SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 14, 1995
THE QUAKER OATS COMPANY
(Exact name of Registrant as specified in its charter)
New Jersey 1-12 36-1655315
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Quaker Tower, P.O. Box 049001, Chicago, Illinois 60604-9001
(Address of principal executive offices)
312-222-7111
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
On March 14, 1995, The Quaker Oats Company, a New Jersey corporation and
the Registrant herein (the "Company"), and QO Acquisition Corp. ("QO"), a
Delaware corporation and a direct, wholly owned subsidiary of the Company,
completed the sale to H. J. Heinz Company, a Pennsylvania corporation, and
its wholly owned subsidiary Star-Kist Foods Corp., a California corporation
("Heinz"), for $725 million in cash, of certain assets, liabilities and
obligations of their Pet Food Business (which includes the businesses in
the United States, Canada and Mexico), including all of the issued and
outstanding capital stock of Gaines Pet Foods Corp., a Delaware corporation
and a wholly owned subsidiary of QO. The acquisition was made pursuant
to the Purchase Agreement dated February 6, 1995, among the Company, QO
and Heinz, as supplemented by Supplement No. 1 thereto dated March 14,
1995.
The purchase price was determined by arms'-length negotiation between the
Company and Heinz. The assets sold included, among other things, various
machinery, equipment, inventory, books and records, intellectual and
intangible property, manufacturing facilities in Kankakee, Illinois, and
Lawrence and Topeka, Kansas, and a pet kennel in Barrington, Illinois.
Major brands sold included Kibbles'n Bits, Cycle, Gravy Train and Ken-L
Ration dog food and Snausages, Pup-Peroni and Pounce pet treats. The
liabilities assumed include primarily advertising and merchandising
reserves and vacation accruals.
Item 7. Financial Statements and Exhibits
(b) Unaudited pro forma combined financial information with respect to
the disposition of the Pet Food Business is attached as an exhibit to
this Form 8-K.
(c) Exhibits (listed by numbers corresponding to the provisions of Item
601 of Regulation S-K)
(2)(a) Purchase Agreement dated February 6, 1995, among the
Company, QO and Heinz.
(2)(b) Supplement No. 1 to Purchase Agreement dated March 14, 1995,
among the Company, QO and Heinz.
(2)(c) Notice of Assignment of Rights Under the Purchase Agreement
dated February 6, 1995, as supplemented by Supplement No. 1 thereto.
(99) Unaudited pro forma combined financial information of the Company
with respect to the disposition of the Pet Food Business.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE QUAKER OATS COMPANY
By Thomas L. Gettings
Thomas L. Gettings
Vice President and
Corporate Controller
Date: March 28, 1995
3
EXHIBIT INDEX
Electronic (E) or
Exhibit Incorporated by
Number Exhibit Description Reference (IBRF)
(2)(a) Purchase Agreement dated E
February 6, 1995, among the
Company, QO and Heinz.
(2)(b) Supplement No. 1 to Purchase E
Agreement dated March 14,
1995, among the Company,
QO and Heinz.
(2)(c) Notice of Assignment of Rights E
Under the Purchase Agreement
dated February 6, 1995, as
supplemented by Supplement
No. 1 thereto.
(99) Unaudited pro forma combined E
financial information of the
Company with respect to the
disposition of the Pet Food
Business.
4
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT dated February 6, 1995,
among The Quaker Oats Company, a New Jersey corporation
("Quaker"), QO Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of Quaker ("QOAC", and together with
Quaker, "Sellers"), and H. J. Heinz Company, a Pennsylvania
corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Quaker owns all of the issued and
outstanding capital stock of QOAC;
WHEREAS, QOAC owns all of the issued and
outstanding capital stock of Gaines (as defined in Article 1
hereof) (the "Gaines Stock");
WHEREAS, Sellers desire to sell and assign to
Purchaser, and Purchaser desires to purchase and assume from
Sellers, the assets and certain liabilities and obligations
of the Pet Food Business (as defined in Article I hereof),
including the Gaines Stock, upon the terms and subject to
the conditions set forth in this Agreement; and
WHEREAS, upon acquisition of such assets,
Purchaser will own directly, or indirectly through Gaines,
all of the material assets, properties, rights and business
presently constituting the Pet Food Business;
NOW, THEREFORE, in consideration of the premises
and the mutual covenants and agreements set forth herein,
the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
"AAA" means the American Arbitration Association.
"Acquired Assets" means the property and assets to
be conveyed by Sellers to Purchaser as specified in
Section 2.1.
"Additional Intellectual Property" has the meaning
specified in Section 2.1(h).
"Affiliate" means any Person who directly, or
indirectly through one or more intermediaries,
controls, or is controlled by, or is under common
control with a specified Person. The term "control"
(including the terms "controlling", "controlled by" and
"under common control with") means the possession,
direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person,
whether through the ownership of voting securities, by
contract, or otherwise.
"Agreement" means this Agreement among Sellers and
Purchaser as originally executed and delivered, as the
same may be amended or supplemented in accordance with
the provisions hereof, together with all Exhibits and
Schedules incorporated herein and made a part hereof by
the references thereto.
"Applicable Environmental Law" means the
Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.;
the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq.; the Clean Air
Act, 42 U.S.C. Section 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1471 et seq.;
the Toxic Substances Control Act, 15 U.S.C. Section 2601
through 2629; and the Safe Drinking Water Act, 42
U.S.C. Section 300f through 300j; and any other Federal
environmental laws; as have been amended from time to
time and in each case as in effect at all relevant
times from the date hereof through the Closing Date;
and any similar state and local laws and ordinances and
the regulations in effect at all relevant times from
the date hereof through the Closing Date implementing
such statutes.
"Arthur Andersen" means Arthur Andersen LLP,
independent public accountants for Quaker.
"Assumed Contracts" has the meaning specified in
Section 2.2(a)(i).
"Assumed Liabilities" has the meaning specified in
Section 2.2(a), as limited by the provisions of Section
2.2(b).
"Base Amount" has the meaning specified in Section
2.4(c).
"Basket" has the meaning specified in Section
10.5.
"Canadian Patents" shall mean those patents set
forth in Schedule 2.1(i).
"Commission" means the United States Securities
and Exchange Commission.
"Closing" and "Closing Date" have the respective
meanings specified in Section 2.6.
"Closing Financial Statements" has the meaning
specified in Section 12.19.
"Closing Inventory" has the meaning specified in
Section 2.4(a).
"Closing Inventory Statement" has the meaning
specified in Section 2.4(a).
"Confidentiality Agreement" has the meaning
specified in Section 5.1.
"Contract" means any contract, agreement, com-
mitment or other binding arrangement (including
purchase orders), whether oral or written, but exclud-
ing Plans and Permits.
"DOJ" means the United States Department of
Justice, including any division thereof.
"Employees" has the meaning specified in Section
7.1.
"Environmental Complaint" has the meaning
specified in Section 3.11(b).
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations of
the Commission promulgated thereunder.
"Excluded Assets" has the meaning specified in
Section 2.1.
"Financial Statements" has the meaning specified
in Section 3.5
"Foreign Trademarks" means those trademarks set
forth in Schedule 2.1(i).
"Formulas" has the meaning specified in Section
2.1(g).
"FTC" means the United States Federal Trade
Commission.
"Gaines" means Gaines Pet Foods Corp., a Delaware
corporation and direct wholly owned subsidiary of QOAC.
"Gaines Employees" has the meaning specified in
Section 7.1.
"Gaines Plans" has the meaning specified in
Section 3.8.
"Gaines Stock" has the meaning set forth in the
second recital to this Agreement.
"Governmental Authority" means (i) any government
or political subdivision thereof whether federal,
state, local or foreign and (ii) any agency,
department, division, court, tribunal or
instrumentality of any such government or political
subdivision.
"Hazardous Discharge" has the meaning specified in
Section 3.11(b).
"Hazardous Substance" means any substance,
chemical, or waste that is listed as hazardous, toxic,
or dangerous or a contaminant or pollutant under
Applicable Environmental Law, and any petroleum
products.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder.
"Indemnitee" and "Indemnitor" have the respective
meanings specified in Section 10.4(a).
"Intellectual Property" has the meaning specified
in Section 3.12(a).
"Inventory" means raw materials, ingredients,
work-in-process, finished goods and packaging materi-
als.
"IRC" means the Internal Revenue Code of 1986, as
amended.
"IRS" means the United States Internal Revenue
Service.
"June Balance Sheet" and "June Financial
Statements" have the meanings specified in Section
12.19.
"Knowledge of Sellers", "Sellers' Knowledge" or
words of similar import means such knowledge of facts
actually known or which, after reasonable inquiry,
could reasonably be expected to be known, by Douglas
Mills, Executive Vice President, R. Thomas Howell, Jr.,
Vice President - General Corporate Counsel and
Corporate Secretary, Michael D. Annes, Director of
Business Development - Thomas Gettings, Vice President
and Corporate Controller, Scott Kappmeyer, Director -
Finance Planning, Margaret Stender, Vice President -
Marketing, Terry Mohr, Vice President - Diversified
Sales, Dick Larson, Vice President - Supply Chain, Carl
Curry, Vice President - Logistics; each of The Quaker
Oats Company; provided, however, that with respect to
Section 3.12 of this Agreement, "Knowledge of Sellers",
to "Sellers' Knowledge" or words of similar import also
includes such knowledge of Janet Silverberg, Trademark
Attorney - The Quaker Oats Company or any attorney or
paralegal under her supervision.
"Lease Agreement" has the meaning specified in
Section 2.6(b)(xii).
"Licensed Patents" has the meaning specified in
Section 5.9.
"Licensed Trade Secrets" has the meaning specified
in Section 5.9.
"Liens" has the meaning specified in Section 3.6.
"Losses" has the meaning specified in Section
10.4(a).
"Material Contracts" has the meaning specified in
Section 3.7.
"Mechanic's Liens" has the meaning specified in
Section 3.6.
"Net Sales" means gross sales less product
returns, price allowances (not including trade deals)
and trade cash discounts.
"Non-Compete Covenant" means the representations,
covenants and warranties provided in Section 5.6.
"Non-Transferred Employees" has the meaning
specified in Section 7.1.
"Notice of Claim" has the meaning specified in
Section 10.4(b).
"NVGP" means Net Sales, less cost of sales (raw
materials costs, package materials costs, manufacturing
labor costs, variable utilities expense, and the cost
of handling to the customer and the cost of
transportation to customers), and advertising and
merchandising expenses.
"OSHA" has the meaning specified in Section 5.14.
"Other Real Property" has the meaning specified in
Section 2.2(b)(xii).
"Owned Real Property" has the meaning specified in
Section 2.1(a).
"Pension Plan" has the meaning specified in
Section 3.8(b).
"Permit" means any certificate of occupancy,
license, permit, order or approval of any Governmental
Authority.
"Permitted Liens" has the meaning specified in
Section 3.6.
"Person" means an individual, a corporation, a
partnership, an association, a limited liability
company, a trust, any unincorporated organization, or a
government or political subdivision thereof.
"Pet Food Business" means the pet food business as
currently is, and in the past twelve months has been,
conducted by Quaker and its Affiliates in the
Territory, including, without limitation, the business
of manufacturing and marketing the Products in the
Territory, but excluding the Excluded Assets.
"Physical Assets" has the meaning specified in
Section 2.1(b).
"Plans" has the meaning specified in Section
3.8(a).
"Products" means all pet products, including,
without limitation, all dry dog and cat food, semi-
moist dog food, canned dog and cat food, dog and cat
treats, including, without limitation, those various
products set forth in Schedule 1.1, and all products
sold by Sellers, Gaines and any Affiliates of Quaker
under the trademarks referred to in Section 3.12.
"Purchase Price" has the meaning specified in
Section 2.3.
"Purchase Price Reduction" has the meaning
specified in Section 2.4(c).
"Purchaser Loss" has the meaning specified in
Section 10.2.
"reasonable best efforts" shall mean best efforts;
provided that in using such best efforts such party
shall not be obligated to incur any substantial finan-
cial obligations.
"Receivables" means all accounts and notes
receivable of the Pet Food Business as of the Closing
Date, including any intercompany receivables.
"Schedules" are the schedules furnished by Sellers
to Purchaser pursuant to this Agreement.
"Securities Act" means the Securities Act of 1933,
as amended, and the rules and regulations of the
Commission promulgated thereunder.
"Sellers' Consolidated or Combined Returns" has
the meaning specified in Section 11.2.
"Statement" has the meaning specified in Section
11.2.
"Sellers' Loss" has the meaning specified in
Section 10.3.
"Taxes" means all taxes, charges, fees, levies,
imposts, or other similar assessments, including,
without limitation, (a) income, alternative minimum,
gross receipts, ad valorem, premium, excise, real
property, personal property, windfall profit, sales,
use, transfer, licensing, withholding, employment,
payroll, estimated and franchise taxes imposed by the
United States, any state, local, or non-United States
government, or any subdivision, agency, or other
similar Person of the United States, or any such
government; (b) any interest, fines, penalties,
assessments, or additions to tax resulting from,
attributable to, or incurred in connection with any
such tax or any contest or dispute in respect thereof,
and (c) any costs, attorneys' fees and expenses
associated therewith.
"Tax Returns" means any report, return, statement,
or other information required to be filed with or
supplied to any taxing authority in connection with
Taxes.
"Taxes Not Yet Due and Payable" has the meaning
specified in Section 3.6.
"Territory" means the United States, Canada and
Mexico (including Puerto Rico and all United States'
territories, protectorates and possessions situated in
the North Western hemisphere), the islands in the
Caribbean, and islands in the Gulf of Mexico.
Notwithstanding the foregoing, for purposes of all
provisions of this Agreement relating to Intellectual
Property, Trade Secrets, Licensed Patents, Licensed
Trade Secrets, and Additional Intellectual Property,
"Territory" means the United States, Canada and Mexico
only.
"Third Party Claims" has the meaning specified in
Section 10.4(c).
"Title Company" has the meaning specified in
Section 8.7.
"Total Purchase Price" means the sum of (i) the
Purchase Price as specified in Section 2.3 and (ii) the
liabilities and obligations assigned to and assumed by
Purchaser pursuant to Section 2.2(a).
"Trade Secrets" has the meaning specified in
Section 2.1(g).
"Transferred Employees" has the meaning specified
in Section 7.1.
"Transition Agreement" has the meaning specified
in Section 2.6(b)(x).
As used in Sections 2.1, 2.2(b) and (d), 2.4,
2.5(b), 2.6, 2.7, 2.8 and 2.9 of this Agreement, all
references to "Quaker" or "Sellers", as the case may be,
shall be deemed to refer to Quaker and each of its
Affiliates that (i) is or has, during the past twelve
months, been engaged in the Pet Food Business, or (ii) owns
or holds tangible or intangible assets or properties which
are used in the Pet Food Business. Accordingly, any
obligation imposed upon an Affiliate of Quaker hereunder
shall be deemed to be an obligation of Quaker to cause such
Affiliate to take such action.
ARTICLE II
SALE AND PURCHASE OF ASSETS
SECTION 2.1. Transfer of Assets. Upon the terms and
subject to the conditions set forth in this Agreement, on
the Closing Date (by means of the transfer and sale by
Quaker to Purchaser of its Pet Food Business assets and, by
operation of law, by means of the sale by QOAC to Purchaser
of the Gaines Stock, as hereinafter described), Sellers
shall sell, assign, transfer, convey and deliver to Pur-
chaser, and Purchaser shall purchase and accept from
Sellers, all of their respective right, title and interest
in, to and in respect of the following assets (the "Acquired
Assets"):
(a) the real property owned by Quaker and Gaines,
as applicable, and described in Schedule 2.1(a), and
the buildings, structures, fixtures and other
improvements located thereon (collectively, the "Owned
Real Property"), together with all right, title and
interest, if any, of Quaker and Gaines, as applicable,
in and to all appurtenances of any nature whatsoever
existing with respect to such Owned Real Property;
(b) all machinery, equipment, tools, dies, molds,
spare parts, motor vehicles, furniture, office
supplies, maintenance and operating supplies, computer
hardware, software and peripherals and other tangible
personal property and all animals used in the Pet Food
Business on the date hereof, including, without
limitation, the machinery, equipment, tools, dies,
molds, spare parts, motor vehicles, furniture, office
supplies, maintenance and operating supplies, computer
hardware, software and peripherals and tangible
personal property and animals categorically described
or to the extent, reasonably practicable, listed in
Schedule 2.1(b); and those items of tangible personal
property and animals which are acquired by Quaker and
Gaines, as applicable, for use in the Pet Food Business
between the date hereof and the Closing Date, but
excluding from this subsection 2.1(b), except to the
extent included below, (i) Inventory and the books and
records described in Section 2.1(d) below and (ii) any
furniture and office supplies disposed of or consumed
by Quaker and Gaines, as applicable, in the ordinary
course of business between the date hereof and the
Closing Date (collectively, the "Physical Assets"),
together with any assignable manufacturers' and
vendors' warranties and other rights relating thereto;
(c) all Inventory owned by Quaker and Gaines, as
applicable, as of the Closing Date, wherever located,
relating to the Pet Food Business, in addition to all
finished products returned by customers after the
Closing Date;
(d) all of the books and records of Quaker and
Gaines, as applicable, to the extent relating to the
Pet Food Business or the Acquired Assets, including,
without limitation, files, equipment maintenance data,
accounting records, internal audit work papers,
Inventory records, sales and sales promotional data
(including with respect to the sales and distribution
locations), advertising materials, customer and
consumer lists, cost and pricing information, supplier
lists, business plans, product development information,
marketing materials (including test marketing and
related market research data), title reports, title
policies, appraisals, engineering and environmental
studies, personnel records (to the extent the transfer
of such records is permitted by law; it being agreed
and understood, however, that if such transfer is not
permitted by law, to the extent permitted by law,
Sellers shall provide Purchaser with reasonable access
to and, to the extent practicable, copies of, such
records), technical data, specifications, work
standards and manufacturing, assembling and process
information, designs, processes, operating manuals,
operating data and plans, engineering drawings, working
drawings, schematics, blueprints, flowsheets and
models, and waste disposal records (including
identification of all entities and facilities used by
Sellers or Gaines or, to the extent available, by any
other owner or operator of the Owned Real Property, at
any time prior to the Closing Date for disposal of
solid wastes and Hazardous Substances, if any), but
excluding invoices and those portions of any such items
of Quaker and Gaines, as applicable, which incorporate
or reflect confidential information relating to any
other business of Quaker and Gaines;
(e) subject to Section 2.7, all Permits relating
to the Pet Food Business or the Acquired Assets,
including, without limitation, Permits which are listed
in Schedule 3.11(a);
(f) all right, title and interest of Sellers,
Gaines and Quaker's Affiliates, as applicable, in and
to all Intellectual Property described in Schedule
3.12(a);
(g) all right, title and interest of Sellers,
Gaines and Quaker's Affiliates, as applicable, in and
to (i) all trade secrets, know-how, technology and
manufacturing processes which are used solely in the
Territory and relate solely to the Pet Food Business,
(ii) all formulas, recipes, process sheets and mixing
instructions which are used solely in the Territory and
relate solely to the Pet Food Business (the
"Formulas"), and (iii) all rights that are similar to
the Formulas and other intangible personal property
which are used solely in the Territory and relate
solely to the Pet Food Business (items (g) (i) through
(g) (iii) being, collectively, the "Trade Secrets");
and those rights in the Licensed Patents and the
Licensed Trade Secrets as set forth in Section 5.9;
(h) all right, title and interest of Sellers,
Gaines, and Quaker's Affiliates, as applicable, in the
Territory in and to all divisions, reissues,
continuations, continuations-in-part, renewals and/or
extensions thereof for all issued patents and pending
patent applications used solely in the Pet Foods
Business as set forth in Schedule 3.12(a), and the
inventions and improvements therein; and all right,
title and interest, of Sellers, Gaines and Quaker's
Affiliates, as applicable, in the Territory and other
foreign countries in and to: all fictitious business
names, all unregistered tradenames and trademarks,
including common law trademarks, all unregistered
copyrights, all label designs, and all tradedress,
which relate solely to the Pet Food Business
(collectively the "Additional Intellectual Property");
(i) all right, title and interest of Sellers,
Gaines and Quaker's Affiliates, as applicable, in and
to Canadian Patents and Foreign Trademarks set forth
in Schedule 2.1(i);
(j) subject to Section 2.7, all of the rights and
interests of Quaker and Gaines, as applicable, under
Contracts relating to the Pet Food Business or the
Acquired Assets, except to the extent such Contracts
are individually or in the aggregate immaterial, in-
cluding, without limitation, those Contracts listed on
Schedule 3.7(a) (but excluding those Contracts on such
Schedules denoted with a single asterisk), plus all
unfilled customer orders as of the Closing Date and any
such Contracts that have been entered into by Quaker
and/or Gaines, between the date hereof and the Closing
Date in the ordinary course of business without
violating the provisions of this Agreement and which
also would not be required to be listed in Schedule
3.7(a);
(k) all right, title and interest of Quaker and
Gaines, as applicable, in and to all one-time,
nonrecurring or unusual deposits made with any
Governmental Authority or with any utility company or
third party relating to the use, operation or enjoyment
of the Acquired Assets or the Pet Food Business or for
use of services provided in respect of the Acquired
Assets or the Pet Food Business, in all cases to the
extent such deposits are not of a type which
customarily would be subject to proration in
transactions of the type contemplated by this
Agreement;
(l) except to the extent the Purchase Price is
reduced pursuant to Section 2.9, all claims of Quaker
and Gaines against third parties relating to the
Acquired Assets or the Pet Food Business, including
without limitation: (i) those claims in respect of
rights under manufacturers' and vendors' warranties,
guarantees or similar obligations and (ii) all rights
of indemnity and claims that Quaker and/or Gaines may
have against any Person who damaged or injured, or
caused any damage or injury to, any portion of the
Acquired Assets or the Pet Food Business;
(m) the goodwill of the Pet Food Business;
(n) the Gaines Stock; and
(o) cash received by Quaker or the Pet Food
Business from customers with respect to shipments of
Products made after the Closing Date; it being hereby
agreed and understood that Sellers and Purchaser shall
enter into such appropriate arrangements so as to
effectuate the purpose and intent of this Section
2.1(o).
provided, however, that the Acquired Assets shall not
include and Sellers shall retain all of their respective
right, title and interest in, to and in respect of, and
Purchaser shall not acquire, the following assets and
property whether owned by Sellers or Gaines on the date
hereof or hereafter acquired by such parties prior to the
Closing Date (the "Excluded Assets"):
(i) except as provided in Section 2.1(o), cash
and cash equivalents;
(ii) the Receivables of the Pet Food Business;
(iii) Tax refunds and Tax claims with respect to
periods ending on or before or which include
the Closing Date, insurance claims, except as
provided in Section 2.9(b), and any prepaid
expenses and other similar items with respect
to the Pet Food Business, except as prorated
in accordance with Section 2.6(d) or as
otherwise provided in Section 2.1(k);
(iv) all rights accruing to Sellers and/or their
respective Affiliates under this Agreement;
(v) any Contract in Schedule 3.7(a) denoted with
a single asterisk;
(vi) the assets described in Schedule 2.1(vi)
which are designated as "Excluded Assets";
(vii) all insurance policies relating to the Pet
Food Business and/or the Acquired Assets,
except those rights, if any, acquired by
Purchaser by operation of law in connection
with the purchase of the Gaines Stock;
(viii) all Gaines Plans, except as set forth on
Schedule 2.1(viii);
(ix) those categories of assets, properties,
rights and interests to be used by Sellers or
their Affiliates in performing their services
under the Transition Agreement (and in the
schedules and exhibits thereto);
(x) all assets normally located at, on or in (a)
the Quaker Tower, 321 North Clark Street,
Chicago, Illinois, 60610, (b) any Quaker
customer business center, (c) any Quaker
sales office, (d) any Quaker distribution
center or (e) the Barrington research and
development center, 617 West Main Street,
Barrington, Illinois, in each case, except
for computer software relating to the Pet
Food Business or the information contained
therein, all books and records relating to
the Pet Food Business (including with respect
to the distribution or sales functions of the
pet food business conducted by Quaker), all
personal computers of Transferred Employees,
the right to use the Licensed Trade Secrets,
the equipment listed on Schedule 2.1(b), and
all Inventory situated at the various Quaker
distribution centers;
(xi) any real property other than the Owned Real
Property;
(xii) each of the Contracts related to the Pet Food
Business which are distributorship, dealer,
broker or manufacturer representative,
Nielsen marketing Contracts, derivatives
Contracts, Contracts relating to any Quaker
customer business center, distribution center
or the Barrington research and development
center, any transportation related Contract,
any warehousing Contract and any information
systems Contracts;
(xiii) that certain Arizona property located at Lot
1 of Section 18, Township 5 South, Range 9
East of the Gila and Salt River Base and
Meridian, located in Pinal County, Arizona
(the "Arizona Property") owned by Gaines; and
(xiv) subject to the provisions of the Transition
Agreement, the "Quaker" trademark or
tradename, including Quaker's or its
Affiliates' (other than Gaines) corporate
names, symbols or identifiers;
Purchaser hereby agrees that in the event that
prior to the Closing, Sellers are unsuccessful in
transferring all of the Excluded Assets to Quaker, then
following the Closing, upon the reasonable request of
Sellers and without further consideration, Purchaser shall
execute, acknowledge and deliver (or cause to be executed,
acknowledged and delivered) to Sellers such other
instruments of conveyance and transfer, assignments, bills
of sale, further assurances and other documents, and shall
take all such other actions as Sellers may reasonably
request in order to vest more effectively in Sellers or put
Sellers in possession of, any of the Excluded Assets, and to
carry out the purpose and intention of this Section 2.1.
SECTION 2.2. Assumption of Liabilities.
(a) Subject to Section 2.2(b), in partial consid-
eration of the transfer to Purchaser of the Acquired
Assets, Purchaser, at the Closing, shall assume, and
thereafter shall pay, fulfill, perform or otherwise
discharge when due, only the following liabilities and
obligations of Sellers to the extent such liabilities
and obligations relate solely to the Pet Food Business
or the Acquired Assets not conducted or owned by Gaines
as of the Closing Date (collectively, the "Assumed
Liabilities"):
(i) all obligations of Quaker accruing after the
Closing under the Contracts relating to the
Pet Food Business or the Acquired Assets (A)
as are listed in Schedule 3.7(a) (but
excluding those Contracts on such Schedule
denoted with a single asterisk), (B) which
are not required to be listed in Schedule
3.7(a) and were entered into by Quaker in the
ordinary course of business consistent with
past practice on or before the date hereof
which individually and in the aggregate are
immaterial and (C) which are entered into by
Quaker in the ordinary course of business
consistent with past practice between the
date hereof and the Closing Date and not in
violation of the provisions of this Agreement
which individually and in the aggregate are
immaterial, and which, in each case, are
validly assigned to Purchaser (collectively,
the "Assumed Contracts").
(ii) all liabilities and obligations accruing
after the Closing under the assumed Permits
held by or on behalf of Sellers and which are
validly assigned to Purchaser;
(iii) the liabilities and obligations undertaken by
Purchaser as provided in Article VII;
(iv) all liabilities and obligations described in
Section 2.2(b)(vii) and Section 2.2(b)(ix)
which are not Excluded Liabilities;
(v) subject to any claims by Purchaser pursuant
to Section 3.14 which shall control, all
refund, return, repair, replacement,
allowance and warranty claims, obligations
and liabilities (a) relating to goods sold or
manufactured by the Pet Food Business prior
to the Closing Date or (b) which arise from
Inventory held on the Closing Date, except in
the case of both clauses (a) and (b) above,
Purchaser shall not assume or be responsible
for any such liability or obligation with
respect to goods manufactured and sold by the
Pet Food Business prior to the Closing Date
unless the claim for refund, return, repair,
replacement, allowance or warranty is made
after the second anniversary of the Closing
Date;
(vi) subject to any claims by Purchaser pursuant
to Section 3.14 which shall control, any
liability or obligation relating to,
resulting from or arising out of claims for
personal injury of any kind or death or
property damage related to the use of, or
exposure to, products manufactured by the Pet
Food Business prior to the Closing Date,
except Purchaser shall not assume or be
responsible for any such liability or obliga-
tion with respect to products which were
manufactured and sold by the Pet Food
Business prior to the Closing Date unless
such claim for personal injury of any kind or
death or property damage is asserted after
the third anniversary of the Closing Date;
(vii) all unpaid liabilities and obligations with
respect to (i) the redemption of Sellers'
coupons after the Closing (including all
handling and processing fees) for the Pet
Food Business issued prior to the Closing
Date up to $8,000,000 and (ii) Sellers'
normal trade billback deals (identified and
accounted for under account number 43 under
Quaker's chart of accounts) entered into in
the ordinary course of business for the Pet
Food Business which are in effect on the
Closing Date; and
(viii) all liabilities and obligations which have
arisen or which arise between the date hereof
and the Closing Date in the ordinary course
of the Pet Food Business and which
individually and in the aggregate are
immaterial.
(b) Notwithstanding anything to the contrary in
Section 2.2(a), except as otherwise set forth below,
neither Purchaser nor Gaines shall assume, or in any
way be liable or responsible for, any liabilities
and/or obligations of Sellers or Gaines, unless
specifically assumed pursuant to Section 2.2(a) (the
"Excluded Liabilities") including, without limitation:
(i) any profit or loss derived from the sale pro-
vided for by this Agreement;
(ii) any liabilities or obligations of Sellers
relating to businesses other than the Pet
Food Business;
(iii) any liability or obligation under Contracts
of Sellers or Gaines or Permits of Sellers or
Gaines that are not Assumed Contracts or
Assumed Permits and any liability or
obligation under the Assumed Contracts or the
Assumed Permits which accrue or arise prior
to the Closing;
(iv) any accounts payable or accrued expenses
(except for obligations set forth in Section
2.2(a) above or to the extent prorated in
accordance with Section 2.6(d)) of the Pet
Food Business as of the Closing Date;
(v) except for the Assumed Contracts, any
intercompany debt, settlement or other
liability or obligation between the Pet Food
Business and Sellers or any Affiliate of
Sellers;
(vi) subject to the provisions of Article VII
which shall be controlling, any liability or
obligation of Sellers relating to the
employment or termination of employment of
any Person arising prior to the Closing Date;
(vii) any liability or obligation relating to,
resulting from or arising out of claims based
on violations of laws or regulations as in
effect at or prior to the Closing Date, in
each case arising out of or relating to
events which have occurred, or products which
have been manufactured, or services which
have been performed by, the Pet Food
Business, or the use of the Acquired Assets
or the operation of the Pet Food Business,
prior to the Closing Date, but in the case of
this subparagraph (b)(vii), only to the
extent that Sellers would be obligated to
indemnify Purchaser under this Agreement as a
result of a breach by Sellers of the
representations and warranties set forth in
Section 3.11(a) or Section 3.11(b);
(viii) subject to Article XI and Section 12.15,
which shall control, any liability or
obligation for federal, state or local income
Taxes;
(ix) any liability (including strict liability)
for: (A) generation, storage, transportation,
disposal or treatment of Hazardous Substances
by or on behalf of the Pet Food Business, or
from, on or into the Owned Real Property or
any leased real property, (B) migrating or
leaching of Hazardous Substances onto or into
the Owned Real Property or any leased real
property, or from the Owned Real Property or
any leased real property, onto or into any
property adjacent thereto; or (C) violations
of Applicable Environmental Laws and/or
Permits which relate to the Pet Food Business
or the Acquired Assets (including the Owned
Real Property and any leased real property);
only to the extent that such liability
relates to conditions or events existing on
or prior to the Closing Date, and only to the
extent Sellers would be obligated to
indemnify Purchaser under this Agreement as a
result of a breach by Sellers of the
representations and warranties set forth in
Section 3.11(b);
(x) except for the Assumed Contracts and as
specifically set forth in Schedule 2.2(b)(x),
any liability or obligation relating to any
indebtedness for borrowed money owed by
Sellers or Gaines to any third party or any
guarantee by Sellers or Gaines in favor of
any third party;
(xi) any debt, liability or obligation of Gaines,
whether accrued, absolute, contingent or
otherwise of any nature whatsoever, whether
or not known due or payable, that arises out
of the operation or conduct of Gaines or its
directors, officers or employees or any
subsidiary on or prior to the Closing Date
not constituting an Assumed Liability; and
(xii) any liability obligation relating in any way
to Sellers' or Gaines' ownership, use,
control, possession, or operation on or prior
to the Closing Date of any real property
other than the Owned Real Property (the
"Other Real Property"), including, without
limitation, any liability (including strict
liability) for: (A) generation, storage,
transportation, disposal or treatment of
Hazardous Substances by or on behalf of the
Pet Food Business, or from, on or into the
Other Real Property, (B) migrating or
leaching of Hazardous Substances onto or into
the Other Real Property, or from the Other
Real Property onto or into any property
adjacent thereto; or (C) violations of
Applicable Environmental Laws and/or Permits
which relate to the Pet Food Business or
Other Real Property;
(xiii) any debt, liability or obligation of Sellers
whether accrued, absolute, contingent or
otherwise of any nature whatsoever, whether
or not known due or payable, that arises out
of operation or conduct of the Pet Food
Business or its directors, officers or
employees or any subsidiary on or prior to
the Closing Date not constituting an Assumed
Liability.
(c) Except as set forth in Article VII and as
otherwise expressly provided in this Agreement, after the
Closing, Purchaser or Gaines solely shall be responsible for
all liabilities and obligations to Transferred Employees
arising from Purchaser's or Gaines' hiring or termination of
such employees and all other liabilities and obligations to
the extent arising from its use or operation of the Pet Food
Business or the Acquired Assets.
(d) Quaker hereby agrees that in the event that prior
to the Closing, Sellers are unsuccessful in transferring all
of the Excluded Liabilities to Quaker, then following the
Closing, upon the reasonable request of Purchaser and
without further consideration, Quaker shall execute,
acknowledge and deliver (or cause to be executed,
acknowledged and delivered) to Purchaser such other
instruments of assumption, further assurances and other
documents, and shall take all such other actions as
Purchaser may reasonably request in order to cause Quaker to
be bound by, and cause Purchaser and Gaines to be released
from, the Excluded Liabilities, and to carry out the purpose
and intention of this Section 2.2.
SECTION 2.3. Purchase Price and Other Consideration;
Payment. On the Closing Date, Purchaser shall acquire the
Acquired Assets, in consideration for (i) a cash purchase
price of SEVEN HUNDRED TWENTY FIVE MILLION and 00/100
DOLLARS ($725,000,000) (the "Purchase Price"), subject to
possible adjustment after the Closing Date as provided in
Sections 2.4 and 2.6(d), and (ii) the execution and delivery
by Purchaser of an assumption agreement pursuant to which
Purchaser shall assume the Assumed Liabilities. The
Purchase Price shall be paid to Quaker at the Closing by
wire transfer of immediately available U.S. funds to an
account (or accounts) designated in writing by Quaker to
Purchaser not less than two business days prior to the
Closing.
SECTION 2.4. Minimum Inventory.
(a) On the Closing Date, Sellers shall take a
complete physical count of the Inventory owned by
Quaker and Gaines, as applicable, relating to the Pet
Food Business, and Purchaser or its representatives
shall be permitted to observe such physical count being
taken. Within 30 days after the Closing Date, Sellers
shall deliver to Purchaser a statement (the "Closing
Inventory Statement") indicating the value of such
Inventory transferred to Purchaser or held by Gaines as
of the Closing Date (the "Closing Inventory"). Such
statement shall be prepared in accordance with (i)
generally accepted accounting principles except for
those procedures which are in accordance with Quaker's
internal accounting policies as at December 31, 1994
and (ii) all books, records and accounts of Sellers and
Gaines. Purchaser and its representatives shall have
the right to review all work papers and procedures used
to prepare the Closing Inventory Statement and the
right to perform any other reasonable procedures
necessary to verify the accuracy thereof. Each party
shall bear its own expenses incurred in connection with
the above procedures. No value shall be assigned to
Inventory which is not in compliance with the warranty
and representation of Sellers set forth in the first
sentence in Section 3.14, which warranty and
representation shall not be qualified or limited for
the purposes of this Section 2.4 by any disclosures in
Schedule 3.14.
(b) Unless Purchaser, within 30 days after deliv-
ery to Purchaser of the Closing Inventory Statement,
notifies Sellers in writing that it objects to the
Closing Inventory Statement and specifies, in reasona-
ble detail, the basis for such objection, such Closing
Inventory Statement shall become final, binding and
conclusive upon the parties for all purposes of this
Agreement. If Purchaser and Sellers are unable to re-
solve any objections to the Closing Inventory Statement
within 10 days after any such notification has been
given, the dispute shall be referred to a nationally
recognized public accounting firm mutually selected by
Purchaser and Sellers. If Purchaser and Sellers are
unable to agree upon the designation of such an
accounting firm within five days after the expiration
of such 10 day period, either Purchaser or Sellers may
thereafter request that the AAA make such designation.
The accounting firm so designated will make a determi-
nation as to each of the items in dispute, which deter-
mination shall be final, conclusive and binding upon
each of the parties hereto. Purchaser and Sellers
shall cooperate with one another and with their author-
ized representatives in order to resolve any and all
matters in dispute under this Section 2.4(b) as soon as
practicable and shall share equally the fees and
expenses of the designated accounting firm and the AAA.
(c) If the value of the Closing Inventory is
lower than $22,000,000 (the "Base Amount"), then the
Purchase Price shall be decreased dollar-for-dollar by
the difference (the "Purchase Price Reduction") between
the Base Amount and the value of the Closing Inventory.
Sellers shall remit the amount of such Purchase Price
Reduction to Purchaser, with interest from the Closing
Date to the date of payment, within five days after de-
livery to Purchaser of the Closing Inventory Statement
as provided in Section 2.4(b) above; provided, however,
that acceptance by Purchaser of such payment shall not
constitute a waiver of Purchaser's right to object to
the Closing Inventory Statement during the 30-day
period following its delivery. If Purchaser does raise
an objection and if resolution of such objection re-
sults in a further Purchase Price Reduction, payment of
such additional amount, with interest, from the Closing
Date to the date of payment, shall be made to Purchaser
within five days following final resolution of the
objection.
(d) If the value of the Closing Inventory exceeds
$26,000,000, Purchaser shall, within five days after
the expiration of the 30-day period referred to in
clause (b) above, or, if Purchaser contests the Closing
Inventory Statement, within five days after final
resolution of such objection, remit to Sellers the
amount of such excess (such remittance not to exceed
the sum of $2,000,000), together with interest thereon
from the Closing Date to the date of payment.
(e) Any undisputed or resolved amounts shall be
payable within five days of the date such amount is
determined to be undisputed or resolved, with interest,
even if other amounts continue to be disputed and
unresolved. Interest for purposes of this Section 2.4
shall be at the prime lending rate as announced by
NationsBank, N.A. on the nearest date next preceding
the date of this Agreement.
SECTION 2.5. Allocation of the Total Purchase Price.
The Total Purchase Price shall be allocated among the
Acquired Assets, as follows:
(a) $245,000,000 shall be allocated to the Gaines
Stock; and
(b) The remainder of the Total Purchase Price
shall be allocated among the remaining Acquired Assets
in accordance with a written appraisal of the remaining
Acquired Assets conducted by a nationally recognized
appraisal firm to be selected by Purchaser, and in
accordance with the requirements of IRC Section 1060.
Such appraisal shall be conducted at Purchaser's sole
direction and completed not less than 30 days prior to
the earlier to occur of the due date, including
extensions, for filing the U.S. federal income Tax
Return for either Sellers or Purchaser for the fiscal
year during which the Closing Date occurs. The cost of
such appraisal shall be borne by Purchaser. Sellers
and Purchaser agree to make all appropriate tax filings
on a basis consistent with such appraisal and to
exchange drafts of any information returns required by
IRC Section 1060, and all similar state statutes, at
least 10 days prior to filing any such return with the
appropriate Governmental Authority. In the event
Purchaser fails to obtain such a written appraisal
within the time specified in this Section 2.5(b),
Sellers may allocate the Total Purchase Price among the
remaining Acquired Assets in any reasonable manner
consistent with the requirements of IRC Section 1060.
SECTION 2.6. Closing; Deliveries at the Closing.
(a) The sale and purchase of the Acquired Assets
contemplated hereby (the "Closing") shall take place on
March 8, 1995 at the offices of Quaker, Quaker Tower,
321 North Clark Street, Chicago, Illinois 60610, or as
soon thereafter as practicable, but not later than
three days after all conditions to each party's
obligation to close hereunder shall have been satisfied
or waived. If all conditions to each party's obliga-
tion to close hereunder shall have been satisfied or
waived prior to March 8, 1995, the parties shall close
promptly thereafter, but in no event less than three
business days after all such conditions have been
satisfied or waived. The day on which the Closing
shall occur is hereinafter referred to as the "Closing
Date".
Except as otherwise required by law, the Closing
shall be deemed to have occurred as of the opening of
business on the Closing Date.
(b) At the Closing, Sellers shall deliver to
Purchaser:
(i) duly executed deeds customarily used (in the
respective jurisdictions in which such Owned
Real Property is situated) to convey the
Owned Real Property to Purchaser in the forms
attached hereto as Exhibits A-1 and A-2,
respectively;
(ii) a duly executed general assignment of all
trademarks that are included in the Acquired
Assets (in the form substantially similar to
Exhibit B-1 attached hereto) and duly
executed assignments in recordable form of
all trademarks that are set forth in Schedule
3.12(a) and are in the Territory. Within 60
days after Closing, Seller shall deliver to
Purchaser duly executed trademark
assignments, in recordable form, for all
trademarks set forth in Schedule 3.12(a), and
to the extent assignable, those Foreign
Trademarks set forth in Schedule 2.1(i) that
have not already been delivered at Closing;
(iii) unexecuted assignments of all patents that
are set forth in Schedule 3.12(a) in a form
substantially similar to Exhibits B-2(a) and
B-2(b) respectively, attached hereto. Within
75 days after Closing, Seller shall deliver
to Purchaser duly executed patent
assignments, in recordable form, for all
patents set forth in Schedule 3.12(a) and, to
the extent assignable, those Canadian Patents
set forth in Schedule 2.1(i);
(iv) a duly executed assignment in recordable form
of all copyright registrations as set forth
in Schedule 3.12(a) in the form substantially
similar to Exhibit B-3 attached hereto, and a
duly executed assignment of all right, title
and interest of the Trade Secrets and
Additional Intellectual Property as defined
in Sections 2.1(g) and 2.1(h);
(v) a duly executed assignment of all right,
title and interest under Contracts and
Permits that are included in the Acquired
Assets in the form attached hereto as Exhibit
C;
(vi) all documents necessary to transfer to
Purchaser title to the motor vehicles that
are included in the Acquired Assets;
(vii) a duly executed bill of sale transferring to
Purchaser all of the remaining Acquired
Assets not transferred pursuant to the
instruments and documents referred to above
in the form attached hereto as Exhibit D;
(viii) the officer's certificate, the opinion of
counsel and the certified resolutions
referred to in Sections 8.1(c) and 8.8;
(ix) subject to Section 2.7, all authorizations,
waivers, consents and approvals necessary to
transfer to Purchaser the Assumed Contracts
and the Permits that are included in the
Acquired Assets;
(x) a duly executed counterpart original of the
agreement substantially conforming to the
outline of substantive terms attached hereto
as Exhibit E (the "Transition Agreement");
(xi) duly executed stock powers or similar
instruments of transfer with respect to the
Gaines Stock;
(xii) a duly executed counterpart original of each
of (A) the Lease Agreement with respect to
certain office space located in the Quaker
Tower in the form attached as Exhibit F-1 and
(B) the Lease Agreement with respect to
certain office space and other space located
at Barrington research and development center
in the form attached as Exhibit F-2
(collectively, the "Lease Agreements");
(xiii) such other documents and instruments as
Purchaser reasonably may request not less
than five days prior to the Closing Date;
(xiv) a duly executed assumption of the Excluded
Liabilities (including all liabilities
relating to the Arizona property) in the form
attached hereto as Exhibit G;
(xv) a duly executed license of the Licensed
Patents and Licensed Trade Secrets as set
forth in Section 5.9; and
(xvi) to the extent assignable, a duly executed
assignment of items Nos. 3, 5, 6 and 7 listed
in Schedule 3.12(b)(iv).
(c) At the Closing, Purchaser shall deliver to
Sellers:
(i) the Purchase Price referred to in Section 2.3
in the manner set forth therein;
(ii) a duly executed assumption agreement in
respect of the Assumed Liabilities in the
form attached hereto as Exhibit H;
(iii) the officer's certificate, the opinion of
counsel and the certified resolutions
referred to in Sections 9.1(c) and 9.6;
(iv) a duly executed counterpart original of the
Transition Agreement;
(v) duly executed counterpart originals of the
Lease Agreements; and
(vi) such other documents and instruments as
Sellers reasonably may request not less than
five days prior to the Closing Date.
(d) As of December 31, 1994 the amount of
Sellers' prepaid premium inventory and media expenses
was $531,000 and $353,000 respectively. Within 30 days
after the Closing, the parties shall prorate all
prepaid expenses and similar items relating to the Pet
Food Business and/or the Acquired Assets, if any, to
the extent Purchaser reasonably is expected to receive
the benefit thereof after the Closing, and Purchaser
shall reimburse Sellers on the date of settlement for
the unused portion of such expenses or other items as
of the Closing Date. In addition, on the same date,
all items listed below relating to the Pet Food
Business and the Acquired Assets shall be prorated as
of the Closing Date, with Sellers liable to the extent
such items relate to any time period up to and
including the day next preceding the Closing Date, and
with Purchaser liable to the extent such items relate
to the Closing Date and all periods subsequent thereto:
personal property, real estate, occupancy and water
Taxes, if any, on or with respect to the Pet Food
Business or the Acquired Assets; rents, Taxes and other
items due to Quaker and Gaines, as applicable, or
payable by Quaker and Gaines, as applicable, under any
Contract to be assigned to or assumed by Purchaser
hereunder (other than those certain one-time
nonrecurring or unusual deposits, the full amount of
which shall be transferred to Purchaser pursuant to
Section 2.1(k)); the amount of any license or
registration fees with respect to any licenses or
registrations which are being assigned or transferred
hereunder; the amount of sewer rents and charges for
water, telephone, electricity and other utilities and
fuel; and any other items which normally are prorated
in connection with similar transactions. Sellers agree
to furnish Purchaser with such documents and other
records as Purchaser reasonably requests in order to
confirm all adjustment and proration calculations
including with respect to prepaid premium inventory and
media expenses made pursuant to this Section 2.6(d).
The net aggregate amount of such prorations shall be
treated as an adjustment to the Purchase Price paid by
Purchaser to Sellers on the Closing Date pursuant to
Section 2.3. If current payments with respect to items
to be prorated pursuant to this Section 2.6(d) are not
ascertainable on or before such post-closing settlement
date, such payments shall be prorated on the basis of
the most recently ascertainable bill therefor and shall
be reapportioned among Sellers and Purchaser when the
current bills with respect to such items have been
issued and a cash settlement shall be made promptly
thereafter on an item-by-item basis. Notwithstanding
anything in this Section 2.6(d) to the contrary, to the
extent that there are any supplemental Taxes assessed
with respect to the Acquired Assets relating to an
event which occurred prior to the Closing Date, the
portion of such Taxes for periods up to the Closing
shall be paid by Sellers when due, notwithstanding the
fact that such Taxes are not assessed or known on the
Closing Date.
SECTION 2.7. Nonassignable Contracts and Permits.
(a) To the extent that any Assumed Contract or
Permit that is included in the Acquired Assets is not
capable of being assigned or transferred without the
prior consent or waiver of the counterparty (or
parties) thereto (including a Governmental Authority),
or if such assignment or transfer or attempted
assignment or transfer would constitute a breach
thereof or a violation of any law, decree, order,
regulation or other governmental edict, this Agreement
shall not constitute an assignment or transfer thereof,
or an attempted assignment or transfer of any such
Contract or Permit until such time as such consent or
waiver has been obtained.
(b) Anything in this Agreement to the contrary
notwithstanding, Sellers are not obligated to transfer
to Purchaser any of their rights and obligations in, to
and under any of the Contracts or Permits to be
assigned hereunder without first having obtained all
necessary consents and waivers thereto. Prior to the
Closing Date, Sellers shall use their reasonable best
efforts to obtain consents and waivers to allow the
assignment of those Assumed Contracts and Permits
listed in Schedule 2.7(b); provided, however, Sellers
shall not without the consent of Purchaser, agree to
any modification of any such Contract or Permit in the
course of obtaining any such consents or waivers, or
pay or commit to pay any consideration payable from the
Acquired Assets. For a reasonable period of time after
the Closing Date, not to exceed 180 days, Sellers shall
use their reasonable best efforts to obtain any
consents or waivers listed in Schedule 2.7(b) which
were not obtained prior to Closing and any other
consents and waivers under any such Contract or Permit
which are reasonably requested by Purchaser.
(c) To the extent that consents or waivers are
not obtained, Sellers shall use their reasonable best
efforts to assure to Purchaser the benefits of such
Contracts and Permits and Sellers and Purchaser shall
cooperate with each other to establish, to the extent
practicable, arrangements that are reasonable and
lawful as to both Sellers and Purchaser, and which
result in the practical realization of the benefits and
obligations under such Contracts and Permits being
apportioned in a manner that is in accordance with the
purpose and intention of this Agreement.
SECTION 2.8. Exclusive Sale of Trade Secrets. Neither
Sellers nor any of their respective Affiliates shall sell,
assign, convey, deliver or otherwise transfer any of the
Trade Secrets, or shall communicate any knowledge, data or
other information with respect to the Trade Secrets to any
Person, in the Territory other than to Purchaser, except to
the extent such knowledge, data, or other information (i) is
or becomes available to the public or becomes part of the
public domain other than as a result of a disclosure by
Sellers or their Affiliates or (ii) becomes available to
Sellers or their Affiliates from a third party which, after
due inquiry of such party, is not known by Sellers or their
Affiliates to be in violation of any agreement with
Purchaser. Nothing contained in this Section 2.8 shall
prevent Sellers from selling, assigning or disclosing any or
all trade secrets (other than the Trade Secrets and the
Licensed Trade Secrets) currently practiced in a country or
locale outside the Territory to any Person of a country or
locale in which such trade secrets (other than the Trade
Secrets and the Licensed Trade Secrets) are being practiced.
SECTION 2.9. Risk of Loss. Risk of loss as to the
Acquired Assets shall pass from Sellers to Purchaser at
Closing. Sellers shall bear all costs and expenses and
assume all risks of condemnation, seizure, destruction,
loss, damage or theft of the Acquired Assets arising and/or
occurring prior to the time of the wire transfer of the
Purchase Price on the Closing Date. Purchaser shall bear
all costs and expenses and assume all risks of condemnation,
seizure, destruction, loss, damage or theft of the Acquired
Assets arising and/or occurring after the time of the wire
transfer of the Purchase Price on the Closing Date. If at
or prior to the time of the wire transfer of the Purchase
Price on the Closing Date, all or any part of the Acquired
Assets to be transferred hereunder are condemned, seized,
destroyed, lost, stolen or damaged, then Purchaser shall
have the options, exercisable by notice to Sellers in
writing:
(a) To reduce the Purchase Price of the Acquired
Assets by an amount equal to the cost of repair, or if
destroyed or damaged beyond repair, or if condemned, seized,
lost or stolen, by an amount equal to the fair market value
of the Acquired Assets and to complete the transaction
herein contemplated at such reduced Purchase Price; it being
hereby agreed and understood that, without Sellers' prior
written consent, no such Purchase Price reduction shall be
made to the extent that such cost of repair or fair market
value, as the case may be, after giving effect to any
property or casualty insurance in respect thereof, exceeds
$10,000,000 (which $10,000,000 shall not include self-
insurance, deductibles and similar co-payments); or
(b) To complete the transaction herein
contemplated without reduction of the Purchase Price in
which event all proceeds of insurance, or compensation for
condemnation or seizure, payable with respect to such
Acquired Assets shall be paid to Purchaser and all rights
and claims of Sellers to any such amounts shall be assigned
to Purchaser; or
(c) To utilize alternatives (i) and (ii)
concurrently but not with respect to any single asset.
Nothing contained in this Section 2.9 shall impair
any of Purchaser's or Sellers' rights under Section 12.1.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
As of the date of this Agreement and as of the
Closing Date, Sellers hereby jointly and severally represent
and warrant to Purchaser as follows:
SECTION 3.1. Incorporation; Qualification. Each of
Sellers and Gaines is a corporation duly incorporated,
validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has the
requisite corporate power and authority to carry on the Pet
Food Business as presently conducted by it and, as
applicable to it, to own, operate and lease the Acquired
Assets. Each Seller and Gaines is duly qualified to do
business and is in good standing in each jurisdiction in
which the conduct of the Pet Food Business or the ownership
or operation of the Acquired Assets, as applicable to it,
requires such qualification, except where the failure to be
so qualified or in good standing would not or could not
reasonably be expected to have a material adverse effect on
the Pet Food Business or the Acquired Assets, each taken as
a whole, or the transactions contemplated hereby.
SECTION 3.2. Authority. Sellers have all requisite
corporate power and authority to execute, deliver and
perform this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Sellers, the performance by them of their
respective obligations hereunder and the consummation by
them of the transactions contemplated hereby have been duly
authorized by the respective Boards of Directors of Sellers
(and approved by Quaker, as sole stockholder of QOAC), and
no other corporate act or proceeding on the part of Sellers
is necessary to approve the execution and delivery of this
Agreement, the performance of Sellers' obligations hereunder
or the consummation by Sellers of the transactions
contemplated hereby.
SECTION 3.3. Execution and Binding Effect. This
Agreement has been duly and validly executed and delivered
by Sellers and constitutes the legal, valid and binding
obligation of them and will be enforceable against them in
accordance with its terms, except as such enforceability may
be limited by bankruptcy, moratorium, insolvency, fraudulent
conveyance, reorganization, liquidation or other laws
relating to or affecting creditors' rights and remedies or
by equitable principles.
SECTION 3.4. No Contravention. Except as set forth in
Schedule 3.4, the execution, delivery and performance of
this Agreement by Sellers and the consummation by Sellers of
the transactions contemplated hereby, and the fulfillment of
and compliance by Sellers with the terms and conditions
hereof, do not and will not:
(a) conflict with or violate any provisions of
the Articles of Incorporation or By-Laws of Quaker,
Gaines or QOAC;
(b) require any consent, approval or notice under
or conflict with, permit or result in a termination or
breach of, or constitute (with or without notice or
lapse of time or both) a default under, or accelerate
or permit the acceleration of any performance required
by, any Contract, Permit or Plan to which Quaker,
Gaines or QOAC is a party, under which any of them has
any rights, or by which Quaker, Gaines or QOAC or any
of the Acquired Assets is bound or subject;
(c) violate any law, statute or ordinance or any
rule, regulation, order, writ, injunction or decree of
any court or of any Governmental Authority applicable
to the Pet Food Business, or by which any of the
Acquired Assets may be bound or subject; or
(d) require any filing, declaration or
registration with, or permit, consent or approval of,
or the giving of notice to, any Governmental Authority;
excluding from the foregoing Sections 3.4(a) through
(d);
(i) such conflicts, violations, breaches,
defaults, accelerations, filings, declara-
tions, registrations, permits, consents,
approvals and notices, the absence of which,
either singly or in the aggregate, would not
be and cannot reasonably be expected to be
material;
(ii) any consents or waivers required in
connection with the Assumed Contracts or
Permits;
(iii) any local filings or recordings to be made by
Purchaser that may be necessary to transfer
any of the Acquired Assets; and
(iv) the filing required under the HSR Act and
expiration of the applicable waiting periods
under the HSR Act.
SECTION 3.5. Financial Statements. Attached as
Schedule 3.5(a) are the following financial statements: (i)
Statement of NVGP (U.S. Business) for the fiscal year ended
June 30, 1994, (ii) Statement of NVGP (U.S. Business) for
the period beginning July 1, 1994 and ending December 31,
1994, (iii) Statement of Assets to be Sold (U.S. Business)
as of December 31, 1994, (iv) Statement of NVGP (Canadian
Business) for the fiscal year ended June 30, 1994, (v)
Statement of NVGP (Canadian Business) for the period
beginning July 1, 1994 and ending December 31, 1994, and
(vi) Statement of Inventory to be Sold (Canadian Business)
as of December 31, 1994 (the "Financial Statements").
Sellers have provided and agree to continue to provide
Purchaser additional monthly financial statements of the
type specified in clauses (i) through (vi) above as soon as
practicable after they were or are prepared through the
Closing Date (the "Monthly Financial Statements").
Schedule 3.5(b) sets forth a list of all line-item
adjustments to NVGP used by Sellers to calculate operating
income of the Pet Food Business. Except as noted in the
Financial Statements, or otherwise set forth in Schedule
3.5(a), the Financial Statements:
(a) were prepared from the books and records of
Sellers; and
(b) have been prepared on a consistent basis for all
periods presented and follows consistent
application of internal accounting practices used
by Sellers and fairly present, in all material
respects, the assets of the Pet Food Business to
be sold by Sellers as of the date set forth there-
in and the NVGP of the Pet Food Business for the
periods indicated.
The books, records and accounts relating to the Pet Food
Business are accurate and complete in all material respects.
SECTION 3.6. Title to Acquired Assets.
(a) The Owned Real Property being transferred to
Purchaser is owned in fee simple and is free and clear of
any liens, charges, pledges, security interests, rights,
easements, covenants, agreements, conditions, restrictions
or other encumbrances (collectively, "Liens") except for (i)
Taxes which are not yet due and payable (collectively,
"Taxes Not Yet Due and Payable"), and the claims of
contractors, materialmen, repairmen and similar persons
("Mechanic's Liens"), which are not yet due and payable,
(ii) restrictive covenants, conditions, restrictions,
easements, rights-of-way, and other similar non-monetary
Liens that would not and could not reasonably be expected
to, individually or in the aggregate, materially interfere
with (1) how any Owned Real Property is used, occupied or
operated as of the Closing Date or (2) how any Owned Real
Property is intended to be used, occupied and operated upon
the completion of any alteration, modification, expansion,
replacement or construction commenced on or before the
Closing Date, (iii) any existing applicable building and
zoning ordinances, and (iv) the Liens set forth in Schedule
3.6. Quaker and Gaines, as applicable, have good and valid
title to all of the other tangible assets and properties
included in the Acquired Assets, in each case free and clear
of any Liens, except for (A) Taxes Not Yet Due and Payable
and Mechanic's Liens which are not yet due and payable and
(B) furniture, office supplies and Inventory disposed of or
consumed by Quaker and Gaines, as applicable, in the
ordinary course of business between the date hereof and the
Closing Date. The exceptions to title referred to in this
Section 3.6(a) above, except as set forth in Section 3.6(b)
subsections (i) through (vi), are collectively referred to
herein as the "Permitted Liens." To the knowledge of
Sellers and except as set forth in Schedule 3.6, all
Physical Assets currently used in the Pet Food Business,
except for those Physical Assets having an aggregate value
of not more than $250,000, are in good condition
commensurate with their age and expected useful life, and
are in working order and repair and have been maintained in
accordance with reasonable maintenance schedules. Except as
set forth in Schedule 3.6, none of Quaker, Gaines or any of
their Affiliates has entered into any material leases,
subleases, licenses or other agreements currently in effect
relating to the use or occupancy of real property in
connection with the Acquired Assets or the Pet Food
Business.
(b) To the knowledge of Sellers and except as
indicated in Schedule 3.6, with respect to each parcel of
Owned Real Property:
(i) All buildings, structures, fixtures,
systems and other improvements on the
Owned Real Property used in the Pet Food
Business as of the Closing Date are in
good condition commensurate with their
age and expected useful life, and in
working order and repair and have been
maintained in accordance with reasonable
maintenance schedules;
(ii) All water, gas, electrical, steam,
compressed air, telecommunication,
sanitary and storm sewage lines and
systems and other systems serving the
Owned Real Property are installed and
operating as of the Closing Date and any
so called hook-up fees and other
associated charges have been fully paid;
(iii) As of the Closing Date, the existence,
use, occupancy and operation of each
such building, structure or other
improvement used in the Pet Food
Business as of the Closing Date is not
dependent on the granting of any special
permit, exception, approval or variance
which has not been obtained by Sellers
or Gaines and no such item obtained by
Sellers or Gaines will be adversely
affected by the transfer of the Owned
Real Property by Seller to Purchaser;
(iv) There is no pending or threatened (A)
changes of zoning, building or other
similar laws, ordinances or regulations
adversely affecting such property which
would or could reasonably be expected to
materially interfere with how any Owned
Real Property is used, occupied or
operated as of the Closing Date or (B)
condemnation of such property;
(v) Neither Sellers nor Gaines has received
notice from any Governmental Authority
requiring work to be done or
improvements to be made upon such
property and has no knowledge of the
enactments or adoption of any ordinance
or resolution by any such Authority
authorizing work or improvements for
which an assessment may be levied
against such property; and
(vi) As of the Closing Date, all buildings,
structures, fixtures, and other
improvements erected on the Owned Real
Property, as used in the Pet Food
Business, conform in all material
respects with all applicable building
and other similar laws, codes,
ordinances, rules, regulations and
orders of Governmental Authorities.
SECTION 3.7. Contracts.
(a) Schedule 3.7(a) lists all Contracts, whether
oral, written or by course of conduct, relating to the
Pet Food Business or the Acquired Assets and (i) which
involve the payment or receipt, or the potential or
contingent liability or rights for payment or receipt,
including any indemnity obligation, in excess of
$250,000 during the remaining term thereof, or (ii)
which have any Affiliate of Sellers as the counterparty
thereto, excluding purchase orders and sales orders
made with unrelated third parties in the ordinary
course of business or (iii) the Contracts referred to
in the next sentence (collectively, the "Material
Contracts"). The types of Contracts disclosed on
Schedule 3.7(a), without respect to the amount to be
paid or received thereunder, also shall include the
following: (A) collective bargaining Contracts or
similar arrangements with any labor union or other
similar organization; (B) Contracts containing
covenants by the Pet Food Business not to compete in
any line of business; (C) consent decrees; (D)
Contracts for the sale or purchase of any assets of or
for the Pet Food Business other than in the ordinary
course of business; (E) indentures, mortgages,
industrial revenue bond agreements, notes, loan or
credit agreements or other agreements or obligations
relating to the borrowing of money or to a guaranty or
assumption, directly or indirectly, of obligations of
others; (F) security agreements, pledges, conditional
sale agreements or title retention agreements; or (G)
Contracts with any current or former officer, director,
employee or shareholder or any member of their family
or their Affiliates; in each case solely to the extent
such Contracts involve payments or have a value of more
than $100,000. Except as otherwise indicated in
Schedule 3.7(a), true and complete copies of each
written Material Contract and true and complete written
summaries of each oral Material Contract described in
Schedule 3.7(a) (together with any and all
modifications, amendments or supplements thereto) have
been delivered to or made available for inspection by
Purchaser prior to execution of this Agreement.
(b) Except as set forth in Schedule 3.7(b), all
Material Contracts are valid and binding obligations of
Sellers, enforceable in accordance with their terms,
except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, fraudulent
conveyance, reorganization, liquidation or other laws
relating to or affecting creditors' rights and remedies
or by equitable principles, and in full force and
effect. Except as set forth in Schedule 3.7(b), no
default by Quaker or Gaines exists under any Material
Contract and there does not exist any event applicable
to Quaker or Gaines that, with notice or lapse of time
or both, would or could reasonably be expected to
constitute an event of default or result in a right to
accelerate or terminate or a loss of rights under any
Material Contract. To the best of Sellers' knowledge,
except as set forth in Schedule 3.7(b), no other party
to any Material Contract is currently in default
thereunder and neither Quaker nor QOAC is aware of any
event applicable to such other party that, with notice
or lapse of time or both, would or reasonably could be
expected to constitute an event of default or result in
a right to accelerate or terminate or a loss of rights
under any Material Contract.
(c) Except as set forth on Schedule 2.7(b), each
Material Contract is capable of being assigned or
transferred to Purchaser without the consent or waiver
of the counterparty (or parties) thereto.
SECTION 3.8. Employee Benefit Plans.
(a) Schedule 3.8 hereto contains a true and com-
plete list of each pension, bonus, deferred
compensation, incentive compensation, stock purchase,
supplemental retirement, severance or termination pay,
employment contract, stock option, hospitalization,
medical, life insurance, dental, disability, salary
continuation, vacation, supplemental unemployment
benefits, profit-sharing, retirement, union contract or
other employee benefit plan, program, policy or
arrangement (whether oral or written) maintained, con-
tributed to, or required to be contributed to, by
Sellers or Gaines for the benefit of any current or
former employee of the Pet Food Business (collectively,
"Plans"). Sellers have delivered or made available to
Purchaser true and complete copies of all documents
embodying the Plans. The Plans sponsored by Gaines are
hereinafter referred to collectively as, the "Gaines
Plans".
(b) Except as described in Schedule 3.8, (i) all
of the Plans which are "employee pension benefit
plans," within the meaning of Section 3(2) of ERISA
(each a "Pension Plan") and which are intended to meet
the requirements for qualification of Section 401(a) of
the IRC are in substantial compliance with such
requirements and their related trusts are exempt from
taxation under Section 501(a) of the IRC; (ii) the IRS
has issued a favorable determination letter, with
respect to the qualification of each such Pension Plan
under the relevant provisions of the IRC in effect
before the Tax Reform Act of 1986, and the IRS has not
taken any action to revoke any such letter; (iii) each
Plan has been operated in all material respects in
accordance with its provisions and in compliance with
the statutes, rules and regulations governing each such
plan; (iv) no "disqualified person" or "party-in-
interest" (as defined in Section 4975 of the IRC and
Section 3 of ERISA, respectively) has engaged in any
"prohibited transaction," as such term is defined in
Section 4975 of the IRC or Section 406 of ERISA, which
could subject Purchaser to any tax or penalty imposed
under Section 4975 of the IRC or Section 502(i) of
ERISA; (v) no event has occurred and there has been no
failure to act on the part of Sellers or a fiduciary of
any Plan that could subject Purchaser to the imposition
of any tax or penalty; (vi) there are no actions, suits
or claims pending (other than claims for benefits)
against any Plan or against the assets of any Plan
relating to the Pet Food Business; (vii) each Pension
Plan which is subject to Part III of Subtitle B of
Title I of ERISA has been maintained in compliance with
the minimum funding standards of ERISA and Sellers
neither have sought nor received a waiver of funding
requirements with respect to any Pension Plan; (viii)
no steps have been taken to terminate any Plan which is
subject to Title IV of ERISA and no proceeding has been
initiated by the Pension Benefits Guaranty Corporation
to terminate any such Plan or to appoint a trustee to
administer any such Plan; and (ix) no "reportable
event" within the meaning of Section 4043 of ERISA and
the regulations thereunder for which notice has not
been waived by regulation has occurred with respect to
any Gaines Plan.
(c) None of the Plans is a "multiemployer plan"
as defined in ERISA Section 3(37).
SECTION 3.9. Absence of Certain Changes. Except as
set forth in Schedule 3.9, with respect to both the Pet Food
Business and the Acquired Assets, none of Quaker, QOAC or
Gaines or any Affiliate of Quaker has since December 31,
1994 (except solely in the case of clause (i) below, since
June 30, 1994):
(a) permitted or allowed any of the Acquired
Assets to be mortgaged, pledged or subjected to any
Liens, other than the Permitted Liens;
(b) materially written down or materially written
up the value of any of the Inventory;
(c) sold, transferred or leased any tangible or
intangible material assets, and since December 31,
1994, sold, transferred or leased any tangible or
intangible assets which would have been included in the
definition of Acquired Assets but for such sale, trans-
fer or lease; other than (i) sales of Inventory and the
disposal or consumption of furniture and office
supplies, in each case in the ordinary course of busi-
ness and (ii) sales or disposal of Physical Assets
which collectively have an aggregate value of less than
$650,000 and are not otherwise material to the Pet Food
Business;
(d) granted increases in the compensation of any
Transferred Employee, which increases singly or in the
aggregate are material, other than in the ordinary
course of business and consistent with past practice;
(e) adopted, entered into or agreed to enter
into, or amended or agreed to amend any Plans with
respect to the Pet Food Business which singly or in the
aggregate are or would or reasonably could be expected
to be material to the Pet Food Business taken as a
whole, other than in the ordinary course of business
and consistent with past practice;
(f) otherwise operated the Pet Food Business
other than in the ordinary course;
(g) made any changes in the customary methods
used in operating the Pet Food Business (including its
marketing, selling and pricing practices and policies)
which singly or in the aggregate are or would or
reasonably could be expected to be material to the Pet
Food Business taken as a whole;
(h) changed any methods of accounting for the
Acquired Assets or the Pet Food Business;
(i) suffered any changes in the assets, liabili-
ties, earnings, business or financial condition which
have been or which would or reasonably could be
expected to be either individually or in the aggregate
materially adverse;
(j) amended the certificate of incorporation or
by-laws of Gaines or merged Gaines with or into or
consolidated it with any other Person or in any way
changed in any manner the character of its business;
(k) waived any right of material value under any
Material Contract;
(l) failed to perform in any material respect any
of its obligations, or suffered or permitted to exist
and be continuing any material default by it under any
Material Contract; or
(m) agreed, whether in writing or otherwise, to
take any of the actions set forth in this Section 3.9.
SECTION 3.10. Litigation. Except as set forth in
Schedule 3.10, (a) there are no claims, actions, suits,
proceedings (including arbitration and alternate dispute
resolution proceedings) or investigations pending or, to
Sellers' knowledge, threatened by or against Sellers, Gaines
or any Affiliate of Quaker that are, or would or could
reasonably be expected to be material either individually or
in the aggregate with respect to (i) the Pet Food Business,
(ii) the Acquired Assets, or (iii) the transactions
contemplated hereby, at law or in equity or before or by any
court or public or governmental authority and (b) there are
no orders, decrees or judgments pending or in effect against
Sellers, Gaines or any Affiliates of Quaker that are, or
would or could reasonably be expected to be material either
individually or in the aggregate with respect to (i) the Pet
Food Business, (ii) the Acquired Assets or (iii) the
transactions contemplated hereby.
SECTION 3.11. Compliance with Laws.
(a) Except as set forth in Schedule 3.11(a), the
Pet Food Business has, for the two-year period next
preceding the date of this Agreement, been conducted in
compliance in all material respects with all statutes,
laws, rules, regulations, ordinances, decrees and
orders applicable to the ownership of the Acquired
Assets and the operation of the Pet Food Business which
were in effect on the appropriate dates (including
those relating to health and safety matters but
excluding those relating to environmental matters) and
Sellers and Gaines have not received, and are not aware
of the threatened receipt of, any notice or citation
that they have failed to comply in any material respect
with any such statutes, laws, rules, regulations,
ordinances, decrees or orders. Except as set forth in
Schedule 3.11(a), Quaker and Gaines, as applicable,
currently hold and are in compliance in all respects
with all Permits necessary for the ownership of the
Acquired Assets and the operation of the Pet Food
Business. All such Permits which are material are
listed in Schedule 3.11(a).
(b) Except as set forth in Schedule 3.11(b):
(i) for the five year period next preceding
the date of this Agreement, the Pet Food Business
has been conducted in compliance in all material
respects with all Applicable Environmental Laws
and decrees and orders issued thereunder
applicable to the ownership of the Acquired Assets
and the operation of the Pet Food Business which
were in effect on the appropriate dates, and
Sellers and Gaines have not received, and are not
aware of the threatened receipt of, any notice of
failure to comply in any material respect with
such Applicable Environmental Laws, decrees or
orders;
(ii) except as permitted by, and in compli-
ance with, the Applicable Environmental Laws, (A)
the Acquired Assets, including the Owned Real
Property, and any Other Real Property, have not
been used for the generation, use, storage,
manufacture, transportation, treatment or disposal
of Hazardous Substances, and (B) no Hazardous
Substances, including asbestos-containing
materials and polychlorinated biphenyls, are
currently located on the Owned Real Property or
any Other Real Property;
(iii) there has been no releasing, spilling,
leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching,
migrating, disposing or dumping of Hazardous
Substances which would or could reasonably be
expected to result in any material liability
(hereinafter a "Hazardous Discharge") from, onto,
or into the Acquired Assets, including the Owned
Real Property and any Other Real Property, and no
contaminated soil or groundwater for which
Applicable Environmental Laws require a response
action or corrective action has resulted therefrom
on the Owned Real Property or any Other Real
Property, or any real property adjacent to such
properties;
(iv) neither the Acquired Assets, including
the Owned Real Property and any Other Real
Property, nor the Sellers' or Gaines' operation of
the Pet Food Business, is subject to any
outstanding or, to Sellers' knowledge, threatened,
complaint, summons, citation, notice, directive,
order, claim, litigation, proceeding, judgment
letter, request for information or other written
communication from any Governmental Authority or
any private party, which would or could reasonably
be expected to result in any material liability:
(A) involving a Hazardous Discharge, on or off-
site, or (B) objecting to odor, noise or dis-
charges of liquid, solid or gaseous materials from
the Acquired Assets, including the Owned Real
Property and any Other Real Property included in
the Acquired Assets, whether hazardous or not
(hereinafter "Environmental Complaints");
(v) there are not currently and, to the
knowledge of Sellers, never have been any
underground storage tanks used or located on the
Owned Real Property, or any Other Real Property
included in the Acquired Assets, which would or
could reasonably be expected to result in any
material liability under Applicable Environmental
Laws;
(vi) to Sellers' Knowledge, there are no out-
standing or threatened Environmental Complaints
against the owners or operators of any of the
facilities that received Hazardous Substances
generated by Sellers or Gaines in the course of
conducting the Pet Food Business that which would
or could reasonably be expected to result in any
material liability in connection with the Acquired
Assets or the Pet Food Business; and
(vii) none of the Owned Real Property is
subject to the Illinois Responsible Property
Transfer Act.
SECTION 3.12. Intellectual Property.
(a) Schedule 3.12(a) sets forth a complete and
accurate list of:
(i) all registered trademarks and tradenames
in the Territory and other foreign countries that
relate solely to the Pet Food Business and all
registrations and pending applications for
registration of trademarks and tradenames that
relate solely to the Pet Food Business filed in
the Territory and foreign countries on behalf of
Quaker, Gaines, or Affiliates;
(ii) all patents issued in the Territory to
Quaker, Gaines, and Affiliates that are used
solely in connection with the Pet Food Business
and all pending patent applications filed in the
Territory by or on behalf of Quaker, Gaines, or
Affiliates that relate solely to the Pet Food
Business; and
(iii) all copyright registrations in the
Territory and all pending applications for
copyright registrations in the Territory filed by
or on behalf of Quaker or Gaines and used in the
Pet Food Business, including copyrights,
registrations and applications for registrations
for printed matter, databases, software and source
codes used by or on behalf of Quaker and Gaines
and used solely in the Pet Food Business.
The foregoing shall hereinafter be referred to
collectively as, the "Intellectual Property".
(b)(i) All of the trademarks, as set forth in
Schedule 3.12(b)(i) are owned by Quaker and
Gaines, as applicable, free and clear of any
liens, charges, pledges, security interests or
other similar encumbrances, are enforceable, valid
and subsisting, and do not conflict with or
infringe on the rights of others.
(ii) Except as set forth in Schedule
3.12(b)(ii), each other item of Intellectual
Property, including all trademarks not set forth
in Schedule 3.12(b)(i) or 2.1(i), and all Formulas
are owned by Quaker, Gaines, or Affiliates, as
applicable, free and clear of any liens, charges,
pledges, security interests, or other similar
encumbrances, and, to Sellers' Knowledge, such
other items of Intellectual Property and Formulas
do not conflict with or infringe on the rights of
others. Except as set forth in Schedule
3.12(b)(ii), to Sellers' Knowledge, each trademark
not set forth in Schedule 3.12(b)(i) or 2.1(i)is
valid and subsisting.
(iii) Except as set forth in Schedule
3.12(b)(iii), no claims, demands or proceedings
are pending that challenge the rights of Quaker,
Gaines or Affiliates in any respect in and to or
restrict the rights of Quaker, Gaines or
Affiliates to use Intellectual Property, Trade
Secrets or Licensed Trade Secrets, Licensed
Patents and neither Quaker, Gaines nor Affiliates
has received any written notice from any third
party alleging that its use of the Intellectual
Property, the Trade Secrets, Licensed Patents or
the Licensed Trade Secrets is infringing on the
rights of such third party. To Sellers'
Knowledge, no claims, demands or proceedings are
pending that challenge the rights of Sellers,
Gaines or Quaker's Affiliates in any respect, in
and to or restrict the right of Sellers, Gaines or
Quaker's Affiliates to use the Additional
Intellectual Property or to Sellers' Knowledge,
neither Sellers, Gaines or Quaker's Affiliates has
received any written notice from any third party
alleging that its use of the Additional
Intellectual Property is infringing on the rights
of such third party.
(iv) Except as set forth in Schedule
3.12(b)(iv), neither Sellers, Gaines nor Quaker's
Affiliates has granted any licenses or other
rights nor has Sellers, Gaines or Quaker's
Affiliates any obligation to grant in the
Territory as related to the Pet Food Business
licenses or other rights to any of the
Intellectual Property or any of the Trade Secrets,
and neither Quaker, Gaines nor Affiliates has
granted any licenses or other rights nor has
Quaker, Gaines or Affiliates any obligation to
grant in the Territory as related the Pet Food
Business any licenses or other rights to any of
the Licensed Patents or any of the Licensed Trade
Secrets.
(v) Except as set forth in Schedule
3.12(b)(v), neither Quaker nor Gaines has made any
claim of any violation or infringement by others
of its rights to the Intellectual Property, the
Trade Secrets, Licensed Patents or the Licensed
Trade Secrets and, to Sellers' Knowledge, neither
Sellers, Gaines nor Quaker's Affiliates is
aware of any basis for the making of any such
claim.
(vi) Quaker and Gaines, as applicable, own
the Licensed Trade Secrets and Licensed Patents or
have a right or valid license to use any Licensed
Trade Secrets and Licensed Patents that are not
owned and have the right to sublicense Purchaser
to use such Licensed Trade Secrets and Licensed
Patents to the extent such sublicenses are
permitted by law.
(vii) None of Sellers, Quaker, Gaines nor
Quaker's Affiliates makes in the Section 3.12 (b)
any representation or warranty with respect to the
Canadian Patents or the Foreign Trademarks.
SECTION 3.13. Taxes. (a) There are no pending or, to
Sellers' Knowledge, threatened actions or proceedings,
assessments or collections of Taxes with respect to the
Acquired Assets that could subject Purchaser to any
liability for such Taxes for the period prior to the Closing
Date or could impair any of the Acquired Assets.
(b) Except as set forth in Schedule 3.13:
(i) All Tax Returns required to be filed by
or with respect to Gaines and any affiliated,
consolidated, combined, or unitary group of which
Gaines is or has been a member have been timely filed
except where the failure to file will not and could not
reasonably be expected to have a material adverse
effect on the financial condition of Gaines, and all
such Tax Returns are true and complete in all material
respects. All Taxes shown due on such Returns have
been timely paid by Gaines (or have been paid on its
behalf).
(ii) Gaines is not required to make any
adjustment pursuant to IRC Section 481(a) (or any
predecessor provision) by reason of any change in any
of its accounting methods, and there is no application
pending with any taxing authority requesting permission
for any changes in any of its accounting methods. The
IRS has not proposed any such adjustment or change in
accounting method.
(iii) Gaines has duly and timely withheld
from employee salaries, wages, and other compensation
and paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for
all periods under all applicable laws.
(iv) Gaines is not obligated to make any
payments and is not a party to any agreements that
would obligate it to make any payments that would not
be deductible under IRC Section 280(g).
(v) During all taxable periods beginning in
1986, Gaines was a member of the affiliated group of
which Sellers were members and has been included in the
consolidated federal income tax return of Quaker and
its subsidiaries for each such period.
(vi) None of the Acquired Assets owned by
Sellers or any assets owned by Gaines is property that
the Purchaser or Gaines will be required to treat as
being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately
prior to the Tax Reform Act of 1986, or is "tax exempt
use property" within the meaning of IRC Section
168(h)(1).
(c) Neither Seller is a "foreign person" within
the meaning of IRC Section 1445(b)(2).
SECTION 3.14. Inventory. Except as set forth in
Schedule 3.14, the Inventory to be sold to Purchaser here-
under shall, on the Closing Date, consist of items that are
usable or saleable in the normal and ordinary course of the
Pet Food Business (including shelf-life) and will not be
adulterated, misbranded, mispackaged or mislabeled within
the meaning of, or in violation of, any applicable local,
state or federal food and drug laws or regulations. Except
as set forth in Schedule 3.14, the products sold or
delivered by the Pet Food Business prior to the date hereof
and the products to be sold between the date hereof and the
Closing were, or will be, usable or saleable in the normal
and ordinary course of the Pet Food Business and were not
and will not be, as the case may be, adulterated,
misbranded, mispackaged, or mislabeled within the meaning
of, or in violation of, any applicable local, state or
federal food and drug laws or regulations.
SECTION 3.15. Brokers and Finders. Except for
Goldman, Sachs & Co., with respect to which Sellers solely
shall be responsible, neither of Sellers nor any of their
respective Affiliates has employed any broker or finder or
incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions
contemplated by this Agreement.
SECTION 3.16. Insurance. Quaker and Gaines, as
applicable, have maintained and will continue to maintain
through the Closing Date a reasonable and customary program
of casualty and property insurance (which may include self-
insurance) with respect to the Acquired Assets and the Pet
Food Business. Quaker and Gaines, as applicable, have
provided Purchaser with a list of all property damage and
personal injury claims against it with respect to the Pet
Food Business and the Acquired Assets since July 1, 1991
involving any claim in excess of $50,000. Between the date
of this Agreement and the Closing Date, Sellers shall
provide or make available to Purchaser all information
pertaining to the Acquired Assets and the Pet Food Business
as reasonably requested by Purchaser or Purchaser's brokers
or insurers to effect insurance on the Acquired Assets and
the Pet Food Business at the Closing Date. Sellers agree
that in the event that a claim against Gaines is made at any
time in the future after the Closing, Sellers will provide
Purchaser with such information as Purchaser may request
including but not limited to copies of all insurance
policies which may be applicable to such claim.
SECTION 3.17. Labor Matters. With respect to the Pet
Food Business, except as disclosed in Schedule 3.17,
Sellers, Gaines and any Affiliate of Quaker, as applicable,
and within the past five years (i) have been and are in
material compliance with all laws, rules, regulations and
ordinances respecting employment and employment practices,
terms and conditions of employment and wages and hours, (ii)
are not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing, (iii) have not
engaged in any unfair labor practice or discriminated on the
basis of race, color, religion, sex, national origin, age or
handicap in its employment practices, and no complaints are
pending or, to the knowledge of Sellers, threatened against
either Quaker or Gaines before any public or governmental
authority regarding any such unfair labor practice or
discrimination and (iv) has not, in the five-year period
next preceding the date of this Agreement experienced a
labor strike or a threatened labor strike. Except as set
forth in Schedule 3.17, no employees of the Pet Food
Business are represented by any union or collective
bargaining unit and, since January 1, 1993, none of Sellers,
Gaines nor any Affiliates of Quaker have received written
notice that the employees of the Pet Food Business have any
intention to organize or join a union, labor organization or
collective bargaining unit.
SECTION 3.18. Accuracy of Sellers' Information
Furnished. The information furnished to Purchaser by
Sellers and their respective Affiliates specifically set
forth in this Agreement and the Schedules hereto is true,
correct and complete in all material respects. Such
information states all material facts required to be stated
therein and does not omit to state a material fact necessary
to make the statements therein, in light of the
circumstances under which such statements are made, not
misleading.
SECTION 3.19. Sufficiency of Acquired Assets. The
Acquired Assets constitute all of the assets, properties and
rights necessary to, primarily used in, or otherwise
materially useful to, the conduct of the Pet Food Business.
SECTION 3.20. Capitalization.
(a) As of the date hereof, the authorized capital
stock of QOAC consists of 1000 shares of common stock, $1.00
par value; 100 shares are issued and outstanding, all of
which are owned by Quaker, free and clear of any Liens; and
all such outstanding shares are validly issued and are fully
paid and nonassessable and not subject to any preemptive or
other similar rights.
(b) As of the date hereof, the authorized capital
stock of Gaines consists of 1000 shares of common stock,
$1.00 par value; 100 shares are issued and outstanding, all
of which are owned by QOAC, free and clear of any Liens;
QOAC has the absolute and unrestricted right, power and
authority to sell the Gaines Stock to Purchaser; and all
such outstanding shares are validly issued and are fully
paid and nonassessable and not subject to any preemptive or
other similar rights. All voting rights of Gaines are
vested exclusively in the Gaines Stock. Upon delivery to
Purchaser of certificates evidencing the Gaines Stock at the
Closing pursuant to the terms and conditions of this
Agreement, Purchaser shall acquire good and valid title to
the Gaines Stock, free and clear of any Liens, other than
any Liens created by or through Purchaser.
(c) Neither QOAC nor Gaines has outstanding any
(i) securities convertible into, or exercisable or
exchangeable for, any of its capital stock, (ii) options,
warrants or rights to subscribe for the purchase of any of
its capital stock, or (iii) agreements, arrangements,
commitments or understandings providing for the issuance,
sale, purchase or redemption of its capital stock.
SECTION 3.21. Liabilities. Except for the Assumed
Liabilities, neither the Pet Food Business nor Gaines has
any indebtedness or liabilities (whether absolute,
contingent, accrued or otherwise) that Purchaser is assuming
that would be required to be included on a balance sheet or
in the related notes, schedules or exhibits thereto
prepared in accordance with GAAP.
SECTION 3.22. No Subsidiaries. Gaines does not
directly or indirectly own, or have any options, rights,
agreements or commitments to acquire, any securities or
equity interests in any Person.
SECTION 3.23. No Other Representations or Warranties.
Except for the representations and warranties contained in
this Agreement and in the other documents to be delivered
pursuant to this Agreement which are attached as Schedules
or Exhibits hereto, neither Sellers nor any other Person
makes any other express or implied representation or
warranty on behalf of Sellers or their respective
Affiliates, and Sellers hereby disclaim any such representa-
tion or warranty, with respect to the execution and delivery
of this Agreement or the consummation of the transactions
contemplated hereby or with respect to the Acquired Assets
or the Pet Food Business, notwithstanding the delivery or
disclosure to Purchaser or any of its officers, directors,
employees, agents or representatives of any documentation or
other information by or on behalf of Sellers or any of their
respective Affiliates with respect to any one or more of the
foregoing, including, without limitation, any projections or
forecasts made by Sellers or delivered to Purchaser by or on
behalf of Sellers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As of the date of this Agreement and as of the Closing
Date, Purchaser hereby represents and warrants to Sellers as
follows:
SECTION 4.1. Incorporation. Purchaser is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Pennsylvania.
SECTION 4.2. Authority. Purchaser has all requisite
corporate power and authority to execute, deliver and per-
form this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Purchaser, the performance by Purchaser of its
obligations hereunder and the consummation by Purchaser of
the transactions contemplated hereby have been duly autho-
rized by the Board of Directors of Purchaser, and no other
corporate act or proceeding on the part of Purchaser is
necessary to approve the execution and delivery of this
Agreement, the performance of Purchaser's obligations
hereunder or the consummation by Purchaser of the trans-
actions contemplated hereby.
SECTION 4.3. Execution and Binding Effect. This
Agreement has been duly and validly executed and delivered
by Purchaser and constitutes the legal, valid and binding
obligation of Purchaser and will be enforceable against
Purchaser in accordance with its terms, except as such
enforceability may be limited by bankruptcy, moratorium,
insolvency, fraudulent conveyance, reorganization, liqui-
dation or other laws relating to or affecting creditors'
rights and remedies or by equitable principles.
SECTION 4.4. No Contravention. Except as set forth in
Schedule 4.4, the execution, delivery and performance of
this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby and the
fulfillment of and compliance by Purchaser with the terms
and conditions hereof, do not and will not:
(a) conflict with or violate any provisions of
the Purchaser's Articles of Incorporation or By-Laws;
(b) require any consent, approval or notice under
or conflict with, result in a termination or breach of,
or constitute (with or without notice or lapse of time
or both) a default under, or accelerate or permit the
acceleration of any performance required by any Con-
tract or plan to which Purchaser is a party or by which
Purchaser or any of its assets or properties is bound
or subject;
(c) violate any law, statute or ordinance or any
rule, regulation, order, writ, injunction or decree of
any court of any Governmental Authority applicable to
Purchaser or by which any of its assets or properties
may be bound or subject; or
(d) require any filing, declaration or registra-
tion with, or permit, consent or approval of, or the
giving of notice to, any public or governmental
authority; excluding from the foregoing Sections 4.4(a)
through (d):
(i) such conflicts, violations, breaches,
defaults, accelerations, filings, declarations,
registrations, permits, consents, approvals and
notices, the absence of which, either singly or in
the aggregate are not material;
(ii) any consents or waivers required in
connection with the Assumed Contracts or Permits;
(iii) any local filings or recordings that may
be necessary to transfer any of the Acquired
Assets; and
(iv) the filing required under the HSR Act
and expiration of the applicable waiting periods
under the HSR Act.
SECTION 4.5. Litigation. There is no claim, action,
suit, proceeding (including arbitration and alternate
dispute resolution proceedings) or investigation pending or,
to Purchaser's knowledge, threatened by or against Purchaser
which reasonably could be expected to have a material
adverse effect on the transactions contemplated hereby, at
law or in equity or before or by any court or public or
Governmental Authority. As of the date hereof, there is no
order, decree or judgment pending or in effect against
Purchaser with respect to the transactions contemplated
hereby.
SECTION 4.6. Brokers and Finders. Except for Dillon,
Read & Co. Inc., with respect to which Purchaser shall
solely be responsible, neither Purchaser nor any Affiliate
of Purchaser has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions
contemplated by this Agreement.
SECTION 4.7. Restricted Securities. Purchaser is
acquiring the Gaines Stock for its own account for invest-
ment purposes only and not with a view to or in connection
with the public resale or distribution thereof or any
interest therein. Purchaser shall not sell, offer for sale,
assign, transfer or dispose of the Gaines Stock or any
interest therein in violation of the Securities Act or any
applicable state securities or "blue sky" laws. Purchaser
is an "accredited investor" within the meaning of Rule 501
under Regulation D under the Securities Act.
SECTION 4.8. No Other Representations and Warranties.
Except for the representations and warranties contained in
this Agreement and in the other documents to be delivered
pursuant to this Agreement which are attached as Exhibits
hereto, neither the Purchaser nor any other Person makes any
other express or implied representation or warranty on
behalf of Purchaser or its Affiliates, and Purchaser hereby
disclaims any such representation or warranty, with respect
to the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby,
notwithstanding the delivery or disclosure to Sellers, any
of their respective officers, directors, employees, agents
or representatives of any documentation or other information
by or on behalf of Purchaser or any Affiliate with respect
to any one or more of the foregoing.
ARTICLE V
COVENANTS OF SELLERS
Sellers jointly and severally covenant and agree with
Purchaser as follows:
SECTION 5.1. Access; Confidential Information. From
the date hereof until the Closing Date, Sellers shall
furnish to Purchaser and its representatives all information
relating to the Pet Food Business reasonably requested by
Purchaser and provide access and any information pertaining
to any Acquired Assets that Purchaser may reasonably request
at such times as shall be mutually agreed upon; provided,
however, that nothing contained herein shall require Sellers
to furnish to Purchaser or provide Purchaser with access to
(i) any formulas, recipes, process sheets, mixing
instructions or cost information relating to the Pet Food
Business prior to the Closing, (ii) any marketing
information and/or pricing information which could have an
anticompetitive effect, or (iii) any financial information
except monthly financial information prepared in the same
manner as the Financial Statements included in Schedule
3.5(a). Any confidential information furnished to Purchaser
or made available for visual inspection shall be subject to
the terms of that certain Confidentiality Agreement entered
into between Quaker and Purchaser dated September 30, 1994,
as amended on January 16, 1995 ("Confidentiality
Agreement"). The provisions of the Confidentiality
Agreement shall survive any termination of this Agreement.
Sellers shall provide the Purchaser with copies of all
Permits material to the Pet Food Business within 15 days
after the date of this Agreement.
Sellers shall make available to Purchaser during
ordinary business hours upon the reasonable request of
Purchaser the employees of Sellers and Gaines referred to in
the definition of "Knowledge of Sellers" set forth in
Article I and the plant managers of the Pet Food Business.
SECTION 5.2. Conduct of Business.
Except as set forth in Schedule 5.2, from the date
hereof until the Closing Date, without the written consent
of Purchaser (which consent shall not unreasonably be
withheld), Sellers and Gaines shall:
(a) not operate the Pet Food Business other than
in the ordinary course of business and the Sellers and
Gaines shall use reasonable best efforts to keep the
Pet Food Business and the Acquired Assets intact and to
maintain the goodwill and reputation associated with
the Pet Food Business;
(b) not make any sale, transfer, lease or other
disposition of any material Acquired Assets or mort-
gage, pledge or otherwise create, permit or suffer to
exist a Lien with respect to any of the Acquired Assets
other than Mechanic's Liens and Taxes Not Yet Due and
Payable;
(c) not grant any increase in compensation to
Transferred Employees or any increase in the rate of
commission, bonus or other variable compensation or any
increase in any other direct or indirect remuneration
(including benefits) payable or to become payable to
any such employees, which increases singly or in the
aggregate are or would or could reasonably be expected
to be material;
(d) not fail to maintain the books, accounts and
records of the Pet Food Business on a basis consistent
with past practice;
(e) not enter into any lease of real property,
Material Contract, employee benefit plan, or Permit or
amend or cancel any Material Contract, Plan or Permit
in respect of the Acquired Assets or the Pet Food
Business;
(f) continue their existing practice relating to
maintaining the Acquired Assets in their present
operating condition and repair (ordinary wear and tear
excepted);
(g) replace any Acquired Assets that are
destroyed or become inoperable as a result of any
casualty, loss or damage;
(h) use reasonable best efforts to keep the
services of the employees (other than the Non-
Transferred Employees) of the Pet Food Business and to
maintain existing relationships with suppliers,
dealers, customers and others having business
relationships with the Pet Food Business;
(i) not permit any Physical Assets to be removed
from the Owned Real Property except for the disposal or
consumption of furniture and office supplies in the
ordinary course of business;
(j) not perform, take any action or incur or
permit or suffer to exist any of the acts,
transactions, events or occurrences of the type
described in Section 3.9, other than Section 3.9(i) or
take any action that would cause any of the
representations or warranties of Sellers to be untrue;
(k) not issue or sell any shares of capital stock
or other securities of Gaines, or grant or enter into
any options, warrants, rights, puts, calls,
commitments, agreements, arrangements or understandings
of any kind with respect thereto, or declare, set aside
or pay any dividend or other distribution in respect of
the capital stock of Gaines or otherwise in any manner
change or reorganize the capital structure of Gaines;
(l) not fail to maintain the validity and
enforceability of the Intellectual Property;
(m) not waive any right of material value under
any Material Contract or enter into or amend, except in
the ordinary course of business, any Material Contract
or other transaction which would, or could reasonably
be expected to, be materially adverse to the Acquired
Assets, business, operations, earnings, condition
(financial or otherwise) of the Pet Food Business;
(n) not engage in the sale of Products except in
the ordinary course of the Pet Food Business;
(o) not make any changes in the customary methods
used in operating the Pet Food Business (including the
marketing, selling and pricing practices and policies);
and
(p) not agree, whether in writing or otherwise,
to do any of the actions prohibited by, or not to do
any of the actions required by, Section 5.2;
(q) prior to the Closing, take all lawful action
which is necessary to (i) effect the transfer from
Gaines to Sellers (or any Affiliate of Quaker) of the
Arizona property and (ii) cause Sellers (or any
Affiliate of Quaker) to assume all liabilities relating
to the Arizona property irrespective of any limitations
contained herein;
(r) shall assign to Purchaser all right and
interests in and to all confidentiality agreements
relating to Pet Food Business and shall take all action
permitted under such agreements necessary to cause all
confidential information to be returned or destroyed;
and
(s) not make any change in list pricing to the
trade or trade deals that would or could reasonably be
expected to encourage the trade to materially increase
forward buying.
SECTION 5.3. [intentionally left blank]
SECTION 5.4. Reasonable Best Efforts; Notifications.
Sellers shall use their reasonable best efforts to fulfill
their conditions to Closing and otherwise to consummate the
transactions contemplated by this Agreement. Prior to the
Closing, Sellers shall as promptly as reasonably practicable
notify Purchaser in writing of the occurrence of any event
as to which it obtains knowledge that would or could
reasonably be expected to result in the failure of a
condition specified in Article VIII or IX hereof.
SECTION 5.5. HSR Act Filing. As promptly as is
practicable after the date hereof, Sellers shall make all
necessary filings applicable to them under the HSR Act and
make any amendments to such filings as may be required, and
will cooperate with Purchaser in connection with HSR Act
filings.
SECTION 5.6. Non-Compete Covenant.
(a) Effective as of the Closing, Sellers shall not,
and Sellers shall cause their Affiliates not to, for a
period of four years from and after the Closing Date,
directly or indirectly as a partner, joint venturer,
employer, contractor, consultant, shareholder, principal or
agent engage in, control, advise with respect to, manage,
act as a consultant to, receive any economic benefit from or
exert any influence upon the marketing, manufacture, sale,
distribution, offering or promoting for sale of the Products
in the Territory; provided that Sellers may, without
violating this covenant (i) own as an investment not in
excess of 5% of the securities of a corporation which
engages in such competition if such securities are traded on
a national securities exchange or traded publicly in the
over-the-counter market, (ii) own as an investment not in
excess of a 5% interest in any partnership which engages in
such competition, (iii) have an ownership interest otherwise
proscribed by this Section 5.5 if such interest arises as a
result of the acquisition of a business not principally
engaged in the proscribed conduct; provided that Seller
shall take all action to cause the pet food business
permitted to be acquired under this clause (iii) not to
materially expand the scope and magnitude of its business or
dispose of such pet food business within 12 months following
the acquisition thereof, (iv) be acquired by any Person that
engages in the proscribed conduct, or (v) in connection with
an employee benefit plan, the assets of which are managed by
an independent investment advisor, invest in any corporation
or other entity which engages in such competition. A
business entity shall not be principally engaged in the
proscribed conduct if its sales of the Products constitute
less than 10% of its total sales.
(b) Sellers shall not, and Sellers shall cause their
respective Affiliates not to, directly or indirectly, for
themselves or on behalf of any other Person induce or
attempt to induce any Transferred Employee to leave his or
her employment with Purchaser or Gaines at any time until
the expiration of two years from the Closing Date.
(c) Sellers shall not, and Sellers shall cause their
respective Affiliates not to, directly or indirectly, (i)
disclose, or (ii) use for their own benefit in the
Territory, or for the benefit of any other Person in the
Territory any Trade Secrets, except to the extent such Trade
Secrets (A) are or become available to the public or become
part of the public domain other than as a result of a
disclosure by Sellers or their respective Affiliates or (B)
become available to Sellers or their respective Affiliates
from a third party, which after due inquiry of such party,
is not known by Sellers or their respective Affiliates to be
in violation of any agreement with Purchaser. Nothing
contained in this Section 5.5(c) shall limit Sellers or
their respective Affiliates obligations under Section
5.5(a).
(d) Sellers acknowledge that in view of the nature of
the Pet Food Business and the business objectives of
Purchaser in acquiring it, and the consideration paid to
Sellers therefor, the foregoing territorial and time
limitations are reasonable and properly required for the
adequate protection of Purchaser and that in the event that
any such territorial or time limitation is deemed to be
unreasonable and is then reduced by a court of competent
jurisdiction, then, as so reduced, the territorial and/or
time limitation shall be enforced.
(e) Sellers further acknowledge that the remedy at law
for any breach by it of the agreements contained in this
Section 5.5 may be inadequate and that Purchaser shall be
entitled to seek injunctive relief without being required to
prove actual damages or post bond. This Section 5.5
constitutes an independent and severable covenant and if any
or all of the provisions of this Section 5.5 are held to be
unenforceable for any reason whatsoever, it shall not in any
way invalidate or affect the remainder of this Agreement
which shall remain in full force and effect. The parties
intend for the covenants of this Section 5.5 to be
enforceable to the maximum extent permitted by law, and if
any reviewing court deems any of such covenants to be
unenforceable or invalid, Purchaser and Sellers authorize
such court to reform (i) the unenforceable or invalid
provisions and to impose such restrictions as so reformed
and (ii) the remaining provisions as it deems reasonable.
SECTION 5.7. Material Change. From the date hereof
through the Closing, Sellers promptly shall inform Purchaser
in writing of any changes in the assets, liabilities,
earnings, business or financial condition of the Pet Food
Business which have been or would or could reasonably be
expected to be either individually or in the aggregate
materially adverse to the Pet Food Business or the Acquired
Assets or the transactions contemplated hereby.
SECTION 5.8. Preservation of Records. Sellers shall
preserve and, during regular business hours and upon
reasonable notice, use reasonable best efforts to make
available to Purchaser and its representatives for
inspection and copying all agreements, records, books and
other documents pertaining to the Pet Food Business or the
Acquired Assets (but excluding portions of such materials
that contain or reflect information relating to any other
business of Sellers) for periods prior to and including the
Closing Date, wherever located for the first to occur of six
years from the date of each such document or six years from
the Closing Date, for (a) the purposes of preparing Tax
returns and financial statements and responding to Tax
audits, (b) the purposes of prosecuting or defending any
claim, litigation, proceeding or investigation which arises
out of or relates to the Pet Food Business, the Acquired
Assets or this Agreement, and (c) any other reasonable
business purpose not detrimental to Sellers. If Purchaser
determines that it does not want Sellers to destroy such
agreements, records, books and other documents, Purchaser
shall give written notice to Sellers 90 days prior to the
applicable expiration date that Purchaser desires to take
possession of such agreements, records, books and other
documents, and then Sellers shall deliver such agreements,
records, books and other documents to Purchaser within 60
days after the date of the Purchaser's notice to Sellers
hereunder.
SECTION 5.9. Patent and Trade Secret Licenses. To the
extent not transferred to Purchaser pursuant to Section
2.1(f), and except as set forth in Schedule 3.12(b)(iv),
Sellers hereby grant to Purchaser an exclusive, perpetual,
irrevocable, assignable, royalty-free license in the
Territory, with a right to sublicense in the Territory, to
manufacture products using the technologies related to the
Pet Food Business claimed in the patents and pending patent
applications as set forth in Schedule 5.9 (collectively the
"Licensed Patents"). To the extent not transferred to
Purchaser pursuant to Section 2.1(g), and to the extent that
Sellers own or have a right to license, Sellers hereby grant
to Purchaser an exclusive, irrevocable, perpetual, royalty-
free license to use in the Territory (i) all technology
including formulae and manufacturing processes related to
the Pet Food Business and all claimed technology in respect
of any patents issued or pending patent applications filed
in the Territory, (ii) all trade secrets, know-how,
technology and manufacturing processes used in the Territory
and related to the Pet Food Business and (iii) all rights
that are similar to the Formulas and other intangible
personal property used in the Territory and related to the
Pet Food Business (items (i), (ii) and (iii) above being,
collectively, the "Licensed Trade Secrets").
SECTION 5.10. Assignment by Affiliates. Quaker and
Gaines shall, and shall cause Affiliates of Quaker to
assign, transfer, or convey, as applicable, to Purchaser all
right, title and interest in and to the Intellectual
Property and the Additional Intellectual Property.
SECTION 5.11. Product Claims. Prior to and following
the Closing, Sellers shall not take any action to encourage
or induce any Person to file claims after the second
anniversary of the Closing of the types referred to in
Sections 2.2(a)(v) and 2.2(a)(vi) with respect to goods
manufactured and sold by the Pet Food Business prior to the
Closing Date.
SECTION 5.12. Capital Improvements. Sellers shall
continue in the ordinary course of business, their capital
improvements program relating to the Pet Food Business
including, without limitation, any construction in progress.
SECTION 5.13. Release. Quaker, for itself and all of
its Affiliates, shall deliver to Purchaser a full release of
Gaines, effective the Closing Date, from any claims,
obligations, liabilities or debts each may have on the
Closing Date or in the future, to assert against or collect
from Gaines whether known or unknown, suspected or
unsuspected, whether arising prior to, on or after the
Closing Date, except for any and all claims arising under
this Agreement.
SECTION 5.14. Resignations. Sellers shall cause the
directors and officers of Gaines to deliver on the Closing
Date their written resignations effective upon the Closing.
SECTION 5.15. Program List Reimbursement. If and to
the extent that Purchaser implements any of the items set
forth on the Information List dated February 4, 1995 and
previously delivered, prior to the second anniversary of the
Closing Date, Sellers shall reimburse Purchaser, promptly
after the receipt of appropriate documentary evidence
therefor, for up to an aggregate of the $1,000,000 of
Purchaser's out-of-pocket expenses incurred in connection
therewith. Such obligation to reimburse Purchaser shall not
be subject to the limits on indemnification that Section
10.5 of this Agreement contains, including the Basket.
SECTION 5.16. Purchase of Equipment. On or before the
Closing, Quaker, at its sole cost and expense, shall
exercise its option under a Lease, dated June 14, 1977,
between Quaker and the City of Lawrence, Kansas, to purchase
the machinery and equipment that are subject to that Lease,
which machinery and equipment shall become a part of the
Acquired Assets. If for any reason Quaker is unable to
exercise such option or purchase such machinery and
equipment before the Closing Date, it shall make
arrangements reasonably satisfactory to Purchaser to permit
Purchaser to use such machinery and equipment on and after
the Closing Date and to transfer title to such machinery and
equipment after the Closing.
SECTION 5.17. Insurance. Sellers shall provide to
Purchaser prior to the Closing (i) a list of all property
damage and personal injury claims against it with respect to
the Pet Food Business and the Acquired Assets since July 1,
1991 involving all such claims relating to cumulative trauma
injury or asbestos related injuries irrespective of the
amount and (ii) to the extent that such information is
available, a list of all property, liability and casualty
insurance policies which have included Gaines as a named
insured since the date of Gaines' incorporation and which
shall include at a minimum the type of coverage, policy
numbers, amounts of coverage, insurers and dates of
coverage.
ARTICLE VI
COVENANTS OF THE PURCHASER
Purchaser covenants and agrees with Sellers as follows:
SECTION 6.1. Preservation of Records. Purchaser shall
preserve and, during regular business hours and upon
reasonable notice, use reasonable best efforts to make
available to Sellers and their representatives for
inspection and copying all agreements, records, books and
other documents pertaining to the Pet Food Business or the
Acquired Assets (but excluding portions of such materials
that contain or reflect information relating to any other
business of Purchaser) for periods prior to and including
the Closing Date, wherever located for the first to occur of
six years from the date of each such document or six years
from the Closing Date, for (a) the purposes of preparing tax
returns and financial statements and responding to tax
audits, (b) the purposes of prosecuting or defending any
claim, litigation, proceeding or investigation which arises
out of or relates to the Pet Food Business, the Acquired
Assets or this Agreement and (c) any other reasonable
business purpose not detrimental to Purchaser. If Sellers
determine that they do not want Purchaser to destroy such
agreements, records, books and other documents, Sellers
shall give written notice to Purchaser 90 days prior to the
applicable expiration date that Sellers desire to take
possession of such agreements, records, books and other
documents, and then Purchaser shall deliver such agreements,
records, books and other documents to Sellers within 60 days
after the date of the Sellers' notice to Purchaser
hereunder.
SECTION 6.2. Reasonable Best Efforts; Notifications.
Purchaser shall use reasonable best efforts to fulfill its
conditions to Closing and otherwise to consummate the
transactions contemplated by this Agreement. Prior to the
Closing, Purchaser shall as promptly as reasonably
practicable notify Sellers in writing of the occurrence of
any event as to which it obtains knowledge that, based on
facts actually known by Sellers on the date hereof, would or
could be reasonably expected to result in the failure of a
condition specified in Article VIII or IX hereof.
SECTION 6.3. HSR Act Filing. As promptly as is
practicable after the date hereof, Purchaser shall make all
necessary filings applicable to it under the HSR Act, and
make any amendments to such filings as may be required, and
will cooperate with Sellers in connection with HSR filings.
SECTION 6.4. Returns and Deductions. Prior to and
following the Closing, if Purchaser agrees to accept the
return of or takes any action to encourage or induce current
or former customers of the Pet Food Business to return or
deduct from future invoices payable to Sellers or their
Affiliates any goods sold by the Pet Food Business prior to
the Closing Date, Purchaser shall promptly pay to Sellers
the receivables relating to such goods actually so accepted,
returned or deducted.
ARTICLE VII
EMPLOYEE MATTERS
SECTION 7.1. Transferred Employees. Purchaser shall,
prior to the Closing Date, offer employment or cause Gaines
to offer employment in connection with the conduct of the
Pet Food Business effective after the Closing Date to those
employees of Sellers who are employed primarily in the Pet
Food Business and those employees of Gaines (collectively,
"Employees"), other than the employees identified in
Schedule 7.1(A) and employees who, immediately prior to the
Closing Date, are receiving long-term disability benefits
under a Plan ("Disabled Employees")(collectively "Non-
Transferred Employees"). The Employees other than the Non-
Transferred Employees are referred to herein as "Transferred
Employees"; provided, however, that any Disabled Employee
who is employed by Purchaser or Gaines within 90 days after
the Closing Date shall be treated as a Transferred Employee
from and after the date of such employment. In the case of
all employees of Gaines immediately prior to the Closing
Date ("Gaines Employees"), such employees shall be treated
as Transferred Employees without regard to whether an offer
of employment is made to or is accepted by them. Each offer
of employment to a non-bargaining unit Employee shall be on
substantially the same terms and conditions, with
substantially the same compensation and with substantially
comparable aggregate benefits (including Plans) as are
applicable to such employees immediately prior to the
Closing Date but in no event greater than such terms and
conditions of employment that Purchaser offers to its
similarly situated employees. With respect to bargaining
unit Employees, Purchaser shall assume the applicable
collective bargaining agreements and Purchaser's offer of
employment shall be upon same terms and conditions as
applicable to each such Employee immediately prior to the
Closing Date except with respect to the benefits provided
under Section 35 of the contract with the American
Federation of Grain Millers and Article IV, Section 2 of the
contract with the International Brotherhood of Firemen and
Oilers, Powerhouse Employees, Operators and Maintenance Men
AFL-CIO, which shall be replaced by Purchaser with similar
benefits. Schedule 7.1(B) lists salaries or wages for each
of the Transferred Employees set forth thereon, as
applicable to such employee on the date hereof and, if
different, as expected to be applicable to such employee on
the expected Closing Date. Purchaser shall continue the
employment of Transferred Employees for at least 90 days
following the Closing Date, except for any Transferred
Employee who voluntarily terminates employment or is
dismissed "for cause." The term "Transferred Employees"
shall not include any employees or former employees of
Quaker or Gaines who prior to the Closing Date have retired,
terminated employment or who are on long term disability.
No offer of employment will be made by Purchaser to
Non-Transferred Employees designated on Schedule 7.1(A), and
Sellers will be responsible for the termination of such
employees. From the date hereof through the Closing Date,
Sellers and their Affiliates will not, with respect to any
person identified as a Transferred Employee, employ or offer
to employ such persons for a position outside the Pet Food
Business or Gaines.
SECTION 7.2. Employee Benefit Transition.
immediately prior to the Closing Date, except as otherwise
provided in this Article VII,
(i) Purchaser and/or Gaines shall be
responsible for all claims, liabilities
and obligations arising from or relating
to the employment and/or termination of
employment on or after the Closing Date
of any Transferred Employee; and
(ii) Except to the extent otherwise provided
for in Section 7.4, Sellers shall be
responsible for all claims, liabilities
and obligations arising from or relating
to (A) the employment and/or termination
of employment prior to the Closing Date
of any Transferred or Non-Transferred
Employee, and of any Non-Transferred
Employee after the Closing Date or (B)
any actions or omissions involving any
employee benefit plan of Gaines (within
the meaning of Section 3(3) of ERISA) or
any other payroll practice of Gaines, as
conducted by the Sellers or Gaines prior
to the Closing Date.
(b) Purchaser or Gaines shall waive pre-existing
condition requirements, evidence of insurability provisions
or any similar provisions under any employee benefit plan or
compensation arrangements maintained or sponsored by or
contributed to by Purchaser or Gaines for such individuals
after the Closing Date.
Purchaser also shall grant credit under Purchaser's
health plans, for the remainder of the calendar year
following the Closing Date, to Transferred Employees for
amounts incurred by them for purposes of health plan
deductibles and limits under Sellers' health Plans during
the portion of the calendar year through the Closing Date
provided that Sellers promptly provide such information as
Purchaser requests and in a manner satisfactory to
Purchaser's health plan administrator.
(c) Except to the extent otherwise provided for in
Section 7.4, Sellers' Plans shall be responsible for any
health and accident claims to the extent of medical
treatment incurred prior to the Closing Date, whether or not
then known or payable, provided the claim is submitted to
Sellers on or prior to December 31, 1995. Purchaser's Plans
shall assume responsibility for all other health and
accident claims to the extent of medical treatment incurred
on and after the Closing Date, or submitted after December
31, 1995. However, if any claims expense for an individual
exceeds $50,000 during the first 50 days following the
Closing Date, the Seller and Purchaser shall each be
responsible for one-half of such claims expense incurred
within the 50-day period.
(d) With respect to pension, savings, severance,
vacation, health and welfare, disability benefits, executive
compensation, incentive and bonus arrangements, Purchaser
shall recognize for purposes of eligibility for
participation and vesting under its employee benefit plans
and compensation arrangements the service of any Transferred
Employee with Sellers or Gaines.
(e) With respect to all post-Closing Date employment
tax withholding responsibilities, Purchaser shall treat all
Transferred Employees as if they had been employed by
Purchaser as of January 1, 1995. The Purchaser and the
Sellers hereby agree to report on a predecessor-successor
basis and shall follow the alternative procedure for
employment tax reporting as prescribed in Section 5 of Rev.
Proc. 84-77, 1984-2 C.B. 753. Sellers shall have no
employment tax reporting responsibilities for such
Transferred Employees after the Closing Date and Purchaser
shall assume all obligations and duties of Sellers to
furnish IRS Forms W-2 to Transferred Employees for the full
1995 calendar year, if administratively practicable.
(f) Purchaser or Gaines shall pay severance benefits
to any Transferred Employee terminated by Purchaser or
Gaines during the 90-day period after the Closing Date in
accordance with Quaker's and Gaines' severance plans.
Thereafter, Purchaser shall pay severance benefits to any
Transferred Employee terminated by Purchaser in accordance
with Purchaser's severance plans.
(g) Purchaser shall be under no obligation to provide
retiree medical benefits to any Transferred Employee.
(h) Except to the extent otherwise provided for in
Section 7.4, Sellers shall take such actions as may be
necessary to terminate before the Closing Date Gaines'
active participation in and/or sponsorship of any and all
employee benefit plans under Section 3(3) of ERISA.
(i) Sellers shall provide for payment on or about July
1, 1995 of a pro rata amount for its fiscal year 1995
through the Closing Date of its Management Incentive Bonus
Plan to Transferred Employees based on Sellers' best
estimate of such amounts for the full fiscal year.
SECTION 7.3. COBRA. Sellers shall be responsible for
satisfying obligations under Section 601 et seq. of ERISA
and Section 4980B of the IRC, to provide continuation
coverage to or with respect to (i) any Transferred Employee
or (ii) any "qualified beneficiary" under any of the Gaines'
group health plans, each in accordance with law with respect
to any "qualifying event" occurring before the Closing Date.
Purchaser shall be responsible for satisfying obligations
under Section 601 et seq. of ERISA and Section 4980B of the
IRC, to provide continuation coverage to or with respect to
any Transferred Employee in accordance with law with respect
to any "qualifying event" which occurs on or after the
Closing Date.
SECTION 7.4. Vacation and Medical Expense Accounts.
As of the Closing Date, Purchaser shall assume obligations
of Sellers to Transferred Employees for any vacation
entitlement and vacation pay entitlement. Sellers shall pay
to the Purchaser within 5 days following the Closing Date an
amount equal to 50% of their obligations for any vacation
entitlement or vacation pay entitlement relating to the
Topeka Vacation Bank Plan. Seller shall determine the
aggregate balance (the total of proportionate employee and
Sellers' allocations, less deductions for expense
reimbursements) of the medical expense accounts for 1995 for
Transferred Employees as of the Closing Date and shall pay
such amount in cash to the Purchaser within 5 days following
the Closing Date. Purchaser shall assume all obligations or
payments to Transferred Employees from their medical expense
accounts after the Closing Date. Purchaser shall provide
vacation and medical expense account benefits to Transferred
Employees in accordance with Section 7.1.
SECTION 7.5. Qualified Plans. Sellers and Purchaser
agree to the following arrangements with respect to the
Pension Plans covering any Transferred Employee prior to the
Closing Date:
(a) Benefits accrued by any Transferred Employee
before the Closing Date under the Sellers' defined
benefit pension Plans shall become fully vested.
Sellers shall treat any Transferred Employee as having
incurred a termination of employment on the Closing
Date for purposes of determining the Transferred
Employee's eligibility for benefits under Sellers'
defined benefit pension Plans.
(b) Accounts of any Transferred Employee under
Sellers' profit sharing Plans, including but not
limited to the Quaker ESOP, after being credited with
all contributions due for any period before the Closing
Date, shall become fully vested on the Closing Date.
(c) Purchaser shall not accept sponsorship or any
other responsibility for any Pension Plan maintained by
Sellers or Gaines.
SECTION 7.6. Disability and Workers' Compensation.
Purchaser shall assume responsibility for all short term
disability benefits payable on and after the Closing Date
with respect to all Transferred Employees. Purchaser shall
not be responsible for any workers' compensation benefits,
occupational diseases claims and long term disability claims
with respect to any occurrences or with respect to any
eligibility for long term disability, before the Closing
Date involving the employees of the Pet Food Business or
Gaines.
SECTION 7.7. No Third Party Beneficiaries. Neither
Purchaser nor Sellers intend this Article VII to create any
rights or interest, except as between Purchaser and Sellers
and no present or future employees of either party (or any
dependents of such employees) will be treated as third party
beneficiaries in or under this Agreement.
SECTION 7.8. Indemnification. Subject to the general
indemnification procedures of Section 10.4, Purchaser shall
indemnify and hold harmless Sellers' and Sellers' Employees
Plans (and their trustees, fiduciaries and administrators)
against (a) any claim related to the rights of a Transferred
Employee (or dependent) to continuation coverage under
Section 4980B of the IRC or Section 601 et seq. of ERISA,
which arises due to or in connection with a qualifying event
that occurs after the Closing Date; (b) all liabilities,
losses, damages, claims, costs and expenses, interests,
awards, judgments and penalties (including, without
limitation, reasonable legal costs and expenses) actually
suffered or incurred, arising out of or resulting from
Purchaser's breach of any covenant set forth in this Article
VII. Subject to the general indemnification procedures of
Section 10.4, Sellers shall indemnify and hold harmless
Purchaser and Purchaser's employee plans (and their
trustees, fiduciaries and administrators) against all
liabilities, losses, damages, claims, costs and expenses,
interests, awards, judgments and penalties (including,
without limitation, reasonable legal costs and expenses)
actually suffered or incurred, arising out of or resulting
from Sellers' breach of any covenant set forth in this
Article VII or (ii) any other liabilities involving any
employee benefit plan of Gaines (within the meaning of
Section 3(3) of ERISA) or any other payroll practice of
Gaines, as conducted by Sellers or Gaines prior to the
Closing Date, except to the extent otherwise provided for in
Section 7.4.
SECTION 7.9. Documents and Forms. Sellers and
Purchaser agree to use their reasonable best efforts to
execute all necessary documents, file all required forms
with any governmental agencies and to undertake all actions
that may be necessary or desirable to implement
expeditiously any actions contemplated herein.
ARTICLE VIII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement are
subject to the fulfillment, prior to or on the Closing Date,
of each of the following conditions, any of which may be
waived in whole or in part by Purchaser:
SECTION 8.1. Accuracy of Representations and
Warranties; Performance of Agreements; Certificates and
Opinion of Counsel.
(a) The representations and warranties of Sellers
contained in this Agreement shall be true and correct
on the date hereof and as of the Closing Date (without
giving effect to any "materiality" or similar standard
or qualification or any supplemental or amended
disclosure after the date hereof) with the same effect
as though such representations and warranties had been
made or given again at and as of the Closing Date
(except for any representation or warranty expressly
stated to have been made or given as of a specified
date, which, at the Closing Date, shall be true and
correct as of the date expressly stated), except for
any breach or breaches thereof which either singly or
in the aggregate, would not and could not reasonably be
expected to have a material adverse effect on the Pet
Food Business or the Acquired Assets or the
transactions contemplated hereby.
(b) Sellers shall have performed and complied in
all material respects with all of their agreements,
covenants and conditions required by this Agreement to
be performed or complied with by them prior to or at
the Closing Date.
(c) Quaker shall have delivered to Purchaser
(i) a certificate of its President or any Vice
President dated the Closing Date and certifying the
fulfillment of the conditions set forth in this Section
8.1 and (ii) an opinion of the Vice President and
General Corporate Counsel or an Associate General
Counsel of Quaker dated the Closing Date substantially
in the form attached hereto as Exhibit I.
SECTION 8.2. Consents. All notices to, and declara-
tions, filings and registrations with, and consents,
approvals and waivers from all Governmental Authorities
necessary in order to consummate the transactions
contemplated hereby, other than those relating to the
transfer of a Permit or the obtaining of a new Permit in
lieu thereof, shall have been obtained.
SECTION 8.3. No Injunction. No permanent injunction
or other order shall have been issued by any court of
competent jurisdiction, or by any governmental or regulatory
authority, which prevents the consummation of the
transactions contemplated in this Agreement.
SECTION 8.4. HSR Act.
(a) The waiting periods under the HSR Act shall have
expired or been terminated;
(b) Neither the FTC nor the Antitrust Division nor any
state, United States territory or possession, local or
federal agency shall have obtained a temporary restraining
order or preliminary or permanent injunction prohibiting the
consummation of the transactions contemplated by this
Agreement;
(c) No private party shall have obtained a temporary
restraining order or preliminary or permanent injunction
prohibiting consummation of the transactions contemplated by
this Agreement;
(d) Neither the FTC nor the Antitrust Division nor any
state, United States territory or possession, local or
federal agency nor the staff or employees thereof shall have
commenced or recommended the commencement of an action for a
preliminary injunction prohibiting consummation of the
transactions contemplated by this Agreement.
SECTION 8.5. Closing Deliveries. Sellers shall have
delivered to Purchaser all deliveries to be made to it
pursuant to Section 2.6(b).
SECTION 8.6. No Material Adverse Change. From the
date hereof through the Closing, there shall not have
occurred any changes in the assets, liabilities, earnings,
business or financial condition of the Pet Food Business or
the Acquired Assets which have been or would or could
reasonably be expected to be, either individually or in the
aggregate, materially adverse to the Pet Food Business, the
Acquired Assets or the transactions contemplated thereby.
SECTION 8.7. Title Insurance and Survey. (a) Sellers
shall diligently proceed to use all reasonable best efforts
to provide to Purchaser by the Closing Date an ALTA Owner's
Form of Title Insurance Policy, 1987 version (Rev. 1990)
(each a "Policy" and collectively, the "Policies") with
respect to each parcel of Owned Real Property. Each Policy
shall (i) be issued on the Closing Date by Chicago Title
Insurance Company (the "Title Company"), (ii) be in such
amount as Purchaser reasonably may determine to be the fair
market value of such real property (including all
improvements located thereon), and (iii) each Policy
delivered hereunder shall insure Purchaser's ownership with
respect to each parcel of Owned Real Property of fee title
without any of the standard Schedule B preprinted exceptions
other than Taxes Not Yet Due and Payable and matters of
survey. With respect to each such Policy Seller shall use
all reasonable best efforts (which shall include the
expenditure of funds only to the extent of customary title
insurance premiums charged in connection therewith) to
obtain (A) an "extended coverage endorsement" insuring over
the general exceptions contained customarily in such Policy,
(B) an ALTA Zoning Endorsement 3.1 (or equivalent) to the
extent available from the Title Company based on a review of
the physical nature of the Owned Real Property limited to
the surveys provided under this Section 8.7, (C) an
endorsement insuring that the real property described in the
title insurance policy is the same real estate as shown on
the survey delivered with respect to such property, (D) an
endorsement insuring that each building structure or other
improvement has direct access to a public street adjoining
the real property on which such improvement is situated over
the driveways and accessways currently being used in
connection with the use and operation of such improvement,
and no such existing driveway or accessway crosses or
encroaches upon any property or property interest not owned
by Sellers or Gaines, (E) all buildings, structures,
fixtures, and other improvements erected on the Owned Real
Property conform in all material respects with all
applicable deed restrictions, and do not encroach on
property of others, and (F) an endorsement insuring over any
exceptions or other matters disclosed in such Policy that
render title unmarketable. If any Lien is disclosed as an
exception on a Policy which would or could reasonably be
expected to render title unmarketable or which would or
could reasonably be expected to materially adversely
interfere with how any Owned Real Property is used, occupied
or operated as of the Closing Date, Sellers at their option
may either remove said exception or agree to indemnify
Purchaser against all losses incurred by Purchaser as a
result of any such exceptions which are not removed or any
reduction of coverage because of said exception to the same
extent Purchaser would have been insured against such losses
by the Title Company had the Policy been issued not
containing or insuring over said exceptions. If Sellers
indemnify Purchaser as aforesaid, Purchaser and Sellers for
a reasonable time after the Closing shall use their
reasonable best efforts to remove such exceptions or provide
such coverage. Seller's indemnity would be terminated or
reduced as appropriate upon removal of such exceptions or
providing such coverages. To the extent available under
applicable state law, any title insurance for any Gaines
Owned Real Property shall include a "non-imputation"
endorsement to the effect that title defects known to the
officers, directors and/or shareholders of Sellers or Gaines
shall not be deemed "facts known to the insured" for
purposes of such Policy. If any Policy and related
indemnification by Sellers, if any, as specified above in
this Section 8.7 is not provided to Sellers in conformity
with the above provisions at or prior to the Closing Date,
Sellers shall diligently use all reasonable efforts to
provide the Policy and said indemnification to Purchaser as
soon after the Closing Date as possible. Seller shall
diligently proceed to use all reasonable efforts to provide
to Purchaser by the Closing Date a current survey of each
parcel of Owned Real Property (each a "Survey" and
collectively the "Surveys") in each case prepared in
insurable form in accordance with standards applicable to
registered and licensed land surveyors making surveys in the
localities in which such parcels are located. If a Survey
shows any encroachments or other conditions which would
individually or in the aggregate, interfere in any material
respect with the use, occupancy, or operation of any parcel
of Owned Real Property as used, occupied and operated as of
the Closing Date, Sellers may either remedy said condition
or agree to indemnify Purchaser against all losses incurred
by Purchaser as a result of any such condition to the same
extent Purchaser would have been insured against such losses
by the Title Company had the Policy been issued to insure
over said condition. If Sellers indemnify Purchaser as
aforesaid, Purchaser and Sellers for a reasonable time after
the Closing shall use their reasonable efforts to remedy
said condition or provide such coverage. Sellers' indemnity
would be terminated or reduced as appropriate upon removal
of such conditions or providing coverages. If any Survey
and related indemnification by Sellers, if any, as specified
above in this Section 8.7 is not provided to Purchaser in
conformity with the above provisions at or prior to the
Closing Date, Sellers shall diligently use all reasonable
efforts to provide the Survey and said indemnification to
Purchaser as soon after the Closing Date as possible.
Without limiting the generality of any of the foregoing, all
claims of Purchaser for indemnification pursuant to this
Section 8.7 shall be subject to the basket described in this
Section 10.5. The costs of such title insurance policies
and surveys shall be borne equally by Sellers and Purchaser.
Nothing contained in this Section 8.7 shall in any way
reduce Purchaser's rights under any other provision of this
Article VIII.
SECTION 8.8. Resolutions. Sellers shall have
delivered to Purchaser true and complete copies of the
resolutions of their respective Board of Directors certified
by their Secretary or Assistant Secretary authorizing and
approving the transactions contemplated herein.
SECTION 8.9. Loss. To the extent applicable, Sellers
shall not have withheld their consent contemplated by
Section 2.9(a).
SECTION 8.10. Post-Signing Matters. There shall not
have occurred any Post-Signing Matters (as defined in
Section 10.5 hereof) that would or could reasonably be
expected to result in Purchaser Losses in excess of $50
million, calculated without any reduction contemplated by
Section 10.6.
ARTICLE IX
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers under this Agreement are
subject to the fulfillment, prior to or on the Closing Date,
of each of the following conditions, all or any of which may
be waived in whole or in part by Sellers:
SECTION 9.1. Accuracy of Representations and
Warranties; Performance of Agreements; Certificate and
Opinion of Counsel.
(a) The representations and warranties of
Purchaser contained in this Agreement shall be true and
correct in all material respects on the date hereof and
as of the Closing Date (without giving effect to any
"materiality" or similar standard or qualification)
with the same effect as though such representations and
warranties had been made or given again at and as of
the Closing Date (except for any representation or
warranty expressly stated to have been made or given as
of a specified date, which, at the Closing Date, shall
be true and correct in all material respects as of the
date expressly stated).
(b) Purchaser shall have performed and complied
in all material respects with all of its agreements,
covenants and conditions required by this Agreement to
be performed or complied with by it prior to or at the
Closing Date.
(c) Purchaser shall have delivered to Sellers
(i) a certificate of its president or any Senior Vice
President dated the Closing Date and certifying the
fulfillment of the conditions set forth in this Section
9.1 and (ii) an opinion of the General Counsel or an
Associate General Counsel dated the Closing Date
substantially in the form attached hereto as Exhibit J.
SECTION 9.2. Consents. All notices to, and
declarations, filings and registrations with and consents,
approvals and waivers from all Governmental Authorities
necessary in order to consummate the transactions
contemplated hereby, other than those relating to the
transfer of a Permit or the obtaining of a new Permit in
lieu thereof, shall have been obtained.
SECTION 9.3. No Injunction. No permanent injunction
or other order shall have been issued by any court of
competent jurisdiction, or by any governmental or regulatory
authority, which prevents the consummation of the
transactions contemplated in this Agreement.
SECTION 9.4. HSR Act. Any waiting period applicable
to the consummation of the transactions contemplated by this
Agreement under the HSR Act shall have expired or been
terminated.
(a) The waiting periods under the HSR Act shall have
expired or been terminated;
(b) Neither the FTC nor the Antitrust Division nor any
state, United States territory or possession, local or
federal agency shall have obtained a temporary restraining
order or preliminary or permanent injunction prohibiting the
consummation of the transactions contemplated by this
Agreement;
(c) No private party shall have obtained a temporary
restraining order or preliminary or permanent injunction
prohibiting consummation of the transactions contemplated by
this Agreement;
(d) Neither the FTC nor the Antitrust Division nor any
state, United States territory or possession, local or
federal agency nor the staff or employees thereof shall have
commenced or recommended the commencement of an action for a
preliminary injunction prohibiting consummation of the
transactions contemplated by this Agreement.
SECTION 9.5. Closing Deliveries. Purchaser shall have
delivered to Sellers all deliveries to be made to them
pursuant to Section 2.6(c).
SECTION 9.6. Resolutions. Purchaser shall have
delivered to Sellers true and complete copies of the
resolutions of its Board of Directors certified by its
Secretary or Assistant Secretary, authorizing and approving
the transactions contemplated herein.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. Survival of Representations and
Warranties and Obligations. All representations,
warranties, agreements, covenants and obligations made or
undertaken by Sellers in this Agreement or in any document
or instrument executed and delivered pursuant hereto shall
survive the Closing hereunder and shall not merge in the
performance of any obligation by any party hereto, and will
remain in full force and effect indefinitely unless, in
respect of any agreement or covenant, some specified period
is set forth in this Agreement or in any document or
instrument executed and delivered pursuant hereto, and
except that all representations and warranties contained
herein or in any exhibit, schedule or certificate delivered
under this Agreement shall remain in effect only until the
second anniversary of the Closing Date (except for
representations and warranties relating to product liability
matters under Section 3.14 and the representations and
warranties set forth in Section 3.11, which shall remain in
effect until the third anniversary of the Closing Date).
All claims for Taxes pursuant to Article XI, including
claims for breach of the representations and warranties set
forth in Section 3.13, and all claims for breach of the
representations and warranties set forth in Section 3.20,
shall remain in effect for the applicable statute of limita-
tions period. All representations, warranties, agreements,
covenants and obligations made or undertaken by Purchaser,
in this Agreement or in any document or instrument executed
and delivered pursuant hereto shall survive the Closing
hereunder and shall not merge in the performance of any
obligation by any party hereto, and will remain in full
force and effect indefinitely unless, in respect of any
agreement or covenant, some specified period is set forth in
this Agreement or in any document or instrument executed and
delivered pursuant hereto, and except that all
representations and warranties contained herein or in any
exhibit, schedule or certificate delivered under this
Agreement shall remain in effect only until the second
anniversary of the Closing Date. If written notice of a
claim for breach of a representation or warranty has been
given by a party prior to the applicable expiration date,
then the relevant representation or warranty shall survive
as to such claim until the claim has been finally resolved.
SECTION 10.2. Indemnification by Sellers. Except as
otherwise limited by this Article X, and except for matters
relating to Taxes which shall be governed by the provisions
of Article XI, Purchaser and its officers, directors,
employees, agents, successors and assigns shall be
indemnified and held harmless by Sellers, jointly and
severally, from any and all liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable legal
fees and expenses) actually suffered or incurred by it
(hereinafter a "Purchaser Loss"), actually arising out of or
resulting from:
(a) the breach of any representation or warranty
by Sellers contained herein or in any exhibit, schedule
or certificate delivered by Sellers or their
representatives under this Agreement (without giving
effect to either the enforceability exception contained
in Section 3.3 or any supplemental or amended
disclosure after the date hereof);
(b) the breach of any covenant or agreement by
Sellers contained herein or in any document delivered
in connection herewith;
(c) the failure of Sellers to pay or otherwise
discharge the Excluded Liabilities;
(d) any violation by Sellers of, or failure by
Sellers to comply with, the bulk transfer laws of any
state or the fraudulent conveyance or preferential
transfer laws of the United States or any state;
(e) any failure by Sellers to comply with the
Worker Adjustment and Retraining Notification Act of
1988 ("WARN Act") with respect to the termination of
any employees of Sellers prior to the Closing Date;
(f) any Mechanic's Liens made or asserted against
the Acquired Assets with respect to goods furnished or
services rendered prior to the Closing Date and any
Taxes Not Yet Due and Payable applicable to periods
prior to the Closing Date that have not been prorated
pursuant to Section 2.6(d);
(g) any Excluded Liabilities;
(h) implementation of the undertaking of the
parties set forth in the last paragraph of Section 2.1
and in Section 2.2(d) (including in each Taxes);
(i) any violation by Sellers of, or failure by
Sellers to comply with, European Union antitrust law
and European Commission notification regulations
relating to the agreement set forth as Item #1 on
Schedule 3.12(b)(ii).
(j) without limiting the foregoing, all claims,
actions, suits, proceedings (including arbitration and
alternate dispute resolution proceedings) pending or
threatened against or with respect to (i) the Pet Food
Business or (ii) the Acquired Assets as of the Closing
Date; and
(k) without limiting the foregoing, orders,
decrees or judgments in effect as of the Closing Date
with respect to (A) the Pet Food Business or (B) the
Acquired Asset.
Purchasers and its officers, directors, employees,
agents, successors and assigns shall be indemnified and held
harmless by Sellers, jointly and severally, from any and all
fines and penalties with respect to the Pet Food Business
levied, assessed or imposed by the Occupational Safety and
Health Administration for events and conditions arising or
existing prior to the Closing Date; it being hereby agreed
and understood that notwithstanding anything to the contrary
contained in this Article X, (i) Purchaser promptly shall
notify Sellers of the levy, assessment or imposition of any
such fines and penalties and Purchaser and Sellers shall act
jointly in defending against, contesting, appealing and
settling any such fines and penalties taking into
consideration the effect of such regulation on the on-going
business of Purchaser, and (ii) the indemnification provided
pursuant to this paragraph shall not be subject to the
Basket described in Section 10.5
SECTION 10.3. Indemnification by Purchaser. Except as
otherwise limited by this Article X, Sellers and their
respective officers, directors, employees, agents,
successors and assigns shall be indemnified and held
harmless by Purchaser from any and all liabilities, losses,
damages, claims, costs and expenses, interest, awards,
judgment and penalties (including, without limitation,
reasonable legal fees and expenses) actually suffered or
incurred by them (hereinafter a "Sellers' Loss") actually
arising out of or resulting from:
(a) the breach of any representation or warranty
by Purchaser contained herein or in any exhibit,
schedule or certificate delivered by Purchaser or its
representatives under this Agreement (without giving
effect to the enforceability exception set forth in
Section 3.3);
(b) the breach of any covenant or agreement by
Purchaser contained herein or in any document delivered
hereunder at the Closing;
(c) the failure of Purchaser to pay or otherwise
discharge the Assumed Liabilities or any other
liability or obligations incurred by Purchaser in
connection with the Acquired Assets or its operation of
the Pet Food Business from and after the Closing Date,
except with respect to which Sellers are obligated to
indemnify Purchaser pursuant to Section 10.2; or
(d) any failure by Purchaser to comply with the
WARN Act with respect to the termination of any
employees of Purchaser after the Closing Date.
SECTION 10.4. Indemnification Procedures.
(a) For the purposes of this Section 10.4, the
term "Indemnitee" shall refer to the Person indemni-
fied, or entitled, or claiming to be entitled to be
indemnified, pursuant to the provisions of Section 10.2
or 10.3, as the case may be; the term "Indemnitor"
shall refer to the Person having the obligation to
indemnify pursuant to such provisions; and "Losses"
shall refer to the "Sellers' Losses" or the "Purchaser
Losses," as the case may be.
(b) An Indemnitee shall deliver written notice (a
"Notice of Claim") to the Indemnitor promptly after the
Indemnitee has knowledge of any claim (including a
Third Party Claim, as hereinafter defined) which an
Indemnitee has determined has given or could give rise
to a right of indemnification under this Agreement. No
failure to give such Notice of Claim shall affect the
indemnification obligations of the Indemnitor here-
under, except to the extent Indemnitor can demonstrate
that its defense of the matter was materially
prejudiced by such failure. The Notice of Claim shall
state the nature of the claim, the amount of the Loss,
if known, and the method of computation thereof, all
with reasonable particularity and containing a refer-
ence to the provisions of this Agreement in respect of
which such right of indemnification is claimed or
arises and the Indemnitor then shall have a period of
30 days to reply to such Notice of Claim.
(c) The obligations and liabilities of an
Indemnitor under this Agreement with respect to losses
arising from claims of any third party that are subject
to the indemnification provisions provided for in this
Agreement ("Third Party Claims") shall be governed by
and contingent upon the following additional terms and
conditions: The Indemnitee at the time it delivers a
Notice of Claim to the Indemnitor of the Third Party
Claim shall advise the Indemnitor that the Indemnitor
shall be permitted, at its option, to assume and
control the entire defense of such Third Party Claim at
the Indemnitor's expense and through counsel of its
choice if it delivers notice within the 30-day period
specified above of its intention to do so to the
Indemnitee and confirms that the Third Party Claim is
one with respect to which the Indemnitor is obligated
to indemnify pursuant to this Agreement. In the event
the Indemnitor exercises its right to undertake the
defense against any such Third Party Claim as provided
above, the Indemnitee shall cooperate with the
Indemnitor in such defense and make available to the
Indemnitor all witnesses, pertinent records, materials
and information in its possession or under its control
relating thereto as reasonably is required by the
Indemnitor, and the Indemnitee shall be entitled to
participate in such defense by its own counsel and at
its own expense; provided, however, that the Indemnitor
shall thereafter consult with the Indemnitee upon the
Indemnitee's reasonable request for such consultation
from time to time with respect to such Third Party
Claim. Except for the settlement of a Third Party
Claim which involves the payment of money only, no
Third Party Claim with respect to which the Indemnitor
has elected to defend pursuant to this Article X may be
settled by the Indemnitor without the prior written
consent of the Indemnitee, which consent shall not
unreasonably be withheld or delayed. If the Indemnitee
does not receive written notice within said 30-day
period that the Indemnitor has elected to assume the
defense of such Third Party Claim, or if (i)
representation of such Indemnitee by the counsel
retained by the Indemnitor would be inappropriate
(based on the advice of counsel to the Indemnitee) due
to actual or potential differing interests between such
Indemnitee and Indemnitor, or (ii) the Indemnitee
reasonably has concluded (based on the advice of
counsel) that there may be legal defenses available to
it that are different from or in addition to those
available to the Indemnitor, the Indemnitee may elect
to assume such defense, assisted by counsel of its own
choosing; provided, however, in such event, the
Indemnitee thereafter shall consult with the Indemnitor
upon the Indemnitor's reasonable request for such
consultation from time to time with respect to such
Third Party Claim. Whether or not the Indemnitee
elects to assume the defense of such Third Party Claim,
the Indemnitor shall not be relieved of its obligations
hereunder. The Indemnitee shall give the Indemnitor at
least 15 days' notice of any proposed settlement or
compromise of any Third Party Claim the Indemnitee has
elected to defend, during which time the Indemnitor may
assume the defense of, and responsibility for, such
Third Party Claim and if it does so, the proposed
settlement or compromise may not be made. In the event
the Indemnitee is, directly or indirectly, conducting
the defense against any such Third Party Claim, the
Indemnitor shall cooperate with the Indemnitee in such
defense and make available to it all such witnesses,
records, materials and information in the Indemnitor's
possession or under its control relating thereto as
reasonably is required by the Indemnitee, and the
Indemnitor may participate in such defense by its own
counsel and at its own expense.
(d) Any claim by an Indemnitee with respect to
Losses which do not result from a Third Party Claim
shall be asserted in the same manner as specified in
Section 10.4(b) above. If the Indemnitor does not
respond to such claim within the 30-day period
specified in Section 10.4(b), the Indemnitor will be
deemed to have rejected such claim, in which event the
Indemnitee will be free to pursue such remedies as may
be available to the Indemnitee under and as limited by
this Agreement.
SECTION 10.5. Limits on Indemnification. No claim may
be made against Quaker and/or QOAC for breach of a
representation or warranty contained herein or in any
exhibit, schedule or certificate delivered under this
Agreement unless and only to the extent the aggregate of all
Purchaser Losses incurred as a result thereof exceed
$5,000,000 (the "Basket") and then only with respect to that
portion of such Purchaser Losses which exceed the Basket;
provided, however, that the Basket shall not apply with
respect to Purchaser Losses incurred resulting from the last
paragraph in Section 10.2 and any breach of a representation
or warranty contained in Sections 3.10, 3.13, 3.14, 3.15 and
3.20, or to the extent it relates to any one of the
foregoing, 3.18 or to any other Purchaser Losses indemnified
under Article XI; and provided further, that with respect to
any breach of a representation or warranty by Sellers
arising primarily out of events occurring after the date
hereof and prior to the Closing Date that have been
disclosed to Purchaser in accordance with Sellers'
obligations under Section 12.17 ("Post-Signing Matters"),
Sellers indemnification obligations hereunder shall be
limited to (x) the first $10,000,000 of Purchaser Losses
resulting from Post-Signing Matters, (y) 50% of the next
$10,000,000 of Purchaser Losses resulting from Post-Signing
Matters, and (z) in any case, not more than an additional
$30,000,000. In no event shall Quaker and/or QOAC be
required to indemnify Purchaser for Purchaser Losses which
in the aggregate exceed $385,156,250 (other than with
respect to the Excluded Liabilities). No claim may be made
against Purchaser for any breach of a representation or
warranty contained herein or in any exhibit, schedule or
certificate delivered under this Agreement unless and only
to the extent that the aggregate of all Sellers' Losses
incurred as a result thereof exceed $5,000,000, and then
only with respect to that portion of such Sellers' Losses
which exceed $5,000,000. Purchaser shall not be required to
indemnify Sellers for Sellers' Losses which in the aggregate
exceed $385,156,250.
SECTION 10.6. Adjustment of Liability. Any
indemnifiable Sellers' Loss or Purchaser Loss, as the case
may be, shall be reduced by any Tax benefit accruing to the
indemnified party on account of the indemnification payment
and by the amounts actually recovered by the indemnified
party from its insurance carriers in respect of such loss
and any amounts recovered by such party subsequent to the
payment by the indemnifying party hereunder with respect to
the same claim shall be remitted to such indemnifying party,
except that such remittance shall not exceed the amount of
the indemnification payment made by such indemnifying party.
SECTION 10.7. Exclusive Remedy. From and after the
Closing, no party hereto shall be liable or responsible in
any manner whatsoever to the other parties, whether for
indemnification or otherwise, except for indemnity as
expressly provided in this Article X and in Article XI and
Section 7.9, which provide the exclusive remedy and cause of
action of the parties hereto for monetary damages with
respect to any matter arising out of or in connection with
this Agreement or any Schedule or Exhibit hereto or any
opinion or certificate delivered in connection herewith,
except for fraud. After the Closing, Purchaser shall not be
entitled to a recision of the sale of the Acquired Assets
except in the case of fraud by Sellers.
ARTICLE XI
TAX MATTERS
SECTION 11.1. Tax Indemnification.
(a) The Sellers shall indemnify and hold harmless the
Purchaser and its officers, directors, employees, agents,
successors and assigns from and against any Purchaser Loss
actually arising out of or resulting from:
(i) any and all Taxes with respect to any
taxable period of Gaines ending on or before the
Closing Date;
(ii) any and all Taxes of any member of a
consolidated, combined or unitary group (other than
Gaines) of which Gaines is or was a member on or prior
to the Closing Date, by reason of the liability of
Gaines pursuant to Treasury Regulation Section
1.1502-6(a) or any analogous or similar state, local or
foreign law or regulation;
(iii) any breach by the Sellers of any
representation, warranty or covenant contained in
Section 3.13 or this Section;
(iv) any and all Taxes allocated to the Sellers
pursuant to subsection (c) hereof and not previously
paid thereunder; and
(v) except for transfer taxes which are the
responsibility of Purchaser pursuant to Section 12.15,
any and all Taxes imposed in connection with or arising
directly from (1) the Acquired Assets on or before the
Closing Date, and (2) the Excluded Assets whether
arising on, before or after the Closing Date.
(b) Purchaser shall indemnify and hold harmless
Sellers and their respective officers, directors, employees,
agents, successors and assigns from and against any Sellers'
Loss actually arising out of or resulting from:
(i) any and all Taxes with respect to any
taxable period of Gaines commencing after the Closing
Date;
(ii) any and all Taxes allocated to the
Purchaser pursuant to subsection (c) hereof and not
previously paid thereunder; and
(iii) any and all Taxes arising out of an actual
or deemed election under IRC Section 338 or any
corresponding or similar provision under any state,
local or foreign law.
permitted by applicable law, close the taxable period of
Gaines on the Closing Date. In any case where applicable
law does not permit Gaines to close its taxable year on the
Closing Date, then Taxes, if any, attributable to the
taxable period of Gaines beginning before and ending after
the Closing Date shall be allocated (i) to the Sellers for
the period up to and including the Closing Date, and (ii) to
the Purchaser for the period subsequent to the Closing Date.
Any allocation of income or deductions required to determine
any Taxes attributable to any period beginning before and
ending after the Closing Date shall be made by means of a
closing of the books and records of Gaines as of the close
of business on the Closing Date, provided that exemptions,
allowances or deductions that are calculated on an annual
basis shall be allocated between the period ending on the
Closing Date and the period after the Closing Date in
proportion to the number of days in each such period.
SECTION 11.2. Preparation of Tax Returns.
(a) The Sellers shall include, or cause to be
included, Gaines in (A) the United States consolidated
federal income Tax Return of Quaker for the taxable periods
of Gaines ending on or before the Closing Date, and (B) all
other consolidated, combined or unitary Tax Returns of the
Sellers or their Affiliates for the taxable period of Gaines
ending (or the portion of any taxable year ending) on the
Closing Date (such Tax Returns referred to in clauses (A)
and (B) hereof are hereinafter referred to as "Seller
Consolidated or Combined Returns") to the extent consistent
with prior years. The Sellers shall prepare or cause to be
prepared, and timely file or cause to be timely filed, all
Seller Consolidated or Combined Returns which include Gaines
for all taxable periods of Gaines ending on or before the
Closing Date. The Sellers also shall prepare or cause to be
prepared and, except as set forth in subsection (b), timely
file or cause to be timely filed, all other Tax Returns of
or which include Gaines or its assets or operations required
to be filed for taxable periods ending on or prior to the
Closing Date. The Sellers shall pay or cause to be paid all
Taxes shown due on such Tax Returns. Upon Purchaser's
request, the Sellers shall provide to Purchaser copies of
any state income tax returns prepared by the Sellers and
filed on a separate basis by Gaines for the tax year ending
on the Closing Date and, to the extent available, any pro
forma returns prepared by the Sellers for Gaines for
inclusion in a state unitary return filed by the Sellers for
such period, with such exclusions as Sellers believe
necessary to exclude information not relating to Gaines.
(b) The Purchaser shall be responsible for filing all
Tax Returns required to be filed by or on behalf of Gaines,
or with respect to its assets and operations, after the
Closing Date other than the Seller Consolidated or Combined
Returns.
(c) With respect to any Tax Return required to be filed
by the Purchaser for a taxable period of Gaines beginning
before and ending after the Closing Date, the Purchaser
shall deliver, at least 20 business days prior to the due
date for filing of such Tax Return (including extensions),
to the Sellers a copy of such Return and a statement setting
forth the amount of Taxes for which the Sellers are
responsible pursuant to Section 11.1(c) hereof (the
"Statement"). The Sellers shall have the right to review
such Return and Statement prior to the filing of such Tax
Return. The Sellers and the Purchaser agree to consult and
resolve in good faith any issue arising as a result of the
review of such Return and Statement and mutually to consent
to the filing as promptly as possible of such Tax Return.
Not later than five business days before the due date for
the payment of Taxes with respect to such Tax Return, the
Sellers shall pay to the Purchaser an amount equal to the
Taxes shown on the Statement (as ultimately agreed by the
parties) as being the responsibility of the Sellers under
Section 11.1(c).
SECTION 11.3. Cooperation. The Sellers and the
Purchaser shall cooperate fully with each other and make
available to each other in a timely fashion such Tax data
and other information as may be reasonably required by the
Sellers or the Purchaser for the preparation of any Tax
Returns required to be prepared and filed by the Sellers or
the Purchaser hereunder, or in connection with the
preparation or filing of any election, consent or
certification. The Sellers and the Purchaser will provide
to each other, and the Purchaser will cause Gaines to
provide to the Sellers, full access, at any reasonable time
and from time to time, at the business location at which the
books and records are maintained, after the Closing Date, to
such Tax data of Gaines as the Sellers or the Purchaser, as
the case may be, may from time to time reasonably request.
SECTION 11.4. Tax Audits.
(a) Gaines or the Purchaser will, promptly upon
receipt of notice thereof, notify the Sellers of the
commencement of any claim, audit, examination, or other
proposed change or adjustment by any taxing authority
concerning any Tax of Gaines for taxable periods ending on
or before or which include the Closing Date.
(b) The Sellers shall have the sole and exclusive
right to represent Gaines' interests in any Tax audit or
administrative or court proceeding relating to taxable
periods of Gaines ending on or before the Closing Date and
to employ counsel of its choice at its expense.
(c) With respect to any taxable period of Gaines
beginning before and ending after the Closing Date, the
Purchaser and the Sellers shall jointly control the defense
and settlement of any Tax audit or administrative or court
proceeding and each party shall cooperate with the other
party at its own expense and there shall be no settlement or
closing or other agreement with respect thereto without the
consent of the other party, which consent will not be
unreasonably withheld.
(d) Purchaser shall have the sole and exclusive right
to represent the interests of Gaines in all other Tax audits
or administrative or court proceedings.
SECTION 11.5. Refunds. Except as otherwise provided
in Section 11.6, to the extent any determination of Tax
liability of Gaines, whether as the result of an audit or
examination, a claim for refund, the filing of an amended
return or otherwise, results in any refund of Taxes paid
attributable to (i) any period which ends on or before the
Closing Date or (ii) any period which includes the Closing
Date but does not begin or end on that day, any such refund
shall belong to Sellers, provided that in the case of any
Tax refund described in clause (ii), the portion of such Tax
refund which shall belong to Sellers shall be that portion
that is attributable to the portion of that period which
ends on the Closing Date (determined on the basis of an
interim closing of the books as of the Closing Date), and
Purchaser shall promptly pay any such refund of Taxes, to
Sellers upon receipt thereof by Purchaser. Any and all
other refunds of Taxes shall belong to Purchaser. Any
payments made under this Section shall be net of any Taxes
payable and expenses incurred with respect to such refund,
credit or interest thereon.
SECTION 11.6. Carrybacks. Purchaser shall not carry
back any Tax attributes of Gaines arising in a taxable
period commencing after the Closing Date to a taxable period
of Gaines ending on or before the Closing Date unless (i) no
waiver of the carry back of such Tax attribute is allowed
under applicable law or (ii) Sellers consent to such carry
back. In any such case, any refund received by the Sellers
shall be paid to the Purchaser net of any Taxes payable and
expenses incurred with respect to such refund.
SECTION 11.7. No Section 338(h)(10) Election. Sellers
and Purchaser agree they shall not make any election under
IRC Section 338(h)(10) or any corresponding or similar
provision under any state, local or foreign law with respect
to the purchase of the Gaines Stock.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Termination of Agreement. This
Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of Purchaser and
Sellers;
(b) by either party if the Closing shall not have
occurred by 5:00 p.m., Eastern time, on June 30, 1995;
provided, however, that the right to terminate this
Agreement under this Section 12.1(b) shall not be
available to any party whose failure to perform any
obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on
or before such date; or
(c) by either party upon the occurrence of any of
the adverse events described in Sections 8.3, 8.4, 9.3
and 9.4.
In the event that Sellers shall disclose to Purchaser
in writing pursuant to Section 12.17 any state of facts,
circumstances or events arising after the date hereof that
Seller identifies as causing the condition set forth in
Section 8.6 of being incapable of being satisfied, Purchaser
shall have the right, but not the obligation, to terminate
this Agreement pursuant to notice to Sellers given within 20
days of such disclosure. In the event that Purchaser fails
to so elect to terminate this Agreement, Purchaser shall not
thereafter be permitted to avoid the Closing as a result of
the failure of the conditions contained in Sections 8.6 and
8.10 solely as a result of such disclosed state of facts,
circumstances or events, but such failure to terminate this
Agreement shall not affect any other rights of Purchaser
under this Agreement including, but not limited to, Article
10.
In the event of termination of this Agreement by either
or both of the parties pursuant to this Section 12.1,
written notice thereof shall forthwith be given to the other
party specifying the provision hereof pursuant to which such
termination is made, and this Agreement shall forthwith
become null, void and of no effect and there shall be no
liability on the part of the parties hereto (or their
respective officers, directors or Affiliates) except (a) as
set forth in Section 12.2 hereof and (b) nothing herein
shall relieve either party from liability for any willful
breach hereof.
SECTION 12.2. Expenses. All costs and expenses,
including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contem-
plated hereby shall be paid by the party incurring such
costs and expenses, whether or not the Closing shall have
occurred.
SECTION 12.3. Waiver. The accuracy of any representa-
tion or warranty, the performance of any covenants or agree-
ment or the fulfillment of any condition of this Agreement
by Purchaser on the one hand or the Sellers on the other,
may be expressly waived in writing by Purchaser or Sellers,
as appropriate. Any waiver hereunder shall be effective
only in the specific instance and for the purpose for which
given. No failure or delay on the part of Purchaser or the
Sellers in exercising any right, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or
privilege.
SECTION 12.4. Consents. Whenever this Agreement
requires a permit or consent by or on behalf of either party
hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance
as set forth in Section 12.3.
SECTION 12.5. Assignment; Parties in Interest. This
Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of, and be enforceable by, the
parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights,
interests or obligations herein shall be assigned, including
by operation of law or otherwise, by any party hereto
without the prior written consent of the other party.
Notwithstanding the foregoing, Purchaser at any time
may assign its rights under this Agreement, in whole or in
part, to any subsidiary of which Purchaser owns 51% or more
of the voting stock either directly or indirectly
("Purchaser Subsidiary"). If Purchaser assigns its rights
under this Agreement to Purchaser Subsidiary, Purchaser
Subsidiary shall be entitled to all of the rights assigned
to it by Purchaser and shall be obligated to perform all of
the corresponding obligations of Purchaser hereunder, and
Purchaser shall guaranty the prompt performance by Purchaser
Subsidiary of such obligations in the same manner as the
guaranty provided by Quaker as set forth in Section 12.20
hereof, and if such assignment is made prior to the Closing,
Purchaser shall provide for the delivery to the Sellers of
the officer's certificate, the opinion of counsel and the
certified resolutions referred to in Sections 9.1(c) and 9.6
by both Purchaser and Purchaser Subsidiary.
SECTION 12.6. Further Assurances. Each of the parties
hereto agrees that, from and after the Closing, upon the
reasonable request of any other party hereto and without
further consideration, such party will execute and deliver
to such other party such documents and further assurances
and will take such other actions (without cost to such
party) as such other party may reasonably request in order
to carry out the purpose and intention of this Agreement.
SECTION 12.7. Entire Agreement. This Agreement and
the Schedules, the Confidentiality Agreement referred to in
Section 5.1 and the other writings referred to herein or
delivered pursuant hereto which form a part hereof contain
the entire agreement and understanding of the parties with
respect to the subject matter hereof. This Agreement and
the Confidentiality Agreement supersede all prior agreements
(including drafts) relating to the transactions contemplated
hereby and all such prior agreements (including drafts)
shall not be relied upon by the parties hereto or introduced
in any court of competent jurisdiction as evidence of an
expression of the parties intention with respect to the
subject matter set forth in this Agreement.
SECTION 12.8. Amendment. This Agreement may be
amended or modified in whole or in part only by a duly
authorized written agreement that refers to this Agreement
and is signed by the parties hereto or by their duly
appointed representatives or successors.
SECTION 12.9. Limitations on Rights of Third Parties.
Nothing expressed or implied in this Agreement is intended
or shall be construed to confer upon or give any Person
other than Purchaser and Sellers any rights or remedies
under or by reason of this Agreement or any transaction
contemplated hereby.
SECTION 12.10. Captions. The captions in this
Agreement are inserted for convenience of reference only and
shall not be considered a part of or affect the construction
or interpretation of any provision of this Agreement.
SECTION 12.11. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute but one
and the same instrument. It shall not be necessary in
making proof of this Agreement to produce or account for
more than one such counterpart.
SECTION 12.12. Notices. All notices, claims,
certificates, requests, demands and other communications
hereunder shall be in writing and will be deemed to have
been duly given if personally delivered or telecopied or on
the date of receipt indicated on the return receipt if
delivered or mailed (registered or certified mail, postage
prepaid, return receipt requested) as follows:
(a) If to Sellers or Gaines, to:
The Quaker Oats Company
P.O. Box 9001
Chicago, Illinois 60604-9001
Telecopy Number: 312-222-8315
Attention: Vice President and
General Corporate Counsel
(b) If to Purchaser, to:
H. J. Heinz Company
600 Grant Street, 60th Floor
Pittsburgh, Pennsylvania 15219
Telecopy Number: 412-456-6102
Attention: Senior Vice President and
General Counsel
or to such other address as the Person to whom notice is to
be given may have previously furnished to the other in
writing in the manner set forth above.
SECTION 12.13. Governing Law. This Agreement shall be
governed by, and construed and enforced in accordance with,
the internal laws of State of Illinois, without regard to
its provisions concerning conflicts or choice of law.
SECTION 12.14. Bulk Sales Law. Purchaser hereby
waives compliance by Sellers with the provision of any
applicable bulk sales laws. Seller shall promptly pay and
discharge when due or contest or litigate all claims of
creditors that are asserted against Purchaser by reason of
non-compliance with such laws, except with respect to any
such claims that relate to the Assumed Liabilities.
SECTION 12.15. Transfer Taxes. All excise, sales,
value added, use, registration, stamp, transfer and similar
Taxes, levies, charges and fees (including all real estate
transfer Taxes) incurred in connection with this Agreement
and the transactions contemplated hereby shall be shared
equally between the parties. Purchaser and Seller shall
cooperate in providing each other appropriate resale exemp-
tion certificates and other appropriate tax documentation.
SECTION 12.16. Public Announcements. All public
announcements relating to this Agreement or the transactions
contemplated hereby shall be made at such time and in such
manner as the parties hereto shall mutually agree, except
that nothing in this Agreement shall prevent a party hereto
from making any disclosure in connection with the transac-
tions contemplated by this Agreement to the extent required
by law or to the extent required by any securities exchange
on which a party has listed its securities provided that
prior notice of such disclosure is given to the other party.
SECTION 12.17. Schedules. Any item disclosed in the
Schedules or in any of the Exhibits attached hereto, under
any specific representation or warranty or Schedule number
hereof, shall be deemed to have been disclosed for all
purposes of this Agreement in response to every
representation or warranty of this Agreement in respect of
which such disclosure relates or is required. In no event
shall Sellers have any liability by virtue of their failure
to disclose in response to any representation or warranty of
this Agreement items which are disclosed herein in response
to another representation or warranty of this Agreement.
Sellers shall promptly, by notice in accordance with this
Agreement, supplement or amend any schedule to this
Agreement to include any matter hereafter arising prior to
Closing which, if existing or occurring before or at the
date of this Agreement, would have been required to be set
forth or described in the Schedule; it being hereby agreed
and understood that any such amendment or supplement to any
schedule to this Agreement shall not operate to cure any
prior breach by Sellers of any representation and warranty
to which such amended or supplemented schedule relates.
SECTION 12.18. [Intentionally left blank]
SECTION 12.19. Cooperation In Connection with SEC
Filings. Sellers and Purchaser shall cooperate with each
other (and their respective independent public accountants,
financial advisors and legal counsels) and make available to
each other such financial and other information as may be
required by Quaker or Purchaser to comply with the
requirements of Regulation S-X with respect to the filing of
periodic reports under the Exchange Act and the filing of
any registration statement on an appropriate form under the
Securities Act.
Sellers, at Purchaser's sole expense, shall cause
Arthur Andersen (a) to commence an audit immediately after
the public announcement by Sellers of the transactions
contemplated by this Agreement of the balance sheet of the
Pet Food Business as of June 30, 1994 (the "June Balance
Sheet"), together with the related statements of income and
cash flows for the fiscal year then ended (collectively, the
"June Financial Statements") and (b) to commence an audit
immediately following the Closing Date of a balance sheet as
of the Closing Date for the Pet Food Business, together with
the related statements of income and cash flows for the
period then ended (the "Closing Financial Statements").
Sellers shall deliver the audited June Financial Statements,
including the unqualified opinion of Arthur Andersen, to
Purchaser as promptly as practicable (but in no event later
than 30 days) after the Closing Date. Seller shall deliver
the audited Closing Financial Statements, including the
unqualified opinion of Arthur Andersen, to Purchaser not
later than 45 days after the Closing Date.
SECTION 12.20. Guarantee. Quaker hereby guarantees the
prompt performance by QOAC of its covenants and obligations
hereunder. In the event of nonperformance by QOAC of any
such covenants or obligations, Quaker shall promptly itself
perform or cause QOAC to perform such covenants and
obligations. The guaranty to Purchaser hereunder is an
absolute, continuing, unconditional and unlimited guaranty
of performance.
Quaker as guarantor shall be entitled to the benefit of
all defenses to and limitations on the guaranteed covenants
and obligations to the same extent that QOAC would have had
such benefit, except that in no event shall the validity of
the guaranty or the obligations of the guarantor be in any
way terminated, affected or impaired by the dissolution of
QOAC or the rejection of such obligations under any
bankruptcy, insolvency or similar laws, now or hereafter
enacted.
SECTION 12.21. Arbitration.
(a) Except as otherwise provided in this Section 12.21
and except for enforcement of Section 5.6 of this Agreement,
any controversy, claim, or dispute between the parties,
directly or indirectly, concerning this Agreement or any
agreement that is an Exhibit to this Agreement or the
alleged or actual breach or subject matter of this Agreement
or such other agreement, including, but not limited to,
questions concerning the scope or applicability of this
Section 12.21, shall be finally settled by arbitration as
provided in this Section 12.21. Any such arbitration shall
be conducted before one arbitrator in accordance with the
Rules of the AAA then in effect. The arbitration shall take
place in New York City, Borough of Manhattan.
(b) The party requesting arbitration shall give a
written demand for arbitration to the other parties by
registered or certified mail. The demand shall set forth a
statement of the nature of the dispute, the amount involved,
if applicable, and the remedies sought. Within 30 days
after receipt of a demand for arbitration, the parties shall
attempt to agree on the appointment of an arbitrator. If by
the end of such 30-day period the parties are unable to
agree on such appointment, the parties by this Agreement
jointly authorize the AAA upon application by any party to
appoint an arbitrator with experience in transactions of a
similar type to the transactions that this Agreement
contemplates. The AAA shall appoint such an arbitrator
within 30 days after receipt of the application from a
party. If the arbitrator fails or is unable to act, his or
her successor will be appointed in the same manner as the
arbitrator whom such successor succeeds.
(c) The parties and the arbitrator shall begin the
arbitration hearing within 60 days after the appointment of
the arbitrator. All discovery shall be completed as soon as
practicable as directed by the arbitrator. The arbitrator
shall render his or her decision in writing within 30 days
of the conclusions of the hearings.
(d) The award rendered by the arbitrator shall be
binding on the parties and final and non-appealable (other
than for bias, fraud, or misconduct of the arbitrator)
regardless of whether one of the parties fails or refuses to
participate in the arbitration. The arbitrator may award
monetary damages, injunctive relief, specific performance,
costs, attorneys' fees, and any other remedies available
under this Agreement. Judgment thereon may be entered in
any court having jurisdiction.
(e) Notwithstanding any other provision of this
Agreement, any party shall be entitled to seek without
posting bond preliminary injunctive relief from any court of
competent jurisdiction pending the final decision or award
of the arbitrators.
(f) The parties shall share equally the fees of the
arbitrator and other costs that the arbitrator does not
order either party to pay.
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the respective duly authorized
officers of Sellers and Purchaser as of the date first above
written.
THE QUAKER OATS COMPANY
By: /s/ Luther C. McKinney
Name: Luther C. McKinney
Title: Senior Vice President -
Law and Corporate
Affairs
QO ACQUISITION CORP.
By: /s/ R. Thomas Howell,Jr.
Name: R. Thomas Howell, Jr.
Title: Vice President
H. J. HEINZ COMPANY
By: /s/ William R. Johnson
Name: William R. Johnson
Title: Senior Vice President
PURCHASE AGREEMENT
AMONG
THE QUAKER OATS COMPANY,
QO ACQUISITION CORP.
and
H. J. HEINZ COMPANY
DATED FEBRUARY 6, 1995
Table of Contents
Page No.
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II SALE AND PURCHASE OF ASSETS. . . . . . . . . . . . 10
SECTION 2.1. Transfer of Assets. . . . . . . . . . . . . 10
SECTION 2.2. Assumption of Liabilities.. . . . . . . . . 16
SECTION 2.3. Purchase Price and Other Consideration. . . 21
SECTION 2.4. Minimum Inventory . . . . . . . . . . . . . 22
SECTION 2.5. Allocation of the Total Purchase Price. . . 24
SECTION 2.6. Closing; Deliveries at the Closing. . . . . 24
SECTION 2.7. Nonassignable Contracts and Permits . . . . 29
SECTION 2.8. Exclusive Sale of Trade Secrets . . . . . . 30
SECTION 2.9. Risk of Loss. . . . . . . . . . . . . . . . 30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . 31
SECTION 3.1. Incorporation; Qualification. . . . . . . . 31
SECTION 3.2. Authority . . . . . . . . . . . . . . . . . 32
SECTION 3.3. Execution and Binding Effect. . . . . . . . 32
SECTION 3.4. No Contravention. . . . . . . . . . . . . . 32
SECTION 3.5. Financial Statements. . . . . . . . . . . . 33
SECTION 3.6. Title to Acquired Assets. . . . . . . . . . 34
SECTION 3.7. Contracts . . . . . . . . . . . . . . . . . 37
SECTION 3.8. Employee Benefit Plans. . . . . . . . . . . 38
SECTION 3.9. Absence of Certain Changes. . . . . . . . . 40
SECTION 3.10. Litigation. . . . . . . . . . . . . . . . . 41
SECTION 3.11. Compliance with Laws. . . . . . . . . . . . 42
SECTION 3.12. Intellectual Property . . . . . . . . . . . 44
SECTION 3.13. Taxes . . . . . . . . . . . . . . . . . . . 46
SECTION 3.14. Inventory . . . . . . . . . . . . . . . . . 48
SECTION 3.15. Brokers and Finders . . . . . . . . . . . . 48
SECTION 3.16. Insurance . . . . . . . . . . . . . . . . . 48
SECTION 3.17. Labor Matters . . . . . . . . . . . . . . . 49
SECTION 3.18. Accuracy of Sellers' Information
Furnished . . . . . . . . . . . . . . . . 49
SECTION 3.19. Sufficiency of Acquired Assets. . . . . . . 49
SECTION 3.20. Capitalization. . . . . . . . . . . . . . . 49
SECTION 3.21. Liabilities . . . . . . . . . . . . . . . . 50
SECTION 3.23. No Other Representations or Warranties. . . 50
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . 52
SECTION 4.1. Incorporation . . . . . . . . . . . . . . . 52
SECTION 4.2. Authority . . . . . . . . . . . . . . . . . 52
SECTION 4.3. Execution and Binding Effect. . . . . . . . 52
SECTION 4.4. No Contravention. . . . . . . . . . . . . . 52
SECTION 4.5. Litigation. . . . . . . . . . . . . . . . . 53
SECTION 4.6. Brokers and Finders . . . . . . . . . . . . 54
SECTION 4.7. Restricted Securities . . . . . . . . . . . 54
SECTION 4.8. No Other Representations and Warranties . . 54
ARTICLE V COVENANTS OF SELLERS. . . . . . . . . . . . . . . . 54
SECTION 5.1. Access; Confidential Information. . . . . . 54
SECTION 5.2. Conduct of Business . . . . . . . . . . . . 55
SECTION 5.3. [intentionally left blank]. . . . . . . . . 58
SECTION 5.4. Reasonable Best Efforts; Notifications. . . 58
SECTION 5.5. HSR Act Filing. . . . . . . . . . . . . . . 58
SECTION 5.6. Non-Compete Covenant. . . . . . . . . . . . 58
SECTION 5.7. Material Change . . . . . . . . . . . . . . 60
SECTION 5.8. Preservation of Records . . . . . . . . . . 60
SECTION 5.9. Patent and Trade Secret Licenses. . . . . . 61
SECTION 5.10. Assignment by Affiliates. . . . . . . . . . 61
SECTION 5.12. Capital Improvements. . . . . . . . . . . . 61
SECTION 5.13. Release . . . . . . . . . . . . . . . . . . 62
SECTION 5.14. Resignations. . . . . . . . . . . . . . . . 62
SECTION 5.15. Program List Reimbursement. . . . . . . . . 62
SECTION 5.16. Purchase of Equipment . . . . . . . . . . . 62
SECTION 5.17. Insurance . . . . . . . . . . . . . . . . . 63
ARTICLE XIII COVENANTS OF THE PURCHASER . . . . . . . . . . . 63
SECTION 6.1. Preservation of Records . . . . . . . . . . 63
SECTION 6.2. Reasonable Best Efforts; Notifications. . . 64
SECTION 6.3. HSR Act Filing. . . . . . . . . . . . . . . 64
SECTION 6.4. Returns and Deductions. . . . . . . . . . . 64
ARTICLE VII EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . 64
SECTION 7.1. Transferred Employees . . . . . . . . . . . 64
SECTION 7.2. Employee Benefit Transition . . . . . . . . 66
SECTION 7.3. COBRA . . . . . . . . . . . . . . . . . . . 68
SECTION 7.4. Vacation. . . . . . . . . . . . . . . . . . 68
SECTION 7.5. Qualified Plans . . . . . . . . . . . . . . 68
SECTION 7.6. Disability and Workers' Compensation. . . . 69
SECTION 7.7. No Third Party Beneficiaries. . . . . . . . 69
SECTION 7.8. Indemnification . . . . . . . . . . . . . . 69
SECTION 7.9. Documents and Forms . . . . . . . . . . . . 70
ARTICLE VIII CONDITIONS TO PURCHASER'S OBLIGATIONS. . . . . . 70
SECTION 8.1. Accuracy of Representations and
Warranties; Performance of Agreements;
Certificates and Opinion of Counsel . . . 70
SECTION 8.2. Consents. . . . . . . . . . . . . . . . . . 71
SECTION 8.3. No Injunction . . . . . . . . . . . . . . . 71
SECTION 8.4. HSR Act . . . . . . . . . . . . . . . . . . 71
SECTION 8.5. Closing Deliveries. . . . . . . . . . . . . 72
SECTION 8.6. No Material Adverse Change. . . . . . . . . 72
SECTION 8.8. Resolutions . . . . . . . . . . . . . . . . 74
SECTION 8.9. Loss. . . . . . . . . . . . . . . . . . . . 75
SECTION 8.10. Post-Signing Matters. . . . . . . . . . . . 75
ARTICLE IX CONDITIONS TO SELLERS' OBLIGATIONS . . . . . . . . 75
SECTION 9.1. Accuracy of Representations and
Warranties; Performance of Agreements;
Certificate and Opinion of Counsel. . . . 75
SECTION 9.2. Consents. . . . . . . . . . . . . . . . . . 76
SECTION 9.3. No Injunction . . . . . . . . . . . . . . . 76
SECTION 9.4. HSR Act . . . . . . . . . . . . . . . . . . 76
SECTION 9.5. Closing Deliveries. . . . . . . . . . . . . 76
SECTION 9.6. Resolutions . . . . . . . . . . . . . . . . 77
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . 77
SECTION 10.1. Survival of Representations and
Warranties and Obligations . . . . . . . 77
SECTION 10.2. Indemnification by Sellers . . . . . . . . 78
SECTION 10.3. Indemnification by Purchaser . . . . . . . 79
SECTION 10.4. Indemnification Procedures . . . . . . . . 80
SECTION 10.5. Limits on Indemnification. . . . . . . . . 83
SECTION 10.6. Adjustment of Liability. . . . . . . . . . 83
SECTION 10.7. Exclusive Remedy . . . . . . . . . . . . . 84
ARTICLE XI TAX MATTERS. . . . . . . . . . . . . . . . . . . . 84
SECTION 11.1. Tax Indemnification. . . . . . . . . . . . 84
SECTION 11.2. Preparation of Tax Returns . . . . . . . . 86
SECTION 11.3. Cooperation. . . . . . . . . . . . . . . . 87
SECTION 11.4. Tax Audits . . . . . . . . . . . . . . . . 87
SECTION 11.5. Refunds. . . . . . . . . . . . . . . . . . 88
SECTION 11.6. Carrybacks . . . . . . . . . . . . . . . . 88
SECTION 11.7. No Section 338(h)(10) Election . . . . . . 88
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . 89
SECTION 12.1. Termination of Agreement . . . . . . . . . 89
SECTION 12.2. Expenses . . . . . . . . . . . . . . . . . 90
SECTION 12.3. Waiver . . . . . . . . . . . . . . . . . . 90
SECTION 12.4. Consents . . . . . . . . . . . . . . . . . 90
SECTION 12.5. Assignment; Parties in Interest. . . . . . 90
SECTION 12.6. Further Assurances . . . . . . . . . . . . 91
SECTION 12.7. Entire Agreement . . . . . . . . . . . . . 91
SECTION 12.8. Amendment. . . . . . . . . . . . . . . . . 91
SECTION 12.9. Limitations on Rights of Third Parties . . 91
SECTION 12.10. Captions . . . . . . . . . . . . . . . . . 92
SECTION 12.11. Counterparts . . . . . . . . . . . . . . . 92
SECTION 12.12. Notices. . . . . . . . . . . . . . . . . . 92
SECTION 12.13. Governing Law. . . . . . . . . . . . . . . 92
SECTION 12.14. Bulk Sales Law . . . . . . . . . . . . . . 93
SECTION 12.15. Transfer Taxes . . . . . . . . . . . . . . 93
SECTION 12.16. Public Announcements . . . . . . . . . . . 93
SECTION 12.17. Schedules. . . . . . . . . . . . . . . . . 93
SECTION 12.18. [Intentionally left blank] . . . . . . . . 94
SECTION 12.19. Cooperation In Connection with SEC
Filings. . . . . . . . . . . . . . . . . 94
SECTION 12.20. Guarantee. . . . . . . . . . . . . . . . . 94
SECTION 12.21. Arbitration. . . . . . . . . . . . . . . . 95
Index of Exhibits
Exhibit Description
A-1 and A-2 Real Estate Deeds
B-1, B-2(a), B-2(b) and B-3 Trademark Patent and Copyright
Assignments
C Assignment Agreement
D Bill of Sale
E Transition Agreement Terms
F-1 and F-2 Lease Agreement
G Gaines Assumption Agreement
H Assumption Agreement
I Sellers' Opinion
J Purchaser's Opinion
EXHIBIT (2)(b)
SUPPLEMENT NO. 1
TO
PURCHASE AGREEMENT
THIS SUPPLEMENT NO. 1 TO PURCHASE AGREEMENT is made on the
14th day of March, 1995 among The Quaker Oats Company, a New Jersey
corporation ("Quaker"), QO Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of Quaker ("QOAC", and together with
Quaker, "Sellers"), and H. J. Heinz Company, a Pennsylvania
corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, Sellers and Purchaser are parties to that certain
Purchase Agreement dated February 6, 1995 (the "Agreement"), pursuant
to which the assets and certain liabilities and obligations of the Pet
Food Business (as defined in Article I of the Agreement), shall be
transferred, sold and assigned by Sellers to Purchaser (or, as
contemplated by Section 12.5 of the Agreement, a Purchaser Subsidiary)
upon the terms and subject to the conditions set forth therein; all
capitalized terms used and not defined herein have the respective
meanings ascribed thereto in the Agreement; and
WHEREAS, by means of the execution and delivery hereof,
Sellers and Purchaser desire to supplement, clarify and amend certain
provisions of the Agreement, as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and set forth in the Agreement, the
parties hereto, intending to be legally bound, hereby agree as
follows:
. Section 2.6(b)(iii) of the Agreement is hereby
amended by deleting the word "unexecuted" appearing in the first line
thereof and substituting in lieu and stead thereof the words "duly
executed".
2. Section 2.8 of the Agreement is hereby amended by
deleting the phrase "and the Licensed Trade Secrets" each time it
appears in such Section.
3. Section 5.9 of the Agreement is hereby amended to add
after the word (i) "manufacture" appearing in the seventh line thereof
the words "only pet food", and (ii) "Territory" appearing in the
fourteenth line thereof the words "in the manufacture of pet food
products only".
4. (a) Section 5.16 of the Agreement is hereby amended to
(i) delete the first sentence thereof in its entirety and to
substitute in lieu and stead thereof the following new first sentence:
"On or prior to August 1, 1995, Quaker shall, at its sole cost and
expense, exercise its option under that certain lease dated June 14,
1977, between Quaker and the City of Lawrence, Kansas (the "City of
Lawrence Lease"), to purchase the machinery and equipment subject to
such lease, and promptly (but in no event later than 20 days)
following such purchase, Quaker shall take all lawful action
(including, without limitation, the execution and delivery of bills of
sale and instruments of assignment and conveyance) necessary to effect
the transfer of such machinery and equipment to Purchaser (or a
Purchaser Subsidiary identified in writing to Quaker) free and clear
of any Liens", (ii) delete from the second sentence thereof all
references to "Closing Date" and "Closing" and to substitute in lieu
and stead thereof the words "August 1, 1995", (iii) add a new third
sentence thereto to read in its entirety, as follows: "Pending such
exercise and transfer, Quaker shall take all lawful action necessary
to enable Purchaser to use such equipment and machinery from and after
the Closing Date and, in the event of such use by Purchaser prior to
said exercise and transfer, Purchaser agrees to indemnify and hold
harmless Quaker (in the manner and to the extent provided in Section
10.3 of the Agreement) from and against any and all Sellers' Losses
resulting from the negligence of Purchaser in the use of such
equipment and machinery or the failure of Purchaser to comply with
applicable laws with respect thereto (not relating to the condition of
such machinery and equipment) or with the terms and conditions of such
use as specified in the City of Lawrence Lease", and (iv) add a fourth
new sentence thereto to read in its entirety as follows: "Solely for
purposes of the representations and warranties set forth in the fourth
sentence of Section 3.6(a) and for no other purpose of the Agreement,
the term "Physical Assets" shall include such equipment and
machinery."
(b) Section 10.2 of the Agreement is hereby amended to
add a new clause (l) thereto to read in its entirety, as follows:
"(l) Quaker's failure to exercise its option to purchase the machinery
and equipment subject to the City of Lawrence Lease or to effect the
transfer of such machinery and equipment to Purchaser free and clear
of any Liens, in either case for any reason whatsoever, and to enable
Purchaser to use such equipment and machinery from and after the
Closing Date.
5. Section 2.6(b) of the Agreement is hereby amended to add
(i) after the word "deliver" appearing in the prefatory sentence
thereof, the following parenthetical reference: "(and in the case of
clauses (vii) and (xvii) below, Sellers shall cause The Quaker Oats
Company of Canada Limited ("Quaker Canada") to deliver)" and (ii) a
new clause (xvii) thereto to read in its entirety, as follows:
"(xvii) a duly executed counterpart original of the Assignment and
Assumption Agreement between Quaker Canada and Purchaser,
substantially in the form of Exhibit K hereto (the "Assignment and
Assumption Agreement").
6. Section 2.6(c) of the Agreement is hereby amended to add
a new clause (vii) thereto to read in its entirety, as follows:
"(vii) a duly executed counterpart original of the Assignment and
Assumption Agreement."
7. Section 8.7 of the Agreement is hereby amended to add to
the penultimate sentence thereof after the word "Purchaser" appearing
therein, the following: "it being hereby agreed that to the extent
Sellers elect to advance on behalf of Purchaser, Purchaser's pro rata
share of such cost, Purchaser shall reimburse Sellers therefor
promptly (and in no event later than five days) after the Closing."
8. Section 10.3 of the Agreement is hereby amended to (i)
add a new subsection (e) thereto to read in its entirety, as follows:
"(e) any violation by Purchaser of the terms of the computer software
licenses (except any violation to the extent it arises out of the fact
that Purchaser is using the software that is the subject of such
licenses) identified on Schedule 10.3(e), (ii) delete the word "or"
appearing at the end of Section 10.3(c), and (iii) delete the period
appearing after the word "Date" appearing in the third line of Section
10.3(d) and to substitute in lieu and stead thereof the following: ";
or".
9. Article VI of the Agreement is hereby amended to add a
new Section 6.5 thereto to read in its entirety, as follows:
SECTION 6.5. Broker Commissions. Purchaser agrees to pay,
in accordance with Quaker's customary payment and
reimbursement policies, all commissions due and payable to
brokers who prior to the Closing Date and in the ordinary
course of business consistent with past practice have sold,
or have entered into contracts or commitments providing for
the sale of, Products to customers of the Pet Food Business,
to the extent such Products are delivered to such customers
after the Closing Date and constitute a receivable of
Purchaser.
10. Sections 5.6(c) and (e) of the Agreement are hereby
amended by replacing all references to "Section 5.5" with "Section
5.6".
11. Section 10.2 of the Agreement is hereby amended by
deleting the words "Purchaser and its" appearing in the fourth line
thereof and substituting in lieu and stead thereof the words "each of
Purchaser and Gaines and their respective".
12. Section 2.1(j) is hereby amended by deleting the word
"or" following the word "individually" in the fifth line thereof, and
substituting in lieu and stead thereof the word "and".
13. Quaker hereby assigns and transfers to Heinz on a non-
exclusive basis its rights, title and interest, whether owned or
licensed, in and to the software from Allen Bradley and Format
International Limited currently used by Quaker or its Affiliates in
connection with the Pet Food Business; Quaker hereby represents that
Heinz shall be entitled to use such software to the same extent that
Quaker or its Affiliates were using such software in the Pet Food
Business.
14. The Schedules to the Agreement are hereby modified and
superseded, as applicable, to extent set forth in Appendix A annexed
hereto.
15. All references to the "Agreement" in any document,
instrument or agreement described in, referred to, annexed to,
contemplated by or incorporated by reference in the Agreement or this
Supplement No. 1 shall be deemed to mean the Agreement as supplemented
by this Supplement No. 1.
16. This Supplement No. 1 shall be effective as of the date
hereof. Except as modified by this Supplement No. 1, the Agreement
shall remain in full force and effect in accordance with its terms.
17. This Supplement No. 1 may be signed in counterparts,
each of which shall constitute an original, but all of which, when
taken together, shall constitute but one and the same instrument.
18. This Supplement No. 1 shall be governed by and construed
and enforced in accordance with the internal laws of the State of
Illinois, applicable to instruments made and performed entirely within
such State.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Supplement No. 1 as of the date first above written.
THE QUAKER OATS COMPANY
By:
Name:
Title:
QO ACQUISITION CORP.
By:
Name:
Title:
H. J. HEINZ COMPANY
By:
Name:
Title:
u:\divestit\l-notice
EXHIBIT (2)(c)
March 14, 1995
The Quaker Oats Company and
QO Acquisition Corp.
P.O. Box 049001
Chicago, Illinois 60604-9001
Attention: Vice President and General Corporate Counsel
Re: Notice of Assignment of Rights Under the Purchase Agreement
dated February 6, 1995, as supplemented by Supplement No. 1
thereto (the "Purchase Agreement")
Dear Sirs:
This letter is a formal notice from H. J. Heinz Company ("Heinz") to
The Quaker Oats Company ("Quaker") and QO Acquisition Corp. ("QOAC," and
together with Quaker, "Sellers") that Heinz has elected to assign its
rights and obligations under the Purchase Agreement, as permitted by and in
accordance with, the terms of Section 12.5 of the Purchase Agreement.
Specifically, Heinz pursuant to an Assignment and Assumption, attached
hereto as Exhibit A, has assigned to its wholly-owned subsidiary, Star-Kist
Foods, Inc. ("Star-Kist"), all of its rights and obligations under the
Purchase Agreement.
Attached hereto as Exhibit B is a copy of the guaranty of Heinz as
required by Section 12.5 of the Purchase Agreement.
Terms used in this letter shall have the same meaning as defined in
the Purchase Agreement, unless otherwise specified.
Very truly yours,
H. J. HEINZ COMPANY
By: ______________________________
Name:
Title:
AGREED AND ACKNOWLEDGED:
THE QUAKER OATS COMPANY
By: _________________________
Name:
Title:
QO ACQUISITION CORP.
By: _________________________
Name:
Title:
ASSIGNMENT AND ASSUMPTION
THIS ASSIGNMENT and ASSUMPTION is made effective March 14, 1995
between H. J. Heinz Company, a Pennsylvania corporation ("Assignor") and
Star-Kist Foods, Inc., a California corporation ("Assignee").
WHEREAS, Assignor is party to a Purchase Agreement among The
Quaker Oats Company, QO Acquisition Corp. and Assignor dated February 6,
1995, as supplemented by Supplement No. 1 thereto of even date herewith
(the "Purchase Agreement");
WHEREAS, undefined capitalized terms used herein shall have the
meanings set forth in the Purchase Agreement;
WHEREAS, Assignor desires to assign all of its rights and
delegate performance of all of its covenants and obligations under the
Purchase Agreement and Assignee is willing to accept such assignment and
delegation;
WHEREAS, Assignee is a wholly owned subsidiary of Assignor; and
WHEREAS, the assignment and assumption provided for herein is
permitted by the terms of Section 12.5 of the Purchase Agreement.
NOW THEREFORE, intending to be legally bound hereby, Assignor and
Assignee hereby agree as follows:
1. Assignment. Effective the date hereof but prior to the
Closing under the Purchase Agreement, Assignor hereby assigns all of its
rights and delegates performance of all of its covenants and obligations
under the Purchase Agreement to Assignee.
2. Acceptance of Assignment. Assignee hereby accepts such
assignment and assumes all of the covenants and obligations of Assignor
under the Purchase Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Assignment and Assumption.
H. J. HEINZ COMPANY
By:________________________________
Its: ________________________________
STAR-KIST FOODS, INC.
By:________________________________
Its: ________________________________
GUARANTY
H. J. Heinz Company ("Guarantor") hereby guarantees in favor of The
Quaker Oats Company and QO Acquisition Corp. (collectively, "Quaker") the
prompt performance by Star-Kist Foods, Inc. ("Star-Kist") of the covenants
and obligations assumed by Star-Kist under that certain Purchase Agreement,
dated February 6, 1995, as supplemented by Supplement No. 1 thereto of even
date herewith, by and among Guarantor, The Quaker Oats Company and QO
Acquisition Corp. ("QOAC") pursuant to that certain Assignment and
Assumption between Guarantor and Star-Kist dated of even date herewith. In
the event of nonperformance by Star-Kist of any such covenants or
obligations, Guarantor shall promptly itself perform or cause Star-Kist to
perform such covenants and obligations and hereby agrees to indemnify and
hold harmless (in the manner and to the extent set forth in Section 10.3 of
the Agreement) Quaker and QOAC from and against any losses suffered,
incurred or sustained by Quaker or QOAC by reason of such nonperformance.
The guaranty to Quaker hereunder is in an absolute, continuing,
unconditional and unlimited guaranty of performance.
Guarantor shall be entitled to the benefit of all defenses to and
limitations on the guaranteed covenants and obligations to the same extent
that Star-Kist would have had such benefit, except that in no event shall
the validity of the guaranty or the obligations of the Guarantor be in any
way terminated, affected or impaired by the dissolution of Star-Kist or the
rejection of such obligations under any bankruptcy, insolvency or similar
laws, now or hereafter enacted.
This Guaranty is intended to benefit Quaker and no other person.
WITNESS the due execution hereof this 14th day of March, 1995.
H. J. HEINZ COMPANY
By:___________________________
Its:___________________________
Exhibit (99) to Form 8-K
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information
should be
read in conjunction with historical financial statements contained in
the
Company's Annual Report on Form 10-K and Quarterly Report on Form
10-Q and the unaudited pro forma financial information of the Company
and
Snapple Beverage Corp. ("Snapple") contained in the Form 8-K/A filed
on
February 17, 1995 to amend Form 8-K filed on December 19, 1994. The
following pro forma information is presented for illustrative
purposes
only and is not necessarily indicative of the operating results or
financial
position that would have occurred had the disposition of the Pet Food
Business been consummated in accordance with the assumptions set
forth
below, nor is it necessarily indicative of future operating results
or
financial position.
Basis of Presentation
The unaudited pro forma combined balance sheet presents the
consolidated
financial position assuming the disposition of the Pet Food Business
had
been consummated on December 31, 1994. The unaudited pro forma
combined
income statements for the year ended June 30, 1994 and for the six
months
ended December 31, 1994 present the consolidated results of
operations
assuming that the disposition had been consummated as of July 1,
1993.
The income statements include pro forma information for the Snapple
acquisition, which was completed on December 6, 1994. The pro forma
information for Snapple was included in the Form 8-K/A filed on
February 17, 1995, and is being amended by this Form 8-K as described
below.
Two-for-one Stock Split-up
Per share information and average number of common shares outstanding
have been restated to reflect the November 1994 two-for-one stock
split-up.
Pro Forma Adjustments
The pro forma adjustments included in the Pet Food Business column on
the
following balance sheet reflect the assets and liabilities sold,
including
inventory, fixed assets, advertising and merchandising reserves and
vacation accruals. The additional amounts in this column reflect
other
items that are affected by the sale of the Pet Food Business,
specifically
writing-off intangibles, and adjusting pension and postretirement
accruals
for preliminary actuarial adjustments. Deferred taxes have been
reclassified to current liabilities. The pro forma adjustments
included
in the Pet Food Business column on the income statements reflect the
direct activity of the business, including net sales and direct
cost of sales, advertising and merchandising expenses, and other
general direct expenses of the business. Pretax income has been
tax effected at the Company's effective tax rates for those periods.
The separate pro forma column on the balance sheet reflects the after-
tax
proceeds from the sale, $725 million less estimated income taxes of
$200 million, as a reduction in short-term debt. This column also
reflects
the estimated gain on the sale of the Pet Food Business. The
separate
pro forma column on the income statements reflects the reduction in
interest expense, as a result of the after-tax proceeds on the sale
reducing short-term debt. Interest expense has been calculated using
the short-term rates on the borrowings obtained for the Snapple
acquisition. If the interest rate were one-eighth of one percent
different,
interest expense would change by approximately $650,000 and $325,000
for the year ended June 30, 1994 and the six months ended
December 31, 1994, respectively. The pro forma tax entry for the six
months ended December 31, 1994 includes an adjustment to reflect the
estimated effective tax rate assuming the disposition had occurred on
July 1, 1993.
The pro forma interest expense adjustment for the Snapple pro forma
combined income statement is hereby amended. The short-term interest
rate used now reflects the actual rate on the borrowings obtained for
the
acquisition. If the interest rate were one-eighth of one percent
different, interest expense would change by $2.1 million and $0.9
million,
for the year ended June 30, 1994 and the six months ended
December 31, 1994, respectively.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1994
The Pet Food Pro ProForma
Quaker Business Forma Combined
Oats Adjustme
Company nts
Dollars in Millions
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $103.0 $103.0
Trade accounts receivable -
net of allowances 546.0 546.0
Inventories:
Finished goods 332.7 (19.9) 312.8
Grains and raw materials 111.4 (3.1) 108.3
Packaging materials and supplies 37.3 (2.0) 35.3
Total inventories 481.4 (25.0) 456.4
Other current assets 226.5 (12.3) 214.2
Total Current Assets 1,356.9 (37.3) 1,319.6
Other Receivables and Investments 121.8 121.8
Property, plant and equipment 2,282.6 (180.8) 2,101.8
Less accumulated depreciation 949.5 (72.0) 877.5
Property - Net 1,333.1 (108.8) 1,224.3
Intangible Assets -
Net of Amortization 561.9 (95.3) 466.6
Unallocated purchase costs 1,687.4 1,687.4
Total Assets $5,061.1 $(241.4) $4,819.7
<FN>
See accompanying notes to unaudited pro forma combined financial information.
<CAPTION>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1994
The Quaker Pet Food ProForma ProForma
Oats Business Adjustmen Combined
Company ts
Dollars in Millions
<S> <C> <C> <C> <C>
Liabilities and Shareholder's
Equity
Current Liabilities:
Short-term debt $1,886.6 $ $(525.0) $1,361.6
Current portion of
long-term debt 45.1 45.1
Trade accounts payable 334.4 334.4
Other current liabilities 707.7 (16.6) 691.1
Total Current Liabilities 2,973.8 (16.6) (525.0) 2,432.2
Long-term Debt 1,025.9 1,025.9
Other Liabilities 516.1 (15.5) 500.6
Deferred Income Taxes 75.6 (13.2) 62.4
Preferred Stock 100.0 100.0
Deferred Compensation (78.1) (78.1)
Treasury Preferred Stock (4.9) (4.9)
Common Shareholders' Equity:
Common stock 840.0 840.0
Reinvested Earnings 867.6 328.9 1,196.5
Cumulative translation adj. (90.0) (90.0)
Deferred compensation (133.1) (133.1)
Treasury common stock (1,031.8) ____ _____ (1,031.8)
Total Common
Shareholder's Equity 452.7 328.9 781.6
Total Liabilities and $5,061.1 $(45.3) $(196.1) $4,819.7
Shareholders' Equity
<FN>
See accompanying notes to unaudited pro forma combined financial information.
<CAPTION>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 1994
The Pro Pro Pro
Quaker Snapple Forma Forma Forma Pro
Oats Beverage Adjus Combine Pet Food Adjus Forma
Company Corp. t- d with Business t- Combine
ments Snapple ments d
Dollars in Millions (Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $5,955.0 $697.6 $6,652.6 $(570.5) $6,082.1
Cost of goods sold 2,926.2 402.9 _____ 3,329.1 (293.0) ____ 3,036.1
Gross profit 3,028.8 294.7 3,323.5 (277.5) 3,046.0
Selling, general and 2,425.6 168.5 40.0 2,634.1 (199.5) 2,434.6
administrative expenses
Restructuring charges and 108.6 108.6 (15.1) 93.5
divestiture gains
Interest expense - net 89.7 2.6 107.0 199.3 (33.1) 166.2
Foreign exchange loss - net 26.2 _____ _____ 26.2 _____ ____ 26.2
Income before income taxes 378.7 123.6 (147.0) 355.3 (62.9) 33.1 325.5
Provision for income taxes 147.2 42.8 (42.8) 147.2 (24.1) 13.2 136.3
Net income 231.5 80.8 (104.2) 208.1 (38.8) 19.9 189.2
Preferred dividends - net of _____ _____ _____ ____
tax 4.0 4.0 4.0
Net income available
for common $227.5 $80.8 $(104.2) $204.1 $(38.8) $19.9 $185.2
Per Common Share:
Net Income $ 1.68 $1.51 $ 1.37
Average number of common
shares outstanding
in thousands) 135,236 135,236 135,236
<FN>
See accompanying notes to unaudited pro forma combined financial information.
<CAPTION>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994
Pro
The Pro Forma Pro
Quaker Snapple Forma Combine Forma Pro
Oats Beverag Adjus d with Pet Adjus Forma
Company e Corp. t- Snapple Food t- Combine
ments Busines ments d
s
Dollars in Millions (Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $3,144.3 $271.6 $3,415.9 $(276.5) $3,139.4
Cost of goods sold 1,616.4 164.9 1,781.3 (139.4) ____ 1,641.9
Gross profit 1,527.9 106.7 1,634.6 (137.1) 1,497.5
Selling, general and 1,322.5 102.6 17.5 1,442.6 (100.7) 1,341.9
administrative expenses
Interest expense - net 39.5 2.6 46.4 88.5 (16.5) 72.0
Foreign exchange loss - net 0.9 _____ 0.9 _____ ____ 0.9
Income before income taxes and
cumulative effect of
accounting change 165.0 1.5 (63.9) 102.6 (36.4) 16.5 82.7
Provision for
income taxes 69.2 0.7 (24.4) 45.5 (15.2) 6.0 36.3
Income before cumulative
effect of accting change 95.8 0.8 (39.5) 57.1 (21.2) 10.5 46.4
Preferred dividends -
net of tax 2.0 ____ 2.0 2.0
Net income available for
common before
cumulative effect of $93.8 $0.8 $(39.5) $55.1 $(21.2) $10.5 $44.4
accounting change
Per Common Share:
Income before cumulative
effect of
accounting change $ 0.70 $ 0.41 $0.33
Average number of common
shares outstanding (in
thousands) 133,567 133,567 133,567
<FN>
See accompanying notes to unaudited pro forma combined financial information.
</TABLE>
