<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------ ------------------------
Commission File Number: 0-15568
---------------------------------------------------------
MICHAEL FOODS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-1579532
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 324, Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, MN 55416
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(612) 546-1500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ]Yes [ ]No
The number of shares outstanding of the registrant's Common Stock, $.01
par value, as of November 1, 1996 was 19,395,731 shares.
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
==============================================================================================================
September 30, December 31,
ASSETS 1996 1995
- ------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,966,000 $ 1,921,000
Accounts receivable, less allowances 50,472,000 40,583,000
Inventories 57,875,000 58,845,000
Prepaid expenses and other 3,059,000 1,622,000
------------ ------------
Total current assets 114,372,000 102,971,000
PROPERTY PLANT AND EQUIPMENT-AT COST
Land 4,140,000 4,117,000
Buildings and improvements 98,198,000 95,109,000
Machinery and equipment 219,884,000 203,557,000
------------ ------------
322,222,000 302,783,000
Less accumulated depreciation 135,639,000 118,642,000
------------ ------------
186,583,000 184,141,000
OTHER ASSETS
Goodwill, net 56,550,000 57,829,000
Net assets held for sale 3,050,000 4,431,000
Other 9,514,000 9,855,000
------------ ------------
69,114,000 72,115,000
------------ ------------
$370,069,000 $359,227,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Notes payable $ 38,700,000 $ --
Current maturities of long-term debt 12,709,000 11,731,000
Accounts payable 37,674,000 27,362,000
Accrued compensation 4,389,000 6,543,000
Accrued insurance 6,907,000 6,945,000
Other accrued expenses 11,713,000 8,295,000
------------ ------------
Total current liabilities 112,092,000 60,876,000
LONG-TERM DEBT, less current maturities 42,910,000 89,690,000
DEFERRED INCOME TAXES 29,758,000 28,566,000
CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 3,000,000 shares authorized,
none issued -- --
Common stock, $.01 par value, 25,000,000 shares authorized,
shares issued 19,395,731 at September 30, 1996 and 19,332,001 at
December 31, 1995 194,000 193,000
Additional paid-in capital 112,613,000 112,374,000
Retained earnings 72,502,000 67,528,000
------------ ------------
185,309,000 180,095,000
------------ ------------
$370,069,000 $359,227,000
============ ============
==============================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net sales $159,928,000 $136,257,000
Cost of sales 144,828,000 116,243,000
------------ ------------
Gross profit 15,100,000 20,014,000
Selling, general and administrative expenses 11,155,000 11,367,000
------------ ------------
Operating profit 3,945,000 8,647,000
Other (income) expense
Interest expense 1,976,000 1,841,000
Interest capitalized (234,000) (61,000)
------------ ------------
1,742,000 1,780,000
Interest income (12,000) (12,000)
------------ ------------
1,730,000 1,768,000
------------ ------------
Earnings before income taxes 2,215,000 6,879,000
Income tax expense 890,000 2,650,000
------------ ------------
NET EARNINGS $ 1,325,000 $ 4,229,000
============ ============
NET EARNINGS PER SHARE $ .07 $ .22
============ ============
DIVIDENDS PER SHARE $ .05 $ .05
============ ============
Weighted average shares outstanding 19,396,000 19,332,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Nine Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net sales $455,478,000 $393,821,000
Cost of sales 403,267,000 333,913,000
------------ ------------
Gross profit 52,211,000 59,908,000
Selling, general and administrative expenses 33,597,000 34,292,000
------------ ------------
Operating profit 18,614,000 25,616,000
Other (income) expense
Interest expense 6,010,000 6,076,000
Interest capitalized (496,000) (113,000)
------------ ------------
5,514,000 5,963,000
Interest income (40,000) (91,000)
------------ ------------
5,474,000 5,872,000
------------ ------------
Earnings before income taxes 13,140,000 19,744,000
Income tax expense 5,260,000 7,600,000
------------ ------------
NET EARNINGS $ 7,880,000 $ 12,144,000
============ ============
NET EARNINGS PER SHARE $ .41 $ .63
============ ============
DIVIDENDS PER SHARE $ .15 $ .15
============ ============
Weighted average shares outstanding 19,379,000 19,326,000
============ ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE> 5
MICHAEL FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, (Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 30,965,000 $ 40,927,000
Cash flows from investing activities:
Capital expenditures (20,594,000) (17,275,000)
Net assets held for sale 800,000 453,000
Other assets 168,000 (2,321,000)
------------- --------------
Net cash used in investing activities (19,626,000) (19,143,000)
Cash flows from financing activities:
Purchase of shares (500,000) --
Proceeds from issuance of common stock 213,000 --
Payments on notes payable and long-term debt (99,916,000) (69,743,000)
Proceeds from notes payable and long-term debt 92,814,000 51,503,000
Cash dividends (2,905,000) (2,898,000)
------------- --------------
Net cash used in financing activities (10,294,000) (21,138,000)
------------- --------------
Net increase in cash and cash equivalents 1,045,000 646,000
Cash and cash equivalents at beginning of year 1,921,000 1,641,000
------------- --------------
Cash and cash equivalents at end of period $ 2,966,000 $ 2,287,000
============= ==============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE> 6
MICHAEL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with Regulation S-X pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to make the information presented not
misleading.
The Company utilizes a fiscal year consisting of either 52 or 53 weeks, ending
on the Saturday nearest to December 31 each year. The quarters ended September
30, 1996 and September 30, 1995 each include thirteen weeks of operations. For
clarity of presentation, the Company has described all periods presented as if
the quarter ended on September 30.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of September
30, 1996, the results of operations for the three and nine month periods ended
September 30, 1996 and 1995, and cash flows for the nine month periods ended
September 30, 1996 and 1995. The results of operations for the nine months
ended September 30, 1996 are not necessarily indicative of the results for the
full year.
NOTE B - INVENTORIES
Inventories other than raw potatoes and potato products are stated at the lower
of cost (determined on a first-in, first-out basis) or market. Raw potatoes
and potato products are stated at the lower of average cost for the year in
which produced or market. The cost of purchasing and raising flocks to laying
maturity is capitalized to inventory, then amortized, assuming no salvage
value, over the estimated productive life of each flock. Inventories consist
of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Work in process and finished goods $21,873,000 $19,848,000
Raw materials and supplies 13,690,000 16,597,000
Flocks 22,312,000 22,400,000
----------- -----------
$57,875,000 $58,845,000
=========== ===========
</TABLE>
NOTE C - LONG-TERM DEBT
The Company has an unsecured revolving line of credit with its principal banks
with interest payable at the banks' reference rates, or alternative variable
rates, at the Company's option. The revolving line of credit was increased
from $55,000,000 to $65,000,000 subsequent to the end of the third quarter. At
September 30, 1996, the Company had $2,700,000 outstanding at the reference
rate of 8.25% and $36,000,000 outstanding at an average variable rate of 5.9%.
This revolving line of credit, which matures on March 31, 1997, contains
certain restrictive covenants similar to the covenants contained in the
Company's senior promissory notes. At September 30, 1996, $16,300,000 of the
then available $55,000,000 revolving line of credit was unused.
6
<PAGE> 7
MICHAEL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(Unaudited)
NOTE D - CONTINGENCIES
Use of Estimates
In preparation of the Company's consolidated financial statements, management
is required to make estimates and assumptions that affect reported amounts of
assets and liabilities and related revenues and expenses. Actual results could
differ from the estimates used by management.
Patent Litigation
The Company had prepaid royalty payments of approximately $8,000,000 at
September 30, 1996 and $8,300,000 as of December 31, 1995 included in other
assets related to an exclusive license agreement for the production and sale of
extended shelf-life liquid egg products. These amounts have arisen as a result
of the Company making payments to prosecute and defend the patents related to
the exclusive license agreement. The Company has the right to offset up to 50%
of otherwise payable royalties for the legal costs which it has incurred to
defend patents underlying the exclusive license agreement. The Company has
been informed by the U.S. Patent and Trademark Office that a patent examiner
has rejected the claims under the four process patents, which are the subject
of the license agreement. Management and the licensor intend to appeal the
decision of the examiner and believe the validity of the patents will
ultimately be upheld. Counsel to the Company and the licensor estimates a full
appeal process could take two years. During the appeal process, the patents
remain valid and in full force and effect. Based upon current and expected
product volume levels, the Company expects to fully recover the remaining
prepaid royalties over the useful life of the exclusive license agreement.
However, there can be no assurance that the Company will be able to fully
recover its prepaid royalty payments. If the patents are ultimately denied
after all appeals have been concluded, the Company would continue to produce
and market the products currently subject to the license agreement without
incurring royalty cost.
Product Litigation
In the fall of 1994, a customer of the Company recalled product which was
potentially contaminated and is settling claims with consumers who became ill
after eating the product before the recall. The customer has filed a suit,
whereby the Company is a co-defendant with other companies alleged to have
supplied contaminated product to the customer's plant. The customer is seeking
damages for losses incurred, as well as alleged loss of past and future
profits. Management and its counsel believe the Company has substantial
defenses to the allegations and believe it is unlikely the Company will incur a
loss from this claim materially in excess of its insurance coverage.
Other Litigation
The Company is also engaged in routine litigation incidental to its business,
which management believes will not have a material effect upon its results of
operations, liquidity or consolidated financial position.
7
<PAGE> 8
MICHAEL FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996 and 1995
(Unaudited)
NOTE E - SIGNIFICANT ACQUISITION
In June, 1996, the Company entered into an agreement to purchase Papetti's
Hygrade Egg Products, Inc. and its affiliates ("Papetti's") in a cash and stock
transaction, along with other consideration, valued in total at approximately
$91 million. Additionally, the Company is to assume approximately $28 million
in debt issued by Papetti's. Papetti's is a producer of further processed egg
products with annual sales in excess of $275 million and total assets of
approximately $100 million. The cash portion of the purchase price is
approximately $48 million and the Common Stock portion is payable with 3.4
million shares. This acquisition transaction will also resolve the patent
litigation presently pending between the parties (see Note D). Pending
satisfactory completion of the due diligence review process and securing of
financing to fund the proposed transaction, it is expected that the acquisition
will close late in the fourth quarter of 1996 or the first quarter of 1997.
NOTE F - REORGANIZATION AGREEMENT
In December, 1995, the Company entered into a Reorganization Agreement with
North Star Universal, Inc. ("North Star") and NSU Merger Co. The
Reorganization Agreement was amended in September, 1996. North Star holds
approximately 38% of the Company's Common Stock. The effect of the
transactions set forth in the Reorganization Agreement is to distribute these
shares to North Star's shareholders after a certain portion of the holdings are
effectively retired to the Company's treasury in consideration for the Company
assuming North Star's net indebtedness, which is estimated to be approximately
$27 million. Following the reorganization, North Star will be renamed Michael
Foods, Inc. and will be comprised of the present operations and management of
the Company. It is expected that the transactions will close in the first
quarter of 1997.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS THREE MONTHS ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales accounted for by
each of the Company's operating divisions for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Eggs and Egg Products 42% 42%
Refrigerated Distribution 32 32
Potato Products 13 16
Dairy Products 18 15
Intercompany Sales (5) (5)
--- ---
TOTAL 100% 100%
=== ===
</TABLE>
The following table sets forth the percentage of divisional operating earnings
(before corporate, interest and income tax expenses) accounted for by each of
the Company's operating divisions for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Eggs and Egg Products 61% 61%
Refrigerated Distribution 35 15
Potato Products (38) 6
Dairy Products 42 18
--- ---
TOTAL 100% 100%
=== ===
</TABLE>
The Eggs and Egg Products Division had higher dollar sales and lower dollar
earnings in the period ended September 30, 1996, as compared to the results of
the same period in 1995. The shell egg category operated at a loss in both
periods. Profitability was lower for most egg products, but increased for
certain egg products. Feed costs, which typically represent roughly
two-thirds of the cost of producing an egg, were approximately 70% higher in
the 1996 period than in the 1995 period, reflecting substantially higher market
prices for corn and soybean meal. This more than offset an approximate 20%
year-over-year increase in egg prices as reported by Urner Barry Publications -
a widely quoted industry pricing service. Significant sales increases were
recorded for certain non-commodity, and less commodity-sensitive, egg products,
notably Easy Eggs (R)(extended shelf-life liquid whole eggs), MicroFresh (frozen
omelets, patties and curds) and dried products, which helped mitigate the
impact of high feed costs on earnings.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS THREE MONTHS ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS, CONT.
The Refrigerated Distribution Division had higher dollar sales and higher
dollar earnings in the period ended September 30, 1996, as compared to the
results of the same period in 1995. Unit sales in core refrigerated items rose
significantly. Profit margins expanded mainly as a result of this volume
improvement, with additional positive impacts seen from improved pricing in
certain lines and effective expense control.
The Potato Products Division had slightly lower dollar sales and operated at a
loss in the period ended September 30, 1996, as compared to the results of the
same period in 1995. A competitive environment in the french fry processing
industry resulted in a loss of market share and depressed unit sales for frozen
potato products. This sharply reduced the production efficiencies of the main
potato products processing facility. Additionally, cost pressures from
procuring more expensive open market potatoes to complement potatoes delivered
under contract and processing yield pressures, from the utilization of large
amounts of under-sized potatoes, resulted in further divisional earnings
pressure.
The Dairy Products Division had higher dollar sales and higher dollar earnings
in the period ended September 30, 1996, as compared to the results of the same
period in 1995. Unit sales rose significantly, due to favorable weather
throughout much of the Division's trade territory, excellent volume growth at a
satellite plant, growth in shelf-stable coffee creamer sales and the addition
of major new customers. Dairy ingredient costs rose sharply during the
quarter, reflecting a tight milk supply in the United States, which somewhat
reduced overall operating profit margins.
The decline in the gross profit margin of the Company for the period ended
September 30, 1996, as compared to the results of the same period in 1995,
reflected the factors discussed above, particularly the significant raw
material issues evident in the Egg Products and Potato Products divisions. It
is management's strategy to increase value-added product sales as a percent of
total sales over time, while decreasing commodity-sensitive products'
contribution to consolidated sales. These efforts historically have been
beneficial to gross profit margins. However, in the 1996 period finished
product pricing did not increase rapidly enough to offset the pressures from
raw material cost and potato quality issues. Selling, general and
administrative expenses decreased as a percent of sales in the period ended
September 30, 1996, as compared to the results of the same period in 1995, due
to the significant sales increase and effective management of operating
expenses across the Company.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
NINE MONTHS ENDED SEPTEMBER 30, 1996 VS NINE MONTHS ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales accounted for by
each of the Company's operating divisions for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Eggs and Egg Products 43% 41%
Refrigerated Distribution 33 33
Potato Products 14 16
Dairy Products 16 15
Intercompany Sales (6) (5)
--- ---
TOTAL 100% 100%
=== ===
</TABLE>
The following table sets forth the percentage of divisional operating earnings
(before corporate, interest and income tax expenses) accounted for by each of
the Company's operating divisions for the periods indicated:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Eggs and Egg Products 60% 57%
Refrigerated Distribution 24 15
Potato Products (7) 13
Dairy Products 23 15
--- ---
TOTAL 100% 100%
=== ===
</TABLE>
The Eggs and Egg Products Division had higher dollar sales and lower dollar
earnings in the nine months ended September 30, 1996, as compared to the
results of the same period in 1995. The shell egg category operated at a loss
in both periods. Feed costs, which typically represent roughly two-thirds of
the cost of producing an egg, were sharply higher in the 1996 period than in
the 1995 period, more than offsetting increased egg prices, which were
approximately 24% higher in the first nine months of 1996 as compared to the
same period in 1995, as reported by Urner Barry Publications - a widely quoted
industry pricing service. Sales increased for certain value-added egg
products, notably Easy Eggs (R) and MicroFresh, which helped mitigate the
impact of high feed costs on earnings.
The Refrigerated Distribution Division had higher dollar sales and higher
dollar earnings in the nine months ended September 30, 1996, as compared to the
results of the same period in 1995. Unit sales increased compared to the
levels of the first nine months of 1995. The combination of volume growth,
pricing improvements in certain product lines and effective expense control
allowed for divisional profit improvement.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
NINE MONTHS ENDED SEPTEMBER 30, 1996 VS NINE MONTHS ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS, CONT.
The Potato Products Division had higher dollar sales and operated at a loss in
the nine months ended September 30, 1996, as compared to the results of the
same period in 1995. A competitive environment in the french fry processing
industry resulted in a loss of market share and depressed unit sales for frozen
potato products. This sharply reduced the production efficiencies of the main
potato products processing facility. Additionally, cost pressures from
procuring more expensive open market potatoes to complement potatoes delivered
under contract and processing yield pressures, from the utilization of large
amounts of under-sized potatoes, resulted in further divisional earnings
pressure.
The Dairy Products Division had higher dollar sales and higher dollar earnings
in the nine months ended September 30, 1996, as compared to the results of the
same period in 1995. Unit sales rose significantly, due to favorable weather
throughout much of the Division's trade territory, excellent volume growth at a
satellite plant, growth in shelf-stable coffee creamer sales and the addition
of major new customers. Dairy ingredient costs rose sharply during the period,
reflecting a tight milk supply in the United States, which reduced overall
operating profit margins.
The decline in the gross profit margin of the Company for the nine months ended
September 30, 1996, as compared to the results of the same period in 1995,
reflected the factors discussed above, particularly the significant raw
material issues evident in the Egg Products and Potato Products divisions. It
is management's strategy to increase value-added product sales as a percent of
total sales over time, while decreasing commodity-sensitive products'
contribution to consolidated sales. These efforts historically have been
beneficial to gross profit margins. However, in the 1996 period finished
product pricing did not increase rapidly enough to offset the pressures from
raw material cost and potato quality issues. Selling, general and
administrative expenses decreased as a percent of sales in the nine month
period ended September 30, 1996, as compared to the results of the same period
in 1995, due to the significant sales increase and effective management of
operating expenses across the Company.
GENERAL
Certain of the Company's products are sensitive to changes in commodity prices.
The Company's egg operations derive approximately 15% - 20% of that division's
net sales from shell eggs, which are sensitive to commodity price swings. A
value-added egg product line, Easy Eggs(R), accounts for approximately 45% of
Egg Products Division net sales and was a comparable percent of sales in the
first nine months of 1995. The remainder of divisional sales are derived from
other egg products, which vary from highly value-added to quite
commodity-sensitive. Gross profit from shell eggs is primarily dependent upon
the relationship between shell egg prices and the cost of feed, both of which
can fluctuate significantly. Shell egg pricing in the first nine months of
1996 was approximately 24% higher than 1995 levels as measured by a widely
quoted pricing service. Gross profit margins from value-added egg products are
less sensitive to commodity price fluctuations.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
GENERAL, CONT.
The Company's Refrigerated Distribution Division derives approximately 70% of
its net sales from refrigerated products produced by others, thereby reducing
the effect of commodity price swings. The balance of divisional sales are from
shell eggs, some of which are produced by the Egg Products Division and are
sold on a distribution, or non-commodity, basis by the Refrigerated
Distribution Division.
The Potato Products Division derives approximately 65% of its net sales from
the refrigerated potato products line. The division typically purchases
80%-90% of its raw potatoes from contract producers under annual contracts.
The remainder is purchased at market prices to satisfy short-term production
requirements or to take advantage of market prices when they are lower than
contracted prices. Small variations in the purchase price of raw materials or
the selling price per pound of end products can have a significant effect on
Potato Products Division operating results. The impact of raw material costs
within the division has been reduced in recent years due to significant
increases in higher value-added refrigerated potato products sales.
The Dairy Products Division sells its products primarily on a cost-plus basis
and, therefore, the division's earnings are not typically affected by raw
ingredient price fluctuations.
Inflation is not expected to have a significant impact on the Company's
business. The Company generally has been able to offset the impact of
inflation through a combination of productivity gains and price increases.
CAPITAL RESOURCES AND LIQUIDITY
Acquisitions and capital expenditures have been, and will likely continue to
be, a capital requirement. The Company plans to continue to invest in
state-of-the-art production facilities to enhance its competitive position,
although the annual rate of spending has declined in recent years.
Historically, the Company has financed its growth principally from internally
generated funds, bank borrowings, issuance of senior debt and the sale of
Common Stock. The Company believes that these financing alternatives will
continue to meet its anticipated needs.
In December, 1995, the Company entered into a Reorganization Agreement with
North Star Universal, Inc. ("North Star") and NSU Merger Co. (the "North Star
Transaction"). Michael Foods, Inc. will merge with a subsidiary of North Star
created for the transaction. After North Star completes certain distributions
of all of the assets unrelated to the Company to its shareholders, North Star
will change its name to Michael Foods, Inc. This Company will be comprised of
the current operations and management of the Company and the effects of the
North Star Transaction will not change the business of the Company. However,
as a result of the North Star Transaction, the Company will have an increased
debt level of approximately $27 million, and attendant interest expense, with a
reduced number of outstanding Common Stock shares. The North Star Transaction
is expected to be accretive to earnings per share.
In June, 1996, the Company entered into an agreement to purchase Papetti's
Hygrade Egg Products, Inc. and its affiliates ("Papetti's"), a producer of
further processed egg products, for cash, stock and other consideration valued
at approximately $91 million. The cash portion of the purchase price is
approximately $48 million and the Common Stock portion is payable with 3.4
million shares. This acquisition transaction will also resolve the patent
litigation presently pending between the parties. Additionally, the Company is
to assume approximately $28 million in debt issued by Papetti's. Pending
satisfactory completion of the due diligence review process and securing of
financing to fund the proposed transaction, it is expected that the acquisition
will close late in the fourth quarter of 1996 or the first quarter of 1997.
Papetti's had 1995 annual sales in excess of $275 million, has total assets of
approximately $100 million and has been consistently profitable throughout its
history. Assuming completion of the Papetti's transaction, approximately 60% -
65% of the Company's annual net sales will be derived from egg products, in
contrast to approximately 43% of net sales for the nine months ended September
30, 1996. Management believes the Company will be the largest
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
CAPITAL RESOURCES AND LIQUIDITY, CONT.
producer of further-processed egg products in the world. The transaction will
significantly increase the Company's involvement in the egg products industry.
Inherent in the industry are exposures to commodity-related variances in feed
costs and commodity-related variances in pricing for certain egg products.
Besides adding significantly to net sales, the acquisition is expected to
increase the Company's operating profits, net interest expense and net
earnings. Shares outstanding will also increase by approximately 3.4 million
shares.
The Papetti's acquisition and the North Star Transaction will leave the Company
with a substantially increased debt level. Management anticipates that at
least 50% of the Company's capitalization will be comprised of debt upon
completion of these transactions. Free cash flow will be applied to reducing
this level of debt in coming years. Because of the increased financial
leverage, management anticipates that equity may be considered as a means to
fund any significant acquisitions over the next 1 - 3 years. Additionally,
management expects that annual capital spending levels may be held within the
range which has prevailed in recent years due to this increased leverage.
The Company invested approximately $20,600,000 in capital expenditures during
the nine months ended September 30, 1996. The Company's 1996 plan calls for
approximately $32,000,000 in total capital expenditures.
The Company has an unsecured line of credit for $65,000,000 with its principal
banks. As of September 30, 1996, approximately $38,700,000 was borrowed under
the line of credit.
SEASONALITY
Consolidated quarterly operating results are affected by the seasonality of the
Company's net sales and operating profits. Specifically, shell egg prices
typically rise seasonally in the first and fourth quarters of the year due to
increased demand during holiday periods. Generally, the Refrigerated
Distribution Division experiences higher net sales and operating profits in the
fourth quarter. Operating profits from potato products are less seasonal, but
tend to be higher in the second half of the year coinciding with the potato
harvest. Operating profits from dairy operations typically are significantly
higher in the second and third quarters due to increased consumption of ice
milk and ice cream products during the summer months.
14
<PAGE> 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.108 Seventh Amendment to Revolving Note Agreement between Bank of America
National Trust and Savings Association, as Agent, and Michael Foods,
Inc., dated as of October 30, 1996
10.109 Revolving Note between Michael Foods, Inc. and Norwest Bank Minnesota,
N. A. dated October 30, 1996
10.110 Revolving Note between Michael Foods, Inc. and Boatmen's National Bank
dated October 30, 1996
10.111 Agreement and Plan of Reorganization, and Amendment Number 1, by and
among Michael Foods, Inc., M. G. Waldbaum Company and Papetti's Hygrade
Egg Products, Inc., and Quaker State Farms, Inc., Papetti's of Iowa
Food Products, Inc., Monark Egg Corporation, Egg Specialties, Inc.,
Papetti Foods, Inc., Casa Trucking Limited Partnership, Papetti
Transport Leasing Limited Partnership, and Papetti Equipment Leasing
Partnership
27.1 Financial Data Schedule
(b) There was one report on Form 8-K filed during the quarter ended September
30, 1996. Under Item 5, the Company reported on July 10, 1996 that it had
entered into an Agreement and Plan of Reorganization with Papetti's Hygrade Egg
Products, Inc. ("Papetti's") and other entities related to Papetti's, pursuant
to which, through a series of transactions, the Company will acquire the assets
of Papetti's through a merger and the assets of the related entities through
merger or asset purchase.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MICHAEL FOODS, INC.
------------------------------------------
(Registrant)
Date: November 7, 1996 By: /s/ Gregg A. Ostrander
-------------------------------
Gregg A. Ostrander
(President and Chief
Executive Officer)
Date: November 7, 1996 By: /s/ John D. Reedy
-------------------------------
John D. Reedy
(Vice President - Finance,
Treasurer, Chief Financial
Officer and Principal
Accounting Officer)
15
<PAGE> 1
EXHIBIT 10.108
SEVENTH AMENDMENT
Dated as of October 30, 1996
THIS SEVENTH AMENDMENT, dated as of October 30, 1996, amends the Revolving
Loan Agreement, dated as of March 30, 1990 (herein, as previously amended,
called the "Credit Agreement"), among MICHAEL FOODS, INC. (herein called the
"Company"), the banks listed therein (the "Banks") and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (herein called the "Agent").
Terms defined in the Credit Agreement are, unless otherwise defined herein or
the context otherwise requires, used herein as defined therein.
WHEREAS, the Company, the Banks and the Agent have entered into the Credit
Agreement which provides for the Banks to make Advances to the Company from
time to time; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective on (and subject to the occurrence of)
the Seventh Amendment Effective Date (as defined below), the signature pages to
the Credit Agreement with respect to the Banks shall be amended by (a) deleting
Toronto Dominion (Texas), Inc. therefrom, (b) deleting the existing "Amount of
Commitment" and "Share" of each other existing Bank and substituting the
following therefor:
Amount of
Commitment Share Bank
- ---------- ----- ----
$25,000,000 38.461538461% Bank of America Illinois
$5,000,000 7.692307692% First Bank National Association,
formerly known as FirsTier Bank, N.A.,
Lincoln
$15,000,000 23.076923077% Cooperative Centrale
Raiffeisenboerenleenbank B.A.,
"Rabobank Nederland"
and (c) adding the following signature blocks and respective amount and share of
commitment:
<PAGE> 2
Amount of
Commitment Share Bank
- ---------- ----- ----
$10,000,000 15.384615385% BOATMEN'S NATIONAL BANK
By: ____________________________
Title: _________________________
Address: 10th and Baltimore
Kansas City, MO 64105
$10,000,000 15.384615385% NORWEST BANK MINNESOTA, N.A.
By: ____________________________
Title: _________________________
Address: Norwest Center
Sixth and Marquette Avenue
Minneapolis, MN 55479-0079
SECTION 2 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Banks that (a) each warranty set forth in Section 7 of the
Credit Agreement is true and correct as of the date of the execution and
delivery of this Seventh Amendment by the Company, with the same effect as if
made on such date, except for such changes that do not constitute an Event of
Default or an Unmatured Event of Default under the Credit Agreement, (b) the
execution and delivery by the Company of this Seventh Amendment and the New
Notes (as hereinafter defined) and the performance by the Company of its
obligations under the Credit Agreement, as amended hereby (herein, as so
amended, called the "Amended Credit Agreement"), and under the New Notes (i)
are within the corporate powers of the Company, (ii) have been duly authorized
by all necessary corporate action, (iii) have received all necessary
governmental approval and (iv) do not and will not contravene or conflict with
any provision of law or of the charter or by-laws of the Company or of any
indenture, loan agreement or other contract, order or decree which is binding
upon the Company and (c) the Amended Credit Agreement and the New Notes are
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency or other similar laws of general
application affecting the enforcement of creditors' rights or by general
principles of equity limiting the availability of equitable remedies.
-2-
<PAGE> 3
SECTION 3 EFFECTIVENESS. The amendments set forth in Section 1 above
shall become effective on such date (herein called the "Seventh Amendment
Effective Date") when the Agent shall have received each of the following
documents, each in form and substance satisfactory to the Agent: (a)
counterparts of this Seventh Amendment executed by the parties hereto; (b) New
Notes, substantially in the form of Exhibit A to the Credit Agreement (herein
called the "New Notes"), payable to the order of Boatmen's National Bank
(herein called "Boatmen's") and Norwest Bank Minnesota, N.A. (herein called
"Norwest") in the respective amounts of their commitments as set forth in
Section 1 above; (c) certified copies of resolutions of the Board of Directors
of the Company authorizing the execution and delivery of this Seventh Amendment
and the New Notes and the performance by the Company of its obligations under
the Amended Credit Agreement and the New Notes; (d) the opinion of Maun &
Simon, counsel to the Company; and (e) such other documents as the Agent or any
Bank may reasonably request in connection with the Company's authorization,
execution and delivery of this Seventh Amendment and the New Notes.
SECTION 4 ADDITION OF BANKS. Concurrently with the effectiveness of
this Seventh Amendment pursuant to Section 3, Boatmen's and Norwest shall each
become a "Bank" under and for all purposes of the Amended Credit Agreement and
shall be bound thereby and entitled to the benefits thereof with all the rights
and obligations of a Bank under the Amended Credit Agreement.
SECTION 5 DELETION OF BANK. Concurrently with the effectiveness of
this Seventh Amendment pursuant to Section 3 (but only after receipt of the
payments referred to in Section 6), Toronto Dominion (Texas), Inc. (herein
called "Toronto Dominion") shall cease to be a "Bank" under and for all
purposes of the Credit Agreement and shall no longer have any rights or
obligations thereunder, except for (i) rights to receive payment of
indemnities, reimbursements and other similar amounts from the Company
(including, without limitation, rights under Section 6.4 of the Credit
Agreement), and (ii) obligations to indemnify, reimburse or make payment to the
Agent, any Bank or the Company with respect to actions, failures to act,
conditions, circumstances or events on or prior to the date of such
effectiveness. Toronto Dominion agrees that it will promptly return to the
Company the Note issued to such institution under the Credit Agreement, marked
to show that such Note has been cancelled.
SECTION 6 PAYMENTS ON THE SEVENTH AMENDMENT EFFECTIVE DATE. To
facilitate the addition of Banks pursuant to Section 4 and the deletion of a
Bank pursuant to Section 5, the Company agrees that on the Seventh Amendment
Effective Date it will (i) prepay all outstanding Advances under the Credit
Agreement together with all
-3-
<PAGE> 4
interest accrued thereon and all amounts (if any) payable under Section 6.4 of
the Credit Agreement in connection with such prepayments and (ii) pay to
Toronto Dominion all accrued and unpaid fees payable to such Bank under the
Credit Agreement (it being understood that the Company may concurrently borrow
Advances under the Credit Agreement from the Banks in accordance with their pro
rata shares of the total amount of the commitments after giving effect hereto).
SECTION 7 MISCELLANEOUS.
SECTION 7.1 Continuing Effectiveness, etc. As herein amended, the
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed in all respects. After the Seventh Amendment Effective Date, all
references in the Credit Agreement and the Notes to "Revolving Loan
Agreement", "Agreement" or similar terms shall refer to the Amended Credit
Agreement.
SECTION 7.2 Counterparts. This Seventh Amendment may be executed in
any number of couterparts and by the different parties on separate
counterparts, and each such counterpart shall be deemed to be an original but
all such counterparts shall together constitute one and the same Seventh
Amendment.
SECTION 7.3 Governing Law. This Seventh Amendment shall be a
contract made under and governed by the internal laws of the State of Illinois.
SECTION 7.4 Successors and Assigns. This Seventh Amendment shall be
binding upon the Company, the Banks and the Agents and their respective
successors and assigns, and shall inure to the benefit of the Company, the
Banks and the Agent and the respective successors and assigns of the Banks and
the Agent.
Delivered at Chicago, Illinois, as of the day and year first above
written.
MICHAEL FOODS, INC.
By: JOHN REEDY
-------------------------------
Title: VP-Finance
---------------------------
-4-
<PAGE> 5
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ R. Guy Stapleton
------------------------------
Title: R. Guy Stapleton
--------------------------
Managing Director
BANK OF AMERICA ILLINOIS
By: /s/ R. Guy Stapleton
------------------------------
Title: R. Guy Stapleton
--------------------------
Managing Director
FIRST BANK NATIONAL ASSOCIATION,
formerly known as FirsTier Bank,
N.A., Lincoln
By: /s/ James M. Williams
------------------------------
Title: Vice-President
--------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND"
By: /s/ Ian Reece Angela R. Reill
------------------------------
Title: Vice President & Manager
--------------------------
Vice President
BOATMEN'S NATIONAL BANK
By: /s/ Ellen M. Isch
------------------------------
Title: Vice President
--------------------------
NORWEST BANK MINNESOTA, N.A.
By: /s/ Jay Benusa
------------------------------
Title: Vice President
--------------------------
-5-
<PAGE> 6
Solely for purposes of
Section 5 hereof:
TORONTO DOMINION (TEXAS), INC.
By: /s/ Neva Nesbitt
------------------------------
Title: Neva Nesbitt
--------------------------
Vice President
-6-
<PAGE> 1
EXHIBIT 10.109
REVOLVING NOTE
$10,000,000 Chicago, Illinois; October 30, 1996
FOR VALUE RECEIVED, the undersigned MICHAEL FOODS, INC. (the "Company")
hereby promises to pay to the order of NORWEST BANK MINNESOTA, N.A. (the
"Bank") on the Termination Date (as such term is defined in the Revolving Loan
Agreement hereinafter referred to), the principal sum of TEN MILLION DOLLARS
($10,000,000), or if less, the then aggregate unpaid principal amount of all
Domestic Advances and Eurodollar Advances (as such terms are defined in the
Revolving Loan Agreement) as may be borrowed by the Company under the Revolving
Loan Agreement. The Company may borrow, repay and reborrow hereunder in
accordance with the provisions of the Revolving Loan Agreement.
The Company promises to pay interest on the unpaid principal amount of
the Advances from time to time outstanding from the date hereof until payment in
full at the rates per annum which shall be determined in accordance with the
provisions of the Revolving Loan Agreement. Said interest shall be payable on
each date provided for in the Revolving Loan Agreement; provided, however, that
interest on any principal portion which is not paid when due shall be payable
on demand.
The portions of the principal sum hereof from time to time representing
Domestic Advances or Eurodollar Advances, and payments of principal thereof,
shall be noted by the holder of this Note on the grid schedule attached hereto.
All payments of principal and interest under this Note shall be made in
immediately available funds at the office of Bank of America National Trust and
Savings Association ("Bank of America") at 231 South LaSalle Street, Chicago,
Illinois 60697, or at such other place as Bank of America shall notify the
Company in writing.
This Note is one of the Notes referred to in, and is subject to the
terms and provisions of, the Revolving Loan Agreement dated as of March 30,
1990 (as the same may be amended, modified or supplemented from time to time,
herein called the "Revolving Loan Agreement") among the Company, certain banks
(including the Bank) and Bank of America National Trust and Savings
Association, as Agent, to which Revolving Loan Agreement reference is hereby
made for a statement of said terms and provisions. The Company expressly waives
any presentment, demand, protest or notice in connection with this Note.
<PAGE> 2
This Note is made under and governed by the internal laws of the State of
Illinois.
Address: 324 Park National MICHAEL FOODS, INC.
Bank Building By: /s/ John Reedy
5353 Wayzata Boulevard ----------------------
Minneapolis, MN 55416 Title: VP-Finance
-------------------
-2-
<PAGE> 3
Schedule attached to Note dated October 30, 1996 of MICHAEL FOODS, INC.,
payable to the order of NORWEST BANK MINNESOTA, N.A.
ADVANCES AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
Type of
Amount of Advance & Amount of Unpaid
Advance Applicable Principal Principal Notation
Date Made Interest Rate Repaid Balance Made By
<S> <C> <C> <C> <C> <C>
</TABLE>
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
this Note. The failure to record the date and amount of any advance on this
schedule shall not, however, limited or otherwise affect the obligations of the
Company under the Revolving Loan Agreement or under this Note to repay the
principal amount of the advances together with all interest accruing thereon.
<PAGE> 1
EXHIBIT 10.110
REVOLVING NOTE
$10,000,000 Chicago, Illinois; October 30, 1996
FOR VALUE RECEIVED, the undersigned MICHAEL FOODS, INC. (the "Company")
hereby promises to pay to the order of BOATMEN'S NATIONAL BANK (the "Bank") on
the Termination Date (as such term is defined in the Revolving Loan Agreement
hereinafter referred to), the principal sum of TEN MILLION DOLLARS
($10,000,000), or if less, the then aggregate unpaid principal amount of all
Domestic Advances and Eurodollar Advances (as such terms are defined in the
Revolving Loan Agreement) as may be borrowed by the Company under the Revolving
Loan Agreement. The Company may borrow, repay and reborrow hereunder in
accordance with the provisions of the Revolving Loan Agreement.
The Company promises to pay interest on the unpaid principal amount of
the Advances from time to time outstanding from the date hereof until payment
in full at the rates per annum which shall be determined in accordance with the
provisions of the Revolving Loan Agreement. Said interest shall be payable on
each date provided for in the Revolving Loan Agreement; provided, however, that
interest on any principal portion which is not paid when due shall be payable
on demand.
The portions of the principal sum hereof from time to time representing
Domestic Advances or Eurodollar Advances, and payments of principal thereof,
shall be noted by the holder of this Note on the grid schedule attached
hereto.
All payments of principal and interest under this Note shall be made in
immediately available funds at the office of Bank of America National Trust and
Savings Association ("Bank of America") at 231 South LaSalle Street, Chicago,
Illinois 60697, or at such other place as Bank of America shall notify the
Company in writing.
This Note is one of the Notes referred to in, and is subject to the
terms and provisions of, the Revolving Loan Agreement dated as of March 30,
1990 (as the same may be amended, modified or supplemented from time to time,
herein called the "Revolving Loan Agreement") among the Company, certain banks
(including the Bank) and Bank of America National Trust and Savings
Association, as Agent, to which Revolving Loan Agreement, reference is hereby
made for a statement of said terms and provisions. The Company expressly waives
any presentment, demand, protest or notice in connection with this Note.
<PAGE> 2
This Note is made under and governed by the internal laws of the State
of Illinois.
Address: 324 Park National MICHAEL FOODS, INC.
Bank Building
5353 Wayzata Boulevard By: JOHN REEDY
Minneapolis, MN 55416 ------------------------------
Title: VP-Finance
---------------------------
-2-
<PAGE> 3
Schedule attached to Note dated October 30, 1996 of MICHAEL FOODS, INC.,
payable to the order of BOATMEN'S NATIONAL BANK.
ADVANCES AND PRINCIPAL PAYMENTS
Type of
Amount of Advance % Amount of Unpaid
Advance Applicable Principal Principal Notation
Date Made Interest Rate Repaid Balance Made By
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owning and unpaid on
this Note. The failure to record the date and amount of any advance on this
schedule shall not, however, limit or otherwise affect the obligations of the
Company under the Revolving Loan Agreement or under this Note to repay the
principal amount of the advances together with all interest accruing thereon.
<PAGE> 1
EXHIBIT 10.111
__________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MICHAEL FOODS, INC.,
M.G. WALDBAUM COMPANY
AND
PAPETTI'S HYGRADE EGG PRODUCTS, INC.,
AND
QUAKER STATE FARMS, INC.,
PAPETTI'S OF IOWA FOOD PRODUCTS, INC.,
MONARK EGG CORPORATION,
EGG SPECIALTIES, INC.,
PAPETTI FOODS, INC.,
CASA TRUCKING LIMITED PARTNERSHIP,
PAPETTI TRANSPORT LEASING LIMITED PARTNERSHIP, and
PAPETTI EQUIPMENT LEASING LIMITED PARTNERSHIP
JUNE 28, 1996
__________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1--DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2--PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Papetti's Hygrade Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 The Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 The Asset Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Surrender and Exchange of Interest in Papetti's Hygrade
and Acquired Entities; Payment of Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Delivery of Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3--CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4--REPRESENTATIONS AND WARRANTIES OF
PAPETTI'S HYGRADE AND THE ACQUIRED ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Shareholders; Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Business Since the Balance Sheet Dates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.6 Litigation, Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.8 Patents, Trademarks, Miscellaneous Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.10 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.11 Correct Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.14 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.15 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16 Qualification/Subsidiaries and Other Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.17 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.18 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.19 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.20 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.21 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.22 Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
4.23 Disclosure by Papetti's Hygrade and the Acquired Entities . . . . . . . . . . . . . . . . . . . . . . . . 30
4.24 Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.25 Securities Law Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.26 Environmental and Health and Safety Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.27 Americans with Disabilities Act and Occupational Safety
and Health Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 5--REPRESENTATIONS AND WARRANTIES OF
MICHAEL AND ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1 Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.2 Corporate Action of Michael and Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.4 Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.6 Business Since the Michael Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.7 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.8 Disclosure by Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.10 Litigation, Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.11 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.12 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.13 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.14 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.15 Environmental and Health and Safety Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 6--COVENANTS OF PAPETTI'S HYGRADE AND THE
ACQUIRED ENTITIES PENDING CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 Maintenance of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.3 Organization, Good Will . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.4 Loss of Key Employees, Customers, Suppliers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.5 Access to Plants, Files and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.6 Options, Warrants, Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.7 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.8 Notice of Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.9 Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.10 Financial Statements Subsequent to Balance Sheet Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.11 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.12 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.13 Closing Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.14 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.15 Supplements to Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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ARTICLE 7--COVENANTS OF MICHAEL AND ACQUISITION
PENDING CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.1 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.2 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.3 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.4 Notice of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.5 Due Diligence Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.6 Closing Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.7 Supplements to Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.8 Actions to Allow the Appointment of Representatives to the
Board of Directors of Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 8--CONDITIONS TO THE OBLIGATIONS OF
PAPETTI'S HYGRADE AND THE ACQUIRED ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.1 Representations, Warranties, Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.2 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.3 Proceedings and Instruments Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.4 Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.5 HSR Notification and Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.6 Federal Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.7 Opinion of Counsel to Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.8 Certificate of Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.9 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.10 Employment and Non-Compete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.11 Certificates of Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.12 Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.13 Settlement Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.14 Related Party Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.15 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.16 Appointment of Representatives to the Board of Directors
of Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 9--CONDITIONS TO THE OBLIGATIONS OF
MICHAEL AND ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.1 Representations, Warranties, Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.2 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.3 Proceedings and Instruments Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.4 Consents of Papetti's Hygrade and the Acquired Entities'
Creditors and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.5 HSR Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.6 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.7 Certificates of Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.8 Certificate of Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
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9.9 Employment and Non-Compete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.10 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.11 Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.12 Related Party Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.13 Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.14 Opinion of Counsel to Papetti's Hygrade and Acquired Entities. . . . . . . . . . . . . . . . . . . . . . . 64
9.15 Settlement Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.16 Related Party Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.17 No Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.18 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 10--OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.1 Employee Benefits to be Granted to Employees of Papetti's
Hygrade and Acquired Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.2 Post-Closing Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.3 Quaker Tax Refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.4 Agreement with Respect to Sunbest-Papetti Farms Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.5 Allocation of Consideration Paid to the Acquired Companies
and the Acquired Partnerships to Assets Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.6 Release of Individual Guarantors from Guarantees Relating to Indebtedness Assumed . . . . . . . . . . . . 67
10.7 Draft of Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE 11--GENERAL INDEMNITY AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.1 Individual Indemnitor's Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.2 Obligation to Dissenters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.3 Michael's Indemnity Agreements 68
11.4 De Minimus Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.5 Limit of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.6 Procedure for General Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.7 Procedure for Article 11 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 12--SURVIVAL OF REPRESENTATIONS AND
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 13--MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.1 Abandonment of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.2 Effect of Termination or Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
13.3 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.4 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
13.6 Appointment of Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
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13.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
13.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
13.9 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
13.10 Law Governing and Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
13.11 Waiver of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
13.12 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
13.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
13.14 Public Statements or Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
13.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
13.16 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
13.17 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -82-
13.18 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -82-
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is entered
into as of June 28, 1996 by and among MICHAEL FOODS, INC., a Delaware
corporation ("Michael"), M.G. WALDBAUM COMPANY, a Nebraska corporation
("Acquisition") and PAPETTI'S HYGRADE EGG PRODUCTS, INC., a New Jersey
corporation ("Papetti's Hygrade") and QUAKER STATE FARMS, INC., a Pennsylvania
corporation ("Quaker"), PAPETTI'S OF IOWA FOOD PRODUCTS, INC., an Iowa
corporation ("Papetti's of Iowa"), MONARK EGG CORPORATION, a Missouri
corporation ("Monark"), EGG SPECIALTIES, INC., a Pennsylvania corporation ("Egg
Specialties"), PAPETTI FOODS, INC., a New Jersey corporation ("Papetti Foods",
and collectively with Quaker, Papetti's of Iowa, Monark, and Egg Specialties,
the "Acquired Companies"), CASA TRUCKING LIMITED PARTNERSHIP, a New Jersey
limited partnership ("Casa Trucking"), PAPETTI TRANSPORT LEASING LIMITED
PARTNERSHIP, a New Jersey limited partnership ("Papetti Transport"), and
PAPETTI EQUIPMENT LEASING LIMITED PARTNERSHIP, a New Jersey limited partnership
("Papetti Equipment" and together with Casa Trucking and Papetti Transport, the
"Acquired Partnerships") (the Acquired Companies and the Acquired Partnerships
are collectively referred to herein as the "Acquired Entities").
RECITALS:
a. The respective Boards of Directors of Michael and Papetti's
Hygrade have determined that it is in the best interests of Michael and
Papetti's Hygrade and their respective shareholders to consummate the merger
(the "Papetti's Hygrade Reorganization") of Papetti's Hygrade with and into
Michael.
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<PAGE> 8
b. The respective Boards of Directors of Michael, Acquisition and
the Acquired Companies have determined that it is in the best interests of
Michael, Acquisition and the Acquired Companies and their respective
shareholders to consummate the mergers (the "Mergers") of the Acquired
Companies with and into Acquisition, a wholly-owned subsidiary of Michael.
c. The Boards of Directors of Michael and Acquisition and the
Partners of the Acquired Partnerships have determined that it is in the best
interests of Michael, Acquisition and the Acquired Partnerships and their
respective shareholders and partners, as applicable, for the Acquired
Partnerships to sell all of the assets of the Acquired Partnerships to
Acquisition and to assign all of the liabilities of the Acquired Partnerships
to Acquisition at the Closing (the "Asset Acquisitions").
d. Michael and the Acquired Entities desire that the Papetti's
Hygrade Reorganization be made on the terms and subject to the conditions set
forth in this Agreement and qualify as a reorganization within the meaning of
Section 368(a) of the Code.
NOW, THEREFORE, the parties hereto represent, warrant, covenant and
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined).
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<PAGE> 9
Affiliate: As defined in Regulation 12b-2 promulgated under the
Exchange Act, as such Regulation is in effect on the date hereof.
Acquisition Agreements: The asset purchase agreements to be executed
and delivered at the Closing between Michael and each of the Acquired
Partnerships in the form attached as Exhibit A to this Agreement.
Acquired Company: As defined in the Preamble of this Agreement.
Acquired Company Common Stock: The outstanding common stock of each
Acquired Company.
Acquired Entities: As defined in the Preamble of this Agreement.
Acquired Partnerships: As defined in the Preamble of this Agreement.
Asset Acquisition: As defined in the Preamble of this Agreement.
Certificate of Merger: The certificate of merger or statutory
equivalent to be executed in connection with the Papetti's Hygrade
Reorganization and filed with the Secretary of State of the State of Delaware
and the Secretary of State of the State of New Jersey and the certificates of
merger or equivalent to be executed in connection with each Merger and filed
with the Secretary of State of Nebraska in the case of Acquisition and the
respective Secretaries of State of the states of incorporation of each Acquired
Company.
Code: The Internal Revenue Code of 1986, as amended.
DGCL: The Delaware General Corporation Law, as amended.
Dissenting Shares: The shares of a Shareholder who has perfected his
or her Dissenters' Rights.
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<PAGE> 10
Dissenters' Rights: Any rights conferred on the Shareholders by the
laws of the State of New Jersey with respect to Papetti's Hygrade and the
respective states of incorporation of each Acquired Company to dissent from the
Merger and obtain payment for their shares in Papetti's Hygrade or such
Acquired Company, as the case may be.
Effective Time: As defined in Article 3.
Exchange Act: The Securities Exchange Act of 1934, as amended.
GAAP: Generally accepted accounting principles.
HSR: Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
IRS: Internal Revenue Service.
Material Adverse Effect: With respect to Papetti's Hygrade and the
Acquired Entities, taken as a whole, or with respect to Michael and its
subsidiaries taken as a whole, means any condition, event, change or occurrence
that has had or may reasonably be expected to have a material adverse effect on
the business, operations, results of operations or financial condition of
Papetti's Hygrade and the Acquired Entities, taken as a whole on a combined
basis, or Michael and its subsidiaries on a consolidated basis, as the case may
be.
Mergers: As defined in the Preamble of this Agreement.
Michael Board: The Board of Directors of Michael.
Michael Common Stock: The Common Stock, par value $.01 per share, of
Michael.
NASDAQ-NMS: The NASDAQ National Market System.
NBCA: The Nebraska Business Corporation Act.
Papetti's Hygrade: As defined in the Preamble of this Agreement.
Papetti's Hygrade Common Stock: The outstanding common stock of
Papetti's Hygrade.
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Papetti's Hygrade Preferred Stock: The outstanding preferred stock of
Papetti's Hygrade.
Papetti's Hygrade Reorganization: As defined in the Preamble of this
Agreement.
Partners: The partners of the Acquired Partnerships.
Representative: The person designated in Section 13.6 to act as the
representative of Papetti's Hygrade and the Acquired Entities for the purpose
of giving or receiving notice, making deliveries, or taking other action
required or permitted under this Agreement or the Acquisition Agreements.
Restructuring: The transactions between Michael and North Star
Universal, Inc. ("NSU") as contemplated by an Agreement and Plan of
Reorganization dated December 21, 1995 between such parties whereby, among
other things, Michael will be merged with a wholly-owned subsidiary of NSU and
NSU will change its name to "Michael Foods, Inc." and carry on the business of
Michael as the surviving corporation.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended.
Shareholder Agreement: The Shareholder Agreement dated as of the
Closing Date between Michael and certain of the Shareholders and Partners in
the form of Exhibit B attached hereto.
Shareholders: The common shareholders of Papetti's Hygrade and the
Acquired Companies.
Surviving Corporation - Acquisition: As defined in Article 2.
Surviving Corporation - Michael: As defined in Article 2.
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<PAGE> 12
Taxes: Any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profit taxes, environmental taxes, custom taking, capital
stock, franchise, employee's income withholding, foreign or domestic
withholding, social security, unemployment, disability, worker's compensation,
employment related insurance, real property, personal property, sales, use,
transfer, value added, alternative or add on minimum or other governmental tax
of any kind whatsoever, including any interest, penalty or addition to any tax
or additional amounts in respect of the foregoing.
ARTICLE 2
PLAN OF REORGANIZATION
2.1 Papetti's Hygrade Reorganization. Subject to the terms and
conditions of this Agreement and the Plan and Agreement of Merger attached
hereto as Exhibit C, at the Effective Time, Papetti's Hygrade shall be merged
with and into Michael with Michael as the surviving corporation (the "Surviving
Corporation - Michael") in the Papetti's Hygrade Reorganization for
consideration payable in shares of Michael Common Stock and immediately
available funds as determined pursuant to Schedule 2.1 hereof. At the
Effective Time, the separate existence of Papetti's Hygrade shall thereupon
cease and the Surviving Corporation - Michael shall continue its corporate
existence under the laws of the State of Delaware. The Articles of
Incorporation and Bylaws of Michael in effect immediately preceding the
Papetti's Hygrade Reorganization shall be the Articles of Incorporation and
Bylaws of the Surviving Corporation - Michael. The Surviving Corporation -
Michael shall take all action as may be necessary to preserve the "Papetti's"
name so that it may be used without interruption in the continuation of the
business
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of Papetti's Hygrade within the Surviving Corporation - Michael. The directors
and officers of Michael immediately preceding the Papetti's Hygrade
Reorganization shall be the directors and officers of the Surviving Corporation
- - Michael, except as specifically agreed by the parties in the Shareholder
Agreement. Upon completion of the Papetti's Hygrade Reorganization, all
acquired assets and liabilities of Papetti's Hygrade shall immediately be
transferred to Acquisition and Acquisition shall continue the business of
Papetti's Hygrade.
2.2 The Mergers. Subject to the terms and conditions of this
Agreement, at the Effective Time, each of the Acquired Companies shall be
merged with and into Acquisition with Acquisition as the surviving corporation
("Surviving Corporation - Acquisition") for the consideration payable in
immediately available funds as determined pursuant to Schedule 2.1 hereof. At
the Effective Time, the separate existence of each such Acquired Company shall
thereupon cease and the Surviving Corporation - Acquisition in the Mergers
shall continue its corporate existence under the laws of the State of Nebraska.
The Articles of Incorporation and Bylaws of Acquisition in effect immediately
preceding each of the Mergers shall be the Articles of Incorporation and Bylaws
of the Surviving Corporation - Acquisition. The Surviving Corporation -
Acquisition shall take all action as may be necessary to preserve the
"Papetti's" name so that it may be used without interruption in the
continuation of the businesses of the Acquired Companies within the Surviving
Corporation. The directors and officers of Acquisition immediately preceding
the Mergers shall be the directors and officers of the Surviving Corporation -
Acquisition.
2.3 The Asset Acquisitions. Subject to the terms and conditions
of this Agreement, at the Effective Time each of the Acquired Partnerships will
sell to Acquisition all of its
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respective assets and Acquisition will assume all of the respective liabilities
of each of the Acquired Partnerships for the consideration payable in
immediately available funds as determined pursuant to Schedule 2.2 hereof, in
each case pursuant to an Acquisition Agreement executed and delivered between
each of the Acquired Partnerships and Acquisition.
2.4 Surrender and Exchange of Interest in Papetti's Hygrade and
Acquired Entities; Payment of Consideration.
2.4.1 On or after the Closing, each Shareholder shall
surrender such Shareholder's share certificate or certificates in
transferable form to Michael or Acquisition, as the case may be, and
shall receive in exchange therefor such holder's pro rata interest in
the applicable consideration payable pursuant to Sections 2.1 and 2.2
hereof. Until surrendered, each certificate formerly representing
shares of Papetti's Hygrade Preferred Stock, Papetti's Hygrade Common
Stock or an Acquired Company Common Stock shall be deemed to evidence a
right to receive the applicable consideration payable pursuant to
Sections 2.1 and 2.2 hereof. At the Effective Time, all outstanding
shares of Papetti's Hygrade Preferred Stock, Papetti's Hygrade Common
Stock or an Acquired Company Common Stock shall be deemed canceled and
shall have no rights other than the right to receive the applicable
consideration payable pursuant to Sections 2.1 and 2.2 hereof;
provided, however, that the Shareholders of Papetti's Hygrade who are
entitled to receive consideration payable pursuant to Section 2.1
hereof, in part, consisting of the Michael Common Stock shall be
entitled to receive any dividends or other distributions, if any,
without interest on
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the Michael Common Stock declared after the Effective Time and payable
to holders of record after the Effective Time with respect to the
number of whole shares of Michael Common Stock for which such
certificates formerly representing shares of Papetti's Hygrade
Preferred Stock and Papetti's Hygrade Common Stock were exchangeable
after the surrender of such certificates. Holders of any
unsurrendered certificates formerly representing shares of Papetti's
Hygrade Preferred Stock or Papetti's Hygrade Common Stock shall not be
entitled to vote the shares of Michael Common Stock to be issued to
such holders until such unsurrendered certificates are exchanged
pursuant to this Section 2.4. Holders of Papetti's Hygrade Common
Stock who exercise Dissenters' Rights in accordance with applicable
law shall only be entitled to receive the fair value of their shares
in accordance with applicable law. Such Dissenting Shareholders of
Papetti's Hygrade Common Stock shall not be entitled to any dividends
or other distributions payable on and after the Effective Time to
holders of Michael Common Stock with respect to the shares involved
regardless of whether such holders have received payment for their
shares.
2.4.2 At the Effective Time, the applicable consideration
payable to the Acquired Partnerships pursuant to Section 2.3 hereof
for the sale of assets described in each Acquisition Agreement shall
be paid by wire transfer of immediately available funds to an account
or accounts designated by Representative upon delivery by the Acquired
Partnerships to Michael of the documents of transfer required under
the Acquisition Agreements.
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2.5 Delivery of Cash. The cash to be received by the Shareholders
pursuant to Sections 2.1 and 2.2 hereof shall be paid by wire transfer to the
account or accounts designated by the Representative upon delivery to Michael
of the certificates formerly representing all of the shares of Papetti's
Hygrade Preferred Stock, Papetti's Hygrade Common Stock or Acquired Company
Common Stock, as the case may be, in transferable form.
2.6 Dissenters' Rights. Holders of Dissenting Shares shall be
entitled to their rights under such laws. Michael, on the one hand, and either
Papetti's Hygrade or one of the Acquired Companies, on the other hand, shall
provide to each other prompt written notice of any written demands for
appraisal, withdrawals of demands for appraisal, and any other instrument in
respect thereof received by either and the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal. Each
holder of Dissenting Shares who becomes entitled to payment of the value of
such Dissenting Shares shall, subject to applicable law, receive payment
therefor (but only after the value therefor shall have been agreed upon or
finally determined pursuant to applicable law).
ARTICLE 3
CLOSING
3.1 The Closing. Subject to the satisfaction or waiver of all of
the conditions described herein, or the prior termination of this Agreement as
provided in Article 13 hereof, the Closing of the Reorganization shall take
place at the offices of Maun & Simon, PLC, 801 Nicollet Mall, Suite 2000,
Minneapolis, Minnesota 55402 at 10:00 a.m. local time on October 1, 1996 or at
such other place, time and date as Michael and Papetti's Hygrade and the
Acquired Entities may mutually select (the "Closing").
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3.2 Effective Time. Upon the complete satisfaction or
satisfactory waiver of all conditions to Closing set forth in this Agreement,
the Plan and Agreement of Merger for the Papetti's Hygrade Reorganization and
the Certificates of Merger for the Mergers shall be executed and,
simultaneously with the Closing, shall be filed in the office of the
Secretaries of State of the state of incorporation of the Surviving Corporation
- - Michael and the Surviving Corporation - Acquisition, respectively and the
states of incorporation of Papetti's Hygrade and the Acquired Companies, as
applicable. The Papetti's Hygrade Reorganization, the Mergers and the Asset
Acquisitions shall become effective immediately upon the filing of the Plan and
Agreement of Merger and the Certificates of Merger with the Secretary of State
of the state of incorporation of the Surviving Corporation - Michael and
Surviving Corporation - Acquisition (the "Effective Time.")
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
PAPETTI'S HYGRADE AND THE ACQUIRED ENTITIES
As an inducement for Michael and Acquisition to enter into this
Agreement, at the date hereof, Papetti's Hygrade and the Acquired Entities,
jointly and severally, represent and warrant with and to Michael and
Acquisition as follows:
4.1 Organization.
4.1.1 Papetti's Hygrade and each Acquired Company is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation as set forth in the
Preamble to this Agreement. Papetti's Hygrade and each Acquired
Company has full corporate power and authority to
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carry on its business as it is now being conducted, to own and operate
its assets, business and properties, to enter into this Agreement and
to perform its obligations hereunder. A complete and correct copy of
the Articles of Incorporation and Bylaws (together with all amendments
thereto and restatements thereof) of Papetti's Hygrade and each
Acquired Company has been delivered to Michael prior to or on the date
hereof.
4.1.2 Each of the Acquired Partnerships is a limited
partnership organized and in good standing under the laws of its state
of organization as set forth in the Preamble to this Agreement. Each
Acquired Partnership has the full power and authority to carry on its
business as it is now being conducted and to own and operate its
assets, business and properties. The general partner of each Acquired
Partnership has the full power and authority to enter into this
Agreement and the Acquisition Agreements and to perform its
obligations hereunder and thereunder. Complete and correct copies of
the Certificate of Limited Partnership and the Limited Partnership
Agreement (together with all amendments thereto and restatements
thereof) of each of the Acquired Partnerships have been delivered to
Michael prior to or on the date hereof.
4.2 Capitalization. The authorized capital stock of Papetti's
Hygrade and each Acquired Company (common and preferred), the par value
thereof, and the issued and outstanding shares is as set forth on Schedule 4.2.
No shares of any class or series are held in the treasury of Papetti's Hygrade
or any Acquired Company. Except as set forth in Schedule 4.2, there are no
other classes of equity, options, warrants, calls, rights or commitments or any
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other agreements of any character relating to the sale, issuance or voting of
any shares of Papetti's Hygrade's or any Acquired Company's capital stock, or
any securities convertible into or evidencing the right to purchase any shares
of Papetti's Hygrade or any such Acquired Company capital stock.
4.3 Shareholders; Partners.
4.3.1 All of the Papetti's Hygrade Preferred Stock, the
Papetti's Hygrade Common Stock and the Acquired Company Common Stock
is validly issued, fully paid and non-assessable with no personal
liability attaching to the ownership thereof and has not been issued
in violation of the preemptive rights of any other Shareholders.
4.3.2 All of the partnership interests have been validly
issued to the Partners as set forth on Schedule 4.3 hereof.
4.4 Financial Statements. (i) The audited consolidated balance
sheets of Papetti's Hygrade as of October 31, 1994 and October 31, 1995, the
audited balance sheets of Papetti's of Iowa at June 30, 1994 and June 29, 1995,
the audited balance sheet of Monark at December 31, 1995, and the audited
balance sheet of Quaker at December 31, 1995, the unaudited combined balance
sheets of Papetti's Hygrade and the Acquired Entities as of December 31, 1994,
December 31, 1995 and March 31, 1996 (except that the unaudited combined balance
sheet at March 31, 1996 includes Papetti's Hygrade balance sheet at January 31,
1996) and the unaudited balance sheet of Papetti's Hygrade at April 30, 1996,
and (ii) the related statements of income and retained earnings and the
statements of cash flows for the fiscal years and periods then ended of
Papetti's Hygrade and such Acquired Entities, together with the notes thereon,
in
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the case of audited financial statements certified by the independent certified
public accountants of Papetti's Hygrade and such Acquired Entities, have been
delivered by Papetti's Hygrade and the Acquired Entities to Michael. Such
audited financial statements and notes were prepared in accordance with GAAP
consistently applied during the periods involved, are in accordance with the
books and records of Papetti's Hygrade and the Acquired Entities, and present
fairly the financial condition and results of operations of Papetti's Hygrade
and the Acquired Entities as of such dates and for such periods. All
transactions between Papetti's Hygrade and the Acquired Entities on the one
hand, and any of their Shareholders or Partners or their Affiliates, on the
other hand, related to the business or operations of Papetti's Hygrade or the
Acquired Entities (other than as related to compensation of any of the
Shareholders or Partners, as applicable, who were employed by Papetti's Hygrade
or any Acquired Entity during any of the periods) have been identified in such
audited financial statements. Except as set forth in Schedule 4.4 hereof, the
unaudited combined financial statements of the Acquired Entities as of and for
the period ended March 31, 1996 and the unaudited financial statements of
Papetti's Hygrade at April 30, 1996 have been prepared by management of
Papetti's Hygrade and the Acquired Entities consistent with the accounting
principles utilized in the preparation of the most recent audited financial
statements, and present fairly the financial condition and results of
operations of Papetti's Hygrade and such Acquired Entities as of such date and
for such periods, except for the lack of complete explanatory footnote
disclosures required by GAAP. All transactions between Papetti's Hygrade and
each Acquired Entity, on the one hand, and their Shareholders or Partners or
Affiliates, on the other hand, related to the business or operation of
Papetti's Hygrade and the Acquired Entities (other than as related to
compensation of any of the
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Shareholders or Partners, as applicable, who were employed by Papetti's Hygrade
and any Acquired Entity during such period) have been identified in such
unaudited financial statements. For purposes of this Agreement, the "Balance
Sheet" shall mean the combined balance sheet of Papetti's Hygrade and the
Acquired Entities at March 31, 1996, excluding the Papetti's Hygrade balance
sheet at January 31, 1996 but adding the balance sheet of Papetti's Hygrade at
April 30, 1996, and the respective dates thereof are referred to as the
"Balance Sheet Dates."
4.5 Business Since the Balance Sheet Dates. Except as set forth
on Schedule 4.5, since the Balance Sheet Dates, there has not been:
4.5.1 Any Material Adverse Effect with respect to Papetti's
Hygrade and the Acquired Entities, taken as a whole, including, but
not limited to, any state or federal regulatory proceedings which
could culminate in an order or other action, which could have such a
material adverse change other than generally known industry trends and
competitive conditions affecting the egg and egg products industry
generally;
4.5.2 Any labor dispute or threat thereof or any attempt to
organize or reorganize the employees of Papetti's Hygrade and the
Acquired Entities for the purpose of collective bargaining;
4.5.3 Any direct or indirect redemption, purchase or other
acquisition by Papetti's Hygrade or the Acquired Companies of any of
the Papetti's Hygrade capital stock, the Acquired Companies capital
stock or by any Acquired Partnership of an Acquired Partnership
interest, as applicable, or declaration of or payment or distribution
of any kind of dividend in cash or other assets to any
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Shareholders or Partners of Papetti's Hygrade or the Acquired
Entities, as applicable;
4.5.4 Any employment, severance, consulting or other
compensation contract entered into by Papetti's Hygrade or the
Acquired Entities with any director, officer or employee, or any bonus
or increase of compensation payable or to become payable to any of
their respective directors, officers, and employees, except for
customary bonuses or increases in compensation in the ordinary course
of business, it being understood that the compensation payable to the
Shareholders and Partners will, in the aggregate, be consistent with
compensation for the preceding year;
4.5.5 Any oral or written communication to Papetti's
Hygrade or the Acquired Entities from any customer or supplier thereof
that Papetti's Hygrade or the Acquired Entities reasonably anticipate
could have a Material Adverse Effect on Papetti's Hygrade and the
Acquired Entities, taken as a whole;
4.5.6 Any satisfaction or discharge of any material lien by
Papetti's Hygrade or any Acquired Entity or payment by Papetti's
Hygrade or any Acquired Entity of any material liability, other than
in the ordinary course of business;
4.5.7 Any guaranty, endorsement or indemnification by
Papetti's Hygrade or any of the Acquired Entities of the obligations
of any third person, firm or corporation;
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4.5.8 Any purchase, sale or transfer of any assets or
cancellation by Papetti's Hygrade or any Acquired Entity of debts or
claims having a value, in the aggregate, of more than $50,000, except,
in each case, in the ordinary course of business;
4.5.9 Any knowing waiver by Papetti's Hygrade or any
Acquired Entity of any rights having a value in excess of $50,000;
4.5.10 Any material transaction or obligation entered into
other than in the ordinary course of business or as otherwise
disclosed in the Schedules to this Agreement;
4.5.11 Any mortgage, pledge, lien or other encumbrance of any
of the assets, tangible or intangible, of Papetti's Hygrade or any
Acquired Entity other than in the ordinary course of business and any
purchase money mortgage or capital lease other than as permitted
hereunder or in the ordinary course of business; or
4.5.12 Any assignment, sale or transfer of any patent,
trademark, trade name, trade secret, copyright or other intangible
asset. 4.6 Litigation, Claims. Except as set forth on Schedule
4.6 hereof, to Papetti's Hygrade and the Acquired Entities' knowledge
after reasonable inquiry, there are no actions, suits, proceedings or
investigations (whether or not purportedly on behalf of Papetti's Hygrade or
the Acquired Entities) pending or threatened against or affecting the ability
of Papetti's Hygrade or the Acquired Entities to comply with their respective
obligations under this Agreement at law or in equity, or before or by any
federal, state, municipal or other
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governmental department, commission, board, agency or instrumentality, domestic
or foreign, which to Papetti's Hygrade and the Acquired Entities' knowledge
after reasonable inquiry, could have a Material Adverse Effect on Papetti's
Hygrade and the Acquired Entities, taken as a whole, nor has any such action,
suit, proceeding or investigation been pending during the twelve-month period
preceding the date of this Agreement. Papetti's Hygrade and the Acquired
Entities are not operating under or subject to, or in default with respect to,
any material order, writ, injunction or decree of any court or federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign.
Other than as set forth on Schedule 4.6, during the past five years, to
Papetti's Hygrade's or any Acquired Entities' knowledge after reasonable
inquiry, there have not been nor is there now pending, any claim(s) against any
person in his or her capacity as either a Shareholder, director, officer or
Partner of Papetti's Hygrade or an Acquired Entity. Papetti's Hygrade and the
Acquired Entities have no actual knowledge of any facts or circumstances
involving the following which would give rise to such a claim:
(i) Copyright, trade name, trademark or patent claims or
litigation;
(ii) Charges in any civil or criminal action or
administrative proceeding involving a violation of any federal or
state securities law, environmental law or regulation, employment
law or any food or sanitation law or regulation;
(iii) Charges in any civil or criminal action or
administrative proceeding involving a violation of any federal or
state antitrust or fair trade law; or
(iv) Actions involving representative actions, class actions
or derivative suits.
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4.7 Compliance with Laws. Except as set forth in Schedule 4.7 hereof,
neither Papetti's Hygrade nor any Acquired Entity has received written notice
and neither Papetti's Hygrade nor any Acquired Entity has any knowledge, having
made reasonable inquiry, of any violation by Papetti's Hygrade or the Acquired
Entities of laws, regulations and orders from any governmental entity having
authority to enforce such laws, regulations and orders that would have a
Material Adverse Effect on Papetti's Hygrade and the Acquired Entities, taken
as a whole, and neither Papetti's Hygrade nor any Acquired Entity has any
actual knowledge, having made reasonable inquiry, that any requirements of
insurance carriers, applicable to Papetti's Hygrade or the Acquired Entities'
business, are not being adhered to in any material respect. To Papetti's
Hygrade and the Acquired Entities' knowledge after reasonable inquiry, no
consent or approval by any governmental or quasi-governmental authority, other
than compliance with HSR and applicable state corporation laws, is required on
the part of Papetti's Hygrade and the Acquired Entities in connection with the
execution, delivery and performance of this Agreement or the Acquisition
Agreements or the consummation of the transactions contemplated hereby or
thereby by Papetti's Hygrade and the Acquired Entities.
4.8 Patents, Trademarks, Miscellaneous Intellectual Property. Schedule
4.8 sets forth a correct and complete list of all registered copyrights,
patents and trademarks, applied for, issued to or owned by Papetti's Hygrade or
the Acquired Entities or under which Papetti's Hygrade or the Acquired Entities
are licensed or franchised, all of which, to the best of Papetti's Hygrade's
and the Acquired Entities' knowledge after reasonable inquiry, are valid, in
good standing and uncontested. Except as set forth on Schedule 4.8, Papetti's
Hygrade and each Acquired Entity possesses adequate rights, licenses or other
authority to use all copyrights,
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patents, inventions, formula, processes (secret or otherwise), trademarks and
trade names necessary to conduct their respective businesses as presently
conducted. Except as set forth on Schedule 4.8, Papetti's Hygrade and the
Acquired Entities have not received any notice or other information with
respect to any alleged infringement or unlawful use of any software license,
copyright, patent, trademark, trade name, process, invention or formula or
other intangible property right owned by any of them or of any claimed
infringement by Papetti's Hygrade and the Acquired Entities of intangible
property rights owned by others. Except as set forth on Schedule 4.8, no
director, officer or Partner, as applicable, of Papetti's Hygrade or the
Acquired Entities has any interest in any such copyright, patent, trademark,
trade name, process, invention or formula. Except as set forth on Schedule
4.8, Papetti's Hygrade and the Acquired Entities have not granted any
outstanding licenses or other rights and have no obligation to grant licenses
or other rights with respect to any copyright, patent, invention, formula,
process, trademark or trade name listed in Schedule 4.8, except as specifically
stated in Schedule 4.8.
4.9 Insurance. Schedule 4.9 hereof is a correct and complete list of all
insurance held by Papetti's Hygrade and the Acquired Entities including the
policy number, name of carrier, coverage, term, expiration date and premium.
Papetti's Hygrade and the Acquired Entities have their respective buildings,
plants and properties insured for replacement value, but not exceeding the
amount it would cost to repair or replace such properties against loss or
damage by fire and all other hazards and risks of the character usually insured
against by persons operating similar properties in the localities where such
properties are located, issued by insurers of recognized responsibility which
to the knowledge of Papetti's Hygrade and the Acquired Entities,
after reasonable inquiry, are valid and enforceable. Papetti's Hygrade and the
Acquired Entities
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maintain general liability, including product liability, insurance that is
customarily carried by persons operating similar properties in the localities
where such properties are located. Papetti's Hygrade and the Acquired Entities
shall use their best efforts to assure that such insurance coverage will
continue in full force and effect through the Closing. Papetti's Hygrade and
the Acquired Entities have not been refused any insurance by any insurance
carrier to which it has applied for insurance during the past three years.
4.10 Indebtedness. Schedule 4.10 hereof, is a correct and complete list
of all instruments, agreements or arrangements pursuant to which Papetti's
Hygrade or any Acquired Entity has borrowed any money, guaranteed or incurred
any indebtedness or established any line of credit which represents any
liability, contingent or otherwise, of Papetti's Hygrade or any Acquired Entity
on the date hereof in excess of $50,000 individually and Papetti's Hygrade and
the Acquired Entities, to their knowledge after reasonable inquiry, are not in
default under any such instrument, agreement or arrangement. True and complete
copies of all such written instruments, agreements or arrangements have been
delivered to Michael prior to or on the date of this Agreement.
4.11 Correct Records. The financial records, ledgers, account books,
minute books, stock certificate books, stock registers, and other corporate
records, as applicable, of Papetti's Hygrade and the Acquired Entities are
current, correct and complete in all material respects and all signatures
therein are the true signatures of the persons who are purported to have
signed. The books, records and accounts of Papetti's Hygrade and the Acquired
Entities, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of assets of Papetti's Hygrade and the Acquired Entities and
Papetti's Hygrade and the Acquired Entities maintain a
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system of internal controls sufficient to provide reasonable assurance that
transactions are executed in accordance with management directives and permit
preparation of financial statements in accordance with GAAP.
4.12 Contracts. Schedule 4.12 hereof lists all of the following written
contracts, plans, agreements, arrangements and leases, true and complete copies
of which have been furnished to Michael as of the date of this Agreement, and
Schedule 4.12 describes any of the following oral contracts, plans, agreements,
arrangements and leases to which Papetti's Hygrade or an Acquired Entity is a
party: (i) each contract for the future purchase of materials, services,
supplies or equipment which (a) has a term in excess of one year or (b)
obligates Papetti's Hygrade or an Acquired Entity to pay, in one installment or
in the aggregate over its term or one year, whichever is shorter, an amount in
excess of $50,000; (ii) each contract with a customer made in the ordinary
course of business which (a) has a term in excess of one year or (b) generates
revenues for Papetti's Hygrade or an Acquired Entity over its term or in any
one 12-month period, whichever is shorter, in excess of $50,000; (iii) each
contract not made in the ordinary and usual course of business; (iv) each
employment, severance and consulting contract; (v) each contract with any labor
union or other labor organization; (vi) each guarantee or accommodation for
which the underlying obligation is in excess of $50,000; (vii) each license and
franchise relating to the business of Papetti's Hygrade or an Acquired Entity;
(viii) each lease of real or personal property which (a) has a term in excess
of one year or (b) obligates Papetti's Hygrade or an Acquired Entity to pay, in
one installment or in the aggregate over its term or one year, whichever is
shorter, an amount in excess of $50,000; and (ix) each contract and agreement
with Affiliates of Papetti's Hygrade or an Acquired Entity. Except as set
forth
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on Schedule 4.12 hereto, Papetti's Hygrade and the Acquired Entities have
performed all material obligations required to be performed by it to date and
have not breached and are not in default under any material term of any
agreement listed in Schedule 4.12 and, to the knowledge of Papetti's Hygrade
and the Acquired Entities, all of the same are enforceable in accordance with
their terms.
4.13 Employee Benefit Plans.
4.13.1 Schedule 4.13 hereof is a true and complete list of
all pension, retirement, bonus, profit-sharing, deferred
compensation, workers' compensation insurance, group insurance and
other employee pension or welfare benefit plans of any type
whatsoever entered into or maintained by Papetti's Hygrade and the
Acquired Entities. All pension benefit plans entered into or
maintained by Papetti's Hygrade and the Acquired Entities are
qualified with the IRS, true and correct copies of which, together
with copies of the most recent IRS determination letter for each
plan have been provided to Michael on or before the date of this
Agreement. Papetti's Hygrade and the Acquired Entities do not
contribute to any employee benefit plan including any
multi-employer benefit plan, except as listed on Schedule 4.13.
4.13.2 Papetti's Hygrade and the Acquired Entities are in
material compliance with and have filed, published and
disseminated all reports, documents, statements and communications
required to be filed, published or disseminated under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and
the rules and regulations promulgated under ERISA,
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and there is no additional funding requirement for any reason,
including but not limited to, amendments or terminations of any
employee benefit plan of Papetti's Hygrade or the Acquired
Entities.
4.13.3 To the knowledge of Papetti's Hygrade and the
Acquired Entities after reasonable inquiry, none of the plans
listed on Schedule 4.13 nor any fiduciary thereof has engaged in
transactions which might subject any of the plans or any fiduciary
thereof, or any party dealing with them, to the tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or to
a civil penalty imposed by Section 502 of ERISA.
4.13.4 Except as set forth on Schedule 4.13, no plan whose
termination could result in a plan termination liability has been
completely or partially terminated since September 2, 1974.
4.13.5 None of the plans or trusts has incurred any
accumulated funding deficiency, as such term is defined in Section
412 of the Code, whether or not such deficiency has been waived.
4.14 Property. Schedule 4.14 hereof contains descriptions of the
locations of Papetti's Hygrade and the Acquired Entities' plants and
structures. Papetti's Hygrade and the Acquired Entities own or lease all the
furniture, equipment and leasehold improvements located in the structures
referred to in Schedule 4.14. All leases of property required to be
capitalized for GAAP have been so capitalized and are reflected on the Balance
Sheet. All other assets and property used in the business of Papetti's Hygrade
and the Acquired Entities, and all assets and property reflected in the Balance
Sheet, or acquired after the Balance Sheet Date (other than
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assets or property sold or otherwise disposed of in the ordinary course of
business subsequent to such date) are or will be as of Closing in each case
free and clear of all security interests, mortgages, pledges, liens,
conditional sales agreements, leases, encumbrances or charges of any nature
whatsoever except as expressly stated in Schedule 4.14. To Papetti's Hygrade's
and the Acquired Entities' knowledge after reasonable inquiry, all real estate
leased by Papetti's Hygrade and the Acquired Entities, their uses,
appurtenances and improvements substantially comply with all applicable
ordinances and regulations, building, and zoning laws. Except as set forth on
Schedule 4.14, the buildings, machinery and equipment currently used in the
business of Papetti's Hygrade and the Acquired Entities are in good and
serviceable condition, reasonable wear and tear excepted.
4.15 No Defaults. The execution, delivery and performance by Papetti's
Hygrade and the Acquired Entities of this Agreement and the Acquisition
Agreements to which an Acquired Entity is a party will not, in any material
respect (with respect to clauses (ii) through (iv), inclusive of this Section
4.15), (i) conflict with the Articles or Certificates of Incorporation,
By-laws, or Limited Partnership Agreements, as applicable, of Papetti's Hygrade
or the Acquired Entities, each as amended to date; (ii) conflict with, result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third-party right of termination,
cancellation, modification or acceleration) under, any of the terms,
conditions, or provisions of any trust agreement, voting agreement,
shareholders agreement, voting trust, note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind affecting Papetti's Hygrade and the Acquired Entities
or to which Papetti's Hygrade or any Acquired Entity is a
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party or by which any of the properties or assets of Papetti's Hygrade or the
Acquired Entities are or may be bound; (iii) to Papetti's Hygrade and the
Acquired Entities' knowledge after reasonable inquiry, violate any requirement
of law applicable to Papetti's Hygrade and the Acquired Entities; or (iv)
violate any order, injunction, judgment or decree of any court or other
governmental authority or any determination of an arbitrator applicable to
Papetti's Hygrade and the Acquired Entities or any of Papetti's Hygrade or the
Acquired Entities' properties or business.
4.16 Qualification/Subsidiaries and Other Interests. Papetti's Hygrade
and the Acquired Entities are each duly qualified, certified or licensed in
each state where it conducts business as identified in Schedule 4.16 hereof and
where the failure to so qualify, license or certify would have a Material
Adverse Effect with respect to Papetti's Hygrade and the Acquired Entities,
taken as a whole. Papetti's Hygrade and the Acquired Entities have no
subsidiary corporations or any other interest in any corporation, partnership,
association or joint venture, other than as described on Schedule 4.16.
4.17 Brokers. Except for Coopers and Lybrand, LLP, whose fee for
investment banking advice and estate or tax planning for the Shareholders or
Partners will be paid by the Shareholders and Partners, there is no broker or
finder or other person who would have any valid claim against Papetti's Hygrade
or the Acquired Entities for a commission or brokerage in connection with this
Agreement or the transactions contemplated hereby and none of Papetti's Hygrade
or the Acquired Entities have retained or employed any other broker, finder or
person as such, nor taken any action which would give any other person any
valid claim against any party hereto for such a commission or brokerage.
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4.18 Employees. Papetti's Hygrade and the Acquired Entities have
delivered to Michael prior to or on the date of this Agreement, the names and
present annual salaries, wages, commissions and bonuses ("Compensation") of all
persons employed by Papetti's Hygrade and the Acquired Entities, which
information also sets forth the names of all directors and officers of
Papetti's Hygrade and the Acquired Entities, as applicable, and a description
of any agreement with respect to the election or tenure of any of them as such.
Except as disclosed on Schedule 4.18, Papetti's Hygrade and the Acquired
Entities have no knowledge after reasonable inquiry, of any pending or
threatened claims of employment discrimination, harassment or wrongful
termination or of violation of any federal or state employment laws.
4.19 Corporate Action. This Agreement and the Acquisition Agreements have
been duly authorized, executed and delivered by Papetti's Hygrade and the
Acquired Entities, as applicable, and upon the approval of the respective
Shareholders or Partners, as applicable, of Papetti's Hygrade and each Acquired
Entity, constitutes a legal, valid and binding agreement of Papetti's Hygrade
and each Acquired Entity, enforceable against them in accordance with their
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
4.20 Liabilities. As of the Balance Sheet Date, Papetti's Hygrade and the
Acquired Entities had no material liabilities, absolute or contingent, which
are not shown on the Balance Sheet or footnotes thereto. All liabilities,
absolute or contingent, of Papetti's Hygrade and the Acquired Entities incurred
subsequent to the Balance Sheet Date will have been incurred only
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in the ordinary course of business and Papetti's Hygrade and the Acquired
Entities will, prior to the Closing, have obtained the consent of Michael to
incur any single such liability incurred subsequent to the date of this
Agreement other than in the ordinary course of business in excess of $50,000
individually.
4.21 Tax Returns. Except as set forth in Schedule 4.21, all federal
income tax returns, and other federal tax returns of every nature, and all
foreign, state, county and local tax returns and declarations of estimated tax
or estimated tax deposit forms required to be filed by Papetti's Hygrade and
the Acquired Entities have been duly filed, and Papetti's Hygrade and the
Acquired Entities have paid or reserved all Taxes which have become due and
owing or pursuant to any assessment received by them and have paid all
installments of estimated tax due. Other than Papetti's Hygrade which has
requested an extension to file its federal and state income tax returns for the
year ended October 31, 1995, the Acquired Entities have filed federal and state
income tax returns for the 1995 tax year. Papetti's Hygrade will file its 1995
federal and state income tax returns on or prior to July 15, 1996. Where such
returns and reports have not been audited and approved or settled, there has
not been any waiver or extension of any applicable statute of limitations, and
Papetti's Hygrade and the Acquired Entities have not received any notice of
deficiency or adjustment. The amounts shown as provided for taxes on the
Balance Sheet are sufficient for the payment of all respective federal,
foreign, state, county and local taxes and the amounts shown as provided for
taxes on each balance sheet of Papetti's Hygrade and the Acquired Entities
provided prior to Closing will be sufficient for the payment of all respective
federal, state, county and local taxes owed for periods prior to Closing.
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All Taxes and other assessments and levies which Papetti's Hygrade and the
Acquired Entities are required by law to withhold or to collect have been duly
withheld and collected, and have been paid over to the proper governmental
authorities or are held by Papetti's Hygrade and the Acquired Entities in
separate bank accounts for such payment. All statements and reports required
to be filed by Papetti's Hygrade and the Acquired Entities under the Code have
been duly filed.
Except as described on Schedule 4.21, there is not now pending or, to the
knowledge of Papetti's Hygrade and the Acquired Entities, contemplated any
audit of any payment, return or report made or filed by Papetti's Hygrade and
the Acquired Entities or, to the knowledge of Papetti's Hygrade and the
Acquired Entities any claimed failure to pay or report any kind of Tax which
may be assessed by any taxing authority against Papetti's Hygrade or the
Acquired Entities.
An election under Code Section 1362(a) has been continuously in effect
with respect to each Acquired Company throughout all of their respective
taxable years except for Papetti's of Iowa as to which such election has been
in effect for all taxable years since the taxable year for which the election
was made and no event has occurred with respect to any Acquired Company that
would cause such election to be revoked or invalid. Each such election will
remain in effect with regard to the portion of the 1996 taxable year deemed to
end on the Closing. The election under Code Section 1362(a) with respect to
Papetti's of Iowa did not create any built in gain for federal income tax
purposes. The Acquired Companies have made similar elections required under
any state law in which each Acquired Company is required to file a state income
tax
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return and such elections have continuously remained in effect throughout the
periods referred to above.
4.22 Banks. Schedule 4.22 hereof is a correct and complete list setting
forth the name of each bank in which Papetti's Hygrade and the Acquired
Entities have an account or safe deposit box, the names of all persons
authorized to draw thereon or to have access thereto, and the name of each
person holding a power of attorney from Papetti's Hygrade or an Acquired
Entity.
4.23 Disclosure by Papetti's Hygrade and the Acquired Entities. No
representation or warranty made by Papetti's Hygrade and the Acquired Entities
in this Agreement, and no statement made in any certificate to be delivered at
the Closing, Exhibit or Schedule furnished or to be furnished in connection
with the transactions herein contemplated, when taken as a whole, contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make such representation or warranty or
any such statement not misleading at the time it was made by Papetti's Hygrade
and the Acquired Entities. No disclosure of information with respect to any
representation or warranty contained in this Agreement, or other matters
contemplated by this Agreement, shall be deemed to have been made or given
unless it expressly appears in this Agreement, or in a document submitted
pursuant to a specific requirement of this Agreement.
4.24 Conflict of Interest. Except as set forth on Schedule 4.24 hereof,
no Shareholder, director, officer, employee or Partner of Papetti's Hygrade or
any Acquired Entity or any relative of any of them, has: (i) loaned to or
guaranteed the loan of a third party to Papetti's Hygrade or any
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Acquired Entity or borrowed any money from Papetti's Hygrade or any Acquired
Entity which remains outstanding; (ii) to Papetti's Hygrade and the Acquired
Entities' knowledge after reasonable inquiry, any interest in any property,
real or personal whether owned or leased, tangible or intangible, including but
not limited to, software, inventions, patents, trade names or trademarks used
in connection with or pertaining to the business of Papetti's Hygrade and the
Acquired Entities or any lender, supplier, customer, sales representative or
distributor of Papetti's Hygrade and the Acquired Entities; or (iii) any
financial interest in any entity other than Papetti's Hygrade and the Acquired
Entities that is engaged in the business of producing, processing or
distributing eggs or egg products; provided, however that such Shareholder,
director, officer, employee or Partner or relative thereof shall not be deemed
to have such interest solely by virtue of the ownership of less than five
percent (5%) of any stock or indebtedness of any publicly-held company, the
stock or indebtedness of which is traded on a recognized stock exchange or
over-the-counter if trades are reported on NASDAQ-NMS or an equivalent
quotation system. Except as set forth on Schedule 4.24, all leases between
Shareholders or Partners or their Affiliates and Papetti's Hygrade or any of
the Acquired Entities are on terms no less favorable to Papetti's Hygrade or
the Acquired Entities as could be obtained from unrelated parties.
4.25 Securities Law Reporting. Neither Papetti's Hygrade nor any of the
Acquired Entities are now and never have been subject to the reporting
requirements of the SEC.
4.26 Environmental and Health and Safety Matters. Except as described on
Schedule 4.26, Papetti's Hygrade and the Acquired Companies are in substantial
compliance with all applicable material laws and regulations related to the
environmental, health and safety (including the United States Food and Drug
Administration ("FDA") and state and local health
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laws), all required governmental permits have been obtained and are in effect,
and no on-site storage, treatment or disposal of hazardous waste or material
has been made (except in compliance with applicable laws and regulations). To
Papetti's Hygrade and the Acquired Entities' knowledge after reasonable
inquiry, there are no pending actions, proceedings or notices of potential
action, and Papetti's Hygrade and the Acquired Entities have no knowledge of
any facts that may lead to actions, proceedings or notices of potential action
from any governmental agency regarding the condition of the properties leased
by or personal property owned by Papetti's Hygrade and the Acquired Entities
under environmental, health or safety laws (including FDA and state and local
health laws), which Papetti's Hygrade and the Acquired Entities reasonably
anticipate could have a Material Adverse Effect with respect to Papetti's
Hygrade and the Acquired Entities, taken as a whole. To the knowledge of
Papetti's Hygrade and the Acquired Entities after reasonable inquiry, Papetti's
Hygrade and the Acquired Entities have lawfully disposed of their waste,
including all hazardous substances and petroleum, and have no knowledge of any
pending or threatened proceedings concerning waste disposal by Papetti's
Hygrade and the Acquired Entities. Except as described on Schedule 4.26, there
are no underground storage tanks, PCBs, asbestos, radon gas, harmful nuclear
radiation, or hazardous wastes present on the properties leased by or personal
property owned by Papetti's Hygrade and the Acquired Entities. All of
Papetti's Hygrade and the Acquired Entities' products are labelled in
accordance with FDA requirements.
4.27 Americans with Disabilities Act and Occupational Safety and Health
Act. Papetti's Hygrade and the Acquired Entities have no actual knowledge of
any violations by Papetti's Hygrade or any Acquired Entity of the Federal
Americans With Disabilities Act or
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Occupational Safety and Health Act mandates and obligations, including but not
limited to, facilities accessibility, equipment and plant safety, and
employment practices.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
MICHAEL AND ACQUISITION
As an inducement for Papetti's Hygrade and the Acquired Entities to enter
into this Agreement at the date hereof, Michael and Acquisition, jointly and
severally, represent and warrant with and to Papetti's Hygrade and the Acquired
Entities for the benefit of Papetti's Hygrade and the Acquired Entities and
their respective Shareholders and Partners that:
5.1 Incorporation. Michael and Acquisition are each corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Nebraska, respectively. Each of Michael and Acquisition has full
corporate power and corporate authority to carry on its business as it is now
being conducted, to own and operate its assets, business and properties, to
conduct its business as now conducted by it, to enter into this Agreement and
the Acquisition Agreements and to perform their respective obligations
hereunder and thereunder. A complete and correct copy of the Certificate of
Incorporation and Bylaws (together with all amendments thereto and restatements
thereof) of each of Michael and Acquisition have been delivered to the
Representative prior to or on the date hereof.
5.2 Corporate Action of Michael and Acquisition. This Agreement and the
Acquisition Agreements have been duly authorized, executed and delivered by
Michael and Acquisition and constitute a legal, valid and binding agreement of
Michael and Acquisition, enforceable against each of them in accordance with
their respective terms, except as such
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enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally,
by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
5.3 Capitalization. Michael has an authorized capital stock consisting of
25,000,000 shares of common stock, par value $.01 per share (the "Michael
Common Stock") of which 19,379,274 are issued and outstanding and 3,000,000
shares of preferred stock, par value $0.01 per share, of which no shares are
outstanding. Acquisition has authorized capital stock consisting of 13,000
shares of common stock, par value $.10 per share and 1,676,660 shares of
preferred stock, par value $.10 per share of which 12,000 shares of common
stock and 1,469,742 shares of preferred stock are issued and outstanding. All
of the outstanding shares of common stock and preferred stock of Acquisition
are owned by Michael. No shares of any class or series are held in the
treasury of Michael or Acquisition. Except as set forth in public filings made
by Michael under the Exchange Act and the Securities Act, there are no other
classes of equity, options, warrants, calls, rights or commitments or any other
agreements of any character relating to the sale, issuance or voting of any
shares of the Michael Common Stock or Acquisition Common Stock, or any
securities convertible into or evidencing the right to purchase any shares of
the Michael Common Stock or Acquisition Common Stock.
5.4 Shareholders. All of the outstanding Michael Common Stock and the
Acquisition Common Stock is validly issued, fully paid and non-assessable with
no personal liability attaching to the ownership thereof and has not been
issued in violation of the preemptive rights of any other shareholders. The
shares of Michael Common Stock to be issued pursuant to the
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Papetti's Hygrade Reorganization will, upon issuance after the Effective Time,
be validly issued and outstanding, fully paid and non-assessable, not subject
to any preemptive rights.
5.5 Financial Statements. (i) The audited consolidated balance sheet of
Michael as of December 31, 1995 and the unaudited condensed consolidated
balance sheets of Michael as of March 31, 1996, and (ii) the related
consolidated statements of income and retained earnings and the consolidated
statements of cash flows for the fiscal years and periods then ended of
Michael, together with the notes thereon, in the case of audited financial
statements certified by the independent certified public accountants of
Michael, have been delivered by Michael to Papetti's Hygrade and the Acquired
Entities. Such audited financial statements and notes were prepared in
accordance with GAAP consistently applied during the periods involved, are in
accordance with the books and records of Michael and present fairly the
financial condition and results of operation of Michael as of such dates and
for such periods. The unaudited condensed consolidated financial statements as
of and for the periods ended March 31, 1996 have been similarly prepared and
present fairly the financial condition and results of operation of Michael as
of such date and for such period, except for the lack of complete explanatory
footnote disclosures required by GAAP. For purposes of this Agreement, the
condensed consolidated Michael Balance Sheet at MarchE31, 1996 is sometimes
referred to as the "Michael Balance Sheet" and the date thereof is referred to
as the "Michael Balance Sheet Date."
5.6 Business Since the Michael Balance Sheet Date. Except as set forth on
Schedule 5.6 hereof, since the Michael Balance Sheet Date, there has not been
any Material Adverse Effect with respect to Michael and Acquisition, including,
but not limited to, any state or federal regulatory proceedings which could
culminate in an order or other action, which could have such
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a material adverse change other than generally known industry trends and
competitive conditions affecting the business of Michael and Acquisition.
5.7 No Defaults. The execution, delivery and performance by Michael and
Acquisition of this Agreement and the Acquisition Agreements to which either is
a party will not, in any material respect (with respect to clauses (ii) through
(iv), inclusive of this Section 5.7), (i) conflict with the Articles or
Certificate of Incorporation or By-laws of Michael or Acquisition, both as
amended to date; (ii) except as may be cured on or prior to Closing and as
identified on Schedule 5.7 hereto, conflict with, result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third-party right of termination, cancellation,
modification or acceleration) under, any of the terms, conditions or provisions
of any trust agreement, voting agreement, shareholders agreement, voting trust,
note, bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind
affecting Michael and Acquisition or to which Michael or Acquisition is a party
or by which any of the properties or assets of Michael or Acquisition are or
may be bound; (iii) to Michael's and Acquisition's knowledge after reasonable
inquiry, violate any requirement of law applicable to Michael and Acquisition;
or (iv) violate any order, injunction, judgment or decree of any court or other
governmental authority or any determination of an arbitrator applicable to
Michael or Acquisition or any of Michael's or Acquisition's properties or
business.
5.8 Disclosure by Michael or Acquisition. No representation or warranty
made by Michael and Acquisition in this Agreement, and no statement made in any
certificate to be delivered at the Closing, Exhibit or Schedule furnished or to
be furnished in connection with the
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transactions herein contemplated, when taken as a whole, contains or will
contain any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make such representation or warranty or any such
statement not misleading at the time it was made by Michael and Acquisition.
No disclosure of information with respect to any representation or warranty
contained in this Agreement, or other matter contemplated by this Agreement
shall be deemed to have been given unless it expressly appears in this
Agreement or in a document submitted pursuant to a specific requirement of this
Agreement.
5.9 Brokers. Except for Piper Jaffray, Inc., there is no broker or
finder or other person who would have any valid claim against Michael or
Acquisition for a commission or brokerage in connection with this Agreement or
the transactions contemplated hereby and neither Michael nor Acquisition or any
of their respective shareholders have retained or employed any such broker,
finder or person as such, nor taken any action which would give any person any
valid claim against any party hereto for such a commission or brokerage.
5.10 Litigation, Claims. Except as set forth on Schedule 5.10 hereof, to
Michael's and Acquisition's knowledge after reasonable inquiry, there are no
actions, suits, proceedings or investigations (whether or not purportedly on
behalf of Michael or Acquisition) pending or threatened against or affecting
the ability of Michael or Acquisition to comply with their obligations under
this Agreement at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign, which to Michael's and Acquisition's
knowledge after reasonably inquiry, could have a Material Adverse Effect on
Michael and Acquisition nor has any such action, suit, proceeding or
investigation been pending during the twelve-month period preceding the date of
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this Agreement. Neither Michael nor Acquisition is operating under or subject
to, or in default with respect to, any material order, writ, injunction or
decree of any court or federal, state, municipal or other governmental
department, commission, board, agency or instrumentality, domestic or foreign.
5.11 Compliance with Laws. Except as set forth in Schedule 5.11 hereof,
neither Michael nor Acquisition has received written notice and neither has any
knowledge, having made reasonable inquiry, of any violation by Michael or
Acquisition of laws, regulations and orders from any governmental entity having
authority to enforce such laws, regulations and orders that would have a
Material Adverse Effect on Michael and Acquisition, and Michael and Acquisition
do not have any actual knowledge, having made reasonable inquiry, that any
requirements of insurance carriers, applicable to Michael's or Acquisition's
businesses, are not being adhered to in any material respect. To Michael's and
Acquisition's knowledge after reasonable inquiry, no consent or approval by any
governmental or quasi-governmental authority, other than compliance with HSR
and applicable state corporation laws, is required on the part of Michael and
Acquisition in connection with the execution, delivery and performance of this
Agreement or the Acquisition Agreements or the consummation of the transactions
contemplated hereby or thereby by Michael or Acquisition.
5.12 Employee Benefit Plans.
5.12.1 Schedule 5.12 hereof is a true and complete list of
all pension, retirement, bonus, profit-sharing, deferred
compensation, workers' compensation insurance, group insurance and
other employee pension or welfare benefit plans of any type
whatsoever entered into or maintained by Michael and
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Acquisition. All pension benefit plans entered into or maintained
by Michael and Acquisition are qualified with the IRS, true and
correct copies of which have been provided to Papetti's Hygrade
and the Acquired Entities on or before the date of this Agreement.
Neither Michael nor Acquisition contribute to any employee
benefit plan including any multi-employer benefit plan, except as
listed on Schedule 5.12.
5.12.2 Michael and Acquisition are in material compliance
with and have filed, published and disseminated all reports,
documents, statements and communications required to be filed,
published or disseminated under ERISA, and the rules and
regulations promulgated under ERISA, and there is no additional
funding requirement for any reason, including but not limited to,
amendments or terminations of any employee benefit plan of Michael
or Acquisition.
5.12.3 To the knowledge of Michael and Acquisition after
reasonable inquiry, none of the plans listed on Schedule 5.12 nor
any fiduciary thereof has engaged in transactions which might
subject any of the plans or any fiduciary thereof, or any party
dealing with them, to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or to a civil
penalty imposed by Section 502 of ERISA.
5.12.4 No plan whose termination could result in a plan
termination liability has been completely or partially terminated
since September 2, 1974.
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5.12.5 None of the plans or trusts has incurred any
accumulated funding deficiency, as such term is defined in Section
412 of the Code, whether or not such deficiency has been waived.
5.13 Liabilities. As of the Michael Balance Sheet Date, neither Michael
nor Acquisition had any material liabilities, absolute or contingent, which are
not shown on the Michael Balance Sheet or footnotes thereto.
5.14 Tax Returns. Except as set forth in Schedule 5.14, all federal
income tax returns, and other federal tax returns of every nature, and all
foreign, state, county and local tax returns and declarations of estimated tax
or estimated tax deposit forms required to be filed by Michael or Acquisition
have been duly filed, and Michael and Acquisition have paid or reserved all
Taxes which have become due and owing or pursuant to any assessment received by
it and have paid all installments of estimated tax due. Where such returns and
reports have not been audited and approved or settled, there has not been any
waiver or extension of any applicable statute of limitations, and neither
Michael nor Acquisition have received any notice of a material deficiency or
adjustment. The amounts shown as provided for taxes on the Balance Sheet are
sufficient for the payment of all respective federal, foreign, state, county
and local taxes for the reported periods.
All Taxes and other assessments and levies which Michael and Acquisition
are required by law to withhold or to collect have been duly withheld and
collected, and have been paid over to the proper governmental authorities or
are held by Michael and Acquisition in separate bank accounts for such payment.
All statements and reports required to be filed by Michael and Acquisition
under the Code have been duly filed.
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Except as described on Schedule 5.14, there is not now pending or, to the
knowledge of Michael and Acquisition, contemplated any audit of any payment,
return or report made or filed by Michael or Acquisition or, to the knowledge
of Michael and Acquisition, any claimed failure to pay or report any kind of
Tax which may be assessed by any taxing authority against Michael or
Acquisition.
5.15 Environmental and Health and Safety Matters. Except as described on
Schedule 5.15, Michael and Acquisition are in substantial compliance with all
applicable material laws and regulations related to environmental, health and
safety laws (including the FDA and state and local health laws), all required
governmental permits have been obtained and are in effect, and no on-site
storage, treatment or disposal of hazardous waste or material has been made
(except in compliance with applicable laws and regulations). To Michael's and
Acquisition's knowledge after reasonable inquiry, there are no pending actions,
proceedings or notices of potential action, and Michael and Acquisition have no
knowledge of any facts that may lead to actions, proceedings or notices of
potential action from any governmental agency regarding the condition of the
properties leased by or personal property owned by Michael and Acquisition
under environmental, health or safety laws (including FDA and state and local
health laws), which Michael and Acquisition reasonably anticipate could have a
Material Adverse Effect with respect to Michael. To the knowledge of Michael
and Acquisition after reasonable inquiry, Michael and Acquisition have lawfully
disposed of their waste, including all hazardous substances and petroleum, and
have no knowledge of any pending or threatened proceedings concerning waste
disposal by Michael or Acquisition.
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ARTICLE 6
COVENANTS OF PAPETTI'S HYGRADE AND THE
ACQUIRED ENTITIES PENDING CLOSING
Papetti's Hygrade and the Acquired Entities covenant and agree that from
the date hereof to and including the Closing:
6.1 Maintenance of Business. Papetti's Hygrade and the Acquired Entities
shall continue to carry on their respective businesses, maintain their
respective plants and equipment and keep their respective books of accounts,
records and files in substantially the same manner as heretofore, except that
Papetti's Hygrade and the Acquired Entities shall seek Michael's consent prior
to incurring any material expense other than in the ordinary course of
business. Papetti's Hygrade and the Acquired Entities will maintain in full
force and effect insurance policies now in effect or substitute comparable
policies therefor.
6.2 Negative Covenants. Without the prior written consent of Michael or
as set forth on Schedule 6.2 or as otherwise permitted herein, Papetti's
Hygrade and the Acquired Entities shall not:
6.2.1 Issue, sell, purchase or redeem, or grant options to
purchase or otherwise agree to sell, purchase or redeem any shares
of their capital stock or partnership interests or any other
securities of Papetti's Hygrade and the Acquired Entities, as
applicable;
6.2.2 Amend their Articles of Incorporation, Bylaws or
Limited Partnership Agreements;
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6.2.3 Incur or prepay any material liability for borrowed
money, short-term debt or long-term debt (as those terms are defined in
GAAP), other than in the ordinary course of business, consistent with past
practices or in connection with this transaction;
6.2.4 Pay or guarantee any obligation or liability other than
obligations or liabilities reflected in the Balance Sheet, when due,
liabilities incurred since the Balance Sheet Date in the ordinary course
of business and obligations under contracts and agreements referred to in
Schedules annexed hereto or entered into in the ordinary course of
business;
6.2.5 Adopt or modify any severance, consulting, bonus,
pension, profit sharing or other compensation plan or enter into any
contract of employment other than employment at will relationships in the
ordinary course of business;
6.2.6 Enter into or modify any material contract or
commitment, incur any material liability, absolute or contingent, waive or
fail to enforce any material right or enter into any other material
transaction, other than in the ordinary course of business or in
connection with this transaction;
6.2.7 Take any action that would or might reasonably be
expected to result in any representation or warranty set forth in this
Agreement being or becoming untrue in any material respect or in any of
the conditions to the consummation of the transactions contemplated by
this Agreement set forth in Article 9 hereof not being satisfied;
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6.2.8 Have made or become obligated to make any dividend
payment or other distribution to the Shareholders or Partners of Papetti's
Hygrade or any Acquired Entity except for distributions with respect to
net income of Papetti's Hygrade and the Acquired Entities accrued after
the Balance Sheet Date;
6.2.9 Enter into any supplier or distributor contract that
cannot be terminated without penalty on sixty (60) days notice.
6.3 Organization, Good Will. Papetti's Hygrade and the Acquired
Entities shall preserve their business organizations intact, and use their best
efforts to retain substantially as at present their respective employees and
officers, and preserve the good will of their respective suppliers, customers
and others having business relations with them.
6.4 Loss of Key Employees, Customers, Suppliers, etc. Papetti's Hygrade
and the Acquired Entities will advise Michael of the termination or threatened
termination of employment of any key employee or officer of Papetti's Hygrade
or an Acquired Entity or the loss of any material significant customer,
supplier or distributor.
6.5 Access to Plants, Files and Records. Papetti's Hygrade and the
Acquired Entities acknowledge that as of the date this Agreement is executed,
Michael has not completed Due Diligence (defined as those actions and
investigations described in subsections (i) through (iv) below). Therefore, at
the reasonable request of Michael and during normal business hours, Papetti's
Hygrade and the Acquired Entities shall, from time to time, give or cause to be
given to Michael, its officers, employees, accountants, counsel and authorized
representatives full access to: (i) all of the property, accounts, books and
other financial records, minute books, deeds, title papers, insurance policies,
licenses, agreements, contracts, commitments, tax returns,
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records and files of every character, employees, equipment, machinery,
fixtures, furniture, vehicles, notes and accounts payable and receivable and
inventories of Papetti's Hygrade and the Acquired Entities; (ii) all such other
information concerning the affairs of Papetti's Hygrade and the Acquired
Entities as Michael may reasonably request; (iii) consult with the independent
auditors of and counsel to Papetti's Hygrade and the Acquired Entities
(including requesting access to the auditor's work papers) with respect to all
matters, including, but not limited to, the financial condition of Papetti's
Hygrade and the Acquired Entities and any legal and regulatory matters
affecting Papetti's Hygrade and the Acquired Entities; (iv) at Michael's and
Acquisition's cost and expense, inspect the plant, properties and operations of
Papetti's Hygrade and the Acquired Entities, including performing a Phase I
environmental audit (the "Environmental Audit"). A copy of the report of the
Environmental Audit will be delivered promptly to Papetti's Hygrade and the
Acquired Entities and Papetti's Hygrade and the Acquired Entities shall be
afforded an opportunity to undertake a Phase II audit, if necessary with
respect to any property, to prove to Michael's satisfaction that no material
hazards exist with respect to such property. Papetti's Hygrade and the
Acquired Entities shall be afforded a 60-day period after receipt from Michael
of the Environmental Audit disclosing the same to cure or make satisfactory
arrangements to cure any material environmental hazards which the Environmental
Audit discloses exist and Michael and Acquisition shall keep confidential all
information regarding any such hazards unless legally required to disclose it.
6.6 Options, Warrants, Rights. Papetti's Hygrade and the Acquired
Companies will retire, terminate or cancel all existing options, warrants,
conversion rights or other rights to
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acquire Papetti's Hygrade Common Stock and the Acquired Company Common Stock,
including but not limited to, any such options, warrants or rights listed in
Schedule 4.2 hereof.
6.7 Third Party Consents. Papetti's Hygrade and the Acquired Entities
will obtain or cause to be obtained, the consent of any third party whose
consent is required by Papetti's Hygrade and the Acquired Entities in order
that the transactions contemplated by this Agreement may be consummated without
violation of any representation, warranty or covenant made by any of them in
this Agreement; provided, however, that Papetti's Hygrade and the Acquired
Entities shall not be required to make any material payment to such third party
or otherwise incur any obligation in order to obtain any such consent.
6.8 Notice of Proceeding. Papetti's Hygrade and the Acquired Entities
will, upon becoming aware of any order or decree or any complaint praying for
an order or decree restraining or enjoining the consummation of this Agreement
or the transactions contemplated hereunder, or upon receiving any notice from
any governmental department, court, agency or commission of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Agreement or the transactions contemplated
hereunder, or to nullify or render ineffective this Agreement or the
transactions contemplated hereunder if consummated, promptly notify Michael in
writing of such order, decree, complaint or notice.
6.9 Confidential Information. From the date hereof until the Closing
or, if, for any reason, the transactions contemplated by this Agreement are not
consummated, Papetti's Hygrade and the Acquired Entities shall not disclose to
third parties or otherwise use any confidential information received from
Michael or Acquisition in the course of investigating,
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negotiating and performing the transactions contemplated by this Agreement;
provided, however, that nothing shall be deemed to be confidential information
which:
6.9.1 is known to Papetti's Hygrade or any Acquired Entity at
the time of disclosure by Michael or Acquisition;
6.9.2 becomes publicly known or available without the
disclosure thereof by Papetti's Hygrade or any Acquired Entity in
violation of this Agreement; or
6.9.3 is rightfully received by Papetti's Hygrade or any
Acquired Entity from a third party.
6.10 Financial Statements Subsequent to Balance Sheet Date. Papetti's
Hygrade and the Acquired Entities shall deliver to Michael interim unaudited
combined financial statements (including elimination of intercompany
transactions) of Papetti's Hygrade and the Acquired Entities for each month
after the month ending March 31, 1996 no later than thirty (30) days after the
end of each such month until the Closing shall have occurred or until this
Agreement is terminated pursuant to Section 13.1. Such financial statements
will be prepared in accordance with GAAP applied on a consistent basis during
the period involved (except such financial statements shall not include the
footnotes required under GAAP), will present fairly the financial condition and
results of operations of Papetti's Hygrade and the Acquired Entities as of such
dates and for such periods, and will be in accordance with the books and
records of Papetti's Hygrade and the Acquired Entities. As soon as practicable
after execution and delivery of this Agreement, Papetti's Hygrade and the
Acquired Entities shall deliver to Michael audited financial statements for
each of the acquired entities for each of the last two fiscal years, in each
case in compliance with Regulation S-X of the SEC. Michael will cooperate with
Papetti's
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Hygrade and the Acquired Entities in the preparation and review of these
audited financial statements.
6.11 Employees. Prior to the Closing, and except as set forth in
Schedule 6.11 hereof, without the written consent of Michael thereto, Papetti's
Hygrade and the Acquired Entities will not increase the rate of compensation of
or grant any severance, bonus or other employee benefit to any employee, or
commit itself to or announce the granting of any such increase in compensation,
bonus or other employee benefit to become effective on or after the Closing.
At or before the Closing, Papetti's Hygrade and the Acquired Entities shall
deliver to Michael a list of Papetti's Hygrade and the Acquired Entities'
employees as of the end of the fiscal quarter immediately preceding the
Closing, indicating the following information for each employee:
6.11.1 his or her compensation and any applicable severance
arrangement;
6.11.2 whether remunerated on an hourly, weekly or monthly
basis;
6.11.3 date of most recent commencement of service with
Papetti's Hygrade and the Acquired Entities; and
6.11.4 accrued holiday, vacation, sick leave, long service
entitlement (if any) and permitted time-off due as compensation for
additional time worked.
6.12 Corporate Action. Subject to the provisions of this Agreement,
Papetti's Hygrade and the Acquired Entities will take all necessary corporate
and other action, including approval of the Papetti's Hygrade Reorganization,
the Mergers and the Asset Acquisitions by the
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Shareholders and Partners, as applicable, required to carry out the
transactions contemplated by this Agreement; provided, however, that nothing in
this Article 6 or anywhere else in this Agreement shall require Papetti's
Hygrade and the Acquired Entities to carry out such transactions if the
conditions to Closing have not been satisfied.
6.13 Closing Best Efforts. Papetti's Hygrade and the Acquired Entities
shall (i) act in good faith and use their respective best efforts to consummate
the transactions contemplated by this Agreement in accordance with the terms of
this Agreement as soon as is reasonably practicable including, without
limitation, (A) the execution and/or delivery of the Acquisition Agreements,
the Shareholder Agreement, the Employment and Non-Compete Agreements, the
Settlement Agreement, and the Related Party Leases, as applicable, and (B)
obtain, make and file all governmental reviews, applications, consents, notices
and other documents required to have been obtained, made and filed in
connection with this Agreement and the transactions contemplated herein by
Papetti's Hygrade and the Acquired Entities and cooperate with Michael with
regard to its required governmental reviews, applications, consents, notices
and other such documents in connection with this Agreement and the transactions
contemplated herein and (ii) not take any action (except as required by law)
that would materially impede or delay the transactions contemplated hereunder
or the ability of Michael or Acquisition to perform their covenants and
agreements provided herein.
6.14 Exclusivity. Unless this Agreement has been terminated as provided
in Section 13.1, Papetti's Hygrade and the Acquired Entities shall not solicit
any bid or offer from a prospective purchaser of Papetti's Hygrade and the
Acquired Entities, or entertain any proposal to sell all or substantially all
of the assets of Papetti's Hygrade and the Acquired Entities or
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merge or consolidate with another party. Prior to Closing, Papetti's Hygrade
and the Acquired Entities will not provide any information with respect to
Papetti's Hygrade and the Acquired Entities or their respective businesses to
any third party, other than Michael and other than in the ordinary course of
business, without the prior consent of Michael.
6.15 Supplements to Schedules. Papetti's Hygrade and the Acquired
Entities shall, not later than five (5) business days prior to the Closing,
deliver to Michael a written notice setting forth any and all facts,
conditions, occurrences, changes and other matters in each case occurring after
the date hereof that will cause the representations and warranties of Papetti's
Hygrade and the Acquired Entities contained herein (including the Schedules)
not to be true and correct in all material respects on and as of the Effective
Time with the same effect as though made on and as of the Effective Time. Such
notice shall specifically refer to this Section 6.15, shall be true, complete
and correct and in reasonable detail, and shall specifically identify each
representation or warranty so affected and the specific manner in which it is
so affected. In the event that Papetti's Hygrade and the Acquired Entities
shall deliver such notice and Michael shall nevertheless proceed to consummate
the Closing, the facts, conditions, occurrences, changes and other matters in
each case, occurring after the date hereof so disclosed as to each
representation and warranty contained herein (including the Schedules) shall be
deemed to constitute an exception to such representation or warranty reflecting
the facts, conditions, occurrences, changes and other matters so disclosed with
the same effect as if such exception had been made in this Agreement (including
the Schedules).
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ARTICLE 7
COVENANTS OF MICHAEL AND ACQUISITION
PENDING CLOSING
Michael and Acquisition covenant and agree that from the date hereof to
and including the Closing:
7.1 Corporate Action. Subject to the provisions of this Agreement,
Michael and Acquisition will take all necessary corporate and other action,
including, if required, approval of the Papetti's Hygrade Reorganization, the
Mergers and the Asset Acquisitions by Michael's or Acquisition's shareholders,
required to carry out the transactions contemplated by this Agreement;
provided, however, that nothing in this Article 7 or anywhere else in this
Agreement shall require Michael or Acquisition to carry out such transactions
if the conditions to Closing have not been satisfied.
7.2 Confidential Information. From the date hereof until the Closing,
or if, for any reason, the transactions contemplated by this Agreement are not
consummated, Michael and Acquisition shall not disclose to third parties or
otherwise use any confidential information received from Papetti's Hygrade or
the Acquired Entities in the course of investigating, negotiating and
performing the transactions contemplated by this Agreement; provided, however,
that nothing shall be deemed to be confidential information which:
7.2.1 is known to Michael and Acquisition at the time of its
disclosure by Papetti's Hygrade or the Acquired Entities;
7.2.2 becomes publicly known or available without the
disclosure thereof by Michael or Acquisition in violation of this
Agreement; or
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7.2.3 is rightfully received by Michael or Acquisition from a
third party.
7.3 Third Party Consents. Michael and Acquisition will obtain or cause
to be obtained, the consent of any third party whose consent is required by
Michael or Acquisition in order that the transactions contemplated by this
Agreement may be consummated without violation of any representation, warranty
or covenant made by either of them in this Agreement; provided, however, that
Michael and Acquisition shall not be required to make any material payment to
such third party or otherwise incur any obligation in order to obtain such
consent.
7.4 Notice of Proceedings. Michael and Acquisition will, upon becoming
aware of any order or decree or any complaint praying for an order or decree
restraining or enjoining the consummation of this Agreement or the transactions
contemplated hereunder, or upon receiving any notice from any governmental
department, court, agency or commission of its intention to institute an
investigation into, or institute a suit or proceeding to restrain or enjoin the
consummation of this Agreement or the transactions contemplated hereunder, or
to nullify or render ineffective this Agreement or the transactions, if
consummated, promptly notify Papetti's Hygrade and the Acquired Entities in
writing of such order, decree, complaint or notice.
7.5 Due Diligence Access. Michael and Acquisition acknowledge that as
of the date this Agreement is executed, Papetti's Hygrade and the Acquired
Entities have not completed Due Diligence (for purposes of this Section 7.5,
"Due Diligence" shall include consultation with all executive officers of
Michael and the independent auditors of and counsel to Michael to obtain
information necessary to verify and confirm the representations and warranties
of Michael and Acquisition set forth herein and examination of all public
filings of Michael under the Exchange Act and the Securities Act). Therefore,
at the reasonable request of Papetti's Hygrade and the
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Acquired Entities during normal business hours, Michael shall, from time to
time, give Papetti's Hygrade and the Acquired Entities, their officers,
employees, accountants, counsel and authorized representatives access to
Michael's executive officers, independent auditors and counsel to complete and
conduct Due Diligence.
7.6 Closing Best Efforts. Michael and Acquisition shall (i) act in good
faith and use their respective best efforts to consummate the transactions
contemplated by this Agreement in accordance with the terms of this Agreement
as soon as is reasonably practicable including, without limitation, (A) the
execution and/or delivery of the Acquisition Agreements, the Shareholder
Agreement, the Employment and Non-Compete Agreements, the Settlement Agreement,
and the Related Party Leases, and (B) obtain, make and file all governmental
reviews, applications, consents, notices and other documents required to have
been obtained, made and filed in connection with this Agreement and the
transactions contemplated herein by Michael and Acquisition and cooperate with
Papetti's Hygrade and the Acquired Entities with regard to their required
governmental reviews, applications, consents, notices and other such documents
in connection with this Agreement and the transactions contemplated herein, and
(ii) not take any action (except as required by law) that would materially
impede or delay the transactions contemplated hereunder or the ability of the
Acquired Entities to perform their covenants and agreements provided herein.
7.7 Supplements to Schedules. Michael shall, not later than five (5)
business days prior to the Closing, deliver to the Representative a written
notice setting forth any and all facts, conditions, occurrences, changes and
other matters in each case occurring after the date hereof that will cause the
representations and warranties of Michael and Acquisition contained herein
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(including the Schedules) not to be true and correct in all material respects
on and as of the Effective Time with the same effect as though made on and as
of the Effective Time. Such notice shall specifically refer to this Section
7.7, shall be true, complete and correct and in reasonable detail, and shall
specifically identify each representation or warranty so affected and the
specific manner in which it is so affected. In the event that Michael shall
deliver such notice and Papetti's Hygrade and the Acquired Entities shall
nevertheless proceed to consummate the Closing, the facts, conditions,
occurrences, changes and other matters in each case, occurring after the date
hereof so disclosed as to each representation and warranty contained herein
(including the Schedules) shall be deemed to constitute an exception to such
representation or warranty reflecting the facts, conditions, occurrences,
changes and other matters so disclosed with the same effect as if such
exception had been made in this Agreement (including the Schedules).
7.8 Actions to Allow the Appointment of Representatives to the Board of
Directors of Michael. Michael shall obtain all of the necessary director
and/or stockholder approvals required to elect or appoint Stephen Papetti and
Arthur J. Papetti to Michael's Board of Directors to serve for an initial
period beginning on the Closing and ending on the date of Michael's next annual
meeting of stockholders or until their respective successors are duly elected
and qualified. In addition, in connection with any annual meeting of
stockholders of Michael that occurs prior to the third anniversary of the
Closing, the Shareholders of Papetti's Hygrade shall be entitled to nominate:
(i) two directors to the slate of directors to be proposed by the Board of
Directors of Michael provided that such Shareholders then beneficially own in
the aggregate 10% or more of the outstanding shares of Michael Common Stock, or
(ii) one
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director to the slate of directors to be proposed by the Board of Directors of
Michael if such Shareholders beneficially own in the aggregate less than 10% of
the outstanding shares of Michael Common Stock. The Shareholders of Papetti's
Hygrade designated nominees shall be given to Michael within 30 days following
the end of each calendar year through notice given by the Representative to
Michael.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF
PAPETTI'S HYGRADE AND THE ACQUIRED ENTITIES
The obligations of Papetti's Hygrade and the Acquired Entities under this
Agreement are, at the option of Papetti's Hygrade and the Acquired Entities,
subject to the fulfillment of the following conditions prior to or at the
Closing:
8.1 Representations, Warranties, Covenants.
8.1.1 All representations and warranties of Michael and
Acquisition contained in this Agreement and in any certificate, Exhibit or
Schedule to be delivered by Michael or Acquisition pursuant hereto or in
connection with the transactions contemplated hereby shall be true and
accurate in all material respects as of the date when made and shall be
deemed to be made again at and as of the Closing and shall then be true
and accurate in all material respects;
8.1.2 Michael and Acquisition shall have performed and
complied in all material respects with each and every covenant, agreement
and condition required by this Agreement to be performed or complied with
by them prior to or at the Closing;
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8.1.3 Acquisition's sole shareholder shall have approved the
Mergers, the Asset Acquisitions, this Agreement and the transactions
contemplated thereby in accordance with applicable law; and
8.1.4 Michael and Acquisition each shall have delivered to
Papetti's Hygrade and the Acquired Entities a certificate of an officer
of Michael and Acquisition, dated as of the Closing, certifying to the
fulfillment of the conditions set forth in this Section 8.1.
8.2 Proceedings. No order, judgment or decree of any court or other
governmental agency shall have been issued which enjoins, prohibits or modifies
the consummation of the transactions contemplated by this Agreement and no
proceedings seeking any such relief before any court or governmental agency
shall have been initiated.
8.3 Proceedings and Instruments Satisfactory. All proceedings,
corporate or otherwise, to be taken in connection with the transactions
contemplated by this Agreement and all documents incident hereto shall be
reasonably satisfactory in form and substance to Papetti's Hygrade and the
Acquired Entities and Michael and Acquisition shall have furnished to Papetti's
Hygrade and the Acquired Entities certified copies of such proceedings and such
other instruments and documents as Papetti's Hygrade and the Acquired Entities
shall have reasonably requested.
8.4 Acquisition Agreements. All of the transactions contemplated in the
Acquisition Agreements shall stand ready to be simultaneously consummated with
the Papetti's Hygrade Reorganization and the Mergers.
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8.5 HSR Notification and Consents. An HSR pre-merger notification shall
have been made and the notification period shall have expired and all other
consents required for the consummation of the transaction contemplated herein
shall have been obtained or waived.
8.6 Federal Tax Opinion. An opinion of Coopers & Lybrand, LLP, dated as
of the date of Closing shall have been obtained with respect to the Papetti's
Hygrade Reorganization, based on customary reliance and subject to customary
qualifications, including the fact that the Restructuring has been or will be
completed in accordance with its terms, to the effect that for federal income
tax purposes:
8.6.1 The Papetti's Hygrade Reorganization will qualify as a
"reorganization" under Section 368(a) of the Code;
8.6.2 No gain or loss will be recognized by any Papetti's
Hygrade Shareholder (except in connection with the receipt of cash) upon
the exchange of the Papetti's Hygrade Preferred Stock and the Papetti's
Hygrade Common Stock for Michael Common Stock in the Papetti's Hygrade
Reorganization;
8.6.3 The basis of the Michael Common Stock received by a
Shareholder of Papetti's Hygrade who exchanges Papetti's Hygrade Preferred
Stock and the Papetti's Hygrade Common Stock for Michael Common Stock will
be the same as the basis of the Papetti's Hygrade Preferred Stock and the
Papetti's Hygrade Common Stock surrendered in exchange therefor (subject
to any adjustments required as the result of receipt of cash in lieu of a
fractional share of Michael Common Stock); and
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8.6.4 The holding period of the Michael Common Stock received
by a Shareholder of Papetti's Hygrade receiving Michael Common Stock will
include the period during which the Papetti's Hygrade Preferred Stock and
the Papetti's Hygrade Common Stock surrendered in exchange therefor was
held (provided that the Papetti's Hygrade Preferred Stock and the
Papetti's Hygrade Common Stock of such Papetti's Hygrade Shareholder was
held as a capital asset at the Effective Time).
8.7 Opinion of Counsel to Michael. Papetti's Hygrade and the Acquired
Entities shall have received an opinion letter dated as of the Closing
addressed to Papetti's Hygrade and the Acquired Entities from Maun & Simon,
PLC, counsel to Michael and Acquisition, in the form of Exhibit D hereto.
8.8 Certificate of Incumbency. Michael shall have furnished to
Papetti's Hygrade and the Acquired Entities a Certificate of the Secretary of
Michael and Acquisition, certified as of the Closing, as to the incumbency and
signatures of the officers of Michael and Acquisition executing this Agreement
and any document contemplated or delivered under this Agreement.
8.9 Resolutions. Michael shall have delivered to Papetti's Hygrade and
the Acquired Entities at the Closing, certified copies of resolutions adopted
by the Board of Directors of Michael and the Board of Directors and
shareholders of Acquisition adopting and approving this Agreement and the
transactions contemplated hereby.
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8.10 Employment and Non-Compete Agreement. At the Closing, Michael shall
have executed and delivered to the Representative employment and non-compete
agreements with *in substantially the form attached hereto and made a part
hereof as Exhibit E, (with such changes in amount of compensation as agreed
upon in each case) (the "Employment and Non-Compete Agreements").
8.11 Certificates of Good Standing. Michael and Acquisition shall have
delivered to Papetti's Hygrade and the Acquired Entities Certificates of Good
Standing (or its equivalent) issued by the Secretary of State of Delaware and
Nebraska, respectively, to the effect that Michael and Acquisition are duly
organized and in good standing under the laws of Delaware and Nebraska,
respectively, as of a date not more than ten (10) days prior to the Closing.
8.12 Shareholder Agreement. Michael shall have executed and delivered to
the Representative at the Closing, the Shareholder Agreement.
8.13 Settlement Agreement. At the Closing, Michael and North Carolina
State University shall have executed and delivered to the Representative a
settlement agreement in substantially the form attached hereto as Exhibit F
(the "Settlement Agreement").
8.14 Related Party Leases. At the Closing, Michael or Acquisition shall
have executed and delivered leases reasonably acceptable to the owners of the
real property set forth on Schedule 8.14 (the "Leased Property") with basic
terms and rental payments, as set forth in Schedule 8.14 (the "Lease Terms")
for the real property or facilities identified therein leased to the Acquired
Entities (the "Related Party Leases"), it being understood that the rental
payments
- ----------------------------------
* The confidential portion has been so omitted and filed separately
with the Securities and Exchange Commission pursuant to a request
for confidential treatment under Rule 24(b)-2 of the Securities Act
of 1934.
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set forth in Schedule 8.14 are not in excess of rental rates for the Leased
Property in effect prior to this Agreement, except as otherwise noted therein.
8.15 No Material Adverse Effect. There shall have been no Material
Adverse Effect with respect to Michael.
8.16 Appointment of Representatives to the Board of Directors of Michael.
Michael shall have taken all necessary actions to assure the immediate
appointment of Stephen Papetti and Arthur J. Papetti to the Board of Directors
of Michael, effective immediately upon Closing of the transactions contemplated
by this Agreement.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF
MICHAEL AND ACQUISITION
The obligations of Michael and Acquisition under this Agreement are, at
the option of Michael and Acquisition, subject to the fulfillment of the
following conditions prior to or at the Closing:
9.1 Representations, Warranties, Covenants.
9.1.1 All representations and warranties of Papetti's Hygrade
and the Acquired Entities contained in this Agreement and in any
certificate, Exhibit or Schedule to be delivered by Papetti's Hygrade and
the Acquired Entities pursuant hereto or in connection with the
transactions contemplated hereby shall be true and accurate in all
material respects as of the date when made and shall be deemed to be made
again at and as of the Closing and shall then be true and accurate in all
material respects;
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9.1.2 Papetti's Hygrade and the Acquired Entities shall have
performed and complied in all material respects with each and every
covenant, agreement and condition required by this Agreement to be
performed or complied with by them prior to or at the Closing;
9.1.3 The Papetti's Hygrade Reorganization, the Mergers, the
Asset Acquisitions and this Agreement shall have been duly approved by the
Shareholders and Partners, as applicable, of Papetti's Hygrade and the
Acquired Entities;
9.1.4 The Representative shall have delivered to Michael at
the Closing, a certificate certifying to the fulfillment of the conditions
set forth in this Section 9.1.
9.2 Proceedings. No order, judgment or decree of any court or other
governmental agency shall have been issued which enjoins, prohibits or modifies
the consummation of the transactions contemplated by this Agreement and no
proceeding seeking any such relief before any court or governmental agency
shall have been initiated.
9.3 Proceedings and Instruments Satisfactory. All proceedings,
corporate or otherwise, required to be taken by Papetti's Hygrade and the
Acquired Entities in connection with the transactions contemplated by this
Agreement shall have been taken and all documents incident hereto shall be
reasonably satisfactory in form and substance to Michael and Papetti's Hygrade
and the Acquired Entities shall have furnished Michael with certified copies of
such proceedings and such other instruments and documents as Michael shall have
reasonably requested.
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9.4 Consents of Papetti's Hygrade and the Acquired Entities' Creditors
and Others. If required by Michael in writing, each instrument or other
agreement or document under which Papetti's Hygrade or an Acquired Entity has
incurred or may incur material debt or other material performance obligations
shall have been amended where necessary or appropriate, without the assumption
by Michael, Papetti's Hygrade or the Acquired Entities of any additional
obligation or cost and in a manner reasonably satisfactory in form and
substance to Michael, Papetti's Hygrade and the Acquired Entities, so as to
permit the transactions contemplated by this Agreement without a default or
acceleration of any obligation thereunder and to provide that none of Michael,
Papetti's Hygrade or the Acquired Entities shall become liable, contingently or
otherwise, by reason of consummation of such transactions, for acceleration of
payment or other acceleration of performance of such material debt or
obligations.
9.5 HSR Notification. An HSR pre-merger notification shall have been
made and the notification period shall have expired.
9.6 Resolutions. Papetti's Hygrade and the Acquired Entities shall
have delivered to Michael at the Closing certified copies of resolutions
adopted by the Board of Directors and Shareholders of Papetti's Hygrade and the
Acquired Companies and the Partners of the Acquired Partnerships adopting and
approving this Agreement and the transactions contemplated hereby.
9.7 Certificates of Good Standing. Papetti's Hygrade and the Acquired
Entities shall have delivered to Michael a Certificate of Good Standing (or its
equivalent) issued by the Secretary of State of the applicable state of
incorporation or organization to the effect that Papetti's Hygrade and such
Acquired Entity is duly organized and in good standing under the laws of such
state, as of a date not more than ten (10) days prior to the Closing and
certificates
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of good standing from each state in which Papetti's Hygrade and each Acquired
Entity is qualified to do business, each as of a date not more than twenty (20)
days prior to the Closing.
9.8 Certificate of Incumbency. Papetti's Hygrade and the Acquired
Entities shall have furnished to Michael a Certificate of the Secretary of
Papetti's Hygrade and each such Acquired Entity, certified as of the Closing,
as to the incumbency and signatures of the officers of Papetti's Hygrade and
the Acquired Entities executing this Agreement and any document contemplated or
delivered under this Agreement.
9.9 Employment and Non-Compete Agreement. At the Closing, * shall have
executed and delivered the Employment and Non-Compete Agreements to Michael.
9.10 Indebtedness. At the Effective Time, the aggregate indebtedness of
Papetti's Hygrade, the Acquired Companies and the Acquired Partnerships assumed
by Michael shall not exceed $28,300,000. "Indebtedness" means obligations of
Papetti's Hygrade and the Acquired Entities owed to third parties other than
Papetti's Hygrade and the Acquired Entities for money borrowed and capitalized
lease obligations.
9.11 Acquisition Agreements. All of the transactions contemplated in the
Acquisition Agreements shall stand ready to be simultaneously consummated with
the Papetti's Hygrade Reorganization and the Mergers.
9.12*
- ----------------------------------
* The confidential portion has been so omitted and filed separately
with the Securities and Exchange Commission pursuant to a request
for confidential treatment under Rule 24(b)-2 of the Securities Act
of 1934.
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9.13 Shareholder Agreement. At the Closing, the Shareholders and Sellers
named in the Shareholder Agreement and the Representative shall have executed
and delivered the Shareholder Agreement to Michael.
9.14 Opinion of Counsel to Papetti's Hygrade and Acquired Entities.
Michael shall have received opinion letters dated as of the Closing
addressed to Michael from Thompson Coburn and O'Connor, Morss & O'Connor,
counsel to Papetti's Hygrade and the Acquired Entities in the form of Exhibit G
hereto.
9.15 Settlement Agreement. At Closing, Papetti's Hygrade shall have
executed and delivered the Settlement Agreement to Michael and North Carolina
State University.
9.16 Related Party Leases. At the Closing, the owners of the Leased
Property shall have executed and delivered leases reasonably acceptable to
Michael for the Leased Property in accordance with the Lease Terms.
9.17 No Material Adverse Effect. There shall have been no Material
Adverse Effect with respect to Papetti's Hygrade and the Acquired Entities,
taken as a whole.
9.18 Tax Opinion. Coopers & Lybrand, LLP shall have delivered to the
Shareholders of Papetti's Hygrade the opinion required by Section 8.6 of this
Agreement.
ARTICLE 10
OTHER AGREEMENTS
10.1 Employee Benefits to be Granted to Employees of Papetti's Hygrade
and Acquired Entities. After the Closing, Michael will provide to the
employees of Papetti's Hygrade and the Acquired Entities benefits no less
favorable than those provided by Michael to its employees from time to time.
Michael will recognize the past services of the employees of Papetti's
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Hygrade and the Acquired Entities for the purposes of eligibility to
participate, vesting and eligibility for benefits under its plans and for
purposes of benefit accrual. Nothing contained herein shall be construed as an
obligation to continue the employment of any employee of Papetti's Hygrade and
the Acquired Entities not subject to an Employment and Non-Compete Agreement or
to in any way limit the ability of Michael or Acquisition to alter the terms or
conditions of employment of any employee of Papetti's Hygrade or the Acquired
Entities not subject to an Employment and Non-Compete Agreement other than as
contemplated by the first two sentences of this Section 10.1.
10.2 Post-Closing Conduct. Except for the Restructuring which will be
consummated as provided in the Restructuring agreement and disclosed in
Michael's public filings, Michael and Acquisition agree that they will not take
or cause to be taken any action or actions which will disqualify the Papetti's
Hygrade Reorganization as a reorganization within the meaning of Section 368(a)
of the Code.
10.3 Quaker Tax Refund. Michael and Acquisition agree that they will
endorse, as necessary, and promptly forward to the Representative for pro rata
distribution to the Shareholders of Quaker, all Quaker tax refunds received
with respect to periods prior to the Closing.*
10.4 Agreement with Respect to Sunbest-Papetti Farms Assets. Papetti's
Hydgrade and the Acquired Entities, on the one hand, and Michael, on the other
hand, shall use their respective reasonable best efforts to cause
Sunbest-Papetti Farms ("Sunbest-Papetti") to agree
- ----------------------------------
* The confidential portion has been so omitted and filed separately
with the Securities and Exchange Commission pursuant to a request
for confidential treatment under Rule 24(b)-2 of the Securities Act
of 1934.
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<PAGE> 72
to (i) sell certain assets and to transfer certain liabilities of
Sunbest-Papetti (such assets and liabilities to be sold and transferred being
identified in Schedule 10.4 to this Agreement) to Acquisition on terms mutually
agreeable to Michael and Sunbest-Papetti and (ii) lease to Acquisition the
Sunbest-Papetti laying facilities at Closing on terms that are mutually
agreeable to Michael and Sunbest-Papetti.*
10.5 Allocation of Consideration Paid to the Acquired Companies and the
Acquired Partnerships to Assets Purchased. The Acquired Companies and Acquired
Partnerships, on the one hand, and Michael or Acquisition, on the other hand,
shall have allocated the consideration with respect to the Acquired Companies
and Acquired Partnerships pursuant to Sections 2.2 and 2.3 of this Agreement
between the assets of the Acquired Companies and Acquired Partnerships prior to
Closing. None of the Acquired Companies or Acquired Partnerships nor Michael
or Acquisition shall take a position in any tax return, examination or other
administrative or judicial proceeding relating to any such return that is
inconsistent with the allocation as is agreed to by the parties pursuant to
this Section 10.4. Acquisition shall prepare and the Acquired Entities shall
agree in advance of its filing with the IRS, an allocation of assets as set
forth in IRS Form 8594.
10.6 Release of Individual Guarantors from Guarantees Relating to
Indebtedness Assumed. On or prior to the Closing Date, Michael and Acquisition
shall take any and all actions that are reasonably necessary or required to
effect the release of the personal guarantees
- ----------------------------------
* The confidential portion has been so omitted and filed separately
with the Securities and Exchange Commission pursuant to a request
for confidential treatment under Rule 24(b)-2 of the Securities Act
of 1934.
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<PAGE> 73
set forth in Schedule 4.24 of this Agreement to the extent that such guarantees
have not otherwise been released prior to or at the Closing.
10.7 Draft of Tax Opinion. Upon receipt of a draft of the tax
opinion referenced in Section 8.6 hereof, Papetti's Hygrade shall
promptly deliver to Michael a copy thereof.
ARTICLE 11
GENERAL INDEMNITY AGREEMENTS
11.1 Individual Indemnitor's Agreements. All representations and
warranties made in this Agreement by Papetti's Hygrade and the Acquired
Entities are made to and for the benefit of both Michael and Acquisition. With
respect to all such representations and warranties in this Agreement (and/or in
the Schedules attached hereto and the certificates to be delivered by Papetti's
Hygrade and the Acquired Entities at the Closing), Stephen Papetti, Alfred
Papetti and Arthur J. Papetti (the "Individual Indemnitors") shall, for the
period specified below, jointly and severally indemnify Michael and Acquisition
against and hold Michael and Acquisition harmless from any and all claims,
actions, suits, liabilities, losses, damages and expenses of every nature and
character (including, but not limited to, all reasonable attorneys' fees and
all amounts paid in settlement of any claims, actions or suits), ("Losses")
which arise or result directly or indirectly from any breach of any such
representation or warranty; provided, however, that, except as provided in the
last sentence of this Section 11.1 the indemnification obligation contained in
this Section 11.1 shall not apply to any Losses which arise or result directly
or indirectly from any such matters unless a Notice of Claim (as defined below)
has been delivered to the Representative prior to the first anniversary of the
Closing. Subject to Sections 11.4 and 11.5, if a Notice of Claim has been
delivered prior to such anniversary date, any and all such
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<PAGE> 74
Losses, whether incurred prior to or after such anniversary date, shall be
subject to indemnification under this Section 11.1. Notwithstanding the
foregoing, but subject to Sections 11.4 and 11.5, if the Notice of Claim arises
out of or relates to a breach of the representation in Sections 4.21 or 4.26 as
to taxes and environmental claims, the Notice of Claim may be given prior to
the third anniversary of the Closing.
11.2 Obligation to Dissenters. The Individual Indemnitors shall also
indemnify and hold harmless Michael from all expenses, claims, damages and
losses arising out of the assertion of statutory Dissenters' Rights by any of
the Shareholders of Papetti's Hygrade and the Acquired Entities in excess of
the consideration that would otherwise have been payable or deliverable by
Michael to such Shareholders had such Shareholders not exercised such
Dissenter's Rights. The Individual Indemnitors promptly after Closing shall
undertake to compromise, settle or pay the claims of dissenting Shareholders in
excess of the consideration provided in Schedule 2.2 and shall otherwise assume
the defense or prosecution of any appraisal process. The obligation under this
Section 11.2 shall not be subject to the limitations of Sections 11.4 and 11.5.
11.3 Michael's Indemnity Agreements. With respect to all representations
and warranties made in this Agreement by Michael and Acquisition (and/or in the
Schedules attached hereto and the certificates to be delivered by Michael or
Acquisition at the Closing), Michael and Acquisition shall for a period of *
from the Closing indemnify the Shareholders and the Partners against and hold
the Shareholders and the Partners harmless from any and all Losses which arise
or result directly or indirectly from any breach of any such representation or
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<PAGE> 75
warranty* If a Notice of Claim has been delivered prior to *, any and all such
Losses, whether incurred prior to or after *, shall be subject to
indemnification under this Section 11.3.*
11.4 De Minimus Claims. No party indemnified under Sections 11.1 or 11.3
above shall make a claim for indemnification unless and until such party has
incurred cumulative Losses for which such party is entitled to indemnification
in excess of the sum of $200,000 and then only for cumulative Losses in excess
of $200,000.
11.5 Limit of Indemnification. The obligation of the Individual
Indemnitors to indemnify Michael and Acquisition under Section 11.1 and Michael
and Acquisition to indemnify the Shareholders and Partners under Section 11.3
shall be limited to * in the aggregate with respect to Losses subject to
Notices of Claim delivered prior to * which in the case of the Individual
Indemnitors shall be reduced to * in the aggregate for Losses subject to
Notices of Claim delivered on or after the * but prior to *, but in no event
shall the aggregate liability of the Individual Indemnitors, exceed *. Except
as provided in Section 13.1.2 and 13.1.3 the indemnification provided in this
Article 11 shall be the sole and exclusive remedy of Michael and Acquisition,
on the one hand, and the Shareholders and Partners, on the other hand, for a
breach of the representations and warranties in this Agreement (and/or in the
Schedules attached hereto and the certificates to be delivered at Closing).
11.6 Procedure for General Claims. Michael shall give prompt written
notice to the Representative of any claim or event with respect to which
Michael or Acquisition believes it is or may be entitled to indemnification
pursuant to this Article 11 and the Representative shall
- ----------------------------------
* The confidential portion has been so omitted and filed separately
with the Securities and Exchange Commission pursuant to a request
for confidential treatment under Rule 24(b)-2 of the Securities Act
of 1934.
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<PAGE> 76
give prompt notice to Michael of any claim or event with respect to which the
Representative believes the Shareholders or the Partners may be entitled to
indemnification pursuant to this Article 11 (in each case, a "Notice of
Claim"); provided, however, that the failure to give notice as provided in this
Section 11.6 shall not relieve the other party of its indemnification
obligations hereunder, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. The Notice of Claim shall
state the nature and basis of said claim or event, the amount thereof to the
extent known and the basis of such party's belief that it may be entitled to
indemnification with respect thereto, including, without limitation,
identifying the representation or warranty which such party believes has been
breached.
If within twenty (20) days from the date of delivery of a Notice of Claim
by Michael to the Representative, the Representative shall not have given
notice to Michael that there is or may be a dispute relating in any way to such
Notice of Claim or the matters set forth therein, or both, then the Individual
Indemnitors shall pay the amount set forth in the Notice of Claim to Michael or
to the Indemnified Party identified in the Notice of Claim to receive such
payment promptly after the expiration of such 20-day period and shall give
notice of such payment or disbursement to the Representative. If within twenty
(20) days from the date of delivery of a Notice of Claim by the Representative
on behalf of the Shareholders or Partners to Michael, Michael shall not have
given notice to the Representative that there is or may be a dispute relating
in any way to such Notice of Claim or the matters set forth therein, or both,
then Michael shall pay the amount set forth in the Notice of Claim to the
Representative for disbursement to the Shareholders and Partners or to another
Indemnified Party set forth in the Notice of Claim promptly after the
expiration of such 20-day period.
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<PAGE> 77
If within twenty (20) days from the date of delivery of a Notice of Claim
by Michael to the Representative or by the Representative on behalf of the
Shareholders or Partners to Michael, the Representative or Michael, as the case
may be, shall have given a Notice of Disputed Claim, then payment of the
disputed claim shall not be made by the Individual Indemnitors or Michael, as
the case may be, until the parties resolve such dispute or a final order or
determination from a court of competent jurisdiction has been obtained
resolving the dispute and directing payment in accordance with the terms
thereof.
11.7 Procedure for Article 11 Third Party Claims. (a) Michael, on the
one hand, and the Representative, on the other, (the "Indemnified Party"),
shall give prompt written notice to the other (the "Indemnifying Party") of any
claim or event with respect to which the Indemnified Party believes it or its
Affiliates, in the case of a notice by Michael, or any Shareholders or Partners
in the case of a notice by the Representative, is or may be entitled to
indemnification pursuant to this Article 11 resulting from any claim, action,
suit or proceeding brought by any third party in connection with any
litigation, administrative proceedings or similar actions (including, without
limitation, claims by any assignee or successor of a party hereto or any
governmental agency) (collectively, "Article 11 Third Party Claims"), together
with an estimate of the amount in dispute thereunder and a copy of any claim,
process, legal pleadings or correspondence with respect thereto received by the
Indemnified Party, provided, however, that the failure of the Indemnified Party
to give such notice shall not relieve the Indemnifying Party of its obligations
hereunder, except to the extent that the Indemnifying Party is prejudiced by
such failure to give notice. Within fifteen (15) days of receipt of such
notice, the Indemnifying Party may, by written notice to the Indemnified Party,
assume the defense of such Article 11
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<PAGE> 78
Third Party Claim through counsel of its own choosing (which counsel shall be
reasonably acceptable to the Indemnified Party) with all fees and expenses
thereof to be paid by the Indemnifying Party, in which event the Indemnified
Party may participate in the defense thereof at its sole expense, provided that
such Indemnified Party shall have the right to employ separate counsel to
represent such Indemnified Party if, in such Indemnified Party's reasonable
judgment, a conflict of interest between the Indemnifying Party and such
Indemnified Party exists with respect to such Article 11 Third Party Claim,
with all fees and expenses of such separate counsel to be paid by the
Indemnifying Party. If the Indemnifying Party fails to assume the defense of
such Article 11 Third Party Claim by failing to deliver a written notice of the
Indemnifying Party's intention to assume such defense within fifteen (15) days
after receipt of the initial notice thereof, or thereafter abandons or fails to
diligently pursue such defense (and only in such circumstances), the
Indemnified Party may assume such defense and the fees and expenses of its
counsel will be paid by the Indemnifying Party. If the Indemnifying Party
exercises its right to undertake the defense against any such Article 11 Third
Party Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying Party
all pertinent records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnifying Party,
with all reasonable expenses incurred in connection therewith to be paid by the
Indemnifying Party. Similarly, if the Indemnified Party is, directly or
indirectly, conducting the defense against any such Article 11 Third Party
Claim, the Indemnifying Party shall cooperate with the Indemnified Party in
such defense and make available to the Indemnified Party all such records,
materials and information in the Indemnifying Party's control relating thereto
as is
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<PAGE> 79
reasonably required by the Indemnified Party, with all reasonable expenses
incurred in connection therewith to be paid by the Indemnifying Party.
Notwithstanding anything in this Section 11.7 to the contrary, however, if a
claim shall be made with respect to which the Indemnifying Party has agreed to
assume the defense thereof, the Indemnifying Party shall not thereafter be
entitled to dispute, and hereby agrees not to dispute, the Indemnified Party's
right to indemnification therefore pursuant to Article 11 hereof or any
subsequent claims of the Indemnified Party with respect to such Article 11
Third Party Claim.
(b) The Indemnifying Party shall not, without the written consent of the
Indemnified Party which consent shall not be unreasonably withheld: (i) settle
or compromise any Article 11 Third Party Claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the delivery
by the claimant or plaintiff to the Indemnified Party of a written release from
all liability in respect of such Article 11 Third Party Claim; (ii) settle or
compromise any Article 11 Third Party Claim in any manner that may adversely
affect the Indemnified Party; or (iii) upon the issuance of an order of a court
of competent jurisdiction or an arbitrator with respect to such Article 11
Third Party Claim, appeal or otherwise challenge such order.
(c) The party assuming the defense of an Article 11 Third Party Claim
shall give prompt notice to the other party and to the Escrow Agent of a claim
for reimbursement or payment of an Article 11 Third Party Claim or costs and
expenses incurred in the defense thereof, specifying in reasonable detail, the
basis for such payment.
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ARTICLE 12
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 Survival. The representations and warranties of the parties
contained in or made pursuant to this Agreement shall be deemed to have been
made on and as of the Closing and shall remain operative and in full force and
effect until the first anniversary of the Closing, except in the case of
Papetti's Hygrade and the Acquired Entities under Section 4.21 and 4.26 for tax
and environmental matters which shall remain in full force and effect until the
third anniversary of the date of Closing, regardless in all cases of any
investigation or statement as to the results thereof, made by or on behalf of
any such party.
ARTICLE 13
MISCELLANEOUS
13.1 Abandonment of Transaction. The transaction may be abandoned, and
this Agreement terminated, at any time after the date of this Agreement, but
not later than the Closing, by:
13.1.1 The mutual consent of the Board of Directors or Partners, as
applicable, of Papetti's Hygrade, the Acquired Entities and Michael; or
13.1.2 Michael, if Papetti's Hygrade and the Acquired Entities are
in breach of any of their representations, warranties, covenants, or
agreements under this Agreement in any material respect and such breach
shall not have been: (i) cured or eliminated by Papetti's Hygrade or such
Acquired Entity within thirty
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(30) business days following receipt by the Representative of written
notice from Michael of such breach; or (ii) waived by Michael on or before
the Closing; or
13.1.3 Papetti's Hygrade and the Acquired Entities, if Michael or
Acquisition is in breach of any of their representations, warranties,
covenants or agreements under this Agreement in any material respect and
such breach shall not have been: (i) cured or eliminated by Michael or
Acquisition within thirty (30) business days following receipt by Michael
of written notice from the Representative of such breach; or (ii) waived
by the Representative on or before the Closing; or
13.1.4 Any party hereto if the consummation of the transactions
contemplated by this Agreement have been enjoined by a court or
governmental department, agency or commission and such injunction is not
subject to appeal; or
13.1.5 Papetti's Hygrade and the Acquired Entities or Michael if
the transactions contemplated herein shall not have become effective on or
before October 31, 1996.
13.1.6 By Michael if a Material Adverse Effect with respect to
Papetti's Hygrade and the Acquired Entities, taken as a whole, has
occurred and by Papetti's Hygrade and the Acquired Entities if a Material
Adverse Effect with respect to Michael has occurred; provided, however,
that the parties agree for a period of thirty (30) business days to
negotiate in good faith to restructure this Agreement.
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13.2 Effect of Termination or Abandonment. If for any reason the
transactions contemplated hereby shall not become effective, all written
Schedules and other information and all copies of material from the books and
records of any party heretofore furnished to any other party shall be returned
promptly to the party furnishing the same and, in such event, the provisions of
this Agreement relating to confidential information as set forth in Sections
6.9 and 7.2 shall survive the termination of this Agreement and the abandonment
of this Agreement and the transactions contemplated hereby.
13.3 Liabilities. In the event this Agreement is terminated and the
contemplated transactions are abandoned pursuant to Section 13.1 hereof, no
party hereto shall have any duty or liability to the other either for costs,
expenses, loss of anticipated profits or otherwise, except with respect to any
liability or damages incurred or suffered by a party as a result of the breach
by the other party of any of its representations, warranties, covenants or
agreements set forth in this Agreement, as applicable.
13.4 Assignment. This Agreement shall not be assigned by Papetti's
Hygrade, the Acquired Entities or Michael.
13.5 Further Assurances. From time to time prior to, at and after the
Closing, Papetti's Hygrade, the Acquired Entities, Michael and Acquisition will
and will cause their respective directors, officers and Partners, as
applicable, to execute all such instruments and take all such actions as
Michael, Papetti's Hygrade and the Acquired Entities, being advised by counsel,
shall reasonably request in connection with the carrying out and effectuating
of the intent and purpose hereof and all transactions and things contemplated
by this Agreement including, without limitation, the execution and delivery of
any and all confirmatory and other
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instruments in addition to those to be delivered at the Closing, and any and
all actions which may reasonably be necessary or desirable to complete the
transactions contemplated hereby.
13.6 Appointment of Representative. By separate power of attorney,
Papetti's Hygrade, each of the Acquired Entities, the Shareholders and the
Partners have designated Arthur N. Papetti to act as his or her or its
representative with respect to all matters relating to or arising out of this
Agreement, the Acquisition Agreements and the Shareholder Agreement. If Arthur
N. Papetti shall be unable to act as the Representative, a successor shall
promptly be selected by vote of a majority of the Shareholders and Partners and
the newly-appointed Representative shall notify Michael of his or her
succession.
13.7 Notices. All notices, demands and other communications which may or
are required to be given hereunder or with respect hereto shall be given by the
Representative on behalf of Papetti's Hygrade and the Acquired Entities and by
Michael on behalf of itself and Acquisition. All such notices, demands and
other communications shall be in writing, shall be given either by personal
delivery or by nationally recognized overnight courier or by facsimile, and
shall be deemed to have been given or made when personally delivered, one
business day after delivered to a nationally recognized overnight courier,
postage prepaid, and receipt requested, or one business day after transmission
by facsimile, receipt confirmed, addressed as follows:
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(i) IF TO MICHAEL OR ACQUISITION:
Jeffrey M. Shapiro
Executive Vice President
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
Telephone: 612-546-1500
Facsimile No.: 612-546-3711
with a copy to:
Albert A. Woodward
Maun & Simon, PLC
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, Minnesota 55402
Telephone: 612-338-1113
Facsimile No.: 612-338-2271
(ii) IF TO THE REPRESENTATIVE:
Arthur N. Papetti
c/o Papetti's Hygrade Egg Products, Inc.
100 Trumbull Street
Elizabeth, New Jersey 07206
Telephone: 908-351-0477
Facsimile No.: 908-354-0136
with a copy to:
Martin B. O'Connor, II Robert M. LaRose
O'Connor, Morss & O'Connor Thompson Coburn
Liberty Hall Center One Mercantile Center
1085 Morris Avenue Suite 3400
Union, New Jersey 07083 St. Louis, Missouri 63101
Telephone: 908-354-5660 Telephone: 314-552-6000
Facsimile No.: 908-354-5786 Facsimile No.: 314-552-7000
or to such other address as any such person or entity may from time to time
designate by notice to the others.
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13.8 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any and all prior agreements
between the parties relating to the subject matter hereof.
13.9 Rules of Construction. This Agreement shall be construed as
follows:
(a) except as otherwise defined in this Agreement, words shall be given
their commonly understood meaning in agreements of this nature, except that
accounting terms shall be given the meaning ascribed thereto in accordance with
GAAP and interpretations thereunder;
(b) this Agreement has been negotiated on behalf of the parties hereto
with the advice of counsel and no general rule of contract construction
requiring an agreement to be more stringently construed against the drafter or
proponent of any particular provision shall be applied in construction of this
Agreement;
(c) the captions of Articles and Sections hereof are for convenience
only and shall not control or affect the meaning or construction of any of the
provisions of this Agreement.
13.10 Law Governing and Forum. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
Delaware, but not including the choice of law rules thereof. The parties agree
that all claims arising out of or relating to this Agreement and the
transaction contemplated hereunder, whether for damages, specific performance
or other equitable relief, shall be initially submitted to the Chancery Court
for the State of Delaware and the parties agree to submit to the jurisdiction
of that court and any appellate court hearing appeals from the Chancery Court
for the State of Delaware for such purpose and the judgment of the courts of
the State of Delaware with respect thereto shall be binding on the parties and
their successors and assigns.
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13.11 Waiver of Provisions. The terms, covenants, representations,
warranties or conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. Such waiver shall be
authorized solely by the individual or his or her personal representative, or
the majority vote of the Board of Directors or the Executive Committee of the
corporate party waiving compliance or by officers authorized by such Board or
Committee or by the unanimous consent of the Partners. The failure of any
party at any time or times to require performance of any provision hereof shall
in no manner affect the right at a later time to enforce the same. No waiver
by any party of any condition, or the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement.
The representations and warranties of the parties hereto contained in this
Agreement or in any certificate or other document delivered pursuant hereto or
in connection herewith prior to or at the Closing shall not be deemed waived or
otherwise amended or modified by any investigation made by any party hereto.
13.12 Successors. All of the terms and conditions of this Agreement
shall be binding upon and inure to the benefit of the successors and permitted
assigns of the parties hereto.
13.13 Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on
all of the parties hereto, notwithstanding that all parties are not signatory
to the original or the same counterpart.
13.14 Public Statements or Releases. The parties hereto each agree
not to make, issue or release any public announcement, statement or
acknowledgment of the existence of, or reveal
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the terms, conditions and status of, the transactions provided for in this
Agreement, without first attempting to the extent reasonably possible (and in
all cases with regard to written matters) to clear such announcement,
statement, acknowledgment or revelation with the other parties hereto. Each
party agrees that it will not unreasonably withhold any such consent or
clearance from another party.
13.15 Severability. In the event that any provision in this
Agreement be held invalid or unenforceable, by a court of competent
jurisdiction, such provision shall be severable from, and such invalidity or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this Agreement, unless such provision goes to the essence of this
Agreement in which case this entire Agreement may be declared invalid and not
binding upon any of the parties.
13.16 No Third Party Beneficiaries. This Agreement and the
obligations of Michael hereunder shall operate exclusively for the benefit of
the parties executing this Agreement and their permitted successors and assigns
and not for the benefit of any other person or entity, including, without
limitation, any creditor, employee or former employee of Papetti's Hygrade and
the Acquired Entities and no such person or entity shall have any rights or
remedies hereunder.
13.17 Schedules. The Schedules attached hereto are incorporated
herein and made a part hereof for all purposes. As used herein, the expression
"this Agreement" means the body of this Agreement and such Schedules, and the
expressions "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement and such Schedules as a whole and not to any
particular part or subdivision thereof.
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13.18 Amendments. No amendment or modification of this Agreement
shall be valid or of any force or effect, unless made by written instrument
signed by the parties hereto, specifying the exact nature of such amendment or
modification.
[THE REMAINDER INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
PAPETTI'S HYGRADE EGG PRODUCTS, INC.
By: /s/ Arthur N. Papetti
--------------------------------------
Its: President
----------------------------
QUAKER STATE FARMS, INC.
By: /s/ Arthur N. Papetti
--------------------------------------
Its: Vice President
----------------------------
PAPETTI'S OF IOWA FOOD PRODUCTS, INC.
By: /s/ Arthur N. Papetti
--------------------------------------
Its: Vice President
----------------------------
MONARK EGG CORPORATION
By: /s/ Arthur N. Papetti
--------------------------------------
Its: Vice President
----------------------------
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EGG SPECIALTIES, INC.
By: /s/ Arthur J. Papetti
--------------------------------------
Its: President
----------------------------
PAPETTI FOODS, INC.
By: /s/ Stephen Papetti
--------------------------------------
Its: President
----------------------------
CASA TRUCKING LIMITED PARTNERSHIP
By: /s/ Alfred Papetti
--------------------------------------
Its: President
----------------------------
PAPETTI TRANSPORT LEASING LIMITED PARTNERSHIP
By: /s/ Arthur J. Papetti
--------------------------------------
Its: President
----------------------------
PAPETTI EQUIPMENT LEASING LIMITED PARTNERSHIP
By: /s/ Arthur J. Papetti
--------------------------------------
Its: President
----------------------------
84
<PAGE> 91
MICHAEL FOODS, INC.
By: /s/ Jeffrey M. Shapiro
------------------------------------
Jeffrey M. Shapiro
Executive Vice President
M.G. WALDBAUM COMPANY
By: /s/ Jeffrey M. Shapiro
------------------------------------
Jeffrey M. Shapiro
Secretary
85
<PAGE> 92
Stephen Papetti, Alfred Papetti, Arthur J. Papetti, as Individual Indemnitors,
hereby jointly and severally agree to be bound by the provisions of Article XI
of the Reorganization Agreement as Individual Indemnitors.
Dated: _____________________, 1996
/s/ Stephen Papetti
----------------------------
STEPHEN PAPETTI
/s/ Alfred Papetti
----------------------------
ALFRED PAPETTI
Arthur Papetti
----------------------------
ARTHUR J. PAPETTI
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<PAGE> 93
Exhibit A - Form of Acquisition Agreement
Exhibit B - Shareholder Agreement
Exhibit C - Papetti's Hygrade Plan and Agreement of Merger
Exhibit D - Opinion Letter of Counsel to Michael
Exhibit E - Employment and Non-Compete Agreement
Exhibit F - Settlement Agreement
Exhibit G - Opinion of Thompson Coburn and O'Connor, Morss & O'Connor
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<PAGE> 94
Schedule 2.1 - Consideration for Acquired Companies
Schedule 2.2 - Consideration for Acquired Partnerships
Schedule 4.2 - Capitalization of Acquired Companies
Schedule 4.3 - Partners of Acquired Companies
Schedule 4.4 - Balance Sheet
Schedule 4.5 - Business Since Balance Sheet Dates
Schedule 4.6 - Litigation
Schedule 4.7 - Compliance with Laws
Schedule 4.8 - Patents, Trademarks, Copyrights
Schedule 4.9 - Insurance
Schedule 4.10 - Indebtedness
Schedule 4.12 - Contracts and Agreements
Schedule 4.13 - Employee Benefits
Schedule 4.14 - Real Estate
Schedule 4.16 - Qualifications/Subsidiaries and Other Interests
Schedule 4.18 - Employees
Schedule 4.21 - Tax Returns
Schedule 4.22 - Banks
Schedule 4.24 - Conflicts of Interest
Schedule 4.26 - Environmental and Health and Safety Matters
Schedule 5.6 - Business Since the Michael Balance Sheet Date
Schedule 5.7 - No Defaults
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<PAGE> 95
Schedule 5.10 - Litigation, Claims
Schedule 5.11 - Compliance with Laws
Schedule 5.12 - Employee Benefit Plans
Schedule 5.14 - Tax Returns
Schedule 5.15 - Environmental and Health and Safety Matters
Schedule 6.2 - Exceptions to Negative Covenants
Schedule 6.11 - Employees
Schedule 8.14 - Related Party Leases
Schedule 10.4 - Certain Assets and Liabilities of Sunbest-Papetti
The Company will furnish supplementally a copy of any omitted schedule to the
Commission upon request.
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<PAGE> 96
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MICHAEL FOODS, INC.,
M.G. WALDBAUM COMPANY
AND
PAPETTI'S HYGRADE EGG PRODUCTS, INC.,
AND
QUAKER STATE FARMS, INC.,
PAPETTI'S OF IOWA FOOD PRODUCTS, INC.,
MONARK EGG CORPORATION,
EGG SPECIALTIES, INC.,
PAPETTI FOODS, INC.,
CASA TRUCKING LIMITED PARTNERSHIP,
PAPETTI TRANSPORT LEASING LIMITED PARTNERSHIP, AND
PAPETTI EQUIPMENT LEASING LIMITED PARTNERSHIP
THIS AMENDMENT to the above-referenced Agreement and Plan of Reorganization
(the "Agreement") is entered into as of October 18, 1996 by and among MICHAEL
FOODS, INC., a Delaware corporation ("Michael"), M.G. WALDBAUM COMPANY, a
Nebraska corporation ("Acquisition") and PAPETTI'S HYGRADE EGG PRODUCTS, INC.,
a New Jersey corporation ("Papetti's Hygrade") and QUAKER STATE FARMS, INC., a
Pennsylvania corporation ("Quaker"), PAPETTI'S OF IOWA FOOD PRODUCTS, INC., an
Iowa corporation ("Papetti's of Iowa"), MONARK EGG CORPORATION, a Missouri
corporation ("Monark"), EGG SPECIALTIES, INC., a Pennsylvania corporation ("Egg
Specialties"), PAPETTI FOODS, INC., a New Jersey corporation ("Papetti Foods"),
and collectively with Quaker, Papetti's of Iowa, Monark, and Egg Specialties,
the "Acquired Companies"), CASA TRUCKING LIMITED PARTNERSHIP, a New Jersey
limited partnership ("Casa Trucking"), PAPETTI TRANSPORT LEASING LIMITED
PARTNERSHIP, a New Jersey limited partnership ("Papetti Transport"), and
PAPETTI EQUIPMENT LEASING LIMITED PARTNERSHIP, a New Jersey limited partnership
("Papetti Equipment)" and together with
<PAGE> 97
Casa Trucking and Papetti Transport, (the "Acquired Partnerships") (the
Acquired Companies and the Acquired Partnerships are collectively referred to
herein as the "Acquired Entities").
RECITALS:
a. Under the date of June 28, 1996, the Parties entered into the Agreement
which, under Section 13.1.5 thereof, permits Papetti's Hygrade and the Acquired
Entities, or Michael, to terminate the Agreement if the transactions
contemplated therein have not become effective on or before October 31, 1996.
b. The Parties mutually desire to extend the period of time for completion of
the Agreement to December 31, 1996.
NOW, THEREFORE, the parties hereto covenant and agree as follows:
1. Section 13.1.5 of the Agreement is amended in its entirety to read as
follows:
"13.1.5 Papetti's Hygrade and the Acquired Entities or Michael if the
transactions contemplated herein shall not have become effective on or
before December 31, 1996."
2. Except as modified by paragraph 1 hereof, the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, each of the parties have caused this Amendment to the
Agreement to be executed and delivered as of the day and year first above
written.
MICHAEL FOODS, INC.
BY: /s/ Jeffrey M. Shapiro
---------------------------------------
ITS: EVP
----------------------------------
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<PAGE> 98
M. G. WALDBAUM COMPANY
BY: /s/ Jeffrey M. Shapiro
-------------------------------
ITS: Secretary
-----------------------------
PAPETTI'S HYGRADE EGG PRODUCTS, INC.
BY: /s/ Arthur Papetti
-------------------------------
ITS: President
-----------------------------
QUAKER STATE FARMS, INC.
BY: /s/ Arthur Papetti
-------------------------------
ITS: Vice President
-----------------------------
PAPETTI'S OF IOWA FOOD PRODUCTS, INC.
BY: /s/ Arthur Papetti
-------------------------------
ITS: Vice President
-----------------------------
MONARK EGG CORPORATION
BY: /s/ Arthur Papetti
-------------------------------
ITS: Vice President
-----------------------------
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<PAGE> 99
EGG SPECIALTIES, INC.
BY: /s/ Arthur J. Papetti
---------------------------
ITS: President
-------------------------
PAPETTI FOODS, INC.
BY: /s/ Stephen Papetti
---------------------------
ITS: President
-------------------------
CASA TRUCKING LIMITED PARTNERSHIP
BY: Casa Trucking Corporation, General
Partner
BY: /s/ Alfred Papetti
---------------------------
ITS: President
-------------------------
PAPETTI TRANSPORT LEASING LIMITED
PARTNERSHIP
BY: Papetti Transport Leasing
Corporation, General Partner
BY: /s/ Arthur J. Papetti
---------------------------
ITS: President
-------------------------
PAPETTI EQUIPMENT LEASING LIMITED
PARTNERSHIP
Papetti Equipment Leasing Corporation,
General Partner
BY: /s/ Arthur J. Papetti
---------------------------
ITS: President
-------------------------
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<PAGE> 100
SCHEDULE 2.1 AND 2.2
PURCHASE PRICE AND CONSIDERATION CALCULATION AND ADJUSTMENTS
PURCHASE PRICE CALCULATION
Subject to the adjustments set forth in this Schedule 2.1 and 2.2, the
aggregate purchase price shall be Eighty-Four Million Nine Hundred Fifty
Thousand and no/100ths Dollars ($84,950,000).
CONSIDERATION PAYABLE TO THE SHAREHOLDERS/PARTNERS OF THE ACQUIRED ENTITIES
Subject to the adjustments set forth in this Schedule 2.1 and 2.2 or in the
Reorganization Agreement, the consideration to be paid at Closing shall be
payable as follows:
Three Million Four Hundred Thousand (3,400,000) Shares of Michael Common
Stock shall be issued by Michael ratably to the Common Shareholders of
Papetti's Hygrade, pursuant to the Papetti's Hygrade Reorganization in
accordance with this Schedule 2.1 and 2.2 and in the manner set forth in
Section 2.3 of the Agreement;
Forty-Seven Million Five Hundred Fifty Thousand Dollars ($47,550,000) shall
be paid in cash by Michael to the Shareholders and Partners of the Acquired
Entities in the amounts determined in accordance with this Schedule 2.1 and
2.2 and in the manner set forth in Section 2.4 of the Agreement.
CLOSING BALANCE SHEET
Within 90 days following the Closing, Michael, on the one hand, and Papetti's
Hygrade and the Acquired Entities, on the other hand, shall cause an audit of
the combined balance sheet of Papetti's Hygrade and the Acquired Entities as of
the Closing Date (Closing Balance Sheet). The Closing Balance Sheet shall be
prepared in accordance with GAAP consistently applied utilizing the accounting
principles described in the most recently completed audited financial
statements of Papetti's Hygrade and the Acquired Entities except that, (i)
depreciation during the period from the Balance Sheet Dates to the Closing Date
shall be computed using the straight-line method, applied to each fixed asset's
existing net book value at the Balance Sheet Dates, divided by the remaining
useful life of each asset, whereby the remaining useful life is computed by
applying the useful life used by Michael for each class of asset, less the
useful life consumed through the Balance Sheet Dates, and (ii), the
capitalization and amortization of tote inventory shall be applied in the
Closing Balance Sheet in a consistent fashion with the method used in
preparation of the Balance Sheet, and (iii), the Closing Balance Sheet shall
contain no accounting effects related to the Settlement Agreement. To the
extent the combined equity
<PAGE> 101
shown on the Closing Balance Sheet exceeds *, which is the combined equity
shown on the combined financial statements as of the Balance Sheet Dates,
adjusted as shown on Schedule 2.1.1, Michael shall pay such excess as
additional cash consideration to the Shareholders and Partners of the Acquired
Entities in the same proportion as the cash distributed at the Closing. To the
extent the combined equity shown on the Closing Balance Sheet is less than *,
the Shareholders and Partners of the Acquired entities shall be jointly and
severally liable to pay Michael such deficit.
The Closing Balance Sheet audit shall be conducted by Grant Thornton LLP in
accordance with generally accepted auditing standards (GAAS). With respect to
the conduct of the audit the parties agree that an audit conducted in
accordance with GAAS will require the audit be planned and performed to obtain
reasonable assurance about whether the Closing Balance Sheet is free from
material misstatement. The Closing Balance Sheet audit will include examining,
on a test basis, evidence supporting the amounts shown on such statement. The
audit will include assessing the significant estimates made by management of
Papetti's Hygrade and the Acquired Entities. The parties agree that Closing
Balance Sheet need not contain all disclosures normally included in audited
financial statements which are prepared in accordance with GAAP.
Upon delivery of the audit of the Closing Balance Sheet, Papetti's Hygrade
and the Acquired Entities, together with their independent auditors, shall have
the right to review the Closing Balance Sheet and adjustments made therein, for
a period of 30 days following receipt thereof. If Papetti's Hygrade and the
Acquired Entities disagree with the Closing Balance Sheet, they shall give
notice to Michael within such 30-day period of their proposed revisions to the
Closing Balance Sheet combined equity. The parties agree to negotiate any
differences for a period of 15 days following receipt by Michael of such
proposed revisions. If the parties are unable to resolve any such differences,
the dispute shall be submitted to a mutually agreeable Big 6 accounting firm
other than Coopers & Lybrand LLP or Grant Thornton LLP who shall finally
determine the Closing Balance Sheet. Within ten (10) days following resolution
of the disputed items, payment shall be made, if required, as provided above.
CLOSING MARKET PRICE AND OTHER ADJUSTMENTS
To the extent that the average of the last transaction prices of Michael
Common Stock as reported by NASDAQ-NMS for the period of ten consecutive
trading days ending three days prior to the date of Closing (the "Closing Date
Average Price") is greater than or less than $* per share, the difference
between $* and the Closing Date Average Price shall be multiplied by
3,400,000 (or such other number as shall equal the aggregate number of shares
of Michael Common Stock that are to be issued to the Shareholders and Partners
of the Acquired
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a Request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
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<PAGE> 102
Entities) to determine the difference in value of the consideration payable in
shares of Michael Common Stock between the date of the Agreement and the date
of Closing (the "Stock Value Differential"). To the extent that the Closing
Date Average Price is greater than $*, the cash portion of the
consideration payable to the Shareholders of Papetti's Hygrade shall be
decreased by one-half of the Stock Value Differential. To the extent that the
Closing Date Average Price is less than $*, the cash portion of the
consideration payable to the Shareholders of Papetti's Hygrade shall be
increased by one-half of the Stock Value Differential. Except as set forth in
the next paragraph of this Schedule 2.1 and 2.2, there shall be no adjustment
to 3,400,000 shares of Michael Common Stock to be issued to the Shareholders of
Papetti's Hygrade at Closing based upon the Stock Value Differential, if any.
In no event shall Michael be required to issue a number of shares of Michael
Common Stock at the Closing that will equal or exceed 20% of its Common Stock
then outstanding. To the extent that it is determined that the number of
shares of Michael Common Stock that Michael would be required to issue at
Closing will be 20% or more of the then-outstanding Common Stock without
considering the Michael Common Stock to be issued hereunder, the number of
shares required to be issued shall be reduced to the highest number of whole
shares that Michael can issue without exceeding such limitation. In such
event, the Shareholders of Papetti's Hygrade who would have been entitled to
receive such shares of Michael Common Stock shall become entitled to receive
the dollar amount of the shares of Michael Common Stock not issued on the basis
of the Closing Date Average Price plus or minus the Stock Value Differential
formula set forth in the immediately preceding paragraph. In no event shall
Michael be required to issue more than 3,400,000 shares of its Common Stock in
the transactions contemplated under the Agreement.
*
- ---------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
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<PAGE> 103
EXHIBIT A
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of this _____ day of ___________________, 1996, by and between
_____________________________________, a New Jersey limited partnership
("Seller"), and M.G. WALDBAUM COMPANY, a Nebraska corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, certain assets of Seller on the terms and conditions set forth herein;
and
WHEREAS, Buyer has agreed in connection with such purchase of certain assets
of Seller to assume certain liabilities of Seller on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of these premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
SALE OF ASSETS
1.1 Assets Purchased. Subject to the terms and conditions set forth in this
Agreement, Seller hereby sells, conveys, assigns, transfers and delivers to
Buyer, and Buyer hereby purchases from Seller, the assets of Seller set forth
on Schedule 1.1 hereof (the "Purchased Assets").
1.2 Liens. The Purchased Assets will be conveyed to the Buyer on the
Closing Date and received by Buyer free and clear of all liens, encumbrances,
claims, charges, taxes or levies except for liens, encumbrances, claims,
charges, taxes and levies created in connection with the Assumed Liabilities
(as such term is defined in Article 2 of this Agreement) or as set forth in
Schedule 4.14 to that Certain Agreement and Plan of Reorganization by and among
Michael Foods, Inc., Buyer, Papetti's Hygrade Egg Products, Inc., Seller and
the other Acquired Entities named therein (the "Reorganization Agreement").
1.3 Purchase Price. The parties hereby agree that the aggregate purchase
price (the "Purchase Price") to be paid by Buyer to Seller for the purchase of
the Purchased Assets and the assumption of the Assumed Liabilities is
___________________________________________ Dollars ($______________), payable
on the Closing Date by wire transfer in immediately available funds to an
account designated by Seller within three (3) days prior to the Closing Date.
<PAGE> 104
1.4 Allocation. The Purchase Price shall be allocated among the
Purchased Assets as mutually agreed upon by the parties hereto pursuant to a
certificate signed by all such parties on or prior to the Closing Date. Buyer
and Seller agree that such allocation will be arrived at by arms length
negotiation, and Buyer and Seller hereby further agree not to take a position in
any tax return, examination or other administrative or judicial proceeding
relating to any such return that is inconsistent with the allocation as is
agreed to by Buyer and Seller pursuant to this Section 1.4.
ARTICLE 2
LIABILITIES OF SELLER
Assumed Liabilities. Subject to the terms and conditions of this Agreement,
Seller shall transfer and assign, and Buyer shall assume, pay and perform the
liabilities and obligations of Seller as more fully described on Schedule 2
(collectively, the "Assumed Liabilities"). Buyer and Seller jointly shall
prepare a Balance Sheet as of a date within five (5) days preceding the Closing
Date (the "Closing Balance Sheet") which shall reflect all of the assets and
liabilities of Seller as of such date.
ARTICLE 3
CLOSING AND CLOSING DATE
Subject to the satisfaction or waiver of all of the conditions described
herein, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Maun & Simon, PLC, 801 Nicollet
Mall, Suite 2000, Minneapolis, Minnesota 55402 at 10:00 a.m. local time on the
date hereof (the "Closing Date").
ARTICLE 4
CONDITIONS PRECEDENT TO CLOSING
AND DELIVERIES AT CLOSING
4.1 Conditions Precedent to Buyer's Obligation to Close. The obligation of
Buyer to consummate the transactions contemplated herein is subject to the
satisfaction at or before Closing of (or the waiver by Buyer of) the following
conditions:
(a) All licenses, franchises, permits and other governmental
authorizations from any governmental body, whether federal, state, local or
foreign, required by the parties hereto shall have been obtained and evidence
of those required of Seller shall have been provided to Buyer;
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<PAGE> 105
(b) All consents, approvals by, notices to or registrations with any
third party required by Seller to execute, deliver and perform its obligations
under this Agreement shall have been obtained and evidence thereof shall have
been provided to Buyer;
(c) Seller shall have performed and complied in all material respects
with each and every covenant, agreement and condition required by this
Agreement to be performed or complied with or satisfied by the Seller at or
prior to the Closing;
(d) On the Closing Date, there shall be no injunction, restraining
order or decree of any nature of any court or governmental agency or body in
effect relating to Seller or Buyer that restrains or prohibits the
consummation of the transactions contemplated by this Agreement; and
(e) The other transactions contemplated by the Reorganization Agreement
shall stand ready to be consummated simultaneously with the transactions
contemplated by this Agreement.
4.2 Conditions Precedent to Seller's Obligation to Close. The obligation of
Seller to consummate the transactions contemplated herein is subject to the
satisfaction at or before Closing of (or the waiver by Seller of) the following
conditions;
(a) All licenses, franchises, permits and other governmental
authorizations from any governmental body, whether federal, state, local or
foreign, required of the parties hereto shall have been obtained and evidence
of those required of Buyer shall have been provided to Seller;
(b) All consents, approvals by, notices to or registrations with any
third party required by Buyer to execute, deliver and perform its obligations
under this Agreement shall have been obtained and evidence thereof shall have
been provided to Seller;
(c) Buyer shall have performed and complied in all material respects
with each and every covenant, agreement and condition required by this
Agreement to be performed or complied with or satisfied by Buyer at or prior
to the Closing;
(d) On the Closing Date, there shall be no injunction, restraining
order or decree of any nature of any court or governmental agency or body in
effect relating to Buyer or Seller that restrains or prohibits the
consummation of the transactions contemplated by this Agreement; and
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<PAGE> 106
(e) The other transactions contemplated by the Reorganization Agreement
shall stand ready to be consummated simultaneously with the transactions
contemplated by this Agreement.
4.3 Closing Deliveries of Seller. On the Closing Date, Seller shall execute
and/or deliver, or shall cause the execution and/or delivery of the same, to
Buyer:
(a) A Bill of Sale and Assignment in the form attached hereto as
Exhibit A;
(b) Possession of the Purchased Assets;
(c) Resolutions of the Partners, certified by the General Partner of
Seller, duly authorizing the execution, delivery and performance of this
Agreement and the transactions contemplated herein; and
(d) A Good Standing Certificate for Seller dated not more than ten (10)
days prior to the Closing Date from the New Jersey Secretary of State,
together with verbal verification of Seller's good standing as of the Closing
Date.
4.4 Closing Deliveries of Buyer. On the Closing Date, Buyer shall execute
and/or deliver, or shall cause the execution and/or delivery of the same, to
Seller:
(a) the Purchase Price;
(b) an Assumption Agreement in the form attached hereto as Exhibit B;
(c) Resolutions of the Board of Directors of Buyer, certified by the
Secretary or an Assistant Secretary of Buyer, duly authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
herein; and
(d) A Good Standing Certificate for Buyer dated not more than ten (10)
days prior to the Closing Date from the Delaware Secretary of State, together
with verbal confirmation of Buyer's good standing as of the Closing Date.
ARTICLE 5
CONFIDENTIALITY
5.1 Confidential Information of Seller. If, for any reason, the
transactions contemplated by this Agreement are not consummated, Buyer shall
not disclose to third parties
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<PAGE> 107
or otherwise use any confidential information received from Seller in the
course of investigating, negotiating, and performing the transactions
contemplated by this Agreement; provided, however, that nothing shall be deemed
to be confidential information which:
(a) is known to Buyer at the time of disclosure by Seller;
(b) becomes publicly known or available without the disclosure thereof
by Buyer in violation of this Agreement; or
(c) is rightfully received by Buyer from a third party.
5.2 Confidential Information of Buyer. If, for any reason, the transactions
contemplated by this Agreement are not consummated, Seller shall not disclose
to third parties or otherwise use any confidential information received from
Buyer in the course of investigating, negotiating, and performing the
transactions contemplated by this Agreement; provided, however, that nothing
shall be deemed to be confidential information which:
(a) is known to Seller at the time of disclosure by Buyer;
(b) becomes publicly known or available without the disclosure thereof by
Seller in violation of this Agreement; or
(c) is rightfully received by Seller from a third party.
ARTICLE 6
MISCELLANEOUS
6.1 Notices. Any notice or other communication required or permitted
hereunder to any party hereto shall be sufficiently given to the other party if
given in accordance with Section 13.7 of the Reorganization Agreement.
6.2 Binding on Successors and Assigns. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by and against the parties
hereto and their respective successors and assigns in accordance with the terms
hereof. Neither the Seller nor the Buyer may assign any of its interest under
this Agreement without the prior written consent of the other.
6.3 Other Provisions. All prior negotiations and agreements between the
parties hereto with regard to the subject matter hereof are superseded by this
Agreement, and there are no representations, warranties, understandings or
agreements other than those expressly set forth herein or in any Schedule or
Exhibit or other document delivered pursuant hereto, except as modified in
writing concurrently herewith or subsequent hereto in accordance with the terms
of
-5-
<PAGE> 108
this Agreement. This Agreement may be amended or modified in whole or in part
only by an agreement in writing executed by all parties hereto and making
specific reference to this Agreement. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute one instrument.
The headings in the sections and subsections of this Agreement, and in the
Schedules and Exhibits are inserted for convenience only and in no way alter,
amend, modify, limit or restrict the contractual obligations of the parties.
The Schedules attached hereto are incorporated herein and made a part hereof
for all purposes. As used herein, the expression "this Agreement" means the
body of this Agreement and all Schedules. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of
Delaware, but not including the choice of law rules thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of and on the date first above written.
SELLER
[ACQUIRED PARTNERSHIP]
By:[GENERAL PARTNER]
By: _________________________________
Title: ______________________________
BUYER
M.G. WALDBAUM COMPANY
By: _________________________________
Title: ______________________________
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<PAGE> 109
Schedule 1.1
THE PURCHASED ASSETS
All of Seller's assets as of the Closing Date including, without limitation,
the following:
a. All intellectual property of Seller used by Seller in its business
including, without limitation, all copyrights, patents, inventions, formula,
processes, trademarks and trade names;
b. All cash and cash equivalents;
c. All inventory of raw materials, work-in-process, finished goods,
manufacturing supplies and packaging supplies;
d. All notes receivable and accounts receivable;
e. All right, title and interest in and to all leases of real property
used by Seller in its business;
f. All plant, property, and equipment and other tangible personal
property used by Seller in its business;
g. All right, title and interest in and to all leases of machinery,
equipment, vehicles and other tangible personal property used by Seller in
its business;
h. All right, title and interest in and to all contracts, agreements and
other arrangements of Seller;
i. All real property and improvements owned by Seller, if any, and all
fixtures thereon;
j. All actions, claims, rights and privileges pertaining to any of the
foregoing; and
k. All books of account and records relating to the purchased assets.
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<PAGE> 110
Exhibit A
BILL OF SALE AND ASSIGNMENT
In connection with that certain Asset Purchase Agreement dated the date
hereof (the "Acquisition Agreement") between _______________________, a New
Jersey limited partnership ("Seller") and M.G. Waldbaum Company, a Nebraska
corporation ("Buyer"), Seller hereby executes and delivers this Bill of Sale
and Assignment as of the _________________ day of _____________________, 1996
in favor of Buyer.
W I T N E S S E T H :
WHEREAS, in accordance with and subject to the terms and conditions of the
Acquisition Agreement, Seller has agreed to sell to Buyer, and Buyer has agreed
to purchase from Seller, all of Seller's right, title and interest in the
assets of Seller described on Schedule 1.1 attached hereto and to the
Acquisition Agreement and incorporated herein by reference (the "Assets").
NOW, THEREFORE, in consideration of the mutual premises and the consideration
provided for in the Acquisition Agreement and for other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
Seller hereby agrees as follows:
1. As of the date hereof, Seller does hereby bargain, sell, convey, assign,
transfer and deliver the Assets to Buyer, its successors and assigns, forever.
2. From and after the date hereof, Seller shall, upon the request of Buyer
execute, deliver and perform, as applicable, all such further acts, assurances,
assignments, transfers, conveyances, powers of attorney and other instruments
and papers as may be reasonably requested by Buyer to sell, convey, assign,
transfer and deliver to and vest in Buyer and protect its rights, title and
interest in and to the Assets.
3. To the extent of any conflict or inconsistency between this Bill of Sale
and Assignment and the Agreement, the terms of the Acquisition Agreement shall
prevail.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment to be
executed as of the day and year first above written.
[ACQUIRED PARTNERSHIP]
By:[GENERAL PARTNERSHIP]
By:______________________________
Title:___________________________
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<PAGE> 111
Exhibit B
ASSUMPTION AGREEMENT
In connection with that certain Asset Purchase Agreement dated the date
hereof (the "Acquisition Agreement") between ________________________________,
a New Jersey limited partnership ("Seller") and M.G. Waldbaum Company, a
Nebraska corporation ("Buyer"), Buyer hereby executes and delivers this
Assumption Agreement (this "Agreement") as of the ______ day of
________________________, 1996 in favor of Seller.
WHEREAS, in accordance with and subject to the terms and conditions of the
Acquisition Agreement, Buyer has agreed to assume, pay and perform all
liabilities and obligations of Seller described on Schedule 2 attached hereto
and to the Acquisition Agreement and incorporated herein by reference (the
"Assumed Liabilities").
NOW THEREFORE, in consideration of the mutual premises provided for in the
Acquisition Agreement and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Buyer hereby agrees
as follows:
1. Assumed Liabilities. From and after the date hereof, Buyer hereby assumes
and agrees to pay, discharge or perform, as applicable, all of the Assumed
Liabilities.
2. Miscellaneous.
a. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
b. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, but not including the choice of law rules
thereof.
c. All capitalized terms used herein and not otherwise defined shall have
the respective meanings ascribed to such terms in the Acquisition Agreement.
d. From and after the date hereof, upon request of Seller, Buyer shall
execute, deliver and perform, as applicable, all such further acts,
assurances, instruments, notices, documents and papers as may be reasonably
requested by Seller for the effective confirmation and consummation of the
assumption by Buyer of the liabilities and obligations assumed hereunder.
e. In the event of any conflict or inconsistency between this Agreement
and the Acquisition Agreement, the terms of the Acquisition Agreement shall
prevail.
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IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be executed by its duly authorized officer on the day and year first above
written.
BUYER
M.G. WALDBAUM COMPANY
By: _________________________________
Title: ______________________________
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SCHEDULE 2
ASSUMED LIABILITIES
All of Seller's liabilities and obligations as of the Closing Date, whether
accrued, absolute, contingent or otherwise, including, without limitation, the
following:
a. All indebtedness for borrowed money including capitalized leases and
purchase money financing and all guarantees;
b. All accounts payable and trade obligations and expenses of Seller;
c. All payroll obligations of Seller and all obligations of Seller under
employee benefit plans, profit sharing plans, retirement plans, health and
welfare plans and other similar such plans;
d. All obligations under any and all leases of real property used by
Seller in its business;
e. All obligations under any and all leases of machinery, equipment,
vehicles and other tangible personal property used by Seller in its business;
and
f. All obligations under all contracts, agreements and other
arrangements of Seller in its business.
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EXHIBIT B
SHAREHOLDER AGREEMENT
This Agreement dated as of _______________, 1996 by and between Michael
Foods, Inc., a Delaware corporation ("Michael"); the Shareholders of Michael
listed on Schedule I (individually "Shareholder" and collectively
"Shareholders"); the other former shareholders and partners of Papetti's
Hygrade Egg Products, Inc. ("Papetti's Hygrade") and the Acquired Entities
identified in the Reorganization Agreement described below and listed on
Schedule I (the "Sellers") and the Representative of the Shareholders and
Sellers;
WHEREAS, Michael is a publicly-held corporation whose common stock is traded
on the NASDAQ National Market System ("NASDAQ-NMS"); and
WHEREAS, under date of __________________, 1996 Michael, M.G. Waldbaum
Company, a Nebraska corporation ("Acquisition"), Papetti's Hygrade and the
Acquired Entities defined therein entered into an Agreement and Plan of
Reorganization (the "Reorganization Agreement") whereby Michael was to acquire
Papetti's Hygrade by merger (the "Papetti's Hygrade Reorganization") and
Acquisition was to acquire each of the Acquired Entities by mergers (the
"Mergers") or through asset purchases and liability assumption (the "Asset
Acquisitions"), as the case may be (the "Reorganization"); and
WHEREAS, as a condition to the completion of Papetti's Hygrade
Reorganization, the Mergers and the Asset Acquisitions, Michael required that
the Shareholders and Sellers enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions hereinafter set forth, the parties agree as follows:
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SECTION 1. CERTAIN DEFINITIONS.
Capitalized terms not otherwise defined herein shall have the meaning
ascribed to them in the Reorganization Agreement. As used in this Agreement,
the following terms shall have the following meanings:
(a) "Affiliate" shall mean, as applied to a specified Person, any other
Person that directly or indirectly through one or more intermediaries,
Controls, or is Controlled by, or is under common Control with, such specified
Person.
(b) "Associate" when used to indicate a relationship with any Person, shall
mean: (i) any corporation or organization of which such Person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10 percent or
more of any class of equity securities; (ii) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (iii) any relative or
spouse of such person, or any relative of such spouse, who has the same primary
residence as such Person or who is a director or officer of the Person or any
of its parents or subsidiaries.
(c) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "Beneficial Ownership" of such securities in
accordance with the provisions of Rule 13d-3 under the Exchange Act, except
that a Person shall be deemed to be the Beneficial Owner of a security if that
Person has the right to acquire Beneficial Ownership of such security without
giving effect to the 60-day provision provided under such rule. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all other Persons with whom such Person would constitute a Group.
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(d) "Business Day" shall mean any day that is not a Saturday, a Sunday, a
bank holiday or any other day on which commercial banking institutions in
Minneapolis, Minnesota, are not generally open for business.
(e) "Control" shall mean, with respect to a specified Person, the position
or the possession, directly or indirectly, of the power to direct, cause the
direction of, or substantially influence the management and policies of such
Person, whether through the ownership of voting securities, partnership
interests or other ownership interests, or by contract or otherwise; provided
that, in any event, any Person who owns directly or indirectly 10% or more of
the securities having ordinary voting power for the election of directors or
other governing body of a corporation or 10% or more of the partnership
interests or other ownership interests of any other Person shall be deemed to
control such corporation or other Person.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect from time to time.
(g) "Equity Securities" shall mean: (i) any and all shares of capital stock
of Michael; and (ii) any other securities, warrants, options or rights of any
nature (whether or not issued by Michael) that are convertible into any,
exchangeable for, or exercisable for the purchase of, or otherwise give the
holder thereof any rights in respect of, shares of capital stock of Michael.
(h) "Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
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(i) "Group" shall mean two or more Persons acting together for the purpose
of acquiring, holding, voting or disposing of Equity Securities, which Persons
would be required to file a statement on Schedule 13D or 13G with the SEC as a
"person" within the meaning of Section 13(d)(3) of the Exchange Act if such
Persons Beneficially Owned sufficient securities to require such a filing under
the Exchange Act.
(j) "Holder" shall mean any Shareholder that owns of record Registrable
Securities.
(k) "Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture or
other entity of whatever nature.
(l) "Registrable Securities" means common stock of Michael acquired by a
Shareholder in the Papetti's Hygrade Reorganization and any securities of
Michael issued in respect thereof as a result of a stock dividend, stock split,
recapitalization, merger or other similar transaction with respect to such
common stock so acquired.
(m) "Requirement of Law" shall mean, as to any specified Person, any law,
treaty, rule or regulation of any Governmental Authority applicable to such
Person or any of its property or to which such Person or any of its property is
subject.
(n) "Schedule 13G Person" shall mean any Person or Group eligible to file a
statement on Schedule 13G with respect to Equity Securities pursuant to Rule
13d-1(b) under the Exchange Act.
(o) "SEC" shall mean the Securities and Exchange Commission or its
successor.
(p) "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in
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effect from time to time, and a reference to a particular section thereof shall
be deemed to include a reference to the comparable section, if any, of any
similar federal statute.
(q) The "Total Voting Power" at any measurement date shall mean the total
number of votes which could have been cast in an election of directors of
Michael had a meeting of the shareholders of Michael been duly held based upon
a record date as of the measurement date if all Equity Securities then
outstanding and entitled to vote at such meeting were present and voted to the
fullest extent possible at such meeting.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF MICHAEL
Michael represents and warrants to the Shareholders and Sellers that:
(a) Michael has been duly incorporated and is validly existing and in good
standing as a corporation under the laws of the State of Delaware, with
corporate power to transact in all material respects its business as now
conducted by it, to enter into this Agreement, and to perform its obligations
hereunder.
(b) This Agreement has been duly authorized, executed and delivered by
Michael and constitutes a legal, valid and binding agreement of Michael,
enforceable against Michael in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally,
by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(c) Except as otherwise contemplated in this Agreement, no consent, approval
or authorization of, or filing, registration, qualification, declaration or
designation with, any Governmental Authority is required on the part of Michael
as a condition to the valid execution,
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delivery and performance of this Agreement by Michael, except where the absence
of any such consent, approval or authorization of, or the failure to make any
such filing, registration, qualification, declaration or designation with any
Governmental Authority would not have a material adverse effect on Michael and
its subsidiaries taken as a whole or materially impair Michael's ability to
perform its obligations hereunder.
(d) The execution, delivery and performance by Michael of this Agreement
will not: (i) conflict with the Articles of Incorporation or Bylaws of Michael,
as amended; (ii) conflict with, result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third-party right of termination, cancellation, material
modification or acceleration) under, any of the terms, conditions or provisions
of any trust agreement, voting agreement, stockholders agreement, voting trust,
note, bond, mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind
affecting Michael or to which Michael is a party or by which any of its
properties or assets are or may be bound; (iii) violate any Requirement of Law
applicable to Michael; or (iv) violate any order, injunction, judgment or
decree of any court or other Governmental Authority or any determination of an
arbitrator applicable to Michael or any of Michael's properties or assets,
except where such conflict, breach or other default under clause (ii) or any
such violation under clauses (iii) or (iv) would not have a material adverse
effect on Michael and its subsidiaries taken as a whole or materially impair
Michael's ability to perform its obligations hereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND SELLERS
Each Shareholder and Seller jointly and severally represents and warrants to
Michael that:
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(a) Each Shareholder and Seller has the legal capacity, power and authority
to enter into and perform all of such Shareholder's and Seller's obligations
under this Agreement. This Agreement has been duly executed and delivered by
each Shareholder and Seller and constitutes a legal, valid and binding
agreement of each Shareholder and Seller, enforceable against each Shareholder
and Seller in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors generally, by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) or by an implied covenant of good faith and fair dealing. If
any Shareholder is married and such Shareholder's Equity Securities constitute
community property, this Agreement has been duly authorized, executed and
delivered by, and constitutes a legal, valid and binding agreement of such
Shareholder's spouse, enforceable against such Person in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(b) No consent, approval or authorization of, or filing, registration,
qualification, declaration or designation with, any Governmental Authority is
required on the part of any Shareholder or Seller as a condition to the valid
execution, delivery and performance of this Agreement by any Shareholder.
(c) The execution, delivery and performance by each Shareholder and Seller
of this Agreement will not: (i) conflict with, result in a violation or breach
of, or constitute (with or
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without notice or lapse of time or both) a default (or give rise to any
third-party right of termination, cancellation, material modification or
acceleration) under, any of the terms, conditions or provisions of any trust
agreement, voting agreement, stockholders agreement, voting trust, note, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind affecting such
Shareholder or Seller or to which such Shareholder or Seller is a party or by
which any of such Shareholder's or Seller's properties or assets are or may be
bound; (ii) violate any Requirement of Law applicable to such Shareholder or
Seller; or (iii) violate any order, injunction, judgment or decree of any court
or other Governmental Authority or any determination of an arbitrator
applicable to such Shareholder or Seller or any of such Shareholder's or
Seller's properties or assets.
SECTION 4. COVENANTS OF THE SHAREHOLDERS AND SELLERS
(a) Acquisition of Equity Securities. For a period of three years from the
date of this Agreement or until the time that the Shareholders and Sellers as a
Group Beneficially Own Equity Securities representing in the aggregate less
than 5% of the Total Voting Power, whichever is earlier, no Shareholder or
Seller shall, directly or indirectly, acquire, offer to acquire, agree to
acquire, become the Beneficial Owner of, or obtain any rights in respect of,
any Equity Securities, by purchase or otherwise, or take any action in
furtherance thereof, if the effect of such acquisition, agreement or other
action would be (either immediately or upon consummation of any such
acquisition, agreement or other action, or expiration of any period of time
provided in any such acquisition, agreement or other action) to increase the
aggregate voting power in the election of directors of all Equity Securities
then Beneficially Owned by all
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Shareholders and Sellers (such aggregate voting power, (the "Aggregate Voting
Power") to 20% or more of the Total Voting Power (such maximum percentage
limitation, the "Maximum Percentage"). Notwithstanding anything to the
contrary in this Section 4(a), the Maximum Percentage may be exceeded if, and
solely to the extent that, the Aggregate Voting Power is or will be increased
solely as a result of a repurchase of any Voting Securities by Michael or any
of its subsidiaries or any other change in Michael's capitalization or by
reason of the issuance of stock options by Michael to any of the Shareholders
pursuant to any stock option plan maintained by Michael.
(b) No Voting Trusts. For a period of three years from the date of this
Agreement or unitl the time that the Shareholders and Sellers as a Group
Beneficially Own Equity Securities representing in the aggregate less than 5%
of the Total Voting Power, whichever is earlier, no Shareholder or Seller shall
deposit any Equity Securities in a voting trust or subject any Equity
Securities to any arrangement or agreement with respect to the voting of such
Equity Securities except for a voting trust or other arrangement among the
Shareholders or Sellers or any of their Affiliates.
(c) No Proxy Solicitation Adverse to Board Recommendation. For a period of
three years from the date of this Agreement or until the time that the
Shareholders and Sellers as a Group Beneficially Own Equity Securities
representing in the aggregate less than 5% of the Total Voting Power, whichever
is earlier, no Shareholder or Seller shall solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) in opposition to the recommendation of the Board of
Directors of Michael with respect to any matter.
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(d) No Formation of Group. For a period of three years from the date of
this Agreement or until the time that the Shareholders and Sellers as a Group
Beneficially Own Equity Securities representing in the aggregate less than 5%
of the Total Voting Power, whichever is earlier, no Shareholder or Seller shall
join a partnership, limited partnership, syndicate or other Group, or otherwise
act in concert with any other Person, for the purpose of acquiring, holding,
voting or disposing of Equity Securities, or otherwise become a "Person" within
the meaning of Section 13(d)(3) of the Exchange Act (in each case other than
solely with other Shareholders or Sellers or their Affiliates or with such
Shareholders', Sellers' or Affiliates' representatives for estate planning
purposes).
(e) Vote For Restructuring. Each Shareholder will vote all of his Equity
Securities in favor of the Restructuring as described in the Reorganization
Agreement at any meeting of the stockholders of Michael called for such purpose
or at any adjournment thereof.
SECTION 5. ADDITIONAL COVENANTS OF SHAREHOLDERS
(a) Two Year Restrictions on Disposition. For a period of two years from
the date of this Agreement, the Shareholders, individually or collectively,
shall not:
(i) sell or offer to sell Equity Securities in excess of 25,000
shares, as adjusted for any share dividend, stock split or other
recapitalization of Equity Securities, during any period of three
consecutive months;
(ii) pledge, hypothecate or encumber any Equity Securities Beneficially
Owned by such Shareholder, except to a financial institution pursuant to a
bona fide pledge, hypothecation or encumbrance to secure a bona fide loan for
money borrowed to one or more Shareholders, provided that, upon foreclosure
on such Equity Securities, such
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financial institution has executed and delivered to Michael an agreement
whereby such financial institution agrees to be legally bound by the terms of
this Agreement as a "Shareholder" as if such financial institution were an
original signatory hereto; or
(iii) take or cause to be taken any action or actions which will
disqualify the Papetti's Hygrade Reorganization as contemplated in the
Reorganization Agreement, as a reorganization within the meaning of Section
368(a) of the Code.
(b) Three Year Restrictions on Disposition. For a period of three
years from the date of this Agreement or until the time that the
Shareholders and Sellers as a Group Beneficially Own Equity Securities
representing in the aggregate less than 5% of the Total Voting Power, whichever
is earlier, the Shareholders, individually or collectively, shall not:
(i) sell or offer to sell Equity Securities having five percent (5%) or
more of the Total Voting Power of Michael to any Person or Group in any single
transaction or series of transactions without providing Michael the first
right to buy such shares as provided in Section 5(c) below;
(ii) sell or offer to sell Equity Securities to any Person or Group
which the Shareholders have actual knowledge at time of the sale to
Beneficially Own five percent (5%) or more of the total Voting Power of
Michael or, to any Person or Group who, by virtue of the sale or offer, would
Beneficially Own, five percent (5%) or more of the Total Voting Power of
Michael, without in either case, providing to Michael a first right to buy
such shares as provided in Section 5(c) below.
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(c) Michael's First Right to Purchase. Upon the occurrence of any event
described in Section 5(b)(i) or (ii), the Shareholder or Shareholders proposing
to sell or offer Equity Securities shall provide written notice thereof to
Michael and shall offer to Michael the right to purchase such Equity Securities.
The notice shall state the number of shares offered and the price per share and
any other conditions of the proposed sale or offer and shall include a copy of
any written document setting forth the terms of the proposed sale or offer
between the Shareholder or Shareholders and the purchaser or offeree. Michael
shall have * from its receipt of such notice within which to purchase the Equity
Securities so offered. In the event that Michael does not complete the purchase
within such * period, the Shareholder or Shareholders sending the notice shall
be permitted for a period of * thereafter to sell Equity Securities equal in
number to the shares offered in such notice free of any restrictions under this
Agreement at a price not less than the purchase price per share set forth in
such notice and under terms and conditions no more favorable to the purchaser
than the terms and conditions offered to Michael in such notice.
(d) Tender Offers. The restrictions set forth in Section 5(b) and the first
right to buy set forth in Section 5(c) shall not apply if a tender offer is
made for all or substantially all of the outstanding shares of Michael Common
Stock and the Board of Directors of Michael does not, within seven days of the
commencement of such tender offer, announce its opposition to the tender offer.
Notwithstanding the foregoing, the following additional terms and conditions
shall apply in the event of the commencement of a tender offer:
(i) In the event that one or more of the Shareholders has given
notice to Michael pursuant to Section 5(c) of this Agreement and, prior to
the exercise
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* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)2 of the Securities Act of 1934.
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of Michael's right to buy, a tender offer is commenced for all or
substantially all of the outstanding shares of Michael Common Stock, Michael
shall, within 20 days of the date that such Shareholder or Shareholders have
given such notice, have the right to acquire the Equity Securities subject to
the notice at the higher of the price offered by the Shareholder or
Shareholders in the notice or the tender offer price, regardless of whether
Michael's Board of Directors has announced its opposition to such tender
offer.
(ii) In the event that one or more of the Shareholders has given
notice to Michael pursuant to Section 5(c) of this Agreement and, subsequent
to the exercise of Michael's right to buy, either a tender offer is commenced
for all or substantially all of the outstanding shares of Michael Common Stock
or the Board of Directors rescinds its earlier opposition to such tender
offer, Michael shall have the option of (A) rescinding its agreement to
purchase the shares from the Shareholder or Shareholders within two days after
the commencement of such tender offer or the announcement by the Board of the
rescission of opposition to the tender offer, or (B) acquiring such shares at
the higher of the price offered by the Shareholder or Shareholders in the
notice or the tender office price.
SECTION 6. LEGEND.
All certificates representing shares of common stock of Michael which are
subject to this Agreement shall bear the following legend:
"The shares represented by this certificate are subject to certain
restrictions on the transfer, sale or other disposition of the shares pursuant
to an agreement dated ________________, 1996 between the issuer and the
registered
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owner hereof, a copy of which may be obtained from the secretary of the
corporation."
Any shareholder receiving common stock of Michael which is subject to this
Agreement shall promptly deliver the certificate for such shares to the
secretary of Michael who shall place the foregoing legend on the certificate.
The Secretary of Michael shall promptly return the legended certificates to the
Shareholders.
SECTION 7. - DIRECTORS.
For a period of three (3) years following the date of this Agreement, the
Board of Directors of Michael shall include representatives of the Shareholders
as provided below. If the Shareholders collectively own * or more of the
outstanding common stock of Michael, they shall be entitled to nominate two (2)
directors. If the Shareholders own less than * of the outstanding common
stock of Michael, they shall be entitled to nominate one (1) director. Within
thirty (30) days following the end of each calendar year the Representative (as
defined in the Reorganization Agreement) shall give notice to Michael of the
nominees of the Shareholders.
SECTION 8. REGISTRATION RIGHTS.
(a) Piggyback Rights. If at any time prior to the third anniversary date of
this Agreement, Michael proposes to register Equity Securities under the
Securities Act, in connection with a public offering of Equity Securities for
its own account solely for cash (other than a registration on Form S-4 or S-8
or any successor form thereof) in a manner that would permit registration of
all or a portion of the Registrable Securities owned by the Shareholders,
Michael will give prompt notice thereof to the Shareholders. Upon written
notice of any Shareholder to Michael received within fifteen (15) days after
delivery of notice of the proposed
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* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
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offering by Michael, Michael will use its best efforts to effect the
registration of the Registrable Securities covered by such notice under the
Securities Act; provided, however, that Michael shall have the right to abandon
the registration in its entirety at any time and shall not be required to
register Registrable Securities if the underwriters in any underwritten
offering reasonably object to the inclusion of such shares in the registration,
and provided further, that in any underwritten offering, the Shareholders
participating in the registration agree to sell their Registrable Securities to
the underwriters on the same terms and conditions as apply to Michael, with
such differences as customarily apply in combined primary and secondary
offerings of Equity Securities.
(b). Requested Registration. If, at any time prior to the third
anniversary date of this Agreement, Michael shall receive a written request
from one or more Shareholders that Michael effect the registration under the
Securities Act of all or a part of such Shareholders' Registrable Securities,
then Michael will, within ten (10) days after receipt thereof, give notice to
all other Shareholders of the receipt of such request and each such holder may
elect by written notice received by Michael within ten (10) days from the date
of the notice by Michael to have all or part of his Registrable Securities
included in such registration. Upon receipt of such notice, Michael will, as
soon as practicable, use reasonable efforts to effect the registration on Form
S-3 and pursuant to Rule 415 (the "Resale Registration Statement") under the
Securities Act of all Registrable Securities which it has been so requested to
register covering resales from time to time of such Registrable Securities and
Michael shall use its reasonable best efforts to: (i) cause the Resale
Registration Statement to be declared effective by the SEC as soon as
practicable thereafter; and (ii) maintain the effectiveness of the Resale
Registration Statement
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continuously until the earliest of: (A) the date on which the Shareholders no
longer hold Registrable Securities registered under the Resale Registration
Statement or (B) the third anniversary of this Agreement or such lesser time as
may be permitted under Rule 144 under the Securities Act to enable the
Shareholders to sell the Registrable Securities under the Securities Act
without such registration. Michael: (i) shall not be obligated to cause any
special audit to be undertaken in connection with any such registration; (ii)
shall be entitled to postpone for a reasonable period of time, but not in
excess of ninety (90) days, the filing of any registration statement otherwise
required to be prepared pursuant to this section if Michael is, at such time,
conducting or about to conduct an underwritten public offering of equity
securities (or securities convertible into equity securities) and is advised in
writing by its managing underwriter that such underwritten public offer would,
in its opinion, be adversely effected by the registration so requested; and
(iii) shall be entitled to postpone such requested registration for up to 90
days if Michael determines, in view of the advisability of deferring public
disclosure of material corporate developments or other information, that such
registration and the disclosure required to be made pursuant thereto would not
be in the best interest of Michael at such time.
(c) Effective Registration. A registration pursuant to this
Section 9 will not be deemed to have been effected unless the Registration
Statement has been declared effective by the SEC; provided, however, that if
after such Registration Statement has been declared effective, the offering of
Registrable Securities pursuant to such Registration Statement is interfered
with by any stop order, injunction or other order or requirement of the SEC or
any other Governmental Authority or court, such Registration Statement will be
deemed not to have
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been effected during the period of such interference until the offering of
Registrable Securities pursuant to such Registration Statement may legally
resume.
(d) Registration Expenses. Michael shall bear all expenses
incurred in connection with the registration of the Registrable Securities
pursuant to this Section 9. Such expenses shall include, without limitation,
all printing, legal and accounting expenses incurred by Michael and all
registration and filing fees imposed by the SEC, any state securities
commission or the NASDAQ-NMS. Each Shareholder shall be responsible for any
brokerage fees or commissions and any taxes of any kind (including, without
limitation, transfer taxes) with respect to any disposition, sale or transfer
of Registrable Securities and for any legal, accounting and other expenses
incurred by such Shareholder.
(e) Selection of Underwriter and Investment Manager. If a
requested registration pursuant to this Section 9 involves an underwritten
offering, Michael shall have the exclusive right to select an investment banker
or bankers and managers to administer the offering.
(f) Registration Procedures. If and whenever Michael is required
to use its reasonable efforts to cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, Michael
will, as expeditiously as reasonably possible: (i) prepare and file with the
SEC such amendments and supplements to such Resale Registration Statement and
the prospectus used in connection therewith and shall timely file with the SEC
all required filings under the Exchange Act as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such Resale Registration Statement and to
keep the Resale Registration Statement effective, but only while it shall be
required under the provisions of this Agreement to cause the Registration
Statement
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to remain current; (ii) furnish to each Shareholder seeking registration
hereunder such number of copies of the prospectus included in such Resale
Registration Statement (including each preliminary prospectus and summary
prospectus), and such other documents as each such Shareholder may reasonably
request in order to facilitate the disposition of the Registrable Securities by
such Shareholder but only while it shall be required under the provisions
hereof to cause the Registration Statement to remain current; (iii) use its
reasonable efforts to register or qualify such Registrable Securities covered
by such Resale Registration Statement under such other securities or blue sky
laws of such jurisdictions as the Shareholders shall reasonably request, except
that Michael shall not, for any purpose, be required to qualify generally to do
business as a foreign corporation in any jurisdiction where, but for the
requirements of this clause, it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction, or consent to general
service of process in any such jurisdiction; (iv) use its reasonable efforts
to list the Registrable Securities on the NASDAQ-NMS, if such Registrable
Securities are not already so listed.
(g) Post-Registration Notices. Michael shall promptly notify the
Shareholders: (i) when a prospectus or any prospectus supplement or
post-effective amendment (including any required filings under the Exchange
Act) has been filed and, with respect to the Resale Registration Statement or
any post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any state securities authority for amendments or
supplements to the Resale Registration Statement and prospectus or for
additional information after the Resale Registration Statement has become
effective; (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Resale Registration Statement; (iv) of the issuance by any
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state securities commission or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the
Registrable Securities under such state's securities or "blue sky" laws; and
(v) of the happening of any event which makes any statement made in the Resale
Registration Statement or related prospectus untrue or which requires the
making of changes in such Resale Registration Statement or prospectus so that
they will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As soon as practicable, following the expiration of the
Suspension Period (as defined below), Michael shall prepare and file with the
SEC and furnish a supplement or amendment to such prospectus so that, as
thereafter deliverable to the purchasers of such Registrable Securities, such
prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Upon receipt of any notice (a "Suspension Notice") by the Shareholders
from Michael of the happening of any event of the kind described in this
Section 9(g), the Shareholders shall forthwith discontinue disposition of the
Registrable Securities pursuant to the Resale Registration Statement until the
Shareholders' receipt of the copies of the supplemental or amended prospectus
contemplated by this Section 9(g) or until the Shareholders have been advised
in writing (the "Advice") by Michael that the use of the prospectus may be
resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in the prospectus, and, if so directed by
Michael, will, or will request any broker or dealer acting as the Shareholders'
agent(s) to deliver to Michael (at Michael's expense) all copies, other
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than permanent file copies then in the Shareholders' or their brokers' or
dealers' possession of the prospectus covering such Registrable Securities
current at the time of receipt of such notice; provided, however, that in no
event shall the period from the date on which the Shareholders receive a
Suspension Notice to the date which the Shareholders receive either the Advice
or copies of the supplemental or amended prospectus contemplated in this
Section 9(g) (the "Suspension Period") exceed 60 calendar days.
(h) Information. Michael may require each selling Shareholder to
furnish it with such information regarding such selling Shareholder and
pertinent to the disclosure requirements relating to the registration and the
distribution of such securities as Michael may from time to time reasonably
request in writing.
(i) Underwriting Agreement. The selling Shareholders shall
execute and deliver an underwriting agreement in customary form in connection
with any underwritten offering made pursuant to a registration hereunder.
SECTION 9 INDEMNIFICATION AND CONTRIBUTION
(a) Indemnification by Michael. Michael agrees to indemnify and
hold harmless to the full extent permitted by law, each Shareholder from and
against all losses, claims, damages, liabilities and expenses (including,
without limitation, reasonable legal fees and expenses incurred by shareholders
(collectively, the "Damages") to which the Shareholders may become subject
under the Securities Act or otherwise, insofar as such Damages (or proceedings
in respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in the Resale Registration Statement (or
any supplement or amendment thereto, including filings under the Exchange Act)
pursuant to which Registrable Securities were
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<PAGE> 134
registered under the Securities Act, or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any prospectus (as amended or supplemented if
Michael shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made, not misleading, except insofar as such Damages arise out of or are
based upon any such untrue statement or omission based upon information
relating to the Shareholders furnished in writing to Michael by the
Shareholders specifically for use therein; provided, however, that Michael
shall not be liable to the Shareholders under this Section 10(a) to the extent
that any such Damages were caused by the fact that the Shareholders sold
Registrable Securities to a Person as to who it shall be established that there
was not sent or given, at or prior to written confirmation of such sale, a copy
of the prospectus as then amended or supplemented if, but only if: (i) Michael
has previously furnished copies of such amended or supplemented prospectus to
the Shareholders; and (ii) such Damages were caused by any untrue statement or
omission or alleged untrue statement or omission contained in the prospectus so
delivered which was corrected in such amended or supplemented prospectus.
(b) Indemnification by Shareholders. The Shareholders agree to
indemnify, jointly and severally, and hold harmless Michael, its stockholders,
directors, officers and each Person, if any, who controls Michael within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from Michael to
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the Shareholders in Section 10(a) of this Agreement but only with reference to
information relating to the Shareholders furnished in writing to Michael by the
Shareholders specifically for use in the Resale Registration Statement (or any
amendment thereto) or any prospectus (or any amendment or supplement thereto);
provided, however, that the Shareholders shall not be obligated to provide such
indemnity to the extent that such Damages result from a failure of Michael to
promptly amend or take action to correct or supplement any such Resale
Registration Statement or prospectus on the basis of corrected or supplemental
information provided in writing by the Shareholders to Michael expressly for
such purpose. In no event shall the liability of the Shareholders hereunder be
greater in amount than the amount of the proceeds received by the Shareholders
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Contribution. To the extent that the indemnification provided
for in Section 10(a) or (b) is unavailable to an indemnified party or
insufficient in respect of any Damages, then each indemnifying party under such
Section, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Damages in such proportion as is appropriate to reflect the relative
fault of Michael, on the one hand, and the Shareholders, on the other hand, in
connection with the statements or omissions that resulted in such Damages, as
well as any other relevant equitable considerations. The relative fault of
Michael, on the one hand, and the Shareholders, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by Michael or by the
Shareholders and the parties' relative intent,
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<PAGE> 136
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
If indemnification is available under Section 10(a) or (b), the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in such sections without regard to the relative fault of said
indemnifying party or the indemnified party or any other equitable
considerations provided for in this Section 10(c). Michael and the
Shareholders agree that it would not be just or equitable if contribution
pursuant to this Section 10(c) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in this section.
SECTION 10. GENERAL PROVISIONS
(a) Governing Law. This agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Delaware
without giving effect to any conflicts of law provisions.
(b) Remedies. Michael, on the one hand, and the Shareholders and
Sellers, on the other, acknowledge and agree that the other would not have an
adequate remedy at law for money damages in the event that any of the covenants
or agreements in this Agreement of such party were not performed in accordance
with its terms, and it is therefore agreed that in addition to and without
limiting any other remedy or right such party may have, any party will have the
right to an injunction or other equitable relief (including specific
performance) in any court of competent jurisdiction, enjoining any such breach
and enforcing specifically the terms and provisions hereof. All rights, powers
and remedies provided under this Agreement or otherwise available in respect
hereof at law or in equity shall be cumulative and not alternative.
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(c) Notices. All notices, demands and other communications which
may or are required to be given hereunder or with respect hereto shall be given
by the Representative on behalf of the Shareholders and Sellers and by Michael
on behalf of itself. All such notices, demands and other communications shall
be in writing, shall be given either by personal delivery or by nationally
recognized overnight courier or by telecopier, and shall be deemed to have been
given or made when personally delivered, one business day after delivered to a
nationally recognized overnight courier, postage prepaid, and receipt
requested, or one business day after transmission by facsimile, receipt
confirmed, addressed as follows:
(i) IF TO MICHAEL:
Jeffrey M. Shapiro
Executive Vice President
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
Telephone: 612-546-1500
Facsimile No.: 612-546-3711
with a copy to:
Albert A. Woodward
Maun & Simon, PLC
2000 Midwest Plaza Building West
801 Nicollet Mall
Minneapolis, Minnesota 55402
Telephone: 612-338-1113
Facsimile No.: 612-338-2271
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<PAGE> 138
(ii) IF TO THE SHAREHOLDERS OR SELLERS:
Arthur N. Papetti
c/o Papetti's Hygrade Egg Products, Inc.
100 Trumbull Street
Elizabeth, New Jersey 07206
Telephone: 908-351-0477
Facsimile No.: 908-354-0136
As Representative
with a copy to:
Martin B. O'Connor, II Robert M. LaRose
O'Connor, Morss & O'Connor Thompson Coburn
Liberty Hall Center One Mercantile Center
1085 Morris Avenue Suite 3400
Union, New Jersey 07083 St. Louis, Missouri 63101
Telephone: 908-354-5660 Telephone: 314-552-6000
Facsimile No.: 908-354-5786 Facsimile No.: 314-552-7000
or to such other address as any such person or entity may from time to time
designate by notice to the others.
(d) Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. The parties agree that they will use their
best efforts at all times to support and defend this Agreement.
(e) Amendments. This Agreement may be amended only by an
agreement in writing signed by all of the parties hereto.
(f) Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
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<PAGE> 139
(g) Counterparts. This Agreement shall become binding when one or
more counterparts hereof, individually or taken together, bears the signatures
of each of the parties hereto. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against the party whose
signature appears thereon, or on whose behalf such counterpart is executed, but
all of which when taken together shall be one and the same statement.
(h) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the successors and assigns of
the parties hereto, provided that a Shareholder may not assign any of his
rights or obligations hereunder to any person without the prior written consent
of Michael. Notwithstanding the foregoing, the consent of Michael shall not be
required in connection with the assignment of this Agreement to the estate of a
Shareholder.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
have duly executed this Agreement, all as of the day and year first above
written.
MICHAEL FOODS, INC.
By: ____________________________
Its: _______________________
__________________________________
Arthur N. Papetti
As Representative of and
attorney-in-fact for the Shareholders
and Sellers listed on Schedule I
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SHAREHOLDERS:
________________________________________
Stephen Papetti
________________________________________
Alfred Papetti
________________________________________
Arthur J. Papetti
SELLERS:
________________________________________
Arthur N. Papetti
________________________________________
Anthony Papetti
THE ALFRED PAPETTI S CORPORATION STOCK
TRUST
By:_____________________________________
Trustee
THE STEPHEN PAPETTI S CORPORATION STOCK
TRUST
By:_____________________________________
Trustee
THE TINA MARIE NOLL S CORPORATION STOCK
TRUST
By:_______________________________________
Trustee
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<PAGE> 141
THE ARTHUR J. PAPETTI S CORPORATION
STOCK TRUST
By:_____________________________________
Trustee
THE MARY BARBARA PAPETTI S CORPORATION
STOCK TRUST
By:_____________________________________
Trustee
IRREVOCABLE LIVING TRUST BY ANTHONY
PAPETTI FBO STEPHEN PAPETTI U/D 2/1/95
By:_____________________________________
Trustee
IRREVOCABLE LIVING TRUST BY ANTHONY
PAPETTI FBO ALFRED PAPETTI U/D 2/1/95
By:_____________________________________
Trustee
IRREVOCABLE LIVING TRUST BY ARTHUR
N. PAPETTI FBO ARTHUR J. PAPETTI U/D
12/1/93
By:_____________________________________
Trustee
IRREVOCABLE LIVING TRUST BY ARTHUR N.
PAPETTI FBO TINA MARIE PAPETTI-NOLL U/D
12/1/93
By:_____________________________________
Trustee
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<PAGE> 142
IRREVOCABLE LIVING TRUST BY ARTHUR N.
PAPETTI FBO MARY BARBARA PAPETTI U/D
12/1/93
By:_____________________________________
Trustee
ARTHUR J. PAPETTI FAMILY LIMITED
PARTNERSHIP
By:_____________________________________
General Partner
STEPHEN PAPETTI FAMILY LIMITED
PARTNERSHIP
By:_____________________________________
General Partner
TINA MARIE NOLL FAMILY LIMITED PARTNERSHIP
By:_____________________________________
General Partner
ALFRED PAPETTI FAMILY TRUST
By:______________________________________
Trustee
STEPHEN PAPETTI FAMILY TRUST
By:_____________________________________
Trustee
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ARTHUR J. PAPETTI FAMILY TRUST
By:_____________________________________
Trustee
TINA MARIE NOLL FAMILY TRUST
By:_____________________________________
Trustee
1995 IRREVOCABLE LIVING GSTE TRUST BY
BARBARA PAPETTI FBO ARTHUR J. PAPETTI
U/D 8/10/95
By:_____________________________________
Trustee
1995 IRREVOCABLE LIVING GSTE TRUST BY
LILLIAN PAPETTI FBO ALFRED PAPETTI
U/D 8/10/95
By:_____________________________________
Trustee
1995 IRREVOCABLE LIVING GSTE TRUST BY
LILLIAN PAPETTI FBO STEPHEN PAPETTI U/D
8/10/95
By:_____________________________________
Trustee
1995 IRREVOCABLE LIVING TRUST BY TINA
MARIE NOLL FBO TINA MARIE NOLL U/D
8/10/95
By:_____________________________________
Trustee
________________________________________
Mary Barbara Papetti
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SCHEDULE I
LIST OF SHAREHOLDERS AND SELLERS
A. SHAREHOLDERS
Stephen Papetti
Alfred Papetti
Arthur J. Papetti
B. SELLERS
Arthur N. Papetti
Anthony Papetti
The Alfred Papetti S Corporation Stock Trust
The Stephen Papetti S Corporation Stock Trust
The Tina Marie Noll S Corporation Stock Trust
The Arthur J. Papetti S Corporation Stock Trust
The Mary Barbara Papetti S Corporation Stock Trust
Declaration of Irrevocable Living Trust by Anthony Papetti FBO Stephen
Papetti U/D 2/1/95
Declaration of Irrevocable Living Trust by Anthony Papetti FBO Alfred
Papetti U/D 2/1/95
Declaration of Irrevocable Living Trust by Arthur N. Papetti FBO
Arthur J. Papetti U/D 12/1/93
Declaration of Irrevocable Living Trust by Arthur N. Papetti FBO Tina
Marie Papetti-Noll U/D 12/1/93
Declaration of Irrevocable Living Trust by Arthur N. Papetti FBO Mary
Barbara Papetti U/D 12/1/93
Arthur J. Papetti Family Limited Partnership
Stephen Papetti Family Limited Partnership
Tina Marie Noll Family Limited Partnership
Alfred Papetti Family Trust
Stephen Papetti Family Trust
Arthur J. Papetti Family Trust
Tina Marie Noll Family Trust
1995 Irrevocable Living GSTE Trust by Barbara Papetti FBO Arthur J.
Papetti U/D 8/10/95
1995 Irrevocable Living GSTE Trust by Lillian Papetti FBO Alfred
Papetti U/D 8/10/95
1995 Irrevocable Living GSTE Trust by Lillian Papetti FBO Stephen
Papetti U/D 8/10/95
1995 Irrevocable Living Trust by Tina Marie Noll FBO Tina Marie Noll
U/D 8/10/95 Mary Barbara Papetti
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EXHIBIT C
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER made this ____ day of ____________,
1996 between MICHAEL FOODS, INC., a Delaware corporation (hereinafter called
"Michael"), and PAPETTI'S HYGRADE EGG PRODUCTS, INC., a New Jersey corporation
(hereinafter called "Papetti's Hygrade").
WHEREAS, the Board of Directors of Michael and Papetti's Hygrade have
approved the merger of Papetti's Hygrade into Michael (the "Merger") upon the
terms and subject to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger has also been approved by the Board of Directors
of Michael pursuant to Section 251(f) of the Delaware General Corporation Law
(the "Delaware Law"), incorporated by Section 252(e) of the Delaware Law and by
the stockholders of Papetti's Hygrade pursuant to Section 14A:10-3 of the New
Jersey Business Corporation Act (the "New Jersey Act"), which Delaware Law and
New Jersey Act permit the merger contemplated herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and of the mutual benefits hereby provided, it is
agreed by and between the parties hereto as follows:
ARTICLE I
At the Effective Time and subject to the terms and conditions of this
Agreement, Papetti's Hygrade shall be merged into Michael and the separate
existence of Papetti's Hygrade shall thereupon cease in accordance with the
applicable provisions of the New Jersey Law. Michael shall be and is herein
sometimes referred to as "Surviving Corporation."
The separate corporate existence of Michael and all of its rights,
privileges, immunities and franchises, public or private, and all its duties
and liabilities as a corporation organized under the Delaware Law will continue
unaffected by the Merger.
ARTICLE II
The Merger shall become effective upon the filing of this Plan and
Agreement of Merger with the Secretary of State of Delaware. The date on which
the Merger becomes effective is hereinafter referred to as the "Effective
Date." The time on such date at which the Merger becomes effective is
hereinafter called the "Effective Time."
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ARTICLE III
The Certificate of Incorporation and Bylaws of Michael in effect at
the Effective Date of the Merger shall be the Certificate of Incorporation and
Bylaws of Michael following the Effective Date of the Merger unless and until
the same shall be amended or repealed, which power to amend or repeal is hereby
expressly reserved, and all rights or powers of whatsoever nature conferred in
such Certificate of Incorporation, or such Bylaws, or herein upon any
shareholder or director or officer of Michael or upon any other persons
whomsoever are subject to the reserved power. Such Certificate of
Incorporation shall constitute the Certificate of Incorporation of Michael
separate and apart from this Plan and Agreement of Merger and may be separately
certified as the Certificate of Incorporation of Michael.
The members of the Board of Directors and the officers of Michael
immediately after the Effective Date of the Merger shall be those persons who
were the members of the Board of Directors and the officers, respectively, of
Michael immediately prior to the Effective Date of the Merger and such persons
shall serve in such offices, respectively, for the term provided for by law or
in the Bylaws, or until their respective successors are elected and qualified.
Michael shall obtain all of the necessary director and/or stockholder approvals
required to elect or appoint Stephen Papetti and Arthur J. Papetti to Michael's
Board of Directors to serve for an initial period beginning at the Effective
Date and ending on the date of Michael's next annual meeting of stockholders or
until their respective successors are duly elected and qualified. In addition,
in connection with any annual meeting of stockholders of Michael that occurs
prior to the third anniversary of the Effective Date, the persons who were the
holders of the common stock of Papetti's Hygrade on the Effective Date (the
"Papetti's Hygrade Shareholders") shall be entitled to nominate: (i) two
directors to the slate of directors to be proposed by the Board of Directors of
Michael provided that the Papetti's Hygrade Shareholders then beneficially own
in the aggregate * or more of the outstanding shares of the $.01 par value
common stock of Michael ("Michael Common Stock"), or (ii) one director to the
slate of directors to be proposed by the Board of Directors of Michael if the
Papetti's Hygrade Shareholders beneficially own in the aggregate less than *
of the outstanding shares of Michael Common Stock. The Papetti's Hygrade
Shareholders designated nominees shall be given to Michael within 30 days
following the end of each calendar year. As soon as practicable after the
Effective Time, Michael shall cause the Board of Directors to be increased and
shall cause the appointment of two (2) Papetti's Hygrade Shareholders to the
Board of Directors.
If at any time Michael shall consider or be advised that any
acknowledgments or assurances in law or other similar actions are necessary or
desirable in order to acknowledge or confirm in and to Michael any right,
title, or interest of Papetti's Hygrade held immediately prior to the Effective
Date of the Merger, Papetti's Hygrade and its proper officers and directors
shall and will execute and deliver all such acknowledgments or assurances in
law and do all things necessary or proper to acknowledge or confirm such right,
title or interest in Michael as shall be necessary to carry out the purposes of
this Plan and Agreement of Merger, and Michael and the proper officers and
directors thereof are fully authorized to take any and all such action in the
name of Michael or otherwise.
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ARTICLE IV
Pursuant to this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any capital stock of
Papetti's Hygrade, the holders of all of the common and preferred stock of
Papetti's Hygrade shall receive an aggregate of 3,400,000 shares of validly
issued, fully paid, non-assessable, Michael Common Stock plus cash in the
amount of $_______________, to be distributed to such shareholders pro rata
according to their respective interests in Papetti's Hygrade as of the
Effective Date.
As soon as practicable after the Effective Date, each holder of a
certificate for shares of Papetti's Hygrade common and preferred stock
outstanding immediately prior to the Effective Time, shall be entitled, upon
surrender of such certificate for cancellation to the Surviving Corporation, to
receive a new certificate for the number of whole shares of Michael Common
Stock to which such holder shall be entitled in the manner provided for above
and until so surrendered, each certificate which, immediately prior to the
Effective Time, represented shares of Papetti's Hygrade common stock shall not
be transferable on the books of the Surviving Corporation but shall be deemed
to evidence ownership of the whole number of shares of Michael Common Stock
into which such shares of Papetti's Hygrade common stock have been converted on
the basis above set forth.
ARTICLE V
Except as herein specifically set forth, the identity, existence,
purposes, powers, objects, franchises, privileges, rights and immunities of
Michael shall continue unaffected and unimpaired by the Merger and the
corporation franchises, existence and rights of Papetti's Hygrade shall be
merged into Michael and Michael shall, as the Surviving Corporation, be fully
vested therewith. At the Effective Time, the separate existence of Papetti's
Hygrade shall cease and, in accordance with the terms of this Plan, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and be subject to all
the restrictions, disabilities and duties of Michael and Papetti's Hygrade; and
all the rights, privileges, powers and franchises of Michael and Papetti's
Hygrade, and all property, real, personal and mixed and all debts due to either
Michael or Papetti's Hygrade on whatever account, including stock
subscriptions, and all other things in action and all and every other interest
of or belonging to or due to each of the corporations shall be taken and deemed
to be transferred to and vested in the Surviving Corporation without further
act or deed; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of Michael and Papetti's Hygrade, and
the title to any real estate or interest therein, vested by deed or otherwise
in either of such corporations, shall not revert or be in any way impaired by
reason of the Merger. The Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of Michael and
Papetti's Hygrade, and any claim existing or action or proceeding pending by or
against either Michael or Papetti's Hygrade may be prosecuted as if the Merger
had not taken place, or the Surviving Corporation may be substituted in its
place. Neither the rights of creditors nor any liens upon the property of
Michael or Papetti's Hygrade
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shall be impaired by the Merger, and all debts, liabilities and duties of each
of Michael or Papetti's Hygrade shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it.
If, upon or after the Effective Date of the Merger, the Surviving
Corporation shall determine that any returns or reports, or any filings of any
kind, are required to be made by Papetti's Hygrade to the Internal Revenue
Service or to any other state or federal administrative or regulatory agency,
or if any assignments, deeds or assurances are necessary or desirable to vest
in the Surviving Corporation any property of Papetti's Hygrade, the President
of the Surviving Corporation, or such other officers thereof as may be
designated by the Board of Directors thereof, shall be empowered to make and
execute on behalf of Papetti's Hygrade all necessary returns or reports, or
filings of any kind, and all proper assignments, deeds or assurances, and to do
all other things necessary and proper to effectuate the Merger and to vest
title to all of the property of Papetti's Hygrade in the Surviving Corporation.
Immediately after the Effective Time, Michael shall distribute all of
the assets and liabilities of Papetti's Hygrade to its wholly- owned subsidiary
M.G. Waldbaum Company who shall thereupon succeed to the business of Papetti's
Hygrade. Michael shall take and shall cause M.G. Waldbaum Company to take such
action as may be necessary to preserve the "Papetti's Hygrade" name so that it
may be continued to be used by Michael and M.G. Waldbaum Company without
interruption.
ARTICLE VI
In the event of the termination and abandonment of this Plan and the
Merger, this Plan shall be void and have no effect, and no liability shall be
incurred hereunder on the part of Michael or Papetti's Hygrade or the
stockholders, directors, or officers thereof.
ARTICLE VII
Any of the terms or conditions of this Plan may be waived at any time
by any of the parties hereto, or the stockholders hereof which are, entitled to
the benefit hereof, by action taken by the Board of Directors of any of the
parties hereto, or may be amended or modified in whole or in part at any time
by any agreement in writing authorized by the respective Boards of Directors of
the parties hereto; provided, however, that no such amendment or modification
or waiver after adoption by the shareholders of Papetti's Hygrade shall be made
which changes the manner in which the Papetti's Hygrade common stock is to be
converted or exchanged as provided in Article IV without the approval of such
stockholders.
ARTICLE VIII
Michael hereby agrees that it may be served with process in New
Jersey in any proceeding for enforcement of any obligation of Papetti's Hygrade
as well as for enforcement
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of any obligation of Michael arising from the Merger, including any suit or
other proceeding to enforce the rights of any stockholders as determined in
appraisal proceeding pursuant to the New Jersey Act. Michael hereby
irrevocably appoints the Secretary of State as its agent to accept service of
process in any such suit or other proceeding. A copy of such process should be
mailed to 324 Park National Bank Building, 5353 Wayzata Boulevard, Minneapolis,
MN 55416.
IN WITNESS WHEREOF, each of the corporate parties hereto, pursuant to
authority duly granted by their respective Boards of Directors, has caused this
Agreement of Merger to be executed as of the date hereof.
MICHAEL FOODS, INC. PAPETTI'S HYGRADE EGG PRODUCTS, INC.
a Delaware corporation a New Jersey corporation
By: _____________________ By:________________________
President President
(The Corporation has no
Corporate Seal)
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<PAGE> 150
CERTIFICATE OF THE SECRETARY OF MICHAEL FOODS, INC.
The undersigned, secretary of Michael Foods, Inc. hereby certifies as
follows:
1. This Agreement was adopted by the Board of Directors of Michael
without any vote of its stockholders pursuant to Delaware General Corporate Law
Section 251(f), incorporated by Delaware General Corporate Law Section 252(e),
with all of the conditions of the first sentence of Section 251(f) being
satisfied in full.
2. The authorized unissued shares of common stock of Michael to be
issued hereunder do not exceed 20% of the common stock of Michael outstanding
immediately prior to the effective date of this Merger.
__________________________________
Jeffrey M. Shapiro, Secretary
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<PAGE> 151
EXHIBIT D
Minneapolis
____________, 1996
Papetti's Hygrade Egg Products, Inc.
Quaker State Farms, Inc.
Papetti's of Iowa Food Products, Inc.
Monark Egg Corporation
Egg Specialties, Inc.
Papetti Foods, Inc.
Casa Trucking Limited Partnership
Papetti Transport Leasing Limited Partnership
Papetti Equipment Leasing Limited Partnership
c/o Papetti's Hygrade Egg Products, Inc.
100 Trumbell Street
Elizabeth, New Jersey 07206
Gentlemen:
We have acted as counsel for Michael Foods, Inc., a Delaware
corporation, ("Michael") and M.G. Waldbaum Company, a Nebraska corporation
("Acquisition") with respect to an Agreement and Plan of Reorganization (the
"Reorganization Agreement") dated as of ____________, 1996, by and among
Michael and Acquisition and Papetti's Hygrade Egg Products, Inc., Quaker State
Farms, Inc., Papetti's of Iowa Food Products, Inc., Monark Egg Corporation, Egg
Specialties, Inc., Papetti Foods, Inc., Casa Trucking Limited Partnership,
Papetti Transport Leasing Limited Partnership, and Papetti Equipment Leasing
Limited Partnership. Section 8.7 of the Reorganization Agreement requires as a
condition to your obligation to consummate the transactions contemplated by the
Reorganization Agreement that you receive an opinion as of this date as to
certain matters. Capitalized terms used herein shall have the meaning ascribed
to them in the Reorganization Agreement.
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<PAGE> 152
Papetti's Hygrade Egg Products, Inc.
_____________, 1996
Page 2
As counsel for Michael and Acquisition, we have examined the
Reorganization Agreement and the agreements required to be executed and
delivered thereunder and have examined and relied upon such records of Michael
and Acquisition, certificates, representations provided by officers of Michael
and Acquisition, and certificates of public officials, and have examined such
matters of law as we have deemed necessary or appropriate for purposes of this
opinion.
Based upon the foregoing, it is our opinion that:
1. Michael and Acquisition are each corporations duly organized,
validly existing and in good standing under the laws of Delaware and Nebraska,
respectively. Each of Michael and Acquisition has full corporate power and
corporate authority to carry on its businesses as now being conducted, to own
and operate its assets, business and properties, to conduct its business as now
conducted by it, to enter into the Reorganization Agreement and the other
agreements required to be executed and delivered thereunder, and to perform
their obligations thereunder.
2. The execution, delivery and performance of the Reorganization
Agreement by Michael and Acquisition, the Acquisition Agreements by
Acquisition, and the Employment Agreements, Settlement Agreement, and
Shareholder Agreement by Michael, have been duly authorized, executed and
delivered by Michael and/or Acquisition, as the case may be, and constitute
legal, valid and binding agreements enforceable against them in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors generally, by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) or by an implied covenant of good faith and fair dealing.
3. The execution, delivery and performance by Michael and Acquisition
of the Reorganization Agreement, the Acquisition Agreements by Acquisition and
the Settlement Agreement, Employment Agreements and Shareholder Agreement by
Michael, will not, in any material respect (with respect to clauses (ii)
through (iv) below), (i) conflict with the Certificate or Articles of
Incorporation or By-laws of Michael or Acquisition, both as amended to date;
(ii) to the best of our knowledge after reasonable inquiry, conflict with,
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third-party right of
termination, cancellation, modification or acceleration) under, any of the
terms, conditions or provisions of any trust agreement, voting agreement,
shareholder agreement, voting trust, note, bond, mortgage, indenture, license,
contract, commitment,
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<PAGE> 153
Papetti's Hygrade Egg Products, Inc.
_____________, 1996
Page 3
arrangement, understanding, agreement or other instrument or obligation of any
kind affecting Michael or Acquisition or to which Michael or Acquisition is a
party or by which any of the properties or assets of Michael or Acquisition are
or may be bound; (iii) to the best of our knowledge after reasonable inquiry,
violate any requirement of law applicable to Michael or Acquisition; or (iv) to
the best of our knowledge after reasonable inquiry, violate any order,
injunction, judgment or decree of any court or other governmental authority or
any determination of an arbitrator applicable to Michael or Acquisition or any
of Michael's or Acquisition's properties or business.
4. The authorized and, to the best of our knowledge after reasonable
inquiry, issued capital stock of each of Michael and Acquisition conforms to
the description thereof contained in Section 5.3 of the Agreement. All of the
outstanding Michael Common Stock and the Acquisition Common Stock is validly
issued, fully paid and non-assessable and has not been issued in violation of
preemptive rights with respect thereto. All of the issued and outstanding
shares of Acquisition are owned by Michael. No shares of any class or series
are held in the treasury of Michael or Acquisition. Except as set forth in
public filings made by Michael under the Exchange Act and the Securities Act,
there are no other claims of equity, options, warrants, calls, rights or
commitments or any other agreements of any character relating to the sale,
issuance or voting of any shares of the Michael Common Stock or Acquisition
Common Stock, or any securities convertible into or evidencing the right to
purchase any shares of the Michael Common Stock or Acquisition Common Stock.
The shares of Michael Common Stock to be issued pursuant to the Papetti's
Hygrade Reorganization are duly authorized, validly issued and outstanding,
fully paid and non-assessable and none of such shares is subject to preemptive
or other similar rights or claims, liens, encumbrances and security interests
of which we have knowledge.
5. To our knowledge after due investigation, there is no suit, action
or proceeding pending or overtly threatened before any court or other
governmental agency by the federal or state government in which it is or will
be sought to restrain or prohibit the consummation of the transactions
contemplated by the Reorganization Agreement.
6. Except as received prior to the date hereof, no consent or
approval by any governmental or quasi-governmental authority is required on the
part of Michael and Acquisition in connection with the execution, delivery and
performance of the Reorganization Agreement, the Acquisition Agreements or the
consummation of the transactions contemplated thereby by Michael or
Acquisition.
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<PAGE> 154
Papetti's Hygrade Egg Products, Inc.
_____________, 1996
Page 4
The opinions expressed herein by the undersigned are expressly limited
to the laws of the State of Minnesota, the Delaware General Corporation Law and
the laws of the United States of America. We assume no responsibility as to
the applicability or the effect of the laws of any other domestic or foreign
jurisdiction on the subject transactions.
We have rendered the foregoing opinion solely for your benefit in
connection with the transactions described in the Reorganization Agreement.
Our opinion may not be quoted or relied upon by, nor copies be delivered to,
any other person or entity, or used for any other purpose, without our prior
written consent.
Very truly yours,
Albert A. Woodward
AAW:mso
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<PAGE> 155
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the ____________ day of
_______________, 1996, by and between MICHAEL FOODS, INC., a Delaware
corporation (hereinafter referred to as "Michael Foods") and * (hereinafter
referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods
(the "Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into
this Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive
to serve as Chairman of the Papetti's Hygrade Foods Division and in such
capacity Executive shall perform such duties as were being performed prior to
and as of the date of this Agreement subject at all times to the direction of
the CEO of Michael Foods.
2. TERM. This Agreement shall be effective as of
__________________, 1996 and shall continue through _________________ 1999,
unless earlier terminated as provided herein. This Agreement may be extended
thereafter upon the written agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from ___________________, 1996 through ______________________, 1999
of at least * payable in substantially equal semi- monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical
insurance and shall permit Executive to participate in other fringe
benefit plans as Michael Foods may from time to time provide for its
other executive officers. The terms
- --------------------
* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24(b)-2 of the Securities Act of
1934.
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<PAGE> 156
of said benefits in all cases shall be no less favorable to Executive
than those offered to other executive officers of Michael Foods.
b. Executive is entitled to take * vacation per annum at
reasonable times and for customary and reasonable lengths of time
consistent with his overall responsibilities hereunder.
c. Michael Foods shall reimburse Executive for all
reasonable expenses incurred by Executive in connection with Michael
Foods' business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of * following termination of employment, Executive shall not directly
or indirectly, whether as an employee, agent, contractor, partner, shareholder
or otherwise, engage in the business of egg production, processing or
distribution in any geographic area where Michael Foods produces or processes
eggs or distributes egg products, except as specified in Schedule I to this
Agreement, nor shall Executive solicit the business of any customer of Michael
Foods on behalf of any company or business entity (other than Michael Foods or
its affiliates) which is engaged in the egg production, processing or
distribution business, whether or not such company or business directly
competes with Michael Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party
or by Executive if Executive's Duties Have Been Substantially Reduced
or Negatively Altered without Executive's prior written consent; or
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael
Foods that Executive has committed an illegal act that directly reflects upon
his fitness to act as an Executive of Michael Foods.
- --------------------
* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24(b)-2 of the Securities Act of 1934.
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<PAGE> 157
"Incapacity" for purposes hereof shall mean a determination by
Michael Foods in its sole discretion that Executive is unable to perform his
job responsibilities hereunder as a result of chronic illness, physical, mental
or any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon
the fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment, an amount equal to the Base Salary for the remaining term
of this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the
month following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without Executive's prior written
consent or by Michael under subsection (c), Executive shall receive no
termination payment.
"Duties are Substantially Reduced or Negatively Altered" means,
without Executive's express written consent:
(i) the assignment to Executive of any duties
inconsistent with Executive's positions, duties, responsibilities and
status with Michael Foods or a change in Executive's reporting
responsibilities, titles or offices, or any removal of Executive from,
or any failure to re-elect Executive to, any of such positions, except
in connection with the termination of Executive's employment for
Cause, upon the Incapacity or death of Executive, or upon the
voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the
minimum Base Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based
anywhere other than the geographic location at which Executive was
based at the effective date of this Agreement except for required
travel on business to an extent substantially consistent with the
business travel obligations of Executive;
(iv) the failure by Michael Foods to continue in effect
benefit and compensation plans substantially equivalent to the benefit
or compensation plans or arrangements in effect at the effective date
of this Agreement; the taking of any action by Michael Foods not
required by law which would adversely affect Executive's participation
in or materially reduce Executive's benefits under any of such plans
or deprive Executive of any material fringe benefit enjoyed by
Executive; or the failure by Michael Foods to provide Executive with
the number of paid vacation days, holidays and personal days to which
Executive was then
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<PAGE> 158
entitled in accordance with Michael Foods' normal leave policy in
effect at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
9. NOTICES. All communications with respect to this agreement
shall be considered given if delivered or sent as follows:
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
*
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage
prepaid, return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
- --------------------
* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24(b)-2 of the Securities Act of
1934.
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<PAGE> 159
10. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement of the parties hereto with respect to the subject matter hereof and
no party shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at
any time may by written agreement extend or modify this Agreement. This
Agreement shall not be altered or otherwise amended except pursuant to an
instrument in writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision
of this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective legal
representatives, successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be
construed under the laws of the State of Minnesota.
c. This Agreement may be executed in one or more
counterparts and each of such counterparts shall for all purposes be
deemed to be an original, but all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
MICHAEL FOODS, INC.
By: ____________________________________
Its: ______________________________
________________________________________
Executive
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<PAGE> 160
*
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
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<PAGE> 161
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the _____ day of
_________________, 1996 (the "Agreement"), by and between MICHAEL FOODS, INC.,
a Delaware corporation (hereinafter referred to as "Michael Foods") and *
(hereinafter referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods
(the "Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into
this Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive
to serve as Executive Vice President of the Papetti's Hygrade Foods Division
and in such capacity Executive shall perform such duties as were being
performed prior to and as of the date of this Agreement subject at all times to
the direction of the President of Papetti's Hygrade Foods Division.
2. TERM. This Agreement shall be effective as of
__________________, 1996 and shall continue through _________________ 1999,
unless earlier terminated as provided herein. This Agreement may be extended
thereafter upon the written agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from ___________________, 1996 through ______________________, 1999 *
payable in substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical
insurance and shall permit Executive to participate in other
fringe benefit plans as Michael
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-1-
<PAGE> 162
Foods may from time to time provide for its other executive officers.
The terms of said benefits in all cases shall be no less favorable
to Executive than those offered to other executive officers of Michael
Foods.
b. Executive is entitled to take * of vacation per annum
at reasonable times and for customary and reasonable lengths of time
consistent with his overall responsibilities hereunder.
c. Michael Foods shall reimburse Executive for all
reasonable expenses incurred by Executive in connection with Michael
Foods' business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of * following termination of employment, Executive shall not directly
or indirectly, whether as an employee, agent, contractor, partner, shareholder
or otherwise, engage in the business of egg production, processing or
distribution in any geographic area where Michael Foods produces or processes
eggs or distributes egg products, except as specified in Schedule I to this
Agreement, nor shall Executive solicit the business of any customer of Michael
Foods on behalf of any company or business entity (other than Michael Foods or
its affiliates) which is engaged in the egg production, processing or
distribution business, whether or not such company or business directly
competes with Michael Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party
or by Executive if Executive's Duties Have Been Substantially Reduced
or Negatively Altered without Executive's prior written consent; or
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael
Foods that Executive has committed an illegal act that directly reflects upon
his fitness to act as an Executive of Michael Foods.
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
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<PAGE> 163
"Incapacity" for purposes hereof shall mean a determination by Michael
Foods in its sole discretion that Executive is unable to perform his job
responsibilities hereunder as a result of chronic illness, physical, mental or
any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon the
fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment, an amount equal to the Base Salary for the remaining term
of this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the month
following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without Executive's prior written
consent or by Michael under subsection (c), Executive shall receive no
termination payment.
"Duties are Substantially Reduced or Negatively Altered" means, without
Executive's express written consent:
(i) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities and status with Michael
Foods or a change in Executive's reporting responsibilities, titles or
offices, or any removal of Executive from, or any failure to re-elect
Executive to, any of such positions, except in connection with the
termination of Executive's employment for Cause, upon the Incapacity or
death of Executive, or upon the voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the minimum Base
Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based anywhere other
than the geographic location at which Executive was based at the
effective date of this Agreement except for required travel on business
to an extent substantially consistent with the business travel
obligations of Executive;
(iv) the failure by Michael Foods to continue in effect benefit and
compensation plans substantially equivalent to the benefit or
compensation plans or arrangements in effect at the effective date of
this Agreement; the taking of any action by Michael Foods not required
by law which would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such plans or
deprive Executive of any material fringe benefit enjoyed by Executive;
or the failure by Michael Foods to provide Executive with the number of
paid vacation days, holidays and personal days to which Executive was
then
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<PAGE> 164
entitled in accordance with Michael Foods' normal leave policy in effect
at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
9. NOTICES. All communications with respect to this agreement shall
be considered given if delivered or sent as follows:
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
*
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-4-
<PAGE> 165
10. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
of the parties hereto with respect to the subject matter hereof and no party
shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at any
time may by written agreement extend or modify this Agreement. This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision of
this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective legal
representatives, successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be construed under
the laws of the State of Minnesota.
c. This Agreement may be executed in one or more counterparts and
each of such counterparts shall for all purposes be deemed to be
an original, but all such counterparts shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
MICHAEL FOODS, INC.
By: ____________________________________
Its: ______________________________
________________________________________
Executive
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<PAGE> 166
*
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-6-
<PAGE> 167
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the _____ day of
_________________, 1996 (the "Agreement"), by and between MICHAEL FOODS, INC., a
Delaware corporation (hereinafter referred to as "Michael Foods") and*
(hereinafter referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods (the
"Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into this
Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive to
serve as Executive Vice President of the Papetti's Hygrade Foods Division and in
such capacity Executive shall perform such duties as were being performed prior
to and as of the date of this Agreement subject at all times to the direction of
the President of Papetti's Hygrade Foods Division.
2. TERM. This Agreement shall be effective as of __________________,
1996 and shall continue through _________________ 1999, unless earlier
terminated as provided herein. This Agreement may be extended thereafter upon
the written agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from ___________________, 1996 through ______________________, 1999 of
at least * payable in substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical insurance
and shall permit Executive to participate in other fringe
benefit plans as Michael
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-1-
<PAGE> 168
Foods may from time to time provide for its other executive officers.
The terms of said benefits in all cases shall be no less favorable to
Executive than those offered to other executive officers of Michael
Foods.
b. Executive is entitled to take * of vacation per annum at
reasonable times and for customary and reasonable lengths of time
consistent with his overall responsibilities hereunder.
c. Michael Foods shall reimburse Executive for all reasonable
expenses incurred by Executive in connection with Michael Foods'
business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of * following termination of employment, Executive shall not directly or
indirectly, whether as an employee, agent, contractor, partner, shareholder or
otherwise, engage in the business of egg production, processing or distribution
in any geographic area where Michael Foods produces or processes eggs or
distributes egg products, except as specified in Schedule I to this Agreement,
nor shall Executive solicit the business of any customer of Michael Foods on
behalf of any company or business entity (other than Michael Foods or its
affiliates) which is engaged in the egg production, processing or distribution
business, whether or not such company or business directly competes with Michael
Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party or by
Executive if Executive's Duties Have Been Substantially Reduced or
Negatively Altered without Executive's prior written consent; or
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael Foods
that Executive has committed an illegal act that directly reflects upon his
fitness to act as an Executive of Michael Foods.
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-2-
<PAGE> 169
"Incapacity" for purposes hereof shall mean a determination by Michael
Foods in its sole discretion that Executive is unable to perform his job
responsibilities hereunder as a result of chronic illness, physical, mental or
any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon the
fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment an amount equal to the Base Salary for the remaining term of
this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the month
following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without Executive's prior written
consent or by Michael under subsection (c), Executive shall receive no
termination payment.
"Duties are Substantially Reduced or Negatively Altered" means, without
Executive's express written consent:
(i) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities and status with Michael
Foods or a change in Executive's reporting responsibilities, titles or
offices, or any removal of Executive from, or any failure to re-elect
Executive to, any of such positions, except in connection with the
termination of Executive's employment for Cause, upon the Incapacity or
death of Executive, or upon the voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the minimum
Base Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based anywhere
other than the geographic location at which Executive was based at the
effective date of this Agreement except for required travel on business
to an extent substantially consistent with the business travel
obligations of Executive;
(iv) the failure by Michael Foods to continue in effect benefit
and compensation plans substantially equivalent to the benefit or
compensation plans or arrangements in effect at the effective date of
this Agreement; the taking of any action by Michael Foods not required
by law which would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such plans or
deprive Executive of any material fringe benefit enjoyed by Executive;
or the failure by Michael Foods to provide Executive with the number of
paid vacation days, holidays and personal days to which Executive was
then
-3-
<PAGE> 170
entitled in accordance with Michael Foods' normal leave policy in effect
at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
9. NOTICES. All communications with respect to this agreement shall
be considered given if delivered or sent as follows:
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
*
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-4-
<PAGE> 171
10. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
of the parties hereto with respect to the subject matter hereof and no party
shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at any
time may by written agreement extend or modify this Agreement. This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision of
this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective legal representatives,
successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be construed under
the laws of the State of Minnesota.
c. This Agreement may be executed in one or more counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, but all such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MICHAEL FOODS, INC.
By: ____________________________________
Its: ______________________________
________________________________________
Executive
-5-
<PAGE> 172
*
- -------------------
* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24(b)-2 of the Securities Act of 1934.
-6-
<PAGE> 173
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the _____ day of
_________________, 1996 (the "Agreement"), by and between MICHAEL FOODS, INC., a
Delaware corporation (hereinafter referred to as "Michael Foods") and *
(hereinafter referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods (the
"Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into this
Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive to
serve as Executive Vice President of the Papetti's Hygrade Foods Division and in
such capacity Executive shall perform such duties as were being performed prior
to and as of the date of this Agreement subject at all times to the direction of
the President of Papetti's Hygrade Foods Division.
2. TERM. This Agreement shall be effective as of __________________,
1996 and shall continue through _________________ 1999, unless earlier
terminated as provided herein. This Agreement may be extended thereafter upon
the written agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from ___________________, 1996 through ______________________, 1999 of
at least * payable in substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical insurance
and shall permit Executive to participate in other fringe benefit plans
as Michael
- --------------------
* The confidential portion has been so omitted and filed
separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment under
Rule 24(b)-2 of the Securities Act of 1934.
-1-
<PAGE> 174
Foods may from time to time provide for its other executive officers.
The terms of said benefits in all cases shall be no less favorable to
Executive than those offered to other executive officers of Michael
Foods.
b. Executive is entitled to take * of vacation per annum at
reasonable times and for customary and reasonable lengths of time
consistent with her overall responsibilities hereunder.
c. Michael Foods shall reimburse Executive for all reasonable
expenses incurred by Executive in connection with Michael Foods'
business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of * following termination of employment, Executive shall not directly or
indirectly, whether as an employee, agent, contractor, partner, shareholder or
otherwise, engage in the business of egg production, processing or distribution
in any geographic area where Michael Foods produces or processes eggs or
distributes egg products, except as specified in Schedule I to this Agreement,
nor shall Executive solicit the business of any customer of Michael Foods on
behalf of any company or business entity (other than Michael Foods or its
affiliates) which is engaged in the egg production, processing or distribution
business, whether or not such company or business directly competes with Michael
Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party or by
Executive if Executive's Duties Have Been Substantially Reduced or
Negatively Altered without Executive's prior written consent; or
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael Foods
that Executive has committed an illegal act that directly reflects upon her
fitness to act as an Executive of Michael Foods.
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-2-
<PAGE> 175
"Incapacity" for purposes hereof shall mean a determination by Michael
Foods in its sole discretion that Executive is unable to perform her job
responsibilities hereunder as a result of chronic illness, physical, mental or
any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon the
fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment an amount equal to the Base Salary for the remaining term of
this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the month
following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without Executive's prior written
consent or by Michael under subsection (c), Executive shall receive no
termination payment.
"Duties are Substantially Reduced or Negatively Altered" means, without
Executive's express written consent:
(i) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities and status with Michael
Foods or a change in Executive's reporting responsibilities, titles or
offices, or any removal of Executive from, or any failure to re-elect
Executive to, any of such positions, except in connection with the
termination of Executive's employment for Cause, upon the Incapacity or
death of Executive, or upon the voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the minimum
Base Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based anywhere
other than the geographic location at which Executive was based at the
effective date of this Agreement except for required travel on business
to an extent substantially consistent with the business travel
obligations of Executive;
(iv) the failure by Michael Foods to continue in effect benefit
and compensation plans substantially equivalent to the benefit or
compensation plans or arrangements in effect at the effective date of
this Agreement; the taking of any action by Michael Foods not required
by law which would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such plans or
deprive Executive of any material fringe benefit enjoyed by Executive;
or the failure by Michael Foods to provide Executive with the number of
paid vacation days, holidays and personal days to which Executive was
then
-3-
<PAGE> 176
entitled in accordance with Michael Foods' normal leave policy in effect
at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
9. NOTICES. All communications with respect to this agreement shall
be considered given if delivered or sent as follows:
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
*
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-4-
<PAGE> 177
10. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
of the parties hereto with respect to the subject matter hereof and no party
shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at any
time may by written agreement extend or modify this Agreement. This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision of
this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective legal representatives,
successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be construed
under the laws of the State of Minnesota.
c. This Agreement may be executed in one or more counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, but all such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MICHAEL FOODS, INC.
By: ____________________________________
Its: ______________________________
________________________________________
Executive
-5-
<PAGE> 178
*
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-6-
<PAGE> 179
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the _____ day of
_________________, 1996 (the "Agreement"), by and between MICHAEL FOODS, INC., a
Delaware corporation (hereinafter referred to as "Michael Foods") and 11
(hereinafter referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods (the
"Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into this
Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive to
serve as President of the Papetti's Hygrade Foods Division and in such capacity
Executive shall perform such duties as were being performed prior to and as of
the date of this Agreement subject at all times to the direction of the CEO of
Michael Foods.
2. TERM. This Agreement shall be effective as of __________________,
1996 and shall continue through _________________ 1999, unless earlier
terminated as provided herein. This Agreement may be extended thereafter upon
the written agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from ___________________, 1996 through ______________________, 1999 of
at least * payable in substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical insurance
and shall permit Executive to participate in other fringe benefit plans
as Michael
- --------------------
* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24(b)-2 of the Securities Act of 1934.
-1-
<PAGE> 180
Foods may from time to time provide for its other executive officers.
The terms of said benefits in all cases shall be no less favorable to
Executive than those offered to other executive officers of Michael
Foods.
b. Executive is entitled to take * of vacation per annum at
reasonable times and for customary and reasonable lengths of time
consistent with his overall responsibilities hereunder.
c. Michael Foods shall reimburse Executive for all reasonable
expenses incurred by Executive in connection with Michael Foods'
business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of * following termination of employment, Executive shall not directly or
indirectly, whether as an employee, agent, contractor, partner, shareholder or
otherwise, engage in the business of egg production, processing or distribution
in any geographic area where Michael Foods produces or processes eggs or
distributes egg products, except as specified in Schedule I to this Agreement,
nor shall Executive solicit the business of any customer of Michael Foods on
behalf of any company or business entity (other than Michael Foods or its
affiliates) which is engaged in the egg production, processing or distribution
business, whether or not such company or business directly competes with Michael
Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party or by
Executive if Executive's Duties Have Been Substantially Reduced or
Negatively Altered without Executive's prior written consent; or
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael Foods
that Executive has committed an illegal act that directly reflects upon his
fitness to act as an Executive of Michael Foods.
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-2-
<PAGE> 181
"Incapacity" for purposes hereof shall mean a determination by Michael
Foods in its sole discretion that Executive is unable to perform his job
responsibilities hereunder as a result of chronic illness, physical, mental or
any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon the
fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment, an amount equal to the Base Salary for the remaining term
of this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the month
following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without Executive's prior written
consent or by Michael under subsection (c), Executive shall receive no
termination payment.
"Duties are Substantially Reduced or Negatively Altered" means, without
Executive's express written consent:
(i) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities and status with Michael
Foods or a change in Executive's reporting responsibilities, titles or
offices, or any removal of Executive from, or any failure to re-elect
Executive to, any of such positions, except in connection with the
termination of Executive's employment for Cause, upon the Incapacity or
death of Executive, or upon the voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the minimum
Base Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based anywhere
other than the geographic location at which Executive was based at the
effective date of this Agreement except for required travel on business
to an extent substantially consistent with the business travel
obligations of Executive;
(iv) the failure by Michael Foods to continue in effect benefit
and compensation plans substantially equivalent to the benefit or
compensation plans or arrangements in effect at the effective date of
this Agreement; the taking of any action by Michael Foods not required
by law which would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such plans or
deprive Executive of any material fringe benefit enjoyed by Executive;
or the failure by Michael Foods to provide Executive with the number of
paid vacation days, holidays and personal days to which Executive was
then
-3-
<PAGE> 182
entitled in accordance with Michael Foods' normal leave policy in effect
at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
9. NOTICES. All communications with respect to this agreement shall
be considered given if delivered or sent as follows:
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
*
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-4-
<PAGE> 183
10. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
of the parties hereto with respect to the subject matter hereof and no party
shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at any
time may by written agreement extend or modify this Agreement. This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision of
this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective legal representatives,
successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be construed
under the laws of the State of Minnesota.
c. This Agreement may be executed in one or more counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, but all such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MICHAEL FOODS, INC.
By: ____________________________________
Its: ______________________________
________________________________________
Executive
-5-
<PAGE> 184
*
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to A request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-6-
<PAGE> 185
EXHIBIT E
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the _____ day of
_________________, 1996 (the "Agreement"), by and between MICHAEL FOODS, INC., a
Delaware corporation and * (hereinafter referred to as "Executive").
WHEREAS, Executive is an employee of Papetti's Hygrade Egg Products,
Inc. which will be merged as of the date hereof with and into Michael Foods (the
"Reorganization"); and
WHEREAS, Michael Foods desires to assure itself of the availability of
the services of the Executive following the Reorganization, and it is a
condition to the Reorganization that Executive and Michael Foods enter into this
Agreement on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Michael Foods shall employ Executive to
serve as President of the Papetti's Hygrade Foods Division and in such capacity
Executive shall perform such duties as were being performed prior to and as of
the date of this Agreement subject at all times to the direction of the CEO of
Michael Foods.
2. TERM. This Agreement shall be effective as of __________________,
1996 and shall continue through _________________ 1999, unless earlier
terminated as provided herein. This Agreement may be extended thereafter upon
the written agreement of the parties hereto.
3. BASE SALARY. For all services rendered by Executive, Michael
Foods agrees to pay Executive an annual Base Salary for each year of this
Agreement from ___________________, 1996 through ______________________, 1999 of
at least * payable in substantially equal semi-monthly installments.
4. ADDITIONAL BENEFITS AND WORKING FACILITIES.
a. Michael Foods shall provide Executive with medical insurance
and shall permit Executive to participate in other fringe benefit plans
as Michael Foods May from time to time provide for its other executive
officers. The terms
- --------------------
* The confidential portion has been so omitted and filed separately with
the Securities and Exchange Commission pursuant to a request for
confidential treatment under Rule 24(b)-2 of the Securities Act of 1934.
-1-
<PAGE> 186
of said benefits in all cases shall be no less favorable to
Executive than those offered to other executive officers of Michael
Foods.
b. Executive is entitled to take * of vacation per annum at
reasonable times and for customary and reasonable lengths of time
consistent with his overall responsibilities hereunder.
c. Michael Foods shall reimburse Executive for all reasonable
expenses incurred by Executive in connection with Michael Foods'
business, including but not limited to, expenses of travel and
entertainment, upon presentation of itemized statements therefor.
5. NON-COMPETE. During Executive's term of employment and for a
period of * following termination of employment, Executive shall not directly or
indirectly, whether as an employee, agent, contractor, partner, shareholder or
otherwise, engage in the business of egg production, processing or distribution
in any geographic area where Michael Foods produces or processes eggs or
distributes egg products, except as specified in Schedule I to this Agreement,
nor shall Executive solicit the business of any customer of Michael Foods on
behalf of any company or business entity (other than Michael Foods or its
affiliates) which is engaged in the egg production, processing or distribution
business, whether or not such company or business directly competes with Michael
Foods.
6. EVENTS OF TERMINATION. The employment of Executive hereunder
shall terminate as follows:
a. Upon the Incapacity or death of Executive;
b. Upon thirty (30) days' written notice by either party or by
Executive if Executive's Duties Have Been Substantially Reduced or
Negatively Altered without Executive's prior written consent;
c. Without notice by Michael Foods for Cause.
"Cause" for purposes hereof shall mean a determination by Michael Foods
that Executive has committed an illegal act that directly reflects upon his
fitness to act as an Executive of Michael Foods.
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-2-
<PAGE> 187
"Incapacity" for purposes hereof shall mean a determination by Michael
Foods in its sole discretion that Executive is unable to perform his job
responsibilities hereunder as a result of chronic illness, physical, mental or
any other disability for a period of six (6) months or more.
If Executive's employment is terminated under subsection (a) or by
Michael under subsection (b) or by Executive under subsection (b) based upon the
fact that Executive's Duties Have Been Substantially Reduced or Negatively
Altered without Executive's prior written consent, Executive shall receive as a
termination payment, an amount equal to the Base Salary for the remaining term
of this Agreement. The termination payments provided above shall be made in
substantially equal monthly installments beginning on the first day of the month
following termination of employment for the balance of the term of this
Agreement. If Executive's employment is terminated by Executive under
subsection (b) for any reason other than that Executive's Duties Have Been
Substantially Reduced or Negatively Altered without Executive's prior written
consent or by Michael under subsection (c), Executive shall receive no
termination payment.
"Duties are Substantially Reduced or Negatively Altered" means, without
Executive's express written consent:
(i) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities and status with Michael
Foods or a change in Executive's reporting responsibilities, titles or
offices, or any removal of Executive from, or any failure to re-elect
Executive to, any of such positions, except in connection with the
termination of Executive's employment for Cause, upon the Incapacity or
death of Executive, or upon the voluntary termination by Executive;
(ii) a reduction in Executive's Base Salary below the minimum
Base Salary in Section 3 hereof;
(iii) Michael Foods requiring Executive to be based anywhere
other than the geographic location at which Executive was based at the
effective date of this Agreement except for required travel on business
to an extent substantially consistent with the business travel
obligations of Executive;
(iv) the failure by Michael Foods to continue in effect benefit
and compensation plans substantially equivalent to the benefit or
compensation plans or arrangements in effect at the effective date of
this Agreement; the taking of any action by Michael Foods not required
by law which would adversely affect Executive's participation in or
materially reduce Executive's benefits under any of such plans or
deprive Executive of any material fringe benefit enjoyed by Executive;
or the failure by Michael Foods to provide Executive with the number of
paid vacation days, holidays and personal days to which Executive was
then
-3-
<PAGE> 188
entitled in accordance with Michael Foods' normal leave policy in effect
at the effective date of this Agreement.
7. ADDITIONAL DOCUMENTS. The parties shall each, without further
consideration, execute such additional documents as may be reasonably required
in order to carry out the purposes and intents of this agreement and to fulfill
the obligations of the respective parties hereunder.
8. WAIVER. Any waiver of any term or condition of this Agreement
shall not operate as a waiver of any other breach of such term or condition, or
of any other term or condition, nor shall any failure to enforce a provision
hereof operate as a waiver of such provisions or of any other provision hereof.
9. NOTICES. All communications with respect to this agreement shall
be considered given if delivered or sent as follows:
a. To Executive by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
*
Copy to:
Martin B. O'Connor, II
O'Connor, Morss & O'Connor
Liberty Hall Center
1085 Morris Avenue
Union, New Jersey 07083
b. To Michael Foods by first class, certified mail, postage prepaid,
return receipt requested, addressed as follows:
Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
or mailed to such other addresses as the parties hereto may designate by notice
given in like manner. Notice shall be effective three (3) days after mailing
or upon personal delivery.
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-4-
<PAGE> 189
10. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
of the parties hereto with respect to the subject matter hereof and no party
shall be liable or bound to another in any manner by any warranties,
representations or guarantees, except as specifically set forth herein.
11. MODIFICATIONS, AMENDMENTS AND WAIVERS. The parties hereto at any
time may by written agreement extend or modify this Agreement. This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing executed by the parties hereto.
12. SEVERABILITY. No finding or adjudication that any provision of
this Agreement is invalid or enforceable shall affect the validity or
enforceability of the remaining provisions herein, and this Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
13. MISCELLANEOUS.
a. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective legal representatives,
successors and assigns of the party thereto.
b. This Agreement is made pursuant to and shall be construed
under the laws of the State of Minnesota.
c. This Agreement may be executed in one or more counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, but all such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
MICHAEL FOODS, INC.
By: ____________________________________
Its: ______________________________
________________________________________
Executive
-5-
<PAGE> 190
*
- -------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to A request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-6-
<PAGE> 191
EXHIBIT F
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement is entered into between Michael Foods, Inc.
("Michael") and North Carolina State University ("NCSU") and their subsidiaries,
affiliates, successors, assigns, insurers, shareholders, directors, officers,
employees, agents, and representatives, on the one hand, and Papetti's Hygrade
Egg Products, Inc., and its subsidiaries, affiliates, successors, assigns,
insurers, shareholders, directors, officers, employees, agents, and
representatives ("Papetti's Hygrade"), on the other hand.
RECITALS
A. The following litigation and claims are pending:
1. Michael Foods, Inc. and North Carolina State University vs.
Papetti's Hygrade Egg Products, Inc., U.S. District Court for the District of
New Jersey, Civil Action No. 89-4645.
2. Papetti's Hygrade Egg Products, Inc. vs. Michael Foods, Inc.,
U.S. District Court for the District of New Jersey, Civil Action No. 91- 1849.
B. In connection with an Agreement and Plan of Reorganization between
Michael and Papetti's Hygrade and certain other related entities dated
__________________, 1996 (the "Reorganization Agreement"), the parties desire to
fully and finally compromise and settle the above litigation and claims, thereby
resolving all issues between and among the parties in respect thereto.
C. For the consideration provided herein and the mutual covenants and
agreements contained herein, the sufficiency of which is hereby acknowledged,
the parties agree as follows:
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<PAGE> 192
AGREEMENTS
1. At the Closing of the transactions contemplated by the Reorganization
Agreement, Papetti's Hygrade shall pay to Michael for the benefit of Michael and
NCSU the sum of *. Payment of the aforesaid amount shall not be deemed an
admission of liability by any party but shall be paid solely to fully settle and
compromise the claims of the parties as hereafter provided.
2. The following patents held by NCSU and exclusively licensed to
Michael are valid and enforceable in all respects:
(1) United States Patent No. 4,808,425
(2) United States Patent No. 4,957,759
(3) United States Patent No. 4,994,291
(4) United States Patent No. 5,019,408
3. The parties will affirmatively and fully cooperate with and assist
one another in defending the validity and enforceability of the aforesaid
patents in the United States Patent and Trademark Office and in the courts,
including pursuing claims that said patents have been infringed by other
persons.
4. Michael and NCSU, on the one hand, and Papetti's Hygrade, on the
other hand, hereby release and forever discharge each other and their
subsidiaries, affiliates, successors, heirs, assigns, insurers, shareholders,
directors, officers, employees, agents, and representatives, of and from any and
all past and present claims, demands, liabilities, judgments, losses,
- --------------------
* The confidential portion has been so omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24(b)-2 of the Securities Act of 1934.
-2-
<PAGE> 193
damages, expenses, and causes of action, at law or in equity, known or unknown,
asserted or unasserted, liquidated or unliquidated, fixed or contingent, direct
or indirect, accrued or unaccrued, which they have ever had, presently have,
claim to have, or claim to have had against one another relating to or as a
result of any competition between them or any aspect of the referenced patents
or any other patents, including, but not limited to, all claims that have been
made or could have been made in the litigation referenced in Recital A hereof;
provided however, that this mutual release is expressly contingent upon the
Reorganization Agreement being finally consummated.
5. Each party shall be responsible for and shall pay its own costs and
expenses, including all attorneys' fees and other professional fees and
expenses, incurred in connection with the litigation and claims referenced in
Recital A hereof.
6. This agreement shall not constitute an admission of liability by any
party.
7. Each party represents and warrants that it is duly authorized to
execute this agreement on its behalf and that this Agreement, when executed and
delivered, will be binding upon each party and enforceable in accordance with
its term, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting creditors'
rights generally or to equitable principles relating to enforceability of
agreements.
8. Each party warrants and represents that it has consulted with its
attorneys regarding the effect of this agreement, and that he or it has executed
this agreement fully aware of its contents, purposes, and effects, based upon
his or its sole judgment, belief, and
-3-
<PAGE> 194
knowledge, and upon the advice of its own attorneys, and that it is not relying
on any representations or statements made by any other party or anyone
representing any other party.
9. This agreement shall be governed by the law of the State of New
Jersey.
10. In the event that the Reorganization Agreement is not finally
consummated, then this agreement shall be null, void, and of no further force or
effect, as if it had never been entered into by the parties, and the parties
shall be restored to all rights and obligations that they possessed before this
agreement was executed.
11. Promptly upon completion of the Reorganization Agreement, the
parties shall cause their respective counsel to execute and file Stipulations of
Dismissal with Prejudice directing the Court to dismiss the litigation described
in Recital A on the merits and without costs to any party.
12. This agreement may be executed in counterparts, with the same force
and effect as if the signatures were upon the same instrument.
MICHAEL FOODS, INC.
Dated:______________, 1996 By____________________________________
Its___________________________________
NORTH CAROLINA STATE UNIVERSITY
Dated:______________, 1996 By_____________________________________
Its____________________________________
-4-
<PAGE> 195
PAPETTI'S HYGRADE EGG PRODUCTS, INC.
Dated: _____________, 1996 By______________________________________
Its_____________________________________
-5-
<PAGE> 196
EXHIBIT G
[THE OPINIONS OF THOMPSON COUBURN AND
O'CONNOR, MORSS & O'CONNOR - TO BE DIVIDED
BETWEEN THE FIRMS AS APPROPRIATE]
_____________, 1996
Michael Foods, Inc.
M.G. Waldbaum Company
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
Re: Agreement and Plan of Reorganization
Ladies and Gentlemen:
We have acted as counsel to Papetti's Hygrade Egg Products, Inc., a New
Jersey corporation ("Papetti's Hygrade"), and Quaker State Farms, Inc., a
Pennsylvania corporation ("Quaker"), Papetti's of Iowa Food Products, Inc., an
Iowa corporation ("Papetti's of Iowa"), Monark Egg Corporation, a Missouri
corporation ("Monark"), Egg Specialties, Inc., a Pennsylvania corporation ("Egg
Specialties"), Papetti Foods, Inc., a New Jersey corporation ("Papetti Foods"
and collectively with Quaker, Papetti's of Iowa, Monark and Egg Specialties,
the Acquired Companies"), Casa Trucking Limited Partnership, a New Jersey
limited partnership ("Casa Trucking"), Papetti Transport Leasing Limited
Partnerhsip, a New Jersey partnership ("Papetti Transport"), and Papetti
Equipment Leasing Limited Partnership, a New Jersey limited partnership
("Papetti Equipment" and together with Casa Trucking and Papetti Transport, the
"Acquired Partnerships") (the Acquired Companies and the Acquired Partnerships
are collectively referred to herein as the "Acquired Entities") in connection
with (i) the acquisition by merger of Papetti's Hygrade by Michael Foods, Inc.,
a Delaware corporation ("Michael"), (ii) the acquisition by merger of the
Acquired Companies by M.G. Waldbaum Company, a Nebraska corporation
("Acquisition"), and (iii) the sale of all of the assets and the assignment of
all of the liabilities of the Acquired Partnerships to Acquisition pursuant to
the Agreement and Plan of Reorganization dated as of ___________________, 1996
(the "Agreement") by and among Michael, Acquisition, Papetti's Hygrade and the
Acquired Entities. Capitalized terms used herein without definition have the
respective meanings ascribed thereto in the Agreement. We are rendering this
opinion to you pursuant to Section 9.14 of the Agreement.
In rendering the opinions set forth herein, we have examined originals or
copies of such corporate records of Papetti's Hygrade and the Acquired Entities
and such other records, agreements, instruments, certificates and documents as
we have deemed necessary as a basis for the opinions hereinafter expressed. In
our examinations, we have assumed the genuineness of all signatures (other than
those of the officers of Papetti's Hygrade and the Acquired Entities);
<PAGE> 197
Michael Foods, Inc.
___________, 1996
Page 2
the authenticity of all documents submitted to us as originals; the conformity
to the originals of all documents submitted to us as certified, photostatic or
conformed copies; and the authenticity of the originals of all such latter
documents. In addition, with respect to the opinions as to the due execution
and binding nature of the Agreement and the Acquisition Agreements, we have
assumed the due execution and delivery of the Agreement and the Acquisition
Agreements by all parties thereto other Papetti's Hygrade and the Acquired
Entities. We have also assumed that each party to the Agreement (other than
Papetti's Hygrade and the Acquired Entities) is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has the sole right, power and authority to enter into the
Agreement and the Acquisition Agreements and that each party thereto (other
than Papetti's Hygrade and the Acquired Entities) has obtained any and all
consents, permits and approvals required by or from any and all federal, state,
local and foreign governmental and regulatory agencies and authorities in
connection with the transactions contemplated thereby. In rendering our
opinion, we have relied as to factual matters upon certificates and statements
of corporate officers of Papetti's Hygrade and the Acquired Entities and have
assumed the correctness of the statements contained therein, and upon
certificates of public officials, all of which certificates have been furnished
or made available to you. The phrase "to our knowledge" or words of similar
import refer to the actual knowledge of attorneys of our firm who have devoted
attention to the transactions contemplated by the Agreement.
We express no opinion with respect to any law, rule, regulation or
matter regarding: (i) any matters of local law (i.e., laws, rules and
regulations of counties, towns, municipalities or special political
subdivisions); or (ii) federal or state antitrust or unfair competition laws
(other than HSR, which is covered by this opinion).
For purposes of our opinion we have assumed that there are no other
agreements or understandings among the party (other than as expressly referred
to in the Agreement and the Acquisition Agreements) that would modify the terms
thereof or the respective rights or obligation of the parties thereunder.
In connection with the opinions expressed herein, we express no opinion
as to the enforceability of any of the following provisions in the Agreement or
the Acquisition Agreements: (i) severability provisions; (ii) provisions to the
effect that the Agreement and the other documents specified therein embodied
the entire agreement of the parties; and (iii) provisions to the effect that a
delay or omission to exercise a right does not constitute a waiver or
acquiescence or that an express waiver of a right does not constitute a
subsequent waiver thereof.
<PAGE> 198
Michael Foods, Inc.
________________, 1996
Page 3
Based upon and subject to the foregoing, we are of the opinion that:
(a) Papetti's Hygrade and each Acquired Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation. Each of the Acquired Partnerships is a limited partnership
organized and in good standing under the laws of its state of organization.
Papetti's Hygrade and the Acquired Entities are each duly qualified, certified
or licensed in each state where it conducts business and where the failure to
so qualify, certify or license would have a Material Adverse Effect with
respect to Papetti's Hygrade and the Acquired Entities, taken as a whole.
(b) Papetti's Hygrade and each Acquired Company has the full corporate
power and authority to enter into the Agreement and perform its obligations
thereunder. The general partners of each Acquired Partnership has the full
power and authority to enter into the Agreement and the Acquisition Agreements
and to perform its duties thereunder.
(c) The Agreement and the Acquisition Agreements have been duly
authorized, executed and delivered by Papetti's Hygrade and the Acquired
Entities and constitutes a legal, valid and binding agreement of Papetti's
Hygrade and each Acquired Entity which is a party thereto, enforceable against
each of them in accordance with their terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium, and other
similar laws relating to or affecting the rights of creditors generally, by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(d) The execution, delivery and performance by Papetti's Hygrade and
the Acquired Entities of the Agreement and the Acquisition Agreements to which
Papetti's Hygrade and an Acquired Entity is a party thereto, will not, in any
material respect (with respect to clauses (ii) through (iv) below) (i) conflict
with the Articles or Certificates of Incorporation, By-laws or Limited
Partnership Agreements, as applicable, of Papetti's Hygrade or the Acquired
Entities, each as amended to date; (ii) to our knowledge, conflict with, result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third-party right of termination,
cancellation, modification or acceleration) under, any of the terms,
conditions, or provisions of any trust agreement, voting agreement, shareholder
agreement, voting trust, note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind affecting Papetti's Hygrade and the Acquired Entities or
to which Papetti's Hygrade or any Acquired Entity is a party or by which any of
the properties or assets of Papetti's Hygrade or the Acquired Entities are or
may be bound; (iii) to our knowledge, violate any requirement of law applicable
to Papetti's Hygrade and the Acquired Entities; or (iv) to our knowledge
violate any order, injunction, judgment or decree of any court or other
governmental authority or any determination of any arbitrator applicable to
Papetti's Hygrade and the Acquired Entities or any of Papetti's Hygrade or the
Acquired Entities properties or business.
<PAGE> 199
Michael Foods, Inc.
_____________, 1996
Page 4
(e) Except as received prior to the date hereof, no consent or
approval by any governmental or quasi-governmental authority is required on the
part of Papetti's Hygrade and the Acquired Entities in connection with the
execution, delivery and performance of this Agreement.
The opinions expressed herein by the undersigned are expressly limited
to the laws of the State of Missouri [WITH RESPECT TO THE OPINION OF THOMPSON
COBURN], the State of New Jersey [WITH RESPECT TO THE OPINION OF O'CONNOR,
MORSS & O'CONNOR], the General Corporation Law of the State of Delaware and the
laws of the United States of America. We assume no responsibility as to the
applicability or the effect of the laws of any other domestic or foreign
jurisdiction on the subject transactions.
This opinion is being rendered solely for the benefit of the addressee
hereof and is not to be used or relied upon by any other person without our
prior written consent. We expressly disavow any obligation to update this
letter in the future.
Very truly yours,
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND CONDENSED CONSOLIDATED BALANCE
SHEETS ON PAGE 2 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD
ENDING SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,966
<SECURITIES> 0
<RECEIVABLES> 50,472
<ALLOWANCES> 0
<INVENTORY> 57,875
<CURRENT-ASSETS> 114,372
<PP&E> 322,222
<DEPRECIATION> 135,639
<TOTAL-ASSETS> 370,069
<CURRENT-LIABILITIES> 112,092
<BONDS> 42,910
0
0
<COMMON> 194
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<TOTAL-LIABILITY-AND-EQUITY> 370,069
<SALES> 455,478
<TOTAL-REVENUES> 455,478
<CGS> 403,267
<TOTAL-COSTS> 403,267
<OTHER-EXPENSES> 33,597
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<INTEREST-EXPENSE> 5,474
<INCOME-PRETAX> 13,140
<INCOME-TAX> 5,260
<INCOME-CONTINUING> 7,880
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