UNITED STATES
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) May 22, 1997
THE QUAKER OATS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 1-12 36-1655315
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Quaker Tower P.O. Box 049001 Chicago, Illinois 60604-9001
(Address of principal executive offices)
Registrant's telephone number, including area code 312-222-7111
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
On May 22, 1997, The Quaker Oats Company (Company) completed the sale of 100
percent of its shares of its wholly-owned subsidiary, Snapple Beverage Corp.
(Snapple) to Triarc Beverage Holdings Corp. (Triarc), a subsidiary of Triarc
Companies, Inc., for $300 million in cash. The disposition was made pursuant
to the Stock Purchase Agreement dated as of March 27, 1997, between the Company
and Triarc. The purchase price was determined by arms-length negotiation
between the Company and Triarc. The assets and liabilities involved in the
transaction included, among other things, accounts receivable, inventories,
other current assets, other non-current assets, fixed assets, intangible
assets, accounts payable and other current and non-current liabilities.
Certain assets and liabilities related to the Snapple business have been
retained by the Company, principally a manufacturing facility in Tolleson,
Arizona and income tax liabilities pertaining to pre-closing periods.
Item 7. Financial Statements and Exhibits
(b) Unaudited pro forma financial information with respect to the disposition
of Snapple 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) Stock Purchase Agreement dated as of March 27, 1997, between the
Company and Triarc. Disclosure schedules supplemental to the Stock
Purchase Agreement will be furnished to the Commission upon request.
(99) Unaudited pro forma financial information of the Company with
respect to the disposition of Snapple.
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
(Registrant)
Date: June 2, 1997 By Thomas L. Gettings
Thomas L. Gettings
Vice President and
Corporate Controller
3
EXHIBIT INDEX
Electronic (E) or
Exhibit Incorporated by
Number Exhibit Description Reference (IBRF)
(2)(a) Stock Purchase Agreement dated E
March 27, 1997, between the
Company and Triarc
(99) Unaudited pro forma E
financial information of the
Company with respect to the
disposition of Snapple
4
STOCK PURCHASE AGREEMENT
BETWEEN
THE QUAKER OATS COMPANY
AND
TRIARC COMPANIES, INC.
Dated as of March 27, 1997
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND TERMS
1.1 Specific Definitions 1
1.2 Terms Defined Elsewhere in the Agreement 6
1.3 Other Definitional Provisions 7
1.4 References to Time 8
ARTICLE II
PURCHASE AND SALE OF THE SHARES
2.1 Purchase and Sale of the Shares 8
2.2 Purchase Price 8
2.3 Closing 9
2.4 Deliveries by Acquiror 9
2.5 Deliveries by Seller 9
2.6 Adjustment to Purchase Price 9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization and Qualification 11
3.2 Capitalization; Subsidiaries 11
3.3 Corporate Authorization 12
3.4 Consents and Approvals 13
3.5 Non-Contravention 13
3.6 Binding Effect 14
3.7 Financial Statements; Absence of Certain Changes 14
3.8 Litigation 15
3.9 Taxes 16
3.10 Employee Benefits 18
3.11 Compliance with Laws 19
3.12 Intellectual Property 19
3.13 Contracts 19
3.14 Brokers 20
3.15 Title to Properties 20
3.16 Environmental Matters 21
3.17 Labor Relations 21
3.18 No Other Representations or Warranties 21
3.19 Disclosure Schedule 22
3.20 Standard 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
4.1 Organization and Qualification 23
4.2 Corporate Authorization 23
4.3 Consents and Approvals 23
4.4 Non-Contravention 24
4.5 Binding Effect 24
4.6 Brokers 24
4.7 Purchase for Investment 25
4.8 Financial Capability 25
4.9 No Other Representations or Warranties 25
ARTICLE V
COVENANTS
5.1 Conduct of Snapple Business 25
5.2 Access 27
5.3 Reasonable Best Efforts 27
5.4 Antitrust Notification 29
5.5 Supplemental Disclosure 29
5.6 Further Assurances 30
5.7 Announcements 30
5.8 Employee Matters 31
5.9 Preservation of Records 33
5.10 Other Agreements 33
5.11 Financial Statements 34
5.12 Related Party Payments 34
5.13 Continental PET 35
5.14 Use of Cash 35
5.15 Payment of Proceeds 35
5.16 Insurance 35
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of Acquiror and Seller 37
6.2 Conditions to the Obligations of Acquiror 37
6.3 Conditions to the Obligations of Seller 38
ARTICLE VII
SURVIVAL; GENERAL INDEMNIFICATION
7.1 Survival 39
7.2 Indemnification by Acquiror 39
7.3 Indemnification by Seller 40
7.4 Procedure for Indemnification 40
7.5 Characterization of Indemnification Payments 43
7.6 Computation of Losses; Disputes 43
ARTICLE VIII
TAX MATTERS; TAX INDEMNIFICATION
8.1 Tax Indemnification 44
8.2 No Tax Elections 45
8.3 Preparation of Tax Returns; Payment of Taxes 45
8.4 Cooperation with Respect to Tax Returns 48
8.5 Tax Audits 48
8.6 Refund Claims 49
8.7 Transfer Taxes 50
8.8 Other Tax Matters 50
8.9 Disputes 50
ARTICLE IX
TERMINATION
9.1 Termination 51
9.2 Effect of Termination 51
9.3 Termination Fee 52
ARTICLE X
GENERAL PROVISIONS
10.1 Extension; Waiver 52
10.2 Amendment 53
10.3 Expenses 53
10.4 Governing Law 53
10.5 Notices 53
10.6 Entire Agreement 54
10.7 Disclosure Schedule 54
10.8 Headings; References 55
10.9 Counterparts 55
10.10 Parties in Interest; Assignment 55
10.11 Severability; Enforcement 55
10.12 Consent to Jurisdiction 55
EXHIBITS
Exhibit A -- Transition Services Agreement
Exhibit B -- Patent License Agreement
Exhibit C -- Shared Technology License Agreement
Exhibit D -- Brooks Agreement
Exhibit E -- Power Packaging Agreement
Exhibit F -- Assignment and Assumption Agreement
Exhibit G -- Opinion of Seller's Counsel
Exhibit H -- Opinion of Acquiror's Counsel
Exhibit I -- Guaranty Agreement
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of March 27, 1997, between THE
QUAKER OATS COMPANY, a New Jersey corporation ("Seller"), and TRIARC COMPANIES,
INC., a Delaware corporation ("Acquiror").
W I T N E S S E T H :
WHEREAS, Snapple Beverage Corp., a Delaware corporation ("Snapple"),
is engaged, directly and through its subsidiaries, in the business of
producing, marketing and distributing beverages and other products under the
Snapple trademark and related trademarks and trade names (the "Snapple
Business");
WHEREAS, Seller is the owner of 1,000 shares of Common Stock, par
value $1.00 per share (the "Shares"), of Snapple, which Shares constitute all
of the outstanding shares of capital stock of Snapple; and
WHEREAS, Seller desires to sell, transfer and deliver to Acquiror,
and Acquiror desires to purchase from Seller, all of the Shares, on the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
1.1 Specific Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Acquiror" shall have the meaning set forth in the preamble to this
Agreement.
"Affiliate" shall mean, with respect to any specified Person, any
other Person directly or indirectly controlling, controlled by or under common
control with such specified Person.
"Agreed Rate" shall mean the 30-day commercial paper rate published
in the most current issue of Federal Reserve Statistical Release H.15 (Selected
Interest Rates) at the Closing Date and reset at such rate as published at 30-
day intervals thereafter.
"Agreement" shall mean this Stock Purchase Agreement, together with
all exhibits and schedules hereto, as the same may be amended or supplemented
from time to time in accordance with the terms hereof.
"Applicable Laws" shall mean, with respect to any Person, all
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Authority applicable to such Person and its business, properties and assets.
"Base Working Capital Amount" shall mean $58,000,000.
"Business" shall mean the Snapple Business and any terminated,
divested or discontinued business or operations that at the time of
termination, divestiture or discontinuation was conducted by any of the
Snapple Companies or its predecessors.
"Business Day" shall mean a day other than a Saturday, Sunday or
other day on which banks located in New York City are authorized or required
by law to close.
"Cash Equivalents" shall mean cash on hand, all other cash in any
bank, savings or similar accounts at any financial institution, and checks,
drafts and similar instruments and any publicly traded stocks, bonds or similar
marketable securities, certificates of deposit, commercial paper, eurodollar
deposits and any other cash equivalents held in the name of or for the account
of any of the Snapple Companies.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.).
"Closing" shall mean the closing of the transactions contemplated by
this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Confidentiality Agreement" shall mean the Agreement, dated December
4, 1996, between Acquiror and Seller.
"DOJ" shall mean the United States Department of Justice.
"Employee Arrangements" shall mean all employment and consulting
agreements, and all bonus and other incentive compensation, deferred
compensation, disability, severance, stock award, stock option, stock purchase,
collective bargaining or workers' compensation agreements, plans, programs,
policies and arrangements with respect to the employment or termination of
employment of any employee, officer, director or other Person who is or was
employed by any of the Snapple Companies or primarily in the Snapple Business.
"Employee Benefit Plans" shall mean all "employee benefit plans", as
defined in Section 3(3) of ERISA, which Seller or the Snapple Companies
maintains and in which any employee or former employee employed by the Snapple
Companies or primarily in the Snapple Business participates.
"Encumbrances" shall mean any and all mortgages, security interests,
liens, claims, pledges, restrictions, leases, title exceptions, rights of
others, charges or other encumbrances.
"Environmental Law" shall mean any law, statute, ordinance, rule,
regulation, order, judgment or decree as in effect as of the date of this
Agreement relating to (i) the protection of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface or subsurface land) or (ii) the exposure of Persons (other than
Persons employed by the Snapple Business or the Snapple Companies) to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labelling, protection, release or disposal of, Hazardous Substances,
but excluding any such law, statute, ordinance, rule, regulation, order,
judgment or decree, including common law, (x) governing protection of worker
health and safety or human health (other than exposure of Persons other than
Persons employed by the Snapple Business or the Snapple Companies to Hazardous
Substances), or (y) establishing the basis for a claim for product liability.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Estimated Cash Equivalents" shall mean the amount of Cash
Equivalents set forth on the Estimated Statement.
"Estimated Working Capital" shall mean the amount of Working Capital
set forth on the Estimated Statement.
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles in effect
in the United States of America.
"Governmental Authority" shall mean any foreign, federal, state or
local government, court, agency or commission or other governmental or
regulatory body or authority.
"Hazardous Substances" shall mean any hazardous substances within the
meaning of 101(14) of CERCLA, 42 U.S.C. Section 9601(14).
"Indemnified Party" shall mean any Person which is seeking
indemnification from an Indemnifying Party pursuant to the provisions of this
Agreement.
"Indemnifying Party" shall mean any party hereto from which any
Indemnified Party is seeking indemnification pursuant to the provisions of this
Agreement.
"Independent Law Firm" shall mean a nationally recognized independent
law firm, jointly selected by the parties; or, if the parties cannot agree on
such law firm, Seller and Acquiror shall each submit the name of a nationally
recognized independent law firm that does not at the time provide, and has not
in the prior two years provided, services to Seller or Acquiror, and the
"Independent Law Firm" shall mean the firm selected by lot from these two
firms.
"IRS" shall mean the United States Internal Revenue Service.
"Knowledge" of Seller or any Snapple Company or any similar phrase
means the actual knowledge of those management employees of Seller identified
in Section 1.1(a) of the Disclosure Schedule, and only with respect to the
following Snapple personnel, William Barker, Mark Entsminger, Charles
Maniscalco and Michael Schott, after reasonable inquiry.
"Legal Proceedings" shall mean any judicial, administrative or
arbitral actions, suits, proceedings (public or private) or governmental
proceedings.
"Material Adverse Effect" shall mean, with respect to any Person, any
change or effect that is materially adverse to the business of such Person and
its Subsidiaries taken as a whole; provided, however, that Material Adverse
Effect shall exclude any change or effect due to (i) general economic or
industry-wide conditions, including, without limitation, devaluation,
revaluation or decline in value of any foreign currency against the U.S.
dollar, (ii) any continuation of an adverse trend disclosed to Acquiror on or
prior to the date hereof, and (iii) any condition described in the Disclosure
Schedule.
"Person" or "person" shall mean and includes any individual,
partnership, joint venture, corporation, association, joint stock company,
trust, unincorporated organization or similar entity.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Seller" shall have the meaning set forth in the preamble to this
Agreement.
"Shares" shall have the meaning set forth in the recitals to this
Agreement.
"Snapple" shall have the meaning set forth in the recitals to this
Agreement.
"Snapple Business" shall have the meaning set forth in the recitals
to this Agreement.
"Snapple Companies" shall mean Snapple and all of its direct and
indirect Subsidiaries.
"Subsidiary" shall mean, with respect to any Person, (i) each
corporation, partnership, joint venture or other legal entity of which such
Person owns, either directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or similar governing body of such
corporation, partnership, joint venture or other legal entity and (ii) each
partnership in which such Person or another Subsidiary of such Person is the
general partner or otherwise controls such partnership.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts, levies
or other assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll, employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic or foreign)
and shall include any transferee liability in respect of Taxes.
"Tax Returns" shall mean all reports, returns, declaration forms and
statements filed or required to be filed with respect to Taxes.
"Working Capital" shall mean the sum of all inventory and trade
accounts receivable of the Snapple Business conducted worldwide, minus all
trade accounts payable of the Snapple Business conducted worldwide; provided,
however, that Working Capital shall not include intercompany receivables and
payables.
"Working Capital Amount" shall mean the Estimated Working Capital
minus the Base Working Capital Amount.
1.2 Terms Defined Elsewhere in the Agreement. For purposes of this
Agreement, the following terms have the meanings set forth in the sections
indicated:
Term Section
Acquiror Indemnified Parties 7.3(a)
Asserted Liability 7.4(a)
Assigned Contracts 5.3
Assignment and Assumption Agreement 5.10
Audited Financial Statements 5.11
Brooks Agreement 5.10
Cash 4.8
Casualty Insurance Claims 5.15(a)
Claim Notice 7.4(a)
Closing Date 2.3
Closing Statement 2.6(a)
Contract 3.13
CPA Firm 2.6(b)
Deposit 2.2(a)
Disclosure Schedule 3.19
Escrow Agent 2.2(a)
Escrow Agreement 2.2(a)
Estimated Amount 2.6(c)
Estimated Statement 2.2(c)
Final Amount 2.6(c)
Financial Statements 3.7(a)
HSR Act 3.4
Independent Accounting Firm 8.9
Insurance Policies 5.15(a)
Losses 7.2
Notice Period 7.4(a)
Objection 2.6(b)
Other Antitrust Regulations 3.4
Patent License Agreement 5.10
Power Packaging Agreement 5.10
Purchase Price 2.2(b)
Quaker Facility Co-Pack Agreement 5.10
Seller Indemnified Parties 7.2
Shared Technology License Agreement 5.10
Snapple Employees 5.8(b)
Snapple Employee Arrangements 5.8(a)
Snapple Employee Benefit Plans 5.8(a)
Statement of Assets and Liabilities 3.7(a)
SVC 5.10
Tax Agreement, Consent or Election 3.9(f)
Tax Ruling 3.9(f)
Transition Services Agreement 5.10
1.3 Other Definitional Provisions. (a) The words "hereof",
"herein", and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
(d) As used in this Agreement, accounting terms which are
specifically defined under GAAP and are not otherwise defined herein shall have
the respective meanings given to them under GAAP.
1.4 References to Time. All references in this Agreement to times
of the day shall be to New York City time.
ARTICLE II
PURCHASE AND SALE OF THE SHARES
2.1 Purchase and Sale of the Shares. On the terms and subject to
the conditions set forth herein, at the Closing, Seller agrees to sell,
transfer and deliver to Acquiror, and Acquiror agrees to purchase from Seller,
the Shares.
2.2 Purchase Price. (a) Upon the execution of this Agreement,
Acquiror shall pay to Weil, Gotshal & Manges LLP, in its capacity as escrow
agent (the "Escrow Agent") pursuant to that certain Escrow Agreement, dated as
of the date hereof, among Acquiror, Seller and the Escrow Agent (the "Escrow
Agreement"), by certified check or wire transfer of immediately available
funds, the sum of $20,000,000 (the "Deposit"), which pursuant to the Escrow
Agreement shall either (i) be applied as a deposit on the Purchase Price as
provided in Section 2.4(a), (ii) be applied toward Acquiror's payment
obligation pursuant to Section 9.3, if any, or (iii) be returned to Acquiror in
the event that the Closing does not occur on or before the date set forth in
Section 9.1(b) due to Seller's failure to satisfy the closing conditions set
forth in Section 6.2 or the non-occurrence of any closing condition set forth
in Section 6.1.
(b) The purchase price for the Shares shall be $300,000,000 plus
the sum of the Working Capital Amount and the Estimated Cash Equivalents (the
"Purchase Price"), as adjusted pursuant to Section 2.6.
(c) Seller shall prepare and deliver to Acquiror, at least five
days but not more than 30 days immediately preceding the Closing Date, an
estimated statement of Working Capital and Cash Equivalents as of the Closing
Date (the "Estimated Statement").
2.3 Closing. The Closing shall take place at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153 at 10:00 A.M.,
on the later of (a) the second Business Day following the satisfaction or
waiver (by the party entitled to waive the condition) of all conditions to the
Closing set forth in Article VI, or (b) 60 days after the date of this
Agreement unless another date, time or place is agreed to by the parties
hereto. The date on which the Closing occurs is called the "Closing Date".
2.4 Deliveries by Acquiror. At the Closing, Acquiror shall deliver
to Seller the following:
(a) an amount which, when added to the Deposit plus accrued
interest thereon which is paid to Seller pursuant to the Escrow Agreement, will
total the Purchase Price, in immediately available funds by wire transfer to
Seller's account set forth in Section 2.4(a) of the Disclosure Schedule or such
other account designated in writing by Seller not less than two Business Days
prior to the Closing; and
(b) the certificates and other documents to be delivered pursuant
to Section 6.3.
2.5 Deliveries by Seller. At the Closing, Seller shall deliver to
Acquiror the following:
(a) a certificate or certificates representing the Shares,
registered in the name of Acquiror; and
(b) the certificates and other documents to be delivered pursuant
to Section 6.2.
2.6 Adjustment to Purchase Price. (a) Within 60 days following
the Closing Date, Seller shall, at its expense, prepare, or cause to be
prepared, and deliver to Acquiror a statement (the "Closing Statement"), which
shall set forth in reasonable detail the amount of Working Capital and Cash
Equivalents as of the Closing Date. The line items included in the Closing
Statement shall be prepared on a basis consistent with the line items contained
in the Statement of Assets and Liabilities of the Snapple Business as of
December 31, 1996 included in the Financial Statements; provided, however, that
the trade accounts payable reflected on the Closing Statement shall, to the
extent reasonably practicable, reflect the trade accounts payable directly
attributable to the Snapple Business, consistent with past practice.
(b) Acquiror shall have 30 days to review the Closing Statement and
to inform Seller in writing of its disagreement (the "Objection") with the
Closing Statement, if any. If Seller does not receive Acquiror's Objection
within such 30-day period, the amount of Working Capital and Cash Equivalents
set forth in the Closing Statement delivered pursuant to Section 2.6(a) shall
be deemed to have been accepted by Acquiror and shall become binding upon
Acquiror. If Acquiror does deliver Acquiror's Objection to Seller, Seller
shall then have 30 days to review and respond to Acquiror's Objection. If
Seller and Acquiror are unable to resolve all of their disagreements with
respect to the determination of Working Capital and Cash Equivalents as of the
Closing Date within 10 days following the completion of Seller's review of
Acquiror's Objection, they may refer, at the option of either party, their
differences to an internationally recognized firm of independent public
accountants selected jointly by Seller and Acquiror, who shall, acting as
experts and not as arbitrators, determine only with respect to the differences
so submitted, whether and to what extent, if any, the amount of Working Capital
and Cash Equivalents set forth in the Closing Statement requires adjustment.
If Seller and Acquiror are unable to so select the independent public
accountants within five days of either party requesting such referral, either
Acquiror or Seller may thereafter request that the American Arbitration
Association make such selection (the firm selected by Seller and Acquiror or by
the American Arbitration Association is referred to as the "CPA Firm"). Seller
and Acquiror shall direct the CPA Firm to use its best efforts to render its
determination within 30 days. The CPA Firm's determination shall be conclusive
and binding upon Seller and Acquiror. The fees and disbursements of the CPA
Firm shall be shared equally by Seller and Acquiror. Seller and Acquiror shall
make readily available to the CPA Firm all relevant books and records relating
to the Closing Statement and all other items reasonably requested by the CPA
Firm.
(c) If the sum of the amount of Working Capital and Cash
Equivalents as of the Closing Date determined in accordance with the procedures
set forth in this Section 2.6 (the "Final Amount") is less than the sum of the
amount of Working Capital and Cash Equivalents set forth in the Estimated
Statement (the "Estimated Amount"), Seller shall, within 10 days following the
determination of the Final Amount, pay to Acquiror an amount in cash equal to
such difference, and if the Final Amount is greater than the Estimated Amount,
Acquiror shall, within such 10 days, pay to Seller an amount in cash equal to
such difference.
(d) The amount payable by Seller to Acquiror or from Acquiror to
Seller, as the case may be, under this Section 2.6 shall bear interest at the
Agreed Rate as in effect from time to time, computed from the Closing Date to
the date of payment of such amount and shall be wire transferred to an account
designated by Acquiror or Seller, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, subject to Sections 3.18, 3.19 and 3.20, hereby represents
and warrants to Acquiror as follows:
3.1 Organization and Qualification. Seller and each Snapple
Company is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own and operate its assets and properties and
to carry on its business as currently conducted. Each Snapple Company is duly
qualified to do business and is in good standing in each jurisdiction where the
ownership or operation of its assets and properties or the conduct of its
business requires such qualification, except where the failure to be so
qualified or in good standing, as the case may be, would not have a Material
Adverse Effect with respect to Snapple.
3.2 Capitalization; Subsidiaries. (a) The authorized capital
stock of Snapple consists of 1,000 shares of Common Stock, par value $1.00 per
share, and 1,000,000 shares of Preferred Stock, par value $0.01 per share. The
Shares constitute the only shares of capital stock of Snapple issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid
and nonassessable and are owned, of record and beneficially, by Seller, free
and clear of all Encumbrances. Other than pursuant to this Agreement, there
are no outstanding subscriptions, options, warrants, rights, puts, calls,
commitments, or other contracts, arrangements or understandings issued by or
binding upon any Snapple Company requiring or providing for, and there are no
outstanding debt or equity securities of any Snapple Company which upon the
conversion, exchange or exercise thereof would require or provide for the
issuance, transfer or sale by any Snapple Company of any new or additional
equity interests in Snapple (or any other securities of Snapple which, with
notice, lapse of time or payment of monies, are or would be convertible into or
exercisable or exchangeable for equity interests in Snapple). Upon transfer of
the Shares to Acquiror in accordance with the terms of Article II hereof,
Acquiror will receive valid title to the Shares, free and clear of all
Encumbrances.
(b) Section 3.2(b) of the Disclosure Schedule sets forth the name
of each Subsidiary of Seller which is a Snapple Company and, with respect to
each such Snapple Company, the jurisdiction in which it is incorporated or
organized and, if not a wholly-owned direct or indirect Subsidiary of Snapple,
the percentage owned directly or indirectly by Snapple. All of the issued and
outstanding shares of capital stock or equity interests of each Snapple Company
owned either directly or indirectly by Snapple or by officers and directors of
Snapple as nominees on behalf of any Snapple Company are duly authorized,
validly issued, fully paid and nonassessable and are owned free and clear of
all Encumbrances. Except as set forth in Section 3.2(b) of the Disclosure
Schedule, there is no subscription, option, warrant, right, put, call,
contract, agreement, commitment, understanding or arrangement to which any
Snapple Company is a party with respect to the issuance, sale, delivery or
transfer of capital stock or other equity interests of any Snapple Company.
3.3 Corporate Authorization. Seller has the requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement and to consummate the transactions contem-
plated by this Agreement. The execution, delivery and performance by Seller of
this Agreement and the consummation by Seller of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate action
on the part of Seller. Seller has heretofore made available to Acquiror true,
correct and complete copies of the certificate of incorporation and bylaws of
each of the Snapple Companies.
3.4 Consents and Approvals. Except as set forth in Section 3.4 of
the Disclosure Schedule, no consent, approval or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required by Seller or any Snapple Company in connection with the execution,
delivery and performance by Seller of this Agreement and the consummation by
Seller of the transactions contemplated by this Agreement, except (i) for the
filing of a premerger notification and report form by Seller under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"),
(ii) as may be required under any local, state or foreign antitrust statute,
law, regulation or rule applicable to Acquiror, Seller or any Snapple Company
("Other Antitrust Regulations"), (iii) as may be required under any
environmental, health, employment or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the transactions
contemplated by this Agreement, (iv) as may be required under the laws of any
foreign jurisdiction in which any Snapple Company or Acquiror conducts business
or owns assets and (v) for such other consents, approvals, orders,
authorizations, registrations, declarations and filings, the failure of which
to be obtained or made would not, individually or in the aggregate, (x) have a
Material Adverse Effect with respect to Snapple or (y) materially impair or
delay the ability of Seller to perform its obligations under this Agreement or
consummate the transactions contemplated by this Agreement.
3.5 Non-Contravention. Except as set forth in Section 3.5 of the
Disclosure Schedule, the execution, delivery and performance by Seller of this
Agreement, and the consummation of the transactions contemplated hereby, do not
and will not (i) violate any provision of the Certificate of Incorporation or
the By-laws of Seller or any Snapple Company, (ii) subject to obtaining the
consents and approvals referred to in Section 3.5 of the Disclosure Schedule,
conflict with, or result in the breach of, or constitute a default under, or
result in the termination, cancellation or acceleration (whether after the
filing of notice or the lapse of time or both) of any material right or
obligation of any of the Snapple Companies under, any material agreement,
lease, contract, note, mortgage, indenture or other obligation of any of the
Snapple Companies; or (iii) subject to the exceptions set forth in Section 3.4,
violate, or result in a breach of or constitute a default under any Applicable
Law or judgment, decree or order of any Governmental Authority to which Seller
or any Snapple Company is subject, other than, in the cases of clauses (ii) and
(iii), any conflict, breach, termination, default, cancellation, acceleration,
loss or violation that, individually or in the aggregate, would not have a
Material Adverse Effect with respect to Snapple or materially impair or delay
the ability of Seller to perform its obligations under this Agreement or
consummate the transactions contemplated by this Agreement.
3.6 Binding Effect. This Agreement constitutes a valid and legally
binding obligation of Seller, enforceable in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
3.7 Financial Statements; Absence of Certain Changes. (a) Section
3.7(a) of the Disclosure Schedule contains (i) the Statement of Assets and
Liabilities of the Snapple Business as of December 31, 1996 (the "Statement of
Assets and Liabilities") and (ii) the Financial Summary-Direct Contribution of
the Snapple Business for the year ended December 31, 1995 and the year ended
December 31, 1996 (collectively, the "Financial Statements").
(b) Except as noted in the Financial Statements or in the Notes
thereto, or otherwise set forth in this Section 3.7(b) or in Section 3.7(b) of
the Disclosure Schedule, the Financial Statements:
(i) have been derived from the consolidated financial
statements of Seller;
(ii) have been prepared in accordance with GAAP and Seller's
internal accounting procedures, applied on a consistent basis for all
periods presented and on a basis consistent with Seller's audited
consolidated financial statements and unaudited interim financial
statements; and
(iii) fairly present, in all material respects, the assets and
liabilities of the Snapple Business to be transferred and assumed
hereunder through the purchase of the Shares as of the date set forth
therein and the direct contribution of the Snapple Business for the
periods indicated.
(c) Except (i) as set forth in the Financial Statements or in the
Notes thereto, (ii) as set forth in Section 3.7(c) of the Disclosure Schedule
or in any other Section of the Disclosure Schedule, (iii) for liabilities and
obligations incurred in the ordinary course of business and (iv) for
indebtedness, obligations or liabilities addressed in any other representation
or warranty set forth in this Article III (including items which need not be
disclosed pursuant to the terms of such representations and warranties), as of
the date hereof, to the Knowledge of Seller, the Snapple Companies do not have
any indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise) that, individually or in the aggregate,
would have a Material Adverse Effect with respect to Snapple.
(d) Except as set forth in Section 3.7(d) of the Disclosure
Schedule, since December 31, 1996, the Snapple Business has been conducted only
in the ordinary course, and, as of the date hereof, there have not been any
changes or developments that, individually or in the aggregate, would have a
Material Adverse Effect with respect to Snapple.
3.8 Litigation. Except as set forth in Section 3.8 of the
Disclosure Schedule, as of the date hereof, there are no Legal Proceedings
pending or, to the Knowledge of Seller, threatened, against Seller or any
Snapple Company that, individually or in the aggregate, would (i) have a
Material Adverse Effect with respect to Snapple or (ii) materially impair or
delay the ability of Seller to perform its obligations under this Agreement or
consummate the transactions contemplated by this Agreement. Except as set
forth in Section 3.8 of the Disclosure Schedule, as of the date hereof, there
is no order, judgment, injunction or decree of any Governmental Authority
outstanding against Seller or any of the Snapple Companies that, individually
or in the aggregate, would have any effect referred to in the foregoing clauses
(i) and (ii). Except as set forth in Section 3.8 of the Disclosure Schedule,
(i) all notices required to have been given to any insurance company insuring
against any Legal Proceeding have been timely and duly given, and (ii) no
insurance company has asserted, orally or in writing, that such Legal
Proceeding is not covered by the applicable policy relating to such Legal
Proceeding other than where the failure to give such notice or the absence of
such coverage would not have, individually or in the aggregate, a Material
Adverse Effect with respect to Snapple. Except as set forth in Section 3.8 of
the Disclosure Schedule, (i) there are no product liability Legal Proceedings
against or involving any of the Snapple Companies or any product manufactured,
marketed or distributed at any time by or on behalf of any of the Snapple
Companies, and (ii) no such Legal Proceeding has been settled, adjudicated or
otherwise disposed of since December 31, 1996 other than such Legal Proceedings
and such settlements, adjudications and dispositions thereof that, individually
or in the aggregate, would not have a Material Adverse Effect with respect to
Snapple. Except as set forth in Section 3.8 of the Disclosure Schedule, there
are no Legal Proceedings pending or, to the Knowledge of Seller, threatened
that would give rise to any right of indemnification on the part of any
director or officer of any of the Snapple Companies or the heirs, executors or
administrators of such director or officer, against any of the Snapple
Companies or any successor to the Snapple Business other than such Legal
Proceedings that, individually or in the aggregate, would not have a Material
Adverse Effect with respect to Snapple.
3.9 Taxes. (a) Each Snapple Company, and each affiliated group
(within the meaning of Section 1504 of the Code) of which any Snapple Company
is a member, has timely filed all federal income Tax Returns and all other
material Tax Returns required to be filed by it. All such Tax Returns are
complete and correct in all material respects. Each of the Snapple Companies
has paid (or Seller or a Subsidiary of Seller has paid on its behalf) all taxes
shown due on such Tax Returns.
(b) Except as disclosed on Section 3.9 of the Disclosure Schedule,
no material deficiencies for any Taxes have been proposed, asserted or assessed
against any of the Snapple Companies that have not been fully paid or
adequately provided for in the appropriate Financial Statements, no requests
for waivers of the time to assess any Taxes are pending, and no power of
attorney with respect to any Taxes has been executed or filed with any taxing
authority. No material issues relating to Taxes have been raised by the
relevant taxing authority during any presently pending audit or examination.
(c) No liens for Taxes exist with respect to any assets or
properties of the Snapple Companies, except for statutory liens for Taxes not
yet due.
(d) Except as disclosed in Section 3.9 of the Disclosure Schedule,
no federal, state, local or foreign audits or other administrative proceedings
or court proceedings are presently pending with regard to any federal income or
material state, local or foreign Taxes or Tax Returns of any of the Snapple
Companies and none of the Snapple Companies has received a written notice of
any pending audit or proceeding.
(e) None of the Snapple Companies has, with regard to any assets or
property held or acquired by any of them, filed a consent to the application of
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by any of the Snapple Companies.
(f) Except as set forth in Section 3.9 of the Disclosure Schedule,
since December 6, 1994 and, to the Knowledge of Seller, at any time prior to
December 6, 1994, none of the Snapple Companies or any of their present or
former Affiliates has received a Tax Ruling or made or entered into a Tax
Agreement, Consent or Election (foreign or domestic) that will have a
continuing adverse effect after the Closing Date on any Snapple Company or any
asset of any Snapple Company, and there are no applications or negotiations
pending with respect to any of the foregoing. For purposes of the preceding
sentence, the term "Tax Ruling" shall mean written rulings of a taxing
authority relating to Taxes and the term "Tax Agreement, Consent or Election"
shall mean a written agreement, consent or election relating to Taxes.
(g) Except as set forth in Section 3.9 of the Disclosure Schedule,
none of the Snapple Companies is a party to, or bound by, or has any obligation
under any Tax indemnity, sharing, allocation, or similar agreement or
arrangement, express or implied, other than the provisions of this Agreement.
(h) The Snapple Companies are for federal, state and local income
tax purposes amortizing over 15 years under Section 197 of the Code, the
acquired deductible intangibles using the bases set forth in Annex 1,
Attachment L of Section 3.7(a) of the Disclosure Schedule. No taxing authority
has at any time proposed or asserted that any such asset or group of assets is
not properly amortizable.
(i) Seller has made available to Acquiror complete and correct
copies of all federal and all material foreign and state income Tax Returns for
taxable periods December 7, 1994 to June 30, 1995 and July 1, 1995 to December
31, 1995 that have been filed by or with respect to each of the Snapple
Companies.
3.10 Employee Benefits. (a) Section 3.10(a) of the Disclosure
Schedule sets forth a complete and correct list of all material Employee
Benefit Plans in the United States and all material Employee Arrangements in
the United States.
(b) With respect to each material Employee Benefit Plan and each
material Employee Arrangement referred to above, a complete and correct copy of
each of the following documents (if applicable) has been provided or made
available to Acquiror: (i) the most recent plan document or agreement and all
amendments thereto; and (ii) the most recent summary plan description and all
related summaries of material modifications.
(c) Except as set forth in Section 3.10(c) of the Disclosure
Schedule, none of the Snapple Employee Benefit Plans is subject to Section
4063, 4064 or 4202 of ERISA.
(d) The Snapple Employee Benefit Plans and their related trusts
intended to qualify under Sections 401 and 501(a) of the Code, respectively,
have been determined by the IRS to qualify under such sections, as amended by
the Tax Reform Act of 1986.
(e) All contributions required to have been made by Snapple or
Seller under any Snapple Employee Benefit Plan or any Applicable Law to any
trusts established thereunder or in connection therewith have been made by the
due date therefor (including any valid extensions).
(f) The Snapple Employee Benefit Plans and Snapple Employee
Arrangements have been maintained, in all material respects, in accordance with
their terms and, to Seller's knowledge, Applicable Laws, including, but not
limited to, the filing of applicable reports, documents and notices regarding
any Snapple Employee Benefit Plans with the Secretary of Labor and the
Secretary of the Treasury, or the furnishing of such documents to participants
in the Snapple Employee Benefit Plans, except where any failure to comply would
not, individually or in the aggregate, have a Material Adverse Effect with
respect to Snapple.
3.11 Compliance with Laws. Except as set forth in Section 3.11 of
the Disclosure Schedule, to the Knowledge of Seller, each of the Snapple
Companies is in compliance with all Applicable Laws, except where the failure
to so comply, individually or in the aggregate, would not have a Material
Adverse Effect with respect to Snapple, and the Snapple Companies have all
permits, licenses, certificates of authority, orders and approvals of, and have
made all filings, applications and registrations with, Governmental Authorities
that are required in order for the Snapple Companies to conduct the Snapple
Business as presently conducted, except for such permits, licenses,
certificates, orders, approvals, filings, applications and registrations, the
failure to have or make would not, individually or in the aggregate, have a
Material Adverse Effect with respect to Snapple; it being understood that
nothing in this representation is intended to address any matters which are the
subject of the representation or warranty set forth in Section 3.16.
3.12 Intellectual Property Section 3.12 of the Disclosure Schedule
sets forth a list and description (including the country of registration) of
all material trademarks, trade names, service marks, copyrights and patents
owned or licensed by any of the Snapple Companies and all material patent
applications of any of the Snapple Companies. Except as set forth in Section
3.12 of the Disclosure Schedule, the Snapple Companies own or possess licenses
or other rights to use all patents, trademarks, trade names, service marks,
copyrights, licenses and product licenses or registrations (including
applications for any of the foregoing) as are necessary to conduct the Snapple
Business as currently conducted, except those the lack of which would not,
individually or in the aggregate, have a Material Adverse Effect with respect
to Snapple; and none of Seller or any of the Snapple Companies has any
Knowledge of any conflict with the proprietary intellectual property rights
relating to the Snapple Business or any Knowledge of any conflict by Seller or
any of the Snapple Companies with the rights of others therein which,
individually or in the aggregate, would have a Material Adverse Effect with
respect to Snapple.
3.13 Contracts. Section 3.13 of the Disclosure Schedule sets forth
a list, as of the date hereof, of each material written contract and lease and
each material oral contract or lease as to which Seller has Knowledge and to
which any of the Snapple Companies is a party ("Contract") (other than (i) any
purchase or sale orders arising in the ordinary course of business, (ii) any
Contract involving the payment of less than $1,000,000 in the aggregate and
(iii) any Contract listed in any other Section of the Disclosure Schedule).
Except as set forth in Section 3.13 of the Disclosure Schedule, each Contract
set forth in Section 3.13 of the Disclosure Schedule is a valid and binding
agreement of the Snapple Company which is a party thereto and, to the Knowledge
of Seller, is in full force and effect. Except as set forth in Section 3.13 of
the Disclosure Schedule, Seller has no Knowledge of any material default under
any Contract set forth in Section 3.13 of the Disclosure Schedule which default
has not been cured or waived and which default would have a Material Adverse
Effect with respect to Snapple.
3.14 Brokers. Except for Goldman, Sachs & Co., whose fees will be
paid by Seller, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Seller or the Snapple Companies who might be entitled to any fee or commission
from Seller or the Snapple Companies in connection with the transactions
contemplated by this Agreement.
3.15 Title to Properties. Each of the Snapple Companies has good
and valid title to all of the material tangible assets and properties which it
owns and which are reflected on the Statement of Assets and Liabilities (except
for assets and properties sold, consumed or otherwise disposed of by the
Snapple Companies in the ordinary course of business since the date of the
Statement of Assets and Liabilities), and such tangible assets and properties
are owned free and clear of all Encumbrances, except for (a) Encumbrances
listed in Section 3.15 of the Disclosure Schedule, (b) liens for current Taxes
not yet due and payable or for Taxes the validity of which is being contested
in good faith, (c) Encumbrances to secure indebtedness reflected on the
Statement of Assets and Liabilities or indebtedness incurred in the ordinary
course of business consistent with past practice after the date thereof,
(d) mechanic's liens, materialmen's liens and other Encumbrances which have
arisen in the ordinary course of business and (e) Encumbrances which, in the
aggregate, would not have a Material Adverse Effect with respect to Snapple or
materially adversely interfere with the use of such material assets and
properties as they are presently being used.
3.16 Environmental Matters. (a) Except as set forth in Section
3.16 of the Disclosure Schedule, to the Knowledge of Seller, the Snapple
Companies are in compliance with all applicable Environmental Laws, except
where the failure to be in compliance would not, individually or in the
aggregate, have a Material Adverse Effect with respect to Snapple.
(b) Except as set forth in Section 3.16 of the Disclosure Schedule,
to the Knowledge of Seller, none of the Snapple Companies has received any
written request for information, or has been notified that it is a potentially
responsible party, under CERCLA or any similar state law with respect to any
on-site or off-site location for which liability is currently being asserted.
(c) Except as set forth in Section 3.16 of the Disclosure Schedule,
there are no writs, injunctions, decrees, orders or judgments outstanding, or
any actions, suits, proceedings or investigations pending or, to the knowledge
of Seller, threatened, relating to compliance by the Snapple Companies with any
Environmental Law that, individually or in the aggregate, would have a Material
Adverse Effect with respect to Snapple.
3.17 Labor Relations. Except as set forth in Section 3.17 of the
Disclosure Schedule, none of the Snapple Companies is a party to any collective
bargaining agreements. Except as set forth in Section 3.17 of the Disclosure
Schedule, there is no unfair labor practice complaint or other proceeding
against any of the Snapple Companies pending before the National Labor
Relations Board which, if adversely decided, would have a Material Adverse
Effect with respect to Snapple, and there is no labor strike pending or
threatened against any Snapple Company which would have a Material Adverse
Effect with respect to Snapple.
3.18 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, neither Seller
nor any other Person makes any other express or implied representation or
warranty on behalf of Seller.
3.19 Disclosure Schedule. On or prior to the date hereof, Seller
has delivered to Acquiror a schedule (as the same may be amended or
supplemented pursuant to this Section 3.19, the "Disclosure Schedule") setting
forth, among other things, items of disclosure relating to any or all of the
representations and warranties of Seller; provided, that (i) no such item is
required to be set forth in the Disclosure Schedule as an exception to a
representation or warranty if its absence would not result in the related
representation or warranty being deemed untrue or incorrect under the standard
established by Section 3.20, and (ii) the mere inclusion of an item in the
Disclosure Schedule shall not be deemed an admission by Seller that such item
represents a material exception or fact, event or circumstance or that such
item would result in a Material Adverse Effect with respect to Snapple. Seller
may, by notice in accordance with this Agreement, amend or supplement any
Section of the Disclosure Schedule to include any matters (x) which, if
existing or occurring before or at the date of this Agreement, would have
caused any representation or warranty of the Seller to be untrue or incorrect
if not set forth or described in the Disclosure Schedule, and (y) hereafter
arising prior to the 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 Disclosure Schedule, it being hereby agreed and understood that any such
amendment or supplement to any Section of the Disclosure Schedule shall not
operate to cure any prior breach by Seller, under the standard established by
Section 3.20, of any representation or warranty to which such amended or
supplemented schedule relates. In no event shall Seller have any liability by
virtue of its failure to disclose in response to any Section of this Agreement
information which is disclosed herein in response to another Section of this
Agreement.
3.20 Standard. No representation or warranty of Seller contained in
Article III hereof shall be deemed untrue or incorrect, and Seller shall not be
deemed to have breached a representation or warranty, as a consequence of the
existence of any fact, circumstance or event unless such fact, circumstance or
event, individually or taken together with all other facts, circumstances or
events inconsistent with any Section of Article III, has had or would have a
Material Adverse Effect with respect to Snapple.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to Seller as follows:
4.1 Organization and Qualification. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own and operate its assets and properties and to carry on its
business as currently conducted. Acquiror is duly qualified to do business and
is in good standing in each jurisdiction where the ownership or operation of
its assets and properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing,
as the case may be, would not have a Material Adverse Effect with respect to
Acquiror.
4.2 Corporate Authorization. Acquiror has the requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance by
Acquiror of this Agreement and the consummation by Acquiror of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Acquiror.
4.3 Consents and Approvals. Except as set forth in Section 4.3 of
the Disclosure Schedule, no consent, approval or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required by Acquiror in connection with the execution, delivery and performance
by Acquiror of this Agreement and the consummation by Acquiror of the
transactions contemplated by this Agreement, except (i) for the filing of a
premerger notification and report form by Acquiror under the HSR Act, (ii) as
may be required under any Other Antitrust Regulations, (iii) as may be required
under any environmental, health, employment or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the transactions contemplated by this Agreement, (iv) as may be required under
the laws of any foreign jurisdiction in which Acquiror or any Snapple Company
conducts business or owns assets and (v) for such other consents, approvals,
orders, authorizations, registrations, declarations and filings, the failure of
which to be obtained or made would not, individually or in the aggregate,
(x) have a Material Adverse Effect with respect to Acquiror or (y) materially
impair or delay the ability of Acquiror to perform its obligations under this
Agreement or consummate the transactions contemplated by this Agreement.
4.4 Non-Contravention. The execution, delivery and performance by
Acquiror of this Agreement, and the consummation by Acquiror of the
transactions contemplated hereby, do not and will not (i) violate any provision
of the Certificate of Incorporation or the By-laws of Acquiror; (ii) conflict
with, or result in the breach of, or constitute a default under, or result in
the termination, cancellation or acceleration (whether after the filing of
notice or the lapse of time or both) of any material right or obligation of
Acquiror or any of its Subsidiaries under, any material agreement, lease,
contract, note, mortgage, indenture or other obligation of Acquiror or its
Subsidiaries; or (iii) subject to the exceptions set forth in Section 4.3,
violate, or result in a breach of or constitute a default under any Applicable
Law or judgment, decree or order of any Governmental Authority to which
Acquiror or any of its Subsidiaries is subject, other than, in the case of
clauses (ii) and (iii), any conflict, breach, termination, default,
cancellation, acceleration, loss or violation which, individually or in the
aggregate, would not have a Material Adverse Effect with respect to Acquiror or
materially impair or delay the ability of Acquiror to perform its obligations
under this Agreement or consummate the transactions contemplated by this
Agreement.
4.5 Binding Effect. This Agreement constitutes a valid and legally
binding obligation of Acquiror enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
4.6 Brokers. Except for Morgan Stanley & Co., Incorporated and
Salomon Brothers Inc, whose fees will be paid by Acquiror, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Acquiror or any Subsidiary of Acquiror
who might be entitled to any fee or commission from Acquiror in connection with
the transactions contemplated by this Agreement.
4.7 Purchase for Investment. Acquiror is acquiring the Shares for
investment and not with a view toward, or for the purpose of, the resale or
distribution thereof. Acquiror acknowledges that the sale of the Shares
hereunder has not been registered under the Securities Act and that the Shares
may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act, pursuant
to an exemption therefrom or in a transaction not subject thereto. Acquiror
has no knowledge that any representation or warranty of Seller contained in
Article III is not true and correct in all material respects.
4.8 Financial Capability. Acquiror will have on the Closing Date
sufficient funds to purchase the Shares and consummate the transactions
contemplated by this Agreement. As of the date hereof, Acquiror has cash and
cash equivalents of approximately $195,000,000 (the "Cash").
4.9 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, neither Acquiror
nor any other Person makes any other express or implied representation or
warranty on behalf of Acquiror.
ARTICLE V
COVENANTS
5.1 Conduct of Snapple Business. Except as otherwise contemplated
by this Agreement or as set forth in Section 5.1 of the Disclosure Schedule or
in any other Section of the Disclosure Schedule, during the period from the
date hereof to the Closing, Seller shall, and shall cause the Snapple Companies
to, taking into account any matters that may arise that are attributable to the
pendency of the transactions contemplated by this Agreement, conduct the
Snapple Business only in the ordinary course. In addition, from and after the
date hereof to the Closing Date, except as otherwise provided in this Agreement
or as otherwise contemplated hereby or as set forth in Section 5.1 of the
Disclosure Schedule or in any other Section of the Disclosure Schedule, Seller
shall not permit any Snapple Company to, without the prior written consent of
Acquiror (which consent shall not be unreasonably withheld):
(i) amend its Certificate of Incorporation, By-Laws or other
comparable charter or organizational documents or merge with or into or
consolidate with any other person;
(ii) issue, sell, pledge, dispose of or encumber, or authorize
or propose the issuance, sale, pledge, disposition or encumbrance of, any
shares of, or securities convertible or exchangeable for, or options,
puts, warrants, calls, commitments or rights of any kind to acquire, any
of its capital stock or subdivide or in any way reclassify any shares of
its capital stock or change or agree to change in any manner the rights
of its outstanding capital stock;
(iii) except as may be required by agreements or arrangements
disclosed in the Disclosure Schedule, grant any severance or termination
pay to, or enter into, extend or amend any employment, consulting,
severance or other compensation agreement with, any of its directors,
officers or other employees whose annual base salary is in excess of
$200,000 which would bind any Snapple Company from and after the Closing
Date;
(iv) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any properties or assets
material to the Snapple Business having a fair market value in excess of
$2 million individually or $10 million in the aggregate;
(v) terminate any distributor or co-packer relationship;
(vi) enter into any material contract or other arrangement with
any new co-packer with a term of more than three months;
(vii) enter into any material distribution agreement with
respect to the Snapple Business, other than those agreements which have
been delivered to distributors prior to the date hereof, but not yet
mutually executed, as described in Section 3.13 of the Disclosure
Schedule;
(viii) implement any change in its accounting principles,
practices or methods, other than as may be required by GAAP and other
than as may be necessary or advisable in connection with the transactions
contemplated hereby; or
(ix) authorize any of, or commit or agree to take any of, the
actions referred to in paragraphs (i) through (viii) above.
5.2 Access. Prior to the Closing, Seller shall, and shall cause
the Snapple Companies to, permit Acquiror and its officers, employees,
accountants, counsel, financial advisors and other representatives to have
reasonable access, during normal business hours and upon reasonable advance
notice, to the properties, books, records, accountants (subject to their
availability) and personnel of Seller and its Affiliates relating to the
Snapple Business, and shall furnish, or cause to be furnished, to Acquiror, all
other information concerning the Snapple Business or the Snapple Companies that
is available as Acquiror may reasonably request. In connection with such
access, Acquiror's representatives shall cooperate with Seller's and Snapple's
representatives and shall use their reasonable best efforts to minimize any
disruption of the Snapple Business. Acquiror agrees to abide by the terms of
the Confidentiality Agreement with respect to such access and any information
furnished to it or its representatives pursuant to this Section 5.2.
5.3 Reasonable Best Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, Seller and Acquiror shall use their
respective reasonable best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings with,
and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Authority, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties (including, without limitation,
any necessary consents for the assignment to Acquiror of the contracts and
arrangements referenced in the Assignment and Assumption Agreement), (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
transactions contemplated by this Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Authority vacated or reversed and (iv) the execution and delivery of any addi-
tional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement; provided, however,
that, notwithstanding the foregoing, the actions of Seller and Acquiror with
respect to filings, approvals and other matters pursuant to the HSR Act and
Other Antitrust Regulations shall be governed by Section 5.4. To the extent
that any contract, permit or other arrangement that the parties intend to
assign, as specified herein and in the Assignment and Assumption Agreement
(hereinafter, collectively the "Assigned Contracts"), is not capable of being
assigned or transferred without the consent or waiver of the other party
thereto or any other third party (including a government or governmental unit),
or if such assignment or transfer or attempted assignment or transfer would
constitute a breach thereof or a violation of any law, decree, order, regula-
tion or other governmental edict, this Agreement shall not constitute an
assignment or transfer thereof, or an attempted assignment or transfer of any
such Assigned Contracts until such time as such consent or waiver is obtained.
Anything in this Agreement to the contrary notwithstanding, Seller is not
obligated to transfer to Acquiror any of its rights and obligations in and to
any of the Assigned Contracts without first having obtained all necessary
consents and waivers. Prior to the Closing Date, Seller shall use its reason-
able best efforts to obtain consents to the assignment of the Assigned
Contracts, provided, however, that Seller shall not, without Acquiror's consent
(which shall not be unreasonably withheld), agree to any modification of any
such Assigned Contracts in the course of obtaining any such consents or
waivers. Prior to and for a reasonable period of time after the Closing Date,
Seller shall cooperate with Acquiror to assist Acquiror in obtaining any other
consents and waivers under any Assigned Contract which are reasonably requested
by Acquiror. If any such consent or waiver cannot be obtained, Seller and
Acquiror will cooperate to implement reasonable arrangements resulting in
Acquiror obtaining the benefits and privileges of the relevant Assigned
Contract (including without limitation enforcement for the benefit of Acquiror
of any and all rights of Seller against a third party or otherwise) while
protecting Seller from continuing liabilities or obligations thereunder.
5.4 Antitrust Notification. (a) Seller and Acquiror shall, as
promptly as practicable, but in no event later than 10 Business Days following
the execution and delivery of this Agreement, file with (i) the FTC and the
DOJ, the notification and report form required for the transactions
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act and (ii) any other applicable Governmental
Authority all filings, reports, information and documentation required for the
transactions contemplated hereby pursuant to Other Antitrust Regulations. Each
of Seller and Acquiror shall furnish to each other's counsel such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission that is necessary under the
HSR Act and Other Antitrust Regulations.
(b) Each of Seller and Acquiror shall use its best efforts to
obtain any clearance required under the HSR Act and Other Antitrust Regulations
for the consummation of the transactions contemplated by this Agreement and
shall keep each other apprised of the status of any communications with, and
any inquiries or requests for additional information from, the FTC and the DOJ
and other Governmental Authorities and shall comply promptly with any such
inquiry or request.
(c) Each of Seller and Acquiror shall use its best efforts to take
any action reasonably necessary to vigorously defend, lift, mitigate and
rescind the effect of any litigation or administrative proceeding adversely
affecting this Agreement or the transactions contemplated hereby, including,
without limitation, promptly appealing any adverse court or administrative
order or injunction.
5.5 Supplemental Disclosure. Seller shall confer on a regular and
frequent basis with Acquiror, report on operational matters and promptly notify
Acquiror of, and furnish Acquiror with, any information it may reasonably
request with respect to, any event or condition or the existence of any fact
that would cause any of the conditions to Acquiror's obligation to consummate
the transactions contemplated by this Agreement not to be completed, and
Acquiror shall promptly notify Seller of, and furnish Seller with any
information it may reasonably request with respect to, any event or condition
or the existence of any fact that would cause any of the conditions to Seller's
obligation to consummate the transactions contemplated by this Agreement not to
be completed. Prior to the Closing, Seller shall deliver to Acquiror within 21
days of the end of each month monthly financial statements of the Snapple
Business, which monthly financial statements are prepared in the ordinary
course of business, on a basis consistent with the direct contribution and
invested capital statements previously delivered.
5.6 Further Assurances. (a) At any time after the Closing Date,
Seller, on the one hand, and Acquiror, on the other hand, shall promptly
execute, acknowledge and deliver any other assurances or documents reasonably
requested by Acquiror or Seller, as the case may be, and necessary for it to
satisfy its respective obligations hereunder or obtain the benefits
contemplated hereby.
(b) In the event that, subsequent to the Closing Date, Acquiror
shall receive written notice from Seller that certain specified assets which
were transferred to Acquiror through the sale of the Shares constitute assets
which were used predominantly in the Seller's non-Snapple Business prior to the
Closing Date, Acquiror shall transfer and deliver any and all of such assets to
Seller without the payment by Seller of any consideration therefor, subject to
all liabilities relating thereto, environmental or otherwise, that were in
effect when such assets were transferred to Acquiror, shall execute such
instruments of conveyance and transfer, assignments, bills of sale and other
documents as may be reasonably requested by Seller in connection therewith and
shall cooperate with Seller in causing the transfer of such assets to occur in
a manner to appropriately minimize the payment of Taxes. In addition, any
transfer of assets pursuant to this Section 5.6(b) shall be treated as if such
assets were distributed as a dividend by Snapple to Seller on the day
immediately preceeding the Closing Date.
5.7 Announcements. Prior to the Closing, neither Seller nor
Acquiror will issue any press release or otherwise make any public statement
with respect to this Agreement and any of the transactions contemplated hereby
without the prior consent of the other (which consent shall not be
unreasonably withheld), except as expressly permitted by and in accordance with
the terms of the Confidentiality Agreement. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by
this Agreement shall be in the form heretofore agreed to by the parties.
5.8 Employee Matters. (a) Section 5.8(a) of the Disclosure
Schedule sets forth a complete and correct list of all Employee Benefit Plans
or portions thereof which Acquiror hereby covenants and agrees that the Snapple
Companies or Acquiror will assume and be liable for with respect to any
employee or former employee of the Snapple Companies or the Snapple Business
after the Closing Date (the "Snapple Employee Benefit Plans"). Section 5.8(a)
of the Disclosure Schedule also sets forth a complete and correct list of all
Employee Arrangements or portions thereof which Acquiror hereby covenants and
agrees that the Snapple Companies or Acquiror will assume and be liable for
with respect to any employee or former employee of the Snapple Companies or the
Snapple Business after the Closing Date (the "Snapple Employee Arrangements").
Effective as of the Closing Date, Snapple Employees (as hereinafter defined in
Section 5.8(b)) will cease participation in all Employee Benefit Plans and all
Employee Arrangements other than the Snapple Employee Benefit Plans and the
Snapple Employee Arrangements. Snapple Employees will be treated as 100%
vested in their accrued benefits under any such Employee Benefit Plan
constituting a qualified pension plan under Section 401(a) of the Code.
(b) Prior to the Closing, Seller shall cause the employees listed in
Section 5.8(b) of the Disclosure Schedule to become employees of Snapple or
another applicable Snapple Company (to the extent that such employees are not
employees of Snapple or another applicable Snapple Company as of the date
hereof). All such employees, any other employees in the Snapple division
working exclusively on the Snapple Business, and any other employees that are
hired by a Snapple Company between the date hereof and the Closing Date, are
hereinafter collectively referred to as the "Snapple Employees". The parties
agree that all Snapple Employees will remain employees of a Snapple Company
immediately following the Closing. Notwithstanding the foregoing, the term
"Snapple Employees" shall not include employees who as of the Closing Date are
"disabled" (within the meaning of the long-term disability plans applicable to
the Snapple Companies), former employees and retired employees of the Snapple
Companies.
(c) No provision of this Agreement shall be construed to prohibit
the Snapple Companies or any Affiliate thereof from having the right to
terminate the employment of any Snapple Employee, with or without cause, or to
amend or to terminate any Snapple Employee Benefit Plans or Snapple Employee
Arrangements established, maintained or contributed to by the Snapple
Companies, Acquiror or their Affiliates after the Closing.
(d) Service by Snapple Employees with the Snapple Companies or any
of their Affiliates shall be recognized under any benefit plan or arrangement
established, maintained or contributed to by Acquiror, the Snapple Companies,
or any of their Affiliates after the Closing for the benefit of any Snapple
Employee solely for purposes of eligibility to participate and vesting, and for
accrual under any severance plan, but in no event shall such service be taken
into account in determining the accrual of benefits under a defined benefit
plan. Acquiror shall indemnify Seller for any claim by Snapple Employees that
they are entitled to severance or similar payments as a result of the
transactions contemplated by this Agreement or any act of Acquiror following
the Closing; provided, that to the extent any such claim arises under any
arrangement, agreement or plan maintained by Seller or any of its Affiliates,
such arrangement, agreement or plan shall have been disclosed to Acquiror prior
to the date of this Agreement.
(e) Prior to the Closing Seller shall take all action necessary to
assume all liabilities of the Snapple Companies arising under, in connection
with or relating to, any Employee Benefit Plan, other than any Snapple Employee
Benefit Plan or any Snapple Employee Arrangement, and all liabilities arising
under, in connection with or relating to all Snapple Employee Benefit Plans and
Snapple Employee Arrangements shall be assumed and paid by Acquiror.
(f) Following the Closing, the Snapple Employees shall have
substantially the same compensation, benefits and severance as provided for
similarly situated employees of Acquiror's Mistic business. It is understood
that Acquiror is not required to maintain any of the benefit plans and
arrangements listed in the Disclosure Schedule.
(g) Seller and Acquiror agree to cooperate to carry out the duties
and responsibilities contained in this Section 5.8. In addition, Seller agrees
to make available to Acquiror such information as Acquiror may reasonably
request to facilitate the determination of (i) the period of service of any
Snapple Employee with the Snapple Companies or any of their Affiliates prior to
the Closing Date, (ii) individual service accruals and salary histories of
Snapple Employees and (iii) such other information as Acquiror may reasonably
request to carry out the provisions of this Section 5.8.
5.9 Preservation of Records. Subject to Section 8.4, Acquiror
agrees that it shall, at its own expense, preserve and keep the records held by
it relating to the Snapple Business that could reasonably be required after the
Closing by Seller for as long as is specified for such categories of records in
Seller's document retention program in effect on the Closing Date (a copy of
which has been provided to Acquiror). In addition, Acquiror shall make such
records available to Seller as may be reasonably required by Seller in
connection with, among other things, any insurance claim, legal proceeding or
governmental investigation relating to the Snapple Business.
5.10 Other Agreements. Each of Seller and Acquiror agrees that it
shall (and, with respect to clauses (ii) through (vii) below, shall cause
Snapple to), on or prior to the Closing, enter into (i) a Transition Services
Agreement, substantially in the form of Exhibit A hereto (the "Transition
Services Agreement"), with respect to shared arrangements between any Snapple
Company, on the one hand, and Seller or any of its other Subsidiaries, on the
other hand, (ii) a Patent License Agreement, substantially in the form of
Exhibit B hereto (the "Patent License Agreement"), with respect to the
licensing of certain patents, (iii) a Shared Technology License Agreement,
substantially in the form of Exhibit C hereto (the "Shared Technology License
Agreement"), with respect to the cross-licensing of shared technology, (iv) an
Assignment and Delegation Agreement Regarding Services of Beverage America,
Inc. d/b/a Brooks Pro-Pak, substantially in the form of Exhibit D hereto (the
"Brooks Agreement"), (v) an Assignment and Delegation Agreement Regarding
Services of Power Packaging, Inc., substantially in the form of Exhibit E
hereto (the "Power Packaging Agreement"), provided, however, that if for any
reason prior to the Closing Date Stokely-Van Camp, Inc. ("SVC"), Snapple and
Power Packaging, Inc. do not enter into an amended Manufacturing Agreement,
substantially in the form of the January 1997 draft previously provided to
Acquiror, with respect to the Tolleson facility, then Seller, Snapple and
Acquiror shall enter into an agreement with respect to SVC's and Snapple's
rights and obligations under the existing Facility Construction and
Manufacturing Agreement dated as of November 30, 1993 between Snapple and Power
Packaging, Inc. that is substantially similar in effect to the Power Packaging
Agreement and (vi) an Assignment and Assumption Agreement, substantially in the
form of Exhibit F hereto (the "Assignment and Assumption Agreement").
5.11 Financial Statements. Seller shall, at Acquiror's expense, (i)
within 90 days following the date of this Agreement, deliver to Acquiror
audited financial statements for the Snapple Companies for the years ended
December 31, 1996, December 31, 1995 and December 31, 1994, such audited
financial statements to present the consolidated balance sheets of the Snapple
Companies as of such dates and the related consolidated statements of
operations and cash flows and related footnotes for each of such years
(collectively, the "Audited Financial Statements") and (ii) within 90 days
following the date on which Seller receives written notice from Acquiror that
Acquiror is required to include such interim financial information in a
specific filing with the United States Securities and Exchange Commission,
unaudited financial statements for the Snapple Companies for the quarters ended
March 31, 1996 and March 31, 1997, such unaudited financial statements to
present the consolidated balance sheets of the Snapple Companies as of such
dates and the related consolidated statement of operations and cash flows and
related footnotes each for such period. In addition, if Acquiror proposes to
engage in a transaction or filing regarding any of the Snapple Companies that
requires the creation of pro forma or historical financial statements for any
of the Snapple Companies, individually or in some combination (including any
filing with the United States Securities and Exchange Commission that requires
financial statements for any of the Snapple Companies prepared in accordance
with Regulation S-X), for any period of time prior to the Closing Date, Seller
shall permit Acquiror and its officers, employees, accountants, counsel,
financial advisors and other representatives, to have reasonable access, during
normal business hours and upon reasonable advance notice, to the properties,
books and records of Seller and its Affiliates relating to the Snapple Business
solely for such purpose.
5.12 Related Party Payments. Except as otherwise provided in this
Agreement and the other agreements and documents contemplated hereby, all
liabilities and obligations of the Snapple Companies to Seller and its
Affiliates shall be paid or otherwise settled on or prior to the Closing.
5.13 Continental PET. Seller shall use commercially reasonable
efforts to provide, in connection with products co-packed by Seller, the
remaining calendar 1997 requirements, and 1998 and 1999 requirements (as
described and limited in the Brooks Agreement and the Power Packaging
Agreement), of Snapple for 20 oz. bottles that are produced for Seller pursuant
to any contract with Continental PET Technologies, Inc. and co-packed at
Seller's Tolleson facility or at the Brooks Pro-Pak facility at a cost equal to
that charged to Seller by Continental PET Technologies, Inc.
5.14 Payment of Proceeds. Acquiror agrees to cause Snapple to pay to
Seller, immediately upon receipt, any proceeds paid to Snapple in connection
with the settlement of the Snapple Beverage Corp. v. Sterling & Sterling
Litigation (E.D.N.Y.). Any payments made under this Section 5.14 shall be net
of any Taxes payable with respect to the receipt or accrual of any such
proceeds after the Closing (taking into account any actual reduction in Tax
liability after the Closing realized or that will be realized upon the payments
pursuant to this Section 5.14).
5.15 Insurance. (a) Seller and Acquiror agree that Casualty
Insurance Claims relating to the Snapple Business (including reported claims
and including incurred but not reported claims) will remain with the Snapple
Companies immediately following the Closing. For purposes hereof, "Casualty
Insurance Claims" shall mean workers' compensation, auto liability, general
liability and products liability claims. The Casualty Insurance Claims are
subject to the provisions of policies of insurance with insurance carriers and
contractual arrangements with insurance adjusters maintained by Seller prior to
the Closing (collectively, the "Insurance Policies"). With respect to the
Casualty Insurance Claims, the following procedures shall apply: (i) Seller
shall continue to administer, adjust, settle and pay, on behalf of Snapple, all
Casualty Insurance Claims with dates of occurrence prior to the date of
Closing; provided, that Seller will obtain the consent of Acquiror prior to
adjusting, settling or paying any Casualty Insurance Claim of an amount greater
than $50,000; and (ii) Seller shall invoice Snapple at the end of each month
for Casualty Insurance Claims paid on behalf of Snapple by the Seller or
Seller's insurance company or insurance adjuster during the previous month.
Acquiror shall cause Snapple to pay the Seller within 15 days of the date of
each monthly invoice. In the event that Snapple does not pay Seller within 15
days of such invoice, interest at the rate of 10% per annum shall accrue on the
amount of such invoice. Casualty Insurance Claims to be paid by Snapple
hereunder shall include all costs necessary to settle claims including, but not
limited to, compensatory, medical, legal and other allocated expenses. In the
event that any Casualty Insurance Claim exceeds a deductible or self-insured
retention under the Insurance Policies, and provided that Snapple shall have
properly paid any costs related to such Casualty Insurance Claim, Snapple shall
be entitled to the benefit of any insurance proceeds that may be available to
discharge any portion of such Casualty Insurance Claim.
(b) Seller makes no representation or warranty with respect to
the existence, applicability, validity or adequacy of any Insurance Policy, and
Seller shall not be responsible to Acquiror or any of its Affiliates for the
failure of any insurer to pay under any such Insurance Policy.
(c) Nothing in this Agreement is intended to provide or shall
be construed as providing a benefit or release to any insurer or claims service
organization of any obligation under any Insurance Policy. Seller and Acquiror
confirm that the sole intention of this Section 5.15 is to divide and allocate
the benefits and obligations under the Insurance Policies between them as of
the Closing Date and not to affect, enhance or diminish the rights and
obligations of any insurer or claims service organization thereunder. Nothing
herein shall be construed as creating or permitting any insurer or claims
service organization the right of subrogation against Seller or Acquiror or any
of their Affiliates in respect of payments made by one to the other under any
Insurance Policy.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to the Obligations of Acquiror and Seller. The
respective obligation of each party to effect the Closing is subject to the
satisfaction or waiver (to the extent permitted under Applicable Laws) on or
prior to the Closing Date of the following conditions:
(a) No Injunctions or Restraints. No statute, rule, regulation,
decree, preliminary or permanent injunction, temporary restraining order or
other order of any nature of any U.S. federal or state Governmental Authority
shall be in effect that restrains, prevents or materially changes the
transactions contemplated hereby; provided, however, that in the case of a
decree, injunction or other order, each of the parties shall have used its best
efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any decree, injunction or other order.
(b) Updating. If Seller has, in accordance with Section 3.19 of
this Agreement, amended or supplemented any Section of the Disclosure Schedule,
the matters included in such amendments or supplements shall not, individually
or in the aggregate, have a Material Adverse Effect with respect to Snapple.
(c) HSR Act. The applicable waiting periods under the HSR Act shall
have expired or been terminated.
6.2 Conditions to the Obligations of Acquiror. The obligation of
Acquiror to effect the Closing is further subject to the satisfaction of the
following conditions, any or all of which may be waived on or prior to the
Closing Date in whole or in part by Acquiror:
(a) Representations and Warranties. The representations and
warranties of Seller made hereunder shall be true and correct, subject to the
standard set forth in Section 3.20, at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement and except to the extent
that any representation or warranty is expressly made as of a specified date,
in which case such representation or warranty shall be true and correct,
subject to the standard set forth in Section 3.20, only as of such date.
Acquiror shall have received a certificate to that effect dated the Closing
Date and signed on behalf of Seller by an authorized officer of Seller.
(b) Agreements. Seller shall have performed in all material
respects all of its material obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Acquiror shall have
received a certificate to that effect dated the Closing Date and signed on
behalf of Seller by an authorized officer of Seller.
(c) Legal Opinion. Acquiror shall have received the opinion of
Seller's in-house counsel, dated as of the Closing Date, addressed to Acquiror
substantially to the effect set forth in Exhibit G hereto.
6.3 Conditions to the Obligations of Seller. The obligation of
Seller to effect the Closing is further subject to the satisfaction of the
following conditions, any or all of which may be waived on or prior to the
Closing Date in whole or in part by Seller:
(a) Representations and Warranties. The representations and
warranties of Acquiror made hereunder shall be true and correct in all material
respects, at and as of the Closing Date, except for changes permitted or contem-
plated by this Agreement and except to the extent that any representation or
warranty is expressly made as of a specified date, in which case such
representation or warranty shall be true and correct in all material respects,
only as of such date. Seller shall have received a certificate to that effect
dated the Closing Date and signed on behalf of Acquiror by an authorized
officer of Acquiror.
(b) Agreements. Acquiror shall have performed in all material
respects all of its material obligations required to be performed by it under
this Agreement at or prior to the Closing Date, and Seller shall have received
a certificate to that effect dated the Closing Date and signed on behalf of
Acquiror by an authorized officer of Acquiror.
(c) Legal Opinion. Seller shall have received the opinion of
Acquiror's counsel, dated as of the Closing Date, addressed to Seller
substantially to the effect set forth in Exhibit H hereto.
ARTICLE VII
SURVIVAL; GENERAL INDEMNIFICATION
7.1 Survival. All of the representations and warranties of Seller
and Acquiror contained in this Agreement (other than in Section 3.9) and all
claims and causes of action with respect thereto shall terminate upon the first
anniversary of the Closing Date and notices of such claims for indemnification
under Section 7.2 or 7.3(a) shall be given within such one-year period. In the
event notice of such claim for indemnification under Section 7.2 or Section
7.3(a) is given (within the meaning of Section 10.5) within the applicable
survival period, the representations and warranties that are the subject of
such indemnification claim shall survive with respect to such claim until such
time as such claim is finally resolved.
7.2 Indemnification by Acquiror. Subject to Section 7.1 and except
as otherwise provided in Article VIII, Acquiror hereby agrees that it shall
indemnify, defend and hold harmless Seller and, if applicable, its directors,
officers, employees, representatives, advisors, agents and Affiliates (the
"Seller Indemnified Parties") from, against and in respect of any and all
damages, claims, losses, charges, actions, suits, proceedings, deficiencies,
Taxes, interest, penalties, and reasonable costs and expenses (but not
including, consequential, exemplary, special and punitive damages and lost
profits, other than such damages awarded to any third party against an
Indemnified Party) (collectively, the "Losses") arising out of, relating to or
resulting from, directly or indirectly:
(i) any breach of any representation or warranty made by Acquiror
contained in this Agreement;
(ii) the breach of any covenant or agreement of Acquiror contained
in this Agreement; and
(iii) except as otherwise provided in Article VIII or specifically
enumerated as an item as to which Seller will indemnify Acquiror pursuant
to Section 7.3, all liabilities and obligations of the Snapple Companies
and the Business, regardless of when they arose or arise and regardless of
by whom or when asserted.
7.3 Indemnification by Seller. (a) Subject to Sections 7.1 and
7.3(b), and except as otherwise provided in Article VIII, Seller hereby agrees
that it shall indemnify, defend and hold harmless Acquiror and, if applicable,
its directors, officers, employees, representatives, advisors, agents and
Affiliates (other than employees of the Snapple Companies) (the "Acquiror
Indemnified Parties") from, against and in respect of any Losses arising out
of, relating to or resulting from, directly or indirectly:
(i) any breach, subject to the standard set forth in Section 3.20,
of any representation or warranty made by Seller contained in this
Agreement;
(ii) the breach of any covenant or agreement of Seller contained in
this Agreement; and
(iii) any liabilities and expenses attributable to Employee Benefit
Plans (other than Snapple Employee Benefit Plans) and Employee
Arrangements (other than Snapple Employee Arrangements), except for
liabilities and expenses to be paid by Acquiror and/or Snapple pursuant to
Section 5.8.
(b) Seller shall not be liable to the Acquiror Indemnified Parties
for any Losses with respect to the matters enumerated in Section 7.3(a) unless
the Losses therefrom exceed an aggregate amount equal to 3% of the Purchase
Price, and then only for such Losses in excess of 3% of the Purchase Price and
only up to an aggregate amount equal to 25% of the Purchase Price; provided,
however, that the foregoing shall not apply to any Losses for claims under
Article II of this Agreement.
7.4 Procedure for Indemnification. Subject to Section 7.1, all
claims for indemnification under this Article VII shall be asserted and
resolved as follows:
(a) In the event that any claim or demand, or other circumstance or
state of facts which could give rise to any claim or demand, for which an
Indemnifying Party may be liable to an Indemnified Party hereunder is asserted
against or sought to be collected by a third party (an "Asserted Liability"),
the Indemnified Party shall as soon as reasonably possible notify the
Indemnifying Party in writing of such Asserted Liability, specifying the nature
of such Asserted Liability (the "Claim Notice"); provided, that no delay on the
part of the Indemnified Party in giving any such Claim Notice shall relieve the
Indemnifying Party of any indemnification obligation hereunder except to the
extent that the Indemnifying Party is materially prejudiced by such delay. The
Indemnifying Party shall have 60 days (or less if the nature of the Asserted
Liability requires) from its receipt of the Claim Notice (the "Notice Period")
to notify the Indemnified Party whether or not the Indemnifying Party desires,
at the Indemnifying Party's sole cost and expense and by counsel of its own
choosing to defend against such Asserted Liability; provided, that if, under
applicable standards of professional conduct a conflict on any significant
issue between the Indemnifying Party and any Indemnified Party exists in
respect of such Asserted Liability, then the Indemnifying Party shall reimburse
the Indemnified Party for the reasonable fees and expenses of one additional
counsel (who shall be reasonably acceptable to the Indemnifying Party). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), consent
to any settlement unless such settlement (i) includes a complete release of the
Indemnified Party and (ii) does not require the Indemnified Party to make any
payment or forego or take any action. Notwithstanding the foregoing, the
Indemnified Party shall have the right to control, pay or settle any Asserted
Liability which the Indemnifying Party shall have undertaken to defend so long
as the Indemnified Party shall also waive any right to indemnification
therefore by the Indemnifying Party. If the Indemnifying Party undertakes to
defend against such Asserted Liability, the Indemnified Party shall cooperate
fully with the Indemnifying Party and its counsel in the investigation, defense
and settlement thereof, but the Indemnifying Party shall control the investi-
gation, defense and settlement thereof. If the Indemnified Party desires to
participate in any such defense it may do so at its sole cost and expense. If
the Indemnifying Party elects not to defend against such Asserted Liability,
then the Indemnifying Party shall have the right to participate in any such
defense at its sole cost and expense, but the Indemnified Party shall control
the investigation, defense and settlement thereof at the reasonable cost and
expense of the Indemnifying Party. The Indemnifying Party shall not be liable
for any settlement of any Asserted Liability effected without its prior written
consent (which consent shall not be unreasonably withheld).
(b) In the event that an Indemnified Party should have a claim
against the Indemnifying Party hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. The Indemnifying Party shall have 60 days
from the date such Claim Notice is delivered during which to notify the
Indemnified Party in writing of any good faith objections it has to the Indemni-
fied Party's Claim Notice or claims for indemnification, setting forth in
reasonable detail each of the Indemnifying Party's objections thereto. If the
Indemnifying Party does deliver such written notice of objection within such 60-
day period, the Indemnifying Party and the Indemnified Party shall attempt in
good faith to resolve any such dispute within 60 days of the delivery by the
Indemnifying Party of such written notice of objection.
(c) With respect to the liabilities for which Seller shall be
required to provide indemnification pursuant to Section 7.3(a)(i) resulting
from a breach of Section 3.16, (i) the Acquiror Indemnified Parties shall
cooperate with Seller, provide Seller as promptly as possible with all relevant
materials, information and data requested by Seller and shall grant Seller,
without charge, reasonable access to employees and premises of the Snapple
Companies, including the right to conduct environmental tests thereon and to
take samples therefrom.
(d) Acquiror acknowledges that the indemnification provisions
contained in this Article VII and in Article VIII constitute Acquiror's sole
remedy with respect to any of the matters arising out of or in connection with
this Agreement, the Disclosure Schedule or any Exhibit hereto. Acquiror
acknowledges and agrees that: (i) Acquiror and its representatives have the
experience and knowledge to evaluate the business, financial condition, assets
and liabilities of the Snapple Companies; and (ii) in determining to acquire
the Shares and, therefore, the Snapple Business and the underlying assets and
liabilities of the Snapple Companies (including the real property, fixtures and
the tangible personal property), Acquiror has made its own investigation into,
and based thereon Acquiror has formed an independent judgment concerning, the
Shares, the Snapple Business and the underlying assets and liabilities of the
Snapple Companies (including the real property, fixtures and the tangible
personal property). It is therefore expressly understood and agreed that,
except as otherwise provided in this Agreement, Acquiror accepts the condition
of the real property and tangible personal property of the Snapple Companies
"AS IS, WHERE IS" without any representation, warranty or guarantee, express or
implied, as to merchantability, fitness for a particular purpose or otherwise
as to the condition, size, extent, quantity, type or value of such property.
Acquiror hereby waives, releases and agrees not to make any claim or bring any
contribution, cost recovery or other action against Seller, its Affiliates,
and, if applicable, their respective directors, officers, shareholders,
partners, attorneys, accountants, agents and employees and their heirs,
successors and assigns, under the Environmental Laws, common law, or any
similar federal, state or local environmental law or regulation now existing or
hereafter enacted other than for Losses which Seller is expressly required to
indemnify Acquiror under this Article VII. Acquiror agrees that it will not
bring any such claim or action under any Environmental Laws or any other
environmental law or regulation which seeks to allocate liabilities between
Acquiror and Seller in a different manner than as expressly set forth in this
Agreement or in a more costly manner than would be the case under applicable
Environmental Laws in effect on the date hereof.
7.5 Characterization of Indemnification Payments. All amounts paid
by Acquiror or Seller, as the case may be, under this Article VII or Article
VIII shall be treated as adjustments to the Purchase Price for all Tax
purposes.
7.6 Computation of Losses; Disputes. The amount of any Losses for
which indemnification is provided under this Article VII or Article VIII shall
be reduced by (x) any related Tax benefits if and when actually realized or
received (but only after taking into account any Tax benefits (including,
without limitation, any net operating losses or other deductions and any
carryovers or carrybacks) to which the Indemnified Party would be entitled
without regard to such item), except to the extent such recovery has already
been taken into account in determining the amount of any such Losses, and (y)
any insurance recovery if and when actually realized or received, in each case
in respect of such Losses. Any such recovery shall be promptly repaid by the
Indemnified Party to the Indemnifying Party following the time at which such
recovery is realized or received pursuant to the previous sentence, minus all
reasonably allocable costs, charges and expenses incurred by the Indemnified
Party in obtaining such recovery. Notwithstanding the foregoing, if (x) the
amount of Indemnifiable Losses for which the Indemnifying Party is obligated to
indemnify the Indemnified Party is reduced by any Tax benefit or insurance
recovery in accordance with the provisions of the previous sentence, and (y)
the Indemnified Party subsequently is required to repay the amount of any such
Tax benefit or insurance recovery or such Tax benefit or insurance recovery is
disallowed, then the obligation of the Indemnifying Party to indemnify with
respect to such amounts shall be reinstated immediately and such amounts shall
be paid promptly to the Indemnified Party in accordance with the provisions of
this Agreement.
ARTICLE VIII
TAX MATTERS; TAX INDEMNIFICATION
8.1 Tax Indemnification. (a) Seller agrees to be responsible for
and to indemnify and hold the Acquiror Indemnified Parties harmless from and
against any and all Taxes (and claims with respect to Taxes) that may be
imposed upon or assessed against any of the Snapple Companies or the assets of
any of the Snapple Companies:
(i) with respect to all taxable periods ending on or prior to
the Closing Date, except for Taxes arising out of any transaction
occurring after the Closing but on the Closing Date not in the ordinary
course;
(ii) with respect to any and all Taxes of any of the Snapple
Companies for the period allocated to Seller pursuant to Section 8.3(d);
(iii) arising by reason of any breach by Seller of any of the
representations contained in Section 3.9 hereof;
(iv) with respect to any claim under the Asset Purchase
Agreement dated as of January 31, 1992 by and among Snapple Beverage
Corp., Snapple Holding Corp., Unadulterated Food Products, Inc., Hyman
Golden, Arnold Greenberg and Leonard Marsh, including under Section 1.09
of such agreement;
(v) with respect to all taxable periods ending on or prior
to the Closing Date, any Taxes arising by reason of Treasury Regulation
Section 1.1502-6 or any comparable provision of state, local or foreign
law; and
(vi) arising by reason of a transfer of assets described in
Section 5.6(b).
(b) Acquiror agrees to indemnify and hold harmless the
Seller Indemnified Parties from and against any and all Taxes of the Snapple
Companies (i) with respect to any taxable period of the Snapple Companies
beginning after the Closing Date, (ii) arising out of any transaction occurring
after the Closing but on the Closing Date not in the ordinary course and
(iii) attributable to the period allocated to Acquiror pursuant to Section
8.3(d).
8.2 No Tax Elections. Seller and Acquiror acknowledge that no
election will be made under Section 338(a) or Section 338(h)(10) of the Code to
treat the purchase and sale of the Shares pursuant to this Agreement as a sale
of assets for income tax purposes. Seller agrees that neither it nor any
Affiliate will apply for, enter into or make any Tax Agreement, Consent or
Ruling with respect to any of the Snapple Companies, or any of the assets owned
by any Snapple Company on the Closing Date. Further, Seller agrees that
neither it nor any Affiliate will make any Tax election with respect to any of
the Snapple Companies or any of the assets owned by any Snapple Company on the
Closing Date without the consent of Acquiror (which consent shall not be
unreasonably withheld), except for those Tax elections consistent with the
prior practice of the Snapple Companies or required by a change in applicable
Tax laws, rules or regulations.
8.3 Preparation of Tax Returns; Payment of Taxes. (a) Seller
shall include the Snapple Companies or cause the Snapple Companies to be
included in, and shall timely file or cause to be timely filed, (i) the United
States consolidated federal income Tax Returns of Seller or its Affiliates for
the taxable periods of the Snapple Companies ending on or prior to the Closing
Date and (ii) where applicable, all other consolidated, combined or unitary Tax
Returns of Seller or its Affiliates for the taxable periods of Snapple ending
on or prior to the Closing Date, and shall pay any and all Taxes due with
respect to the returns referred to in clause (i) or (ii) of this Section
8.3(a). The Tax Returns referred to in this Section 8.3(a) shall be prepared
in a manner consistent with the prior practice of the Snapple Companies unless
otherwise required by a change in applicable Tax laws, rules or regulations.
Seller shall provide Acquiror with copies of such Tax Returns, but only to the
extent of the discrete Snapple federal income Tax Return which is made part of
and includable in the United States consolidated federal income Tax Return of
Seller and the discrete Snapple state income tax returns which are made part of
and includable in any consolidated, combined or unitary state Tax Return.
Seller shall provide such Tax Returns (or the portion thereof) to Acquiror at
least 30 days prior to the due date for filing such return, and Acquiror shall
have the right to review and comment on such Tax Returns for 15 days following
receipt thereof. Nothing contained in the foregoing shall in any manner
terminate, limit or adversely affect any right of Acquiror Indemnified Parties,
Seller or Snapple to receive indemnification pursuant to any provision in this
Agreement.
(b) In addition to the Tax Returns referred to in Section 8.3(a)
above, Seller shall prepare all other Tax Returns of, or which include, any of
the Snapple Companies for taxable periods that end on, end prior to or which
include the Closing Date. To the extent any such Tax Returns are required to
be filed (taking into account any extensions) on or prior to the Closing Date,
Seller shall timely file or shall cause the Snapple Companies to timely file
such Tax Returns and shall pay any and all Taxes due with respect to such Tax
Returns. To the extent any such Tax Returns are required to be filed after the
Closing Date, and provided that Acquiror has complied with its obligations
pursuant to Section 8.4 in a timely manner so as to permit Seller to perform
the following obligations, (i) Seller shall provide Acquiror with copies of
such Tax Returns and, in the case of those Tax Returns for taxable periods that
end after the Closing Date, a schedule showing the computation of Taxes
allocated to each of Seller and Acquiror (such allocation computed in the
manner described in Section 8.3(d) hereunder) at least 30 days prior to the due
date for filing such Tax Returns (taking into account any extensions), (ii)
Acquiror shall have the right to review and approve (which approval shall not
be unreasonably withheld) such Tax Returns, and in the case of those Tax
Returns for taxable periods that end after the Closing Date, the schedule
setting forth the computation of the allocation of Taxes, (iii) Seller shall
pay Acquiror any amount owing from Seller under Section 8.1(a)(i) and (ii) no
later than two Business Days before the filing of the underlying Tax Returns,
and (iv) Acquiror shall timely file or cause to be timely filed all such Tax
Returns and shall pay or cause to be paid all Taxes due with respect to such
Tax Returns, provided, however, that nothing contained in the foregoing shall
in any manner terminate, limit or adversely affect any right of Acquiror
Indemnified Parties, Seller Indemnified Parties or Snapple to receive
indemnification pursuant to the terms of this Agreement. Any disputes between
Seller and Acquiror shall be resolved as provided in Section 8.9.
(c) Acquiror shall reimburse Seller for all costs, expenses and
fees incurred in connection with Seller's preparation of Tax Returns required
to be filed after the Closing Date, including, without limitation, those costs
associated with the services of Seller's employees in connection therewith,
which shall be valued at $140 per hour. Seller shall invoice Acquiror at the
end of each month for such costs, expenses and fees incurred by Seller and
Acquiror shall pay Seller the amount shown as due on such invoice within 15
days of the invoice date. In the event that Acquiror does not pay Seller
within 15 days of such invoice, interest at the rate of 10% per annum shall
accrue on the unpaid amount. The liability of Acquiror pursuant to this
Section 8.3(c) shall not exceed $50,000.
(d) For federal income tax purposes, the taxable year of Snapple
shall end as of the close of the Closing Date and, with respect to all other
Taxes, Seller and Acquiror will, unless prohibited by Applicable Law, close the
taxable period of the Snapple Companies as of the close of the Closing Date.
Neither Seller nor Acquiror shall take any position inconsistent with the
preceding sentence on any Tax Return. Notwithstanding anything contained
herein to the contrary, Seller and Acquiror shall report all transactions not
in the ordinary course of business occurring after the Closing but on the
Closing Date on Acquiror's federal unconsolidated and other consolidated or
combined Tax Returns. In any case where Applicable Law does not permit Snapple
and its Subsidiaries to close its taxable year on the Closing Date or in any
case in which a Tax is assessed with respect to a taxable period which includes
the Closing Date (but does not begin or end on that day), then Taxes, if any,
attributable to the taxable period of any of the Snapple Companies beginning
before and ending after the Closing Date shall be allocated (i) to Seller for
the period up to and including the Closing Date and (ii) to Acquiror 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 the Snapple Companies as of the close of the Closing Date,
provided that exemptions, allowances or deductions that are calculated on an
annual basis (including, but not limited to, depreciation and amortization
deductions) 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.
8.4 Cooperation with Respect to Tax Returns. Acquiror and Seller
agree to furnish or cause to be furnished to each other, and each at their own
expense, as promptly as practicable, such information (including access to
books and records) and assistance, including making employees available on a
mutually convenient basis to provide additional information and explanations of
any material provided, relating to the Snapple Companies or the Snapple
Business as is reasonably necessary for the filing of any Tax Return and
elections in respect thereof, for the preparation for any audit, and for the
prosecution or defense of any claim, suit or proceeding relating to any
adjustment or proposed adjustment with respect to Taxes. Acquiror or Snapple
shall retain in its possession, and shall provide Seller reasonable access to
(including the right to make copies of), such supporting books and records and
any other materials that Seller may specify with respect to Tax matters
relating to any taxable period ending on or prior to the Closing Date until the
relevant statute of limitations (or extensions thereof) has expired. After
such time, Acquiror may dispose of such material, provided that prior to such
disposition Acquiror shall give Seller a reasonable opportunity to take
possession of such materials.
8.5 Tax Audits. (a) Seller shall have the sole right to represent
the interests of the Snapple Companies in any Tax audit or administrative or
court proceeding relating to taxable periods of the Snapple Companies which end
on or before the Closing Date and to employ counsel of its choice at its
expense. Acquiror agrees that it will cooperate fully with Seller and its
counsel in the defense against or compromise of any claim in any said
proceeding. Seller agrees that it will not settle any such proceeding in a
manner that has a Material Adverse Effect on Acquiror for any taxable period
that ends after the Closing Date. Seller agrees that it will keep Acquiror
fully informed as to the status and resolution of any such proceeding.
(b) If any taxing authority asserts a claim, makes an assessment or
otherwise disputes or affects the Tax reporting position of the Snapple
Companies for taxable periods ending on or prior to the Closing Date, Acquiror
shall, promptly upon receipt by Acquiror or any of the Snapple Companies of
notice thereof, inform Seller thereof.
(c) Seller and Acquiror jointly shall represent the interests of the
Snapple Companies in any Tax audit or administrative or court proceeding
relating to any taxable period of the Snapple Companies which includes (but
does not begin or end on) the Closing Date. All costs, fees and expenses paid
to third parties in the course of such proceeding shall be borne by Seller and
Acquiror in the same ratio as the ratio in which, pursuant to the terms of this
Agreement, Seller and Acquiror would share the responsibility for payment of
the Taxes asserted by the taxing authority in such claim or assessment if such
claim or assessment were sustained in its entirety.
(d) Acquiror shall have the sole right to represent the interests of
the Snapple Companies in any Tax audit or administrative or court proceeding
relating to taxable periods of the Snapple Companies which begins after the
Closing Date and to employ counsel of its choice at its expense. Acquiror
agrees that it will not settle any such proceeding in a manner which has a
Material Adverse Effect on Seller for any taxable period that ends on, ends
prior to or which includes the Closing Date.
(e) Seller shall not take any position on any Tax Return, Tax
refund claim or in any Tax audit or administrative or court proceeding that is
inconsistent with the representation contained in Section 3.9(h) of this
Agreement, unless otherwise required by applicable Tax laws, rules or
regulations.
8.6 Refund Claims. Seller shall not file any amended Tax Return or
file or apply for any Tax refund with respect to any Snapple Company without
the consent of Acquiror, which consent shall not be unreasonably withheld, it
being understood and agreed that the foregoing shall not apply to the
utilization of any loss arising on the sale of the Shares. Except as otherwise
provided in Section 8.7, to the extent any determination of Tax liability of
the Snapple Companies results in any refund of Taxes paid with respect 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 Seller, provided that any Tax refund described in clause
(i) or (ii) of this Section 8.6 that is attributable to a carryback with
respect to state or local income Taxes arising after the Closing Date shall
belong to Acquiror to the extent that Acquiror is not permitted under the
applicable state or local law to elect to carry forward the relevant tax
attribute and provided further that in the case of any Tax refund described in
clause (ii) of this Section 8.6 the portion of such Tax refund which shall
belong to Seller 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), Acquiror shall promptly
pay any such refund that belongs to Seller, and the interest actually received
thereon, to Seller upon receipt thereof by Acquiror. Any payments made under
this Section 8.6 shall be net of any Taxes payable with respect to such refund,
credit or interest thereon (taking into account any actual reduction in Tax
liability realized upon the payment pursuant to this Section 8.6).
8.7 Transfer Taxes. Acquiror shall be liable for and shall pay
(and shall indemnify and hold harmless Seller against) all sales, use, stamp,
documentary, filing, recording, transfer or similar fees or taxes or
governmental charges as levied by any taxing authority or governmental agency
in connection with the transfer of the Shares (other than taxes measured by or
with respect to income imposed on Seller). Acquiror hereby agrees to file all
necessary documents (including, but not limited to, all Tax Returns) with
respect to all such amounts in a timely manner.
8.8 Other Tax Matters. (a) The indemnification provided for in
this Article VIII shall be the sole and exclusive remedy for any claim in
respect of Taxes and the provisions of Article VII (other than Sections 7.5 and
7.6) shall not apply to such claims.
(b) Any claim for indemnity under this Article VIII may be made at
any time prior to 60 days after the expiration of the applicable Tax statute of
limitations with respect to the relevant taxable period (including all periods
of extension, whether automatic or permissive).
8.9 Disputes. If the parties disagree as to the amount of any
payment to be made under, or any other matter arising out of this Article VIII,
the parties shall attempt in good faith to resolve such dispute, and any agreed
upon amount shall be paid to the appropriate party. If such dispute is not
resolved within 15 days, the parties shall, in accordance with the procedures
set forth in Section 2.6(b) for selecting a CPA Firm, select an internationally
recognized firm of independent public accountants to resolve the dispute (the
"Independent Accounting Firm"). If and to the extent that the dispute presents
legal issues, the Independent Accounting Firm shall have the authority to
consult an Independent Law Firm. The fees of the Independent Accounting Firm
and the Independent Law Firm shall be borne equally by Seller and Acquiror, and
the decision of such Independent Accounting Firm and Independent Law Firm shall
be final and binding on all parties. Following the decision of the Independent
Accounting Firm and/or the Independent Law Firm, the parties shall each take or
cause to be taken any action that is necessary or appropriate to implement such
decision of the Independent Accounting Firm and the Independent Law Firm.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by agreement of Acquiror and Seller;
(b) by either Acquiror, on the one hand, or Seller, on the other
hand, by giving written notice of such termination to the other, if the Closing
shall not have occurred on or prior to June 30, 1997; provided, however, that
the terminating party is not in breach of its obligations under this Agreement;
or
(c) by Seller if, as a result of action or inaction by Acquiror,
the Closing shall not have occurred on or prior to the later of (i) the date
that is two Business Days following the date on which all of the conditions to
Closing set forth in Sections 6.1 and 6.2 are satisfied or waived or (ii) 60
days after the date of this Agreement.
9.2 Effect of Termination. In the event of termination by Seller
or Acquiror pursuant to Section 9.1, written notice thereof shall promptly be
given to the other party and, except as otherwise provided herein, the trans-
actions contemplated by this Agreement shall be terminated and become void and
have no effect, without further action by the other party, other than the
provisions of the last sentence of Section 5.2 and Article X. Nothing in this
Section 9.2 shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement.
9.3 Termination Fee. In the event the Closing does not occur on or
before the earlier of the dates set forth in Section 9.1(b) or 9.1(c) for any
reason other than (i) Seller's failure to satisfy the closing conditions set
forth in Section 6.2, or (ii) the non-occurrence of any closing condition set
forth in Section 6.1, then Acquiror agrees to pay Seller either of the
following amounts, immediately upon Seller's demand and election, which
election shall be made in Seller's sole discretion within fourteen (14) days
following the earlier of the dates set forth in Section 9.1(b) or 9.1(c), as
applicable: (x) the sum of $10,000,000 as a termination fee, in which case the
parties agree that payment of such fee shall not relieve Acquiror from
liability for its breach hereunder or be construed as limiting Seller's rights
in any manner, except that such $10,000,000 shall be credited against any
damages which may be awarded to Seller or (y) the sum of $20,000,000 as
liquidated damages, which the parties agree shall be in lieu of any other
damages to which Seller might be entitled hereunder and shall relieve Acquiror
from any liability for its breach hereunder. Any amounts payable to Seller
pursuant to this Section 9.3 shall be applied against the Deposit and the
remainder of the Deposit shall be returned to Acquiror pursuant to the terms of
the Escrow Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 Extension; Waiver. The parties hereto, by action taken or
authorized by their respective boards of directors, may, to the extent legally
allowed: (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto; (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto; and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
10.2 Amendment. This Agreement may be amended, modified or
supplemented only by written agreement of Acquiror and Seller at any time prior
to the Closing Date with respect to any of the terms contained herein.
10.3 Expenses. Each of the parties hereto shall pay the fees and
expenses of its respective counsel, accountants and other experts and shall
pay all other costs and expenses incurred by it in connection with the
negotiation, preparation and execution of this Agreement and the consummation
of the transactions contemplated hereby. Except as otherwise specifically
provided herein, Seller shall pay any fees and expenses incurred prior to
Closing of any counsel, accountants and other experts of any of the Snapple
Companies and shall pay all other costs and expenses incurred by any of the
Snapple Companies incurred prior to Closing in connection with the negotiation
and preparation of this Agreement.
10.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
reference to choice of law principles, including all matters of construction,
validity and performance.
10.5 Notices. Notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer there-of) and delivered by
hand or by telecopy or on the date of receipt indicated on the return receipt
if mailed (registered or certified, return receipt requested, properly
addressed and postage prepaid):
If to Seller, to:
The Quaker Oats Company
321 N. Clark Street
Chicago, Illinois 60610
Attention: John G. Jartz
Facsimile: (312) 245-3341
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Dennis J. Block, Esq.
Facsimile: (212) 310-8007
and,
If to Acquiror, to:
Triarc Companies, Inc.
280 Park Avenue
New York, NY 10017
Attention: Brian L. Schorr, Esq.
Facsimile: (212) 451-3216
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Neale M. Albert, Esq.
Facsimile: (212) 373-2377
Such names and addresses may be changed by notice given in accordance with this
Section 10.5.
10.6 Entire Agreement. This Agreement, together with all schedules,
exhibits, annexes, certificates, instruments and agreements delivered pursuant
hereto and the Confidentiality Agreement contain the entire understanding of
the parties hereto and thereto with respect to the subject matter contained
herein and therein, and supersede and cancel all prior agreements,
negotiations, correspondence, undertakings and communications of the parties,
oral or written, respecting such subject matter. There are no restrictions,
promises, representations, warranties, agreements or undertakings of any party
hereto with respect to the transactions contemplated by this Agreement other
than those set forth herein or made hereunder.
10.7 Disclosure Schedule. The Disclosure Schedule is incorporated
into this Agreement by reference and made a part hereof.
10.8 Headings; References. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. All
references herein to "Articles", "Sections" or "Exhibits" shall be deemed to be
references to Articles or Sections hereof or Exhibits hereto unless otherwise
indicated.
10.9 Counterparts. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
10.10 Parties in Interest; Assignment. Neither this Agreement nor
any of the rights, interest or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties;
provided, however, that Acquiror may, in its sole discretion, assign any or all
of its rights, interests and obligations to an Affiliate in which event
Acquiror shall guarantee unconditionally and irrevocably the obligations
assigned to such Affiliate in a guarantee agreement in the form attached hereto
as Exhibit I. Subject to the preceding sentence this Agreement shall inure to
the benefit of and be binding upon Seller and Acquiror and shall inure to the
sole benefit of Seller and Acquiror and their respective successors and
permitted assigns. Nothing in this Agreement, express or implied, is intended
to confer upon any other Person any rights or remedies under or by reason of
this Agreement.
10.11 Severability; Enforcement. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to
permit enforcement of such restriction to its fullest extent, each party agrees
that a court of competent jurisdiction may enforce such restriction to the
maximum extent permitted by law, and each party hereby consents and agrees that
such scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
10.12 Consent to Jurisdiction. Each party hereto hereby irrevocably
and unconditionally (i) submits, for itself and its property, to the exclusive
jurisdiction of any Federal Court sitting in New York County of the State of
New York in any suit, action or proceeding arising out of or relating to this
Agreement or for recognition or enforcement of any judgment rendered in any
such suit, action or proceeding, (ii) waives any objection which it may now or
hereafter have to the laying of venue of any such suit, action or proceeding in
any such court, including any claim that any such suit, action or proceeding
has been brought in an inconvenient forum and (iii) waives all rights to a
trial by jury in any such suit, action or proceeding. Any and all service of
process and any other notice and any such action or proceeding shall be
effective against any party if given personally or by registered or certified
mail, return receipt requested, or by any other means of mail that requires a
signed receipt, postage prepaid, mailed to such party as provided herein.
Nothing herein contained shall be deemed to affect the right of any party to
serve process in any manner permitted by law.
IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed as of the date first written above.
THE QUAKER OATS COMPANY
By: Luther C. McKinney
Name: Luther C. McKinney
Title: Senior Vice President
Law, Corporate Affairs
and Corporate Secretary
TRIARC COMPANIES, INC.
By: Nelson Peltz
Name: Nelson Peltz
Title: Chairman and Chief Executive
Officer
Exhibit (99) to Form 8-K
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information should be read in
conjunction with the historical financial statements contained in the Company's
1996 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q as of
March 31, 1997. 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
Snapple 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 balance sheet presents the consolidated financial
position of the Company assuming the disposition of Snapple had been
consummated on March 31, 1997. The unaudited pro forma income statements for
the year ended December 31, 1996, and for the three months ended March 31,
1997, present the consolidated results of operations of the Company assuming
that the disposition had been consummated as of January 1, 1996.
Pro Forma Adjustments
Balance Sheet
The following notes describe the historical and pro forma adjustments found on
the accompanying balance sheet.
(1) The amounts included in the Snapple column reflect the assets and
liabilities involved in the transaction, including accounts receivable,
inventories, other current assets, other non-current assets, fixed assets,
intangible assets, accounts payable, and other current and non-current
liabilities.
(2) This pro forma adjustment reflects the pretax proceeds of $300 million
from the sale as an immediate reduction in short-term debt. The Company
intends to use a portion of the sale proceeds to repurchase shares of common
stock in conjunction with the Company's share repurchase and cost reduction
plan announced on April 23, 1997. The remainder of the proceeds will be used
to reduce domestic short-term debt and other general corporate purposes.
Income Statements
The following notes describe the historical and pro forma adjustments found on
the accompanying income statements.
(1) The amounts included in the Snapple 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 including 1996 restructuring charges related to a
change in how the Company sold Snapple beverages in certain Texas markets.
Pretax income has been tax effected at the Company's statutory tax rate after
adjusting for non-deductible goodwill amortization.
(2) The pro forma adjustment reflects the reduction in interest expense, as a
result of $300 million of the proceeds from the sale being used to reduce
domestic short-term debt. Interest expense was calculated using the weighted
average interest rate on domestic short-term debt outstanding at March 31,
1997, which approximates the interest rates in effect during the pro forma
periods presented.
(3) Pretax income has been tax effected at the Company's statutory tax rate.
(4) The Company reduced the carrying value of Snapple net assets to fair value
based on the $300 million purchase price and recognized a $1.4 billion
impairment loss during the first quarter of 1997. The Company also recorded an
income tax benefit of $260 million as a result of the transaction during the
first quarter of 1997.
[CAPTION]
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
The Less: Pro
Quaker Snapple Forma Pro
Oats Company (1) Adjustments Forma
(Dollars in Millions)
Assets
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $105.1 $ 4.7 $ _ $100.4
Trade accounts receivable -
net of allowances 351.8 28.0 _ 323.8
Inventories:
Finished goods 217.7 28.4 _ 189.3
Grains and raw materials 69.9 5.2 _ 64.7
Packaging materials and supplies 31.5 3.4 _ 28.1
Total inventories 319.1 37.0 _ 282.1
Other current assets 211.2 29.4 _ 181.8
Total Current Assets 987.2 99.1 _ 888.1
Property, plant and equipment 1,956.0 35.6 _ 1,920.4
Less accumulated depreciation 759.9 11.0 _ 748.9
Property - net 1,196.1 24.6 _ 1,171.5
Intangible assets - net of
amortization and valuation
reserve 714.4 272.7 _ 441.7
Other assets 312.8 37.6 _ 275.2
Total Assets $3,210.5 $434.0 $ _ 2,776.5
</TABLE>
See accompanying notes to the unaudited pro forma financial information.
[CAPTION]
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
The Less: Pro
Quaker Oats Snapple Forma Pro
Company (1) Adjustments Forma
(Dollars in Millions)
Liabilities and Shareholders' Equity
<S> <C> <C> <C> <C>
Current Liabilities:
Short-term debt $561.0 $ _ $(300.0) (2) $261.0
Current portion of long-term debt 68.2 _ _ 68.2
Trade accounts payable 262.8 19.6 _ 243.2
Other current liabilities 567.8 41.2 _ 526.6
Total Current Liabilities 1,459.8 60.8 (300.0) 1,099.0
Long-term debt 973.2 0.2 _ 973.0
Other liabilities 535.8 1.4 _ 534.4
Deferred income taxes 134.0 71.6 _ 62.4
Preferred Stock 100.0 _ _ 100.0
Deferred Compensation (61.0) _ _ (61.0)
Treasury Preferred Stock (17.4) _ _ (17.4)
Common Shareholders' Equity:
Common stock 840.0 _ _ 840.0
Reinvested earnings 372.0 _ _ 372.0
Cumulative translation adjustment (71.6) _ _ (71.6)
Deferred compensation (103.3) _ _ (103.3)
Treasury common stock (951.0) _ _ (951.0)
Total Common Shareholders' Equity 86.1 _ _ 86.1
Total Liabilities and Shareholders' $3,210.5 $134.0 $(300.0) $2,776.5
Equity
</TABLE>
See accompanying notes to the unaudited pro forma financial information.
[CAPTION]
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
The Less: Pro
Quaker Oats Snapple Forma Pro
Company (1) Adjustments Forma
(Dollars in Millions Except Per Share Data)
<S> <C> <C> <C> <C>
Net sales $5,199.0 $550.8 $ _ $4,648.2
Cost of goods sold 2,807.5 344.7 _ 2,462.8
Gross profit 2,391.5 206.1 _ 2,185.4
Selling, general and administrative
expenses 1,981.0 255.9 _ 1,725.1
Gains on divestitures and restructuring
charges - net (113.4) 16.6 - (130.0)
Interest expense - net 99.4 _ (17.1) (2) 82.3
Foreign exchange loss - net 8.9 _ _ 8.9
Income (loss) before income taxes 415.6 (66.4) 17.1 499.1
Provision (benefit) for income taxes 167.7 (8.6) 6.9 (3) 183.2
Net income (loss) 247.9 (57.8) 10.2 315.9
Preferred dividends - net of tax 3.7 _ _ 3.7
Net Income (Loss)
Available for Common $ 244.2 $(57.8) $10.2 $312.2
Per Common Share:
Net Income $ 1.80 $ 2.30
Average Number of Common
Shares Outstanding (in thousands) 135,466 135,466
</TABLE>
See accompanying notes to the unaudited pro forma financial information.
[CAPTION]
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
The Less: Pro
Quaker Oats Snapple Forma Pro
Company (1) Adjustments Forma
(Dollars in Millions Except Per Share Data)
<S> <C> <C> <C> <C>
Net sales $1,201.7 $ 96.6 $ _ $1,105.1
Cost of goods sold 627.7 57.3 _ 570.4
Gross profit 574.0 39.3 _ 534.7
Selling, general and administrative
expenses 491.5 51.5 _ 440.0
Loss on assets held for sale 1,404.0 _ (1,404.0) (4) -
Interest expense - net 24.0 _ (4.3) (2) 19.7
Foreign exchange loss - net 2.5 _ _ 2.5
(Loss) income before income taxes (1,348.0) (12.2) 1,408.3 72.5
(Benefit) provision for income taxe (238.2) (4.0) 261.7 (3)(4) 27.5
Net (Loss) Income (1,109.8) (8.2) 1,146.6 45.0
Preferred dividends - net of tax 0.9 _ _ 0.9
Net (Loss) Income Available
for Common $(1,110.7) $ (8.2) $1,146.6 $ 44.1
Per Common Share:
Net (Loss) Income $ (8.15) $ 0.32
Average Number of Common
Shares Outstanding (in thousands) 136,305 136,305
</TABLE>
See accompanying notes to the unaudited pro forma financial information.
