<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) March 14, 1995
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H. J. HEINZ COMPANY
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(Exact name of registrant as specified in charter)
Pennsylvania 1-3385 25-0542520
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(State of (Commission (IRS Employer
Incorporation) File Number) Identification
No.)
600 Grant Street, Pittsburgh, Pennsylvania 15219
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-456-5700
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Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
-------------------------------------
On March 14, 1995, H. J. Heinz Company (the "Company") completed the
acquisition of all of the U.S. and Canadian pet food businesses of The
Quaker Oats Company (the "Acquired Business") for $725 million in cash.
The purchase price was determined by negotiations between the Company and
The Quaker Oats Company.
Among the major brands of the Acquired Business are Kibbles'n Bits dry
dog food; Cycle canned and dry dog food; Gravy Train dry dog food (U.S.
only); Ken-L Ration canned dog food; and Snausages, Pup-Peroni and Pounce
pet treats. The Acquired Business will become part of the Company's Heinz
Pet Products affiliate whose major brands include 9-Lives and Amore canned
cat food, Reward and Skippy canned dog food, and Meaty Bone and Jerky Treats
pet snacks.
The Company intends to use the majority of the assets of the Acquired
Business in substantially the same manner as such assets have been used.
The funds used to purchase the Acquired Business were obtained from
the private placement of $700 million of commercial paper (in reliance on
the exemption contained in Section 4(2) of the Securities Act of 1933 and
the rules thereunder) with the balance of the funds being obtained from
the working capital of the Company.
ITEM 5. OTHER INFORMATION.
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On March 14, 1995, Standard & Poor's Ratings Group lowered the "A-1+"
commercial paper rating and the "AA-" long-term debt rating of the Company
to "A-1" and "A+," respectively.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
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(a) Financial statements of Business Acquired. The financial statements
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of the Acquired Business for the periods specified in Rule 3-05(b)
of Regulation S-X are not available at the time of filing this
report on Form 8-K. These financial statements will be filed
as soon as practicable, but in no event later than 60 days after
the date on which this report on Form 8-K must be filed.
(b) Pro forma financial information. The pro forma financial information
--------------------------------
required pursuant to Article 11 of Regulation S-X relating to
the acquisition of the Acquired Business is not available at
the time of filing this report on Form 8-K. This pro forma
financial information will be filed as soon as practicable,
but in no event later than 60 days after the date on which this
report on Form 8-K must be filed.
(c) Exhibits.
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2. Purchase Agreement dated February 6, 1995 among The Quaker
Oats Company, QO Acquisition Corp. and the Company, as
supplemented by Supplement No. 1 to Purchase Agreement
dated March 14, 1995.
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
H. J. Heinz Company
Date: March 29, 1995 By: /s/ David R. Williams
-----------------------------
Name: David R. Williams
Title: Senior Vice President - Finance
and Chief Financial Officer
<PAGE>
PURCHASE AGREEMENT
AMONG
THE QUAKER OATS COMPANY,
QO ACQUISITION CORP.
and
H. J. HEINZ COMPANY
DATED FEBRUARY 6, 1995
<PAGE>
Table of Contents
<TABLE>
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Page No.
<S> <C>
ARTICLE I DEFINITIONS....................................... 2
ARTICLE II SALE AND PURCHASE OF ASSETS...................... 12
SECTION 2.1. Transfer of Assets........................ 12
SECTION 2.2. Assumption of Liabilities................. 20
SECTION 2.3. Purchase Price and Other Consideration.... 27
SECTION 2.4. Minimum Inventory......................... 27
SECTION 2.5. Allocation of the Total Purchase Price.... 30
SECTION 2.6. Closing; Deliveries at the Closing........ 31
SECTION 2.7. Nonassignable Contracts and Permits....... 37
SECTION 2.8. Exclusive Sale of Trade Secrets........... 38
SECTION 2.9. Risk of Loss.............................. 38
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS....... 40
SECTION 3.1. Incorporation; Qualification.............. 40
SECTION 3.2. Authority................................. 40
SECTION 3.3. Execution and Binding Effect.............. 41
SECTION 3.4. No Contravention.......................... 41
SECTION 3.5. Financial Statements...................... 42
SECTION 3.6. Title to Acquired Assets.................. 44
SECTION 3.7. Contracts................................. 47
SECTION 3.8. Employee Benefit Plans.................... 49
SECTION 3.9. Absence of Certain Changes................ 50
SECTION 3.10. Litigation................................ 52
SECTION 3.11. Compliance with Laws...................... 53
SECTION 3.12. Intellectual Property..................... 56
SECTION 3.13. Taxes..................................... 59
SECTION 3.14. Inventory................................. 60
SECTION 3.15. Brokers and Finders....................... 61
SECTION 3.16. Insurance................................. 61
SECTION 3.17. Labor Matters............................. 62
SECTION 3.18. Accuracy of Sellers' Information
Furnished............................... 62
</TABLE>
(i)
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Page No.
<S> <C>
SECTION 3.19. Sufficiency of Acquired Assets............ 63
SECTION 3.20. Capitalization............................ 63
SECTION 3.21. Liabilities............................... 64
SECTION 3.22. No Subsidiaries........................... 64
SECTION 3.23. No Other Representations or Warranties.... 64
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER...... 65
SECTION 4.1. Incorporation............................. 65
SECTION 4.2. Authority................................. 65
SECTION 4.3. Execution and Binding Effect.............. 65
SECTION 4.4. No Contravention.......................... 66
SECTION 4.5. Litigation................................ 67
SECTION 4.6. Brokers and Finders....................... 67
SECTION 4.7. Restricted Securities..................... 67
SECTION 4.8. No Other Representations and Warranties... 68
ARTICLE V COVENANTS OF SELLERS.............................. 68
SECTION 5.1. Access; Confidential Information.......... 68
SECTION 5.2. Conduct of Business....................... 70
SECTION 5.3. [intentionally left blank]................ 72
SECTION 5.4. Reasonable Best Efforts; Notifications.... 72
SECTION 5.5. HSR Act Filing............................ 73
SECTION 5.6. Non-Compete Covenant...................... 73
SECTION 5.7. Material Change........................... 75
SECTION 5.8. Preservation of Records................... 75
SECTION 5.9. Patent and Trade Secret Licenses.......... 76
SECTION 5.10. Assignment by Affiliates.................. 77
SECTION 5.11. Product Claims............................ 77
SECTION 5.12. Capital Improvements...................... 77
SECTION 5.13. Release................................... 77
SECTION 5.14. Resignations.............................. 78
SECTION 5.15. Program List Reimbursement................ 78
SECTION 5.16. Purchase of Equipment..................... 78
SECTION 5.17. Insurance................................. 79
ARTICLE VI COVENANTS OF THE PURCHASER........................ 79
SECTION 6.1. Preservation of Records................... 79
SECTION 6.2. Reasonable Best Efforts; Notifications.... 80
SECTION 6.3. HSR Act Filing............................ 80
SECTION 6.4. Returns and Deductions.................... 80
</TABLE>
(ii)
<PAGE>
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Page No.
<S> <C>
ARTICLE VII EMPLOYEE MATTERS................................ 81
SECTION 7.1. Transferred Employees..................... 81
SECTION 7.2. Employee Benefit Transition............... 82
SECTION 7.3. COBRA..................................... 85
SECTION 7.4. Vacation.................................. 86
SECTION 7.5. Qualified Plans........................... 86
SECTION 7.6. Disability and Workers' Compensation...... 87
SECTION 7.7. No Third Party Beneficiaries.............. 87
SECTION 7.8. Indemnification........................... 87
SECTION 7.9. Documents and Forms....................... 88
ARTICLE VIII CONDITIONS TO PURCHASER'S OBLIGATIONS.......... 88
SECTION 8.1. Accuracy of Representations and
Warranties; Performance of Agreements;
Certificates and Opinion of Counsel..... 89
SECTION 8.2. Consents.................................. 90
SECTION 8.3. No Injunction............................. 90
SECTION 8.4. HSR Act................................... 90
SECTION 8.5. Closing Deliveries........................ 91
SECTION 8.6. No Material Adverse Change................ 91
SECTION 8.7. Title Insurance and Survey................ 91
SECTION 8.8. Resolutions............................... 94
SECTION 8.9. Loss...................................... 94
SECTION 8.10. Post-Signing Matters...................... 94
ARTICLE IX CONDITIONS TO SELLERS' OBLIGATIONS............... 94
SECTION 9.1. Accuracy of Representations and
Warranties; Performance of Agreements;
Certificate and Opinion of Counsel...... 94
SECTION 9.2. Consents.................................. 95
SECTION 9.3. No Injunction............................. 95
SECTION 9.4. HSR Act................................... 96
SECTION 9.5. Closing Deliveries........................ 96
SECTION 9.6. Resolutions............................... 96
ARTICLE X INDEMNIFICATION................................... 97
SECTION 10.1. Survival of Representations and
Warranties and Obligations............. 97
</TABLE>
(iii)
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Page No.
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SECTION 10.2. Indemnification by Sellers............... 98
SECTION 10.3. Indemnification by Purchaser............. 100
SECTION 10.4. Indemnification Procedures............... 101
SECTION 10.5. Limits on Indemnification................ 104
SECTION 10.6. Adjustment of Liability.................. 105
SECTION 10.7. Exclusive Remedy......................... 105
ARTICLE XI TAX MATTERS...................................... 106
SECTION 11.1. Tax Indemnification...................... 106
SECTION 11.2. Preparation of Tax Returns............... 108
SECTION 11.3. Cooperation.............................. 109
SECTION 11.4. Tax Audits............................... 110
SECTION 11.5. Refunds.................................. 110
SECTION 11.6. Carrybacks............................... 111
SECTION 11.7. No Section 338(h)(10) Election........... 111
ARTICLE XII MISCELLANEOUS................................... 112
SECTION 12.1. Termination of Agreement................. 112
SECTION 12.2. Expenses................................. 113
SECTION 12.3. Waiver................................... 113
SECTION 12.4. Consents................................. 114
SECTION 12.5. Assignment; Parties in Interest.......... 114
SECTION 12.6. Further Assurances....................... 114
SECTION 12.7. Entire Agreement......................... 115
SECTION 12.8. Amendment................................ 115
SECTION 12.9. Limitations on Rights of Third Parties... 115
SECTION 12.10. Captions................................. 115
SECTION 12.11. Counterparts............................. 115
SECTION 12.12. Notices.................................. 116
SECTION 12.13. Governing Law............................ 117
SECTION 12.14. Bulk Sales Law........................... 117
SECTION 12.15. Transfer Taxes........................... 117
SECTION 12.16. Public Announcements..................... 117
SECTION 12.17. Schedules................................ 117
SECTION 12.18. [Intentionally left blank]............... 118
SECTION 12.19. Cooperation In Connection with SEC
Filings................................ 118
SECTION 12.20. Guarantee................................ 119
</TABLE>
(iv)
<PAGE>
<TABLE>
Page No.
<S> <C>
SECTION 12.21. Arbitration.............................. 119
</TABLE>
(v)
<PAGE>
Index of Exhibits
Exhibit Description
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A-1 and A-2 Real Estate Deeds
B-1, B-2(a), B-2(b) and B-3 Trademark Patent and Copyright
Assignments
C Assignment Agreement
D Bill of Sale
E Transition Agreement Terms
F-1 and F-2 Lease Agreement
G Gaines Assumption Agreement
H Assumption Agreement
I Sellers' Opinion
J Purchaser's Opinion
(vi)
[IN ACCORDANCE WITH ITEM 601(b)(2) OF REGULATION S-K, THE EXHIBITS AND SCHEDULES
TO THE PURCHASE AGREEMENT HAVE BEEN OMITTED. H.J. HEINZ COMPANY AGREES TO
FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED EXHIBIT OR SCHEDULE TO THE
COMMISSION UPON REQUEST.]
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT dated February 6, 1995, among The Quaker Oats
Company, a New Jersey corporation ("Quaker"), QO Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Quaker ("QOAC", and together with
Quaker, "Sellers"), and H. J. Heinz Company, a Pennsylvania corporation
("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Quaker owns all of the issued and
outstanding capital stock of QOAC;
WHEREAS, QOAC owns all of the issued and outstanding capital stock of
Gaines (as defined in Article 1 hereof) (the "Gaines Stock");
WHEREAS, Sellers desire to sell and assign to Purchaser, and Purchaser
desires to purchase and assume from Sellers, the assets and certain liabilities
and obligations of the Pet Food Business (as defined in Article I hereof),
including the Gaines Stock, upon the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS, upon acquisition of such assets, Purchaser will own directly,
or indirectly through Gaines, all of the material assets, properties, rights and
business presently constituting the Pet Food Business;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
<PAGE>
I
DEFINITIONS
"AAA" means the American Arbitration Association.
---
"Acquired Assets" means the property and assets to be conveyed by
---------------
Sellers to Purchaser as specified in Section 2.1.
"Additional Intellectual Property" has the meaning specified in
--------------------------------
Section 2.1(h).
"Affiliate" means any Person who directly, or indirectly through one
---------
or more intermediaries, controls, or is controlled by, or is under common
control with a specified Person. The term "control" (including the terms
"controlling", "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Agreement among Sellers and Purchaser as
---------
originally executed and delivered, as the same may be amended or
supplemented in accordance with the provisions hereof, together with all
Exhibits and Schedules incorporated herein and made a part hereof by the
references thereto.
"Applicable Environmental Law" means the Comprehensive Environmental
----------------------------
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Sections
9601 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42
-- ----
U.S.C. Sections 6901 et seq.; the Federal Water Pollution Control Act,
-- ----
33 U.S.C. Sections 1251 et seq.; the Clean Air
-- ----
2
<PAGE>
Act, 42 U.S.C. Sections 7401 et seq.; the Hazardous Materials
-- ----
Transportation Act, 49 U.S.C. Sections 1471 et seq.; the Toxic
-- ----
Substances Control Act, 15 U.S.C. Sections 2601 through 2629; and the
Safe Drinking Water Act, 42 U.S.C. Sections 300f through 300j; and any
other Federal environmental laws; as have been amended from time to time
and in each case as in effect at all relevant times from the date hereof
through the Closing Date; and any similar state and local laws and
ordinances and the regulations in effect at all relevant times from the
date hereof through the Closing Date implementing such statutes.
"Arthur Andersen" means Arthur Andersen LLP, independent public
---------------
accountants for Quaker.
"Assumed Contracts" has the meaning specified in Section 2.2(a)(i).
-----------------
"Assumed Liabilities" has the meaning specified in Section 2.2(a), as
-------------------
limited by the provisions of Section 2.2(b).
"Base Amount" has the meaning specified in Section 2.4(c).
-----------
"Basket" has the meaning specified in Section 10.5.
------
"Canadian Patents" shall mean those patents set forth in Schedule
----------------
2.1(i).
"Commission" means the United States Securities and Exchange
----------
Commission.
"Closing" and "Closing Date" have the respective meanings specified in
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Section 2.6.
3
<PAGE>
"Closing Financial Statements" has the meanings specified in Section
----------------------------
12.19.
"Closing Inventory" has the meaning specified in Section 2.4(a).
-----------------
"Closing Inventory Statement" has the meaning specified in Section
---------------------------
2.4(a).
"Confidentiality Agreement" has the meaning specified in Section 5.1.
-------------------------
"Contract" means any contract, agreement, commitment or other binding
--------
arrangement (including purchase orders), whether oral or written, but
excluding Plans and Permits.
"DOJ" means the United States Department of Justice, including any
---
division thereof.
"Employees" has the meaning specified in Section 7.1.
---------
"Environmental Complaint" has the meaning specified in Section
-----------------------
3.11(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
"Excluded Assets" has the meaning specified in Section 2.1.
---------------
"Financial Statements" has the meaning specified
--------------------
in Section 3.5
4
<PAGE>
"Foreign Trademarks" shall mean those trademarks set forth in Schedule
------------------
2.1(i).
"Formulas" has the meaning specified in Section 2.1(g).
--------
"FTC" means the United States Federal Trade Commission.
---
"Gaines" means Gaines Pet Foods Corp., a Delaware corporation and
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direct wholly owned subsidiary of QOAC.
"Gaines Employees" has the meaning specified in Section 7.1.
----------------
"Gaines Plans" has the meaning specified in Section 3.8.
------------
"Gaines Stock" has the meaning set forth in the second recital to this
------------
Agreement.
"Governmental Authority" means (i) any government or political
----------------------
subdivision thereof whether federal, state, local or foreign and (ii) any
agency, department, division, court, tribunal or instrumentality of any
such government or political subdivision.
"Hazardous Discharge" has the meaning specified in Section 3.11(b).
-------------------
"Hazardous Substance" means any substance, chemical, or waste that is
-------------------
listed as hazardous, toxic, or dangerous or a contaminant or pollutant
under Applicable Environmental Law, and any petroleum products.
5
<PAGE>
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
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1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnitee" and "Indemnitor" have the respective meanings specified
---------- ----------
in Section 10.4(a).
"Intellectual Property" has the meaning specified in Section 3.12(a).
---------------------
"Inventory" means raw materials, ingredients, work-in-process,
---------
finished goods and packaging materials.
"IRC" means the Internal Revenue Code of 1986, as amended.
---
"IRS" means the United States Internal Revenue Service.
---
"June Balance Sheet" and "June Financial Statements" have the meanings
------------------ -------------------------
specified in Section 12.19.
"Knowledge of Sellers", "Sellers' Knowledge" or words of similar
-------------------- ------------------
import means such knowledge of facts actually known or which, after
reasonable inquiry, could reasonably be expected to be known, by Douglas
Mills, Executive Vice President, R. Thomas Howell, Jr., Vice President -
General Corporate Counsel and Corporate Secretary, Michael D. Annes,
Director of Business Development - Thomas Gettings, Vice President and
Corporate Controller, Scott Kappmeyer, Director - Finance Planning,
Margaret Stender - Vice President Marketing, Terry Mohr, Vice President -
Diversified Sales, Dick Larson, Vice President - Supply Chain, Carl Curry,
Vice President - Logistics; each of The Quaker Oats Company; provided,
--------
however, that with respect to
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6
<PAGE>
Section 3.12 of this Agreement, "Knowledge of Sellers", to "Sellers'
Knowledge" or words of similar import also includes such knowledge of
Janet Silverberg, Trademark Attorney - The Quaker Oats Company or any
attorney or paralegal under her supervision.
"Lease Agreement" has the meaning specified in Section 2.6(b)(xii).
---------------
"Licensed Patents" has the meaning specified in Section 5.9.
----------------
"Licensed Trade Secrets" has the meaning specified in Section 5.9.
----------------------
"Liens" has the meaning specified in Section 3.6.
-----
"Losses" has the meaning specified in Section 10.4(a).
------
"Material Contracts" has the meaning specified in Section 3.7.
------------------
"Mechanic's Liens" has the meaning specified in Section 3.6.
----------------
"Net Sales" means gross sales less product returns, price allowances
---------
(not including trade deals) and trade cash discounts.
"Non-Compete Covenant" means the representations, covenants and
--------------------
warranties provided in Section 5.6.
"Non-Transferred Employees" has the meaning specified in Section 7.1.
-------------------------
"Notice of Claim" has the meaning specified in Section 10.4(b).
---------------
7
<PAGE>
"NVGP" means Net Sales, less cost of sales (raw materials costs,
----
package materials costs, manufacturing labor costs, variable utilities
expense, and the cost of handling and the cost of transportation to
customers), and advertising and merchandising expenses.
"OSHA" has the meaning specified in Section 5.14.
----
"Other Real Property" has the meaning specified in Section
-------------------
2.2(b)(xiii).
"Owned Real Property" has the meaning specified in Section 2.1(a).
-------------------
"Pension Plan" has the meaning specified in Section 3.8(b).
------------
"Permit" means any certificate of occupancy, license, permit, order or
------
approval of any Governmental Authority.
"Permitted Liens" has the meaning specified in Section 3.6.
---------------
"Person" means an individual, a corporation, a partnership, an
------
association, a limited liability company, a trust, any unincorporated
organization, or a government or political subdivision thereof.
"Pet Food Business" means the pet food business as currently is, and
-----------------
in the past twelve months has been, conducted by Quaker and its Affiliates
in the Territory, including, without limitation, the business of
manufacturing and marketing the Products in the Territory, but excluding
the Excluded Assets.
8
<PAGE>
"Physical Assets" has the meaning specified in Section 2.1(b).
---------------
"Plans" has the meaning specified in Section 3.8(a).
-----
"Products" means all pet products, including, without limitation, all
--------
dry dog and cat food, semi-moist dog food, canned dog and cat food, dog and
cat treats, including, without limitation, those various products set forth
in Schedule 1.1, and all products sold by Sellers, Gaines and any
Affiliates of Quaker under the trademarks referred to in Section 3.12.
"Purchase Price" has the meaning specified in Section 2.3.
--------------
"Purchase Price Reduction" has the meaning specified in Section
------------------------
2.4(c).
"Purchaser Loss" has the meaning specified in Section 10.2.
--------------
"reasonable best efforts" shall mean best efforts; provided that in
-----------------------
using such best efforts such party shall not be obligated to incur any
substantial financial obligations.
"Receivables" means all accounts, and notes receivable of the Pet Food
-----------
Business as of the Closing Date, including any intercompany receivables.
"Schedules" are the schedules furnished by Sellers to Purchaser
---------
pursuant to this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations of the Commission promulgated thereunder.
9
<PAGE>
"Sellers' Consolidated or Combined Returns" has the meaning specified
-----------------------------------------
in Section 11.2.
"Statement" has the meaning specified in Section 11.2.
---------
"Sellers' Loss" has the meaning specified in Section 10.3.
-------------
"Taxes" means all taxes, charges, fees, levies, imposts, or other
-----
similar assessments, including, without limitation, (a) income, alternative
minimum, gross receipts, ad valorem, premium, excise, real property,
personal property, windfall profit, sales, use, transfer, licensing,
withholding, employment, payroll, estimated and franchise taxes imposed by
the United States, any state, local, or non-United States government, or
any subdivision, agency, or other similar Person of the United States, or
any such government; (b) any interest, fines, penalties, assessments, or
additions to tax resulting from, attributable to, or incurred in connection
with any such tax or any contest or dispute in respect thereof, and (c) any
costs, attorneys' fees and expenses associated therewith.
"Tax Returns" means any report, return, statement, or other
-----------
information required to be filed with or supplied to any taxing authority
in connection with Taxes.
"Taxes Not Yet Due and Payable" has the meaning specified in Section
-----------------------------
3.6.
"Territory" means the United States, Canada and Mexico (including
---------
Puerto Rico and all United States' territories, protectorates and
possessions situated in
10
<PAGE>
the North Western hemisphere), the islands in the
Caribbean, and in the Gulf of Mexico. Notwithstanding the foregoing, for
purposes of all provisions of this Agreement relating to Intellectual
Property, Trade Secrets, Licensed Patents, Licensed Trade Secrets, and
Additional Intellectual Property, "Territory" means the United States,
Canada and Mexico only.
"Third Party Claims" has the meaning specified in Section 10.4(c).
------------------
"Title Company" has the meaning specified in Section 8.7.
-------------
"Total Purchase Price" means the sum of (i) the Purchase Price as
--------------------
specified in Section 2.3 and (ii) the liabilities and obligations assigned
to and assumed by Purchaser pursuant to Section 2.2(a).
"Trade Secrets" has the meaning specified in Section 2.1(g).
-------------
"Transferred Employees" has the meaning specified in Section 7.1.
---------------------
"Transition Agreement" has the meaning specified in Section
--------------------
2.6(b)(ix).
"Warehousing and Distribution Agreement" has the meaning specified in
--------------------------------------
Section 2.6(b)(x).
As used in Sections 2.1, 2.2(b) and (d), 2.4, 2.5(b), 2.6, 2.7, 2.8
and 2.9 of this Agreement, all references to "Quaker" or "Sellers", as the case
may be, shall be deemed to refer to Quaker and each of its Affiliates that (i)
is or has, during the past twelve months, been engaged in the Pet Food Business,
or (ii) owns or holds tangible or intangible assets or properties which
11
<PAGE>
are used in the Pet Food Business. Accordingly, any obligation imposed upon
an Affiliate of Quaker hereunder shall be deemed to be an obligation of Quaker
to cause such affiliate to take such action.
II
SALE AND PURCHASE OF ASSETS
Section 2.1. Transfer of Assets. Upon the terms and subject to the
------------------
conditions set forth in this Agreement, on the Closing Date (by means of the
transfer and sale by Quaker to Purchaser of its Pet Food Business assets and,
by operation of law, by means of the sale by QOAC to Purchaser of the Gaines
Stock, as hereinafter described), Sellers shall sell, assign, transfer, convey
and deliver to Purchaser, and Purchaser shall purchase and accept from Sellers,
all of their respective right, title and interest in, to and in respect of the
following assets (the "Acquired Assets"):
(a) the real property owned by Quaker and Gaines, as applicable, and
described in Schedule 2.1(a), and the buildings, structures, fixtures and
other improvements located thereon (collectively, the "Owned Real
Property"), together with all right, title and interest, if any, of Quaker
and Gaines, as applicable, in and to all appurtenances of any nature
whatsoever existing with respect to such Owned Real Property;
(b) all machinery, equipment, tools, dies, molds, spare parts, motor
vehicles, furniture, office supplies, maintenance and operating supplies,
computer hardware, software and peripherals and other tangible personal
property and all animals used in the Pet Food Business on the date hereof,
including, without limitation, the machinery, equipment, tools, dies,
molds, spare parts, motor vehicles, furniture, office
12
<PAGE>
supplies, maintenance and operating supplies, computer hardware, software
and peripherals and tangible personal property and animals categorically
described or to the extent, reasonably practicable, listed in Schedule
2.1(b); and those items of tangible personal property and animals which
are acquired by Quaker and Gaines, as applicable, for use in the Pet Food
Business between the date hereof and the Closing Date, but excluding from
this subsection 2.1(b), except to the extent included below, (i) Inventory
and the books and records described in Section 2.1(d) below and (ii) any
furniture and office supplies disposed of or consumed by Quaker and
Gaines, as applicable, in the ordinary course of business between the date
hereof and the Closing Date (collectively, the "Physical Assets"),
together with any assignable manufacturers' and vendors' warranties and
other rights relating thereto;
(c) all Inventory owned by Quaker and Gaines, as applicable, as of the
Closing Date, wherever located, relating to the Pet Food Business, in
addition to all finished products returned by customers after the Closing
Date;
(d) all of the books and records of Quaker and Gaines, as applicable,
to the extent relating to the Pet Food Business or the Acquired Assets,
including, without limitation, files, equipment maintenance data,
accounting records, internal audit work papers, Inventory records, sales
and sales promotional data (including with respect to the sales and
distribution locations of the Pet Food Business), advertising materials,
customer and consumer lists, cost and pricing information, supplier lists,
business plans, product development information, marketing materials
(including test marketing and related market research data), title reports,
title policies, appraisals, engineering and environmental studies,
Personnel
13
<PAGE>
records (to the extent the transfer of such records is permitted
by law; it being agreed and understood, however, that if such transfer is
not permitted by law, to the extent permitted by law, Sellers shall provide
Purchaser with reasonable access to and, to the extent practicable, copies
of, such records), technical data, specifications, work standards and
manufacturing, assembling and process information, designs, processes,
operating manuals, operating data and plans, engineering drawings, working
drawings, schematics, blueprints, flowsheets and models, and waste disposal
records (including identification of all entities and facilities used by
Sellers or Gaines or, to the extent available, by any other owner or
operator of the Owned Real Property, at any time prior to the Closing Date
for disposal of solid wastes and Hazardous Substances, if any), but
excluding invoices and those portions of any such items of Quaker and
Gaines, as applicable, which incorporate or reflect confidential
information relating to any other business of Quaker and Gaines;
(e) subject to Section 2.7, all Permits relating to the Pet Food
Business or the Acquired Assets, including, without limitation, Permits
which are listed in Schedule 3.11(a);
(f) all right, title and interest of Quaker, Gaines and Affiliates, as
applicable, in and to all Intellectual Property described in Schedule
3.12(a);
(g) all right, title and interest of Quaker, Gaines and Affiliates, as
applicable, in and to (i) all trade secrets, know-how, technology and
manufacturing processes which are used solely in the Territory and relate
solely to the Pet Food Business, (ii) all formulas, recipes, process sheets
and mixing instructions which are used solely in the Territory and relate
solely to the Pet Food Business (the
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"Formulas"), and (iii) all rights that are similar to the Formulas and
other intangible personal property which are used solely in the Territory
and relate solely to the Pet Food Business (items (g) (i) through (g)
(iii) being, collectively, the "Trade Secrets"); and those rights in the
Licensed Patents and the Licensed Trade Secrets as set forth in Section
5.9;
(h) all right, title and interest of Quaker, Gaines, and Affiliates,
as applicable, in the Territory in and to all divisions, reissues,
continuations, continuations-in-part, renewals and/or extensions thereof
for all issued patents and pending patent applications used solely in the
Pet Foods Business as set forth in Schedule 3.12(a), and the inventions and
improvements therein; and all right, title and interest, of Quaker, Gaines
and Affiliates, as applicable, in the Territory and other foreign countries
in and to: all fictitious business names, all unregistered tradenames and
trademarks, including common law trademarks, all unregistered copyrights,
all label designs, and all tradedress, which relate solely to the Pet Food
Business (collectively the "Additional Intellectual Property");
(i) all right, title and interest of Quaker, Gaines and Affiliates, as
applicable, in and to Canadian Patents and Foreign Trademarks set forth in
Schedule 2.1(i);
(a) subject to Section 2.7, all of the rights and interests of Quaker
and Gaines, as applicable, under Contracts relating to the Pet Food
Business or the Acquired Assets, except to the extent such Contracts are
individually or in the aggregate immaterial, including, without limitation,
those Contracts listed on Schedule 3.7(a) (but excluding those Contracts on
such Schedules denoted with a single asterisk), plus all
15
<PAGE>
unfilled customer orders as of the Closing Date and any such Contracts
that have been entered into by Quaker and/or Gaines, between the date
hereof and the Closing Date in the ordinary course of business without
violating the provisions of this Agreement and which also would not be
required to be listed in Schedule 3.7(a);
(b) all right, title and interest of Quaker and Gaines, as
applicable, in and to all one-time, nonrecurring or unusual deposits made
with any Governmental Authority or with any utility company or third party
relating to the use, operation or enjoyment of the Acquired Assets or the
Pet Food Business or for use of services provided in respect of the
Acquired Assets or the Pet Food Business, in all cases to the extent such
deposits are not of a type which customarily would be subject to proration
in transactions of the type contemplated by this Agreement;
(c) except to the extent the Purchase Price is reduced pursuant to
Section 2.9, all claims of Quaker and Gaines against third parties relating
to the Acquired Assets or the Pet Food Business, including without
limitation: (i) those claims in respect of rights under manufacturers' and
vendors' warranties, guarantees or similar obligations and (ii) all rights
of indemnity and claims that Quaker and/or Gaines may have against any
Person who damaged or injured, or caused any damage or injury to, any
portion of the Acquired Assets or the Pet Food Business;
(d) the goodwill of the Pet Food Business;
(e) the Gaines Stock; and
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<PAGE>
(f) cash received by Quaker or the Pet Food Business from customers
with respect to shipments of Products made after the Closing Date; it being
hereby agreed and understood that Sellers and Purchaser shall enter into
such appropriate arrangements so as to effectuate the purpose and intent of
this Section 2.1(n).
provided, however, that the Acquired Assets shall not include and Sellers shall
-------- -------
retain all of their respective right, title and interest in, to and in respect
of, and Purchaser shall not acquire, the following assets and property whether
owned by Sellers or Gaines on the date hereof or hereafter acquired by such
parties prior to the Closing Date (the "Excluded Assets"):
(i) except as provided in Section 2.1(n), cash and cash
equivalents;
(ii) the Receivables of the Pet Food Business;
(iii) Tax refunds and Tax claims with respect to periods ending
on or before or which include the Closing Date, insurance claims,
except as provided in Section 2.9(b), and any prepaid expenses
and other similar items with respect to the Pet Food Business,
except as prorated in accordance with Section 2.6(d) or as
otherwise provided in Section 2.1(j);
(iv) all rights accruing to Sellers and/or their respective
Affiliates under this Agreement;
(v) any Contract in Schedule 3.7(a) denoted with a single
asterisk;
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<PAGE>
(vi) the assets described in Schedule 2.1(vi) which are
designated as "Excluded Assets";
(vii) all insurance policies relating to the Pet Food Business
and/or the Acquired Assets, except those rights, if any, acquired
by Purchaser by operation of law in connection with the purchase
of the Gaines Stock;
(viii) all Gaines Plans, except as set forth on
Schedule 2.1(viii);
(ix) those categories of assets, properties, rights and
interests to be used by Sellers or their Affiliates in
performing their services under the Transition Agreement (and
in the schedules and exhibits thereto);
(x) all assets normally located at, on or in (a) the Quaker
Tower, 321 North Clark Street, Chicago, Illinois, 60610, (b) any
Quaker customer business center, (c) any Quaker sales office, (d)
any Quaker distribution center or (e) the Barrington research and
development center, 617 West Main Street, Barrington, Illinois,
in each case, except for computer software relating to the Pet
Food Business or the information contained therein, all books and
records relating to the Pet Food Business (including with respect
to the distribution or sales functions of the pet food business
conducted by Quaker), all personal computers of Transferred
Employees, the right to use the Licensed Trade Secrets, the
equipment listed
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<PAGE>
on Schedule 2.1(b), and all Inventory situated at the various
Quaker distribution centers;
(xi) any real property other than the Owned Real Property;
(xii) each of the Contracts related to the Pet Food Business
which are distributorship, dealer, broker, manufacturer
representative, Nielsen marketing Contracts, derivative
Contracts, Contracts relating to any Quaker customer business
center, distribution center or the Barrington research and
development center, any transportation related Contract, any
warehousing Contract or any information systems Contracts;
(xiii) that certain Arizona property located at Lot 1 of Section
18, Township 5 South, Range 9 East of the Gila and Salt River
Base and Meridian, located in Pinal County, Arizona (the "Arizona
Property") owned by Gaines; and
(xiv) subject to the provisions of the Transition Agreement, the
"Quaker" trademark or tradename, including Quaker's or its
Affiliates' (other than Gaines) corporate names, symbols or
identifiers;
Purchaser hereby agrees that in the event that prior to the Closing,
Sellers are unsuccessful in transferring all of the Excluded Assets to Quaker,
then following the Closing, upon the reasonable request of Sellers and without
further consideration, Purchaser shall execute, acknowledge and deliver (or
cause to be executed,
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acknowledged and delivered) to Sellers such other instruments of conveyance and
transfer, assignments, bills of sale, further assurances and other documents,
and shall take all such other actions as Sellers may reasonably request in
order to vest more effectively in Sellers or put Sellers in possession of, any
of the Excluded Assets, and to carry out the purpose and intention of this
Section 2.1.
Section 2.2 Assumption of Liabilities.
-------------------------
(a) Subject to Section 2.2(b), in partial consideration of the
transfer to Purchaser of the Acquired Assets, Purchaser, at the Closing,
shall assume, and thereafter shall pay, fulfill, perform or otherwise
discharge when due, only the following liabilities and obligations of
Sellers to the extent such liabilities and obligations relate solely to
the Pet Food Business or the Acquired Assets not conducted as of the
Closing Date (collectively, the "Assumed Liabilities"):
(i) all obligations of Quaker accruing after the Closing under
the Contracts relating to the Pet Food Business or the Acquired
Assets (A) as are listed in Schedule 3.7(a) (but excluding those
Contracts on such Schedule denoted with a single asterisk), (B)
which are not required to be listed in Schedule 3.7(a) and were
entered into by Quaker in the ordinary course of business
consistent with past practice on or before the date hereof which
individually and in the aggregate are not material and (C) which
are entered into by Quaker in the ordinary course of business
consistent with past practice between the date hereof and the
Closing Date and not in violation of the provisions of this
Agreement which individually and in the aggregate are immaterial,
and which, in each
20
<PAGE>
case, are validly assigned to Purchaser (collectively, the
"Assumed Contracts").
(ii) all liabilities and obligations accruing after the Closing
under the assumed Permits held by or on behalf of Sellers and
which are validly assigned to Purchaser;
(iii) the liabilities and obligations undertaken by Purchaser as
provided in Article VII;
(iv) all liabilities and obligations described in Section
2.2(b)(vii) and Section 2.2(b)(ix) which are not Excluded
Liabilities;
(v) subject to any claims by Purchaser pursuant to Section
3.14 which shall control, all refund, return, repair,
replacement, allowance and warranty claims, obligations and
liabilities (a) relating to goods sold or manufactured by the
Pet Food Business prior to the Closing Date or (b) which arise
from Inventory held on the Closing Date, except in the case of
both clauses (a) and (b) above, Purchaser shall not assume or
be responsible for any such liability or obligation with respect
to goods manufactured and sold by the Pet Food Business prior to
the Closing Date unless the claim for refund, return, repair,
replacement, allowance or warranty is made after the second
anniversary of the Closing Date;
(vi) subject to any claims by Purchaser pursuant to Section
3.14 which shall control, any liability or obligation relating
to,
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resulting from or arising out of claims for personal injury
of any kind or death or property damage related to the use of,
or exposure to, products manufactured by the Pet Food Business
prior to the Closing Date, except Purchaser shall not assume or
be responsible for any such liability or obligation with respect
to products which were manufactured and sold by the Pet Food
Business prior to the Closing Date unless such claim for
personal injury of any kind or death or property damage is
asserted after the third anniversary of the Closing Date;
(vii) all unpaid liabilities and obligations with respect to (i)
the redemption of Sellers' coupons after the Closing (including
all handling and processing fees) for the Pet Food Business
issued prior to the Closing Date up to $8,000,000 and (ii)
Sellers' normal trade billback deals (identified and accounted
for under account number 43 under Quaker's chart of accounts)
entered into in the ordinary course of business for the Pet Food
Business which are in effect on the Closing Date; and
(viii) all liabilities and obligations which have arisen or which
arise between the date hereof and the Closing Date in the
ordinary course of the Pet Food Business and which individually
and in the aggregate are immaterial.
(b) Notwithstanding anything to the contrary in Section 2.2(a), except
as otherwise set forth below, neither Purchaser nor Gaines shall assume, or
in any way be liable or responsible for, any liabilities
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<PAGE>
and/or obligations of Sellers or Gaines, unless specifically assumed
pursuant to Section 2.2(a) (the "Excluded Liabilities") including,
without limitation:
(i) any profit or loss derived from the sale provided for by
this Agreement;
(ii) any liabilities or obligations of Sellers other than those
relating to businesses other than the Pet Food Business;
(iii) any liability or obligation under Contracts of Sellers or
Gaines or Permits of Sellers or Gaines that are not Assumed
Contracts or Assumed Permits and any liability or obligation
under the Assumed Contracts or the Assumed Permits which accrue
or arise prior to the Closing;
(iv) any accounts payable or accrued expenses (except for
obligations set forth in Section 2.2(a) above or to the extent
prorated in accordance with Section 2.6(d)) of the Pet Food
Business as of the Closing Date;
(v) except for the Assumed Contracts, any intercompany debt,
settlement or other liability or obligation between the Pet Food
Business and Sellers or any Affiliate of Sellers;
(vi) subject to the provisions of Article VII which shall be
controlling, any liability or obligation of Sellers relating to
the employment or termination of employment of any Person
arising prior to the Closing Date;
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<PAGE>
(vii) any liability or obligation relating to, resulting from or
arising out of claims based on violations of laws or regulations
as in effect at or prior to the Closing Date, in each case
arising out of or relating to events which have occurred, or
products which have been manufactured, or services which have
been performed by, the Pet Food Business, or the use of the
Acquired Assets or the operation of the Pet Food Business, prior
to the Closing Date, but in the case of this subparagraph
(b)(vii), only to the extent that Sellers would be obligated to
indemnify Purchaser under this Agreement as a result of a breach
by Sellers of the representations and warranties set forth in
Section 3.11(a) or Section 3.11(b);
(viii) subject to Article XI and Section 12.15, which shall
control, any liability or obligation for federal, state or local
income Taxes;
(ix) any liability (including strict liability) for: (A)
generation, storage, transportation, disposal or treatment of
Hazardous Substances by or on behalf of the Pet Food Business,
or from, on or into the Owned Real Property or any leased real
property, (B) migrating or leaching of Hazardous Substances onto
or into the Owned Real Property or any leased real property, or
from the Owned Real Property or any leased real property, onto
or into any property adjacent thereto; or (C) violations of
Applicable Environmental Laws and/or Permits which relate to the
Pet Food Business or the Acquired Assets (including the Owned
Real
24
<PAGE>
Property and any leased real property); only to the extent
that such liability relates to conditions or events existing on
or prior to the Closing Date, and only to the extent Sellers
would be obligated to indemnify Purchaser under this Agreement
as a result of a breach by Sellers of the representations and
warranties set forth in Section 3.11(b);
(i) except for the Assumed Contracts and as specifically set
forth in Schedule 2.2(b)(x), any liability or obligation relating
to any indebtedness for borrowed money owed by Sellers or Gaines
to any third party or any guarantee by Sellers or Gaines in favor
of any third party;
(ii) any debt, liability or obligation of Gaines, whether
accrued, absolute, contingent or otherwise of any nature
whatsoever, whether or not known due or payable, that arises out
of the operation or conduct of Gaines or its directors, officers
or employees or any subsidiary on or prior to the Closing Date
not constituting an Assumed Liability; and
(iii) any liability obligation relating in any way to Sellers'
or Gaines' ownership, use, control, possession, or operation on
or prior to the Closing Date of any real property other than the
Owned Real Property (the "Other Real Property"), including,
without limitation, any liability (including strict liability)
for: (A) generation, storage, transportation, disposal or
treatment of Hazardous Substances by or on behalf of the Pet
Food Business, or from, on
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<PAGE>
or into the Other Real Property, (B) migrating or leaching of
Hazardous Substances onto or into the Other Real Property, or
from the Other Real Property onto or into any property adjacent
thereto; or (C) violations of Applicable Environmental Laws
and/or Permits which relate to the Pet Food Business or Other
Real Property, only to the extent that such liability relates to
conditions or events existing on or prior to the Closing Date,
and only to the extent that Sellers would be obligated to
indemnify Purchaser under this Agreement as a result of a breach
by Sellers of the representations and warranties set forth in
Section 3.11(b);
(iv) any debt, liability or obligation of Sellers whether
accrued, absolute, contingent or otherwise of any nature
whatsoever, whether or not known due or payable, that arises out
of operation or conduct of the Pet Food Business or its
directors, officers or employees or any subsidiary on or prior to
the Closing Date not constituting an Assumed Liability.
(b) Except as set forth in Article VII and as otherwise expressly provided in
this Agreement, after the Closing, Purchaser or Gaines solely shall be
responsible for all liabilities and obligations to Transferred Employees arising
from Purchaser's or Gaines' hiring or termination of such employees and all
other liabilities and obligations to the extent arising from its use or
operation of the Pet Food Business or the Acquired Assets.
(c) Quaker hereby agrees that in the event that prior to the Closing,
Sellers are unsuccessful in transferring all of the Excluded Liabilities to
Quaker, then following the
26
<PAGE>
Closing, upon the reasonable request of Purchaser and without further
consideration, Quaker shall execute, acknowledge and deliver (or cause to be
executed, acknowledged and delivered) to Purchaser such other instruments of
assumption, further assurances and other documents, and shall take all such
other actions as Purchaser may reasonably request in order to cause Quaker to
be bound by, and cause Purchaser and Gaines to be released from, the Excluded
Liabilities, and to carry out the purpose and intention of this Section 2.2.
SECTION 2.3. Purchase Price and Other Consideration; Payment. On the
------------------------------------------------
Closing Date, Purchaser shall acquire the Acquired Assets, in consideration for
(i) a cash purchase price of SEVEN HUNDRED TWENTY FIVE MILLION and 00/100
DOLLARS ($725,000,000) (the "Purchase Price"), subject to possible adjustment
after the Closing Date as provided in Sections 2.4 and 2.6(d), and (ii) the
execution and delivery by Purchaser of an assumption agreement pursuant to
which Purchaser shall assume the Assumed Liabilities. The Purchase Price shall
be paid to Quaker at the Closing by wire transfer of immediately available U.S.
funds to an account (or accounts) designated in writing by Quaker to Purchaser
not less than two business days prior to the Closing.
SECTION 2.4. Minimum Inventory.
------------------
(a) On the Closing Date, Sellers shall take a complete physical count
of the Inventory owned by Quaker and Gaines, as applicable, relating to the
Pet Food Business, and Purchaser or its representatives shall be permitted
to observe such physical count being taken. Within 30 days after the
Closing Date, Sellers shall deliver to Purchaser a statement (the "Closing
Inventory Statement") indicating the value of such Inventory transferred
to Purchaser or held by Gaines as of the Closing Date (the "Closing
Inventory"). Such
27
<PAGE>
statement shall be prepared in accordance with (i) generally accepted
accounting principles except for those procedures which are in accordance
with Quaker's internal accounting policies as at December 31, 1994 and (ii)
all books, records and accounts of Sellers and Gaines. Purchaser and its
representatives shall have the right to review all work papers and
procedures used to prepare the Closing Inventory Statement and the right to
perform any other reasonable procedures necessary to verify the accuracy
thereof. Each party shall bear its own expenses incurred in connection with
the above procedures. No value shall be assigned to Inventory which is not
in compliance with the warranty and representation of Sellers set forth in
the first sentence in Section 3.14, which warranty and representation shall
not be qualified or limited for the purposes of this Section 2.4 by any
disclosures in Schedule 3.14.
(b) Unless Purchaser, within 30 days after delivery to Purchaser of
the Closing Inventory Statement, notifies Sellers in writing that it
objects to the Closing Inventory Statement and specifies, in reasonable
detail, the basis for such objection, such Closing Inventory Statement
shall become final, binding and conclusive upon the parties for all
purposes of this Agreement. If Purchaser and Sellers are unable to resolve
any objections to the Closing Inventory Statement within 10 days after any
such notification has been given, the dispute shall be referred to a
nationally recognized public accounting firm mutually selected by Purchaser
and Sellers. If Purchaser and Sellers are unable to agree upon the
designation of such an accounting firm within five days after the
expiration of such 10 day period, either Purchaser or Sellers may
thereafter request that the AAA make such designation. The accounting firm
so designated will make a determination as to each of the items in dispute,
which deter-
28
<PAGE>
mination shall be final, conclusive and binding upon each of the
parties hereto. Purchaser and Sellers shall cooperate with one another and
with their authorized representatives in order to resolve any and all
matters in dispute under this Section 2.4(b) as soon as practicable and
shall share equally the fees and expenses of the designated accounting firm
and the AAA.
(c) If the value of the Closing Inventory is lower than $22,000,000
(the "Base Amount"), then the Purchase Price shall be decreased dollar-for-
dollar by the difference (the "Purchase Price Reduction") between the Base
Amount and the value of the Closing Inventory. Sellers shall remit the
amount of such Purchase Price Reduction to Purchaser, with interest from
the Closing Date to the date of payment, within five days after delivery to
Purchaser of the Closing Inventory Statement as provided in Section 2.4(b)
above; provided, however, that acceptance by Purchaser of such payment
-------- -------
shall not constitute a waiver of Purchaser's right to object to the Closing
Inventory Statement during the 30-day period following its delivery. If
Purchaser does raise an objection and if resolution of such objection
results in a further Purchase Price Reduction, payment of such additional
amount, with interest, from the Closing Date to the date of payment, shall
be made to Purchaser within five days following final resolution of the
objection.
(d) If the value of the Closing Inventory exceeds $26,000,000,
Purchaser shall, within five days after the expiration of the 30-day period
referred to in clause (b) above, or, if Purchaser contests the Closing
Inventory Statement, within five days after final resolution of such
objection, remit to Sellers the amount of such excess (such remittance not
to exceed the sum of $2,000,000), together with interest thereon from the
Closing Date to the date of payment.
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<PAGE>
(e) Any undisputed or resolved amounts shall be payable within five
days of the date such amount is determined to be undisputed or resolved,
with interest, even if other amounts continue to be disputed and
unresolved. Interest for purposes of this Section 2.4 shall be at the
prime lending rate as announced by NationsBank, N.A. on the nearest date
next preceding the date of this Agreement.
SECTION 2.5. Allocation of the Total Purchase Price. The Total Purchase
---------------------------------------
Price shall be allocated among the Acquired Assets, as follows:
(a) $245,000,000 shall be allocated to the Gaines Stock;
(b) The remainder of the Total Purchase Price shall be allocated
among the remaining Acquired Assets in accordance with a written appraisal
of the remaining Acquired Assets conducted by a nationally recognized
appraisal firm to be selected by Purchaser, and in accordance with the
requirements of IRC Section 1060. Such appraisal shall be conducted at
Purchaser's sole direction and completed not less than 30 days prior to the
earlier to occur of the due date, including extensions, for filing the U.S.
federal income Tax Return for either Sellers or Purchaser for the fiscal
year during which the Closing Date occurs. The cost of such appraisal
shall be borne by Purchaser. Sellers and Purchaser agree to make all
appropriate tax filings on a basis consistent with such appraisal and to
exchange drafts of any information returns required by IRC Section 1060,
and all similar state statutes, at least 10 days prior to filing any such
return with the appropriate Governmental Authority. In the event Purchaser
fails to obtain such a written appraisal within the time specified in this
Section 2.5(b),
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<PAGE>
Sellers may allocate the Total Purchase Price among the remaining
Acquired Assets in any reasonable manner consistent with the requirements
of IRC Section 1060.
SECTION 2.6. Closing; Deliveries at the Closing.
-----------------------------------
(a) The sale and purchase of the Acquired Assets contemplated hereby
(the "Closing") shall take place on March 8, 1995 at the offices of Quaker,
Quaker Tower, 321 North Clark Street, Chicago, Illinois 60610, or as soon
thereafter as practicable, but not later than three days after all
conditions to each party's obligation to close hereunder shall have been
satisfied or waived. If all conditions to each party's obligation to close
hereunder shall have been satisfied or waived prior to March 8, 1995, the
parties shall close promptly thereafter, but in no event less than three
business days after all such conditions have been satisfied or waived. The
day on which the Closing shall occur is hereinafter referred to as the
"Closing Date".
Except as otherwise required by law, the Closing shall be deemed to
have occurred as of the opening of business on the Closing Date.
(c) At the Closing, Sellers shall deliver to Purchaser:
(i) duly executed deeds customarily used (in the respective
jurisdictions in which such Owned Real Property is situated) to
convey the Owned Real Property to Purchaser in the forms attached
hereto as Exhibits A-1 and A-2, respectively;
(ii) a duly executed general assignment of all trademarks that
are included in the
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Acquired Assets (in a form substantially similar to Exhibit B-1
attached hereto) and duly executed assignments in recordable
form of all trademarks that are set forth in Schedule 3.12(a)
and are in the Territory. Within 60 days after Closing, Seller
shall deliver to Purchaser duly executed trademark assignments,
in recordable form, for all trademarks set forth in Schedule
3.12(a), and to the extent assignable, those Foreign Trademarks
set forth in Schedule 2.1(i) that have not already been
delivered at Closing;
(iii) unexecuted assignments of all patents that are set forth
in Schedule 3.12(a) in a form substantially similar to Exhibits
B- 2(a) and B-2(b) respectively, attached hereto. Within 75
days after Closing, Seller shall deliver to Purchaser duly
executed patent assignments, in recordable form, for all patents
set forth in Schedule 3.12(a) and, to the extent assignable,
those Canadian Patents set forth in Schedule 2.1(i);
(iv) a duly executed assignment in recordable form of all
copyright registrations as set forth in Schedule 3.12(a) in a
form substantially similar to Exhibit B-3 attached hereto, and a
duly executed assignment of all right, title and interest of the
Trade Secrets and Additional Intellectual Property as defined in
Sections 2.1(g) and 2.1(h);
(v) a duly executed assignment of all right, title and
interest under Contracts and Permits that are included in the
Acquired
32
<PAGE>
Assets in the form attached hereto as Exhibit C;
(vi) all documents necessary to transfer to Purchaser title to
the motor vehicles that are included in the Acquired Assets;
(vii) a duly executed bill of sale transferring to Purchaser all
of the remaining Acquired Assets not transferred pursuant to the
instruments and documents referred to above in the form attached
hereto as Exhibit D;
(viii) the officer's certificate, the opinion of counsel and the
certified resolutions referred to in Sections 8.1(c) and 8.8;
(ix) subject to Section 2.7, all authorizations, waivers,
consents and approvals necessary to transfer to Purchaser the
Assumed Contracts and the Permits that are included in the
Acquired Assets;
(x) a duly executed counterpart original of the agreement
substantially conforming to the outline of substantive terms
attached hereto as Exhibit E (the "Transition Agreement");
(xi) duly executed stock powers or similar instruments of
transfer with respect to the Gaines Stock;
(xii) a duly executed counterpart original of each of (A) the
Lease Agreement with respect to certain office space located
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in the Quaker Tower in the form attached as Exhibit F-1 and (B)
the Lease Agreement with respect to certain office space and
other space located at Barrington research and development
center in the form attached as Exhibit F-2 (collectively, the
"Lease Agreements");
(xiii) such other documents and instruments as Purchaser
reasonably may request not less than five days prior to the
Closing Date;
(xiv) a duly executed assumption of the Excluded Liabilities
(including all liabilities relating to the Arizona property) in
the form attached hereto as Exhibit G;
(xv) a duly executed license of the Licensed Patents and
Licensed Trade Secrets as set forth in Section 5.9; and
(xvi) to the extent assignable, a duly executed assignment of
items Nos. 3, 5, 6 and 7 listed in Schedule 3.12(b)(iv).
(d) At the Closing, Purchaser shall deliver to Sellers:
(i) the Purchase Price referred to in Section 2.3 in the
manner set forth therein;
(ii) a duly executed assumption agreement in respect of the
Assumed Liabilities in the form attached hereto as Exhibit H;
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(iii) the officer's certificate, the opinion of counsel and the
certified resolutions referred to in Sections 9.1(c) and 9.6;
(iv) a duly executed counterpart original of the Transition
Agreement;
(v) [intentionally left blank]
(vi) a duly executed counterpart original of the Lease
Agreements; and
(vii) such other documents and instruments as Sellers reasonably
may request not less than five days prior to the Closing Date.
(e) As of December 31, 1994 the amount of Sellers' prepaid premium
inventory and media expenses was $531,000 and $353,000 respectively.
Within 30 days after the Closing, the parties shall prorate all prepaid
expenses and similar items relating to the Pet Food Business and/or the
Acquired Assets, if any, to the extent Purchaser reasonably is expected to
receive the benefit thereof after the Closing, and Purchaser shall
reimburse Sellers on the date of settlement for the unused portion of such
expenses or other items as of the Closing Date. In addition, on the same
date, all items listed below relating to the Pet Food Business and the
Acquired Assets shall be prorated as of the Closing Date, with Sellers
liable to the extent such items relate to any time period up to and
including the day next preceding the Closing Date, and with Purchaser
liable to the extent such items relate to the Closing Date and all periods
subsequent thereto: personal property, real estate, occupancy and water
Taxes, if any, on or with respect to the Pet Food
35
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Business or the Acquired Assets; rents, Taxes and other items due to
Quaker and Gaines, as applicable, or payable by Quaker and Gaines, as
applicable, under any Contract to be assigned to or assumed by Purchaser
hereunder (other than those certain one-time nonrecurring or unusual
deposits, the full amount of which shall be transferred to Purchaser
pursuant to Section 2.1(j)); the amount of any license or registration
fees with respect to any licenses or registrations which are being
assigned or transferred hereunder; the amount of sewer rents and charges
for water, telephone, electricity and other utilities and fuel; and any
other items which normally are prorated in connection with similar
transactions. Sellers agree to furnish Purchaser with such documents and
other records as Purchaser reasonably requests in order to confirm all
adjustment and proration calculations including with respect to prepaid
premium inventory and media expenses made pursuant to this Section 2.6(d).
The net aggregate amount of such prorations shall be treated as an
adjustment to the Purchase Price paid by Purchaser to Sellers on the
Closing Date pursuant to Section 2.3. If current payments with respect to
items to be prorated pursuant to this Section 2.6(d) are not ascertainable
on or before such post-closing settlement date, such payments shall be
prorated on the basis of the most recently ascertainable bill therefor and
shall be reapportioned among Sellers and Purchaser when the current bills
with respect to such items have been issued and a cash settlement shall be
made promptly thereafter on an item-by-item basis. Notwithstanding
anything in this Section 2.6(d) to the contrary, to the extent that there
are any supplemental Taxes assessed with respect to the Acquired Assets
relating to an event which occurred prior to the Closing Date, the portion
of such Taxes for periods up to the Closing shall be paid by Sellers when
due, notwithstanding the
36
<PAGE>
fact that such Taxes are not assessed or known on the Closing Date.
Section 2.7. Nonassignable Contracts and Permits.
-----------------------------------
(a) To the extent that any Assumed Contract or Permit that is
included in the Acquired Assets is not capable of being assigned or
transferred without the prior consent or waiver of the counterparty (or
parties) thereto (including a Governmental Authority), or if such
assignment or transfer or attempted assignment or transfer would constitute
a breach thereof or a violation of any law, decree, order, regulation or
other governmental edict, this Agreement shall not constitute an assignment
or transfer thereof, or an attempted assignment or transfer of any such
Contract or Permit until such time as such consent or waiver has been
obtained.
(b) Anything in this Agreement to the contrary notwithstanding,
Sellers are not obligated to transfer to Purchaser any of their rights and
obligations in, to and under any of the Contracts or Permits to be assigned
hereunder without first having obtained all necessary consents and waivers
thereto. Prior to the Closing Date, Sellers shall use their reasonable
best efforts to obtain consents and waivers to allow the assignment of
those Assumed Contracts and Permits listed in Schedule 2.7(b); provided,
--------
however, Sellers shall not without the consent of Purchaser, agree to any
-------
modification of any such Contract or Permit in the course of obtaining any
such consents or waivers, or pay or commit to pay any consideration payable
from the Acquired Assets. For a reasonable period of time after the
Closing Date, not to exceed 180 days, Sellers shall use their reasonable
best efforts to obtain any consents or waivers listed in Schedule 2.7(b)
which were not obtained prior to Closing and any other
37
<PAGE>
consents and waivers under any such Contract or Permit which are
reasonably requested by Purchaser.
(c) To the extent that consents or waivers are not obtained, Sellers
shall use their reasonable best efforts to assure to Purchaser the benefits
of such Contracts and Permits and Sellers and Purchaser shall cooperate
with each other to establish, to the extent practicable, arrangements that
are reasonable and lawful as to both Sellers and Purchaser, and which
result in the practical realization of the benefits and obligations under
such Contracts and Permits being apportioned in a manner that is in
accordance with the purpose and intention of this Agreement.
Section 2.8. Exclusive Sale of Trade Secrets. Neither Sellers nor any
--------------------------------
of their respective Affiliates shall sell, assign, convey, deliver or otherwise
transfer any of the Trade Secrets, or shall communicate any knowledge, data or
other information with respect to the Trade Secrets to any Person, in the
Territory other than to Purchaser, except to the extent such knowledge, data,
or other information (i) is or becomes available to the public or becomes part
of the public domain other than as a result of a disclosure by Sellers or their
Affiliates or (ii) becomes available to Sellers or their Affiliates from a third
party which, after due inquiry of such party, is not known by Sellers or their
Affiliates to be in violation of any agreement with Purchaser. Nothing
contained in this Section 2.8 shall prevent Sellers from selling, assigning or
disclosing any or all trade secrets currently practiced in a country or locale
outside the Territory to any Person of a country or locale in which such trade
secrets are being practiced.
Section 2.9. Risk of Loss. Risk of loss as to the Acquired Assets shall
------------
pass from Sellers to Purchaser at Closing. Sellers shall bear all costs and
expenses and assume all risks of condemnation, seizure, destruction, loss,
damage or
38
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theft of the Acquired Assets arising and/or occurring prior to the time of the
wire transfer of the Purchase Price on the Closing Date. Purchaser shall bear
all costs and expenses and assume all risks of condemnation, seizure,
destruction, loss, damage or theft of the Acquired Assets arising and/or
occurring after the time of the wire transfer of the Purchase Price on the
Closing Date. If at or prior to the time of the wire transfer of the Purchase
Price on the Closing Date, all or any part of the Acquired Assets to be
transferred hereunder are condemned, seized, destroyed, lost, stolen or
damaged, then Purchaser shall have the options, exercisable by notice to
Sellers in writing:
(a) To reduce the Purchase Price of the Acquired Assets by an amount equal
to the cost of repair, or if destroyed or damaged beyond repair, or if
condemned, seized, lost or stolen, by an amount equal to the fair market value
of the Acquired Assets and to complete the transaction herein contemplated at
such reduced Purchase Price; it being hereby agreed and understood that, without
Sellers' prior written consent, no such Purchase Price reduction shall be made
in the event, and only to the extent that, such cost of repair or fair market
value, as the case may be, after giving effect to any property or casualty
insurance in respect thereof, exceeds $10,000,000 (which $10,000,000 shall not
include self-insurance, deductibles and similar co-payments); or
(b) To complete the transaction herein contemplated without reduction of
the Purchase Price in which event all proceeds of insurance, or compensation for
condemnation or seizure, payable with respect to such Acquired Assets shall be
paid to Purchaser and all rights and claims of Sellers to any such amounts shall
be assigned to Purchaser; or
(c) To utilize alternatives (i) and (ii) concurrently but not with
respect to any single asset.
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Nothing contained in this Section 2.9 shall impair any of Purchaser's
or Sellers' rights under Section 12.1.
III
REPRESENTATIONS AND WARRANTIES OF SELLERS
As of the date of this Agreement and as of the Closing Date, Sellers
hereby jointly and severally represent and warrant to Purchaser as follows:
Section 3.1. Incorporation; Qualification. Each of Sellers and Gaines is a
----------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and has the requisite
corporate power and authority to carry on the Pet Food Business as presently
conducted by it and, as applicable to it, to own, operate and lease the Acquired
Assets. Each Seller and Gaines is duly qualified to do business and is in good
standing in each jurisdiction in which the conduct of the Pet Food Business or
the ownership or operation of the Acquired Assets, as applicable to it, requires
such qualification, except where the failure to be so qualified or in good
standing would not or could not reasonably be expected to have a material
adverse effect on the Pet Food Business or the Acquired Assets, each taken as a
whole, or the transactions contemplated hereby.
Section 3.2. Authority. Sellers have all requisite corporate power and
---------
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Sellers, the performance by them of their respective obligations hereunder
and the consummation by them of the transactions contemplated hereby have been
duly authorized by the respective Boards of Directors of Sellers
40
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(and approved by Quaker, as sole stockholder of QOAC), and no other corporate
act or proceeding on the part of Sellers is necessary to approve the execution
and delivery of this Agreement, the performance of Sellers' obligations
hereunder or the consummation by Sellers of the transactions contemplated
hereby.
Section 3.3. Execution and Binding Effect. This Agreement has been duly and
----------------------------
validly executed and delivered by Sellers and constitutes the legal, valid and
binding obligation of them and will be enforceable against them in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
moratorium, insolvency, fraudulent conveyance, reorganization, liquidation or
other laws relating to or affecting creditors' rights and remedies or by
equitable principles.
Section 3.4. No Contravention. Except as set forth in Schedule 3.4, the
----------------
execution, delivery and performance of this Agreement by Sellers and the
consummation by Sellers of the transactions contemplated hereby, and the
fulfillment of and compliance by Sellers with the terms and conditions hereof,
do not and will not:
(a) conflict with or violate any provisions of the Articles of
Incorporation or By-Laws of Quaker, Gaines or QOAC;
(b) require any consent, approval or notice under or conflict with,
permit or result in a termination or breach of, or constitute (with or
without notice or lapse of time or both) a default under, or accelerate or
permit the acceleration of any performance required by, any Contract,
Permit or Plan to which Quaker, Gaines or QOAC is a party, under which any
of them has any rights, or by which Quaker, Gaines or QOAC or any of the
Acquired Assets is bound or subject;
41
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(c) violate any law, statute or ordinance or any rule, regulation,
order, writ, injunction or decree of any court or of any Governmental
Authority applicable to the Pet Food Business, or by which any of the
Acquired Assets may be bound or subject; or
(d) require any filing, declaration or registration with, or permit,
consent or approval of, or the giving of notice to, any Governmental
Authority; excluding from the foregoing Sections 3.4(a) through (d);
(i) such conflicts, violations, breaches, defaults,
accelerations, filings, declarations, registrations, permits,
consents, approvals and notices, the absence of which, either
singly or in the aggregate, would not be and cannot reasonably be
expected to be material;
(ii) any consents or waivers required in connection with the
Assumed Contracts or Permits;
(iii) any local filings or recordings to be made by Purchaser
that may be necessary to transfer any of the Acquired Assets; and
(iv) he filing required under the HSR Act and expiration of the
applicable waiting periods under the HSR Act.
Section 3.5. Financial Statements. Attached as Schedule 3.5(a) are the
--------------------
following financial statements: (i) Statement of NVGP (U.S. Business) for the
fiscal year ended June 30, 1994, (ii) Statement of NVGP (U.S. Business) for
the period beginning July 1, 1994 and ending December 31, 1994, (iii) Statement
of Assets to be Sold (U.S. Business)
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as of December 31, 1994, (iv) Statement of NVGP (Canadian Business) for the
fiscal year ended June 30, 1994, (v) Statement of NVGP (Canadian Business) for
the period beginning July 1, 1994 and ending December 31, 1994, and (vi)
Statement of Inventory to be Sold (Canadian Business) as of December 31, 1994
(the "Financial Statements"). Sellers have provided and agree to continue to
provide Purchaser additional monthly financial statements of the type specified
in clauses (i) through (vi) above as soon as practicable after they were or are
prepared through the Closing Date (the "Monthly Financial Statements").
Schedule 3.5(b) sets forth a list of all line-item adjustments to NVGP used by
Sellers to calculate operating income of the Pet Food Business. Except as
noted in the Financial Statements, or otherwise set forth in Schedule 3.5(a),
the Financial Statements:
(a) were prepared from the books and records of Sellers; and
(b) have been prepared on a consistent basis for all periods presented and
follows consistent application of internal accounting practices used
by Sellers and fairly present, in all material respects, the assets of
the Pet Food Business to be sold by Sellers as of the date set forth
there-in and the NVGP of the Pet Food Business for the periods
indicated.
The books, records and accounts relating to the Pet Food Business are accurate
and complete in all material respects.
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Section 3.6. Title to Acquired Assets.
------------------------
(a) The Owned Real Property being transferred to Purchaser is owned in fee
simple and is free and clear of any liens, charges, pledges, security interests,
rights, easements, covenants, agreements, conditions, restrictions or other
encumbrances (collectively, "Liens") except for (i) Taxes which are not yet due
and payable (collectively, "Taxes Not Yet Due and Payable"), and the claims of
contractors, materialmen, repairmen and similar persons ("Mechanic's Liens"),
which are not yet due and payable, (ii) restrictive covenants, conditions,
restrictions, easements, rights-of-way, and other similar non-monetary Liens
that would not and could not reasonably be expected to, individually or in the
aggregate, materially interfere with (1) how any Owned Real Property is used,
occupied or operated as of the Closing Date or (2) how any Owned Real Property
is intended to be used, occupied and operated upon the completion of any
alteration, modification, expansion, replacement or construction commenced on or
before the Closing Date, (iii) any existing applicable building and zoning
ordinances, and (iv) the Liens set forth in Schedule 3.6. Quaker and Gaines, as
applicable, have good and valid title to all of the other tangible assets and
properties included in the Acquired Assets, in each case free and clear of any
Liens, except for (A) Taxes Not Yet Due and Payable and Mechanic's Liens which
are not yet due and payable and (B) furniture, office supplies and Inventory
disposed of or consumed by Quaker and Gaines, as applicable, in the ordinary
course of business between the date hereof and the Closing Date. The exceptions
to title referred to in this Section 3.6(a) above, except as set forth in
Section 3.6(b) subsections (i) through (vi), are collectively referred to herein
as the "Permitted Liens." To the knowledge of Sellers and except as set forth
in Schedule 3.6, all Physical Assets currently used in the Pet Food Business
with an aggregate value of more than $250,000 are in good condition commensurate
with their age and expected useful life, and are in working order and repair and
have been maintained in accordance with reasonable maintenance
44
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schedules. Except as set forth in Schedule 3.6, none of Quaker, Gaines or any
of their Affiliates has entered into any material leases, subleases, licenses
or other agreements currently in effect relating to the use or occupancy of
real property in connection with the Acquired Assets or the Pet Food Business.
(b) To the knowledge of Sellers and except as indicated in Schedule 3.6,
with respect to each parcel of Owned Real Property:
(i) All buildings, structures, fixtures, systems and other
improvements on the Owned Real Property used in the Pet Food
Business as of the Closing Date are in good condition
commensurate with their age and expected useful life, and in
working order and repair and have been maintained in
accordance with reasonable maintenance schedules;
(ii) All water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and
systems and other systems serving the Owned Real Property
are installed and operating as of the Closing Date and any
so called hook-up fees and other associated charges have
been fully paid;
(iii) As of the Closing Date, the existence, use, occupancy and
operation of each such building, structure or other
improvement used in the Pet Food Business as of the Closing
Date is not dependent on the granting of any special permit,
exception, approval or variance which has not been obtained
by Sellers or
45
<PAGE>
Gaines and no such item obtained by Sellers or
Gaines will be adversely affected by the transfer of the
Owned Real Property by Seller to Purchaser;
(iv) There is no pending or threatened (A) changes of zoning,
building or other similar laws, ordinances or regulations
adversely affecting such property which would or could
reasonably be expected to materially interfere with how any
Owned Real Property is used, occupied or operated as of the
Closing Date or (B) condemnation of such property;
(v) Neither Sellers nor Gaines has received notice from any
Governmental Authority requiring work to be done or
improvements to be made upon such property and has no
knowledge of the enactments or adoption of any ordinance or
resolution by any such Authority authorizing work or
improvements for which an assessment may be levied against
such property; and
(vi) As of the Closing Date, all buildings, structures, fixtures,
and other improvements erected on the Owned Real Property,
as used in the Pet Food Business, conform in all material
respects with all applicable building and other similar
laws, codes, ordinances, rules, regulations and orders of
Governmental Authorities.
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Section 3.7. Contracts.
---------
(a) Schedule 3.7(a) lists all Contracts, whether oral, written or by
course of conduct, relating to the Pet Food Business or the Acquired Assets
and (i) which involve the payment or receipt, or the potential or
contingent liability or rights for payment or receipt, including any
indemnity obligation, in excess of $250,000 during the remaining term
thereof, or (ii) which have any Affiliate of Sellers as the counterparty
thereto, excluding purchase orders and sales orders made with unrelated
third parties in the ordinary course of business or (iii) the Contracts
referred to in the next sentence (collectively, the "Material Contracts").
The types of Contracts disclosed on Schedule 3.7(a), without respect to the
amount to be paid or received thereunder, also shall include the following:
(A) collective bargaining Contracts or similar arrangements with any labor
union or other similar organization; (B) Contracts containing covenants by
the Pet Food Business not to compete in any line of business; (C) consent
decrees; (D) Contracts for the sale or purchase of any assets of or for the
Pet Food Business other than in the ordinary course of business; (E)
indentures, mortgages, industrial revenue bond agreements, notes, loan or
credit agreements or other agreements or obligations relating to the
borrowing of money or to a guaranty or assumption, directly or indirectly,
of obligations of others; (F) security agreements, pledges, conditional
sale agreements or title retention agreements; or (G) Contracts with any
current or former officer, director, employee or shareholder or any member
of their family or their Affiliates; in each case solely to the extent such
Contracts involve payments or have a value of more than $100,000. Except
as otherwise indicated in Schedule 3.7(a), true and complete copies of each
written Material Contract and true and complete written
47
<PAGE>
summaries of each oral Material Contract described in Schedule 3.7(a)
(together with any and all modifications, amendments or supplements
thereto) have been delivered to or made available for inspection by
Purchaser prior to execution of this Agreement.
(b) Except as set forth in Schedule 3.7(b), all Material Contracts are
valid and binding obligations of Sellers, enforceable in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
moratorium, insolvency, fraudulent conveyance, reorganization, liquidation
or other laws relating to or affecting creditors' rights and remedies or by
equitable principles, and in full force and effect. Except as set forth in
Schedule 3.7(b), no default by Quaker or Gaines exists under any Material
Contract and there does not exist any event applicable to Quaker or Gaines
that, with notice or lapse of time or both, would or could reasonably be
expected to constitute an event of default or result in a right to
accelerate or terminate or a loss of rights under any Material Contract.
To the best of Sellers' knowledge, except as set forth in Schedule 3.7(b),
no other party to any Material Contract is currently in default thereunder
and neither Quaker nor QOAC is aware of any event applicable to such other
party that, with notice or lapse of time or both, would or reasonably could
be expected to constitute an event of default or result in a right to
accelerate or terminate or a loss of rights under any Material Contract.
(c) Except as set forth on Schedule 2.7(b), each Material Contract is
capable of being assigned or transferred to Purchaser without the consent
or waiver of the counterparty (or parties) thereto.
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Section 3.8. Employee Benefit Plans.
----------------------
(a) Schedule 3.8 hereto contains a true and complete list of each
pension, bonus, deferred compensation, incentive compensation, stock
purchase, supplemental retirement, severance or termination pay, employment
contract, stock option, hospitalization, medical, life insurance, dental,
disability, salary continuation, vacation, supplemental unemployment
benefits, profit-sharing, retirement, union contract or other employee
benefit plan, program, policy or arrangement (whether oral or written)
maintained, contributed to, or required to be contributed to, by Sellers or
Gaines for the benefit of any current or former employee of the Pet Food
Business (collectively, "Plans"). Sellers have delivered or made available
to Purchaser true and complete copies of all documents embodying the Plans.
The Plans sponsored by Gaines are hereinafter referred to collectively as,
the "Gaines Plans".
(b) Except as described in Schedule 3.8, (i) all of the Plans which are
"employee pension benefit plans," within the meaning of Section 3(2) of
ERISA (each a "Pension Plan") and which are intended to meet the
requirements for qualification of Section 401(a) of the IRC are in
substantial compliance with such requirements and their related trusts are
exempt from taxation under Section 501(a) of the IRC; (ii) the IRS has
issued a favorable determination letter, with respect to the qualification
of each such Pension Plan under the relevant provisions of the IRC in
effect before the Tax Reform Act of 1986, and the IRS has not taken any
action to revoke any such letter; (iii) each Plan has been operated in all
material respects in accordance with its provisions and in compliance with
the statutes, rules and regulations governing each such
49
<PAGE>
plan; (iv) no "disqualified person" or "party-in-interest" (as defined in
Section 4975 of the IRC and Section 3 of ERISA, respectively) has engaged
in any "prohibited transaction," as such term is defined in Section 4975
of the IRC or Section 406 of ERISA, which could subject Purchaser to any
tax or penalty imposed under Section 4975 of the IRC or Section 502(i) of
ERISA; (v) no event has occurred and there has been no failure to act on
the part of Sellers or a fiduciary of any Plan that could subject
Purchaser to the imposition of any tax or penalty; (vi) there are no
actions, suits or claims pending (other than claims for benefits) against
any Plan or against the assets of any Plan relating to the Pet Food
Business; (vii) each Pension Plan which is subject to Part III of Subtitle
B of Title I of ERISA has been maintained in compliance with the minimum
funding standards of ERISA and Sellers neither have sought nor received a
waiver of funding requirements with respect to any Pension Plan; (viii) no
steps have been taken to terminate any Plan which is subject to Title IV
of ERISA and no proceeding has been initiated by the Pension Benefits
Guaranty Corporation to terminate any such Plan or to appoint a trustee to
administer any such Plan; and (ix) no "reportable event" within the
meaning of Section 4043 of ERISA and the regulations thereunder for which
notice has not been waived by regulation has occurred with respect to any
Gaines Plan.
(c) None of the Plans is a "multiemployer plan" as defined in ERISA
Section 3(37).
Section 3.9. Absence of Certain Changes. Except as set forth in
--------------------------
Schedule 3.9, with respect to both the Pet Food Business and the Acquired
Assets, none of Quaker, QOAC or Gaines or any Affiliate of Quaker has since
December 31, 1994 (except solely in the case of clause (i) below), since
June 30, 1994:
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(a) permitted or allowed any of the Acquired Assets to be mortgaged,
pledged or subjected to any Liens, other than the Permitted Liens;
(b) materially written down or materially written up the value of
any of the Inventory;
(c) sold, transferred or leased any tangible or intangible material
assets, and since December 31, 1994, sold, transferred or leased any
tangible or intangible assets which would have been included in the
definition of Acquired Assets but for such sale, transfer or lease; other
than (i) sales of Inventory and the disposal or consumption of furniture
and office supplies, in each case in the ordinary course of business and
(ii) sales or disposal of Physical Assets which collectively have an
aggregate value of less than $650,000 and are not otherwise material to the
Pet Food Business;
(d) granted increases in the compensation of any Transferred Employee,
which increases singly or in the aggregate are material, other than in the
ordinary course of business and consistent with past practice;
(e) adopted, entered into or agreed to enter into, or amended or
agreed to amend any Plans with respect to the Pet Food Business which
singly or in the aggregate are or would or reasonably could be expected to
be material to the Pet Food Business taken as a whole, other than in the
ordinary course of business and consistent with past practice;
(f) otherwise operated the Pet Food Business other than in the
ordinary course;
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(g) made any changes in the customary methods used in operating the
Pet Food Business (including its marketing, selling and pricing practices
and policies) which singly or in the aggregate are or would or reasonably
could be expected to be material to the Pet Food Business taken as a whole;
(h) changed any methods of accounting for the Acquired Assets or the
Pet Food Business;
(i) suffered any changes in the assets, liabilities, earnings,
business or financial condition which have been or which would or
reasonably could be expected to be either individually or in the aggregate
materially adverse;
(j) amended the certificate of incorporation or by-laws of Gaines or
merged Gaines with or into or consolidated it with any other Person or in
any way changed in any manner the character of its business;
(k) waived any right of material value under any Material Contract;
(l) failed to perform in any material respect any of its obligations,
or suffered or permitted to exist and be continuing any material default by
it under any Material Contract; or
(m) agreed, whether in writing or otherwise, to take any of the
actions set forth in this Section 3.9.
Section 3.10. Litigation. Except as set forth in Schedule 3.10, (a)
----------
there are no claims, actions, suits, proceedings (including arbitration and
alternate dispute resolution proceedings) or investigations pending or, to
Sellers' knowledge, threatened by or against Sellers, Gaines or any Affiliate
of Quaker that are, or would or could reasonably
52
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be expected to be material either individually or in
the aggregate with respect to (i) the Pet Food Business, (ii) the Acquired
Assets, or (iii) the transactions contemplated hereby, at law or in equity or
before or by any court or public or governmental authority and (b) there are no
orders, decrees or judgments pending or in effect against Sellers, Gaines or any
Affiliates of Quaker that are, or would or could reasonably be expected to be
material either individually or in the aggregate with respect to (i) the Pet
Food Business, (ii) the Acquired Assets or (iii) the transactions contemplated
hereby.
Section 3.11. Compliance with Laws.
--------------------
(a) Except as set forth in Schedule 3.11(a), the Pet Food Business
has, for the two-year period next preceding the date of this Agreement,
been conducted in compliance in all material respects with all statutes,
laws, rules, regulations, ordinances, decrees and orders applicable to the
ownership of the Acquired Assets and the operation of the Pet Food
Business which were in effect on the appropriate dates (including those
relating to health and safety matters but excluding those relating to
environmental matters) and Sellers and Gaines have not received, and are
not aware of the threatened receipt of, any notice or citation that they
have failed to comply in any material respect with any such statutes,
laws, rules, regulations, ordinances, decrees or orders. Except as set
forth in Schedule 3.11(a), Quaker and Gaines, as applicable, currently
hold and are in compliance in all respects with all Permits necessary for
the ownership of the Acquired Assets and the operation of the Pet Food
Business. All such Permits which are material are listed in Schedule
3.11(a).
(b) Except as set forth in Schedule 3.11(b):
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(i) for the five year period next preceding the date of this
Agreement, the Pet Food Business has been conducted in compliance in
all material respects with all Applicable Environmental Laws and
decrees and orders issued thereunder applicable to the ownership of
the Acquired Assets and the operation of the Pet Food Business which
were in effect on the appropriate dates, and Sellers and Gaines have
not received, and are not aware of the threatened receipt of, any
notice of failure to comply in any material respect with such
Applicable Environmental Laws, decrees or orders;
(ii) except as permitted by, and in compliance with, the Applicable
Environmental Laws, (A) the Acquired Assets, including the Owned Real
Property, and any Other Real Property, have not been used for the
generation, use, storage, manufacture, transportation, treatment or
disposal of Hazardous Substances, and (B) no Hazardous Substances,
including asbestos-containing materials and polychlorinated biphenyls,
are currently located on the Owned Real Property or any Other Real
Property;
(iii) there has been no releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, migrating, disposing or dumping of Hazardous Substances
which would or could reasonably be expected to result in any material
liability (hereinafter a "Hazardous Discharge") from, onto, or into
the Acquired Assets, including the Owned Real Property and any Other
Real Property, and no contaminated soil or groundwater for which
Applicable Environmental Laws require a response action or corrective
action has resulted therefrom
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on the Owned Real Property or any Other Real Property, or any real
property adjacent to such properties;
(iv) neither the Acquired Assets, including the Owned Real Property
and any Other Real Property, nor the Sellers' or Gaines' operation of
the Pet Food Business, is subject to any outstanding or, to Sellers'
knowledge, threatened, complaint, summons, citation, notice,
directive, order, claim, litigation, proceeding, judgment letter,
request for information or other written communication from any
Governmental Authority or any private party, which would or could
reasonably be expected to result in any material liability: (A)
involving a Hazardous Discharge, on or off-site, or (B) objecting to
odor, noise or discharges of liquid, solid or gaseous materials from
the Acquired Assets, including the Owned Real Property and any Other
Real Property included in the Acquired Assets, whether hazardous or
not (hereinafter "Environmental Complaints");
(v) there are not currently and, to the knowledge of Sellers, never
have been any underground storage tanks used or located on the Owned
Real Property, or any Other Real Property included in the Acquired
Assets, which would or could reasonably be expected to result in any
material liability under Applicable Environmental Laws;
(vi) to Sellers' Knowledge, there are no outstanding or threatened
Environmental Complaints against the owners or operators of any of the
facilities that received Hazardous Substances generated by Sellers or
Gaines in the course of conducting the Pet Food Business that which
would
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or could reasonably be expected to result in any material
liability in connection with the Acquired Assets or the Pet Food
Business; and
(vii) none of the Owned Real Property is subject to the Illinois
Responsible Property Transfer Act.
Section 3.12. Intellectual Property.
---------------------
(a) Schedule 3.12(a) sets forth a complete and accurate list of:
(i) all registered trademarks and tradenames in the Territory and
other foreign countries that relate solely to the Pet Food Business
and all registrations and pending applications for registration of
trademarks and tradenames that relate solely to the Pet Food Business
filed in the Territory and foreign countries on behalf of Quaker,
Gaines, or Affiliates;
(ii) all patents issued in the Territory to Quaker, Gaines, and
Affiliates that are used solely in connection with the Pet Food
Business and all pending patent applications filed in the Territory by
or on behalf of Quaker, Gaines, or Affiliates that relate solely to
the Pet Food Business; and
(iii) all copyright registrations in the Territory and all pending
applications for copyright registrations in the Territory filed by or
on behalf of Quaker or Gaines and used in the Pet Food Business,
including copyrights, registrations and applications for registrations
for printed matter, databases, software and source codes used by or on
behalf of Quaker and Gaines and used solely in the Pet Food Business;
and
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The foregoing shall hereinafter be referred to collectively as, the
"Intellectual Property".
(b)(i) All of the trademarks, as set forth in Schedule 3.12(b)(i) are
owned by Quaker and Gaines, as applicable, free and clear of any
liens, charges, pledges, security interests or other similar
encumbrances, are enforceable, valid and subsisting, and do not
conflict with or infringe on the rights of others.
(i) Except as set forth in Schedule 3.12(b)(ii), each other item of
Intellectual Property, including all trademarks not set forth in
Schedule 3.12(b)(i) or 2.1(i), and all Formulas are owned by Quaker,
Gaines, or Affiliates, as applicable, free and clear of any liens,
charges, pledges, security interests, or other similar encumbrances,
and, to Sellers' Knowledge, such other items of Intellectual Property
and Formulas do not conflict with or infringe on the rights of others.
Except as set forth in Schedule 3.12(b)(ii), to Sellers' Knowledge,
each trademark not set forth in Schedule 3.12(b)(i) or 2.1(i)is valid
and subsisting.
(ii) Except as set forth in Schedule 3.12(b)(iii), no claims, demands
or proceedings are pending that challenge the rights of Quaker,
Gaines or Affiliates in any respect in and to or restrict the rights
of Quaker, Gaines or Affiliates to use Intellectual Property, Trade
Secrets or Licensed Trade Secrets, Licensed Patents and neither
Quaker, Gaines nor Affiliates has received any written notice from
any third party alleging that its use of the Intellectual Property,
the Trade Secrets, Licensed Patents or
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the Licensed Trade Secrets is infringing on the rights of such third
party. To Sellers' Knowledge, no claims, demands or proceedings are
pending that challenge the rights of Quaker, Gaines or Affiliates, in
any respect, in and to or restrict the right of Quaker, Gaines or
Affiliates to use the Additional Intellectual Property or to Sellers'
Knowledge, neither Quaker, Gaines nor Affiliates has received any
written notice from any third party alleging that its use of the
Additional Intellectual Property is infringing on the rights of such
third party.
(iii) Excepts set forth in Schedule 3.12(b)(iv), neither Quaker,
Gaines nor Affiliates has granted any licenses or other rights nor
has Quaker, Gaines or Affiliates any obligation to grant in the
Territory as related to the Pet Food Business licenses or other
rights to any of the Intellectual Property or any of the Trade
Secrets, and neither Quaker, Gaines nor Affiliates has granted any
licenses or other rights nor has Quaker, Gaines or Affiliates any
obligation to grant in the Territory as related the Pet Food
Business any licenses or other rights to any of the Licensed Patents
or any of the Licensed Trade Secrets.
(iv) Except as set forth in Schedule 3.12(b)(v), neither Quaker nor
Gaines has made any claim of any violation or infringement by others
of its rights to the Intellectual Property, the Trade Secrets,
Licensed Patents or the Licensed Trade Secrets and, to Sellers'
Knowledge, neither Quaker, Gaines nor Affiliates is aware of any basis
for the making of any such claim.
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(v) Quaker and Gaines, as applicable, own the Licensed Trade Secrets
and Licensed Patents or have a right or valid license to use any
Licensed Trade Secrets and Licensed Patents that are not owned and
have the right to sublicense Purchaser to use such Licensed Trade
Secrets and Licensed Patents to the extent such sublicenses are
permitted by law.
(vi) Neither Quaker, Gaines nor Affiliates make any representation or
warranty with respect to the Canadian Patents or the Foreign
Trademarks.
Section 3.13. Taxes. (a) There are no pending or, to Sellers' Knowledge,
-----
threatened actions or proceedings, assessments or collections of Taxes with
respect to the Acquired Assets that could subject Purchaser to any liability
for such Taxes for the period prior to the Closing Date or could impair any of
the Acquired Assets.
(a) Except as set forth in Schedule 3.13:
(i) All Tax Returns required to be filed by or with respect to
Gaines and any affiliated, consolidated, combined, or unitary group of
which Gaines is or has been a member have been timely filed except
where the failure to file will not and could not reasonably be expected
to have a material adverse effect on the financial condition of Gaines,
and all such Tax Returns are true and complete in all material
respects. All Taxes shown due on such Returns have been timely paid by
Gaines (or have been paid on its behalf).
(ii) Gaines is not required to make any adjustment pursuant to
IRC Section 481(a) (or any predecessor provision) by reason of any
change in any of its accounting methods, and there is no application
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pending with any taxing authority requesting permission for any changes
in any of its accounting methods. The IRS has not proposed any such
adjustment or change in accounting method.
(iii) Gaines has duly and timely withheld from employee salaries,
wages, and other compensation and paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for
all periods under all applicable laws.
III(lxxxi) Gaines is not obligated to make any payments and is
not a party to any agreements that would obligate it to make any
payments that would not be deductible under IRC Section 280(g).
III(lxxxii) During all taxable periods beginning in 1986, Gaines
was a member of the affiliated group of which Sellers were members and
has been included in the consolidated federal income tax return of
Quaker and its subsidiaries for each such period.
(vi) None of the Acquired Assets owned by Sellers or any assets
owned by Gaines is property that the Purchaser or Gaines will be
required to treat as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect immediately prior to the Tax Reform Act of
1986, or is "tax exempt use property" within the meaning of IRC Section
168(h)(1).
(b) Neither Seller is a "foreign person" within the meaning of IRC
Section 1445(b)(2).
Section 3.14. Inventory. Except as set forth in Schedule 3.14, the
---------
Inventory to be sold to Purchaser hereunder shall,
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on the Closing Date, consist of items that are usable or saleable in the normal
and ordinary course of the Pet Food Business (including shelf-life) and will
not be adulterated, misbranded, mispackaged or mislabeled within the meaning
of, or in violation of, any applicable local, state or federal food and drug
laws or regulations. Except as set forth in Schedule 3.14, the products sold
or delivered by the Pet Food Business prior to the date hereof and the products
to be sold between the date hereof and the Closing were, or will be, usable or
saleable in the normal and ordinary course of the Pet Food Business and were
not and will not be, as the case may be, adulterated, misbranded, mispackaged,
or mislabeled within the meaning of, or in violation of, any applicable local,
state or federal food and drug laws or regulations.
Section 3.15. Brokers and Finders. Except for Goldman, Sachs & Co., with
-------------------
respect to which Sellers solely shall be responsible, neither of Sellers nor
any of their respective Affiliates has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
Section 3.16. Insurance. Quaker and Gaines, as applicable, have maintained
---------
and will continue to maintain through the Closing Date a reasonable and
customary program of casualty and property insurance (which may include
self-insurance) with respect to the Acquired Assets and the Pet Food Business.
Quaker and Gaines, as applicable, have provided Purchaser with a list of all
property damage and personal injury claims against it with respect to the Pet
Food Business and the Acquired Assets since July 1, 1991 involving any claim in
excess of $50,000. Between the date of this Agreement and the Closing Date,
Sellers shall provide or make available to Purchaser all information pertaining
to the Acquired Assets and the Pet Food Business as reasonably requested by
Purchaser or Purchaser's brokers
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or insurers to effect insurance on the Acquired Assets and the Pet Food
Business at the Closing Date. Sellers agree that in the event that a claim
against Gaines is made at any time in the future after the Closing, Sellers
will provide Purchaser with such information as Purchaser may request including
but not limited to copies of all insurance policies which may be applicable to
such claim.
Section 3.17. Labor Matters. With respect to the Pet Food Business,
-------------
except as disclosed in Schedule 3.17, Sellers, Gaines and any Affiliate of
Quaker, as applicable, and within the past five years (i) have been and are in
material compliance with all laws, rules, regulations and ordinances respecting
employment and employment practices, terms and conditions of employment and
wages and hours, (ii) are not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing, (iii) have not engaged in any
unfair labor practice or discriminated on the basis of race, color, religion,
sex, national origin, age or handicap in its employment practices, and no
complaints are pending or, to the knowledge of Sellers, threatened against
either Quaker or Gaines before any public or governmental authority regarding
any such unfair labor practice or discrimination and (iv) has not, in the five-
year period next preceding the date of this Agreement experienced a labor strike
or a threatened labor strike. Except as set forth in Schedule 3.17, no
employees of the Pet Food Business are represented by any union or collective
bargaining unit and, since January 1, 1993, none of Sellers, Gaines nor any
Affiliates of Quaker have received written notice that the employees of the Pet
Food Business have any intention to organize or join a union, labor organization
or collective bargaining unit.
Section 3.18. Accuracy of Sellers' Information Furnished. The information
------------------------------------------
furnished to Purchaser by Sellers and their respective Affiliates specifically
set forth in this Agreement and the Schedules hereto is true, correct and
complete in all material respects. Such information states
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all material facts required to be stated therein and does not omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which such statements are made, not misleading.
Section 3.19. Sufficiency of Acquired Assets. The Acquired Assets
------------------------------
constitute all of the assets, properties and rights necessary to, primarily
used in, or otherwise materially useful to, the conduct of the Pet Food
Business.
Section 3.20. Capitalization.
--------------
(a) As of the date hereof, the authorized capital stock of QOAC consists
of 1000 shares of common stock, $1.00 par value; 100 shares are issued and
outstanding, all of which are owned by Quaker, free and clear of any Liens; and
all such outstanding shares are validly issued and are fully paid and
nonassessable and not subject to any preemptive or other similar rights.
(b) As of the date hereof, the authorized capital stock of Gaines
consists of 1000 shares of common stock, $1.00 par value; 100 shares are issued
and outstanding, all of which are owned by QOAC, free and clear of any Liens;
QOAC has the absolute and unrestricted right, power and authority to sell the
Gaines Stock to Purchaser; and all such outstanding shares are validly issued
and are fully paid and nonassessable and not subject to any preemptive or other
similar rights. All voting rights of Gaines are vested exclusively in the
Gaines Stock. Upon delivery to Purchaser of certificates evidencing the Gaines
Stock at the Closing pursuant to the terms and conditions of this Agreement,
Purchaser shall acquire good and valid title to the Gaines Stock, free and
clear of any Liens, other than any Liens created by or through Purchaser.
(c) Neither QOAC nor Gaines has outstanding any (i) securities
convertible into, or exercisable or
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exchangeable for, any of its capital stock, (ii) options, warrants or rights to
subscribe for the purchase of any of its capital stock, or (iii) agreements,
arrangements, commitments or understandings providing for the issuance, sale,
purchase or redemption of its capital stock.
Section 3.21. Liabilities. Except for the Assumed Liabilities, neither the
-----------
Pet Food Business nor Gaines has any indebtedness or liabilities (whether
absolute, contingent, accrued or otherwise) that Purchaser is assuming that
would be required to be included on a balance sheet or in the related notes,
schedules or exhibits thereto prepared in accordance with GAAP.
Section 3.22. No Subsidiaries. Gaines does not directly or indirectly own,
---------------
or have any options, rights, agreements or commitments to acquire, any
securities or equity interests in any Person.
Section 3.23. No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Agreement and in the other
documents to be delivered pursuant to this Agreement which are attached as
Schedules or Exhibits hereto, neither Sellers nor any other Person makes any
other express or implied representation or warranty on behalf of Sellers or
their respective Affiliates, and Sellers hereby disclaim any such
representation or warranty, with respect to the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby or with
respect to the Acquired Assets or the Pet Food Business, notwithstanding the
delivery or disclosure to Purchaser or any of its officers, directors,
employees, agents or representatives of any documentation or other information
by or on behalf of Sellers or any of their respective Affiliates with respect
to any one or more of the foregoing, including, without limitation, any
projections or forecasts made by Sellers or delivered to Purchaser by or on
behalf of Sellers.
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IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date of this Agreement and as of the Closing Date, Purchaser
hereby represents and warrants to Sellers as follows:
Section 4.1. Incorporation. Purchaser is a corporation duly incorporated,
-------------
validly existing and in good standing under the laws of the State of
Pennsylvania.
Section 4.2. Authority. Purchaser has all requisite corporate power and
---------
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Purchaser, the performance by Purchaser of its obligations hereunder and the
consummation by Purchaser of the transactions contemplated hereby have been
duly authorized by the Board of Directors of Purchaser, and no other corporate
act or proceeding on the part of Purchaser is necessary to approve the
execution and delivery of this Agreement, the performance of Purchaser's
obligations hereunder or the consummation by Purchaser of the transactions
contemplated hereby.
Section 4.3. Execution and Binding Effect. This Agreement has been duly and
----------------------------
validly executed and delivered by Purchaser and constitutes the legal, valid
and binding obligation of Purchaser and will be enforceable against Purchaser
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, fraudulent conveyance, reorganization,
liquidation or other laws relating to or affecting creditors' rights and
remedies or by equitable principles.
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Section 4.4. No Contravention. Except as set forth in Schedule 4.4, the
----------------
execution, delivery and performance of this Agreement by Purchaser and the
consummation by Purchaser of the transactions contemplated hereby and the
fulfillment of and compliance by Purchaser with the terms and conditions hereof,
do not and will not:
(a) conflict with or violate any provisions of the Purchaser's
Articles of Incorporation or By-Laws;
(b) require any consent, approval or notice under or conflict with,
result in a termination or breach of, or constitute (with or without notice
or lapse of time or both) a default under, or accelerate or permit the
acceleration of any performance required by any Contract or plan to which
Purchaser is a party or by which Purchaser or any of its assets or
properties is bound or subject;
(c) violate any law, statute or ordinance or any rule, regulation,
order, writ, injunction or decree of any court of any Governmental
Authority applicable to Purchaser or by which any of its assets or
properties may be bound or subject; or
(d) require any filing, declaration or registration with, or permit,
consent or approval of, or the giving of notice to, any public or
governmental authority; excluding from the foregoing Sections 4.4(a)
through (d):
(i) such conflicts, violations, breaches, defaults,
accelerations, filings, declarations, registrations, permits,
consents, approvals and notices, the absence of which, either singly
or in the aggregate are not material;
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(ii) any consents or waivers required in connection with the
Assumed Contracts or Permits;
(iii) any local filings or recordings that may be necessary to
transfer any of the Acquired Assets; and
(iv) the filing required under the HSR Act and expiration of
the applicable waiting periods under the HSR Act.
Section 4.5. Litigation. There is no claim, action, suit, proceeding
----------
(including arbitration and alternate dispute resolution proceedings) or
investigation pending or, to Purchaser's knowledge, threatened by or against
Purchaser which reasonably could be expected to have a material adverse effect
on the transactions contemplated hereby, at law or in equity or before or by
any court or public or Governmental Authority. As of the date hereof, there is
no order, decree or judgment pending or in effect against Purchaser with
respect to the transactions contemplated hereby.
Section 4.6. Brokers and Finders. Except for Dillon, Read & Co. Inc., with
-------------------
respect to which Purchaser shall solely be responsible, neither Purchaser nor
any Affiliate of Purchaser has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
Section 4.7. Restricted Securities. Purchaser is acquiring the Gaines
---------------------
Stock for its own account for investment purposes only and not with a view to
or in connection with the public resale or distribution thereof or any interest
therein. Purchaser shall not sell, offer for sale, assign, transfer or dispose
of the Gaines Stock or any interest therein in
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violation of the Securities Act or any applicable state securities or "blue
sky" laws. Purchaser is an "accredited investor" within the meaning of Rule
501 under Regulation D under the Securities Act.
Section 4.8. No Other Representations and Warranties. Except for the
---------------------------------------
representations and warranties contained in this Agreement and in the other
documents to be delivered pursuant to this Agreement which are attached as
Exhibits hereto, neither the Purchaser nor any other Person makes any other
express or implied representation or warranty on behalf of Purchaser or its
Affiliates, and Purchaser hereby disclaims any such representation or warranty,
with respect to the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, notwithstanding the
delivery or disclosure to Sellers, any of their respective officers, directors,
employees, agents or representatives of any documentation or other information
by or on behalf of Purchaser or any Affiliate with respect to any one or more
of the foregoing.
V
COVENANTS OF SELLERS
Sellers jointly and severally covenant and agree
with Purchaser as follows:
Section 5.1. Access; Confidential Information. From the date hereof until
--------------------------------
the Closing Date, Sellers shall furnish to Purchaser and its representatives all
information relating to the Pet Food Business reasonably requested by Purchaser
and provide access and any information pertaining to any Acquired Assets that
Purchaser may reasonably request at such times as shall be mutually agreed
upon; provided, however, that nothing contained herein shall require
------------------
Sellers to furnish to Purchaser or provide Purchaser with access to
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(i) any formulas, recipes, process sheets, mixing instructions or cost
information relating to the Pet Food Business prior to the Closing, (ii) any
marketing information and/or pricing information which could have an
anticompetitive effect, or (iii) any financial information except monthly
financial information prepared in the same manner as the Financial Statements
included in Schedule 3.5(a). Any confidential information furnished to
Purchaser or made available for visual inspection shall be subject to the terms
of that certain Confidentiality Agreement entered into between Quaker and
Purchaser dated September 30, 1994, as amended on January 16, 1995
("Confidentiality Agreement"). The provisions of the Confidentiality Agreement
shall survive any termination of this Agreement. Sellers shall provide the
Purchaser with copies of all Permits material to the Pet Food Business within
15 days after the date of this Agreement.
Sellers shall make available to Purchaser during ordinary business
hours upon the reasonable request of Purchaser the employees of Sellers and
Gaines referred to in the definition of "Knowledge of Sellers" set forth in
Article I and the plant managers of the Pet Food Business.
Section 5.2. Conduct of Business.
-------------------
Except as set forth in Schedule 5.2, from the date hereof until the Closing
Date, without the written consent of Purchaser (which consent shall not
unreasonably be withheld), Sellers and Gaines shall:
(a) not operate the Pet Food Business other than in the ordinary
course of business and the Sellers and Gaines shall use reasonable best
efforts to keep the Pet Food Business and the Acquired Assets intact and
to maintain the goodwill and reputation associated with the Pet Food
Business;
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(b) not make any sale, transfer, lease or other disposition of any
material Acquired Assets or mortgage, pledge or otherwise create, permit or
suffer to exist a Lien with respect to any of the Acquired Assets other
than Mechanic's Liens and Taxes Not Yet Due and Payable;
(c) not grant any increase in compensation to Transferred Employees or
any increase in the rate of commission, bonus or other variable
compensation or any increase in any other direct or indirect remuneration
(including benefits) payable or to become payable to any such employees,
which increases singly or in the aggregate are or would or could reasonably
be expected to be material;
(d) not fail to maintain the books, accounts and records of the Pet
Food Business on a basis consistent with past practice;
(e) not enter into any lease of real property, Material Contract,
employee benefit plan, or Permit or amend or cancel any Material Contract,
Plan or Permit in respect of the Acquired Assets or the Pet Food Business;
(f) continue their existing practice relating to maintaining the
Acquired Assets in their present operating condition and repair (ordinary
wear and tear excepted);
(g) replace any Acquired Assets that are destroyed or become
inoperable as a result of any casualty, loss or damage;
(h) use reasonable best efforts to keep the services of the employees
(other than the Non-Transferred Employees) of the Pet Food Business and to
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maintain existing relationships with suppliers, dealers, customers and
others having business relationships with the Pet Food Business;
(i) not permit any Physical Assets to be removed from the Owned Real
Property except for the disposal or consumption of furniture and office
supplies in the ordinary course of business;
(j) not perform, take any action or incur or permit or suffer to exist
any of the acts, transactions, events or occurrences of the type described
in Section 3.9, other than Section 3.9(i) or take any action that would
cause any of the representations or warranties of Sellers to be untrue;
(k) not issue or sell any shares of capital stock or other securities
of Gaines, or grant or enter into any options, warrants, rights, puts,
calls, commitments, agreements, arrangements or understandings of any kind
with respect thereto, or declare, set aside or pay any dividend or other
distribution in respect of the capital stock of Gaines or otherwise in any
manner change or reorganize the capital structure of Gaines;
(l) not fail to maintain the validity and enforceability of the
Intellectual Property;
(m) not waive any right of material value under any Material Contract
or enter into or amend, except in the ordinary course of business, any
Material Contract or other transaction which would, or could reasonably be
expected to, be materially adverse to the Acquired Assets, business,
operations, earnings, condition (financial or otherwise) of the Pet Food
Business;
(n) not engage in the sale of Products except in the ordinary course
of the Pet Food Business;
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(o) not make any changes in the customary methods used in operating
the Pet Food Business (including the marketing, selling and pricing
practices and policies); and
(p) not agree, whether in writing or otherwise, to do any of the
actions prohibited by, or not to do any of the actions required by, Section
5.2;
(q) prior to the Closing, take all lawful action which is necessary
to (i) effect the transfer from Gaines to Sellers (or any Affiliate of
Quaker) of the Arizona property presently owned, held and used by Gaines
and (ii) cause Sellers (or any Affiliate of Quaker) to assume all
liabilities relating to the Arizona property irrespective of any
limitations contained herein;
(r) shall assign to Purchaser all right and interests in and to all
confidentiality agreements relating to Pet Food Business and shall take all
action permitted under such agreements necessary to cause all confidential
information to be returned or destroyed; and
(s) not make any change in list pricing to the trade or trade deals
that would or could reasonably be expected to encourage the trade to
materially increase forward buying.
Section 5.3. [intentionally left blank]
Section 5.4. Reasonable Best Efforts; Notifications. Sellers shall use
--------------------------------------
their reasonable best efforts to fulfill their conditions to Closing and
otherwise to consummate the transactions contemplated by this Agreement. Prior
to the Closing, Sellers shall as promptly as reasonably practicable
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notify Purchaser in writing of the occurrence of any event as to which it
obtains knowledge that would or could reasonably be expected to result in the
failure of a condition specified in Article VIII or IX hereof.
Section 5.5 HSR Act Filing. As promptly as is practicable after the
--------------
date hereof, Sellers shall make all necessary filings applicable to them
under the HSR Act and make any amendments to such filings as may be required,
and will cooperate with Purchaser in connection with HSR Act filings.
Section 5.6. Non-Compete Covenant.
--------------------
(a) Effective as of the Closing, Sellers shall not, and Sellers shall
cause their Affiliates not to, for a period of four years from and after the
Closing Date, directly or indirectly as a partner, joint venturer, employer,
contractor, consultant, shareholder, principal or agent engage in, control,
advise with respect to, manage, act as a consultant to, receive any economic
benefit from or exert any influence upon the marketing, manufacture, sale,
distribution, offering or promoting for sale of the Products in the Territory;
provided that Sellers may, without violating this covenant (i) own as an
--------
investment not in excess of 5% of the securities of a corporation which engages
in such competition if such securities are traded on a national securities
exchange or traded publicly in the over-the-counter market, (ii) own as an
investment not in excess of a 5% interest in any partnership which engages in
such competition, (iii) have an ownership interest otherwise proscribed by this
Section 5.5 if such interest arises as a result of the acquisition of a business
not principally engaged in the proscribed conduct; provided that Seller shall
--------
take all action to cause the pet food business permitted to be acquired under
this clause (iii) not to materially expand the scope and magnitude of its
business or dispose of such pet food business within 12 months following the
acquisition thereof, (iv) be acquired by any Person that
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engages in the proscribed conduct, or (v) in connection with an employee
benefit plan, the assets of which are managed by an independent investment
advisor, invest in any corporation or other entity which engages in such
competition. A business entity shall not be principally engaged in the
proscribed conduct if its sales of the Products constitute less than 10% of its
total sales.
(b) Sellers shall not, and Sellers shall cause their respective
Affiliates not to, directly or indirectly, for themselves or on behalf of any
other Person induce or attempt to induce any Transferred Employee to leave his
or her employment with Purchaser or Gaines at any time until the expiration of
two years from the Closing Date.
(c) Sellers shall not, and Sellers shall cause their respective
Affiliates not to, directly or indirectly, (i) disclose, or (ii) use for their
own benefit in the Territory, or for the benefit of any other Person in the
Territory any Trade Secrets, except to the extent such Trade Secrets (A) are or
become available to the public or become part of the public domain other than
as a result of a disclosure by Sellers or their respective Affiliates or (B)
become available to Sellers or their respective Affiliates from a third party,
which after due inquiry of such party, is not known by Sellers or their
respective Affiliates to be in violation of any agreement with Purchaser.
Nothing contained in this Section 5.5(c) shall limit Sellers or their
respective Affiliates obligations under Section 5.5(a).
(d) Sellers acknowledge that in view of the nature of the Pet Food
Business and the business objectives of Purchaser in acquiring it, and the
consideration paid to Sellers therefor, the foregoing territorial and time
limitations are reasonable and properly required for the adequate protection of
Purchaser and that in the event that any such territorial or time limitation is
deemed to be
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unreasonable and is then reduced by a court of competent jurisdiction, then, as
so reduced, the territorial and/or time limitation shall be enforced.
(e) Sellers further acknowledge that the remedy at law for any breach by
it of the agreements contained in this Section 5.5 may be inadequate and that
Purchaser shall be entitled to seek injunctive relief without being required to
prove actual damages or post bond. This Section 5.5 constitutes an independent
and severable covenant and if any or all of the provisions of this Section 5.5
are held to be unenforceable for any reason whatsoever, it shall not in any way
invalidate or affect the remainder of this Agreement which shall remain in full
force and effect. The parties intend for the covenants of this Section 5.5 to
be enforceable to the maximum extent permitted by law, and if any reviewing
court deems any of such covenants to be unenforceable or invalid, Purchaser and
Sellers authorize such court to reform (i) the unenforceable or invalid
provisions and to impose such restrictions as so reformed and (ii) the remaining
provisions as it deems reasonable.
Section 5.7. Material Change. From the date hereof through the
---------------
promptly shall inform Purchaser in writing of any changes in the assets,
liabilities, earnings, business or financial condition of the Pet Food Business
which have been or would or could reasonably be expected to be either
individually or in the aggregate materially adverse to the Pet Food Business or
the Acquired Assets or the transactions contemplated hereby.
Section 5.8. Preservation of Records. Sellers shall preserve and,
-----------------------
during regular business hours and upon reasonable notice, use reasonable best
efforts to make available to Purchaser and its representatives for inspection
and copying all agreements, records, books and other documents pertaining to
the Pet Food Business or the Acquired Assets (but excluding portions of such
materials that contain or
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reflect information relating to any other business of Sellers) for
periods prior to and including the Closing Date, wherever located for the first
to occur of six years from the date of each such document or six years from the
Closing Date, for (a) the purposes of preparing Tax returns and financial
statements and responding to Tax audits, (b) the purposes of prosecuting or
defending any claim, litigation, proceeding or investigation which arises out of
or relates to the Pet Food Business, the Acquired Assets or this Agreement, and
(c) any other reasonable business purpose not detrimental to Sellers. If
Purchaser determines that it does not want Sellers to destroy such agreements,
records, books and other documents, Purchaser shall give written notice to
Sellers 90 days prior to the applicable expiration date that Purchaser desires
to take possession of such agreements, records, books and other documents, and
then Sellers shall deliver such agreements, records, books and other documents
to Purchaser within 60 days after the date of the Purchaser's notice to Sellers
hereunder.
Section 5.9. Patent and Trade Secret Licenses. To the extent not
--------------------------------
transferred to Purchaser pursuant to Section 2.1(f), and except as set forth
in Schedule 3.12(b)(iv), Sellers hereby grant to Purchaser an exclusive,
irrevocable, assignable, royalty-free license in the Territory, with a right
to sublicense in the Territory, to manufacture products using the technologies
related to the Pet Food Business claimed in the patents and pending patent
applications as set forth in Schedule 5.9 (collectively the "Licensed Patents").
To the extent not transferred to Purchaser pursuant to Section 2.1(g), and to
the extent that Sellers own or have a right to license, Sellers hereby grant to
Purchaser an exclusive, irrevocable, perpetual, royalty-free license to use in
the Territory (i) all technology including formulae and manufacturing processes
related to the Pet Food Business and all claimed technology in respect of any
patents issued or pending patent applications filed in the Territory, (ii) all
trade secrets, know-how, technology and manufacturing
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processes used in the Territory and related to the Pet Food Business and (iii)
all rights that are similar to the Formulas and other intangible personal
property used in the Territory and related to the Pet Food Business (items (i),
(ii) and (iii) above being, collectively, the "Licensed Trade Secrets").
Section 5.10. Assignment by Affiliates. Quaker and Gaines shall, and
-------------------------
shall cause Affiliates of Quaker to assign, transfer, or convey, as applicable,
to Purchaser all right, title and interest in and to the Intellectual Property
and the Additional Intellectual Property.
Section 5.11. Product Claims. Prior to and following the Closing,
--------------
Sellers shall not take any action to encourage or induce any Person to file
claims after the second anniversary of the Closing of the types referred to in
Sections 2.2(a)(v) and 2.2(a)(vi) with respect to goods manufactured and sold
by the Pet Food Business prior to the Closing Date.
Section 5.12. Capital Improvements. Sellers shall continue in the
--------------------
ordinary course of business, their capital improvements program relating to
the Pet Food Business including, without limitation, any construction in
progress.
Section 5.13. Release. Quaker, for itself and all of its Affiliates,
-------
shall deliver to Purchaser a full release of Gaines, effective the Closing
Date, from any claims, obligations, liabilities or debts each may have on the
Closing Date or in the future, to assert against or collect from Gaines
whether known or unknown, suspected or unsuspected, whether arising prior to,
on or after the Closing Date, except for any and all claims arising under this
Agreement.
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Section 5.14. Resignations. Sellers shall cause the directors and
------------
officers of Gaines to deliver on the Closing Date their written resignations
effective upon the Closing.
Section 5.15. Program List Reimbursement. If and to the extent that
--------------------------
Purchaser implements any of the items set forth on the Information List dated
February 4, 1995 and previously delivered, prior to the second anniversary of
the Closing Date, Sellers shall reimburse Purchaser, promptly after the
receipt of appropriate documentary evidence therefor, for up to an aggregate of
the $1,000,000 of Purchaser's out-of-pocket expenses incurred in connection
therewith. Such obligation to reimburse Purchaser shall not be subject to the
limits on indemnification that Section 10.5 of this Agreement contains,
including the Basket.
Section 5.16. Purchase of Equipment. On or before the Closing, Quaker,
---------------------
at its sole cost and expense, shall exercise its option under a Lease, dated
June 14, 1977, between Quaker and the City of Lawrence, Kansas, to purchase the
machinery and equipment that are subject to that Lease, which machinery and
equipment shall become a part of the Acquired Assets. If for any reason Quaker
is unable to exercise such option or purchase such machinery and equipment
before the Closing Date, it shall make arrangements reasonably satisfactory to
Purchaser to permit Purchaser to use such machinery and equipment on and after
the Closing Date and to transfer title to such machinery and equipment after
the Closing.
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Section 5.17. Insurance. Sellers shall provide to Purchaser prior to
---------
the Closing (i) a list of all property damage and personal injury claims
against it with respect to the Pet Food Business and the Acquired Assets since
July 1, 1991 involving all such claims relating to cumulative trauma injury or
asbestos related injuries irrespective of the amount and (ii) to the extent
that such information is available, a list of all property, liability and
casualty insurance policies which have included Gaines as a named insured
since the date of Gaines' incorporation and which shall include at a minimum
the type of coverage, policy numbers, amounts of coverage, insurers and dates
of coverage.
VI
COVENANTS OF THE PURCHASER
Purchaser covenants and agrees with Sellers as
follows:
Section 6.1. Preservation of Records. Purchaser shall preserve and,
-----------------------
during regular business hours and upon reasonable notice, use reasonable best
efforts to make available to Sellers and their representatives for inspection
and copying all agreements, records, books and other documents pertaining to the
Pet Food Business or the Acquired Assets (but excluding portions of such
materials that contain or reflect information relating to any other business of
Purchaser) for periods prior to and including the Closing Date, wherever
located for the first to occur of six years from the date of each such document
or six years from the Closing Date, for (a) the purposes of preparing tax
returns and financial statements and responding to tax audits, (b) the purposes
of prosecuting or defending any claim, litigation, proceeding or investigation
which arises
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out of or relates to the Pet Food Business, the Acquired Assets or
this Agreement and (c) any other reasonable business purpose not detrimental to
Purchaser. If Sellers determine that they do not want Purchaser to destroy
such agreements, records, books and other documents, Sellers shall give written
notice to Purchaser 90 days prior to the applicable expiration date that
Sellers desire to take possession of such agreements, records, books and other
documents, and then Purchaser shall deliver such agreements, records, books and
other documents to Sellers within 60 days after the date of the Sellers' notice
to Purchaser hereunder.
Section 6.2. Reasonable Best Efforts; Notifications. Purchaser shall use
--------------------------------------
reasonable best efforts to fulfill its conditions to Closing and otherwise to
consummate the transactions contemplated by this Agreement. Prior to the
Closing, Purchaser shall as promptly as reasonably practicable notify Sellers
in writing of the occurrence of any event as to which it obtains knowledge
that, based on facts actually known by Sellers on the date hereof, would or
could be reasonably expected to result in the failure of a condition specified
in Article VIII or IX hereof.
Section 6.3. HSR Act Filing. As promptly as is practicable after the date
--------------
hereof, Purchaser shall make all necessary filings applicable to it under the
HSR Act, and make any amendments to such filings as may be required, and will
cooperate with Sellers in connection with HSR filings.
Section 6.4. Returns and Deductions. Prior to and following the Closing,
----------------------
if Purchaser agrees to accept the return of or takes any action to encourage or
induce current or former customers of the Pet Food Business to return or deduct
from future invoices payable to Sellers or their Affiliates any goods sold by
the Pet Food Business prior to the Closing Date, Purchaser shall promptly pay
to Sellers the receivable
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relating to such goods actually so accepted, returned
or deducted.
VII
EMPLOYEE MATTERS
Section 7.1. Transferred Employees. Purchaser shall, prior to the Closing
---------------------
Date, offer employment or cause Gaines to offer employment in connection with
the conduct of the Pet Food Business effective after the Closing Date to those
employees of Sellers who are employed primarily in the Pet Food Business and
those employees of Gaines (collectively, "Employees"), other than the employees
identified in Schedule 7.1(A) and employees who, immediately prior to the
Closing Date, are receiving long term disability benefits under a Plan
("Disabled Employees")(collectively "Non-Transferred Employees"). The
Employees other than the Non-Transferred Employees are referred to herein as
"Transferred Employees"; provided, however, that any Disabled Employee who is
-------- -------
employed by Purchaser or Gaines within 90 days after the Closing Date shall be
treated as a Transferred Employee from and after the date of such employment.
In the case of all employees of Gaines immediately prior to the Closing Date
("Gaines Employees"), such employees shall be treated as Transferred Employees
without regard to whether an offer of employment is made to or is accepted by
them. Each offer of employment to a non-bargaining unit Employee shall be on
substantially the same terms and conditions, with substantially the same
compensation and with substantially comparable aggregate benefits (including
Plans) as are applicable to such employees immediately prior to the Closing
Date but in no event greater than such terms and conditions of employment that
Purchaser offers to its similarly situated employees. With respect to
bargaining unit Employees, Purchaser shall assume the applicable collective
bargaining agreements and Purchaser's offer
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of employment shall be upon same terms and conditions as applicable to each such
Employee immediately prior to the Closing Date except with respect to the
benefits provided under Section 35 of the contract with the American Federation
of Grain Millers and Article IV, Section 2 of the contract with the
International Brotherhood of Firemen and Oilers, Powerhouse Employees, Operators
and Maintenance Men AFL-CIO, which shall be replaced by Purchaser with similar
benefits. Schedule 7.1(B) lists salaries or wages for each of the Transferred
Employees set forth thereon, as applicable to such employee on the date hereof
and, if different, as expected to be applicable to such employee on the expected
Closing Date. Purchaser shall continue the employment of Transferred Employees
for at least 90 days following the Closing Date, except for any Transferred
Employee who voluntarily terminates employment or is dismissed "for cause." The
term "Transferred Employees" shall not include any employees or former employees
of Quaker or Gaines who prior to the Closing Date have retired, terminated
employment or who are on long term disability.
No offer of employment will be made by Purchaser to Non-Transferred
Employees designated on Schedule 7.1(A), and Sellers will be responsible for the
termination of such employees. From the date hereof through the Closing Date,
Sellers and their Affiliate will not, with respect to any person identified as a
Transferred Employee, employ or offer to employ such persons for a position
outside the Pet Food Business or Gaines.
Section 7.2. Employee Benefit Transition.
---------------------------
(a) With respect to each Transferred Employee immediately prior to the
Closing Date, except as otherwise provided in this Article VII,
(i) Purchaser and/or Gaines shall be responsible for all claims,
liabilities
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and obligations arising from or relating to the employment
and/or termination of employment on or after the Closing
Date of any Transferred Employee; and
(ii) Except to the extent otherwise provided for in Section 7.4,
Sellers shall be responsible for all claims, liabilities and
obligations arising from or relating to (A) the employment
and/or termination of employment prior to the Closing Date
of any Transferred or Non-Transferred Employee, and of any
Non-Transferred Employee after the Closing Date or (B) any
actions or omissions involving any employee benefit plan of
Gaines (within the meaning of Section 3(3) of ERISA) or any
other payroll practice of Gaines, as conducted by the
Sellers or Gaines prior to the Closing Date.
(b) Purchaser or Gaines shall waive pre-existing condition requirements,
evidence of insurability provisions or any similar provisions under any employee
benefit plan or compensation arrangements maintained or sponsored by or
contributed to by Purchaser or Gaines for such individuals after the Closing
Date.
Purchaser also shall grant credit under Purchaser's health plans, for the
remainder of the calendar year following the Closing Date, to Transferred
Employees for amounts incurred by them for purposes of health plan deductibles
and limits under Sellers' health Plans during the portion of the calendar year
through the Closing Date provided that Sellers promptly provide such information
as Purchaser requests and in a manner satisfactory to Purchaser's health plan
administrator.
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(c) Except to the extent otherwise provided for in Section 7.4,
Sellers' Plans shall be responsible for any health and accident claims to the
extent of medical treatment incurred prior to the Closing Date, whether or not
then known or payable, provided the claim is submitted to Sellers on or prior
to December 31, 1995. Purchaser's Plans shall assume responsibility for all
other health and accident claims to the extent of medical treatment incurred on
and after the Closing Date, or submitted after December 31, 1995. However, if
any claims expense for an individual exceeds $50,000 during the first 50 days
following the Closing Date, the Seller and Purchaser shall each be responsible
for one-half of such claims expense incurred within the 50-day period.
(d) With respect to pension, savings, severance, vacation, health and
welfare, disability benefits, executive compensation, incentive and bonus
arrangements, Purchaser shall recognize for purposes of eligibility for
participation and vesting under its employee benefit plans and compensation
arrangements the service of any Transferred Employee with Sellers or Gaines.
(e) With respect to all post-Closing Date employment tax withholding
responsibilities, Purchaser shall treat all Transferred Employees as if they had
been employed by Purchaser as of January 1, 1995. The Purchaser and the Sellers
hereby agree to report on a predecessor-successor basis and shall follow the
alternative procedure for employment tax reporting as prescribed in Section 5 of
Rev. Proc. 84-77, 1984-2 C.B. 753. Sellers shall have no employment tax
reporting responsibilities for such Transferred Employees after the Closing Date
and Purchaser shall assume all obligations and duties of Sellers to furnish IRS
Forms W-2 to Transferred Employees for the full 1995 calendar year, if
administratively practicable.
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(f) Purchaser or Gaines shall pay severance benefits to any Transferred
Employee terminated by Purchaser or Gaines during the 90-day period after the
Closing Date in accordance with Quaker's and Gaines' severance plans.
Thereafter, Purchaser shall pay severance benefits to any Transferred Employee
terminated by Purchaser in accordance with Purchaser's severance plans.
(g) Purchaser shall be under no obligation to provide retiree medical
benefits to any Transferred Employee.
(h) Except to the extent otherwise provided for in Section 7.4, Sellers
shall take such actions as may be necessary to terminate before the Closing Date
Gaines' active participation in and/or sponsorship of any and all employee
benefit plans under Section 3(3) of ERISA.
(i) Sellers shall provide for payment on or about July 1, 1995 of a pro
rata amount for its fiscal year 1995 through the Closing Date of its Management
Incentive Bonus Plan to Transferred Employees based on Sellers' best estimate
of the such amounts for the full fiscal year.
Section 7.3. COBRA. Sellers shall be responsible for satisfying
-----
obligations under Section 601 et seq. of ERISA and Section 4980B of the IRC,
-- ---
to provide continuation coverage to or with respect to (i) any Transferred
Employee or (ii) any "qualified beneficiary" under any of the Gaines' group
health plans, each in accordance with law with respect to any "qualifying
event" occurring before the Closing Date. Purchaser shall be responsible for
satisfying obligations under Section 601 et seq. of ERISA and Section 4980B of
-- ----
the IRC, to provide
continuation coverage to or with respect to any Transferred Employee in
accordance with law with respect to any "qualifying event" which occurs on or
after the Closing Date.
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Section 7.4. Vacation and Medical Expense Accounts. As of the Closing
-------------------------------------
Date, Purchaser shall assume obligations of Sellers to Transferred Employees
for any vacation entitlement and vacation pay entitlement. Sellers shall pay
to the Purchaser within 5 days following the Closing Date an amount equal to
50% of their obligations for any vacation entitlement or vacation pay
entitlement relating to the Topeka Vacation Bank Plan. Seller shall determine
the aggregate balance (the total of proportionate employee and Sellers'
allocations, less deductions for expense reimbursements) of the medical expense
accounts for 1995 for Transferred Employees as of the Closing Date and shall
pay such amount in cash to the Purchaser within 5 days following the Closing
Date. Purchaser shall assume all obligations or payments to Transferred
Employees from their medical expense accounts after the Closing Date.
Purchaser shall provide vacation and medical expense account benefits to
Transferred Employees in accordance with Section 7.1.
Section 7.5. Qualified Plans. Sellers and Purchaser agree to the
---------------
following arrangements with respect to the Pension Plans covering any
Transferred Employee prior to the Closing Date:
(a) Benefits accrued by any Transferred Employee before the Closing
Date under the Sellers' defined benefit pension Plans shall become fully
vested. Sellers shall treat any Transferred Employee as having incurred a
termination of employment on the Closing Date for purposes of determining
the Transferred Employee's eligibility for benefits under Sellers' defined
benefit pension Plans.
(b) Accounts of any Transferred Employee under Sellers' profit
sharing Plans, including but not limited to the Quaker ESOP, after being
credited with all contributions due for any period before the Closing Date,
shall become fully vested on the Closing Date.
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(c) Purchaser shall not accept sponsorship or any other
responsibility for any Pension Plan maintained by Sellers or Gaines.
Section 7.6. Disability and Workers' Compensation. Purchaser shall assume
------------------------------------
responsibility for all short term disability benefits payable on and after the
Closing Date with respect to all Transferred Employees. Purchaser shall not be
responsible for any workers' compensation benefits, occupational diseases claims
and long term disability claims with respect to any occurrences or with respect
to any eligibility for long term disability, before the Closing Date involving
the employees of the Pet Food Business or Gaines.
Section 7.7. No Third Party Beneficiaries. Neither Purchaser nor Sellers
----------------------------
intend this Article VII to create any rights or interest, except as between
Purchaser and Sellers and no present or future employees of either party (or any
dependents of such employees) will be treated as third party beneficiaries in or
under this Agreement.
Section 7.8. Indemnification. Subject to the general indemnification
---------------
procedures of Section 10.4, Purchaser shall indemnify and hold harmless
Sellers' and Sellers' Employees Plans (and their trustees, fiduciaries and
administrators) against (a) any claim related to the rights of a Transferred
Employee (or dependent) to continuation coverage under Section 4980B of the
IRC or Section 601 et seq. of ERISA, which arises due to or in connection with a
-- ----
qualifying event that occurs after the Closing Date; (b) all liabilities,
losses, damages, claims, costs and expenses, interests, awards, judgments and
penalties (including, without limitation, reasonable legal costs and expenses)
actually suffered or incurred, arising out of or resulting from Purchaser's
breach of any covenant set forth in this Article VII. Subject to the general
indemnification procedures
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of Section 10.4, Sellers shall indemnify and hold harmless Purchaser and
Purchaser's employee plans (and their trustees, fiduciaries and administrators)
against all liabilities, losses, damages, claims, costs and expenses, interests,
awards, judgments and penalties (including, without limitation, reasonable legal
costs and expenses) actually suffered or incurred, arising out of or resulting
from Sellers' breach of any covenant set forth in this Article VII or (ii) any
other liabilities involving any employee benefit plan of Gaines (within the
meaning of Section 3(3) of ERISA) or any other payroll practice of Gaines, as
conducted by Sellers or Gaines prior to the Closing Date, except to the extent
otherwise provided for in Section 7.4.
Section 7.9. Documents and Forms. Sellers and Purchaser agree to use
-------------------
their reasonable best efforts to execute all necessary documents, file all
required forms with any governmental agencies and to undertake all actions
that may be necessary or desirable to implement expeditiously any actions
contemplated herein.
VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, any of which may be waived in whole or in part by Purchaser:
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Section 8.1. Accuracy of Representations and Warranties; Performance of
----------------------------------------------------------
Agreements; Certificates and Opinion of Counsel.
------------------------------------------------
(a) The representations and warranties of Sellers contained in this
Agreement shall be true and correct on the date hereof and as of the
Closing Date (without giving effect to any "materiality" or similar
standard or qualification or any supplemental or amended disclosure after
the date hereof) with the same effect as though such representations and
warranties had been made or given again at and as of the Closing Date
(except for any representation or warranty expressly stated to have been
made or given as of a specified date, which, at the Closing Date, shall be
true and correct as of the date expressly stated), except for any breach or
breaches thereof which either singly or in the aggregate, would not and
could not reasonably be expected to have a material adverse effect on the
Pet Food Business or the Acquired Assets or the transactions contemplated
hereby.
(b) Sellers shall have performed and complied in all material
respects with all of their agreements, covenants and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing Date.
(c) Quaker shall have delivered to Purchaser (i) a certificate of its
President or any Vice President dated the Closing Date and certifying the
fulfillment of the conditions set forth in this Section 8.1 and (ii) an
opinion of the Vice President and General Corporate Counsel or an Associate
General Counsel of Quaker dated the Closing Date substantially in the form
attached hereto as Exhibit I.
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Section 8.2. Consents. All notices to, and declarations, filings and
--------
registrations with, and consents, approvals and waivers from all Governmental
Authorities necessary in order to consummate the transactions contemplated
hereby, other than those relating to the transfer of a Permit or the obtaining
of a new Permit in lieu thereof, shall have been obtained.
Section 8.3. No Injunction. No permanent injunction or other order
-------------
shall have been issued by any court of competent jurisdiction, or by any
governmental or regulatory authority, which prevents the consummation of the
transactions contemplated in this Agreement.
Section 8.4. HSR Act.
-------
(a) The waiting periods under the HSR Act shall have expired or been
terminated;
(b) Neither the FTC nor the Antitrust Division nor any state, United States
territory or possession, local or federal agency shall have obtained a temporary
restraining order or preliminary or permanent injunction prohibiting the
consummation of the transactions contemplated by this Agreement;
(c) No private party shall have obtained a temporary restraining order or
preliminary or permanent injunction prohibiting consummation of the transactions
contemplated by this Agreement;
(d) Neither the FTC nor the Antitrust Division nor any state, United States
territory or possession, local or federal agency nor the staff or employees
thereof shall have commenced or recommended the commencement of an action for a
preliminary injunction prohibiting consummation of the transactions contemplated
by this Agreement.
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Section 8.5. Closing Deliveries. Sellers shall have delivered to
------------------
Purchaser all deliveries to be made to it pursuant to Section 2.6(b).
Section 8.6. No Material Adverse Change. From the date hereof through the
--------------------------
Closing, there shall not have occurred any changes in the assets, liabilities,
earnings, business or financial condition of the Pet Food Business, or the
Acquired Assets which have been or would or could reasonably be expected to be,
either individually or in the aggregate, materially adverse to the Pet Food
Business, the Acquired Assets or the transactions contemplated thereby.
Section 8.7. Title Insurance and Survey. (a) Sellers shall diligently
--------------------------
proceed to use all reasonable best efforts to provide to Purchaser by the
Closing Date an ALTA Owner's Form of Title Insurance Policy, 1987 version
(Rev. 1990) (each a "Policy" and collectively, the "Policies") with respect to
each parcel of Owned Real Property. Each Policy shall (i) be issued on the
Closing Date by Chicago Title Insurance Company (the "Title Company"), (ii) be
in such amount as Purchaser reasonably may determine to be the fair market
value of such real property (including all improvements located thereon), and
(iii) each Policy delivered hereunder shall insure Purchaser's ownership with
respect to each parcel of Owned Real Property of fee title without any of the
standard Schedule B preprinted exceptions other than Taxes Not Yet Due and
Payable and matters of survey. With respect to each such Policy Seller shall
use all reasonable best efforts (which shall include the expenditure of funds
only to the extent of customary title insurance premiums charged in connection
therewith) to obtain (A) an "extended coverage endorsement" insuring over the
general exceptions contained customarily in such Policy, (B) an ALTA Zoning
Endorsement 3.1 (or equivalent) to the extent available from the Title Company
based on a review of the physical nature of the Owned Real Property limited to
the surveys provided under this Section 8.7, (C) an
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endorsement insuring that the real property described in the title insurance
policy is the same real estate as shown on the survey delivered with respect to
such property, (D) an endorsement insuring that each building structure or other
improvement has direct access to a public street adjoining the real property on
which such improvement is situated over the driveways and accessways currently
being used in connection with the use and operation of such improvement, and no
such existing driveway or accessway crosses or encroaches upon any property or
property interest not owned by Sellers or Gaines, (E) all buildings, structures,
fixtures, and other improvements erected on the Owned Real Property conform in
all material respects with all applicable deed restrictions, and do not encroach
on property of others, and (F) an endorsement insuring over any exceptions or
other matters disclosed in such Policy that render title unmarketable. If any
Lien is disclosed as an exception on a Policy which would render title
unmarketable or which would or could reasonably be expected to materially
adversely interfere with how any Owned Real Property is used, occupied or
operated as of the Closing Date, Sellers at their option may either remove said
exception or agree to indemnify Purchaser against all losses incurred by
Purchaser as a result of any such exceptions which are not removed or any
reduction of coverage because of said exception to the same extent Purchaser
would have been insured against such losses by the Title Company had the Policy
been issued not containing or insuring over said exceptions. If Sellers
indemnify Purchaser as aforesaid, Purchaser and Sellers for a reasonable time
after the Closing shall use their reasonable best efforts to remove such
exceptions or provide such coverage. Seller's indemnity would be terminated or
reduced as appropriate upon removal of such exceptions or providing such
coverages. To the extent available under applicable state law, any title
insurance for any Gaines Owned Real Property shall include a "non-imputation"
endorsement to the effect that title defects known to the officers, directors
and/or shareholders of Sellers or Gaines
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shall not be deemed "facts known to the insured" for purposes of such Policy. If
any Policy and related indemnification by Sellers, if any, as specified above in
this Section 8.7 is not provided to Sellers in conformity with the above
provisions at or prior to the Closing Date, Sellers shall diligently use all
reasonable efforts to provide the Policy and said indemnification to Purchaser
as soon after the Closing Date as possible. Seller shall diligently proceed to
use all reasonable efforts to provide to Purchaser by the Closing Date a current
survey of each parcel of Owned Real Property (each a "Survey" and collectively
the "Surveys") in each case prepared in insurable form in accordance with
standards applicable to registered and licensed land surveyors making surveys in
the localities in which such parcels are located. If a Survey shows any
encroachments or other conditions which would individually or in the aggregate,
interfere in any material respect with the use, occupancy, or operation of any
parcel of Owned Real Property as used, occupied and operated as of the Closing
Date, Sellers may either remedy said condition or agree to indemnify Purchaser
against all losses incurred by Purchaser as a result of any such condition to
the same extent Purchaser would have been insured against such losses by the
Title Company had the Policy been issued to insure over said condition. If
Sellers indemnify Purchaser as aforesaid, Purchaser and Sellers for a reasonable
time after the Closing shall use their reasonable efforts to remedy said
condition or provide such coverage. Sellers' indemnity would be terminated or
reduced as appropriate upon removal of such conditions or providing coverages.
If any Survey and related indemnification by Sellers, if any, as specified above
in this Section 8.7 is not provided to Purchaser in conformity with the above
provisions at or prior to the Closing Date, Sellers shall diligently use all
reasonable efforts to provide the Survey and said indemnification to Purchaser
as soon after the Closing Date as possible. Without limiting the generality of
any of the foregoing, all claims of Purchaser for indemnification pursuant to
this
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Section 8.7 shall be subject to the basket described in this Section 10.5. The
costs of such title insurance policies and surveys shall be borne by equally by
Sellers and Purchaser. Nothing contained in this Section 8.7 shall in any way
reduce Purchaser's rights under any other provision of this Article VIII.
Section 8.8. Resolutions. Sellers shall have delivered to Purchaser true
-----------
and complete copies of the resolutions of their respective Board of Directors
certified by their Secretary or Assistant Secretary authorizing and approving
the transactions contemplated herein.
Section 8.9. Loss. To the extent applicable, Sellers shall not have
----
withheld their consent contemplated by Section 2.9(a).
Section 8.10. Post-Signing Matters. There shall not have occurred any
--------------------
Post-Signing Matters (as defined in Section 10.5 hereof) that would or could
reasonably be expected to result in Purchaser Losses in excess of $50 million.
IX
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in whole or in part by Sellers:
Section 9.1. Accuracy of Representations and Warranties; Performance of
--------------------------------------------------------------
Agreements; Certificate and Opinion of Counsel.
-----------------------------------------------
(a) The representations and warranties of Purchaser contained in this
Agreement shall be true and
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correct in all material respects on the date hereof and as of the Closing
Date (without giving effect to any "materiality" or similar standard or
qualification) with the same effect as though such representations and
warranties had been made or given again at and as of the Closing Date
(except for any representation or warranty expressly stated to have been
made or given as of a specified date, which, at the Closing Date, shall be
true and correct in all material respects as of the date expressly stated).
(b) Purchaser shall have performed and complied in all material
respects with all of its agreements, covenants and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing Date.
(c) Purchaser shall have delivered to Sellers (i) a certificate of
its president or any Senior Vice President dated the Closing Date and
certifying the fulfillment of the conditions set forth in this Section 9.1
and (ii) an opinion of the General Counsel or an Associate General Counsel
dated the Closing Date substantially in the form attached hereto as Exhibit
J.
Section 9.2. Consents. All notices to, and declarations, filings and
--------
registrations with and consents, approvals and waivers from Governmental
Authorities necessary in order to consummate the transactions contemplated
hereby, other than those relating to the transfer of a Permit or the obtaining
of a new Permit in lieu, shall have been obtained.
Section 9.3. No Injunction. No permanent injunction or other order
-------------
shall have been issued by any court of competent jurisdiction, or by any
governmental or regulatory authority, which prevents the consummation of the
transactions contemplated in this Agreement.
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Section 9.4. HSR Act. Any waiting period applicable to the consummation
-------
of the transactions contemplated by this Agreement under the HSR Act shall
have expired or been terminated.
(a) The waiting periods under the HSR Act shall have expired or been
terminated;
(b) Neither the FTC nor the Antitrust Division nor any state, United States
territory or possession, local or federal agency shall have obtained a temporary
restraining order or preliminary or permanent injunction prohibiting the
consummation of the transactions contemplated by this Agreement;
(c) No private party shall have obtained a temporary restraining order or
preliminary or permanent injunction prohibiting consummation of the transactions
contemplated by this Agreement;
(d) Neither the FTC nor the Antitrust Division nor any state, United States
territory or possession, local or federal agency nor the staff or employees
thereof shall have commenced of recommended the commencement of an action for a
preliminary injunction prohibiting consummation of the transactions contemplated
by this Agreement.
Section 9.5. Closing Deliveries. Purchaser shall have delivered to
------------------
Sellers all deliveries to be made to them pursuant to Section 2.6(c).
Section 9.6. Resolutions. Purchaser shall have delivered to Sellers
-----------
true and complete copies of the resolutions of its Board of Directors certified
by its Secretary or Assistant Secretary, authorizing and approving the
transactions contemplated herein.
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X
INDEMNIFICATION
Section 10.1. Survival of Representations and Warranties and Obligations.
----------------------------------------------------------
All representations, warranties, agreements, covenants and obligations made or
undertaken by Sellers in this Agreement or in any document or instrument
executed and delivered pursuant hereto shall survive the Closing hereunder and
shall not merge in the performance of any obligation by any party hereto, and
will remain in full force and effect indefinitely unless, in respect of any
agreement or covenant, some specified period is set forth in this Agreement or
in any document or instrument executed and delivered pursuant hereto, and except
that all representations and warranties contained herein or in any exhibit,
schedule or certificate delivered under this Agreement shall remain in effect
only until the second anniversary of the Closing Date (except for
representations and warranties relating to product liability matters under
Section 3.14 and the representations and warranties set forth in Section 3.11,
which shall remain in effect until the third anniversary of the Closing Date).
All claims for Taxes pursuant to Article XI, including claims for breach of the
representations and warranties set forth in Section 3.13, and all claims for
breach of the representations and warranties set forth in Section 3.20, shall
remain in effect for the applicable statute of limitations period. All
representations, warranties, agreements, covenants and obligations made or
undertaken by Purchaser, in this Agreement or in any document or instrument
executed and delivered pursuant hereto shall survive the Closing hereunder and
shall not merge in the performance of any obligation by any party hereto, and
will remain in full force and effect indefinitely unless, in respect of any
agreement or covenant, some specified period is set forth in this Agreement or
in any document or instrument executed and
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delivered pursuant hereto, and except that all representations and warranties
contained herein or in any exhibit, schedule or certificate delivered under this
Agreement shall remain in effect only until the second anniversary of the
Closing Date. If written notice of a claim for breach of a representation or
warranty has been given by a party prior to the applicable expiration date, then
the relevant representation or warranty shall survive as to such claim until the
claim has been finally resolved.
Section 10.2. Indemnification by Sellers. Except as otherwise limited
--------------------------
by this Article X, and except for matters relating to Taxes which shall be
governed by the provisions of Article XI, Purchaser and its officers,
directors, employees, agents, successors and assigns shall be indemnified and
held harmless by Sellers, jointly and severally, from any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable legal fees and expenses)
actually suffered or incurred by it (hereinafter a "Purchaser Loss"), actually
arising out of or resulting from:
(a) the breach of any representation or warranty by Sellers contained
herein or in any exhibit, schedule or certificate delivered by Sellers or
their representatives under this Agreement (without giving effect to either
the enforceability exception contained in Section 3.3 or any supplemental
or amended disclosure after the date hereof);
(b) the breach of any covenant or agreement by Sellers contained
herein or in any document delivered in connection herewith;
(c) the failure of Sellers to pay or otherwise discharge the Excluded
Liabilities;
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(d) any violation by Sellers of, or failure by Sellers to comply
with, the bulk transfer laws of any state or the fraudulent conveyance or
preferential transfer laws of the United States or any state;
(e) any failure by Sellers to comply with the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN Act") with respect to the
termination of any employees of Sellers prior to the Closing Date;
(f) any Mechanic's Liens made or asserted against the Acquired Assets
with respect to goods furnished or services rendered prior to the Closing
Date and any Taxes Not Yet Due and Payable applicable to periods prior to
the Closing Date that have not been prorated pursuant to Section 2.6(d);
(g) any Excluded Liabilities;
(h) implementation of the undertaking of the parties set forth in the
last paragraph of Section 2.1 and in Section 2.2(d);
(i) any violation by Sellers of, or failure by Sellers to comply
with, European Union antitrust law and European Commission notification
regulations relating to the agreement set forth as Item #1 on Schedule
3.12(b)(ii).
(j) without limiting the foregoing, all claims, actions, suits
proceedings (including arbitration and alternate dispute resolution
proceedings) pending or threatened against or with respect to (i) the Pet
Food Business or (ii) the Acquired Assets as of the Closing Date; and
(k) without limiting the foregoing, orders, decrees or judgments in
effect as of the Closing Date
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with respect to (A) the Pet Food Business or (B) the Acquired Asset.
Purchasers and its officers, directors, employees, agents, successors and
assigns shall be indemnified and held harmless by Sellers, jointly and
severally, from any and all fines and penalties with respect to the Pet Food
Business levied, assessed or imposed by the Occupational Safety and Health
Administration for events and conditions arising or existing prior to the
Closing Date; it being hereby agreed and understood that notwithstanding
anything to the contrary contained in this Article X, (i) Purchaser promptly
shall notify Sellers of the levy, assessment or imposition of any such fines and
penalties and Purchaser and Sellers shall act jointly in defending against,
contesting, appealing and settling any such fines and penalties taking into
consideration the effect of such regulation on the on-going business of
Purchaser, and (ii) the indemnification provided pursuant to this paragraph
shall not be subject to the Basket described in Section 10.5
Section 10.3 Indemnification by Purchaser. Except as otherwise limited
----------------------------
by this Article X, Sellers and their respective officers, directors, employees,
agents, successors and assigns shall be indemnified and held harmless by
Purchaser from any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgment and penalties (including, without
limitation, reasonable legal fees and expenses) actually suffered or incurred
by them (hereinafter a "Sellers' Loss") actually arising out of or resulting
from:
(a) the breach of any representation or warranty by Purchaser
contained herein or in any exhibit, schedule or certificate delivered by
Purchaser or its representatives under this Agreement (without giving
effect to the enforceability exception set forth in Section 3.3);
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(b) the breach of any covenant or agreement by Purchaser contained
herein or in any document delivered hereunder at the Closing;
(c) the failure of Purchaser to pay or otherwise discharge the
Assumed Liabilities or any other liability or obligations incurred by
Purchaser in connection with the Acquired Assets or its operation of the
Pet Food Business from and after the Closing Date, except with respect to
which Sellers are obligated to indemnify Purchaser pursuant to Section
10.2; or
(d) any failure by Purchaser to comply with the WARN Act with respect
to the termination of any employees of Purchaser after the Closing Date.
Section 10.4. Indemnification Procedures.
--------------------------
(a) For the purposes of this Section 10.4, the term "Indemnitee"
shall refer to the Person indemnified, or entitled, or claiming to be
entitled to be indemnified, pursuant to the provisions of Section 10.2 or
10.3, as the case may be; the term "Indemnitor" shall refer to the Person
having the obligation to indemnify pursuant to such provisions; and
"Losses" shall refer to the "Sellers' Losses" or the "Purchaser Losses," as
the case may be.
(b) An Indemnitee shall deliver written notice (a "Notice of Claim")
to the Indemnitor promptly after the Indemnitee has knowledge of any claim
(including a Third Party Claim, as hereinafter defined) which an Indemnitee
has determined has given or could give rise to a right of indemnification
under this Agreement. No failure to give such Notice of Claim shall affect
the indemnification obligations of the Indemnitor hereunder, except to the
extent Indemnitor can demonstrate
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that its defense of the matter was materially prejudiced by such failure.
The Notice of Claim shall state the nature of the claim, the amount of the
Loss, if known, and the method of computation thereof, all with reasonable
particularity and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises and the Indemnitor then shall have a period of 30 days to reply to
such Notice of Claim.
(c) The obligations and liabilities of an Indemnitor under this
Agreement with respect to losses arising from claims of any third party
that are subject to the indemnification provisions provided for in this
Agreement ("Third Party Claims") shall be governed by and contingent upon
the following additional terms and conditions: The Indemnitee at the time
it delivers a Notice of Claim to the Indemnitor of the Third Party Claim
shall advise the Indemnitor that the Indemnitor shall be permitted, at its
option, to assume and control the entire defense of such Third Party Claim
at the Indemnitor's expense and through counsel of its choice if it
delivers notice within the 30-day period specified above of its intention
to do so to the Indemnitee and confirms that the Third Party Claim is one
with respect to which the Indemnitor is obligated to indemnify pursuant to
this Agreement. In the event the Indemnitor exercises its right to
undertake the defense against any such Third Party Claim as provided above,
the Indemnitee shall cooperate with the Indemnitor in such defense and make
available to the Indemnitor all witnesses, pertinent records, materials and
information in its possession or under its control relating thereto as
reasonably is required by the Indemnitor, and the Indemnitee shall be
entitled to participate in such defense by its own counsel and at its own
expense; provided, however, that the Indemnitor shall thereafter consult
-------- -------
with the Indemnitee upon the
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Indemnitee's reasonable request for such consultation from time to time
with respect to such Third Party Claim. Except for the settlement of a
Third Party Claim which involves the payment of money only, no Third Party
Claim with respect to which the Indemnitor has elected to defend pursuant
to this Article X may be settled by the Indemnitor without the prior
written consent of the Indemnitee, which consent shall not unreasonably be
withheld or delayed. If the Indemnitee does not receive written notice
within said 30-day period that the Indemnitor has elected to assume the
defense of such Third Party Claim, or if (i) representation of such
Indemnitee by the counsel retained by the Indemnitor would be inappropriate
(based on the advice of counsel to the Indemnitee) due to actual or
potential differing interests between such Indemnitee and Indemnitor, or
(ii) the Indemnitee reasonably has concluded (based on the advice of
counsel) that there may be legal defenses available to it that are
different from or in addition to those available to the Indemnitor, the
Indemnitee may elect to assume such defense, assisted by counsel of its own
choosing; provided, however, in such event, the Indemnitee thereafter shall
-------- -------
consult with the Indemnitor upon the Indemnitor's reasonable request for
such consultation from time to time with respect to such Third Party Claim.
Whether or not the Indemnitee elects to assume the defense of such Third
Party Claim, the Indemnitor shall not be relieved of its obligations
hereunder. The Indemnitee shall give the Indemnitor at least 15 days'
notice of any proposed settlement or compromise of any Third Party Claim
the Indemnitee has elected to defend, during which time the Indemnitor may
assume the defense of, and responsibility for, such Third Party Claim and
if it does so, the proposed settlement or compromise may not be made. In
the event the Indemnitee is, directly or indirectly, conducting the defense
against any such Third Party Claim, the
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Indemnitor shall cooperate with the Indemnitee in such defense
and make available to it all such witnesses, records, materials and
information in the Indemnitor's possession or under its control relating
thereto as reasonably is required by the Indemnitee, and the Indemnitor may
participate in such defense by its own counsel and at its own expense.
(d) Any claim by an Indemnitee with respect to Losses which do not
result from a Third Party Claim shall be asserted in the same manner as
specified in Section 10.4(b) above. If the Indemnitor does not respond to
such claim within the 30-day period specified in Section 10.4(b), the
Indemnitor will be deemed to have rejected such claim, in which event the
Indemnitee will be free to pursue such remedies as may be available to the
Indemnitee under and as limited by this Agreement.
Section 10.5 Limits on Indemnification. No claim may be made against
-------------------------
Quaker and/or QOAC for breach of a representation or warranty contained herein
or in any exhibit, schedule or certificate delivered under this Agreement
unless and only to the extent the aggregate of all Purchaser Losses incurred
as a result thereof exceed $5,000,000 (the "Basket") and then only with respect
to that portion of such Purchaser Losses which exceed the Basket; provided,
-------- -------
however, that the Basket shall not apply with respect to Purchaser Losses
incurred resulting from the last paragraph in Section 10.2 and any breach of a
representation or warranty contained in Sections 3.10, 3.13, 3.14, 3.15, 3.18
and 3.20, or to the extent it relates to any one of the foregoing or to any
other Purchaser Losses indemnified under Article XI; and provided further, that
-------- -------
with respect to any breach of a representation or warranty by Sellers arising
primarily out of events occurring after the date hereof and prior to the Closing
Date that have been disclosed to Purchaser in accordance with Sellers'
obligations under Section 12.17
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("Post-Signing Matters"), Sellers indemnification obligations hereunder shall be
limited to (x) the first $10,000,000 of Purchaser Losses resulting from Post-
Signing Matters, (y) 50% of the next $10,000,000 of Purchaser Losses resulting
from Post-Signing Matters, and (z) in any case, not more than an additional
$30,000,000. In no event shall Quaker and/or QOAC be required to indemnify
Purchaser for Purchaser Losses which in the aggregate exceed $385,156,250 (other
than with respect to the Excluded Liabilities). No claim may be made against
Purchaser for any breach of a representation or warranty contained herein or in
any exhibit, schedule or certificate delivered under this Agreement unless and
only to the extent that the aggregate of all Sellers' Losses incurred as a
result thereof exceed $5,000,000, and then only with respect to that portion of
such Sellers' Losses which exceed $5,000,000. Purchaser shall not be required to
indemnify Sellers for Sellers' Losses which in the aggregate exceed
$385,156,250.
Section 10.6. Adjustment of Liability. Any indemnifiable Sellers' Loss or
-----------------------
Purchaser Loss, as the case may be, shall be reduced by any Tax benefit
accruing to the indemnified party on account of the indemnification payment and
by the amounts actually recovered by the indemnified party from its insurance
carriers in respect of such loss and any amounts recovered by such party
subsequent to the payment by the indemnifying party hereunder with respect to
the same claim shall be remitted to such indemnifying party, except that such
remittance shall not exceed the amount of the indemnification payment made by
such indemnifying party.
Section 10.7. Exclusive Remedy. From and after the Closing, no party
----------------
hereto shall be liable or responsible in any manner whatsoever to the other
parties, whether for indemnification or otherwise, except for indemnity as
expressly provided in this Article X and in Article XI and Section 7.9, which
provide the exclusive remedy and cause of action of the parties hereto for
monetary damages with respect to any
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matter arising out of or in connection with this Agreement or any Schedule or
Exhibit hereto or any opinion or certificate delivered in connection herewith,
except for fraud. After the Closing, Purchaser shall not be entitled to a
recision of the sale of the Acquired Assets except in the case of fraud by
Sellers.
XI
TAX MATTERS
Section 11.1. Tax Indemnification.
-------------------
(a) The Sellers shall indemnify and hold harmless the Purchaser and its
officers, directors, employees, agents, successors and assigns from and against
any Purchaser Loss actually arising out of or resulting from:
(i) any and all Taxes with respect to any taxable period of Gaines
ending on or before the Closing Date;
(ii) any and all Taxes of any member of a consolidated, combined or
unitary group (other than Gaines) of which Gaines is or was a member on
or prior to the Closing Date, by reason of the liability of Gaines
pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or
similar state, local or foreign law or regulation;
(iii) any breach by the Sellers of any representation, warranty or
covenant contained in Section 3.13 or this Section;
(iv) any and all Taxes allocated to the Sellers pursuant to subsection
(c) hereof and not previously paid thereunder; and
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(v) except for transfer taxes which are the responsibility of Purchaser
pursuant to Section 12.15, any and all Taxes imposed in connection with or
arising directly from (1) the Acquired Assets on or before the Closing
Date, and (2) the Excluded Assets whether arising on, before or after the
Closing Date.
(b) Purchaser shall indemnify and hold harmless Sellers and their respective
officers, directors, employees, agents, successors and assigns from and against
any Sellers' Loss actually arising out of or resulting from:
(i) any and all Taxes with respect to any taxable period of Gaines
commencing after the Closing Date;
(ii) any and all Taxes allocated to the Purchaser pursuant to subsection
(c) hereof and not previously paid thereunder; and
(iii) any and all Taxes arising out of an actual or deemed election under
IRC Section 338 or any corresponding or similar provision under any state,
local or foreign law.
(c) The Sellers and the Purchaser will, to the extent permitted by
applicable law, close the taxable period of Gaines on the Closing Date. In any
case where applicable law does not permit Gaines to close its taxable year on
the Closing Date, then Taxes, if any, attributable to the taxable period of
Gaines beginning before and ending after the Closing Date shall be allocated
(i) to the Sellers for the period up to and including the Closing Date, and
(ii) to the Purchaser for the period subsequent to the Closing Date. Any
allocation of income or deductions required to determine any Taxes attributable
to any period beginning before and ending after the Closing Date shall be made
by means of a closing of the books and records of Gaines as of
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the close of business on the Closing Date, provided that exemptions, allowances
or deductions that are calculated on an annual basis shall be allocated between
the period ending on the Closing Date and the period after the Closing Date in
proportion to the number of days in each such period.
Section 11.2. Preparation of Tax Returns.
--------------------------
(a) The Sellers shall include, or cause to be included, Gaines in (A) the
United States consolidated federal income Tax Return of Quaker for the taxable
periods of Gaines ending on or before the Closing Date, and (B) all other
consolidated, combined or unitary Tax Returns of the Sellers or their Affiliates
for the taxable period of Gaines ending (or the portion of any taxable year
ending) on the Closing Date (such Tax Returns referred to in clauses (A) and (B)
hereof are hereinafter referred to as "Seller Consolidated or Combined Returns")
to the extent consistent with prior years. The Sellers shall prepare or cause
to be prepared, and timely file or cause to be timely filed, all Seller
Consolidated or Combined Returns which include Gaines for all taxable periods of
Gaines ending on or before the Closing Date. The Sellers also shall prepare or
cause to be prepared and, except as set forth in subsection (b), timely file or
cause to be timely filed, all other Tax Returns of or which include Gaines or
its assets or operations required to be filed for taxable periods ending on or
prior to the Closing Date. The Sellers shall pay or cause to be paid all Taxes
shown due on such Tax Returns. Upon Purchaser's request, the Sellers shall
provide to Purchaser copies of any state income tax returns prepared by the
Sellers and filed on a separate basis by Gaines for the tax year ending on the
Closing Date and, to the extent available, any pro forma returns prepared by the
Sellers for Gaines for inclusion in a state unitary return filed by the Sellers
for such period, with such exclusions as Sellers believe necessary to exclude
information not relating to Gaines.
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(b) The Purchaser shall be responsible for filing all Tax Returns required to
be filed by or on behalf of Gaines, or with respect to its assets and
operations, after the Closing Date other than the Seller Consolidated or
Combined Returns.
(c) With respect to any Tax Return required to be filed by the Purchaser for
a taxable period of Gains beginning before and ending after the Closing Date,
the Purchaser shall deliver, at least 20 business days prior to the due date for
filing of such Tax Return (including extensions), to the Sellers a copy of such
Return and a statement setting forth the amount of Taxes for which the Sellers
are responsible pursuant to Section 11.1(c) hereof (the "Statement"). The
Sellers shall have the right to review such Return and Statement prior to the
filing of such Tax Return. The Sellers and the Purchaser agree to consult and
resolve in good faith any issue arising as a result of the review of such Return
and Statement and mutually to consent to the filing as promptly as possible of
such Tax Return. Not later than five business days before the due date for the
payment of Taxes with respect to such Tax Return, the Sellers shall pay to the
Purchaser an amount equal to the Taxes shown on the Statement (as ultimately
agreed by the parties) as being the responsibility of the Sellers under Section
11.1(c).
Section 11.3. Cooperation. The Sellers and the Purchaser shall cooperate
-----------
fully with each other and make available to each other in a timely fashion
such Tax data and other information as may be reasonably required by the
Sellers or the Purchaser for the preparation of any Tax Returns required to be
prepared and filed by the Sellers or the Purchaser hereunder, or in connection
with the preparation or filing of any election, consent or certification. The
Sellers and the Purchaser will provide to each other, and the Purchaser will
cause Gaines to provide to the Sellers, full access, at any reasonable time
and from time to time,
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at the business location at which the books and records are maintained, after
the Closing Date, to such Tax data of Gaines as the Sellers or the Purchaser, as
the case may be, may from time to time reasonably request.
Section 11.4. Tax Audits.
----------
(a) Gaines or the Purchaser will, promptly upon receipt of notice
thereof, notify the Sellers of the commencement of any claim, audit,
examination, or other proposed change or adjustment by any taxing authority
concerning any Tax of Gaines for taxable periods ending on or before or which
include the Closing Date.
(b) The Sellers shall have the sole and exclusive right to represent
Gaines' interests in any Tax audit or administrative or court proceeding
relating to taxable periods of Gaines ending on or before the Closing Date and
to employ counsel of its choice at its expense.
(c) With respect to any taxable period of Gaines beginning before and
ending after the Closing Date, the Purchaser and the Sellers shall jointly
control the defense and settlement of any Tax audit or administrative or court
proceeding and each party shall cooperate with the other party at its own
expense and there shall be no settlement or closing or other agreement with
respect thereto without the consent of the other party, which consent will not
be unreasonably withheld.
(d) Purchaser shall have the sole and exclusive right to represent the
interests of Gaines in all other Tax audits or administrative or court
proceedings.
Section 11.5. Refunds. Except as otherwise provided in Section 11.6,
-------
to the extent any determination of Tax liability of Gaines, whether as the
result of an audit or examination, a claim for refund, the filing of an amended
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return or otherwise, results in any refund of Taxes paid attributable to (i) any
period which ends on or before the Closing Date or (ii) any period which
includes the Closing Date but does not begin or end on that day, any such refund
shall belong to Sellers, provided that in the case of any Tax refund described
in clause (ii), the portion of such Tax refund which shall belong to Sellers
shall be that portion that is attributable to the portion of that period which
ends on the Closing Date (determined on the basis of an interim closing of the
books as of the Closing Date), and Purchaser shall promptly pay any such refund
of Taxes, to Sellers upon receipt thereof by Purchaser. Any and all other
refunds of Taxes shall belong to Purchaser. Any payments made under this Section
shall be net of any Taxes payable and expenses incurred with respect to such
refund, credit or interest thereon.
Section 11.6. Carrybacks. Purchaser shall not carry back any Tax
----------
attributes of Gaines arising in a taxable period commencing after the Closing
Date to a taxable period of Gaines ending on or before the Closing Date unless
(i) no waiver of the carry back of such Tax attribute is allowed under
applicable law or (ii) Sellers consent to such carry back. In any such case,
any refund received by the Sellers shall be paid to the Purchaser net of any
Taxes payable and expenses incurred with respect to such refund.
Section 11.7. No Section 338(h)(10) Election. Sellers and Purchaser agree
------------------------------
they shall not make any election under IRC Section 338(h)(10) or any
corresponding or similar provision under any state, local or foreign law with
respect to the purchase of the Gaines Stock.
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XII
MISCELLANEOUS
Section 12.1 Termination of Agreement. This Agreement may be
------------------------
terminated at any time prior to the Closing:
(a) by mutual written consent of Purchaser and Sellers;
(b) by either party if the Closing shall not have occurred by 5:00
p.m., Eastern time, on June 30, 1995; provided, however, that the right to
-------- -------
terminate this Agreement under this Section 12.1(b) shall not be available
to any party whose failure to perform any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing to occur
on or before such date; or
(c) by either party upon the occurrence of any of the adverse events
described in Sections 8.3, 8.4, 9.3 and 9.4.
In the event that Sellers shall disclose to Purchaser in writing pursuant
to Section 12.17 any state of facts, circumstances or events arising after the
date hereof that Seller identifies as causing the condition set forth in Section
8.6 of being incapable of being satisfied, Purchaser shall have the right, but
not the obligation, to terminate this Agreement pursuant to notice to Sellers
given within 20 days of such disclosure. In the event that Purchaser fails to
so elect to terminate this Agreement, Purchaser shall not thereafter be
permitted to avoid the Closing as a result of the failure of the conditions
contained in Sections 8.6 and 8.10 solely as a result of such disclosed state of
facts, circumstances or events, but such failure to terminate this Agreement
shall not affect any other rights of Purchaser
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under this Agreement including, but not limited to, Article 10.
In the event of termination of this Agreement by either or both of the
parties pursuant to this Section 12.1, written notice thereof shall forthwith be
given to the other party specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith become null, void and of
no effect and there shall be no liability on the part of the parties hereto (or
their respective officers, directors or Affiliates) except (a) as set forth in
Section 12.2 hereof and (b) nothing herein shall relieve either party from
liability for any willful breach hereof.
Section 12.2. Expenses. All costs and expenses, including, without
--------
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
Section 12.3. Waiver. The accuracy of any representation or warranty, the
------
performance of any covenants or agreement or the fulfillment of any condition
of this Agreement by Purchaser on the one hand or the Sellers on the other, may
be expressly waived in writing by Purchaser or Sellers, as appropriate. Any
waiver hereunder shall be effective only in the specific instance and for the
purpose for which given. No failure or delay on the part of Purchaser or the
Sellers in exercising any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
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Section 12.4. Consents. Whenever this Agreement requires a permit or
--------
consent by or on behalf of either party hereto, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in Section 12.3.
Section 12.5. Assignment; Parties in Interest. This Agreement and all of
-------------------------------
the provisions hereof shall be binding upon and inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or
obligations herein shall be assigned, including by operation of law or
otherwise, by any party hereto without the prior written consent of the other
party.
Notwithstanding the foregoing, Purchaser at any time may assign its rights
under this Agreement, in whole or in part, to any subsidiary of which Purchaser
owns 51% or more of the voting stock either directly or indirectly ("Purchaser
Subsidiary"). If Purchaser assigns its rights under this Agreement to Purchaser
Subsidiary, Purchaser Subsidiary shall be entitled to all of the rights assigned
to it by Purchaser and shall be obligated to perform all of the corresponding
obligations of Purchaser hereunder, and Purchaser shall guaranty the prompt
performance by Purchaser Subsidiary of such obligations in the same manner as
the guaranty provided by Quaker as set forth in Section 12.20 hereof, and if
such assignment is made prior to the Closing, Purchaser shall provide for the
delivery to the Sellers of the officer's certificate, the opinion of counsel and
the certified resolutions referred to in Sections 9.1(c) and 9.6 by both
Purchaser and Purchaser Subsidiary.
Section 12.6. Further Assurances. Each of the parties hereto agrees that,
------------------
from and after the Closing, upon the reasonable request of any other party
hereto and without further consideration, such party will execute and deliver
to such other party such documents and further assurances and will
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take such other actions (without cost to such party) as such other party may
reasonably request in order to carry out the purpose and intention of this
Agreement.
Section 12.7. Entire Agreement. This Agreement and the Schedules, the
----------------
Confidentiality Agreement referred to in Section 5.1 and the other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire agreement and understanding of the parties with respect to
the subject matter hereof. This Agreement and the Confidentiality Agreement
supersede all prior agreements (including drafts) relating to the transactions
contemplated hereby and all such prior agreements (including drafts) shall not
be relied upon by the parties hereto or introduced in any court of competent
jurisdiction as evidence of an expression of the parties intention with respect
to the subject matter set forth in this Agreement.
Section 12.8. Amendment. This Agreement may be amended or modified in
---------
whole or in part only by a duly authorized written agreement that refers to
this Agreement and is signed by the parties hereto or by their duly appointed
representatives or successors.
Section 12.9. Limitations on Rights of Third Parties. Nothing expressed or
--------------------------------------
implied in this Agreement is intended or shall be construed to confer upon or
give any Person other than Purchaser and Sellers any rights or remedies under
or by reason of this Agreement or any transaction contemplated hereby.
Section 12.10. Captions. The captions in this Agreement are inserted for
--------
convenience of reference only and shall not be considered a part of or affect
the construction or interpretation of any provision of this Agreement.
Section 12.11. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original,
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but all of which together shall constitute but one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
Section 12.12. Notices. All notices, claims, certificates, requests,
-------
other communications hereunder shall be in writing and will be deemed to have
been duly given if personally delivered or telecopied or on the date of receipt
indicated on the return receipt if delivered or mailed (registered or certified
mail, postage prepaid, return receipt requested) as follows:
(a) If to Sellers or Gaines, to:
The Quaker Oats Company
P.O. Box 9001
Chicago, Illinois 60604-9001
Telecopy Number: 312-222-8315
Attention: Vice President and
General Corporate Counsel
(b) If to Purchaser, to:
H. J. Heinz Company
600 Grant Street, 60th Floor
Pittsburgh, Pennsylvania 15219
Telecopy Number: 412-456-6102
Attention: Senior Vice President and
General Counsel
or to such other address as the Person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above.
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Section 12.13. Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the internal laws of State of
Illinois, without regard to its provisions concerning conflicts or choice of
law.
Section 12.14. Bulk Sales Law. Purchaser hereby waives compliance by
--------------
Sellers with the provision of any applicable bulk sales laws. Seller shall
promptly pay and discharge when due or contest or litigate all claims of
creditors that are asserted against Purchaser by reason of non-compliance with
such laws, except with respect to any such claims that relate to the Assumed
Liabilities.
Section 12.15. Transfer Taxes. All excise, sales, value added, use,
--------------
registration, stamp, transfer and similar Taxes, levies, charges and fees
(including all real estate transfer Taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be shared equally
between the parties. Purchaser and Seller shall cooperate in providing each
other appropriate resale exemption certificates and other appropriate tax
documentation.
Section 12.16. Public Announcements. All public announcements relating to
--------------------
this Agreement or the transactions contemplated hereby shall be made at such
time and in such manner as the parties hereto shall mutually agree, except
that nothing in this Agreement shall prevent a party hereto from making any
disclosure in connection with the transactions contemplated by this Agreement
to the extent required by law or to the extent required by any securities
exchange on which a party has listed its securities provided that prior notice
of such disclosure is given to the other party.
Section 12.17. Schedules. Any item disclosed in the Schedules or in any of
---------
the Exhibits attached hereto, under any specific representation or warranty or
Schedule number hereof, shall be deemed to have been disclosed for all purposes
of this Agreement in response to every
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representation or warranty of this Agreement in respect of which such disclosure
relates or is required. In no event shall Sellers have any liability by virtue
of their failure to disclose in response to any representation or warranty of
this Agreement items which are disclosed herein in response to another
representation or warranty of this Agreement. Sellers shall promptly, by notice
in accordance with this Agreement, supplement or amend any schedule to this
Agreement to include any matter hereafter arising prior to Closing which, if
existing or occurring before or at the date of this Agreement, would have been
required to be set forth or described in the Schedule; it being hereby agreed
and understood that any such amendment or supplement to any schedule to this
Agreement shall not operate to cure any prior breach by Sellers of any
representation and warranty to which such amended or supplemented schedule
relates.
Section 12.18. [Intentionally left blank]
Section 12.19. Cooperation In Connection with SEC Filings. Sellers and
------------------------------------------
Purchaser shall cooperate with each other (and their respective independent
public accountants, financial advisors and legal counsels) and make available
to each other such financial and other information as may be required by
Quaker or Purchaser to comply with the requirements of Regulation S-X with
respect to the filing of periodic reports under the Exchange Act and the
filing of any registration statement on an appropriate form under the
Securities Act.
Sellers, at Purchaser's sole expense, shall cause Arthur Andersen (a)
to commence an audit immediately after the public announcement by Sellers of the
transactions contemplated by this Agreement of the balance sheet of the Pet Food
Business as of June 30, 1994 (the "June Balance Sheet"), together with the
related statements of income and cash flows for the fiscal year then ended
(collectively, the "June Financial Statements") and (b) to commence an audit
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immediately following the Closing Date of a balance sheet as of the Closing Date
for the Pet Food Business, together with the related statements of income and
cash flows for the period then ended (the "Closing Financial Statements").
Sellers shall deliver the audited June Financial Statements, including the
unqualified opinion of Arthur Andersen, to Purchaser as promptly as practicable
(but in no event later than 30 days) after the Closing Date. Seller shall
deliver the audited Closing Financial Statements, including the unqualified
opinion of Arthur Andersen, to Purchaser not later than 45 days after the
Closing Date.
Section 12.20. Guarantee. Quaker hereby guarantees the prompt performance
----------
by QOAC of its covenants and obligations hereunder. In the event of
nonperformance by QOAC of any such covenants or obligations, Quaker shall
promptly itself perform or cause QOAC to perform such covenants and
obligations. The guaranty to Purchaser hereunder is an absolute, continuing,
unconditional and unlimited guaranty of performance.
Quaker as guarantor shall be entitled to the benefit of all defenses to and
limitations on the guaranteed covenants and obligations to the same extent that
QOAC would have had such benefit, except that in no event shall the validity of
the guaranty or the obligations of the guarantor be in any way terminated,
affected or impaired by the dissolution of QOAC or the rejection of such
obligations under any bankruptcy, insolvency or similar laws, now or hereafter
enacted.
Section 12.21. Arbitration.
-----------
(a) Except as otherwise provided in this Section 12.21 and except for
enforcement of Section 5.6 of this Agreement, any controversy, claim, or dispute
between the parties, directly or indirectly, concerning this Agreement or any
agreement that is an Exhibit to this Agreement or the
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alleged or actual breach or subject matter of this Agreement or such other
agreement, including, but not limited to, questions concerning the scope or
applicability of this Section 12.21, shall be finally settled by arbitration as
provided in this Section 12.21. Any such arbitration shall be conducted before
one arbitrator in accordance with the Rules of the AAA then in effect. The
arbitration shall take place in New York City, Borough of Manhattan.
(b) agree on such appointment, the parties by this Agreement jointly
authorize the AAA upon application by any party to appoint an arbitrator with
experience in transactions of a similar type to the transactions that this
Agreement contemplates. The AAA shall appoint such an arbitrator within 30
days after receipt of the application from a party. If the arbitrator fails or
is unable to act, his or her successor will be appointed in the same manner as
the arbitrator whom such successor succeeds.
(c) The parties and the arbitrator shall begin the arbitration hearing
within 60 days after the appointment of the arbitrator. All discovery shall be
completed as soon as practicable as directed by the arbitrator. The arbitrator
shall render his or her decision in writing within 30 days of the conclusions of
the hearings.
(d) The award rendered by the arbitrator shall be binding on the
parties and final and non-appealable (other than for bias, fraud, or misconduct
of the arbitrator) regardless of whether one of the parties fails or refuses to
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participate in the arbitration. The arbitrator may award monetary damages,
injunctive relief, specific performance, costs, attorneys' fees, and any other
remedies available under this Agreement. Judgment thereon may be entered in
any court having jurisdiction.
(e) Notwithstanding any other provision of this Agreement, any party
shall be entitled to seek without posting bond preliminary injunctive relief
from any court of competent jurisdiction pending the final decision or award of
the arbitrators.
(f) The parties shall share equally the fees of the arbitrator
and other costs that the arbitrator does not order either party to pay.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the respective duly authorized officers of Sellers and Purchaser as of the date
first above written.
THE QUAKER OATS COMPANY
By: /s/ Luther C. McKinney
-------------------------
Name: Luther C. McKinney
Title: Senior Vice President -
Law and Corporate
Affairs
QO ACQUISITION CORP.
By: /s/ R. Thomas Howell,Jr.
-------------------------
Name: R. Thomas Howell, Jr.
Title: Vice President
H. J. HEINZ COMPANY
By: /s/ William R. Johnson
-----------------------
Name: William R. Johnson
Title: Senior Vice President
<PAGE>
SUPPLEMENT NO. 1
TO
PURCHASE AGREEMENT
THIS SUPPLEMENT NO. 1 TO PURCHASE AGREEMENT is made on the 14th day of
March, 1995 among The Quaker Oats Company, a New Jersey corporation ("Quaker"),
QO Acquisition Corp., a Delaware corporation and wholly owned subsidiary of
Quaker ("QOAC", and together with Quaker, "Sellers"), and H. J. Heinz Company, a
Pennsylvania corporation ("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sellers and Purchaser are parties to that certain Purchase
Agreement dated February 6, 1995 (the "Agreement"), pursuant to which the assets
and certain liabilities and obligations of the Pet Food Business (as defined in
Article I of the Agreement), shall be transferred, sold and assigned by Sellers
to Purchaser (or, as contemplated by Section 12.5 of the Agreement, a Purchaser
Subsidiary) upon the terms and subject to the conditions set forth therein; all
capitalized terms used and not defined herein have the respective meanings
ascribed thereto in the Agreement; and
WHEREAS, by means of the execution and delivery hereof, Sellers and
Purchaser desire to supplement, clarify and amend certain provisions of the
Agreement, as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and set forth in the Agreement, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. Section 2.6(b)(iii) of the Agreement is hereby amended by
deleting the word "unexecuted" appearing in the first line thereof and
substituting in lieu and stead thereof the words "duly executed".
2. Section 2.8 of the Agreement is hereby amended by deleting the
phrase "and the Licensed Trade Secrets" each time it appears in such Section.
3. Section 5.9 of the Agreement is hereby amended to add after the
word (i) "manufacture" appearing in the seventh line thereof the words "only pet
food", and (ii) "Territory" appearing in the fourteenth line thereof the words
"in the manufacture of pet food products only".
<PAGE>
4. (a) Section 5.16 of the Agreement is hereby amended to (i) delete
the first sentence thereof in its entirety and to substitute in lieu and stead
thereof the following new first sentence: "On or prior to August 1, 1995,
Quaker shall, at its sole cost and expense, exercise its option under that
certain lease dated June 14, 1977, between Quaker and the City of Lawrence,
Kansas (the "City of Lawrence Lease"), to purchase the machinery and equipment
subject to such lease, and promptly (but in no event later than 20 days)
following such purchase, Quaker shall take all lawful action (including, without
limitation, the execution and delivery of bills of sale and instruments of
assignment and conveyance) necessary to effect the transfer of such machinery
and equipment to Purchaser (or a Purchaser Subsidiary identified in writing to
Quaker) free and clear of any Liens", (ii) delete from the second sentence
thereof all references to "Closing Date" and "Closing" and to substitute in lieu
and stead thereof the words "August 1, 1995", (iii) add a new third sentence
thereto to read in its entirety, as follows: "Pending such exercise and
transfer, Quaker shall take all lawful action necessary to enable Purchaser to
use such equipment and machinery from and after the Closing Date and, in the
event of such use by Purchaser prior to said exercise and transfer, Purchaser
agrees to indemnify and hold harmless Quaker (in the manner and to the extent
provided in Section 10.3 of the Agreement) from and against any and all Sellers'
Losses resulting from the negligence of Purchaser in the use of such equipment
and machinery or the failure of Purchaser to comply with applicable laws with
respect thereto (not relating to the condition of such machinery and equipment)
or with the terms and conditions of such use as specified in the City of
Lawrence Lease", and (iv) add a fourth new sentence thereto to read in its
entirety as follows: "Solely for purposes of the representations and warranties
set forth in the fourth sentence of Section 3.6(a) and for no other purpose of
the Agreement, the term "Physical Assets" shall include such equipment and
machinery."
(b) Section 10.2 of the Agreement is hereby amended to add a new
clause (l) thereto to read in its entirety, as follows: "(l) Quaker's failure
to exercise its option to purchase the machinery and equipment subject to the
City of Lawrence Lease or to effect the transfer of such machinery and equipment
to Purchaser free and clear of any Liens, in either case for any reason
whatsoever, and to enable Purchaser to use such equipment and machinery from and
after the Closing Date.
5. Section 2.6(b) of the Agreement is hereby amended to add (i) after
the word "deliver" appearing in the prefatory sentence thereof, the following
parenthetical reference: "(and in the case of clauses (vii) and (xvii) below,
Sellers shall cause The Quaker Oats Company of Canada Limited ("Quaker Canada")
to deliver)" and (ii) a new clause (xvii) thereto to read in its entirety, as
follows: "(xvii) a duly executed counterpart original of the Assignment and
Assumption Agreement between Quaker Canada and Purchaser, substantially in the
form of Exhibit K hereto (the "Assignment and Assumption Agreement").
6. Section 2.6(c) of the Agreement is hereby amended to add a new
clause (vii) thereto to read in its entirety, as follows: "(vii) a duly
executed counterpart original of the Assignment and Assumption Agreement."
- 2 -
<PAGE>
7. Section 8.7 of the Agreement is hereby amended to add to the
penultimate sentence thereof after the word "Purchaser" appearing therein, the
following: "it being hereby agreed that to the extent Sellers elect to advance
on behalf of Purchaser, Purchaser's pro rata share of such cost, Purchaser shall
reimburse Sellers therefor promptly (and in no event later than five days) after
the Closing."
8. Section 10.3 of the Agreement is hereby amended to (i) add a new
subsection (e) thereto to read in its entirety, as follows: "(e) any violation
by Purchaser of the terms of the computer software licenses (except any
violation to the extent it arises out of the fact that Purchaser is using the
software that is the subject of such licenses) identified on Schedule 10.3(e),
(ii) delete the word "or" appearing at the end of Section 10.3(c), and (iii)
delete the period appearing after the word "Date" appearing in the third line of
Section 10.3(d) and to substitute in lieu and stead thereof the following: ";
or".
9. Article VI of the Agreement is hereby amended to add a new Section
6.5 thereto to read in its entirety, as follows:
SECTION 6.5. Broker Commissions. Purchaser agrees to pay, in
------------------
accordance with Quaker's customary payment and reimbursement policies,
all commissions due and payable to brokers who prior to the Closing
Date and in the ordinary course of business consistent with past
practice have sold, or have entered into contracts or commitments
providing for the sale of, Products to customers of the Pet Food
Business, to the extent such Products are delivered to such customers
after the Closing Date and constitute a receivable of Purchaser.
10. Sections 5.6(c) and (e) of the Agreement are hereby amended by
replacing all references to "Section 5.5" with "Section 5.6".
11. Section 10.2 of the Agreement is hereby amended by deleting the
words "Purchaser and its" appearing in the fourth line thereof and substituting
in lieu and stead thereof the words "each of Purchaser and Gaines and their
respective".
12. Section 2.1(j) is hereby amended by deleting the word "or"
following the word "individually" in the fifth line thereof, and substituting in
lieu and stead thereof the word "and".
13. Quaker hereby assigns and transfers to Heinz on a non-exclusive
basis its rights, title and interest, whether owned or licensed, in and to the
software from Allen Bradley and Format International Limited currently used by
Quaker or its Affiliates in connection with the Pet Food Business; Quaker hereby
represents that Heinz shall be entitled to use such software to the same extent
that Quaker or its Affiliates were using such software in the Pet Food Business.
- 3 -
<PAGE>
14. The Schedules to the Agreement are hereby modified and superseded,
as applicable, to extent set forth in Appendix A annexed hereto.
15. All references to the "Agreement" in any document, instrument or
agreement described in, referred to, annexed to, contemplated by or incorporated
by reference in the Agreement or this Supplement No. 1 shall be deemed to mean
the Agreement as supplemented by this Supplement No. 1.
16. This Supplement No. 1 shall be effective as of the date hereof.
Except as modified by this Supplement No. 1, the Agreement shall remain in full
force and effect in accordance with its terms.
17. This Supplement No. 1 may be signed in counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one and the same instrument.
18. This Supplement No. 1 shall be governed by and construed and
enforced in accordance with the internal laws of the State of Illinois,
applicable to instruments made and performed entirely within such State.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Supplement No. 1 as of the date first above written.
THE QUAKER OATS COMPANY
By: /s/ John G. Jartz
------------------------------------
Name: John G. Jartz
Title: Vice President--Business Development
QO ACQUISITION CORP.
By: /s/ R. Thomas Howell, Jr.
------------------------------------
Name: R. Thomas Howell, Jr.
Title: Vice President
H. J. HEINZ COMPANY
By: /s/ William R. Johnson
------------------------------------
Name: William R. Johnson
Title: Senior Vice President
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