<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
January 23, 1997
----------------------------------------
Date of Report (Date of Earliest Event Reported)
Commission File No. 1-9973
THE MIDDLEBY CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 36-3352497
------------------------------ --------------------------------------
(State of Incorporation) (IRS Employer Identification Number)
1400 Toastmaster Drive
Elgin, Illinois 60120-9274
---------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (847) 741-3300
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 23, 1997, The Middleby Corporation (the "Company")
completed the sale of substantially all of the assets of its Victory
Refrigeration Company ("Victory") subsidiary to an investor group led
by local management at Victory. Gross proceeds from the sale are
expected to amount to approximately $6,100,000, less amounts for
certain retained liabilities of approximately $2,600,000. The
proceeds are subject to post closing adjustments. The terms of the
sale were the results of arms-length negotiations. This sale was
announced on November 1, 1996, concluding the sale of all of the
assets of Victory. The sale and leaseback of the Victory facility
to an unrelated third party had previously been completed on
December 27, 1996 for net proceeds of approximately $4,556,000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following pro forma financial information is filed herewith.
Pro forma consolidated statement of operations (unaudited) for
the year ended December 30, 1995 and nine months ended September
28, 1996.
Pro forma consolidated balance sheet (unaudited) as of September
28, 1996.
Notes to the pro forma financial statements (unaudited).
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<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements are
presented to illustrate the effect of certain adjustments to the historical
consolidated financial statements that result from the sale of Victory, as
if the sale and related transactions had occurred at the beginning of the
periods presented for the Consolidated Statements of Earnings from
Continuing Operations and as of September 28, 1996 for the Consolidated
Balance Sheet.
The accompanying pro forma consolidated financial statements should be read
in conjunction with the Company's historical consolidated financial
statements and notes thereto appearing elsewhere herein. The Company's
historical financial statements have been restated to reflect the sale of
Victory as a discontinued operation. The pro forma consolidated financial
statements are presented for informational purposes only and are not
necessarily indicative of actual results had the sale and related
transactions occurred at the beginning of the periods presented for the
Consolidated Statements of Operations from Continuing Earnings and as of
September 28, 1996 for the Consolidated Balance Sheet, nor do they purport
to represent the results of future operations of the Company.
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<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
FROM CONTINUING OPERATIONS
(AMOUNTS IN $000'S, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 28, 1996 YEAR ENDED DECEMBER 30, 1995
------------------------------------ ----------------------------
PRO RESTATED PRO
HISTORICAL(a) ADJUSTMENTS FORMA HISTORICAL(b) ADJUSTMENTS FORMA
------------- ----------- ----- ------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . . . . . . . . $89,571 $89,571 $106,348 $106,348
Cost of Sales. . . . . . . . . . . . . . . . . 63,080 63,080 73,812 73,812
------ ------ ------ ------
Gross Profit. . . . . . . . . . . . . . . 26,491 26,491 32,536 32,536
Selling and Distribution Expenses. . . . . . . 13,280 13,280 15,385 15,385
General and Administrative Expenses. . . . . . 6,735 6,735 8,470 8,470
Provision for Product Line Discontinuance. . . - - 900 900
----- ----- ----- ---
Income from Operations. . . . . . . . . . 6,476 6,476 7,781 7,781
Interest Expense and Deferred Financing
Costs . . . . . . . . . . . . . . . . . . . 3,277 3,277 4,319 4,319
Other (Income) Expense, Net. . . . . . . . . . 132 132 547 547
--- --- --- ---
Earnings Before Income Taxes . . . . . . . . . 3,067 3,067 2,915 2,915
Provision (Benefit) for Income Taxes . . . . . 1,069 1,069 (340) (340)
----- ----- --- ---
Net Earnings from Continuing
Operations . . . . . . . . . . . . . . $1,998 $1,998 $3,255 $3,255
------ ------ ------ ------
------ ------ ------ ------
Earnings Per Share from Continuing
Operations. . . . . . . . . . . . . . . . . $0.24 $0.24 $0.37 $0.37
----- ----- ----- -----
----- ----- ----- -----
Weighted Average Shares of Common
Stock Outstanding . . . . . . . . . . . . . 8,406,000 8,406,000 8,685,000 8,685,000
</TABLE>
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<PAGE>
THE MIDDLEBY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 28, 1996
(AMOUNTS IN $000'S)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
-----------
ASSETS HISTORICAL(a) DR. CR. PRO FORMA
- ------------------------------------------------- ------------- --- --- ---------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents. . . . . . . . . . . . $958 $958
Accounts Receivable, net . . . . . . . . . . . . 19,115 19,115
Inventories, net . . . . . . . . . . . . . . . . 21,062 21,062
Prepaid Expenses and Other . . . . . . . . . . . 1,271 1,271
Current Deferred Taxes . . . . . . . . . . . . . 2,086 2,086
Net Assets of Discontinued Operations. . . . . . 9,443 637(c) -
8,806(g)
----- ----- ----- -----
Total Current Assets . . . . . . . . . . . . 53,935 -- 9,443 44,492
Property, Plant and Equipment. . . . . . . . . . 18,480 18,480
Excess Purchase Price Over Net Assets
Acquired . . . . . . . . . . . . . . . . . . 7,568 7,568
Deferred Taxes . . . . . . . . . . . . . . . . . 2,930 2,930
Other Assets . . . . . . . . . . . . . . . . . . 2,040 2,040
----- ----- ----- -----
Total Assets . . . . . . . . . . . . . . . . $84,953 $ - $9,443 $75,510
------- ------- ------ -------
------- ------- ------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Maturities of Long-Term Debt . . . . . . $2,556 $2,556
Accounts Payable . . . . . . . . . . . . . . . . 12,184 12,184
Accrued Expenses . . . . . . . . . . . . . . . . 7,830 7,830
----- ------ ------ -----
Total Current Liabilities. . . . . . . . . . 22,570 - - 22,570
Long-Term Debt . . . . . . . . . . . . . . . . . 45,132 637(c) 36,439
3,500(d)
4,556(e)
Minority Interest and Other Non-current
Liabilities . . . . . . . . . . . . . . . . . 1,900 1,900
Shareholders' Equity:
Preferred Stock, $.01 par value;
nonvoting; 2,000 shares authorized;
none issued. . . . . . . . . . . . . . . . . - -
Common Stock, $.01 par value;
20,000 shares authorized; 8,422
issued and outstanding . . . . . . . . . . . 84 84
Paid-in Capital . . . . . . . . . . . . . . . 28,001 28,001
Cumulative Translation Adjustment . . . . . . (275) (275)
Accumulated Deficit . . . . . . . . . . . . . (12,459) 750(f) (13,209)
-------- --- ------ --------
Total Shareholders' Equity . . . . . . . . . 15,351 750 - 14,601
------ --- ------ ------
Total Liabilities and
Shareholders' Equity . . . . . . . . $84,953 $9,443 $ - $75,510
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
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<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The unaudited pro forma financial information should be read in conjunction with
historical financial statements contained in the Company's Annual Report on Form
10-K for the year ended December 30, 1995 and Quarterly Report on Form 10-Q for
the quarter ended September 28, 1996. Certain amounts have been reclassified to
present the financial statements consistently between periods. The pro forma
information is presented for illustrative purposes only.
(a) The historical information for the period ended September 28, 1996 was
previously reported in the Company's quarterly report on Form 10-Q for
the quarter ended September 28, 1996 and was restated to reflect
Victory as a discontinued operation.
(b) The historical information for the fiscal year ended 1995 has been
restated in this filing to reflect Victory as a discontinued
operation.
(c) Represents the reduction in net assets of Victory in the form of net
cash generated by operations prior to January 23, 1997 utilized to pay
down the Company's revolving credit facility.
(d) The expected proceeds for the sale of Victory of $6,100,000, net of
payments for certain liabilities of approximately $2,600,000, are
anticipated to be utilized to pay down the Company's term loan and
revolving credit facility. These sale proceeds are subject to
post-closing adjustments.
(e) Represents the net proceeds from the sale of property and facilities
of Victory utilized to pay down the Company's term loan and revolving
credit facility.
(f) Represents additional operating losses of the discontinued operation
in excess of amounts estimated and recorded at September 28, 1996,
which reduced the ultimate sale proceeds realized.
(g) Represents the reported net assets of Victory to be disposed in
conjunction with the sale.
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<PAGE>
(c) Exhibits
(10)(iii)(j) Agreement of Purchase and Sale of the Company's Cherry
Hill, New Jersey facility with attached lease,
incorporated by reference Exhibit (10)(iii)j to the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 26, 1996
(10)(iii)(k) Asset Purchase Agreement among Middleby Marshall Inc.,
Victory Refrigeration Company and Victory Acquisition
Group dated December 27, 1996
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE MIDDLEBY CORPORATION
By: /s/ John J. Hastings
---------------------------
John J. Hastings
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Dated: February 7, 1997
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<PAGE>
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of December 27, 1996 by and between
VICTORY ACQUISITION GROUP L.L.C. a Delaware limited liability company ("Buyer").
VICTORY REFRIGERATION COMPANY, a Delaware corporation ("Seller"), and MIDDLEBY
MARSHALL INC., a Delaware corporation ("Middleby").
This Agreement sets forth the terms and conditions upon which Seller will
sell and convey to Buyer and Buyer will purchase from Seller, all of the assets
of Seller and assume certain of the liabilities of Seller as hereinafter set
forth.
In consideration of the mutual agreements contained herein, intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
1.01 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, at the closing of the transactions contemplated by this
Agreement (the "Closing"), Seller shall sell, transfer, convey, assign and
deliver to Buyer and Buyer shall purchase, acquire and accept from Seller all of
the Assets (the "Acquisition"). The Assets shall be transferred free and clear
of all security interests, liens, pledges, liabilities, charges and encumbrances
of every nature and description, except for the Assumed Liabilities (as
hereinafter defined).
The term "Assets" means all of the properties, assets, interests and
rights, real or personal, tangible or intangible, whether or not reflected on
the books or records of Seller or the balance sheet of Seller as of the Closing
Date (the "Closing Balance Sheet"), owned by Seller or used or held for use in
connection with Seller's business (the "Business"), including any business prior
to the date hereof or currently conducted or located at the headquarters of
Seller at 110 Woodcrest Road, Cherry Hill, New Jersey 08003 (the
"Headquarters"), and including, without limitation, all of the right, title and
interest of Seller to all assets reflected on the Closing Balance Sheet and in
the following:
(i) all interests related to the lease of the Headquarters, including
all amendments and modifications thereto, a copy of which is set forth as
Exhibit A hereto (the "Lease"), together with Seller's right, title and interest
in all buildings, improvements, fixtures and other appurtenances thereto;
(ii) all personal property, including without limitation, all
machinery and equipment ("Machinery and Equipment") and furniture and fixtures
("Furniture and Fixtures"),
<PAGE>
and computer hardware and software owned or used by Seller or located at its
Headquarters, including without limitation all personal property reflected on
the unaudited balance sheet of Seller as at November 23, 1996 previously
delivered by Seller to Buyer (the "Preliminary Balance Sheet"), other than
personal property sold in the ordinary course of business in accordance with
past practice and the Closing Balance Sheet;
(iii) all raw materials, work in process and finished goods of
Seller as of the Closing Date (as herein defined) including, without limitation,
all inventory reflected on the Closing Balance Sheet and all raw materials, work
in process and finished goods located at the Headquarters on the Closing Date
("Inventory");
(iv) all accounts receivable of Seller on the Closing Date or
reflected on the Closing Balance Sheet ("Closing A/R");
(v) all rights of Seller under express or implied warranties from
suppliers of Seller and all of Seller's other claims, causes of action, rights,
entitlements and demands against third parties;
(vi) all prepaid expenses of Seller on the Closing Date;
(vii) subject to Seller's rights pursuant to Section 1.11 hereof,
all right, title and interest of Seller in, to and under all contracts
(including without limitation all supply and distribution agreements and joint
venture agreements), leases, agreements, commitments, licenses, and all other
legally binding arrangements ("Contracts"), whether oral or written, including
without limitation all Contracts that are listed in the Disclosure Schedule (the
"Disclosure Schedule") attached hereto and made a part hereof and to be
delivered by Seller to Buyer on the date hereof and updated up to the Closing
Date and all Contracts that are not required to be listed in the Disclosure
Schedule pursuant to this Agreement;
(viii) all books of account, general, financial, accounting and
personnel records, files, invoices, correspondence, customer and supplier lists
and other data owned or used by Seller prior to and on the Closing Date (the
"Corporate Records");
(ix) all rights of every nature and description under or arising out
of all insurance policies, fidelity bonds, surety bonds, guaranties and third
party indemnities of or for the benefit of Seller with respect to the Assets;
(x) all intellectual property rights of Seller, including any
copyrights, patents, inventions, processes, formulas, trade secrets, know-how,
technology, technical information, trademarks, trade names, brand names, service
marks and all other marks and names owned, licenses or used by Seller, and any
symbols, logos or designs owned or used by Seller, including without limitation
the names Victory and Victory Refrigeration Company and the logos set forth on
Exhibit B hereto (the "Intellectual Property"); provided, that the foregoing
shall not include any rights to the use of the name "Middleby," or any of
Middleby's logos; provided, that Buyer
<PAGE>
shall have the right to use remaining Inventory, including packaging and
supplies, that bears the name "Middleby" in conjunction with the name "Victory"
for up to one year following the Closing date; provided, that with respect to
the metal plates which are attached to products currently produced by Seller
(which after the Closing Date will be produced by Buyer, which bear the name
"Middleby." Buyer agrees to discontinue use of such metal plates as soon as
practicable following the Closing Date;
(xi) all licenses, approvals, and any other authorizations granted by
any state or other authority (collectively, the "Authorizations").
1.02 EXCLUDED ASSETS. Notwithstanding anything herein to the contrary, the
following assets of Seller shall not constitute Assets and shall not be
transferred to Buyer at the Closing (the "Excluded Assets"):
(i) except as otherwise set forth herein, all cash or cash
equivalents of Seller;
(ii) except as otherwise set forth herein, the stock books and minute
books of Seller (the "Stockholder Records"); PROVIDED, HOWEVER, that Seller
shall deliver to Buyer copies of all Stockholder Records promptly following the
signing of this Agreement;
(iii) any rights of Seller arising under this Agreement or under
any other agreement between Seller and Buyer entered into on or after the date
of this agreement;
(iv) any inventory of Seller that is Excess (as hereinafter defined)
or Obsolete (as hereinafter defined);
(v) any rights to the use of the name "Middleby," or any of
Middleby's logos;
(vi) any rights to tax refunds;
(vii) any receivables owed to seller by Middleby or its
affiliates; and
(viii) all rights against third parties relating to non-assumed
liabilities.
1.03 LIABILITIES. Buyer shall not assume any liabilities of Seller in
connection with the sale pursuant to this Agreement, except for those
liabilities specifically set forth in and as limited by Exhibit C hereto and/or
reflected on the Closing Balance Sheet (the "Assumed Liabilities"). Exhibit C
shall include a description of each Contract that Buyer has agreed to assume
(the "Assumed Contracts"). At the Closing, Buyer shall assume and agree to pay,
discharge and/or perform as an when due all of the Assumed Liabilities. Any and
all liabilities incurred by Seller in connection with the Assets prior to the
Closing Date (as hereinafter defined) which are not among the Assumed
Liabilities shall remain the sole responsibility of and be paid by Seller.
<PAGE>
1.04 PRORATION OF CERTAIN CHARGES. In determining the value of any Balance
Sheet Item (as hereinafter defined), particularly the Assumed Liabilities, for
purposes of calculating the Purchase Price (as hereinafter defined) or any
Purchase Price Adjustment (as hereinafter defined), the following items shall,
at the times set forth below, be prorated retroactively effective as of midnight
on the Closing Date, with all such items attributable to periods prior to 12:01
a.m. on the Closing Date being for the sole account of Seller and all such items
attributable to periods after the Closing Date being for the sole account of
Buyer: (i) on the Closing Date, the rent, taxes, fees and deposits of Seller or
applicable to the Assets, and (ii) as promptly as practicable following the
Closing Date, but in any event no later than three (3) months thereafter, the
water, sewer, gas, electricity, telephone and other utilities charges applicable
to the Assets.
1.05. PURCHASE PRICE. (a) Subject to the terms and conditions of this
Agreement, the total purchase price for the Assets (the "Purchase Price") shall
be equal to the Net Tangible Book Value as of the Closing Date. On the Closing
Date, Buyer shall pay Seller an amount in cash equal to (i) the Purchase Price
minus (ii) $1,000,000 (such $1,000,000, the "Escrow Fund"). On the Closing
Date, Buyer shall pay the Escrow Fund into the Escrow Account pursuant to
Section 1.06 hereof. The term "Net Tangible Book Value" shall mean Closing A/R
plus Inventory plus Machinery and Equipment plus Furniture and Fixtures plus
Other Assets minus Assumed Liabilities (each of "Closing A/R", "Inventory",
"Machinery and Equipment". "Furniture and Fixtures", "Other Assets", and
"Assumed Liabilities" is referred to herein as a "Balance Sheet Item" and taken
together, all of such items are referred to herein as the "Balance Sheet
Items"). "Other Assets" shall mean those Assets listed and valued (in
accordance with Section 1.05(b) hereof) on Section 1.05(b) of the Disclosure
Schedule.
(b) For purposes of calculating the Purchase Price:
(i) Closing A/R shall be valued at an amount equal to one hundred
percent of face value on the Closing Date minus amounts deemed to be
uncollectible by the controller of Seller minus amounts that have not arisen out
of the ordinary course of business of Seller as determined by the controller of
Seller.
(ii) Inventory shall be valued at cost in accordance with generally
accepted accounting principles consistently applied ("GAAP"). The value of the
Inventory on the Closing Balance Sheet shall not include any raw materials, work
in process or finished goods which are deemed to be Excess or Obsolete.
"Excess" shall mean items, stated in accordance with GAAP, which are not
anticipated to be used in production within the twelve months following the
Closing Date or twenty-four months for items which are specifically identified
as inventory held to service products that have been sold prior to the Closing
Date. "Obsolete" shall mean items which have been discontinued or which are
used in the production of discontinued items or which are not currently being
offered for sale at the same price or higher and on the same terms and
conditions as they previously were offered to customers or which are of
below-standard quality, including, without limitation, all raw materials, work
in process or finished goods relating to Seller's product known as the Glass
Door Merchandiser. The parties hereto agree that the amount of Inventory
reflected therein (utilizing definitions of Excess and Obsolete Inventory noted
above in this
<PAGE>
paragraph), shall be binding on the parties hereto and shall be used in
preparing the Closing Balance Sheet, subject to (a) additions or deletions of
Inventory from the date of the October Inventory to the Closing Date and (b) the
determination of the amount of Excess and Obsolete Inventory, including any
changes in the amounts of Obsolete or Excess Inventory from the date of the
Preliminary Balance Sheet to the Closing Date.
(iii) Machinery and Equipment shall be valued at the lower of
depreciated cost or market value (based on a going concern value) in the
aggregate.
(iv) Furniture and Fixtures shall be valued at the lower of
depreciated cost or market value (based on a going concern value) in the
aggregate.
(v) "Other Assets" shall be valued at the lower of depreciated cost
or market value. Such assets shall not exceed $250,000 in the aggregate.
(vi) "Assumed Liabilities" shall be valued at face amount.
(vii) In the event that the parties hereto are not able to agree
upon the market value of any Asset, they shall mutually select an appraiser to
make such a determination and such appraiser's determination shall be binding
upon the parties hereto.
(c) The Purchase Price for the Assets shall be allocated as set forth in
Exhibit D of the Disclosure Schedule, which the parties hereto agree will be
prepared by Buyer on the Closing Date. Each of Buyer and Seller agrees to
report the transactions consummated pursuant to this Agreement for tax reporting
purposes in accordance with and based upon the allocation set forth in Exhibit D
hereto, and shall comply with, and furnish information required by, Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"), and any Treasury
regulations thereunder.
1.06. ESCROW FUND; PURCHASE PRICE ADJUSTMENT. (a) On the Closing Date,
(i) Seller and Buyer shall set up an escrow account (the "Escrow Account"),
appoint American National Bank and Trust Company of Chicago, as escrow agent
(the "Escrow Agent") and execute and Escrow Agreement in the form set forth in
Exhibit E hereto and (ii) Buyer shall pay the Escrow Fund into the Escrow
Account.
(b) The Purchase Price shall be subject to adjustment (the "Purchase Price
Adjustment") after the Closing Date as set forth below:
(i) Within 30 days following the Closing Date, Seller shall submit to
Buyer in writing descriptions of any adjustments (the "Seller's Proposed
Adjustments") that it believes should be made to the value of any of the Balance
Sheet Items preliminarily agreed upon by the parties hereto on the Closing Date.
<PAGE>
(ii) Within 45 days after receipt of Seller's Proposed Adjustments
(the "Adjustment Period"), Buyer shall submit to Seller in writing descriptions
of any adjustments (the "Buyer's Proposed Adjustments" and together with
Seller's Proposed Adjustments, the "Proposed Adjustments") that it believes
should be made to the value of any of the Balance Sheet Items preliminarily
agreed upon by the parties hereto on the Closing Date. Any amounts remaining in
the Escrow Account following the end of the Adjustment Period which exceed the
aggregate amount of Buyer's Proposed Adjustments shall be promptly paid to
Seller. Buyer and Seller agree to use best efforts to determine whether or to
what extent the respective Proposed Adjustments are agreed upon by the parties
hereto, appropriate adjustments shall be made to the Balance Sheet Items and
Purchase Price and the parties hereto shall promptly instruct the Escrow Agent
to pay to Buyer an amount equal to the non-disputed amount of Buyer's Proposed
Adjustments, less any amount of Seller's Proposed Adjustments. to the extent
that the parties hereto have not agreed upon any or all of the Proposed
Adjustments within 30 days of the submission of Buyer's Proposed Adjustments to
Seller, then the issues subject to the dispute shall be submitted to and
determined in accordance with ("GAAP") by Arthur Andersen LLP or another
independent accounting firm of national reputation mutually appointed by Buyer
and Seller (the "Independent Accounting Firm"), which shall make the definitive
determination. The fees, expenses and other costs of retaining the Independent
Accounting Firm shall be paid by the part whose net Proposed Adjustments
submitted to the Independent Accounting Firm are the furthest away in dollar
terms from the Independent Accounting Firm's final determination (the "Non-
Prevailing Party"). The decision of the Independent Accounting Firm shall have
the legal effect of an arbitral award and shall be final, binding and conclusive
on Seller and Buyer. After the Independent Accounting Firm has made its
determination with respect to the Proposed Adjustments, the parties hereto shall
promptly instruct the Escrow Agent to pay to Buyer any amounts payable to Buyer
as determined by the Independent Accounting Firm.
(iii) Once all Proposed Adjustments have been determined by
agreement between the parties or by the Independent Accounting Firm as set forth
above, and Buyer has been paid all amounts it is due to be paid pursuant to such
Proposed Adjustments, then any amounts remaining in the Escrow Account,
including any interest accrued thereon, shall be delivered to Seller; PROVIDED,
that Buyer shall be entitled to receive the interest that has accrued on funds
paid to Buyer out of the Escrow Fund. Buyer and Seller shall equally pay any
fees and expenses of the Escrow Agent. In the event that Buyer is deemed to owe
Seller any amounts as a result of the Proposed adjustments as set forth above,
then Buyer shall promptly pay such amounts in cash to Seller.
1.07. WARRANT AGREEMENT; LICENSE AGREEMENT. On the Closing Date Buyer
and Seller shall execute (a) a Warrant Agreement in the form set forth as
Exhibit F hereto (the "Warrant Agreement"), and (b) a License Agreement in the
form set forth as Exhibit G hereto (the "License Agreement').
1.08 CLOSING. (a) The Closing will take place at the offices of Richards &
O'Neil; 885 Third Avenue; New York, New York 10022 on January 15, 1997 at 10:00
a.m., or if the conditions to Closing set forth in articles 6 and 7 have not
been satisfied by such date, as soon as
<PAGE>
practicable after such conditions shall have been satisfied, or at such other
time, date and place as the parties may mutually agree (the "Closing Date").
(b) At the Closing, Seller will deliver to Buyer:
(i) a duly executed Bill of Sale in the form annexed hereto as
Exhibit H, transferring title to the Assets (the "Bill of Sale");
(ii) all documents of title necessary to transfer ownership of the
Assets to Buyer;
(iii) executed assignments of the Lease and the Assumed Contracts
in term and substance reasonably satisfactory to Buyer;
(iv) possession of the Lease, Assumed Contracts, Inventory, Furniture
and Fixtures, Machinery and Equipment, Corporate Records and all other Assets,
free and clear of all liens and encumbrances except for the Assumed Liabilities;
(v) possession of all records necessary to substantiate the value of
and to maximize Buyer's ability to collect on the Closing A/R;
(vi) executed assignments of the Intellectual Property;
(vii) all estoppel certificates, modifications, assignments and
consents of landlords, licensors and third-party vendors;
(viii) the release of any Uniform Commercial Code security
interests and financing statements encumbering any of the Assets shall be
delivered to Buyer from the creditors holding the same;
(ix) evidence that all corporate action required to be taken by
Seller, and all action required to be taken by the stockholders of Seller, has
been taken to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby so that this Agreement and
all documents executed and delivered by Seller pursuant hereto are binding and
enforceable against seller;
(x) executed copies of the consents referred to in Section 2.21
hereof;
(xi) executed copies of all documents and agreements referred to in
this Agreement or the Exhibits hereto or which are necessary or appropriate to
complete the transactions contemplated by this Agreement;
(xii) the opinion of counsel referred to in Section 7.09 hereof;
<PAGE>
(xiii) all such other deeds, endorsements, assignments and other
instruments which are necessary to vest in Buyer good and marketable title to
the Assets; and
(xiv) all other previously undelivered documents required to be
delivered by Seller to Buyer at or prior to the Closing in connection with the
transactions contemplated by this Agreement.
(c) At the Closing, Buyer will deliver to Seller:
(i) executed assumptions of the Lease and the Instrument of
Assumption of Liabilities in the respective forms of Exhibits I and J hereto;
(ii) the Purchase Price less the Escrow Funds referred to in Section
1.06;
(iii) executed copies of all documents and agreements referred to
in this Agreement or the Exhibits hereto or which are necessary or appropriate
to complete the transactions contemplated by this Agreement;
(iv) evidence that all corporate action required to be taken by Buyer
has been taken to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby so that this Agreement and
all documents executed and delivered by Buyer pursuant hereto are binding and
enforceable against Buyer;
(v) the opinion of counsel referred to in Section 6.07 hereof; and
(vi) all other previously undelivered documents required to be
delivered by Buyer to Seller at or prior to the Closing.
(d) At the Closing, Buyer will deliver to the Escrow Agent the Escrow
Fund.
1.09. FURTHER ASSURANCES. After the Closing, Seller shall from time to
time, at the request of Buyer and at the sole cost and expense of Seller,
execute and deliver such other instruments of conveyance and transfer and take
such other actions as Buyer may reasonably request, in order to more effectively
consummate the transactions contemplated hereby and to vest in Buyer good and
marketable title to the Assets (including, without limitation, reasonable
assistance in the collection (Seller shall be reimbursed by Buyer for reasonable
out of pocket expenses in connection with any such collection) or reduction to
possession of any of such Assets). After the Closing, Buyer shall from time to
time, at the request of Seller and at the sole cost and expense of Buyer,
execute and deliver such other instruments and take such other actions as Seller
may reasonably request, in order to more effectively consummate the transactions
contemplated hereby.
<PAGE>
1.10. MAIL RECEIVED AFTER CLOSING. Following the Closing, Buyer may
receive and open all mail addressed to the Headquarters or Seller which relates
to the Assets or the Business and deal with the contents thereof to the extent
that such mail and the contents thereof relate to the Assets or the Business and
any of the obligations or liabilities assumed by Buyer pursuant to this
Agreement.
1.11. BOOKS AND RECORDS. The Seller will leave at the Headquarters all
business books and records relating to the business or the Assets prior to the
Closing Date, including all Corporate Records and all invoices, purchase orders
and other records which may be necessary or useful to enable Buyer to service
its current and prospective customers and accounts of the Business. Such
business records may be in the form of written documents or computer disks.
After the Closing Date, Buyer agrees to allow Seller access to such business
records at Buyer's headquarters for legitimate business purposes not adverse to
Buyer's business interests upon reasonable notice. Buyer agrees to retain all
business books and records for a period of at least seven years following the
Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
2.01. CORPORATE ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to carry on its business as it is now
being conducted and to own the properties and assets it now owns. Seller is
duly qualified or licensed to do business as a foreign corporation in all
jurisdictions in which the ownership of property or the conduct of its business
requires such qualification except jurisdictions in which Seller's failure to
qualify to do business will have no material adverse effect on the business,
prospects, operations, properties, assets or condition (financial or otherwise)
of Seller (a "Material Adverse Effect"). The copies of the Certificate of
Incorporation and By-Laws of Seller heretofore delivered to Buyer are complete
and correct copies of such instruments as presently in effect.
2.02. AUTHORIZATION. Seller has full corporate power and authority to
enter into and perform its obligations under this Agreement, to sell, assign,
transfer, convey and deliver the Assets pursuant to this Agreement, and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Seller and, assuming this Agreement has been duly
authorized, executed and delivered by Buyer, is a legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
except that (i) such enforcement may be subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
<PAGE>
2.03. OWNERSHIP OF CAPITAL STOCK. As of the date of this Agreement,
all of the authorized, issued and outstanding capital stock of Seller is owned
by Victory International, Inc., a Delaware corporation ("Victory
International"), which is a wholly-owned subsidiary of Middleby, Middleby is a
wholly-owned subsidiary of The Middleby Corporation, a Delaware corporation.
2.04. SUBSIDIARIES AND AFFILIATES. Seller does not own, directly or
indirectly, any capital stock or other equity securities of any corporation or
have any direct or indirect equity or ownership interest in any business or
assets other than the Business and the Assets.
2.05. NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provision of the Certificate of Incorporation or By-Laws of Seller,
or, except as specified in Section 2.05 of the Disclosure Schedule, violate, or
be in conflict with, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any Lien (as hereinafter defined) upon any Assets
under any agreement or commitment to which Seller is a party or by which Seller
is bound, or to which the property of Seller is subject, or violate any statute
or law or any judgement, decree, order, regulation or rule of court or
governmental authority.
2.06. FINANCIAL STATEMENTS. Seller has heretofore delivered to Buyer:
the Preliminary Balance Sheet and an unaudited statement of income for the
eleven months ended on November __, 1996 (the "Preliminary Income Statement" and
together with the Preliminary Balance Sheet, the Additional Financial Statements
and the Closing Balance Sheet, the "Financial Statements"). The respective
balance sheet portions of the Financial Statements and the notes thereto fairly
present the assets, liabilities and financial condition of Seller as at the
respective dates thereof, and the respective statement of income portions of the
Financial Statements and the notes thereto fairly present the results of
operations for the period therein referred to, all in accordance with GAAP
consistently applied throughout the periods.
2.07 NO UNDISCLOSED LIABILITIES. Seller does not have any liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
were not fully reflected or reserved against in the Financial Statements except
for liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date of the Preliminary Balance Sheet
and which are reflected or reserved against in the Closing Balance Sheet; and
the reserves reflected in the Financial Statements are adequate, appropriate and
reasonable.
2.08. ACCOUNTS RECEIVABLE. All accounts receivable of Seller, whether
reflected in the Financial Statements or otherwise, represent sales actually
made in the ordinary course of business of Seller in accordance with its normal
credit policies, and are current and collectible net of any reserves shown on
the Financial Statements (which reserves are adequate and were calculated
consistent with past practice). Subject to such reserve, each of the accounts
receivable either has
<PAGE>
been collected in full or will be collected in full, without any set-off, within
90 days after the day on which it became due and payable.
2.09. INVENTORIES. Except as set forth in Section 2.09 of the
Disclosure Schedule; (i) all of the Inventory consists of a quality and quantity
usable and salable in the ordinary and usual course of business, except for
items which are Obsolete or Excess, all of which have been written off for
purposes of the Financial Statements; (ii) all inventories not written off have
been reflected on the Financial Statements at the lower of cost or market; (iii)
the quantities of each type of inventory (whether raw materials,
work-in-process, or finished goods) are not Excess, but are reasonable and
warranted in the present circumstances of Seller; and (iv) all work in process
and finished goods inventory is free of any defect or other deficiency other
than as set forth in the warranty reserves in the Financial Statements.
2.10. ABSENCE OF CERTAIN CHANGES. Except as and to the extent set
forth in Section 2.10 of the Disclosure Schedule, since the date of the
Preliminary Balance Sheet, Seller has not:
(a) Suffered any material adverse change in its working capital, financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves, business, operations or prospects;
(b) Incurred any liabilities or obligations absolute, accrued, contingent
or otherwise except items incurred in the ordinary course of business and
consistent with past practice, none of which exceeds $25,000 (counting
obligations or liabilities arising from one transaction or a series of similar
transactions, and all periodic installments or payments under any lease or other
agreement providing for periodic installments or payments, as a single
obligation or liability), or increased, or experienced any change in any
assumptions underlying or methods of calculating, any bad debt, contingency or
other reserves:
(c) Paid, discharged or satisfied any claim, liabilities or obligations
(absolute, accrued, contingent or otherwise) other than the payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice or liabilities and obligations reflected or reserved against in the
Preliminary Balance Sheet or incurred in the ordinary course of business and
consistent with past practice.
(d) Permitted or allowed any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, except for
liens for current taxes not yet due;
(e) Written down the value of any inventory (including write-downs by
reason of shrinkage or mark-down) or written off as uncollectible any notes or
accounts receivable, except for immaterial write-downs and write-offs in the
ordinary course of business and consistent with past practice;
(f) Canceled any debts or waived any claims or rights of substantial
value;
<PAGE>
(g) Sold, transferred, or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible), except (i) in the
ordinary course of business and consistent with past practice and (ii) for the
pending sale of the Headquarters to Vineland Construction Co. ("Vineland"), a
New Jersey corporation (the "Headquarters Sale/Leaseback);
(h) Disposed of or permitted to lapse any rights to the use of any patent,
trademark, trade name or copyright, or disposed of or disclosed to any person
other than representatives of Buyer any trade secret, formula, process or
know-how not theretofore a matter of public knowledge;
(i) Granted any increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension, profit sharing or
other plan or commitment) or any increase in the compensation payable or to
become payable to any officer or employee other than annual increases in
accordance with past practices;
(j) Made any single capital expenditure or commitment in excess of $25,000
for additions to property, plant, equipment or intangible capital assets or made
aggregate capital expenditures and commitments in excess of $50,000 for
additions to property, plant, equipment or intangible capital assets;
(k) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly any shares of capital stock or other securities
of Seller;
(l) Made any change in any method of accounting or accounting practice;
(m) Paid, loaned or advanced any amount to, or sold, transferred or leased
any properties or assets (real, personal or mixed, tangible or intangible) to,
or entered into any agreement or arrangement with, any of its affiliates,
including Middleby or any of its affiliates: or
(n) Agreed, whether in writing or otherwise, to take any action described
in this Section
2.11. TITLE TO PROPERTIES: ENCUMBRANCES. Seller has good, valid and
marketable title to all the properties and assets which it purports to own
(real, personal and mixed, tangible and intangible), including, without
limitation, all of the Assets and the properties and assets reflected the
Financial Statements (except for persona l property having an aggregate book
value not in excess of $100,000 sold since the date of the Preliminary Balance
Sheet in the ordinary course of business and consistent with past practice).
All properties and assets reflected in the Financial Statements are free and
clear of all title defects or objections, liens, claims, charges, security
interests or other encumbrances of any nature whatsoever including, without
limitation, leases, chattel mortgages, conditional sales contracts, collateral
security arrangements and other title or interest retention arrangements
("Liens"), except, with respect to all such properties and assets: (a) Liens
shown on the Financial Statements as securing specified liabilities or
obligations with
<PAGE>
respect to which no default exists: (b) Liens for current taxes not yet due: and
(c) Liens securing indebtedness to Northwestern Mutual Life Insurance Company
and Sanwa Business Credit Corporation. The Assets being purchased by Buyer
pursuant to this Agreement include all rights, properties and other assets
necessary to permit Seller or Buyer, following the purchase by Buyer of the
Assets pursuant to this Agreement, to conduct the Business in all material
respects in the same manner as Seller's business has been conducted prior to the
date hereof. The Bill of Sale and the endorsements, assignments and other
instruments to be executed and delivered to Buyer by Seller at the Closing will
be valid and binding obligations of Seller enforceable in accordance with their
terms, and will convey to Buyer good and valid title to all the Assets.
2.12. LEASES. Section 2.12 of the Disclosure Schedule contains a list
of all leases pursuant to which Seller leases real or personal property. Except
as set forth in Section 2.12 of the Disclosure Schedule, all such leases are
valid, binding and enforceable in accordance with their terms, and are in full
force and effect; there are no existing defaults by Seller thereunder; no event
of default has occurred which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute a default
thereunder.
2.13. TAXES. Seller has duly filed all tax reports and returns
required to be filed by it and has duly paid all taxes and other charges due or
claimed to be due from it by federal, state, local or foreign taxing authorities
(including, without limitation, those due in respect of the properties, income,
franchises, licenses, sales or payrolls of any of them); the reserves for taxes
reflected in the Financial Statements are adequate and there are no tax liens
upon any property or assets of Seller except liens for current taxes not yet
due. The federal income tax returns of Seller have been examined by the
Internal Revenue Service and, except to the extent shown therein, all
deficiencies asserted as a result of such examinations have been paid or finally
settled and no issue has been raised by the Internal Revenue Service in any such
examination which, by application of the same or similar principles, reasonably
could be expected to result in a proposed deficiency for any other period not so
examined. Further, no state of facts exists or has existed which would
constitute grounds for the assessment of any tax liability with respect to the
periods which have not been audited by the Internal Revenue Service. Except to
the extent set forth in Section 2.13 of the Disclosure Schedule, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal income tax return for any period. Copies of all
income tax returns for Seller in respect of all years not barred by the statute
of limitations have heretofore been delivered by Seller to Buyer and all such
returns are listed in Section 2.13 of the Disclosure Schedule.
2.14. CONTRACTS AND COMMITMENTS. Except as set forth in Section 2.14
of the Disclosure Schedule.
(a) Seller has no agreements, contracts, commitments or restrictions which
are material to its business, operations or prospects or which require the
making of any charitable contribution;
<PAGE>
(b) No purchase contracts or commitments of Seller continue for a period
of more than 12 months or are in excess of the normal, ordinary and usual
requirements of business or at any excessive price;
(c) Seller has no outstanding contracts with officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors or dealers
that are not cancelable by it on notice of not longer than 90 days and without
liability, penalty or premium or any agreement or arrangement providing for the
payment of any bonus or commission based on sales or earnings;
(d) Seller has no collective bargaining or union contracts or agreements;
(e) Seller is not in default, nor does it know of any basis for any valid
claim of default, under any contract made or obligation owed by it;
(f) Seller is not restricted by agreement from carrying on its business
anywhere in the world;
(g) Seller has no debt obligation for borrowed money, including guarantees
of or agreements to acquire any such debt obligation of others;
(h) Seller has no agreements or contracts obligating it to pay or supply
products or services in an amount in excess of $250,000.
(i) Seller has no power of attorney outstanding or any obligations or
liabilities (whether absolute, accrued, contingent or otherwise), as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization or other entity.
2.15. CUSTOMERS AND SUPPLIERS. Except to the extent set forth in
Section 2.15 of the Disclosure Schedule, there has not been any material adverse
change in the business relationship of Seller with any of the ten largest
customers or suppliers of Seller.
2.16. ORDERS, COMMITMENTS AND RETURNS. Section 2.16 of the Disclosure
Schedule set forth as of November 23, 1996 each claim against Seller to return
in excess of an aggregate of $25,000 of merchandise by reason of alleged
overshipments, defective merchandise or otherwise, or of merchandise in the
hands of customers under an understanding that such merchandise would be
returnable.
2.17. AGREEMENTS IN FULL FORCE AND EFFECT. All contracts, agreements,
plans, leases, policies and licenses referred to in the Disclosure Schedule are
valid and in full force and effect, and true copies thereof have been heretofore
made available to Buyer.
2.18. INSURANCE. Section 2.18 of the Disclosure Schedule contains a
list or copies of all material policies of fire, liability, workmen's
compensation and other forms of insurance owned or
<PAGE>
held by Seller. All such policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the date of the
Closing have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which Seller is
a party; are valid, outstanding and enforceable policies; provide adequate
insurance coverage for the assets and operations of Seller; will remain in full
force and effect through the respective dates set forth in Section 2.18 of the
Disclosure Schedule without the payment of additional premiums; and will not in
any way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement. Section 2.18 of the Disclosure Schedule
identifies all risks which Seller, its Board of Directors or officers have
designated as being self insured. Seller has not been refused any insurance
with respect to its assets or operations, nor has its coverage been limited, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance during the last three years.
2.19. EMPLOYEE BENEFIT PLANS. Except as set forth in Section 2.19 of
the Disclosure Schedule, Seller has no bonus, deferred compensation, pension,
profit-sharing, retirement, stock purchase, stock option or any other fringe
benefit plan, arrangement or practice, whether formal or informal. Section 2.19
of the Disclosure Schedule contains a list or copies of official documentation
of each bonus, deferred compensation, pension, profit-sharing or retirement plan
or arrangement, and each other fringe benefit plan, of Seller, whether formal or
informal. The Financial Statements reflect in the aggregate an accrual of all
amounts accrued but unpaid under the aforesaid plans and arrangements as of the
dates of such Financial Statements. Seller has no commitment, whether formal or
informal and whether legally binding or not, to create any additional such plan
or arrangement.
2.20. LITIGATION. Except as set forth in Section 2.20 of the
Disclosure Schedule, there is no action, suit, inquiry, proceeding or
investigation by or before any court of governmental or other regulatory or
administrative agency or commission pending or, to the best knowledge of Seller,
threatened against or involving Seller, or which questions or challenges the
validity of this Agreement or any action taken or to be taken by Seller pursuant
to this Agreement or in connection with the transactions contemplated hereby;
and Seller does not know or have any reason to know of any valid basis for any
such action, proceeding or investigation. Except as set forth in Section 2.20
of the Disclosure Schedule. Seller is not subject to any judgment, order or
decree entered in any lawsuit or proceeding.
2.21. CONSENTS. Except as set forth in Section 2.21 of the Disclosure
Schedule, no consent of any person is necessary to the consummation of the
transactions contemplated hereby or to Buyer's operation of the Business in
substantially the same manner as it is currently being conducted by Seller,
including, without limitation, consents from parties to loans, contracts, leases
or other agreements and consents from government agencies, whether federal,
state or local.
2.22. COMPLIANCE WITH LAW. Except as set forth in Section 2.22 of the
Disclosure Schedule, the operations of Seller have been conducted in accordance
with all applicable laws, regulations and other requirements of all national
governmental authorities, and of all states,
<PAGE>
municipalities and other political subdivisions and agencies thereof, having
jurisdiction over Seller, including without limitation, all such laws,
regulations and requirements relating to antitrust, consumer protection,
currency exchange, equal opportunity, health, occupational safety, pension,
securities and trading-with-the-enemy matters. Seller has not received any
notification of any uncured asserted present or past failure by Seller to comply
with such laws, rules or regulations.
2.23 BROKERS AND FINDERS. Neither Seller nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage, fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
2.24 PERSONNEL. Section 2.24 of the Disclosure Schedule sets forth a true
and complete list of:
(a) the names and current salaries of all directors and officers;
(b) all labor union contracts; and
(c) all group insurance programs in effect for employees of Seller.
Seller is not in default with respect to any of its obligations referred to in
the preceding sentence.
2.25. ENVIRONMENTAL MATTERS. Except as set forth in Section 2.25 of
the Disclosure Schedule (a) The Assets comply with all environmental laws,
ordinances, rules, permits and regulations including, without limitation, those
relating to hazardous or toxic materials and occupational safety and health; and
(b) There is not present in, on, at or beneath the Assets (i) any toxic or
hazardous materials (including, without limitation, ureaformaldehydes, PCB's,
asbestos or asbestos containing materials) or (ii) any underground storage
tanks.
2.26. PRODUCTS LIABILITY. Except as set forth in Section 2.26 of the
Disclosure Schedule or reflected in the Financial Statements under the liability
item "Accrued Warranty," there is not action, suit, inquiry, proceeding or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or, to the best knowledge of Seller,
threatened against or involving Seller relating to any product alleged to have
been manufactured or sold by Seller and alleged to have been defective, or
improperly designed or manufactured, nor does it know of any valid basis for any
such action, proceeding or investigation.
2.27. KNOW-HOW, TRADEMARKS, PATENTS. Seller owns or is licensed to use
the inventions, processes, know-how, formulas, trade secrets, patents,
trademarks, trade names, brand names and copyrights sufficient to conduct, as
presently conducted, the Business without infringement of or conflict with any
rights of third parties. No claims have been asserted by any third party based
on the use by, or challenging the ownership of, Seller of any patents,
trademarks, trade names and copyrights, any applications therefor or with
respect to any agreement or license relating to technology, know-ow or processes
which Seller is licensed for or uses.
<PAGE>
2.28. LABOR MATTERS. Except as set forth in Section 2.28 of the
Disclosure Schedule, there are not in existence any (a) work stoppages
respecting employees of Seller, (b) grievance or arbitration proceedings arising
out of collective bargaining agreements to which Seller is a party, (c) unfair
labor practice complaints against Seller, (d) statutes, contracts or agreements
domestic or foreign which will obligate Seller or, following the Acquisition,
Buyer to make any severance payments which will obligate Seller or, following
the Acquisition, Buyer to make any severance payments as a consequence of the
Acquisition, or (e) representations, claims or petitions pending before the
National Labor Relations Board, and no questions concerning representation exist
with respect to employees of Seller. All collective bargaining agreements to
which Seller is a party or by which it is bound or its employees are covered are
set forth in Section 2.28 of the Disclosure Schedule.
2.29. DISCLOSURE. No representations or warranties by Seller in this
Agreement and no statement contained in any document (including, without
limitation, the Financial Statements and the Disclosure Schedule), certificate,
or other writing furnished or to be furnished by Seller to Buyer or any of its
representatives pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to make the
statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.01. CORPORATE ORGANIZATION. Buyer is limited liability company duly
organized validly existing and in good standing under the laws of the State of
Delaware.
3.02. AUTHORIZATION. Buyer has full power and authority to enter into
this Agreement and to carry out the transactions contemplated hereby. The
members of Buyer have taken all action required by law, its Certificate of
Formation and Limited Liability Company Agreement or otherwise to authorize the
execution and delivery of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Buyer and,
assuming this Agreement has been duly executed and delivered by Seller, is a
valid and binding agreement of Buyer, enforceable against Buyer in accordance
with its terms except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.03. NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provisions of the Certificate of Formation or Limited Liability
Company Agreement of Buyer, or violate, or be in
<PAGE>
conflict with, or constitute a default under, or cause the acceleration of the
maturity of any debt or obligation pursuant to any agreement or commitment to
which Buyer is a party or by which Buyer is bound, or violate any statute of law
or any judgment, decree, order, regulation or rule of any court or governmental
authority.
3.04. BROKERS AND FINDERS. Neither Buyer nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
3.05. CONSENTS. No consent of any person is necessary to the
consummation of the transactions contemplated hereby.
ARTICLE IV
COVENANTS AND OTHER AGREEMENTS OF SELLER
Seller hereby covenants and agrees with Buyer as follows:
4.01. FULL ACCESS. Seller shall afford to Buyer, its counsel,
accountants and other representatives, full access to the plants, offices,
warehouses, properties, books and records of Seller in order that Buyer may have
full opportunity to make such investigations as it shall desire to make of the
affairs of Seller. Seller shall cause its officers, attorney and accountants to
furnish such additional financial and operating data and other information as
Buyer shall from time to time request provided, however, that any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the business of Seller.
4.02. CONSENTS. Seller will obtain prior to the Closing, at no cost to
Buyer, all consents which are necessary, or have been reasonably requested by
Buyer, to the purchase of the Assets and the consummation of the other
transactions contemplated hereby, including, without limitation: (i) the consent
of each person holding a Lien on real property or personal property owned or
leased by Seller: (ii) the consent of each lessor of real or personal property
leased by Seller, including the consent to the assignment of the Lease; (iii)
the approval of Victory International, the sole stockholder of Seller, and (iv)
all other consents referred to in Section 2.21 hereof. Seller shall pay any
fees or expenses incurred in obtaining any consents, including the consent to
the assignment of the Lease. All such consents will be in writing and executed
counterparts thereof will be delivered to Buyer at or prior to the Closing.
4.03. SUPPLEMENTS TO DISCLOSURE SCHEDULE. From time to time prior to
the Closing, Seller will promptly supplement or amend the Disclosure Schedule
with respect to any matter hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedule. No supplement or amendment of the
Disclosure Schedule made pursuant to this section shall be deemed to cure any
breach of any representation or warranty made in this Agreement unless Buyer
specifically agrees thereto in writing.
<PAGE>
4.04. ADDITIONAL FINANCIAL STATEMENTS. From the date hereof to the
Closing Date, Seller shall furnish Buyer with the balance sheet and income
statement, in form and substance similar to those previously delivered pursuant
to Section 2.06 hereof, as of the last day of each calendar month, and for the
respective one month period ended on each such respective date, each certified
by the Chief Financial Officer of Middleby, within ten business days after the
end of each calendar month (the "Additional Financial Statements").
4.05. EXCLUSIVITY. (a) Beginning on the date of this Agreement and
ending thirty (30) days after the Termination Date (as hereinafter defined) (the
"Exclusivity Period"), Middleby, Seller and their respective affiliates shall
cease to have any discussions with parties other than Buyer concerning any
merger, sale of stock, sale of assets (other than non-material assets in the
ordinary course of business and consistent with past practice), disposition or
refinancing of any indebtedness of Seller or any similar transaction involving
Seller (all of the foregoing such transactions being referred to herein as
"Acquisition Proposals" is provided, that the negotiation, execution or
performance of the Headquarters Sale Leaseback shall not be deemed to be a
violation of the foregoing restriction. During the Exclusivity Period,
Middleby, Seller and their respective affiliates will not, and they will use
their best efforts to cause their respective directors, officers, employees and
agents not to, directly or indirectly, engage in, solicit, encourage or initiate
any discussions with, or provide any information regarding Seller or its
business or operations or this Agreement or the transactions contemplated hereby
to any corporation, partnership, person or other entity or group, other than
Buyer and its officers, employees and agents, concerning any Acquisition
Proposals. Seller will immediately notify Buyer if it receives an offer from
any other party to engage in an Acquisition Proposal.
(b) Seller and Middleby jointly and severally agree to promptly pay Buyer
as liquidated damages a fee in the amount specified in paragraph 4.05(c) hereof
if the Acquisition is abandoned or terminated by Seller for any reason prior to
the end of the Exclusivity Period. Seller shall be deemed to have abandoned or
terminated the Acquisition if and only if it or Middleby has entered into any
non-binding agreements in principle, non-binding letters of intent or any other
preliminary or definitive agreements with any party other than Buyer relating to
any Acquisition Proposal prior to the end of the Exclusivity Period, or Middleby
or Seller has otherwise violated any provision of Section 4.05 hereof.
(c) The fee payable pursuant to paragraph 4.05(b) above will be an amount
in cash equal to all out of pocket expenses incurred by Buyer and its
affiliates, including fees and expenses of legal counsel, and investment banking
and bank commitment fees, plus the greater of $300,000 or fifteen percent of the
proposed Total Value of any Acquisition Proposal. The term "Total Value" shall
mean any cash or other consideration paid or offered by any potential buyer or
its affiliates in connection with an Acquisition Proposal plus any debt or other
long-term liabilities of Seller or Middleby proposed to be assumed by such
potential buyer or its affiliates in connection with An Acquisition Proposal.
4.06. MIDDLEBY INVESTMENT. Middleby agrees that it shall, no less than
six weeks prior to the expected Closing Date, make a cash investment into Seller
in an amount sufficient to enable
<PAGE>
Seller to pay all accounts payable which are more than 75 days past due on that
date. Middleby further agrees that it shall, no less than least two weeks prior
to the expected Closing Date, make an additional cash investment into Seller in
an amount sufficient to enable Seller to pay all accounts payable which will be
more than 60 days past due on the Closing Date.
4.07. NON-COMPETITION. Neither Middleby nor Seller, nor any subsidiary
in which either Middleby or Seller own or control, directly or indirectly, 20%
or more of the equity in the aggregate, shall compete with Buyer for five years
following the Closing Date for business with Seller's existing and prospective
customers in North and South America in the manufacture and sale of foodservice
refrigeration equipment and beverage refrigeration equipment, including any of
the product lines which Seller now manufactures, sells, and/or distributes (the
undertaking of Middleby and Seller in the preceding sentence is hereinafter
referred to as "Seller's Non-Compete"). Seller's Non-Compete is void and of no
further effect if (i) Middleby merges with or is acquired by an existing
competitor of Seller; provided, that the consolidated revenues of such
competitor shall at least be equal to 75% of the trailing twelve month
consolidated revenues of Middleby, (ii) Buyer's Non-Compete (as hereinafter
defined) is rendered and of no further effect or (iii) Seller or Middleby
requires an existing competitor of Buyer if less than 40% of such acquiree's
revenues are derived from product lines covered by the foregoing clauses (a) and
(b); provided, that until the second anniversary of the Closing Date, in the
event that in excess of 20% of such acquiree's revenues are derived from product
lines covered by the foregoing clauses (a) and (b), then Middleby and Seller
jointly and severally agrees to promptly pay to Buyer as liquidated damages a
lump sum payment equal to $500,000 multiplied by the number of years for partial
years ) remaining of Seller's Non-Compete.
4.08. COVENANT TO SATISFY CONDITIONS. Each of Seller and Middleby will
use its best efforts to insure that the conditions set forth in Article VII
hereof are satisfied, insofar as such matters are within its control.
4.09. DELIVERIES. Promptly following the execution of this Agreement,
Seller agrees to deliver to Buyer summaries of all insurance policies and copies
of all contracts, agreements, union agreements and employee benefit plans
referenced in Sections 2.12, 2.14, 2.19 and 2.28 of the Disclosure Schedule.
4.10. CERTIFICATES. At the Closing, Seller will furnish Buyer with
such certificates of Seller's officers to evidence compliance with the covenants
set forth in this Article IV as may be reasonably requested by Buyer.
4.11. TRADE SHOWS. Seller and Middleby agree that for a period of one
year following the Closing Date, Buyer shall be allowed to participate in all
national and major regional trade shows in which Middleby or its affiliates
participate, and that Buyer shall be allocated substantially the same space and
placement in such shows as Seller has used in the two years preceding the
Closing Date; provided, that in the event that Seller and/or Middleby in such
show due to the rules governing such show, then Seller and Middleby are only
required to use best efforts to allow
<PAGE>
Buyer to participate in such show with Middleby. Buyer agrees to reimburse
Seller and Middleby for any out of pocket costs incurred in connection with
space used by Buyer.
4.12. USE OF NAME. Seller agrees to bring to the Closing an executed
Amendment to its Certificate of Incorporation changing is name so that the name
"Victory Refrigeration Company" becomes available for use by Buyer. Seller and
Middleby also agree to make available to Buyer any other names used by Seller
that incorporate the word "Victory." Seller understands and agrees that within
one day following the Closing Date that Buyer shall file such Amendment with the
State of Delaware and shall simultaneously change the name of Buyer to "Victory
Refrigeration Company LLC." Seller and Middleby agree to file any other
appropriate documentation necessary or appropriate to abandon Seller's or
Middleby's use of such name or names with the States of Delaware and New Jersey
and any other jurisdiction in which Seller or Middleby uses any name
incorporating the word "Victory."
4.13. USE OF SUPPLIES. Subject to Section 1.01(x) hereof, Seller
agrees that following the Closing Date Buyer may use such supplies, packaging
materials and inventory that bear the name "Middleby" that Buyer has purchased
from Seller on the Closing Date provided, that Buyer shall not be entitled to
sue Middleby stationary or represent to others that it is acting on Middleby's
behalf this shall not entitle Buyer to produce any new materials using the
"Middleby" name.
4.14. BULK TRANSFER LAWS. Seller hereby covenants to comply with the
provisions of any bulk transfer law of any applicable jurisdiction in connection
with the sale of the Assets to Buyer.
4.15. ESTOPPEL CERTIFICATE. Seller hereby covenants to request that
Vineland or any other purchaser of the Headquarters sign an estoppel certificate
containing such terms and representations as are customary in connection with an
assignment and assumption of a lease and the other transactions contemplated by
this Agreement.
4.16. PROFIT SHARING PLAN. Seller and Middleby each hereby covenants
to direct the appropriate third parties to have all employees of Seller fully
vested in all amounts that have been granted to such respective employees
pursuant to The Middleby Corporation Profit Sharing (the "Plan"). With respect
to the Plan, Seller and or Middleby hereby covenant to make the 1996
contribution to the respective accounts of Seller's employees that Seller and/or
Middleby would have otherwise made in the absence of the transactions
contemplated by this Agreement, and to fully vest each such employee with
respect to each such respective amount.
4.17. REMOVAL OF LIENS. Seller and Middleby agree to use best efforts
to have all Liens encumbering the Assets removed contemporaneously with the
Closing.
ARTICLE V
COVENANTS AND AGREEMENTS OF BUYER
<PAGE>
5.01. DELIVERY OF PURCHASE PRICE. At the Closing, Buyer shall deliver
to Seller or its representatives the Purchase Price minus the Escrow Fund, which
Escrow Fund Buyer shall concurrently tender or deliver to the Escrow Agent.
5.02. COVENANT TO SATISFY CONDITIONS. Buyer will use its best efforts
to insure that the conditions set forth in Article VI hereof are satisfied,
insofar as such matters are within the control of any of them.
5.03. CERTIFICATES. At the Closing, Buyer will furnish Seller or its
representativs with such certificates of its officers and others to evidence
compliance with the covenants set forth in this Article V as may be reasonably
requested by Seller or its representatives.
5.04. NON-COMPETITION. Neither Buyer nor any subsidiary in which Buyer
owns or controls, directly or indirectly, 20% or more of the equity in the
aggregate, shall compete with Middleby for five years following the Closing Date
for business with Middleby's existing and prospective customers in North and
South America in any of the product lines which Middleby now manufactures,
sells, and/or distributes (the undertaking of Buyer in the preceding sentence is
hereinafter referred to as "Buyer's Non-Compete"). Buyer's Non-Compete is void
and of no further effect if (i) Buyer merges with or is acquired by an existing
competitor of Middleby, provided, that the consolidated revenues of such
competitor shall at least be equal to 75% of the trailing twelve month
consolidated revenues of Buyer, (ii) Seller's Non-Compete is rendered void and
of no further effect or (iii) Buyer acquires an existing competitor of Middleby.
5.05. PERFORMANCE OF WARRANTIES. Buyer shall assume and perform all
warranty obligations of Seller or Middleby with respect to products
manufactured, sold or distributed by Seller or Middleby in the course of
operating the Business prior to the Closing Date.
5.06. USE OF SUPPLIES. For up to one year following the Closing Date,
Buyer agrees that Seller may use such supplies, packaging materials and
inventory that bear the name "Victory"; provided, that Seller shall not be
entitled to use Victory stationary or represent to others that it is acting on
Victory's behalf; provided, further, that the name "Victory" cannot appear on
any products produced by Seller. This shall not entitle Seller to produce any
new materials using the "Victory" name.
5.07. UNION CONTRACTS. Following the Closing Date, Buyer agrees to
accept and consent to all of the terms and conditions of the union contract(s)
referenced in Section 2.28 of the Disclosure Schedule.
5.08. EMPLOYEE MATTERS. On the Closing Date, Buyer agrees to offer
employment to all individuals who are employees of Seller on such date;
provided, that Buyer and Seller agree that such employees will remain
employees-at-will of Buyer, and Buyer may terminate the employment of such
employees at any time after the Closing Date; provided, further, that this
covenant shall not give rise to any rights of third parties.
<PAGE>
5.09. LEASE DEPOSIT. On the first anniversary of the Closing Date,
Buyer shall deposit in escrow with Seller an amount equal to three months rent
under the Lease as security for Seller's guarantee of Buyer's lease payments
(the "Lease Deposit"). On the first day of each of the tenth, eleventh and
twelfth calendar months following the first anniversary of the closing date of
the Headquarters Sale/Leaseback, Seller shall pay one third of the Lease Deposit
(or one-third of the any remaining amounts of the Lease Deposit in the event
that Seller shall have previously paid any part of the Lease Deposit to the
lessor under the Lease as a result of Buyer's failure to pay amounts due under
the Lease) to the lessor under the Lease.
ARTICLE VI
CONDITIONS TO SELLER'S OBLIGATIONS
Each and every obligation of Seller under this Agreement to be performed on
or before the Closing shall be subject to the satisfaction, on or before the
Closing, of each of the following conditions, unless waived in writing by
Seller:
6.01. REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Buyer contained in Article III hereof and in all certificates and
other documents delivered and to be delivered by Buyer to Seller pursuant hereto
or in connection with the transactions contemplated hereby shall be true,
complete and accurate in all material respects as of the date when made and at
and as of the Closing as though such representations and warranties were made at
and as of such date except for changes expressly permitted or contemplated by
the terms of this Agreement.
6.02. PERFORMANCE. Buyer shall have entered into, performed and
complied with all agreements, obligations and conditions required or
contemplated by this Agreement to be entered into performed or complied with by
them on or prior to the Closing Date.
6.03. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby.
6.04. DELIVERY OF PURCHASE PRICE. Buyer shall have tendered or
delivered to Seller or Seller's representatives the Purchase Price minus the
Escrow Fund, which Escrow Fund Buyer shall concurrently tender or deliver to the
Escrow Agent.
6.05. CERTIFICATES. Buyer shall have furnished Seller or its
representatives with such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article VI as may be reasonably
requested by Seller.
<PAGE>
6.06. WARRANT AGREEMENT; LICENSE AGREEMENT. Buyer shall have executed
and delivered each of the Warrant Agreement and the Licence Agreement.
6.07. OPINION OF BUYER'S COUNSEL. Buyer shall have delivered to Seller
an opinion of counsel reasonably acceptable to Seller, dated as of the Closing
Date, in form and substance satisfactory to Seller, with respect to the matters
set forth on Exhibit K attached hereto.
6.08. REIMBURSEMENT AGREEMENT. Buyer shall have executed and delivered
the Reimbursement Agreement in the form of Exhibit M.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
Each and every obligation of Buyer under this Agreement to be performed on
or before the Closing shall be subject to the satisfaction, on or before the
Closing, of each of the following conditions, unless waived in writing by Buyer.
7.01. REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties contained in Article II hereof, the Disclosure Schedule and in all
certificates and other documents delivered and to be delivered by Seller to
Buyer pursuant hereto or in connection with the transactions contemplated hereby
shall be true, complete and accurate in all material respects as of the date
when made and at and the Closing Date as though such representations and
warranties were made at and as of such date, except for changes expressly
permitted or contemplated by the terms of this Agreement; PROVIDED, that
notwithstanding the foregoing, this condition shall be deemed to have been
satisfied if the aggregate value of all breaches of representations and warrant
is less than $100,000.
7.02. PERFORMANCE. Seller shall have entered into, performed and
complied with all agreements, obligations and conditions required or
contemplated by this Agreement to be entered into, performed or complied with by
them on or prior to the Closing Date.
7.03. INVESTIGATIONS. Neither any investigation of Seller by Buyer,
not the Disclosure Schedule or any supplement thereto nor any other document
delivered to Buyer as contemplated b this Agreement, shall have revealed any
facts or circumstances which, in the good faith judgment of Buyer, reflect in a
material adverse way on the financial condition, assets, liabilities (absolute,
accrued, contingent or otherwise), reserves, business, operations or prospects
of Seller.
7.04. CERTAIN APPROVALS. All consents from third parties and
government agencies required to consummate the transaction contemplated hereby
shall have been obtained and all Authorizations shall have been obtained.
7.05. FINANCING. Buyer shall have obtained debt financing (the
"Financing") of not less than the greater of: (a) seven multiplied by the sum of
the Seller's most recent six months (i) net
<PAGE>
income, (ii) interest accrued or paid, (iii) taxes accrued or paid, and (iv)
depreciation and amortization; or (b) the sum of (i) .85 multiplied by the
Closing A/R value (as determined pursuant to this Agreement) plus (iii) .2
multiplied by the Machinery and Equipment value (as determined pursuant to this
Agreement); or (c) $6,000,000. The terms of the Financing shall include terms
no less favorable to Buyer than the following: (i) an average interest rate no
greater than three hundred basis points over the Prime Rate, as published in the
Wall Street Journal, (ii) a minimum of a five year amortization schedule and
(iii) no more than five percent of the principal due in the first year.
7.06. NO PROCEEDING OR LITIGATION. There shall not be threatened,
instituted or pending any suit, action, investigation, inquiry or other
proceeding by or before any court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgement or decree which (a) in the reasonable judgement of Buyer materially
impairs Buyer's ability to exercise control over or manage the business and
affairs of Seller after the Closing, (b) in the reasonable judgement of Buyer
might have a Material Adverse Effect on Seller or (c) has not been disclosed in
the Disclosure Schedule.
7.07. NO INJUNCTION. On the Closing Date there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that any of the
transactions provided for herein not be consummated as so provided or imposing
any conditions on the consummation of the transaction contemplated hereby.
7.08. MATERIAL CHANGE. From October 26, 1996 to the Closing Date,
Seller shall not have suffered any material adverse change (whether or not
such change is referred to or described in any supplement to the Disclosure
Schedule) in its business, prospects, financial condition, working capital,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves or
operations.
7.09. OPINION OF SELLER'S COUNSEL. Seller shall have delivered to
Buyer an opinion of counsel reasonably acceptable to Buyer, dated as of the
Closing Date. in form and substance satisfactory to Buyer, with respect to the
matters set forth on Exhibit L attached hereto.
7.10. CONSENTS OBTAINED. All consents referred to in Section 2.21
hereof shall have been obtained.
7.11. CERTIFICATES. Seller shall have furnished Buyer or its
representatives with such certificates of its officers and others to evidence
compliance with the conditions set forth in this Article VII as may be
reasonably requested by Buyer.
7.12. LICENSE AGREEMENT. Seller shall have executed and delivered the
License Agreement.
<PAGE>
7.13. BULK SALES LAWS. Any necessary periods following notice of bulk
transfer shall have passed as required under applicable bulk transfer laws.
7.14. REMOVAL OF LIENS. All Liens encumbering the Assets shall have
been removed.
7.15. NON-FOREIGN PERSON AFFIDAVIT. The Buyer shall have received a
"non-foreign person affidavit" (as described in Section 1445 of the Code), dated
the Closing Date, in the form of Exhibit N hereto.
ARTICLE VIII
CONDUCT OF SELLER'S
BUSINESS PENDING THE CLOSING
Seller agrees that from the date hereof to and including the Closing Date,
and except as otherwise expressly consented to or approved by Buyer in writing,
it shall do as follows:
8.01. REGULAR COURSE OF BUSINESS. Seller will carry on its business
diligently and substantially in the same manner as heretofore conducted, and
Seller shall not institute any new methods of manufacture, purchase, sale,
lease, management, accounting or operation or engage in any transaction or
activity, enter into any agreement or make any commitment, except in the
ordinary course of business and consistent with past practice; provided, that
the Headquarters Sale/Leaseback shall be deemed to be a permitted transaction
for purposes of the foregoing.
8.02. AMENDMENTS. No change or amendment shall be made in the
Certificate of Incorporation or By-Laws of Seller.
8.03. ORGANIZATION. Seller shall use its best efforts to preserve its
corporate existence and business organization intact, to keep available to Buyer
its officers and key employees, and to preserve for Buyer its relationship with
suppliers, distributors, customers and other having business relations with it.
8.04. CERTAIN CHANGES. Seller will not:
(a) Borrow or agree any funds or incur, or assume or become subject to,
whether directly or by way of guarantee or otherwise, any obligation or
liability (absolute or contingent), except obligations and liabilities incurred
in the ordinary course of business and consistent with past practice;
(b) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice of liability or obligations reflected or reserved against in the
Preliminary Balance Sheet or incurred in the ordinary course of business and
consistent with past practice;
<PAGE>
(c) Permit or allow any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any Lien;
(d) Terminate any contracts or agreements, or otherwise dispose of any of
its properties or assets, except in the ordinary course of business and
consistent with past practice;
(e) Dispose of or permit to lapse any rights to the use of any
Intellectual Property;
(f) Grant my bonus to any officer or employee or any increase in the
compensation of any officer or employee (including any such increase pursuant to
any bonus, pension, profit sharing or other plan or commitment) or any increase
in the compensation payable or to become payable to any offer of employee other
than annual increases in accordance with past practices;
(g) Make any single capital expenditure or commitment in excess of $50,000
for additions to property, plant or equipment or make aggregate capital
expenditures and commitments in excess of $150,000;
(h) Sell, transfer, or otherwise dispose of any of its properties or
assets (real, personal or mixed, tangible or intangible), except (i) in the
ordinary course of business and consistent with past practice, (ii) for the
Headquarters Sale Leaseback, or (iii) any Excess or Obsolete Inventory.
(i) Grant or extend any power of attorney or act, as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization or other entity; or
(j) Agree, whether in writing or otherwise, to do any of the foregoing.
8.05. CONTRACT. No contract or commitment will be entered into and no
purchase of raw materials or supplies and no sale of assets will be made, by or
on behalf of Seller, except (i) normal contracts or commitments for the purchase
of, and normal purchases of, raw materials or supplies, made in the ordinary
course of business and consistent with past practice, (ii) normal contracts or
commitments for sale of, and normal sales of, inventory in the ordinary course
of business and consistent with past practice, (iii) other contracts,
commitments, purchases or sales in the ordinary course of business and
consistent with past practice not in excess of $100,000 individually or $250,000
in the aggregate, and (iv) the Headquarters Sale/Leaseback.
8.06. INSURANCE; PROPERTY. Seller shall adequately insure all
property, real, personal and mixed, owned or leased by Seller, against all
ordinary and insurable risks.
8.07. NO DEFAULT. Seller shall not do any act or omit to do any act,
or permit any act or omission to act, which will cause a breach of any material
contract or commitment of Seller or which would cause the breach of any
representation or warranty made hereunder.
<PAGE>
8.08. COMPLIANCE WITH LAWS. Seller shall duly comply with all laws
applicable to it and its properties, operations, business and employees.
8.09. TAX RETURNS. Seller shall prepare and file all federal, state,
local and foreign tax returns and amendments thereto required to be filed by it.
Seller will ensure that Buyer or its representatives shall have a reasonable
opportunity to review each such return and amendment.
ARTICLE IX
INDEMNIFICATION
9.01. SURVIVAL OF REPRESENTATIONS OF WARRANTIES. All representations
and warranties contained in Articles II and III, except for Sections 2.08. and
2.09. shall survive the Closing and shall remain in full force and effect until
the completion of the eighteen month anniversary of the Closing Date; provided,
that the representations and warranties contained in Sections 2.25 and 2.26
shall survive the Closing and shall remain in full force and effect until the
fifth anniversary of the Closing Date. Notwithstanding the foregoing and
subject to the other provisions of this Article IX, including Sections 9.03.,
9.04., 9.05. hereof, the representations and warranties (i) relating to
liabilities for which reserves of at least $1.00 are reflected on the Closing
Balance Sheet or (ii) contained in Sections 2.08. and 2.09. shall survive the
Closing and shall remain in full force and effect until the end of the
Adjustment Period.
9.02. GENERAL INDEMNITY. After the Closing Date, each party hereto
shall indemnify (the "Indemnifying Party") and hold the other party hereto, as
appropriate (the "Indemnified Party"), harmless to the extent provided in this
Article IX from and against any and all losses, damages, liabilities, claims,
demands, judgements, settlements, costs and expenses of any nature whatsoever
(including reasonable attorneys' fees and expenses) ("Losses") resulting from or
arising out of (i) any breach of any representation or warranty of the
Indemnifying Party contained in Articles II or III, as the case may be, (ii) the
nonperformance, partial or total, of any covenant or agreement of the
Indemnifying Party contained in this Agreement, to the extent not waived by the
Indemnified Party: provided, that no indemnification shall be payable in respect
of any Losses of the Indemnified unless the aggregate amount of such Losses
exceeds $20,000, but once Losses exceed such amount the Indemnified Party shall
be entitled to recover for the entire amount of Losses. For purposes of
Sections 9.03. 9.04. and 9.05(a) and the other provisions (other than Section
9.05(b)) of this Article IX. Seller shall be deemed to be the Indemnifying
Party and Buyer shall be deemed to be the Indemnified Party. For purposes of
Section 9.05(b), Buyer shall be deemed to be the Indemnifying Party and Seller
shall be deemed to be the Indemnified Party.
9.03. NON-ASSUMED LIABILITIES. Seller shall indemnify, reimburse,
defend and hold harmless Buyer for, from and against any and all Losses incurred
by Buyer resulting from any liabilities of Seller or any liability to which any
Asset may be subject or causes of action arising against Seller or the Assets
prior to the Closing date, other than any Losses resulting from the Assumed
Liabilities.
<PAGE>
9.04. ENVIRONMENTAL CLAIMS. Seller agrees to indemnify, reimburse,
defend, and hold harmless Buyer for, from and against all Losses incurred by
Buyer under any environmental protection and pollution control laws or resulting
from or in connection with damage or pollution to the environment arising from
events, operations or activities of Seller or its predecessors prior to the
Closing Date or from conditions or circumstances existing at or prior to the
Closing Date as a result thereof.
9.05. PRODUCT LIABILITY CLAIMS. (a) Seller agrees to indemnify,
reimburse, defend and hold harmless Buyer for, from and against all Losses
incurred by Buyer as a result of any products (i) sold or distributed by Seller
on or prior to the Closing Date, or (ii) that are finished goods on the Closing
Date ("Seller's Finished Goods"); provided, that the foregoing indemnity shall
not obligate Seller to indemnify Buyer for products repaired or replaced after
the Closing Date under warranties granted in connection with the sale of such
products.
(b) Buyer agrees to indemnify, reimburse, defend and hold harmless Seller
for, from and against all Losses (i) incurred by Seller as a result of any
products manufactured, sold or distributed (other than Seller's Finished Goods)
by Buyer after the Closing Date, including, but not limited to, inventory and
work-in-process purchased by Buyer from Seller or (ii) resulting from products
repaired or replaced after the Closing Date under warranties granted in
connection with the sale of such products.
9.06. LIMITATIONS ON INDEMNIFICATION. (a) Losses resulting from the
breach or nonperformance by an Indemnifying Party of a representation, warranty,
covenant or agreement shall be limited to the amount of actual damages sustained
by the Indemnified Party by reason of such breach or nonperformance net of any
current tax benefits realized by the Indemnified Party.
(b) No party hereto shall be entitled to make any claim for
indemnification under Section 9.02, with respect to the breach of any particular
representation and warranty contained herein, after the date on which such
representation and warranty ceases to survive pursuant to Section 9.01 or with
respect to any covenant or agreement to be performed prior to the Closing Date,
more than two years after the Closing Date; PROVIDED, HOWEVER, that, if prior to
the date on which such representation and warranty ceases to survive, the
Indemnifying Party shall have received written notification of a claim for
indemnity hereunder specifying the facts on which such claim is based, and such
claim shall not have been finally resolved or disposed of at such date, such
claim shall continue as a basis for indemnity until it is finally resolved or
disposed of, without regard to any applicable statutes of limitation or
limitations imposed by this Agreement.
9.07. THIRD PARTY CLAIMS. If a claim by a third party is made against
an Indemnified Party, and if such party intends to seek indemnity with respect
thereto under this Article IX, the Indemnified Party shall promptly notify the
Indemnifying Party of such claim. Notwithstanding anything herein to the
contrary, if the relief sought or the allegations made by the third party, if
proven would result in a Material Adverse Effect on the Indemnified Party, then
the Indemnified Party may, at its option, undertake, conduct and control the
defense (but not the settlement) of a third party claim, and the Indemnified
Party shall retain its right to receive indemnification from
<PAGE>
the Indemnifying Party; PROVIDED, that in the event that Indemnifying Party
determines to undertake, conduct and control, through counsel of its own
choosing and at its own expense, the settlement or defense thereof, then the
terms of this sentence shall be superseded by the other terms of this Section
9.07. The Indemnifying Party shall have thirty days after receipt of such
notice to undertake, conduct and control, through counsel of its own choosing
and at its own expense, the settlement or defense thereof, and the Indemnified
Party shall cooperate with it in connection therewith; PROVIDED, THAT, (i) the
Indemnifying Party shall permit the Indemnified Party to participate in such
settlement or defense through counsel chosen by the Indemnified Party, provided
that the fees and expenses of such counsel shall be borne by the Indemnified
Party and (ii) the Indemnifying Party shall promptly reimburse the Indemnified
Party for the full amount of any Loss resulting from such claim and all related
expenses incurred by the Indemnified Party within the limits of this Article IX,
net of any tax benefits realized by the Indemnified Party as a result of such
loss and expenses. If and to the extent any such tax benefit has not been
realized at the time of such reimbursement, such tax benefit shall not reduce
the amount of such reimbursement, but the Indemnified Party shall pay to the
Indemnifying Party the amount of such tax benefit at such time as and to the
extent that the Indemnified Party realizes such tax benefit. So long as the
Indemnifying Party is reasonably contesting any such claim in good faith, the
Indemnified Party shall not pay or settle any claim. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay or settle any such
claim, provided that in such event it shall waive any right to indemnity
therefor by the Indemnifying Party. If the Indemnifying Party does not notify
the Indemnified Party within thirty days after the receipt of the Indemnified
Party's notice of claim of indemnity hereunder that it elects to undertake the
defense thereof, the Indemnified Party shall have the right to contest, settle
or compromise the claim in the exercise of its reasonable judgment at the
expense of the Indemnifying Party.
ARTICLE X
TERMINATION AND ABANDONMENT
10.01. METHODS OF TERMINATION. The transactions contemplated herein may
be terminated and/or abandons at any time before the Closing:
(a) By mutual consent of Buyer and Seller; or
(b) By Buyer on or after February 28, 1997, or such later date as may be
established pursuant to Section 1.08 hereof (the "Termination Date"), if any of
the conditions provided for in Article VII of this Agreement shall not have been
met or waived in writing by Buyer prior to such date; or
(c) By Seller on or after the Termination Date, if any of the conditions
provided for in Article VI of this Agreement shall not have been met or waived
in writing by Seller prior to such date.
<PAGE>
10.02. PROCEDURE UPON TERMINATION. In the event of termination and
abandonment by Buyer or Seller pursuant to Section 10.01 hereof, written notice
thereof shall forthwith be given to the other parties hereto and the
transactions contemplated by this Agreement shall be terminated and/or
abandoned, without further action by Seller or Buyer. If the transactions
contemplated by this Agreement are terminated and/or abandoned as provided
herein:
(a) Each party will redeliver all documents, work papers and other
materials and property of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution hereof,
to the party furnishing the same;
(b) All confidential information received by any party hereto with respect
to the business of any other party or its subsidiaries shall be treated in
accordance with Section 11.01 hereof; and
(c) No party hereto shall have any liability or further obligation to any
other party to this Agreement except as stated in subparagraphs (a) and (b) of
this Section 10.02.
ARTICLE XI
MISCELLANEOUS AGREEMENTS AND PROVISIONS
11.01. Non-Disclosure. (a) The parties hereto agree that the
information contained in this Agreement and the letter of intent dated as of
November 1, 1996 (the "Letter of Intent") by and between Seller, Buyer and
Middleby, among others, is confidential and except as may be required by law,
civil investigative demand, subpoena or other similar process or as required for
transferring Authorizations or Contracts, each party hereto agrees not to
disclose to any person (excluding its and its affiliate's directors, key
employees, potential lenders, potential investors, legal counsel, accounts,
consultants and representatives, only to the extent that such individuals need
to know such confidential information) the existence or substance of any
discussions or negotiations that are or have taken place between the parties
hereto (including the identity of any of the principals of Buyer), any of the
terms or conditions of the Letter of Intent, this Agreement or any amendments,
supplements or modifications hereto or thereto or any information furnished in
connection with this Agreement or the transactions contemplated hereby.
(b) No information will be deemed confidential and subject to this Section
11.01 if it is developed independently by any party, was available to any party
prior to the date of the Letter of Intent, or becomes generally available to the
public other than as a result of a breach by a party of its obligations
hereunder. Middleby, Seller and Buyer shall use all confidential information
solely for the purpose of completing the transactions contemplated by this
Agreement.
(c) The provisions of this Section 11.01 shall survive the termination of
this Agreement for a period of one year following any such termination.
<PAGE>
11.02 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented by written agreement of the
parties hereto or their representatives at any time prior to the Closing with
respect to any of the terms contained herein.
11.03. WAIVER OF COMPLIANCE. Any failure of the parties hereto to
comply with any obligation, covenant, agreement or condition herein may be
expressly waived in writing by the parties hereto or their representatives, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
11.04. EXPENSES. Except as otherwise set forth herein, each party
hereto agrees that all fees and expenses incurred by it in connection with this
Agreement shall be borne by it including,
without limitation, all fees and expenses of counsel, financial advisors,
actuaries and accounts, provided, that in the event that any party hereto takes
legal action in connection with this Agreement or the transactions contemplated
hereby, the prevailing party in such action shall have all of its costs and
expenses, including fees and expenses of legal counsel, paid or reimbursed by
the party whose requested relief from the court, arbitrator or mediator
overseeing the litigation, arbitration or mediation is the furthest away in
dollar terms from the final determination of such court, arbitrator or mediator.
In the event that Buyer takes legal action in connection with this Agreement
prior to the Closing, and Middleby or Seller is the prevailing party and Buyer
has insufficient funds to cover the foregoing expenses, such expenses shall be
paid by Hank Schmitz, Brian C. Flynn, Jr. and Keith D. Jue on a pro rata basis
based on their respective equity positions in Buyer.
11.05 NOTICES. All notices, request, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail
with postage prepaid:
(a) If to Seller, to:
The Middleby Corporation
1400 Toastmaster Driver
Elgin, IL 60120
Attention: John Hastings
with a copy to:
D'Ancona & Pflaum
30 North LaSalle
Suite 2900
Chicago, IL 60602
Attention: Nick Sack
or to such other person or address as Seller shall furnish to Buyer in writing.
<PAGE>
(b) If to Buyer, to:
Victory Refrigeration Company LLC
110 Woodcrest Road
Cherry Hill, NJ 08003
Attention: Eileen Kuriskin
with a copy to:
Columbia Equity Partners
310 Madison Avenue, Suite 1514
New York, NY 10017
Attention: Keith D. Jue
or to such other person or address as Buyer shall furnish to Seller in writing.
11.06 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement and the rights,
interests or obligations hereunder may be assigned to any of the parties hereto
to any affiliate of such party without the prior written consent of the other
parties, which assignment shall not relieve assignee of its respective
obligations or liabilities hereunder. Buyer's rights to indemnification under
this Agreement may be assigned by the Buyer to the financial institution(s)
providing Buyer with the Financing without the prior written consent of Seller.
11.07 PUBLICITY. No party hereto shall make or issue, or cause to be
made or issued, any announcement or written statement concerning this Agreement
or the transactions contemplated hereby for dissemination to the general public
without the prior consent of the other party. This provision shall not apply,
however, to any announcement or written statement required to be made by law or
the regulations of any federal or state governmental agency or any stock
exchange, except that the party required to make such announcement shall,
whenever practicable, consult with the other party concerning the timing and
content of such announcement before such announcement is made.
11.08 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware, without regard to its conflicts of law doctrine.
11.09. COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
11.10 HEADINGS. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
11.11 ENTIRE AGREEMENT. This Agreement, including the Financial
statements, the exhibits and schedules hereto, including the Disclosure Schedule
and the other documents and certificates delivered pursuant to the terms hereof,
set forth the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and supersede all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto, including the Letter of Intent.
11.12 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
VICTORY ACQUISITION GROUP LLC
By: /s/ Harold R. Schmitz
--------------------------------
Name: Harold R. Schmitz
Title: President
VICTORY REFRIGERATION COMPANY
By: /s/ John J. Hastings
--------------------------------
Name: John J. Hastings
Title: Vice President
Accepted with respect to those Sections
in which it is specifically referenced.
MIDDLEBY MARSHALL INC.
<PAGE>
By: /s/ John J. Hastings
--------------------------------
Name: John J. Hastings
Title: Executive Vice President
Accepted personally with respect to the last sentence of section 11.04 only:
/s/ Hank Schmitz
- -------------------------------
Hank Schmitz
/s/ Brian C. Flynn, Jr.
- -------------------------------
Brian C. Flynn, Jr.
/s/ Keith D. Jue
- -------------------------------
Keith D. Jue
