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EXHIBIT 10-1
------------
PURCHASE AGREEMENT
Dated September 21, 2001
Among
ASSOCIATED BRANDS, INC.
(a Delaware corporation),
ASSOCIATED BRANDS INC.
(an Ontario corporation)
and
GENESEE CORPORATION
(a New York corporation)
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TABLE OF CONTENTS
-----------------
PAGE
SCHEDULES........................................................................................................12
EXHIBITS.........................................................................................................13
PURCHASE AGREEMENT...............................................................................................14
RECITALS:........................................................................................................14
ARTICLE 1 DEFINITIONS............................................................................................14
1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings:........14
1.2 Other Defined Terms.....................................................................................24
1.3 Construction of Defined Terms...........................................................................25
1.4 Usage of Terms..........................................................................................25
1.5 References to Articles, Sections, Exhibits and Schedules................................................26
ARTICLE 2 PURCHASE AND SALE OF SHARES............................................................................26
2.1 Sale of Shares..........................................................................................26
2.2 Purchase Price..........................................................................................26
2.3 Closing Certificate; Preliminary Purchase Price Closing Adjustment; Physical Inventory; Audit;
Effective Date Financial Report; Final Purchase Price Closing Adjustment................................26
2.4 Payments by Buyer.......................................................................................27
2.5 Final Purchase Price Closing Adjustment.................................................................28
2.6 Taxes, Penalties and Fees...............................................................................28
2.7 Bridge Financing .......................................................................................15
ARTICLE 3 CLOSING................................................................................................31
3.1 Closing.................................................................................................31
3.2 Conveyances at Closing..................................................................................31
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3.3 Certificates and Other Documents........................................................................31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER...............................................................31
4.1 Organization and Authority of the Corporation to Conduct Business.......................................31
4.2 Power and Authority; Binding Effect.....................................................................32
4.3 Authorized and Issued Shares............................................................................32
4.4 Title of Shares and Certain Other Assets................................................................32
4.5 No Conflict or Violation................................................................................32
4.6 Consents and Approvals..................................................................................33
4.7 No Proceedings..........................................................................................33
4.8 Financial Statements; Unknown Liabilities...............................................................33
4.9 Tax Matters.............................................................................................34
4.10 Real Property...........................................................................................34
4.11 Tangible Personal Property..............................................................................36
4.12 Intellectual Property...................................................................................36
4.13 Compliance with Laws; Permits...........................................................................37
4.14 Litigation..............................................................................................38
4.15 Labor Matters...........................................................................................38
4.16 Employee Benefit Plans..................................................................................39
4.17 Transactions with Certain Persons.......................................................................42
4.18 Insurance...............................................................................................42
4.19 Inventory...............................................................................................43
4.20 Accounts Receivable.....................................................................................43
4.21 Material Contracts......................................................................................43
4.22 Suppliers and Customers.................................................................................43
4.23 Business Records........................................................................................44
4.24 Bank Accounts; Powers of Attorney.......................................................................44
4.25 Environmental Matters...................................................................................44
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4.26 Absence of Certain Changes..............................................................................45
4.27 Brokers.................................................................................................45
4.28 Absence of Certain Payments.............................................................................46
4.29 Product Guaranties; Product Liability...................................................................46
4.30 Effective Date Working Capital..........................................................................46
4.31 Change in Control.......................................................................................46
4.32 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Payments.....................................................................47
4.33 Workers Compensation....................................................................................47
4.34 Enterprise Development Zone or Similar Credits..........................................................47
4.35 Conduct Pending Closing.................................................................................47
4.36 Material Misstatements or Omissions.....................................................................47
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER................................................................47
5.1 Organization and Good Standing..........................................................................47
5.2 Authority; Authorization; Binding Effect................................................................47
5.3 No Conflict or Violation................................................................................48
5.4 Consents and Approvals..................................................................................48
5.5 No Proceedings..........................................................................................48
5.6 Brokers.................................................................................................48
5.7 Material Misstatements or Omissions.....................................................................48
5.8 Guarantor...............................................................................................48
ARTICLE 6 COVENANTS AND CONDUCT OF THE PARTIES PRIOR TO AND AFTER CLOSING........................................48
6.1 Investigation by Buyer..................................................................................48
6.2 Environmental Audits....................................................................................49
6.3 Matters Relating to Real Property.......................................................................50
6.4 Notifications, Consents and Approvals...................................................................51
6.5 Conduct Pending Closing.................................................................................51
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6.6 Notification of Certain Matters.........................................................................52
6.7 Delivery of Interim Financial Statements................................................................53
6.8 Escrow Agreement........................................................................................53
6.9 Repayment of Employee Advances..........................................................................53
6.10 Termination of Related Person Arrangements..............................................................53
6.11 Accounts Receivable Payments............................................................................53
6.12 Standstill Agreement....................................................................................54
6.13 Satisfaction of Indebtedness............................................................................54
6.14 Liquidation of TKI Foods International, Inc. (the "FSC")................................................54
6.15 Insurance...............................................................................................54
6.16 Tax Matters.............................................................................................54
6.17 Employee Matters........................................................................................55
6.18 Severance Policy. .....................................................................................56
6.19 Specific Claim..........................................................................................56
ARTICLE 7 CONDITIONS TO SELLER'S OBLIGATIONS.....................................................................56
7.1 Representations, Warranties and Covenants...............................................................56
7.2 No Proceedings..........................................................................................56
7.3 Closing Certificates....................................................................................57
7.4 Legal Opinion...........................................................................................57
7.5 Escrow Agreement........................................................................................57
7.6 Required Consents and Filings...........................................................................57
7.7 Bridge Financing........................................................................................42
ARTICLE 8 CONDITIONS TO BUYER'S OBLIGATIONS......................................................................57
8.1 Representations, Warranties and Covenants...............................................................57
8.2 Required Consents and Filings...........................................................................58
8.3 No Proceedings..........................................................................................58
8.4 No Material Adverse Change..............................................................................58
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8.5 Closing Certificate.....................................................................................58
8.6 Legal Opinion...........................................................................................58
8.7 Escrow Agreement........................................................................................58
8.8 Employment Arrangements, Release and Resignations.......................................................58
8.9 No Casualty or Environmental Problems...................................................................58
8.10 Financing...............................................................................................58
8.11 Section 6.13 Covenants. The Covenants in Section 6.13 shall have been satisfied........................59
ARTICLE 9 INDEMNIFICATIONS AND OTHER POST CLOSING MATTERS........................................................59
9.1 Survival and Indemnifications...........................................................................59
9.2 Claims Against the Escrow...............................................................................63
9.3 Effect of Basket........................................................................................63
9.4 Use of Corporate Name or Trade Name.....................................................................64
9.5 Access to Records and Personnel.........................................................................64
9.6 Confidentiality.........................................................................................64
9.7 Non-Competition.........................................................................................64
9.8 Seller's Assistance.....................................................................................66
9.9 Tangible Net Worth Maintenance .........................................................................51
ARTICLE 10 MISCELLANEOUS.........................................................................................66
10.1 Further Assurances; Information.........................................................................66
10.2 Risk of Loss............................................................................................67
10.3 Termination.............................................................................................67
10.4 Notices.................................................................................................68
10.5 Public Statements.......................................................................................69
10.6 Choice of Law...........................................................................................69
10.7 Expenses................................................................................................69
10.8 Titles..................................................................................................70
10.9 Waiver..................................................................................................70
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10.10 Effective; Binding......................................................................................70
10.11 Entire Agreement........................................................................................70
10.12 Modification............................................................................................70
10.13 Counterparts............................................................................................70
10.14 Consent to Jurisdiction.................................................................................71
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SCHEDULES
SCHEDULE DESCRIPTION
-------- -----------
1.1(ax) February 24, 2001 Pro-Forma Debt Free Balance Sheet
4.1 Organizational and Authority of the Corporation to
Conduct Business
4.3 Authorized and Issued Shares
4.4(b) Title
4.4(c) Leases
4.5 No Conflict or Violation
4.6 Consents and Approvals
4.8 Financial Statements; Unknown Liabilities
4.9 Tax Matters
4.10 Real Property
4.11 Tangible Personal Property
4.12 Intellectual Property
4.13 Compliance with Laws; Permits
4.14 Litigation
4.15 Labor Matters
4.16 Employee Benefit Plans
4.17 Transactions with Certain Persons
4.18 Insurance
4.19 Inventory
4.20 Accounts Receivable
4.21 Material Contracts
4.22 Suppliers and Customers
4.24 Bank Accounts; Powers of Attorney
4.25 Environmental Matters
4.26 Absence of Certain Changes
4.29 Product Guaranties; Product Liability
4.31 Change in Control
4.33 Workers Compensation
4.34 Enterprise Development Zone of Similar Credits
5.4 Consents and Approvals
6.3 Matters Relating to Real Property
6.4 Notifications, Consents and Approvals
6.5 Conduct Pending Closing
6.18 Severance Policy
10.11 Entire Agreement
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EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
2.2 Guaranty
2.7(a) Restated Mortgage Note
2.7(b) Mortgage Modification and Extension Agreement
6.3 Matters Relating to Real Property
6.8 Escrow Agreement
7.4(a) Seller's Legal Opinion (▇▇▇▇▇▇▇ ▇▇▇▇ LLP)
7.4(b) Seller's Legal Opinion (▇▇▇▇▇ & ▇▇▇▇▇ LLP)
7.7(c) Assignment of Mortgage
8.6 Buyer's Legal Opinion
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT dated September 21, 2001 is by and among
ASSOCIATED BRANDS, INC., a Delaware corporation with its principal place of
business to be at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Buyer"),
ASSOCIATED BRANDS INC. ("Guarantor"), an Ontario corporation with its principal
place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ and GENESEE
CORPORATION, a New York corporation with its principal place of business at 600
Powers Building, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("Seller").
RECITALS:
A. Seller owns in the aggregate one hundred (100) shares of the common
stock ("Common Stock") of Ontario Foods, Incorporated ("Corporation") of the par
value of $1.00 per share, which constitute all of the issued and outstanding
shares of OFI (the "Shares").
B. Buyer desires to purchase and accept from Seller the Shares and
Seller desires to sell and transfer to Buyer the Shares, and Guarantor wishes to
induce Seller to sell the Shares to Buyer, upon the terms and conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties, intending to
be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the
following meanings:
(a) "ACCOUNTS RECEIVABLE" shall mean all trade receivables and accounts
receivable of the Corporation as determined in accordance with GAAP and to the
extent reflected on the Effective Date Financial Report.
(b) "ACCOUNTS PAYABLE" shall mean (i) all current trade accounts
payable of the Corporation as of the Effective Date as determined in accordance
with GAAP and to the extent reflected on the Effective Date Financial Report and
(ii) all checks written on the Corporation's "zero balance" or other bank
accounts on or prior to the Effective Date which have not cleared as of the
Effective Date.
(c) "ACCRUED LIABILITIES" shall mean (i) accrued expenses of the
Corporation (other than Accounts Payable) of a type shown on the Financial
Statements, as determined in accordance with GAAP, (ii) accrued expenses under
the Employee Benefit Plans at a rate not less than the expense accrued for the
previous plan year (pro-rated through the Effective Date), including but not
limited to (A) vacation benefits earned through the Effective Date, (B) short
term disability benefits incurred through the Effective Date and (C) amounts
payable to employees incurred prior to or as a consequence of the Closing
including, but not limited to,
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amounts owing pursuant to the Severance Pay and Benefits Policy of the
Corporation dated March 1, 2000 (the "Severance Policy") and (iii) overdrafts on
any bank account and reimbursement obligations under any credit facility of the
Corporation acquired by Buyer (in each of items (i) through (iii), to the extent
reflected on the Effective Date Financial Report).
(d) "AFFILIATE" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise). Without
limiting the generality of the foregoing, the Corporation will be an Affiliate
of Buyer from and after the Closing.
(e) "AGREEMENT" shall mean, unless the context otherwise requires, this
Purchase Agreement together with the Schedules, Exhibits and the Disclosure
Schedule attached hereto, and the certificates and instruments to be executed
and delivered in connection herewith.
(f) "APRIL 28 BALANCE SHEET" shall mean the audited balance sheet for
the Corporation dated April 28, 2001.
(g) "BUSINESS" shall mean all activities which the Corporation is
presently, or is presently contemplating, conducting or pursuing, including,
without limitation, the production, packaging and sale of food products,
including, without limitation, side dishes, bouillon, artificial sweeteners,
soup mixes, ice tea mixes, instant beverage mixes and hot cocoa, sold under the
Corporation's proprietary label brands or as private label brands for food and
other store chains or wholesalers and the Corporation's contract processing and
packaging business.
(h) "BUSINESS RECORDS" shall mean originals or true copies of all
operating data and records of the Business including, without limitation,
financial, accounting and bookkeeping books and records, purchase and sale
orders and invoices, sales and sales promotional data, advertising materials,
market research studies, marketing analyses, research and development materials,
past and present price lists, past and present customer service files, customer
complaint files, credit files, guaranty and warranty files, product liability
files, batch and product serial number records and files, written operating
methods and procedures, formulae, specifications, operating records, quality
assurance records, information technology manuals and procedures, bills of
material, bills of lading and other information related to the Tangible Personal
Property and the Current Real Property, reference catalogues, insurance files,
personnel records, records relating to potential acquisitions and other records,
on whatever media, pertaining to the Business, or to customers or suppliers of,
or any other parties having contracts or other business relationships with, the
Business.
(i) "BUYER'S ACCOUNTANTS" shall mean those accountants at the firm of
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP who from time to time provide accounting services to Buyer.
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(j) "CAPITALIZED LEASE OBLIGATION" shall mean the amount of liability
capitalized or disclosed (or which should be disclosed in accordance with GAAP)
on a balance sheet in respect of a lease or other agreement for the use of
property which should be capitalized on the lessee's or user's balance sheet in
accordance with GAAP.
(k) "CASH" shall mean cash and cash equivalents of the Corporation held
in any of its bank accounts or safe deposit boxes, but excluding bank
overdrafts.
(l) "CASH SWEEP ADJUSTMENT" shall mean, during the period from July 28,
2001 to the Closing Date, all cash swept from the Corporation's bank accounts by
the Seller minus all cash advances to the Corporation's bank accounts from the
Seller plus any payments on account of the indebtedness (principal and interest)
of the Corporation to related party or third party lenders.
(m) "CLAIMS PERIOD" shall mean the period beginning on the Closing Date
and ending 24 months following the Closing Date.
(n) "CLOSING DATE" shall mean the latest to occur of (i) September 24,
2001 and (ii) 5 days after all other consents, approvals and other actions
required to be obtained from or performed by any third party as a condition to
Closing have been obtained, performed or waived, or if such day is not a
business day, the next succeeding business day, or any other date as Seller and
Buyer shall mutually agree in writing; provided however, that the Effective Date
("Effective Date") for the purchase of the Shares shall be July 28, 2001.
(o) "COBRA" shall mean the provisions of Part 6 of Subtitle B of Title
I of ERISA and Section 4980B of the Code and all regulations thereunder.
(p) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(q) "CONTRACTS" shall mean (i) the Material Contracts of the
Corporation and (ii) the Minor Contracts of the Corporation.
(r) "CORPORATION'S ACCOUNTANTS" shall mean those accountants at the
firm of PricewaterhouseCoopers LLP who are preparing the Financial Statements
and who from time to time provide accounting services to Seller.
(s) "CURRENT REAL PROPERTY" shall mean all Real Property currently
owned or leased by the Corporation or in which the Corporation has any interest.
(t) "CUSTOMER LISTS" shall mean all past and current customer and
potential customer lists of the Business.
(u) "DOLLAR ($)" shall mean the U.S. dollar.
(v) "EARNINGS BEFORE TAX" shall have the meaning as set forth on the
Interim Financial Statements.
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(w) "EFFECTIVE DATE WORKING CAPITAL" shall mean the Working Capital as
of the Effective Date.
(x) "EMPLOYEE BENEFIT PLAN" shall mean any (i) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (ii) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (iii) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (iv) Employee Welfare Benefit Plan or fringe
benefit plan or program, (v) any severance benefit plan or (vi) any similar
plan, arrangement or program relating to the Business which is maintained,
administered or contributed to by the Corporation, or which covers any employee
or former employee of the Corporation by reason of such employee's employment by
the Corporation.
(y) "EMPLOYEE PENSION BENEFIT PLAN" shall have the meaning set forth in
ERISA Section 3(2).
(z) "EMPLOYEE WELFARE BENEFIT PLAN" shall have the meaning set forth in
ERISA Section 3(1).
(aa) "EMPLOYMENT AGREEMENT" shall mean the employment agreement between
Seller together with its subsidiaries and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ dated January 25,
2000.
(ab) "ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encroachment, reservation,
restriction, encumbrance, or other right of any Person, or any other restriction
or limitation of any nature whatsoever, affecting title to the Shares or the
Current Real Property, the Tangible Personal Property, the Inventory, the
Intellectual Property or any other assets of the Corporation.
(ac) "ENFORCEABILITY LIMITATIONS" shall mean (i) bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights and (ii) the discretion of the appropriate
court with respect to specific performance, injunctive relief or other terms of
equitable remedies.
(ad) "ENVIRONMENTAL CLAIMS" shall mean any notice of violation, notice
of potential or actual responsibility or liability, or written claim, suit,
action, demand, directive or order (including those for contribution and/or
indemnity) by any Governmental Authority or other Person for any damage
(including, but not limited to, personal injury, tangible or intangible property
damage, natural resource damage, indirect or consequential damages,
investigative costs, removal, response or remediation costs, nuisance,
pollution, contamination or other adverse effects on the environment or for
fines, penalties or restrictions or conditions on existing environmental permits
or licenses) resulting from or relating to (i) the presence of, a Release or
threatened Release into the environment of, or exposure to, any Hazardous
Substances, (ii) the generation, manufacture, processing, distribution, use,
handling, transportation, storage, treatment or disposal of any Hazardous
Substances, (iii) the violation, or alleged violation, of any Environmental Laws
or (iv) the non-compliance or alleged non-compliance with any Environmental
Laws.
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(ae) "ENVIRONMENTAL CONDITIONS" shall mean any condition with respect
to the environment on or off the Real Property, whether or not yet discovered,
which could or does result in any Environmental Claim, including, without
limitation, any condition resulting from the operation of the Business and/or
any activity or operation conducted by any Person on or off the Real Property.
(af) "ENVIRONMENTAL LAWS" shall mean any applicable, or relevant and
appropriate, statutes, ordinances, or other written, published laws, any
written, published rules or regulations, judicial orders, directives and any
licenses, permits, judgments and written notices, orders and directives issued
pursuant thereto, enacted, promulgated or issued by any Governmental Authority,
in effect as of the Closing Date, relating to pollution or protection of public
health or the environment from Hazardous Substances (including, but not limited
to, any air, surface water, groundwater, land surface or sub-surface strata,
whether outside, inside or under any structure), or to the identification,
reporting, generation, manufacture, processing, distribution, use, handling,
treatment, storage, disposal, transportation, presence, Release or threatened
Release of, any Hazardous Substances. Without limiting the generality of the
foregoing, Environmental Laws shall include the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended, the Clean
Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air
Act, as amended, and all analogous laws enacted, promulgated or lawfully issued
by any Governmental Authority, but shall exclude the Occupational Safety and
Health Act, as amended, and similar state laws.
(ag) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(ah) "ERISA AFFILIATE" shall mean a trade or business, whether or not
incorporated, which is deemed to be in common control or affiliated with the
Corporation within the meaning of Section 4001 of ERISA or Sections 414(b), (c),
(m), or (o) of the Code.
(ai) "FINANCIAL STATEMENTS" shall mean the audited financial statements
of the Corporation for the fiscal years ended April 29, 2000 and April 28, 2001
(consisting of a balance sheet, a statement of income and retained earnings, a
statement of cash flows and all related footnotes) and the Effective Date
Financial Report.
(aj) "FINAL PURCHASE PRICE CLOSING ADJUSTMENT" shall mean the Purchase
Price Closing Adjustment as finally determined in accordance with Section 2.3.
(ak) "GAAP" shall mean, with respect to all accounting matters and
issues, generally accepted accounting principles as in effect from time to time
in the United States applied (to the extent applicable) consistent with the
Financial Statements and the Interim Financial Statements.
(al) "GOODWILL" shall mean the goodwill of the Business.
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(am) "GOVERNMENTAL AUTHORITY" shall mean any federal, state, local or
foreign government, or any political subdivision of any of the foregoing, or any
court, agency or other entity, body, organization or group, exercising any
executive, legislative, judicial, quasi-judicial, regulatory or administrative
function of government, or any supranational body (including the European
Union).
(an) "GOVERNMENTAL REQUIREMENT" shall mean any published law, statute,
ordinance, directive or regulation of any Governmental Authority now in effect.
(ao) "HAZARDOUS SUBSTANCES" shall mean any pollutants, contaminants,
substances, hazardous and/or toxic chemicals, known carcinogens, wastes, and any
ignitable, corrosive, reactive, toxic or other hazardous substances or
materials, whether solids, liquids or gases (including, but not limited to,
petroleum and its derivatives, PCBs, asbestos, radioactive materials, waste
waters, sludge, slag and any other substance, material or waste), as defined in
or regulated by any Environmental Laws or as determined by any Governmental
Authority.
(ap) "INDEBTEDNESS" shall mean, with respect to any Person (without
duplication), (i) all obligations of such Person for borrowed money, including
without limitation all obligations for principal and interest, and for
prepayment and other penalties, fees, costs and charges of whatsoever nature
with respect thereto, (ii) all obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by such
Person, (iii) all obligations of such Person issued or assumed as the deferred
purchase price of property or services (other than accounts payable to suppliers
and similar accrued liabilities incurred in the ordinary course of business and
paid in a manner consistent with industry practice and other than any such
obligations for services to be rendered in the future), (iv) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien or security interest
on property owned or acquired by such Person whether or not the obligations
secured thereby have been assumed, (v) all Capitalized Lease Obligations of such
Person, (vi) all obligations of such Person guaranteeing, or in effect
guaranteeing, any Indebtedness, dividend or other obligation of any other
Person, (vii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (viii) all obligations arising out of foreign exchange contracts,
and (x) all obligations arising out of interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance, currency
spot and forward contracts and other agreements or arrangements designed to
provide protection against fluctuations in interest or currency exchange rates.
(aq) "INDEPENDENT ACCOUNTANTS" shall mean the Buffalo office of Ernst &
Young, or any successor thereof.
(ar) "INSURANCE" shall mean any fire, product liability, automobile
liability, general liability, worker's compensation, medical insurance stop-loss
coverage or other form of insurance of the Business, and any tail coverage
purchased with respect thereto.
(as) "INTELLECTUAL PROPERTY" shall mean all intellectual property used
to conduct the Business including, without limitation, (i) all inventions
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent
Page 20 of 107
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and re-examinations
thereof, (ii) all trademarks, service marks, trade dress, logos, trade names,
and corporate names (including, without limitation, the name "Ontario Foods",
"Ontario Foods, Incorporated", "T.K.I. Foods, Inc." "TKI" or "Freedom Foods"),
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all copyrightable
works, all copyrights, and all applications, registrations and renewals in
connection therewith (including, without limitation, all artwork for product
packaging and advertising and promotional materials), (iv) all mask works and
all applications, registrations, and renewals in connection therewith, (v) all
trade secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (vi) all computer software (including data and
related documentation and including software installed on hard disk drives)
other than off-the-shelf computer software subject to shrink-wrap licenses and
(vii) all copies and tangible embodiments of any of the foregoing (in whatever
form or medium).
(at) "INTERIM FINANCIAL STATEMENTS" shall mean the unaudited interim
financial statements of the Corporation, consisting of an income statement and a
balance sheet of the Corporation for the period ended the Effective Date.
(au) "INVENTORY" shall mean all ingredients, raw material,
work-in-process and finished goods inventory of the Business, including, without
limitation, all packaging material. Solely for purposes of calculating Working
Capital, "Inventory" shall mean Inventory of the Business after reduction for
reserves for damage or obsolescence (as determined in accordance with GAAP) or
obsolete or excess, as reflected on the Effective Date Financial Report.
(av) "KNOWLEDGE," insofar as it relates to the Knowledge of the Seller
and/or the Corporation, shall mean the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Good, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇ upon each of them
making due inquiry with any other individual that they might reasonably expect
to have knowledge of the subject matter.
(aw) "LOSSES" shall mean all losses, liabilities, deficiencies, damages
(including, without limitation, consequential damages), encumbrances, fines,
penalties, costs and expenses (including, without limitation, all fines,
penalties and other amounts paid pursuant to a judgment, compromise or
settlement), court costs and reasonable legal and accounting fees and
disbursements, net of any insurance proceeds or other recoupment.
(ax) "FEBRUARY 24, 2001 PRO-FORMA DEBT FREE BALANCE SHEET" shall mean
the unaudited pro-forma balance sheet of the Corporation attached hereto as
SCHEDULE 1.1(ax).
(ay) "MATERIAL CONTRACTS" shall mean the following written contracts
and oral contracts which are currently in effect and to which the Corporation is
a party or by which the Corporation is bound:
Page 21 of 107
(i) any agreement (or group of related agreements with the same
Person or its Affiliates) for the lease of real property or personal property
(whether or not capitalized under GAAP) providing for lease payments in excess
of $10,000 per year,
(ii) any agreement (or group of related agreements with the same
Person or its Affiliates) not cancelable by the Corporation without penalty for
the purchase or sale of raw materials, commodities, supplies, products or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than 1 year, involves consideration
in excess of $25,000 or is anticipated to result in a loss to the Corporation
exceeding $10,000,
(iii) any agreement concerning the Corporation's membership in a
partnership or joint venture,
(iv) any agreement (or group of related agreements with the same
Person or its Affiliates) under which the Corporation has created, incurred or
assumed any Indebtedness,
(v) any agreement under which the Corporation has imposed an
Encumbrance on any of its assets,
(vi) any letter of credit or performance bond,
(vii) any confidentiality or non-competition agreement (other than
confidentiality agreements (x) related to Seller's negotiations to sell the
Business (y) with the Corporation's employees, agents, distributors and
independent contractors, and (z) with other Persons, in each case entered into
in the ordinary course of the Business),
(viii) any agreement with any Affiliate of the Corporation,
(ix) any profit sharing, deferred compensation, severance or other
plan or arrangement for the benefit of the Corporation's current or former
partners, shareholders, directors, officers or employees (other than any
Employee Benefit Plans or agreements described in clause (xi)),
(x) any collective bargaining agreement,
(xi) any agreement not terminable at will or upon 30 days notice
by the Corporation without penalty (other than severance obligations) for the
employment of any individual on a full-time, part-time, consulting or other
basis,
(xii) any agreement or instruments reflecting outstanding loans or
advances from the Corporation to the Corporation's directors, officers or
employees, other than travel and entertainment expenses advanced to any officer
or employee of the Corporation in the ordinary course of the Business and in an
amount which does not exceed $1,000 for any such officer or employee,
(xiii) any agreement for the prospective acquisition of any
business or product line of any other Person,
Page 22 of 107
(xiv) any distributor, sales representative, dealer or broker
agreement not terminable by the Corporation upon 90 days or less written notice
without penalty,
(xv) any Intellectual Property license or royalty agreement,
(xvi) any independent contractor agreement requiring payments by
the Corporation in excess of $10,000 per year,
(xvii) any agreement providing for indemnification by the
Corporation other than indemnification agreements contained in standard terms
and conditions of sale or contained in any agreement constituting a Material
Contract under any other provision of this Section 1.1(bb), or
(xviii) any other agreement (or group of related agreements with
the same Person or its Affiliates) not cancelable by the Corporation without
penalty the performance of which will extend over a period of more than 1 year,
involves consideration in excess of $10,000 or is anticipated to result in a
loss to the Corporation exceeding $5,000.
(az) "MEDINA REAL PROPERTY" shall mean the Current Real Property, known
as 4001 Salt Works Road, ▇▇▇▇▇▇, New York, owned by the County of Orleans
Industrial Development Agency and leased to the Corporation.
(ba) "MINOR CONTRACTS" shall mean any contract and other agreement
(other than the Material Contracts), whether written or oral, to which the
Corporation is a party or by which either Corporation is bound.
(bb) "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
3(37) of ERISA.
(bc) "NET SALES" shall have the meaning as set forth on the Interim
Financial Statements.
(bd) "OTHER CURRENT ASSETS" shall mean all current assets of the
Corporation other than Accounts Receivable and Inventory as determined in
accordance with GAAP and to the extent reflected on the Effective Date Financial
Report.
(be) "OWNED INTELLECTUAL PROPERTY" shall mean all Intellectual Property
owned by the Corporation.
(bf) "OWNED TANGIBLE PERSONAL PROPERTY" shall mean all Tangible
Personal Property owned by the Corporation.
(bg) "PBGC" shall mean the Pension Benefit Guaranty Corporation.
(bh) "PERMITTED ENCUMBRANCES" shall mean (i) liens which will be
removed by payment of Indebtedness reflected on the Effective Date Financial
Report in the amounts reflected on the Effective Date Financial Report, (ii)
liens which are removed on or prior to the Effective Date and (iii) the
Permitted Title Encumbrances.
Page 23 of 107
(bi) "PERMITS" shall mean all permits, licenses, consents, franchises,
approvals and other authorizations required from any Governmental Authority or
other Person in connection with the operation of the Business and necessary to
conduct the Business as presently conducted.
(bj) "PRE-CLOSING PERIOD" shall mean the period beginning on April 29,
2001 and ending on the Effective Date.
(bk) "PERSON" shall mean any Governmental Authority, individual,
association, joint venture, partnership, corporation, limited liability company,
trust or other entity.
(bl) "PREDECESSOR" shall mean a Person, if any, whose status or
activities could give rise to a claim against the Corporation.
(bm) "PROCEEDING" shall mean any claim, demand, action, suit,
litigation, dispute, order, writ, injunction, judgment, assessment, decree,
grievance, arbitral action, investigation or other proceeding.
(bn) "PROHIBITED TRANSACTION" shall have the meaning set forth in ERISA
Section 406 and Code Section 4975.
(bo) "PURCHASE PRICE" shall mean the purchase price for the Shares
which shall be equal to $27,000,000, as increased or decreased by the Purchase
Price Closing Adjustment and as increased by Buyer's obligation to pay Seller
for certain insurance coverage as described in Section 6.15.
(bp) "PURCHASE PRICE CLOSING ADJUSTMENT" shall mean, whether positive
or negative, the Working Capital Adjustment minus (i) the Indebtedness of the
Corporation on the Closing Date and (ii) plus or minus, as the case may be, the
Cash Sweep Adjustment.
(bq) "REAL PROPERTY" shall mean (i) all real property now or in the
past owned or leased by the Corporation, or any Predecessor, or in which the
Corporation, or any Predecessor has now or in the past had any interest together
with, (ii) all buildings and improvements located thereon and (iii) all rights,
privileges, interests, easements, hereditaments and appurtenances thereunto in
any way incident, appertaining or belonging thereto.
(br) "RELATED PERSON" shall mean any partner, shareholder, director,
officer or employee of the Corporation, any Person related to any such partner,
shareholder, director, officer or employee by blood or marriage, or the
Corporation, or any partnership, trust or other entity in which any such person
has a substantial interest as a shareholder, partner, trustee or otherwise.
(bs) "RELEASE" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, migration,
dumping or disposing into the environment which could give rise to an
Environmental Claim or which is required to be reported pursuant to 40 C.F.R.
302 or 355, or any analogous Environmental Law.
(bt) "REPORTABLE EVENT" shall have the meaning set forth in ERISA
Section 4043.
Page 24 of 107
(bu) "REPRESENTATIVE" shall mean any officer, director, principal,
attorney, accountant, agent, employee or other representative of any Person.
(bv) "TANGIBLE PERSONAL PROPERTY" shall mean all tangible personal
property (other than Inventory) owned or leased by the Corporation or in which
the Corporation has any interest including, without limitation, show equipment,
production and processing equipment, warehouse equipment, computer hardware,
furniture and fixtures, transportation equipment, leasehold improvements,
supplies and other tangible assets, together with any transferable manufacturer
or vendor warranties related thereto.
(bw) "TAX" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, startup,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), health, unemployment, disability, real property,
personal property, intangible property, sales, use, transfer, registration,
value added, goods and services, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not.
(bx) "TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and any amendment thereof.
(by) "WORKING CAPITAL" shall mean (i) the sum of (A) the Cash, (B) the
Accounts Receivable (net of reserves for doubtful accounts as computed in
accordance with GAAP), (C) the Inventory and (D) the Other Current Assets MINUS
(ii) the sum of (A) the Accounts Payable and (B) the Accrued Liabilities (not
including workers' compensation liability, if any).
(bz) "WORKING CAPITAL ADJUSTMENT" shall mean (i) if the Effective Date
Working Capital is equal to or greater than $9,699,000, the amount, expressed as
a positive number, by which the Effective Date Working Capital exceeds
$9,699,000 or (ii) if the Effective Date Working Capital is less than
$9,699,000, the amount, expressed as a negative number, by which the Effective
Date Working Capital is less than $9,699,000.
1.2 OTHER DEFINED TERMS. The following terms shall have the meanings defined for
such terms in the Sections set forth below:
TERM SECTION
---- -------
ALTA 6.3(a)
Bad Debt Allowance 6.11
Basket 9.1(e)
Buyer Introduction
Casualty 10.2
Casualty Amount 10.2
Closing 3.1
Closing Certificate 2.3(a)
Closing Purchase Price Reconciliation 2.5
COBRA 4.16(n)
Page 25 of 107
Common Stock Recitals
Confidential Information 9.6
Corporation Recitals
Covenant Expiration Date 9.7(c)(i)
Defect Notice 6.3(c)
Disapproved Encumbrance 6.3(c)
Effective Date 1.1(a)
Effective Date Financial Report 2.3(c)
Endorsements 6.3(a)
Escrow Agent 2.4(a)
Escrow Agreement 6.8
Escrow Funds 2.4(a)
Excess Uncollected Receivables 6.11
Final Purchase Price Closing Adjustment 2.3(c)
Guaranty 2.2
Guarantor Introduction
Letter of Credit 2.7
Tangible Net Worth 9.9
▇▇▇▇▇▇ Mortgage 4.8(b)
Mortgage Modification and Extension Agreement 2.4(b)
Ontario Foods, Inc. Recitals
Permitted Title Encumbrances 6.3(a)
Preliminary Purchase Price Closing Adjustment 2.3(a)
Proposed Purchase Price Closing Adjustment 2.3(c)
Related Affiliate 9.7(a)
Required Consents and Filings 6.4
Restated Mortgage Note 2.4(a)
Restricted Territory 9.7(c)(ii)
Seller Introduction
Shares Recitals
Subsequent Mortgage 2.7(c)
Subsequent Note 2.7(c)
Subsidiary 4.9
Survey and Surveys 6.3(b)
Title Commitments 6.3(a)
Title Company 6.3(a)
Title Policies 6.3(a)
1.3 CONSTRUCTION OF DEFINED TERMS. As used in this Agreement, Accounts Payable,
Accounts Receivable, Accrued Liabilities, Indebtedness, Inventory, and Other
Current Assets of the Corporation and the adjustments based thereon shall mean
the amounts determined in accordance with GAAP, except as expressly modified by
the applicable definition.
1.4 USAGE OF TERMS. Except where the context otherwise requires, words importing
the singular number shall include the plural number and vice versa. Use of the
word "including" shall mean "including, without limitation".
Page 26 of 107
1.5 REFERENCES TO ARTICLES, SECTIONS, EXHIBITS AND SCHEDULES. All references in
this Agreement to Articles, Sections (and other subdivisions), Exhibits and
Schedules refer to the corresponding Articles, Sections (and other
subdivisions), Exhibits and Schedules of or attached to this Agreement, unless
the context expressly, or by necessary implication, otherwise requires.
ARTICLE 2
---------
PURCHASE AND SALE OF SHARES
---------------------------
2.1 SALE OF SHARES. Subject to the terms and conditions contained in this
Agreement, on the Closing Date Seller shall sell, convey, transfer, assign, and
deliver to Buyer, and Buyer shall acquire from Seller, all of the Shares, free
and clear of any Encumbrances. The sale, conveyance, transfer, assignment and
delivery of the Shares is to be effective as of the Effective Date.
2.2 PURCHASE PRICE. As consideration for the sale, conveyance, transfer,
assignment and delivery of the Shares, Buyer shall pay to Seller an amount equal
to the Purchase Price for the Shares. Such consideration shall be paid in
accordance with Sections 2.4, 2.5 and 2.6. Guarantor is delivering herewith its
guaranty (the "Guaranty") in the form of EXHIBIT 2.2 guaranteeing, subject to
Buyer's conditions to close the transactions contemplated by this Agreement,
payment of the Purchase Price and performance of Buyer's obligations under this
Agreement.
2.3 CLOSING CERTIFICATE; PRELIMINARY PURCHASE PRICE CLOSING ADJUSTMENT; PHYSICAL
INVENTORY; AUDIT; EFFECTIVE DATE FINANCIAL REPORT; FINAL PURCHASE PRICE CLOSING
ADJUSTMENT.
(a) CLOSING CERTIFICATE; PRELIMINARY PURCHASE PRICE CLOSING ADJUSTMENT.
On the fifth business day prior to the Closing Date, Seller shall cause the
President or the Chief Financial Officer of the Corporation in good faith to
prepare and deliver to Buyer a certificate (the "Closing Certificate")
containing the Effective Date Working Capital, the Working Capital Adjustment,
the Indebtedness of the Corporation on the Closing Date, the Cash Sweep
Adjustment and the Purchase Price Closing Adjustment based on the Interim
Financial Statements (the "Preliminary Purchase Price Closing Adjustment") and
the Purchase Price. The Closing shall proceed, and the payments required to be
made on the Closing Date pursuant to Section 2.4 shall be determined, on the
basis of the Closing Certificate and the Preliminary Purchase Price Closing
Adjustment.
(b) PHYSICAL INVENTORY. Neither Buyer nor Seller will conduct a full
physical inventory prior to the Closing Date. With respect to any Inventory of
the Corporation located at any premises not owned or leased by the Corporation,
(i) for purposes of the Preliminary Purchase Price Closing Adjustment, Seller
shall provide to Buyer in writing a good faith estimate as to the amount of such
Inventory prior to the Closing Date and (ii) for purposes of the Final Purchase
Price Closing Adjustment, Seller shall obtain from each Person who is in
possession of any such Inventory written certification as to the amount of such
Inventory as of the Effective Date. In connection with the preparation of the
Effective Date Financial Report, the valuation of Inventory will be at the lower
of cost or market and computed by the Corporation's Accountants
Page 27 of 107
in accordance with GAAP and consistent with the procedures followed for the
valuation of inventories for the April 28 Balance Sheet.
(c) AUDIT; EFFECTIVE DATE FINANCIAL REPORT. As promptly as possible
after the Closing and in any event prior to 90 days after the Closing, Seller
shall cause the Corporation's Accountants to prepare and deliver to Buyer (i) an
audited balance sheet of the Corporation as of the Effective Date in accordance
with GAAP and (ii) a supplemental report setting forth the Effective Date
Working Capital, the Working Capital Adjustment, the Indebtedness of the
Corporation on the Closing Date, the Cash Sweep Adjustment and the Purchase
Price Closing Adjustment and the Purchase Price based thereon (the "Proposed
Purchase Price Closing Adjustment"), each of which shall be reported on by the
Corporation's Accountants without qualification (collectively the "Effective
Date Financial Report"). Any third-party expenses or fees incurred by Seller or
the Corporation in preparing the Effective Date Financial Report and the
Proposed or Final Purchase Price Closing Adjustment shall be borne by Seller.
The Corporation's Accountants shall deliver or make available to Buyer promptly
and in any event, within 5 business days after any written request, any work
papers or other information requested by Buyer. If Buyer does not object, or
otherwise fails to respond, to the Effective Date Financial Report within 30
days after delivery to Buyer, such Effective Date Financial Report shall
automatically become final and conclusive. In the event that Buyer objects to
the Effective Date Financial Report within such 30-day period, Seller and Buyer
shall promptly meet and endeavor to reach agreement as to the content of the
Effective Date Financial Report. If Seller and Buyer agree on the content of the
Effective Date Financial Report, such Effective Date Financial Report shall
become final and conclusive. If Seller and Buyer are unable to reach agreement
within 20 days after the delivery of such objection to the Effective Date
Financial Report, then the Independent Accountants shall promptly be retained to
undertake a determination of the Effective Date Financial Report, which
determination shall be made as quickly as possible. Buyer and Seller shall each
submit a proposed Final Purchase Price Closing Adjustment to the Independent
Accountants. Only disputed item(s) shall be submitted to the Independent
Accountants for review. In resolving any disputed item, the Independent
Accountants may not assign a value to such item greater than the greatest value
for such item claimed by either party or less than the lowest value for such
item claimed by either party, in each case as presented to the Independent
Accountants. Such determination of the Independent Accountants shall be final
and binding on Seller and Buyer, shall include any interest pursuant to Section
2.5 and shall include an allocation of their fees and expenses, which shall be
borne by Seller and Buyer in proportion to their relative success in the
determination. For instance, if the Buyer's proposed Final Purchase Price
Closing Adjustment is $100,000 lower than the Seller's and the Independent
Accountants conclude that the Final Purchase Price Closing Adjustment is $75,000
higher than the Buyer's proposed figure, the Buyer will bear 75% of the expenses
of the fees and expenses of the Independent Accountants and the Seller will bear
25% thereof. The Purchase Price and the payments required to be made after the
Effective Date pursuant to Section 2.5 shall be finally determined on the basis
of the Effective Date Financial Report after any determinations described in
this Section 2.3(c).
2.4 PAYMENTS BY BUYER. Buyer shall deliver or pay to Seller or the
Escrow Agent the purchase consideration set forth in Section 2.3 as follows:
Page 28 of 107
(a) At the Closing, Buyer shall deliver or pay the following to the
escrow agent designated in the Escrow Agreement (the "Escrow Agent") to be held
in escrow pursuant to the terms and conditions of the Escrow Agreement:
(i) A promissory note in the amount of $2.25 million made payable
to Seller (the "Restated Mortgage Note"); and
(ii) 10% of the Purchase Price (as adjusted by the Preliminary
Purchase Price Closing Adjustment) minus $2.25 million, in cash by wire
transfer, certified check or bank draft to an account designated by the Escrow
Agent to Buyer (the amounts represented by (i) and (ii) being collectively, the
"Escrow Funds").
(b) At the Closing, Buyer shall pay to Seller an amount equal to the
Purchase Price (as adjusted by the Preliminary Purchase Price Closing
Adjustment) minus the Escrow Funds plus an amount equal to the Purchase Price
(as adjusted by the Preliminary Purchase Price Closing Adjustment) multiplied by
(5% multiplied by x/365, where x equals the number of days from the Effective
Date to and including the Closing Date), in cash by wire transfer, certified
check or bank draft to an account designated by Seller to Buyer in writing not
less than 2 business days prior to the Closing Date.
2.5 FINAL PURCHASE PRICE CLOSING ADJUSTMENT. Within 5 business days after
determination of the Final Purchase Price Closing Adjustment, Buyer or Seller,
as the case may be, shall pay to the other the amount by which the Purchase
Price, as adjusted by the Final Purchase Price Closing Adjustment, is greater or
less than the Purchase Price, as adjusted by the Preliminary Purchase Price
Closing Adjustment (such difference being the "Closing Purchase Price
Reconciliation"); provided, however, that if the Closing Purchase Price
Reconciliation is positive by an amount greater than $250,000, Buyer shall pay
such difference to Seller no later than 90 days after the Closing Date. If (i)
Buyer fails to pay any amount owing pursuant to this Section 2.5 or (ii) Seller
fails to pay any amount owing pursuant to this Section 2.5 within 5 business
days, then the amount so owing shall be payable on demand and interest shall
accrue on the unpaid amount from the date due until paid at a rate equal to the
lower of (A) ten percent (10%) per annum or (B) the highest rate permitted by
law.
2.6 TAXES, PENALTIES AND FEES. Seller shall be responsible for the payment of
any transfer tax under New York State Tax Law Section 1401(e). The parties agree
that the fair market value of the real property located in Medina, New York is
$2.7 million and that $2.7 million of the Purchase Price is apportioned to this
real property. Buyer and Seller shall each execute and deliver New York State
form TP-584 consistent with the immediately preceding information. Seller shall
also be responsible for the payment of any transfer taxes, penalties or fees
(including, without limitation, any penalty or fee for prepayment of the ▇▇▇▇▇▇
Mortgage or any ▇▇▇ fee) relating to the repayment of the Corporation's
Indebtedness and related transfer of real property, except that Seller and Buyer
shall each pay one half of the $21,165 administrative fee owed to the ▇▇▇ of
Orleans County with respect to the existing ▇▇▇▇▇▇ Mortgage financing.
Page 29 of 107
2.7 BRIDGE FINANCING.
(a) RESTATED MORTGAGE NOTE. The Restated Mortgage Note, which shall be
substantially in the form of EXHIBIT 2.7(a), shall have a term of 18 months with
interest payable to Seller monthly at the rate of 12% per annum for the first 6
months and 15% per annum for the remaining 12 months. Seller may not assign the
Restated Mortgage Note without the written consent of Buyer and Buyer's senior
lender not to be unreasonably withheld.
(b) MORTGAGE MODIFICATION AND EXTENSION AGREEMENT. The Restated
Mortgage Note shall be secured by an assignment of the ▇▇▇▇▇▇ Mortgage to
Seller. At the Closing, Buyer and Seller shall execute and deliver a mortgage
modification and extension agreement substantially in the form of EXHIBIT 2.7(b)
representing a first mortgage on the ▇▇▇▇▇▇ Real Property (the "Mortgage
Modification and Extension Agreement"). Seller may not assign the Mortgage
Modification and Extension Agreement without the written consent of Buyer and
Buyer's senior lender not to be unreasonably withheld. Notwithstanding any other
provision of this Agreement, Seller shall be entitled to exercise its rights and
remedies under the Mortgage Modification and Extension Agreement during the term
of the Restated Mortgage Note.
(c) SUBSEQUENT MORTGAGE FINANCING OBLIGATION. At Buyer's option, Seller
shall, within 30 days after maturity of the Restated Mortgage Note, refinance
the outstanding balance under the Restated Mortgage Note by taking a new note
from Buyer with a term of 5 years, with payments of principal and interest
amortized over 15 years and interest payable at 3.5% over the then current
interest rate on 5 year U.S. Treasuries (the "Subsequent Note"), if (i) the
Restated Mortgage Note is not repaid in full upon maturity, (ii) except for
non-payment of the principal amount of the Restated Mortgage Note, Buyer is not
in default under the Restated Mortgage Note at the time of the refinancing, and
(iii) Buyer is not in default under its senior lender debt at the time of the
refinancing. The Subsequent Note will be secured by a first mortgage on the
▇▇▇▇▇▇ Real Property (the "Subsequent Mortgage"). The balance of the terms of
the Subsequent Note and the terms of the Subsequent Mortgage shall be such terms
as are commercially reasonable. Seller may not assign the Subsequent Note or
Subsequent Mortgage without the written consent of Buyer and Buyer's senior
lender not to be unreasonably withheld. If Buyer has made a good faith claim for
indemnification in excess of the cash portion of the Escrow Funds that is
unresolved upon maturity of the Restated Mortgage Note, then the Subsequent Note
will consist of two notes. The first note shall be in amount equal to the amount
by which Buyer's good faith claim for indemnification exceeds the cash portion
of the Escrow Funds but shall not exceed the amount by which total Escrow Funds
immediately prior to maturity of the Restated Mortgage Note exceed the cash
portion of the Escrow Funds. The first note shall be delivered to the Escrow
Agent and held as Escrow Funds under the terms of the Escrow Agreement. The
second note shall be in amount equal to the remainder of the outstanding balance
under the Restated Mortgage Note. The second note shall be delivered to Seller.
If there are two notes, the portion of the monthly payment allocable to
principal on the first note shall be payable to the Escrow Agent and the portion
allocable to interest shall be payable directly to Seller. Monthly payments on
the second note shall be payable to Seller. If Buyer has made a good faith claim
for indemnification in excess of the cash portion of the Escrow Funds that is
unresolved at the time the ▇▇▇▇▇▇ Real Property is sold upon foreclosure, then
Seller's proceeds from the sale to the extent of the principal outstanding on
the first note will be paid to the Escrow Agent and held as Escrow Funds under
the terms of the Escrow Agreement. Notwithstanding
Page 30 of 107
anything to the contrary contained in the Restated Mortgage Note and the
Mortgage Modification and Extension Agreement, in the event Buyer refinances the
Restated Mortgage Note and the Mortgage Modification and Extension Agreement
with Seller upon maturity as described in this Section 2.7(c), Seller agrees
that (a) no late payment charge will be assessed, (b) the interest rate charged
on the Restated Mortgage Note shall remain at the then applicable rate until the
refinanced rate is established or Buyer is no longer making a good faith effort
to complete the refinancing, and (c) if no event of default exists other than
non-payment of principal, Seller shall not seek to exercise its remedies under
the Restated Mortgage Note and Mortgage Modification Extension Agreement,
provided that Buyer is making a good faith effort to complete the refinancing.
(d) LETTER OF CREDIT. The Restated Mortgage Note shall also be secured
by a $500,000 irrevocable letter of credit to be provided to Seller by Buyer
from Buyer's senior lender (the "Letter of Credit"). The Letter of Credit will
have a term of 19 months beginning on the Closing Date. Seller may not draw upon
the Letter of Credit until maturity of the Restated Mortgage Note and then only
under the terms and conditions set forth in this Section 2.7(d). If an event of
default exists upon maturity of the Restated Mortgage Note other than
non-payment of principal and the Restated Mortgage Note is not refinanced as
provided in Section 2.7(c), the term of the Letter of Credit will be extended
and Buyer may draw upon the Letter of Credit only to the extent the proceeds
from a sale of the ▇▇▇▇▇▇ Real Property upon foreclosure do not satisfy Buyer's
outstanding obligations under the Restated Mortgage Note. If Buyer refinances
with Seller as set forth in Section 2.7(c), upon execution and delivery of the
Subsequent Note and the Subsequent Mortgage, Seller may draw upon the Letter of
Credit up to the lesser of (i) the amount of the Letter of Credit or (ii) the
amount outstanding under the Restated Mortgage Note immediately prior to
execution and delivery of the Subsequent Note and the Subsequent Mortgage, with
the amount drawn being applied against the Subsequent Note. If Buyer has made a
good faith claim for indemnification in excess of the cash portion of the Escrow
Funds that is unresolved at the ▇▇▇▇ ▇▇▇▇▇▇ makes a draw upon the Letter of
Credit, the funds drawn, up to the amount by which the amount of the claim
exceeds the cash portion of the Escrow Amount, will be paid to the Escrow Agent
and held as Escrow Funds under the terms of the Escrow Agreement. Any reduction
of the Subsequent Note under this Section shall first be made to the first note
(referred to in Section 2.7(c)). The Letter of Credit will contain the terms and
conditions set forth in this Section 2.7(d) and otherwise will be in form
acceptable to both Seller and Buyer's senior lender.
(e) DISBURSEMENTS OF ESCROW FUNDS. If disbursements of the Escrow Funds
are required in excess of the cash balance of the Escrow Funds, such excess
shall be set off against the Restated Mortgage Note as follows, first to any
unpaid charges, then to outstanding interest and then to reduce principal.
(f) THIRD PARTY MORTGAGE REFINANCING. Buyer agrees to use commercially
reasonable efforts to find a new mortgage lender. Upon finding a new mortgage
lender and closing of the replacement mortgage financing, Buyer shall pay the
funds received, up to the amount of the outstanding principal under the Restated
Mortgage Note, to the Escrow Agent in cash by wire transfer, certified check or
bank draft to the account designated by the Escrow Agent under Section 2.4(a).
The outstanding principal under the Restated Mortgage Note shall be reduced by
the amount of principal so received.
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(g) FEES AND COSTS. Buyer shall be responsible for the payment of (i)
any ▇▇▇ fees relating to the Restated Mortgage Note financing, but only to the
extent such fees exceed the ▇▇▇ fees that would have been payable by Buyer had
the ▇▇▇▇▇▇ Mortgage been discharged immediately prior to or upon the Closing
Date, and (ii) Seller's costs related to the Restated Mortgage Note financing
except any penalty or fee for prepayment of the ▇▇▇▇▇▇ Mortgage.
ARTICLE 3
---------
CLOSING
-------
3.1 CLOSING. The closing of the transactions contemplated by this Agreement
shall be held at 10:00 a.m. local time on the Closing Date at the offices of
▇▇▇▇▇ Peabody LLP, Rochester, New York, or any other place as Buyer and Seller
mutually agree in writing ("Closing"). The Closing shall be effective as of the
close of business on the Effective Date. Seller shall operate the business for
the account of Buyer from the day following the Effective Date to the Closing
Date.
3.2 CONVEYANCES AT CLOSING.
(a) INSTRUMENTS AND POSSESSION. Upon the terms and conditions contained
in this Agreement, on the Closing Date, Seller shall deliver to Buyer (i) share
certificates representing all of the Shares, (ii) a stock power executed by
Seller conveying all of the Shares, (iii) such other instruments as shall be
reasonably requested by Buyer to vest in Buyer title in and to the Shares in
accordance with the provisions of this Agreement and (iv) such other documents
and agreements as are contemplated by this Agreement.
(b) FORM OF INSTRUMENTS. All of such instruments shall be in form and
substance, and shall be executed and delivered in a manner, reasonably
satisfactory to Buyer and Seller, but shall not diminish the status of title to
the Shares required to be delivered by Seller pursuant to this Agreement.
3.3 CERTIFICATES AND OTHER DOCUMENTS. Each of Buyer and Seller shall deliver or
cause to be delivered the certificates and other documents and items described
in Articles 6, 7 and 8 of this Agreement.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
OF SELLER
---------
Seller represents and warrants to Buyer as follows:
4.1 ORGANIZATION AND AUTHORITY OF THE CORPORATION TO CONDUCT BUSINESS. The
Corporation is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. SCHEDULE 4.1 sets forth the
jurisdiction of organization of the Corporation and each jurisdiction where it
is qualified to do business. The Corporation is duly qualified and in good
standing in each jurisdiction where it is required to be qualified and where the
failure to qualify
Page 32 of 107
might have a material adverse effect on the Business, financial condition or
operations of the Corporation. The Corporation has full corporate power and
authority to conduct its business as it is presently being conducted and to own
and lease its properties and assets. Except as set forth on SCHEDULE 4.1, the
Corporation does not have any stock or equity interest in any other Person.
4.2 POWER AND AUTHORITY; BINDING EFFECT. The Seller has all necessary power and
authority and has taken all action necessary to authorize, execute and deliver
this Agreement, to consummate the transactions contemplated by this Agreement,
and to perform its obligations under this Agreement. This Agreement has been
duly executed and delivered by the Seller and constitutes a legal, valid and
binding obligation of the Seller enforceable against the Seller in accordance
with its terms, except as such enforcement may be limited by the Enforceability
Limitations.
4.3 AUTHORIZED AND ISSUED SHARES. The authorized capitalization of the
Corporation consists solely of one hundred (100) shares of Common Stock of the
par value of $1.00 per share of which only the Shares are issued and
outstanding. Seller owns all of the Shares. All of the Shares are duly
authorized, validly issued, fully paid and nonassessable, except as provided in
Section 630 of the New York Business Corporation Law. There are not now
outstanding any other shares, phantom shares or other securities, or any
options, warrants or any rights related to the Shares or to any other shares,
phantom shares or other securities of the Corporation. Except as set forth in
SCHEDULE 4.3, there are no agreements of any kind relating to the issuance of
any shares of the Corporation, or any convertible or exchangeable securities or
any options, warrants or other rights relating to the stock of the Corporation.
Except for this Agreement and as set forth in SCHEDULE 4.3, there are no voting
agreements, voting trusts, buy-sell agreements, options or right of first
purchase agreements or other agreements of any kind relating to the Shares.
4.4 TITLE OF SHARES AND CERTAIN OTHER ASSETS.
(a) The Seller has good title to the Shares, free and clear of all
Encumbrances, and at the Closing will have full legal right and power to sell,
assign and transfer title to the Shares to Buyer pursuant to this Agreement free
and clear of all Encumbrances.
(b) Except as set forth in SCHEDULE 4.4(b) and except for Permitted
Encumbrances, the Corporation has good title to all of its personal property,
free and clear of all Encumbrances.
(c) The Corporation owns or leases pursuant to leases described on
SCHEDULE 4.4(c) all tangible personal property used in the Business and all
other tangible personal property located at the real property described on
SCHEDULE 4.10 and owns or otherwise has sufficient rights with respect to all
intangible property used in connection with the Business necessary to carry on
the Business in the manner in which it is currently operated.
4.5 NO CONFLICT OR VIOLATION. The execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement, and the
fulfillment of the terms of this Agreement, do not and will not result in or
constitute (i) a violation of or conflict with any provision of the
organizational or other governing documents of the Corporation, (ii) except as
set forth on SCHEDULE 4.5, a breach of, a loss of rights under, or constitute an
event, occurrence, condition or act which is or, with the giving of notice or
the lapse of time, would
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become, a material default under, or result in the acceleration of any
obligations under, any term or provision of, any material contract, agreement,
indebtedness, lease, commitment, license, franchise, permit, authorization or
concession to which the Seller or the Corporation is a party, (iii) a violation
by the Seller or the Corporation of any statute, rule, regulation, ordinance,
by-law, code, order, judgment, writ, injunction, decree or award applicable to
the Seller or the Corporation which could result in a penalty in excess of
$1,000 or a loss of privilege or (iv) an imposition of any Encumbrance on the
Shares or any Encumbrance (other than a Permitted Encumbrance) on the assets of
the Corporation.
4.6 CONSENTS AND APPROVALS. Except as set forth on SCHEDULE 4.6, no consent,
approval or authorization of, or declaration, filing or registration with, any
Person is required to be made or obtained by the Seller in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated by this Agreement.
4.7 NO PROCEEDINGS. There is no Proceeding pending or, to the Knowledge of the
Seller, threatened against, relating to or affecting in any adverse manner the
transactions contemplated by this Agreement.
4.8 FINANCIAL STATEMENTS; UNKNOWN LIABILITIES.
(a) The Financial Statements have and will fairly present the financial
condition and the results of operations of the Corporation as of their
respective dates and for the periods then ended in accordance with GAAP applied
on a consistent basis. The Interim Financial Statements will fairly present the
financial condition and the results of operations of the Corporation as of their
date and for the period then ended in accordance with GAAP, except for the
absence of footnote disclosures and other routine differences between audited
and interim unaudited financial statements. The books and records of the
Corporation from which the Financial Statements have been prepared and from
which the Interim Financial Statements will be prepared fairly reflect in all
material respects the assets, liabilities and operations of the Corporation, and
the Financial Statements are in conformity therewith and the Interim Financial
Statements are and will be in conformity therewith.
(b) Except as disclosed on SCHEDULE 4.8, there are, and as of the
Effective Date there will be, no liabilities or obligations of any nature,
whether absolute, accrued, contingent, known, unknown, matured, unmatured or
otherwise, and whether or not required to be disclosed or provided for in
financial statements in accordance with GAAP, of the Corporation except (i)
liabilities and obligations reflected in the Financial Statements for the fiscal
year ended April 28, 2001, excluding any third party debt (other than the
mortgage presently existing on the real property located in Medina, New York
("Medina Mortgage") if the parties hereto agree to continue the ▇▇▇▇▇▇ Mortgage)
and excluding debt between the Corporation and any Affiliate and (ii)
liabilities and obligations incurred between April 28, 2001 and the Effective
Date in the ordinary course of business of the Corporation (none of which
results from, arises out of or relates to any breach of contract, breach of
contractual warranty, tort, infringement or violation of law).
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4.9 TAX MATTERS.
(a) Except as set forth on SCHEDULE 4.9, (i)(A) Seller with respect to
the Corporation and (B) the Corporation and any company now or previously owned
by the Corporation including, without limitation, T.K.I. Foods, Inc. and Freedom
Foods and any subsidiary of T.K.I. Foods, Inc. and Freedom Foods (a
"Subsidiary"), (1) has filed all Tax Returns required to be filed, (2) all Taxes
required to have been withheld in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party
have been withheld, (3) all such Tax Returns were correct and complete in all
material respects when filed, (ii) all Taxes required to have been paid by the
Corporation or any Subsidiary (whether or not shown on any Tax Return),
including, without limitation, Taxes for which the Corporation is jointly and
severally liable with Seller (or an Affiliate of Seller or the Corporation),
have been paid, (iii) neither the Corporation nor any Subsidiary, nor Seller
(nor any Affiliate of Seller or the Corporation), is currently the beneficiary
of any extension of time within which to file any Tax Return and (iv) no notice
has been received by the Corporation or any Subsidiary (or Seller or any
Affiliate of the Corporation or Seller if the Corporation is jointly and
severally liable for any Tax related thereto) and no claim has been made in the
last 5 years by any Governmental Authority in a jurisdiction where the
Corporation or any Subsidiary (or Seller or any Affiliate of the Corporation or
Seller if the Corporation is jointly and severally liable for any Tax related
thereto) does not file Tax Returns that the Corporation or any Subsidiary (or
Seller or any Affiliate of the Corporation or Seller if the Corporation is
jointly and severally liable for any Tax related thereto) is or may be subject
to taxation by that jurisdiction. There are no Encumbrances on any of the assets
of the Corporation that arose in connection with any failure (or any alleged
failure) to pay any Tax.
(b) There is no dispute or claim concerning any Tax liability of the
Corporation or any Subsidiary or Seller (or any Affiliate of the Corporation or
Seller for any period during which the Corporation was jointly and severally
liable with such Persons for Taxes) either (i) claimed or raised by any
Governmental Authority in writing or (ii) as to which the Corporation or Seller
(or any Affiliate of the Corporation or any Subsidiary or Seller) has Knowledge.
SCHEDULE 4.9 lists all federal, state, local, and foreign Tax Returns filed with
respect to the Corporation or any Subsidiary (or Seller or any Affiliate of
Seller or the Corporation if by virtue of filing such Tax Return the Corporation
is jointly and severally liable for any Tax related to such Tax Return) for any
taxable period ended on or after May 3, 1997, indicates those Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of an audit. Seller has delivered to Buyer correct and complete copies
of all federal, state, and local and foreign Tax Returns, examination reports,
and statements of deficiencies agreed to by the Corporation or any Subsidiary
(or Seller or any Affiliate of Seller or the Corporation if the Corporation is
jointly and severally liable for any Tax related thereto) for any period ended
on or after May 3, 1997.
4.10 REAL PROPERTY. SCHEDULE 4.10 contains a true, complete and correct
list of the Real Property and identifies all Real Property which constitutes
Current Real Property. Except as set forth on SCHEDULE 4.10, (a) the Corporation
enjoys peaceful and undisturbed possession of the Current Real Property it
leases, (b) none of the Current Real Property is subject to any commitment for
sale or use by any Person other than to the extent the Corporation leases said
Current Real Property, (c) none of the Current Real Property is subject to any
Encumbrance
Page 35 of 107
which in any material respect interferes with or impairs the value,
transferability or present and continued use thereof in the usual and normal
conduct of the Business, (d) no labor has been performed or material furnished
for the Current Real Property for which a mechanic's or materialman's lien or
liens, or any other lien, has been or could be claimed by any Person, (e) the
Current Real Property, and each user thereof, is, to the knowledge of Seller, in
material compliance with all Governmental Requirements (including without
limitation all zoning, subdivision and other applicable land use ordinances) and
all existing covenants, conditions, restrictions and easements, and the current
use of the Current Real Property does not constitute a non-conforming use under
the applicable zoning ordinances and (f) no default or breach exists with
respect to, and the Corporation has not received any notice of any default or
breach under, any Encumbrance affecting any of the Current Real Property. There
are no condemnation, eminent domain or expropriation proceedings pending, or to
the Knowledge of Seller contemplated or threatened, against the Current Real
Property or any part thereof, and the Seller does not know of any desire of any
Governmental Authority to take or use the Current Real Property or any part
thereof. There are no existing, or to the Knowledge of Seller, contemplated or
threatened, general or special assessments affecting the Current Real Property
or any portion thereof. The Corporation has not received notice of, nor does
Seller have any Knowledge of, any pending or threatened Proceeding (including
without limitation condemnation or eminent domain proceeding) before any
Governmental Authority which relates to the ownership, maintenance, use or
operation of the Current Real Property, nor does the Seller know of any fact
which might give rise to any such Proceeding or any type of existing or intended
use of any real property adjacent to the Current Real Property which might
materially adversely affect the use of the Current Real Property. To Seller's
Knowledge, none of the Current Real Property is located within any area
determined to be flood-prone under the Federal Flood Protection Act of 1973, or
any comparable state or local Governmental Requirement. The Corporation has not
received any notice from any insurance company of any defects or inadequacies in
the Current Real Property or any part thereof which would materially and
adversely affect the insurability of the Current Real Property or the premiums
for the insurance thereof, and no notice has been given by any insurance company
which has issued a policy with respect to any portion of the Current Real
Property or by any board of fire underwriters (or other body exercising similar
functions) requesting the performance of any repairs, alterations or other work
which has not been complied with. All water, sewer, gas, electric, telephone and
drainage facilities and all other utilities servicing the Current Real Property
are installed to the improvements situated on the Current Real Property, are, to
the knowledge of Seller, connected pursuant to valid permits, enter the Current
Real Property through adjoining public streets, are adequate for the present
operation of the Business and otherwise are in compliance in all material
respects with all Governmental Requirements applicable thereto. Access to and
from the Current Real Property is via public streets, which streets are
sufficient to ensure adequate vehicular and pedestrian access for the present
operation of the Business. Except as set forth on SCHEDULE 4.10, the buildings
and improvements on the Current Real Property (including, without limitation,
the heating, air conditioning, mechanical, electrical and other systems used in
connection therewith) are in a reasonable state of repair, have been well
maintained and are free from infestation by termites, other wood destroying
insects, vermin and other pests. Except as set forth on SCHEDULE 4.10, there are
no repairs or replacements exceeding $25,000 in the aggregate for all Current
Real Property or $5,000 for any single repair or replacement or which to
Seller's Knowledge are
Page 36 of 107
required to avoid interruption of the Business or which are currently
contemplated by the Corporation.
4.11 TANGIBLE PERSONAL PROPERTY. Seller has delivered to Buyer (a) a
depreciation list of each item of Tangible Personal Property owned by the
Corporation having a value in excess of $5,000, and (b) a list of each item of
Tangible Personal Property leased by the Corporation having an annual rental in
excess of $5,000. Except as set forth in SCHEDULE 4.11, there is no tangible
personal property used in the operation of the Business other than the Tangible
Personal Property. Except as set forth on SCHEDULE 4.11, the Tangible Personal
Property owned by the Corporation is free and clear of any Encumbrances (other
than Permitted Encumbrances). Except as set forth on SCHEDULE 4.11, all of the
Tangible Personal Property is located at the Current Real Property and there is
no tangible personal property located at the Current Real Property which is not
owned or leased by the Corporation. Except as set forth in SCHEDULE 4.11, the
Tangible Personal Property is in good working condition and adequate for its
intended use, ordinary wear and tear and normal repairs and replacements
excepted. Except as disclosed on SCHEDULE 4.11, there are no repairs or
replacements exceeding $25,000 in the aggregate for all Tangible Personal
Property or $5,000 for any single item of Tangible Personal Property which are
currently budgeted for by the Corporation or required to avoid an interruption
to production in the near future.
4.12 INTELLECTUAL PROPERTY.
(a) Except as set forth on SCHEDULE 4.12, (i) there is no material
intellectual property used in the Business other than the Intellectual Property,
(ii) each material item of Intellectual Property owned or used by the
Corporation immediately prior to the Closing Date will be owned or available for
use by the Corporation on substantially similar terms and conditions immediately
subsequent to the Closing Date and (iii) the Corporation has taken reasonable
commercial actions to maintain and protect each item of material Intellectual
Property used in the Business.
(b) Except as set forth on SCHEDULE 4.12, to the Seller's Knowledge (i)
the Corporation has not during the last 5 years interfered with, infringed upon,
misappropriated or otherwise come into conflict with any intellectual property
rights of third parties, and the Corporation has not received any charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that the Corporation must
license or refrain from using any intangible property rights of any third party)
which has not been resolved and (ii) no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any of the
Intellectual Property.
(c) SCHEDULE 4.12 identifies each patent or registration which has been
issued to the Corporation with respect to any of the Intellectual Property,
identifies each pending patent application or application for registration which
the Corporation has made with respect to any of the Intellectual Property, and
identifies each license or other agreement which the Corporation has granted to
any third party with respect to any of the Intellectual Property. Seller has
delivered to Buyer correct and complete copies of all such patents,
registrations, applications, licenses and agreements (as amended to date) and
has made available to Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each such
item. SCHEDULE 4.12 also identifies each trade name or unregistered
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trademark used by the Corporation. Except as set forth on SCHEDULE 4.12, with
respect to each item of Intellectual Property required to be identified in
SCHEDULE 4.12: (i) Seller has no Knowledge of any reason (other than possible
descriptiveness) why the Corporation would be unable to register with the United
States Patent and Trademark Office each item which is an unregistered trademark,
(ii) the Corporation possesses all right, title and interest in and to the item,
free and clear of any Encumbrances or licenses, (iii) the item is not subject to
any outstanding injunction, judgment, order, decree, ruling, or charge, (iv) no
Proceeding is pending or, to the Knowledge of Seller, threatened which
challenges the legality, validity, enforceability, use or ownership of the item
and (v) other than routine indemnities given to distributors, sales
representatives, dealers, brokers and customers, the Corporation has no current
obligations to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item.
(d) SCHEDULE 4.12 identifies each item of Intellectual Property that
any third party owns and that the Corporation uses pursuant to license,
sublicense or agreement. Seller has delivered to Buyer correct and complete
copies of all such licenses, sublicenses and other agreements (as amended to
date). Except as set forth on SCHEDULE 4.12, with respect to each item of
Intellectual Property required to be identified in SCHEDULE 4.12: (i) the
license, sublicense or other agreement covering the item is enforceable, except
as may be limited by Enforceability Limitations, (ii) following the Closing, the
license, sublicense or other agreement will continue to be enforceable on
substantially similar terms and conditions, except as may be limited by
Enforceability Limitations, (iii) neither the Corporation nor, to the Knowledge
of Seller, any other party to the license, sublicense or other agreement is in
material breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit early termination,
modification or acceleration thereunder, (iv) neither the Corporation nor, to
the Knowledge of Seller, any other party to the license, sublicense or other
agreement has repudiated any provision thereof, (v) to Seller's Knowledge the
underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge, (vi) no Proceeding is
pending or, to the Knowledge of Seller, threatened which challenges the
legality, validity, enforceability or use of the underlying item of Intellectual
Property and (vii) the Corporation has not granted any sublicense or similar
right with respect to the license, sublicense or other agreement.
(e) Except as set forth on SCHEDULE 4.12, to Seller's Knowledge Buyer's
use of the Intellectual Property will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any intangible property
rights of third parties as a result of the continued operation of the Business
as presently conducted and as presently proposed to be conducted.
4.13 COMPLIANCE WITH LAWS; PERMITS. Except as set forth on SCHEDULE 4.13, the
conduct of the Business is in compliance in all material respects with all
applicable Governmental Requirements, including, without limitation,
requirements of the U.S. Food and Drug Administration, the U.S. Department of
Agriculture and the New York Department of Agriculture and Markets. The
Corporation has not received any notice to the effect that, or otherwise been
advised that, the Corporation is not in compliance in all material respects with
any applicable Governmental Requirement and there are no presently existing
facts, circumstances or events which, with notice or lapse of time, would result
in material violations of any applicable Governmental Requirement. SCHEDULE 4.13
identifies all material Permits
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issued to the Corporation and currently in effect. Except as set forth on
SCHEDULE 4.13, the Permits constitute all permits, consents, licenses,
franchises, authorizations and approvals used in the operation of and necessary
to conduct the Business. All of the Permits are valid and in full force and
effect, no violations have been experienced, noted or recorded and no violations
are expected, and no Proceeding is pending or, to the Knowledge of Seller,
threatened to revoke or limit any of the Permits.
4.14 LITIGATION. Except as set forth on SCHEDULE 4.14, there is no Proceeding
pending or, to the Knowledge of Seller, currently threatened which is (a) a
Proceeding against or relating to the Shares or the Corporation, or its
properties, assets or business or (b) a Proceeding relating to the Business and
against or relating to any partner, shareholder, member, director, officer or
employee of the Corporation.
4.15 LABOR MATTERS.
(a) SCHEDULE 4.15 identifies for each current employee of the
Corporation as of August 1, 2001, his or her name, position or job title, and
his or her current base compensation and bonus compensation. Except as set forth
on SCHEDULE 4.15: (i) the Corporation has no obligations under any written or
oral labor agreement, collective bargaining agreement or other agreement with
any labor organization or employee group, (ii) the Corporation is not currently
engaged in any unfair labor practice and there is no unfair labor practice
charge or other employee-related or employment-related complaint against the
Corporation pending or, to the Knowledge of Seller, threatened before any
Governmental Authority, (iii) there is currently no labor strike, labor
disturbance, slowdown, work stoppage or other material labor dispute or
arbitration pending or, to the Knowledge of Seller, threatened against the
Corporation and no material grievance currently being asserted, (iv) the
Corporation has not experienced a labor strike, labor disturbance, slowdown,
work stoppage or other material labor dispute at any time during the three years
immediately preceding the date of this Agreement and (v) there is no
organizational campaign being conducted or, to the Knowledge of Seller,
contemplated and there is no pending or, to the Knowledge of Seller, threatened
petition before any Governmental Authority or other dispute as to the
representation of any employees of the Corporation. Except as set forth on
SCHEDULE 4.15, the Corporation has complied in all material respects with, and
is currently in compliance in all material respects with, all applicable
Governmental Requirements relating to any of its employees or consultants
(including, without limitation, any Governmental Requirement of the Occupational
Safety and Health Administration), and the Corporation has not received within
the past 3 years any written notice of failure to comply with any such
Governmental Requirement which has not been rectified.
(b) Except as set forth on SCHEDULE 4.15, the Corporation has on file a
valid Form I-9 for each employee hired by the Corporation on or after November
7, 1986 and continuously employed after November 6, 1986 or the applicable date
of hire. Except as set forth on SCHEDULE 4.15, to the Knowledge of Seller, all
employees of the Corporation employed in the United States are (i) United States
citizens, or lawful permanent residents of the United States, (ii) aliens whose
right to work in the United States is unrestricted, (iii) aliens who have valid,
unexpired work authorization issued by the Attorney General of the United States
(Immigration and Naturalization Service) or (iv) aliens who have been
continually employed by the Corporation since November 6, 1986 or the applicable
date of hire. Except as set forth on
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SCHEDULE 4.15, the Corporation has not been the subject of an immigration
compliance or employment visit from, nor has the Corporation been assessed any
fine or penalty by, or been the subject of any order or directive of, the United
States Department of Labor or the Attorney General of the United States
(Immigration and Naturalization Service).
4.16 EMPLOYEE BENEFIT PLANS. With respect to the Employee Benefit Plans of the
Corporation:
(a) SCHEDULE 4.16 sets forth a list identifying each Employee Benefit
Plan which is an Employee Pension Benefit Plan, including any Multiemployer
Plan, and a list identifying each Employee Benefit Plan which is an Employee
Welfare Benefit Plan. Except as otherwise identified on SCHEDULE 4.16, (i) no
Employee Benefit Plan is maintained, administered or contributed to by any
entity other than the Corporation, and (ii) no Employee Benefit Plan is
maintained under any trust arrangement which covers any employee benefit
arrangement which is not an Employee Benefit Plan.
(b) The Corporation has delivered or has caused to be delivered to
Buyer true and complete copies of (i) the Employee Benefit Plans (including
related trust agreements, custodial agreements, insurance contracts, investment
contracts and other funding arrangements, if any, and adoption agreements, if
any), (ii) any amendments to the Employee Benefit Plans, (iii) written
interpretations of the Employee Benefit Plans, (iv) summary plan descriptions
and summaries of material modifications, as defined under ERISA, of each
Employee Benefit Plan for which such documents are required by ERISA), (v) the
three most recent annual reports (e.g., the complete Form 5500 series) prepared
in connection with each Employee Benefit Plan (if any such report was required),
including all attachments (including, without limitation, the audited financial
statements, if any) and (vi) the three most recent actuarial valuation reports
prepared in connection with each Employee Benefit Plan (if any such report was
required).
(c) Each Employee Benefit Plan which is an Employee Pension Benefit
Plan that is intended to be "qualified" within the meaning of Section 401(a) of
the Code has received a favorable determination letter from the IRS. The
Corporation has delivered or caused to be delivered to Buyer the latest
determination letters of the Internal Revenue Service relating to each such
Employee Benefit Plan. Such determination letters have not been revoked.
Furthermore, there are no pending proceedings or, to the Knowledge of the
Corporation or Seller, threatened proceedings in which the "qualified" status of
any such Employee Benefit Plan is at issue and in which revocation of the
determination letter has been threatened. Each such Employee Benefit Plan has
not been amended or operated, since the receipt of the most recent determination
letter, in a manner that would adversely affect the "qualified" status of the
Plan. No distributions have been made from any such Employee Benefit Plan that
would violate in any respect the restrictions under Treas. Reg. Section
1.401(a)(4)-5(b), and none will have been made by the Closing Date. There has
been no termination or partial termination, as defined in Section 411(d) of the
Code and the regulations thereunder, of any such Employee Benefit Plan.
(d) The Corporation has made all required contributions under each
Employee Benefit Plan on a timely basis or, if not yet due, adequate accruals
therefore have been provided for in the Financial Statements. No Employee
Benefit Plan which is an Employee Pension Benefit Plan has incurred any
"accumulated funding deficiency" within the meaning of
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Section 302 of ERISA or Section 412 of the Code and no such Plan has applied for
or received a waiver of the minimum funding standards imposed by Section 412 of
the Code.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Corporation relating to, or change
in employee participation or coverage under any Employee Benefit Plan that would
increase materially the expense of maintaining such Employee Benefit Plan above
the level of expense incurred in respect of such Employee Benefit Plan for the
most recent plan year with respect to Employee Benefit Plans. The execution of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not constitute an event under any Employee Benefit Plan, which
(either alone or upon the occurrence of a subsequent event) will or may result
in any payment, acceleration, vesting or increase in benefits to any employee,
former employee or director of the Corporation.
(f) Except as set forth on SCHEDULE 4.16, each Employee Benefit Plan
has been maintained in compliance with its terms and the requirements prescribed
by any and all Governmental Requirements, including but not limited to, ERISA
and the Code, which are applicable to such Employee Benefit Plan.
(g) Except as set forth on SCHEDULE 4.16, there are no pending or, to
the Knowledge of Seller, threatened (i) Proceedings by any employees, former
employees or plan participants or the beneficiaries, spouses or representatives
of any of them, other than ordinary and usual claims for benefits by
participants or beneficiaries, or (ii) Proceedings by any Governmental Authority
of or against any Employee Benefit Plan, the assets held thereunder, the trustee
of any such assets, or the Corporation relating to any of the Employee Benefit
Plans. If any of the actions described in this Section 4.16(g) are initiated
prior to the Closing Date, Seller shall notify Buyer of such action prior to the
date of Closing.
(h) The Corporation has not engaged in (i) any transaction or acted or
failed to act in a manner that violates the fiduciary requirements of Section
404 of ERISA, or (ii) any Prohibited Transaction with respect to any Employee
Benefit Plans, and will not so engage, act or fail to act prior to the Closing
Date. Furthermore, to the Knowledge of Seller, no other "party in interest," as
defined in Section 3(14) of ERISA, or "disqualified person," as defined in
Section 4975(e)(2) of the Code, has engaged in any Prohibited Transaction.
(i) No liability has been incurred by the Corporation or any ERISA
Affiliate for any tax, penalty or other liability, other than the liability to
make contributions and to pay benefits in the normal course, with respect to any
Employee Benefit Plan and, to the Knowledge of Seller, such Plans do not expect
to incur any such liability prior to the date of Closing.
(j) Except for required premium payments, no liability to the Pension
Benefit Guaranty Corporation (the "PBGC") has been incurred by the Corporation
or its Affiliates with respect to any Employee Benefit Plan which is an Employee
Pension Benefit Plan that has not been satisfied in full, and no event has
occurred and there exists no condition or set of circumstances that could result
in the imposition of any such liability. The Corporation has complied, or will
comply, with all requirements for premium payments, including any interest and
penalty charges for late payment, due to PBGC on or before the Closing Date with
respect to each Employee Benefit Plan for which any premiums are required. No
proceedings to terminate,
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pursuant to Section 4042 of ERISA, have been instituted or, to the Knowledge of
the Corporation or Seller, are threatened by the PBGC with respect to any
Employee Benefit Plan (or any Pension Plan maintained by an ERISA Affiliate).
There has been no termination or partial termination, as defined in Section
411(d) of the Code and the regulations thereunder, of any Employee Benefit Plan
which is an Employee Pension Benefit Plan. No reportable event, within the
meaning of Section 4043 of ERISA, has occurred with respect to any Employee
Benefit Plan which is an Employee Pension Benefit Plan.
(k) As of the date of this Agreement, with respect to each Employee
Benefit Plan which is covered by Title IV of ERISA and which is not a
Multiemployer Plan, the current value of the accumulated benefit obligations
(based on the actuarial assumptions that would be utilized upon termination of
such Plan) do not exceed the current fair value of the assets of such Employee
Benefit Plan. Except as listed in SCHEDULE 4.16, there has been no material
adverse change in the financial condition of any such Employee Benefit Plan, no
change in actuarial assumptions with respect to any such Employee Benefit Plan
and no increase in benefits under any such Employee Benefit Plan as a result of
plan amendment, written interpretations, announcements, change in applicable law
or otherwise which, individually or in the aggregate, would result in the value
of any such Employee Benefit Plan's accrued benefits exceeding the current value
of such Employee Benefit Plan's assets.
(l) Except as disclosed on SCHEDULE 4.16, neither the Corporation nor
any ERISA Affiliate has ever maintained, adopted or established, contributed or
been required to contribute to, or otherwise participated in or been required to
participate in, nor will they become obligated to do so through the Closing
Date, any Multiemployer Plan. Except as disclosed on SCHEDULE 4.16, no amount is
due from, or owed by, the Corporation or any ERISA Affiliate on account of a
Multiemployer Plan of ERISA or on account of any withdrawal therefrom.
(m) Except as disclosed on SCHEDULE 4.16, no Employee Benefit Plan
provides benefits, including without limitation, any severance or other
post-employment benefit, salary continuation, termination, death, disability, or
health or medical benefits (whether or not insured), life insurance or similar
benefit with respect to current or former employees (or their spouses or
dependents) of the Corporation beyond their retirement or other termination of
service other than (i) coverage mandated by applicable law, (ii) deferred
compensation benefits fully accrued as Accrued Liabilities on the Financial
Statements or Interim Financial Statements, or (iii) benefits, the full cost of
which is borne by the current or former employee (or his or her beneficiary).
(n) Each Employee Benefit Plan which is an Employee Welfare Benefit
Plan that is a group health plan (as defined for the purposes of Section 4980B
of the Code and Part 6 of Subtitle B of Title I of ERISA, and all regulations
thereunder, ("COBRA")) has complied at all times, and will continue to comply
through the date of Closing, with requirements of COBRA to provide health care
continuation coverage to qualified beneficiaries who have elected, or may elect
to have, such coverage. The Corporation or its agent who administers any such
Employee Welfare Benefit Plans, have complied at all times and will continue to
comply through the date of Closing, with the notification and written notice
requirements of COBRA. There are no pending or, to the Knowledge of Seller,
threatened claims, suits, or other proceedings by any employee, former employee,
participants or by the beneficiary, dependent or representative of
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any such person, involving the failure of any such Employee Welfare Benefit Plan
or of any other group health plan ever maintained by the Corporation to comply
with the health care continuation coverage requirements of COBRA.
(o) Each Employee Benefit Plan which is an Employee Welfare Benefit
Plan and that is a group health plan (as defined for the purposes of Section
9832(a) of the Code) has complied at all times, and will continue to comply
through the date of Closing, with requirements of Sections 9801 and 9802 of the
Code.
(p) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Corporation that, individually or in the
aggregate, could give rise to the payment by the Corporation, directly or
indirectly, of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
4.17 TRANSACTIONS WITH CERTAIN PERSONS. Except as set forth on SCHEDULE 4.17 or
as otherwise disclosed in this Agreement, (a) no Related Person is presently, or
at any time during the past 1 year has been, a party to any transaction with the
Corporation including, without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of services to or by, (ii)
providing for the rental or sale of real or personal property to or from or
(iii) otherwise requiring payments annually to or from (other than for services
as officers or employees of the Corporation), such Related Person and (b) no
shareholder, director, officer or employee of the Corporation is related to any
other shareholder, director, officer or employee of the Corporation by blood or
marriage. All such transactions have been and are on an arms-length basis
providing for substantially the same payment and performance terms as would
reasonably be expected to be negotiated with an independent third party. Except
as set forth on SCHEDULE 4.17, there is no outstanding amount in excess of $500
owing (including, without limitation, pursuant to any advance, note or other
indebtedness instrument) from the Corporation to any Related Person identified
on SCHEDULE 4.17 or from any Related Person identified on SCHEDULE 4.17 to the
Corporation.
4.18 INSURANCE. SCHEDULE 4.18 contains a complete and accurate list of all
current policies or binders of Insurance (showing as to each policy or binder
the carrier, policy number, coverage limits, expiration dates, annual premiums,
deductibles and a general description of the type of coverage provided and
policy exclusions) maintained by the Corporation and relating to the
Corporation's properties, assets and personnel. Except as set forth on SCHEDULE
4.18, all of the Insurance is "occurrence" based insurance. The Insurance is in
full force and effect and sufficient for compliance in all material respects
with all requirements of applicable law and of all contracts to which the
Corporation is a party. The Corporation is not in material default under any of
the Insurance, and the Corporation has not failed to give any notice or to
present any claim under any of the Insurance in a due and timely manner. No
notice of cancellation, termination, reduction in coverage or increase in
premium (other than reductions in coverage or increases in premiums in the
ordinary course) has been received with respect to any of the Insurance, and all
premiums with respect to any of the Insurance have been timely paid. The
Corporation has not experienced claims in excess of current coverage of the
Insurance. Except as disclosed on SCHEDULE 4.18, there will be no retrospective
insurance premiums or charges on or with respect to any of the Insurance for any
period or occurrence through the Effective Date.
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4.19 INVENTORY. Except as set forth on SCHEDULE 4.19, (a) all of the Inventory
is owned by the Corporation free and clear of any Encumbrances (other than
Permitted Encumbrances) and is located at the Current Real Property, (b) none of
the Inventory is on consignment, (c) the Inventory reflected in the Financial
Statements and Interim Financial Statements has been valued in a manner
consistent with past practices and procedures and in accordance with GAAP, and
(d) all inventory located at the Current Real Property is owned by the
Corporation and is not held by the Corporation (on consignment or otherwise) for
or on behalf of any other Person. If any inventory located at the Current Real
Property is not owned by the Corporation, the information concerning this
inventory provided on SCHEDULE 4.19 is based on a recent physical count.
Attached as part of SCHEDULE 4.19 is the Corporation's report entitled Status of
Obsolete Reserves dated as of the Effective Date. This report accurately
reflects the amount and value of all Inventory located at the premises of
suppliers as of the date of this Agreement that is (a) owned by the Corporation
or (b) for which the Corporation has a binding commitment to purchase. The
updated Status of Obsolete Reserves set forth in Item 2 of SCHEDULE 4.19
accurately reflects the amount, value and identity of Inventory taken as a
reserve on the balance sheet of the Corporation dated July 28, 2001.
4.20 ACCOUNTS RECEIVABLE. All of the Accounts Receivable of the Corporation are
bona fide receivables, are reflected on the books and records of the
Corporation, arose in the ordinary course of the Business and will be collected
in the ordinary course of business consistent with past collection practices at
their full face value net of reserves for doubtful accounts as reflected on the
Effective Date Financial Report. Except as set forth on SCHEDULE 4.20, no Person
has any liens on the Accounts Receivable, there is no right of offset against
any of the Accounts Receivable, and no agreement for deduction or discount has
been made with respect to any of the Accounts Receivable other than ordinary
course trade discounts.
4.21 MATERIAL CONTRACTS. SCHEDULE 4.21 contains a true and correct list or
description of the Material Contracts. True and correct copies of the Material
Contracts have been delivered to Buyer. Each of the Material Contracts is
enforceable against the Corporation and, to the Knowledge of Seller, each other
party thereto, in accordance with its terms, except as such enforcement may be
limited by Enforceability Limitations. Except as set forth on SCHEDULE 4.21,
neither the Corporation nor, to the Knowledge of Seller, any other party to any
Material Contract, is in material default thereunder or in material breach
thereof, and the Corporation has not during the past 2 years obtained or granted
any material waiver of or under any provision of any Material Contract. There
exists no event, occurrence, condition or act which constitutes or, with the
giving of notice, the lapse of time or the happening of any future event or
condition, would become a material default by the Corporation or, to the
Knowledge of Seller, any other party under any Material Contracts. Seller does
not know of a threatened default under any Material Contracts.
4.22 SUPPLIERS AND CUSTOMERS. SCHEDULE 4.22 contain a list of the 10 largest
suppliers and 20 largest customers of the Business for the fiscal year ending
April 28, 2001. Except as set forth on SCHEDULE 4.22, none of the suppliers or
customers set forth on SCHEDULE 4.22 has informed the Corporation that it
intends to terminate its relationship with the Corporation, and Seller is not
aware of any such supplier or customer that intends to terminate such
relationship or of any material problem or dispute with any such supplier or
customer. Seller believes that the Corporation has good business relationships
with each such supplier and customer. Seller does
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not believe that the consummation of a sale of the Shares will or is likely to
disrupt the existing relationships with any such supplier or customer in any
material respect.
4.23 BUSINESS RECORDS. No material records of accounts, personnel records and
other business records for the past 5 years relating to the Business have been
destroyed and all such records are available upon request, subject to applicable
Governmental Requirements and/or contractual prohibitions or limitations.
4.24 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 4.24 contains a true, complete
and correct list of all bank accounts and safe deposit boxes maintained by the
Corporation and all persons entitled to draw thereon, to withdraw therefrom or
with access thereto, a description of all lock box arrangements for the
Corporation and a description of all powers of attorney granted by the
Corporation.
4.25 ENVIRONMENTAL MATTERS. Except as described in environmental reports and
other documents listed in SCHEDULE 4.25, copies of which reports and documents
have been provided to Buyer, and further, with regard to all Predecessors and
all Persons other than Corporation, to Seller's Knowledge:
(a) the Corporation and its assets, properties and operations are now,
and at all times during Corporation's ownership or use of its assets and
properties prior to the Effective Date have been, in compliance in all material
respects with all applicable Environmental Laws, and each Predecessor and its
assets, properties and operations were in compliance in all material respects
with all applicable Environmental Laws;
(b) except in compliance with Environmental Laws, no Person has
generated, manufactured, refined, transported, treated, stored, handled,
disposed, transferred, produced or processed any Hazardous Substance at, on,
under the Real Property, and, to Seller's Knowledge, there has been and is no
Release of any Hazardous Substance at, on, under, in, to or from the Real
Property or in the vicinity of the Real Property, whether as a result of the
operations and activities at the Real Property or otherwise;
(c) no Person has caused or contributed to the Release of Hazardous
Substances at, on, under, in, to or from any of the Real Property and is not, to
the Knowledge of Seller, otherwise liable or potentially liable for any such
Releases and, to Seller's Knowledge, there exist no Environmental Conditions at,
on or under the Real Property;
(d) no Person has received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, the presence,
Release or threatened Release of any Hazardous Substance at any location,
whether at the Real Property or otherwise, that was allegedly manufactured,
used, generated, processed, treated, stored, disposed of or otherwise handled at
or transported from the Real Property or otherwise;
(e) no Person has received any notice of any other claim, demand or
action by any Person alleging any actual or threatened injury or damage to any
Person, property, natural resource or the environment arising from or relating
to the presence, Release or threatened Release of any Hazardous Substances at,
on, under, in, to or from the Real Property or in
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connection with any operations or activities thereat, or at, on, under, in, to
or from any other property;
(f) neither the Current Real Property nor any operations or activities
thereat is nor, to Seller's Knowledge has the Real Property been, subject to any
judicial or administrative proceeding, order, consent, agreement or any lien
relating to any applicable Environmental Laws or Environmental Claims;
(g) there are no underground storage tanks presently located at the
Current Real Property and, to Seller's Knowledge, there have been no Releases of
any Hazardous Substances from any underground storage tanks or related piping at
the Real Property;
(h) there is no equipment containing PCBs at levels greater than 50
parts per million located at, on, under or in the Current Real Property; and
(i) there is no asbestos or asbestos-containing material located at,
on, under or in the Current Real Property.
4.26 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 4.26 or as
reflected in the Interim Financial Statements delivered on or before the date of
this Agreement, since April 28, 2001 there has not been:
(a) any material adverse change in the Business, financial condition or
operations of the Corporation;
(b) any increase in the compensation of or granting of bonuses payable
or to become payable by the Corporation to any officer or employee for the
fiscal year ending April 28, 2001, other than annual increases or bonuses
consistent with the Corporation's past practices and not resulting in the
compensation for any such officer or employee for such fiscal year exceeding one
hundred and five percent (105%) of the compensation of such officer or employee
for the preceding fiscal year;
(c) any sale or transfer by the Corporation of any tangible or
intangible asset having a value at the time of disposition greater than $10,000
or $25,000 in the aggregate for all such assets, any mortgage or pledge or
creation of any Encumbrance relating to any such asset, any lease of real
property or equipment, or any cancellation of any debt or claim, except in the
ordinary course of business;
(d) any other material transaction not in the ordinary course of the
Business or not otherwise consistent with the Corporation's past practices
involving consideration in excess of $25,000; or
(e) any material change in accounting methods or principles.
4.27 BROKERS. Seller and/or the Corporation has entered into an agreement,
arrangement or understanding with ▇.▇. ▇▇▇▇▇▇▇ which will result in the
obligation to pay a finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated by
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this Agreement. Any such fee, commission or payment has been or will be paid
exclusively by Seller.
4.28 ABSENCE OF CERTAIN PAYMENTS. To the Knowledge of Seller, neither the
Corporation, nor any other Person owned or controlled by the Corporation, nor
any of its respective partners, shareholders, directors, officers, employees or
agents, or other people acting on behalf of any of them, have with respect to
the Business (a) engaged in any activity prohibited by the United States Foreign
Corrupt Practices Act of 1977 or any other similar law, regulation or decree,
directive or order of any Governmental Authority or (b) without limiting the
generality of the preceding clause (a), used any corporate or other funds for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to officials of any Governmental
Authority. To the Knowledge of Seller neither the Corporation, nor any Person
owned or controlled by the Corporation, nor any of its partners, shareholders,
directors, officers, employees or agents, or other Persons acting on behalf of
any of them, have accepted or received any unlawful contributions, payments,
gifts or expenditures.
4.29 PRODUCT GUARANTIES; PRODUCT LIABILITY.
(a) A form of each product guaranty relating to products produced
(including products produced under co-packing agreements), marketed, sold or
delivered by the Corporation at any time during the 2 year period preceding the
date of this Agreement is attached to or set forth on SCHEDULE 4.29.
(b) SCHEDULE 4.29 sets forth a true and complete list of (A) all
products produced (including products produced under co-packing agreements),
marketed, sold or delivered by the Corporation or any predecessor of the
Corporation that have been recalled or withdrawn (whether voluntarily or
otherwise) at any time since December 31, 1996 and (B) all Proceedings (whether
completed or pending) at any time since December 31, 1996 seeking the recall,
withdrawal, suspension or seizure of any product produced (including products
produced under co-packing agreements), marketed, sold or delivered by the
Corporation or any predecessor of the Corporation.
(c) Except to the extent covered by applicable insurance the
Corporation has no liability or potential liability arising out of any injury to
individuals or property as a result of the ownership, possession or use of any
product produced, marketed, sold or delivered by the Corporation, and, to the
Knowledge of the Corporation, there is no basis for the assertion of any such
liability against the Corporation.
4.30 EFFECTIVE DATE WORKING CAPITAL. The Corporation has not changed or varied
any of its practices concerning the collection of accounts receivable, the
payment of Accounts Payable, the Inventory levels it maintains or any other
methods or practices concerning the Corporation's working capital as a result of
or in contemplation of the transactions which are the subject of this Agreement.
4.31 CHANGE IN CONTROL. Except for this Agreement and as disclosed on SCHEDULE
4.31, the Corporation is not party to any contract or arrangement (including,
without limitation, any approval, authorization, declaration, filing or
registration) which contains a "change in control",
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"potential change in control" or similar provision, and the consummation of the
transactions contemplated by this Agreement shall not (either alone or upon the
occurrence of additional acts or events) result in any payment or payments
becoming due from the Corporation to any person or give any person the right to
terminate or alter the provisions of any agreement to which the Corporation is a
party.
4.32 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ SEVERANCE PAYMENTS . Neither the Corporation nor Buyer has
any obligation to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ with respect to (i) the Employment Agreement
or (ii) any other employment arrangements with ▇▇. ▇▇▇▇▇▇▇▇.
4.33 WORKERS COMPENSATION. Seller has maintained adequate workers compensation
coverage for the employees of the Corporation and has been in compliance with
all Governmental Requirements with respect to workers compensation matters.
Except as disclosed on SCHEDULE 4.33, there are no prior unpaid obligations or
pending claims or obligations for workers compensation by an employee or former
employee of the Corporation.
4.34 ENTERPRISE DEVELOPMENT ZONE OR SIMILAR CREDITS. Except as disclosed on
SCHEDULE 4.34, neither the Corporation nor Seller is obligated to repay or
refund any amount with respect to any Enterprise Development Zone credit or
similar credits offered by any Governmental Authority.
4.35 CONDUCT PENDING CLOSING. The covenants in Section 6.5 have not been
breached for the period from the Effective Date through the Closing Date.
4.36 MATERIAL MISSTATEMENTS OR OMISSIONS. None of the representations and
warranties by Seller in this Agreement contains any untrue statement of a
material fact, or omits to state any material fact necessary to make the
statements or facts contained therein not misleading.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer and Guarantor hereby jointly and severally represent and warrant
to Seller as follows:
5.1 ORGANIZATION AND GOOD STANDING. Buyer is a Delaware corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has full power and authority to conduct its business as
presently being conducted and to own and lease its properties and assets.
5.2 AUTHORITY; AUTHORIZATION; BINDING EFFECT. Buyer has all necessary power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement and to perform its obligations under
this Agreement. Copies of all resolutions of the board of directors of Buyer
with respect to the transactions contemplated by this Agreement, certified by
the Secretary or an Assistant Secretary of Buyer, in form reasonably
satisfactory to counsel for Seller, have been delivered to Seller. This
Agreement has been duly executed and delivered by Buyer and constitutes a legal,
valid and binding obligation of Buyer, enforceable
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against Buyer in accordance with its terms, except as such enforcement may be
limited by Enforceability Limitations.
5.3 NO CONFLICT OR VIOLATION. The execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement and the
performance by Buyer of its obligations under this Agreement, do not and will
not result in or constitute (i) a violation of or a conflict with any provision
of the certificate of incorporation or by-laws of Buyer, (ii) a breach of, a
loss of rights under, or constitute an event, occurrence, condition or act which
is or, with the giving of notice, the lapse of time or the happening of any
future event or condition, would become, a material default under, any term or
provision of any contract, agreement, indebtedness, lease, commitment, license,
franchise, permit, authorization or concession to which Buyer is a party or
(iii) a violation by Buyer of any statute, rule, regulation, ordinance, by-law,
code, order, judgment, writ, injunction, decree or award.
5.4 CONSENTS AND APPROVALS. Except as disclosed on SCHEDULE 5.4, no consent,
approval or authorization of, or declaration, filing or registration with, any
Person is required to be made or obtained by Buyer in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated by this Agreement.
5.5 NO PROCEEDINGS. There is no Proceeding pending or, to the knowledge of
Buyer, threatened against, relating to or affecting in any adverse manner the
transactions contemplated by this Agreement.
5.6 BROKERS. Buyer or its Affiliate has entered into an agreement, arrangement
or understanding with Shoniker and Associates which will result in the
obligation to pay a finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby. Any such fee, commission
or payment has been or will be paid exclusively by Buyer or its Affiliate.
5.7 MATERIAL MISSTATEMENTS OR OMISSIONS. None of the representations and
warranties by Buyer in this Agreement contains any untrue statement of a
material fact, or omits to state any material fact necessary to make the
statements or facts contained therein not misleading.
5.8 GUARANTOR. The representations and warranties in Section 5.1, 5.2, 5.3, 5.4,
5.5, 5.6 and 5.7 are true in respect of Guarantor as if "Buyer" is read to mean
"Guarantor" and "Agreement" is read to mean "Agreement and Guaranty," except
that Guarantor is incorporated under the laws of Ontario.
ARTICLE 6
---------
COVENANTS AND CONDUCT OF THE
----------------------------
PARTIES PRIOR TO AND AFTER CLOSING
----------------------------------
Seller, on the one hand, and Buyer, on the other hand, each covenant
and agree with the other as follows:
6.1 INVESTIGATION BY BUYER. During the period beginning on the date of this
Agreement and ending on the Closing Date, Buyer and each Representative of Buyer
may continue to conduct a
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due diligence review of the Corporation and the Business. In connection with
such due diligence review, Buyer and each Representative of Buyer shall be
granted full access to all Current Real Property upon reasonable prior notice
and during normal business hours, and Seller shall, upon request by Buyer,
arrange for Buyer to be granted full access to any third party warehouses or
other facilities where property of the Corporation is located. In connection
with such due diligence review, Seller agrees, and shall cause each
Representative of Seller, upon reasonable prior notice, to (i) cooperate with
Buyer and each Representative of Buyer, (ii) provide all information, and all
documents and other data relating to such information, reasonably requested by
Buyer or any Representative of Buyer (including, without limitation, (A) the
work papers of the Corporation's Accountants, (B) the Tax Returns of the
Corporation or any Subsidiary (or Seller or any Affiliate of Seller or the
Corporation to the extent that the Corporation is jointly and severally liable
for Taxes with respect to such Tax Return), and (C) all responses to auditor's
inquiry letters for the past 5 years or related to the preparation of the
Financial Statements) and (iii) permit Buyer and each Representative of Buyer to
inspect any assets of the Corporation. Buyer shall not be given access to
information regarding Seller's negotiations to sell the Business. Buyer shall
disclose to Seller in writing any information gained in its due diligence review
which might reasonably be adjudged to result in a breach of any of Seller's
representations, warranties and covenants. Except as set forth in Section 6.2,
Buyer and each Representative of Buyer shall be granted full access to all
Current Real Property upon reasonable prior notice and during normal business
hours. In connection with such due diligence review, Seller agrees, and shall
cause each Representative of Seller, upon reasonable prior notice, to (i)
cooperate with Buyer and each Representative of Buyer, (ii) provide all
information, and all documents and other data relating to such information,
reasonably requested by Buyer or any Representative of Buyer (including, without
limitation, the work papers of the Corporation's Accountants and all responses
to auditor's inquiry letters for the past 5 years or related to the preparation
of the Financial Statements) and (iii) permit Buyer and each Representative of
Buyer to inspect any assets of the Corporation.
6.2 ENVIRONMENTAL AUDITS. In addition to any environmental investigations and
audits conducted by Buyer or its Representatives prior to the date of this
Agreement, Buyer shall, at Buyer's sole expense, be permitted to cause further
environmental audits of the Real Property to be conducted assessing the presence
and/or disposition of Hazardous Substances and compliance with Environmental
Laws provided, however, that prior to conducting any intrusive testing on the
Corporation's property Buyer shall have executed and delivered an agreement,
acceptable to Seller which, among other things, requires Buyer and its
Representatives to comply with all applicable Environmental Laws and
Corporation's policies and procedures, provides evidence of general liability,
automobile, and pollution liability insurance and indemnification of Seller from
and against any personal injury and property damage arising from such intrusive
testing, and provided further that Buyer shall provide for Seller's approval a
written scope of work that describes the media to be sampled, number, depth and
location of samples, constituents for which analysis will be performed,
analytical methodologies to be used and other pertinent information. No
intrusive testing shall occur without Seller's prior approval which shall not be
unreasonably withheld. Seller shall cause the Corporation to grant a license to
Buyer's qualified environmental consultants to enter upon the Current Real
Property, upon giving the Corporation reasonable notice, with persons and
materials to conduct such environmental audits. Buyer shall provide Seller with
a copy of all draft reports of the environmental audits and provide Seller at
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least three business days to comment on such drafts. Buyer also shall provide
Seller with a copy of all final environmental audit reports.
6.3 MATTERS RELATING TO REAL PROPERTY .
(a) Buyer shall obtain, at Buyer's sole cost and expense, except that
Seller shall be responsible for the cost of the title search continuation work
through the Closing Date, a commitment from Attorneys Title Insurance Fund or
any other title insurance company acceptable to Buyer (the "Title Company") for
the issuance of an American Land Title Association ("ALTA") extended coverage
owner's policy of title insurance (including mechanics' lien coverage) for each
parcel included in the ▇▇▇▇▇▇ Real Property setting forth the status of title to
each such parcel (individually a "Title Commitment" and collectively the "Title
Commitments"). The Title Commitments shall be accompanied by true, complete and
legible copies of all Encumbrances identified therein. At Closing, the policies
to be issued pursuant to the Title Commitments (individually a "Title Policy"
and collectively the "Title Policies") shall insure that the Corporation has
good, marketable and indefeasible title to the ▇▇▇▇▇▇ Real Property, subject
only to those Encumbrances accepted by Buyer pursuant to subparagraph (c) of
this Section 6.3 ("Permitted Title Encumbrances"), and shall include the
additional coverages and endorsements described in SCHEDULE 6.3 attached hereto
(collectively the "Endorsements"). At the Closing, Seller shall deliver to the
Title Company such affidavits (including an affidavit of title) and other
documentation as shall be necessary to enable the Title Company to issue the
Title Policies with the Endorsements subject only to Permitted Title
Encumbrances and with a non-imputation endorsement reasonably acceptable to
Buyer. Buyer shall pay all fees and premiums incurred in the issuance of the
Title Policies.
(b) Buyer shall obtain, at Buyer's sole cost and expense, current
surveys covering each parcel included in the Owned Current Real Property
(individually a "Survey" and collectively the "Surveys"), dated subsequent to
this Agreement, each of which shall be prepared by a surveyor duly licensed
under the laws of the state in which such Current Real Property is located and
approved by Buyer. Each survey (i) shall be in form and substance satisfactory
to the Buyer and the Title Company, (ii) shall be prepared in accordance with
the 1997 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys
as adopted by ALTA and the American Congress on Surveying & Mapping and (iii)
shall be certified to Buyer, the Corporation and the Title Company using the
form of certification attached hereto as EXHIBIT 6.3.
(c) On or prior to the 10th business day following the Buyer's receipt
of the Title Commitment or all of the Surveys, whichever is later, Buyer shall
notify Seller in writing (the "Defect Notice") of any unacceptable Encumbrances
or other matters disclosed by either the Title Commitments or the Surveys
(individually a "Disapproved Encumbrance" and collectively the "Disapproved
Encumbrances"). Seller agrees to use commercially reasonable efforts to
eliminate the Disapproved Encumbrances or otherwise resolve the Disapproved
Encumbrances to the satisfaction of Buyer on or before the Closing Date. Seller
shall have 3 business days after receipt of the Defect Notice to notify Buyer in
writing (i) that the Disapproved Encumbrances will be eliminated or otherwise
resolved as provided above or (ii) that the Disapproved Encumbrances will not be
eliminated or otherwise resolved. If Seller elects not to cause any Disapproved
Encumbrance to be eliminated or otherwise resolved, Buyer shall have the right,
in its sole discretion, for a period of 5 business days following the expiration
of the 3 business day
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period provided for above, to notify Seller of Buyer's election to either waive
such objection and proceed with the Closing, without any reduction in the
Purchase Price, or to terminate this Agreement. Absent any notice from Buyer
within such 5 business day period, Buyer shall be deemed to have elected to
terminate this Agreement. If Seller gives notice that one or more Disapproved
Encumbrances will be eliminated or otherwise resolved, and such Disapproved
Encumbrances are not so eliminated or otherwise resolved on or before the
Closing Date, Buyer shall have the right to either (i) terminate this Agreement
by written notice to Seller or (ii) proceed with the Closing, with an abatement
of the Purchase Price equal to the actual cost of eliminating or resolving such
Disapproved Encumbrance.
6.4 NOTIFICATIONS, CONSENTS AND APPROVALS. As soon as practicable, Buyer and
Seller, as applicable, shall commence all reasonable actions to obtain the
consents and approvals and to make the filings set forth on SCHEDULE 6.4 (the
"Required Consents and Filings") required to consummate the transactions
contemplated by this Agreement.
6.5 CONDUCT PENDING CLOSING. Except as disclosed on SCHEDULE 6.5,
(a) From the Effective Date to the Closing Date, and except as
otherwise specifically provided in this Agreement or consented to or approved by
Buyer in advance in writing, such consent or approval not to be unreasonably
withheld or delayed, Seller agrees as follows:
(i) The Corporation shall carry on its business substantially in
the same manner as heretofore conducted and shall not engage in any transaction
or activity, enter into, terminate or amend any agreement or make any commitment
except in the ordinary course of business.
(ii) The Corporation shall use reasonable commercial efforts to
preserve its existence and business organization intact and to preserve its
properties, assets and relationships with its employees, suppliers, customers
and others with whom it has business relations.
(iii) The Corporation shall not (i) grant any increase in
compensation to any employee or (ii) enter into, or amend in any material
respect, any Employee Benefit Plan.
(iv) The Corporation shall not (A) grant any special conditions
with respect to any Account Receivable other than in the ordinary course of
business (e.g., extended terms), (B) fail to pay any Account Payable on a timely
basis in the ordinary course of business consistent with past practice, (C)
except as described on SCHEDULE 6.5 or as otherwise disclosed in this Agreement,
make or commit to make any capital expenditures, (D) purchase Inventory in
excess of supplies necessary in the ordinary course of business and, in no event
exceeding, for any particular item, a 6 month supply (E) ship Inventory or take
any other action designed or having the effect of accelerating the generation of
Accounts Receivable in a manner inconsistent with past practice or (F) start up
or acquire any new business or product line.
(v) The Corporation shall not enter into any settlement with
respect to any Proceeding against or relating to the Corporation, or any of its
officers, directors, employees, or properties, assets or business.
(vi) The Corporation shall not make any payment of principal
with respect to any debt owing to Seller or any other Affiliate; and Seller
hereby waives any rights it may have to any principal payments owed to it by the
Corporation during this period, provided that the transaction contemplated by
this Agreement is completed.
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(vii) No change or amendment shall be made in or to the
certificate or articles of incorporation or other governing or organizational
charter or instruments of the Corporation.
(viii) The Corporation shall not declare, pay or set aside for
payment any dividend or other distribution (whether in cash, stock or property)
with respect to its capital stock or directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock.
(ix) Neither the Seller nor the Corporation shall voluntarily
take any action which would cause, or voluntarily fail to take any action the
failure of which would cause, any representation or warranty of Seller contained
in this Agreement to be breached or untrue in any material respect.
(x) The Corporation shall not make any payment of interest
with respect to any debt owing to Seller or any other Affiliate; and Seller
hereby waives any rights it may have to any interest payments owed to it by the
Corporation during this period, provided that the transaction contemplated by
this Agreement is completed.
(b) From the date of this Agreement to the Closing Date, and except as
otherwise specifically provided in this Agreement or consented to or approved by
Seller in advance in writing, such consent or approval not to be unreasonably
withheld or delayed, Buyer shall not voluntarily take any action which would
cause, or voluntarily fail to take any action the failure of which would cause,
any representation or warranty of Buyer contained in this Agreement to be
breached or untrue in any respect.
6.6 NOTIFICATION OF CERTAIN MATTERS.
(a) Seller shall give prompt written notice to Buyer of (i) any fact or
circumstance, or any occurrence or failure to occur of any event of which Seller
has Knowledge, which fact, circumstance, occurrence or failure causes or, with
notice or the lapse of time, would cause any representation or warranty of
Seller contained in this Agreement to be breached or untrue or inaccurate in any
respect any time from the date of this Agreement to the Closing Date and (ii)
any failure of Seller to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by Seller under this Agreement.
(b) Buyer shall give prompt written notice to Seller of (i) any fact or
circumstance, or any occurrence or failure to occur of any event of which Buyer
has knowledge, which fact, circumstance, occurrence or failure causes or, with
notice or the lapse of time, would cause any representation or warranty of Buyer
contained in this Agreement to be breached or untrue or inaccurate in any
respect any time from the date of this Agreement to the Closing Date and (ii)
any failure of Buyer to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by Buyer under this Agreement.
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6.7 DELIVERY OF INTERIM FINANCIAL STATEMENTS. Within 20 days of the end of each
month after the execution of this Agreement and prior to the Closing Date,
Seller shall deliver or cause to be delivered to Buyer internally prepared
unaudited monthly and year-to-date interim financial statements of the
Corporation.
6.8 ESCROW AGREEMENT. On the Closing Date, each of Seller, Buyer and the Escrow
Agent shall enter into an escrow agreement substantially in the form attached as
EXHIBIT 6.8 (the "Escrow Agreement").
6.9 REPAYMENT OF EMPLOYEE ADVANCES. On or prior to the Closing Date, Seller
shall cause all outstanding employee advances to be repaid to the Corporation in
full, other than ordinary course travel advances in amounts consistent with past
practice.
6.10 TERMINATION OF RELATED PERSON ARRANGEMENTS. All agreements and other
arrangements, whether oral or written, with Related Persons which are disclosed
pursuant to Section 4.3 or 4.17 shall be terminated on or prior to the Closing
Date, except to the extent the continuation thereof is specifically consented to
by Buyer in writing.
6.11 ACCOUNTS RECEIVABLE PAYMENTS. After the Closing Date, Buyer will exercise
its commercially reasonable efforts to collect the Accounts Receivable, but
without being required to incur any third party expenses, so as to minimize the
amount of the Accounts Receivable which remain uncollected 120 days after the
Effective Date. Seller will deliver to Buyer on the Closing Date an aging report
of the Accounts Receivable as of the Effective Date and Buyer will promptly
deliver such reports to Seller on a monthly basis after the Closing Date. All
payments with respect to Accounts Receivable received by the Buyer after the
Effective Date from a customer or other debtor shall be credited to the oldest
accounts receivable of the Corporation with respect to that customer, unless the
customer or other debtor designates such payment as being made with respect to a
specific debt other than its oldest accounts receivable. To the extent that the
aggregate Accounts Receivable as of the Effective Date which are not collected
in full within 120 days of the Effective Date exceed the Corporation's allowance
for bad debts and write-offs as shown on the Effective Date Financial Report
(the "Bad Debt Allowance"), after Buyer so notifies Seller and the parties
discuss the matter, the excess of such uncollected accounts receivable ("Excess
Uncollected Receivables") shall be paid by Seller to Buyer within 30 days of
notification by Buyer of the applicable amount. At any time that Seller
reimburses Buyer for Excess Uncollected Receivables, the Corporation will be
required to deliver to Seller an assignment of the Excess Uncollected
Receivables, without recourse, for $1.00 consideration. In the event of any such
assignment of Excess Uncollected Receivables, Buyer shall cause the Corporation
to cooperate fully with Seller, at Seller's expense, in collecting such Excess
Uncollected Receivables including, without limitation, the prompt remitting to
Seller of all payments received by the Corporation from any obligor of any such
Excess Uncollected Receivable, such payments to be credited to the oldest
accounts receivable of the Corporation, with respect to that obligor, unless the
obligor or other debtor designates such payment as being made with respect to a
specific debt other than its oldest account receivable. To the extent that the
aggregate Accounts Receivable as of the Effective Date collected within 120 days
of the Effective Date exceed aggregate Accounts Receivable less the Bad Debt
Allowance as of the Effective Date, after Buyer so notifies Seller and the
parties discuss the matter, the excess of
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such collected Accounts Receivable shall be paid by Buyer to Seller within 150
days after the Effective Date.
6.12 STANDSTILL AGREEMENT. Seller shall not negotiate the sale of the Shares or
the Business with any other Person before September 24, 2001. If Seller or its
agents (including, but not limited to, ▇.▇. ▇▇▇▇▇▇▇) violate this condition,
Seller shall pay Buyer or Buyer's Affiliates reasonable out-of-pocket third
party expenses incurred in connection with the transactions contemplated by this
Agreement up to $1,000,000.
6.13 SATISFACTION OF INDEBTEDNESS. On or prior to the Closing Date, Seller shall
cause the Corporation to pay, or cause to be paid, its Indebtedness as reflected
on the Financial Statements or the Interim Financial Statements or to otherwise
obtain a release of all liability of the Corporation with respect thereto
satisfactory in form and substance to Buyer; provided, however, that if the
parties hereto agree to continue the ▇▇▇▇▇▇ Mortgage, the ▇▇▇▇▇▇ Mortgage shall
not be paid by the Corporation or Seller. Such satisfaction of Indebtedness
shall be done in a manner (i) consistent with the methodology used to prepare
the February 24, 2001 Pro Forma Debt Free Balance Sheet and (ii) without
resulting in any liability to the Corporation, Buyer or any Affiliate of Buyer
for any Tax.
6.14 LIQUIDATION OF TKI FOODS INTERNATIONAL, INC. (THE "FSC"). On or prior to
the Closing Date, Seller shall cause the Corporation to liquidate the FSC at the
expense of Seller or, to the extent such liquidation cannot be completed before
the Closing Date, Seller shall pay directly or shall reimburse Buyer for any
costs incurred by Buyer in effecting such liquidation, including, without
limitation, any Tax Liability resulting from such liquidation.
6.15 INSURANCE. Seller shall cause the Corporation to maintain its current
products liability and other insurance coverage through the Closing Date. Buyer
shall obtain or maintain equivalent products liability insurance coverage
insuring against claims relating to products manufactured after the Closing
Date. For the period between the Effective Date and the Closing Date, Seller
shall purchase, from an insurer mutually agreeable to Buyer and Seller, workers
compensation insurance for the Corporation with coverage that is retroactive to
the Effective Date. Buyer shall, through an adjustment to the Purchase Price,
reimburse Seller $20,170 for the property insurance premium paid by Seller that
affords the Corporation insurance coverage after the Effective Date. Buyer shall
be responsible for the deductible under any insurance policies held by the
Seller for the benefit of the Corporation for (i) claims made against the
Corporation relating to events that occurred during the period beginning on the
Effective Date and ending on the Closing Date (for occurrence based coverage)
and (ii) for claims made against the Corporation during the period beginning on
the Effective Date and ending on the Closing Date (for claims made coverage).
6.16 TAX MATTERS.
(a) TAX YEAR CLOSING. For federal and New York State income tax
purposes the Closing will result in a closing of the Corporation's and any of
its Subsidiary's tax years. The federal tax liability of the Corporation and any
Subsidiary for the Pre-Closing Period shall be the liability of Seller and
shall be included in Seller's consolidated return covering the Pre-Closing
Period. The New York State tax liability of the Corporation and any Subsidiary
for the Pre-
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Closing Period shall be the liability of Seller and shall be included in
Seller's combined report covering the Pre-Closing Period. The tax liability
of the Corporation and any Subsidiary for any state or locality other than New
York State for the Pre-Closing Period shall be the liability of Seller and
shall be reported on a separately-filed return prepared and filed by Seller.
(b) ALLOCATION OF TAX LIABILITY. The taxable income or loss of the
Corporation for the Pre-Closing Period shall be allocated between the first
federal income Tax Return due for Buyer after the Closing and the consolidated
federal income tax return due for Seller in accordance with Treas. Reg. Section
1.1502-76(b). Any taxable income or loss that must be reported on any state or
local income tax return attributable to the Pre-Closing Period shall be
allocated in the same manner as set forth above. Taxable income or loss for the
Pre-Closing Period shall be determined on a closing-of-the-books basis as of the
close of business on the Effective Date.
(c) COOPERATION. Seller shall prepare and file on a timely basis all
Tax Returns covering taxable periods ending on or prior to the Effective Date.
Buyer shall prepare and file on a timely basis all Tax Returns which include any
period following the Effective Date. Buyer and Seller shall furnish or cause to
be furnished to each other, upon request, as promptly as practicable, such
information (including, without limitation, access to books and records) and
assistance relating to the Corporation as is reasonably necessary for
preparation and filing of any Tax Return, for any audit relating thereto, and
for the prosecution or defense of any claim, suit or proceeding relating to any
proposed tax adjustment. Buyer and Seller shall cooperate with each other in the
conduct of any audit or other proceeding involving the Corporation and any
Subsidiary or any other entity with which it was or is consolidated or combined
for any tax purpose.
(d) TAX DETERMINATION. Seller shall (i) file its 2002 Federal and New
York State ("NYS") Tax Returns expeditiously and (ii) avail itself of the
procedure provided in Section 6501(d) of the Code and Section 1083(c)(6) of the
NYS Tax Law to seek an accelerated determination of its Taxes (and Taxes of the
Corporation, or any Subsidiary and any Affiliate for which a consolidated or
combined return is filed) for periods ending on or prior to the April 2002 tax
year of Seller. If the Governmental Authority to which an application for
accelerated determination of Taxes is made accepts such an application and
conducts an audit, Seller shall not liquidate or dissolve prior to the
resolution (including final settlement and any payment related thereto) of an
audit by the Governmental Authority for such periods. In the event of an audit
by the Governmental Authority, on conclusion of such audit Seller shall use its
best efforts to obtain from the Governmental Authority a closing agreement or
other written determination of final resolution of Tax liabilities that finally
and conclusively determines the Tax liabilities for the Corporation or any
Subsidiary (and any Affiliate of either). If no audit is conducted by the
Internal Revenue Service or NYS with respect to the foregoing tax periods and
Persons, Seller shall not liquidate or dissolve prior to the end of the usual
statutory period for assessment under Section 6501 of the Code and NYS law with
respect to these tax periods.
6.17 EMPLOYEE MATTERS.
(a) ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇. Seller shall make any severance or related
payments owing to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ under (i) the Employment Agreement or (ii)
any other employment arrangements. So long as ▇▇. ▇▇▇▇▇▇▇▇ remains employed by
Seller, Seller shall make Mr.
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▇▇▇▇▇▇▇▇'▇ services available to Buyer for up to 6 months subsequent to the
Closing Date. Buyer shall compensate Seller for ▇▇. ▇▇▇▇▇▇▇▇'▇ services at the
hourly rate of $95 per hour and for reasonable out-of-pocket expenses incurred
by Seller or ▇▇. ▇▇▇▇▇▇▇▇ in connection with the services rendered by ▇▇.
▇▇▇▇▇▇▇▇. Buyer shall reimburse Seller as described above within 30 days of
receipt of an itemization of payments Seller asserts are owing by Buyer in
connection with this provision.
(b) ACCRUALS FOR PROFIT SHARING AND PENSION COSTS. If the amounts
accrued on the Effective Date Financial Report for accrued profit sharing and
accrued pension costs for the Corporation's fiscal year ending April 2002 are
not paid to employees by May 31, 2002, then the Corporation will pay the unpaid
portion of such accrued amounts to Seller within 30 days.
6.18 SEVERANCE POLICY. Buyer shall not change the Severance Policy attached as
SCHEDULE 6.18 during the 6 month period following the Effective Date and will
honor this policy with respect to employees of the Corporation who are
terminated within that period. Except as provided in the preceding sentence,
Seller acknowledges that no provision of this Agreement will limit the ability
of the Corporation to modify any other term or condition of employment of any
employee of the Corporation on or after the Closing Date.
6.19 SPECIFIC CLAIM. Seller shall not liquidate or dissolve until it delivers
evidence, reasonably satisfactory to Buyer, that all of the claims described in
Item 1 of SCHEDULE 4.14 and any amended related claims are completely settled or
resolved and all obligations of Seller under any related settlement agreement or
judgment are fully satisfied.
ARTICLE 7
---------
CONDITIONS TO SELLER'S OBLIGATIONS
----------------------------------
The obligation of Seller to consummate the transactions contemplated by
this Agreement, is subject, in the absolute and sole discretion of Seller, to
the satisfaction, on or prior to the Closing Date, of each of the following
conditions (any of which, in Seller's absolute and sole discretion, may be
waived in writing in whole or in part without impairing or affecting any right
of indemnification or other right or remedy under this Agreement):
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Buyer and Guarantor contained in this Agreement shall be true and
correct in all material respects at and as of the Closing Date, except as and to
the extent that the facts and conditions upon which such representations and
warranties are based are expressly required or permitted to be changed by the
terms of this Agreement, and Buyer shall have performed in all material respects
all agreements and covenants required by this Agreement to be performed by it
prior to or at the Closing Date.
7.2 NO PROCEEDINGS. No Proceeding shall be pending, threatened or anticipated
against Buyer, Guarantor or Seller seeking to enjoin, or adversely affecting,
the consummation of the transactions contemplated by this Agreement.
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7.3 CLOSING CERTIFICATES. Buyer shall have furnished Seller with a certificate
of an officer of Buyer, in form and substance reasonably satisfactory to Seller,
to evidence compliance with the conditions set forth in Sections 7.1 and 7.2.
Guarantor shall have furnished Seller with a certificate of an officer of
Guarantor, in form and substance reasonably satisfactory to Seller, to evidence
compliance with the conditions set forth in Sections 7.1 and 7.2.
7.4 LEGAL OPINION. Seller shall have received an opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ LLP,
substantially in the form of EXHIBIT 7.4(a). Seller shall have received an
opinion of ▇▇▇▇▇ & ▇▇▇▇▇ LLP, substantially in the form of EXHIBIT 7.4(b).
7.5 ESCROW AGREEMENT. Each of Buyer and the Escrow Agent shall have executed and
delivered the Escrow Agreement.
7.6 REQUIRED CONSENTS AND FILINGS. The Required Consents and Filings shall have
been obtained or made.
7.7 BRIDGE FINANCING.
(a) Seller shall be satisfied with the terms and conditions of the
Restated Mortgage Note, Mortgage Modification and Extension Agreement and all
other bridge financing documents.
(b) Buyer shall have executed and delivered to Seller the Restated
Mortgage Note and the Mortgage Modification and Extension Agreement.
(c) M&T Real Estate, Inc. shall have executed an assignment of the
▇▇▇▇▇▇ Mortgage substantially in the form of EXHIBIT 7.7(c).
(d) Buyer's senior lender shall have executed and delivered to Seller
the Letter of Credit.
ARTICLE 8
---------
CONDITIONS TO BUYER'S OBLIGATIONS
---------------------------------
The obligation of Buyer to consummate the transactions contemplated by
this Agreement, is subject, in the absolute and sole discretion of Buyer, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions (any of which, in Buyer's absolute and sole discretion, may be waived
in writing in whole or in part without impairing or affecting any right of
indemnification or other right or remedy under this Agreement):
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date, except as and to the extent
that the facts and conditions upon which such representations and warranties are
based are expressly required or permitted to be changed by the terms of this
Agreement and Seller shall have performed or caused to be performed in all
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material respects all agreements and covenants required by this Agreement to be
performed or caused to be performed by it prior to or at the Closing Date.
8.2 REQUIRED CONSENTS AND FILINGS. The Required Consents and Filings shall have
been obtained or made.
8.3 NO PROCEEDINGS. No Proceeding shall be pending, threatened or anticipated
against Buyer, Guarantor or Seller seeking to enjoin, or adversely affecting,
the transactions contemplated by this Agreement.
8.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse change
in the business, assets or financial condition of the Corporation, other than as
permitted by Section 10.2.
8.5 CLOSING CERTIFICATE. Seller shall have furnished or caused to be furnished
to Buyer a certificate or certificates in form reasonably satisfactory to Buyer
to evidence compliance with the conditions set forth in Sections 8.1, 8.2, 8.3
and 8.4.
8.6 LEGAL OPINION. Buyer shall have received an opinion from ▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP,
substantially in the form of EXHIBIT 8.6.
8.7 ESCROW AGREEMENT. Each of Seller and the Escrow Agent shall have executed
and delivered the Escrow Agreement.
8.8 EMPLOYMENT ARRANGEMENTS, RELEASE AND RESIGNATIONS. Seller and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ shall have amended the Employment Agreement to release the Corporation
from any obligation or liability under the Employment Agreement and any other
employment arrangements. ▇▇. ▇▇▇▇▇▇▇▇ shall have resigned from or been
terminated by the Corporation as an employee and shall have signed and delivered
to the Corporation a release of all claims against the Corporation. All officers
and directors of the Corporation shall have resigned as officers and directors
of the Corporation.
8.9 NO CASUALTY OR ENVIRONMENTAL PROBLEMS. Buyer shall not have elected to
terminate this Agreement in accordance with Section 6.3 or Section 10.2.
8.10 FINANCING.
(a) Buyer shall have obtained financing for the purchase of the Shares
acceptable to the Buyer in its sole discretion.
(b) Buyer and Buyer's senior lender shall be satisfied with the terms
and conditions of the Restated Mortgage Note, Mortgage Modification and
Extension Agreement and all other bridge financing documents.
(c) Seller shall have executed and delivered to Buyer the Mortgage
Modification and Extension Agreement.
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(d) M&T Real Estate, Inc. shall have executed and delivered an
assignment of the ▇▇▇▇▇▇ Mortgage substantially in the form of EXHIBIT 7.7(c).
8.11 SECTION 6.13 COVENANTS. The Covenants in Section 6.13 shall have been
satisfied.
ARTICLE 9
---------
INDEMNIFICATIONS AND OTHER POST CLOSING MATTERS
-----------------------------------------------
9.1 SURVIVAL AND INDEMNIFICATIONS.
(a) SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
(i) All representations and warranties of Seller contained in this
Agreement shall survive the Effective Date for the duration of the Claims Period
and then expire, EXCEPT THAT (A) the representations and warranties in Section
4.4 (Title Matters), Section 4.25 (Environmental Matters) and Section 4.9 (Tax
Matters) shall survive the Closing until the later of December 31, 2003 or the
date on which the Seller is liquidated and dissolved. Any claim made by Buyer
with respect to the representations and warranties of Seller contained in this
Agreement must be initiated by Buyer during the Claims Period, except that any
claim with respect to the representations and warranties in Section 4.25
(Environmental Matters), Section 4.9 (Tax Matters) and Section 4.4 (Title) must
be initiated by the later of December 31, 2003 or the date on which the Seller
is liquidated and dissolved. All of the representations and warranties of Seller
contained in this Agreement shall in no respect be limited or diminished by any
past or future inspection, investigation, examination or possession on the part
of Buyer or its Representatives or any notice pursuant to Section 6.6(a). All
covenants and agreements made by Seller contained in this Agreement (including,
without limitation, the obligation of Seller to convey the Shares to Buyer free
and clear of any Encumbrance and the indemnification obligations of Seller set
forth in this Section 9.1) shall survive the Closing Date until fully performed
or discharged.
(ii) All representations and warranties of Buyer contained in this
Agreement shall survive the Closing Date for the duration of the Claims Period.
Any claim made by Seller with respect to the representations and warranties of
Buyer contained in this Agreement must be initiated during the Claims Period.
All of the representations and warranties of Buyer contained in this Agreement
shall in no respect be limited or diminished by any past or future inspection,
investigation, examination or possession on the part of Seller or their
Representatives or any notice pursuant to Section 6.6(b). All covenants and
agreements made by Buyer contained in this Agreement (including the
indemnification obligations of Buyer set forth in this Section 9.1) shall
survive the Closing Date until fully performed or discharged.
(b) GENERAL INDEMNIFICATION BY SELLER. Seller hereby agrees to defend,
indemnify and hold harmless Buyer and its Affiliates, and the directors,
officers and employees of Buyer and its Affiliates, from, against and in respect
of the following:
Page 60 of 107
(i) any and all Losses suffered or incurred by any of them by
reason of any breached or untrue representation or warranty of Seller contained
in this Agreement and any Proceeding incident thereto;
(ii) any and all Losses suffered or incurred by any of them (before
or after the Closing) by reason of the nonfulfillment of any covenant or
agreement by Seller contained in this Agreement (including, without limitation,
the payment or performance by Seller of its obligations under Sections 2.3 and
2.5 with respect to purchase price adjustments) and Seller's obligations under
Section 9.1(c) (Tax Indemnification), Section 9.1(d) (Workers Compensation
Indemnification) and Section 9.1(e) (Specific Claim Indemnification);
(iii) any and all Losses suffered or incurred by any of them by
reason of any demands, claims, inquiries, arbitration or lawsuits of any former
shareholder of the Corporation, or any such shareholder's personal
representative or any other person making a claim based on a relationship with a
shareholder of the Corporation;
(iv) any and all Losses suffered or incurred by any of them
arising from any Indebtedness of the Corporation on the Effective Date,
including, without limitation, any Loss resulting from satisfaction of
Indebtedness in a manner that gives rise to a Tax Liability, except to the
extent reflected in the Effective Date Financial Report;
(v) any and all Losses suffered or incurred by any of them
attributable to the operation of the Business or the activities of the
Corporation on or prior to the Closing Date, except to the extent such Losses
(A) are disclosed in this Agreement and specifically made an obligation of Buyer
or (B) are fully reflected on the Effective Date Financial Report and used in
calculating the Purchase Price Closing Adjustment; and
(vi) any and all Losses suffered or incurred by any of them by
reason of (A) any failure of any Employee Benefit Pension Plans maintained by
the Corporation to satisfy any discrimination testing requirements as required
by Governmental Requirements, whether in order to correct or compensate for such
failure or otherwise and (B) any withdrawal liability of the Corporation or an
ERISA Affiliate relating to any Multiemployer Plan.
(c) TAX INDEMNIFICATION.
(i) Seller agrees to be responsible for and to indemnify and hold
Buyer, its Affiliates and the Corporation harmless from and against any and all
Losses incurred by Buyer arising from any Taxes that may be imposed upon or
assessed against the Corporation or Buyer or the assets of the Corporation or
Buyer (A) for all periods ending on or prior to the Effective Date (including,
without limitation, Taxes for which the Corporation is jointly and severally
liable with Seller (or any Affiliate of Seller or the Corporation) imposed by
Treas. Regs. Section 1.1502-6(a) or any similar provision of state, local or
foreign law) and for all Taxes attributable to the Corporation's operations
prior to or on the Effective Date or (B) arising by reason of any breach by
Seller of any of the representations contained in Section 4.9 (Tax Matters) or
the covenants contained in Section 6.13, 6.14, or 6.16.
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(ii) Any claim for indemnity under this Section 9.1(c) may be
made at any time prior to 60 days after the expiration of the applicable tax
statute of limitations with respect to the relevant taxable period (including
all periods of extension, whether automatic or permissive).
(d) WORKERS COMPENSATION INDEMNIFICATION. Seller agrees to be
responsible for and shall indemnify Buyer with respect to Losses arising from
workers compensation claims relating to periods before the Effective Date.
(e) SPECIFIC CLAIMS INDEMNIFICATION.
(i) Seller agrees to be responsible for and shall indemnify Buyer
with respect to Losses arising from the matter described in Item 1 on SCHEDULE
4.14 or any breach by Seller of the covenants contained in Section 6.19; and
(ii) Seller agrees to be responsible for and shall indemnify Buyer
and its lenders with respect to Losses arising from the security interest
underlying Illinois UCC-1 No. 3592597 filed 9/27/96.
(f) INDEMNIFICATION BY BUYER. Buyer, and Guarantor, jointly and
severally, hereby agree to indemnify and hold harmless Seller and its
Affiliates, and the directors, officers and employees of Seller and its
Affiliates from, against, and in respect of:
(i) any and all Losses suffered or incurred by any of them
resulting from any breached or untrue representation or warranty of Buyer
contained in this Agreement and any Proceeding incident thereto; or
(ii) any and all Losses suffered or incurred by any of them
resulting from the nonfulfillment of any covenant or agreement of Buyer
contained in this Agreement.
(g) LIMITATIONS ON LIABILITY. The indemnification obligations set forth
in this Article 9 shall apply only if the Closing occurs, and then only after
the aggregate amount of such obligations exceed $250,000 (the "Basket"), at
which time the indemnification obligations shall be effective as to the amount
by which such aggregate amount exceeds $50,000. The foregoing indemnification
threshold shall not apply to any indemnification obligations on account of a
breach of the representation and warranties in Section 4.9 (Tax Matters), a
breach of the covenants set forth in Section 2.6 (Taxes, Penalties and Fees),
Section 2.7 (Bridge Financing), Section 6.11 (Accounts Receivable Payments) and
Section 6.15 (Insurance), Section 9.1(c) (Tax Indemnification), Section 9.1(d)
(Workers' Compensation), Section 9.1(e) (Specific Claims Indemnification),
Section 10.7 Expenses, the adjustments required under Section 2.3 and 2.5, or
any Losses arising from an under-accrual for promotional coupons issued prior to
the Effective Date. Notwithstanding anything to the contrary contained in this
Agreement, Seller shall not have any liability to Buyer under this Section 9.1
or otherwise in an amount in excess of $13,500,000, except that a breach of a
representation or warranty or misrepresentation made by Seller in Section 4.4
(Title of Shares and Certain Other Assets) and any Losses arising from Seller's
fraud shall not be so limited.
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(h) NOTIFICATION AND DEFENSE OF CLAIMS OR ACTIONS.
(i) As used in this Section 9.1, any party seeking indemnification
pursuant to this Section 9.1 is referred to as an "indemnified party" and any
party from whom indemnification is sought pursuant to this Section 9.1 is
referred to as an "indemnifying party." An indemnified party which proposes to
assert the right to be indemnified under this Section 9.1 shall submit a written
demand for indemnification to the indemnifying party setting forth with
specificity the facts as then known which form the basis for the claim for
indemnification. With respect to claims based on actions by third parties, an
indemnified party shall, within 10 days after the receipt of notice of the
commencement of any Proceeding against it in respect of which a claim for
indemnification is to be made against an indemnifying party, notify the
indemnifying party in writing of the commencement of such Proceeding, enclosing
a copy of all papers served; provided, however, that the failure to so notify
the indemnifying party of any such claim, action, suit or proceeding shall not
relieve the indemnifying party from any liability which it may have to the
indemnified party, except to the extent that the indemnifying party is
prejudiced thereby. Thereafter, the indemnified party shall deliver to the
indemnifying party, within 5 days after receipt by the indemnified party, copies
of all further notices relating to such claim.
(ii) If any third-party claim is brought against an indemnified
party and it gives notice to the indemnifying party of the claim, the
indemnifying party will be entitled to participate in the defense of such claim
and, to the extent that it wishes (unless the indemnifying party is also a party
to such claim and the indemnified party determines in good faith on the written
advice of counsel, a copy of which it shall provide to the indemnifying party,
that joint representation would be prejudicial to it), to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim, the indemnifying party will not,
as long as it diligently conducts such defense, be liable to the indemnified
party under this Section 10 for any fees of other counsel or any other expenses
with respect to the defense of such claim, in each case subsequently incurred by
the indemnified party in connection with the defense of such claim, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a third party claim, (i) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Law or any
violation of the rights of any Person and no effect on any other claims that may
be made against the indemnified party, and (B) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (ii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent.
(iii) A claim for indemnification for any matter not involving a
third-party claim may be asserted by notice to the party from whom
indemnification is sought within the time periods set forth in Section 9.1.
Promptly upon being aware of a matter that may give rise to a claim for
indemnification under Section 9.1, the indemnified party will promptly, if a
claim is to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that it is adversely affected by the
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indemnifying party's failure to give such notice. Following receipt of a notice
of claim for indemnification, the indemnifying party shall have thirty (30) days
in which to satisfy its indemnification responsibilities or advise the
indemnified party if the indemnifying party disputes the claim made in whole or
in part. If the indemnified party does not receive a notice of dispute within
said thirty (30) day period, the indemnifying party shall be deemed to have
consented to the claim identified in the indemnified party's notice. The notice
from the indemnifying party shall set forth in reasonable detail the nature of
its objection(s).
(iv) In the event that any claim for indemnification is made with
respect to any third-party claim pursuant to this Section 9.1, (A) the party
assuming primary responsibility for the defense of such claim shall at all times
keep the other party reasonably informed as to the status of such claim and (B)
the party not primarily responsible for the defense of such claim shall
cooperate fully with the other party in connection with such defense.
(v) Any indemnification amounts payable by Seller or Buyer under
this Section 9.1 shall be calculated after giving effect to (i) any proceeds
(net of any retro-premium adjustments) received from insurance policies covering
the Losses that are the subject of the claim for indemnity and (ii) the actual
realized tax benefit to the indemnified party resulting from the damage, loss,
liability or expense that is the subject of the indemnity, provided that to the
extent that any tax benefit is realized in a tax year other than the year in
which the indemnity is paid, the indemnified party shall make a payment to the
indemnifying party in the amount of such realized tax benefit in the year in
which it is realized. For purposes hereof, an actual realized tax benefit is an
actual reduction in Taxes payable or a refund of Taxes previously paid after
taking into account the tax impact of any indemnification from the indemnifying
party and any future tax detriment resulting from the Loss in question. The
indemnification for a tax liability assessed by a state or local government
shall not exceed sixty-six percent (66%) of the assessment (or, if federal tax
rates change after the date of this Agreement, the difference (expressed as a
percentage) between 100% and the highest federal tax rate at such time),
provided that such state or local tax liability is a deductible amount for
federal purposes. In the event of a tax assessment by the Internal Revenue
Service or a foreign, state or local government, which would give rise to a
future deductible amount, the amount of the indemnification shall not exceed the
true economic cost of the tax adjustment to the Buyer. All future tax costs and
benefits would be discounted to present value at a discount rate of prime plus
one percent (1%) compounded monthly.
9.2 CLAIMS AGAINST THE ESCROW. To the extent that Seller does not make
indemnification payments within the prescribed time period, Buyer may seek
reimbursement for any indemnification claim under Section 9.1 in accordance with
the terms of the Escrow Agreement.
9.3 EFFECT OF BASKET. It is specifically understood and agreed that with respect
to any claim for indemnification arising in favor of Buyer or its Affiliates
under a section referred to in Section 9.1(g) (Limitations on Liability) which
could also give rise to a claim under any other provision of this Agreement, the
claim arising under the Section referred to in 9.1(g) shall control and the
$250,000 Basket and $50,000 deductible shall not apply to such claim.
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9.4 USE OF CORPORATE NAME OR TRADE NAME. After the Closing, Seller will not use
or refer to the names "Ontario Foods", "T.K.I. Foods" or "Freedom Foods" or any
trade name included within the Intellectual Property, or any derivative or
variation thereof or any name similar thereto, except as required by law.
9.5 ACCESS TO RECORDS AND PERSONNEL.
(a) Until the later of December 31, 2003 or dissolution of Seller,
Buyer and its Representatives shall have reasonable access to all of the books
and records, if any, relating to the Business which Seller, or any of its
Representatives, may retain after the Closing Date. Such access shall be
afforded by Seller and its Representatives upon receipt of reasonable advance
notice and during normal business hours. Buyer shall be solely responsible for
any costs and expenses incurred by it pursuant to this Section 9.5(a). If Seller
shall desire to dispose of any of such books and records prior to the expiration
of the retention period, Seller shall, prior to such disposition, give Buyer a
reasonable opportunity, at Buyer's expense, to segregate and remove such books
and records as Buyer may select. On the later of December 31, 2003 or
dissolution of Seller, all books and records relating to the Business will be
transferred to Buyer.
(b) For a period of 6 years after the Closing Date, Seller and its
Representatives shall have reasonable access to all of the books and records
relating to the Business prior to the Closing which Buyer, or any of its
Representatives, may retain after the Closing Date. Such access shall be
afforded by Buyer and its Representatives upon receipt of reasonable advance
notice and during normal business hours. Seller shall be solely responsible for
any costs and expenses incurred by them pursuant to this Section 9.5(b). If
Buyer shall desire to dispose of any of such books and records other than in the
ordinary course of business prior to the expiration of such 6 year period, Buyer
shall, prior to such disposition, give Seller a reasonable opportunity, at
Seller's expense, to segregate and remove such books and records as Seller may
select.
9.6 CONFIDENTIALITY. Seller has had access to, and has gained knowledge with
respect to the Business, including, without limitation, trade secrets, financial
results and information, processes and techniques, technical production and cost
data, methods of doing business and information concerning customers and
suppliers, and other valuable and confidential information relating to the
Business (the "Confidential Information"). Seller acknowledges that unauthorized
disclosure or misuse of the Confidential Information will cause irreparable
damage to the Corporation and Buyer subsequent to the Closing. The parties also
agree that covenants by Seller not to make unauthorized disclosures of the
Confidential Information are essential to the growth and stability of the
business of the Corporation and Buyer. Accordingly, Seller agrees that it will
not use or disclose any Confidential Information obtained in the course of its
past connection with the Business, other than information generally available to
the public through sources other than Seller.
9.7 NON-COMPETITION.
(a) The Seller agrees that, beginning on the Closing Date and
continuing until the Covenant Expiration Date (as defined in Section 9.7(c)), it
shall not, directly or indirectly, for its own account or as agent, employee,
officer, director, trustee, consultant, partner, stockholder or equity owner of
any corporation or any other entity (except that its may own securities
Page 65 of 107
constituting less than 3% of any class of securities of a public company), or
member of any firm or otherwise, (i) engage or attempt to engage, in the
Restricted Territory (as defined in Section 9.7(c)), in the Business or any
other business activity which is directly or indirectly competitive with the
business conducted by the Corporation or any other Affiliate of Buyer at the
Effective Date, (ii) employ or solicit the employment of any person who is
employed by the Corporation or any other Affiliate of Buyer at the Effective
Date or at any time during the 6 month period preceding the Effective Date,
except that Seller shall be free to employ or solicit the employment of any such
person whose employment with the Corporation or any other Affiliate of Buyer has
terminated for any reason (without any interference from such Seller) and who
has not been employed by the Corporation or any other Affiliate of Buyer for at
least 6 months, (iii) canvass or solicit business in competition with the
Business or any other business conducted by the Corporation or by any other
Affiliate of Buyer conducting or pursuing activities similar to those of either
Corporation (a "Related Affiliate") at the Effective Date from any person or
entity who during the 6 month period preceding the Effective Date shall have
been a customer of the Corporation or any Related Affiliate or from any person
or entity which the Seller has reason to believe might in the future become a
customer of the Corporation or any Related Affiliate as a result of marketing
efforts, contacts or other facts and circumstances of which Seller is aware,
(iv) willfully dissuade or discourage any person or entity from using, employing
or conducting business with the Corporation or any other Affiliate of Buyer or
(v) intentionally disrupt or interfere with, or seek to disrupt or interfere
with, the business or contractual relationship between the Corporation or any
other Affiliate of Buyer and any supplier who during the 6 month period
preceding the Effective Date shall have supplied components, materials or
services to the Corporation or any other Affiliate of Buyer.
(b) Notwithstanding the foregoing, the restrictions imposed by this
Section 9.7 and Section 9.6 shall not in any manner be construed to prohibit,
directly or indirectly, the Seller or any of its employees from serving as an
employee or consultant of the Corporation or any other Affiliate of Buyer.
(c) For purposes of this Agreement, the following terms shall have the
meanings given them below:
(i) "Covenant Expiration Date" shall mean the date which is 4 years
after the Effective Date.
(ii) "Restricted Territory" shall mean anywhere in North America
where the Corporation or any other Affiliate of Buyer conducts or plans to
conduct the Business or any other business activity, as the case may be, at the
Effective Date.
(d) The Seller acknowledges that (a) a remedy at law for its failure to
comply with Section 9.6 and this Section 9.7 of this Agreement may be inadequate
and (b) Buyer and each of its Affiliates shall be entitled to seek and obtain
from a court having jurisdiction specific performance, an injunction, a
restraining order or any other equitable relief in order to enforce any such
provision. The right to obtain such equitable relief shall be in addition to any
other remedy to which Buyer or any of its Affiliates is entitled under
applicable law (including, but not limited to, monetary damages).
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9.8 SELLER'S ASSISTANCE. Following the Closing Date, for a reasonable time
period and at Buyer's expense for out of pocket expenses, Seller shall continue
to assist Buyer with the transition of those services that were previously
provided by Seller to the Corporation, including, without limitation,
preparation of tax filings, fixed asset accounting, workers compensation and
other insurance and employee benefit programs.
9.9 TANGIBLE NET WORTH MAINTENANCE.
(a) Seller shall maintain a Tangible Net Worth (as defined below) in an
amount that is not less than:
(i) $13.5 million during the 12 month period following the Closing
Date; and
(ii) $1.5 million until the later of December 31, 2003 or complete
liquidation of Seller.
(b) "Tangible Net Worth" shall mean shareholders' equity less goodwill
less deferred income tax asset as determined in accordance with GAAP.
(c) If Buyer makes a good faith claim for indemnification under this
Agreement, until the claim is finally resolved, Seller shall maintain Tangible
Net Worth equal to the lesser of the amount claimed or the applicable net worth
requirement from Section 9.9(a).
(d) Seller may maintain any or all of the Tangible Net Worth in a
liquidating trust, if the liquidating trust assumes all of Seller's obligations
to Buyer on a joint and several basis with Seller.
ARTICLE 10
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MISCELLANEOUS
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10.1 FURTHER ASSURANCES; INFORMATION.
(a) Both before and after the Closing Date, each party will cooperate
in good faith with each other party and will take all appropriate action and
execute any agreement, instrument or other writing of any kind which may be
reasonably necessary or advisable to carry out and confirm the transactions
contemplated by this Agreement.
(b) If at any time within 3 years of the date of this Agreement, Buyer
or any of its Affiliates proposes to register under the Securities Act of 1933
any Securities in connection with any registered offering thereof and in
connection therewith the Securities and Exchange Commission makes any comments
or requests any information with respect to accounting information presented in
the registration statement pertaining to any period prior to the Closing Date
related to the Corporation, then Seller, at Buyer's sole expense, will cooperate
fully in responding promptly to such comments or questions, and will request the
Corporation's Accountants to respond (also at Buyer's sole expense) to comments
on the relevant financial
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statements or to provide such information as the Securities and Exchange
Commission requests in order to cause the Securities and Exchange Commission to
declare effective such registration statement, at the expense of Buyer or its
designated Affiliates, as the case may be. In addition, Seller will provide to
any underwriters in connection with any such registration a comfort letter
reasonably requested by such underwriter relating to financial information
pertaining to any period prior to the Closing Date in accordance with SAS 72
upon receipt of consent from its auditors.
10.2 RISK OF LOSS. Risk of loss with respect to any of the property or assets of
the Corporation shall be borne by Seller at all times prior to the Closing and
shall pass to Buyer only upon transfer to Buyer at Closing of title to the
Shares. If any of the Current Real Property, the Tangible Personal Property or
the Inventory is lost, damaged or destroyed by fire, theft, casualty or any
other cause or causes prior to the Closing (a "Casualty"), Seller shall promptly
notify Buyer in writing of such Casualty and the details thereof and shall
answer promptly any reasonable requests from Buyer for details or information.
Buyer shall thereafter proceed with the Closing, except that in the event of a
Casualty to the Current Real Property, the Tangible Personal Property or the
Inventory, the Purchase Price shall be reduced by the dollar amount (based upon
replacement value) of the Casualty loss (and any insurance proceeds received or
receivable as a result of such Casualty shall be payable to Seller); PROVIDED,
HOWEVER, that if such Casualty/Casualties are in an aggregate amount in excess
of $250,000 from the date of this Agreement through the Closing Date or
materially interfere, in Buyer's reasonable discretion, with the operation of
the Business, Buyer may terminate this Agreement. The aforesaid option shall be
exercised by Buyer by written notice to Seller given within 15 days or the
number of days remaining to the Closing, whichever is less, after the later of
Buyer receiving (i) written notice of any such Casualty and (ii) satisfactory
responses to all of its reasonable requests, if any, for details or information.
If this Agreement is not terminated by Buyer pursuant to this Section 10.2 and
if Buyer and Seller are unable to agree as to the dollar amount of the loss
(based upon replacement value) or the insurance proceeds to be recovered, Buyer
and Seller shall proceed with the Closing as scheduled, except that Buyer shall
place in escrow pursuant to the Escrow Agreement (to be held pending agreement
as to the final amount) an additional amount (based upon estimated replacement
value of the damaged or destroyed property) as determined by a firm selected by
the Independent Accountants (the "Casualty Amount") and the payments to be made
by Buyer on the Closing Date pursuant to this Agreement shall be reduced by the
Casualty Amount. The escrow agent shall hold the Casualty Amount until the
dispute has been resolved following the Closing either by agreement of Buyer and
Seller or otherwise. In the event that the actual Casualty loss is greater than
or less than the Casualty Amount held in escrow, to the extent necessary, the
parties shall make appropriate adjustment payments.
10.3 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date as follows:
(a) By written agreement of Buyer and Seller;
(b) By Buyer or Seller by written notice to the other in the event that
the Closing Date has not occurred for any reason on or prior to September 24,
2001, but only if the terminating party is not in material breach of, or
material default under, any provision of this Agreement;
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(c) By Buyer by written notice to Seller of its election to terminate
this Agreement pursuant to Section 6.3 or Section 10.2; or
(d) by Seller by written notice to Buyer if Buyer proposes, in writing,
any reduction of the Purchase Price other than as provided for in this
Agreement.
In the event of the termination of this Agreement by any party as provided in
this Section 10.3, no party shall have any liability hereunder of any nature
whatsoever, other than for indemnification pursuant to Section 9.1. In the event
that a condition precedent to its obligations is not satisfied, nothing
contained in this Agreement shall be deemed to require any party to terminate
this Agreement, rather than to waive such condition precedent and proceed with
the Closing, which waiver shall not impair or affect any right of
indemnification or other right or remedy hereunder.
10.4 NOTICES. Unless otherwise provided in this Agreement, any agreement,
notice, request, instruction or other communication to be given hereunder by any
party to the other shall be in writing and (i) delivered personally (such
delivered notice to be effective on the date it is delivered), (ii) mailed by
certified mail return receipt requested, postage prepaid (such mailed notice to
be effective 7 days after the date it is mailed) or (iii) sent by facsimile
transmission (such facsimile notice to be effective on the date that
confirmation of such facsimile transmission is received), with a confirmation
sent by way of one of the above methods, as follows:
If to Seller addressed to:
Genesee Corporation
600 Powers Building
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ Peabody LLP
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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If to Buyer, addressed to:
Associated Brands, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone:▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇ ▇ & ▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may designate in a writing to any other party any other address or
telecopy number to which, and any other Person to whom or which, a copy of any
such notice, request, instruction or other communication should be sent.
10.5 PUBLIC STATEMENTS. Buyer and Seller agree to cooperate, both prior to and
after the Closing, in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated by this Agreement
(including any statements to employees of the Corporation) and no press release
or other public statements shall be issued without the joint consent of Buyer
and Seller; PROVIDED, HOWEVER, that Seller may issue press releases or make
public statements without Buyer's consent to the extent Seller's counsel
reasonably advises it is required by law so long as, Seller gives Buyer an
opportunity to review such press release or public statement before its release
or the statement is consistent with language previously approved by Buyer in
writing.
10.6 CHOICE OF LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of New
York without regard to principles of conflicts of law, except that, with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a party to or the subject of this Agreement, the law of the
jurisdiction under which the respective entity was organized shall govern.
10.7 EXPENSES. Except as otherwise provided in this Agreement and except to the
extent reflected on the Effective Date Financial Report under Accounts Payable
or Accrued Liabilities, Seller shall pay all legal, accounting and other
expenses of Seller and the Corporation incident to this Agreement and Buyer
shall pay all legal, accounting and other expenses of Buyer incident to this
Agreement. Except as otherwise provided in this Agreement, nothing contained in
this
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Agreement shall be interpreted or construed to require Buyer to directly or
indirectly pay, assume or be liable for any of the foregoing expenses of Seller
and the Corporation.
10.8 TITLES. The headings of the articles and sections of this Agreement are
inserted for convenience of reference only, and shall not affect the meaning or
interpretation of this Agreement.
10.9 WAIVER. No failure of any party to this Agreement to require, and no delay
by any party to this Agreement in requiring, any other party to comply with any
provision of this Agreement shall constitute a waiver of the right to require
such compliance. No failure of any party to this Agreement to exercise, and no
delay by any party to this Agreement in exercising, any right or remedy under
this Agreement shall constitute a waiver of such right or remedy. No waiver by
any party to this Agreement of any right or remedy under this Agreement shall be
effective unless made in writing. Any waiver by any party to this Agreement of
any right or remedy under this Agreement shall be limited to the specific
instance and shall not constitute a waiver of such right or remedy in the
future.
10.10 EFFECTIVE; BINDING. This Agreement shall be effective upon the due
execution hereof by each party to this Agreement. Upon becoming effective, this
Agreement shall be binding upon each party to this Agreement and upon each
successor and assignee of each party to this Agreement and shall inure to the
benefit of, and be enforceable by, each party to this Agreement and each
successor and assignee of each party to this Agreement; PROVIDED, HOWEVER, that,
except as provided for in the immediately following sentence, no party to this
Agreement shall assign any right or obligation arising pursuant to this
Agreement without first obtaining the written consent of the other parties.
Buyer may assign all or a portion of its rights and obligations under this
Agreement to one or more Affiliates of Buyer or to Buyer's lender(s), or to any
agent for Buyer's lender(s), as security for payment of indebtedness and
liability owing by Buyer provided that Buyer and Guarantor shall remain liable
hereunder notwithstanding any such assignment.
10.11 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties to this Agreement with respect to the subject matter of this Agreement
and supersedes each course of conduct previously pursued, accepted or acquiesced
in, and each written or oral agreement and representation previously made, by
the parties to this Agreement with respect to the subject matter of this
Agreement, other than the confidentiality agreements between Seller and
Guarantor attached as SCHEDULE 10.11 which shall survive this Agreement.
10.12 MODIFICATION. No course of performance or other conduct hereafter pursued,
accepted or acquiesced in, and no oral agreement or representation made in the
future, by any party to this Agreement, whether or not relied or acted upon, and
no usage of trade, whether or not relied or acted upon, shall modify or
terminate this Agreement, impair or otherwise affect any obligation of any party
pursuant to this Agreement or otherwise operate as a waiver of any such right or
remedy. No modification of this Agreement or waiver of any such right or remedy
shall be effective unless made in writing duly executed by the parties to this
Agreement.
10.13 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute one and the same instrument. Any party may execute this Agreement by
facsimile signature and the other
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party shall be entitled to rely on such facsimile signature as evidence that
this Agreement has been duly executed by such party. Any party executing this
Agreement by facsimile signature shall immediately forward to the other party an
original signature page by overnight mail.
10.14 CONSENT TO JURISDICTION. Each party to this Agreement hereby (i) consents
to the exclusive jurisdiction of the United States District Court for the
Western District of New York located in Erie County or, if such court does not
have jurisdiction over such matter, to the Supreme Court of the State of New
York located in Erie County and (ii) irrevocably agrees that all actions or
proceedings arising out of or relating to this Agreement shall be litigated in
such court. Each party to this Agreement accepts for itself and in connection
with its properties, generally and unconditionally, the exclusive jurisdiction
and venue of the aforesaid courts and waives any defense of forum no convenience
or any similar defense, and irrevocably agrees to be bound by any non-appeasable
judgment rendered thereby in connection with this Agreement.
(SIGNATURES ON FOLLOWING PAGE)
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed on the day and year indicated at the beginning of this
Agreement.
GENESEE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
ASSOCIATED BRANDS, INC. (DELAWARE)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman & CEO
ASSOCIATED BRANDS INC. (ONTARIO)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman & CEO