SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15d of the
Securities and Exchange Act of 1934
---------------------------
Date of Report (Date of earliest
event reported) July 31, 1998
WLR Foods, Inc.
(Exact name of registrant as specified in its charter)
Virginia 0-17060 54-1295923
(State of (Commission File (IRS Employer Iden-
Incorporation) Number) tification No.)
P.O. Box 7000 22815
Broadway, Virginia (Zip Code)
(Address of Principal executive offices)
(540) 896-7001
(Registrant's telephone number,
including area code)
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Item 2. Disposition of Assets
Pursuant to the terms of a Stock Purchase Agreement dated July 31,
1998, the Registrant sold all of the outstanding stock of its wholly-
owned subsidiary, Cassco Ice & Cold storage, Inc. (Cassco), to
Packaged Ice, Inc. (Buyer) of Houston, Texas, for the sum of
$59,025,000 cash. The transaction closed on July 31, 1998. The
Agreement provides that the purchase price is subject to adjustment
for, among other things, changes in the net asset value of Cassco
since April 25, 1998. The proceeds from the sale will be used to
reduce the registrant's existing indebtedness.
In the Agreement, the Registrant made various representations and
warranties as to itself and Cassco and has agreed to indemnify Buyer
for any breaches thereof. The Registrant is obligated to indemnify
Buyer for certain claims only to the extent the aggregate of such
claims exceed $350, 000, and is subject to a maximum obligation of $25
million. The Registrant is also responsible for the full amount of
certain remediation costs, subject to the $25 million limitation.
There is no limit on the Registrant's indemnification obligation with
respect to claims for breaches of representations and warranties
relating to corporation organizational matters, authorization,
capitalization, ownership of assets and taxes and tax returns.
On the Closing Date, the Registrant entered into various agreements
with Buyer pursuant to the Agreement including (a) a Noncompetition
Agreement prohibiting Registrant and its affiliates from competing
with Buyer in the ice manufacturing and cold storage business for a
period of five years and (b) a Transitional Services Agreement
relating to the purchase and sale of products.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired. Not
applicable.
(b) Pro Forma Financial Information. As of the date of the
filing of this current report on Form 8-K, it is
impracticable for the Registrant to provide the pro
forma financial information required by this item 7(b).
In accordance with Item 7(b) of Form 8-K, such
financial statements shall be filed by amendment to
this Form 8-K no later than 60 days after August 15,
1998.
(c) Exhibits
Exhibit 2 Stock Purchase Agreement dated July
31, 1998
Exhibit 99 Press Release dated August 3, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WLR Foods, Inc.
By:__/s/ Dale S. Lam__
Dale S. Lam
Vice President of Finance
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Exhibit Index
Exhibit No. Description
2 Stock Purchase Agreement
99 Press Release
3
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Exhibit 2
1. PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . 1
1.1 Stock Purchase . . . . . . . . . . . . . . . . . . . . 1
1.2 Certain Liabilities . . . . . . . . . . . . . . . . . . 2
1.3 Purchase Price . . . . . . . . . . . . . . . . . . . . 2
1.4 Payment . . . . . . . . . . . . . . . . . . . . . . . . 5
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . 6
2.2 Closing Transactions . . . . . . . . . . . . . . . . . 6
3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . 7
3.1 Organization, Power and Authority . . . . . . . . . . . 7
3.2 Authorization of Transaction . . . . . . . . . . . . . 8
3.3 Capitalization of Company . . . . . . . . . . . . . . . 9
3.4 Compliance with Laws . . . . . . . . . . . . . . . . . 9
3.5 Environmental. . . . . . . . . . . . . . . . . . . . . 10
3.6 Financial Statements . . . . . . . . . . . . . . . . . 14
3.7 Undisclosed Liabilities . . . . . . . . . . . . . . . . 15
3.8 Governmental Authorities and Consents . . . . . . . . . 16
3.9 Accounts Receivable . . . . . . . . . . . . . . . . . . 17
3.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . 17
3.11 Ownership of Assets . . . . . . . . . . . . . . . . . . 18
3.12 Absence of Certain Events . . . . . . . . . . . . . . . 19
3.13 Taxes and Tax Returns. . . . . . . . . . . . . . . . . 21
3.14 Patents and Trademarks . . . . . . . . . . . . . . . . 25
3.15 Legal Proceedings . . . . . . . . . . . . . . . . . . . 25
3.16 Schedules of Material Contracts . . . . . . . . . . . . 26
3.17 Officers and Directors, Employees, Powers of Attorney
and Certain Authorized Persons . . . . . . . . . . . . 27
3.18 Transactions with Affiliates . . . . . . . . . . . . . 27
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . 28
3.20 Delivery of Documents: Corporate Records . . . . . . . 28
3.21 Brokerage . . . . . . . . . . . . . . . . . . . . . . . 29
3.22 Employees . . . . . . . . . . . . . . . . . . . . . . . 29
3.23 Employee Benefit Plans . . . . . . . . . . . . . . . . 31
3.24 Suppliers and Customers . . . . . . . . . . . . . . . . 33
3.25 Books and Records . . . . . . . . . . . . . . . . . . . 33
3.26 Real Property . . . . . . . . . . . . . . . . . . . . . 34
3.27 Personal Property . . . . . . . . . . . . . . . . . . . 36
3.28 Permits . . . . . . . . . . . . . . . . . . . . . . . . 37
3.29 Bank Accounts; Powers of Attorney . . . . . . . . . . . 37
3.30 Capital Projects . . . . . . . . . . . . . . . . . . . 38
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . 38
4.1 Organization and Corporate Power . . . . . . . . . . . 38
4.2 Authorization of Transaction . . . . . . . . . . . . . 39
4.3 No Violation . . . . . . . . . . . . . . . . . . . . . 39
4.4 Governmental Authorities and Consents . . . . . . . . . 40
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4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . 40
4.6 Brokerage . . . . . . . . . . . . . . . . . . . . . . . 41
4.7 Financing . . . . . . . . . . . . . . . . . . . . . . . 41
5. COVENANTS OF SELLER AND COMPANY . . . . . . . . . . . . . . 41
5.1 Access . . . . . . . . . . . . . . . . . . . . . . . . 41
5.2 Operation of the Business of Company . . . . . . . . . 41
5.3 Required Approvals . . . . . . . . . . . . . . . . . . 43
5.4 Cooperation by Seller . . . . . . . . . . . . . . . . . 43
5.5 Supplements to Agreement and Disclosure Letter. . . . 43
5.6 Standstill . . . . . . . . . . . . . . . . . . . . . . 44
5.7 Discharge of Encumbrances . . . . . . . . . . . . . . . 44
5.8 Resignations . . . . . . . . . . . . . . . . . . . . . 45
5.9 Withdrawal or Termination of Company Plans . . . . . . 45
5.10 Environmental Due Diligence . . . . . . . . . . . . . . 45
6. COVENANTS OF BUYER. . . . . . . . . . . . . . . . . . . . . 46
6.1 Cooperation by Buyer. . . . . . . . . . . . . . . . . . 46
6.2 Employee Matters . . . . . . . . . . . . . . . . . . . 47
7. MUTUAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . 47
7.1 Governmental Consents . . . . . . . . . . . . . . . . . 47
7.2 Consents to Assign Leases and Contracts . . . . . . . . 48
7.3 Books and Records . . . . . . . . . . . . . . . . . . . 49
8. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 51
8.1 Conditions Precedent to Buyer's Obligations . . . . . . 51
8.2 Conditions Precedent to Company's and the Seller s
Obligations . . . . . . . . . . . . . . . . . . . . . . 54
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 56
9.1 Indemnification of Buyer Indemnities . . . . . . . . . 56
9.2 Indemnification of Seller Indemnities . . . . . . . . . 60
9.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . 61
9.4 Indemnification Procedure . . . . . . . . . . . . . . . 61
9.5 Sole and Exclusive Remedy . . . . . . . . . . . . . . . 63
9.6 Notice of Breach . . . . . . . . . . . . . . . . . . . 64
9.7 Discovery of Breach . . . . . . . . . . . . . . . . . . 64
9.8 Limitations on Amount . . . . . . . . . . . . . . . . . 64
9.9 Survival of Terms . . . . . . . . . . . . . . . . . . . 65
9.10 Negligence and Strict Liability . . . . . . . . . . . . 66
10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 66
10.1 Termination of Agreement . . . . . . . . . . . . . . . 66
10.2 Procedure Upon Termination . . . . . . . . . . . . . . 67
11. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 67
11.1 Section 338 Election . . . . . . . . . . . . . . . . . 67
11.2 Apportionment of Taxable Income . . . . . . . . . . . . 68
11.3 Preparation and Filing of Income Tax Returns . . . . . 68
11.4 Payment of Income Taxes . . . . . . . . . . . . . . . . 68
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11.5 Termination of Tax Sharing Agreement . . . . . . . . . 69
11.6 Audit . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.7 Books and Records . . . . . . . . . . . . . . . . . . . 70
11.8 Refunds . . . . . . . . . . . . . . . . . . . . . . . . 71
11.9 Allocation Statement . . . . . . . . . . . . . . . . . 71
12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 71
12.1 Stock Representation . . . . . . . . . . . . . . . . . 71
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . 72
12.3 Entire Agreement . . . . . . . . . . . . . . . . . . . 73
12.4 Waivers and Amendment . . . . . . . . . . . . . . . . . 74
12.5 Governing Law . . . . . . . . . . . . . . . . . . . . . 74
12.6 Binding Effect; No Assignment . . . . . . . . . . . . . 74
12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . 75
12.8 Severability of Provisions . . . . . . . . . . . . . . 75
12.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . 75
12.10 No Third Party Beneficiaries . . . . . . . . . . . . . 76
12.11 Captions . . . . . . . . . . . . . . . . . . . . . . . 76
12.12 Waiver Of Jury Trial . . . . . . . . . . . . . . . . . 76
12.13 Arbitration Proceedings . . . . . . . . . . . . . . . 76
12.14 No Strict Construction . . . . . . . . . . . . . . . . 77
12.15 Insolvency or Bankruptcy of Buyer . . . . . . . . . . 77
12.16 Public Announcements . . . . . . . . . . . . . . . . . 77
12.17 Confidentiality . . . . . . . . . . . . . . . . . . . 78
12.18 Time Is Of The Essence . . . . . . . . . . . . . . . . 78
<PAGE>
CASSCO ICE & COLD STORAGE, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), dated as of July 31,
1998, is made by and among CASSCO ICE & COLD STORAGE, INC., a Virginia
corporation ("Company"), WLR FOODS, INC., the sole shareholder of the
Company ("Seller"), and PACKAGED ICE, INC., a Texas corporation
("Buyer").
RECITALS
A. The Company is a corporation duly organized and validly
existing under the laws of the Commonwealth of Virginia with
authorized capital stock of 5,000 shares of common stock, with voting
rights, without par value, (the "Common Stock").
B. The Seller owns 1,000 shares of the Common Stock, (the
"Shares"), which Shares constitute all of the issued and outstanding
shares of the Common Stock.
C. The Buyer wishes to acquire and the Seller desires to sell
the Shares as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree with each other as follows:
1. PURCHASE AND SALE OF STOCK.
1.1 Stock Purchase. At the Closing provided for in Section 2
herein, the Buyer agrees to purchase from the Seller and the Seller
agrees to sell to the Buyer the Shares, pursuant to the terms of the
Agreement, for the consideration provided in Section 1.3 below.
1.2 Certain Liabilities. The Company shall continue to be
responsible for all of the liabilities of the Company existing at the
end of business on the Closing Date (as defined in Section 2 below)
except for those liabilities (each an "Excluded Liability" and
collectively the "Excluded Liabilities") which are expressly excluded
from this Agreement and set forth in Section 1.2 of that certain
letter from Seller to Buyer dated as of the date hereof (the
"Disclosure Letter") delivered prior to the execution of this
Agreement. Seller shall pay off or otherwise discharge all Excluded
Liabilities at or prior to the Closing. To the extent any Excluded
Liabilities are not paid off or discharged at or prior to Closing,
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then Buyer shall have the right to reduce the Preliminary Payment (as
defined in Section 1.4) by all amounts necessary to discharge any or
all such Excluded Liabilities.
1.3. Purchase Price.
(a) The purchase price to be paid for the Shares (the
"Purchase Price") shall be Fifty-Nine Million Twenty-Five Thousand
Dollars ($59,025,000), payable in cash, and subject to the Post
Closing Adjustments as defined in section 1.3(c) below.
(b) Within 30 days following the Closing Date (as such date
is defined in section 2 below), Seller, at Seller's sole cost and
expense, shall cause KPMG Peat Marwick LLP ("KPMG") to prepare and
deliver to the Company, Seller and Buyer its report on a schedule in
the form annexed in Section 1.3 of the Disclosure Letter (the "Closing
Schedule"). The Closing Schedule shall reflect the net asset value of
the Company ("NAV") as of the end of business on April 25, 1998 (the
"Base NAV"), July 25, 1998 (the "July 25 NAV"), the Closing Date (the
"Closing Date NAV") and (if such date is prior to the Closing Date)
August 15, 1998 (the "August 15 NAV"). The Company NAV at each such
date shall be determined in accordance with generally accepted
accounting principles consistently applied ("GAAP") except that the
following shall be excluded from such determination:
(i) intercompany receivables outstanding as of the
date of the NAV determination which such receivables will not be paid
into the Company by Seller or Seller's affiliates;
(ii) any receivables in favor of the Company from
Buyer outstanding as of the date of the NAV determination which such
receivables will not be paid into the Company by Buyer and shall be
written off simultaneously with the Closing;
(iii) current income taxes payable, which shall be the
responsibility of the Seller; and
(iv) deferred income tax assets and liabilities, which
shall be the responsibility of the Seller.
(c) The Purchase Price set forth in Section 1.3(a) above
shall be adjusted according to the following post-closing
determinations (the "Post-Closing Adjustments"):
(i) The Purchase Price shall be decreased by the
amount, if any, of Excluded Liabilities which have not been satisfied
by Seller prior to Closing.
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(ii) The Purchase Price shall be increased if more, or
decreased if less, as the case may be by all of the following: (w)
the full amount, if any, by which the July 25 NAV is more or less than
the Base NAV; (x) fifty percent (50%) of the amount, if any, by which
the August 15 NAV is more or less than the July 25 NAV if the Closing
Date is subsequent to August 15, 1998, or fifty percent (50%) of the
amount, if any, by which the Closing Date NAV is more or less than the
July 25 NAV if the Closing Date is on or before August 15, 1998; (y)
ten percent (10%) of the amount, if any, by which the Closing Date NAV
is more or less than the August 15 NAV if the Closing Date is
subsequent to August 15, 1998, and (z) an amount equal to thirty-nine
percent (39%) of the total increase in NAV that does not increase the
Purchase Price pursuant to the formula set forth in (x) and (y) above.
(d) During the thirty (30) days following the Buyer's
receipt of the Closing Schedule, Buyer and Deloitte & Touche, LLP
("Deloitte") shall be permitted, subject to the execution of customary
and standard releases, to review such Schedule and working papers of
KPMG related thereto. If any matter is in dispute and cannot be
resolved in such thirty (30) day period, both accounting firms shall,
within an additional five (5) day period following expiration of
Deloitte's review period, submit the question or questions in dispute
to the Washington, D.C. office of Arthur Anderson, LLP, or, in the
event Arthur Anderson has a conflict or is otherwise unable or
unwilling to accept the engagement, such other mutually agreed upon,
neutral auditor (the "Neutral Auditor") which shall resolve the
dispute within thirty (30) days after the question(s) are referred to
them and whose decision shall be final and binding on all parties
hereto. The parties shall share equally the fees, costs and expenses
of the Neutral Auditor.
On the later of (i) 120 days after the Closing Date or (ii), five
(5) business days after the earlier of the Seller and Buyer agreeing
on the Post Closing Adjustments or the final decision of the Neutral
Auditor, the payments described in Section 1.4(b) below shall occur
(the "Second Closing Date").
1.4 Payment.
(a) On the Closing Date, Buyer shall pay to or for the
benefit of the Seller, by wire transfer of immediately available
funds, Fifty-Nine Million Dollars ($59,000,000) (the "Preliminary
Payment"); and
(b) On the Second Closing Date, if the Purchase Price,
after making the Post-Closing Adjustments, (i) exceeds the Preliminary
Payment, Buyer shall pay to or for the benefit of the Seller, by wire
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transfer of immediately available funds, a sum equal to the amount of
the excess in accordance with Section 1.3(c)(ii) plus interest from
the Closing Date or (ii) is less than the Preliminary Payment, Seller
shall remit to Buyer, by wire transfer of immediately available funds,
a sum equal to such deficiency plus interest from the Closing Date.
Interest shall be calculated at a rate equal to the prime rate of the
Chase Manhattan Bank on the Closing Date.
2. CLOSING.
2.1 Closing Date. The closing of the transaction contemplated
by the Agreement (the "Closing") shall take place at the offices of
Wharton, Aldhizer and Weaver, P.L.C. in Harrisonburg, Virginia at
10:00 a.m. on the later of (a) August 3, 1998, or (b) the date that is
two (2) business days following the date on which all of the
conditions contained in Article 8, to the extent not waived, are
satisfied (the "Closing Date"), or at such other place or time as the
parties may agree. The Closing shall be deemed to have taken place at
12:01 a.m. on the Closing Date. Subject to provisions herein to the
contrary, failure to consummate the purchase and sale contemplated
herein on the date and time and at the place determined pursuant to
this Section 2.1 will not result in the termination of the Agreement
and will not relieve any party of any of its obligations herein;
provided, however, either party may terminate this Agreement as
provided in Article 10.
2.2 Closing Transactions. Subject to the conditions set forth
herein, on the Closing Date, the parties hereto agree as follows:
(a) The Seller shall deliver to Buyer certificates
representing the Shares, duly endorsed in blank or accompanied by duly
executed stock powers;
(b) Buyer shall deliver to Seller the Preliminary Payment
in accordance with Section 1.4(a); and
(c) There shall be delivered to the Company, the Seller and
Buyer, as applicable, the documents or instruments required to be
delivered as set forth in Section 2.2(c) of the Disclosure Letter.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Except as set forth in
a corresponding numbered section of the Disclosure Letter, the Seller
represents and warrants to Buyer as follows:
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3.1 Organization, Power and Authority. The Seller and the
Company are each corporations duly organized and existing in good
standing under the laws of the Commonwealth of Virginia with all
corporate power and authority, including possession of all material
licenses, permits and authorizations, necessary to carry on their
respective business as now being conducted and to own and operate
their respective assets. The Company is duly qualified to do business
in all jurisdictions where such qualification is required. Schedule
3.1 of the Disclosure Letter lists each jurisdiction where the Company
is qualified to transact business as a foreign corporation. Seller
has delivered or made available to Buyer true and complete copies of
the Company's articles of incorporation, bylaws and resolutions of the
board of directors and shareholder.
3.2 Authorization of Transaction. The execution, delivery and
performance by the Seller and the Company of this Agreement and the
performance by them of the transactions contemplated hereby have been
duly authorized by all necessary corporate action of the Seller and
the Company. This Agreement is a valid and binding obligation of the
Seller and the Company, and each instrument contemplated by this
Agreement, when executed and delivered by the Seller and the Company
in accordance with the provisions hereof, will be a valid and binding
obligation of the Seller and the Company, in each case enforceable
against the Seller and the Company in accordance with its terms
(except as such enforceability may be limited by applicable creditors'
rights laws.) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any violation of any provision of the
certificate of incorporation or bylaws of the Seller or the Company,
(b) except as set forth in Section 3.2 of the Disclosure Letter,
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) in the terms, conditions or
provisions of any material agreement or material obligation (or
agreements or obligations which in the aggregate would be material) to
which the Company or the Seller is a party or by which its or their
assets are bound, (c) except as expressly waived by Buyer, violate any
judgment, order or award of any court, administrative agency or
governmental body against or binding upon the Company, its assets or
the Seller, (d) except as expressly waived by Buyer, constitute a
violation by the Company of any law or regulation of any jurisdiction
as relates to it or its assets, or (e) result in the creation of any
lien or encumbrance on any of the Company's assets.
3.3 Capitalization of Company. The Company is a corporation
duly organized and validly existing under the laws of the Commonwealth
of Virginia with authorized capital stock of 5,000 shares of common
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stock, with voting rights, without par value of which 1,000 shares are
issued and outstanding and constitute the Shares. All issued and
outstanding Shares of the Company have been duly authorized and
validly issued, are fully paid and nonassessable, were issued in
compliance with all applicable federal and state securities or "blue
sky" laws, and, except as set forth in Section 3.3 of the Disclosure
Letter, are owned by the Seller free and clear of all liens, pledges,
claims, security interests or other encumbrances of any nature
whatsoever. There are no outstanding or authorized options, warrants,
rights, trusts, contracts or agreements of any kind or nature
whatsoever with respect to shares of stock in the Company, except as
set forth in Section 3.3 of the Disclosure Letter. Except as set
forth in Section 3.3 of the Disclosure Letter, the Company does not
own an equity interest in any corporation, limited liability company
or other entity, and is not a partner of any partnership or joint
venture.
3.4 Compliance with Laws. Seller and their respective officers,
directors, agents and employees have complied with all applicable
laws, regulations, and ordinances, whether federal, state or local,
which affect the business practices, or any owned or leased properties
of the Company and to which the Company or any of its directors,
officers, agents or employees may be subject, except where the failure
to comply would not, individually or in the aggregate, have a material
adverse effect on the Company and no claims have been filed against
the Company alleging a violation of any such laws, regulations, or
ordinances.
3.5 Environmental.
(a) Compliance with Environmental Laws. Except as
disclosed in Section 3.5 of the Disclosure Letter, the Company has
been and is operated in compliance with all Environmental Laws and all
permits related to Environmental Laws except when the failure to be in
compliance would not individually or in the aggregate, have a material
adverse effect on the Company.
(b) Hazardous Materials. Except as disclosed in Section
3.5 of the Disclosure Letter, the Company has neither caused nor
allowed the generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal, transport or
handling of any Hazardous Materials at any of the properties or
facilities used in connection with the Company s business, including
the Real Property (as defined in Section 3.26(c) hereof), except in
compliance with all Environmental Laws. To Seller s and the Company's
knowledge, no generation, treatment, manufacture, processing,
distribution, use, storage, discharge, release, disposal, transport or
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handling of any Hazardous Materials has occurred at any of the
properties or facilities used in connection with the Company s
business, including the Real Property, except in compliance with all
Environmental Laws.
(c) Existence of an Action. Except as disclosed in Section
3.5 of the Disclosure Letter, neither Seller nor the Company has
received any notice from any Governmental Authority or other person
alleging or concerning any Environmental Claim against the Company,
whether for personal injuries or property damages. Except as
disclosed in Section 3.5 of the Disclosure Letter, there is no pending
or, to the knowledge of Seller and the Company, threatened claim
affecting the Company or concerning any Environmental Claim, whether
for personal injuries or property damages.
(d) Environmental Permits. The Company is in possession of
and in compliance with all material permits required under the
Environmental Laws with respect to the operation of its business.
Except as set forth in Section 3.5 of the Disclosure Letter, there are
no claims, actions, proceedings, inquiries or investigations pending
or, to the knowledge of Seller and the Company, threatened which seek
to modify, revoke or deny renewal of any such permit. Neither Seller
nor the Company has any knowledge of any fact or condition that is
reasonably likely to give rise to any claims, actions, proceedings,
inquiries or investigations to modify, revoke or deny renewal of any
of such permit. Except as set forth in Section 3.5 of the Disclosure
Letter, no consent, waiver or approval from any person is necessary
for the transfer of any such permit, and the consummation of the
transactions contemplated by this Agreement will not violate, alter,
impair or invalidate, in any respect, any such permit.
(e) Miscellaneous. Without in any way limiting the
generality of the foregoing, except as set forth in Section 3.5 to the
Disclosure Letter, (i) to the knowledge of the Seller and the Company,
none of the off-site locations where the Company has transported,
released, discharged, stored, disposed or arranged for the disposal of
Hazardous Materials has been identified as a facility that is subject
to any existing claims, actions, proceedings, inquiries or
investigations under any Environmental Law or, to the knowledge of
Seller and the Company, is the subject of any threatened claims,
actions, proceedings, inquiries or investigations by any person, (ii)
no underground improvement regulated by any Environmental Law,
including any storage or treatment tank, is located on the Real
Property, (iii) to the knowledge of Seller and the Company, there is
no asbestos contained in or forming part of the assets of the Company,
and (iv) no polychlorinated biphenyls or polychlorinated biphenyls-
containing items are used or stored at the Real Property.
7
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(f) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "Environmental Claim" shall mean a claim under any
Environmental Law or with respect to the presence, use, release,
manufacture, generation, storage, transportation or disposal of any
Hazardous Materials.
(ii) "Environmental Law" shall mean (i) the Clean Air
Act (42 U.S.C. Section 7401 et seq.), (ii) the Clean Water Act (33
U.S.C. Section 1251 et seq.), (iii) the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund
Amendments and Re-authorization Act of 1986 (42 U.S.C. Section 9601 et
seq.), (iv) the Federal Water Pollution Control Act (33 U.S.C. Section
1251 et seq.), (v) the Hazardous Materials Transportation Act (49
U.S.C. Section 5101 et seq.), (vi) the National Environmental Policy
Act (42 U.S.C. Section 4321 et seq.), (vii) the Oil Pollution Act of
1990 (33 U.S.C. Section 2701 et seq.), (viii) the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid
Waste Amendments of 1984 (42 U.S.C. Section 6901 et seq.), (ix) the
Safe Drinking Water Act (42 U.S.C. Section 300f et seq.), (x) the
Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), (xi)
any state or local law, ordinance, regulation, or statute regulating
any activity or substance regulated by any of the foregoing statutes,
or (xii) any other federal, state or local law, ordinance, regulation,
or statute regulating any activity or substance regulated by law,
ordinance, regulation, or statute prohibiting, regulating or
restricting the disposal, generation, handling, placement, recycling,
release, storage, or treatment of any contaminant, liquid, mass,
material, matter, pollutant, solid, substance, or waste classified or
considered to be hazardous or toxic to human health or the environment
or otherwise related to environmental protection or health and safety.
(iii) "Governmental Authority" shall mean any federal,
state, local, or other governmental agency, department, branch,
commission, board, bureau, court, instrumentality or body.
(iv) "Hazardous Material" shall mean (i) any
contaminant, liquid, mass, material, matter, pollutant, solid,
substance, or waste for which any Environmental Law limits, prohibits,
or regulates its disposal, generation, handling, placement, recycling,
release, storage, or treatment, (ii) any carcinogenic, corrosive,
explosive, flammable, infectious, mutagenic, radioactive, or toxic
8
<PAGE>
substance, (iii) any diesel fuel, gasoline, or other petroleum product
in an unconfined manner, (iv) any substance that contains
polychlorinated biphenyls, (v) any substance that contains asbestos,
(vi) any substance that contains urea formaldehyde foam installation,
(vii) any substance that constitutes a nuisance upon any property or
(viii) any substance that imposes a hazard to the health or safety of
any individual.
3.6 Financial Statements. The Seller has delivered or made
available to Buyer (a) the Company's audited balance sheets at June
28, 1997 and June 29, 1996 and the related statements of earnings,
shareholder equity and cash flows for the fiscal year ended June 28,
1997, and shall deliver on or before the Closing Date (or as soon
thereafter as available) the Company's audited balance sheet at June
27, 1998, and the related statements of earnings, shareholder equity
and cash flows for the fiscal year ended June 27, 1998 (collectively,
the "Financial Statements"), and (b) shall deliver, as soon as they
are available, the Company's unaudited balance sheet as of the end of
the month prior to the Closing Date and the related statement of
earnings for the period then ended (the "Interim Financial
Statements"). The Financial Statements and the Interim Financial
Statements fairly present, in all material respects, the financial
position and results of operations and cash flows of the Company as of
the respective dates thereof and for the periods therein referenced,
all in accordance with generally accepted accounting principles; and
the Financial Statements and Interim Financial Statements referred to
in this Section reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the
notes, if any, to such Financial Statements and Interim Financial
Statements.
3.7 Undisclosed Liabilities. The Company is not liable for or
subject to any liabilities which are material, except (a) liabilities
disclosed or reserved for the Interim Financial Statements, (b)
liabilities specifically disclosed in Section 3.7 of the Disclosure
Letter, and (c) liabilities under any contract, commitment, or
agreement specifically disclosed in this Agreement or the Disclosure
Letter (or not specifically required to be disclosed in this Agreement
or the Disclosure Letter as a result of failure to meet any minimum
dollar thresholds), none of which liabilities under any such contract,
commitment or agreement are required under generally accepted
accounting principles consistently applied to have been adequately and
specifically disclosed or reserved for on the Financial Statements or
Interim Financial Statements, except for those liabilities as
described in Section 3.7 of the Disclosure Letter. As used in this
Agreement, the term "liability" shall include any direct or indirect
9
<PAGE>
liability, indebtedness, obligation, guarantee or endorsement (other
than items, such as endorsements of notes, bills, and checks,
presented to banks for collection or deposit in the ordinary course of
business), either accrued, absolute, contingent or otherwise. Without
limiting the generality of the foregoing, except as disclosed in
Section 3.7 of the Disclosure Letter, the costs of all retirement,
incentive, bonus, or other plans or policies for the benefit of
employees of the Company, including without limitation, the costs of
all past service benefits, are fully accrued and reflected on the
Interim Financial Statements.
3.8 Governmental Authorities and Consents. Except as provided
in Section 3.8 of the Disclosure Letter, neither the Company nor the
Seller is required to submit any notice, report or other filing with
any governmental authority in connection with the execution or
delivery by it of this Agreement and the other agreements contemplated
hereby to which the Seller is a party or the consummation of the
transactions contemplated hereby or thereby. Other than as listed in
Section 3.8 of the Disclosure Letter, no consent, approval or
authorization of any governmental or regulatory authority or any other
party or person is required to be obtained by the Company or the
Seller in connection with its execution, delivery and performance of
this Agreement and the other agreements contemplated hereby to which
the Company is a party or the transactions contemplated hereby or
thereby.
3.9 Accounts Receivable. All accounts receivable reflected on
the Financial Statements and the Interim Financial Statements and all
accounts receivable of the Company arising subsequent to June 27, 1998
have arisen only in the ordinary course of business for goods sold and
delivered or services performed. Unless paid prior to the Closing
Date, the accounts receivable are current and are collectible net of
the reserves shown on the Interim Financial Statements. Subject to
such reserves, each of the accounts receivable has been or will be
collected in full without set off within 150 days after which it first
became due and payable. The reserves for bad debts, if any, reflected
on the Interim Financial Statements are in accordance with generally
accepted accounting principles and consistent with past practice.
3.10 Inventory. All inventory reflected on the Interim Financial
Statements and all inventory acquired by the Company subsequent to
June 27, 1998 is usable or salable in the ordinary course of business
of the Company consistent with past practice, and is reflected on the
Interim Financial Statements and books of the Company at prices at
least equal to the lower of cost or market value thereof. Proper
recognition has been given to appropriate mark-downs for unusable or
10
<PAGE>
unsalable inventory. The inventory on hand is, and will be at the
Closing, to the best of Seller's and Company's knowledge, ability and
estimation (a) adequate for the conduct of the business, and (b) not
in excess of normal operating requirements of the Company's business.
3.11 Ownership of Assets. Except as set forth in Section 3.11 of
the Disclosure Letter, the Company is the owner of its assets, and has
good and marketable title to all of its assets, free and clear of any
lien, security interest, lease, title, retention or financing
agreement, charge or other encumbrance, (collectively the
"Encumbrances") except for: (a) statutory liens for current taxes or
assessments not yet due or delinquent, (b) mechanics', carriers',
workers', repairers', warehousers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as
to which there is no default on the part of the Company, and (c) such
other liens, imperfections of title, charges, easements, restrictions,
encumbrances and other matters of similar nature which do not relate
to borrowed money and do not individually or in the aggregate,
substantially impair or materially adversely interfere with the
operation of its business, or materially detract from the value of the
applicable property ("Permitted Encumbrances"). The assets of the
Company as of the Closing Date will constitute all of the assets
necessary to conduct the business as currently conducted and as
conducted in generating the items of income and cash flows included in
the Financial Statements and Interim Financial Statements. The
building, plants, structures, and equipment of the Company are in
operating condition and are sufficient for the continued conduct of
the Company's business after the Closing in substantially the same
manner as conducted prior to the Closing.
3.12 Absence of Certain Events. Except as set forth in Section
3.12 of the Disclosure Letter, the Financial Statements or the Interim
Financial Statements, since April 30, 1998, the Company has not:
(a) Amended its articles of incorporation or bylaws;
(b) Changed its authorized capital stock or issued or sold,
or purchased, redeemed or otherwise acquired, or issued any rights to
subscribe for, or warrants to purchase, or entered into any agreement,
commitment or obligation (including, without limitation, any
convertible securities) to issue, sell, purchase, redeem or otherwise
acquire, any shares of its capital stock, or made any declaration or
any payment or distribution of any dividend or any other distribution
with respect to its capital stock;
11
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(c) Incurred any liabilities, which are in the aggregate
material (other than liabilities incurred in the ordinary course of
business consistent with past practice and capital expenditures not in
excess of $25,000), or discharged or satisfied any lien or
encumbrance, or paid any liabilities, which are in the aggregate
material (other than in the ordinary course of business consistent
with past practice), or failed to pay or discharge when due any
liabilities the failure to pay or discharge of which has caused or
will cause any actual material damage or risk of material loss to the
Company;
(d) Sold, assigned or transferred any of its assets or
properties except in the ordinary course of business consistent with
past practice;
(e) Created, incurred, assumed or guaranteed any
indebtedness for money, borrowed, or mortgaged, pledged or subjected
to any lien, pledge, mortgage, security interest, conditional
contract or other encumbrances of any nature whatsoever, any of its
assets or properties, except in the ordinary course of business
consistent with past practice and liens, if any, of current taxes not
yet due and payable or those arising by operation of law;
(f) Entered into or suffered any amendment or termination
of any material contract, commitment or agreement to which it is a
party or by which it is bound, or cancelled, modified or waived any
debts or claims held by it, other than in the ordinary course of
business consistent with past practice;
(g) Suffered any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting its
business, or suffered any repeated, recurring or prolonged shortage,
cessation or interruption of inventory shipments, supplies or utility
services required by the Company to conduct its business or suffered
any change in its financial condition or in the nature of its business
or operations which has had or might have a material adverse effect on
its business;
(h) Received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or
condition of any similar character which has had or might have a
material adverse effect on its business;
(i) Increased the salaries or other compensation of, or
made any advance or loan to, any of its shareholders, directors,
officers or employees, or made any increase in, or any additions to,
other benefits to which any of its shareholders, directors, officers
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or employees may be entitled, except in the ordinary course of
business, provided however, that any increase or authorization to
increase salary or other compensation shall not exceed in the
aggregate in any twelve month period, three percent (3%) of the
Company's aggregate compensation to officers, directors, or employees.
(j) Changed any of the accounting principles followed by it
or the methods of applying such principles; or
(k) Entered into any transaction other than in the ordinary
course of business or conducted its cash management practices other
than in the ordinary course of business (including, without
limitation, with respect to maintenance of collection of accounts
receivable and payment of accounts payable);
3.13 Taxes and Tax Returns.
(a) General. Seller has made available to Buyer each Tax
report and return in connection with the Company's assets, business,
and employees that either Seller or the Company filed during the five
years immediately preceding the date of this Agreement or such earlier
period for which the statute of limitations has not yet expired,
including any of Seller's combined, consolidated, or unitary income
Tax reports and returns including the operations of the Company.
(b) Consolidated Income Tax Returns. The Company has been
included in Seller's combined, consolidated, and unitary income Tax
reports and returns for all periods for which the applicable statute
of limitations has not expired. In addition, the Company will remain
a member of Seller's affiliated group with respect to the filing of
such income Tax reports and returns through the Closing Date.
(c) Tax Returns and Payments. Either Seller or the Company
has timely filed all Tax reports and returns required to be filed by
Seller or the Company in connection with the Company's assets,
business, and employees and either Seller or the Company has timely
paid and discharged all Tax obligations shown on such reports and
returns, including any withholding obligations. Such Tax reports and
returns are accurate and complete in all material respects and
correctly compute the Tax obligation to which each such report or
return pertains.
(d) No Notices. Except as disclosed in Section 3.13 of the
Disclosure Letter, neither Seller nor the Company has received any
determination letter, revenue agent report, or other notice of any
proposed or outstanding Tax deficiency against or allocable to the
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Company which remain pending and/or have not yet been resolved.
Except as set forth in Section 3.13 of the Disclosure Letter, neither
Seller nor the Company has executed any extension agreement or waiver
of any statute of limitations with respect to the assessment or
collection of any Tax against the Company.
(e) No Audits. Except as disclosed in Section 3.13 of the
Disclosure Letter, neither the Internal Revenue Service ("IRS") nor
any other taxing authority (collectively with the IRS, the "Taxing
Authorities") has contacted Seller or the Company concerning a future
audit or examination of any Tax reports and returns that include the
Company other than audits and examinations which have been resolved
and any taxes due in connection therewith have been paid. Except as
disclosed in Section 3.13 of the Disclosure Letter, no such audit or
examination is in process or has occurred with respect to any period
for which the statute of limitations has not expired.
(f) No Tax Liens. No Tax liens exist with respect to any
assets of the Company, other than statutory Tax liens for Taxes not
yet due.
(g) No Agreements. No Tax ruling from any Taxing Authority
addressed to the Company or closing agreement with any Taxing
Authority has a continuing effect upon the Company. In addition, no
such Tax ruling or closing agreement is pending.
(h) No Golden Parachutes. The Company does not have any
contract that could require the Company to make any "excess parachute
payment" as defined under Section 280G of the Code, determined without
considering any of the exceptions contained in such Section.
(i) No Partnerships. The Company is not a member of any
joint venture, partnership, or other arrangement or Contract that is
treated as a partnership for income Tax purposes.
(j) No Property Treated as Owned by Another Person. No
property of the Company is property that the Company is required to
treat as owned by another Person pursuant to Section 168(f)(8) of the
Code or any other applicable Law.
(k) No Tax Exempt Use Property. No property of the Company
is "tax exempt use property" as defined under Section 168(h)(1) of the
Code.
(l) No Tax Exempt Bond Financed Property. Other than
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certain of the Excluded Liabilities, no property of the Company is
"tax exempt bond financed property" under Section 168(g) of the Code.
(m) No Transfer Taxes. Except as set forth in Section 3.13
of the Disclosure Letter, the sale of the Shares to Buyer will not
impose or create any Tax obligations on Buyer or the Company,
including any withholding Tax obligations on Buyer.
(n) No Foreign Seller. Seller is not a "foreign person"
under Sections 1445 and 7701 of the Code.
(o) NOL Carry forwards. The Company has no net operating
loss carry forwards.
(p) Definitions. For the purposes of this Agreement, "Tax"
shall mean any assessment, charge, duty, fee, impost, levy, tariff, or
tax of any nature whatsoever imposed by any federal, state, local, or
other governmental agency, department, branch, commission, board,
bureau, court, instrumentality or body, or payable pursuant to any tax
sharing agreement, including any income, payroll, withholding, excise,
gift, alternative minimum, capital gain, added value, social security,
sales, use, real and personal property, use and occupancy, business
and occupation, mercantile, real estate, capital stock, and franchise
tax or charge, together with any related interest, penalties or
additions thereon.
3.14 Patents and Trademarks. Those intellectual property assets
listed in Section 3.14 of the Disclosure Letter are all those
necessary for the operation of the Company's business as it is
currently conducted. The Company or the Seller (or their respective
officers) is the owner of all right, title and interest in and to each
such intellectual property asset, free and clear of all liens,
security interests, charges, or encumbrances, except as otherwise
disclosed in this Agreement and/or the Disclosure Letter. To the
knowledge of Seller and the Company, no person has infringed upon or
misappropriated any of such intellectual property.
3.15 Legal Proceedings. Except as set forth in Section 3.15 of
the Disclosure Letter, there are no disputes, claims, actions, suits
or proceedings, arbitrations or investigations, either administrative
or judicial, pending or, to the knowledge of the Company or the
Seller, threatened or contemplated, by or against or affecting the
business, at law or in equity or otherwise, before or by any court or
governmental agency or body, domestic or foreign, or before an
arbitrator of any kind. The Company is not subject to, or in default
15
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with respect to any, indictment, order, injunction, decree or award of
any court, arbitrator or governmental agency or body, domestic or
foreign. Except as disclosed in Section 3.15 of the Disclosure
Letter, neither the Company nor the Seller has any knowledge of any
state of facts or occurrence of any event that might reasonably form
the basis of any claim against the Company which might have a
materially adverse effect on its assets.
3.16 Schedules of Material Contracts. Set forth in Section 3.16
of the Disclosure Letter are complete and accurate lists of the
following as of July 31, 1998:
(a) All employment, consulting, agency or representative
agreements to which the Company is a party or is otherwise bound;
(b) Each instrument or agreement defining the terms of
which any debt of, or guarantee by, the Company has been or may be
issued;
(c) All loans or advances (excluding advances for ordinary
and necessary business expenses) by the Company to any of its
officers, directors or shareholders, or any member of their immediate
families; and
(d) All contracts, commitments or agreements, including
without limitation, lease agreements, to which the Company is a party
or is otherwise bound which involve or might involve future payments
by the Company of more than $50,000 or which extend or might extend
beyond twelve (12) months from the date hereof, and all other
contracts, commitments or agreements which might materially affect the
Company. Except as may be disclosed in Section 3.16 of the
Disclosure Letter, the Company has no knowledge of any breach or
default, or claimed or alleged breach or default, by the Company or
any other party under any term or provision of any material contract,
commitment, agreement, plan, authorization, instrument or other
document listed in the Disclosure Letter.
3.17 Officers and Directors, Employees, Powers of Attorney and
Certain Authorized Persons. Section 3.17 of the Disclosure Letter
sets forth a complete and accurate list of:
(a) The names of all directors and the names and offices of
all officers of the Company;
(b) The names, job title, date of employment and current
compensation (including salary, bonus and amounts paid under any
benefit plan) of all employees and independent contractors of the
Company whose total compensation equals or exceeds $40,000 per annum
16
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(hereinafter "Key Employee"); and
(c) The names of all persons authorized to borrow money and
guarantee indebtedness on behalf of the Company.
3.18 Transactions with Affiliates. No director, officer or
shareholder of the Company, or any member of their immediate families,
owns or has an ownership interest in any business, corporate or
otherwise other than the Seller, which is a party to, or in any
property which is the subject of, business arrangements or relations
of any kind with the Company.
3.19 Insurance. Section 3.19 of the Disclosure Letter contains
a true and complete list of all policies or binders of fire,
liability, product liability, vehicular, title and other insurance
held by the Company specifying the insurer, the amount of the
coverage, the type of insurance, and the policy number, if any. As of
the date of this Agreement, the policies and binders listed in Section
3.19 of the Disclosure Letter are in full force and effect, are valid,
binding and enforceable in accordance with its terms, insure the
Company in reasonably sufficient amounts against all risks usually
insured against by persons operating similar businesses or properties
in the localities where such businesses or properties are located and
have been issued by insurers authorized to do business in locations in
which the Company is located. There is no default with respect to any
provision contained in any such policy or binder nor has there been
any failure to give any notice or present any claim under any such
policy or binder in due and timely fashion. No notice of cancellation
or non-renewal of any such policy or binder has been received.
3.20 Delivery of Documents: Corporate Records. The Company has
made available to Buyer true, correct and complete copies of all
documents, including all amendments, supplements or modifications
thereof or waivers currently in effect thereunder, described in the
Disclosure Letter and in the articles of incorporation and the bylaws,
as amended, of the Company. The minute record book of the Company,
which has been made available to Buyer for its inspection, contains
accurate records of all meetings and consents in lieu of meetings of
the Board of Directors (and any committee thereof) and voting of
shareholders of Company since the time of incorporation and accurately
reflect all transactions referred to in such minutes and consents and
accurate records of all issuances and transfers of record of the
capital stock of the Company, and will be complete and current as of
the Closing.
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3.21 Brokerage. Except as set forth in Section 3.21 of the
Disclosure Letter, there are no claims for brokerage commission,
finders fees or similar compensation in connection with the
transaction contemplated by this Agreement based on any arrangements
or agreements made by or on behalf of the Company. Seller shall be
responsible for all such claims, fees and compensation for the matters
set forth in Section 3.21 of the Disclosure Letter.
3.22 Employees.
(a) No Key Employee and no group of employees or
independent contractors of the Company has any plans to terminate his
or her employment or relationship as an independent contractor with
the Company.
(b) All employees of the Company are either United States
citizens or resident aliens specifically authorized to engage in
employment in the United States in accordance with all laws. All sums
due for employee compensation and benefits and all vacation time owing
to any employee of the Company (including all persons whose employment
by the Company terminated prior to the date of this Agreement) have
been duly and adequately accrued on the accounting books and records
of the Company.
(c) Contracts. Section 3.22 of the Disclosure Letter lists
each (i) contract between the Company and a Key Employee, and (ii)
collective bargaining agreement and other contract to or with any
labor union, employee representative or group of employees. Other
than the contracts listed in Section 3.22 of the Disclosure Letter,
the Company's employment of each employee is terminable at will
without any penalty or severance obligation of any kind on the part of
the Company, subject to any requirements of applicable law. To the
knowledge of the Company and the Seller, there are no pending attempts
to form an employee or union organization affecting the Company, and
to the Seller's and Company's knowledge, no such attempts have taken
place in the past five years.
(d) Compliance with Labor Laws. The Company has complied
and is presently complying in all material respects with all laws
respecting employment and employment practices, terms and conditions
of employment, and wages and hours, and is not engaged in any unfair
labor practice or unlawful employment practice.
(e) Labor Actions and Relations. There is no unfair labor
practice charge or complaint against the Company pending or threatened
before the National Labor Relations Board nor is there any grievance
or any arbitration proceeding arising out of or under any collective
18
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bargaining agreement pending. There is no labor strike, slowdown or
work stoppage pending or threatened against the Company. The Company
has neither experienced any significant work stoppages nor been a
party to any action before the National Labor Relations Board
involving any issue for the past three years nor been a party to any
arbitration proceeding arising out of or under any collective
bargaining agreement for the past three years. Except as disclosed in
Section 3.22 of the Disclosure Letter, there is no charge or complaint
pending or, to the Seller s and Company s knowledge, threatened
against the Company before the Equal Employment Opportunity Commission
or the Department of Labor or any state or local agency of similar
jurisdiction.
3.23 Employee Benefit Plans.
(a) Each of the Company Plans is, and has been, adopted and
operated in material compliance with its terms and all applicable
laws, rules and regulations (including, where applicable, the Employee
Retirement Income Security Act of 1974 ("ERISA") and the Code).
(b) None of the Company Plans or any trusts relating
thereto have engaged in any transaction in connection with which the
Company or any fiduciaries of any Company Plans or related trusts is
or could be subject either to a civil penalty or other liability under
Sections 502(i), 406 or 409 of ERISA or a tax imposed by Section 4975
of the Code, and no event has occurred and no condition exists with
respect to the Company Plans that could subject the Company to any
other tax or penalty under the Code or civil penalty or other
liability under ERISA or other laws.
(c) Except as set forth in Section 3.23 of the Disclosure
Letter, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee,
officer, director or independent contractor of Company to severance
pay, unemployment compensation or any other payment; (ii) accelerate
the time of payment or vesting, or increase the amount of payments or
compensation due any such person; or (iii) result in any prohibited
transaction described in Section 406 of ERISA or Section 4975 of the
Code for which an exemption is not available.
(d) Neither the Company nor Buyer shall have any liability
or obligation under the Company Plans after the Closing.
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(e) The following terms defined in this Section 3.23 shall
have the meanings specified below for all purposes of this Agreement:
"Company Plans" shall mean all Plans maintained by or
contributed to by the Company or which cover any employees, former
employees, retirees, directors or independent contractors of the
Company or any other Plan as to which the Company has any liability,
actual, contingent or otherwise.
"Plan" shall mean any bonus, deferred compensation,
incentive compensation, stock purchase, restricted stock, stock
option, severance, hospitalization or other medical, life or other
insurance, employee welfare, supplemental unemployment benefit,
profit-sharing, pension or retirement plan, program, agreement or
arrangement or any other employee benefit plan, program, agreement or
arrangement, including any such plan, program, agreement or
arrangement covering retirees or former employees and including
without limitation any "employee pension benefit plan" and any
employee welfare benefit plan as those terms are defined in Section
3 of ERISA.
3.24 Suppliers and Customers. The relationships of the Company
with its material suppliers and material customers are satisfactory.
Except as set forth in Section 3.24 of the Disclosure Letter, no such
material supplier or customer has canceled or otherwise terminated,
or, to the Seller and Company s knowledge, threatened to cancel or
otherwise terminate, its relationship with the Company, or to
materially decrease its services to the Company or its usage of the
services of the Company. Any such cancellation, termination or threat
by a material supplier or material customer which is not also a
material supplier or customer of the Buyer as of the date of this
Agreement shall not constitute a breach of this representation and
warranty, if such material supplier or material customer is, or shall
have become, a material supplier or material customer of the Buyer
prior to the Closing Date.
3.25 Books and Records. The books and records of the Company,
all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal
controls.
3.26 Real Property.
(a) Owned Real Property. Schedule 3.26(a) lists each
parcel of real property owned by the Company. Each parcel of real
property listed in Section 3.26(a) of the Disclosure Letter and any
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parcel of real property purchased after the date hereof (collectively,
the "Owned Real Property") is (i) in compliance with all material
laws, ordinances, rules and regulations, including the Americans with
Disabilities Act and any material building, fire, land use, occupancy,
safety, set-back, or zoning law or ordinance, (ii) not burdened by any
covenant, easement, encroachment, restrictive covenant, right-of-way,
servitude, lien, security interest or other encumbrance, other than
Permitted Encumbrances, and (iii) not subject to any condemnation,
eminent domain or similar action, claim or proceeding. Seller has
delivered or made available to Buyer a true and complete copy of all
surveys, title policies, title commitments, environmental reports and
material correspondence from any governmental authorities in the
possession of Seller or the Company with respect to each parcel of
Owned Real Property.
(b) Leased Real Property. Section 3.26(b) of the
Disclosure Letter lists all the leases of real property ("Leased Real
Property") to which the Company is a party. All of the leases in
Section 3.26(b) of the Disclosure Letter and any leases of real
property entered into after the date of this Agreement (collectively,
the "Real Property Leases") are valid, binding and in full force and
effect. Seller has made available to Buyer a true and correct copy of
each Real Property Lease (and will make such copy of any Real Property
Lease entered into after the date of this Agreement). Except as
disclosed in Section 3.26(b) of the Disclosure Letter (i) each of the
Real Property Leases is in full force and effect and has not been
amended or modified; (ii) neither the Company nor any other party
thereto is in default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a default
thereunder; (iii) neither Seller nor the Company has received any
notice that any party to any Real Property Lease intends to cancel,
terminate or refuse to renew the same or to exercise or decline to
exercise any option or other right thereunder; and (iv) no rental
under the Real Property Leases has been paid more than one month in
advance.
(c) The zoning of each parcel of the Owned Real Property
and Leased Real Property (collectively the "Real Property") permits
the improvements located thereon and the continuation of business
presently being conducted thereon. The Real Property is served by
utilities and services necessary for the normal and continued
operation of the business presently conducted thereon.
(d) At Closing, the Real Property will be free and clear of
all Encumbrances, other than Permitted Encumbrances, or other
restrictions which would materially affect the use for which it is
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held by the Company. Neither Seller nor the Company has received
notice that any of the Real Property is subject to any governmental
decree or order to be sold, or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of
compensation therefor, nor to the Seller's and Company's knowledge,
has any such condemnation, expropriation or taking been proposed.
3.27 Personal Property
(a) Owned Personal Property. Section 3.27(a) of the
Disclosure Letter lists all of the personal property (including all
machinery, equipment, vehicles, structures, fixtures and furniture)
owned by the Company, located on its premises or shown on the Interim
Financial Statements or acquired after the date thereof (except for
inventory subsequently sold in the ordinary course of business and
consistent with past practice and for personal property with a net
book value of less than $10,000 which may not be listed).
(b) Leased Personal Property. Section 3.27(b) of the
Disclosure Letter lists all the leases of personal property to which
the Company is a party and require payment of more than $12,000 per
annum. All of the leases on Section 3.27(b) of the Disclosure Letter
and any leases of personal property entered into after the date of
this Agreement and require payments of more than $12,000 per annum
(collectively, the "Personal Property Leases") are valid, binding and
in full force and effect. Neither the Company nor any other person is
in default under any Personal Property Lease, nor is there any event
which with notice or lapse of time, or both, would constitute a
default thereunder by the Company or any other person. True and
complete copies of all the Personal Property Leases and any amendments
thereto have been made available to Buyer.
3.28 Permits. "Permit" shall mean any license, approval,
certificate, franchise, registration, permit or authorization issuable
by any federal, state, local or other governmental agency, department,
branch, commission, board, bureau, court, instrumentality or body
(collectively, "Governmental Authority"). Section 3.28 of the
Disclosure Letter lists each Permit issued to the Company or with
respect to any of its assets that is material to the Company (the
"Material Permits"). Each Material Permit is currently in effect, no
violation of the terms of such Material Permit has occurred, the
issuing Governmental Authority has not taken or, to Seller's and
Company's knowledge, threatened to take any action to revoke or limit
such Material Permit, and, to Seller's and Company's knowledge, no
basis exists for revoking or limiting it. In addition, to the
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Seller's and Company's knowledge, no issuing Governmental Authority
has indicated that it will not renew a Material Permit and no basis
for failing to renew a Material Permit exists. No Material Permit
will terminate or require re-issuance in connection with the change in
control of the Company upon the sale of the Shares to Buyer.
3.29 Bank Accounts; Powers of Attorney. Section 3.29 of the
Disclosure Letter lists the names of (a) each bank, trust company and
stock or other broker with which the Company has an account, credit
line or safe deposit box or vault (the "Bank Accounts"), (b) all
persons authorized to draw on, or to have access to, each of the Bank
Accounts, and (c) all persons authorized by proxies, powers of
attorney or other like instrument to act on behalf of the Company.
Each of the Bank Accounts has a zero or positive cash balance. No
proxies, powers of attorney or other like instruments are irrevocable.
3.30 Capital Projects. Section 3.30 of the Disclosure Letter
sets forth a list of all capital projects of the Company, including
construction projects and acquisitions of capital assets, which have
been commenced but not completed, or with respect to which commitments
have been entered into with third persons, as of June 27, 1998
("Capital Projects"). Section 3.30 of the Disclosure Letter also sets
forth with respect to each Capital Project (a) the amounts budgeted by
the Company, or the amounts contractually committed to be expended for
such Capital Project, and (b) the amounts remaining to be paid after
June 27, 1998 for completion of such Capital Project.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents
and warrants to the Company and Seller as follows:
4.1 Organization and Corporate Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Texas, with full corporate power and authority to
enter into this Agreement and the other agreements contemplated hereby
to which Buyer is a party and perform its obligations hereunder and
thereunder. Buyer has delivered to Seller true and complete copies of
Buyer's articles of incorporation and its bylaws.
4.2 Authorization of Transaction. The execution, delivery and
performance by the Buyer of this Agreement and the performance by it
of the transactions contemplated hereby have been duly authorized by
all necessary corporate action of the Buyer. This Agreement is a
valid and binding obligation of the Buyer, and each instrument
contemplated by this Agreement, when executed and delivered by the
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Buyer in accordance with the provisions hereof, will be a valid and
binding obligation of the Buyer, in each case enforceable against the
Buyer in accordance with its terms (except as such enforceability may
be limited by applicable creditors' rights laws.) Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) conflict with or result in
any violation of any provision of the certificate of incorporation or
bylaws of the Buyer, (b) constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) in the
terms, conditions or provisions of any material obligation (or
obligations which in the aggregate would be material) to which the
Buyer is a party or by which Buyer is bound, (c) violate any judgment,
order or award of any court, administrative agency or governmental
body against or binding upon the Buyer, or (d) constitute a violation
by the Buyer of any law or regulation of any jurisdiction as relates
to it or its assets.
4.3 No Violation. Buyer is not subject to or obligated under
its certificate of incorporation, its by-laws, any applicable law, or
rule or regulation of any governmental authority, or any agreement or
instrument, or any license, franchise or permit, or subject to any
order, writ, injunction or decree, which would be breached or violated
by its execution, delivery or performance of this Agreement and the
other agreements contemplated hereby to which Buyer is a party.
4.4 Governmental Authorities and Consents. Except for the pre-
merger notification report required under the Hart Scott Rodino
Antitrust Improvement Act of 1976, as amended (the "HSR Act"), Buyer
and its officers, directors, employees, affiliates, subsidiaries or
owners are not required to submit any notice, report or other filing
with any governmental authority in connection with the execution or
delivery by it of this Agreement and the other agreements contemplated
hereby to which Buyer is a party or the consummation of the
transactions contemplated hereby or thereby, and no consent, approval
or authorization of any governmental or regulatory authority or any
other party or person is required to be obtained by Buyer in
connection with its execution, delivery and performance of this
Agreement and the other agreements contemplated hereby to which Buyer
is a party or the transactions contemplated hereby or thereby.
4.5 Litigation. There are no actions, suits, proceedings, orders
or investigations pending or, to Buyer's knowledge, threatened against
or affecting Buyer (or any of Buyer's officers, directors, employees,
affiliates or subsidiaries) at law or in equity, or before or by any
federal, state, municipal or other governmental department,
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commission, board, bureau, agency or instrumentality, domestic or
foreign, which would adversely affect Buyer's performance under this
Agreement and the other agreements contemplated hereby to which Buyer
is a party or the consummation of the transactions contemplated hereby
or thereby.
4.6 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation incurred by Buyer in connection
with the transactions contemplated by this Agreement.
4.7 Financing. Buyer has the funds and/or the financing
available (and at Closing will have the funds and/or financing
available) to consummate the transactions contemplated by this
Agreement.
5. COVENANTS OF SELLER AND COMPANY.
5.1 Access. Until the Closing, the Company shall give the
authorized representatives of Buyer reasonable access, during normal
business hours and upon reasonable notice, to all of the records and
properties of the Company. The Company will furnish the
representatives of Buyer during such period with all information as
such representatives may reasonably request and cooperate with such
representatives in connection with such review and examination.
5.2 Operation of the Business of Company. The Company and the
Seller agree that from the date hereof until Closing, except as
otherwise provided below, it and they will operate the Company's
business substantially as presently operated and only in the ordinary
course, and, consistent with such operation, it and they will (i)
maintain the assets in good repair, order and condition, reasonable
wear and tear excepted; (ii) maintain in full force and effect all
licenses, permits, easements and rights and other authorizations
currently in effect; (iii) use their best efforts to maintain in full
force and effect the insurance policies and binders currently in
effect, including, without limitation, those listed in Section 3.19 of
the Disclosure Letter; (iv) use their best efforts to keep available
the services of its present officers, employees and agents and to
maintain its relations and goodwill with its suppliers, customers,
distributors, and any others having business relations with them; (v)
give to Buyer and its respective accountants, counsel and other
representatives reasonable access, without unreasonably interfering
with the Company's business operations, to all of its assets,
including without limitation its properties, contracts, commitments,
agreements and records (financial and other) and furnish to Buyer all
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such documents and copies of documents and records and information
with respect to its affairs and copies of any working papers relating
thereto as Buyer shall from time to time reasonably request; (vi)
promptly advise Buyer in writing of the threat or commencement of any
dispute, claim, action, suit or proceeding, arbitration or
investigation when the amount claimed is $25,000 or more in the
aggregate or the occurrence of any development of a nature that is or
may be materially adverse to the business, operations, properties,
assets or prospects of the Company; (vii) not propose or take any
action which would make any representation or warranty in Section 3
hereof untrue; and (viii) maintain salaries, bonuses and other
compensation levels as of the date hereof except to the extent such
salaries, bonuses and other compensation levels may be modified in the
ordinary course of the Company s business, not to exceed 3% of the
Company's aggregate compensation in any twelve month period.
5.3 Required Approvals. As promptly as practicable after the
date of this Agreement, the Seller will, and will cause the Company
to, make all filings required to be made by them in order to
consummate the transactions contemplated by this Agreement (including
all filings under the HSR Act), the cost of which shall be paid by
Buyer. Between the date of this Agreement and the Closing Date, the
Seller will, and will cause the Company to (a) cooperate with Buyer
with respect to all filings that Buyer is required to make in
connection with the contemplated transaction, and (b) cooperate with
Buyer in obtaining all consents necessary, including taking all
actions requested by Buyer to cause early termination of any
applicable waiting period under the HSR Act.
5.4. Cooperation by Seller. From July 2, 1998 through the
Closing, Seller has used and shall continue to use all reasonable
efforts to take all actions and do all things necessary or advisable
to consummate the transactions contemplated by this Agreement, and
cooperate with the Buyer in connection with the foregoing, and to
cause all conditions set forth in Article 8 to be satisfied on or
prior to Closing.
5.5 Supplements to Agreement and Disclosure Letter. If, between
the date of this Agreement and the Closing Date, Seller or the Company
becomes aware that any of the representations and warranties in this
Agreement or the Disclosure Letter was materially inaccurate when made
or if during such period any event occurs or condition changes that
would cause any such representation or warranty to be materially
inaccurate had such representation or warranty been made as of the
time of such occurrence or change, then Seller shall notify Buyer
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thereof in writing and supplement the Disclosure Letter hereto to
account for any such inaccuracy, event or change. Any such supplement
to the Disclosure Letter shall not be deemed to have been disclosed as
of the date of this Agreement or to have cured any breach of a
representation or warranty made in this Agreement, unless so agreed to
in writing by Buyer.
5.6 Stand still. Until the earlier to occur of the Closing or
August 15, 1998, Seller shall not, nor shall Seller permit the Company
or any representative of Seller or the Company to, (a) directly or
indirectly, encourage, solicit, initiate or participate in discussions
or negotiations with, or provide any information or assistance to, any
person (other than Buyer and its representatives) concerning any
merger, sale of securities, sale of substantial assets, investment
proposals or similar transaction involving the Company, (b) entertain
or discuss any acquisition or investment proposals whatsoever relating
to the Company, or (c) disclose to any third party any non-published
information concerning the Company or its financial condition.
5.7 Discharge of Encumbrances. Seller shall take all actions
and do all things necessary to pay off or otherwise discharge all
Excluded Liabilities and to cause all Encumbrances other than
Permitted Encumbrances on the assets of the Company to be terminated
or otherwise discharged at or prior to the Closing. Seller shall not
use any of the Company's assets or cash balances to pay off the
Excluded Liabilities.
5.8 Resignations. Seller shall cause each of the Company's
officers, directors, consultants and Key Employees whose resignation
Buyer requested in writing concurrent with the execution of this
Agreement to resign pursuant to a written resignation effective
immediately before the Closing. Seller shall make any severance or
other payments to such persons in connection with their resignations.
5.9 Withdrawal or Termination of Company Plans. At or prior to
the Closing, Seller shall cause the Company to withdraw as a
participating employer in, or cause the termination of, any and all
plans, programs, agreements and arrangements for the benefit of the
Company's current or former employees (collectively the "Company
Plans"). Neither the Company nor Buyer shall have any liability or
obligation under the Company Plans after the Closing.
5.10 Environmental Due Diligence. Buyer shall have completed the
environmental site assessment audits and delivered to Seller an
executive summary of same (the "Executive Summary") which it has
commissioned Environmental Resources Management of Kennesaw, Georgia
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("ERM") to conduct with respect to the Real Property. From and after
Closing, Seller shall be responsible for the actual costs of any
further restoration, remedial work or other environmental action which
is indicated in the Executive Summary (including the need to conduct
further testing and analysis (collectively, "Environmental
Remediation"). A copy of the Executive Summary is annexed to Section
3.15 of the Disclosure Letter. If the estimated cost of Environmental
Remediation (as estimated by ERM prior to or at Closing and after
consultation with Seller and Buyer) is less than Five Million Dollars
($5,000,000.00), Buyer shall not have the right to terminate this
Agreement under Section 10.1(c) as a result of the condition set forth
in this Section 5.10 not being fulfilled. If the estimated cost of
Environmental Remediation is $5,000,000.00 or more, Buyer and Seller
each shall have the right to terminate this Agreement under Section
10.1(c) and Section 10.1(b), respectively, as a result of the
conditions set forth in this Section 5.10 not being fulfilled. Seller
shall have the exclusive right to control the Environmental
Remediation and Seller will have the obligation to commence and
complete the Environmental Remediation which shall (i) be conducted
by an entity certified and qualified to do such Environmental
Remediation and (ii) bring the Real Property into compliance with
applicable law and regulation.
6. COVENANTS OF BUYER.
6.1 Cooperation by Buyer. From July 2, 1998 through the Closing
Date, Buyer has used and shall continue to use all reasonable efforts
to take all actions and do all things necessary or advisable to
consummate the transactions contemplated by this Agreement, and
cooperate with the Seller in connection with the foregoing, and to
cause all conditions set forth in Article 8 to be satisfied on or
prior to Closing.
6.2 Employee Matters. For the period beginning on the Closing
Date and ending on June 26, 1999, Buyer shall provide to the employees
of the Company employee benefits which are substantially similar to
either the benefits provided to similarly situated employees of the
Buyer and its affiliates, or those benefits which are provided to the
employees of the Company immediately prior to the Closing Date.
Employees shall include all persons on leave of absence in accordance
with the Company's policies, including workers' compensation.
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7. MUTUAL COVENANTS.
7.1 Governmental Consents. Promptly after the date of this
Agreement, each party shall take all actions, do all things necessary
and cooperate with each other to obtain all consents required by any
Governmental Authority to consummate as promptly as possible the
transactions contemplated hereby, including the filing of any pre-
merger notification required under the HSR Act. The parties shall use
all reasonable efforts to comply as promptly as practicable with any
request made pursuant to the HSR Act for additional information.
Buyer shall pay the statutory filing fee required by the HSR Act.
7.2 Consents to Assign Leases and Contracts.
(a) Cooperation and Reasonable Efforts. Each party hereby
agrees to use reasonable efforts, to take reasonable actions,
including Buyer's delivery to third parties of its audited financial
statement, and to cooperate with each other as may be necessary to
obtain consents to transfer and assign all licenses, permits,
contracts, leases and agreements requiring consent. Prior to sending
any request for a consent, Seller shall submit such request to Buyer
for its approval which shall not be unreasonably withheld. Seller
shall promptly deliver to Buyer copies of all consents received and
all correspondence and requests concerning the consents. Buyer shall
have the right to reasonably participate in any discussions between
Seller and any person from whom Seller seeks a consent. Except as
expressly provided herein, neither party shall be required to pay any
sum, to incur any obligation or to agree to any amendment of any
license, permit, contract, lease or agreement in order to obtain any
such consent to transfer and assign the license, permit, contract,
lease or agreement.
(b) Pre-Closing; Required Consents. Section 7.2 of the
Disclosure Letter sets forth the list which Buyer has delivered to
Seller of the licenses, permits, contracts, leases and agreements to
which a consent to transfer and assign must be obtained from the
appropriate third party prior to Closing (collectively, the "Required
Consents"). Except for the Required Consents, the obtaining of any
consents related to licenses, permits, contracts, leases and
agreements shall not be a condition to Closing, and Closing shall
occur irrespective of whether any such Consent has been obtained.
(c) Post-Closing Efforts to Obtain Consents. In the event
any Required Consent is not obtained on or prior to Closing, each
Party will, for a period of one year following the Closing Date, (i)
abide by the requirements of Section 7.2(a), and (ii) cooperate with
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each other in any lawful and reasonable arrangement to provide that
Buyer shall receive the benefits under any license, permit, contract
or agreement not assigned and transferred at the Closing by reason of
the failure to obtain such Required Consent (a "Non-Transferred
Instrument"), provided that, to the extent the parties are successful
in providing the material benefits of any Non-Transferred Instrument
to the Company, the Company shall pay, honor and discharge when due
all liabilities of the Company related thereto to the extent the
liabilities were incurred after the Closing Date.
7.3 Books and Records.
(a) Access. For a period of six years after Closing, each
party shall provide the other party with reasonable access during
normal business hours to its books and records relating to the Company
(other than books and records protected by the attorney-client
privilege) to the extent that they relate to the condition or
operation of the Company prior to Closing and are requested by such
party to prepare its tax returns, to respond to third party claims or
for any other legitimate purpose specified in writing. Each party
shall have the right, at its own expense, to make copies of any such
books and records.
(b) Destruction. For a period of three years after
Closing, no party shall dispose of or destroy any books and records
relating to the Company to the extent that they relate to the
condition or operation of the Company prior to the Closing without
first offering to turn over possession thereof to the other party by
written notice at least 30 days prior to the proposed date of
disposition or destruction.
(c) Confidentiality. Each party may take such action as it
deems reasonably appropriate to separate or redact information
unrelated to the Company from documents and other materials requested
and made available pursuant to this Section and may condition the
other party's access to documents and other materials that it deems
confidential to the execution and delivery of an agreement by the
other party not to disclose or misuse such information.
(d) Assistance. Each party shall, upon the written
reasonable request of and at the requesting party's expense, make
personnel available to assist in locating and obtaining any books and
records relating to the Company to the extent that they relate to the
condition or operation of the Company prior to Closing and make
personnel available whose assistance, participation or testimony is
reasonably required in anticipation of, preparation for or the
prosecution or defense of any third party claim in which the other
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party does not have any adverse interest. Notwithstanding the
foregoing, neither party shall be obligated to provide any assistance
or take any action which would disrupt its business operations.
8. CONDITIONS PRECEDENT.
8.1 Conditions Precedent to Buyer's Obligations. All
obligations of Buyer to consummate this Agreement are subject to the
fulfillment, prior to or as of the Closing, of each of the following
conditions and the receipt of the following documents (subject to the
right of Buyer to waive such requirement):
(a) Certificate as to Representations, Warranties and
Covenants. All of the representations and warranties of the Seller
contained in this Agreement, the Disclosure Letter, or in any
certification, list, certificate or document delivered pursuant to the
provisions hereof shall be true at Closing Date as though such
representations and warranties were made on such date, (except to the
extent stated therein to be true as of some other date and except to
reflect changes permitted or contemplated by this Agreement), provided
however, this Section 8.1(a) shall be deemed satisfied if the failures
of such representations and warranties to be true and correct would
not individually or in the aggregate be reasonably likely to result in
damages to the Company or Buyer of more than Seven Hundred Fifty
Thousand Dollars ($750,000), and an executive officer of Seller shall
have delivered to Buyer a certificate, in the form set forth in
Section 8.1(a) of the Disclosure Letter, confirming the satisfaction
of the conditions set forth in this Section 8.1.
(b) Performance of Covenants. Seller shall have executed,
delivered, performed and complied with all agreements, covenants,
obligations and conditions required by this Agreement to be executed,
performed or complied with by it including without limitation, the
documents identified in Section 2.2(c) of the Disclosure Letter.
(c) Certificate as to Corporate Authority. Annexed to
Section 8.1(c) of the Disclosure Letter is a certified copy of the
appropriate board and shareholder's resolution of the Seller
authorizing the execution and performance of this Agreement and all
necessary documents to consummate this Agreement, along with a
certificate of the Secretary of State of each state in which the
Company is qualified to do business stating that the Company is in
good standing as of the Closing Date.
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(d) Opinion of Counsel. Seller shall have delivered to the
Buyer an opinion of counsel for Seller, dated as of the Closing Date
and in substantially the same form as set forth in Section 8.1(d) of
the Disclosure Letter.
(e) Government Filings. All governmental filings,
authorizations and approvals that are required for the consummation of
the transactions contemplated hereby and the continued operation of
the Company's businesses thereafter, shall have been duly made and
obtained on terms satisfactory to Buyer, including, without
limitation, all filings under the HSR Act, and pursuant to any rules
or regulations promulgated by the U.S. Food and Drug Administration
and the U.S. Department of Agriculture, and copies of each of the
foregoing shall have been delivered to Buyer, and all applicable
waiting periods under the HSR Act shall have expired or been
terminated.
(f) Amendment to Warehouse Storage and Services Agreement.
Amendments, substantially in the form set forth in Section 8.1(f) of
the Disclosure Letter, shall have been made to that certain Warehouse
Storage and Service Agreement dated April 1, 1998 entered into between
the Company and Wampler Foods, Inc.
(g) Non-Compete Covenants/Employment Agreements. As at
Closing, Seller shall have executed a non-competition agreement
substantially in the form set forth in Section 8.1(g) of the
Disclosure Letter and Buyer shall have entered into satisfactory
employment agreement (including covenants not to compete) with R. O.
Deavers.
(h) Consents. Seller shall have received and delivered to
Buyer all Required Consents, each in form and substance reasonably
satisfactory to Buyer, and all such Required Consents shall be in full
force and effect.
(i) Release. Seller shall have executed and delivered to
Buyer a release in the form set forth in Section Schedule 8.1(i) of
the Disclosure Letter.
(j) No Order as Action. No order shall be in effect
forbidding or enjoining the consummation of the transactions
contemplated by this Agreement. No action shall be pending seeking to
enjoin the Closing, or seeking damages or other relief against Buyer
as a result of the transactions contemplated hereby.
(k) Transitional Services Agreement. Seller and Buyer will
enter into the transitional services agreement in the form set forth
in Section 8.1(k) of the Disclosure Letter.
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8.2 Conditions Precedent to Company's and the Seller's
Obligations. All obligations of the Company and the Seller to
consummate this Agreement are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions and the receipt of
the following documents (subject to the right of the Company or Seller
to waive such requirement):
(a) Representations and Warranties. Buyer's
representations and warranties contained in this Agreement or on any
certificate or document delivered pursuant to the provisions hereof
shall be true as of the Closing as though such representations and
warranties were made on such date (except to the extent that it is
stated herein to be true as of some other date and except to reflect
changes permitted or contemplated by this Agreement) provided,
however, this Section 8.2(a) shall be deemed satisfied if the failure
of such representations and warranties to be true and correct would
not, individually or in the aggregate, be reasonably likely to result
in damages to the Company or the Seller of more than Seven Hundred
Fifty Thousand Dollars ($750,000) and an executive officer of Buyer
shall have delivered to Seller a certificate in the form set forth in
Section Schedule 8.2(a) of the Disclosure Letter, confirming the
satisfaction of the conditions set forth in this Section 8.2.
(b) Performance of Covenants. Buyer shall have executed,
performed and complied with all agreements and conditions required by
this Agreement to be executed, performed or complied with by it prior
to or as of the Closing Date and Buyer shall deliver to Seller a
certificate signed by its Secretary to such effect.
(c) Certificate as to Corporate Authority. Annexed to
Section 8.2(c) of the Disclosure Letter is a copy of the appropriate
board resolutions of Buyer ratifying or authorizing the execution and
performance of this Agreement and all necessary documents to
consummate this Agreement as certified by its secretary.
(d) Opinion of Counsel. Buyer shall have delivered to the
Seller an opinion of counsel for Buyer, dated as of the Closing Date,
in substantially the same form as set forth in Section 8.2(d) of the
Disclosure Letter.
(e) Government Filings. All governmental filings,
authorizations and approvals that are required for the consummation of
the transactions contemplated hereby shall have been duly made and
obtained on terms satisfactory to the Seller, including, without
limitation, all filings under the HSR Act, and pursuant to any rules
or regulations promulgated by the U.S. Food and Drug Administration
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and the U.S. Department of Agriculture, and copies of each of the
foregoing shall have been delivered to the Seller, and all applicable
waiting periods under the HSR Act shall have expired or been
terminated.
(f) Covenants and Agreements. Buyer shall have executed,
performed and complied in all material respects with all of the
covenants and agreements required to be executed and performed by it
under this Agreement on or prior to the Closing.
9. INDEMNIFICATION.
9.1 Indemnification of Buyer Indemnities. Seller shall indemnify
and hold harmless Buyer, the Company and their respective officers,
directors, employees, attorneys, stockholders, controlling persons,
and affiliates (collectively, the "Buyer Indemnities") from, and will
pay to the Buyer Indemnities the amount of any Damages (as defined in
Section 9.3 below) arising, directly or indirectly, from or in
connection with:
(a) the inaccuracy of any representation or warranty made
by Seller in this Agreement (but giving effect to any supplement to
the Disclosure Letter which Seller delivers to Buyer at or prior to
Closing), the Disclosure Letter, the supplements to the Disclosure
Letter, or any other certificate or document delivered by or on behalf
of Seller pursuant to this Agreement;
(b) the breach of any representation or warranty made by
Seller in this Agreement as if such representation or warranty were
made on and as of the Closing Date, but giving effect to any
supplement to the Disclosure Letter to this Agreement which Seller
delivers to Buyer at or prior to Closing;
(c) any breach by Seller of any covenant or obligation of
Seller in this Agreement, including, without limitation, the
obligation to pay Excluded Liabilities, to discharge Encumbrances
other than Permitted Encumbrances, and to pay for the Environmental
Remediation.
(d) any product shipped or manufactured by, or any services
provided by, the Company prior to the Closing Date;
(e) any claim by any person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such person with either
Seller or the Company (or any person acting on their behalf) in
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connection with this Agreement or any of the transactions contemplated
hereby;
(f) any action, arbitration proceeding, cause of action,
charge, counterclaim, cross claim, inquiry, investigation, suit, legal
action, litigation (hereinafter collectively, "Actions" and each an
"Action"), order, consent decree, injunction, determination, judgment,
award or writ of any Governmental Authority or arbitrator (hereinafter
collectively, "Orders" and each an "Order") against the Company
pending or accrued on or prior to the Closing Date;
(g) (i) the Company's failure, at any time prior to
Closing, to obtain all Material Permits required by all Environmental
Laws, to comply with all Environmental Laws, or to comply with all
Material Permits required by all Environmental Laws; or (ii) the
Company's failure, at any time prior to Closing, to comply with any
applicable covenant running with the Real Property at any time prior
to the Closing by the Company that relates to the protection of human
health, safety or the environment including, without limitation, any
such covenant that relates to protection from Hazardous Materials;
(h) any Environmental Claim (i) against the Company the
basis of which arose prior to the Closing; (ii) against any person
whose liability for any Environmental Claim the Company may have
retained or assumed at any time prior to the Closing, either
contractually or by operation of law; or (iii) against, or in respect
of, any real or personal property or operations which at any time
prior to the Closing were owned or leased, in whole or in part, by the
Company;
(i) the existence of Hazardous Materials upon, about or
beneath the Real Property at any time prior to the Closing by the
Company (whether or not caused, or contributed to, by the Company and
including Hazardous Materials that migrated on to the real property
from an off-site source prior to the Closing), or migrating or
threatening to migrate from any real property owned or leased at any
time prior to the Closing by the Company, or the existence of any
Environmental Claim or violation of any Environmental Law pertaining
to any real property owned or leased at any time prior to the Closing
by the Company;
(j) any Taxes attributable to taxable years or periods
ending on or prior to the Closing Date, that are attributable to the
Company or any affiliated group (as defined under Code Section
1504(a)) of which the Company was a member on or prior to the Closing
Date.
(k) any unpaid insurance premiums, audits, application of
experience modifiers, liabilities arising out of pre-Closing Date
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insurance contracts, any loss sensitive rating scheme whereby the
Company is obligated to pay any portion of the loss under a
retrospective rating agreement, large deductible, retention plan or
other rating scheme that obligates the Company to pay any additional
premium, as the foregoing relate to the Company s insurance coverage,
self insurance or other risk retention plans, including, without
limitation, the following types of insurance: worker's compensation,
products liability, commercial general liability, automobile
liability, property, cargo, transit, warehouseman s legal liability,
and employee benefits programs, such as health insurance, dental
insurance and any other plan that is subject to ERISA; provided,
however, the Buyer and the Company shall remit to Seller all refunds
or compensate Seller for all credits received by the Buyer or the
Company with respect to insurance premiums paid by Seller prior to the
Closing and not reflected on the Company's balance sheet.
9.2 Indemnification of Seller Indemnities. Buyer and the
Company shall indemnify and hold harmless Seller, its officers,
directors, employees, attorneys, stockholders, controlling persons and
affiliates (collectively the "Seller Indemnities") from and will pay
to the Seller Indemnities the amount of any Damages (as defined in
Section 9.3 below) arising, directly or indirectly, from or in
connection with:
(a) the inaccuracy of any representation or warranty made
by Buyer in this Agreement, or any other certificate or document
delivered by or on behalf of Buyer pursuant to this Agreement;
(b) the inaccuracy of any representation or warranty made
by Buyer in this Agreement or any other certificate or document
delivered by or on behalf of Buyer pursuant to this Agreement;
(c) the breach by Buyer of any covenant or obligation of
Buyer in this Agreement; or
(d) all liabilities assumed or maintained by the Company
pursuant to the terms of this Agreement;
(e) any liabilities or obligations of the Buyer or the
Company arising subsequent to the Closing Date pursuant to the terms
of this Agreement, except for liabilities or obligations for which
Seller is responsible pursuant to the terms of this Agreement; or
(f) any claim by any person for brokerage or finder s fees
or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such person with Buyer
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(or any person acting on its behalf) in connection with this Agreement
or any of the transactions contemplated hereby.
9.3 Damages. For purposes of this Article 9, "Damages" shall
mean (i) the net amount of any loss, liability, claim, damage
(including incidental and consequential damages), expenses (including
reasonable attorney's fees), penalty, fine or diminution of value,
whether or not involving a third party claim; and (ii) all reasonable
expenses of investigation and monitoring, reasonable costs of
containment, abatement, removal, repair, clean up, restoration,
remedial work and other reasonable response costs. Each party shall
be required to mitigate in full the Damages it seeks from the other
and to assign all of its right, title and interest in any claim for
which the other party has made payment. Damages shall be net of any
and all recoveries or credits that a party receives with respect to
the matter for which a claim for indemnification is made.
9.4 Indemnification Procedure. The indemnification obligations
under this Agreement shall be subject to the following procedures:
(a) Third Party Claims. Promptly after receipt by an
indemnified party (an "Indemnitee") under Section 9.1 or 9.2 of notice
of the commencement of any Action against it, such Indemnitee will, if
a claim is to be made against an indemnifying party (an "Indemnitor")
under such Section, give notice to the Indemnitor of the commencement
of such Action, but the failure to notify the Indemnitor will not
relieve the Indemnitor of any liability that it may have to any
Indemnitee, except to the extent that the Indemnitor demonstrates that
the defense of such action is prejudiced by the Indemnitee's failure
to give such notice. Except as otherwise stated in this Section 9.4,
the Indemnitor shall have the exclusive right to settle such Action
and to control the response thereto or the defense thereof in any suit
or proceeding arising therefrom. The Indemnitee may employ counsel
and participate in any such defense all at Indemnities' own expense.
Should the Indemnitor fail to undertake such defense or fail
diligently to prosecute an Action, the Indemnitee may undertake and
assume control of such defense, at Indemnitor's expense. If the
Indemnitor pursues the defense of any Action, (i) no compromise or
settlement of such claims may be effected by the Indemnitor without
the Indemnitee's consent unless (A) there is no finding or admission
of any violation of law or any violation of the rights of any person
and no effect on any other claims that may be made against the
Indemnitor, and (B) the sole relief provided is monetary damages that
are paid in full by the Indemnitor; and (ii) the Indemnitee will have
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no liability with respect to any compromise or settlement of such
claims effected without its consent, which shall not be unreasonably
withheld. If notice is given to an Indemnitor of the commencement of
any Action and the Indemnitor does not, within ten days after the
Indemnitee s notice is given, give notice to the Indemnitee of its
intent to assume the defense of such Action, the Indemnitor will be
bound by any determination made in such Action or any compromise or
settlement effected by the Indemnitee. Notwithstanding the foregoing,
if an Indemnitee determines in good faith that there is a reasonable
probability that an Action may adversely affect it or its affiliates
other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the Indemnitee may,
by notice to the Indemnitor, assume the exclusive right to defend,
compromise, or settle such Action, but the Indemnitor will not be
bound by any determination of an Action so defended or any compromise
or settlement effected without its consent (which may not be
unreasonably withheld).
(b) Other Claims. A claim for indemnification for any
matter not involving a third-party claim may be asserted by notice to
the party from whom indemnification is sought.
9.5 Sole and Exclusive Remedy. The parties agree that except as
otherwise provided in this Agreement, to the extent permitted by
applicable law, the indemnification provided in this Article 9 shall
be the sole and exclusive relief and remedy available to the parties
hereto with respect to a breach of a representation, warranty,
covenant or agreement contained in this Agreement if the Closing
occurs. Notwithstanding the foregoing, no provision in this Agreement
shall in any manner limit the right of a party to seek judicial or
other relief for fraud.
9.6 Notice of Breach. If before the Closing a party notifies
another party of its breach of this Agreement, such notification shall
neither prevent such other party from seeking damages for such breach
nor decrease or mitigate such damages if such other party still closes
the transactions contemplated by this Agreement.
9.7 Discovery of Breach. If before the Closing a party
discovers that another party has breached this Agreement, such
discovery shall neither prevent such party from seeking damages for
such breach nor decrease or mitigate such damages if such party still
closes the transactions contemplated by this Agreement.
9.8 Limitations on Amount. Neither party hereto will have any
liability (for indemnification or otherwise) with respect to the
matters described in Section 9.1 or 9.2 until the total of all Damages
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of the indemnified party with respect to such matters exceeds $350,000
in the aggregate (the "Basket"), and then the indemnifying party shall
be responsible to the indemnified party only for those Damages which
exceed the Basket; provided, however, the Basket (as it applies to the
Seller) shall not apply to any claim for indemnification arising out
of a breach of any representations, warranties or covenants contained
in Sections 3.1, 3.2, 3.3, 3.11, 3.13 and 3.23, and litigation
disclosed in Section 3.15 of the Disclosure Letter, indemnification
obligations under Section 9.1(k) and the Seller's obligation to
discharge all Excluded Liabilities and pay for Environmental
Remediation. The maximum liability that will be payable by Seller
hereunder shall be Twenty-Five Million Dollars ($25,000,000) (the
"Cap"); provided, however, the Cap will not apply to a claim: for
indemnification arising out of a breach of any of Seller's
representations, warranties or covenants contained in Sections 3.1,
3.2, 3.3, 3.11, or 3.13; Damages resulting from either party's willful
or intentional misrepresentations; and the Seller's obligation to
discharge all Excluded Liabilities.
9.9 Survival of Terms. All agreements, covenants, indemnity
obligations and other terms of this Agreement and any documents
contemplated under this Agreement shall survive the Closing. All
representations and warranties set forth in this Agreement or the
Disclosure Letter or certificate delivered in connection with this
Agreement and each party's indemnification obligations to one another
with respect to the representations and warranties shall expire on the
day which is one year from the Closing Date, provided, however, that
(a) the representations and warranties set forth in Sections 3.1, 3.2,
3.3, 3.5, 3.11, 3.13, and 3.23 shall survive until the expiration of
the applicable statute of limitations, giving effect to any extensions
thereof, as applicable, (the "Expiration Date") and (b) the parties'
respective indemnification obligations shall expire and not be
applicable with respect to any liability arising out of a cause of
action of the statute of limitations (giving effect to any extensions
thereof) which has expired prior to the Expiration Date. If a party
receives notice of a claim for indemnification before the applicable
Expiration Date, the party shall remain responsible for any Damages
relating thereto notwithstanding the subsequent expiration of such
representation or warranty.
9.10 Negligence and Strict Liability. THE PROVISIONS OF THIS
AGREEMENT CONCERNING CLAIMS FOR DAMAGES AND INDEMNIFICATION SHALL
APPLY WHETHER OR NOT THE PARTY OR OTHER PERSON CLAIMING SUCH DAMAGES
OR INDEMNIFICATION WAS NEGLIGENT, GROSSLY NEGLIGENT, OR STRICTLY
LIABLE IN CONNECTION WITH THE EVENTS GIVING RISE TO SUCH CLAIM
PROVIDED, HOWEVER, SELLER SHALL HAVE NO INDEMNIFICATION OBLIGATION OR
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BE RESPONSIBLE FOR DAMAGES ARISING IN CONNECTION WITH THE ACTS OR
OMISSIONS OF BUYER OR THE COMPANY SUBSEQUENT TO THE CLOSING DATE.
10. TERMINATION.
10.1 Termination of Agreement. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual agreement of Seller and Buyer;
(b) by the Seller if any of the conditions set forth in
Section 5.10 and Section 8.2 shall have become incapable of
fulfillment through no fault of the Seller and shall not have been
waived by the Seller;
(c) by the Buyer if any of the conditions set forth in
Section 8.1 shall have become incapable of fulfillment through no
fault of the Buyer and shall not have been waived by the Buyer; or
(d) by the Buyer or Seller if the Closing has not occurred
(other than through the failure of the party seeking to terminate this
Agreement to fully comply with its obligations) on or before September
15, 1998 or such later date as the parties may agree upon.
10.2 Procedure Upon Termination. In the event of termination
pursuant to Section 10.1, written notice thereof shall be immediately
given to the other party and the transactions contemplated by this
Agreement shall be terminated, without any further action by either
party. If the transactions contemplated by this Agreement are
terminated as provided herein:
(a) each party shall return all documents, work papers and
other materials of the other party, whether obtained before or after
the execution hereof, to the party furnishing the same; and
(b) such termination shall not in any way limit, restrict
or relieve any party of liability for any breach of this Agreement.
11. TAX MATTERS.
11.1 Section 338 Election. The parties shall elect to treat the
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purchase of the Shares as a purchase of assets for federal income Tax
purposes pursuant to Section 338(h)(10) of the Code and any similar
provisions under state and other income Tax laws (collectively, the
"Section 338 Election").
11.2 Apportionment of Taxable Income. With respect to any
combined, consolidated, or unitary income Tax reports or returns that
Seller files with the Company, the Parties shall elect to treat the
Closing Date as the last day of a taxable period of the Company (a
"Pre-Closing Tax Period").
Notwithstanding the foregoing, Buyer or the Company shall be
responsible for preparing and filing all income Tax reports and
returns covering the Company for Tax periods ending after the Closing
Date, even if such reports and returns cover periods prior to the
Closing Date.
11.3 Preparation and Filing of Income Tax Returns. With respect
to any income Tax report or return applicable to the Pre-Closing Tax
Period, the Company shall provide to Seller the information necessary
to prepare such reports and returns no later than 60 days after the
Closing Date.
11.4 Payment of Income Taxes. Any taxable income or loss of the
Company for any Pre-Closing Tax Period shall be included in Seller s
consolidated federal income Tax return and any consolidated, combined,
or unitary income Tax reports and returns that Seller files after the
Closing Date. Seller shall pay all Taxes owed with respect to such
Pre-Closing Tax Period and file all reports and returns when due.
Notwithstanding anything to the contrary in this Agreement, however,
Seller shall pay any income Taxes owed in connection with the Section
338 Election and the Company shall not reimburse Seller for any such
income Taxes.
11.5 Termination of Tax Sharing Agreement. Any contract or
agreement between Seller and the Company that relates to the Company
for the income Taxes of Seller shall terminate as of the Closing Date
and any rights or obligations resulting from such contract shall be
eliminated as of the Closing Date, provided that the Company shall pay
Seller at the Closing any amounts owed under any such contract,
including the estimated income Tax on the Company's operations during
the Pre-Closing Tax Period, or Seller shall pay the Company any
amounts owed under any such contract, including the estimated income
Tax benefit that Seller will realize from including the Company's
operations with Seller's operations during the Pre-Closing Tax period.
The termination of any such contract shall be pursuant to an agreement
among Seller, the Company, and any other relevant parties, which
agreement shall be in form and substance satisfactory to Buyer (the
"Tax Sharing Termination Agreement").
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11.6 Audit. If after the Closing either Buyer, Seller or the
Company receives a notice of deficiency or a proposed adjustment in
connection with any audit or other proceeding concerning any income
Tax report or return covering the operations of the Company on or
before the Closing Date, the party receiving such item shall notify
the other party, or if the Company received such notice the Company
shall notify Seller, of its receipt. Seller shall have the sole and
exclusive right to settle or contest any such notice of deficiency or
proposed adjustment and to represent the Company in connection with
any audit or other proceeding relating to any income Tax reports or
returns including the operations of the Company for any Tax periods
ending on or before the Closing Date. Seller, however, shall not
settle any issue without the prior consent of Buyer, which consent
shall not be unreasonably withheld, if such settlement would adversely
affect any past, present, or future income Taxes of Buyer or the
Company or the Company's future operations. Buyer shall have the sole
and exclusive right to settle or contest any notice of deficiency or
proposed adjustment, and to represent the Company in connection with
any audit or other proceeding relating to any income Tax report or
return including the operations of the Company for any Tax period
ending after the Closing Date, even if such report or return includes
the operations of the Company for a period before the Closing Date,
provided, however, that the settlement or other resolution of such
notice adjustment, audit or proceeding does not result in any
liability or a finding of a violation of any law against Seller.
Buyer must obtain Seller's written consent, which will not be
unreasonably withheld, to any settlement or resolution which may
result in any liability or a finding of a violation of any law against
Seller.
11.7 Books and Records. During the period beginning on the
Closing Date and ending on the day immediately preceding the fifth
anniversary of the Closing Date, Seller and Buyer shall provide each
other with reasonable access during normal business hours to the books
and records of Seller and the Company, respectively, to the extent
that such books and records relate to the condition or operation of
the Company prior to the Closing and Seller or Buyer requires such
books and records to prepare income Tax reports or returns or respond
to third party claims, including any audits or proceedings with
respect to such reports or returns. Seller and Buyer shall have the
right to make copies of such books and records at its own expense.
Prior to providing access to such books and records, Seller or Buyer
may redact such information that it considers appropriate.
11.8 Refunds. Seller shall be entitled to any Tax refund
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applicable or allocable to the Company for periods arising prior to
the Closing Date.
11.9 Allocation Statement. For purposes of Section 1060 of the
Code and any Tax election requiring an allocation of the Purchase
Price, the aggregate of the Purchase Price and the Company s
liabilities shall be allocated to Company s assets and the covenant
not to compete in accordance with a mutually agreed upon allocation
statement to be prepared by Buyer and delivered to Seller on or before
September 15, 1998. Consistent with Section 1060 of the Code, the
Parties shall allocate any adjustment to the Purchase Price
proportionately to such assets and the covenant not to compete unless
the adjustment specifically relates to a particular asset. In such a
case, the parties shall allocate such adjustment to such asset.
12. MISCELLANEOUS.
12.1 Stock Representation.
(a) Buyer understands that the Shares have not been
registered under the Securities Act of 1933 (the "Securities Act") and
the Shares are being offered and sold under an exemption from
registration provided by the Securities Act and the rules and
regulations thereunder in reliance, in good faith, upon the
representations and warranties of the Seller and the Company contained
herein. Accordingly, the certificates evidencing the Shares will bear
the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT BE OFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND BLUE SKY LAWS OR
AN EXEMPTION THEREFROM IS AVAILABLE.
(b) Buyer acknowledges that the Shares are being acquired
solely for its own account, as principal, for investment and not for
the interest of any other entity and not with a view to, or in
connection with, any resale or distribution of such Shares.
12.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, postage prepaid, telecopied
(with copy to follow) or delivered against receipt to the party to
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whom it is to be given at the following address or telecopy number (or
such other address or telecopy number as the party shall have
furnished in writing in accordance with the provisions of this
Section.
(a) If to the Company and the Seller, at:
WLR Foods, Inc.
PO Box 7000
Broadway, VA 22815-7000
Attention: James L. Keeler,
President, CEO
Telecopy: (540) 896-0498
with a copy to:
Wharton, Aldhizer & Weaver, P.L.C.
100 S. Mason Street
Harrisonburg, VA 22801
Attention: John W. Flora, Esquire
Telecopy: (540) 434-5502
(b) If to Buyer at:
Packaged Ice, Inc.
8572 Katy Freeway Suite 101
Houston, TX 77024
Attention: James F. Stuart, CFO
Telecopy: (713) 464-4681
with a copy to:
Akin, Gump, Strauss, Hauer & Feld,
LLP
300 Convent Street Suite 1500
San Antonio, TX 78205
Attention: Alan Schoenbaum, Esquire
Telecopy: (210) 224-2035
Any notice or other communication given by certified mail shall
be deemed given at the time of certification thereof, except for a
notice changing a party's address which shall be deemed given at the
time of receipt thereof.
12.3 Entire Agreement. This Agreement (together with the
Disclosure Letter) and the collateral agreements executed in
connection with the consummation of the transactions contemplated
hereby contain the entire agreement between the parties with respect
to such transactions and supersedes all prior agreements, written or
oral, with respect thereto.
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12.4 Waivers and Amendment. This Agreement may be amended and
the terms hereof may be waived only by a written instrument signed by
the parties or, in the case of a waiver, by the party waiving
compliance. No delay on the part of either party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any waiver on the part of either party of any such right,
power or privilege, or any single or partial exercise of any such
right, power or privilege, preclude any further exercise thereof or
the exercise of any other such right, power or privilege.
12.5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of Virginia
without regard to the conflicts of laws principles.
12.6 Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and its
respective successors and legal representatives. This Agreement is
not assignable without the prior written consent of the non-assigning
party, provided, however, Buyer may assign its rights (but not its
obligations) under this Agreement for (i) collateral security purposes
to any lenders providing financing to Buyer or any of its affiliates
or subsidiaries, and any such lender may exercise all of the rights
and remedies of the Buyer hereunder; and (ii) in whole or in part, to
any subsequent purchaser of the Company, or any of its subsidiaries,
or any of their divisions or any material portion of their assets
(whether such sale is structured as a sale of stock, a sale of assets,
a merger or otherwise).
12.7 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same instrument. Each
counterpart may consist of a number of copies hereof each signed by
less than all, but together signed by all, of the parties hereto.
12.8 Severability of Provisions. If any provision or any portion
of any provision of this Agreement or the application of any such
provision or any portion thereof to any person or circumstance, shall
be held invalid or unenforceable, the remaining portion of such
provision and the remaining provisions or portion of such provisions
as is held invalid or unenforceable to persons or circumstances, other
than those as to which it is held invalid or unenforceable, shall not
be affected thereby.
12.9 Expenses. Except as otherwise provided herein, the Seller
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and Buyer shall pay all of their own fees, costs and expenses
(including, without limitation, fees, costs and expenses of legal
counsel, investment bankers, accountants, brokers or other
representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with the negotiation of the letter of
intent between the parties, this Agreement, the performance of its
obligations hereunder, and the consummation of the transactions
contemplated hereby. Buyer will pay the HSR Act filing fee. The
determination of when any party, or which party, has incurred any such
expense shall be made in a manner consistent with past billing and
employment practices.
12.10 No Third Party Beneficiaries. This Agreement is solely
for the benefit of the parties and no other person shall have any
right, interest, or claim under this Agreement, except as provided in
Article 9 hereof.
12.11 Captions. All Section titles or captions contained in
this Agreement or in the Disclosure Letter or referred to herein are
for convenience only, shall not be deemed a part of this Agreement and
shall not affect the meaning or interpretation of this Agreement. All
references herein to Section shall be deemed references to such parts
of this Agreement, unless the context shall otherwise require.
12.12 Waiver Of Jury Trial. As a specifically bargained
inducement for each of the parties to enter into this Agreement (each
party having had opportunity to consult counsel), each party expressly
waives the right to trial by jury in any lawsuit or proceeding
relating to or arising in any way from this Agreement or the
transactions contemplated herein.
12.13 Arbitration Proceedings. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be
settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in
Washington, D.C. and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof,
and shall not be appealable. The prevailing party in any such
arbitration shall be entitled to recover its reasonable attorneys'
fees and expenses in connection with any such arbitration.
12.14 No Strict Construction. The parties hereto have
participated jointly in the negotiation of this Agreement. In the
event an ambiguity or question of intent or interpretation arises,
this Agreement will be construed as negotiated jointly by the parties
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hereto and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any provision of
this Agreement.
12.15 Insolvency or Bankruptcy of Buyer. Notwithstanding
anything to the contrary contained herein, in the event Buyer, prior
to Closing, shall make an assignment for the benefit of creditors,
shall file a voluntary petition in bankruptcy, or shall be adjudicated
bankrupt or insolvent, or shall file any petition or pleading seeking
or consenting to any reorganization or similar relief under any
present or future Bankruptcy Act or similar law then in addition to,
and not in lieu of, any other rights or remedies available to the
Seller at law or in equity under this Agreement, the Seller may
terminate this Agreement without further obligation by it or the
Seller to Buyer.
12.16 Public Announcements. Any public announcements or similar
publicity with respect to this Agreement or the contemplated
transactions will be issued, if at all, at such time and in such
manner as Buyer and the Seller jointly determine or as required by
law. Unless consented to by the other party in advance or required by
law, prior to the Closing the Buyer and the Seller shall keep this
Agreement strictly confidential and may not make any disclosure of
this Agreement to anyone. The Seller and Buyer will consult with each
other concerning the means by which the Company's employees, customers
and suppliers and others having dealings with the Company will be
informed of the contemplated transaction.
12.17 Confidentiality. Between the date of this Agreement and
the Closing Date, Buyer and the Seller will maintain in confidence,
and will cause the directors, officers, employees, agents, and
advisors of Buyer and the Seller to maintain in confidence any
written, oral or other information obtained in confidence from another
party or the Company in connection with this Agreement, unless (a)
such information is already known to such party or to others not bound
by a duty of confidentiality or such information becomes publicly
available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or
obtaining any consent or approval required by the consummation of the
transaction herein, or (c) the furnishing or use of such information
is required by law.
If the contemplated transactions are not consummated, each party
will return or destroy as much of such written information as the
other party may request.
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12.18 Time Is Of The Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the
essence.
[STOCK PURCHASE AGREEMENT SIGNATURE PAGE FOLLOWS]
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[STOCK PURCHASE AGREEMENT SIGNATURE PAGE]
WITNESS the following signatures and seals; and
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by its respective officers hereunto duly authorized as of the
day and year first above written.
COMPANY
CASSCO ICE & COLD STORAGE, INC.
By:______________________
Its:_____________________
SELLER
WLR FOODS, INC.
By:______________________
Its:_____________________
BUYER
PACKAGED ICE, INC.
By:_____________________
Its:____________________
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Exhibit 99
FOR IMMEDIATE RELEASE
Media Contact: Kathleen W. Lawrence
Director of Corporate
Communication
(540) 896-0406
Investor Contact: Dale S. Lam
Vice President of Finance
(540) 896-7001
WLR FOODS' SALE OF CASSCO COMPLETE
Broadway, Virginia, August 3, 1998 - James L. Keeler, President and
Chief Executive Officer of WLR Foods, Inc. (NASDAQ: WLRF), announced
that the company's sale of its Cassco Ice and Cold Storage subsidiary
to Packaged Ice, Inc. of Houston Texas was finalized on July 31, 1998.
"We are pleased to announce that the sale of Cassco is now complete.
The selling price is $59 million, plus or minus post-closing
adjustments, and the proceeds will be used to reduce debt," said
Keeler. "The reduction in our interest costs as a result of this
transaction will more than offset Cassco's anticipated operating
income for fiscal 1999, and WLR Foods' balance sheet will improve
considerably."
As part of the transaction, Neil D. Showalter, Chief Financial Officer
for WLR Foods, Inc., will move to Packaged Ice, Inc. as Senior Vice
President. Mr. Showalter was President of Cassco Ice & Cold Storage,
Inc. from 1996 to 1997. Before serving as President, Mr. Showalter
was Vice President from 1994 to 1996 and General Manager of
Administration from 1989 to 1994.
WLR Foods, Inc. will conduct a professional search to fill the
position of Chief Financial Officer. "In the meantime," said Keeler,
"I have the fullest confidence that Dale Lam, our Vice President of
Finance, will do an excellent job in overseeing the company's
financial activities during the search period."
WLR Foods, Inc. is a fully integrated provider of high quality turkey
and chicken products primarily under the Wampler Foods(R) brand. It
is nationally ranked as the seventh largest poultry processor by sales
volume and is an international leader in poultry exports. WLR Foods
has processing operations in Virginia, North Carolina, West Virginia,
and Pennsylvania.
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