<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 10, 1998
Ralcorp Holdings, Inc.
(Exact name of registrant as specified in its charter)
Missouri 1-12619 43-1766315
(State or other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
800 Market Street, Suite 2900
St. Louis, MO 63101
(Address of principal (Zip Code)
executive offices)
(314) 877-7000
(Registrant's telephone number, including area code)
<PAGE> 2
Item 2. Other Events.
In a press release dated September 10, 1998, the Registrant announced it had
completed its previously announced transaction to sell its Beech-Nut Nutrition
Corporation ("Beech-Nut") subsidiary for $68 million in cash. Beech-Nut was
sold to St. Louis based The Milnot Company. The Registrant employed an
investment banking firm to conduct a bidding process for the sale of
Beech-Nut. The Stock Purchase Agreement and Amendment thereto are filed as
Exhibits 99.2 and 99.3.
Item 7. Financial Statements and Exhibits.
Exhibit 99.1 Unaudited Proforma Financial Combined Financial Information.
Exhibit 99.2 Stock Purchase Agreement dated July 29, 1998 by and among
Milnot Holding Corporation, RH Financial Corporation and
Ralcorp Holdings, Inc..
Exhibit 99.3 First Amendment to Stock Purchase Agreement dated
September 10, 1998 by and among Milnot Holding Corporation,
RH Financial Corporation and Ralcorp Holdings, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RALCORP HOLDINGS, INC.
(Registrant)
Dated: September 25, 1998 By: /s/ T. G. Granneman
-------------------
Duly Authorized Signatory and
Chief Accounting Officer
<PAGE> 3
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
Exhibit 99.1 Unaudited Proforma Financial Combined Financial Information.
Exhibit 99.2 Stock Purchase Agreement dated July 29, 1998 by and among
Milnot Holding Corporation, RH Financial Corporation and
Ralcorp Holdings, Inc.
Exhibit 99.3 First Amendment to Stock Purchase Agreement dated
September 10, 1998 by and among Milnot Holding Corporation,
RH Financial Corporation and Ralcorp Holdings, Inc.
<PAGE> 1
RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Ralcorp was organized for the purpose of effecting the Spin-Off and the Merger
and has operated as an independent company only since January 31, 1997. The
Ralcorp historical financial information presented in the "Ralcorp Historical"
column of the unaudited pro forma combined statements of earnings for the nine
months ended June 30, 1997 and year ended September 30, 1997 reflect four
months, October 1, 1996 through January 31, 1997, during which the various
spun-off businesses operated as divisions or subsidiaries of Old Ralcorp.
These historical financial statements include the results of operations of the
branded cereal and snack businesses (the Branded Business), which Ralcorp sold
to General Mills on January 31, 1997 and the Resort Operations, which Ralcorp
sold to Vail Resorts, Inc. on January 3, 1997. In addition, on July 29, 1998,
the Company announced the planned sale of its branded baby food subsidiary
(Beech-Nut) to the Milnot Company. Historical financial information presented
in the "Ralcorp Historical" column of the unaudited pro forma combined
statements of earnings for the nine month periods ended June 30, 1998 and 1997
and year ended September 30, 1997 and unaudited pro forma combined balance
sheet at June 30, 1998 reflect operating results and financial position
including Beech-Nut. The "Ralcorp Historical" column in the unaudited pro
forma combined statement of earnings for the nine months ended June 30, 1998
already reflects the dispositions of the Branded Business and Resort
Operations. Therefore, the historical financial statements for all periods
shown do not reflect the combined results of operations or financial position
that would have existed had Ralcorp operated independently and without
Beech-Nut. The unaudited pro forma information may not necessarily reflect
future results of operations or what the results of operations would have been
had the formation of Ralcorp, exclusive of Beech-Nut, and its related
businesses occurred at the beginning of the periods shown.
The pro forma combined statements of earnings for the nine month period ended
June 30, 1997 and year ended September 30, 1997 presents the combined results
of Ralcorp's operations assuming that the sales of the Branded Business and
the Resort Operations and the intended sale of Beech-Nut had occurred as of
October 1, 1996. The pro forma combined statement of earnings for the nine
month period ended June 30, 1998 presents the combined results of Ralcorp's
operations assuming that the intended sale of Beech-Nut had occurred as of
October 1, 1997. These statements of earnings have been prepared by adjusting
the historical information for the effect of costs and expenses and the
recapitalization which might have occurred had the Spin-Off, the sale of the
Resort Operations and intended sale of Beech-Nut occurred at the beginning of
fiscal 1997 and, as appropriate, had the intended sale of Beech-Nut solely
occurred at the beginning of fiscal 1998.
The pro forma combined balance sheet at June 30, 1998 presents the combined
financial position of Ralcorp assuming the intended sale of Beech-Nut had
occurred at that date. At June 30, 1998, the historical balance sheet already
reflects the Branded Business and Resort Operations sales. This balance sheet
data has been prepared by adjusting the historical balance sheet for the
effect of assets, liabilities and recapitalization which might have occurred
had the intended sale of Beech-Nut occurred on June 30, 1998.
The "Branded Business," "Resort Operations" and "Beech-Nut Operations" columns
in the pro forma combined statements of earnings represent the combined
historical results of operations of the Branded Business, the consolidated
historical operating results of the Resort Operations and the consolidated
historical operating results of Beech-Nut, respectively. The "Beech-Nut"
column in the pro forma combined balance sheet at June 30, 1998 represents the
specific assets and liabilities related to Beech-Nut that the Company
anticipates will be acquired by Milnot after closing this sale transaction.
Please read the notes to the respective unaudited pro forma combined financial
statements, following each statement, for a discussion of adjustments made to
the historical financial information in order to calculate the Ralcorp pro
forma financial information.
<PAGE> 2
<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(in millions except share and per share data)
Nine Months Ended June 30, 1998
Pro Forma
Ralcorp Beech-Nut Adjustments Pro Forma
----------------------------
Historical Operations Debit Credit Ralcorp
------------ ------------ ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 427.6 $ (96.9) $ 330.7
------------ ------------ -----------
Costs and Expenses
Cost of products sold 277.9 (49.8) 228.1
Selling, general and administrative 74.5 (17.6) $ .8 (a) 57.7
Advertising and promotion 43.3 (29.1) 14.2
Interest expense, net (.1) $ 2.6 (b) (2.7)
Equity earnings in Vail Resorts (13.9) (13.9)
------------ -----------
381.7 (96.5) (.8) 2.6 283.4
------------ ------------ ------------- -------- -----------
Earnings before Income Taxes 45.9 (.4) (.8) (2.6) 47.3
Income Taxes 17.4 (.2) (.7) (c) 17.9
------------ ------------ ------------- -----------
Net Earnings $ 28.5 $ (.2) $ (1.5) $ (2.6) $ 29.4
============ ============ ============= ======== ===========
Basic Earnings per Common Share(d) $ .87 $ .90
============ ============ ============= ======== ===========
Diluted Earnings per Common Share(d) $ .86 $ .89
============ ============ ============= ======== ===========
Weighted Average Shares Outstanding - Basic(d) 32.8 32.8
Weighted Average Shares Outstanding - Diluted(d) 33.2 33.2
<FN>
Notes to Unaudited Pro Forma Combined Statement of Earnings for Nine Months Ended June 30, 1998
(a) To reflect the fixed costs (i.e., information systems, general administrative and corporate overhead) included
in the historical results of operations of Beech-Nut absorbed by Ralcorp with the intended sale of Beech-Nut.
(b) Interest income shown of $2.7 million for the nine months ended June 30, 1998, reflects residual interest earned
on short term investments.
(c) To reflect the tax effect of the pro forma adjustments shown at an effective rate of 38%.
(d) The weighted average number of shares used to compute Ralcorp earnings per share (basic and diluted) is based on
the weighted average number of Ralcorp common shares outstanding (basic and diluted) during the nine months ended
June 30, 1998.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(in millions except share and per share data)
Twelve Months Ended September 30, 1997
Pro Forma
Ralcorp Branded Resort Beech-Nut Adjustments
-------------
Historical Business Operations Operations Debit
------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 739.7 $ (172.5) $ (33.1) $ (151.0)
------------ ---------- ------------ ------------
Costs and Expenses
Cost of products sold 425.2 (43.4) (27.5) (79.4) $ 1.4 (a)
Selling, general and administrative 126.5 (20.9) (3.5) (23.4) 6.6 (a)
Advertising and promotion 138.6 (78.1) (1.8) (41.0)
Interest expense, net 7.9 (1.4) (2.8)
Gain on Branded Sale (515.4) 515.4 (f)
Restructuring charge 19.7 -
Equity earnings in Vail Resorts (4.7)
------------
197.8 (143.8) (35.6) (143.8) 523.4
------------ ---------- ------------ ------------ -------------
Earnings before Income Taxes 541.9 (28.7) 2.5 (7.2) (523.4)
Income Taxes 10.4 (11.2) 1.0 (2.8)
------------ ---------- ------------ ------------
Net Earnings $ 531.5 $ (17.5) $ 1.5 $ (4.4) $ (523.4)
============ ========== ============ ============ =============
Basic Earnings per Common Share(e) $ 16.11
============
Diluted Earnings per Common Share(e) $ 16.01
============
Weighted Average Shares Outstanding - Basic(e) 33.0
Weighted Average Shares Outstanding - Diluted(e) 33.2
Pro Forma
Adjustments Pro Forma
-----------
Credit Ralcorp
----------- -----------
<S> <C> <C> <C>
Net Sales $ 383.1
-----------
Costs and Expenses
Cost of products sold 276.3
Selling, general and administrative $ 3.3 (g) 82.0
Advertising and promotion 17.7
Interest expense, net 7.4 (c) (3.7)
Gain on Branded Sale -
Restructuring charge 15.1 (h) 4.6
Equity earnings in Vail Resorts 2.3 (b) (7.0)
-------- -----------
28.1 369.9
-------- -----------
Earnings before Income Taxes (28.1) 13.2
Income Taxes (7.7) (d) 5.1
-------- -----------
Net Earnings $ (20.4) $ 8.1
======== ===========
Basic Earnings per Common Share(e) $ .25
===========
Diluted Earnings per Common Share(e) $ .24
===========
Weighted Average Shares Outstanding - Basic(e) 33.0
Weighted Average Shares Outstanding - Diluted(e) 33.2
<FN>
Notes to Unaudited Pro Forma Combined Statement of Earnings for the Year Ended September 30, 1997
(a) To reflect the fixed costs (i.e., fixed manufacturing, information systems, general administrative and corporate
overhead) included in the combined historical results of operations of the Branded Business and Beech-Nut absorbed
by Ralcorp with the sale of the Branded Business and the intended sale of Beech-Nut.
(b) To reflect Ralcorp's equity earnings in Vail Resorts. The equity earnings include $1.9 million for the year ended
September 30, 1997, of amortization income. The amortization income is the result of the basis difference between
the net book value of the Resort Operations' net assets contributed to Vail Resorts and Ralcorp's approximate
22.6% equity interest in Vail Resorts' net assets. This basis difference is being amortized ratably over 20 years.
(c) To reduce interest expense due to General Mills assuming $215.0 million of Ralcorp debt upon the sale of the
Branded Business. Interest income shown of $3.7 million for the year ended September 30, 1997, reflects residual
interest earned on short term investments.
(d) To reflect the tax effect of the pro forma adjustments shown at an effective rate of 38%.
(e) The weighted average number of shares used to compute Ralcorp earnings per share (basic and diluted) is based on
the weighted average number of Ralcorp common shares outstanding (basic and diluted) during the year ended
September 30, 1997.
(f) To eliminate the tax-free gain on sale of the Branded Business.
(g) To eliminate certain expenses incurred directly as a result of the Branded Business and Resort Operations sale
transactions.
(h) To eliminate the amount of the second quarter of fiscal 1997 restructuring charge that was specifically related
to the sale of the Branded Business.
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(in millions except share and per share data)
Nine Months Ended June 30, 1997
Pro Forma
Ralcorp Branded Resort Beech-Nut Adjustments
-------------
Historical Business Operations Operations Debit
------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 595.0 $ (172.5) $ (33.1) $ (118.3)
------------ ---------- ------------ ------------
Costs and Expenses
Cost of products sold 328.4 (43.4) (27.5) (62.3) $ 1.4 (a)
Selling, general and administrative 101.8 (20.9) (3.5) (17.8) 6.5 (a)
Advertising and promotion 125.0 (78.1) (1.8) (30.6)
Interest expense, net 8.1 (1.4) (2.8)
Gain on Branded Sale (516.5) 516.5 (f)
Restructuring charge 23.0 -
Equity earnings in Vail Resorts (7.9)
------------
61.9 (143.8) (35.6) (110.7) 524.4
------------ ---------- ------------ ------------ -------------
Earnings before Income Taxes 533.1 (28.7) 2.5 (7.6) (524.4)
Income Taxes 6.5 (11.2) 1.0 (2.8)
------------ ---------- ------------ ------------
Net Earnings $ 526.6 $ (17.5) $ 1.5 $ (4.8) $ (524.4)
============ ========== ============ ============ =============
Basic Earnings per Common Share(e) $ 15.98
============
Diluted Earnings per Common Share(e) $ 15.86
============
Weighted Average Shares Outstanding - Basic(e) 33.0
Weighted Average Shares Outstanding - Diluted(e) 33.2
Pro Forma
Adjustments Pro Forma
-----------
Credit Ralcorp
----------- -----------
<S> <C> <C> <C>
Net Sales $ 271.1
-----------
Costs and Expenses
Cost of products sold 196.6
Selling, general and administrative $ 3.3 (g) 62.8
Advertising and promotion 14.5
Interest expense, net 6.6 (c) (2.7)
Gain on Branded Sale -
Restructuring charge 18.4 (h) 4.6
Equity earnings in Vail Resorts 2.3 (b) (10.2)
-------- -----------
30.6 265.6
-------- -----------
Earnings before Income Taxes (30.6) 5.5
Income Taxes (8.5) (d) 2.0
-------- -----------
Net Earnings $ (22.1) $ 3.5
======== ===========
Basic Earnings per Common Share(e) $ .11
===========
Diluted Earnings per Common Share(e) $ .11
===========
Weighted Average Shares Outstanding - Basic(e) 33.0
Weighted Average Shares Outstanding - Diluted(e) 33.2
<FN>
Notes to Unaudited Pro Forma Combined Statement of Earnings for the Nine Months Ended June 30, 1997
(a) To reflect the fixed costs (i.e., fixed manufacturing, information systems, general administrative and corporate
overhead) included in the combined historical results of operations of the Branded Business and Beech-Nut absorbed
by Ralcorp with the sale of the Branded Business and the intended sale of Beech-Nut.
(b) To reflect Ralcorp's equity earnings in Vail Resorts. The equity earnings include $1.0 million for the nine months
ended June 30, 1997, of amortization income. The amortization income is the result of the basis difference between
the net book value of the Resort Operations' net assets contributed to Vail Resorts and Ralcorp's approximate 22.6%
equity interest in Vail Resorts' net assets. This basis difference is being amortized ratably over 20 years.
(c) To reduce interest expense due to General Mills assuming $215.0 million of Ralcorp debt upon the sale of the
Branded Business. Interest income shown of $2.7 million for the nine months ended June 30, 1997, reflects residual
interest earned on short term investments.
(d) To reflect the tax effect of the pro forma adjustments shown at an effective rate of 38%.
(e) The weighted average number of shares used to compute Ralcorp earnings per share (basic and diluted) is based on
the weighted average number of Ralcorp common shares outstanding (basic and diluted) during the nine months ended
June 30, 1997.
(f) To eliminate the tax-free gain on sale of the Branded Business.
(g) To eliminate certain expenses incurred directly as a result of the Branded Business and Resort Operations sale
transactions.
(h) To eliminate the amount of the second quarter of fiscal 1997 restructuring charge that was specifically related
to the sale of the Branded Business.
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
RALCORP HOLDINGS, INC.
Pro Forma Combined Balance Sheet
(in millions)
June 30, 1998
Pro Forma
Ralcorp Adjustments Ralcorp
--------------------------
Historical Beech-Nut Debit Credit Pro Forma
------------ ---------- ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2.6 $ - $ 68.0 (a) $ 1.2 (b) $ 69.4
Receivables, less allowance for doubtful
accounts 39.8 10.4 29.4
Inventories 76.3 31.1 45.2
Prepaid expenses 9.4 .3 .9 (c) 8.2
------------ ---------- ------------ ------- -----------
Total Current Assets 128.1 41.8 68.0 2.1 152.2
------------ ---------- ------------ ------- -----------
Investments and Other Assets 124.0 124.0
------------ ---------- ------------ -------- -----------
Deferred income taxes 6.2 6.2
------------ ---------- ------------ -------- -----------
Property at Cost 273.2 39.8 .8 (d) 232.6
Accumulated depreciation 119.8 22.0 97.8
------------ ---------- ------------ ------- -----------
153.4 17.8 - .8 134.8
------------ ---------- ------------ ------- -----------
Total $ 411.7 $ 59.6 $ 68.0 $ 2.9 $ 417.2
============ ========== ============ ======= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ - $ - $ - $ - $ -
Accounts payable 27.5 2.3 6.3 (e) 31.5
Other current liabilities 30.0 3.3 1.1 (f) 25.6
------------ ---------- ------------ ------- -----------
Total Current Liabilities 57.5 5.6 1.1 6.3 57.1
------------ ---------- ------------ ------- -----------
Long-Term Debt 10.7 - - - 10.7
------------ ---------- ------------ ------- -----------
Other Liabilities 36.5 3.5 .9 (c) 32.1
------------ ---------- ------------ ------- -----------
Shareholders' Equity
Common stock .3 .3
Capital in excess of par value 110.1 110.1
Retained earnings 204.8 10.3 (g) 215.1
Common stock in treasury, at cost (8.2) (8.2)
------------ ---------- ------------ ------- -----------
Total Shareholders' Equity 307.0 - - 10.3 317.3
------------ ---------- ------------ ------- -----------
Total $ 411.7 $ 9.1 $ 2.0 $ 16.6 $ 417.2
============ ========== ============ ======= ===========
<FN>
Notes to Unaudited Pro Forma Combined Balance Sheet at June 30, 1998
(a) To reflect the cash proceeds of the Beech-Nut sale transaction.
(b) To reflect payment of transaction costs related to the Beech-Nut sale transaction.
(c) To reflect the write off of the current and deferred tax assets and liabilities associated
with the specific assets and liabilities to be sold in the Beech-Nut sale transaction.
(d) To reflect fair value of assets on the records of Ralcorp to be sold as part of the Beech-Nut sale.
(e) To reflect estimated taxes payable on net cash proceeds.
(f) To adjust amount of certain liabilities retained by Ralcorp.
(g) To record the estimated gain on sale of the Beech-Nut baby food subsidiary.
</TABLE>
<PAGE> 1
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement ("Agreement") is made as of July 29, 1998,
by and among Milnot Holding Corporation, a Delaware corporation ("Buyer"), RH
Financial Corporation, a Nevada corporation ("Seller"), and Ralcorp Holdings,
Inc., a Missouri corporation ("Guarantor").
RECITALS
--------
Seller desires to sell and Buyer desires to purchase all of the issued
and outstanding shares (the "Shares") of capital stock of Beech-Nut Nutrition
Corporation, a Nevada corporation (the "Company"), for the consideration and
on the terms set forth in this Agreement. Guarantor desires to guaranty the
obligations of Seller.
AGREEMENT
---------
In consideration of the mutual covenants and agreements contained herein,
the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following capitalized terms have the
meanings specified or referred to in this Article I:
"ADDITIONAL TAXES" - as defined in Section 12.1(e).
-----------------
"ADJUSTED BOOK INVENTORY" - means the aggregate value of the raw
-------------------------
materials, packaging and other supplies, work in process and finished products
--
inventories on any given date determined by adjusting the Inventory Amount on
the June Balance Sheet (i.e., $26,102,000 in finished goods and $4,962,000 in
raw materials) to reflect: (i) purchases of raw materials and supplies in the
ordinary course of business; (ii) direct production costs incurred and
allocable to inventory produced since June 30, 1998, in accordance with GAAP
applied on a consistent basis with the June Balance Sheet; (iii) allocation of
indirect costs to inventory produced since June 30, 1998, in accordance with
GAAP applied on a consistent basis with the June Balance Sheet; (iv) sales of
finished products; and (v) the use of supplies in the ordinary course of
business, consistent with past practices.
"AFFILIATE(S)" - has the meaning set forth in Rule 12b-2 of the
------------
regulations promulgated under the Securities Exchange Act.
"BALANCE SHEET" - as defined in Section 3.4.
--------------
"BUYER" - as defined in the first paragraph of this Agreement.
-----
"CLOSING" - as defined in Section 2.3.
-------
"CLOSING DATE" - the date and time as of which the Closing actually takes
------------
place.
"COMPANY" - as defined in the Recitals of this Agreement.
-------
"COMPANY EMPLOYEE PLANS" - as defined in Section 3.11.
------------------------
"CONSENT" - any approval, consent, ratification, waiver, license, permit
-------
or other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" - all of the transactions contemplated by
--------------------------
this Agreement, including:
(a) the sale of the Shares by Seller to Buyer; and
<PAGE> 2
(b) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement and the agreements contemplated
hereby.
"CONTRACT" - any agreement, contract, obligation, promise, or undertaking
--------
(whether written or oral) that is legally binding.
"CUTOFF TIME" - MEANS 11:59 P.M. ON JUNE 30, 1998.
------------
"DAMAGES" - as defined in Section 10.1.
-------
"ENCUMBRANCE" - any charge, claim, lien, option, pledge, security
-----------
interest, call, proxy or similar restriction.
"ENVIRONMENTAL LAW" - any Legal Requirement that relates to public health
-----------------
and safety and pollution or protection of the environment, including without
limitation all those relating to the presence, use, production, reduction,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, wastes or
pollutants.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
-----
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES" - any real property, leaseholds, or other interests
----------
currently owned or operated by the Company and any buildings, plants,
structures, or equipment located thereon.
"FDA" - as defined in Section 3.12.
-----
"FINANCIAL STATEMENTS" - as defined in Section 3.4.
---------------------
"GAAP" - generally accepted United States accounting principles
----
consistently applied.
"GOVERNMENTAL AUTHORIZATION" - any approval, consent, license, permit,
---------------------------
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"GOVERNMENTAL BODY" - any:
------------------
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity
and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
"GUARANTOR" - as defined in the Recitals.
---------
"HAZARDOUS MATERIALS" - any waste or other substance that is listed,
--------------------
defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, petroleum and petroleum products, and
asbestos or asbestos-containing materials.
"HSR ACT" - the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
--------
any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
<PAGE> 3
"INTELLECTUAL PROPERTY ASSETS" - as defined in Section 3.19.
------------------------------
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
---
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service or any successor
---
agency, and, to the extent relevant, the United States Department of the
Treasury.
"JUNE BALANCE SHEET" - as defined in Section 3.4.
--------------------
"KNOWLEDGE," "BEST KNOWLEDGE" OR ANY VARIATION OF THE FOREGOING - the
--------- --------------- ----------------------------------
knowledge, after reasonable inquiry of, in the case of the Company, the Seller
or the Guarantor, the persons listed on Schedule 1A and, in the case of the
Buyer, the persons listed on Schedule 1B and in each case excluding any other
persons.
"LEGAL REQUIREMENT(S)" - any federal, state, local, municipal, foreign,
---------------------
international, multinational or other governmental order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MATERIAL ADVERSE CHANGE" - any event or occurrence or series of events
-------------------------
or occurrences that has had or would reasonably be expected to have
(individually or together) a material adverse effect on the business,
financial condition or results of operations of the Company.
"MATERIAL CONTRACT" - as defined in Section 3.15.
------------------
"OCCUPATIONAL SAFETY AND HEALTH LAW" - any Legal Requirement designed to
-----------------------------------
provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working
conditions.
"ORDER" - any award, decision, injunction, judgment, order, ruling,
-----
decree or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORGANIZATIONAL DOCUMENTS" - the articles or certificate of incorporation
------------------------
and any amendments thereto and the bylaws of a corporation.
"ORIGINAL SCHEDULES" - as defined in Section 5.5.
-------------------
"PBGC" - the Pension Benefit Guaranty Corporation.
----
"PERSON" - any individual, corporation (including any non-profit
------
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other
entity or Governmental Body.
"PROCEEDING(S)" - any action, audit, hearing, investigation, charge,
-------------
litigation, grievance or suit (at law or equity) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental
Body or arbitrator.
"PRODUCT" - as defined in Section 3.12.
-------
"PURCHASE PRICE" - as defined in Section 2.2.
---------------
"RECORDS" - as defined in Section 12.3.
-------
"RELEASE" - any spilling, leaking, pumping, pouring, emitting, emptying,
-------
discharging, injecting, depositing, escaping, leaching, dumping, disposing or
other releasing into the environment, whether intentional or unintentional.
<PAGE> 4
"REPRESENTATIVE" - with respect to a particular Person, any director,
--------------
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" - the Securities Act of 1933 or any successor law, and
---------------
regulations and rules issued pursuant to that Act or any successor law.
"SELLER" - as defined in the first paragraph of this Agreement.
------
"SHARES" - as defined in the Recitals of this Agreement.
------
"TAX SHARING ARRANGEMENT" - as defined in Section 12.1(a)(v).
-------------------------
"TAXES" - any federal, state, local and foreign tax (including without
-----
limitation any income or franchise tax or tax in lieu thereof (such as a tax
on capital), capital gains tax, value added tax, sales or use tax, gift tax,
real estate tax, real estate or other transfer tax, excise tax or property
tax), levy, tariff duty (including customs duty), payroll, withholding, FICA
or similar tax, the Alternative Minimum Tax, and any deficiency, fee,
interest, penalty or other charge related thereto imposed by any Governmental
Body.
"TAX RETURNS" - returns, declarations, reports, claims for refund,
------------
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"TITLE COMMITMENTS" - as defined in Section 7.5.
------------------
"TITLE INSURER" - as defined in Section 7.5.
--------------
"TITLE POLICIES" - as defined in Section 7.5.
---------------
"TRANSITION SERVICES AGREEMENT" - as defined in Section 2.4.
-------------------------------
"UPDATED SCHEDULES" - as defined in Section 5.5.
-------------------
"WC PAYMENT AMOUNT" - the amount by which the estimated total future
-------------------
liability for Company's workers' compensation claims for occurrences on or
prior to June 30, 1998 exceeds (a positive number) or is less than (a negative
number) the Accrued Workers' Compensation Self Insurance Amount reflected on
the June Balance Sheet ($725,000).
ARTICLE II
SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES - Subject to the terms and conditions of this Agreement, at
------
Closing, Seller will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Seller, free and clear of all Encumbrances.
2.2 PURCHASE PRICE - The purchase price (the "Purchase Price") for the
--------------
Shares will be $68,000,000, plus interest thereon at an annual rate of 12.0%
per annum (not compounding) from August 28, 1998 to, but not including, the
Closing Date if the Closing Date is after August 28, 1998.
2.3 CLOSING - The consummation of the purchase and sale (the "Closing")
-------
provided for in this Agreement will take place at a mutually agreeable
location in Las Vegas or Reno, Nevada at 10:00 a.m. (local time) on the date
selected by the Buyer upon at least five (5) business days notice to the
Seller following satisfaction or waiver of all conditions to the Closing in
Articles VII and VIII (other than those conditions specified to be satisfied
by deliveries at the Closing) or at such other time and place as the parties
may agree. Subject to the provisions of Article IX, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at
the place determined pursuant to this Section 2.3 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
<PAGE> 5
2.4 CLOSING OBLIGATIONS - At the Closing:
--------------------
(a) Seller will deliver to Buyer:
(i) certificates representing the Shares, duly endorsed or
accompanied by duly executed stock powers in a form reasonably satisfactory to
Buyer with all requisite federal, state and local transfer stamps affixed
thereto;
(ii) a certificate executed by Seller stating that the Seller's
representations and warranties in this Agreement are accurate in all material
respects as of the Closing Date as if made on the Closing Date (giving full
effect to any supplements in the Updated Schedules that were delivered by
Seller to Buyer prior to the Closing Date in accordance with Section 5.5) and
that all other conditions in Article VII are satisfied;
(iii) the deliveries required by Article VII and the
documentation reasonably required by Buyer confirming satisfaction of matters
set forth in Article VII;
(iv) all minute books and stock record books of the Company in
Seller's, Guarantor's or their Affiliates' possessions; .
(v) a duly executed assignment, in form and substance reasonably
satisfactory to Buyer, pursuant to which Seller, Guarantor and their
Affiliates assign to Buyer all confidentiality agreements related exclusively
to the Company and all indemnification rights, noncompete and nonsolicitation
protections and other rights and covenants related to the Company or its
business, to the extent such rights, protections or covenants (x) were entered
into by or assigned to the Seller, the Guarantor, any of their predecessors or
any Affiliate of any of the foregoing and (y) are assignable to Buyer without
prejudice to Guarantor's interests;
(vi) a duly executed agreement for post-closing transition
services (the "Transition Services Agreement") in substantially the same form
as attached hereto as Exhibit 2.4(vi); and
(vii) a bill of sale for $1.00 covering the transfer of certain
office equipment to the Company as set forth on Schedule 2.6.
(b) Buyer will deliver to Seller:
(i) the Purchase Price by wire transfer to an account specified
by Seller;
(ii) a certificate executed by Buyer stating that the Buyer's
representations and warranties in this Agreement are accurate in all material
respects as of the Closing Date as if made on the Closing Date; and
(iii) the deliveries required by Article VIII and the
documentation reasonably required by Seller confirming satisfaction of matters
set forth in Article VIII.
(iv) a duly executed Transition Services Agreement.
2.5 POST EXECUTION CASH MANAGEMENT -
---------------------------------
(a) Cash ManagementProcedures - From the Cut-off Time through the Closing
-------------------------
Date (the "Interim Period"), the Guarantor, the Seller and the Company shall
continue to employ the same cash management procedures and practices as those
followed prior to the Cut-off Time (including (i) continuing to collect funds
generated by the operations of the Company from bank accounts and bank lock
boxes and through the Company's standard depository transfer systems, (ii)
continuing to fund bank accounts in connection with cash disbursements and
(iii) continuing to adjust the intercompany accounts between the Company and
the Guarantor.
(b) Cash Ledger Account - All cash, checks and similar items of payment
-------------------
received during the Interim Period by the Company or by the Guarantor or the
Seller (or any of their Affiliates) on behalf of the Company (other than
insurance proceeds) shall be credited to the account of the Company on a
separate ledger account (the "Cash Ledger Account") maintained by the
Guarantor, and,subject to the restrictions set forth in Section 2.5(d), all
cash, checks and similar items of payment made during the Interim Period by
the Guarantor or the Seller on behalf of the Company with respect to (i)
liabilities and reserves reflected on the liability side of the June Balance
Sheet (assuming the incorporation of the Supplemental Balance Sheet
Information attached to the June Balance Sheet), (ii) trade payables and
current liabilities incurred by the Company since June 30, 1998, in the
ordinary course of business or (iii) capital expenditures for the Company
<PAGE> 6
(but, in each case under clauses (i), (ii) or (iii), not including any
long-term liabilities (other than workers' compensation), and any liabilities
for which the Buyer or the Company would be indemnified by the Seller under
this Agreement if such disbursement were not made (ignoring the $250,000
basket for purposes of such determination)), shall be debited on the Cash
Ledger Account. Upon request by the Buyer, the Guarantor shall provide the
Buyer with a daily log of all credits and all debits recorded on the Cash
Ledger Account, in reasonable detail.
(c) Ownership/Responsibility - All credits reflected on the Cash Ledger
------------------------
Account shall be the sole property of the Guarantor and the Seller, and
following the Closing, the Company and the Buyer shall have no rights or
claims thereto except as set forth in this Section 2.5. All debits reflected
on the Cash Ledger Account shall be the sole responsibility of the Guarantor
and the Seller, and following the Closing, the Company and the Buyer shall
have no liability or obligations with respect thereto.
(d) Timing - All checks and other forms of payment made by the Guarantor
------
or the Seller during the Interim Period (except checks drawn from Company Bank
Accounts that are set forth on Schedule 2.5 as remaining with the Company
following the Closing (the "Retained Accounts")) shall be debited against the
Cash Ledger Account when issued or when reconciliation information is
available in the ordinary course of business consistent with past practices.
In either case Guarantor and Seller shall be liable for the final settlement
of such payments (whether before or after the Closing). All funding by the
Guarantor or the Seller during the Interim Period of checks drawn from the
Retained Accounts during the Interim Period shall be debited against the Cash
Ledger Account when funded, and the Guarantor and the Seller shall be liable
for the final settlement of any such funded payments (whether before or after
the Closing).
(e) Uncollected Checks - All checks and other forms of payment received by
------------------
or on behalf of the Company during the Interim Period shall be credited to the
Cash Ledger Account when received. If within 30 days after Closing any check
or other form of payment received during the Interim Period has not been
collected by the Guarantor or the Seller in cash, the accounts receivable
relieved by such payment shall be restored and shall be the sole property of
the Company (including all rights to pursue collection against the account
debtor), and the Buyer shall remit the amount of such uncollected payment to
the Guarantor in cash.
(f) Payment of Adjustment - As soon as practicable, but no later than
---------------------
seven (7) days following the Closing, Guarantor and Buyer shall jointly
determine, as of 11:59 p.m. on the Closing Date, on an unaudited basis, the
balance of the Company's Cash Ledger Account without giving effect to the
adjustment in Section 12.5. To the extent that the balance of the Company's
Cash Ledger Account so determined exceeds or is less than zero ($0), then in
the case of an excess Guarantor shall remit the amount of such excess to Buyer
and in the case of a deficiency Buyer shall remit the amount of such
deficiency to Guarantor.
(g) Restoration of June 30, 1998 Receivables - If any checks or other
----------------------------------------
forms of payment received by or on behalf of the Company prior to the Cutoff
Time are subsequently returned for insufficient funds or otherwise do not
settle, (i) the Accounts Receivable balance on the June Balance Sheet shall be
deemed to be increased, for all purposes of this Agreement, by the amount of
such unsettled payment and the amount thereof shall be debited to the Cash
Ledger Account, (ii) to the extent a new check or other form of payment in
respect of such unsettled payment is received by or on behalf of the Company
during the Interim Period, the amount thereof shall be credited to the Cash
Ledger Account when such check or other form of payment is received and (iii)
to the extent no new check or other form of payment in respect of such
unsettled amount is received by or on behalf of the Company during the Interim
Period, but the amount of the earlier check or other form of payment is
received in cash (e.g., by resubmitting the original check for payment), the
amount of cash so received shall be credited to the Cash Ledger Account upon
receipt.
(h) Ownership of Accounts - Except as set forth on Schedule 2.5, all
----------------------
disbursements, collection and lock box bank accounts used in the Company's
business shall remain with Guarantor after Closing, subject to the Guarantor's
obligation following the Closing to remit the amount of any receipts in
respect of the Company's business to the Company on a weekly basis along with
payor and invoice information (including any and all remittance advices).
2.6 SHARED ASSETS/SHARED SERVICES - The parties acknowledge that the
------------------------------
Seller, Guarantor and their Affiliates provide certain services to the
Company. Schedule 2.6 describes such services and sets forth the disposition
of assets (tangible and intangible) necessary to perform such services.
<PAGE> 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and consummate
the Contemplated Transactions, Seller, and Guarantor with respect to Section
3.2, represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
---------------------------------
(a) The Company is a corporation duly incorporated under the laws of
the state of Nevada. The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada, with
full corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under this Agreement and the
Contemplated Transactions. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties
owned or used by it, or the nature of the activities conducted by it, requires
such qualification except where the failure to be so qualified would not
result in a Material Adverse Change. Schedule 3.1 sets forth each
jurisdiction in which the Company is so qualified.
(b) Seller has delivered to Buyer complete and correct copies of the
Organizational Documents of the Company, as currently in effect and complete
and correct copies of Company's minute books and stock record books. The
Company is not in default of or in violation of any provisions of its
Organizational Documents. The Company has no subsidiaries or other interests
in any other Person and the Company has never had any subsidiaries or
interests in any other Person.
3.2 AUTHORITY; NO CONFLICT
------------------------
(a) Each of this Agreement and the Transition Services Agreement have
been duly authorized, executed and delivered by Seller and Guarantor and
constitutes the legal, valid, and binding obligation of Seller and Guarantor,
enforceable against each in accordance with its terms subject to the
insolvency Legal Requirements and general principles of equity (including the
ability or inability to secure injunctive relief for specific performance).
Seller and Guarantor have the absolute and unrestricted right, power,
authority and capacity to execute and deliver this Agreement and the
Transition Services Agreement and perform their obligations under this
Agreement, the Transition Services Agreement and any other documents delivered
by them at Closing, and no other corporate proceedings or approvals, votes or
consents are necessary to authorize the execution, delivery and performance of
this Agreement, the Transition Services or any of such other documents by
Seller or Guarantor.
(b) Except as set forth on Schedule 3.2, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will:
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Company's or the Seller's Organizational Documents, or
(B) any resolution adopted by the board of directors or the stockholders of
the Company, Seller or Guarantor;
(ii) contravene, conflict with, or result in a violation of, any
Legal Requirement or any Order to which the Company, Seller or Guarantor may
be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of any Governmental Authorization that is held by
the Company or that is necessary to conduct the Company's business in
substantially the same manner as presently conducted;
(iv) contravene, conflict with, result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Material Contract; or
(v) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company.
(c) Except as set forth in Schedule 3.2, neither the Company, Seller
nor Guarantor is now or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
<PAGE> 8
3.3 CAPITALIZATION - The authorized capital stock of the Company consists
--------------
of 1,000 shares of common stock, par value $1.00 per share, of which 1,000
shares are issued and outstanding and constitute the Shares. Seller is and
will be on the Closing Date the record and beneficial owner and holder of the
Shares, free and clear of all Encumbrances. All of the Shares have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no Contracts relating to the issuance, sale, or transfer of any capital stock,
equity securities or other securities of the Company. The Company does not
own nor have any Contract to acquire, any capital stock, equity securities or
other securities of any Person or any direct or indirect equity or ownership
interest in any other business.
3.4 FINANCIAL STATEMENTS - Attached as Schedule 3.4 hereto are the
---------------------
Condensed Balance Sheets at September 30, 1997 (the "Balance Sheet"),
September 30, 1996, and June 30, 1998 (the "June Balance Sheet") and the
related condensed statements of income and cash flows for the years ended
September 30, 1997 and September 30, 1996, and the nine (9) months ended June
30, 1998, respectively (collectively, the "Financial Statements"). The
Financial Statements were prepared in accordance with GAAP consistently
applied except if and to the extent the Company's accounting policies,
procedures and methodologies set forth on Schedule 3.4 as are different from
GAAP, and fairly present the financial condition and results of operations (to
the earnings before income taxes level) and cash flows of the Company at
September 30, 1997, September 30, 1996 and June 30, 1998 and for the twelve
(12) month periods and nine (9) month periods, respectively, then ended.
Neither this Section 3.4 nor any other provision in this Agreement shall be
construed as a representation or warranty as to the accuracy or completeness
of any budgets or projections relating to or reflecting the Company.
3.5 BOOKS AND RECORDS - The books of account, minute books, and stock
-----------------
record books of the Company, all of which have been made available to Buyer,
are complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Company contain
accurate and complete records of all meetings held of, and material corporate
action taken by, the stockholders and the Board of Directors, and no meeting
of any such stockholders or Board of Directors has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of the
Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES -
------------------------------------
(a) Schedule 3.6 contains a complete and accurate list and legal
description of all real property owned by the Company (the "Owned Real
Property") and a complete and accurate list of each lease of real property
owned or used by the Company requiring the payment by the Company of $50,000
or more per year (the "Leased Real Property"). The Company owns (with good
and marketable title in the case of real property subject only to the matters
permitted by the following sentence and to matters set forth on Schedule 3.6)
all the properties and assets (whether real, personal, or mixed and whether
tangible or intangible) that they purport to own, including all of the
properties and assets reflected in the Balance Sheet and the June Balance
Sheet, or used in the Company's business except for the assets set forth on
Schedule 2.6 as remaining with Guarantor or its Affiliates after Closing
(except for assets held under capitalized leases disclosed or not required to
be disclosed in Schedule 3.6 and personal property sold since the date of the
Balance Sheet or the June Balance Sheet, as the case may be, in the ordinary
course of business) and all of such remaining assets will be owned by the
Company after the Closing or will be transferred to the Company at Seller's
sole cost and expense after the Closing except in both cases for assets set
forth on Schedule 2.6 as remaining with Guarantor or its Affiliates after
Closing. All material properties and assets reflected in the Balance Sheet,
the June Balance Sheet or listed or required to be listed on Schedule 3.6 are
(or will be at the Closing) free and clear of all Encumbrances except for: (a)
liens for current taxes not yet due, and (b) with respect to real property,
(i) minor imperfections of title, if any, none of which, individually or in
the aggregate, is substantial in amount, materially detracts from the value or
materially impairs the use of the property subject thereto, or materially
impairs the operations of the Company; (ii) zoning laws and other land use
restrictions that do not materially impair the present use of the property
subject thereto, (iii) easements and other restrictions that would not
individually or in the aggregate materially impair the present use of the
property; and (iv) matters disclosed in the title policies referred to on
Schedule 3.6 (together, the "Real Property Permitted Encumbrances").
<PAGE> 9
(b) Owned Properties. With respect to each parcel of Owned Real
----------------
Property: (i) there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any person the right of use or
occupancy of any portion of such parcel (except as referred to in paragraph
(a) of this Section 3.6); and (ii) there are no outstanding actions or rights
of first refusal to purchase such parcel (other than the right of the Buyer
pursuant to this Agreement), or any portion thereof or interest therein.
(c) Leased Properties. With respect to each Leased Real Property,
-----------------
the lease is in full force and effect and the Company holds a valid and
existing leasehold or subleasehold interest. The Seller has delivered to
Buyer true, correct, complete and accurate copies of each lease described in
Schedule 3.6 (the "Leases"). To the Seller's Knowledge, with respect to each
Lease listed on Schedule 3.6: (i) the Lease is legal, valid, binding,
enforceable and in full force and effect; (ii) the Lease will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the Closing; (iii) neither the Company nor any other party to
the Lease is in material breach or default, and no event has occurred which,
with notice or lapse of time, would constitute such a material breach or
default or permit termination, material modification or acceleration under the
Lease; (iv) no party to the Lease has repudiated any provision thereof; (v)
there are no disputes of a material nature, oral agreements, or forbearance
programs in effect as to the Lease; (vi) the Lease has not been modified in
any respect, except to the extent that such modifications are disclosed by the
documents delivered to Buyer or are not material; and (vii) the Company has
not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in the Lease.
(d) Real Property Disclosure. Except as set forth on Schedule 3.6,
------------------------
there is no Real Property leased or owned by the Company and used in the
Company's business. The Owned Real Property and Leased Real Property is
referred to collectively herein as the "Real Property."
3.7 CONDITION AND SUFFICIENCY OF ASSETS - Except as set forth on Schedule
-----------------------------------
3.7, to the Seller's Knowledge, the buildings, plants, structures, and
equipment of the Company are structurally sound, are in good operating
condition and repair (ordinary wear and tear excepted), and are adequate for
the uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance.
3.8 INVENTORY - Except as set forth on Schedule 3.8, all inventory of the
---------
Company, reflected in the Balance Sheet or the June Balance Sheet consisted of
and all inventory at Closing will consist of a quality and quantity usable and
salable in the ordinary course of business, and that is not adulterated, out
of date, damaged or defective, except for obsolete items and items of
below-standard quality, all of which as of June 30, 1998 have been written off
or written down to net realizable value in the June Balance Sheet and all of
which as of the Closing are reflected in an inventory reserve on the books and
records of the Company, prepared in a manner consistent with and using
assumptions consistent with those used in calculating the inventory reserve or
direct inventory reduction reflected on the June Balance Sheet.
3.9 NO UNDISCLOSED LIABILITIES - Except as set forth in Schedule 3.9, the
--------------------------
Company has no liabilities or obligations of any nature to or imposed by third
parties (whether known or unknown, whether absolute, accrued, contingent, or
otherwise, and whether due or to become due and regardless of when asserted)
except for liabilities or obligations (a) to the extent reflected or reserved
against in the June Balance Sheet (assuming the incorporation of the
Supplemental Balance Sheet Information attached to the June Balance Sheet),
(b) under any Contracts disclosed or not required to be disclosed on Schedule
3.15(a) (other than for breaches thereof), (c) which are current trade and
accrued liabilities incurred in the ordinary course of business since the date
of the June Balance Sheet (none of which is a liability for breach of
contract, tort, infringement or lawsuit), or (d) incurred in connection with
this Agreement or the Contemplated Transactions as set forth in or expressly
contemplated by this Agreement.
<PAGE> 10
3.10 TAXES
-----
(a) The Company has filed or caused to be filed (on a timely basis
since March 31, 1991) all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. The Company has paid
all Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Seller or the Company,
except such Taxes, if any, as are listed in Schedule 3.10 and are being
contested in good faith. All Taxes accrued but not due as of June 30, 1998
(except taxes based on income), are accrued on the June Balance Sheet. The
Company has not incurred any liability for Taxes since June 30, 1998, except
in the ordinary course of business.
(b) All Taxes that the Company is or was required by Legal
Requirement to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Body or
other Person.
(c) All Tax Returns filed by (or that include on a consolidated
basis) the Company are true, correct, and complete in all material respects.
(d) No claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(e) There is no dispute or claim concerning any liability for Taxes
of the Company either (i) claimed or raised by any authority in writing or
(ii) as to which the Seller has knowledge or as to which any of the directors
and officers (and employees responsible for Tax matters) of the Company, has
knowledge based upon personal contact with any agent of such authority.
(f) Schedule 3.10 lists all federal, state, local, and foreign income
Tax Returns filed with respect to the Company for taxable periods ended on or
after September 30, 1994, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. The
Seller or the Company has delivered to the Buyer those portions of the
following which relate to the Company: Correct and complete copies of all
federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since April 1, 1994.
(g) The Company has not waived any statute of limitations in respect
to Taxes or agreed to any extensions of time with respect to a Tax assessment
or deficiency, except an extension of the statute on the September 30, 1994
Federal Form 1120 consolidated return of Guarantor until June 15, 1999.
(h) The Company has not filed a consent under IRC 341(f) concerning
collapsible corporations. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under IRC 280G (or any corresponding provision of state, local or
foreign income Tax law).
(i) The Company will not be required to include any adjustment in
taxable income for any taxable period (or portion thereof) ending on or after
June 30, 1998, as a result of (i) a change in method of accounting for a
taxable period (or portion thereof) ending on or prior to the Closing Date or
(ii) any "closing agreement," as described in IRC 7121 (or any corresponding
provision of state, local or foreign income Tax law).
(j) The Company has not been a member of an affiliated group (as
described in IRC 1504 and any corresponding provision of state, local or
foreign income Tax law) filing a consolidated federal income Tax Return (other
than a group the common parent of which was Guarantor or its predecessor).
The business of the Company was operated as a division of Ralston Purina
Company prior to the April 1, 1994 spin-off of Guarantor and subsidiaries,
including the Company.
<PAGE> 11
3.11 EMPLOYEE BENEFITS -
------------------
(a) Schedule 3.11 contains an accurate and complete list of all Plans, as
defined below, contributed to, maintained or sponsored by the Company, to
which the Company is obligated to contribute or with respect to which the
Company has any liability or potential liability, whether direct or indirect,
including, without limitation, all Plans contributed to, maintained or
sponsored by each member of the controlled group of companies, within the
meaning of IRC Sections 414(b), 414(c), 414(m) and 414(o), of which the
Company is a member to the extent the Company has any potential liability with
respect to such Plan (collectively, the "Company Employee Plans" and
individually, a "Company Employee Plan"). For purposes of this Agreement, the
term "Plans" shall mean: (i) employee benefit plans as defined in Section 3(3)
of ERISA, whether or not funded and whether or not terminated, and (ii) fringe
benefit plans, policies, programs and arrangements, whether or not subject to
ERISA, whether or not funded, and whether or not terminated, including without
limitation, stock bonus, stock option, deferred compensation, pension,
severance, bonus, incentive, health, disability and welfare plans.
(b) Except as set forth in Schedule 3.11, the Company does not contribute
to, have any obligation to contribute to or otherwise have any liability or
potential liability with respect to (i) any Multiemployer Plan (as such term
is defined in Section 3(37) of ERISA), (ii) any Plan of the type described in
Sections 4063 and 4064 of ERISA or in IRC Section 413(c), or (iii) any Plan
which provides health, life insurance, accident or other "welfare-type"
benefits to current or future retirees or current former employees, their
spouses or dependents, other than in accordance with IRS 4980B or applicable
state continuation coverage law.
(c) Except as set forth in Schedule 3.11, none of the Company Employee
Plans obligate the Company to pay separation, severance, termination or
similar-type benefits solely as a result of any transaction contemplated by
this Agreement or solely as a result of a change in control or ownership
within the meaning of IRC Section 280G.
(d) Each Company Employee Plan and each related trust, insurance contract
and fund has been maintained, funded and administered in compliance with its
terms and the terms of each applicable collective bargaining agreement and in
compliance with all applicable law and regulations, including, without
limitation, ERISA and the IRC. None of the Company, any trustee or
administrator of any Company Employee Plan, or any other person has engaged in
any transaction with respect to any Company Employee Plan which could subject
the Company, or any trustee or administrator of any Company Employee Plan, or
any party dealing with any Company Employee Plan, or Buyer to any tax or
penalty imposed by ERISA or the IRC. There are no pending or threatened
actions, suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands with respect to any Company Employee Plan (other
than routine claims for benefits), and Guarantor has no knowledge of any facts
which could give rise to or be expected to give rise to any such actions,
suits, claims, complaints, charges, proceedings, hearings, investigations or
demands. No Company Employee Plan that is subject to the funding requirements
of IRC Section 412 or Section 312 of ERISA has incurred any "accumulated
funding deficiency," as such term is defined in such Sections of the IRC and
ERISA, whether or not waived. No liability to the PBGC (except for routine
payment of premiums) has been or is expected to be incurred with respect to
any Company Employee Plan that is subject to Title IV of ERISA, no reportable
event (as such term is defined in Section 4043 of ERISA) has occurred with
respect to any Company Employee Plan, and the PBGC has not commenced or
threatened the termination of any Company Employee Plan. None of the assets
of the Company is the subject of any lien arising under ERISA or the IRC, the
Company has not been required to post any security pursuant to Section 307 of
ERISA or IRC Section 401(a)(29), and Guarantor has no knowledge of any facts
which could be expected to give rise to such lien or such posting of security.
(e) Except as set forth on Schedule 3.11(e), each Company Employee Plan
that is intended to be qualified under IRC Section 401(a) has received a
favorable determination letter from the Internal Revenue Service as to the
qualification under the IRC of such Company Employee Plan, and nothing has
occurred since the date of such determination letter that could adversely
affect the qualification of such Company Employee Plan.
(f) No underfunded "defined benefit plan" (as such term is defined in
Section 3(35) of ERISA) has been, during the five (5) years preceding the
Closing Date, transferred out of the controlled group of companies (within the
meaning of IRC Sections 414(b), (c), (m) and (o)) of which the Company is a
member or was a member during such five (5) year period.
<PAGE> 12
(g) As of the Closing Date, the fair market value of the assets of each
Company Employee Plan that is a defined benefit pension plan equals or exceeds
the present value of all vested and non-vested liabilities thereunder
determined in accordance with PBGC methods, factors and assumptions applicable
to a defined benefit pension plan terminating on such date. With respect to
each Company Employee Plan that is subject to the funding requirements of IRC
Section 412 and Section 302 of ERISA, all required or recommended
contributions for all periods ending prior to or as of the Closing Date
(including periods from the first day of the then-current plan year to the
Closing Date and including all quarterly contributions required in accordance
with IRS Section 412(m)) shall have been made or properly accrued. With
respect to each other Company Employee Plan, all required or recommended
payments, premiums, contributions, reimbursements or accruals for all periods
ending prior to or as of the Closing Date shall have been made or properly
accrued. No Company Employee Plan has any material unfunded liabilities.
(h) With respect to each Company Employee Plan, Seller has provided Buyer
with true, complete and correct copies, to the extent applicable, of (i) all
documents pursuant to which the Company Employee Plans are maintained, funded
and administered, (ii) the two most recent annual reports (Form 5500 series)
filed with the Internal Revenue Service (with attachments), (iii) the two
most recent actuarial reports, (iv) the two most recent financial statements,
(v) all governmental rulings, determinations, and opinions (and pending
requests for governmental rulings, determinations, and opinions), and (vi) the
most recent valuation (but in any case at least one that has been completed
within the last calendar year) of the present and future obligations under
each Company Employee Plan that provides post-retirement or post-employment
health, life insurance, accident or other "welfare-type" benefits.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
----------------------------------------------------------------
(a) Except as set forth on Schedule 3.12, the Company and its predecessors
since November 4, 1989 have complied in all material respects with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership of its assets;
(b) Except as set forth on Schedule 3.12, the Company has not received any
unresolved notice or other written communication from any Governmental Body
setting forth any actual or alleged violation of, or failure to comply with,
any Legal Requirement;
(c) The Company has, or is capable of obtaining without incurring a
material expense, and without incurring any penalty or liability, all
Governmental Authorizations necessary to operate the Company in substantially
the same manner as presently conducted. To the Company's Knowledge, Schedule
3.12 sets forth all such Governmental Authorizations presently held or
obtained. The Company is in compliance in all material respects with the
terms, restrictions and conditions of such Governmental Authorizations; and
(d) FDA Compliance. Except as set forth on Schedule 3.12 and without
--------------
limiting in any way the generality of Section 3.12 hereof:
(i) The Company is not (and the Seller and the Guarantor, on behalf of the
Company, are not) in receipt of notice of, and is not currently subject to
any unresolved finding of deficiency, finding of non-compliance, compelled or
voluntary recall (which recall was material), investigation, penalty, fine,
sanction, assessment, audit, request for corrective or remedial action, or
other compliance or enforcement action, in each case relating to the products
made, developed, licensed, under development, leased, sold, used or serviced
by the Company ("Products") or to the Company's facilities in which the
Products are manufactured, processed, used, handled or stored, by the United
States Food and Drug Administration ("FDA") or any other federal, state, local
or foreign authority having or asserting responsibility for the regulation of
food products ("Regulatory Authorities"); and
(ii) The Company is in compliance in all material respects with all
applicable regulations and requirements of the FDA and other authorities
relating to every Product (including, but not limited to, any requirements for
investigating customer complaints and inquiries, labeling requirements and
protocols, shipping requirements, record-keeping and reporting requirements,
monitoring requirements, packaging or repackaging requirements, laboratory
controls, sterility requirements, inventory controls, and storage and
warehousing procedures), except where the final resolution of any such
non-compliance (individually or in the aggregate) with the foregoing would not
result in a Governmental Agency requiring a recall of the Company's products
nor would result in the imposition of a material fine or penalty against or a
material liability of the Company.
<PAGE> 13
(iii) The Seller does not have Knowledge of any facts which
would indicate that the FDA or other Regulatory Authorities have or will
prohibit or materially restrict the marketing, sale, manufacture, processing
or use in the United States of any Product or the operation or use of any
facility in which the Products are made.
(iv) The Company has not received and the Seller and the
Guarantor on behalf of the Company have not received any written notice from a
Regulatory Authority, nor from a Person who is currently a co-packer for the
Company, or in a similar arrangement with the Company, indicating that any
product produced for the Company was or may be adulterated or misbranded (as
defined by any applicable Legal Requirements).
(e) For purposes of this Section 3.12 only, no matter shall be deemed
"material" unless the Damages arising from or related to such matter, or group
of related matters, exceed $25,000 and all such matters or group of related
matters that satisfy such requirement shall be deemed material.
3.13 LEGAL PROCEEDINGS; SETTLEMENTS AND ORDERS
---------------------------------------------
(a) Except as set forth on Schedule 3.13, there are no pending
Proceedings:
(i) that have been commenced by or against the Company; or
(ii) that challenge, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
(b) To the Seller's Knowledge, except as set forth on Schedule 3.13,
no Proceeding described above has been threatened in writing.
(c) Except as set forth in Schedule 3.13, there is no settlement or
Order to which the Company or any of its material assets or properties are
subject.
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS - Except as set forth in
---------------------------------------
Schedule 3.14, since the date of the Balance Sheet, the Company has conducted
its businesses in the ordinary course of business and there has not been any:
(a) change in the Company's authorized or issued capital stock or the
holders thereof; grant of any stock option or right to purchase shares of
capital stock of the Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by the Company of any shares of any such
capital stock; or declaration or payment of any dividend or other distribution
or payment in respect of shares of capital stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or employee (except
in the ordinary course of business consistent with past practice) or entry
into or modification or termination of any employment, severance, or similar
Contract with any director, officer, or employee;
(d) adoption of, or increase or decrease in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) any Material Adverse Change or any material casualty loss or
damage to the Company's assets;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least
$50,000;
(g) sale (other than sales of inventory and obsolete equipment in the
ordinary course of business), lease, or other disposition of any asset or
property of the Company or mortgage, pledge, or imposition of any Encumbrance
on any material asset or property of the Company, including the sale, lease,
license or other disposition of any of the Intellectual Property Assets;
<PAGE> 14
(h) material change in the accounting methods or practices used by
the Company or in its cash management practices and procedures;
(i) incurrance by the Company of any indebtedness for borrowed money
(excluding normal and customary trade credit);
(j) guarantees by the Company for the repayment of money borrowed by
another party, loans or advances (other than advances to employees in the
ordinary course of business consistent with past practices);
(k) Capital expenditure or group of related expenditures by the
Company in excess of $25,000; or
(l) binding agreement by the Company to do any of the foregoing.
3.15 CONTRACTS; NO DEFAULTS
------------------------
(a) Schedule 3.15(a) contains a complete and accurate list, and
Seller has delivered to Buyer true and complete copies, of:
(i) each Contract that involves performance of services or
delivery of goods or materials by (or to) the Company of an unperformed amount
or value in excess of $50,000;
(ii) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement requiring the payment in excess of
$50,000 per year;
(iii) each licensing or royalty agreement with respect to
material Intellectual Property Assets;
(iv) each collective bargaining agreement to or with any labor
union or other employee representative of a group of employees;
(v) each joint venture, partnership, and other Contract (however
named) involving a sharing of profits, losses, costs, or liabilities by the
Company with any other Person;
(vi) each Contract containing covenants that materially restrict
the business activity of the Company or limit the freedom of the Company to
compete with any Person;
(vii) each Contract providing for payments to or by any Person
based on sales, purchases, or profits, other than direct payments for goods;
(viii) each Contract for capital expenditures with a remaining
balance to be paid in excess of $50,000;
(ix) each outstanding surety bond and letter of credit under
which the Company is liable or that Seller has obtained on behalf of the
Company;
(x) each employment or severance agreement between the Company
and any employee, officer or director;
(xi) each agreement pursuant to which the Company has
indebtedness for borrowed money or has guaranteed the indebtedness or
performance of another Person; or
(xii) each material amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Each of the foregoing Contracts is referred to as a "Material Contract."
(b) Except as set forth on Schedule 3.15(b), each Material Contract
is valid and enforceable in accordance with its terms subject to insolvency
Legal Requirements and general principles of equity;
<PAGE> 15
(c) The Company and to Seller's Knowledge, all other parties to the
Material Contracts have performed all obligations required to be performed by
them and are not in material default under or in material breach of nor is the
Company in receipt of any claim of default or breach of any Material Contract.
To the Seller's Knowledge, except as set forth on Schedule 3.15(c), no event
has occurred or circumstance exists that (with or without notice or lapse of
time) will contravene, or conflict with, or result in a violation or breach
of, or give the Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Material Contract.
3.16 INSURANCE
---------
(a) Seller has delivered to Buyer true and complete copies of all
policies of insurance (including all endorsements, amendments and
modifications thereto) to which the Guarantor, Seller or Company is a party
and under which the Company, or any director or officer of the Company, is
covered.
(b) Schedule 3.16 describes any self-insurance arrangement by or
affecting the Company.
(c) Guarantor, Seller or the Company has paid all premiums due, and
have otherwise performed all of their material respective obligations, under
each policy to which the Company is a party or that provides coverage to the
Company or director or officer thereof.
3.17 ENVIRONMENTAL MATTERS - Except as set forth on Schedule 3.17, to the
---------------------
Seller's Knowledge:
(a) The Company and its predecessors since November 4, 1989 have
complied in all material respects with all Environmental Laws.
(b) Neither Seller (with respect to the Company's business) nor the
Company has received any citation, notice, Order or summons, and neither
Seller (with respect to the Company's business) nor the Company has any
liability that relates to Hazardous Materials, or any alleged, actual, or
potential material violation or failure to comply with any Environmental Law
with respect to any of the Facilities or the Company's operations, or with
respect to any property or facility at or to which Hazardous Materials were
generated, manufactured, refined, transferred, transported, disposed of,
Released, imported, used, or processed by the Company.
(c) There are no Hazardous Materials present at the Facilities
including any Hazardous Materials (i) contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether
moveable or fixed) or other containers, either temporary or permanent, and
(ii) deposited or located in land, water, sumps, or any other part of the
Facilities.
(d) None of the Seller (with respect to the Company's business), the
Guarantor (with respect to the Company's business) or the Company has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or Released any Hazardous Material, or owned or operated
any facility or property, so as to give rise to material liability of the
Company, including without limitation any liability for investigation, cleanup
or response costs, natural resource damages or attorneys fees, pursuant to the
federal Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended as of the Closing Date, or any other Environmental Law
relating to the investigation or cleanup of Hazardous Materials.
<PAGE> 16
3.18 LABOR RELATIONS; COMPLIANCE - Except as set forth on Schedule 3.18,
---------------------------
since March 31, 1994, the Company has not been nor is a party to any
collective bargaining or other labor Contract. Since September 30, 1994,
there has not been, there is not presently pending or existing, and, to
Seller's Knowledge, there is not threatened, (a) any strike or work stoppage,
(b) any union organizing or decertification efforts or any other question
concerning representation, or (c) any Proceeding against or affecting the
Company relating to any alleged material violation of any Legal Requirement
pertaining to labor relations or employment matters, including, without
limitation any complaint filed by an employee or union with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any
comparable Governmental Body. There is no lockout of any employees by the
Company, and no such action is presently contemplated by the Company. The
Company has complied in all material respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
wages, hours, collective bargaining, occupational safety and health, and plant
closings.
Any notice required under any labor or employment Legal Requirements, or
collective bargaining agreement regarding the Contemplated Transactions has
been or will be given, and all bargaining obligations with any employee
representative regarding such transactions have been or will be satisfied.
Since September 30, 1994, the Company has not implemented any plant closing or
mass layoff of employees as those terms are defined in the Worker Adjustment
Retraining and Notification ("WARN") Act of 1988, as amended, or any similar
state or local law or regulation, and no layoffs that could implicate such
laws or regulations will be implemented before Closing without advance
notification to Buyer in writing.
3.19 INTELLECTUAL PROPERTY
----------------------
(a) Intellectual Property Assets-The term "Intellectual Property
----------------------------
Assets" shall mean:
(i) registered and unregistered trademarks, service marks, trade
dress, trade names, corporate names, Internet domain names, and registrations
and applications for the foregoing, together with all goodwill associated with
each of the foregoing;
(ii) patents, patent applications, patent disclosures and
inventions;
(iii) copyrights in both published works and unpublished works;
and
(iv) know-how, trade secrets, product formulations, recipes,
manufacturing and production processes.
(b) Schedule 3.19 sets forth a complete and correct list of all of
the following that are owned by, used by, or licensed for use by the Company;
(i) patented or registered Intellectual Property Assets and pending patent
applications or other applications for registrations of Intellectual Property
Assets; (ii) material unregistered trademarks, material unregistered service
marks, trade names, corporate names and Internet domain names; and (iii) all
material licenses, agreements or arrangements covering Intellectual Property
Assets to which the Company is a party, either as licensor or licensee, or a
third-party beneficiary.
(c) Except as set forth on Schedule 3.19;
(i) the Company owns and possesses all right, title and interest
in and to, or has a valid right to use (in substantially the manner as
presently used), free and clear of all Encumbrances, all the United States
(including its territories) based Intellectual Property Assets set forth on
Schedule 3.19 ("U.S. Intellectual Property Assets"); and to the Seller's
Knowledge, the Company owns and possesses all right, title and interest in and
to, or has a valid right to use (in substantially the manner as presently
used), free and clear of all material Encumbrances, (A) all the non-United
States based Intellectual Property Assets set forth on Schedule 3.19 and (B)
all other Intellectual Property Assets necessary for the operation of business
of the Company as presently conducted (collectively, the "Other Company
Intellectual Property Assets");
<PAGE> 17
(ii) all of the U.S. Intellectual Property Assets are valid and
enforceable, and to the Seller's Knowledge, all the Other Company Intellectual
Property Assets are valid and enforceable;
(iii) no claim by any third party contesting the validity,
enforceability, use or ownership of any of the U.S. Intellectual Property
Assets or the Other Company Intellectual Property Assets has been made, is
currently outstanding or is threatened, and to Seller's Knowledge there are no
grounds for the same;
(iv) to the Seller's Knowledge no third party has infringed,
misappropriated or otherwise conflicted with any of the U.S. Intellectual
Property Assets or Other Company Intellectual Property Assets, and the Seller
has no Knowledge of any facts that indicate a likelihood of any of the
foregoing; it is understood and agreed that Nabisco's trademark registration
for the mark "Beech-Nut" and Nabisco's existing uses of such trademark in the
United States for candy, gum and cough drops shall not be a basis for any
claims for breach of this Section 3.19; and
(v) the Company has not infringed, misappropriated or otherwise
conflicted with, and the operation of the business of the Company as presently
conducted will not infringe, misappropriate or otherwise conflict with, any
Intellectual Property Assets of any third party, and Seller has no Knowledge
of any facts which indicate a likelihood of any of the foregoing.
3.20 BROKERS OR FINDERS - Except as set forth on Schedule 3.20, neither
------------------
the Company, Guarantor nor Seller or their agents have incurred any obligation
or liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement.
3.21 ACCOUNTS RECEIVABLE - All accounts receivable of the Company that are
-------------------
reflected on the Balance Sheet or the June Balance Sheet represented valid
obligations arising from sales actually made, or services actually performed
in the ordinary course of business subject to no offset or deduction except as
reflected on the Balance Sheet, the June Balance Sheet, or as indicated in
Schedule 3.4 as applicable.
3.22 INDEBTEDNESS - Except as set forth on Schedule 3.22, the Company has
------------
no indebtedness for borrowed money or any guaranty obligations relating to
borrowings by another entity.
3.23 DISCLOSURE - To the Knowledge of the Seller, there is no fact that
----------
has specific application to the Company (other than general economic
conditions) that, as far as Seller can reasonably foresee, could be reasonably
expected to result in a Material Adverse Change with respect to the Company
that has not been set forth in this Agreement, or the Schedules to this
Agreement.
3.24 OFFICERS AND DIRECTORS; BANK ACCOUNTS - Schedule 3.24 lists all
--------------------------------------
officers and directors of the Company, and all of the Company's bank accounts,
safety deposit boxes and lock boxes (designating each authorized signatory
with respect thereto).
3.25 INSIDER TRANSACTIONS - Except as set forth on Schedule 3.25, neither
--------------------
the Seller nor any of its officers, directors, employees or Affiliates is a
party to any agreement, contract, commitment, transaction or understanding
with the Company or which pertains to the business of the Company, or has any
interest in any property, real or personal or mixed, tangible or intangible,
used in or pertaining to the business of the Company.
3.26 POWERS OF ATTORNEY, GUARANTEES - Except as set forth on Schedule
------------------------------
3.26, there are no outstanding powers of attorney executed on behalf of the
Company and the Company is not a guarantor or otherwise liable for any
indebtedness of any other Person, firm or corporation other than endorsements
for collection in the ordinary course of business.
<PAGE> 18
3.27 PRODUCT WARRANTIES - Except as set forth on Schedule 3.27, the
-------------------
Company has not made any warranties with respect to the products manufactured
and/or sold by it.
3.28 YEAR 2000- The Seller, Guarantor or its Affiliates have undertaken an
---------
internal review of the Guarantor's and its subsidiaries' information systems
for the purpose of analyzing the impact of the date-related issues arising
from the Year 2000 and the Seller has no Knowledge of any facts that would
cause it to believe that, if the Company were to remain an Affiliate of
Seller, the expenditure necessary to upgrade, modify or replace its
information systems to avoid date-related issues arising from the Year 2000
would be material.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING - Buyer is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the laws of the State
of Delaware
4.2 AUTHORITY; NO CONFLICT
------------------------
(a) Each of this Agreement and the Transition Services Agreement has
been duly authorized, executed and delivered by Buyer and constitutes the
legal, valid, and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms subject to insolvency Legal Requirements and general
principles of equity (including the ability or inability to secure injunctive
relief for specific performance). Buyer has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this Agreement and
the Transition Services Agreement and perform its obligations under this
Agreement and the Transition Services Agreement and any other documents
delivered by it at Closing, and no other corporate proceedings or approvals,
votes or consents are necessary to authorize the execution, delivery and
performance of this Agreement and the Transition Services Agreement by Buyer.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will:
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Company's Organizational Documents, or (B) any resolution
adopted by the board of directors or the stockholders of the Buyer;
(ii) contravene, conflict with, or result in a violation of, any
Legal Requirement or any Order to which the Buyer may be subject; or
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of any Governmental Authorization that is held by
the Buyer or that is necessary to conduct the Buyer's business in
substantially the same manner as presently conducted.
(c) Except as set forth in Schedule 4.2, the Buyer is not now and
will not be required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
4.3 INVESTMENT INTENT - Buyer is acquiring the Shares for its own account
-----------------
and not with a view to their distribution within the meaning of Section 2(11)
of the Securities Act.
4.4 CERTAIN PROCEEDINGS - There is no pending Proceeding that has been
-------------------
commenced against Buyer that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
threatened.
4.5 BROKERS OR FINDERS - Buyer and its agents have incurred no obligation
------------------
or liability, contingent or otherwise, for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this
Agreement.
<PAGE> 19
ARTICLE V
COVENANTS OF SELLER PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION - Between the date of this Agreement and the
------------------------
Closing Date, Seller will, and will cause the Company and its Representatives
to afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full access to the
Company's personnel, properties (excluding subsurface testing), contracts,
books and records, and other documents and data during normal business hours
as Buyer may reasonably request.
5.2 OPERATION OF THE COMPANY'S BUSINESS - Between the date of this
--------------------------------------
Agreement and the Closing Date, Seller will, and will cause the Company to:
(a) conduct the business of the Company in the ordinary course of
business consistent with past practice including, as applicable, with respect
to quantity and frequency (including, without limitation, with respect to
maintenance of working capital balances, collection of accounts receivable,
payment of accounts payable, payment of employee compensation and cash
management practices generally), and maintain its books and records consistent
with past practices;
(b) use commercially reasonable efforts to cause its current
insurance (or reinsurance) policies not to be canceled or terminated or any of
the coverage thereunder to lapse, unless simultaneously with such termination,
cancellation or lapse, replacement policies providing coverage equal to or
greater than the coverage under the canceled, terminated or lapsed policies
for substantially similar premiums are in full force and effect;
(c) keep in full force and effect its corporate existence and all
material rights, franchises and all of the Company's Intellectual Property
Assets currently in use and relating or pertaining to its business;
(d) use commercially reasonable efforts to keep the Company's
business organization and properties intact, including its present business
operations, physical facilities, working conditions, officers and employees
and its present relationships with lessors, licensors, suppliers,
distributors, customers and consumers and others having business relations
with it;
(e) maintain the assets of the Company in good repair, order and
condition consistent with past practices including, replacing or repairing in
accordance with past practices its inoperable, worn out or obsolete assets
with assets of good quality consistent with prudent practices and current
needs;
(f) do nothing to discourage employees from continuing their
employment with the Company after the Closing;
(g) use commercially reasonable efforts to obtain releases of the
Company on any guarantees, suretyship obligations or other promises of payment
or performance given by the Company as requested by Buyer except to the extent
any of the foregoing relate to the Company's business;
(h) promptly (once Seller or Guarantor or any officer or director of
the Company obtains knowledge thereof) inform Buyer in writing of any material
variances from the representations and warranties contained in Article III or
any breach of any covenant hereunder by the Company, the Guarantor or the
Seller;
(i) comply with all material Legal Requirements and contractual
obligations applicable to the operations and business of the Company;
(j) pay and discharge when payable all Taxes (other than income
Taxes), assessments and governmental charges imposed upon its properties (in
each case before the same becomes delinquent and before penalties accrue
thereon) and all claims for labor, materials or supplies which if unpaid would
by law become an Encumbrance upon any of its property, unless and to the
extent that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with GAAP
consistently applied) have been established on its books with respect thereto
and reflected on the June Balance Sheet;
<PAGE> 20
(k) cooperate with Buyer and use all commercially reasonable efforts
to cause the conditions to Buyer's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental notices, filings,
authorizations, approvals, consents, releases and terminations);
(l) file any forms or related material that the Guarantor, the Seller
or the Company may be required to file with the Federal Trade Commission and
the Antitrust Division of the United States Department of Justice under the
HSR Act, use all reasonable efforts to obtain an early termination of the
applicable waiting period, and make any further filings pursuant thereto that
may be necessary, proper, or advisable in connection therewith; and
(m) confer on a regular and reasonable basis with representatives of
Buyer to report on operational matters and the general status of ongoing
operations with respect to the Company.
5.3 NEGATIVE COVENANTS OF THE COMPANY AND SELLER. Prior to the Closing,
--------------------------------------------
without Buyer's prior written consent, which consent shall not be unreasonably
withheld, the Seller shall cause the Company not to, and the Company shall
not:
(a) enter into, amend or modify any employment or severance agreement
(except as contemplated by Section 7.8) or other agreement or arrangement with
any employees of the Company, or grant any increase in salary or bonus or
otherwise increase the compensation payable to any director, officer,
employee, consultant, advisor or agent employed by or who renders services to
the Company or any employee benefit plan, incentive arrangement or other
benefit covering any of such Persons, except wage or salary increases required
by existing contracts or by compensation policies which are consistent with
past practices;
(b) enter into, establish, amend, terminate or (except as required
by the express terms thereof) make any contribution to any employment or labor
agreement except as otherwise provided by Section 7.8 or any employee pension
benefit plan or any employee welfare benefit plan which covers employees of
the Company provided that this Section 5.3(b) shall not prohibit the Company
from executing a definitive labor agreement reflecting the terms of the
memorandum of understanding described in Item 1 of Schedule 3.18;
(c) terminate, modify, or amend any existing Material Contracts or
any material Governmental Authorizations to which the Company is a party or is
bound or which relates to the business of the Company;
(d) except as specifically contemplated by this Agreement, enter into
any contract, agreement or transaction, other than in the ordinary course of
business consistent with past practices and at arm's length with unaffiliated
Persons;
(e) take any action that would require disclosure under Section
5.2(h) or that would cause any of the changes listed in Section 3.14 to occur
or to be likely to occur; or
(f) materially alter pricing, promotions, discounts or other sales
terms or the level of credit risk accepted from that in place or committed to
on the date of this Agreement.
5.4 REQUIRED APPROVALS - As promptly as practicable after the date of this
------------------
Agreement, Seller will, and will cause the Company to, (i) make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions (including all filings under the HSR Act) and (ii)
obtain all third party consents set forth in Schedule 3.2. Between the date
of this Agreement and the Closing Date, Seller will, and will cause the
Company to, (a) cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all
consents identified in Schedule 4.2.
<PAGE> 21
5.5 NOTIFICATION - Not less than two (2) business days prior to the
------------
Closing Date, Seller shall provide Buyer with a copy of all amendments that
Seller proposes to make to the Schedules (the "Original Schedules') delivered
or to be delivered by Seller hereunder (as amended by such proposed
amendments, the "Updated Schedules"). If and to the extent that the Closing
occurs following delivery of the Updated Schedules, Buyer shall be deemed to
have consented to the Updated Schedules and the corresponding representations,
warranties, covenants and agreements of Sellers shall be deemed to be
qualified, supplemented or amended in accordance with the Updated Schedules.
If the Updated Schedules disclose an event or condition which, by itself, or
together with any other events or conditions so disclosed, indicates that the
Seller's representations and warranties in this Agreement, giving effect to
the Original Schedules but not the Updated Schedules, are not accurate in all
material respects as of the Closing Date as if made on the Closing Date, Buyer
may terminate this Agreement without further liability or obligation on the
part of the Buyer pursuant to Article IX. If the Seller did not have
Knowledge, as of the date hereof, of any of the events and conditions
disclosed on the Updated Schedules sufficient to give rise to the foregoing
termination right, such termination shall be Buyer's sole remedy hereunder for
breach of such representations and warranties, and the Seller shall have no
further liability or obligation hereunder except with respect to (i) any
breach of covenants and agreements herein prior to such termination and (ii)
any provisions herein which expressly survive the termination hereof.
5.6 EXCLUSIVITY - Until the Closing or, if earlier, the date this
-----------
Agreement is terminated in accordance with its terms, each of the Company and
the Seller agrees not to (and will not permit any of its Affiliates, or any
employee, officer, director, partner, agent, trustee, representative or other
Person acting on its behalf or any entity under his or her control to),
directly or indirectly, sell or agree to sell to any other Person, discuss or
negotiate with any other Person a possible sale of, or solicit or accept any
offer to purchase from any other Person, all or any part of the Company's
securities or assets (other than the sale of inventory in the ordinary course
of business), whether such transaction takes the form of an issuance or sale
of Shares or other securities, merger, consolidation, sale of assets,
liquidation, dissolution, refinancing, recapitalization, reorganization or
otherwise), or provide any information to any other Person concerning the
Company (other than in the ordinary course of business consistent with past
practices). The Seller represents and warrants that it has ceased all
discussions with all Persons (other than Buyer) regarding all of the foregoing
and that neither the Seller nor any of its respective Affiliates, officers,
directors, affiliates, partners, trustees, agents or representatives is a
party to or bound by any agreement relating to any of the foregoing, other
than agreements with Buyer.
ARTICLE VI
COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 REQUIRED APPROVALS - As promptly as practicable after the date of this
------------------
Agreement, Buyer will, and will cause each of its Affiliates to, make all
filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions (including all filings under the HSR Act). Between
the date of this Agreement and the Closing Date, Buyer will, (a) cooperate
with Seller with respect to all filings that Seller is required by Legal
Requirements to make in connection with the Contemplated Transactions, and
(b) cooperate with Seller in obtaining all consents identified in Section 3.2.
6.2 SATISFACTION OF CONDITIONS - Between the date of this Agreement and
--------------------------
the Closing Date, Buyer will use commercially reasonable efforts to cause the
conditions in Article VIII to be satisfied.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction,
as of the Closing, of each of the following conditions (any of which may be
waived by Buyer, in whole or in part):
<PAGE> 22
7.1 ACCURACY OF REPRESENTATIONS - All of Seller's representations and
---------------------------
warranties in this Agreement must be accurate in all material respects as of
the Closing Date as if made on the Closing Date (after giving effect to the
Updated Schedules).
7.2 SELLER'S PERFORMANCE
---------------------
(a) All of the covenants and obligations that Seller is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing must have been duly performed and complied with in all material
respects.
(b) Each document required to be delivered pursuant to Section 2.4
must have been tendered or delivered, and each of the other covenants and
obligations in Article V must have been performed and complied with in all
respects.
7.3 CONSENTS- Each of the Consents identified in Schedule 3.2 must have
--------
been obtained on terms and conditions reasonably satisfactory to Buyer and
must be in full force and effect and copies, if available, must have been
provided to Buyer.
7.4 ADDITIONAL DOCUMENTS -
---------------------
(a) Seller must have delivered to Buyer an opinion of R. W. Lockwood,
Vice President and General Counsel of Seller, dated the Closing Date, in a
form reasonably satisfactory to Buyer.
(b) Seller and Guarantor shall have delivered certified resolutions
of their respective Boards of Directors and, with respect to Seller, its
shareholders, relating to the authorization of the Agreement and Contemplated
Transactions.
7.5 REAL PROPERTY DOCUMENTS - Title Insurance. Buyer shall have obtained,
----------------------- ---------------
in preparation for Closing, a commitment for an ALTA Owner's Policy of Title
Insurance Form B-1970 for each parcel of Owned Real Property (the "Title
Commitments"), issued by a title insurer satisfactory to Buyer (the "Title
Insurer"), in such amount as Buyer determines to be the fair market value
(including all improvements thereon) insuring Buyer's interest in such parcel
as of Closing, subject only to the Real Property Permitted Encumbrances.
Buyer shall obtain surveys and title insurance policies ("Title Policies") in
each case in form and substance reasonably satisfactory to Buyer on or before
the Closing from the Title Insurer based upon the Title Commitments. Seller
will deliver to the Title Insurer the Title Insurer's standard Closing
Affidavit reasonably necessary to issue the Title Policies and endorsements
thereto.
7.6 NO INJUNCTION, ETC. - No action or proceeding shall be pending or
-------------------
threatened before any court, governmental agency or arbitrator wherein an
unfavorable judgment, decree, injunction or order would prevent the
performance of this Agreement or the consummation of any of the Contemplated
Transactions, declare unlawful the Contemplated Transactions, cause such
transactions to be rescinded or materially and adversely affect the right of
Buyer to own, operate or control the Company, and no such judgment, decree,
injunction or order shall have been entered and be in existence.
7.7 RESIGNATIONS - Other than Persons identified by Buyer in writing at
------------
least ten (10) days prior to Closing, all of the Company's Directors and
Officers shall resign their positions effective immediately after the Closing.
7.8 SEVERANCE AGREEMENTS -
---------------------
(a) Guarantor has or shall have entered into severance agreements
with certain Company employees listed on Schedule 7.8(a). The terms of the
agreements for these employees are described in Schedule 3.14. Guarantor
shall pay the entire cost of these agreements.
<PAGE> 23
(b) Guarantor has or shall have entered into severance agreements
with certain Company employees listed on Schedule 7.8(b). The terms of the
agreements for these employees are described in Schedule 3.14. Guarantor
shall pay the entire cost of these agreements.
7.9 RELEASE OF COMPANY FROM GUARANTY - The Seller shall have delivered to
--------------------------------
Buyer a complete release of the Company from its guaranty obligations under
the Guarantor's credit facility described on Schedule 3.22 and Seller shall
have, at its expense, discharged any other indebtedness and caused a complete
release of any other guaranty described on Schedule 3.22; it being understood
that obligations under the Waste Water Treatment Contract to pay fees
regardless of usage while bond obligations are outstanding are referenced on
Schedule 3.22, but will not be released.
7.10 GOVERNMENTAL APPROVALS. All governmental filings, authorizations and
----------------------
approvals that are required for the transfer of the Shares and the
consummation of the Contemplated Transactions shall have been duly made and
obtained on terms reasonably satisfactory to Buyer, and all applicable waiting
periods (and any extension thereof) under the HSR Act, shall have expired or
otherwise been terminated;
7.11 NO MATERIAL ADVERSE CHANGE. Since the date hereof and since the date
--------------------------
of the June Balance Sheet, there shall not have been a Material Adverse Change
with respect to the Company; it being acknowledged that the impact on the
Company's results of operations, sales volume, sales prices, market share and
customer retention of (i) increased trade spending and price discounts by
other baby food manufacturers, (ii) the introduction of organic baby food by
Gerber and (iii) an overall decline in consumer purchases of baby food,
substantially consistent with the impact of such factors for the three months
ended June 30, 1998, shall not be deemed a Material Adverse Change.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Shares and to take the other actions required
to be taken by Seller at the Closing is subject to the satisfaction, as of the
Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS - All of Buyer's representations must be
---------------------------
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 BUYER'S PERFORMANCE
--------------------
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing Date, must have been performed and complied with in all material
respects.
(b) Buyer must have tendered or delivered each of the documents
required to be delivered by Buyer pursuant to Section 2.4 and must have
tendered or made the cash payment required to be made by Buyer pursuant to
Section 2.4.
8.3 CONSENTS - Each of the Consents identified in Schedule 4.2 must have
--------
been obtained and must be in full force and effect.
<PAGE> 24
8.4 ADDITIONAL DOCUMENTS -
---------------------
(a) Buyer must have delivered to Seller an opinion of Kirkland &
Ellis dated the Closing Date, in a form of reasonably satisfactory to Seller.
(b) Buyer shall have delivered certified resolutions of its Board of
Directors relating to the authorization of the Agreement and the Contemplated
Transactions.
8.5 NO INJUNCTION - There must not be in effect any Legal Requirement or
-------------
any injunction or other Order that prohibits or declares unlawful or causes to
be rescinded or Materially Adversely Affects the sale of the Shares by Seller
to Buyer.
8.6 LETTERS OF CREDIT / SURETY BONDS - Buyer shall have undertaken all
--------------------------------
actions necessary to remove Seller and Guarantor from the surety bonds and
letters of credit listed on Schedule 8.6 under which Seller or Guarantor is
liable and that relate to the Company's business.
8.7 GOVERNMENTAL APPROVALS. All governmental filings, authorizations and
----------------------
approvals that are required for the transfer of the Shares and the
consummation of the Contemplated Transactions shall have been duly made and
obtained on terms reasonably satisfactory to Seller, and all applicable
waiting periods (and any extension thereof) under the HSR Act, shall have
expired or otherwise been terminated.
ARTICLE IX
TERMINATION
9.1 TERMINATION EVENTS - Buyer may terminate this Agreement by notice to
------------------
Seller (i) if the Closing shall not have occurred on or before forty-five (45)
days following the date hereof (except as a result of Buyer's breach of this
Agreement), (ii) at any time prior to the Closing if a material default shall
be made by Seller or Guarantor in the observance or in the due and timely
performance of any of the terms hereof to be performed by Seller or Guarantor
that cannot be cured at or prior to the Closing, (iii) at the Closing if any
of the conditions precedent to the performance of Buyer's obligations at the
Closing shall not have been fulfilled or (iv) after receipt of the Updated
Schedules and at or prior to the Closing, if the Updated Schedules disclose an
event or condition which, by itself, or together with any other events or
conditions so disclosed, indicates that the Seller's representations and
warranties in this Agreement, giving effect to the Original Schedules but not
the Updated Schedules, are not accurate in all material respects as of the
Closing Date as if made on the Closing Date.
Seller may terminate this Agreement by notice to Buyer (i) if the Closing
shall not have occurred on or before forty-five (45) days following the date
hereof except as a result of Seller's or Guarantor's breach of this
Agreement), (ii) at any time prior to the Closing if a material default shall
be made by Buyer in the observance or in the due and timely performance of any
of the terms hereof to be performed by Buyer that cannot be cured at or prior
to the Closing, or (iii) at the Closing if any of the conditions precedent to
the performance of Seller's obligations at the Closing shall not have been
fulfilled.
9.2 EFFECT OF TERMINATION - Each party's right of termination under
-----------------------
Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
9.1, all further obligations of the parties under this Agreement will
terminate, except that the obligations in Article XIII will survive; provided,
however, that if this Agreement is terminated by a party because of the breach
of the Agreement by the other party or because one or more of the conditions
to the terminating party's obligations under this Agreement is not satisfied
as a result of the other party's failure to comply with its obligations under
this Agreement, the terminating party's right to pursue all legal remedies
will survive such termination unimpaired.
<PAGE> 25
ARTICLE X
INDEMNIFICATION; REMEDIES
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER - Seller will
--------------------------------------------------
indemnify and hold harmless Buyer and the Company for any loss, liability,
claim, cost, damage, deficiency (excluding any claim by the Buyer or the
Company for punitive or exemplary damages) or expense (including costs of
investigation and defense and reasonable attorneys' fees), whether or not
involving a third party claim (collectively, "Damages"), arising from or in
connection with:
(a) any breach of any representation or warranty made by Seller in
this Agreement or in any certificate delivered hereunder (after giving effect
to the Updated Schedules);
(b) any breach by the Seller of any covenant or obligation of Seller
in this Agreement;
(c) any anti-trust litigation set forth on Schedule 10.1(c) and any
other anti-trust or unfair competition claims, proceedings, litigation or
investigations relating to Periods prior to Closing;
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Guarantor, Seller or the
Company (or any Person acting on behalf of any of them) in connection with any
of the Contemplated Transactions;
(e) any violations of or obligations arising under any Environmental
Law with respect to the properties, Facilities or operations of the Seller
(with respect to the Company's business), the Guarantor (with respect to the
Company's business) or the Company, whether or not constituting a breach of
any representation or warranty hereunder and whether or not disclosed to Buyer
prior to the Closing Date (whether on Schedule 3.17 or otherwise) or
identified by Buyer or its agents or representatives through their
investigations prior to the Closing Date, to the extent such violations or
obligations arise from or relate to (i) the operation of the Company's
business on or prior to the Closing Date (including without limitation any
transportation, disposal or Release of Hazardous Materials at any facility or
location) or (ii) the disposal or Release of Hazardous Materials at the
Facilities on or prior to the Closing Date; provided, however, that Seller
shall be required to indemnify Buyer and Company only to the extent such
damages exceed the $129,000 reserve for environmental matters regardless of
whether such reserve was intended to cover the liability for which Buyer seeks
indemnification on the June Balance Sheet;
(f) any liability with respect to the withdrawal or partial
withdrawal from a multi-employer plan prior to the Closing Date as defined in
Section 4001 of ERISA;
(g) the shut down of the San Jose, California manufacturing facility
previously operated by the Company or a predecessor thereof regardless of any
reserve therefor in any Financial Statement; and
(h) any matters disclosed on Schedule 3.9 (Undisclosed Liabilities)
or Schedule 3.13 (Legal Proceedings), whether or not such matters are also
disclosed elsewhere, unless, and only to the extent that, such matter is
clearly identified on such Schedule as being exempted from this Section 10.1.
The remedies provided in this Section 10.1 will be the exclusive remedy to
Buyer for damages arising under this Agreement for breaches of representations
and warranties, liabilities for which Seller indemnifies Buyer as set forth in
Section 10.1, pre-closing covenants, and any certificates delivered in
connection with its Agreement and the Contemplated Transactions. However,
buyer may pursue any remedy under law or at equity for breach of any
post-closing covenants, fraud or breach of the Transition Services Agreement
or any other agreement entered into in connection herewith.
<PAGE> 26
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER - Buyer will, in the
-----------------------------------------------
case of (a), (b) and (c) below, and the Company will, in the case of (d)
below, indemnify and hold harmless Seller, and will pay to Seller the amount
of any Damages arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement or in any certificate delivered by Buyer pursuant to this
Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions; and
(d) any Damages to the extent arising from the conduct of the
Company's business prior to or after Closing (excluding Damages to the extent
retained or to be indemnified by Seller or Guarantor under this Agreement).
10.3 SURVIVAL. All representations, warranties, covenants and agreements
--------
set forth in this Agreement or in any writing or certificate delivered in
connection with this Agreement shall survive the Closing Date and the
consummation of the Contemplated Trans-actions and shall not be affected by
any exami-nation made for or on behalf of Buyer, the knowledge of any of its
officers, directors, stockholders, employees or agents, or the acceptance of
any certificate or opinion. Notwithstanding the foregoing, no Party shall be
entitled to recover for any Damages pur-suant to Section 10.1(a) or Section
10.2(a) unless written notice of a claim thereof is delivered to the other
Party prior to the Applicable Limitation Date specifying the factual basis of
the claim to the extent known by the claimant. For purposes of this
Agreement, the term "Applicable Limitation Date" shall be the date which is 18
months after the C-losing Date; provided that the Applicable Limitation Date
with respect to the following Damages shall be as follows:
(i) with respect to any Damages covered by Section 10.1(e) the
Applicable Limitation Date shall be the date which is 60 months after the
Closing Date;
(ii) with respect to any Damages arising from or related to a breach
of the representations and warranties of the Company set forth in Section
3.11(f) (ERISA control group) or Section 3.10 (Taxes), the Applicable
Limitation Date shall be the expiration of the statute of limitations (or
limitation of actions) applicable to the Damages which are giving rise to the
claim for indemnification (including any extensions thereto);
(iii) with respect to any Damages arising from or related to a breach
of the representations and warranties of the Company set forth in Section 3.1
(Organization and Good Standing), Section 3.2 (Authority; No Conflict),
Section 3.3 (Capitalization), or Section 3.20 (Brokers or Finders), there
shall be no Applicable Limitation Date (i.e., such representations and
warranties shall survive forever);
(iv) with respect to any Damages arising from or related to a breach
of the representations and warranties of the Company set forth in Section 3.19
(Intellectual Property), but only as it relates to the trademark "Beech-Nut"
used in association with baby food or infant or toddler food in the United
States and its territories, the Applicable Limitation Date shall be the date
which is sixty (60) months after the Closing Date; and
(v) with respect to any Damages arising from or related to a breach
of Section 3.8 (Inventory) which would have been revealed by a visual
inspection as presently stored (e.g., without moving or opening boxes or
pallets), the Applicable Limitation Date shall be the date which is 90 days
after the Closing Date.
<PAGE> 27
10.4 LIMITATIONS ON AMOUNT-SELLER -
------------------------------
(a) General Rule. Except as otherwise provided herein, Seller will
------------
have no liability (for indemnification or otherwise) with respect to the
matters described in clause (a), or, with respect to pre-closing covenants
only, clause (b) of Section 10.1, (i) until the total of all Damages with
respect to such matters exceeds $250,000, and then only for the amount by
which such Damages exceed $250,000 or (ii) in excess of $4,000,000 for all
such matters.
(b) Antitrust Litigation, Withdrawal Liabilities and San Jose Plant
---------------------------------------------------------------
Shutdown. Damages described in clause (c) or clause (f) or clause (g) of
-------
Section 10.1 shall be indemnified by the Seller without regard to any basket,
deductible or cap (e.g., of the type described in Section 10.4(a)), and
without regard to any reserve with respect to such Damages on the Financial
Statements.
(c) Other Disclosed Liabilities. Subject to each other provision of
---------------------------
this Section 10.4 which addresses Damages with more particularity, Damages
relating to each liability disclosed in Schedules 3.9 or 3.13 shall be subject
to indemnification pursuant to Section 10.1 without regard to any basket,
deductible or cap, to the full extent such Damages, in the aggregate, exceed
the reserves for liabilities of such type on the Supplementary Balance Sheet
Information attached to the June Balance Sheet.
(d) Undisclosed Liabilities. Subject to each other provision of this
-----------------------
Section 10.4 which addresses Damages with more particularity, damages with
respect to the matters described in 10.1(a) relating to liabilities that were
required to be set forth on Schedule 3.9 or Schedule 3.13, to the extent not
set forth thereon, shall be subject to indemnification pursuant to Section
10.1, subject to the basket, deductible and cap set forth in Section 10.4(a);
provided that each product liability claim for Damages shall be ignored for
purposes of this Section 10.4(d) unless and until such claim, together with
all other claims related thereto, exceeds $5,000; and provided further that
such indemnification shall be made only to the extent such Damages, in the
aggregate, exceed the reserves for liabilities of such type on the
Supplementary Balance Sheet Information attached to the June Balance Sheet.
(e) Environmental Liabilities. All Damages referred to in Section
-------------------------
10.1(e), net of applicable reserves on the Supplementary Balance Sheet
Information attached to the June Balance Sheet, shall be subject to
indemnification pursuant to Section 10.1, without regard to any basket,
deductible or cap once the amount of such Damages exceeds $100,000 (and then
only to the extent of such excess); provided that the amount of such
indemnification shall not exceed 60% of such Damages until such Damages
(whether paid by Seller or Buyer) exceed $5 million at which time such
indemnification shall be for 100% of such Damages in excess of $5 million.
(f) Inventory - No indemnification for Damages for breach of Section
---------
3.8 shall be available under any provision of this Agreement except pursuant
to this paragraph (f). Within fifteen (15) business days following the
execution of this Agreement, Seller shall take a physical inventory of the
Company's raw materials, packaging and other supplies, work in process and
finished products in accordance with past practice. Buyer shall be given
reasonable notice of the time and date thereof, and Buyer and its agents and
accountants may be present at the taking of such physical inventory. In the
event that the amount of inventory on hand on the date of such physical
inventory as determined by such physical inventory (valued in accordance with
the Accounting Principles set forth in Schedule 3.4) is less than the Adjusted
Book Inventory, then the purchase price to be paid at Closing shall be reduced
by the amount of such difference in value. Seller shall have no further
<PAGE> 28
indemnification obligations to Buyer regarding the quantity of inventory on
hand. Any other Damages arising from or related to any other breach of the
representations of the Company set forth in Section 3.8 (Inventory) shall be
indemnified pursuant to Section 10.1 without regard to any basket or
deductible to the full extent of such breach. Notwithstanding anything to the
contrary contained in this Agreement, no indemnification for Damages for
breach of Section 3.8 related to the quality of the inventory at Closing shall
be available if such Damages are the result of actions of Buyer's officers or
employees.
(g) Intellectual Property - Any Damages arising from or related to a
---------------------
breach of the representations and warranties of the Seller set forth in
Section 3.19 (Intellectual Property) as those representations and warranties
relate to the trademark "Beech-Nut" used in association with baby, infant or
toddler foods in the United States and its territories, shall be indemnified
pursuant to Section 10.1 without regard to any basket, deductible or cap or
any reserve with respect to such Damages on the Financial Statements.
(h) Wastewater Treatment Agreement Litigation - Damages with respect
-----------------------------------------
to arrearages under the Waste Water Treatment Agreement with the Village of
Canajoharie for the Village's two fiscal years ended May 31, 1997 shall be
indemnified only to the extent such Damages exceed $275,000. Notwithstanding
anything to the contrary contained in this Agreement, (i) Buyer shall conduct
the Company's defense of all claims, proceedings, litigation or investigations
with respect to the Waste Water Treatment Agreement, (ii) at Seller's or
Guarantor's request, Buyer shall apprise Seller and Guarantor of the status of
any such actions for which Seller is or may be obligated to indemnify Buyer or
the Company and (iii) Buyer shall not settle any such action for which Seller
is obligated to indemnify Buyer or the company without the consent of Seller
or Guarantor, which consent shall not be unreasonably withheld. No
indemnification shall be available for any under-accrual of arrearages under
the Waste Water Treatment Agreement relating to periods after May 31, 1997.
(i) "Naturals" - Any Damages arising from or related to use of the
--------
word "Naturals" on the Company's baby food packaging or in the Company's
advertising shall be indemnified only to the extent such Damages arise from or
relate to product produced prior to the Closing.
(j) Workers' Compensation - No indemnification for Damages for
----------------------
Workers' Compensation claims shall be available under any provision of this
Agreement except pursuant to this Section 10.4(j). Commencing no later than
the third day following execution of this Agreement, the parties shall confer
and attempt to agree upon the WC Payment Amount. In the event no agreement
can be reached upon the WC Payment Amount by the Closing Date, the parties
shall agree upon and retain (at equal shared expense) a third party insurance
expert who shall, on or before 45 days following the Closing Date, submit WC
Payment Amount to the parties. Such third party insurance expert's
determination of WC Payment Amount shall be final and binding on the parties.
If the WC Payment Amount so determined is a positive amount, then Seller shall
pay such amount (not to exceed $500,000) to Buyer within two (2) business days
following notice of such determination.
(k) Working Capital Items - There shall be no indemnification for
---------------------
Damages arising out of, or related to, the failure to record, the improper
recording of, or the understatement or overstatement of (i) uncleared
deductions from paid invoices, whether taken, or to be taken, on, before or
after the date of the Agreement; (ii) consumer advertising in process but not
billed; and (iii) trade advertising and promotion programs agreed upon but not
yet deducted or paid; all, as more fully described in Items 1, 2, 3 and 4 of
Schedule 3.4.
(l) Certain Other Representations. Any Damages arising from or
------------------------------
related to a breach of the representations and warranties of the Company set
forth in Section 3.1 (Organization and Good Standing), Section 3.2 (Authority;
No Conflict), Section 3.3 (Capitalization), Section 3.20 (Brokers or Finders),
or Section 3.11(f) (ERISA control group), shall be indemnified pursuant to
Section 10.1 without regard to any basket, deductible or cap or any reserve
with respect to such Damages on the Financial Statements.
<PAGE> 29
(m) Insurance. The indemnification obligations of the Seller
---------
hereunder shall be reduced by any related insurance proceeds received by the
Company in respect of such Damages; provided (1) such insurance proceeds are
on account of insurance coverage for which the premium was paid prior to the
date of the June Balance Sheet and (2) only 60% of any insurance received in
respect of Damages to which Section 10.4(g) applies shall serve to reduce the
Seller's indemnification obligations thereunder. Seller and Guarantor shall
use commercially reasonable efforts to submit claims for insurance coverage
and to pursue such claims. Seller shall use commercially reasonable efforts
to maintain the benefits of existing insurance coverage applicable to the
Company for periods prior to Closing.
(n) Timing. If any claim for indemnification made by the Company or
------
the Buyer is not paid or reimbursed within 15 days after notice to the Seller,
then the Buyer and the Seller will negotiate in good faith to resolve the
matter and if the matter has not been resolved within 45 days after the
initial notice to the Seller, any of the Buyer, the Company, the Seller or the
Guarantor may initiate binding arbitration pursuant to the arbitration
procedures attached as Exhibit 10.4 hereto and if so initiated shall be the
exclusive remedy therefor.
10.5 LIMITATIONS ON AMOUNT-BUYER - Buyer will have no liability (for
----------------------------
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) (with respect to pre-closing covenants only) of Section 10.2 to the
extent Seller receives insurance proceeds in respect thereof, and until the
total of all Damages with respect to such matters exceeds $250,000, and then
only for the amount by which such Damages exceed $250,000. In addition, Buyer
shall have no obligation to provide indemnification pursuant to clause (a) or
clause (b) of Section 10.3 with respect to any misrepresentation or breach of
warranty, representation, or any covenant, if the conditions, facts or
circumstances giving rise to such misrepresentation or breach were known to
Seller prior to or at Closing (regardless of whether Seller waives such
misrepresentation or breach in writing or otherwise).
10.6 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS
----------------------------------------------------
(a) Promptly upon being notified by a third party with respect to a
matter which may give rise to a claim for indemnification under Section 10.1
or 10.2, such 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 the defense of such action is
adversely affected by the indemnifying party's failure to give such notice or
such notice is given after the expiration of the applicable survival period
contained herein.
(b) If any claim referred to in Section 10.6(a) 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 that
joint representation would be inappropriate) and accepts full liability for
such claim, 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 and in good
faith 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 Legal
Requirements 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
<PAGE> 30
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.
10.7 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS - 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 promptly
upon becoming aware of the indemnification claim and within the time period
set forth in 10.3. Any failure to provide such prompt notice shall release an
indemnifying party to the extent any such failure adversely affects the
ability of the indemnifying party to defend the relevant claim.
10.8 ADJUSTMENT TO PURCHASE PRICE - Any indemnification payments to be
----------------------------
made pursuant to this Article X shall be deemed an adjustment to the Purchase
Price.
ARTICLE XI
EMPLOYEES
11.1 PURCHASER'S OBLIGATIONS -
------------------------
(a) Except as otherwise specifically provided in this Article XI and
in Article X, after the Closing, (i) the Company shall be responsible, with
respect to Continued Company Employees (as defined in Section 11.1(b) herein),
for all liabilities, obligations and commitments relating to all wages,
salaries, bonuses and other forms of compensation and related expenses,
workers' compensation claims, and employee benefit liabilities under any and
all Plans, programs and arrangements maintained or contributed to by the
Guarantor, Seller or the Company and their affiliates, (including, without
limitation, those set forth on Schedule 3.11) if incurred or accrued on or
prior to June 30, 1998, only to the extent reflected on the liabilities side
of the June Balance Sheet (assuming the incorporation of the Supplemental
Balance Sheet Information attached to the June Balance Sheet) and, if incurred
after June 30, 1998, and until the Closing Date, only to the extent incurred
or accrued in the ordinary course of business consistent with past practice
and not in violation of this Agreement and (ii) Seller shall be responsible,
with respect to Continued Company Employees, for all liabilities, obligations
and commitments relating to all wages, salaries, bonuses and other forms of
compensation and related expenses, and workers' compensation claims and for
any and all employee benefits incurred under any and all plans, programs and
arrangements maintained or contributed to by the Guarantor, Seller or the
Company and their affiliates, (including, without limitation, those set forth
on Schedule 3.11) if incurred or accrued on or prior to June 30, 1998, to the
extent not reflected on the liabilities side of the June Balance Sheet
(assuming the incorporation of the Supplemental Balance Sheet Information
attached to the June Balance Sheet) and, if incurred or accrued after June 30,
1998, to the extent not incurred or accrued in the ordinary course of business
consistent with past practice or in violation of this Agreement. The Company
shall not be responsible for, and Seller shall indemnify the Company and Buyer
with respect to, any and all liabilities, obligations and commitments relating
to wages, salaries, bonuses, and other forms of compensation and related
expenses, workers' compensation claims and employee benefits liabilities with
respect to any person who is not a Continued Company Employee. The Company
shall be responsible, with respect to Continued Company Employees, for all
liabilities, obligations and commitments relating to wages, salaries, bonuses
and other forms of compensation and related expenses, and workers'
compensation claims, incurred or accrued after the Closing Date and any and
all employee benefits accrued or relating to claims incurred after the Closing
Date under any and all plans, programs and arrangements maintained or
contributed to by Buyer or its affiliates. For purposes hereof, a claim shall
be considered incurred on the date treatment is rendered or a service is
performed, provided that a workers' compensation claim shall be considered
incurred on the date the event giving rise to the claim occurs.
(b) Except as set forth on Schedule 11.1(b)(i), all persons who are
employed by the Company (including persons with recall rights under the
Company's collective bargaining agreement) and including those persons listed
on Schedule 11.1(b)(ii) as of the Closing Date shall be referred to herein as
<PAGE> 31
the "Continued Company Employees". Neither Buyer, the Company nor any of
their affiliates shall have any obligation under this Agreement or otherwise
with respect to any person who is not a Continued Company Employee, including
any Company employee who has retired or terminated employment (other than
persons with recall rights as described herein) on or prior to the Closing
Date. Except as otherwise agreed by upon by Seller and Buyer, the Company
shall no longer participate in, and the Continued Company Employees shall no
longer accrue benefits under, any employee benefit plan, arrangement, or
program of Seller or Guarantor on or after the Closing Date. With respect to
any Continued Company Employee that, on the Closing Date, is on long-term
disability or on a leave of absence with respect to a waiting period prior to
incurring a total or long-term disability under any Company Employee Plan,
Seller shall be responsible for all employee benefit obligations accrued or
incurred by or payable to such person during the "disability period" as though
such person were employed by Seller during such period. For purposes of this
Section 11.1, "disability period" shall mean the period beginning on the
Closing Date and ending on the date the person resumes active employment with
the Company after recovery from such condition.
11.2 DEFINED CONTRIBUTION PLANS -
----------------------------
On a date that is mutually agreeable to Seller and Buyer, which shall be no
later than one hundred twenty (120) days after the date Seller receives
evidence that the Buyer (or one of its affiliates) has established the plans
contemplated by this Section 11.2, there shall be a transfer of cash (and, at
the election of Buyer, notes representing outstanding participant loans) from
the Ralcorp Holdings, Inc. Savings Investment Plan ("Guarantor's Savings
Plan") to the defined contribution plans maintained by Buyer or one of its
affiliates ("Buyer's Defined Contribution Plans"). The amount of the transfer
shall be equal to the aggregate account balances (whether vested or not) under
Guarantor's Savings Plan of all "Continued Company Employees" as of the date
of transfer. Buyer shall cause Buyers' Defined Contribution Plans to assume
benefits under Guarantor's Savings Plan. The parties shall cooperate in
preparing any governmental filings required in connection with such asset
transfer as well as the asset transfer contemplated in Section 11.3.
11.3 DEFINED BENEFIT PLANS -
-----------------------
(a) Effective as of the Closing Date, Buyer shall establish or shall
cause the Company or an affiliate of Buyer to establish a defined benefit plan
("Buyer's Pension Plan") for the benefit of employees of the Company who, on
or after the Closing Date, are covered under the collective bargaining
agreement between the Company and Bakery, Confectionery and Tobacco Workers
Union Local No. 50 ("Union Employees"). After the Closing Date and within
forty-five (45) days after receipt of a copy of Buyer's Pension Plan, or if
later, within ten days after the expiration of the thirty day waiting period
prescribed by IRC Section 6058(b), Seller shall cause the trustees under the
Ralcorp Holdings, Inc. Retirement Plan ("Guarantor's Pension Plan") to
transfer to Buyer's Pension Plan an amount in cash or property acceptable to
Buyer equal to the Accumulated Benefit Obligation ("ABO") as defined in
Financial Accounting Standard 87 ("FAS 87") under Guarantor's Pension Plan
with respect to Continued Company Employees who, as of the Closing Date, are
Union Employees, using for this purpose the actuarial assumptions and factors
used by Guarantor in Guarantor's most recent Annual Report on Form 10-K except
the interest rate used shall be equal to the average annual yield of 30-year
U.S. Treasury Securities for the week immediately preceding the date of the
transfer (the "Transfer Amount). Interest at an annual rate of equal to the
rate used to calculate the Transfer Amount from the Closing Date to the actual
date of transfer shall be added to the Transfer Amount. Guarantor shall
calculate the ABO and shall deliver to Buyer at least thirty days prior to the
proposed transfer date a schedule of the ABO calculation with respect to
Guarantor's Pension Plan along with such other information which is necessary
for Buyer to verify such results.
(b) In no event will the Transfer Amount be less than the amount
necessary to satisfy IRC Section 414(1) and, if necessary, the asset transfer
described in (a) will be adjusted upward to an amount which satisfies IRC
414(1).
<PAGE> 32
(c) Effective as of the Closing Date, Guarantor shall cause to be
fully vested under Guarantor's Pension Plan each Continued Company Employee
whose accrued benefit is not transferred to Buyer's Pension Plan pursuant to
section 11.3(a) and each such Continued Company Employee shall be entitled to
commence payment of his or her benefit under Guarantor's Pension Plan in
accordance with the terms of Guarantor's Pension Plan on the basis that the
Continued Company Employee incurred a Severance from Service on the Closing
Date as a result of the transaction contemplated in this Agreement. For
purposes of determining the amount of benefits payable under the Guarantor's
Pension Plan, (i) the compensation of each Continued Company Employee under
this subsection (c) shall only include compensation considered compensation
pursuant to Guarantor's Pension Plan and paid or payable to such Continued
Company Employees by the Company or the Guarantor for services prior to and
including the Closing Date and shall not include compensation paid or payable
to such Continued Company Employee by the Company or the Buyer for services
after the Closing Date; and (ii) each Continued Company Employee's period of
service shall be determined pursuant to the Guarantor's Pension Plan and shall
only include the time prior to and including the Closing Date during which
such Continued Company Employee provided services to the Company or the
Guarantor and shall not include any period of time after the Closing Date
during which services were provided by such Continued Company Employee to the
Company or the Buyer.
11.4 SEVERANCE -
---------
Except as set forth in Section 7.8, Guarantor shall be responsible for all
severance or change of control payments (whether payable prior to or after the
Closing) which are due solely as a result of the consummation of the
transactions contemplated by this Agreement or pursuant to an employment
agreement or other severance agreement in effect on or before the Closing
Date. With respect to Continued Company Employees who are terminated by the
Buyer on or after the Closing Date, except as otherwise described in Section
7.8, the Buyer shall be responsible for severance benefits payable pursuant to
severance plans, policies and practices of the Buyer applicable to such
employees at the time of their termination. Buyer shall cause the Company to
provide any required notice under the Workers Adjustment and Retraining
Notification Act ("WARN") with respect to the termination on or after the
Closing Date of Company employees.
11.5 VACATION -
--------
Buyer shall, or shall cause the Company to, credit each Company employee with
vacation benefits which were accrued under Guarantor's and/or Company's
vacation program but not yet taken as of the Closing Date to the extent
reflected as a liability on the Company's books and records as of the Closing
Date, which liability shall not exceed the corresponding liability on the
Supplemental Balance Sheet Information attached to the June Balance Sheet, as
decreased to reflect vacation taken or expired since the date of the June
Balance Sheet and increased to reflect vacation earned for hours worked since
the date of the June Balance Sheet, all in the ordinary course of business
consistent with past practices.
11.6 BONUSES - Buyer and/or the Company agree to pay to the Continued
-------
Company Employees set forth on Schedule 11.6 the bonus amount next to their
name on November 15, 1998, provided such Continued Company Employees are
employed by the Company on the date of payment. Guarantor shall be
responsible for and shall reimburse Company or Buyer for 75% of such bonus
amounts; and the Company and/or Buyer will pay 25% of the bonus amount.
Guarantor's obligations under this article shall be treated as an adjustment
to the Purchase Price.
11.7 EMPLOYEE RELATED OBLIGATIONS -
------------------------------
(a) After the Closing, Company and Buyer shall be responsible for the
continuing health benefits under COBRA of all Continued Company Employees, and
their qualified beneficiaries, whose employment terminates or who otherwise
become entitled to elect COBRA continuation coverage after the Closing. After
the Closing, Seller shall continue to be liable for health benefits of former
<PAGE> 33
employees or qualified beneficiaries of employees of the Company who made, or
who were entitled to make COBRA elections under Seller's health benefit
program prior to the Closing. For purposes of this paragraph, all references
to COBRA or to the rights under COBRA of employees and their qualified
beneficiaries shall be to (or determined with respect to) Section 4980B of the
IRC. If either Seller or Buyer breach any of the foregoing obligations with
respect to COBRA continuation rights, then notwithstanding anything to the
contrary in Article XI of this Agreement, Seller and Buyer each agree to
indemnify and hold the other harmless for any and all liabilities incurred by
such other party (or incurred by such other party's health benefit program) in
excess of amounts received from affected employees of the Company or their
qualified beneficiaries with respect to their cost of COBRA coverage.
The post retirement welfare benefits for Continued Company Employees under the
plans maintained or contributed to by Seller or Guarantor or the Company,
whether payable prior to or after the Closing, shall be the responsibility of
Seller and Guarantor.
(b) After the Closing Date, the Company shall be responsible for
employee-related liabilities and obligations, with respect to the Continued
Company Employees, under any Plan and any other plans, practice and programs
of the Buyer or the Company which may be offered to the Continued Company
Employees.
ARTICLE XII
OTHER AGREEMENTS AND COVENANTS
12.1 TAX MATTERS
------------
(a) Liability for Taxes
---------------------
(i) Notwithstanding any other provision in this Agreement, including, but
not limited to Article X hereof, Seller shall be liable for all (A) Taxes
imposed on the Company for any taxable year that ends on or prior to the
Closing Date (including Taxes attributable to the Section 338(h)(10) Election,
provided that any Additional Taxes shall be reimbursed by Buyer pursuant to
the subsection (e)(ii) hereof) and, with respect to any period which begins
before and ends after the Closing Date (a "Straddle Period"), the portion of
such Straddle Period ending on and including the Closing Date; provided,
however, Seller shall not be liable for and shall not indemnify Buyer for any
Taxes (other than Taxes related to income) accrued on the June Balance Sheet
(Taxes described in this proviso are referred to as "Excluded Taxes") and (B)
Taxes of any other Person to which the Company or Buyer may be subject by
virtue (1) of the Company's status prior to the Closing Date as a member of
any affiliated, combined or unitary group of which the Company or such other
Person was also a member, including any penalties or interest related thereto
(including pursuant to Treas. Reg. Section 1.1502-6 and any successor
provision and any similar provision under state or local law) and (2) any
written contractual obligation entered into by the Company on or before the
Closing Date. Buyer shall be entitled to any refund of Taxes (1) for which it
is liable pursuant to this paragraph (a)(i) or (2) which is reflected as an
asset on the June Balance Sheet. Seller shall be entitled to any refund of
taxes for which it is liable pursuant to this paragraph (a)(i).
(ii) Notwithstanding any other provision in this Agreement, including, but
not limited to Article X, Buyer shall be liable for (A) all Taxes imposed on
the Company for any taxable year or period that begins after the Closing Date
and, with respect to any Straddle Period, the portion of such Straddle Period
beginning after the Closing Date and (B) any Excluded Taxes. Buyer shall be
entitled to any refund of Taxes for which it is liable pursuant to this
paragraph (a)(ii).
(iii) For purposes of paragraphs (a)(i) and (a)(ii) of this Section 12.1,
whenever it is necessary to determine the liability for Taxes of the Company
for a portion of any Straddle Period, the determination of the Taxes of the
Company for the portion of the Straddle Period ending on and including, and
the portion of the Straddle Period beginning after, the Closing Date shall be
determined by assuming that the Straddle Period consisted of two (2) taxable
years or periods, one of which ended at the close of the Closing Date and the
<PAGE> 34
other of which began at the beginning of the day following the Closing Date,
and items of income, gain, deduction, loss or credit of the Company for the
Straddle Period shall be allocated between such two (2) taxable years or
periods on a "closing of the books basis" by assuming that the books of the
Company were closed at the close of the Closing Date; provided, however, that,
subject to applicable legal requirements, the Company exemptions, allowances
or deductions that are calculated on an annual basis, such as the deduction
for depreciation, shall be apportioned between such two (2) taxable years or
periods on a daily basis.
(iv) For purposes of paragraphs (a)(i) and (a)(ii) of this Section 12.1,
whenever it is necessary to allocate an item of income, gain, deduction, loss
or credit to either a taxable year or period that ends on or before the
Closing Date or taxable year or period that begins after the Closing Date,
rules consistent with those in Treas. Reg. 1.1502-76(b) shall be applied
(without any ratable allocation under Treas. Reg. 1.1502-76(b)(2)(ii) or
(iii)).
(v) On or prior to the Closing Date, all Tax Sharing Arrangements (other
than this Agreement) between Seller, Guarantor or any of their Affiliates on
one hand, and the Company on the other hand, shall terminate and neither the
Seller nor the Company shall have any further rights or obligations
thereunder. For purposes of this paragraph, a "Tax Sharing Arrangement" shall
mean any agreement or arrangement for the allocation or payment of tax
liabilities or payment for tax benefits with respect to a consolidated,
combined or unitary tax return which tax return includes the Company.
(b) Tax Returns - Seller shall file or cause to be filed when due all
-----------
Tax Returns that are required to be filed by or with respect to the Company
for taxable years or periods ending on or before the Closing Date and shall
remit any Taxes due in respect of such Tax Returns (other than Tax Returns
relating to Taxes accrued on the date of the June Balance Sheet), and Buyer
shall file or cause to be filed when due all Tax Returns that are required to
be filed by or with respect to the Company for taxable years or periods ending
after the Closing Date and Tax Returns relating to Taxes accrued on the June
Balance Sheet and shall remit any Taxes due in respect of such Tax Returns.
Seller or Buyer shall reimburse the other party for the Taxes for which Seller
or Buyer is liable pursuant to paragraph (a) of this Section 12.1 but which
are payable with Tax Returns to be filed by the other party pursuant to the
preceding sentence upon the written request of the party entitled to
reimbursement, setting forth in detail the computation of the amount owed by
Seller or Buyer, as the case may be, but in no event earlier than ten days
prior to the due date for the payment of such Taxes.
(c) Contest Provisions - Each party shall notify the other promptly
------------------
(and no more than 30 days after receipt) in writing upon receipt by that party
of notice of any pending or threatened federal, state, local or foreign tax
audits, examinations or assessments which may affect any tax liability for
which Seller or Buyer is liable pursuant to paragraph (a) of this Section
12.1, provided that failure to comply with this provision shall not affect any
right to indemnification hereunder unless such failure shall materially impair
the indemnifying party's right to contest, defend or protest such matter. The
indemnifying party shall have the sole right to conduct any tax audit or
administrative or court proceeding relating to a potential liability for Taxes
for which it is liable pursuant to paragraph (a) of this Section 12.1. In the
case of any Straddle Period, Seller and Buyer shall be entitled to participate
at their expense in any tax audit or administrative or court proceeding
relating (in whole or in part) to Taxes attributable to the portion of such
Straddle Period ending on and including the Closing Date. Buyer and Seller
each agrees not to settle any tax claim which may be the subject of
indemnification by the other party pursuant to this Section 12.1, or to settle
any other tax claim or file an amended Tax Return if such settlement or
amended filing would have an adverse impact on the other party's liability for
Taxes without the prior written consent of the indemnifying party (which
consent shall not be unreasonably withheld).
(d) Assistance and Cooperation - After the Closing Date, Seller and
--------------------------
Buyer shall (and cause their respective Affiliates to):
<PAGE> 35
(i) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing in accordance with
paragraph (b) of this Section 12.1;
(ii) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Company;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of the Company;
(iv) provide timely notice to the other in writing of any
pending or threatened tax audits or assessments of the Company for taxable
periods for which the other may have a liability under this Section 12.1; and
(v) furnish the other with copies of all correspondence received
from any taxing authority in connection with any tax audit with respect to any
taxable period for which the other may have a liability under this Section
12.1.
(e) Election Under Section 338(h)(10)
------------------------------------
(i) Seller and Company shall, if requested by Buyer, join with
Buyer in preparing a joint election on Form 8023 for the Company under Section
338(h)(10) of the Code and under any applicable similar provisions of state
law with respect to the purchase of the Shares ("Section 338(h)(10) Election).
The Form 8023 shall be prepared and executed by Buyer and Seller no later than
two hundred ten (210) days following the Closing and timely filed by Buyer if
it so elects in its sole discretion. Information accompanying the Form 8023
will reflect the purchase price allocation set forth on the schedule
accompanying Form 8023 which shall be prepared by Buyer and delivered to the
Seller within ninety (90) days of the Closing Date; the parties hereto agree
to take no position for any tax or financial reporting purposes which is
contrary to such allocation. Information accompanying the Form 8023 will
reflect the purchase price allocation among the Company's assets, based on a
qualified independent appraisal paid for by Buyer and reasonably acceptable to
Seller.
(ii) The parties acknowledge that by reason of the Section
338(h)(10) Election, Seller may incur an aggregate state income tax liability
greater than that which would have been incurred had a Section 338(h)(10)
Election not been filed. Accordingly, Buyer shall pay to Seller in accordance
with this Section 12.1(e), (x) an amount calculated by (A) first determining
the additional state income tax liability of Seller, if any, resulting from
the transaction being treated as a deemed sale of assets as opposed to a sale
by Seller of the Company Shares, and (B) then reducing the amount of such
additional state income tax liability by the amount of the reduction in the
Seller's federal income tax liability (calculated without the application of
any net operating loss carryforwards, foreign tax credits or other tax credits
or credit carryovers and, if Seller has a loss for such year ignoring the
effect of the Section 338(h)(10) Election, calculated at a 35% rate) that
results from the deduction attributable to the amount determined under the
preceding clause (A) and (y) an amount equal to the additional state taxes
(net of federal tax benefit) due as a result of the payment by buyer to Seller
of the differences between (A) and (B) above; provided, however, that the
amount described in this subsection (y) of this paragraph shall be reduced by
the amount, if any, by which the payment due from Buyer to Seller under
Section 10.4(j) is less than $500,000. The amount described in the preceding
sentence shall be referred to as the "Additional Taxes." Notwithstanding any
other provision hereof, the amount of Additional Taxes for which Buyer shall
be obligated to pay to Seller shall be determined as of the Closing Date (and
therefor shall be determined without giving effect to any adjustment to the
Purchase Price which occurs after the Closing Date other than as specifically
provided above with respect to any Additional Taxes).
(iii) Seller shall provide Buyer with a detailed analysis of the
calculation of Additional Taxes due by reason of the proposed Section
338(h)(10) Election within one hundred (100) days of the Closing Date. If the
Buyer and Seller are unable to reach agreement on the amount of the Additional
Taxes within one hundred twenty (120) days of the Closing Date, the Buyer and
Seller will jointly appoint a mutually acceptable accounting firm to determine
the amount of Additional Taxes and shall direct such accounting firm to
determine the amount of Additional Taxes by no later than the date that is one
hundred eighty (180) days after the Closing Date.
<PAGE> 36
(iv) The amount of any Additional Taxes payable to Seller shall
be paid by Buyer within ten (10) days after the date such amount is determined
under the preceding subparagraph (iii).
(f) Adjustment to Purchase Price - Any payment received by Buyer or
----------------------------
Seller from the other party under this Section 12.1 will be deemed to be an
adjustment to the Purchase Price unless, under applicable law, such payment is
not treated as received by such other party.
(g) Buyer covenants that it will timely file with the New York State
Department of Taxation and Finance, the Transferee Questionnaire (Form TP 581)
and/or affidavits, documents and any other information required pursuant to
Article 31-B of the Tax Law of the State of New York and the regulations
promulgated thereunder (the "RPTGT") as it applies to the Company's real
property (as defined for purposes of the RPTGT) located at Canajoharie and
Fort Plain, New York. Buyer agrees that such questionnaire and/or affidavit
documents and other information will be completed consistently with the
Transferor Questionnaire (Form TP 580) which shall be provided by Seller to
Buyer not less than twenty-five (25) days prior to the Closing Date. Buyer,
Guarantor and Seller shall maintain all questionnaires, affidavits, documents
and information as required of each party to comply with the RPTGT. Buyer
agrees that it will pay, when due, any real estate transfer taxes under the
RPTGT.
12.2 BUYER'S REVIEW - Buyer confirms that Seller has made available to
--------------
Buyer and its representatives and agents, the opportunity to ask questions of
the officers and management of the Company and to acquire such additional
information about the Company's business and financial condition as Buyer has
requested, and all such information has been received.
12.3 RECORDS - Subsequent to the Closing, Buyer and Seller and Guarantor
-------
shall provide or cause to be provided to each other and each other's
Representatives, reasonable access (for the purpose of examining and copying
during normal business hours) to the books and records of the Company and
Seller and Guarantor (insofar as they relate to the Company), including, but
not limited to, accounting and tax records, and tax returns, sales and
purchase documents, notes, memoranda, test records and any other electronic or
written data ("Records") pertaining to periods or occurrences prior to the
Closing. Unless otherwise consented to in writing by the other, the parties
shall not, for a period of seven (7) years following the Closing, destroy,
alter or otherwise dispose of any of the books and records of the Company or
Seller and Guarantor (insofar as they relate to the Company) pertaining or
relating to periods prior to the Closing.
12.4 GUARANTEE -
---------
(a) Guarantor hereby unconditionally guarantees the due and punctual
payment and performance of all of the Seller's obligations set forth in this
Agreement. This guaranty is an irrevocable guaranty of payment (and not just
of collection) and shall continue in effect notwithstanding any extension or
modification of the terms of this Agreement, any assumption of any such
guaranteed obligation by any other party or any other act or event that might
otherwise operate as a legal or equitable discharge of Guarantor under this
Section 12.4. This guaranty is in no way conditioned upon any requirement
that the Buyer first attempt to collect or enforce any guaranteed obligation
from or against the Seller. So long as any obligation of the Seller to the
Buyer under this Agreement remains unpaid or undischarged, Guarantor hereby
waives (but only with respect to the Buyer and its Affiliates and not as to
any other parties) all rights to subrogation arising out of any payment by
Guarantor under this Section 12.4.
(b) The obligation of Guarantor hereunder shall be absolute and
unconditional irrespective of the validity, legality or enforceability of this
Agreement or any other document related hereto, and shall not be affected by
or contingent upon (i) the liquidation or dissolution of, or the merger or
consolidation of the Seller with or into any corporation, or any sale or
transfer by the Seller or all or any part of its property or assets, (ii) the
<PAGE> 37
bankruptcy, receivership, insolvency, reorganization or similar proceedings
involving or affecting the Seller, (iii) any modification, alteration,
amendment or addition of or to this Agreement, or (iv) any disability or any
other defense of the Seller or any other person and any other circumstance
whatsoever (with or without notice to or knowledge of Guarantor) which may or
might in any manner or to any extent vary the risks of Guarantor or might
otherwise constitute a legal or equitable discharge of a surety or a guarantor
or otherwise.
(c) Guarantor hereby waives all special suretyship defenses and protest,
notice of protest, demand for performance, diligence, notice of any other
action at any time taken or omitted by the Buyer and, generally, all demands
and notices of every kind in connection with this Section 12.4 and the
Seller's obligations hereby guaranteed, and which Guarantor may otherwise
assert against the Buyer.
(d) This Section 12.4 shall continue to be effective or shall be
reinstated, as the case may be, if at any time payment or performance of any
of the obligations of the Seller under this Agreement is rescinded or must
otherwise be restored or returned by the Buyer upon the insolvency, bankruptcy
or reorganization of the Seller or otherwise.
(e) Guarantor acknowledges that each of the waivers set forth above is
made with full knowledge of its significance and consequences and under the
circumstances the waivers are reasonable and not contrary to public policy.
If any of said waivers is determined to be contrary to any applicable law or
public policy, such waivers shall be effective only to the extent permitted by
law.
12.5 FORGIVENESS OF INTERCOMPANY DEBT - On the Closing Date, the Company
--------------------------------
shall forgive the intercompany account receivable, if any, due from Seller or
any of its Affiliates and existing as of the Cutoff Time, and Seller shall
forgive, by way of indirect capital contributions to the Company, the
intercompany account receivables, if any due from the Company to Seller or any
of its Affiliates and existing as of the Cutoff Time.
12.6 NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY -
--------------------------------------------------------
(a) Non-Competition. In consideration of the payment of the Purchase
Price and as a condition precedent to Buyer's willingness to enter into this
Agreement and consummate the transactions contemplated hereby, during the
period beginning on the Closing Date and ending on the fifth anniversary of
the Closing Date (the "Non-Compete Period"), the Seller, the Guarantor and
their Affiliates (each, a "Noncompete Party") hereby agrees that such
Noncompete Party shall not engage (whether as an owner, operator, manager,
employee, officer, director, consultant, advisor, representative or otherwise)
directly or indirectly in any business that the Company conducts or proposes
to conduct as of the Closing Date anywhere in the world; provided that
ownership of less than five percent (5%) of the outstanding stock of any
publicly-traded corporation shall not be deemed to be engaging solely by
reason thereof in any of its businesses. Each Noncompete Party acknowledges
that the business that the Company currently conducts or proposes to conduct
includes, without limitation, the manufacture, marketing and sale of baby and
infant food, and toddler food in jars and tubs and cereal, juice and bottled
water marketed for babies, infants or primarily for toddlers. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 12.6 is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time with which the judgment may be
appealed.
<PAGE> 38
(b) Non-Solicitation. Each Noncompete Party and the Company and
Buyer agree that during the period beginning on the Closing Date and ending on
the first anniversary thereof, each such party shall, and shall use its best
efforts to cause its Affiliates to, refrain from, directly or indirectly
contacting, approaching or soliciting for the purposes of offering employment
to or hiring (whether as an employee, consultant, agent, independent
contractor or otherwise) or actually hiring any Person employed by the
Company, or Buyer (in the case of a Noncompete Party) or any Noncompete Party
(in the case of Buyer and the Company), as the case may be, at any time after
the date hereof and prior to the Closing Date or during the one year period
following the Closing Date, without the prior written consent of the Buyer (in
the case of a Noncompete Party), or Guarantor (in the case of Buyer or the
Company). During the period beginning on the Closing Date and ending on the
first anniversary thereof, each Noncompete Party shall not induce or attempt
to induce any customer or other business relation to the Company into any
business relationship which might materially harm the Company. The term
"indirectly" as used in this Section 12.6 with respect to a Person is intended
to mean any acts authorized or directed by or on behalf of such Person or any
Person controlled by such Person.
(c) Confidentiality. Each Noncompete Party agrees to treat and hold
as confidential any information concerning the business and affairs of the
Company that is not or does not become generally available to the public other
than as a result of a disclosure in violation of this Agreement (the
"Confidential Information"), refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Buyer or destroy, at the request and option of Buyer, all tangible embodiments
(and all copies) of the Confidential Information which are in his possession
or under his control. In the event that any Noncompete Party is requested or
required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Noncompete
Party shall notify Buyer promptly of the request or requirement so that Buyer
may seek an appropriate protective order or waive compliance with the
provisions of this Section 12.9. If, in the absence of a protective order or
the receipt of a waiver thereunder, such Noncompete Party is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, such Noncompete Party may disclose the
Confidential Information to the tribunal; provided that such Noncompete Party
shall use his best efforts to obtain, at the request of Buyer an order or
other assurance that confidential treatment shall be accorded to such portion
of the Confidential Information required to be disclosed as Buyer shall
designate. If the Contemplated Transactions are not consummated, each party
will return or destroy as much of such written information as the other party
may reasonably request and the Confidentiality Agreement entered into on
February 18, 1998, by and between the Guarantor and Madison Dearborn Partners,
shall remain in full force and effect. In addition, if the Closing occurs,
the Standstill Provisions of said Confidentiality Agreement shall remain in
full force and effect.
(d) Remedy for Breach. Each Noncompete Party acknowledges and agrees
that in the event of a breach by any Noncompete Party of any of the provisions
of this Section 12.9, monetary damages shall not constitute a sufficient
remedy. Consequently, in the event of any such breach, the Company, Buyer
and/or their respective successors or assigns shall be entitled to, in
addition to the other rights and remedies existing in their favor, specific
performance and/or injunctive or other relief in order to enforce or prevent
any violations of the provisions hereof from any court of competent
jurisdiction, in each case without the requirement of posting a bond or
proving actual damages.
12.7 ASSIGNMENT OF RIGHTS - Seller and Guarantor shall use their
----------------------
respective commercially reasonable efforts to cause all of the confidentiality
agreements benefiting the Company and all indemnification rights, noncompete
and nonsolicitation protections and other rights and covenants related to the
Company or its business, which are currently for the benefit of the Seller,
the Guarantor, any of their predecessors or any Affiliate of any of the
<PAGE> 39
foregoing, to be assigned to the Company at the Closing provided such
agreements can be assigned to the Company without prejudice to the Seller or
Guarantor or their Affiliates. To the extent any such rights, protections or
covenants are not so assigned, Seller and Guarantor shall cause such rights,
protections and covenants to be pursued as reasonably directed by the Company
or the Buyer, and at the Company's expense.
12.8 RISK OF LOSS/MATERIAL CASUALTY. If at any time after the date of
------------------------------
this Agreement and prior to the Closing, any material portion of the tangible
assets or the real property are damaged by fire or other casualty or, in the
case of the equipment, becomes materially inoperable, Buyer may at its option
terminate this Agreement. If Buyer elects to keep this Agreement in full
force and effect, Buyer shall be entitled to receive all insurance proceeds
payable to the Company, Seller or Guarantor with respect to any casualty
losses suffered after June 30, 1998 with respect to the Company's tangible
assets or real property.
ARTICLE XIII
GENERAL PROVISIONS
13.1 EXPENSES - Except as otherwise expressly provided in this Agreement,
--------
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party. Notwithstanding the foregoing, (a) Buyer shall pay all filing
fees required by the HSR and (b) the Company shall not pay any of its, the
Sellers or the Guarantor's expenses, all of which shall be paid by the Seller
or the Guarantor.
13.2 PUBLIC ANNOUNCEMENTS - Upon the execution of the Agreement, the
---------------------
parties shall jointly issue a press release describing the transaction the
form of which shall be mutually agreed upon by Buyer and Seller and which
shall include information required by any Legal Requirements, (including, but
not limited to the Purchase Price) . In addition, after execution of this
Agreement, Guarantor shall be entitled to disclose any information required by
any Legal Requirement. Other than as contemplated in the foregoing sentence,
the parties, prior to the Closing shall keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
Notwithstanding the foregoing, Buyer may disclose this Agreement or any
portion hereof, and any information related thereto (i) to its officers,
directors, partners, employees, accountants, counsel, consultants, advisors,
agents and potential or actual sources of finance, (ii) to the extent it has
been previously known on a non-confidential basis by Buyer, (iii) to the
extent it is in the public domain through no fault of Buyer, (iv) to the
extent lawfully acquired by Buyer from sources other than Guarantor, Seller or
their Affiliates or (v) to the extent necessary to satisfy any Legal
Requirement. Seller and Buyer will consult with each other concerning the
means by which the Company's employees, customers, and suppliers and others
having dealings with the Company will be informed of the Contemplated
Transactions.
13.3 NOTICES - All notices, consents, waivers, and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a
copy is mailed by mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as
a party may designate by notice to the other parties):
SELLER'S AND Vice President, General Counsel and Secretary
GUARANTOR'S Ralcorp Holdings, Inc.
ATTENTION: 800 Market Street
Suite 2900
St. Louis, MO 63101
Facsimile No.: 314/877-7748
<PAGE> 40
BUYER'S ATTENTION: Scott Meader
Milnot Company
100 S. 4th Street
St. Louis, MO 63102
Facsimile No.: 314/436-7679
With Copies To: Edward T. Swan
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Facsimile No.: 312/861-2200
Nicholas W. Alexos
c/o Madison Dearborn Partners, Inc.
Three First National Plaza, Suite 3800
Chicago, IL 0602
Facsimile No.: 312/895-1001
13.4 JURISDICTION; SERVICE OF PROCESS - Any action or proceeding seeking
--------------------------------
to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against any of the parties in the courts of the State
of Missouri, City of St. Louis, or, if it has or can acquire jurisdiction, in
the United States District Court for the Eastern District of Missouri, and
each of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world.
13.5 FURTHER ASSURANCES -
-------------------
(a) The parties shall (i) furnish upon request to each other such further
information, (ii) execute and deliver to each other such other documents, and
(iii) do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement, and (iv) reasonably assist each other
in the prosecution and defense of litigation associated with the Company's
business provided that the party seeking assistance shall compensate the other
party for the reasonable out-of-pocket cost of such assistance; and
(b) The Seller and the Guarantor shall not in any manner take any action
which is designed, intended, or might be reasonably anticipated to have the
effect of discouraging customers, suppliers, lessors, licensors and other
business associates from maintaining the same business relationships with the
Company after the date of this Agreement as were maintained with the Company
prior to the date of this Agreement.
(c) The Seller and the Guarantor shall make available all property and
records of the Company in the possession of the Seller, the Guarantor or any
Affiliate to be removed by the Company to the Company's or the Buyer's
premises promptly after the Closing, including without limitation, all
equipment used in connection with the "helpline" service provided to consumers
of the Company and the Guarantor but excluding any property and related
records indicated on Schedule 2.6 that will remain with the Guarantor or any
of its Affiliates.
13.6 WAIVER - The rights and remedies of the parties to this Agreement are
------
cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
<PAGE> 41
13.7 ENTIRE AGREEMENT AND MODIFICATION - This Agreement constitutes (along
---------------------------------
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to
its subject matter. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
13.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS - Neither party
--------------------------------------------------
may assign any of its rights under this Agreement without the prior consent of
the other party, which will not be unreasonably withheld, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary or
Affiliate of Buyer. Subject to the preceding sentence, this Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any Person other than
the parties to this Agreement any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement.
This Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and
assigns. Notwithstanding the foregoing, the Buyer may pledge this Agreement
as security for any borrowings used to fund the Purchase Price and the
Company's working capital requirements.
13.9 SEVERABILITY - If any provision of this Agreement is held invalid or
------------
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13.10 SECTION HEADINGS, CONSTRUCTION - The headings of Sections in this
------------------------------
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Agreement. All words
used in this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
13.11 TIME OF ESSENCE - With regard to all dates and time periods set
---------------
forth or referred to in this Agreement, time is of the essence.
13.12 GOVERNING LAW - This Agreement will be governed by the laws of the
-------------
State of Missouri without regard to conflict of laws principles.
13.13 COUNTERPARTS - This Agreement may be executed in multiple
------------
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first written above.
MILNOT HOLDING CORPORATION RH FINANCIAL CORPORATION
By: /s/ Scott Meader By: /s/ J. R. Micheletto
---------------- --------------------
Scott Meader J. R. Micheletto
President Chief Executive Officer
RALCORP HOLDINGS, INC.
(AS GUARANTOR)
By: /s/ J. R. Micheletto
--------------------
J. R. Micheletto
Chief Executive Officer
and President
<PAGE> 1
AMENDMENT NO. 1 TO THE
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (this "Amendment") is made as of September 10,
1998 by and among Milnot Holding Corporation, a Delaware corporation
("Buyer"), RH Financial Corporation, a Nevada corporation ("Seller"), and
Ralcorp Holdings, Inc., a Missouri corporation ("Guarantor").
WHEREAS, Buyer, Seller and Guarantor entered into that certain Stock
Purchase Agreement, dated as of July 29, 1998 (the "Original Agreement").
WHEREAS, Buyer, Seller and Guarantor have agreed to amend the
Original Agreement.
NOW, THEREFORE, the parties to this Amendment hereby agree as
follows:
1. The Original Agreement is hereby amended by replacing Section
2.5(f), in its entirety, with the following:
(f) Payment of Adjustment - As soon as practicable, but no later than
---------------------
thirty (30) days after the Closing for the period from July 1, 1998 through
and including July 31, 1998, and no later than forty-five (45) days after the
Closing for the time period from August 1, 1998 through and including the
Closing, Guarantor and Buyer shall jointly determine, as of 11:59 p.m. on July
31, 1998 and as of 11:59 p.m. on the Closing Date (respectively), on an
unaudited basis, the balance of the Company's Cash Ledger Account without
giving effect to the adjustment in Section 12.5. To the extent that the
balance of the Company's Cash Ledger Account so determined as of each such
date exceeds or is less than zero ($0), then in the case of an excess
Guarantor shall remit promptly the amount of such excess to Buyer and in the
case of a deficiency Buyer shall remit promptly the amount of such deficiency
to Guarantor. Any payments to be made under this Section 2.5(f) shall bear
interest at 12% per annum commencing at the end of the respective period
provided above.
2. This Amendment may be executed in counterparts each of which
may contain the signature of only one party but each such counterpart will be
deemed an original and all such counterparts together will constitute one and
the same Amendment.
3. Except as hereinabove specifically provided, the Original
Agreement shall remain in full force and effect in accordance with the terms
and provisions thereof. In the event of any conflict between the terms and
provisions of this Amendment and the terms and provisions of the Original
Agreement, the terms and provisions of this Amendment shall govern.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed this AMENDMENT
as of the date first written above.
MILNOT HOLDING CORPORATION
By: /s/ Scott Meader
----------------
Name: Scott Meader
Title: President
RH FINANCIAL CORPORATION
By: /s/ J. R. Micheletto
--------------------
Name: J. R. Micheletto
Title: Chief Executive Officer
RALCORP HOLDINGS, INC. (As Guarantor)
By: /s/ J. R. Micheletto
--------------------
Name: J. R. Micheletto
Title: Chief Executive Officer
