an admission that such information is material to the Assets, the Business or
Seller. In addition, matters reflected in the Schedules are not necessarily
limited to matters required by this Agreement to be reflected in such Schedules.
Such additional matters are set forth for informational purposes only and do not
necessarily include other matters of a similar nature. Prior to the Closing,
Seller shall have the right to supplement, modify or update the Schedules hereto
to reflect changes in the ordinary course of the Business prior to the Closing;
provided, however, that any such supplements, modifications or updates shall be
subject to Buyer's rights under Section 3(a)(i).
XXV. Representation by Counsel; Interpretation. Seller and Buyer
acknowledge that each of them has been represented by counsel in connection with
this Agreement and the transactions contemplated hereby. Accordingly, any rule
of law or any legal decision that would require interpretation of any claimed
ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
XXVI. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid and effective under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
XXVII. Bulk Transfer Laws. Buyer hereby waives compliance by Seller
with the provisions of any so-called bulk transfer laws of any jurisdiction in
connection with the sale of the Assets. Notwithstanding anything to the contrary
in Section 10, Seller shall indemnify and hold Buyer harmless from any Losses
which Buyer may incur due to the failure to so comply.
XXVIII. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Illinois
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
XXIX. Exhibits and Schedules. All Exhibits and Schedules annexed
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
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XXX. Dispute Resolution.
A. Negotiation. In the event of any controversy, dispute or claim
between Seller and Buyer as to the interpretation of any provision of this
Agreement (or the performance of obligations hereunder), the matter, upon
written request of either party, shall be referred to representatives of the
parties for decision, each party being represented by a senior executive officer
who has no direct operational responsibility for the matters contemplated by
this Agreement (the "Representatives"). The Representatives shall promptly meet
in a good faith effort to resolve the dispute. If the Representatives do not
agree upon a decision within 30 days after reference of the matter to them, each
of Buyer and Seller shall be free to exercise the remedies available to it under
Section 30(b).
B. Arbitration. Any controversy, dispute or claim arising out of or
relating in any way to this Agreement or the other agreements contemplated
hereby or the transactions arising hereunder or thereunder that cannot be
resolved by negotiation pursuant to Section 30(a) shall, except as otherwise
provided in Section 2(b), be settled exclusively by arbitration in the City of
Chicago, Illinois, except for the injunctive relief referred to in Section
10(b). Such arbitration shall be administered by the Center for Public Resources
(the "Institute") in accordance with its then prevailing Rules for
Non-Administered Arbitration of Business Disputes (except as otherwise provided
herein), by three arbitrators, one of whom shall be chosen by Buyer, one of whom
shall be chosen by Seller, and the third who shall be chosen by such first two
arbitrators. Notwithstanding anything to the contrary provided in Section 28
hereof, the arbitration shall be governed by the United States Arbitration Act,
9 U.S.C. ss. 1 et seq. The fees and expenses of the Institute and the
arbitrators shall be shared equally by the parties and advanced by them from
time to time as required; provided that at the conclusion of the arbitration,
the arbitrators shall award costs and expenses (including the costs of the
arbitration previously advanced and the fees and expenses of attorneys,
accountants and other experts) and interest at the Applicable Rate to the
prevailing party. No pre-arbitration discovery (other than document discovery as
authorized by the arbitrators on specific application therefor for reasonable
cause) shall be permitted, except that the arbitrators shall have the power in
their sole discretion, on application by either party, to order pre-arbitration
examination of the witnesses and documents that the other party intends to
introduce in its case-in-chief at the arbitration hearing. The arbitrators shall
render their decision in writing within 90 days of the conclusion of the
arbitration hearing. The arbitrators shall not be empowered to award to any
party any consequential damages, lost profits to the extent relating to any
business or asset owned by Buyer (including, but not limited to, Buyer's ▇▇▇.
▇▇▇▇▇▇▇▇▇▇▇'▇ business) other than the Business, or relating to any effect on
Buyer's capitalization, or punitive damages in connection with any dispute
arising out of or relating in any
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way to this Agreement or the Ancillary Agreements or the transactions arising
hereunder or thereunder, and each party hereby irrevocably waives any right to
recover such damages. Notwithstanding anything to the contrary provided in this
Section 30(b) and without prejudice to the above procedures, either party may
apply to any court of competent jurisdiction for temporary injunctive or other
provisional judicial relief if such action is necessary to avoid irreparable
damage or to preserve the status quo until such time as the arbitration panel is
convened and available to hear such party's request for temporary relief. The
award rendered by the arbitrators shall be final and not subject to judicial
review and judgment thereon may be entered in any court of competent
jurisdiction.
* * * * *
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
KRAFT FOODS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Vice President
MBW FOODS INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Executive Vice President