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UNITED STATES
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): November 19, 1999
Favorite Brands International, Inc.
and the Guarantors identified in Footnote (1) below
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(Exact Name of Registrant as Specified in Charter)
Delaware 333-67221 75-2608980
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(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation) Identification No.)
2121 Waukegan Road, Bannockburn, Illinois 60015
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(Address of Principal Executive Offices) (Zip Code)
(847) 405-5800
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
(1) The following domestic direct subsidiaries of Favorite Brands
International, Inc. are Guarantors of the Company's Senior Notes and are
Co-Registrants, each of which is incorporated in the jurisdiction and has
the I.R.S. Employer Identification Number indicated: Trolli Inc., a
Delaware corporation (52-1716800) and Sather Trucking Corp., a Delaware
corporation (41-1849044).
Item 2. Acquisition or Disposition
On November 19, 1999, Favorite Brands International, Inc., its subsidiaries
Sather Trucking Corp. and Trolli Inc. and its parent Favorite Brands
International Holding Corp., ("the Company") completed the sale of substantially
all of their assets to Nabisco, Inc. and its affiliates for $475 million in cash
and the assumption of certain liabilities. Pursuant to the terms of the sale,
which was approved by the Bankruptcy Court on November 18, 1999, the purchase
price may be subsequently adjusted based on working capital balances (as defined
in the agreement) as of the closing date. In addition, the Company will retain
its cash on hand at closing and certain liabilities. Pursuant to the court order
approving the sale, on November 19, 1999 the Company used $200.5 million of the
proceeds from the sale to repay all amounts outstanding under its senior secured
credit facility. After paying administrative and other priority claims, the
remaining proceeds from the sale will be distributed pursuant to a plan of
liquidation, which the Company expects to develop and file with the Bankruptcy
Court in the next several months.
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The purchase price for the assets was determined by arm's-length
negotiation between the Company and Nabisco. Prior to this transaction, there
were no material relationships between Nabisco and the Company or its
affiliates, directors, or officers or any associate of any director or officer
of the Company.
The foregoing description of the Purchase Agreement is qualified in its
entirety by the full text of the Purchase Agreement (including Amendment No. 1
and Amendment No. 2 thereto) which is incorporated by reference into this
Form 8-K as set forth in Exhibits 2(a), 2(b), and 2(c).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired. Not applicable.
(b) Pro Forma Financial Information.
The unaudited proforma income statements of Favorite Brands
International, Inc. and its subsidiaries ("Favorite Brands") for
the year ended June 26, 1999 and the seventeen weeks ended October
23, 1999, and the unaudited proforma balance sheet of Favorite
Brands as of October 23, 1999 attached hereto as Exhibit 28.
(c) Exhibits.
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Exhibit No. Description of Exhibit
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2(a) Asset Purchase Agreement (the "Purchase Agreement") by and among
Favorite Brands International Holding Corp.
Favorite Brands International, Inc.
Sather Trucking Corporation and
Trolli, Inc.
as Sellers and
Nabisco, Inc.
Nabisco Brands Company and
Nabisco Technology Company,
as Purchasers
Dated as of September 28, 1999
2(b) Amendment No. 1 to Purchase Agreement
2(c) Amendment No. 2 to Purchase Agreement
28 The unaudited proforma income statements of Favorite Brands
International, Inc and its subsidiaries ("Favorite Brands") for the
year ended June 26, 1999 and the seventeen weeks ended October 23,
1999, and the unaudited proforma balance sheet of Favorite Brands
as of October 23, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Favorite Brands International, Inc.
Dated: December 6, 1999 By: /s/ Steven F. Kaplan
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President, Chief Operating Officer
and Chief Financial Officer
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ASSET PURCHASE AGREEMENT
by and among
FAVORITE BRANDS INTERNATIONAL HOLDING CORP.
FAVORITE BRANDS INTERNATIONAL, INC.
SATHER TRUCKING CORPORATION and
TROLLI, INC.,
as Sellers
and
NABISCO, INC.,
NABISCO BRANDS COMPANY and
NABISCO TECHNOLOGY COMPANY,
as Purchasers
Dated as of September 28, 1999
===============================================================================
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TABLE OF CONTENTS
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ARTICLE 1
PURCHASE AND SALE OF ASSETS
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Section 1.01. Acquired Assets......................................... 2
Section 1.02. Excluded Assets......................................... 3
Section 1.03. Cure Costs.............................................. 3
Section 1.04. Assumed Liabilities..................................... 3
Section 1.05. Excluded Liabilities.................................... 3
Section 1.06. Purchase Price.......................................... 4
Section 1.07. Good Faith Deposit...................................... 5
Section 1.08. Closing Balance Sheet................................... 5
Section 1.09. Post-Closing Adjustment of Purchase Price............... 7
Section 1.10. Transition Matters...................................... 7
Section 1.11. Release................................................. 8
ARTICLE 2
THE CLOSING
Section 2.01. Closing................................................. 8
Section 2.02. Deliveries at Closing................................... 8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 3.01. Organization............................................ 9
Section 3.02. Authority Relative to this Agreement.................... 9
Section 3.03. Consents and Approvals.................................. 9
Section 3.04. Financial Statements.................................... 10
Section 3.05. Certain Assets.......................................... 10
Section 3.06. Brokers................................................. 11
Section 3.07. Material Contracts...................................... 11
Section 3.08. Intellectual Property................................... 12
Section 3.09. Required and Other Consents............................. 13
Section 3.10. Absence of Certain Changes.............................. 13
Section 3.11. Litigation and Proceedings.............................. 14
Section 3.12. Compliance with Laws and Court Orders................... 14
Section 3.13. Products................................................ 14
Section 3.14. Inventories............................................. 14
Section 3.15. Receivables............................................. 14
Section 3.16. Environmental Compliance................................ 15
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Section 3.17. Conduct of Activities................................... 15
Section 3.18. No Material Liabilities................................. 15
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Section 4.01. Organization............................................ 16
Section 4.02. Authority Relative to this Agreement.................... 16
Section 4.03. Consents and Approvals.................................. 16
Section 4.04. No Violations........................................... 17
Section 4.05. Brokers................................................. 17
Section 4.06. Financing............................................... 17
ARTICLE 5
COVENANTS
Section 5.01. Notice of the Section 363/365 Motion and
Section 363/365 Order................................... 17
Section 5.02. Access and Information.................................. 18
Section 5.03. Books and Records....................................... 18
Section 5.04. Seven-Day Notice........................................ 19
Section 5.05. Additional Matters...................................... 19
Section 5.06. Further Assurances...................................... 20
Section 5.07. Employees and Benefit Programs.......................... 20
Section 5.08. Public Announcements.................................... 27
Section 5.09. Conduct of the Business................................. 28
Section 5.10. Notices of Certain Events............................... 29
Section 5.11. No-shop Clause.......................................... 29
Section 5.12. Bankruptcy Court Approval of Interim Order.............. 29
Section 5.13. Name Changes............................................ 31
Section 5.14. Permits................................................. 31
Section 5.15. State Environmental Transfer Statutes................... 32
Section 5.16. Bidding Procedures...................................... 32
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.01. Conditions Precedent to Obligation of the
Sellers and the Purchasers.............................. 32
Section 6.02. Conditions Precedent to Obligation of the Sellers....... 32
Section 6.03. Conditions Precedent to Obligation of the Purchasers.... 33
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ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
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Section 7.01. Termination............................................. 33
Section 7.02. Effect of Termination................................... 35
ARTICLE 8
GENERAL PROVISIONS
Section 8.01. Survival of Representations, Warranties, and Agreements. 36
Section 8.02. Indemnity............................................... 36
Section 8.03. Transfer Taxes.......................................... 36
Section 8.04. Notices................................................. 36
Section 8.05. Descriptive Headings; Certain Terms..................... 38
Section 8.06. Entire Agreement, Assignment............................ 38
Section 8.07. Governing Law........................................... 38
Section 8.08. Expenses................................................ 38
Section 8.09. Amendment............................................... 38
Section 8.10. Waiver.................................................. 38
Section 8.11. Counterparts; Effectiveness............................. 39
Section 8.12. Severability; Validity; Parties of Interest............. 39
Section 8.13. Bulk Sales.............................................. 39
Section 8.14. All Obligations Joint and Several....................... 39
ARTICLE 9
DEFINITIONS
Section 9.01. Defined Terms........................................... 39
ARTICLE 10
TAX MATTERS
Section 10.01. Tax Definitions........................................ 43
Section 10.02. Tax Matters............................................ 43
Section 10.03. Tax Cooperation........................................ 44
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SCHEDULES
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Schedule 1.02 - Excluded Assets
Schedule 3.05(a) - Real Property (Owned) and Real Property (Leased)
Schedule 3.05(c) - Leases
Schedule 3.07(a) - Material Contracts
Schedule 3.07(b) - Material Contracts
Schedule 3.08(a) - Business Intellectual Property
Schedule 3.08(b) - Intellectual Property Licences
Schedule 3.08(c) - Intellectual Property Litigation and Claims
Schedule 3.10 - Absence of Certain Changes
Schedule 3.11 - Litigation and Proceedings
Schedule 3.16(a) - Environmental Reports
Schedule 3.16(b) - New Jersey or Connecticut Real Property
Schedule 5.07(a) - Retained Employees
Schedule 5.07(b)(i) - Benefit Arrangements
Schedule 5.07(b)(vi) - Employee Benefits
Schedule 5.07(b)(viii) - Transferred Employee Benefits
Schedule 5.07(b)(ix) - Transferred Employee Deductions
Schedule 5.07(c)(i) - Certain Employees
EXHIBITS
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Exhibit A - Example of Working Capital Calculation
Exhibit B - Form of Transition Services Agreement
Exhibit C - Form of Interim Order
Exhibit D - Form of 363/365 Order
Exhibit E - Bidding Procedures
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of September 28, 1999 (the
"Agreement"), is made by and among Favorite Brands International Holding Corp.,
a Delaware corporation, Favorite Brands International, Inc., a Delaware
corporation, Sather Trucking Corporation, a Delaware corporation and Trolli,
Inc., a Delaware corporation (collectively, the "Sellers"), and Nabisco, Inc., a
New Jersey corporation, Nabisco Brands Company, a Delaware corporation, and
Nabisco Technology Company, a Delaware corporation (collectively, the
"Purchasers"). Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in Article 9.
WHEREAS, the Sellers are engaged in the business of developing,
manufacturing, marketing, selling and delivering candy and confectionary
products (collectively, the "Business");
WHEREAS, the Sellers sought relief under Chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code") by filing a case (the "Chapter 11
Case") in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court");
WHEREAS, the Purchasers desire to purchase the assets of each of the
Sellers related to the Business and assume certain liabilities from the Sellers,
and the Sellers desire to sell, convey, assign and transfer to the Purchasers,
substantially all of the assets and properties related to the Business together
with certain obligations and liabilities relating thereto, all in the manner and
subject to the terms and conditions set forth herein and in accordance with
Sections 363 and 365 and other applicable provisions of the Bankruptcy Code; and
WHEREAS, the Acquired Assets will be sold pursuant to an order of the
Bankruptcy Court approving such sale under Section 363 of the Bankruptcy Code,
and such sale will include the assumption and assignment of certain executory
contracts and unexpired leases and liabilities thereunder under Section 365 of
the Bankruptcy Code and the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
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ARTICLE 1
PURCHASE AND SALE OF ASSETS
Section 1.01. Acquired Assets.
(a) Section 363 Assigned Assets. Pursuant to Section 363 of the
Bankruptcy Code and on the terms and subject to the conditions precedent
set forth in Article 6 of this Agreement, at the Closing the Sellers shall
sell, assign, transfer, convey, and deliver to the Purchasers, and the
Purchasers shall purchase and accept from the Sellers, all of the Sellers'
rights, title, and interests in, to and under all of the assets, property,
rights and claims of the Sellers related to the Business, of every kind and
description, wherever located, real, personal or mixed, whether tangible or
intangible, owned, held or used in the conduct of the Business by the
Sellers as the same shall exist on the Closing Date, including all such
assets shown on the Balance Sheet which have not been subsequently disposed
of in the ordinary course of business, and all such assets of the Business
thereafter acquired by the Sellers (collectively, the "Section 363 Assigned
Assets"); provided that the Section 363 Assigned Assets shall not include
any executory contracts or unexpired leases, which are dealt with
exclusively in Section 101(b) nor shall they include the Excluded Assets as
provided in Section 1.02.
(b) Section 365 Assumed Rights. Pursuant to Section 365 of the
Bankruptcy Code, at the Closing the Sellers shall assume and assign to the
Purchasers, and the Purchasers shall accept from the Sellers, all of the
Sellers' rights under and title and interest in (1) all of Sellers'
executory contacts and unexpired leases listed on Schedule 3.07(a) but
excluding such contracts and leases listed on Schedule 3.07(a) that have
been marked with an asterisk ("*"); (2) all of Sellers' other executory
contracts and unexpired leases entered into in the ordinary course prior to
the date hereof which are not within the scope of the definition of
Material Contract; and (3) all of Sellers' executory contracts and
unexpired leases entered into in the ordinary course after the date hereof
and not in contravention of Section 5.09 (collectively, the "Section 365
Assumed Rights"). The executory contracts listed on Schedule 3.07 that have
been marked with an asterisk ("*") and any other executory contracts or
leases not included as Section 365 Assumed Rights are referred to herein as
the "Excluded Contracts."
(c) Intellectual Property Rights. The assets so transferred shall,
pursuant to Sections 363 and 365 of the Bankruptcy Code, include all
rights, title and interest in, to and under all Intellectual Property, in
each
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case owned or licensed by the Sellers and used or held or held for use in
the Business, including the items listed in Schedule 308(a).
Section 1.02. Excluded Assets. Notwithstanding the foregoing, the
Purchasers expressly understand and agree that (a) the assets and properties of
the Sellers listed on Schedule 1.02 and (b) the Excluded Contracts
(collectively, the "Excluded Assets") shall be excluded from the Acquired
Assets.
Section 1.03. Cure Costs. The Sellers shall take all necessary steps,
including paying all necessary costs, to achieve cure and reinstatement of and
the assumption and assignment of the Section 365 Assumed Rights.
Section 1.04. Assumed Liabilities. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Purchasers shall
assume from the Sellers and thereafter pay, perform or discharge in accordance
with their terms (a) all of the liabilities and obligations of the Sellers
arising after March 30, 1999 in the ordinary course of business and reflected or
required to be reflected on the Closing Balance Sheet, (b) all of the
obligations and liabilities related to the Section 365 Assumed Rights, (c) all
liabilities and obligations arising under Environmental Laws in connection with
any Real Property included in the Acquired Assets; (provided that the Purchaser
shall not assume any liabilities and obligations arising out of or relating to
(i) transportation of, arrangement for transportation of, disposal or
arrangement for disposal of, Hazardous Substances or other materials prior to
the Closing Date at any location other than the Real Property included in the
Acquired Assets or (ii) any property or facility owned, leased or operated prior
to the Closing Date by any Seller or otherwise relating to the operation of the
Business that is not included in the Acquired Assets), (d) any obligation or
liability for sales, use and property taxes attributable to the period beginning
on or after March 31, 1999, (e) liabilities and obligations arising after March
30, 1999 related to product returns and product liability and product warranty
claims and (f) the liabilities and obligations that Purchasers agree to perform
or assume in Section 5.07. The Liabilities to be assumed pursuant to this
Agreement shall be referred to herein as the "Assumed Liabilities."
Section 1.05. Excluded Liabilities. Notwithstanding any provision in this
Agreement or any other writing or commitment (written or oral) to the contrary,
the Purchasers are assuming only the Assumed Liabilities and are not assuming
any other liability or obligation of the Sellers (or any predecessors of the
Sellers or any prior owners of all or part of their businesses and assets) of
whatever nature, whether presently in existence or arising hereafter. All such
other liabilities and obligations shall be retained by and remain obligations
and liabilities of the Sellers (all such liabilities and obligations not being
assumed being herein referred to as the "Excluded Liabilities"). Notwithstanding
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anything to the contrary in Section 1.04, none of the following shall be Assumed
Liabilities for the purposes of this Agreement:
(a) any liability or obligation under any Environmental Laws that is
not an Assumed Liability;
(b) any liability or obligation related to a Retained Employee;
(c) any liability or obligation for Designated Chapter 11 Costs and
any contracts related thereto;
(d) any liability or obligation for indebtedness for borrowed money or
evidenced by bonds or notes (including accrued interest and fees with
respect thereto);
(e) any liability or obligation for (i) any Tax imposed by the Code,
(ii) any foreign, state or local income or franchise Tax, (iii) any Tax as
a result of having been a member of an affiliated, consolidated, combined
or unitary group and (iv) any Tax described in clause (2) of the definition
of Tax;
(f) (i) one-half of the amounts payable to the Post-Closing Employees
pursuant to the Approved Employee Orders and (ii) $165,000 payable to Tom
Polke in connection with the sale of the General Line Candy business; and
(g) any liability or obligation relating to an Excluded Asset.
Section 1.06. Purchase Price.
(a) In consideration for the Acquired Assets, the Purchasers shall pay
to the Sellers at the Closing an aggregate of $475,000,000 in cash (the
"Purchase Price") less the Good Faith Deposit and any interest credited
thereon, by wire transfer. The Purchase Price shall be paid as provided in
Section 202(b) and shall be subject to post-closing adjustment as provided
in Section 109.
(b) The Purchase Price (plus Assumed Liabilities to the extent
properly taken into account under Section 1060 of the Code) shall be
allocated among the Acquired Assets acquired by each of the Purchasers as
agreed upon by the Purchasers and the Sellers after the Closing. The
Purchasers and the Sellers agree to be bound by such allocation and to
file, according to Section 1060 of the Code, all returns and reports with
respect to the transactions contemplated by this Agreement, including, but
not
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limited to, all federal, state and local tax returns on the basis of such
allocation. If an adjustment is made with respect to the Purchase Price
pursuant to Section 1.09, the allocation shall be adjusted in accordance
with Section 1060 of the Code and as agreed by the Purchasers and the
Sellers. The Purchasers and the Sellers agree to file any additional
information return required to be filed pursuant to Section 1060 of the
Code and to treat the adjusted allocation in the manner described above.
Section 1.07. Good Faith Deposit. Within seven days of the execution of the
Agreement, the Purchasers shall deliver to the Sellers a wire transfer payable
to the order of an escrow agent to be jointly selected by Purchasers and Sellers
(the "Escrow Agent"), in the amount of $5,000,000 (the "Good Faith Deposit").
The Escrow Agent will hold the money pursuant to a customary escrow agreement in
form and substance reasonably satisfactory to the Purchasers and Sellers. The
Good Faith Deposit will be invested as the Purchasers may direct consistent with
Sellers' investment guidelines as approved by the Bankruptcy Court. The Good
Faith Deposit may be retained by the Sellers only in two circumstances: (a) at
the Closing as a credit against the Purchase Price or (b) if this Agreement is
terminated pursuant to Section 7.01(ix). In all other circumstances, the Good
Faith Deposit shall be returned to the Purchasers promptly after termination of
this Agreement.
Section 1.08. Closing Balance Sheet. (a) As promptly as practicable, but no
later than 45 days, after the Closing Date, Sellers will cause to be prepared
and delivered to Purchasers the Closing Balance Sheet, together with a review
report from Arthur Andersen certifying that the Closing Balance Sheet has been
prepared in accordance with the terms of this Agreement, and a schedule based on
such Closing Balance Sheet setting forth Sellers' calculation of Closing Working
Capital. The Closing Balance Sheet ("Closing Balance Sheet") shall (a) fairly
present in all material respects the consolidated financial position of the
Business as at the close of business on the Closing Date in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
basis consistent with those used in the preparation of the Balance Sheet (but
shall not include the footnotes and other disclosures normally required by
GAAP), (b) include line items substantially consistent with those in the Balance
Sheet, (c) be prepared in accordance with accounting policies and practices
consistent with those used in the preparation of the Balance Sheet (including
calculating reserves in accordance with the same methodology used to calculate
such reserves in preparation of the Balance Sheet), (d) not include any purchase
accounting or other adjustment arising out of the consummation of the
transactions contemplated hereby, (e) not give effect to the transactions
contemplated by this Agreement, and (f) exclude, in all cases, the effect
(including the Tax effect) of any act, decision, event or transaction after the
Closing not in the ordinary course of business consistent with past practices of
the Sellers or any subsidiary and excluding any provision for
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deferred income tax assets or liabilities. "Working Capital" means the excess of
the current portion of the Acquired Assets over the current portion of the
Assumed Liabilities. "Closing Working Capital" means the Working Capital as
reflected on the Closing Balance Sheet.
(b) If Purchasers disagree with Sellers' calculation of Closing Working
Capital delivered pursuant to Section 1.08(a), Purchasers may, within 30 days
after delivery of the documents referred to in Section 1.08(a), deliver a notice
to Sellers disagreeing with such calculation and setting forth Purchasers'
calculation of such amount. Any such notice shall be accompanied by a report
from Deloitte & Touche specifying those items or amounts as to which Purchasers
disagree. Any such notice of disagreement shall specify those items or amounts
as to which Purchasers disagree, and Purchasers shall be deemed to have agreed
with all other items and amounts contained in the Closing Balance Sheet and the
calculation of Closing Working Capital delivered pursuant to Section 1.08(a).
(c) If a notice of disagreement shall be delivered pursuant to Section
1.08(b), Purchasers and Sellers shall, during the 15 days following such
delivery, use their best efforts to reach agreement on the disputed items or
amounts in order to determine, as may be required, the amount of Closing Working
Capital. If, during such period, Purchasers and Sellers are unable to reach such
agreement, they shall promptly thereafter cause KPMG Peat Marwick, to review
this Agreement and the disputed items or amounts for the purpose of calculating
Closing Working Capital. In making such calculation, KPMG Peat Marwick shall
consider only those items or amounts in the Closing Balance Sheet or Sellers'
calculation of Closing Working Capital as to which Purchasers have disagreed.
KPMG Peat Marwick shall deliver to Purchasers and Sellers, within 30 days of
being engaged, a report setting forth such calculation. Such report shall be
final and binding upon Purchasers and Sellers. The cost of such review and
report shall be borne by Sellers if the difference between Final Working Capital
and Sellers' calculation of Closing Working Capital delivered pursuant to
Section 1.08(a) is greater than the difference between Final Working Capital and
Purchasers' calculation of Closing Working Capital delivered pursuant to Section
1.08(b), by Purchasers if the first such difference is less than the second such
difference and otherwise equally by Purchasers and Sellers.
(d) Purchasers and Sellers agree that they will, and agree to cause their
respective employees and independent accountants to, cooperate and assist in the
preparation of the Closing Balance Sheet and the calculation of Closing Working
Capital and in the conduct of the audits, reviews and negotiations referred to
in this Section, including without limitation, making available their books,
records, work papers and personnel. The Sellers shall be entitled to use the
Post-Closing Employees, and the Purchasers and Sellers shall be entitled to
review and have access to the books, records, work papers and personnel relating
to the Business,
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in connection with the preparation, reviews, audits, negotiations and other
related activities referred to in this Section 1.08.
Section 1.09. Post-Closing Adjustment of Purchase Price. (a) If Base
Working Capital exceeds Final Working Capital, Sellers shall pay to Purchasers,
as an adjustment to the Purchase Price, in the manner and with interest as
provided in Section 109(b), the sum of (i) the excess, if any, of $63 million
over Final Working Capital plus (ii) 35% of the excess, if any, of $74 million
over the greater of $63 million and Final Working Capital. If Final Working
Capital exceeds Base Working Capital, Purchasers shall pay to Seller, in the
manner and with interest as provided in Section 109(b), the sum of (i) the
excess, if any, of Final Working Capital over $90 million plus (ii) 20% of the
excess, if any, of the lesser of Final Working Capital and $90 million over $74
million. "Base Working Capital" means $74 million. "Final Working Capital" means
Closing Working Capital as shown in Sellers' calculation delivered pursuant to
Section 108(a), if no notice of disagreement with respect thereto is duly
delivered pursuant to Section 108(b); or if such a notice of disagreement is
delivered, as agreed by Purchasers and Sellers pursuant to Section 108(c) or in
the absence of such agreement, as shown in the independent accountant's
calculation delivered pursuant to Section 108(c). Set forth on Exhibit A are
sample calculations of the purchase price adjustments that would be payable
based on various amounts of Final Working Capital.
(b) Any payment pursuant to Section 109(a) shall be made at a mutually
convenient time and place within 10 days after the Final Working Capital has
been determined by delivery by Purchasers or Sellers, as the case may be, by
wire transfer in immediately available funds to such account of such other party
as may be designated by such other party; provided that (1) any payment by
Sellers pursuant to Section 1.09(a) shall be paid to Purchasers from the funds
escrowed pursuant to Section 2.02(b), and (2) to the extent such escrowed funds
are insufficient to satisfy the entire amount owing to Purchasers pursuant to
Section 1.09(a), then Sellers promptly shall deliver to Purchasers the remaining
balance in immediately available funds by wire transfer to an account of
Purchasers designated by Purchasers. The amount of any payment to be made
pursuant to this Section shall bear interest from and including the Closing Date
to but excluding the date of payment at a rate per annum equal to 8%. Such
interest shall be payable at the same time as the payment to which it relates
and shall be calculated daily on the basis of a year of 365 days and the actual
number of days elapsed.
Section 1.10. Transition Matters. On the Closing Date, the parties shall
execute an agreement (the "Transition Services Agreement"), substantially in the
form attached hereto as Exhibit B.
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Section 1.11. Release. On the Closing Date, the Purchasers shall release
the Sellers' officers, directors, shareholders and Retained Employees from any
and all claims, actions, causes of action and liabilities of any type related to
actions taken or omitted by such persons in such capacities, (whether known or
unknown, whether disputed or undisputed, whether fixed or contingent, whether
liquidated or unliquidated) other than claims related solely to this Agreement
or the transactions contemplated hereby. On the Closing Date, the Purchasers
shall release the Sellers from any and all claims, actions, causes of action and
liabilities of any type, whether known or unknown, whether disputed or
undisputed, whether fixed or contingent, whether liquidated or unliquidated
related to Nabisco, Inc. and Nabisco Brands Company v. Trolli, Inc. and Mederer
Corporation (Civil Action No. 97 CIV 4139 (S.D.N.Y.), J. Chin) (the "Nabisco
Claim"). Nothing herein shall release Sellers from (a) any claims that
Purchasers may have against Sellers for a breach of this Agreement or the
transactions contemplated hereby or (b) any claims that Purchasers may have
against Sellers as a result of being legally required to pay Excluded
Liabilities, provided that such claims must be made by Purchaser at least five
(5) business days prior to confirmation of the Sellers' Plan of Reorganization.
Except for the Nabisco Claim, the Purchasers represent that, to the knowledge of
the General Counsel of Nabisco, Inc., they do not intend to file a claim in the
Chapter 11 Case prior to the bar date order.
ARTICLE 2
THE CLOSING
Section 2.01. Closing. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom (Illinois) located at 333 West Wacker Drive, Suite 2100,
Chicago, Illinois 60606 at 10:00 a.m. on (a) within three business days after
the conditions set forth in Article 6 shall have been satisfied or waived or (b)
at such other time, date and place as shall be fixed by agreement among the
parties (the date of the Closing being herein referred to as the "Closing
Date").
Section 2.02. Deliveries at Closing.
(a) At the Closing, the Sellers shall deliver to the Purchasers (1)
such deeds, bills of sale, assignments of leases and contracts, and any
other instruments of conveyance (collectively, the "Conveyance Documents")
that are necessary or appropriate to effectuate the transfer of the
Acquired Assets to the Purchasers, and (2) such other documents,
instruments or certificates as the Purchasers or their counsel may
reasonably request.
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(b) At the Closing, the Purchasers shall deliver to the Sellers (1)
such duly executed instruments as are deemed necessary or appropriate to
effectuate the assumption of the Assumed Liabilities by the Purchasers; (2)
such other documents, instruments or certificates required to be delivered
as a condition precedent to the Seller's obligations under this Agreement,
or as the Sellers or their counsel may reasonably request; (3) $465,000,000
less the Good Faith Deposit, including interest credited thereon in
accordance with Section 107; and (4) $10,000,000 by wire transfer for
deposit pursuant to an escrow agreement which shall (i) be in form and
substance reasonably satisfactory to Purchasers and Sellers; and (ii)
provide that such funds shall be used to satisfy Sellers' obligations, if
any, pursuant to Section 1.09 of this Agreement, and for no other purpose.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally represent and warrant to the Purchasers
as follows:
Section 3.01. Organization. The Sellers are corporations duly organized,
validly existing and in good standing under the laws of the jurisdiction of
their incorporation and have the corporate power and authority and all necessary
governmental approvals to own, lease and operate their properties and to carry
on their business, and are in good standing, in each jurisdiction where the
operations of the Business require such qualification, except where the failure
to have such authority or approvals or to be so qualified would not individually
or in the aggregate have a Material Adverse Effect.
Section 3.02. Authority Relative to this Agreement. The Sellers have the
corporate power and authority to enter into this Agreement and to carry out
their obligations hereunder. The execution, delivery and performance of this
Agreement by the Sellers and the consummation by the Sellers of the transactions
contemplated hereby have been duly authorized by all requisite corporate action.
This Agreement has been duly and validly executed and delivered by the Sellers
and (assuming this Agreement constitutes a valid and binding obligation of the
Purchasers), will constitute a valid and binding obligation of the Sellers upon
the entry of the Section 363/365 Order, except for the provisions of Section
7.02 hereof which shall become the binding obligation of the Sellers upon the
entry of the Interim Order.
Section 3.03. Consents and Approvals. No consent, approval, or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required to be made or obtained by the Sellers in
connection with the execution, delivery and performance of this Agreement and
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the consummation of the transactions contemplated hereby, except (a) for
consents, approvals or authorizations of, or declarations or filings with, the
Bankruptcy Court, (b) for consents, approvals or authorizations which may be
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (c) for consents, approvals, authorization,
declarations, filings or registrations, which, if not obtained, would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 3.04. Financial Statements. The Sellers have heretofore delivered
to the Purchasers financial statements (the "Financial Statements") for the
fiscal year ended June 26, 1999. The Financial Statements fairly present in all
material respects the financial condition, cash flows, changes in stockholders
equity and results of operation of the Business as at the dates thereof and for
the period then ending in accordance with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto).
Section 3.05. Certain Assets.
(a) Schedule 305(a) sets forth the street addresses of all real
property used or held for use in the Business (the "Real Property"), which
the Sellers own, lease, operate or sublease, specifying whether such Real
Property is owned or leased and in the case of leases or subleases, the
name of the lessor or sublessor.
(b) The Sellers (i) own fee-simple title to the Real Property
designated on Schedule 3.05(a) as being owned by the Sellers and (ii) have
a valid leasehold interest in the Real Property designated on Schedule
3.05(a) as being leased by Sellers. The Sellers have good and valid title
to, or a valid leasehold interest in, all material tangible personal
property included in the Acquired Assets.
(c) Except as described in Schedule 305(c), as of Closing all leases
of Real Property or personal property will be valid, binding and
enforceable in accordance with their respective terms and there does not
exist under any such lease, any default or any event which with notice or
lapse of time or both would constitute a default other than defaults caused
solely by filing the Chapter 11 Case or defaults that will be cured
pursuant to Section 1.03 of this Agreement.
(d) Except for (i) the Excluded Assets and (ii) other nonmaterial
assets owned by customers of the Sellers that are used by Sellers to
produce product for such customers, the Acquired Assets constitute all of
the property and assets used or held for use in the Business and are
adequate to conduct the Business as currently conducted.
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(e) Upon consummation of the transactions contemplated hereby, the
Purchasers will have acquired good title in and to, or a valid leasehold
interest in, as applicable, each of the Acquired Assets, free and clear of
all Liens other than Liens related to the Assumed Liabilities and Permitted
Exceptions.
Section 3.06. Brokers. No person is entitled to any brokerage, financial
advisory or finder's fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Sellers that would be payable by Purchasers.
Section 3.07. Material Contracts.
(a) Except as disclosed in Schedule 307(a) as of the date hereof, the
Sellers are not a party to or bound by:
(i) any (x) lease for real property or (y) lease for personal
property requiring aggregate payments after Closing of $100,000 or
more;
(ii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets that has a term of at least
one year or that requires aggregate payments after Closing of $100,000
or more;
(iii) any agreement that requires aggregate payments after
Closing of $100,000 or more;
(iv) any sales, distribution or other similar agreements not
entered into in the ordinary course providing for the sale by the
Sellers of materials, supplies, goods, services, equipment or other
assets that requires aggregate payments after Closing of $100,000 or
more;
(v) any partnership, joint venture or other similar agreement
or arrangement;
(vi) any agency, dealer, sales representative, marketing or
other similar agreement; or
(vii) any agreement that limits the freedom of the Sellers to
compete in any line of business or with any Person or in any area or
to own, operate, sell, transfer, pledge or otherwise dispose of or
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encumber any Acquired Asset or which would so limit the freedom of the
Purchasers after the Closing Date.
The agreements and contracts required to be disclosed on Schedule
3.07(a) are referred to herein as the "Material Contracts". Notwithstanding
anything else in this Section 3.07(a), if any agreement by its terms can be
completed or terminated by Sellers (by providing notice of termination or
otherwise) with an aggregate cost to the Sellers of less than $100,000,
then such agreement shall not be considered a Material Contract.
(b) Except as set forth as Schedule 3.07(b), each Material Contract is
a valid and binding agreement of the Sellers, and to the Sellers'
knowledge, the other party thereto and is in full force and effect, and
none of the Sellers or, to the knowledge of the Sellers, any other party
thereto is in default or breach in any material respect under the terms of
any Material Contract and no event or circumstance has occurred that, with
notice or lapse of time or both, would constitute a default or breach
thereunder (except for defaults and breaches caused solely by filing the
Chapter 11 Case or that will be cured pursuant to Section 1.03 of this
Agreement). True and complete copies of each Material Contract have been
delivered to the Purchasers.
Section 3.08. Intellectual Property.
(a) Schedule 308(a) of this Agreement contains a complete and accurate
list of all registered trademarks, patents and copyrights owned or licensed
by the Sellers as of the date hereof and used in the Business (the
"Business Intellectual Property"). With respect to the trademarks and U.S.
patents listed on Schedule 3.08(a), such schedule also specifies (1) the
jurisdictions in which such trademarks or U.S. patents are registered or in
which an application for registration has been filed; (2) the registration
or application numbers; (3) with respect to the trademarks, the termination
or expiration dates; and (4) whether the owner thereof is not one of the
Sellers.
(b) Schedule 308(b) sets forth a list of all licenses, sublicenses and
other agreements as to which the Sellers are a party and pursuant to which
any Person is authorized to use any Business Intellectual Property.
(c) Except as set forth on Schedule 3.08(c), as of the date hereof,
since January 1, 1999, no Seller has been a defendant in any action, suit
or proceeding relating to, and has not received any written claim alleging
that the Sellers are infringing upon the Intellectual Property of others.
To the
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Sellers' knowledge, no other person is infringing upon any Business
Intellectual Property and no Seller is infringing upon the Intellectual
Property of any other Person except in each case as would not have a
Material Adverse Effect. No Business Intellectual Property is subject to
any outstanding judgment, injunction, order, decree or agreement
restricting the use thereof by the Sellers with respect to the Business or
restricting the licensing thereof by the Sellers to any Person.
Section 3.09. Required and Other Consents. Schedule 309 sets forth each
agreement, contract, lease or other instrument binding upon Sellers that will
constitute an Assumed Liability which requires the consent or other action by
any Person as a result of the execution, delivery and performance of this
Agreement, unless such document can be assumed and assigned without such consent
under the Bankruptcy Code except such consents or actions as would not,
individually or in the aggregate, have a Material Adverse Effect if not received
or taken by the Closing Date.
Section 3.10. Absence of Certain Changes. Except as disclosed in Schedule
310 or authorized by the Bankruptcy Court prior to the date hereof, since the
Balance Sheet Date, the Business has been conducted in the ordinary course, and
there has not been:
(a) any event, occurrence, development or state of circumstances or
facts which, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect;
(b) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Acquired Asset which,
individually or in the aggregate, has had or could reasonably be expected
to have individually or in the aggregate a Material Adverse Effect;
(c) any change in any method of accounting or accounting practice by
the Sellers with respect to the Business except for any such change after
the date hereof required by reason of a change in GAAP;
(d) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Business, which employees were not subject to
a collective bargaining agreement at the Balance Sheet Date, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to employees of the Business; or
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(e) any sale or other disposition of any material assets other than
sales of products in the ordinary course of business.
Section 3.11. Litigation and Proceedings. Schedule 3.11 contains an
accurate list of all legal actions, suits and proceedings pending as of the date
hereof against any Seller, whether or not stayed pursuant to Section 362 of the
Bankruptcy Code. Except as described in Schedule 3.11, there is no action, suit,
investigation or proceeding pending against or threatened against or affecting
the Business or any Acquired Asset before any court or arbitrator or any
government body, agency or official which (a) could reasonably be expected to
have individually or in the aggregate, a Material Adverse Effect or (b) in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
Section 3.12. Compliance with Laws and Court Orders. The Business has since
March 30, 1999 been conducted in compliance with all laws, statutes, rules,
regulations, judgments, injunctions, orders or decrees applicable to the
Acquired Assets or the conduct of the Business and since January 1, 1999 the
Sellers have not received any written communication from a government authority
that alleges that the Business has not been conducted in compliance with any
laws, statutes, rules, regulations, judgements, injunctions, orders or decrees,
except in each case for violations that have not had and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 3.13. Products. None of the products produced or sold by the
Sellers since January 1, 1998 in connection with the Business were adulterated,
contaminated or misbranded, in any material respect, within the meaning of the
Federal Food, Drug and Cosmetic Act, as amended (the "FDA Act"), or any other
federal, state or local law, rule or regulation, nor will any of the same
constitute articles prohibited from introduction into interstate commerce under
the provisions of Section 302(d), 404, 405 or 505 of the FDA Act.
Section 3.14. Inventories. Since the Balance Sheet Date, the inventories
related to the Business have been maintained in the ordinary course of business.
After giving effect to any applicable reserves, all of the inventories recorded
on the Balance Sheet consist of, and all inventories related to the Business on
the Closing Date will consist of, items of a quality usable or saleable in the
normal course of the Business consistent with past practices and are and will be
in quantities reasonable for the normal operation of the Business in accordance
with past practice.
Section 3.15. Receivables. All accounts receivable (other than receivables
collected since the Balance Sheet Date) reflected on the Balance Sheet are valid
and fully collectible in the aggregate amount thereof, subject to trade
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discounts, less any applicable reserves recorded on the Balance Sheet. All
accounts receivable arising out of or relating to the Business at the Balance
Sheet Date have been included in the Balance Sheet, in accordance with GAAP
applied on a consistent basis.
Section 3.16. Environmental Compliance. Seller has provided Purchasers with
copies of the environmental reports and other documents listed on Schedule
3.16(a) (the "Environmental Reports"), which constitute all material
environmental reports prepared by Sellers (or at Sellers' direction) and with
respect to the Acquired Assets. Except for (x) matters disclosed in the
Environmental Reports (provided that the amount of costs or damages that may
arise from such matter are of substantially the same magnitude as those that
would reasonably be likely to have been foreseen after reading the Environmental
Reports), and (y) matters not so disclosed that would not (i) have a material
adverse effect on the use or operations of the Real Property, (ii) require
remediation involving material costs at the Real Property or (iii) result in a
Material Adverse Effect, in connection with the operations of the Business or
ownership, lease or operation of the Real Property (1) Sellers are in compliance
with all applicable Environmental Laws and there are no liabilities arising in
connection with or relating to the Sellers, the Real Property, Business or
Acquired Assets of any kind whatsoever, whether accrued, contingent, absolute,
determinable or otherwise, arising under or relating to any Environmental Laws;
(2) Sellers have received no written notices of violations or demand from any
other person arising under such Environmental Laws and there are no governmental
investigations pending or threatened regarding the Sellers' compliance with or
liability under any Environmental Laws except, in each case for violations or
demands which have been corrected or liability which has been resolved; (3)
Sellers have all Environmental Permits required under Environmental Laws; (4)
there are no Hazardous Substances on the Real Property which require any
remediation or cleanup under applicable Environmental Laws; and (5) except as
disclosed on Schedule 3.16(b) none of the Acquired Assets or the Real Property
is located in New Jersey or Connecticut.
Section 3.17. Conduct of Activities. Each Seller is a debtor in its Chapter
11 Case. All of the operations of the Business are operated by Sellers except
for the operations of Trolli De Mexico which operates solely as a sales office
for Trolli's sales in Mexico.
Section 3.18. No Material Liabilities. There are no material liabilities
which will be an Assumed Liability other than liabilities assumed pursuant to
Section 1.04(a), (b), (d) and (f).
SELLER MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE ACQUIRED
ASSETS, THE ASSUMED LIABILITIES OR
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THE BUSINESS EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY MADE IN SECTION 3,
INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION,
MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY OF THE
ACQUIRED ASSETS, AND IT IS UNDERSTOOD THAT, EXCEPT FOR THE EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT, BUYER
TAKES THE ASSETS ON AN "AS IS" AND "WHERE IS" BASIS.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers represent and warrant to the Sellers as follows:
Section 4.01. Organization. Each Purchaser is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted. Each Purchaser is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification appropriate, except where
the failure to be so qualified would not individually or in the aggregate have a
material adverse effect on such Purchaser's ability to complete the transactions
contemplated by this Agreement.
Section 4.02. Authority Relative to this Agreement. Each Purchaser has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery, and performance of this
Agreement by the Purchasers and the consummation by the Purchasers of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement has been duly and validly executed and
delivered by each Purchaser and (assuming this Agreement constitutes a valid and
binding obligation of the Sellers) constitutes a valid and binding agreement of
each Purchaser, enforceable against such Purchaser in accordance with its terms,
except as enforceability against Purchasers may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium, and other laws of similar
application affecting creditors' rights generally against Purchasers from time
to time, in effect and to general equitable principles.
Section 4.03. Consents and Approvals. Except for consents, approvals or
authorizations which may be required under the HSR Act, no consent, approval, or
authorization of, or declaration, filing or registration with, any United States
federal or state governmental or regulatory authority is required to be made or
obtained by the any Purchaser in connection with the execution, delivery, and
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performance of this Agreement and the consummation of the transactions
contemplated hereby.
Section 4.04. No Violations. Assuming that the conditions set forth in
Article 6 shall have been satisfied, neither the execution, delivery or
performances of this Agreement by the Purchasers, nor the consummation by the
Purchasers of the transactions contemplated hereby, nor compliance by the
Purchasers with any of the provisions hereof, will (a) conflict with or result
in any breach of any provisions of the articles or certificate of incorporation,
as the case may be, or bylaws of the Purchasers, (b) result in a violation or
breach of, or constitute (with or without due notice or lapse of time) a default
(or give rise to any right of termination, cancellation, acceleration, vesting,
payment, exercise, suspension, or revocation) under any of the terms, conditions
or provisions of any note, bond, mortgage, deed of trust, security interest,
indenture, license, contract, agreement, plan or other instrument or obligation
to which any Purchaser is a party or by which any Purchaser or the Purchasers'
properties or assets may be bound or affected, (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to any Purchaser or
the Purchasers' properties or assets, (d) result in the creation or imposition
of any encumbrance on any asset of any Purchaser, or (e) cause the suspension or
revocation of any permit, license, governmental authorization, consent or
approval necessary for any Purchaser to conduct its business as currently
conducted, except in the case of clauses (b), (c), (d), and (e) for violations,
breaches, defaults, terminations, cancellations, accelerations, creations,
impositions, suspensions or revocations that would not individually or in the
aggregate have a material adverse effect on the Purchasers' ability to complete
the transactions contemplated by this Agreement.
Section 4.05. Brokers. Except for Warburg Dillon Read, no person is
entitled to any brokerage, financial advisory, finder's or similar fee or
commission payable by the Purchasers in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Purchasers.
Section 4.06. Financing. On the Closing Date, the Purchasers will have cash
on hand or financing sufficient to deliver the Purchase Price to the Sellers.
ARTICLE 5
COVENANTS
Section 5.01. Notice of the Section 363/365 Motion and Section 363/365
Order. The Sellers shall notify, as is required by the Bankruptcy Code, all
parties entitled to notice of the Section 363/365 Motion, the Section 363/365
Order and/or the Section 363/365 Interim Order, as modified by orders in respect
of notice which may be issued at any time and from time to time by the
Bankruptcy Court.
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Section 5.02. Access and Information. After entry of the Interim Order, the
Sellers shall afford to the Purchasers and to the Purchaser's financial
advisors, legal counsel, accountants, consultants, financing sources and other
authorized representatives reasonable access during normal business hours
throughout the period prior to the Closing Date to the books, records,
properties and personnel of the Sellers and, during such period, shall furnish
as promptly as practicable to the Purchasers any and all such information as the
Purchasers reasonably may request, including all pleadings and other documents
or schedules filed with the Bankruptcy Court, provided that (a) such access does
not unreasonably interfere with the normal operations of the Sellers or the
Business (b) the Sellers need not disclose any competitively sensitive
information, and (c) all requests for information and access to the Sellers'
facilities, and all proposed contracts with Sellers' personnel shall be approved
in advance (which approval shall not unreasonably be withheld) by its President,
Steven Kaplan or its General Counsel, Brooks Gruemmer, Mike Alger, Mary Kaye
Sinclair and Mitch Liss.
Section 5.03. Books and Records.
(a) If the Purchasers wish to dispose of or destroy any of the
business records or files of the Business which are transferred to the
Purchasers pursuant to this Agreement, they shall first give 60 days' prior
written notice to the Sellers, and the Sellers shall have the right, at
their option and expense, upon prior written notice to the Purchasers
within such 60-day period, to take possession of such records and files
within 90 days after the date of the notice from the Sellers.
(b) The Purchasers shall allow the Sellers and any of their directors,
officers, employees, counsel, representatives, accountants and auditors
(collectively, the "Sellers' Representatives") access to all business
records and files of the Sellers or the Business that are transferred to
the Purchasers in connection herewith, which are reasonably required by
such Sellers' Representatives in order to complete the Chapter 11 Case,
during regular business hours and upon reasonable notice at the Sellers'
former offices and the Sellers' Representatives shall have the right to
make copies of any such records and files; provided, however, that any such
access or copying shall be had or done in such a manner so as not to
unreasonably interfere with the normal conduct of the Purchasers' business
or operations. This Section 5.03 shall cease to be enforceable after
Sellers complete the Chapter 11 Case. The provisions of Article 10 shall
control access to records for the matters covered by Article 10.
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Section 5.04. Seven-Day Notice.
(a) At any time between seven and eight days prior to the Auction (as
defined in Exhibit E), Sellers may deliver to Purchasers a certificate (the
"Seven-Day Notice") stating that the Sellers' representations and
warranties in this Agreement are true and correct except as set forth
therein. Sellers promptly shall provide such additional information
relating to the matters included in the Seven-Day Notice (including full
and prompt access to any of Sellers' officers, employees, consultants and
professionals) as Purchasers reasonably may request, which shall be in
addition to and not limited by any rights of Purchasers under Section 5.02.
(b) If Sellers notify Purchasers that, subject to the Purchasers'
affirmative response, Purchasers have made the Successful Bid (as defined
in Schedule E), then Purchasers (promptly, but no later than 24 hours after
being so notified) shall notify Sellers whether, based on the information
provided to Purchasers pursuant to Section 5.04(a), Purchasers deem Section
6.03(a) as being satisfied. If within such 24-hour period the Purchasers
shall not have delivered any notice to Sellers, then Purchasers shall be
deemed to have waived the condition set forth in Section 6.03(a) with
respect to the information set forth in the Seven-Day Notice.
(c) Notwithstanding any affirmative response or deemed waiver by
Purchasers under Section 5.04(b), if prior to Closing Purchasers learn any
new or additional information relevant to the satisfaction of the condition
set forth in Section 6.03(a), then whether such condition is satisfied
shall be determined based on all information available at such time,
including the matters disclosed in or pursuant to the Seven-Day Notice.
Section 5.05. Additional Matters. Subject to the terms and conditions
herein, except as provided by the Bankruptcy Code, the Bankruptcy Rules or any
other orders entered or approvals or authorizations granted by the Bankruptcy
Court in the Chapter 11 Cases, including any order contemplated by Section
7.01(ii) hereof, each of the parties hereto agrees to use all commercially
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable, including under
applicable laws and regulations, to consummate and make effective the
transactions contemplated by this Agreement, including using all commercially
reasonable efforts to obtain all necessary waivers, consents and approvals
required under this Agreement. Without limiting the foregoing, the Purchasers
and the Sellers shall (a) no later than five (5) business days after the
execution of this Agreement, make all filings required under the HSR Act, (b)
use their respective commercially reasonable
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efforts to seek early termination of the 15 days waiting period under the HSR
Act, (c) respond promptly, but in no event in less than two (2) weeks, to any
additional requests for information under the HSR Act and (d) take all other
action necessary to expedite compliance with the HSR Act in order to consummate
the transactions contemplated hereby.
Section 5.06. Further Assurances. In addition to the provisions of this
Agreement, from time to time after the Closing Date, the Sellers and the
Purchasers will use all commercially reasonable efforts to execute and deliver
such other instruments of conveyance, transfer or assumption, as the case may
be, and take such other action as may be reasonably requested to implement more
effectively the conveyance and transfer of the Acquired Assets to the Purchasers
and the assumption of the Assumed Liabilities by the Purchasers. The Purchasers
and each Seller hereby irrevocably consent to the personal and subject-matter
jurisdiction of the Bankruptcy Court for all purposes necessary to effectuate
this Section. Each Seller will seek to include in any plan of reorganization in
any of the Chapter 11 Cases supported by it, provision for retained jurisdiction
of the Bankruptcy Court to effectuate this Section 5.06, and will use
commercially reasonable efforts to oppose any such plan of reorganization which
fails to include such provisions.
Section 5.07. Employees and Benefit Programs.
(a) Employee Benefits Definitions. The following terms, as used
herein, having the following meanings:
"Approved Employee Orders" means the Orders approved by the
Bankruptcy Court and listed as Item I. of Schedule 3.07(a).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" of any entity means any other entity which,
together with such entity, would be treated as a single employer under
Section 414 of the Code.
"International Plan" means an employment, severance or similar
contract, arrangement or policy (exclusive of any such contract which
is terminable within 30 days without liability of the Sellers or any
of its ERISA Affiliates), or a plan or arrangement providing for
severance, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits,
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pension or retirement benefits or for deferred compensation, profit-
sharing, bonuses, stock options, stock appreciation rights or other
forms of incentive compensation or post-retirement insurance,
compensation or benefits that (a) is not an Employee Plan or a Benefit
Arrangement, (b) is maintained or contributed to by the Sellers or any
ERISA Affiliate of Sellers and (c) covers any employee or former
employee of the Sellers or any of their subsidiaries.
"Multiemployer Plan" means each Employee Plan that is a
multiemployer plan, as defined in Section (37) of ERISA.
"Non-Transferred Liabilities" has the meaning set forth in
Section 5.07(d)(ii)
"Post-Closing Employees" has the meaning set forth in Section 1.1
of the Transition Services Agreement.
"Retained Employees" means the employees listed on Schedule
5.07(a).
"Sellers' Employee Liabilities" means all liabilities,
obligations and commitments arising out of or related to the
employment (or termination of employment) by each Seller of all Active
Employees who are not Retained Employees, including, but not limited
to, any obligation or liability for (a) accrued but unpaid wages,
salary, incentive or bonus compensation, vacation benefits and pay, or
other compensation, (b) all claims for severance or other termination
benefits, (c) all workers compensation claims, and (d) all claims
under the agreements, arrangements and other policies promulgated by
the Sellers pursuant to the Approved Employee Orders, provided,
however, that Sellers' Employee Liabilities shall not include (i)
employee tort claims or claims under federal and state employee
discrimination or sexual harassment laws including claims under Title
VII of the Civil Rights Act of 1964; (ii) amounts payable in excess of
the amounts reflected in the Approved Employee Orders on the date
hereof; (iii) Sellers' Retained Employee Liabilities, and (iv) Non-
Transferred Liabilities.
"Sellers' Retained Employee Liabilities" has the meaning set
forth in Section 5.07(d)(i).
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(b) ERISA Representations. The Sellers hereby represent and warrant
to the Purchasers that:
(i) Schedule 5.07(b)(i) lists each "employee benefit plan", as
such term is defined in Section 3(3) of ERISA, which (A) is subject to
any provision of ERISA, (B) is maintained, administered or contributed
to by the Sellers or any of their ERISA Affiliates and (C) covers any
employee of the Business (hereinafter referred to collectively as the
"Employee Plans") and (ii) lists each employment, severance or other
similar contract and any material arrangement, policy, plan or
arrangement providing for insurance coverage (including any self-
insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation or other forms of incentive compensation
or post-retirement insurance, compensation or benefits which (D) is
not an Employee Plan, (E) is entered into, maintained or contributed
to, as the case may be, by the Sellers or any of their subsidiaries
and (F) covers any U.S. employee of the Business. Such contracts,
plans and arrangements are hereinafter referred to collectively as the
"Benefit Arrangements."
(ii) With respect to each Employee Plan, the Sellers have
provided (or will prior to Closing provide) a true and complete copy
of such plan document and the most recently filed Form 5500. Each
Benefit Arrangement has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such
Benefit Arrangement except where any such failure to do so would not,
individually or in the aggregate, have a Material Adverse Effect.
(iii) No Employee Plan is (x) a Multiemployer Plan, (y) an
International Plan or (z) subject to Title IV of ERISA. None of the
Sellers nor any of the Sellers' Affiliates has incurred any liability
under Title IV of ERISA arising in connection with the termination of
any plan covered or previously covered by Title IV of ERISA that could
become, after the Closing Date, an obligation of the Purchasers or any
of their Affiliates.
(iv) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust
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forming a part thereof is exempt from tax pursuant to Section 501(a)
of the Code. The Sellers have furnished to the Purchasers copies of
the most recent Internal Revenue Service determination or notification
letters with respect to each such Plan. Each Employee Plan has been
maintained in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable
to such Plan, except where any such failure to do so would not,
individually or in the aggregate, have a Material Adverse Effect.
(v) The Acquired Assets are not now nor will they after the
passage of time be subject to any Lien imposed under Code Section
412(n) by reason of the failure of the Sellers or their Affiliates to
make timely installments or other payments required by Code Section
412.
(vi) With respect to the employees of the Business, there are
no employee post-retirement medical or health plans in effect, except
as required by Section 601 of ERISA and Purchasers shall have no
responsibility for any such retiree benefits other than as set forth
in Schedule 5.07(b)(vi).
(vii) The Sellers have made available to Purchasers copies of
all material Employee Plans or Benefit Arrangements. Except as
disclosed in such copies, there has been no amendment to, written
interpretation of or announcement (whether written or not written) by
the Sellers relating to, or change in employee participation or
coverage under, any Employee Plan or Benefit Arrangement which would
increase materially the expense of maintaining such Employee Plan or
Benefit Arrangement above the level of the expense incurred in respect
thereof for the most recent fiscal year.
(viii) Except as set forth on Schedule 5.07(b)(viii), no
Transferred Employee will become entitled to any retirement, severance
or similar benefit solely as a result of the transactions contemplated
hereby.
(ix) Except as set forth on Schedule 5.07(b)(ix), there is no
contract, agreement, plan or arrangement covering any Transferred
Employee that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to the
terms of Code Section 280G.
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(c) Employees and Offers of Employment.
(i) Schedule 5.07(c)(i) sets forth a true and complete list of
the names, titles, and annual salaries of all employees of the
Business whose annual base salary exceeds $100,000.
(ii) The Purchaser shall assume, pay and perform all Sellers'
Employee Liabilities. On the Closing Date, the Purchasers shall offer
employment to all Active Employees of the Business; provided, that the
Purchasers may terminate at any time after the Closing Date the
employment of any employee who accepts such offer; provided, however,
that the Purchasers are solely responsible for any WARN Act
notification and any liability under the WARN Act for any failure to
notify employees, if any, relating to any termination of any of the
Active Employees on or after the Closing. For purposes of this Section
5.07, the term "Active Employee" shall mean any Person other than a
Retained Employee who, on the Closing Date, is actively employed by
the Sellers or who is on short-term disability leave, authorized leave
of absence, military service or lay-off with recall rights as of the
Closing Date (such inactive employees shall be offered employment by
the Purchasers as of the date they return to active employment), but
shall exclude any other inactive or former employee including any
Person who has been on long-term disability leave or unauthorized
leave of absence or who has terminated his or her employment, retired
or died on or before the Closing Date. Any such offers shall be at
such salary or wage and benefit levels that are substantially
comparable in the aggregate to either (A) the wages and benefits
(other than Benefit Arrangements implemented pursuant to the Approved
Employee Orders) made available by Sellers to such Active Employees
immediately prior to the Closing, or (B) the wages and benefits then
made available by the Purchasers to similarly-situated employees and
on such other terms and conditions as the Purchasers shall in its sole
discretion deem appropriate; provided, however, (y) Purchaser shall be
responsible for all Sellers' Employee Liabilities related to any
employees that do not accept such offer, and (z) however that
Purchasers are solely responsible for any WARN Act notification and
any liability under the WARN Act for any failure to notify employees,
if any, relating to any termination of any of the Active Employees on
or after the Closing. The employees who accept and commence employment
with the Purchasers are hereinafter collectively referred to as the
"Transferred Employees". Except in connection with the
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Transition Services Agreement, the Sellers will not take, and will
cause each of its subsidiaries not to take, any action which would
impede, hinder, interfere or otherwise compete with the Purchasers'
effort to hire any Transferred Employees. In addition, Purchasers
shall assume Sellers' obligations to continue health benefits for the
month in which the termination occurs for any employee who, during the
12 months ending on the Closing Date, has been terminated by the
Company.
(d) Sellers' Employee Benefit Plans.
(i) Except as provided in clause (e)(iv) below, the Sellers
shall retain all obligations and liabilities under the Employee Plans,
Benefit Arrangements or otherwise in respect of each Retained Employee
and each Person who is not an Active Employee (including any
beneficiary thereof ("Sellers' Retained Employee Liabilities")).
Except as expressly set forth herein, no assets of any Employee Plan
or Benefit Arrangement shall be transferred to the Purchasers or any
of their Affiliates or to any plan of the Purchasers or any of their
Affiliates. Accrued benefits or account balances of Transferred
Employees under the Employee Plans and Benefit Arrangements shall be
fully vested as of the Closing Date.
(ii) With respect to the Transferred Employees (including any
beneficiary or dependent thereof), the Sellers shall retain (A) all
liabilities and obligations arising under any group life, accident,
medical, dental or disability plan or similar arrangement that is
insured to the extent that such liability or obligation relates to
contributions or premiums accrued (whether or not payable), or to
claims incurred (whether or not reported), on or prior to the Closing
Date, (B) all liabilities and obligations arising under any worker's
compensation arrangement to the extent such liability or obligation is
insured and relates to the period prior to the Closing Date and (C)
except to the extent provided in Section 5.07(e)(ii), all other
liabilities and obligations arising under the Sellers' 401(k) Plans to
the extent any such liability or obligation relates to the period
prior to the Closing Date (the "Non-Transferred Liabilities").
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(e) Purchasers Benefit Plans.
(i) The Purchasers or one of their Affiliates will recognize
all service of the Transferred Employees with the Sellers (or their
predecessors) or any of their Affiliates, only for purposes of
eligibility to participate in and to vest under those employee benefit
plans, within the meaning of Section 3(3) of ERISA, in which the
Transferred Employees are enrolled by the Purchasers or one of their
Affiliates immediately after the Closing Date. The Purchasers shall
cause all pre-existing condition exclusions under any medical and
dental plans made available by the Purchasers to Transferred Employees
to be waived in respect of such Employees. Expenses incurred by
Transferred Employees under Seller's medical and dental plans during
the year that includes the Closing Date shall be taken into account
for purposes of satisfying deductible and coinsurance requirements and
satisfaction of out-of-pocket provisions of the Purchasers medical and
dental plans in which Transferred Employees participate for such year.
(ii) Account balances as of the Closing Date of the Transferred
Employees (including earnings thereon through the date of transfer)
under Sellers' 401(k) Plans, shall be transferred, in cash, to a
defined contribution plan of the Purchasers or one of their
Affiliates. The Purchasers and Sellers shall use their best efforts to
complete such transfer within 60 days of the Closing Date. Such
transfer shall be effected in accordance with applicable law and
regulations and the Purchasers shall make or cause to be made, and the
Sellers shall make or cause to be made, any required filings in
connection therewith. The Purchasers or one of their Affiliates may
require, as a condition to the acceptance of any such transfer,
evidence satisfactory to the Purchasers of the qualified status of the
401(k) Plans, including, if appropriate, a copy of a favorable
determination letter from the Internal Revenue Service. Sellers may
require, as a condition to making such transfer evidence satisfactory
to Sellers of the qualified status of Purchasers' defined contribution
plan, including a copy of a favorable determination letter form the
Internal Revenue Service. In consideration of such transfer, the
Purchasers or one of their Affiliates shall assume all liabilities to
Transferred Employees under Sellers' 401(k) Plans. Each of the parties
hereto shall pay its own expenses in connection with such transfer.
Neither the Purchasers nor any of their Affiliates shall assume any
other obligations or liabilities arising under or attributable to the
Sellers' 401(k) Plans, the same to be retained or assumed by the
Sellers.
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(iii) Purchasers shall make available to each Transferred
Employee who did not receive a written agreement pursuant to the
Approved Employee Orders and who is terminated during the 12-month
period commencing on the Closing Date a severance benefit
substantially comparable in the aggregate to the benefit made
available to such Employee by the Sellers immediately prior to the
Closing Date, which such benefit shall not exceed the greater of (x) 3
months of base salary or (y) one week of base salary for each year of
employment (plus COBRA coverage as required under Sellers' severance
policy).
(iv) Purchasers shall make COBRA continuation coverage available
under Purchasers' group health plans to each Retained Employees,
Active Employees, former employees of Sellers whose employment with
Sellers was terminated prior to Closing, and each of their qualified
beneficiaries whose qualifying event occurred prior to or in
connection with the Closing. For purposes of this paragraph, the
foregoing terms shall have the meanings given to them under IRS
regulations under Code Section 4980B.
(f) No Third Party Beneficiaries. No provision of this Article shall
create any third party beneficiary or other rights in any employee or
former employee (including any beneficiary or dependent thereof) of the
Sellers or of any of their subsidiaries in respect of continued employment
(or resumed employment) with either the Purchasers or the Businesses or any
of their Affiliates and no provision of this Section 5.07 shall create any
such rights in any such Persons in respect of any benefits that may be
provided, directly or indirectly, under any Employee Plan or Benefit
Arrangement or any plan or arrangement which may be established by the
Purchasers or any of their Affiliates. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate after the
Closing Date any such plans or arrangements of the Purchasers or any of
their Affiliates.
Section 5.08. Public Announcements. The Purchasers and the Sellers shall
consult with each other before issuing any press release or making any public
statement or other public communication with respect to the Agreement or the
transactions contemplated hereby. The Purchasers and the Sellers shall not issue
any such press release or make any such public statement or public communication
without the prior consent of the other party, which shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement
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as may, upon the advice of counsel, be required by law or any listing agreement
with any national securities exchange.
Section 5.09. Conduct of the Business. Except as otherwise provided herein
or authorized by the Bankruptcy Court prior to the date hereof, from the date
hereof until the Closing Date, the Sellers:
(a) shall conduct the Business in the ordinary course and shall use
commercially reasonable efforts to preserve intact the business
organizations and relationships with third parties and to keep available
the services of the present employees of the Business;
(b) shall not take or agree to commit to take any action that they
know would make any representation or warranty of Sellers hereunder
inaccurate in any material respect at, or as of any time prior to, the
Closing Date;
(c) shall not offer credit terms or trade promotions to any Major
Customers except in the ordinary course consistent with past practices with
respect to the applicable product lines of Sellers (Trolli, General Line
Candy, Fruit Snacks and Marshmallow) or except to the extent reasonably
necessary to be competitive with competitors' product offerings; and
(d) shall not, without Purchasers' Consent, enter into any contract
(other than a purchase order or sale order entered into in the ordinary
course) which requires aggregate payments of at least $500,000.
"Purchasers' Consent" means the Purchasers's consent (which shall not
unreasonably be withheld) to the matters described in clause (d) of this
Section. Purchasers shall be deemed to have given such consent if they
shall not have notified either of Brooks Gruemmer by e-mail
([email protected]) or facsimile (847-444-2123) or Steve Kaplan
by e-mail ([email protected]) or facsimile (847-444-2114) of their
disapproval of such contract or arrangement not later than the end of the
next business day after delivery of an e-mail communication to each of Rick
Pace ([email protected]) and Tom Whitten ([email protected]) which sets
forth the material terms and conditions of such contract or arrangement. If
Purchasers disapprove of any such arrangement or contract pursuant to this
clause (d), then any event, condition or matter that arises in connection
with, or as a result of, such disapproval shall not in any manner (i) be
deemed to be a breach of any of Sellers' representations, warranties,
covenants or obligations under this Agreement, or (ii) constitute a
Material Adverse Effect.
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As used in clause (c), "Major Customers" means the ten largest
customers (as measured by dollar value of fiscal year 1999 sales) of each of
Sellers' operating units (Trolli, General Line Candy, Fruit Snacks and
Marshmallow).
Section 5.10. Notices of Certain Events. The Sellers shall promptly notify
the Purchasers of damage or destruction by fire or other casualty of any
material Acquired Asset or in the event that any material Acquired Asset becomes
the subject of any proceeding or, to the knowledge of the Sellers, threatened
proceeding for the taking thereof or any part thereof or of any right relating
thereto by condemnation, eminent domain or other similar governmental action.
Section 5.11. No-shop Clause. From the date hereof until termination of
this Agreement, the Sellers shall not, and will not permit any Person acting for
or on behalf of the Sellers to, without the prior written consent of the
Purchasers, solicit offers to buy the Business, provided that the Sellers may
solicit "higher or better" offers for the Business pursuant to the procedures
for soliciting "higher or better" offers approved by the Bankruptcy Court in the
Interim Order to the extent required under the Bankruptcy Code. If the Sellers
determine in good faith that a Competing Transaction presents a "higher or
better" offer made for the Business, the Sellers shall have the right to enter
into an agreement providing for the Competing Transaction and terminate this
Agreement pursuant to Section 7.01(a)(ii).
Section 5.12. Bankruptcy Court Approval of Interim Order.
(a) The Sellers hereby confirm that it is critical to the process of
arranging an orderly sale of the Sellers' assets to proceed by selecting the
Purchasers to enter into this Agreement in order to present the Bankruptcy Court
with arrangements for obtaining the highest realizable prices for such assets
and that, without the Purchasers having committed substantial time and effort to
such process, the estates of the Sellers would have to employ a less orderly
process of sale and thereby both incur higher costs and risk attracting lower
prices. Accordingly, the contributions of the Purchasers to the process have
indisputably provided very substantial benefit to the estates of the Sellers.
The Sellers acknowledge that the Purchasers would not have invested the effort
in negotiating and documenting the transaction provided for herein and incurring
duties to pay its outside advisors if the Purchasers were not entitled to the
Break-up Fee plus reasonable fees and disbursements of its counsel incurred as a
result of the Purchasers' attempt to purchase the Acquired Assets, if the
Purchasers are not the successful bidder for the Acquired Assets.
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(b) As promptly as practicable after the date hereof, the Sellers and
the Purchasers, as co-moving parties, shall file and serve motions with the
Bankruptcy Court seeking:
(i) an order approving the Break-Up Fee and all other payments
to Purchasers arising under this Agreement as joint and several
obligations of the Sellers having priority as an administrative
expense in their cases before the Bankruptcy Court, the bidding
procedures relating to the sale of the Acquired Assets under Sections
363 and 365 of the Bankruptcy Code, the adequacy of notice to
creditors and parties in interest for the approval of the transactions
contemplated hereby and setting a date for a hearing on the asset sale
(the "Interim Order"); and
(ii) an order authorizing the Sellers to sell the Acquired Assets
to the Purchasers pursuant to this Agreement and Sections 363 and 365
of the Bankruptcy Code, free and clear of all Liens in or on the
Acquired Assets (including any and all "claims and interests" in the
Assets within the meaning of Section 363(f) of the Bankruptcy Code),
other than Liens related to the Assumed Liabilities and Permitted
Exceptions and otherwise free and clear of claims and liabilities,
such that the Purchasers shall not, among other things, incur any
liability as a successor to the Business and authorizing, among other
things, the Sellers, pursuant to Section 365 of the Bankruptcy Code,
to assume and to assign to the Purchasers the Section 365 Assumed
Rights and authorizing the Sellers to enter into and to perform the
Transition Services Agreement (the "Section 363/365 Order").
(c) The Sellers shall use commercially reasonable efforts to obtain
the Interim Order no later than October 31, 1999, and the Section 363/365
Order no later than December 31, 1999. The Interim Order shall be in the
form attached to this Agreement as Exhibit C, the Section 363/365 Order
shall be substantially in the form attached to this Agreement as Exhibit D
(with such changes thereto proposed by the Sellers as the Purchasers in
their sole discretion accepts), and the motions relating to the Interim
Order and the Section 363/365 Order shall be in form and substance
satisfactory to the Purchasers.
(d) Subject to the Interim Order, the Sellers shall promptly make any
filings, take all actions, and use commercially reasonable efforts to
obtain any and all other approvals and orders necessary or appropriate for
consummation of the transactions contemplated hereby, subject to their
obligations to comply with any order of the Bankruptcy Court.
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(e) In the event an appeal is taken, or a stay pending appeal is
requested or reconsideration is sought, from either the Interim Order or
the Section 363/365 Order, the Sellers shall immediately notify the
Purchasers of such appeal or stay request and shall provide to the
Purchasers within one business day a copy of the related notice of appeal
or order of stay or application for reconsideration. The Sellers shall also
provide the Purchasers with written notice, (and copies of) any other or
further notice of appeal, motion or application filed in connection with
any appeal from or application for reconsideration of, either of such
orders and any related briefs.
(f) It is agreed that no Section 363/365 Order will be satisfactory
unless it contains provisions reasonably satisfactory to Purchasers
declaring (a) that the provision of Section 1.08(c) of the Asset Purchase
Agreement providing for submission of certain disputes to independent
accountants of nationally recognized standing shall be deemed to be a
stipulation of submission to final and binding arbitration within the
meaning of Bankruptcy Rule 9019(c), (b) that the engagement of such
accountants under such Section 1.08(c) shall not be deemed to be a
retention of professionals by Sellers within the meaning of Section 327 of
the Bankruptcy Code and (c) that upon resolution of such dispute by such
accountants Sellers and Sellers' attorneys shall be authorized and required
to comply with such resolution and Sellers shall be authorized and required
to pay compensation, if any, owed by Sellers, to such accountants, all
without further order of the Bankruptcy Court.
Section 5.13. Name Changes. Within 45 days after the Closing, the Sellers
jointly and severally agree (a) to cause (1) Trolli, Inc. to change its name to
"FBI Subsidiary No. 1" or some other name not using the word "Trolli" and (2)
Sather Trucking Corporation to change its name to "FBI Trucking Corporation" or
some other name not using the word "Sather" and (b) after the Closing, until
papers are duly filed with the applicable Secretaries of State to effect such
name changes, not to permit Trolli, Inc. or Sather Trucking Corporation to use
its name in any way for the purpose of selling or marketing any product or
service or otherwise in any manner which does or might compete with the
Purchasers or, in any other way which, in the Purchasers's reasonable judgment,
would, could or might be detrimental to the Purchasers's enjoyment of the rights
and goodwill it sought when it paid for and acquired the assets of Trolli, Inc.
or Sather Trucking Corporation.
Section 5.14. Permits. Prior to the Closing Date, each Seller (1) shall use
its reasonable best efforts to identify all material permits (including
Environmental Permits) necessary to operate the Business from and after the
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Closing Date, and (2) shall use its reasonable best efforts to obtain consents
to the transfer of such material permits which are transferrable to Purchasers
at or prior to Closing. Prior to and after the Closing, each Seller shall
cooperate with Purchasers with respect to the transfer of all material permits.
Section 5.15. State Environmental Transfer Statutes. Each Seller shall,
to the extent necessary to transfer the Acquired Assets to Purchasers, comply
with the disclosure requirements of any state environmental transfer statute,
including, without limitation, the New Jersey Industrial Site Recovery Act, the
Illinois Responsible Property Transfer Act and the Indiana Responsible Property
Transfer Act, that are applicable as a result of the transactions contemplated
hereby. Each Seller also agrees that, prior to providing any documents or
information to the applicable governmental agency, Purchasers shall have the
right to reasonably review and approve (such approval not to be unreasonably
withheld) the form and substance of any such documents or information.
Section 5.16. Bidding Procedures. Sellers (1) shall conduct the auction
process in accordance with the Open Auction Procedures of the Bidding Procedures
and (2) shall not amend, waive, modify or supplement in a material respect the
Bidding Procedures except as set forth therein.
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.01. Conditions Precedent to Obligation of the Sellers and the
Purchasers. The respective obligations of each party to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction of the
following conditions:
(a) the Section 363/365 Order shall have been entered by the
Bankruptcy Court and such order shall not have been stayed, modified,
reversed or amended; and
(b) the waiting period, if any, under the HSR Act shall have
expired or been terminated.
Section 6.02. Conditions Precedent to Obligation of the Sellers. The
obligation of the Sellers to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing Date of the following additional conditions:
(a) the Purchasers shall have performed in all material respects
their obligations under this Agreement required to be performed by the
Purchasers at or prior to the Closing Date; and
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(b) the representations and warranties of the Purchasers contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date as if made at and as of such date except as otherwise
contemplated by this Agreement.
Section 6.03. Conditions Precedent to Obligation of the Purchasers. The
obligation of the Purchasers to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing Date of the following additional conditions:
(a) the Sellers shall have performed their obligations under this
Agreement required to be performed by the Sellers at or prior to the
Closing Date, and the representations and warranties of the Sellers
contained in this Agreement shall be true as of the date hereof and on
and as of the Closing Date, except, in each case, for (i) representations
and warranties that relate to a specific date or time (which need only be
true and correct as of such date or time), (ii) breaches of
representations or warranties that will be cured pursuant to Section
1.03 of this Agreement, and (iii) breaches of such representations,
warranties (disregarding all qualifications and exceptions contained
therein related to materiality or Material Adverse Effect), covenants
and obligations that, in the aggregate, would not have a Material Adverse
Effect.
(b) There shall be no injunction, order or decree of any nature of
any court or government authority of competent jurisdiction that is in
effect that prohibits or materially restrains the consummation of the
transactions contemplated under this Agreement.
(c) No statute, rule or regulation shall have been promulgated by any
federal or state governmental authority which prohibits the consummation
of the transactions contemplated by this Agreement.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.01. Termination.
This Agreement may be terminated:
(i) by mutual written agreement of the Sellers and the
Purchasers prior to the Closing Date;
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(ii) by Sellers or Purchasers if a Competing Transaction is
approved by the Bankruptcy Court, whether or not in accordance with
the bidding procedures attached hereto as Exhibit E as the same may be
modified by order of the Bankruptcy Court (the "Bidding Procedures");
(iii) at any time before the Closing, by the Purchasers if any
of the conditions set forth in Section 6.01 or Section 6.03 shall
have become incapable of fulfillment or cure and shall not have been
waived by the Purchasers, provided that the Purchasers are not then
in breach of this Agreement;
(iv) at any time before the Closing, by the Sellers if any of
the conditions set forth in Section 6.01 or Section 6.02 shall have
become incapable of fulfillment or cure and shall not have been
waived by the Sellers, provided that the Sellers are not then in
breach of this Agreement.
(v) at any time after March 31, 2000, by the Sellers if the
Closing fails to occur on or before such date, unless such failure
is due to the action or inaction of the Sellers;
(vi) at any time after March 31, 2000, by the Purchasers if
the Closing fails to occur on or before such date, unless such
failure is due to the action or inaction of the Purchasers;
(vii) by the Purchasers, at any time within 14 days after the
earlier of (a) October 31, 1999 if the Interim Order has not been
entered by the Bankruptcy Court, and (b) the date the Bankruptcy
Court denies the Interim Order; if the Purchasers fail to terminate
this Agreement within 14 days of such date, the Purchasers shall be
deemed to have waived their rights under this Section 7.01(vii);
(viii) at any time after December 31, 1999, by the Purchasers or
the Sellers if by such date the Section 363/365 Order has not been
entered;
(ix) by the Sellers if the Closing has not occurred as the
result of the Purchasers' failure to consummate the transactions
contemplated by this Agreement within 10 days after the satisfaction
of the conditions set forth in Sections 6.01 and 6.03, provided that
Sellers are ready to close;
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<PAGE>
(x) by the Purchasers if the Closing has not occurred as the
result of the Sellers failure to consummate the transactions
contemplated by this Agreement within 10 days after the satisfaction
of the conditions set forth in Section 6.01 and 6.02, provided that
Purchasers are ready to close; or
(xi) by the Purchasers in the event of a material breach of
the covenants contained in Section 5.16.
Section 7.02. Effect of Termination. If this Agreement is terminated under
Section 7.01, written notice thereof will forthwith be given to the other party
and this Agreement will thereafter become void and have no further force and
effect and, except for those provisions that expressly survive the termination
of this Agreement, all further obligations of the Sellers and the Purchasers to
each other under this Agreement will terminate without further obligation or
liability of the Sellers or the Purchasers to the other, except that:
(a) each party will return all documents, workpapers and other
material of any other party relating to the transactions contemplated by
this Agreement, whether so obtained before or after the execution of this
Agreement, to the party furnishing the same, and all confidential
information received by any party to this Agreement with respect to the
business of any other party will be treated in accordance with the
Confidentiality Agreement between Nabisco, Inc. and Favorite Brands
International, Inc.;
(b) if this Agreement is terminated by Sellers pursuant to Section
7.01(ix), provided that the Sellers either have satisfied or are reasonably
likely to satisfy the conditions set forth in this Agreement which are
within the Sellers' control to satisfy, then the Purchasers shall be
jointly and severally liable to the Sellers for any damages resulting from
such breach and the Sellers will be entitled to retain the Good Faith
Deposit plus interest credited thereon to apply towards such damages; and
(c) if this Agreement is terminated pursuant to Section 7.01(ii), the
Sellers, upon approval by Bankruptcy Court of a Competing Transaction,
shall pay the Purchasers the Break-Up Fee;
(d) if this Agreement is terminated by Purchasers pursuant to Section
7.01(x), provided that the Purchasers either have satisfied or are
reasonably likely to satisfy the conditions set forth in this Agreement
which are within the Purchasers' control to satisfy, then the Sellers shall
be jointly and severally liable to Purchasers for any damages resulting
from such breach.
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<PAGE>
ARTICLE 8
GENERAL PROVISIONS
Section 8.01. Survival of Representations, Warranties, and Agreements. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive beyond the Closing Date. The covenants
contained in Sections 1.03, 1.04, 1.05, 1.08, 1.09, 1.11, 5.03, 5.06, 5.07(c),
5.07(d), 5.07(e), 5.13, 5.15, 8.02, 8.03 and 10.03 shall survive the Closing.
Section 8.02. Indemnity. The Sellers shall indemnify the Purchasers for any
liability resulting from the payment by Purchasers anytime up to five business
days before the Confirmation Date of Sellers' Plan of Reorganization of an
Excluded Liability (a) that the Purchasers legally are compelled to pay or (b)
that the Purchasers pay with consent of the Sellers.
Section 8.03. Transfer Taxes. In accordance with section 1146(c) of the
Bankruptcy Code, the making or delivery of any instrument of transfer under a
plan confirmed under section 1129 of the Bankruptcy Code shall not be taxed
under any law imposing a stamp tax or similar tax. The instruments transferring
the Assets to the Purchasers shall contain the following endorsement:
"Because this [instrument] has been authorized pursuant to Order of
the United States Bankruptcy Court for the District of Delaware
relating to a plan of reorganization of the Grantor, it is exempt
from transfer taxes, stamp taxes or similar taxes pursuant to 11
U.S.C. (S)1146(c)."
In the event real estate transfer Taxes are required to be paid in order to
record the deeds to be delivered to the Purchasers in accordance herewith, or in
the event any such Taxes are assessed at any time thereafter, such real estate
transfer Taxes incurred as a result of the transactions contemplated hereby
shall be paid one-half by the Sellers and one-half by the Purchasers. In the
event sales, use or other transfer Taxes are assessed at Closing or at any time
thereafter on the transfer of any other Acquired Assets, such Taxes incurred as
a result of the transactions contemplated hereby shall be paid by the Sellers.
The Purchasers and the Sellers shall cooperate in providing each other with any
appropriate resale exemption certifications and other similar documentation.
Section 8.04. Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given upon (a)
confirmation of receipt of a facsimile transmission, (b) confirmed delivery by a
standard overnight carrier or when delivered by hand, or (c) the expiration of
five
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<PAGE>
(5) business days after the day when mailed by registered or certified mail
(postage prepaid, return receipt requested), addressed to the respective parties
at the following addresses (or such other address for a party as shall be
specified by like notice):
(a) If to the Purchasers, to
Nabisco, Inc.
7 Campus Drive, P.O. Box 311
Parsippany, New Jersey 07054-0311
Telecopy: 973-539-9150
Attention: James A. Kirkman III
Executive Vice President, General Counsel and Secretary
with the copy (which shall not constitute notice) to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: 212-450-4800
Attention: Stephen H. Case, Esq.
and
(b) If to the Sellers, to
Favorite Brands International, Inc.
2121 Waukegan Road
Bannockburn, Illinois 60015
Telecopy: 847-444-2114
Attention: Steven Kaplan, President
with the copy (which shall not constitute notice) to:
Favorite Brands International, Inc.
2121 Waukegan Road
Bannockburn, Illinois 60015
Telecopy: 847-444-2123
Attention: Brooks Gruemmer, Esq.,
Vice President of Administration and General Counsel
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<PAGE>
with the copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive, Suite 2100
Chicago, Illinois 60606
Telecopy: (312) 407-0411
Attention: David S. Kurtz, Esq.
Section 8.05. Descriptive Headings; Certain Terms. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All references to "$" or
dollars shall be to United States dollars and all references to "days" shall be
to calendar days unless otherwise specified.
Section 8.06. Entire Agreement, Assignment. This Agreement (including the
Exhibits, and the other documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof, including any transaction between or among
the parties hereto and (b) shall not be assigned by operation of law or
otherwise.
Section 8.07. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the rules of conflict of laws of the State of Delaware or any other
jurisdiction. The Purchasers and Sellers irrevocably and unconditionally consent
to submit to the jurisdiction of the Bankruptcy Court for any litigation arising
out of or relating to this Agreement and the transactions contemplated thereby
(and agree not to commence any litigation relating thereto except in the
Bankruptcy Court).
Section 8.08. Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated thereby shall be paid by
the party incurring such expenses. The foregoing shall not affect the legal
right, if any, that any party hereto may have to recover expenses from any other
party that breaches its obligations hereunder.
Section 8.09. Amendment. This Agreement and the Exhibits and Schedules
thereto may not be amended except by an instrument in writing signed on behalf
of all the parties hereto.
Section 8.10. Waiver. At any time prior to the Closing Date, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
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<PAGE>
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
Section 8.11. Counterparts; Effectiveness. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement. This Agreement shall
become effective when each party hereto shall have received counterparts thereof
signed by all the other parties hereto.
Section 8.12. Severability; Validity; Parties of Interest. If any provision
of this Agreement or the application thereof to any person or circumstance is
held invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to other persons or circumstances, shall not be
affected thereby, and to such end, the provisions of this Agreement are agreed
to be severable. Nothing in this Agreement, express or implied, is intended to
confer upon any person not a party to this Agreement any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Section 8.13. Bulk Sales. The Purchasers hereby waive compliance by any of
the Sellers with any bulk sales or other similar laws in any applicable
jurisdiction in respect of the transactions contemplated by this Agreement.
Section 8.14. All Obligations Joint and Several. Whenever this Agreement
provides for an obligation of "Seller" or "Sellers" such obligation shall be
deemed to have been intended as, and to be interpreted and enforced as, a joint
and several obligation of all Sellers. Whenever this Agreement provides for an
obligation of "Purchaser" or "Purchasers" such obligation shall be deemed to
have been intended as, and be interpreted and enforced as, a joint and several
obligation of all Purchasers.
ARTICLE 9
DEFINITIONS
Section 9.01. Defined Terms. As used herein, the terms below shall have the
following meanings.
"Acquired Assets" means the Section 363 Assigned Assets, the Section 365
Assumed Rights and the Intellectual Property.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such other
Person.
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"Agreement" has the meaning set forth in Preamble.
"Assumed Liabilities" has the meaning set forth in Section 1.04.
"Balance Sheet" means the audited balance sheet of the Business as of
June 26, 1999.
"Balance Sheet Date" means June 26, 1999.
"Bankruptcy Code" has the meaning set forth in the Recitals.
"Bankruptcy Court" has the meaning set forth in the Recitals.
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedures, as
amended.
"Bidding Procedures" has the meaning set forth in Section 7.01(ii).
"Break-Up Fee" means the fee payable by the Sellers jointly and severally
to the Purchasers in the amount of $8,300,000 upon the approval by the
Bankruptcy Court of a Competing Transaction.
"Business" has the meaning set forth in the Recitals.
"Chapter 11 Cases" has the meaning set forth in the Recitals.
"Closing" has the meaning set forth in Section 2.01.
"Closing Date" has the meaning set forth in Section 2.01.
"Competing Transaction" means any transfer or other disposition or
retention under a Chapter 11 plan of reorganization of all or substantially all
of the Acquired Assets or any significant portion thereof, or any transfer of an
ownership interest in, any one or more of the Sellers of, the Business or any
significant portion thereof, in a single transaction or series of related
transactions, provided that (i) the Purchasers have not theretofore terminated
this Agreement pursuant to Section 7 hereof or (ii) the Bankruptcy Court has not
theretofore declined to enter the Section 363/365 Order.
"Designated Chapter 11 Costs" means all out of pocket fees and expenses
incurred or owed in connection with the administration of Chapter 11 Cases
including the U.S. Trustee fees, the fees and expenses of attorneys,
accountants, financial advisors, consultants and other professionals retained by
the Sellers, the Creditors' Committee, the postpetition lenders or the
prepetition
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<PAGE>
lenders incurred or owed in connection with the administration of the Chapter 11
Case (but specifically excluding ordinary course professionals as authorized by
the Bankruptcy Court), and all out of pocket expenses of Sellers in connection
with the transactions contemplated under this Agreement.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or any agreement with any governmental authority or other third
party, relating to the environment, human health and safety or to pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substances, wastes or materials.
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the Business.
"Excluded Assets" has the meaning set forth in Section 1.02.
"Excluded Liabilities" has the meaning set forth in Section 1.05.
"Financial Statements" has the meaning set forth in Section 3.04.
"Hazardous Substances" means any pollutant, contaminant, waste or chemical
or any toxic, radioactive, ignitable corrosive, reactive or otherwise hazardous
substance, waste or material or any substance, waste or material having any
constituent elements displaying any of the foregoing characteristics including
petroleum, its derivatives, by-products and other hydrocarbons, and any
substance, waste or material regulated under any Environmental Law.
"HSR Act" has the meaning set forth in Section 3.03.
"including" shall always be read as "including without limitation".
"Intellectual Property" means all trademarks, service marks, trade names,
logos, computer software, mask work, invention, patent, trade secret, copyright,
technology, processes, inventions, proprietary data, formulae, research and
development data, computer software programs, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right.
"Leases" means the Sellers' material real property leases to which the
Sellers are a party related to the operation of the Business.
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<PAGE>
"Lien" means any interest in the Acquired Assets by a Person other than the
Sellers, including any mortgage, lien, pledge, charge, security interest,
encumbrance or other adverse claim of any kind in respect of any Acquired Asset.
"Material Adverse Effect" means any event, condition or matter in respect
of the operation of the Business, the Acquired Assets and the Assumed
Liabilities that in the aggregate will result in or have a material adverse
effect on the business, Assumed Liabilities, Acquired Assets, financial
condition or results of operations of the Business. Purchasers acknowledge that
there may be a disruption to the Business as a result of the execution of this
Agreement, the announcement by Purchasers of their intention to purchase the
Business or the announcement by Sellers of their intention to sell the Business,
or the consummation of the transactions contemplated hereby, and Purchasers
agree that such disruptions do not and shall not constitute a Material Adverse
Effect.
"Permitted Exceptions" means imperfections of title, restrictions or
encumbrances, if any, that (a) cannot be released or cured under the Bankruptcy
Code pursuant to a sale of assets under Sections 363 or 365 of the Bankruptcy
Code and that either (i) would not involve material costs to correct or remove
or (ii) do not materially impair the use and operation of such asset in the
Business as currently conducted or (b) are caused solely by Purchaser.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Purchase Price" has the meaning set forth in Section 1.06(a).
"Purchasers" has the meaning set forth in the Preamble.
"Retained Employees" has the meaning set forth in Section 5.07.
"Section 365 Assumed Rights" has the meaning set forth in Section 1.01(b).
"Section 363/365 Motion" means the motion filed by the Sellers in the Case
seeking entry of the Section 363/365 Order.
"Section 363/365 Order" has the meaning set forth in Section 5.12.
"Sellers" has the meaning set forth in the Preamble.
"Transition Services Agreement" has the meaning set forth in Section 1.10.
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<PAGE>
"Transferred Employees" has the meaning set forth in Section 5.07.
"WARN Act" means the Worker Adjustment and Retraining Notification Act of
1988.
ARTICLE 10
TAX MATTERS
Section 10.01. Tax Definitions. The following terms, as used herein, have
the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Pre-Closing Tax Period" means (1) any Tax Period ending on or before the
Closing Date and (2) with respect to a Tax Period that commences before but ends
after the Closing Date, the portion of such period up to and including the
Closing Date.
"Tax" and, with correlative meaning, "Taxes" means (1) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, registration,
recording, documentary, conveyancing, gains, withholding on amounts paid to or
by the Sellers, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority (a "Taxing Authority") responsible for the
imposition of any such tax (domestic or foreign), or (2) liability for the
payment of any amounts of the type described in (1) as a result of being party
to any agreement or any express or implied obligation to indemnify any other
Person.
Section 10.02. Tax Matters. The Sellers hereby represent and warrant to the
Purchasers that:
(a) Except to the extent, if any, constrained by the pendency of
their respective Chapter 11 Cases, or reserved for on the Balance Sheet,
the Sellers have timely paid all Taxes, and all interest and penalties due
thereon and payable by it for the Pre-Closing Tax Period which will have
been required to be paid on or prior to the Closing Date, the non-payment
of which would result in a Lien on any Acquired Asset (that would not be
released pursuant to the Section 363/365 Order) or would otherwise have a
Material Adverse Effect.
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<PAGE>
(b) The Sellers have established, in accordance with GAAP applied on
a basis consistent with that of preceding periods, adequate reserves for
the payment of all Tax liabilities, assessments, interest and penalties
which arise from or with respect to the Acquired Assets or the operation of
the Business and are incurred in or attributable to the Pre-Closing Tax
Period (that would not be released pursuant to the Section 363/365 Order),
the non-payment of which would result in a Lien on any Acquired Asset, or
would otherwise have a Material Adverse Effect.
(c) Except as reserved for on the Balance Sheet, there is no claim,
action, audit or other proceeding now pending or threatened in writing
asserting that any Seller is liable for sales or use Tax in any
jurisdiction other than a jurisdiction in which such Seller is currently
filing sales or use Tax returns, as the case may be.
Section 10.03. Tax Cooperation.
(a) The Purchasers and the Sellers agree to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Business and the Acquired Assets
(including access to books and records) as is reasonably necessary for the
filing of all Tax returns, the making of any election relating to Taxes,
the preparation for any audit by any taxing authority, and the prosecution
or defense of any claim, suit or proceeding relating to any Tax. The
Purchasers shall retain all books and records with respect to Taxes
pertaining to the Assets and Taxes described in clause (d) of Section 1.04
for a period of at least six years following the Closing Date. Sellers
shall retain any records retained by Sellers related to Taxes until
liquidation. Each party shall provide the other with at least ten days
prior written notice before destroying or transferring custody of any such
books and records, during which period the party receiving such notice can
elect to take possession, at its own expense, of such books and records.
(b) Any Tax return relating to Taxes described in clause (i) of
Section 1.04 and required to be filed by any Seller shall be prepared in a
manner consistent with past practice and without a change of any election
or any accounting method.
[Remainder of page intentionally blank; next page is signature page]
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<PAGE>
IN WITNESS WHEREOF, the Sellers and the Purchasers have caused this
Agreement to be executed on their behalf by their officers thereunto duly
authorized, as of the date first above written.
FAVORITE BRANDS
INTERNATIONAL HOLDING
CORP.
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
FAVORITE BRANDS
INTERNATIONAL, INC.
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
SATHER TRUCKING CORPORATION
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
TROLLI, INC.
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
NABISCO, INC.
By:
------------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Sellers and the Purchasers have caused this
Agreement to be executed on their behalf by their officers thereunto duly
authorized, as of the date first above written.
FAVORITE BRANDS
INTERNATIONAL HOLDING
CORP.
By:
------------------------------
Name:
Title:
FAVORITE BRANDS
INTERNATIONAL, INC.
By:
------------------------------
Name:
Title:
SATHER TRUCKING CORPORATION
By:
------------------------------
Name:
Title:
TROLLI, INC.
By:
------------------------------
Name:
Title:
NABISCO, INC.
By: /s/ James A. Kirkman, III
------------------------------
Name: James A. Kirkman, III
Title: Executive Vice President
& General Counsel
<PAGE>
NABISCO BRANDS COMPANY
By: /s/ Kathleen J. Gallagher
------------------------------
Name: Kathleen J. Gallagher
Title: President
NABISCO TECHNOLOGY COMPANY
By: /s/ Kathleen J. Gallagher
------------------------------
Name: Kathleen J. Gallagher
Title: President
<PAGE>
Schedules and Exhibits
Pursuant to Item 601 of Regulation S-K, the Registrant has not filed copies
of the Schedules and Exhibits to the Agreement. The Registrant intends to
provide copies of such Schedules and Exhibits to the Commission upon request.
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AMENDMENT NO. 1
TO THE
ASSET PURCHASE AGREEMENT
THIS AMENDMENT, dated as of October 7, 1999 (the "Amendment") to the Asset
Purchase Agreement, dated as of September 23, 1999 (the "Asset Purchase
Agreement"), is made by and among Favorite Brands International Holding Corp., a
Delaware corporation, Favorite Brands International, Inc., a Delaware
corporation, Sather Trucking Corporation, a Delaware corporation and Trolli,
Inc., a Delaware corporation (collectively, the "Sellers"), and Nabisco, Inc., a
New Jersey corporation, Nabisco Brands Company, a Delaware corporation, and
Nabisco Technology Company, a Delaware corporation (collectively, the
"Purchasers"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Asset Purchase Agreement.
WHEREAS, the Sellers and Purchasers desire to amend the Asset Purchase
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
AMENDMENTS
Section 1.01. Amendment of Section 7.02(c). Section 7.02(c) of the Asset
Purchase Agreement is amended and restated as follows:
(c) if this Agreement is terminated pursuant to Section 7.01(ii), the
Sellers, upon consummation of a Competing Transaction, shall pay the
Purchasers (1) the Break-up Fee and (2) the reasonable fees and
disbursements of the Purchasers' counsel, up to $650,000, incurred as a
result of the Purchasers' attempt to purchase the Acquired Assets;
Section 1.02. Amendment of Section 9.01. The definition of "Break-up Fee"
in Section 9.01 of the Asset Purchase Agreement is amended and restated as
follows:
<PAGE>
"Break-Up Fee" means the fee payable by the Sellers jointly and
severally to the Purchasers in the amount of $8,300,000 upon consummation
of a Competing Transaction.
Section 1.03. Amendments to Exhibits C and E. Exhibits C and E, as amended
and restated, are attached hereto.
ARTICLE 2
GENERAL PROVISIONS
Section 2.01. Descriptive Headings. The headings contained in this
Amendment are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Amendment.
Section 2.02. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the rules of conflict of laws of the State of Delaware or any other jurisdiction
in accordance with Section 8.07 of the Asset Purchase Agreement. The Purchasers
and Sellers irrevocably and unconditionally consent to submit to the
jurisdiction of the Bankruptcy Court for any litigation arising out of or
relating to this Amendment (and agree not to commence any litigation relating
thereto except in the Bankruptcy Court).
Section 2.03. Counterparts; Effectiveness. This Amendment may be executed
in two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement. This Amendment shall
become effective when each party hereto shall have received counterparts thereof
signed by all the other parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the Sellers and the Purchasers have caused this
Agreement to be executed on their behalf by their officers thereunto duly
authorized, as of the date first above written.
FAVORITE BRANDS
INTERNATIONAL HOLDING
CORP.
By: /s/ Steven F. Kaplan
-------------------------
Name: Steven F. Kaplan
Title: President
FAVORITE BRANDS
INTERNATIONAL, INC.
By: /s/ Steven F. Kaplan
-------------------------
Name: Steven F. Kaplan
Title: President
SATHER TRUCKING CORPORATION
By: /s/ Steven F. Kaplan
-------------------------
Name: Steven F. Kaplan
Title: President
TROLLI, INC.
By: /s/ Steven F. Kaplan
-------------------------
Name: Steven F. Kaplan
Title: President
NABISCO, INC.
By:
-------------------------
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the Sellers and the Purchasers have caused this
Agreement to be executed on their behalf by their officers thereunto duly
authorized, as of the date first above written.
FAVORITE BRANDS
INTERNATIONAL HOLDING
CORP.
By:
--------------------------------
Name:
Title:
FAVORITE BRANDS
INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
SATHER TRUCKING CORPORATION
By:
--------------------------------
Name:
Title:
TROLLI, INC.
By:
--------------------------------
Name:
Title:
NABISCO, INC.
By: /s/ James Kirkman III
--------------------------------
Name: James Kirkman III
Title: Executive Vice President
and General Counsel
<PAGE>
NABISCO BRANDS COMPANY
By: /s/ Kathleen J. Gallagher
--------------------------------
Name: Kathleen J. Gallagher
Title: President
NABISCO TECHNOLOGY COMPANY
By: /s/ Kathleen J. Gallagher
--------------------------------
Name: Kathleen J. Gallagher
Title: President
-4-
<PAGE>
AMENDMENT NO. 2
TO THE
ASSET PURCHASE AGREEMENT
THIS AMENDMENT, dated as of November 19, 1999 (the "Amendment") to the
Asset Purchase Agreement, dated as of September 28, 1999 (as amended through the
date hereof, the "Asset Purchase Agreement"), is made by and among Favorite
Brands International Holding Corp., a Delaware corporation, Favorite Brands
International, Inc., a Delaware corporation, Sather Trucking Corporation, a
Delaware corporation, and Trolli, Inc., a Delaware corporation (collectively,
the "Sellers"), and Nabisco, Inc., a New Jersey corporation, Nabisco Brands
Company, a Delaware corporation, and Nabisco Technology Company, a Delaware
corporation (collectively, the "Purchasers"). Capitalized terms used herein and
not otherwise defined shall have the respective meanings set forth in the Asset
Purchase Agreement.
WHEREAS, the Sellers and Purchasers desire to amend the Asset Purchase
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
AMENDMENTS
Section 1.01. Amendment of Section 1.01. Section 1.01 of the Asset
Purchase Agreement is amended to add immediately after the last sentence of
paragraph (b) of such Section the following new sentence:
The contract between Favorite Brands International and Share Data,
Inc. dated October 21, 1998 is excluded from the Section 365 Assumed Rights
and shall be included in the Excluded Contracts.
Section 1.02. Amendment of Section 1.03. Section 1.03 of the Asset
Purchase Agreement is amended to add immediately after the last sentence of such
Section the following new sentence:
<PAGE>
If (a) prior to the effective date of any Chapter 11 plan in the
Sellers' Chapter 11 Cases, a third party files a lawsuit against Purchasers
alleging that Purchasers owe such third party an amount representing cure
costs (as defined in the Notice of Assumption and Assignment), and (b)
Purchasers notify Sellers of such lawsuit within ten business days of being
served, then the Sellers will seek an order from the bankruptcy court
enjoining such prosecution, and, to the extent that such cure costs are
determined by the bankruptcy court to be allowable against Sellers or
Purchasers or both, Sellers shall pay such amounts to such third party.
Other than to pay amounts so allowed by the Bankruptcy Court, Purchasers
shall not be entitled to assert any claim against Sellers arising out of
this provision.
Section 1.03. Amendment of Section 1.06. Section 1.06 of the Asset
Purchase Agreement is amended to add immediately preceding the first sentence of
paragraph (b) of such Section the following clause:
For federal income tax purposes only,
Section 1.04. Amendment of Section 1.08. Section 1.08 of the Asset
Purchase Agreement is amended to delete clause (b) of paragraph (a) of such
Section and replace such clause with the following new clause (b):
(b) only include line items that are (i) substantially consistent with
those in the Balance Sheet, and (ii) required to calculate Closing Working
Capital or directly relate to Property, Plant and Equipment.
Section 1.05. Amendment of Section 1.09. Section 1.09 of the Asset
Purchase Agreement is amended to add immediately after the last sentence of
paragraph (a) of such Section the following new sentence:
In addition, the Purchasers shall pay to the Sellers, as an additional
adjustment to the Purchase Price, an amount equal to the amount of cash
transferred to Purchasers' 401(k) Plans from Sellers' 401(k) Plans
representing unallocated forfeitures.
Section 1.06. Amendment of Section 2.02. Section 2.02 of the Asset
Purchase Agreement is amended to add immediately after the last sentence of
paragraph (a) of such Section the following new sentence:
2
<PAGE>
Purchasers and Sellers agree that any representations and warranties
contained in any assignments or other instruments of conveyance, including,
but not limited to, assignments of rights in intellectual property, will
not have any legal effect between Purchasers and Sellers, and Sellers do
not make or agree to any representations or warranties except those
contained in the Asset Purchase Agreement and such representations and
warranties do not survive Closing.
Section 2.02 of the Asset Purchase Agreement is further amended to add
immediately after paragraph (b) of such Section the following new paragraphs (c)
and (d):
(c) At or prior to Closing, both the Purchasers and the Sellers
agree that each will deliver payment in full for any and all outstanding
trade payables to each other as of Closing from transactions and business
with each other that is not related to this Agreement.
(d) In the morning of the next business day immediately after
Closing, Bank of America's BAMTRAC support group will process a "Previous
Day Reporting BAMTRAC Composite Report" from the Bank of America BAMTRAC
System for the Trolli Lockbox/Operating Account at Bank of America (Account
87657-62355). Based on such Report, the Purchasers and Sellers will
calculate an amount herein referred to as the "Lockbox Cash." For
purposes of this Agreement, the Lockbox Cash will be equal to the amount on
the "Lockbox Credits (LBCR) Requested" line less the total amount reflected
on such report as "0 Day Money" in the "Availability Distributed" line
items. An example of such calculation is set forth in Exhibit A to this
Amendment. The Purchasers will wire the Lockbox Cash to the Sellers within
two business days after the calculation of the amount of Lockbox Cash to:
CHASE MANHATTAN BANK/NY
ABA # 021000021
CREDIT TO: FAVORITE BRANDS INTL INC.
ACCT NO: 323-845-851
Section 1.07. Amendment of Section 3.13. Section 3.13 is amended to add
immediately at the end of the sentence of such Section the following clause:
3
<PAGE>
, except in each case for violations that have not had and could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
Section 1.08. Amendment of Section 3.14. Section 3.14 is amended to delete
the last sentence of such Section.
Section 1.09. Amendment of Section 3.15. Section 3.15 is amended to delete
the first sentence of such Section and replace such sentence with the following
sentence:
All accounts receivable (other than receivables collected since the
Balance Sheet Date) reflected on the Balance Sheet arose in the ordinary
course of business.
Section 1.10. Amendment of Section 4.03. Section 4.03 is amended to delete
the word "the" that appears before the words "any Purchaser" in the fifth line
of such Section.
Section 1.11. Amendment of Section 5.03. Section 5.03 is amended to add
immediately after the words "Chapter 11 Case" in the first sentence of paragraph
(b) of such Section the following parenthetical:
(including objecting to claims filed in the Chapter 11 Case)
Section 1.12. Amendment of Schedule 1.02. Schedule 1.02 is amended to add
immediately after Item 11. of such Schedule the following Items 12. through 15.:
12. One Buick Park Avenue automobile
13. Motor Vehicle Lease Agreement between Bredeman Lexus - Glenview and
Favorite Brands International for a 1998 Lexus LS400
14. Any rights that Sellers may have pursuant to agreements with pre-
petition creditors to settle pre-petition claims other than with
respect to the Section 365 Assumed Rights.
4
<PAGE>
15. Insurance policies underlying Sellers' obligations under pre-petition
deferred compensation arrangements for former employees Gene Allen and
George Lebreaux.
16. All rights, claims and remedies arising under chapter 5 of title 11 of
the Bankruptcy Code including, without limitation, (S)(S) 544, 547,
548, 549, 550, 551, 552 and 553.
Section 1.13. Amendment of Schedule 3.07(a). Schedule 3.07(a) is amended as
follows:
(a) add immediately after Item IV. hhh. and Item V. x. of Schedule
3.07(a) the Material Contracts respectively listed in Exhibit B attached
hereto;
(b) for the Material Contract listed in Item IV. aaa. of Schedule
3.07(a), the name "Imperial Sugar Company" is deleted and replaced with the
name "Indiana Sugar Company"; and
(c) add an asterisk ("*") immediately next to the Material Contract
listed in Item XIII. b. of Schedule 3.07(a) to denote a contract not to be
assumed by the Purchaser.
ARTICLE 2
GENERAL PROVISIONS
Section 2.01. Descriptive Headings. The headings contained in this
Amendment are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Amendment.
Section 2.02. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the rules of conflict of laws of the State of Delaware or any other jurisdiction
in accordance with Section 8.07 of the Asset Purchase Agreement. The Purchasers
and Sellers irrevocably and unconditionally consent to submit to the
jurisdiction of the Bankruptcy Court for any litigation arising out of or
relating to this Amendment (and agree not to commence any litigation relating
thereto except in the Bankruptcy Court).
5
<PAGE>
Section 2.03. Counterparts; Effectiveness. This Amendment may be executed
in two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement. This Amendment shall
become effective upon the Closing when each party hereto shall have received
counterparts thereof signed by all the other parties hereto.
6
<PAGE>
IN WITNESS WHEREOF, the Sellers and the Purchasers have caused this
Agreement to be executed on their behalf by their officers thereunto duly
authorized, as of the date first above written.
FAVORITE BRANDS
INTERNATIONAL HOLDING CORP.
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
FAVORITE BRANDS
INTERNATIONAL, INC.
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
SATHER TRUCKING CORPORATION
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
TROLLI, INC.
By: /s/ Steven F. Kaplan
------------------------------
Name: Steven F. Kaplan
Title: President
NABISCO, INC.
By: /s/ Peter Klein
------------------------------
Name: Peter Klein
Title: Executive Vice President
<PAGE>
NABISCO BRANDS COMPANY
By: /s/ Peter Klein
------------------------------
Name: Peter Klein
Title: Authorized Signatory
NABISCO TECHNOLOGY COMPANY
By: /s/ Peter Klein
------------------------------
Name: Peter Klein
Title: Authorized Signatory
<PAGE>
EXHIBIT A
[Bank of America. LOGO] BANK OF AMERICA
FAVORITE BRANDS INTERNATIONAL
PREVIOUS DAY REPORTING
BANTRAC COMPOSITE REPORT
AS OF NOV 10
******************BANK OF AMERICA-NORTHBROOK - NORTHBROOK, IL*******************
** U.S. DOLLAR *** TROLLI, INC. 82355
765762355 LATEST UPDATE: NOV 11 04:13 CST
<TABLE>
<CAPTION>
- ----------------------------------- BALANCES -----------------------------------
<S> <C> <C>
LOSING LEDGER BAL 0.00 0 DAY FLOAT 0.56
YTD AVG LEDGER BAL 0.00 1 DAY FLOAT 0.00
YTD AVG LEDGER BAL 0.00 2 DAY FLOAT 0.00
3 DAY FLOAT 0.00
OPENING AVAIL BAL 0.00 4 DAY FLOAT 0.00
CLOSING AVAIL BAL 0.00 5 DAY FLOAT 0.00
YTD AVG AVAIL BAL 0.00
YTD AVG AVAIL BAL 0.00
- ------- CREDIT SUMMARIES ----------- ----------- DEBIT SUMMARIES -----------
TOTAL CREDITS 168,908.34 TOTAL DEBITS 168,908.34
LOCKBOX CREDITS 161,708.56 CHECKS PAID 168,908.34
ZSA TRANSFER CR 7,199.78 MISC DEBITS 0.00
*********************************** CREDITS ************************************
* LOCKBOX CREDITS (LBCR) *
161,708.56 00000098678
AVAILABILITY DISTRIBUTED:
[0/1/2 DAYS: 0.58/97,584.00/64,124.00]
- ----------
161,708.56 LOCKBOX CREDITS (LBCR) REQUESTED 1 ITEMS
* ZBA TRANSFER CREDITS (ZBATCR) *
7,199.78 SAME-CENTER FROM 6188700953
- ----------
7,199.78 ZBA TRANSFER CREDITS (ZBATCR) REQUESTED 1 ITEMS
168,908.34 TOTAL CREDITS REQUESTED 2 ITEMS
- ----------------------------------- DEBITS -------------------------------------
* CHECKS (CK) *
104.84 00000061968
189.70 00000061982
29.97 00000061993
65.80 00000061997
2,498.40 00000062004
5,400.00 00000073302
34,762.13 00000073343
323.50 00000073348
870.48 00000073350
908.16 00000073362
</TABLE>
1 and 2 Day Money Calculation
- -------------------------------------------------
LBCR 161,708.56
"0 Day Money" (0.56)
-----------
Amount to be Transferred to Estate $161,708.00
===========
<PAGE>
<TABLE>
<S> <C> <C>
76,000.00 00000073374
218.80 00000073392
6,775.29 00000073384
23,274.99 00000073395
65.00 00000073400
843.16 00000073405
1,968.31 00000073409
8,396.31 00000073419
965.19 00000073427
490.25 00000073430
1,272.08 00000073441
3,037.00 00000073446
150.00 00000073470
150.00 00000073471
150.00 00000073473
- ------------------
168,908.34 CHECKS (CK) REQUESTED 25 ITEMS
MISCELLANEOUS DEBITS (MISCOR)
.00 AVAILABILITY DISTRIBUTED:
[0/1/2 DAYS: 0.00/97,584.00/64.124.00]
FLOAT TRANSFER TO ACCOUNT 8198700963
- ------------------
.00 MISCELLANEOUS DEBITS (MISCOR) REQUESTED 1 ITEMS
168,908.34 TOTAL DEBITS REQUESTED 26 ITEMS
======= END OF ACCOUNT ======= 62366 ================= 8765762356 =============
</TABLE>
<PAGE>
Exhibit B
Amendments to Schedule 3.07(a)
------------------------------
IV. Key Purchasing Agreements
-------------------------
iii. Contract Order between Trolli, Inc. and Cargill North American Corn
Milling, dated 12/28/98, contract number 20197.00.
jjj. Contract Order between Trolli, Inc. and Cargill North American Corn
Milling, dated 1/5/99, contract number 20615.00.*
kkk. Contract Order between Trolli, Inc. and Cargill North American Corn
Milling, dated 1/5/99, contract number 20614.00.*
lll. Purchase Order between Trolli, Inc. and GMI Products, Inc., dated
6/15/99, contract number 033363, in the amount of $422,928.00.
mmm. Purchase Order between Trolli, Inc. and DynaGel Incorporated, dated
11/20/98, contract number 031180, in the amount of $1,900,000.00.
nnn. Purchase Order between Trolli, Inc. and Kind & Knox Gelatine, Inc.,
dated 11/20/98, contract number 031179, in the amount of $993,700.00.
ooo. Purchase Order between Trolli, Inc. and Leiner Davis Gelatin (USA),
dated 11/16/98, contract number 030732, in the amount of
$7,520,000.00.
V. Software Agreements
-------------------
y. Internet Services Agreement between Favorite Brands International,
Inc. and KSI-Net56 dated December 17, 1997.
* Indicates a contract that will not be assumed by the Purchasers
<PAGE>
Exhibit 28
Pro Forma Financial Information
Favorite Brands International, Inc. and its subsidiaries ("Favorite Brands")
completed the sale of substantially all of their assets to Nabisco, Inc. on
November 19, 1999. The pro forma income statement data for the year ended June
26, 1999 and the seventeen weeks ended October 23, 1999 presented below have
been prepared assuming Favorite Brands consummated the sale and repaid its
senior secured credit facility at the beginning of the period presented and
reflect other adjustments relating to the disposition. The pro forma balance
sheet data as of October 23, 1999 assumes Favorite Brands consummated the sale
on October 23, 1999. The pro forma income statement and balance sheet data
presented below is unaudited. As described above, the purchase price may be
adjusted based upon working capital balances as of the closing date. The pro
forma income statement and balance sheet data assume that there is no adjustment
to the purchase price. The pro forma income statement data is not necessarily
indicative of what the actual results of operations would have been had the
transaction occurred at the beginning of the period presented, nor do they
purport to indicate the results of future operations. All amounts are in
thousands except per share data.
Income Statement Data:
Favorite Brands International, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Pro Forma
Year Ended Pro Forma Adjustments Year Ended
June 26, 1999 DR CR June 26, 1999
------------- -- -- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales........................................................$ 733,327 $733,327 (a) $ -
Costs and expenses:
Cost of sales............................................... 460,362 $ 460,362 (a) -
Selling, marketing and administrative....................... 269,055 269,055 (a) -
Amortization of intangible assets........................... 18,488 18,488 (a) -
Restructuring and business integration costs................ 1,320 1,320 (a) -
Goodwill write-off.......................................... 50,000 50,000 (a) -
------------- -------------------- ------------
799,225 - 799,225 -
Loss from operations............................................. (65,898) 733,327 (799,225) -
Interest expense (income)................................... 50,180 64,180 (b) (14,000)
Reorganization charges under Chapter 11..................... 20,191 12,807 (c) 7,384
------------- -------------------- ------------
Loss before income taxes......................................... (136,269) 733,327 (876,212) 6,616
Provision for income taxes.................................. 48,151 48,151 (a) -
------------- -------------------- ------------
Loss before extraordinary charge and cumulative
effect of change in accounting principle....................$ (184,420) $733,327 $(924,363) $ 6,616
============= ==================== ============
Pro Forma
Seventeen Seventeen
Weeks Ended Pro Forma Adjustments Weeks Ended
October 23, 1999 DR CR October 23, 1999
---------------- -- -- ----------------
(Unaudited) (Unaudited) (Unaudited)
Net sales........................................................$ 225,839 $225,839 (a) $ -
Costs and expenses:
Cost of sales............................................... 140,816 $ 140,816 (a) -
Selling, marketing and administrative....................... 63,407 63,407 (a) -
Amortization of intangible assets........................... 5,350 5,350 (a) -
------------- ------------------- ------------
209,573 - 209,573 -
Income from operations........................................... 16,266 225,839 (209,573) -
Interest expense (income)................................... 5,956 - 10,956 (b) (5,000)
Reorganization charges under Chapter 11..................... 5,413 - 2,222 (c) 3,191
------------- ------------------- ------------
Income before income taxes....................................... 4,897 225,839 (222,751) 1,809
Provision for income taxes.................................. - - - -
------------- ------------------- ------------
Income (loss) before cumulative effect of change
in accounting principle.....................................$ 4,897 $225,839 $(222,751) $ 1,809
============= =================== ============
</TABLE>
<PAGE>
Balance Sheet Data:
Favorite Brands International, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Pro Forma
October 23, Pro Forma Adjustments October 23,
1999 DR CR 1999
----------- -- -- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents................................$ 21,694 $475,000 $219,424 (d) $277,270
Accounts receivable, net................................. 59,926 59,713 (e) 213
Inventories.............................................. 72,493 72,493 (e) -
Prepaid expenses and other current assets................ 11,139 - 10,837 (e) 302
---------- -------- -------- --------
Total current assets........................... 165,252 475,000 362,467 277,785
---------- -------- -------- --------
Property, Plant and Equipment, at Cost:
Land..................................................... 5,200 5,200 (e) -
Buildings................................................ 75,224 75,224 (e) -
Machinery and equipment.................................. 236,482 236,482 (e) -
Construction in progress................................. 10,131 - 10,131 (e) -
---------- -------- -------- --------
327,037 - 327,037 -
Less accumulated depreciation............................ 83,098 - 83,098 (e) -
---------- -------- -------- --------
243,939 - 243,939 -
---------- -------- -------- --------
Other Assets:
Intangible assets, net................................... 266,090 266,090 (f) -
Other assets............................................. 1,469 - 190 (e) 1,279
---------- -------- -------- --------
267,559 - 266,280 1,279
---------- -------- -------- --------
$ 676,750 $475,000 $872,686 $279,064
---------- -------- -------- --------
Current Liabilities:
Accounts payable and accrued liabilities.................$ 61,402 $ 51,139 (e) $ 10,263
Other current liabilities................................ 1,040 579 - (e) 461
---------- -------- -------- --------
Total current liabilities...................... 62,442 51,718 - 10,724
---------- -------- -------- --------
Noncurrent Liabilities:
Other long-term liabilities.............................. 2,299 2,299 - (e) -
---------- -------- -------- --------
Total noncurrent liabilities................... 2,299 2,299 - -
---------- -------- -------- --------
Prepetition Secured Debt...................................... 200,500 200,500 (d) -
Liabilities subject to compromise............................. 463,837 6,400 (d) 457,437
Commitments and Contingencies................................. - - - -
---------- -------- -------- --------
Total liabilities............................. 729,078 260,917 - 468,161
---------- -------- -------- --------
Stockholder's Equity:
Common Stock, $.01 par value; 1,000 shares authorized,
issued and outstanding......................... - -
Additional paid-in capital............................... 195,751 195,751
Accumulated deficit...................................... (248,079) 136,769 - (f) (384,848)
---------- -------- -------- --------
Total stockholder's equity..................... (52,328) 136,769 - (189,097)
---------- -------- -------- --------
$ 676,750 $397,686 $ - $279,064
---------- -------- -------- --------
</TABLE>
Favorite Brands International, Inc. and Subsidiaries
Notes To Pro Forma Financial Information
(a) Pro forma adjustment arises from the sale of substantially all assets of
Favorite Brands as if the transaction had been consummated as of the
beginning of the period for which the pro forma financial statement is
presented.
(b) Pro forma adjustment arises from the estimation of interest income earned
on the proceeds of the sale of Favorite Brands and the elimination of
interest expense on all debt as if the transaction had been consummated as
of the beginning of the period for which the pro forma financial statement
is presented. For purposes of preparing the pro forma income statement
data, it has been assumed that no interest is paid on the senior notes and
senior subordinated notes. The determination of whether or not interest is
paid on these instruments will be made when the Company's plan of
liquidation is developed and approved.
(c) If Favorite Brands had completed the sale at the beginning of the period
presented, the only activities during the period would have been winding
down the affairs of the entities and administering Favorite Brands'
bankruptcy estate. Therefore, the pro forma adjustment eliminates the
reorganization charges under Chapter 11 that were actually incurred during
this period and adds back an estimate of the reorganization charges
Favorite Brands would have incurred as if the sale had occurred at the
beginning of the period.
(d) Pro forma adjustments arise from the proceeds received from the buyer,
$475,000 and the payment of $201,615 to Favorite Brands' senior secured
debt holders including interest and fees, the payment of $11,400 relating
to transaction fees, the payment of $6,400 of cure costs as required by the
sale agreement, and $9 transferred to the buyer. No adjustment to the
purchase price is assumed as a result of working capital balances as of the
closing date.
(e) Pro forma adjustments to accounts receivable, inventory, prepaid and other
assets, fixed assets, accounts payable, accruals and other liabilities
arise due to the sale of such assets to the buyer and the assumption of
such liabilities by the buyer as if the transaction was consummated on
October 23, 1999.
(f) Pro forma adjustments to goodwill and equity result from the loss incurred
from the transaction as if the sale had been consummated on October 23,
1999.
