UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the Quarter Ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________________ to____________________
Commission File No. 1-6442
ORANGE-CO, INC.
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation or organization)
59-0918547
(IRS Employer Identification Number)
2020 U.S. Highway 17 South, P. O. Box 2158, Bartow, Florida 33830
(Address of principal executive offices)
(941) 533-0551
(Registrant's telephone no.)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes XX No
Number of shares outstanding of common stock, $.50 par value, as of
August 12, 1996: 10,301,975 shares
ORANGE-CO, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
June 30, 1996 (unaudited) and September 30, 1995 (audited)
Consolidated Statements of Operations (unaudited) 4
Nine and Three Months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows (unaudited) 5
Nine Months ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements (unaudited) 6-9
ITEM 2.
Management's Discussion and Analysis of Results of
Operations and Financial Conditions 10-15
PART II. OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K 16
SIGNATURES 16
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, September 30,
1996 1995
ASSETS (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and short-term investments $ 645 $ 845
Receivables 8,324 9,617
Advances on fruit purchases - 787
Inventories 58,530 36,067
Prepaid and other 152 33
--------- ---------
Total current assets 67,651 47,349
--------- ---------
Property and equipment, net 118,008 107,785
--------- ---------
Other assets:
Excess of cost over net assets of
acquired companies 11,495 11,778
Property held for disposition 427 692
Other 4,305 3,408
--------- ---------
Total other assets 16,227 15,878
--------- ---------
Total assets $201,886 $171,012
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments on long-term debt $ 2,615 $ 2,094
Note payable to bank 3,000 -
Accounts payable 4,306 4,394
Accrued liabilities 11,548 11,318
--------- ---------
Total current liabilities 21,469 17,806
Deferred income taxes 21,520 21,585
Other liabilities 576 437
Long-term debt 52,640 31,252
--------- ---------
Total liabilities 96,205 71,080
--------- ---------
Stockholders' equity:
Preferred stock, $.10 par value,
10,000,000 shares authorized; none issued - -
Common stock, $.50 par value, 30,000,000
shares authorized; 10,349,399 issued 5,175 5,175
Capital in excess of par value 71,417 71,417
Retained earnings 29,539 23,823
--------- ---------
106,131 100,415
Less:
Treasury stock, at cost: 47,424 shares
at June 30, 1996 and 50,924 shares at
September 30, 1995 (450) (483)
--------- ---------
Total stockholders' equity 105,681 99,932
--------- ---------
Total liabilities and stockholders' equity $201,886 $171,012
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-3-
<TABLE>
<CAPTION>
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
(in thousands except for per share data)
Nine Months Three Months
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $ 85,379 $86,876 $34,023 $26,764
Cost of sales 70,219 71,977 28,659 20,746
--------- -------- -------- --------
Gross profit 15,160 14,899 5,364 6,018
Other costs and expenses, net:
Selling, general and administrative (3,837) (3,338) (1,315) (1,079)
Gain on disposition of property
and equipment 77 561 14 52
Other 12 467 18 459
Interest (1,580) (1,320) (584) (405)
--------- -------- -------- --------
Income before income taxes 9,832 11,269 3,497 5,045
Income tax expense 3,071 4,139 1,021 1,697
--------- -------- -------- --------
Net income $ 6,761 $ 7,130 $ 2,476 $ 3,348
========= ======== ======== ========
Net income per common and common
equivalent shares: $ .66 $ .69 $ .24 $ .33
========= ======== ======== ========
Average number of common and
common equivalent shares outstanding 10,301 10,298 10,302 10,298
========= ======== ======== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-4-
<TABLE>
<CAPTION>
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
(in thousands)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 6,761 $ 7,130
--------- ----------
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization 3,534 3,051
Increase(decrease) in deferred income taxes (65) 1,709
(Gain) on disposition of property and
equipment and other (77) (1,039)
Change in assets & liabilities:
Decrease in receivables 1,293 961
Decrease in advances on fruit purchases 787 475
(Increase)decrease in inventory (22,463) 2,942
(Increase) in prepaid and other (119) (102)
Increase(decrease) in accounts payable and
accrued liabilities 216 (25)
Increase(decrease) in income taxes payable (74) 1,206
Other, net (941) (528)
--------- --------
Total adjustments (17,909) 8,650
--------- --------
Net cash provided by (used for)
operating activities (11,148) 15,780
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property & equipment 175 780
Proceeds from sale of property held for disposal 328 714
(Increase)decrease in note & mortgage receivables 104 (371)
Additions to property & equipment (13,556) (6,836)
--------- --------
Net cash (used for) investing activities (12,949) (5,713)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of treasury stock 18 -
Cash dividends paid (1,030) -
Proceeds from (payments on) short-term debt 3,000 (4,000)
Proceeds from (payments on) long-term debt 21,909 (6,222)
Net cash provided by (used for) financing --------- --------
activities 23,897 (10,222)
--------- --------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (200) (155)
--------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 845 765
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 645 $ 610
========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-5-
ORANGE-CO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. MANAGEMENT'S OPINION
The Consolidated Financial Statements include the accounts of
Orange-co, Inc. and Subsidiaries (the "Company"), after elimination
of material intercompany accounts and transactions.
In the opinion of the management of the Company, the
accompanying financial statements reflect adjustments, consisting
only of normal recurring adjustments unless otherwise disclosed,
which are necessary to present fairly the financial position,
results of operations and cash flows for the periods presented:
. Unaudited Consolidated Balance Sheet at June 30, 1996
. Audited Consolidated Balance Sheet at September 30, 1995
. Unaudited Consolidated Statements of Operations for the
nine and three month periods ended June 30, 1996 and 1995
. Unaudited Consolidated Statements of Cash Flows for the nine
month periods ended June 30, 1996 and 1995
2. NOTES PAYABLE AND LONG-TERM DEBT
As of June 30, 1996, the Company had a $40 million working
capital line of credit payable in January, 1998. Accordingly, the
balance at June 30, 1996 was classified as long-term. This facility
is collateralized by most of the Company's current assets. The
outstanding balance at June 30, 1996 was approximately $35,427,000
leaving approximately $3,973,000 additional funds available under a
borrowing base calculation. The interest rate is variable based
upon the financial institution's cost of funds plus a margin.
Additionally, as of June 30, 1996 the Company had a $10,000,000
short-term capital revolving credit facility. As of June 30, 1996
the balance on this facility was $3,000,000 leaving approximately
$7,000,000 additional funds available under a borrowing base
calculation. The interest rate on this facility is variable based
upon the financial institution's cost of funds plus a margin.
At June 30, 1996, the Company's outstanding long-term debt
(including the $35,427,000 balance on the working capital line of
credit) was approximately $55,255,000 of which $2,615,000 matures in
the next twelve months and the remainder matures at various times
over the subsequent twelve years.
Interest paid, net of amounts capitalized, was approximately
$1,536,000 and $1,353,000 for the nine months ended June 30, 1996
and 1995, respectively. Interest capitalized was approximately
$461,000 and $427,000 for the nine months ended June 30, 1996 and
1995, respectively.
Certain mortgage agreements contain loan covenants. At June
30, 1996, the Company was in compliance with these loan covenants.
-6-
3. INVENTORIES
<TABLE>
<CAPTION>
The major components of inventory are summarized as follows (in
thousands):
June 30, September
1996 30, 1995
<S> <C> <C>
Finished goods $48,111 $24,086
Fruit-on-tree 7,082 7,952
Other 3,337 4,029
------- -------
Total $58,530 $36,067
======= =======
</TABLE>
As of June 30, 1996 the Company held futures contracts for
frozen concentrated orange juice ("FCOJ"). The net futures
positions totaled approximately $3,636,000 with unrealized gains of
approximately $65,000. Exposure to off-balance sheet risk related
to these positions results from market fluctuations of FCOJ futures
prices relative to the Company's open positions. As of June 30,
1996 deposits with brokers totaled $103,000.
4. OTHER
The Company operates in one industry segment, "Citrus".
Substantially all sales are to entities that market citrus and
citrus-related products.
During the nine and three month periods ended June 30, 1996,
the Company had two customers who individually accounted for
approximately 21.2% and 18.9%, and 20.9% and 16.8% of total sales
for the respective periods. During the nine and three month periods
ended June 30, 1995, the Company had two customers who individually
accounted for approximately 17.4% and 13.9% and 24.1% and 15.9% of
total sales for the respective periods.
5. INCOME TAXES
Income tax expense is calculated using the asset and
liability method prescribed by Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("FAS No. 109").
Under this method deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under FAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax
rates or a deferred tax asset valuation reserve is recognized in
income in the period that includes the enactment or revaluation
date.
-7-
<TABLE>
<CAPTION>
Income tax expense for the nine and three month periods ended
June 30, 1996 and 1995 consists of the following (in thousands):
Nine Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Current:
Federal income tax $2,639 $2,431 $ 952 $1,645
State income tax 497 - 169 (48)
------ ------ ------- -------
Total 3,136 2,431 1,121 1,597
------- ------ ------- -------
Deferred:
Federal income tax $ (58) $1,543 $ (90) $ 123
State income tax (7) 165 (10) (23)
------- ------ ------- -------
Total (65) 1,708 (100) 100
------- ------ ------- -------
Income tax expense $3,071 $4,139 $1,021 $1,697
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Following is a reconciliation of the expected income tax expense
computed at the U.S. Federal statutory rate of 34% and the actual
income tax expense for the nine and three month periods ended June
30, 1996 and 1995 (in thousands):
Nine Months Three Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Expected income tax $3,343 $3,831 $1,189 $1,715
Increase(decrease) in income
taxes resulting from:
Loss on foreign operations 44 33 19 9
Permanent items 96 96 32 32
State income taxes, net of
federal tax benefit 328 165 112 (71)
Change in valuation
allowance for deferred tax asset (806) - (299) -
Other, net 66 14 (32) 12
------- ------ ------- -------
Actual income tax expense $3,071 $4,139 $1,021 $1,697
======= ====== ======= =======
</TABLE>
The reduction of $806,000 and $299,000, during the nine and three
month periods ended June 30, 1996, in the valuation allowance for a
deferred tax asset reflects management's estimate that the Company is
more likely than not to receive benefit from investment tax credit
carryforwards which expire in 1997 and thereafter.
-8-
6. CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
The following table reflects the changes in Stockholders' Equity
since September 30, 1995 as a result of net income, dividends paid,
and treasury stock transactions (in thousands):
Treasury
September 30, Net Dividends Stock June 30,
1995 Income Paid Issued 1996
<S> <C> <C> <C> <C> <C>
Common stock $ 5,175 $ - $ - $ - $ 5,175
Capital in excess
of par value 71,417 - - - 71,417
Retained earnings 23,823 6,761 (1,030) (15) 29,539
Treasury stock (483) - - 33 (450)
-------- ------ -------- ----- --------
Total stockholders'
equity $99,932 $6,761 $(1,030) $ 18 $105,681
======== ====== ======== ====== =========
</TABLE>
7. OTHER INCOME
During the third quarter of fiscal 1995 the Company was awarded
insurance proceeds of approximately $453,000 in excess of the book
value to replace certain equipment destroyed by a fire in the Bartow
processing facility. This event did not materially affect the
operations of the Company.
-9-
PART I - ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Fiscal 1996 versus Fiscal 1995
The following is management's discussion and analysis of
significant factors which have affected the Company's operations
during the periods included. It compares the Company's operations
for the nine and three month periods ended June 30, 1996 to
operations for the nine and three month periods ended June 30, 1995.
The following table reflects changes in sales, cost of sales and
gross profit by division and other changes in the Statements of
Operations through net income between the respective periods.
Nine Months (YTD) and Three Months (QTR) Ended June 30, 1996
vs Nine Months (YTD) and Three Months (QTR) Ended June 30, 1995
Increases/(Decreases)
(in thousands)
Sales Cost of Sales Net Change
YTD QTR YTD QTR YTD QTR
Beverage Division $(1,836) $7,094 $(2,064) $7,730 $ 228 $ (636)
Grove Management Division 339 165 306 183 33 (18)
-------- ------ -------- ------ ----- ------
Total $(1,497) $7,259 $(1,758) $7,913 261 (654)
======== ====== ======== ======
Other costs and expenses, net:
Selling, general and administrative (499) (236)
Gain on disposition of property and equipment (484) (38)
Other income (455) (441)
Interest (260) (179)
------- -------
Income before income taxes (1,437) (1,548)
Income tax expense 1,068 676
------- -------
Net income $ (369) $ (872)
======= =======
RESULTS OF OPERATIONS
SALES
Sales for the nine month period ended June 30, 1996 decreased
approximately $1,497,000 or 1.7% compared to the same period in the
prior year. The Beverage Division sales decreased approximately
$1,836,000 during this period. This decrease was partially offset
by an increase of approximately $339,000 in sales in the Grove
Management Division. Sales for the current three month period ended
June 30, 1996 increased approximately $7,259,000 or 27.1% compared
to the same period in the prior year. The Beverage Division
accounted for the principal increase in sales during the current
three month period of approximately $7,094,000. Grove Management
Division sales also increased approximately $165,000 during the same
three month period.
BEVERAGE DIVISION The Beverage Division sales decreased
approximately $1,836,000 or 2.2% during the current nine month
period and increased approximately $7,094,000 or 28.0% during the
current three month period compared to the same periods in the prior
year as a result of various increases and decreases. The principal
decreases in sales resulted from a reduction in the sales of the
-10-
Company's citrus by-products of approximately $4,590,000 and
$2,878,000 during the current nine and three month respective
periods primarily as a result of a decrease in volume due to
seasonal fluctuations. Additionally, sales from storage and
product handling for customers under contract decreased
approximately $3,268,000 and $578,000 during the current nine
and three month periods primarily as a result of a decrease in
the volume of these activities compared to the same periods in
the prior year.
Partially offsetting these decreases was an increase in the sales
of the Company's bulk citrus juice products of approximately
$1,336,000 and $8,811,000 during the current nine and three month
periods compared to the same periods in the prior year. Of this,
higher prices accounted for increases in sales of approximately
$5,661,000 and $3,743,000 during the current respective periods.
The increase during the current nine month period was partially
offset by a decrease in sales of approximately $4,325,000 as a
result of a reduction in the volume of bulk citrus juice products
sold. However, increased volume during the current three month
period accounted for an increase in sales of approximately
$5,068,000.
Sales also increased approximately $1,117,000 and $377,000 during
the current nine and three month respective periods as a result of
increased sales of the Company's packaged citrus juices. Of these
increases approximately $591,000 and $377,000 resulted from
increased volumes sold during the current nine and three month
periods. During the current nine month period sales of these
packaged citrus juices also increased approximately $526,000 as a
result of higher prices.
The Company's non-orange packaged juices and drink base sales
increased approximately $3,569,000 and $1,362,000 during the current
nine and three month respective periods. Of these increases
approximately $2,910,000 and $1,063,000 resulted from volume
increases and approximately $659,000 and $299,000 during the current
nine and three month periods resulted from higher prices.
GROVE MANAGEMENT DIVISION Grove Management sales increased
approximately $339,000 or 8.5% and $165,000 or 11.8% for the current
nine month and three month periods compared to the same periods in
the prior year. The principal increase of approximately $391,000 in
the current nine month period was primarily due to an increase in
grove caretaking and an increase in the price per box of fruit sold
to third party packers and processors. These increases were partially
offset by a decrease in revenues of approximately $52,000 primarily
due to a decrease in the volume of boxes harvested. The principal
increases totaling approximately $219,000 in the current three month
period was also due to an increase in grove caretaking and an increase
in charges for harvesting activities. These increases during the
current three month period were partially offset by a decrease in
revenues of approximately $54,000 due to a reduction in volume of
boxes of fruit sold to third party packers and processors.
GROSS PROFIT
Gross profit increased approximately $261,000 or 1.8% for the
current nine month period and decreased approximately $654,000 or
10.9% for the current three month period ended June 30, 1996 compared
to the same periods in the prior year. The principal increase for
the current nine month period of approximately $228,000 and the
principal decrease for the current three month period of approximately
$636,000 occurred in the Company's Beverage Division. Additionally,
the Grove Management Division gross profit increased approximately $33,000
during the current nine month period and decreased approximately $18,000
-11-
during the current three month period compared to the same periods
in the prior year.
BEVERAGE DIVISION Gross profit of the Beverage Division increased
$228,000 or 1.6% during the current nine month period and decreased
approximately $636,000 or 10.9% during the current three month
period compared to the same periods in the prior year due to
offsetting increases and decreases.
The principal decreases of approximately $4,186,000 and
$2,455,000 in the Beverage Division gross profit for the current
nine and three month periods resulted primarily from decreases
in the volume of sales of the Company's by-products including feed,
pulp cells, and citrus oils. Additionally, gross profit decreased
approximately $1,231,000 and $126,000 from a reduction of services
including storage and product handling for customers under contract.
During the current nine and three month periods the Company's
gross profit from the sale of its bulk citrus juice products
increased approximately $5,002,000 and $2,403,000 respectively
compared to the same periods in the prior year. Of these increases
price increases accounted for approximately $5,661,000 and
$3,743,000 respectively during the current nine and three month
periods. Partially offsetting these increases were decreases of
approximately $248,000 and $2,232,000 in the current periods as a
result of higher costs of raw fruit and concentrate used in the
production of bulk citrus juice products compared to the same
periods in the prior year. Additionally, gross profit decreased
approximately $411,000 and increased approximately $892,000 during
the current nine and three month periods as a result of seasonal
fluctuations in the volume of sales.
The Company has in the past utilized and may in the future
utilize the FCOJ futures market to hedge fruit inventory,
anticipated requirements and sales commitments of FCOJ. The effects
of this hedging activity, if any, are reflected in sales and in the
cost of inventories and flow through cost of sales in the
Consolidated Statements of Operations as the associated products are
sold. As of June 30, 1996 the Company held contracts for FCOJ
futures with unrealized gains of approximately $65,000 which would
have been realized if said positions had been prematurely liquidated
on that date. These unrealized gains are based upon the closing
market price of equivalent futures obligations and do not necessarily
represent prices at which the Company expects to sell the FCOJ.
Gross profit from the sale of packaged citrus juice products
increased approximately $541,000 and decreased approximately
$257,000 during the current nine and three month periods compared to
the same periods in the prior year. During the current nine month
period increases in the price of these products accounted for the
principal increase in gross profit compared to the prior year. In
the current three month period the increased cost of production
principally from the higher cost of raw fruit and concentrate
accounted for the principal decrease compared to the same period
in the prior year.
Additionally, gross profit from the sale of the Company's
non-orange packaged juices and drink base products increased
approximately $102,000 in the current nine month period and
decreased approximately $201,000 in the current three month period
compared to the same periods in the prior year. Of these increases
and decreases higher prices for these products accounted for
increases in gross profit of approximately $659,000 and $299,000 in
the current nine and three month periods compared to the same
periods in the prior year. Additional increases of $233,000 and
$130,000 in the current nine and three month respective periods
-12-
resulted from higher volumes of sales of these products.
However, higher production costs, primarily ingredients,
reduced gross profit on non-orange packaged juices and drink
base products by approximately $790,000 and $630,000 during the
current nine and three month periods compared to the same periods
in the prior year.
GROVE MANAGEMENT DIVISION Grove Management gross profit increased
approximately $33,000 for the current nine month period and
decreased by approximately $18,000 for the current three month
period compared to the same periods in the prior year. The
principal increase of approximately $43,000 in the current nine
month period was due to an increase in grove caretaking. This
increase in gross profit was partially offset by a decrease of
approximately $10,000 from a reduction in harvesting activities
and from fruit sold to third party packers and processors. During
the current three month period gross profit from grove caretaking
and harvesting activities increased by approximately $14,000.
These increases in gross profit during the current three month
period were offset by a decrease of approximately $32,000 from
fruit sold to third party packers and processors due to a
reduction in the volume of boxes sold.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased approximately
$499,000 or 15.0% and $236,000 or 21.9% for the current nine and
three month respective periods compared to the same periods in the
prior year. These increases were primarily the result of increases
in staffing and benefit costs.
GAIN/(LOSS) ON DISPOSITION OF PROPERTY AND EQUIPMENT
The decreased gain on the disposition of property and equipment
of approximately $484,000 and $38,000 for the nine and three month
periods ending June 30, 1996 compared to the same periods in the
prior year was principally due to differences in gains on sales of
commercial properties not utilized in citrus production or processing.
INTEREST EXPENSE
Interest expense increased approximately $260,000 or 19.7% and
$179,000 or 44.2% in the current nine and three month periods
respectively, compared to the same periods in the prior year. The
primary increases of approximately $322,000 and $478,000 in the
current respective periods were the result of increases in
outstanding debt, while increases of approximately $48,000 and
$18,000 during the current nine and three month periods were the
result of decreases in interest income. Also increasing interest
expense for the current three month period was a decrease in
capitalized interest of approximately $42,000. Partially offsetting
these increases in the current nine and three month periods were
decreases of approximately $40,000 and $344,000 respectively due to
a reduction in interest rates and decreases of approximately $36,000
and $15,000 as a result of decreases in amortization of deferred
loan costs and other related interest charges. Additionally, a
decrease of approximately $34,000 in the current nine month period
was the result of an increase in capitalized interest.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Bartow processing plant normally operates from
early November through late May or June. While the plant is in
operation, the inventory of processed juice increases to a level
which will cover anticipated sales until the
-13-
next crop is being harvested and the plant begins operation again.
The Company's working capital credit facility is generally utilized
to finance these inventories. Borrowings under this credit facility
normally peak in late May or June. The Company began processing
activities for the 1995-96 season in late October 1995 and completed
these activities in May 1996.
The Company's ability to generate cash adequate to meet its
needs, including the financing of its inventories and trade
receivables, has been supported primarily by cash flow from
operations and periodic borrowings under its primary $40 million
credit facility. This facility is secured principally by most of
the Company's current assets. The outstanding balance at June 30,
1996 was approximately $35,427,000 and approximately $3,973,000 of
additional borrowings were available. The terms of the agreement
call for repayment of the principal amount in January 1998;
accordingly, it is classified as long-term. The Company anticipates
that the working capital facility will be adequately serviced with
cash proceeds from operations. Management believes this facility will
provide sufficient working capital over the next two years.
Additionally, the Company had a $10 million short-term capital
revolving credit. As of June 30, 1996, the balance on this facility
was $3,000,000 and approximately $7,000,000 of additional borrowings
were available.
Current assets increased approximately $20,302,000 as of June 30,
1996 compared to September 30, 1995. The principal component of
this was an increase in inventories of approximately $22,463,000 in
the first nine months of the current year due to the seasonal
accumulation of inventories. The Company's accounts receivable
balance decreased approximately $1,293,000 during the nine months
ending June 30, 1996. Additionally, there was a decrease in cash
and short-term cash investments of approximately $200,000. Advances
on fruit purchases decreased approximately $787,000 as the Company
processed the purchased fruit and collected these advances.
Current liabilities increased during the first nine months of
fiscal 1996 approximately $3,663,000 compared to September 30, 1995.
This increase was due principally to additional borrowings of
$3,000,000 on the Company's short-term revolving credit facility to
support operations. Also, the current portion of long-term debt
increased approximately $521,000 compared to September 30, 1995.
Additionally, accounts payable and accrued liabilities increased
approximately $142,000.
Long-term debt increased approximately $21,388,000 during the
current nine month period. This was primarily the result of an
increase of approximately $18,333,000 in the Company's long-term
working capital facility used principally to finance the seasonal
accumulation of inventories. Additionally, long-term borrowings
under existing mortgages increased approximately $4,639,000 to
finance capital improvements. There was a decrease of
approximately $1,584,000 which represents principal payments made
on long-term debt during the nine month period.
At June 30, 1996, the Company's outstanding long-term debt was
approximately $52,640,000 including the working capital facility of
approximately $35,427,000. In addition, current installments of long-
term debt were approximately $2,615,000 with the remaining amounts
due on various dates over the subsequent twelve years. The Company
anticipates that amounts due over the next twelve months will be
paid out of working capital. At June 30, 1996, the Company was in
compliance with its loan covenants.
-14-
During the first nine months of the current fiscal year, capital
expenditures of approximately $1,907,000 were made for the
installation of new irrigation systems on 3,553 acres of Company-
owned groves. Additional expenditures of approximately $6,161,000
were made during the same period primarily for the purpose of
improving the Bartow processing facility. Also during this period,
expenditures of approximately $345,000 were made for grove
operations equipment. The Company anticipates that these
improvements will be financed principally by working capital or by
securing additional funds under existing mortgages.
OTHER SIGNIFICANT EVENTS
In October 1995 the United States Department of Agriculture
("USDA") announced a Florida crop estimate of approximately
202,000,000 boxes of round oranges for the 1995-96 season. In
July, 1996 the USDA announced the state harvested approximately
203,200,000 boxes of round oranges during the 1995-96 season
which is the second largest Florida crop in history.
In July 1996 the Company purchased the Birds Eye food service
juice business in the United States from Kraft Foods, Inc. The
Birds Eye business consists of products similar to the Company's
existing packaged juices sold to the food service industry.
-15-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. EXHIBIT Page No.
10.24 Second Amendment to the Loan Agreement
between Orange-co, Inc. and Farm Credit of
Southwest Florida, ACA dated May 16, 1996 17
10.25 Asset Purchase Agreement between Kraft
Foods, Inc. and Orange-co, Inc. 20
27 Financial Data Schedule (Electronic Filing
Only)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934 the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ORANGE-CO, INC.
(Registrant)
Date: August 13, 1996 By: /s/Gene Mooney
----------------------------
Gene Mooney
President and
Chief Operating Officer
Date: August 13, 1996 By: /S/Dale A. Bruwelheide
---------------------------
Dale A. Bruwelheide
Vice President and
Chief Financial Officer
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000004507
<NAME> ORANGE-CO, INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 495
<SECURITIES> 150
<RECEIVABLES> 8,738
<ALLOWANCES> (414)
<INVENTORY> 58,530
<CURRENT-ASSETS> 67,651
<PP&E> 155,874
<DEPRECIATION> (37,866)
<TOTAL-ASSETS> 201,886
<CURRENT-LIABILITIES> 21,469
<BONDS> 0
0
0
<COMMON> 76,592
<OTHER-SE> 29,539
<TOTAL-LIABILITY-AND-EQUITY> 201,886
<SALES> 85,379
<TOTAL-REVENUES> 85,379
<CGS> (70,219)
<TOTAL-COSTS> (70,219)
<OTHER-EXPENSES> 89
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,580)
<INCOME-PRETAX> 9,832
<INCOME-TAX> (3,071)
<INCOME-CONTINUING> 6,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,761
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
EXHIBIT 10.24
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT ("Second Amendment") is dated
the 16th day of May, 1996, by and between Orange-co, Inc., a Florida
corporation and Orange-co of Florida, Inc., a Florida corporation (the
"Borrower") and Farm Credit of Southwest Florida, ACA (the "Lender").
BACKGROUND
On April 19, 1993, Borrower and Lender executed a loan agreement (the
"Agreement"). Pursuant to the provisions of the Agreement, Lender made a
$7,600,000.00 term loan to Borrower (the "Term Loan"). The Term Loan was
evidenced by a promissory note executed by Borrower in favor of Lender dated
April 19, 1993 (the "1993 Note"). Payment of the 1993 Note was secured
pursuant to the terms of a real estate mortgage ("Mortgage") and security
agreement dated April 19, 1993, covering real and personal property located
in DeSoto County, Florida (the "Property") and by a collateral assignment
of rents and leases dated April 19, 1993 (the "Assignment of Rents")
covering rents and leases arising from the Property encumbered by the
Mortgage. On May 2, 1994, Borrower and Lender executed an amendment to
loan agreement (the "First Amendment").
Borrower has applied to Lender for a loan in the amount of
$5,000,000.00 and Lender has agreed to loan $5,000,000.00 to Borrower in
consideration of Borrower executing a mortgage modification agreement, a
promissory note in the amount of $5,000,000.00 ("1996 Note"), this second
amendment to Loan Agreement and other loan documents ("Loan Documents") and
otherwise agreeing to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the promises
contained herein, the parties agree as follows:
1. Recitals. All of the above recitals are true and correct in every
respect and are incorporated herein and made a part hereof.
2. 1996 Note. Borrower will execute and deliver the 1996 Note to
Mortgagee and all the Loan Documents in consideration of Mortgagee loaning
$5,000,000.00 to Mortgagor.
3. Future Advance. By virtue of the $5,000,000.00 Lender has
advanced under the Mortgage, the Parties hereby agree that the Mortgage be
modified and restated to include the language in the future advance clause
to read as follows:
This Mortgage shall also secure any future advances made by Lender,
at its option, to Borrower, or one or more of all of them, as may be
made during the time authorized by law for such advance, PROVIDED
THAT THE MAXIMUM AMOUNT SECURED HEREBY SHALL NOT AT ANY ONE TIME
EXCEED THE PRINCIPAL SUM OF FIFTEEN MILLION TWO HUNDRED TEN THOUSAND
and NO/100 DOLLARS ($15,200,000.00), plus interest thereon, and any
disbursements made for the payment of taxes, levies or insurance on
the Property covered by the lien of this Mortgage, with interest on
such disbursements. In the event of such advance, the amount
thereof shall be added to the mortgage debt.
4. Loan Agreement, Ratification, No Novation. Except as expressly
modified or supplemented hereby, the terms of the original Mortgage and 1993
Note, as well as the terms and provisions contained in the Loan Documents
and all agreements, instruments, and documents executed or delivered
pursuant thereto have remained and shall remain at all times in full force
and effect in accordance with their respective terms, and have not been
novated by the provisions of this Amendment, including but not limited to
the Collateral Assignment, Uniform Commercial Code Filing Statements and
any other loan documents are hereby ratified and confirmed. The parties
hereto acknowledge and agree that the Collateral Assignment shall also
serve as additional security of the 1996 Note dated May 16th, 1996.
5. Security. The parties hereto acknowledge and agree that the
payment of the entire indebtedness evidenced by the 1993 Note and 1996
Note, is secured by the Mortgage, as modified, Security Agreement and
Collateral Assignment as well as such other collateral, if any, listed
in any other Loan Documents executed by Mortgagor and Makers in favor
of Mortgagee and intended to collateralize the 1993 Note and 1996 Note.
6. Estoppel and Release. Borrower hereby acknowledges and
agrees that, as of the date hereof, there exists no right of offset,
defense, counterclaim, claim, or objection in favor of either such
party as against Lender with respect to the 1996 Note, Mortgage,
Collateral Assignments and Security Agreements, any collateral
therefor, or any other aspect of the transactions contemplated thereby,
or alternatively, that any such right of offset, defense, counterclaim,
claim, or objection is hereby expressly waived. In connection with
the foregoing, each borrower hereby jointly and severally releases
and discharges Lender, its directors, officers, employees, agents,
successors, and assigns from any and all rights, claims, demands,
actions, causes of action, suits, proceedings, agreements, contracts,
judgments, damages, debts, duties, liabilities, or obligations,
whether in law or in equity, known or unknown, choate or inchoate,
which it has had, now has, or hereafter may have, arising under or
in any manner relating to, whether directly or indirectly, the 1996
Note, Mortgage, Collateral Assignments and Security Agreements, any
collateral therefor, or any other aspect of the transactions
contemplated thereby from the beginning of time until the date hereof.
7. Headings. The titles and headings preceding the text of the
paragraphs of this Amendment have been inserted solely for the convenience
of reference and shall neither constitute a part of this Amendment nor
affect its meaning, interpretation, or effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the day and year first above written.
WITNESSES: BORROWER:
Orange-co, Inc., a Florida
corporation
/s/Gilbert A. Smith Jr. By:/s/Gene Mooney
- ---------------------------- ----------------------------
Gilbert A. Smith Jr. Gene Mooney, its President
Print: Gilbert A. Smith Jr.
/s/Eric L. Dunham By:/s/Dale A. Bruwelheide
- ---------------------------- ----------------------------
Eric L. Dunham Dale Bruwelheide, its Vice President
Print: Eric L. Dunham and Chief Financial Officer
As to Borrower
Orange-co of Florida, Inc., a Florida
corporation
/s/ Gilbert A. Smith Jr. By:/s/Gene Mooney
- ---------------------------- ------------------------------
Gilbert A. Smith Jr. Gene Mooney, its President
Print: Gilbert A. Smith
/s/Eric L. Dunham By:/s/Dale A. Bruwelheide
- ---------------------------- --------------------------------
Eric L. Dunham Dale Bruwelheide, its Vice President
Print: Eric L. Dunham and Chief Financial Officer
As to Borrower
FARM CREDIT OF SOUTHWEST FLORIDA,
ACA, a federally chartered corporation
/s/Gilbert A. Smith Jr. By:/s/Eric L. Dunham
- ----------------------------- __________________________________
Gilbert A. Smith Jr. Eric L. Dunham, its Vice President
Print:Gilbert A. Smith Jr.
As to Lender
EXHIBIT 10.25
ASSET PURCHASE AGREEMENT
BETWEEN
KRAFT FOODS, INC.
NORTH AMERICAN FOODSERVICE DIVISION
AND
ORANGE-CO, INC.
ASSET PURCHASE AGREEMENT
THIS Agreement is entered into as of this 28th day of
June, 1996 by and between the North American Foodservice
Division of Kraft Foods, Inc., a Delaware corporation ("Seller"),
and Orange-Co, Inc., a Florida corporation ("Buyer").
Subject to the terms and conditions set forth herein,
Buyer desires to purchase from Seller (subject to certain
associated liabilities, as set forth in Section 1.03) and Seller
desires to sell to Buyer (subject to Buyer assuming such
liabilities) the business, assets and properties, operating as a
going concern, which constitute Seller's BIRDS EYE(R) and GOLD `N
RICH(R) frozen concentrated juice products for foodservice business
in the United States, its territories, Puerto Rico and to the U.S.
Military (collectively, the "Business").
The parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
Section 1.01 Basic Transaction.
(a) Purchased Assets. Except as otherwise provided below,
on and subject to the terms set forth in this Agreement, Buyer
hereby agrees to purchase from Seller, and Seller hereby agrees to
sell, convey, assign, transfer, and deliver at the Closing (as
defined in Section 1.04 below) to Buyer all properties, assets,
goodwill and other rights owned by Seller or any affiliate of
Seller of every kind and nature whatsoever, tangible or
intangible, and wherever located, of the Business, as set forth
below, which are used exclusively in the Business (the "Purchased
Assets"), including but not limited to the following:
(i) all Birds Eye Juice Dispenser Installment
Sales Contracts and contingent installment payments
arising therefrom and Seller-Owned Equipment Agreements
and Agency Agreements(as set forth in Schedules
1.01(a)(i) and (a)(ii) relating to the Business;
(ii) all rights existing under leases (of personal
property) used exclusively in the Business, and
contracts, licenses, permits, distribution arrangements,
sales and purchase agreements, other agreements and
business arrangements used exclusively in the Business,
including without limitation, all such leases, contracts
and agreements described in the Schedules to this
Agreement;
(iii) all machinery and equipment used
exclusively in the Business, including but not limited
to the processing equipment located at Indian River
Foods more fully described in Schedule 1.01(a)(iii);
(iv) all production supplies, spare parts (set
forth in Schedule 1.01(a)(iv)), and other miscellaneous
supplies of any kind used exclusively in the Business;
(v) all beverage dispensing equipment for frozen
concentrated juice products and associated spare parts
used exclusively in the Business;
(vi) all patents, set forth on Schedule 4.11, which
are specifically marked as being included in the
Purchased Assets; all know-how, processes, trade secrets
and confidential information used exclusively in the
Business;
(vii) all trademarks, set forth on Schedule
4.11, marked as being included in the Purchased Assets;
all rights relating to the Business under the Trademark
License set forth on Schedule 4.11; all registered and
unregistered copyrights used exclusively in the
Business; all trade dress associated with the trademarks
and the trademark licenses to be acquired as the
Purchased Assets; and all registrations for, and
applications for registration of, any of the foregoing;
and all goodwill and going concern value of the
Business;
(viii) all formulae (secret or otherwise), data,
engineering, technical and shop drawings, blue prints,
art work, and specifications used exclusively in the
Business;
(ix) all business records, tangible data,
documents, files, customer and supplier lists,
operations or maintenance manuals, credit information
and sales literature of the Business; provided, however,
that credit information shall be limited to customer
payment records and the current status of customer
accounts; further provided that Seller may retain
copies of the foregoing for its records, and, further
provided, that Seller shall have the right to use in its
ongoing business operations any of the foregoing
materials which were not used by Seller exclusively by
Seller for the Business;
(x) all of Seller's right, title and interest in
and to all licenses and permits of the Business to the
extent transferable; and
(xi) all advertising and point of sale materials,
including artwork, which does not include trademarks of
Seller other than BIRDS EYE(R) and GOLD'N RICH(R) in the
United States.
The Purchased Assets shall be conveyed free and clear of
all liabilities, obligations, liens and encumbrances excepting
Assumed Liabilities and liens and encumbrances which are
specifically disclosed herein or expressly permitted by the terms
hereof or established by this Agreement and the Exhibits and Attachments
referred to herein.
(b) Excluded Assets. Notwithstanding the foregoing, the
parties agree that the following are expressly excluded from this
purchase and sale and are not included in the Purchased Assets
(the "Excluded Assets"):
(i) Seller's rights under or pursuant to this
Agreement and other agreements with Buyer contemplated
hereby;
(ii) Seller's minute books and stockholder and
stock transfer records and similar corporate records;
(iii) any of Seller's cash and cash equivalents
and bank accounts;
(iv) accounts receivable arising out of the Business
from sales of juice inventory through the Closing Date;
(v) insurance policies and claims thereunder,
claims for and rights to receive tax refunds, all tax
returns of the Business and any notes, worksheets, files
or documents related thereto;
(vi) any patents and trademarks and other intellectual
property rights of Seller or its affiliates which are
not set forth on Schedule 4.11 and specifically marked
as being included in the Purchased Assets or
specifically encompassed by one of the enumerated
clauses of Section 1.01(a), and rights under the
Trademark License set forth on Schedule 4.11 which do
not relate to the Business.
(vii) formulas for frozen concentrate products sold
under trademarks other than BIRDS EYE(R) or GOLD `N RICH(R)
in the United States.
(viii) all general research and development work
except for specific research and development work
related exclusively to the business;
(ix) all claims relating to Excluded Assets or
Excluded Liabilities; and
(x) all assets other than the assets included
within the Purchased Assets.
Section 1.02 Consideration for Purchased Assets.
(a) Aggregate Consideration. At the Closing (as defined in
Section 1.04), Buyer will assume the Assumed Liabilities (as
defined in Section 1.03) and pay to Seller the sum of US Two
Million Two Hundred Fifty Thousand Dollars (US$2,250,000.00) by
certified check or by wire transfer of immediately available
funds in the United States, as Seller shall direct Buyer.
Section 1.03 Assumption of Liabilities.
(a) Liabilities Assumed. Subject to the conditions
specified in this Agreement, and as additional consideration for
the sale and transfer of the Purchased Assets, Buyer will assume
on the Closing Date and pay, discharge or perform when due the
following liabilities and obligations, whether fixed, absolute or
contingent, matured or unmatured, of Seller with respect to the
Business as they exist on the Closing Date, including any claims
in respect thereof (hereinafter referred to as the "Assumed
Liabilities"):
(i) Seller's liabilities and obligations under the
contracts or commitments relating to the Business listed
on the Schedules to this Agreement and under contracts
or commitments which are not required to be listed
thereon or herein because of materiality (as defined in
Section 4.12(a)) limitations set forth herein, and
liabilities and obligations incurred after the date
hereof in the ordinary course of business to the extent
not paid prior to the Closing Date, provided, however,
that Buyer shall not be required to assume any liability
for juice product-related inventory purchased by Seller
and sold to customers prior to the Closing Date;
(ii) all liabilities and obligations for trade
promotion and marketing programs (including, without
limitation, trade allowance programs and end-user rebate
programs, regardless of when issued) related to product
shipments on and after the Closing Date. For those
promotions and programs (set forth in Schedule
1.03(a)(ii)) which begin before the Closing Date and end
after the Closing Date, Buyer assumes the proportional
liability for the volume of product shipped on and after
the Closing Date, as related to the total volume of
product shipped during the entire promotion or program;
(iii) all liabilities and obligations for all
consumer or governmental complaints, trade complaints,
product liability claims, written product guarantees set
forth on the packaging therefore and returned unsaleable
merchandise which arise from the sale of product packed
by or purchased by Buyer;
(iv) Seller's liabilities and obligations under the
contracts and commitments relating to the repair and
maintenance of the frozen juice dispensing equipment
provided to distributors and other customers of the
Business; and
(v) all liabilities and obligations of the
Business which arise or are incurred on or after the
Closing Date, except for those liabilities and
obligations which so arise or are so incurred but are
Excluded Liabilities.
(b) Excluded Liabilities. Buyer will not assume or be
liable for any of the following liabilities or obligations (herein
referred to as "Excluded Liabilities") and, notwithstanding any
implication to the contrary above, none of the following
liabilities or obligations are "Assumed Liabilities" for purposes
of this Agreement:
(i) any of Seller's liabilities or obligations
under this Agreement and the other agreements with Buyer
contemplated hereby;
(ii) any of Seller's liabilities or obligations for
expenses or fees incident to or arising out of the
negotiation, preparation, approval, or authorization of
this Agreement or the consummation (or preparation for
the consummation) of the transactions contemplated
hereby, including without limitation, attorneys' and
accountants' fees;
(iii) any liability or obligation of Seller
with respect to federal, state, local or foreign taxes
taxes; and any liability for interest, penalties or additions
to any of such taxes;
(iv) any of Seller's obligations or liabilities
which relate to any bonus, retirement, retiree,
disability, pension, profit sharing, stock bonus,
thrift, incentive, deferred or other compensation or
welfare benefit plan, program or arrangement;
(v) any liability or obligation of Seller which
relates to the Excluded Assets;
(vi) any liabilities or obligations arising out of
any litigation, suit or action, or incurred as a result
of any act, omission or negligence of Seller and
Seller's products distributed prior to the Closing Date;
(vii) any liability or obligation which arises
from waste, hazardous waste or any other substance,
matter or materials which Seller has, or has caused to
be, transported and disposed off-site; and
(viii) any other liability or obligation of
Seller not assumed by Buyer under Section 1.03(a)
hereof.
Section 1.04 The Closing.
The closing of the purchase and sale of the Purchased Assets,
the assumption of the Assumed Liabilities and the other
transactions contemplated by this Agreement (the "Closing") will
take place at the White Plains, NY offices of Seller, at 9:00 a.m.
local time on June 28, 1996 or at such other place or on such
other date as is mutually agreeable to the parties; provided,
however, that if any of the conditions to the Closing set forth in
this Agreement have not been satisfied or waived by the party
entitled to the benefit of such condition, the Closing will take
place on the third business day after all conditions have been
satisfied or waived. The date and time of the Closing are herein
referred to as the "Closing Date." The Closing will be effective
as of the close of business on June 30, 1996, or such other time
as mutually agreed upon by both the Seller and the Buyer.
Section 1.05 Procedures at Closing. At the Closing, the parties
shall take the following steps in the order listed below
(provided, however, that upon their completion all such steps
shall be deemed to have occurred simultaneously):
(a) Seller shall deliver to Buyer the deliveries required
pursuant to Section 2.01(f).
(b) Buyer shall deliver to Seller the deliveries required
pursuant to Section 2.02(e).
(c) Buyer shall deliver the Purchase Price to Seller, by
certified check made payable to Seller or by wire transfer in
immediately available funds in the United States, as Seller shall
direct to Buyer.
(d) Buyer and Seller shall execute and deliver a cross
receipt acknowledging receipt from the other of the respective
deliveries.
ARTICLE 2
CONDITIONS TO CLOSING
Section 2.01 Conditions to Buyer's Obligations. The obligation
of Buyer to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following
conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article
4 hereof, both individually and considered as a whole, shall have
been true and correct in all material respects as of the date
hereof and such representations and warranties shall be true and
correct in all material respects at and as of the Closing Date
except where the failure to be true or correct would not have a
material adverse effect (a "MAE") on the Business;
(b) Seller will have performed in all material respects all
of the covenants and agreements required to be performed by it
under this Agreement;
(c) except for such changes that are attributable in whole
or in part to the announcement of or knowledge with respect to the
transactions contemplated by this Agreement, there will have been
no material adverse change in the financial condition, business,
assets, or employee, customer, or supplier relations of the
Business (exclusive of the Excluded Assets and Excluded
Liabilities), and there will have been no casualty loss or damage
to the Purchased Assets which is material to such Purchased Assets
taken as a whole (whether or not covered by insurance);
(d) the consents, approvals, or other actions by third
parties that are required for the consummation of the transactions
contemplated hereby and are indicated in Schedule 4.15 as being a
condition to Closing for Buyer will have been obtained;
(e) no action, proceeding or investigation by or before any
court or governmental or administrative body initiated by a
governmental or administrative entity will be pending, wherein a
judgment, decree or order is likely to be issued that would
prevent any of the transactions contemplated by this Agreement or
would require a divestiture which would materially adversely
affect the Business;
(f) on the Closing Date, Seller will have delivered to Buyer
the following:
(i) a certificate dated the Closing Date executed
by a Vice President of Seller, stating that, to the best
of his knowledge, the conditions specified in
subsections (a) through (c) hereof have been satisfied;
(ii) certified copies of the resolutions duly
adopted by Seller's board of directors, authorizing the
execution, delivery and performance of this Agreement;
(iii) a short-form good standing certificate
for Seller from its state of organization dated not
earlier than five (5) days prior to the Closing Date;
(iv) copies of any third party and governmental
consents (or other evidence reasonably satisfactory to
Buyer) that Seller is required by subsections (d) and
(e) hereof to obtain in order to effect the transactions
contemplated by this Agreement;
(v) a bill of sale evidencing the sale of the
Purchased Assets;
(vii) a transition services agreement between
Seller and Buyer.
(vii) partial assignment of Seller's rights under the
Trademark License Agreement between Seller and the Dean
Foods Company("Dean") dated December 27, 1993 to use the
trademarks set forth in Schedule 4.11 (3) in connection
with the manufacture, packaging, distribution, sale and
promotion of foodservice juice products in the United
States, its territories, Puerto Rico and to the US
Military, to the extent authorized by said Trademark
License Agreement; and
(ix) such other documents as Buyer may reasonably
request in connection with the transactions contemplated
hereby.
(g) all proceedings to be taken by Seller in connection with
the consummation of the transactions contemplated hereby and all
documents required to be delivered by Seller in connection with
the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Buyer.
Any condition specified in this Section 2.01 may be waived by
Buyer, provided that no such waiver will be effective unless it is
set forth in a writing executed by Buyer.
Section 2.02 Conditions to Seller's Obligations. The obligation
of Seller to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the following
conditions on or before the Closing Date:
(a) the representations and warranties set forth in Article
5 hereof, both individually and considered as a whole, shall have
been true and correct in all material respects as of the date
hereof and such representations and warranties shall be true and
correct in all material respects as of the Closing Date;
(b) Buyer will have performed in all material respects all
the covenants and agreements required to be performed by it under
this Agreement;
(c) the consents, approvals or actions by third parties that
are required for consummation of the transactions contemplated
hereby and are indicated in Schedule 4.15 as being a condition to
Closing for Seller will have been obtained;
(d) no action or proceeding before any court or government
body initiated by a governmental or administrative entity will be
pending wherein a judgment, decree or order would prevent any of
the transactions contemplated by this Agreement;
(e) on the Closing Date, Buyer will have delivered to Seller
the following:
(i) an officers' certificate executed by the
President or a Vice President of Buyer dated the Closing
Date, stating, to the best of his or her knowledge that
the conditions specified in subsections (a) or (b)
hereof have been satisfied;
(ii) certified copies of the resolutions adopted by
Buyer's board of directors authorizing the execution,
delivery and performance of this Agreement and the other
agreements contemplated hereby;
(iii) a short-form good standing certificate of
Buyer from its state of organization, dated not earlier
than five (5) days prior to the Closing Date;
(iv) Buyer will have executed such agreements or
instruments as are reasonably necessary to evidence
Buyer's assumption of the Assumed Liabilities;
(v) a transition services agreement between Seller
and Buyer; and
(vi) an agreement in form satisfactory to Seller to
supply Kraft Foods Canada, Inc. and the Kraft Foods
International unit of Kraft Foods, Inc. with their
respective requirements for products of the Business
(for Canada and Japan, respectively) for a period of
eighteen (18) months on terms, equal to or better
than the terms currently available to Seller under its
agreement with Indian River Foods. At the end of eighteen
(18) months, Buyer will supply Kraft Foods Canada, Inc, and
Kraft Foods International on a basis competitive with
customers which purchase similar quantities of juice
products, after giving due consideration to any import
or export duties. In no event will Buyer be required to
supply goods and services at a price which is less than
the Buyer's fixed and variable cost of production, including
ingredient costs, direct labor, packaging costs and allocated
manufacturing overhead, plus a profit margin of fifteen
(15%). All importation duties on goods shipped into
Japan or Canada will be paid by the Kraft Foods
International unit of Kraft Foods, Inc.(or its customer
for such goods) or Kraft Foods Canada, Inc.; and
(vii) such other documents as Seller may
reasonably request in connection with the transactions
contemplated hereby.
(f) the Board of Directors of Seller's parent company or its
executive committee shall have approved this Agreement and the
transactions contemplated hereby.
(g) all proceedings to be taken by Buyer in connection with
the consummation of the transactions contemplated hereby and all
documents required to be delivered by Buyer in connection with the
transactions contemplated hereby will be reasonably satisfactory
in form and substance to Seller.
Any condition specified in this Section 2.02 may be waived by
Seller, provided that no such waiver will be effective unless it
is set forth in a writing executed by Seller.
ARTICLE 3
COVENANTS PRIOR TO CLOSING
Section 3.01 Affirmative Covenants of Seller. Prior to the
Closing, unless Buyer has otherwise consented in writing, Seller
will take the following actions with respect to the Business:
(a) continue to conduct all operations of the Business at
all locations at which such operations are presently conducted,
but only in the ordinary and usual course of business;
(b) use reasonable commercial efforts to preserve its
present business relationships with customers and suppliers;
(c) maintain the Purchased Assets in customary repair, order
and condition;
(d) maintain the financial records of the business in a
manner consistent with historical practice;
(e) maintain the existence of and protect the trademarks,
service marks, trade names, copyrights, trade secrets, licenses
and other proprietary rights of the Business;
(f) comply in all material respects with applicable legal
requirements and contractual obligations;
(g) permit Buyer and its employees, agents, environmental
consultants, appraisers and accountants and legal representatives
to have reasonable access, on reasonable notice, during normal
business hours, to the books, records, contracts, leases, key
personnel, accountants, plants and equipment of the Business; and
(h) use reasonable commercial efforts to comply with all
conditions to Buyer's obligations to close and to obtain all other
third party consents and governmental approvals relating to the
transactions contemplated hereby.
Section 3.02 Negative Covenants of Seller. Prior to the
Closing, without the prior written consent of Buyer, Seller will
not with respect to the Business:
(a) take any action that would require disclosure under
Section 4.07 of this Agreement;
(b) sell or transfer any of the Purchased Assets other than
in the ordinary course of business;
(c) make or obligate itself to make capital expenditures
with respect to the Business aggregating more than $25,000 without
prior approval of Buyer.
Section 3.03 Covenant of Buyer. Prior to the Closing, Buyer
will use reasonable commercial efforts to comply with all
conditions to Seller's obligations to close.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 4.01 Corporate Organization and Power. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of Delaware and has the corporate power and
authority to carry on its business as now being conducted and to
own and operate the properties and assets now owned and being
operated by it. Seller is qualified as a foreign corporation for
the transaction of business and is in good standing under the laws
of each jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except
such jurisdictions where the failure to qualify will not have a
materially adverse effect on the Business. Except as set forth in
Schedule 4.01, Seller has full corporate power and authority to
execute, deliver and perform this Agreement and the other
agreements contemplated hereby.
Section 4.02 Authority; Authorization. Except as set forth in
Schedule 4.01, the execution, delivery and performance by Seller
of this Agreement and the other agreements contemplated hereby
have been duly authorized by Seller, and the performance of this
Agreement constitutes a valid and binding obligation of Seller,
enforceable in accordance with its terms.
Section 4.03 No Violation. Except as set forth in Schedules 4.01
and 4.03, the execution, delivery and performance of this
Agreement by Seller and the consummation of the transactions
contemplated hereby do not and will not:
(a) conflict with or result in any breach of any of,
constitute a default under, result in a violation of, or give any
third party the right to accelerate any obligation under the
provisions of the charter or by-laws of Seller or any indenture,
mortgage, loan agreement by which Seller is bound or to which any
of the Purchased Assets are subject, or any law, statute, rule,
regulation, judgment or decree to which Seller is subject; or
(b) result in the creation of any lien, security interest,
charge or encumbrance upon the Purchased Assets.
Section 4.04 Financial Schedules. Schedule 4.04 fairly presents
in all material respects in accordance with Seller's historical
accounting practices the operating results of the business for
the 52-week periods ending December 31, 1994 and December 30,
1995. The operating results exclude interest and income tax
expenses and amortization of intangibles.
Operating results consist of the following components:
. Operating Revenue - Gross sales less returns, cash discounts,
warehouse allowances, unsaleables/distressed expenses and non-
performance trade promotions.
. Variable Contribution - Operating revenue less production
costs, co-manufacturer purchases, freights, variable distribution
and variable trade promotions.
. Direct Contribution - Variable contribution less marketing
expenses which include advertising and other promotions, expenses
of servicing juice dispensers, depreciation expense of juice
dispensers and depreciation of production equipment owned by the
business.
The Business sells Product to affiliated companies and divisions
at normal customer (arm's length) prices. Total sales of Product
to affiliates were approximately $1.5 million for the 52-
week period ending December 31, 1994 and $1.3 million
for the 52- week period ending December 30, 1995, and $0.3 million
for the thirteen (13) weeks ending March, 1996.
Section 4.05 No Undisclosed Liabilities. Except as disclosed
herein or in the Schedules hereto (or are not required to be
disclosed in the Schedules because of materiality thresholds), and
except for Excluded Liabilities and except as incurred after the
date hereof in the ordinary course of business, the Business has
no material liabilities or obligations that would be required to
be reflected on a balance sheet (or required to be disclosed in
the notes thereto) prepared in accordance with United States
generally accepted accounting principles.
Section 4.06 No Material Adverse Change. Since March 31, 1996
and except as set forth in the Schedules, Seller has conducted the
Business only in the ordinary course and in conformity with past
practice, and there has been no material adverse change in the
assets, business or employee, customer or supplier relations of
the Business (exclusive of the Excluded Assets and the Excluded
Liabilities), except for such changes that are attributable in
whole or in part to the announcement of or knowledge with respect
to the transactions contemplated by this Agreement.
Section 4.07 Absence of Certain Changes. Except as set forth in
Schedule 4.07, since March 31, 1996, Seller has not with respect
to the Business:
(a) created, incurred, assumed or guaranteed any
indebtedness or become subject to any liabilities, except current
liabilities incurred in the ordinary course of business and
liabilities under contracts entered into in the ordinary course of
business;
(b) mortgaged, pledged or subjected to any lien, security
interest or other encumbrance, any of the Purchased Assets, except
liens for current property taxes not yet due and payable;
(c) sold, assigned or transferred any assets, except in the
ordinary course of business and consistent with past practices;
(d) sold, assigned or transferred any patents, trademarks or
trade secrets;
(e) suffered any extraordinary losses, whether or not
covered by insurance;
(f) extended credit other than in the ordinary course of
business or permitted any change in its credit practices or in its
methods of maintaining its books, accounts or business records;
(g) except as required by United States generally accepted
accounting principles, changed any of its accounting principles or
the methods by which such principles are applied for financial
reporting purposes;
(h) engaged in any trade promotion programs or other
marketing or coupon programs other than in the ordinary course of
business; or
(i) entered into any agreement to do any of the acts
previously described in this Section 4.07.
Section 4.08 Dispensing Equipment and Spare Parts Inventory. All
dispensing equipment and associated spare parts inventories of the
Business on the Closing Date will be at levels adequate, in
Seller's judgment, in relation to the circumstances of the
Business and in accordance with past dispensing equipment and
spare parts stocking practices.
Section 4.09 Title to Purchased Assets. Except as set forth in
Schedule 4.11, Seller is the sole and exclusive legal and
equitable owner of all right, title and interest in and has good
and valid title to all of the Purchased Assets (other than
leased assets).
[Section 4.10 - Intentionally omitted.]
Section 4.11 Intellectual Property. Schedule 4.11 contains a
complete and accurate list of all material patents, trademarks and
trademark rights used in the operation of the Business in the
manner in which it is currently being conducted. Schedule 4.11
also contains a complete and accurate list and description of all
licenses and other agreements relating to any of the foregoing.
Except as set forth on Schedule 4.11, with respect to the
foregoing items of intellectual property and the material service
marks, copyrights, formulae and trade dress currently used in the
Business:
(a) Seller is the sole and exclusive owner free and clear of
any rights of other persons and has the sole and exclusive right
to use the same in the conduct of its business;
(b) no proceedings have been instituted, are pending or, to
the knowledge of Seller, are threatened which challenge any rights
in respect thereto or the validity thereof;
(c) none of the aforesaid infringes upon or otherwise
violates the rights of others or is being infringed upon by
others, and none is subject to any outstanding order, decree,
judgment, stipulation or charge;
(d) no licenses, sublicenses or agreements pertaining to any
of the aforesaid have been granted or entered into by Seller;
(e) Seller has not received any notice of interference or
infringement of any of the foregoing; and
(f) except as set forth in Schedule 4.11, Seller has the
right to use the material trade secrets, know-how and processes
used in the operation of the Business.
Section 4.12 Material Contracts. All contracts, agreements,
instruments and leases (other than those entered into after the
date hereof with the written consent of Buyer or which are
Excluded Liabilities pursuant to Section 1.03(b)) related
exclusively to the Business, or by which any of the Purchased
Assets are subject, meeting any of the descriptions set forth
below (the "Material Contracts"), are listed in Schedule 4.12:
(a) any agreement obligating the business to purchase or
sell any products or services and which either
(i) was not entered into in the normal course of
business; or
(ii) is not terminable without payment or penalty
upon 60 days (or less) notice; or
(iii) is in an aggregate amount exceeding
$150,000.
(b) any indebtedness, obligation or liability for borrowed
money, or liability for the deferred purchase price of property in
in aggregate amount exceeding $100,000 (excluding normal
trade payables), or any instrument guaranteeing any indebtedness,
obligation or liability, or any obligation to incur any
indebtedness, obligation or liability;
(c) any joint venture, partnership or other arrangement
involving a sharing of profits involving the Business;
(d) any sales agency brokerage, distribution or similar
contract;
(e) any agreement restricting the right of the Business to
compete with any other person or entity, which would apply to
Buyer after the Closing;
(f) any consulting agreement or arrangement;
(g) any Installment Sales Contract or Seller-Owned Equipment
Agreement (set forth in Exhibits 4.12(g) (i) and (ii) of Schedule
4.12) for juice dispensing equipment; and.
(h) any trade promotions and marketing programs as defined
in Section 1.03(a)(ii).
Except as set forth in Schedule 4.12:
(i) all Material Contracts are in full force and effect and
are valid, binding and enforceable in accordance with their terms,
except to the extent such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affect the enforcement of creditors' rights or by
general equitable principles;
(j) Seller is not, and to the knowledge of Seller, no other
party to any Material Contract is, in breach of any provision of,
in violation of, or in default under the terms of any Material
Contract;
(k) no event has occurred which, after the giving of notice
or passage of time or otherwise, would constitute a default under
or result in the breach of any Material Contract by Seller, or to
the knowledge of Seller, by any other party; and
(l) Seller has made available to Buyer accurate and complete
copies of each Material Contract.
Section 4.13 Taxes. All federal, state and other tax returns,
reports and declarations of every nature required to be filed by
or on behalf of Seller (either separately or as part of a
consolidated group) prior to the Closing have been timely filed
and such returns, reports and declarations as so filed are
complete and accurate and disclose all taxes required to be paid
for the periods covered thereby, except for any such failures to
file and such errors which would not have a material adverse
effect on the Business. All taxes and all deficiency assessments,
penalties and interest relating to any period ending prior to the
Closing shall have been paid as of the Closing. All taxes,
including estimated taxes, for periods beginning before and ending
on or after the Closing have been paid as required by law in a
timely manner. There are no tax liens on any property of Seller
and no basis exists for any such liens.
Section 4.14 Litigation. Except as set forth in Schedule 4.14,
Seller is not engaged in or a party to or, to the knowledge of
Seller, threatened with any suit, action proceedings,
investigation or legal, administrative, arbitration or other
method of settling disputes or disagreements or governmental
investigation with respect to the Business that are reasonably
likely to have a MAE on the Business or the Purchased Assets.
There are no actions, suits, proceedings, orders or investigations
pending or, to the knowledge of Seller, threatened against or
affecting Seller at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign,
which are reasonably likely to materially adversely affect
Seller's performance under this Agreement or the consummation of
the transactions contemplated hereby.
Section 4.15 Compliance with Law, and Licenses and Permits and
Consents.
(a) Except as set forth in Schedule 4.15 and in the other
Schedules attached hereto, Seller is not, with respect to the
Business, in material violation of any law or regulation,
including, without limitation, any law or regulation pertaining to
occupational safety or health, environmental protection, price
discrimination, antitrust, equal employment opportunity, employees
retirement income security or other law, ordinance, judicial
decree, order or regulation. No notice (the reason for which has
not been corrected) has been served upon Seller by any
governmental body or other person of any violation of any law,
ordinance, code, rule or regulation or requiring or calling
attention to the necessity of any work, repairs, new construction,
installation or alteration in connection with any real or personal
property or equipment of Seller with respect to the Business.
(b) Seller has all material licenses, permits, approvals and
other authorizations as are necessary in order to enable it to
own, operate and use its assets and conduct its business as it is
currently being conducted . All such licenses, permits,
approvals, franchises, clearances and authorizations are listed in
Schedule 4.15, and are in full force and effect. Except as set
forth in Schedule 4.15, no material violations have been recorded
or alleged in respect of any such licenses, approvals or
authorizations, and no proceeding is pending or, to the knowledge
of Seller, threatened or contemplated with respect to the
revocation or limitation of the same.
(c) Except as set forth in Schedule 4.15, there are no third
party consents required in order to permit or allow Buyer to own
or operate the Purchased Assets or the Business after Closing in
materially the same way as they were operated prior to Closing.
Section 4.16 Environmental Matters. The dispensing units to be
transferred to Buyer hereunder employ chlorofluorocarbons as a
coolant. Federal Environmental Protection Agency ("EPA")
regulations currently prohibit the unregulated venting of such
coolant, and require that such coolant be recovered prior to
disposal of the equipment. Seller represents that Seller is in
material compliance with the currently applicable EPA and any
other Federal, State and Local regulations with respect to venting
of such coolant, but Seller makes no representation and disclaims
all liability to Buyer with respect to venting of equipment
supplied to distributors and other customers by Seller, except
that Seller has informed its customers in writing about such EPA
regulations.
Section 4.17 NO IMPLIED REPRESENTATIONS. SELLER MAKES NO
REPRESENTATION, EXPRESS OR IMPLIED, BEYOND THOSE EXPRESSLY MADE IN
THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OR REPRESENTATION AS TO THE CONDITION, MERCHANTABILITY OR
SUITABILITY OF ANY OF THE PURCHASED ASSETS, AND IT IS UNDERSTOOD
THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF
SELLER CONTAINED IN THIS ARTICLE 4, BUYER TAKES THE ASSETS AS IS
AND WHERE IS.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller:
Section 5.01 Corporate Organization and Power. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Buyer
has full corporate power and authority to execute, deliver and
perform this Agreement and the other agreements contemplated
hereby.
Section 5.02 Authorization. The execution, delivery and
performance by Buyer of this Agreement and the other agreements
contemplated hereby have been duly authorized by Buyer. The
performance of this Agreement and the other agreements
contemplated hereby constitutes a valid and binding obligation of
Buyer, enforceable in accordance with its terms.
Section 5.03 No Violation. The execution, delivery and
performance of this Agreement and the other agreements
contemplated hereby by Buyer and the consummation of the
transactions contemplated hereby or thereby do not and will not:
(a) conflict with or result in any breach of;
(b) constitute a default under;
(c) result in a violation of; or
(d) give any third party the right to accelerate any
obligation under the provisions of Buyer's certificate of
incorporation or bylaws or any indenture, mortgage, lease, loan
agreement or other agreement or instrument to which Buyer is bound
or affected, or any law, statute, rule, regulation, judgment or
decree to which Buyer is subject.
Section 5.04 Litigation. There are no actions, suits,
proceedings, orders or investigations pending or, to the knowledge
of Buyer, threatened against or affecting Buyer at law or in
equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which might adversely affect
Buyer's performance under this Agreement or the consummation of
the transactions contemplated hereby.
ARTICLE 6
TERMINATION
Section 6.01 Termination. This Agreement may be terminated at
any time prior to the Closing by mutual written consent of Seller
and Buyer.
Section 6.02 Confidentiality. In the event of any termination of
this Agreement, each of Seller and Buyer shall treat as
confidential and not disclose, or use directly or indirectly for
its benefit in any manner whatsoever, or permit others under its
control to disclose, or to use, any information concerning the
other obtained pursuant to or in connection with the transaction
which is the subject of this Agreement which is not a matter of
public knowledge, and Seller and Buyer shall each promptly return
to the other or destroy upon written request all written
information and documents received from the other or its
representatives, including all copies thereof.
ARTICLE 7
ADDITIONAL AGREEMENTS
Section 7.01 Survival. The representations, warranties,
covenants and agreements set forth in this Agreement, or in any
writing delivered in connection with this Agreement, will survive
the Closing Date and the consummation of the transactions
contemplated hereby, notwithstanding any examination made for or
on behalf of Buyer or Seller; provided, however, that the
representations and warranties of Seller contained in Article 4
and the representations and warranties of Buyer contained in
Article 5 shall survive only until December 31, 1997. No claim
for the recovery of indemnifiable damages based upon the
inaccuracy of such representations and warranties may be asserted
by a party after such representations and warranties shall be thus
extinguished; provided, however, that claims first asserted in
writing within the applicable period shall not thereafter be
barred.
Section 7.02 Indemnification.
(a) Seller agrees to indemnify Buyer and its affiliates,
officers, directors and agents and hold them harmless against any
loss, liability, claim, damage or expense (including reasonable
legal expenses and costs) ("Losses") which any of such persons or
entities may suffer, sustain or become subject to, as the result
of a breach of any representation, warranty, covenant, or
agreement by Seller contained in this Agreement or the other
agreements contemplated hereby, or the failure of Seller to pay,
discharge or perform any of the Excluded Liabilities; provided,
however, that Seller will not be liable for any such loss, claim,
damage, liability, or expense arising out of a breach by Seller of
any representation or warranty contained in Article 4 unless the
aggregate amount of all such losses, claims, damages, liabilities,
and expenses resulting to Buyer from all such breaches or claims
exceeds an amount equal to 5% of the Purchase Price (the "Seller's
Allowance"), in which case Seller will only be liable for such
amounts in excess of the amount of the Seller's Allowance; and
provided further, that in no event shall the aggregate amount of
Seller's liabilities arising out of a breach by Seller of any
representation or warranty contained in Article 4 exceed one-third
of the Purchase Price (but claims arising under Section
1.03(b)(vi) hereof shall not be subject to such limitation).
(b) Buyer agrees to indemnify Seller and its affiliates,
officers, directors and agents and hold them harmless against any
loss, liability, claim, damage or expense (including reasonable
legal expenses and costs) which any of such persons or entities
may suffer, sustain or become subject to, as the result of a
breach of any representation, warranty, covenant, or agreement by
Buyer contained in this Agreement or the other agreements
contemplated hereby, or any failure of Buyer to discharge or
perform any of the Assumed Liabilities, and shall indemnify Seller
and its affiliates, officers, directors and agents and hold them
harmless against any and all actions, suits, claims and other
proceedings which arise directly or indirectly out of the
operation of the Business after the Closing, including without
limitation the manufacture, distribution, marketing and sale of
products; provided, however, that Buyer will not be liable for any
such loss, claim, damage , liability or expense arising out of a
breach by Seller of any representation or warranty contained in
Article 5 unless the aggregate amount of all such losses , claims,
damages, liabilities and expenses resulting to the Seller from all
such breach or claims exceeds an amount equal to 5% of the
Purchase Price (the "Buyers Allowance") in which case the Buyer
will only be liable for such amounts in excess of the Buyers
Allowance.
(c) Promptly, but in no event later than 90 days, after
receipt by an officer of Buyer or of Seller, of written notice of
any claim or potential claim by any third party, which could give
rise to a right to indemnification pursuant to Section 7.02(a) or
(b), Buyer or Seller, as the case may be, shall give the party who
may become obligated to provide indemnification hereunder written
notice describing such claim in reasonable detail to the extent
then known. After the indemnifying party has acknowledged in
writing that it is indemnifying the other party with respect to
any such claim, the indemnifying party will be entitled to assume
the defense thereof; provided, however, that the other party may
at its election and its own expense participate in any such
defense to the extent that it reasonably believes that the defense
of such claim, including the anticipated resolution, will
materially affect its ongoing business. At the indemnifying
party's reasonable request, the other party will cooperate with
the indemnifying party in the preparation or conduct of any such
defense (including Seller's defense of an Excluded Liability or
Buyer's defense of an Assumed Liability), and the indemnifying
party will reimburse the other party for any expenses incurred in
connection with such request.
(d) The indemnification rights provided in Sections 7.02,
7.08, and 8.10 shall be the sole and exclusive remedy available to
each of the parties to this Agreement as against the other party
for any misrepresentation, breach of warranty or failure to
fulfill any covenant or agreement contained herein or in
connection with or arising out of or relating to any of the
transactions contemplated hereby.
(e) Any indemnity under this Agreement shall be treated as
an adjustment to the Purchase Price for income tax purposes.
Section 7.03 Continuing Assistance. At any time and from time to
time after the Closing, at Buyer's request and without further
consideration or compensation whatsoever, Seller will execute and
deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as Buyer may
reasonably deem necessary or desirable in order to more
effectively transfer, convey and assign to Buyer, and to confirm
Buyer's title to, all of the Purchased Assets, to put Buyer in
actual possession and operating control thereof and to assist
Buyer in exercising all rights with respect thereto. Subsequent
to the Closing, Seller will refer all customer, supplier, and
other inquiries relating to the Business to Buyer.
Section 7.04 Expenses and Transfer Taxes.
(a) Except as otherwise expressly provided herein, each
party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this
Agreement, the performance of its obligations hereunder (whether
or not the Closing occurs), and the consummation of the
transactions contemplated by this Agreement.
(b) Buyer and Seller will each pay one-half of all state,
county, or local or provincial sales, excise, value added, use,
registration, stamp or other transfer taxes and similar taxes,
levies, charges or fees required to be paid on the transfer of any
of the Purchased Assets. The parties will cooperate in providing
each other with appropriate resale exemption certification and
other similar tax and fee documentation; provided that Buyer shall
be responsible for all such taxes which are in excess of the
amounts which would otherwise apply if one or more of Buyer's
affiliates, rather than Buyer, acquires any of the Purchased
Assets.
Section 7.05 Press Releases and Announcements. No press
releases, announcements or other disclosure related to this
Agreement or the transactions contemplated herein will be issued
or made without the joint approval of Buyer and Seller, except for
any public disclosure which Buyer or Seller in good faith believes
is required by law (in which case the disclosing party will
consult with the other party prior to making such disclosure).
Buyer and Seller will cooperate to prepare press releases to be
issued on the Closing date.
Section 7.06 Retention and Access to Records.
(a) The parties recognize that Seller will require full
access to all appropriate records and documentation of the
Business audits for tax periods in which Seller owns the Business.
Buyer and Seller agree that Seller may:
(i) maintain copies of any business records of the
Business which are included in the Purchased Assets, and
(ii) prepare a comprehensive index and file plan of
any business records of the Business which are included
in the Purchased Assets (the "File Plan").
(b) Buyer agrees to maintain such records in a manner
consistent with the File Plan and to keep such materials
reasonably accessible for a period of not less than ten years from
the Closing Date (plus any additional time during which Buyer has
been advised that there is an ongoing tax audit with respect to
periods prior to the Closing Date.
(c) During such period, Buyer agrees to give Seller
reasonable cooperation, access (including copies), and reasonable
staff assistance (at a cost to Seller of $0.10 (ten cents) per
copy requested by Seller), as needed, during normal business hours
with respect to books and business records and other financial
data delivered to Buyer hereunder for (i) the preparation of tax
returns and financial statements and (ii) the management and
handling of tax audits, and (iii) for the defense and
investigation of any claims, consumer or governmental complaints,
or other liabilities asserted by third parties related to the
Business. Buyer shall have the same rights, and Seller the same
obligations, as are set forth in the preceding sentence with
respect to records of Seller pertaining to the Business that are
not included in the Purchased Assets with the exception of tax
returns relating to taxes that are not the responsibility of
Buyer.
(d) Whether before or after the expiration of the period in
(b), above, Buyer shall furnish information regarding payment or
deductibility of liabilities assumed if Seller deems such
information reasonably necessary for income tax purposes.
Section 7.07 Non-Competition.
(a) Seller agrees that for a period of three years
commencing with the Closing Date, it and its affiliates will not,
directly or indirectly, either for itself or any affiliate or for
any other person, partnership, corporation or company, permit its
name to be used by or participate in any enterprise involved in
the business of producing, manufacturing, marketing, distributing
or selling a frozen concentrated 100% juice products
for foodservice anywhere in the United States of America
(the "Territory"). For purposes of this Agreement, the term
"Participate" includes any direct or indirect interest in any
enterprise, whether as stockholder, partner, or otherwise
(other than by ownership of less than five percent of
the stock of a publicly-held corporation) or otherwise. Seller
agrees that this covenant is reasonably designed to protect
Buyer's substantial investment and is reasonable with respect to
its duration, geographical area and scope.
(b) Notwithstanding anything set forth above to the
contrary:
(i) Seller may hereafter purchase, or otherwise
become affiliated with or participate in, an enterprise
producing, manufacturing, marketing or selling a frozen
concentrated 100% juice products for foodservice in
the Territory if less than twenty-five (25%) of the
aggregate gross revenues of such enterprise for its most
recently concluded fiscal year were derived from producing,
manufacturing, marketing or selling frozen concentrated
100% juice products for foodservice in the Territory.
(ii) Seller may continue to own and operate or
hereafter own, operate, acquire or otherwise become
affiliated with any wholesale or retail grocery
business, any grocery distribution business, any
ingredient supply business or any foodservice
distribution business other than the Business;
(iii) Seller may engage in any joint marketing,
promotion or in-store merchandising program for any of
Seller's products and any frozen concentrated 100% juice
products for foodservice produced by or for any Person
not bound by this paragraph provided that no such program
shall be designed to or executed in such a manner so as
to create the impression that Seller is engaged in the
frozen concentrated 100% juice products for
foodservice business; and
(iv) Seller may engage in Seller's other frozen
concentrate for foodservice businesses (which market
such products under trademarks other than BIRDS EYE(R) and
GOLD `N RICH(R) in the United States, including
products that include frozen concentrated 100% juice
products as an ingredient, provided that none of such
products do not constitute frozen concentrated 100%
juice products for foodservice.
Section 7.08 Bulk Transfer Laws. Buyer hereby waives compliance
by Seller with the provisions of any so-called bulk transfer laws
of any jurisdiction in connection with the sale of the Purchased
Assets. Notwithstanding anything to the contrary in Section 7.02,
Seller agrees to indemnify Buyer against all liability, damage or
expense which Buyer may suffer due to the failure to so comply or
to provide notice required by any such law.
Section 7.09 Allocation of Purchase Price and Assumed
Liabilities. No later than 90 days after Closing, Buyer shall
prepare and submit to Seller for its approval, which approval will
not be unreasonably withheld, its proposed allocation of the
Purchase Price and the Assumed Liabilities. In the event Buyer
and Seller agree on such an allocation, such allocation shall be
reflected in an allocation schedule which shall become part of
this Agreement, and Buyer and Seller agree to allocate the
Purchase Price and the Assumed Liabilities in accordance with such
schedule, to be bound by such allocations for income tax purposes,
to account for and report the purchase and sale in accordance with
such allocations, and not to take any position which is
inconsistent with such allocations without the prior written
consent of the other, except to the extent such consistency is not
permitted by applicable law or generally accepted accounting
principles. The parties will exchange drafts of any information
returns required by IRC Section 1060 and any similar state
statutes, at least ten days prior to filing such returns and will
discuss in good faith any modifications suggested by the receiving
party.
Section 7.10 Third Party Beneficiaries. This Agreement does not
create any rights in parties who are not a party to this
Agreement, other than the parties entitled to be indemnified
pursuant to Section 7.02 hereof.
Section 7.11 Non-Assignable Undertakings and Rights.
Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any claim,
contract, license, permit, lease, commitment, sales order or
purchase order which would otherwise be assigned hereunder if any
attempted assignment thereof without the consent of the other
party thereto or the grantor thereof would constitute a breach
thereof or would in any way affect the rights of Seller
thereunder. If such consent is not obtained, Seller shall act as
the agent for Buyer in order to obtain for Buyer the benefit
thereunder. To the extent that consents or waivers are not
obtained by Seller prior to Closing, Seller and Buyer shall
continue to seek such consents or waivers and to cooperate with
each other to establish, to the extent practicable, arrangements
that are reasonable and lawful as to both Seller and Buyer, and
which result in the benefits and obligations under such assumed
contracts, leases and permits being apportioned in a manner
that is in accordance with the purpose and intention of
this Agreement.
ARTICLE 8
MISCELLANEOUS
Section 8.01 Amendment and Waiver.
(a) This Agreement may be amended, or any provision of this
Agreement may be waived, provided that any such amendment or
waiver will be binding upon Seller only if set forth in a writing
executed by Seller, and any such amendment or waiver will be
binding upon Buyer only if set forth in a writing executed by
Buyer.
(b) No course of dealing between or among any persons having
any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.
Section 8.02 Notices. Except as otherwise expressly set forth in
this Agreement, all notices, demands and other communications to
be given or delivered under or by reason of the provisions of this
Agreement will be in writing and will be deemed to have been given
and to have been received when delivered personally, or by
documented overnight delivery service, or sent by telecopy,
telefax, or other electronic transmission service, provided a
confirmation copy is also sent no later than the next business day
by first class mail, return receipt requested. Notices, demands
and communications to Buyer or Seller will, unless another address
is specified in writing, be sent to the address indicated below:
Notices to Seller: with a copy to:
North American Foodservice Division
Kraft Foods, Inc. Kraft Foods, Inc.
Kraft Court Three Lakes Drive
Glenview, IL 60025 Northfield, IL 60093
Attn: Thomas P. Hoeppner
President Attn: General Counsel
FAX: FAX: (847) 646-4431
Notices to Buyer: with a copy to:
Orange-co, Inc.
2020 US Highway 17 South
Bartow, Florida 33830
Attention: Gene Mooney
President
FAX:
Section 8.03 Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by either party without
prior written consent of the other party, except that Buyer may
assign all or any of its rights and obligations hereunder to any
designated affiliate of Buyer so long as (i) such assignment(s) do
not result in any delay in consummating the transactions
contemplated hereby, (ii) no such assignment shall relieve Buyer
of its obligations hereunder and (iii) Buyer shall be responsible
for any increased costs resulting therefrom.
Section 8.04 Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provisions will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this
Agreement.
Section 8.05 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict
construction will be applied against any person.
Section 8.06 Captions. The captions used in this Agreement are
for convenience of reference only and do not constitute a part of
this Agreement and will not be deemed to limit, characterize or in
any way affect any provision of this Agreement, and all provisions
of this Agreement will be enforced and construed as if no caption
had been used in this Agreement.
Section 8.07 Complete Agreement. This document and the documents
referred to herein contain the complete agreement between the
parties and supersede any prior understandings, agreements or
representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
Section 8.08 Governing Law/Arbitration.
(a) The substantive law (and not the law of conflicts) of
the State of New York will govern all questions concerning the
construction, validity and interpretation of this Agreement and
the performance of the obligations imposed by this Agreement.
(b) The parties hereto agree to attempt to settle any claim
or controversy arising out of this Agreement through consultation
and negotiation in good faith and a spirit of mutual cooperation.
The following outlines the steps that the parties will take in
such regard:
(i) Any party may give the other party hereto written
notice of any dispute not resolved in the normal course of
business. Within 15 business days after delivery of the
notice, the receiving party shall submit to the other party a
written response. The notice from the initiating party and
the response from the receiving party shall include (a) a
statement of the party's position and a summary of arguments
supporting that position, and (b) the name and title of the
executive who will represent that party and of any other
person who will accompany the executive at a meeting of the
parties. Such executive(s) shall have the authority to
settle the controversy and shall be a higher level of
management than the persons with direct responsibility for
administration of this Agreement. Within 30 days after
delivery of the disputing party's notice, the executives of
both parties shall meet at a mutually acceptable time and
place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the dispute. All reasonable
requests for information made by one party to the other will
be honored.
(ii) If the disputed matter has not been resolved within
60 days of the disputing party's notice, or if the executives
fail to meet within 30 days, either party may initiate
resolution of the dispute through alternate dispute
resolution ("ADR") procedures by sending written notice to
the other party. Such ADR may, at the election of the
parties, take the form of mediation, arbitration, neutral
fact finding, mini-trial, or any other such form of dispute
resolution agreed to by the parties. Within 30 days of
receipt of notice of initiation of ADR procedures the parties
will agree to: (a) the form of ADR procedure, and (b) the
ground rules of the proceeding, including, but not limited
to, whether binding, the role of the neutral, meetings of the
parties, when parties may withdraw, timing, discovery, party
representatives, costs of the proceeding, and the settlement
agreement. The parties agree that the Center for Public
Resources ("CPR") Model ADR Procedures will be used as a
guide in determining such proceedings and ground rules.
(iii) The procedures specified in this section shall
be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of this Agreement;
provided, however, that a party, without prejudice to the
above procedures, may file a complaint for statute of
limitations or venue reasons, or to seek a preliminary
injunction or other provisional judicial relief, if in its
sole judgment such action is necessary to avoid irreparable
damage or to preserve the status quo. Despite such action
the parties will continue to participate in good faith in the
procedures specified in this section. In the event that
disputes arising out of this Agreement are not able to be
resolved by the parties pursuant to ADR, then the parties may
pursue any legal remedy available.
(iv) All negotiations pursuant to this section are
confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of
Evidence and state rules of evidence.
Section 8.09 Counterparts. This Agreement may be executed in one
or more counterparts (including by means of Faxed signature
pages), any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will
constitute one and the same instrument.
Section 8.10 Investment Advisors. Buyer has not used an
investment advisor in connection with the transactions
contemplated by this Agreement, and there are no claims for
brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement
based on any arrangement or agreement by or on behalf of Buyer.
Seller has not retained any broker or finder or incurred any
liability or obligation for any brokerage commissions or finder's
fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or
agreement by or on behalf of Seller. Notwithstanding anything to
the contrary in Section 7.02, Buyer will indemnify Seller for any
breach of its representation in this Section, and Seller will
indemnify Buyer for any breach of their representation in this
Section.
Section 8.11 Disclaimer Regarding Projections. In connection
with Buyer's investigation of the Business, Buyer has received
from Seller certain projections, including but not limited to and
projections of volume and revenue for fiscal years 1996 and 1997
and certain business plan information for such fiscal years. This
information includes the information provided to Buyer on or about
January, 1996 and information contained in the Confidential
Evaluation Materials and the Data Room. Buyer acknowledges that
there are uncertainties inherent in attempting to make such
projections and other forecasts and plans, that Buyer is familiar
with such uncertainties, that Buyer is taking full responsibility
for making its own evaluation of the adequacy and accuracy of all
projections and other forecasts and plans so furnished to it, and
that Buyer shall have no claim against Seller with respect
thereto. Accordingly, Seller makes no representation or warranty
with respect to such projections and other forecasts and plans.
Section 8.12 Schedules. The disclosures in the Schedules hereto
are to be taken as relating to the representations and warranties
as a whole.
Section 8.13 Waiver of Trial by Jury. Buyer and Seller each
waive any right to trial by jury with respect to any claim,
action, counterclaim or defense arising out of this Agreement, any
Schedule hereto or any action or omission of Buyer or Seller in
connection with the transactions contemplated hereby or thereby.
Section 8.14 Representation by Counsel, Interpretation. Seller
and Buyer each acknowledges that it has been represented by
counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law or
any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that
drafted it has no application and is expressly waived. The
provisions of this Agreement shall be interpreted in a reasonable
manner to effect the intent of Buyer and Seller.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
KRAFT FOODS, INC. BUYER: ORANGE-CO, INC.
NORTH AMERICAN
FOODSERVICE DIVISION
BY:/s/John Neubauer BY:/s/Gene Mooney
- -------------------------- ___________________________
John Neubauer Gene Mooney
PRINT: John Neubauer PRINT: Gene Mooney
TITLE: Business Unit Mgr TITLE: President
DATE: 6/28/96 DATE: June 28, 1996
