SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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) July 2, 1998
B&G Foods, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 333-39813 13-3916496
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(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation No.)
426 Eagle Rock Avenue, Roseland, New Jersey 07068
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (973) 228-2500
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2 Acquisition or Disposition of Assets
B&G Foods, Inc. is filing this Form 8-K to report its acquisition of Maple
Grove Farms of Vermont, Inc., Up Country Naturals of Vermont, Inc. and Les
Produits Alimentaires Jacques et Fils Inc. (collectively the "Acquired
Companies"). See Press Release, dated July 6, 1998, attached as Exhibit 99.3.
On July 2, 1998, BGH Holdings, Inc. ("Buyer"), a subsidiary of B&G
Foods, Inc., entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement") by and among Buyer, each of the Acquired
Companies, and William F. Callahan and Ruth M. Callahan (collectively,
the "Sellers"), providing for the acquisition by Buyer of all of the
issued and outstanding capital stock of the Acquired Companies (the
"Stock"), for an aggregate purchase price of $15,170,000, consisting of
$14,170,000 in cash, 1,000 shares of Common Stock of B&G Foods Holdings
Corp. ("Holdings"), having an aggregate value of $10,000, and 990
shares of the 13% Series A Cumulative Preferred Stock of Holdings,
having an initial aggregate liquidation preference of $990,000. The
closing under the Stock Purchase Agreement occurred on July 17, 1998.
The Stock Purchase Agreement provides for a post-closing adjustment to
be paid by either Buyer or Seller under certain circumstances. The
terms and conditions of the acquisition are set forth in the Stock
Purchase Agreement, which has been filed as Exhibit 2 to this filing.
Item 7 Financial Statements, Pro Forma Financial Statements and Exhibits
*(a) Financial Statements of Businesses Acquired
Financial Statements of Maple Grove Farms of Vermont, Inc., Up Country
Naturals of Vermont, Inc., and Les Produits Alimentaires Jacques et
Fils Inc., with Independent Auditors' Statement Thereon.
*(b) Pro Forma Financial Information
(c) Exhibits
Stock Purchase Agreement, dated July 2, 1998, by and among BGH
Holdings, Inc., Maple Grove Farms of Vermont, Inc., Up Country Naturals
of Vermont, Inc., Les Produits Alimentaires Jacques et Fils Inc,
William F. Callahan and Ruth M. Callahan.
Press Release, dated July 6, 1998.
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* These items will be filed in a supplementary filing within the time
period specified by the rules promulgated under the Securities Exchange
Act of 1934, as amended.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
B&G FOODS, INC.
Date: August 3, 1998 By: /s/ Robert C. Cantwell
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Name: Robert C. Cantwell
Title: Executive Vice President
of Finance and Chief Financial Officer
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EXHIBITS INDEX
Exhibit
Number Description
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2 Stock Purchase Agreement, dated July 2, 1998, by and among BGH
Holdings, Inc., Maple Grove Farms of Vermont, Inc., Up Country Naturals
of Vermont, Inc., Les Produits Alimentaires Jacques et Fils Inc,
William F. Callahan and Ruth M. Callahan.
*99.1 Financial Statements of Maple Grove Farms of Vermont, Inc., Up Country
Naturals of Vermont, Inc., and Les Produits Alimentaires Jacques et
Fils Inc., with Independent Auditors' Statement Thereon.
*99.2 Pro Forma Information.
99.3 Press Release, dated July 6, 1998.
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* These items will be filed in a supplementary filing within the time
period specified by the rules promulgated under the Securities Exchange
Act of 1934, as amended.
STOCK PURCHASE AGREEMENT
By and Among
BGH HOLDINGS, INC.
As Buyer
and
MAPLE GROVE FARMS OF VERMONT, INC.
UPCOUNTRY NATURALS OF VERMONT, INC.
LES PRODUITS ALIMENTAIRES JACQUES ET FILS, INC.
William F. Callahan
and
RUTH M. CALLAHAN
As Sellers
Dated July 2, 1998
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STOCK PURCHASE AGREEMENT
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Background......................................................................................... 1
Terms.............................................................................................. 1
ARTICLE I
THE TRANSACTION............................................... 1
1.1 Sale and Purchase of Stock........................................................... 1
1.2 Purchase Price; Post-Closing Adjustment; Payment..................................... 1
1.3 Closing.............................................................................. 4
1.4 Default by Any of the Sellers........................................................ 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY.......................... 5
2.1 Organization......................................................................... 5
2.2 Capitalization and Ownership; Power and Authority.................................... 5
2.3 Authorization and Enforceability..................................................... 6
2.5 Qualification; Location of Business and Assets....................................... 6
2.6 No Violation of Laws or Agreements................................................... 6
2.7 Financial Statements................................................................. 7
2.8 No Undisclosed Liabilities........................................................... 7
2.9 No Changes........................................................................... 8
2.10 Taxes................................................................................ 11
2.11 Inventory............................................................................ 14
2.12 Accounts Receivable.................................................................. 15
2.13 No Pending Litigation or Proceedings................................................. 16
2.14 Contracts; Compliance................................................................ 16
2.15 Compliance With Laws................................................................. 18
2.16 Consents............................................................................. 19
2.17 Title................................................................................ 19
2.18 Real Estate.......................................................................... 20
2.19 Transactions with Related Parties.................................................... 22
2.20 Condition of Assets.................................................................. 22
2.21 Compensation Arrangements; Bank Accounts; Officers and Directors..................... 22
2.22 Labor Relations...................................................................... 23
2.23 Products Liability................................................................... 24
2.24 Insurance............................................................................ 24
2.25 Patents and Intellectual Property Rights............................................. 25
2.26 Employee Benefit Plans............................................................... 26
2.27 Brokerage............................................................................ 30
2.28 Acquisition of Holdings Shares for Investment........................................ 31
2.29 Material Customers................................................................... 31
2.30 Disclosure........................................................................... 32
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ARTICLE III
REPRESENTATION AND WARRANTIES OF BUYER.................................... 32
3.1 Organization......................................................................... 32
3.2 Power and Authority.................................................................. 32
3.3 Authorization and Enforceability..................................................... 32
3.4 No Violation of Laws or Agreements................................................... 32
3.5 Brokerage............................................................................ 33
ARTICLE IV
CERTAIN OBLIGATIONS OF SELLERS, THE COMPANIES AND BUYER........................... 33
4.1 Conduct of Business Pending Closing.................................................. 33
4.2 Insurance............................................................................ 35
4.3 Fulfillment of Agreements............................................................ 36
4.4 Access, Information and Documents.................................................... 36
4.5 Resignations......................................................................... 36
4.6 Financing............................................................................ 37
4.7 Hart-Scott-Rodino Antitrust Improvement.............................................. 37
4.8 Tax Matters; Cooperation............................................................. 37
ARTICLE V
CONDITIONS TO CLOSING; TERMINATION...................................... 37
5.1 Conditions Precedent to Obligations of Buyer......................................... 37
5.2 Conditions Precedent to the Obligations of the Sellers............................... 41
5.3 Termination.......................................................................... 43
Article VI
CERTAIN ADDITIONAL COVENANTS......................................... 44
6.1 Costs, Expenses and Taxes............................................................ 44
6.2 Brokers.............................................................................. 44
6.3 Additional Covenants................................................................. 44
6.4 Indemnification By Sellers........................................................... 46
6.5 Indemnification by Buyer............................................................. 48
ARTICLE VII
MISCELLANEOUS................................................ 50
7.1 Nature and Survival of Representations............................................... 50
7.2 Notices.............................................................................. 50
7.3 Successors and Assigns............................................................... 51
7.4 Governing Law........................................................................ 52
7.5 Headings............................................................................. 52
7.6 Counterparts......................................................................... 52
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7.7 Further Assurances................................................................... 52
7.8 Amendment and Waiver................................................................. 52
7.9 Entire Agreement..................................................................... 52
</TABLE>
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LIST OF SCHEDULES
Schedule 1.2(a) Allocation of Purchase Price
Schedule 1.2(b) Opening Balance for Working Capital
Computation Based on 12/28/97 Unaudited
Balance Sheet
Schedule 1.2(c) Closing Balance Sheet GAAP exceptions
Schedule 1.2(c)(i) 1997 Balance Sheet
Schedule 1.3 Payment of Purchase Price
Schedule 2.2 Capitalization and Stockholders; Existing
Liens on Stock
Schedule 2.5 States of Qualification; Location of Business
and Assets
Schedule 2.6 Violations of Laws, Agreements
Schedule 2.8 No Undisclosed Liabilities
Schedule 2.9 Changes Since Balance Sheet Date
Schedule 2.10 Taxes
Schedule 2.10(c) Canadian Taxes
Schedule 2.11 Inventory
Schedule 2.12 List and Aging of Accounts Receivable
Schedule 2.13 Litigation
Schedule 2.14 Contracts; Unfilled Firm Purchase Orders
Schedule 2.15 Permits and Licenses
Schedule 2.17 Permitted Liens and Encumbrances
Schedule 2.18(a) Real Estate
Schedule 2.18(b) Encroachments
Schedule 2.18(i) Exceptions that Will Not Exist After Closing
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Schedule 2.19 Transactions with Related Parties
Schedule 2.21 Compensation Arrangements, Bank Accounts and
Officers and Directors
Schedule 2.22 Labor Relations
Schedule 2.23 Product Liability
Schedule 2.24 Insurance
Schedule 2.25 Patents, Trademarks, Etc.
Schedule 2.26 Employee Benefit Plans
(a) plans
(c) no violations
(d) foreign plans
Schedule 2.29 Material Customers
Schedule 3.4 Violations of Buyer's Agreements
Schedule 5.1(h) Loans Paid Off At Closing
Schedule 5.2(h) Release of Guarantees
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LIST OF EXHIBITS
Exhibit A Form of Employment Agreement
Exhibit B Form of Consulting Agreement
Exhibit C Form of Securities Purchase and Holders Agreement for
William F. Callahan
Exhibit D Form of Securities Purchase and Holders Agreement for
Sumner Kaufman
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STOCK PURCHASE AGREEMENT
THIS IS A STOCK PURCHASE AGREEMENT (the "Agreement") dated as of July
2, 1998, by and among BGH HOLDINGS, INC., a Delaware corporation ("Buyer");
MAPLE GROVE FARMS OF VERMONT, INC., a Vermont corporation ("MGF"); UPCOUNTRY
NATURALS OF VERMONT, INC., a Vermont corporation ("UN"); LES PRODUITS
ALIMENTAIRES JACQUES ET FILS, INC. a corporation organized under the laws of the
Province of Quebec, Canada ("JEF" and, together with MGF and UN, the
"Companies"); and William F. Callahan and Ruth M. Callahan (hereinafter referred
to collectively as "Sellers" and individually as a "Seller"), who together own
all of the issued and outstanding capital stock of the Companies.
Background
Sellers together own all of the issued and outstanding capital stock
(the "Stock") of the Companies. Buyer desires to purchase and Sellers desire to
sell the Stock, on the terms and subject to the conditions set forth in this
Agreement.
Terms
In consideration of the mutual covenants contained herein and intending
to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE TRANSACTION
1.1 Sale and Purchase of Stock. At the Closing referred to in Section
1.3 below, the Sellers will sell and assign to Buyer, and Buyer will purchase
from the Sellers, the Stock.
1.2 Purchase Price; Post-Closing Adjustment; Payment.
(a) Purchase Price. The aggregate purchase price for all of the
Stock (the "Purchase Price") shall be $15,170,000, which shall be paid to the
Sellers at the Closing as follows: (i) $14,170,000 in cash (the "Cash Purchase
Price"), (ii) 1,000 shares (the "Holdings Common Shares") of Common Stock, par
value $.01 per share, of B&G Foods Holdings Corp., a Delaware corporation
("Holdings"), having an aggregate value of $10,000 and (iii) 990 shares
(together with the Holdings Common Shares,
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the "Share Purchase Price") of the 13% Series A Cumulative Preferred Stock, par
value $.01 per share, of Holdings having an initial aggregate liquidation
preference of $990,000 (the "Holdings Preferred Shares"). The Cash Purchase
Price shall be payable by wire transfer of immediately available funds to the
accounts designated by Sellers prior to Closing. The Purchase Price with respect
to each Company shall be allocated among the Sellers and Sumner Kaufman in the
manner specified on Schedule 1.2(a).
(b) Post-Closing Adjustment. The Purchase Price shall be subject to
adjustment after Closing as follows. If the Combined Net Assets (as hereinafter
defined) of the Companies as of the Closing Date is less than $828,529 (as
calculated on the worksheet entitled "Opening Balance for Working Capital
Computation Based on 12/28/97 Unaudited Balance Sheet" attached hereto as
Schedule 1.2(b)), then the Cash Purchase Price shall be reduced by the amount of
such deficiency. If the Combined Net Assets of the Companies as of the Closing
Date shall exceed $828,529, then the Cash Purchase Price shall be increased by
the amount of such excess. As used herein, "Combined Net Assets" shall mean the
excess or deficiency, as of the Closing Date, of the Total Assets (x) minus the
Total Liabilities, (y) minus the pre-tax net earnings of JEF (translated into
United States dollars (USD) at the spot rate as of the Closing Date (as
hereinafter defined), and (z) plus up to USD$12,300 (which represents the tax
benefit of the prior year's net operating loss carry forward in JEF through the
Closing Date at the applicable Canadian tax rate translated into USD at the spot
rate as of December 28, 1997). As used herein, "Total Assets" means the book
value of the current assets and fixed assets of the Companies on a combined
basis as reflected on the Closing Balance Sheet (as hereinafter defined) and
shall not include (i) a receivable payable to the Companies from William F.
Callahan in the amount of $620,000 (the "Callahan Receivable") and (ii) other
assets which are not fixed or current assets. "Total Liabilities" means the book
value of the total liabilities of the Companies on a combined basis as reflected
on the Closing Balance Sheet, provided that current liabilities shall include
all amounts, whether or not current, outstanding as of the Closing Date under
the Companies' revolving credit facility. In addition, the parties agree that
the Closing Balance Sheet shall include a litigation reserve of $50,000.
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(c) The Closing Balance Sheet.
(i) Buyer shall, at its expense, cause to be prepared and delivered
to the Sellers, within 60 days following the Closing, the combined balance sheet
of the Companies as of the Closing Date (the "Closing Balance Sheet"), in
conformity with generally accepted accounting principles (except for such
instances of nonconformity as are specified on Schedule 1.2(c) which are
referred to collectively herein as the "GAAP Exceptions") applied on a basis
consistent with the Companies' combined balance sheet as of December 28, 1997
(the "1997 Balance Sheet"), a copy of which is attached as Schedule 1.2(c)(i).
The Closing Balance Sheet shall have been reviewed by KPMG Peat Marwick. Buyer
shall also deliver a calculation of the Combined Net Assets made in the manner
set forth in Section 1.2(b) of this Agreement. In connection with the
preparation of the Closing Balance Sheet and calculation of the Combined Net
Assets, Sellers and their accountants shall be permitted to review all work
papers, books and records associated with such preparation and calculation and
to discuss the foregoing with officers and the accountants of the Buyer. The
Sellers shall keep confidential any information relating to the post-closing
operations of Buyer and the Companies to which the Sellers or their accountants
may receive access in connection with the foregoing. Sellers shall advise Buyer,
within 45 days following the delivery by Buyer to the Sellers of the Closing
Balance Sheet and calculation of the Combined Net Assets, whether Sellers
dispute the Closing Balance Sheet or the calculation of the Combined Net Assets.
In the event of any dispute under this Section 1.2(c), the parties shall seek to
resolve such dispute between themselves during the 30-day period following the
date on which Sellers shall have advised Buyer of such dispute. In the event the
parties are unable to resolve such dispute within such 30-day period, such
dispute shall be referred to a "big six" accounting firm mutually selected by
Sellers and Buyer (or if the parties shall fail to agree on such selection, such
accounting firm shall be selected by lot (which lot shall exclude KPMG Peat
Marwick)), which accounting firm shall be requested to seek to resolve such
dispute within 30 days after such dispute is referred to them. The determination
of such dispute by such accounting firm shall be final and binding on the
parties. The fees and expenses of such accounting firm in resolving such dispute
shall be borne 50% by Sellers and 50% by Buyer.
(ii) The net amount of any adjustment to the Purchase Price
pursuant to this Section shall be paid by Buyer to Sellers or by Sellers to
Buyer, as the case may be, (together
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with interest on such amount from the Closing Date until paid at a rate equal to
8% per annum) within 10 days after the final determination of such adjustment is
made.
1.3 Closing.
(a) Time and Place. The closing under this Agreement (the
"Closing") will take place on the third business day after all of the conditions
to closing set forth in Article V are fulfilled or waived, or such other date
and such other time as Sellers and Buyer shall agree in writing (the "Closing
Date"). The Closing shall take place at 10:00 a.m. local time at the offices of
Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, New York 10112, or at
such other time, date or place as the parties mutually shall agree.
(b) Deliveries and Proceedings at the Closing. At the Closing:
(i) Deliveries by Sellers. Each Seller will deliver to Buyer
certificates evidencing his or her Stock accompanied by stock powers duly
executed in blank or duly executed instruments of transfer, and any other
documents that are necessary to transfer to Buyer good title to the Stock, free
and clear of any lien, claim, security interest, pledge, mortgage, hypothec,
prior claim, charge, equity, option, preemptive right, right of first refusal,
restriction or encumbrance of any nature ("Lien").
(ii) Deliveries By Buyer. Buyer will deliver to Sellers the Cash
Purchase Price by wire transfer of immediately available funds to the accounts
designated by Sellers and in such amounts as are set forth on Schedule 1.3, less
any withholding required by Canadian federal or provincial law, which shall be
consistent with the allocation provided for in Schedule 1.2. Buyer will deliver
certificates representing the Share Purchase Price registered to William F.
Callahan and Sumner Kaufman in the amounts and in the names set forth on
Schedule 1.3 hereto.
(iii) Other Deliveries. The closing certificates, opinions of
counsel and other documents required to be delivered pursuant to this Agreement
will be exchanged.
1.4 Default by Any of the Sellers. If any Seller fails to deliver to
Buyer at the Closing any of the Stock to be sold by such Seller hereunder, such
failure will not relieve any
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other Seller of any obligation hereunder, and Buyer may (a) acquire the
remaining shares of Stock; or (b) refuse to make such acquisition and thereby
terminate all of its obligations hereunder, in either case without prejudice to
its rights against such defaulting Seller.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY
William F. Callahan and each Company hereby, jointly and severally,
represent and warrant to Buyer and Ruth M. Callahan represents and warrants to
Buyer only as to those matters related to her as a Seller contained in Sections
2.2, 2.3, 2.10(b), 2.27 and 2.30 below, as follows:
2.1 Organization. Each Company is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each Company has all requisite power and authority to own or
lease its properties and assets as now owned or leased and to carry on its
business as and where now being conducted. The copies of each Company's articles
of incorporation and bylaws, as amended to date, which have been delivered to
Buyer, are correct and complete and are in full force and effect.
2.2 Capitalization and Ownership; Power and Authority. Each Company's
authorized and outstanding capital stock, and shares held in treasury, are as
set forth on Schedule 2.2. All of such outstanding shares have been duly
authorized, validly issued and are fully paid and nonassessable, were not issued
in violation of the terms of any agreement or other understanding binding upon
such Company, and were issued in compliance with all applicable federal, state
and provincial securities or "blue-sky" laws and regulations. There are no
outstanding subscriptions, options, warrants, rights, agreements, calls,
commitments or demands of any character relating to the capital stock of each
Company and no securities convertible into or exchangeable for any of such
capital stock. Each Seller (x) is the sole record and beneficial owner of the
shares of Stock set opposite his or her name on Schedule 2.2, free and clear of
any Lien, except for those Liens disclosed on Schedule 2.2 and (b) has full
legal right, power and authority to enter into this Agreement, transfer such
Stock to Buyer in accordance with this Agreement and to perform his or her other
obligations hereunder, without the need for the consent of any other person or
entity. Upon delivery to Buyer at the Closing of certificates
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representing the Stock in accordance herewith, Buyer will acquire good and
valid, and legal and beneficial, title to such Stock, free and clear of any
Liens. The Sellers own all of the issued and outstanding capital stock of the
Companies, as set forth on Schedule 2.2.
2.3 Authorization and Enforceability. This Agreement has been duly
executed and delivered by each Seller and constitutes the legal, valid and
binding obligations of such Seller, enforceable in accordance with its terms.
The execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of each Company. This
Agreement has been duly executed and delivered by each Company and constitutes
the legal, valid and binding obligation of such Company enforceable in
accordance with its terms.
2.4 Subsidiaries. No Company, directly or indirectly, owns any stock
of, or any other interest in, any other corporation, partnership, joint venture,
business association or other entity.
2.5 Qualification; Location of Business and Assets. No Company is duly
qualified, in good standing and duly authorized to do business as a foreign
corporation in any jurisdiction, and the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on any Company.
There has not been any claim by any jurisdiction to the effect that any Company
is required to qualify or otherwise be authorized to do business therein other
than as disclosed on Schedule 2.5. Set forth on Schedule 2.5 is each location
(specifying state, county and city) where each Company (specifying which entity)
(a) has a place of business, (b) owns or leases real property, and (c) owns or
leases any other property, including inventory, equipment, furniture, tools and
dies.
2.6 No Violation of Laws or Agreements. Except as disclosed on Schedule
2.6, the execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated by this Agreement and the compliance with the
terms, conditions and provisions of this Agreement by the Sellers and the
Companies, will not (a) contravene any provision of any Company's articles of
incorporation or bylaws; (b) conflict with or result in a breach of or
constitute a default, termination or modification of (or an event that
reasonably could be expected, with the passage of time or the giving of notice
or both, to
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constitute a default, termination or modification) under any of the terms,
conditions or provisions of any indenture, mortgage, loan or credit agreement or
any other agreement or instrument to which any Company or any Seller is a party
or by which any of them or any of their assets may be bound or affected, or any
judgment or order of any court or governmental department, commission, board,
agency or instrumentality, domestic or foreign, or, to the best of Sellers'
knowledge, any applicable law, rule or regulation; (c) result in the creation or
imposition of any Lien upon any of the Companies' assets or give to others any
interests or rights therein; (d) result in the maturation or acceleration of any
liability or obligation of any Company (or give others the right to cause such a
maturation or acceleration); (e) result in the termination of or loss of any
right (or give others the right to cause such a termination or loss) under any
agreement or contract to which any Company is a party or by which any of them
may be bound; or (f) result in the loss of or require the repayment of any
government grant, subsidy or tax credit.
2.7 Financial Statements. The books of account and related records of
the Companies fairly reflect in reasonable detail its assets, liabilities and
transactions in accordance with generally accepted accounting principles applied
on a consistent basis except for the GAAP Exceptions. William F. Callahan and
the Companies have delivered to Buyer the combined statements of income and
retained earnings and statements of cash flow of the Companies for the fiscal
year ended September 28, 1997 and for the three-months ended December 28, 1997
and combined balance sheets of the Companies as at each of such dates
(collectively, the "Financial Statements"). The Financial Statements (i) are
correct and complete and in accordance with the books and records of the
Companies, (ii) fairly present in all material respects the financial condition,
assets and liabilities of the Companies as at their respective dates and the
results of their operations and changes in financial position for the periods
covered thereby, and (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied except for the GAAP
Exceptions. All references in this Agreement to the "Balance Sheet Date" shall
mean December 28, 1997.
2.8 No Undisclosed Liabilities. The Companies have no liability or
obligation of any nature, whether due or to become due, absolute, contingent or
otherwise, including liabilities for or in respect of federal, state, provincial
and local taxes and any interest or penalties relating thereto,
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except (a) to the extent reflected as a liability on the Balance Sheet, (b)
liabilities incurred in the ordinary course of business consistent with past
practice since the Balance Sheet Date and fully reflected as liabilities on the
Companies' books of account, none of which, individually or in the aggregate,
has been materially adverse and (c) liabilities disclosed on Schedule 2.8.
2.9 No Changes. Except as disclosed on Schedule 2.9, since the Balance
Sheet Date, each Company has conducted its businesses only in the ordinary
course and consistent with past practice. Without limiting the generality of the
foregoing sentence, except as disclosed on Schedule 2.9, since the Balance Sheet
Date, there has not been:
(a) any change in the financial condition, assets, liabilities,
prospects, net worth, earning power or business of any Company, except changes
in the ordinary course of business, none of which, individually or in the
aggregate, has been or will be materially adverse to such Company;
(b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the properties, business or prospects of any
Company, or any material deterioration in the operating condition of any
Company's assets;
(c) any mortgage, hypothec, prior claim, pledge or subjection to
any Lien of any kind of any Company's assets, tangible or intangible;
(d) any strike, walkout, labor trouble or any other new or
continued event, development or condition of any character which has or could
materially adversely affect the business, properties or prospects of any
Company;
(e) any declaration, setting aside or payment of a dividend or
other distribution in respect of any of the capital stock of any Company, or any
direct or indirect redemption, purchase or other acquisition of any capital
stock of any Company or any rights to purchase such capital stock or securities
convertible into or exchangeable for such capital stock, except for the purchase
by William F. Callahan of the one percent (1%) interest in UN (10 shares of
1,010 issued and outstanding shares) formerly held by John Morrissey on or about
February 12, 1998;
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(f) any increase in the salaries or other compensation payable or
to become payable to, or any advance (excluding advances for ordinary business
expenses) or loan (except for the Callahan Receivable) to, any officer,
director, employee or shareholder of any Company (except normal annual merit
increases made in the ordinary course of business and consistent with past
practice), or any increase in, or any addition to, other benefits (including
without limitation any bonus, profit-sharing, pension or other plan) to which
any of its or their officers, directors, employees or shareholders may be
entitled, or any payments to any pension, retirement, profit-sharing, bonus or
similar plan except payments in the ordinary course of business and consistent
with past practice made pursuant to the employee benefit plans described on
Schedule 2.26, or any other payment of any kind to or on behalf of any such
officer, director, employee or shareholder other than payment of base
compensation and reimbursement for reasonable business expenses in the ordinary
course of business;
(g) any making or authorization of any capital expenditures in
excess of $50,000;
(h) any cancellation or waiver of any right material to the
operation of any Company's business or any cancellation or waiver of any debts
or claims of substantial value or any cancellation or waiver of any debts or
claims against any Related Party (as such term is hereinafter defined);
(i) any sale, transfer or other disposition of any assets of any
Company, except sales of inventory in the ordinary course of business;
(j) any payment, discharge or satisfaction of any liability or
obligation (whether accrued, absolute, contingent or otherwise) by any Company,
other than the payment, discharge or satisfaction, in the ordinary course of
business, of liabilities or obligations shown or reflected on the Balance Sheet
or incurred in the ordinary course of business since the Balance Sheet Date;
(k) any material and adverse change or any threat of any material
and adverse change in any Company's relations with, or any loss or threat of
loss of, any Company's important suppliers, clients or customers;
(l) any write-offs as uncollectible of any notes or accounts
receivable of any Company or write-downs of the
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value of any assets or inventory by any Company other than in immaterial amounts
or in the ordinary course of business consistent with past practice and at a
rate no greater than during the twelve months ended on the Balance Sheet Date;
(m) any change by any Company in any method of accounting or
keeping its books of account or accounting practices;
(n) any creation, incurrence, assumption or guarantee by any
Company of any obligations or liabilities (whether absolute, accrued, contingent
or otherwise and whether due or to become due), except in the ordinary course of
business, or any creation, incurrence, assumption or guarantee by any Company of
any indebtedness for money borrowed;
(o) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or assets (whether real,
personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any "Related Party" (as hereinafter
defined), except for (i) directors' fees, (ii) compensation to the officers and
employees of the Companies at rates not exceeding the rates of compensation
(including bonuses) disclosed on Schedule 2.21 hereto, (iii) distributions
and/or advances from MGF to, or for the benefit of, Sellers of up to fifty
percent of pre-tax income to pay income taxes with respect to MGF (as used
herein, a "Related Party" means any Seller, any of the officers or directors of
the Companies, any affiliate, associate or relative of any Seller, any Company,
or any of their respective officers or directors, or any business or entity in
which any Seller, any Company or any affiliate, associate or relative of any
such person has any direct or material indirect interest), and (iv)
distributions or advances to William F. Callahan of such amounts that are
included in the Callahan Receivable;
(p) any disposition of or failure to keep in effect any rights in,
to or for the use of any patent, trademark, service mark, trade name or
copyright, or any disclosure to any person not an employee or other disposal of
any trade secret, process or know-how; or
(q) any transaction, agreement or event outside the ordinary course
of any Company's business or inconsistent with past practice.
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2.10 Taxes. (a) Each Company has (i) timely filed all returns
required to be filed by it with respect to all United States and Canadian
federal, state, provincial and local income, payroll, withholding, excise,
sales, use, real and personal property, use and occupancy, business and
occupation, mercantile, real estate, capital stock franchise, corporate,
capital, goods and services, value-added, unemployment compensation, customs,
duty, severance, gross receipts, or other tax, assessment or charge of any kind
whatsoever (all the foregoing taxes, assessments and charges including interest
and penalties thereon and including estimated taxes, being hereinafter
collectively called "Taxes"), (ii) paid all Taxes shown to have become due
pursuant to such returns and (iii) paid all other Taxes for which a notice of
assessment or demand for payment has been received, except for those listed on
Schedule 2.10. All tax returns have been prepared in accordance with all
applicable laws and requirements and accurately reflect the taxable income (or
other measure of tax) of the corporation filing the same. The accruals for Taxes
contained in the Balance Sheet are adequate to cover all liabilities for Taxes
of the Companies for all periods ending on or before the Balance Sheet Date and
include adequate provision for all deferred Tax, and nothing has occurred
subsequent to that date to make any of such accruals inadequate. All Taxes for
periods beginning after the Balance Sheet Date have been paid or are adequately
reserved against on the books of the Companies. Each Company has timely filed
all information returns or reports, including forms 1099, which are required to
be filed and has accurately reported all information required to be included on
such returns or reports. True copies of United States and Canadian federal,
state and provincial income tax returns of each Company for each of their prior
three fiscal years have been delivered to Buyer. There are no proposed
assessments of Tax against any Company or proposed adjustments to any Tax return
filed, pending against any Company or any proposed adjustments to the manner in
which any Tax of any Company is determined. Except as disclosed on Schedule
2.10, each Tax return of the Companies has been audited by the relevant
authorities (and all deficiencies or proposed deficiencies resulting from such
audits have been paid or are adequately provided for in the Financial
Statements), or the statute of limitations with respect to each Tax return has
expired, and no Tax return is under examination by any taxing authority. Except
as disclosed on Schedule 2.10, there are no suits or similar proceedings now
pending or, to the knowledge of William F. Callahan, threatened against any
Company with respect to any Tax, and there are no matters under discussion with
any taxation or other authority relating to any Tax, or any claims for any
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additional Tax asserted by any such authority. No Company has ever (a) filed any
consent agreement under section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), (b) executed a waiver or consent extending any statute of
limitation for any Tax liability which remains outstanding, (c) except as
disclosed on Schedule 2.10, joined in or been required to join in filing a
consolidated, combined or unitary federal or state income Tax return, (d)
applied for a Tax ruling, (e) entered into a closing agreement with any taxing
authority or (f) filed an election under section 338(g) or section 338(h)(10) of
the Code or caused a deemed election under section 338(e) thereof. No Company
(i) has agreed to make, nor is it required to make any adjustment under Section
481 of the Code by reason of a change in accounting method or otherwise, (ii)
owns an interest in an entity characterized as a partnership for federal income
tax purposes, or (iii) is a party to any agreement that provides for payments
(whether on its own or together with other payments) could result in the payment
of "excess parachute payments" within the meaning of Section 280G of the Code in
connection with the transactions contemplated in this Agreement. No Company is a
party to any tax sharing, tax allocation or similar agreement or arrangement
pursuant to which it could be liable for the Taxes of any other person. MGF has
made a valid election to be treated as an "S" corporation under the Code, which
election has been in effect from and including May 1, 1988 and MGF has qualified
as an S corporation for federal and Vermont state income tax purposes at all
times since May 1, 1988.
(b) Neither MGF nor any Seller is a "foreign person" within the
meaning of the Internal Revenue Code and regulations promulgated thereunder.
(c) Neither Revenue Canada Taxation nor any other taxing authority
is now asserting or threatening to assert any deficiency or claim for additional
Taxes against JEF and there are no disputes as to any Taxes payable by JEF nor
as to any matter which would have the effect of reducing any tax-loss carry
forward that may be available to JEF. The inventories of JEF have been valued
for tax purposes at the lower of cost or net realizable value. The fair market
value of all depreciable assets of JEF is at least the amount of the
undepreciated capital cost therefor recorded on its books and the paid up
capital of JEF for income tax purposes equals its paid up capital under
corporate law. JEF (i) has not made any election under Section 85 of the Income
Tax Act (Canada) with respect to the acquisition or disposition of any property;
(ii) has not made any election under Sub-section 83(2) of the Income Tax Act
(Canada) with
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respect to payment out of a capital dividend account; (iii) has not acquired or
had the use of any property from a person with whom it was not dealing at arm's
length; (iv) has not disposed of anything to a person with whom it was not
dealing at arm's length for proceeds less than the fair market value thereof;
(v) has not discontinued carrying on any business in respect of which any
non-capital losses were incurred; (vi) has made all elections required to be
made under the Income Tax Act (Canada) in connection with any distributions and
all such elections were true and correct and in prescribed form and were made
within the prescribed time periods; (vii) is not, nor has previously been at any
time, associated with any other Canadian-controlled private corporation (within
the meaning of the Income Tax Act (Canada), and (viii) has not filed with the
Minister of National Revenue any agreement or form under Section 125(3) of the
Income Tax Act (Canada) and is not carrying on and has never carried on business
as a member of any partnership.
Neither JEF nor its directors, officers of employees are aware of any
contingent Tax liabilities or any grounds which would prompt a re-assessment,
including aggressive treatment of income and expenses in filing earlier Tax
returns.
Control of JEF has not been acquired by a person or persons since its
date of incorporation with the exception of the transfer of 100 Class J shares
from Jacques Trust/Fiducie Jacques to William F. Callahan, settlor and sole
beneficiary of said Trust, or or about January 30, 1995 (for purposes of this
section, "control" is to be given the meaning found in Sections 186, 251 and 256
of the Income Tax Act (Canada)); there are no amounts outstanding and unpaid for
which JEF has previously claimed a deduction under the Income Tax Act (Canada);
and there are no circumstances existing which could result in the application to
JEF of either Section 78 or Section 80 of the Income Tax Act (Canada). JEF has
not claimed and will not claim any reserve under any one or more of subparagraph
40(1)(a)(iii) or subparagraphs 20(1)(m) or 20(1)(n) of the Income Tax Act
(Canada) if any such amount could be included in JEF's income for a period
ending after Closing. The financial statements and scheduled attached to the
corporate income tax returns as filed by JEF for each of its taxation years
reflect and disclose all transactions to which JEF was or is a party as required
by the Income Tax Act (Canada) and the regulations made thereunder or other
applicable revenue laws and all of the transactions to which JEF was or is a
party are reflected or disclosed in these financial statements and schedules and
these statements and schedules have been duly and accurately completed as
required by
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these acts and regulations. JEF is not and will not become liable for any
invalid, late or excess designations under the Share Purchase Tax Credit
Provisions or the Scientific Research and Experimental Development Tax Credit
Provisions of the Income Tax Act (Canada) or for unpaid taxes under Part VII or
Part VIII of the Income Tax Act (Canada). JEF has never received a dividend out
of tax paid undistributed surplus or 1971 capital surplus on hand dividends
within the meaning of the Income Tax Act (Canada) with respect to any assets it
currently holds. JEF has no net capital losses as of the Balance Sheet Date and
no transactions since that date will result in any net capital loss. JEF is a
GST registrant for the purposes of the Goods and Services Tax provided under the
Excise Tax Act (Canada) and its registration number is 139050512RT and a PST
registrant for purposes of the Quebec Sales provided for under the Quebec Sales
Tax Act and its registration number is 1140566846. JEF has not made or been a
party to any election under Sections 150(1), 156(1), 227(1) or 273(1) of the
Excise Tax Act of Canada or corresponding provisions of the Quebec Sales Tax
Act. The preceding representations and warranties in this Section 2.10(c) which
refer to the Income Tax Act (Canada) are true and correct with respect to the
same or equivalent provisions, if any, of the Quebec Taxation Act or any other
provincial taxation legislation.
Schedule 2.10(c) accurately sets out the status of JEF's following tax
accounts as of the Balance Sheet Date and there will be no change to any of such
tax accounts between such date and the Closing Date except those which occurred
in the ordinary course of JEF's business: (a) the adjusted cost base of JEF's
capital properties; (b) the cost of JEF's depreciable properties for capital
cost allowance purposes; (c) the capital cost allowance taken on each class of
JEF's depreciable property; (d) the undepreciated capital cost of each class of
JEF's depreciable property; (e) JEF's cumulative eligible capital account; (f)
JEF's refundable dividend tax on hand; (g) JEF's non-capital losses and net
capital losses; (h) JEF's investment tax credits; (i) the input tax credits, as
defined in the Excise Tax Act for the purposes of the Goods and Services Tax and
the Quebec Sales Tax Act for purposes of the Quebec Sales Tax.
2.11 Inventory. All of the inventories of the Companies, including that
reflected in the Balance Sheet, are valued at the lower of cost or market, the
cost thereof being determined on a first-in, first-out basis, except as
disclosed in the Financial Statements. All of the inventories of the Companies
reflected in the Balance Sheet and all inventories acquired since the Balance
Sheet Date consist of items of a
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quality and quantity usable and saleable in the ordinary course of the
Companies' businesses within a reasonable period of time and at normal profit
margins, and all of the raw materials and work in process inventory of the
Companies reflected in the Balance Sheet and all such inventories acquired since
the Balance Sheet Date can reasonably be expected to be consumed in the ordinary
course of business within a reasonable period of time consistent with each
Company's prior business practices, provided, however, that all such inventories
of bulk pure maple syrup in barrels are usable and saleable only if blended
together. Established reserves for obsolete and slow moving inventory are
adequate. Attached hereto as Schedule 2.11 is a summary of each Company's
inventory of finished goods, work in process and raw materials as of (i) May 24,
1998 with respect to general inventory and (ii) May 28, 1998 with respect to
bulk maple syrup. Except as set forth on Schedule 2.11, no inventory is held on
consignment by or for any of the Companies and none of the Companies is under
any material liability or obligation with respect to the return of inventory or
merchandise. All ingredients and finished products in inventory (i) comply in
all material respects with the Food, Drug and Cosmetic Act and all acts amending
or supplementing the Food, Drug and Cosmetic Act (including without limitation
the Food Additive Amendment of 1958), and with pure food and drug laws of each
and all states of the United States and the applicable laws and regulations in
each jurisdiction of Canada where any such product is located or into which any
such product is shipped by the Companies, (ii) are not adulterated or misbranded
within the meaning of the Food, Drug and Cosmetic Act or such other laws, (iii)
are not prohibited from introduction into interstate commerce under the
provisions of Sections 404 or 505 of the Food, Drug and Cosmetic Act and (iv) do
not contain a hazardous substance or a banned substance.
2.12 Accounts Receivable. To the knowledge of William F. Callahan and
each Company, all of the accounts and notes receivable of the Companies
represent amounts receivable for merchandise actually delivered or services
actually provided (or, in the case of non-trade accounts or notes represent
amounts receivable in respect of other bona-fide business transactions), have
arisen in the ordinary course of business, and, to the Companies' and William F.
Callahan's knowledge, are not subject to any counterclaims or offsets not in the
ordinary course of business and have been billed and are generally due within 30
days after such billing. To the knowledge of William F. Callahan and each
Company, all such receivables are fully collectible in the normal and ordinary
course of business, except to the extent of a reserve in an amount not in excess
of the reserve for
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doubtful accounts and other related reserves reflected on the Balance Sheet.
Schedule 2.12 sets forth (a) the total amount of accounts receivable of the
Companies outstanding as of May 24, 1998 and (b) the agings of such receivables
based on the following schedule: 0-30 days, 31-60 days, 61-90 days, and over 90
days, from the due date thereof.
2.13 No Pending Litigation or Proceedings. Except as set forth on
Schedule 2.13, there are no actions, suits, arbitrations, investigations, or
administrative or other proceedings pending or, to the best of William F.
Callahan's and the Companies' knowledge, threatened against or affecting any
Company or any of their assets or affecting the Stock or any Seller's rights
thereto, at law or in equity, by or before any court or governmental or
administrative department, agency or instrumentality, and there is no basis for
any such action, suit, investigation or proceeding. There are presently no
outstanding judgments, decrees or orders of any court or any governmental or
administrative agency against or affecting any Company, or any of their assets
or businesses or affecting the Stock or any Seller's rights thereto, except as
disclosed on Schedule 2.13.
2.14 Contracts; Compliance. Except as listed on Schedule 2.14, no
Company is a party to or bound by any lease, contract or commitment, oral or
written, formal or informal, of the following types:
(a) mortgages, hypothecs, trust deeds, indentures, security
agreements or other agreements and instruments relating to the borrowing of
money, the extension of credit or the granting of Liens;
(b) employment and consulting agreements;
(c) union or other collective bargaining agreements;
(d) powers of attorney;
(e) sales agency, manufacturers representative and distributorship
agreements or other distribution or commission arrangements;
(f) licenses of patent, trademark and other intellectual property
rights;
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(g) agreements, orders or commitments for the purchase of services,
raw materials, supplies or finished products from any one supplier for an amount
in excess of $25,000;
(h) agreements, orders or commitments for the sale of products or
services for more than $25,000 to any single purchaser;
(i) contract or option relating to the sale by any Company of any
asset, other than sales of inventory in the ordinary course of business;
(j) bonus, profit-sharing, compensation, stock option, pension,
retirement, deferred compensation, accrued vacation pay, group insurance,
welfare agreements or other plans, agreements, trusts or arrangements for the
benefit of employees;
(k) agreements or commitments for capital expenditures in excess of
$50,000 for any single project;
(l) partnership or joint venture agreements;
(m) agreements requiring the consent of any party thereto to the
consummation of the transactions contemplated hereby;
(n) agreements, arrangements or understandings with any Related
Party;
(o) lease or sublease agreements under which it is lessor, lessee,
sublessor or sublessee;
(p) agreement, contract or commitment for any charitable or
political contribution;
(q) agreements, contracts or commitments for the warehousing or
storage of any of the assets of any Company; or
(r) other agreements, contracts and commitments which are material
to the business of each Company, or which involve payments or receipts of more
than $25,000 in any single year, or which were entered into other than in the
ordinary and usual course of business.
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All such leases, contracts and other commitments are in full force and
effect; all parties to such leases, contracts and other commitments have
complied with the provisions thereof; no such party is in default under any of
the terms thereof; and no event has occurred which constitutes or, with the
passage of time or the giving of notice or both, would constitute a default by
any party under any provision thereof. Except as disclosed on Schedule 2.14, the
Companies have received no prepayment with respect to any such lease or
contract. The copies of each of the written leases, contracts and commitments
delivered by Sellers to the Buyer represent the full and complete text thereof
and have not been amended or modified, nor have any provisions thereof or rights
of any party thereto been waived; and the summaries of the oral leases,
contracts and commitments are true and complete in all material respects. Set
forth on Schedule 2.14 is a summary of unfilled firm purchase orders for each
operational division of the Companies as of the last day of the month
immediately preceding the present month.
2.15 Compliance With Laws. Each Company holds and is in material and
substantial compliance with the terms and conditions of all permits,
certificates, licenses, approvals, registrations and authorizations required
under all statutes, laws, rules, regulations and orders, foreign, provincial,
federal, state and municipal, (including without limitation those relating to
environmental protection, occupational safety and health, equal employment
practices and fair trade practices) (collectively, "Laws") in connection with
its business ("Permits"). Schedule 2.15 sets forth a list of all such Permits,
all such Permits are in full force and effect. Each Company has materially
complied with all applicable Laws. Other than as set forth on Schedule 2.15, no
notice, citation, summons, judgment or order has been issued, no complaint nor
claim has been filed, no penalty has been assessed, no litigation is pending
and, to the Companies' and William F. Callahan's knowledge, no investigation,
inspection or review is pending or threatened by any governmental or other
entity or third party (a) with respect to any alleged violation by any Company
of any Law or Permit, (b) with respect to any alleged failure by any Company to
have any Permit, or (c) with respect to any use, handling, management,
generation, treatment, storage, recycling, transportation or disposal
("Management"), Release (as defined in CERCLA) or threat of Release of any
hazardous or toxic or polluting substances, wastes or materials ("Hazardous
Materials") generated by or on behalf of any Company. Except as disclosed on
Schedule 2.15, no Company has Managed or Released any Hazardous Materials on any
property, including any property now or
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previously owned or leased by any Company or at any off-site location, nor has
anyone acting on behalf of any Company Managed or Released any Hazardous
Materials on any property now or previously owned or leased by any Company or on
behalf of any Company at any off-site location, in either case in violation of
any Law or in a manner which has resulted in or may result in liability or
obligations of the Company, including liability or obligations with respect to
the investigation remediation or other response action with respect to Hazardous
Materials ("Remediation") or liability for personal injury, property damages to
natural resources, whether under Laws or under civil or common law. No Company
has transported any Hazardous Materials or arranged for the transportation of
such substances to any location which is the subject of foreign, provincial,
federal, state or local enforcement actions or other investigations which may
lead to claims against any Company or the Buyer for Remediation or for personal
injury claims, including, but not limited to, claims under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") or
state, local, provincial, federal or foreign laws of similar effect.
2.16 Consents. Except as required under the HSR Act and as set forth on
Schedule 2.16 hereto, no consent, approval or authorization of, or registration
or filing with, any person, including any governmental authority or other
regulatory agency, is required in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
2.17 Title. The Companies have good, marketable, and indefeasible title
fee to all Real Estate (as hereinafter defined), except for the Quebec Property
(as hereinafter defined), and good, marketable and indefeasible fee or leasehold
title to the personal property, and with respect to all real property located in
the Province of Quebec (the "Quebec Properties"), JEF is the registered owner of
all properties and assets, including the properties and assets reflected in the
Financial Statements (except those disposed of in the ordinary course of
business since the Balance Sheet Date), and all such interest in the real
property, personal property and the Quebec Property is held free and clear of
any mortgage, hypothec, prior claim, pledge, lien, restriction, encumbrance,
tenancy, license, encroachment, covenant, condition, right of way, easement,
claim, security interest, charge, option, conditional sales agreement, reserve
or servitude (and apparent or nonapparent, with respect to the Quebec Property),
violation of restrictions of public law,
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homologated line, right of first refusal or offer, use and impairment taxes,
arrears or taxes (including, without limitation, school, municipal (whether
special or general), intermunicipal, local improvement and surtax), or any other
matter affecting, or defects in, title, except: (a) minor imperfections of
title, none of which, individually or in the aggregate, materially detracts from
the value of or impairs the use or enjoyment of the affected properties or
impairs the operations of the Company, (b) liens for current taxes not yet due
and payable, and (c) as disclosed on Schedule 2.17 (collectively "Permitted
Encumbrances"). Except as disclosed on Schedule 2.17, no Company has received in
respect of any of its assets any notice of conflict with the asserted rights of
any other party. The assets owned or leased by each Company on the Closing Date
will include all of the assets necessary for, or that are used by, such Company
in the conduct of such Company's business consistent with past practice.
2.18 Real Estate.
(a) Schedule 2.18(a) contains a correct list and summary
description of all real properties owned (beneficially or of record)
(collectively, the "Real Estate") by each Company and identifies all title
insurance policies covering any of, or relating to, such properties. One of the
Companies is in actual, exclusive possession of each parcel of Real Estate. The
Companies or William F. Callahan have delivered to Buyer complete copies of all
title policies and surveys pertaining to the Real Estate that are known by them
to exist and are in their possession or control. To the knowledge of William F.
Callahan and the Companies, all such surveys were accurate in all material
respects at the time made. No real property or estates or interests therein,
other than the Real Estate, is used by the Companies in the conduct of their
respective businesses.
(b) All structures and other improvements on the Real Estate are
within the lot lines and do not encroach on the property of any other person
except as otherwise disclosed on Schedule 2.18(b).
(c) To each Companies' and William F. Callahan's knowledge, the
construction, use and operation of all Real Estate materially conforms to all
applicable building, zoning, safety, environmental, subdivision, and other laws,
ordinances, regulations, codes, permits, licenses and certificates, and all
restrictions and conditions affecting title.
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(d) Neither the Sellers nor any Company has received any written or
oral notice for assessments for public improvements against any of the Real
Estate which remains unpaid, and no such assessment has been proposed.
(e) Neither the Sellers nor any Company has received any written or
oral notice or order by any governmental or other public authority, any
insurance company which has issued a policy with respect to any of the Real
Estate, or any board of fire underwriters or other body exercising similar
functions which (i) relates to violations of building, safety, fire or other
ordinances or regulations, (ii) claims any defect or deficiency with respect to
any of the Real Estate or (iii) requests the performance of any repairs,
alterations or other work to or in any of the Real Estate or in the streets
bounding the same.
(f) There is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Estate,
and to the best knowledge of the Sellers and the Companies no such proceeding is
contemplated.
(g) The water, gas, electricity and other utilities serving each
parcel of the Real Estate have been, and are currently, adequate to service the
normal operation of each parcel of the Real Estate, as conducted in the past and
as currently conducted.
(h) The Real Estate is accessible by public roads and is free from
strips, gores and enclaves. To the Sellers' knowledge, no fact or condition
exists which would result in the termination of the current access from the Real
Estate to any presently existing highways and roads adjoining or situate on the
Real Estate (as the case may be).
(i) On and as of the Closing Date, all of the Real Estate shall be
free and clear of, and none of the Real Estate shall be subject to, exceptions
listed on Schedule 2.18(i) under the heading Exceptions That Will Not Exist
After Closing ("Exceptions That Will Not Exist After Closing").
(j) With respect to the Real Estate located in the Province of
Quebec: (i) all delays to register legal hypothecs against such property arising
out of any construction or renovation shall have expired on or prior to the date
hereof and as of the date hereof, no such legal hypothecs are registered
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against such property or remain uncancelled; (ii) such property is not part of a
housing complex according to an Act Respecting the Regie du Logement (Quebec);
(iii) there is no contestation of real estate taxes relating to such property;
(iv) neither the whole nor any part of such property is subject to any law
protecting agricultural land; (v) such property is not subject to the provisions
of the Cultural Property Act (Quebec) or any regulations or directives
thereunder; and (vi) all mutation taxes under an Act Respecting Duties on
Transfers of Immoveables (Quebec) have been paid and no transfer duties are
outstanding.
2.19 Transactions with Related Parties. Except as disclosed on Schedule
2.19, no Related Party:
(a) has borrowed money or loaned money to any Company which has not
been repaid;
(b) has any contractual or other claim, express or implied, of any
kind whatsoever against any Company;
(c) had, since the Balance Sheet Date, any interest in any property
or assets used by any Company in their respective businesses; or
(d) has been engaged, since the Balance Sheet Date, in any other
transaction with any Company (other than employment relationships at the
salaries disclosed in Schedule 2.21).
2.20 Condition of Assets. The buildings, structures, machinery,
equipment, tools, fixtures, furniture, improvements and other assets of the
Companies, including those reflected in the Balance Sheet, are in good operating
condition and repair and are suitable for and are adequate and sufficient for
the purposes for which they are used in their respective businesses, subject to
normal wear and tear, and, to the knowledge of William F. Callahan, there are no
defects with respect thereto which would subject any Company to liability under
applicable law.
2.21 Compensation Arrangements; Bank Accounts; Officers and Directors.
Schedule 2.21 sets forth the following information:
(a) the names and current annual salary, including any bonus, if
applicable, of all present officers and employees of each Company whose current
annual salary, including
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any promised, expected or customary bonus, equals or exceeds $40,000, together
with a statement of the full amount of all remuneration paid by such Company to
each such person and to any director of such Company, during the calendar year
preceding the date hereof;
(b) the name of each bank in which each Company has an account or
safe deposit box, the identifying numbers or symbols thereof and the names of
all persons authorized to draw thereon or to have access thereto; and
(c) the names and titles of all directors and officers of each
Company and of each trustee, fiduciary or plan administrator of each employee
benefit plan of each Company.
2.22 Labor Relations. Except as disclosed on Schedule 2.22 (a) no
employee of any Company is represented by any union or other labor organization;
(b) there is no unfair labor practice complaint against any Company pending or
threatened before the National Labor Relations Board; (c) there is no labor
strike, dispute, slow down or stoppage actually pending or, to the best
knowledge of William F. Callahan and the Companies, threatened against or
involving any Company; (d) no grievance which might have an adverse affect on
any Company or the conduct of their businesses is pending; (e) no private
agreement restricts any Company from relocating, closing or terminating any of
their operations or facilities; (f) none of the Companies in the past three
years experienced any work stoppage or other labor difficulty or committed any
unfair labor practice; and (g) there are no outstanding decisions or settlements
or pending settlements to which any Company is a party or, to the knowledge of
Sellers, affecting any Company generally, in each case under any employment
legislation which place any obligation upon any Company to do or refrain from
doing any act or which places a financial obligation upon any Company. The
Companies have paid or accrued all current assessments under all employment
legislation in relation to them; the Companies have not been subject to any
special or penalty assessment under any employment legislation which has not
been paid and the Companies' workers' compensation claims experience has not
given right to or resulted in any surcharge or additional premium being imposed
on the Companies or any of them under any workers compensation legislation and
there are not currently pending any claims or investigations with respect to any
of the foregoing, except for workers compensation claims in the ordinary course
of business.
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2.23 Products Liability. Except as set forth on Schedule 2.23, all
of which matters are adequately covered by insurance, there are no actions,
suits, investigations, claims, damages or expenses pending or, to the best
knowledge of William F. Callahan or any of the Companies, threatened with
respect to any product liability or any similar claim that relates to any
product manufactured or sold by any Company to others. To the knowledge of
William F. Callahan and each Company, there are no liabilities of any Company,
fixed or contingent, asserted or unasserted, with respect to any claim for the
breach of any express or implied product warranty or any other similar claim
with respect to any product manufactured or sold by any Company to others other
than standard warranty obligations (to replace, repair or refund) made by the
Companies in the ordinary course of business to purchasers of their products.
2.24 Insurance. Attached hereto as Schedule 2.24 is a complete and
correct list of all policies of insurance of which any Company is the owner,
insured or beneficiary, or covering any of their property, indicating for each
policy the carrier, risks insured, the amounts of coverage, deductible, premium
rate, cash value if any, expiration date and any pending claims thereunder. All
such policies are valid, outstanding and in full force and effect. The coverages
provided by such policies are reasonable, in both scope and amount, in light of
the risks attendant to the businesses in which the Companies are, or have been,
engaged and are comparable to coverages customarily maintained by companies in
similar lines of businesses and such insurance is sufficient in the aggregate to
cover all reasonably foreseeable damage to and liabilities or contingencies
relating to the conduct by the Companies of their business and affairs. There is
no default with respect to any provision contained in any such policy, nor has
there been any failure to give any notice or present any claim under any such
policy in a timely fashion or in the manner or detail required by the policy.
Except as set forth on Schedule 2.24, there are no outstanding unpaid premiums
or claims under such policies. Schedule 2.24 contains an accurate and complete
description of any provision contained in such policies which provide for
retrospective or retroactive premium adjustments. No notice of cancellation or
non-renewal with respect to, or disallowance of any claim under, any such policy
has been received by any Company. None of the Companies has been refused any
insurance, nor has its coverage been limited by any insurance carrier to which
it has applied for insurance or with which it has carried insurance during the
last five years. All products liability and general liability policies
maintained by or for the benefit of any Company have
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been "occurrence" policies and not "claims made" policies. Schedule 2.24
contains a complete and correct list of all such products liability and general
liability policies, indicating for each policy, the carrier, risks insured, the
amount and dates of coverage, deductible and any pending claims thereunder; and
all such policies are in full force and effect.
2.25 Patents and Intellectual Property Rights.
(a) Schedule 2.25 contains a complete and accurate list of all
patents and patent applications, industrial design registrations, copyright
registrations, trademarks, service marks, trade names, and registrations and
applications for registration of trademarks, service marks, trade names, trade
dress and domain names used by any Company in the conduct of its business
specifying as to each such item, as applicable: (i) the owner of the item, (ii)
the jurisdictions in which the item is issued or registered or in which any
application for issuance or registration has been filed, (iii) the respective
issuance, registration, or application number of the item, and (iv) the date of
application and issuance or registration of the item.
(b) Schedule 2.25 also contains a complete and accurate list of all
material licenses, sublicenses, consents and other agreements (whether written
or otherwise) (i) pertaining to any patents, industrial design rights,
trademarks, service marks, trade names, trade dress, copyrights, trade secrets,
computer software programs (other than standard, commercially available
programs), or other intellectual property used by any Company in the conduct of
its business, and (ii) by which any Company licenses or otherwise authorizes a
third party to use such intellectual property. None of the Companies or, to the
knowledge of William F. Callahan and the Companies, any other party is in breach
of or default under any such license or other agreement and each such license or
other agreement is now and immediately following the Closing shall be valid and
in full force and effect.
(c) Except as explicitly indicated in Schedule 2.25, each Company
owns or is licensed or otherwise has the exclusive right to use, and has the
right to bring actions for the infringement of, all patents, industrial design
rights, trademarks, service marks, trade names, trade dress, copyrights,
inventions, technology, know-how, designs, formulae, trade secrets, confidential
and proprietary information, computer software programs (other than standard,
commercially available
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programs), domain names, and other intellectual property necessary for the
operation of business of such Company as it is currently conducted.
(d) The business operations of each Company do not, to the
knowledge of William F. Callahan and the Companies, infringe on the patents,
industrial design rights, trademarks, service marks, trade names, trade dress,
copyrights, trade secrets or other intellectual property rights of any third
party, and no claim has been made, notice given, or dispute arisen to that
effect except as disclosed on Schedule 2.25. No Company has any pending claims
that a third party has violated or infringed any of such Company's patents,
industrial design rights, trademarks, service marks, trade names, trade dress,
copyrights, trade secrets or other proprietary rights. No Company has given any
indemnification to any third party against infringement of such intellectual
property rights.
(e) Except as explicitly indicated in Schedule 2.25, all of the
patents, industrial design registrations, trademark and service mark
registrations, copyright registrations and domain name registrations indicated
in Schedule 2.25 are valid and in full force, are held of record in the name of
the Companies free and clear of all Liens and are not the subject of any
cancellation or reexamination proceeding or any other proceeding challenging
their extent or validity. Except as explicitly indicated in Schedule 2.25, one
of the Companies is the applicant of record in all patent applications, and
applications for trademark, service mark, trade dress, industrial design, and
copyright registration indicated in Schedule 2.25, and no opposition, extension
of time to oppose, interference, rejection, or refusal to register has been
received in connection with any such application.
(f) To the knowledge of William F. Callahan and the Companies, none
of the material trade secrets, know-how or other confidential or proprietary
information of any Company has been disclosed to any person unless such
disclosure was necessary, and was made pursuant to an appropriate
confidentiality agreement.
2.26 Employee Benefit Plans.
(a) Set forth on Schedule 2.26(a) is a true and complete list of
each (i) "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (including any
"multiemployer plan" as
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defined in Section 3(37) of ERISA), (ii) all other pension, retirement,
supplemental retirement, deferred compensation, excess benefit, profit sharing,
bonus, incentive, stock purchase, stock ownership, stock option, stock
appreciation right, employment, severance, salary continuation, termination,
change- of-control, health, life, death benefit, welfare, disability, group
insurance, vacation, holiday and fringe benefit plan, program, contract,
arrangement or policy, whether formal or informal, maintained, contributed to,
or required to be contributed to, by any of the Companies or any "ERISA
Affiliate" or under which any of the Companies or any ERISA Affiliate may have
any liability within the United States (the "Benefit Plans"). For purposes of
this Agreement, "ERISA Affiliate" means (i) any corporation included with any of
the Companies in a controlled group of corporations within the meaning of
Section 414(b) of the Code; (ii) any trade or business (whether or not
incorporated) which is under common control with any of the Companies within the
meaning of Section 414(c) of the Code; (iii) any member of an affiliated service
group of which any of the Companies is a member within the meaning of Section
414(m) of the Code; or (iv) any other person or entity treated as an affiliate
of any of the Companies under Section 414(o) of the Code.
(b) As applicable with respect to each Benefit Plan, the Companies
have delivered to Buyer, true and complete copies of (i) each Benefit Plan,
including all amendments thereto, and in the case of an unwritten Benefit Plan,
a written description thereof, (ii) all trust documents, investment management
contracts, custodial agreements and insurance contracts relating thereto, (iii)
the current summary plan description and each summary of material modifications
thereto, (iv) the three most recent annual reports (Form 5500 and all schedules
thereto) filed with the Internal Revenue Service ("IRS"), (v) the most recent
IRS determination letter and each currently pending application to the IRS for a
determination letter, (vi) the three most recent summary annual reports,
actuarial reports, financial statements and trustee reports, and (vii) all
records, notices and filings concerning IRS or Department of Labor audits or
investigations, "prohibited transactions" within the meaning of Section 406 of
ERISA or Section 4975 of the Code and "reportable events" within the meaning of
Section 4043 of ERISA.
(c) Except as otherwise disclosed with particularity on Schedule
2.26(c):
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(i) The Companies and each ERISA Affiliate are in compliance in all
respects with the provisions of ERISA and the Code applicable to the Benefit
Plans. Each Benefit Plan has been maintained, operated and administered in
compliance in all respects with its terms and any related documents or
agreements and the applicable provisions of ERISA and the Code.
(ii) The Benefit Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code (each a "Pension Plan")
now meet, and at all times since their inception have met the requirements for
such qualification, and the related trusts are now, and at all times since their
inception have been, exempt from taxation under Section 501(a) of the Code.
(iii) All Pension Plans have received determination letters from
the IRS to the effect that such Pension Plans are qualified and the related
trust are exempt from federal income taxes and no determination letter with
respect to any Pension Plan has been revoked nor, to the best knowledge of the
Companies is there any reason for such revocation, nor has any Pension Plan been
amended since the date of its most recent determination letter in any respect
which would adversely affect its qualification.
(iv) No Benefit Plan is now or at any time has been subject to Part
3, Subtitle B of Title I of ERISA or Title IV of ERISA. No Benefit Plan is now
or at any time has been a "multiemployer plan" within the meaning of Section
3(37) of ERISA.
(v) There are no pending audits or investigations by any
governmental agency involving the Benefit Plans, and no threatened or pending
claims (except for individual claims for benefits payable in the normal
operation of the Benefit Plans), suits or proceedings involving any Benefit
Plan, any fiduciary thereof or service provider thereto, nor to the best
knowledge of the Companies is there any reasonable basis for any such claim,
suit or proceeding.
(vi) Neither the Companies, any ERISA Affiliate, nor to the best
knowledge of the Companies, any fiduciary, trustee or administrator of any
Benefit Plan, has engaged in or, in connection with the transactions
contemplated by this Agreement, will engage in any transaction with respect to
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any Benefit Plan which would subject any such Benefit Plan, the Companies, any
ERISA Affiliate or Buyer to a tax, penalty or liability for a "prohibited
transaction" under Section 406 of ERISA or Section 4975 of the Code. None of the
assets of any Benefit Plan is invested in any property constituting "employer
real property" or any "employer security" within the meaning of Section 407 of
ERISA.
(vii) Any insurance premium under any insurance policy related to a
Benefit Plan for any period up to and including the Closing Date shall have been
paid, or accrued and booked on or before the Closing Date, and, with respect to
any such insurance policy or premium payment obligation, neither the Companies,
any ERISA Affiliate nor the Buyer shall be subject to a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability.
(viii) With respect to each Benefit Plan that is a "group health
plan" within the meaning of Section 607 of ERISA and that is subject to Section
4980B of the Code, the Companies and each ERISA Affiliate comply in all respects
with the continuation coverage and certification requirements of the Code and
ERISA.
(ix) No Benefit Plan provides benefits, including, without
limitation, death or medical benefits, beyond termination of service or
retirement other than (A) coverage mandated by law or (B) death or retirement
benefits under a Benefit Plan qualified under Section 401(a) of the Code.
Neither the Companies nor any ERISA Affiliate has made a written or oral
representation to any current or former employee promising or guaranteeing any
employer paid continuation of medical, dental, life or disability coverage for
any period of time beyond retirement or termination of employment.
(x) Sellers' execution of, and performance of the transactions
contemplated by this Agreement will not constitute an event under any Benefit
Plan that will result in any payment (whether as severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any employee. No
Benefit Plan provides for "parachute payments" within the meaning of Section
280G of the Code.
(d) Schedule 2.26(d) lists all pension, retirement, supplemental
retirement, deferred compensation, excess benefit, profit sharing, bonus,
incentive, stock purchase, stock ownership, stock option, stock appreciation
right,
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employment, severance, salary continuation, termination, change-of-control,
health, life, death benefit, welfare, disability, group insurance, vacation,
holiday and fringe benefit plan, program, contract or arrangement, any of the
Companies or any ERISA Affiliate or under which any of the Companies or any
ERISA Affiliate may have liability, outside the United States (the "Foreign
Plans".) Schedule 2.26(d) contains an accurate and complete description of, and
sets forth the annual amount payable pursuant to, each of the Foreign Plans as
of the dates thereof.
(e) A true and complete copy of each Foreign Plan including all
amendments and modifications thereof together with all related trust agreements
and insurance contracts together with all governmental filings made during the
last three years have been delivered to Buyer. With respect to each current
Foreign Plan, or plan under which benefits may be due to, or liabilities may
exist in respect of, current or former employees, the Sellers have delivered to
the Buyer accurate and complete copies of (i) all currently applicable plan
texts and agreements; (ii) all summary plan descriptions and material employee
communications; (iii) the most recent annual report; (iv) the most recent annual
and periodic accounting of plan assets; (v) the most recent actuarial valuation.
(f) Each Foreign Plan has been maintained, operated and
administered in compliance in all material respects with its terms and with all
applicable laws. All contributions and other payments required to be made by the
Companies or any ERISA Affiliate to any Foreign Plan which respect to any period
up to and including the Closing Date shall have been made or accrued and booked
on or before the Closing Date. All Foreign Plans have been duly registered where
required by, and are in good standing under, all applicable legislation. There
are no pending audits, investigations or proceedings by any Governmental Entity
involving the Foreign Plans and no threatened or pending claims (except for
individual claims for benefits payable in the normal operation of the Foreign
Plan), suits or proceedings against or involving any Foreign Plan or asserting
any rights or claims to benefits under any Foreign Plan that could give rise to
any material liability.
2.27 Brokerage. Except as described in the first sentence of Section
6.2, the fees and expenses of which shall be borne by Sellers, no Company nor
any Seller has made any agreement or taken any other action which might cause
anyone to become entitled to a broker's fee or commission as a result of the
transactions contemplated hereunder.
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2.28 Acquisition of Holdings Shares for Investment. (a) The Holdings
Common Shares and Holdings Preferred Shares being acquired under this Agreement
are being acquired by William F. Callahan and Sumner Kaufman for investment and
not with a view to any distribution thereof that would violate the Securities
Act of 1933, as amended (the "Securities Act"), or the applicable state
securities laws of any state; and William F. Callahan and Sumner Kaufman will
not distribute any of the Holdings Common Shares and Holdings Preferred Shares
in violation of the Securities Act or the applicable securities laws of any
state.
(b) Each of William F. Callahan and Sumner Kaufman understands that
the Holdings Common Shares and Holdings Preferred Shares being acquired
hereunder have not been registered under the Securities Act or the securities
laws of any state and must be held indefinitely unless transfer thereof is
subsequently registered under the Securities Act and any applicable state
securities laws or unless an exemption from such registration becomes or is
available.
(c) Each of William F. Callahan and Sumner Kaufman is financially
able to hold the Holdings Common Shares and Holdings Preferred Shares being
acquired hereunder for long-term investment, believes that the nature and amount
of the Holdings Common Shares and Holdings Preferred Shares being purchased are
consistent with such Investor's overall investment program and financial
position, and recognizes that there are substantial risks involved in the
purchase of the Holdings Common Shares and Holdings Preferred Shares.
(d) Each of William F. Callahan and Sumner Kaufman confirms that he
(i) is familiar with the proposed business of Holdings, (ii) has had the
opportunity to ask questions of the officers and directors of Holdings and to
obtain (and that he has received to his satisfaction) such information about the
business and financial condition of Holdings as he has reasonably requested, and
(iii) either alone or with his purchaser representative (as defined in Rule
501(h) promulgated under the Securities Act), if any, has such knowledge and
experience in financial and business matters such that he is capable of
evaluating the merits and risks of the prospective investment in the Holdings
Common Shares and Holdings Preferred Shares.
2.29 Material Customers. Schedule 2.29 sets forth a true and complete
list of all customers that accounted for ten
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percent or more of the net sales of MFG for the fiscal year ended September 28,
1997 ("MFG Material Customers"). Except as disclosed on Schedule 2.29, since
September 28, 1997 there has not been any adverse change or any threat of any
adverse change in MFG's relationship with, or any loss or threat of loss of, any
MFG Material Customer.
2.30 Disclosure. No representation or warranty by William F. Callahan
or the Companies, or, as applicable, Ruth M. Callahan, in this Agreement, and no
exhibit, document, statement, certificate or schedule furnished or to be
furnished to Buyer pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading or necessary to
provide Buyer with adequate and complete information as to the Companies and
their affairs and the Stock.
ARTICLE III
REPRESENTATION AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers as follows:
3.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
copies of Buyer's articles of incorporation and by-laws, as amended to date,
which have been delivered to Sellers, are correct and complete and are in full
force and effect.
3.2 Power and Authority. Buyer has full corporate power and authority
to make, execute, deliver and perform this Agreement.
3.3 Authorization and Enforceability. The execution, delivery and
performance of this Agreement by Buyer have been duly authorized by all
necessary corporate action on the part of Buyer, and this Agreement has been
duly executed and delivered by Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms.
3.4 No Violation of Laws or Agreements. Except as set forth on Schedule
3.4, the execution and delivery of this
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Agreement do not, and the consummation of the transactions contemplated by this
Agreement and the compliance with the terms, conditions and provisions of this
Agreement by the Buyer, will not (a) contravene any provision of any Buyer's
articles of incorporation or bylaws; (b) conflict with or result in a breach of
or constitute a default (or an event that reasonably could be expected, with the
passage of time or the giving of notice or both, to constitute a default) under
any of the terms, conditions or provisions of any indenture, mortgage, loan or
credit agreement or any other agreement or instrument to which Buyer is a party
or by which any of them or any of their assets may be bound or affected, or any
judgment or order of any court or governmental department, commission, board,
agency or instrumentality, domestic or foreign, or any applicable law, rule or
regulation or (c) result in the maturation or acceleration of any liability or
obligation of Buyer (or give others the right to cause such maturation or
acceleration) which would prevent Buyer from consummating the transactions
contemplated by this Agreement.
3.5 Brokerage. Except as described in the second sentence of Section
6.2, the fees and expenses of which shall be borne by Buyer, Buyer has not made
any agreement or taken any other action which might cause anyone to become
entitled to a broker's fee or commission as a result of the transactions
contemplated hereunder.
ARTICLE IV
CERTAIN OBLIGATIONS OF SELLERS, THE COMPANIES AND BUYER
4.1 Conduct of Business Pending Closing. From and after the date hereof
and pending Closing, and unless Buyer shall otherwise consent or agree in
writing, William F. Callahan and each Company covenant and agree that:
(a) Ordinary Course. The business of each Company will be conducted
only in the ordinary course and consistent with past practice, including
billing, shipping and collection practices, inventory transactions and payment
of accounts payable.
(b) Preservation of Business. They will use all reasonable efforts
to preserve the business organization of each Company intact, to keep available
to Buyer the services of each present officers and employees of each Company and
to
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preserve for Buyer the good will of the suppliers, customers and other having
business relations with each Company.
(c) Material Transactions. They will not permit any Company to:
(i) amend its Articles of Incorporation or Bylaws;
(ii) change its authorized or issued capital stock or issue any
rights or options to acquire shares of its capital stock;
(iii) enter into any contract or commitment the performance of
which may extend beyond the Closing, except those made in the ordinary course of
business the terms of which are consistent with past practice and reasonable in
light of current conditions;
(iv) enter into any employment or consulting contract or
arrangement with any person which is not terminable at will, without penalty or
continuing obligation;
(v) sell, transfer, lease or otherwise dispose of any of its assets
other than in the ordinary course of business and consistent with past practice;
(vi) incur, create, assume or suffer to exist any mortgage, pledge,
lien, restriction, encumbrance, tenancy, encroachment, covenant, condition,
right-of-way, easement, claim, security interest, charge or other matter
affecting title on any of its assets or other property, except Permitted
Encumbrances and the continuance of MGF's credit facility with Fleet Bank - NH;
(vii) make, change or revoke any tax election or make any agreement
or settlement with any taxing authority;
(viii) declare or pay any dividend or other distribution (except as
necessary to allow Sellers to pay income taxes for the period September 28, 1997
through the Closing Date) in respect of any class of its capital stock, or make
any payment to redeem, purchase or otherwise acquire, or call for redemption,
any of such stock or any securities convertible into or exchangeable for such
stock;
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(ix) increase or otherwise change the compensation payable or to
become payable to any officer, employee or agent;
(x) make or authorize the making of any capital expenditure in
excess of $50,000;
(xi) incur any debt or other obligation for money borrowed other
than under MGF's existing credit facility with Fleet Bank-NH, and in the
ordinary course of business consistent with past practice.
(xii) incur any other obligation or liability, absolute or
contingent except in the ordinary course of business consistent with past
practice;
(xiii) waive or permit the loss of any substantial right;
(xiv) guarantee or become a co-maker or accommodation maker or
otherwise become or remain contingently liable in connection with any liability
or obligation of any person other than any Company;
(xv) loan, advance funds or make an investment in or capital
contribution to any person other than any Company;
(xvi) take any action or permit to occur any event set forth in
subparagraphs (c) and (e) through (j) and (l) through (p) of Section 2.9;
(xvii) take any action or omit to take any action which will result
in a violation of any applicable law or cause a breach of any agreements,
contracts or commitments; or
(xviii) enter into any agreement to do any of the foregoing.
4.2 Insurance. Each Company shall maintain in full force and effect the
policies of insurance listed on Schedule 2.24, subject only to variations
required by the ordinary operations of its business, or else will obtain, prior
to the lapse of any such policy, substantially similar coverage with insurers of
recognized standing and approved in writing by the Buyer. Each Company and
William F. Callahan shall promptly
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advise the Buyer in writing of any change of insurer or type of coverage in
respect of the policies listed on Schedule 2.24.
4.3 Fulfillment of Agreements. William F. Callahan and each Company
shall use his or its respective best efforts to cause all of the conditions to
the obligations of the Buyer under Section 5.1 of this Agreement to be satisfied
on or prior to the Closing. Each Company shall use its best efforts, and William
F. Callahan shall use his best efforts and shall cause each Company to use its
best efforts, to conduct its business in such a manner that at the Closing the
representations and warranties of the Sellers and each Company contained in this
Agreement shall be true and correct as though such representations and
warranties were made on, as of, and with reference to such date. The Sellers and
each Company will promptly notify Buyer in writing of any event or fact which
represents or is likely to cause a breach of any of their or its
representations, warranties, covenants or agreements. Each Company and William
F. Callahan shall promptly advise Buyer in writing of the occurrence of any
condition or development (exclusive of general economic factors affecting
business in general) of a nature that is or may be materially adverse to the
business, operations, properties, assets, prospects or conditions (financial or
otherwise) of any Company.
4.4 Access, Information and Documents. Each Company will give and
William F. Callahan will cause each Company to give to Buyer and to Buyer's
counsel, accountants and other representatives full access during normal
business hours to all of such Company's properties, books, tax returns,
contracts, commitments, records, officers, personnel and accountants and will
furnish to Buyer all such documents and copies of documents (certified to be
true copies if requested) and all information with respect to the affairs of
such Company as Buyer may reasonably request.
4.5 Resignations. At the Closing, William F. Callahan will deliver
written resignation of each Company's directors and officers and of the
trustees, plan administrators and fiduciaries of the Benefit Plans.
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4.6 Financing. Buyer will use its commercially reasonable efforts to
complete its arrangements for the debt financing (the "Financing") required to
effect the transactions contemplated by this Agreement and to pay related fees
and expenses on terms reasonably satisfactory to Buyer.
4.7 Hart-Scott-Rodino Antitrust Improvement. Promptly after the date
hereof, Buyer and the Seller will file the required notifications with the
Federal Trade Commission ("FTC") and the Antitrust Division of the Department of
Justice ("Department") pursuant to and in compliance with the Hart-Scott- Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"). The parties hereto shall not
intentionally or negligently delay submission of information requested by FTC
and Department under the HSR Act and shall use their respective best efforts
promptly to supply, or cause to be supplied, such information and shall use
their best efforts to obtain early termination of the applicable waiting period.
4.8 Tax Matters; Cooperation. Buyer agrees to cooperate with Sellers to
make an election under Internal Revenue Code Section 1377(a) to specifically cut
off books as of the Closing Date. Buyer agrees to cooperate with Sellers in
effectuating the termination of MGF's S corporation election effective as of
12:01 a.m. the day after the Closing Date. Buyer agrees to file a stub year
return for JEF with a year-end date of the Closing Date.
ARTICLE V
CONDITIONS TO CLOSING; TERMINATION
5.1 Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to proceed with the Closing under this Agreement are subject to the
fulfillment prior to or at Closing of the following conditions (any one or more
of which may be waived in whole or in part by Buyer at Buyer's option):
(a) Bringdown of Representations and Warranties. The
representations and warranties of William F. Callahan and each Company and, as
applicable, Ruth M. Callahan, contained in this Agreement that are not qualified
by materiality shall be true and correct in all material respects, and the
representations of William F. Callahan and each Company and, as applicable, Ruth
M. Callahan, set forth in this Agreement that are qualified by materiality shall
be true and correct on and as of the time of Closing, with the same force and
effect as though
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such representations and warranties had been made on, as of and with reference
to such time and Buyer shall have received certificates to such effect, one
signed by the Sellers and the others signed by the chief executive officer and
chief financial officer of each Company.
(b) Performance and Compliance. The Sellers and each Company shall
have performed all of the covenants and complied with all of the provisions
required by this Agreement to be performed or complied with by them on or before
the Closing and Buyer shall have received certificates to such effect, one
signed by the Sellers and the others signed by the chief executive officer and
chief financial officer of each Company.
(c) Opinion of Counsel. Buyer shall have received from Downs,
Rachlin & Martin PLLC and Martineau Walker, counsel for the Sellers, an opinion
dated the date of the Closing in form and substance satisfactory to Buyer.
(d) Satisfactory Instruments. All instruments and documents
required on the Sellers' and each Company's part to effectuate and consummate
the transactions contemplated hereby shall be delivered to Buyer and shall be in
form and substance reasonably satisfactory to Buyer and its counsel.
(e) Required Consents. All consents and
approvals of third parties to the transactions contemplated hereby shall have
been obtained, and all waiting periods specified by law the passing of which is
necessary for the consummation of such transactions (including without
limitation the waiting period under the HSR Act) shall have passed or been
terminated.
(f) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions contemplated
hereby or which would limit or adversely affect Buyer's ownership or control of
any Company or the business of any Company, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any court or governmental agency or other regulatory or administrative agency or
commission, (i) challenging any of the transactions contemplated by this
Agreement or seeking monetary relief by reason of the consummation of such
transactions or (ii) by any present or former owner of any capital stock or
equity interest in any Company (whether through a derivative action or
otherwise)
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against any Company or any officer, director or shareholder of any Company in
his capacity as such or (iii) which might have a material adverse effect on the
business, prospects or condition (financial or otherwise) of any Company.
(g) Financing. Buyer shall have completed its arrangements for the
Financing on terms and conditions reasonably satisfactory to Buyer and received
the proceeds thereof.
(h) Pay-Off Documentation. Buyer shall have received documentation
reasonably satisfactory to Buyer evidencing the discharge of all of the
indebtedness (and liens associated with such indebtedness) listed on Schedule
5.1(h), which schedule sets forth the estimated amounts of such indebtedness as
of July 2, 1998. The parties understand and agree that the estimated payoff
amounts contained on Schedule 5.1(h) are for informational purposes only and
Buyer will receive a confirmation of actual payoff amounts at least two business
days prior to the Closing Date.
(i) Employment Agreement. William F. Callahan shall have executed
and delivered the Employment Agreement substantially in the form of Exhibit A.
(j) Consulting Agreement. William F. Callahan shall have executed
and delivered the Consulting Agreement substantially in the form of Exhibit B.
(k) Title Insurance. Sellers shall have delivered, (i) good and
valid, irrevocable ALTA or CLTA title insurance binders or commitments
(collectively, the "Title Commitments," and each a "Title Commitment"), in final
form, from one or more title insurance companies reasonably acceptable to Buyer
(collectively, the "Title Company"), irrevocably committing the Title Company
(subject only to the satisfaction of any industry standard requirements
contained in the Title Commitment and reasonably acceptable to Buyer) to issuing
ALTA form of title insurance policies insuring good, valid, indefeasible fee
simple title to each parcel of the Real Estate in the owner in the respective
amounts as Buyer requests prior to Closing, subject to no liens or exceptions to
title other than the Permitted Encumbrances, except the Exceptions That Will Not
Exist After Closing, or (ii) with respect to the Quebec Property and at Buyer's
election, a title opinion satisfactory in form and substance to Buyer
(collectively the "Title Policies"). Each of the Title Commitments shall be
effective as of a date occurring
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not earlier than the date of this Agreement, and the effective dates of each of
them shall be brought down to the time of the Closing. Each such Title
Commitment shall include such endorsements thereto as may reasonably be
requested by Buyer.
(l) Survey. The Buyer shall have received as- built surveys of each
parcel of Real Estate (the "Surveys") in accordance with the 1992 minimum
standard detail requirements for ALTA/ACSM Land Title, including Table A items
2,3,4,6,7,8,9,10,11 and 13 and with the Accuracy Standards (as adopted by ALTA
and ACSM) of an Urban Survey, dated after June 1, 1998, and showing, without
limiting the foregoing, with respect to each parcel of the Real Estate, all
easements and other appurtenances and all easements and other encumbrances
burdening such parcel, and showing adequate physical and legal access to and
from the property and one or more right of ways. Each Survey shall be certified
to the Company owning the property surveyed, the Buyer, the Title Company and
any other person reasonably requested by Buyer and shall comply with any
requirements imposed by the Title Company as a condition to the removal of any
survey exception from the general exceptions to the Title Policy covering the
Real Estate shown on the Survey.
(m) Exceptions That Will Not Exist After Closing. Evidence of
discharge or termination of all of the Exceptions That Will Not Exist After
Closing in recordable form satisfactory to Buyer shall have been delivered to
Buyer.
(n) FIRPTA. Buyer shall have received certificates from the
Sellers, made under penalties of perjury, stating that neither MFG nor UN is a
foreign corporation, foreign partnership, foreign trust or foreign estate and
listing both the U.S. Employer Identification Number and principal business
office address of each of MFG and UN.
(o) Canadian Witholding Certificates. Buyer shall have received
from Sellers copies of applications for certificates pursuant to Section 116 of
the Income Tax Act of Canada and the corresponding provision under the Quebec
Taxation Act and such applications shall have been filed with the appropriate
authorities.
(p) Security Holders Agreement. Each of William F. Callahan and
Sumner Kaufman shall have executed and delivered to Buyer the form of securities
purchase and holders agreements attached hereto as Exhibit C and Exhibit D,
respectively.
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(q) Substitution of Letters of Credit. Buyer shall have received
documentation reasonably satisfactory to Buyer evidencing (i) the cancellation
and replacement of the Letters of Credit and Standby Letters of Credit issued by
Fleet Bank for the benefit of (1) Steven J. Graf (No. HS 1098058), (2) Roy
Barros (No. HS 1098061), (3) Connecticut Indemnity Co. (No. HS 1048017) and (4)
Getion Cadapp Inc. (No. HS 1096366), and the consent by each of such parties to
such replacement; or (ii) the continuation of the letters of credit referenced
in the preceding clause (i) by such issuer based on collateral provided by
Buyer, and the release by such issuer of all related liens on the assets of the
Companies and the Stock.
(r) Cancellation/Assignment of Life Insurance Policies. Sellers
shall have delivered documentation reasonably satisfactory to Buyer evidencing
the cancellation, or the assignment to William F. Callahan, of the life
insurance polices listed on Schedule 2.24 insuring William F. Callahan and Susan
Callahan.
(s) Canadian Ministries. Buyer shall have received documentation or
access to information reasonably satisfactory to Buyer in response to its
inquiries to each of the following in the Province of Quebec: Bureau du
commissaire du travail, Commission de la sante et securite du travail,
Commission des normes du travail, Municipalite de Saint-Evariste- de-Forsyth,
Ministere de l'envirnnement et de la faune and Ministere des ressources
naturelles du Quebec.
5.2 Conditions Precedent to the Obligations of the Sellers. The
obligations of the Sellers to proceed with the Closing hereunder are subject to
the fulfillment prior to or at Closing of the following conditions (any one or
more of which may be waived in whole or in part by the Sellers at the Sellers'
option):
(a) Bringdown of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement that are not
qualified by materiality shall be true and correct in all material respects, and
the representations of Buyer set forth in this Agreement that are qualified by
materiality shall be true and correct on and as of the time of Closing, with the
same force and effect as though such representations and warranties had been
made on, as of and with reference to such time and Buyer shall have delivered to
the Sellers a certificate, signed by its President or a Vice President, to such
effect.
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(b) Performance and Compliance. Buyer shall have performed all of
the covenants and complied with all the provisions required by this Agreement to
be performed or complied with by it on or before the Closing and Buyer shall
have delivered to the Sellers a certificate, signed by its President or a Vice
President, to such effect.
(c) Opinion of Counsel for Buyer. The Sellers shall have received
from Dechert Price & Rhoads, counsel for Buyer, an opinion dated the date of the
Closing in form and substance satisfactory to the Sellers.
(d) Litigation. No order of any court or administrative agency
shall be in effect which restrains or prohibits the transactions contemplated
hereby and there shall not have been threatened, nor shall there be pending, any
action or proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging any of the
transactions contemplated by this Agreement or seeking monetary relief by reason
of the consummation of such transactions.
(e) B&G Foods, Inc. Board Appointment. William F. Callahan and
shall have been appointed to the board of directors of B&G Foods, Inc.,
effective upon the Closing hereunder.
(f) Satisfactory Instruments. All instruments and documents
required on the part of Buyer to effectuate and consummate the transactions
contemplated hereby shall be delivered to the Sellers and shall be in form and
substance reasonably satisfactory to the Sellers and their counsel.
(g) Required Consents. All consents and approvals of all
governmental departments, agencies, authorities and commissions required for the
transactions contemplated hereby shall have been obtained, and all waiting
periods specified by law the passing of which is necessary for the consummation
of such transactions (including without limitation the waiting period under the
HSR Act) shall have passed or been terminated.
(h) Release of Sellers. Sellers shall have received documentation
reasonably satisfactory to Sellers evidencing the release of Sellers as
guarantors from all of the loans of the Companies set forth on Schedule 5.2(h).
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(i) Payment of Subordinated Debt. William F. Callahan shall have
received $3,603,018.59 (which amount includes accrued but unpaid interest
through July 9, 1998), plus an additional amount equal to $556 per day from July
10, 1998 to the Closing Date, in full satisfaction of the outstanding
indebtedness of the Companies to William F. Callahan.
(j) Employment Agreement. Buyer shall have executed and delivered
the Employment Agreement substantially in the form of Exhibit A.
(k) Consulting Agreement. Buyer shall have executed and delivered
the Consulting Agreement substantially in the form of Exhibit B.
(l) Security Holders Agreement. Holdings shall have executed and
delivered to each of William F. Callahan and Sumner Kaufman the form of security
holders agreement attached hereto as Exhibit C and D, respectively.
5.3 Termination.
(a) When Agreement May Be Terminated. This Agreement may be
terminated at any time prior to Closing:
(i) By mutual consent of Buyer and Sellers;
(ii) By Buyer if there has been a breach by Sellers of any of their
representations, warranties or covenants, or if any of the conditions specified
in Section 5.1 hereof shall not have been fulfilled by the time required and
shall not have been waived by Buyer;
(iii) By Sellers if there has been a breach by Buyer of any of its
representations, warranties or covenants, or if any of the conditions specified
in Section 5.2 hereof shall not have been fulfilled by the time required and
shall not have been waived by Sellers;
(iv) By Buyer or Sellers if Closing shall not have occurred prior
to August 31, 1998; provided that Buyer or Sellers may terminate this Agreement
pursuant to this subparagraph (iv) only if Closing shall not have occurred by
such date for a reason other than a failure by such party to satisfy
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the conditions to Closing of the other party set forth in Section 5.1 or 5.2
hereof.
(b) Effect of Termination. In the event of termination of this
Agreement by either Sellers or Buyer, as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of either
Sellers or Buyer or Buyer's officers or directors, except for liabilities
arising from a breach of this Agreement prior to such termination; provided,
however, that the obligations of the parties set forth in Section 6.4 and 6.5
hereof shall survive such termination.
Article VI
CERTAIN ADDITIONAL COVENANTS
6.1 Costs, Expenses and Taxes. The Sellers will pay all costs and
expenses, including legal fees, in connection with their and the Companies'
performance of and compliance with this Agreement, and all transfer, documentary
and similar taxes in connection with the delivery of the shares of Stock to be
made hereunder. The Sellers shall also be responsible for the costs and expenses
of preparing any tax returns with respect to periods prior to the Closing Date.
Buyer will pay all cost and expenses, including legal fees, of Buyer's
performance of and compliance with this Agreement. Buyer will pay (i) the
notification filing fee required under the HSR Act, (ii) the costs and expenses
of obtaining any title insurance, title opinions and surveys; and (iii) the
costs and expenses of Phase I Environmental Assessments. In addition, Buyer will
pay any prepayment penalties imposed upon the Companies in connection with the
prepayment of such Companies' indebtedness at Closing, provided, however, that
in the event the aggregate of all such prepayment penalties exceeds $49,000,
then Sellers shall be responsible for the payment of any such excess.
6.2 Brokers. The Sellers have engaged Kaufman & Company as a broker in
connection with this transaction, and any fee, commission or other amount
payable to such broker will be paid by the Sellers. Buyer has engaged Chapman
Partners as a broker in connection with this transaction, and any fee,
commission or other amount payable to such broker will be paid by the Buyer.
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6.3 Additional Covenants.
(a) Payment of Callahan Receivable. On the Closing Date and
immediately following the Closing, William F. Callahan shall pay to Buyer, by
means of wire transfer of immediately available funds, the funds necessary to
fully discharge the Callahan Receivable.
(b) Repayment of Debt. In the event the Buyer shall have paid any
of the indebtedness of the Companies or Sellers prior to and in connection with
the Closing and the Closing for any reason does not promptly occur thereafter,
Sellers and the Companies shall be jointly and severally responsible for
promptly reimbursing Buyer for the full amount of all such payments.
(c) Option to Purchase Additional Shares of Holdings. Within six
months following the Closing Date, William F. Callahan shall have the right to
acquire additional Holdings Common Shares and Holdings Preferred Shares for an
aggregate purchase price of $100,000, on such terms and conditions, including
price per share, as are identical to those offered by Holdings Corp. to the
existing outside directors of B&G Foods, Inc.
(d) Covenant Not to Compete. (i) From and after the Closing Date,
no Seller will, unless acting as an officer, director or employee of the
Companies, Buyer or their affiliates, directly or indirectly, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of, or be connected as an officer, employee, stockholder, partner or
otherwise with, any business conducting business under any name similar to the
name of any of the Companies or Buyer. For a period of five years from and after
the Closing Date, no Seller will, except as an officer or employee of Buyer, the
Companies or their affiliates, directly or indirectly, own, manage, operate,
join, control or participate in the ownership, management, operation or control
of, or be employed or otherwise connected as an officer, employer, stockholder,
partner or otherwise with, any business which at any relevant time during such
period directly or indirectly competes with Buyer, any of the Companies, or any
related entities (including any parent, subsidiary or affiliate of Buyer) in any
state in the United States or province of Canada in which Buyer, any of the
Companies or any such related entity is then conducting business. Ownership of
not more than 2% of the outstanding stock of any publicly traded company shall
not be a violation of this Section. The restrictive covenant contained in this
Section is a covenant independent of any other provision of this Agreement and
the
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existence of any claim which any Seller may allege against any other party to
this Agreement, whether based on this Agreement or otherwise, will not prevent
the enforcement of this covenant. Sellers agree that Buyer's remedies at law for
any breach or threat of breach by any Seller of the provisions of this Section
will be inadequate, and that Buyer shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Section and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which Buyer may be entitled at law or equity. In the event of litigation
regarding the covenant not to compete, the prevailing party in such litigation
shall, in addition to any other remedies the prevailing party may obtain in such
litigation, be entitled to recover from the other party its reasonable legal
fees and out of pocket costs incurred by such party in enforcing or defending
its rights hereunder. The length of time for which this covenant not to compete
shall be in force shall not include any period of violation or any other period
required for litigation during which Buyer seeks to enforce this covenant.
Should any provision of this Section be adjudged to any extent invalid by any
competent court or tribunal, such provision will be deemed modified to the
extent necessary to make it enforceable.
(ii) The portion of the Purchase Price to be allocated to the
Covenant Not to Compete contained in Section 6.3(d)(i) above shall be $100,000
and Buyer agrees it will not take any inconsistent position with respect to such
allocation for income tax or accounting purposes.
6.4 Indemnification By Sellers.
(a) Extent of Indemnity. William F. Callahan hereby agrees to
indemnify and hold harmless Buyer from and against:
(i) any loss, liability, claim, obligation, damage or deficiency of
or to Buyer or any Company arising out of or resulting from any breach of any
representation or warranty on the part of the Sellers or any Company contained
in this Agreement or in any statement or certificate furnished or to be
furnished to Buyer pursuant hereto or in connection with the transactions
contemplated hereby;
(ii) any loss, liability, claim, obligation, damage or deficiency
of or to Buyer or any Company arising out of or resulting from any
nonfulfillment of any agreement on the part of the Sellers or any Company
contained in
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this Agreement or in any statement or certificate furnished or to be furnished
to Buyer pursuant hereto or in connection with the transactions contemplated
hereby;
(iii) any and all liabilities of any Company of any nature, whether
due or to become due, whether accrued, absolute, contingent or otherwise,
existing on the Closing Date or arising out of any transactions entered into, or
any state of facts existing, prior to such date, except (A) liabilities
reflected as liabilities on the Closing Balance Sheet (but only to the extent so
reserved or reflected), and (B) liabilities incurred since the Balance Sheet
Date in the ordinary course of business consistent with past practice and to the
extent permitted by this Agreement and reflected on the books of account of the
Companies;
(iv) any and all liabilities, except to the extent otherwise
reflected in the Closing Balance Sheet for (A) Taxes of the Companies for any
taxable period ending on or before the Closing Date, (B) in the case of a
taxable period that includes, but does not end on, the Closing Date, Taxes of
the Companies that are allocable to the portion of such taxable period up to and
including the Closing Date (a "Pre-Closing Period"), (C) any liability for Taxes
of any consolidated, combined or unitary group of corporations that included a
Company on or before the Closing Date and for which the Company may be liable
under Treas. Reg. ss.1.1502-6 or analogous provisions of state, local or foreign
tax law, and (D) any liability for Taxes of any other person pursuant to the
terms of a tax sharing or tax allocation agreement or similar arrangement. Taxes
allocable to a Pre-Closing Period shall be determined, in the case of real and
personal property Taxes, on a per diem basis and, in the case of other Taxes,
based on an interim closing of the books basis as of the Closing Date.
(v) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing or the enforcement of this Section;
(vi) any losses, liability, claim, obligation, damage or deficiency
of or to any Company arising out of or resulting from or pertaining to
environmental conditions or violations first occurring, exiting or arising prior
to the Closing, including without limitation, (A) (i) the presence, Release, or
threat of Release of Hazardous Materials at any
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property now or previously owned, operated or leased by the Company or in
connection with its or their business; (ii) arising from the off-site
Management, Release or threat of Release of Hazardous Materials generated by or
on behalf of any Company prior to Closing Date; or (iii) the violation of any
Environmental Law by any Company prior to Closing and for a reasonable period of
time after the Closing Date necessary to come into compliance with any Law; or
(B) arising out of any of the events or circumstances described in the preceding
clause (A) based on a claim or theory that any Company is a successor in
interest to any of its predecessors.
6.5 Indemnification by Buyer. Buyer hereby agrees to indemnify and hold
harmless the Sellers from and against:
(a) any loss, liability, claim, obligation, damage or deficiency
arising out of or resulting from any breach of any representation or warranty,
or nonfulfillment of any agreement on the part of Buyer contained in this
Agreement or in any statement or certificate furnished or to be furnished to the
Sellers in connection with the transactions contemplated hereby, and
(b) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing or the enforcement of this Section.
6.6 Limitations on Indemnification. (a) For purposes of this Agreement,
the aggregate amount of such losses, liabilities, claims, obligations, damages,
deficiencies, costs, expenses and fees (including attorneys fees) incurred by
Sellers, on the one hand, or buyer, on the other hand, shall be referred to as
"Damage" or "Damages."
(b) William F. Callahan shall not be obligated to pay any
indemnification amounts for Damages pursuant to Section 6.4(i) until the
aggregate amount of all Damages pursuant thereto exceeds an amount equal to
$100,000 on an after-tax basis (the "Basket"), whereupon Buyer shall be entitled
to indemnification under Section 6.4(i) for all such Damages in excess of such
amount up to a maximum amount equal to $4,000,000.
(c) Notwithstanding the foregoing Section 6.6(b), William F.
Callahan shall not be obligated to pay any
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indemnification amounts for Damages incurred in connection with the litigations
disclosed on Schedule 2.13 (including, without limitation, settlement amounts
and attorneys' fees, collectively "Litigation Damages"), until the aggregate
amount of all such Litigation Damages exceeds the sum of (i) $275,000 and (ii)
the then unused portion of the Basket (the sum of (i) and (ii) being referred to
herein as the "Litigation Threshold"). William F. Callahan shall indemnify Buyer
for and hold Buyer harmless from any and all Litigation Damages in excess of the
Litigation Threshold. In the event that aggregate Litigation Damages shall
exceed the Litigation Threshold, the parties agree that Buyer shall not settle
prior to final adjudication the matter of Joyce Gammell v. William F. Callahan
and Maple Grove Farms of Vermont, Inc. (the "Gammell Litigation") without the
prior consent of William F. Callahan, which shall not be withheld unreasonably.
Notwithstanding the foregoing, William F. Callahan shall not have the right to
consent to such settlement if Buyer agrees to pay settlement costs (including
attorneys' fees) on the Gammell Litigation to the extent that such settlement
costs cause aggregate Litigation Damages to exceed the Litigation Threshold (it
being understood that William F. Callahan shall not be required to indemnify
Buyer for the amount of such excess).
(d) Sellers shall have no liability to Buyer with respect to
Sellers' representation in the second sentence of Section 2.12, it being
understood that Buyer shall look to the reserves for accounts receivable on the
Closing Balance Sheet for such obligations, which reserve shall include a proper
reserve for the Sam's Club receivable, which receivable is currently outstanding
in the amount of $28,126.
(e) Notwithstanding the provisions of Section 6.6(b), above, the
limitations on the indemnification obligations of William F. Callahan shall not
apply to breaches of representations or warranties made by Sellers or the
Companies in Sections 2.1, 2.2 or 2.3. Notwithstanding anything to the contrary
set forth herein, no limitation or condition of liability or indemnity
applicable to any Seller shall apply to any breach of a representation or
warranty if such representation or warranty was made with actual knowledge by a
Seller that it (i) contained an untrue statement of a material fact or (ii)
omitted to state a material fact necessary to make the statements contained
therein not misleading. For purposes of calculating the amount of Damages
incurred arising out of or relating to any breach of a representation or
warranty, all references to "material" or other materiality qualifications (or
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correlative terms), including as expressed in accounting concepts such as GAAP,
shall be disregarded.
ARTICLE VII
MISCELLANEOUS
7.1 Nature and Survival of Representations. The provisions set forth in
Section 6.1 of this Agreement shall expressly survive the termination or
abandonment of this Agreement. All covenants and agreements contained in this
Agreement shall survive the Closing Date and shall remain in full force and
effect. The representations and warranties set forth in Articles II and III of
this Agreement shall survive the Closing Date for a period of eighteen months,
except (a) the representations in Sections 2.10, 2.15 (as to environmental
protection only) and 2.26 shall survive until the date which is 60 days after
the expiration of the statute of limitations applicable to such matters, (b) the
representations and warranties in Sections 2.1, through 2.4 and Sections 3.1
through 3.3 shall survive the Closing Date in perpetuity, and (c) the foregoing
time limitations shall not apply to any claims which have been the subject of a
written notice specifying the factual basis of the claim in reasonable detail
prior to expiration of the applicable time period. No right of indemnification
hereunder shall be limited by reason of any investigation or audit conducted
before or after the Closing or the knowledge of any party of any breach of a
representation, warranty, covenant or agreement by the other party at any time
or the decision of any party to complete the Closing.
7.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or, if mailed, when mailed by United States first-class,
certified or registered mail, postage prepaid, to the other party at the
following addresses (or at such other address as shall be given in writing by
any party to the other):
If to Buyer, to:
BGH Holdings, Inc.
c/o B&G Foods, Inc.
426 Eagle Rock Avenue
Roseland, New Jersey 07068
Attention: President
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With a required copy to:
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
Attention: Glyndwr P. Lobo
If to the Companies or Sellers, to:
Maple Grove Farms of Vermont, Inc.
167 Portland Street
St. Johnsbury, Vermont 05819
Attention: William F. Callahan
With a required copy to:
Downs, Rachlin & Martin PLLC
9 Prospect Street
P.O. Box 99
St. Johnsbury, Vermont 05819-0099
Attention: James G. Wheeler, Jr.
7.3 Successors and Assigns. This Agreement, and all rights and powers
granted hereby, will bind and inure to the benefit of the parties hereto and
their respective successors and assigns, except that neither this Agreement nor
any of the rights, interests or obligations hereunder may be assigned by either
party without the prior written consent of the other party. Notwithstanding the
foregoing, Buyer may assign all or any portion of its rights and obligations
hereunder: (i) as collateral security to one or more persons that provide the
Financing, provided that such persons obtain no greater rights against Sellers
or the Companies as are available to Buyer under this Agreement; (ii) to any
person that acquires all or any substantial portion of the businesses of Buyer
or the Companies following the Closing in connection with the disposition by
Buyer of its businesses or of the Companies; or (iii) to an entity which,
directly or indirectly, controls, is controlled by, or is under common control
with Buyer (any such person referred to in Subsections (i), (ii) and (iii) is
referred to herein as an "Assignee"). In the event of any such assignment and
assumption, all rights and obligations of Buyer shall be assumed by the
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Assignee, but Buyer shall remain liable for any and all such obligations to
Seller regardless of such assignment.
7.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to principles of conflicts of laws. Any action, suit or other proceeding
initiated by any Seller or Buyer against the other under or in connection with
this Agreement may be brought in the federal courts for the Southern District of
New York or any state court in New York County, New York, as the party bringing
such action, suit or proceeding shall elect, having jurisdiction over the
subject matter thereof. Buyer and Sellers hereby submit themselves to the
jurisdiction of any such court.
7.5 Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
7.7 Further Assurances. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
7.8 Amendment and Waiver. The parties may by mutual agreement amend
this Agreement in any respect, and any party, as to such party, may (a) extend
the time for the performance of any of the obligations of any other party, (b)
waive any inaccuracies in representations by any other party, (c) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, and (d) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
7.9 Entire Agreement. This Agreement and the Schedules and Exhibits
hereto, each of which is hereby
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incorporated herein, set forth all of the promises, covenants, agreements,
conditions and undertakings between the parties hereto with respect to the
subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written.
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
BGH HOLDINGS, INC.
By:
---------------------------------
Name: David Wenner
Title: President
MAPLE GROVE FARMS OF VERMONT, INC.
By:
---------------------------------
Name: William F. Callahan
Title: President
UPCOUNTRY NATURALS OF VERMONT, INC.
By:
---------------------------------
Name: William F. Callahan
Title: President
[signatures continued on next page]
54
<PAGE>
LES PRODUITS ALIMENTAIRES JACQUES
ET FILS, INC.
By:
---------------------------------
Name: William F. Callahan
Title: Director
--------------------------------------
William F. Callahan
--------------------------------------
Ruth M. Callahan
With respect to Section 2.28 only:
--------------------------------------
Sumner Kaufman
55
Press Release
B&G Foods, Inc. has agreed to purchase Maple Grove Farms of Vermont, Inc., a
privately held company headquartered in St. Johnsbury, Vermont. Maple Grove
Farms sells pure maple syrup and salad dressings under the Maple Grove Farm(R)
label and natural foods under the Up Country Naturals(R) label. The company also
manufactures private label maple syrup products. Maple Grove's 1997 sales were
approximately $37,000,000.
B&G intends to incorporate the Maple Grove Farm products into its national
distribution system and utilize Maple Grove Farm's extensive network of
specialty distributors to increase sales of existing B&G products. The company
intends to operate the St. Johnsbury facility and to maintain the Maple Grove
Farm sales force to service the expanded distribution of the combined companies'
products.
B&G is a diversified food products company with 1997 proforma sales of
$175,000,000. The company, headquartered in Roseland, N.J., manufactures and
sells B&G(R) brand pickles, peppers and specialty items, Trappey(R) peppers,
Vermont Maid(R) syrup, Regina(R) wine vinegars, Brer Rabbit(R) molasses, and Red
Devil(R) hot sauces. The company produces similar products for private label and
food service customers. It also manufactures and sells bagel chips and baked
snacks under the Burns & Ricker(R) and New York Style(R) labels. B&G Foods was
acquired in December 1996 by the New York investment firm Bruckmann, Rosser and
Sherrill & Co., L.P.. Maple Grove Farms would be the company's third acquisition
since its purchase by BRS. Previously, B&G accquired a variety of brands from
Nabisco in June, 1997 and Trappey's Fine Foods from J. McIlhenny and Sons, Inc.
in August, 1997.
Released: July 6, 1998
