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): March 8, 2000
Northland Cranberries, Inc.
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(Exact name of registrant as specified in its charter)
Wisconsin 0-16130 39-1583759
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
800 First Avenue South, P.O. Box 8020
Wisconsin Rapids, Wisconsin 54495-8020
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(Address of principal executive offices including zip code)
(715) 424-4444
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(Registrant's telephone number)
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Item 2. Acquisition or Disposition of Assets.
On March 8, 2000, Northland Cranberries, Inc. (the "Company")
consummated the previously announced sale of its private label juice business to
Cliffstar Corporation ("Cliffstar"), based in Dunkirk, New York, pursuant to the
terms of an Asset Purchase Agreement, dated as of January 5, 2000, and First
Amendment to Asset Purchase Agreement, dated as of March 8, 2000, by and between
the Company and Cliffstar (together, the "Agreement"), which are filed as
exhibits to this Current Report on Form 8-K and which are incorporated by
reference herein.
The private label juice business assets sold by the Company consisted
primarily of finished goods and work-in-process inventories, raw materials
inventories consisting of labels and ingredients that relate to customers of the
private label juice business (other than cranberry juice and cranberry juice
concentrates), certain trademarks (MINOT, CONWAY'S and MIN-OT) and goodwill,
contracts relating to the purchase of raw materials inventory and the sale of
products, and 135,000 gallons of cranberry juice concentrate. No plants or
equipment were included in the sale. Cliffstar also assumed certain liabilities
under purchased contracts. The Company's private label juice business
represented approximately $43 million of its $237 million in fiscal 1999
revenues.
In connection with the sale, the Company received Cliffstar's
unsecured, subordinated promissory note for $28 million which will be amortized
over six years and bears interest at a rate of 10% per annum, as well as
approximately $6.3 million in cash related to inventory transferred to Cliffstar
on the closing date. The Company will also receive additional amounts related to
inventory following completion of a transition period and final inventory
adjustments, as well as approximately $3.5 million in installment payments over
the remainder of the year 2000 for cranberry concentrate sold to Cliffstar.
Additionally, the Agreement provides that Cliffstar will make certain annual
earn-out payments to the Company for a period of six years from the closing date
based generally on operating profit from Cliffstar's sale of cranberry juice,
cranberry juice cocktail and drinks, blended cranberry juice and blended
cranberry juice cocktail and drinks. Cliffstar has a one-time option to
terminate its obligation to make earn-out payments to the Company under certain
circumstances. That option is exerciseable at any time prior to the last day of
the 30th calendar month after the closing. If Cliffstar elects to terminate the
earn-out obligation, it will be required to make a termination payment equal to
$50,000,000 less all principal payments made on the aforementioned promissory
note up to the date of such termination.
The Company and Cliffstar also entered into:
o a Non-Competition Agreement pursuant to which the Company agreed
not to compete with Cliffstar in the United States and Canada in
the private label juice business for the period during which
Cliffstar is making earn-out payments to the Company and for two
years thereafter;
o a Cranberry Purchase and Supply Agreement pursuant to which
Cliffstar agreed to purchase a minimum of 150,000 barrels of
cranberries from the Company (subject to downward adjustment of
either quantity or price in certain circumstances) each year
during the period in which Cliffstar is making earn-out payments
to the Company, commencing with the twelve month period beginning
November 1, 2000;
o a Trademark License Agreement pursuant to which the Company
licensed back from Cliffstar the use of the Minot name for
cranberry sauce and non-juice private label purposes; and
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o a CoPacking Agreement pursuant to which the Company agreed to
pack specified quantities of Cliffstar juice products during each
year of the period in which Cliffstar is making earn-out payments
to the Company.
The Company and Cliffstar also agreed to negotiate in good faith to
enter into a Cranberry Sauce Agreement pursuant to which Cliffstar would be the
exclusive sales representative for the Company for the sale of private label and
Minot brand cranberry sauce for an indefinite term and terminable on 3 years
advance notice.
As a result of the sale, Northland expects to realize an after-tax
gain on sale of approximately $1.2 million, or approximately $.06 per fully
diluted share.
The purchase price paid for the assets was based on arms-length
negotiations between the Company and Cliffstar.
Item 7 Financial Statements and Exhibits.
(b) The Company will provide pro forma financial information required
by Item 7 by amendment to this Current Report on Form 8-K within sixty days of
the date hereof.
(c) The Company has filed the exhibits listed in the accompanying
Exhibit Index as part of this Current Report on Form 8-K.
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SIGNATURES
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.
NORTHLAND CRANBERRIES, INC.
Date: March 23, 2000 By: /s/ John Swendrowski
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John Swendrowski
Chairman and Chief Executive Officer
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NORTHLAND CRANBERRIES, INC.
EXHIBIT INDEX TO FORM 8-K
Report Dated March 8, 2000
Exhibit
No. Description
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(2.1) Asset Purchase Agreement, dated as of January 5, 2000, by and among
Northland Cranberries, Inc. and Cliffstar Corporation.*
(2.2) First Amendment to Asset Purchase Agreement, dated as of March 8,
2000, by and among Northland Cranberries, Inc. and Cliffstar
Corporation.
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* The schedules and exhibits to this document are not being filed herewith. The
registrant agrees to furnish supplementally a copy of any such schedule or
exhibit to the Securities and Exchange Commission upon request.
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NORTHLAND CRANBERRIES, INC.
AND
CLIFFSTAR CORPORATION
January 5, 2000
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ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE OF ASSETS..............................................1
1.1. Assets to be Transferred..........................................1
1.2. Excluded Assets...................................................3
2. ASSUMPTION OF LIABILITIES................................................4
2.1. Liabilities to be Assumed.........................................4
2.2. Liabilities Not to be Assumed.....................................5
3. PURCHASE PRICE -PAYMENT.................................................6
3.1. Purchase Price...................................................6
3.2. Payment of Purchase Price........................................6
3.3. Determination of Earnout Amount..................................8
3.4. Option to Terminate Earnout Period..............................13
3.5. Inventory Purchase Price; Concentrate Purchase Price............14
3.6. Covenants of Cliffstar During Earnout Period....................15
3.7. Allocation of Purchase Price....................................17
4. REPRESENTATIONS AND WARRANTIES OF NORTHLAND............................18
4.1. Corporate.......................................................18
4.2. Authority.......................................................18
4.3. No Violation....................................................18
4.4. Financial Information...........................................19
4.5. Inventory.......................................................19
4.6. Litigation......................................................19
4.7. Title to Properties.............................................20
4.8. Contracts and Commitments.......................................20
4.9. Private Label Intangibles.......................................20
4.10. Major Customers and Suppliers...................................21
4.11. Product Warranty and Product Liability..........................21
4.12. No Brokers or Finders...........................................21
4.13. No Material Adverse Change......................................21
4.14. Compliance with Law.............................................22
4.15. Disclosure......................................................22
5. REPRESENTATIONS AND WARRANTIES OF CLIFFSTAR............................22
5.1. Corporate.......................................................22
5.2. Authority.......................................................22
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5.3. No Brokers or Finders...........................................23
5.4. No Violation....................................................23
5.5. Financial Statements............................................23
5.6. Disclosure......................................................23
6. OTHER MATTERS..........................................................24
6.1. Noncompetition Agreement........................................24
6.2. Confidential Information........................................24
6.3. HSR Act Filings.................................................24
6.4. Product Liability Matters.......................................24
6.5. Use of Minot's Name.............................................25
6.6. Waiver of Bulk Sales Compliance.................................25
6.7. Cranberry Purchase and Supply Agreement.........................25
6.8. [Intentionally Left Blank]......................................25
6.9. Trademark License Agreement.....................................25
6.10. Co-Packing Agreement............................................25
6.11. Cranberry Sauce Purchase Agreement..............................25
6.12. Opening Inventory...............................................26
7. FURTHER COVENANTS OF NORTHLAND.........................................26
7.1. Access to Information and Records...............................26
7.2. Conduct of Business Pending the Closing.........................26
7.3. Consents........................................................27
7.4. Other Action....................................................27
7.5. Disclosure......................................................27
8. CONDITIONS PRECEDENT TO CLIFFSTAR'S OBLIGATIONS........................27
8.1. Representations and Warranties True on the Closing Date.........28
8.2. Compliance With Agreement.......................................28
8.3. Absence of Litigation...........................................28
8.4. Consents and Approvals..........................................28
8.5. Hart-Scott-Rodino Waiting Period................................28
9. CONDITIONS PRECEDENT TO NORTHLAND'S OBLIGATIONS........................28
9.1. Representations and Warranties True on the Closing Date.........28
9.2. Compliance With Agreement.......................................29
9.3. Absence of Litigation...........................................29
9.4. Hart-Scott-Rodino Waiting Period................................29
10. INDEMNIFICATION........................................................29
10.1. By Northland....................................................29
10.2. By Cliffstar....................................................30
10.3. Indemnification of Third-Party Claims...........................30
10.4. Payment.........................................................31
10.5. Limitations on Indemnification..................................32
10.6. No Waiver.......................................................32
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11. CLOSING................................................................32
11.1. Documents to be Delivered by Northland..........................32
11.2. Documents to be Delivered by Cliffstar..........................34
12. TERMINATION............................................................35
12.1. Right of Termination Without Breach.............................35
12.2. Termination for Breach..........................................35
13. RESOLUTION OF DISPUTES.................................................36
13.1. Arbitration.....................................................36
13.2. Arbitrators.....................................................37
13.3. Procedures; No Appeal...........................................37
13.4. Authority.......................................................37
13.5. Entry of Judgment...............................................37
13.6. Confidentiality.................................................37
13.7. Continued Performance...........................................37
13.8. Tolling.........................................................38
14. MISCELLANEOUS..........................................................38
14.1. Disclosure Schedule.............................................38
14.2. Further Assurance...............................................38
14.3. Disclosures and Announcements...................................38
14.4. Assignment; Parties in Interest.................................38
14.5. Law Governing Agreement.........................................39
14.6. Amendment and Modification......................................39
14.7. Notice..........................................................39
14.8. Expenses........................................................40
14.9. Entire Agreement................................................41
14.10. Counterparts....................................................41
14.11. Headings........................................................41
14.12. Jointly Drafted.................................................41
14.13. Glossary of Terms...............................................41
Exhibits
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Exhibit A - Promissory Note
Exhibit B - Noncompetition Agreement
Exhibit C - Cranberry Purchase and Supply Agreement
Exhibit D - Trademark License Agreement
Exhibit E - Co-Packing Agreement
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Disclosure Schedule
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Schedule 1.1.(b) - Trademarks
Schedule 1.2.(n) - Contracts
Schedule 2.1.(b) - Promotions
Schedule 2.2.(a) - Contracts
Schedule 3.7 - Purchase Price Allocation
Schedule 4.1.(c) - Foreign Corporation Qualification
Schedule 4.3 - Violation, Conflict, Default
Schedule 4.4 - Financial Information
Schedule 4.6 - Litigation
Schedule 4.7 - Liens to be Released at Closing
Schedule 4.8 - Contracts
Schedule 4.9 - Private Label Intangibles
Schedule 4.10.(a) - Major Customers
Schedule 4.10.(b) - Major Suppliers
Schedule 4.11 - Product Warranty, Warranty Expense and Liability Claims
Schedule 5.4 - Violation, Conflict Default
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement") dated January 5, 2000, by
and between CLIFFSTAR CORPORATION, a Delaware corporation ("Cliffstar"), and
NORTHLAND CRANBERRIES, INC., a Wisconsin corporation ("Northland").
RECITALS
A. As part of the business conducted by Northland, Northland
manufactures, packages, distributes and sells to customers in the grocery,
convenience store, mass-merchandising and institutional business in the United
States, Puerto Rico, Canada, and Mexico who sell to consumers under the "Minot"
brand name and such customers' private labels ("Private Label Customers"), (i)
shelf-stable cranberry-juice cocktails, blended cranberry juices, blended
cranberry drinks, (ii) apple juice and cider products, and (iii) other
shelf-stable juices and drinks (collectively, the "Private Label Juice
Business").
B. Among the other businesses conducted by Northland, Northland
also (i) manufactures, packages, distributes and sells, under the "Minot" brand
name and customers' private labels, cranberry-based products, non-shelf stable
juice products, frozen concentrates and cranberry and cranberry blend sauces
(the "Non-Juice Private Label Business"), (ii) manufactures, packages,
distributes and sells under the Northland, Seneca, Meadow Valley, Awake,
Tree-Sweet, Orange Plus, Ruby Red and Poncho Plus brand names, and to customers
who resell under their own brand or trade name to customers for sale to
consumers (a) cranberry-based products, cranberry sauces, blended-cranberry
juices, cranberry juice cocktails and blended cranberry drinks, (b) apple juice
and cider and (c) other shelf-stable juices and drinks (the "Branded Business")
and (iii) is engaged in the co-packing of such products for other branded
producers (the "Co-Packing Business").
C. Northland also conducts a private label shelf-stable juice
business in countries other than the United States, Puerto Rico, Canada and
Mexico and may continue and expand such business (the "Non-North American
Private Label Business").
D. Cliffstar desires to purchase from Northland and Northland
desires to sell to Cliffstar the "Purchased Assets" (as defined in Section 1.1
below) of Northland relating to the Private Label Juice Business.
NOW THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows.
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1. PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and conditions of
this Agreement, on the Closing Date (as hereinafter defined) Northland
shall sell, transfer, convey, assign, and deliver to Cliffstar, and
Cliffstar shall purchase and accept the following (the "Purchased Assets"):
1.1.(a) Inventory.
(i) All finished goods inventories of Northland as of
the Closing Date bearing any of the Trademarks (as hereinafter
defined) or relating to customers of the Private Label Juice
Business (the "Finished Goods Inventory");
(ii) All work-in-process inventory of Northland
relating to the Trademarks or customers of the Private Label
Juice Business (other than cranberry juice or cranberry juice
concentrates) (the "Work-In-Process Inventory");
(iii) The raw materials inventories of Northland
relating to the Trademarks or customers of the Private Label
Juice Business that consist of labels and ingredients that are
usable in the Private Label Juice Business (other than cranberry
juice or cranberry juice concentrates, except to the extent
provided in subsection (iv) below) (the "Raw Materials
Inventory"), and excluding any packing or shipping supplies and
any raw materials inventory of Northland relating to the Non-
Juice Private Label Business, the Branded Business or the
Co-Packing Business (the Finished Goods Inventory, the Work-In-
Process Inventory and the Raw Materials Inventory are sometimes
collectively referred to as the "Inventory").
(iv) 150,000 gallons of cranberry juice concentrate
(the "Purchased Concentrate").
1.1.(b) Trademarks and Goodwill. The trademarks for the marks
identified on Schedule 1.1.(b), subject to the license of such marks
to Northland for use in connection with the sale of non-juice
cranberry products and cranberry sauce as described in Section 6.9
below (the "Trademarks"), and the goodwill of the Private Label Juice
Business (such Trademarks and goodwill are hereinafter referred to as
the "Private Label Intangibles").
1.1.(c) Contracts and Purchase and Sale Orders. The contracts
(including all purchase, sale and exchange orders and agreements)
relating to the sale of Private Label Juice Business products and to
the purchase of Raw Materials Inventory solely in connection with the
Private Label Juice Business (the "Contracts").
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provided, however, that in no event shall "Purchased Assets" include any of the
Excluded Assets.
If, at the Closing, any of the Purchased Assets shall be
non-assignable or non-transferable to Cliffstar without the consent of some
other person, and such consent is not obtained, and in the event Closing occurs
despite such failure of assignability, transferability or consent, such
Purchased Asset shall be retained by Northland, and Northland shall use its best
efforts to make the use and benefit of such Purchased Asset available to
Cliffstar to the same extent, as nearly as may be possible, as if such
impediment to assignment or transfer did not exist.
1.2. Excluded Assets. The provisions of Section 1.1 notwithstanding,
and whether or not such assets relate to the Purchased Assets or Private
Label Juice Business, Northland shall not sell, transfer, assign, convey or
deliver to Cliffstar, and Cliffstar will not purchase or accept the
following assets of Northland (collectively the "Excluded Assets"):
1.2.(a) Cash and Cash Equivalents. All cash and cash equivalents.
1.2.(b) Consideration. The consideration delivered by Cliffstar
to Northland pursuant to this Agreement.
1.2.(c) Accounts Receivable. All accounts receivable (including
customer accounts receivable relating to the Private Label Juice
Business) outstanding as of the Closing Date (including accounts
receivable for any Private Label Juice Business products shipped prior
to the Closing but not invoiced) and any other trade rights to receive
payments as of the Closing Date, including all trade accounts
receivable representing amounts receivable in respect of goods
shipped, products sold or services rendered on or prior to the Closing
Date, and the full benefit of all securities of such accounts or
debts.
1.2.(d) Tax Credits and Records. Federal, state and local income
and franchise tax credits and tax refund claims and associated returns
and records.
1.2.(e) Refunds, Deposits. All refunds, deposits, prepayments or
prepaid expenses.
1.2.(f) Insurance Policies. All insurance policies, programs,
reserves and related bonds of any nature covering the Private Label
Juice Business prior to Closing.
1.2.(g) Claims. All claims, causes of action, choses in action,
rights of recovery and rights of set-off of any kind, against any
person or entity, including without limitation any liens, security
interests, pledges or other rights to payment or to enforce payment in
connection with the Private Label Juice Business or products delivered
by Northland on or prior to the Closing Date.
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1.2.(h) Registrations. All franchise tax registrations and sales
and use permits of Northland.
1.2.(i) Advertising Time. All advertising time and advertising
space, including free standing inserts, booked prior to Closing for
periods after the Closing Date.
1.2.(j) Tangible Property. All real and tangible personal
property of Northland (other than the Inventory described in Section
1.1.(a) above), including all owned and leased real property and all
machinery, equipment, vehicles, supplies, parts, repair parts and
other tangible assets of Northland.
1.2.(k) Inventories. All inventories of Northland (other than the
Inventory described in Section 1.1.(a) above), including all
inventories of non-blended cranberry juice, raw or frozen cranberries
and cranberry concentrates, all inventories of bottles and caps, all
inventories of raw materials, work-in-process finished goods relating
to the Branded Juice Business, Non-Juice Private Label Business or
Co-Packing Business of Northland and packaging and shipping supplies
and materials not relating specifically to or held for use exclusively
in the Private Label Juice Business.
1.2.(l) Customer Lists, Business Records. All tax and sales
records, invoices, forms, designs, customer lists, customer credit
information, product specifications and technical data of Northland,
whether or not relating to the Purchased Assets.
1.2.(m) Trademarks and Goodwill. All of Northland's trademarks,
trade rights, copyrights, trade secrets, goodwill and other intangible
assets (other than the Trademarks and goodwill described in Section
1.1.(b)), including without limitation, those rights associated with
the Non-Domestic Private Label Business.
1.2.(n) Contracts. Any contracts relating to the purchase of Raw
Materials that do not relate solely to the purchase of Raw Materials
used in the Private Label Juice Business and the contracts listed and
described on Schedule 1.2.(n).
2. ASSUMPTION OF LIABILITIES
2.1. Liabilities to be Assumed. As used in this Agreement, the term
"Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted
or unasserted, liquidated or unliquidated, secured or unsecured. Subject to
the terms and conditions of this Agreement, on the Closing Date, Cliffstar
shall assume and agree to perform and discharge the following, and only the
following, Liabilities of Northland (collectively the "Assumed
Liabilities"):
2.1.(a) Contractual Liabilities. Northland's Liabilities arising
from and after the Closing Date under and pursuant to the following
Contracts:
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(i) All Contracts described in either of Sections 1.1.
(c) or 4.8;
(ii) Every Contract entered into by Northland in the
ordinary course of the Private Label Juice Business which does
not involve consideration or other expenditure by Northland
payable or performable on or after the Closing Date in excess of
$10,000 or performance over a period of more than three months.
The Contracts described in subsections 2.1.(a)(i) and (ii) above are
hereinafter collectively described as the "Assumed Contracts."
2.1.(b) Promotions. All Northland's Liabilities related to
agreements, policies and programs involving coupons, trade allowances
and promotions relating to the Private Label Juice Business and
entered into in the ordinary course of business, to the extent set
forth in Schedule 2.1(b).
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, Cliffstar is not assuming any
Liabilities of Northland and all such Liabilities shall be and remain the
responsibility of Northland. Notwithstanding the provisions of Section 2.1,
Cliffstar is not assuming and Northland shall not be deemed to have
transferred to Cliffstar the following Liabilities of Northland
notwithstanding the fact that such Liabilities are or may be associated
with the Private Label Juice Business:
2.2.(a) Certain Contracts. The Liabilities of Northland under and
pursuant to the contracts and leases described in Section 1.2.(n).
2.2.(b) Taxes Arising from Transaction. Any taxes applicable to,
imposed upon or arising out of the sale or transfer of the Purchased
Assets to Cliffstar and the other transactions contemplated by this
Agreement, including but not limited to any income, transfer, sales,
use, gross receipts or documentary stamp taxes.
2.2.(c) Other Taxes. Any Liability of Northland for Federal
income or excise taxes and any other federal, state or local income,
profit, franchise, excise, bottler's or other taxes (and any penalties
or interest due on account thereof).
2.2.(d) Insured Claims. Any Liability of Northland insured
against, to the extent such Liability is or will be paid by an
insurer.
2.2.(e) Product Liability. Any Liability of Northland arising out
of or in any way relating to or resulting from any product
manufactured, assembled or sold prior to the Closing Date (including
any Liability of Northland for claims made for injury to person,
damage to property or other damage, whether made in product liability,
tort, breach of warranty or otherwise), whether asserted before or
after the Closing Date.
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2.2.(f) Litigation Matters. Any Liability with respect to any
action, suit, proceeding, arbitration, investigation or inquiry,
whether civil, criminal or administrative ("Litigation"), whether or
not described in Schedule 4.6.
2.2.(g) Infringements. Any Liability to a third party for
infringement of such third party's Trade Rights.
2.2.(h) Transaction Expenses. All Liabilities incurred by
Northland in connection with this Agreement and the transactions
contemplated herein.
2.2.(i) Liability For Breach. Liabilities of Northland for any
breach or failure to perform any of Northland's covenants and
agreements contained in, or made pursuant to, this Agreement, or,
prior to the Closing, any other contract, whether or not assumed
hereunder, including breach arising from assignment of contracts
hereunder without consent of third parties.
2.2.(j) Accounts Payable. All accounts and other payables
outstanding as of the Closing Date.
2.2.(k) Violation of Laws or Orders. Liabilities of Northland for
any violation of or failure to comply with any statute, law,
ordinance, rule or regulation (collectively, "Laws") or any order,
writ, injunction, judgment, plan or decree (collectively, "Orders") of
any court, arbitrator, department, commission, board, bureau, agency,
authority, instrumentality or other body, whether federal, state,
municipal, foreign or other (collectively, "Government Entities").
3. PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The purchase price (the "Purchase Price") for the
Purchased Assets shall be (i) the assumption of the Assumed Liabilities,
(ii) $28,000,000 ("Base Purchase Price"), (iii) the Earnout Amount as
defined in Section 3.3 below, (iv) the Inventory Purchase Price as defined
in Section 3.5.(a) below and (v) the Concentrate Purchase Price as defined
in Section 3.5(c) below.
3.2. Payment of Purchase Price. The Purchase Price shall be paid by
Cliffstar as follows:
3.2.(a) Assumption of Liabilities. At the Closing, Cliffstar
shall deliver to Northland such documents and instruments as are
reasonably required to evidence the assumption of the Assumed
Liabilities.
3.2.(b) Cliffstar's Promissory Note. At the Closing, Cliffstar
shall deliver to Northland Cliffstar's unsecured promissory note in
the principal amount of $28,000,000 upon the terms and in
substantially the form of the Promissory Note attached hereto as
Exhibit A.
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3.2.(c) Payment of Earnout Amount. Within 10 business days after
the final determination of the Annual Earnout Amount pursuant to
Section 3.3.(c) below, Cliffstar shall pay to Northland (in addition
to any principal payments payable on the Promissory Note during such
Earnout Year) an amount equal to the greater of (i) the Minimum Annual
Earnout Amount for such Earnout Year or (ii) the Annual Earnout Amount
reduced by principal payments made to Northland on the Promissory Note
due during such Earnout Year. Earnout Amount payments with respect to
an Earnout Year in excess of the sum of the Minimum Earnout Amount and
principal payments on the Promissory Note for each Earnout Year during
the Earnout Period will be credited against future principal payments
due on the Promissory Note in inverse order of maturity as provided in
the Promissory Note. In the event of a prepayment on the Promissory
Note by Cliffstar, other than a prepayment in payment of the Annual
Earnout Amount pursuant to this subsection, the amount prepaid shall
continue to be used in the amounts, and at the times of, the
originally scheduled remaining installments in determining the payment
of the Annual Earnout Amount above, but only to the extent such
prepayment has not already been offset against the current or any
prior years' Annual Earnout Amount payments. All payments of the
Earnout Amount shall be made by wire transfer of immediately available
funds in accordance with written wire transfer instructions provided
by Northland at least two business days in advance of the date of
payment. In the event that the Earnout Amount for an Earnout Year is
subsequently adjusted in accordance with Section 3.3.(c)(iii) hereof,
the additional amounts, if any, payable by Cliffstar pursuant to this
Section 3.2.(c) shall be made by wire transfer to Northland's account
within five business days of resolution of the Earnout Amount pursuant
to Section 3.3.(c)(iii).
3.2.(d) Payment of Inventory Purchase Price. The Inventory
Purchase Price shall be paid as follows:
(i) Interim Inventory Amount. At the Closing,
Cliffstar shall deliver to Northland, by wire transfer of
immediately available funds (in accordance with appropriate wire
transfer instructions previously delivered by Northland to
Cliffstar), an amount equal to the Inventory Purchase Price as
shown on the books of Northland as of the Effective Time. Such
amount (the "Interim Inventory Amount") shall be mutually agreed
to by the parties on or before the Closing Date; and
(ii) Final Inventory Amount. Within five business days
after the final determination of the Inventory Purchase Price
pursuant to Section 3.5.(b) below:
(A) if the Final Inventory Amount exceeds the
Interim Inventory Amount, then Cliffstar shall pay to
Northland by wire transfer of immediately available
funds (in accordance with appropriate wire transfer
instructions previously delivered by Northland to
Cliffstar) the amount of such excess, and
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(B) if the Interim Inventory Amount exceeds the
Final Inventory Amount, then Northland shall pay to
Cliffstar by wire transfer of immediately available
funds the amount of such excess.
3.3. Determination of Earnout Amount.
3.3.(a) Certain Definitions. For purposes of determining the
Annual Earnout Amount (as defined in Section 3.3.(c) below) and this
Agreement, the following definitions shall apply:
(i) Case. "Case" shall mean the industry standard
number of bottles or cans packed for retail delivery of a
particular size of bottle or can from time to time. For
example, one Case will currently equal four 128 oz. bottles,
eight 64 oz. bottles, twelve 32 oz. bottles, and twenty-four 16
oz. or 10 oz. bottles or 12 oz. cans.
(ii) Cranberry Juice Products. "Cranberry Juice
Products" shall mean cranberry juice and cranberry juice
cocktail and drinks and blended cranberry juice and blended
cranberry juice cocktail and drinks containing any amount of
cranberry juice.
(iii) Cranberry Profits. For each Earnout Year,
"Cranberry Profits" shall mean the Net Revenues of Cliffstar from
the sales of Cranberry Juice Products less the Total Costs
incurred by Cliffstar (as defined in subparagraph (x) below).
(iv) Earnout Amount. The "Earnout Amount" shall be the
sum of the Annual Earnout Amounts for each Earnout Year during
the Earnout Period, provided that if the option to terminate the
Earnout Period pursuant to Section 3.4 hereof is exercised by
Cliffstar, the Earnout Amount shall be deemed to be $50,000,000.
(v) Earnout Period. Unless earlier terminated as
provided in Section 3.4 below, the Earnout Period shall be a six-
year period commencing on the Closing Date and ending on the
sixth anniversary of the Closing Date.
(vi) Earnout Year. An Earnout Year shall be a period
corresponding with Cliffstar's fiscal year, provided that (A) the
first Earnout Year shall be a short period commencing on the
Closing Date and ending on December 30, 2000 and (B) the last
Earnout Year shall be a short period commencing January 1, 2006
and ending on the sixth anniversary of the Closing Date. The
parties hereto acknowledge that Cliffstar follows an accounting
convention which provides for interim financial statements of "5
weeks, 4 weeks and 4 weeks" and a fiscal year ending on the
Saturday closest to the end of each calendar year.
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Any reference to monthly accounting statements or fiscal year end
shall be read in the context of such convention.
(vii) Minimum Annual Earnout Amount. The Minimum Annual
Earnout Amount for each Earnout Year shall be as follows:
Earnout Year Minimum Annual
Earnout Amount
1 $ 416,667
2 500,000
3 708,333
4 958,333
5 1,000,000
6 1,208,333
7 208,333
-- -------
$5,000,000
(Numbers assume a February 29, 2000 Closing Date)
provided, that any Annual Earnout Amounts paid by Cliffstar to
Northland following the repayment of the Promissory Note in its
entirety (and in excess of the Minimum Annual Earnout Amount for
the Earnout Year to which such payment relates) shall be credited
against the Minimum Earnout Amount and shall reduce the Minimum
Annual Earnout Amounts for the remaining Earnout Years in inverse
order starting with Earnout Year Six.
(viii) Minimum Earnout Amount. The Minimum Earnout Amount
to be paid by Cliffstar to Northland for all years during the
Earnout Period shall be $5,000,000.
(ix) Net Revenues. "Net Revenues" for an Earnout Year
or any period thereof for purposes of this Agreement shall mean
the dead net price realized by Cliffstar from the sale of
Cranberry Juice Products during such Earnout Year, which for
purposes of this Agreement shall mean gross revenues less all
discounts (including cash discounts, off-invoice and per case
billback promotional allowances and volume rebates) and brokerage
to outside sources (provided that brokerage expenses shall be
deductible only to the extent of 3% of total dead net price
realized from the sale of Cranberry Juice Products by Cliffstar
without prior approval of Northland); provided that Net Revenues
shall be (i) increased by an amount equal to the aggregate
discounts or favorable pricing granted by Cliffstar on orders
of Cranberry Juice Products to customers to the extent such
discounts are (A) disproportionate to discounts granted on
purchases of other products of Cliffstar with respect to the same
or contemporaneous orders by the same or related customers and
(B) greater than routine or customary discounts or favorable
pricing offered on a regular basis to customers
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generally on Cranberry Juice Products without regard to purchases
of other products of Cliffstar; and (ii) increased by the
aggregate sum of the excess of Total Cost per Case of Cases of
Cranberry Juice Products sold for a net price below Total Cost
per Case over the dead net price realized from such Cases, but
only to the extent that such aggregate sum exceeds $500,000 on an
annualized basis.
(x) Total Costs. "Total Costs" for an Earnout Year
shall mean the sum of the costs and expenses listed below
incurred by Cliffstar allocable to Cranberry Juice Products sold
during the Earnout Year:
(A) Direct Product Costs. The net cost to
Cliffstar for all ingredients (including, without
limitation, raw materials, sweeteners, flavorings and/or
other juices) utilized in Cranberry Juice Products sold
during the Earnout Year, and packaging; provided,
however, that the cost to Cliffstar per Barrel or
"Barrel Equivalent" of cranberries, cranberry juice and
cranberry concentrates shall be deemed to be equal to
the average Barrel Equivalent Purchase Price (not
including incentive payments) for cranberries purchased
by Cliffstar from Northland during such Earnout Year
pursuant to the Cranberry Purchase and Supply Agreement
described in Section 6.7 (which aggregate costs shall be
deemed to encompass, without limitation, all costs of
cleaning, binning, handling, processing, transportation
to bottling facilities, freezing costs and storage,
grower relations and other cranberry inventory
expenses). For purposes of this Agreement, a Barrel
shall be equal to 100 lbs. of raw cranberries and a
Barrel Equivalent shall be deemed to equal 1.5 gallons
of 50 Brix cranberry concentrate. Notwithstanding the
foregoing, if the Cliffstar Grower Price referred to in
Section 3(b)(i) of the Cranberry Purchase and Supply
Agreement for the Crop Year commencing on the November 1
prior to an Earnout Year is greater than the Barrel
Equivalent Purchase Price paid for Cranberries purchased
from Northland during such Earnout Year, then the cost
to Cliffstar per Barrel or Barrel Equivalent of
cranberries, cranberry juice and cranberry concentrates
shall be deemed to be equal to such Cliffstar Grower
Price.
(B) Production Fee.
(1) Direct Shipments and Internal
Warehoused Products. For all Cases that are
shipped directly to customers or stored in
Cliffstar or Related Party owned or leased
warehouse facilities, a $1.85 per Case fee for
Cases of Cranberry Juice Products sold during
the
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Earnout Year as an allowance for all juice
pressing, handling, bottling, freight and internal
finished goods warehousing costs and expenses
incurred by Cliffstar relating to such Cases.
(2) Outside Warehoused Product. For all
Cases that are shipped to third-party warehouse
facilities prior to delivery to customers, a $1.60
per Case fee for Cases of Cranberry Juice Products
sold during an Earnout Year as an allowance
for all juice pressing, handling and bottling
costs and expenses incurred by Cliffstar relating
to such Cases.
(C) Selling and Administration Fee. A selling
and administration fee equal to 6% of Net Revenues for
the Earnout Year as defined in Subsection 3.3.(a)(ix)
above as an allowance for all selling, promotional and
administration expenses and bad debts, fees and fines
incurred by Cliffstar relating to Cranberry Juice
Products sold during the Earnout Year.
(D) Clearly Defined Charges. Any other clearly
defined product charges incurred by Cliffstar
exclusively with respect to Cranberry Juice Products
sold during the Earnout Year or properly allocable to
the Earnout Year, not otherwise listed or described in
this Section 3.3.(a)(x), including actual paid freight
and outside warehousing costs for Cases described in
Section (B)(2) above.
3.3.(b) Accounting Standards. The determination of the Cranberry
Profits and components thereof shall be determined in accordance with
generally accepted accounting principles, subject to the specific
provisions of this Agreement. Inventories of finished goods,
work-in-process and raw materials shall be maintained on a first-in,
first-out basis.
3.3.(c) Determination of Annual Earnout Amount.
(i) The Annual Earnout Amount for each Earnout Year
shall be the greater of (A) the Minimum Annual Earnout Amount for
such Year or (B) the sum of (1) 17-1/2% of the first $20,000,000
[Assumes of Cranberry Profits of Cliffstar for such year (15% of the first
February $16,666,667 of Cranberry Profits for the first Earnout Year,
29, 2000 17.083% of the first $20,000,000 of Cranberry Profits for the
Closing] second Earnout Year and 17-1/2% of the first $3,333,333 of
Cranberry Profits in the seventh Earnout Year) plus (2) 25% of
the Cranberry Profits of Cliffstar for such year in excess of
$20,000,000 ($3,333,333 in the seventh Earnout Year). The Annual
Earnout Amount for any Earnout Year shall
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not be offset or reduced by a negative Annual Earnout Amount in
any prior Earnout Year during the Earnout Period. Northland shall
in no event be obligated to return any Earnout Amount Payment
previously made to Northland.
(ii) Within 90 days following the end of each Earnout
Year, Cliffstar shall prepare and deliver to Northland a detailed
statement of Cliffstar's Cranberry Profits for the prior Earnout
Year and a statement illustrating the computation of the Annual
Earnout Amount for such year (the "Cranberry Profits Statement"),
in each case examined and audited by Cliffstar's independent
auditors ("Cliffstar's Accountants"). Northland's independent
auditors ("Northland's Accountants") shall have access to all
relevant books and records of Cliffstar relating to the
calculation of the Cranberry Profits Statement and payment of the
Annual Earnout Amount, and Cliffstar will make available all
necessary information relating to Cliffstar in order to enable
Northland's Accountants to verify the calculation of amounts
listed on the Cranberry Profits Statement and the Annual Earnout
Amount Statement, including the work papers, schedules and source
materials used by Cliffstar in preparing such statements.
(iii) If Northland disagrees with any items on the
Cranberry Profits Statement or Annual Earnout Amount Statement,
Northland shall notify Cliffstar in writing of such disagreement
(such notice setting forth the basis for such disagreement in
reasonable detail) within 30 days of receipt by Northland of the
Cranberry Profits Statement and Northland may request during such
30-day period any additional information related thereto.
Northland and Cliffstar shall thereafter negotiate in good faith
to resolve any such disagreements. If Northland and Cliffstar are
unable to resolve any such disagreements within 15 days of
notification to Cliffstar of such disagreements, (A) in the event
that Deloitte & Touche LLP was both Northland's Accountants and
Cliffstar's Accountants as of the end of such Earnout Year,
Northland and Cliffstar shall submit the disagreement to the
national office of Deloitte & Touche LLP to resolve such
disagreements; (B) in all other cases, the disagreement shall be
submitted to a third accounting firm of nationally recognized
standing to be mutually selected by Northland and Cliffstar, or
if no agreement on such firm is reached, to such a firm selected
by Northland's Accountants and Cliffstar's Accountants (the
accounting firm selected pursuant to Clause (A) or Clause (B), as
the case may be, shall be referred to herein as the "Resolving
Accounting Firm"). The resolution of such disagreements by the
Resolving Accounting Firm shall be final and binding on Northland
and Cliffstar. In the event that the final determination of the
Annual Earnout Amount by the Resolving Accounting Firm differs
from the Annual Earnout Amount Statement (the "Statement
Differential") by
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five percent or less, Northland shall pay the fees and expenses
of the Resolving Accounting Firm relating to the resolution of
any such disagreements. In the event that the Statement
Differential is greater than five percent, such fees and expenses
shall be paid by Cliffstar. Within five days of resolution of the
disagreements by the Resolving Accounting Firm, Cliffstar or
Northland, as the case may be, shall pay to the other the
additional amounts, if any, determined to be owing as a result of
such resolution.
3.3.(d) Acquisition of Other Private Label Juice Businesses. In
the event that Cliffstar or any Related Party, during the Earnout
Period, acquires the assets and business of a business engaged in the
production and sale of Cranberry Juice Products (or a controlling
interest in a corporation or other entity engaged in such business)
(an "Acquired Business") (it being understood that acquisition of less
than a controlling interest by Cliffstar or any Related Party during
the Earnout Period would be a violation of Section 3.6.(d) hereof),
the results of operations of the Acquired Business shall be included
in the determination of Cranberry Profits following the effective date
of such acquisition through the end of the Earnout Period as if such
business were owned and operated directly by Cliffstar. For each
Earnout Year that begins after the effective date of such acquisition,
(i) each of the percentages set forth in Section 3.3.(c).(B) shall be
amended to a percentage determined in each case by multiplying the
original percentage by a fraction, the numerator of which is
Cliffstar's Net Revenues (as defined in Section 3.3.(a)(ix)) for the
prior Earnout Year and the denominator of which is the sum of
Cliffstar's Net Revenues and the Net Revenues of the Acquired Business
for the equivalent annual period (determined in the manner set forth
in Section 3.3(a)(ix)), and (ii) each of the dollar thresholds set
forth in Section 3.3.(c).(B) shall be amended to a dollar amount
determined in each case by dividing the original dollar amount by the
fraction determined in (i) above.
3.3.(e) Cross-Default. In the event that there shall be an event
which shall constitute a material breach by Northland of its covenants
and obligations under Section 2 of the Noncompetition Agreement to be
entered into pursuant to Section 6.1, which breach shall not have been
cured after 30 days prior written notice, the Earnout Amount,
following written notice from Cliffstar to Northland to such effect,
shall be reduced to the Minimum Earnout Amount less aggregate Annual
Earnout Amounts previously paid to Northland by Cliffstar.
3.4. Option to Terminate Earnout Period.
3.4.(a) Option. Cliffstar shall have a one-time option to
terminate the Earnout Period. Such option shall be exercisable and
effective after exercise at any time on or before the last day of the
30th calendar month of the Earnout Period and all remaining
obligations to make future payments of the Earnout Amount upon written
notice as provided below and payment to Northland of the "Earnout
Termination Payment." The Earnout Termination Payment shall be an
amount equal to $50,000,000 less the sum of (i) the Minimum Annual
Earnout Amounts, if any, paid
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with respect to the first and second Earnout Years and (ii) all
principal payments made on the Promissory Note prior to the date of
the Earnout Termination Payment. In the event that Cliffstar elects to
terminate the Earnout Period and makes the Earnout Termination Payment
to Northland pursuant to this Section 3.4, no payment of the Annual
Earnout Amount or Minimum Annual Earnout Amount shall be due for the
Earnout Year during which termination occurs or any succeeding Earnout
Year and this Agreement and all obligations of Cliffstar under
Sections 3.2.(b) and (c) and Section 3.6 hereof shall terminate.
3.4.(b) Notice of Termination and Payment of Earnout Termination
Payment. In the event Cliffstar elects to terminate the Earnout
Period, Cliffstar shall deliver written notice of such election to
Northland (the "Earnout Termination Notice"). Payment of the Earnout
Termination Payment shall be made in installments as follows:
(i) The first installment in the amount of the lesser
of $16,666,667 or the Earnout Termination Payment shall be paid
by wire transfer of immediately available funds to Northland
within 15 days of the date of the Earnout Termination Notice.
(ii) The balance, if any, shall be paid by delivery of
Cliffstar's promissory note in the amount of such remaining
balance in substantially the form (other than payment terms) of
the Promissory Note attached hereto as Exhibit A. The first
installment of such note shall be in the amount of the lesser of
$16,666,667 or the principal balance of the note and shall be
payable on the first anniversary date of the Earnout Termination
Notice. The then remaining balance of such note, if any, shall be
payable in full on the second anniversary date of the Earnout
Termination Notice. The note shall bear interest at the rate of
8% per annum, payable with installments of principal. Payment of
the Earnout Termination Payment pursuant to this Section 3.4(b)
shall constitute payment in full of the Promissory Note delivered
by Cliffstar pursuant to Section 3.2(b) hereof.
3.5. Inventory Purchase Price; Concentrate Purchase Price.
3.5.(a) Inventory Purchase Price Defined. The purchase price for
the Inventory (the "Inventory Purchase Price") shall be the lower of
(i) Northland's cost basis for the Finished Goods Inventory, the
Work-In-Process Inventory and the Raw Material Inventory or (ii)
market as of the Closing Date determined in accordance with generally
accepted accounting principles consistently applied.
3.5.(b) Determination of Inventory Purchase Price. A physical
inventory of the Inventory shall be taken as of the Effective Time by
representatives of Northland, Cliffstar and Deloitte & Touche LLP.
Within 15 days following the Closing Date, Cliffstar shall deliver to
Northland an updated detailed schedule of its
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calculation of the Inventory Purchase Price based on such physical
inventory and a copy of the workpapers used in the preparation of the
inventory and calculation of the Inventory Purchase Price. Northland
may notify Cliffstar in writing within 20 business days following
receipt of Cliffstar's calculation of the Inventory Purchase Price
that it does not agree with any values set forth thereon, in which
case Northland and Cliffstar will use good faith efforts during the
30-day period following receipt of such written notice to resolve any
differences they may have as to the calculation of the Inventory
Purchase Price. Such written notice shall identify with specificity
the items or amounts with which Northland disagrees. If Northland and
Cliffstar cannot reach agreement during that 30-day period, their
disagreements shall be promptly submitted to Deloitte & Touche, which
shall conduct such additional review as is necessary to resolve the
specific disagreements referred to it. The review of Deloitte & Touche
will be restricted as to scope to address only those specific
disagreements referred to it by Northland and Cliffstar. The final
form of the determination of the Inventory Purchase Price (the "Final
Inventory Amount") shall be determined by Deloitte & Touche as
promptly as practicable following its engagement, shall confirmed in
writing to, and shall be final and binding upon, Northland and
Cliffstar for purposes of this Article 3. In the event that Northland
and Cliffstar agree on the Inventory Purchase Price without submission
of disagreements to Deloitte & Touche, Cliffstar shall provide
Northland with written confirmation of the final Inventory Purchase
Price so agreed to, which, upon written acknowledgement by Northland,
shall become the Final Inventory Amount for purposes of this Section
3.5.
[Assumes 3.5.(c) Concentrate Purchase Price; Payment. The purchase price
February for the Purchased Concentrate (the "Concentrate Purchase Price") shall
29, 2000 be $4,350,000 and shall be payable in ten equal installments of
Closing $435,000 by wire transfer to Northland of immediately available funds,
Date.] the first installment of which shall be payable at Closing. The
remaining installments shall commence on March 31 and shall continue
on the last business day of each month thereafter until paid in full.
3.6. Covenants of Cliffstar During Earnout Period. Cliffstar hereby
covenants and agrees that until the expiration or termination of the
Earnout Period, Cliffstar shall:
3.6.(a) Furnish to Northland:
(i) As soon as available after the end of each quarter
of each Earnout Year, but in no event later than 30 days after
the end of each such quarter, a statement of Cranberry Profits of
Cliffstar for such quarter and for that part of the Earnout Year
ending with such quarter; all in reasonable detail and certified
as true and correct by the chief financial officer of Cliffstar;
and
(ii) As soon as available prior to the beginning of
each Earnout Year, a projected Cranberry Profits statement of
Cliffstar for such year, in reasonable detail, representing the
good faith projections of
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Cliffstar and certified by Cliffstar's chief financial officer as
being the most accurate projections available and consistent with
the projections used by Cliffstar for internal planning purposes.
All such statements shall be complete and correct in all material
respects and be prepared in reasonable detail and in accordance
with GAAP subject to specific provisions set forth in this
Agreement.
3.6.(b) To continue to engage in the production and sale of
cranberry juice products substantially as now conducted by it with the
exception of reasonable extensions and/or reductions thereof, and
except following a sale of all or substantially all of its assets and
business, to preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal
conduct of its business.
3.6.(c) Not to permit or cause itself to liquidate, wind up or
dissolve (or suffer any liquidation or dissolution), except following
a sale of all or substantially all of its assets and business to which
subparagraph (f) below applies.
3.6.(d) Not to cause or permit any Related Party to conduct or
engage in the production and sale of Cranberry Juice Products or enter
into any agreement or arrangement pursuant to or in connection with
which Cliffstar or any Related Party owns or controls any financial
interest in any entity engaged in the private label cranberry juice
business provided however, that neither Cliffstar nor any Related
Party shall be prohibited from (i) owning less than 5% of an entity
engaged in the private label cranberry juice business and (ii) making
an acquisition of a controlling interest in a business that is subject
to the provisions of Section 3.3(d) above.
3.6.(e) To cause any payments by Cliffstar to any Related Party
for services rendered or goods provided for any cost or expense that
would enter into the determination of Cranberry Profits hereunder to
be for actual services rendered and/or actual goods provided, in
either case at an appropriate fair market value.
3.6.(f) If prior to the expiration or termination of the Earnout
Period,
(i) Cliffstar shall enter into any transaction of
merger, consolidation or amalgamation as a result of which
Cliffstar is not the surviving entity;
(ii) A majority of Cliffstar's stock is sold,
transferred or otherwise disposed of in one or more transactions
to persons or entities who are not Related Parties; or
(iii) Cliffstar shall, in one transaction or a series of
transactions, sell all or any substantial part of the assets of
its business; or
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(iv) Cliffstar shall, in one transaction or a series of
transactions, sell all or substantially all of the assets of the
Private Label Juice Business acquired from Northland hereunder,
then
Northland shall have the option of maintaining its rights under
Article 3 hereof to receive the Earnout Amount, in which case
Cliffstar shall make any of the transactions set forth in (i), (ii) or
(iii) above contingent on the other party assuming the obligations
under Section 3.3 hereof or, in lieu of receiving the Earnout Amount,
Northland may elect to receive the greater of (a) $50,000,000 less the
sum of all Earnout Amount payments paid or payable with respect to
prior Earnout Years and all principal payments made on the Promissory
Note or (b) an amount equal to the average Earnout Amount earned with
respect to prior Earnout Years multiplied by the number of Earnout
Years remaining in the Earnout Period (including the current year). In
the event Northland elects to receive the payments described above in
lieu of the Earnout Amount, the Note shall become immediately due and
payable and all payments of principal thereunder upon such
acceleration shall be credited against the amounts due hereunder.
For purposes of this Section 3.6, "Related Party" shall mean stockholders
and any person, firm or corporation which, directly or indirectly, controls
Cliffstar, and any spouse or descendant of any such person or any entity
(including trusts, limited partnerships and limited liability companies)
controlled by Cliffstar or other Related Party. For the purpose of the
definition of "Related Party," "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with") means
the possession, directly or indirectly of the power to direct or cause the
direction of management and policies, either directly or indirectly,
whether through the ownership of voting securities or by contract or
otherwise of any person, firm or entity.
For purposes of this Section 3.6, any act, or failure to act by any Related
Party that would result in a violation of any provision of this Section 3.6
if such act or failure to act were by Cliffstar shall be deemed to be a
violation by Cliffstar of its obligations under this Section 3.6.
3.7. Allocation of Purchase Price. The aggregate Purchase Price
(including the assumption by Cliffstar of the Assumed Liabilities) shall be
allocated among the Purchased Assets for tax purposes in accordance with
Schedule 3.7. Northland and Cliffstar will follow and use such allocation
in all tax returns, filings or other related reports made by them to any
governmental agencies. To the extent that disclosures of this allocation
are required to be made by the parties to the Internal Revenue Service
("IRS") under the provisions of Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code") or any regulations thereunder, Cliffstar
and Northland will disclose such reports to the other prior to filing with
the IRS.
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4. REPRESENTATIONS AND WARRANTIES OF NORTHLAND
Northland makes the following representations and warranties to
Cliffstar, each of which is true and correct on the date hereof, shall
remain true and correct to and including the Closing Date and shall survive
the Closing of the transactions provided for herein.
4.1. Corporate.
4.1.(a) Organization. Northland is a corporation duly organized
and validly existing under the laws of the State of Wisconsin.
4.1.(b) Corporate Power. Northland has all requisite corporate
power and authority to own, operate and lease its properties, to carry
on its business as and where such is now being conducted, to enter
into this Agreement and the other documents and instruments to be
executed and delivered by Northland pursuant hereto and to carry out
the transactions contemplated hereby and thereby.
4.1.(c) Qualification. Northland is duly licensed or qualified to
do business as a foreign corporation, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased
by it, or the nature of its business, makes such licensing or
qualification necessary. The states in which Northland is licensed or
qualified to do business are listed in Schedule 4.1.(c).
4.2. Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Northland
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors. No
other or further corporate act or proceeding on the part of Northland is
necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by Northland pursuant hereto or
the consummation of the transactions contemplated hereby and thereby. This
Agreement constitutes, and when executed and delivered, the other documents
and instruments to be executed and delivered by Northland pursuant hereto
will constitute, valid binding agreements of Northland, enforceable in
accordance with their respective terms.
4.3. No Violation. Except as set forth on Schedule 4.3, neither the
execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Northland pursuant hereto, nor
the consummation by Northland of the transactions contemplated hereby and
thereby (a) will violate any applicable Law or Order, (b) except for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), will require any authorization, consent, approval,
exemption or other action by or notice to any Government Entity (including,
without limitation, under any "plant-closing" or similar law), or (c)
subject to obtaining the consents referred to in Schedule 4.3, will violate
or conflict with, or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien (as defined in Section 4.7.(a)) upon any
of the assets of Northland under, any term or provision of the Articles of
Incorporation or By-laws of Northland or of any contract, commitment,
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understanding, arrangement, agreement or restriction of any kind or
character to which Northland is a party or by which Northland or any of its
assets or properties may be bound or affected.
4.4. Financial Information. Included as Schedule 4.4 are the unaudited
historical schedules of revenues and case sales for the Private Label Juice
Business for Northland's fiscal year ended August 31, 1999, and an
unaudited pro forma balance sheet as of August 31, 1999 reflecting the
assets and liabilities of the Private Label Juice Business being
transferred to Cliffstar (the "Reference Financial Information"). The
Reference Financial Information has been prepared in accordance with the
books and records of Northland and fairly presents the information
purported to be presented therein at the dates indicated therein. The
Reference Financial Information relates solely to the Private Label Juice
Business. Except as set forth in Schedule 4.4 or the Reference Financial
Information, there are no liabilities relating to the Private Label Juice
Business which have not been disclosed.
4.5. Inventory. All Inventory of the Private Label Juice Business
reflected on the Reference Balance Sheet is of a quality and quantity
usable and saleable in the ordinary course of business, had a commercial
value at least equal to the value shown on such balance sheet and is valued
in accordance with generally accepted accounting principles at the lower of
cost (on a FIFO basis) or market. All inventory purchased since the date of
such balance sheet is of a quality and quantity usable and saleable in the
ordinary course of business. The Finished Goods Inventory complies in all
material respects with applicable governmental standards relating to the
production, sale, packaging and labeling of food products. All items of
Finished Goods Inventory are of a quality ordinarily produced in accordance
with the requirements of specifications of customers, are fit for human
consumption, are saleable based on Northland's normal sales experience
prior to the expiration of their shelf life, if any, and will require no
rework with respect to services performed prior to Closing in excess of
normal reserves established therefor.
4.6. Litigation. Except as set forth in Schedule 4.6, there exists no
litigation, action, suit, arbitration, investigation, claim or proceeding
(collectively "Litigation") pending or, to the Northland's knowledge,
threatened, that materially involves the Purchased Assets or which could
involve a claim or Litigation against Cliffstar, any of the Contracts, or
the transactions contemplated by this Agreement, at law or in equity, or by
or before any governmental authority.
4.7. Title to Properties. Northland has good and marketable title to
all the Purchased Assets, free and clear of all mortgages, liens (statutory
or otherwise), security interests, claims, pledges, licenses, equities,
options, conditional sales contracts, assessments, levies, easements,
covenants, reservations, restrictions, rights-of-way, exceptions,
limitations, charges or encumbrances of any nature whatsoever
(collectively, "Liens") except those Liens described in Schedule 4.7 that
will be released on or before Closing. None of the Purchased Assets are
subject to any restrictions with respect to the transferability thereof.
Northland has complete and unrestricted power and right to sell, assign,
convey and deliver the Purchased Assets to Cliffstar as contemplated
hereby. At Closing, Cliffstar will receive good and
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marketable title to all the Purchased Assets, free and clear of all Liens
of any nature whatsoever.
4.8. Contracts and Commitments. Schedule 4.8 contains a list or
description of all Contracts. Except as set forth in Schedule 4.8,
Northland is not in default under any Contract, nor has any event or
omission occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or cause the
acceleration of any of Northland's obligations or result in the creation of
any Lien on any of the assets owned or used by Northland. Except as set
forth in Schedule 4.8, no third party is in default under any Contract or
commitment to which Northland is a party, nor to Northland's knowledge has
any event or omission occurred which, through the passage of time or the
giving of notice, or both, would constitute a default thereunder or give
rise to an automatic termination, or the right of discretionary
termination, thereof.
4.9. Private Label Intangibles. Schedule 4.9 lists the Private Label
Intangibles specifying whether such Private Label Intangibles are owned,
controlled, used or held (under license or otherwise) by Northland, and
also indicating which of such Private Label Intangibles are registered. All
Private Label Intangibles shown as registered in Schedule 4.9 have been
properly registered, all pending registrations and applications have been
properly made and filed and all annuity, maintenance, renewal and other
fees relating to registrations or applications are current. In order to
conduct the business of the Private Label Juice Business, as such is
currently being conducted or proposed to be conducted, Northland does not
require any trademarks, trade names, copyrights, patents, or rights or
licenses for the use of intellectual property of others (collectively
"Trade Rights") other than the Private Label Intangibles. Northland is not
infringing and has not infringed on any Trade Rights of another in the
operation of the business of Northland, nor, to Northland's knowledge, is
any other person infringing on the Private Label Intangibles. Northland has
not granted any license or made any assignment of any Private Label
Intangibles listed on Schedule 4.9, and no other person has any right to
use any Private Label Intangibles owned or held by Northland. Northland
does not pay any royalties or other consideration for the right to use any
Trade Rights of others in connection with or relating to the Private Label
Juice Business. There is no Litigation pending or, to Northland's
knowledge, threatened to challenge Northland's right, title and interest
with respect to its continued use and right to preclude others from using
any Private Label Intangibles. The Private Label Intangibles are valid,
enforceable and in good standing, and there are no equitable defenses to
enforcement based on any act or omission of Northland.
4.10. Major Customers and Suppliers.
4.10.(a) Customers. Schedule 4.10.(a) contains a complete list
of the customers of the Private Label Juice Business and sets forth
the name of each customer of the Private Label Juice Business that has
purchased Private Label Juice Business products from Northland in the
fiscal year ended August 31, 1999.
4.10.(b) Major Suppliers. Schedule 4.10.(b) contains a list of
the suppliers to the Private Label Juice Business in the fiscal year
ended August 31, 1999.
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4.11. Product Warranty and Product Liability. Schedule 4.11 contains a
true, correct and complete copy of Northland's standard warranty or
warranties for sales of Products (as defined below) and, except as stated
therein, there are no warranties, commitments or obligations with respect
to the return or replacement of Products. Schedule 4.11 contains a
description of all product liability claims and similar Litigation relating
to Products manufactured or sold, or services rendered, which are presently
pending or, which to Northland's knowledge, are threatened, or which have
been asserted or commenced against Northland within the last two years, in
which a party thereto either requests injunctive relief or alleges damages
in excess of $10,000 (whether or not covered by insurance). None of the
Products has been the subject of any recall campaign and, to Northland's
knowledge, no facts or conditions exist which could reasonably be expected
to result in such a recall campaign. As used in this Section 4.11, the term
"Products" means any and all Private Label Juice Business products
currently or at any time previously manufactured, distributed or sold by
Northland under the Minot Brand name or to customers for sale under their
brand names.
4.12. No Brokers or Finders. Neither Northland nor any of its
directors, officers, employees or agents have retained, employed or used
any broker or finder in connection with the transactions provided for
herein or the negotiation thereof.
4.13. No Material Adverse Change. Since the date of the Reference
Financial Information and other than reductions in volume of sales and/or
loss of customers for reasons other than quality of product or performance
by Northland, there has been no change in the financial condition, business
or operations of Northland which has had or could reasonably be expected to
have a material adverse effect on the Private Label Juice Business.
4.14. Compliance with Law. The Private Label Juice Business is being
conducted in material compliance with all applicable laws, ordinances or
regulations of any governmental body, and all governmental approvals,
permits and licenses required for Northland to conduct the Private Label
Juice Business as presently conducted have been obtained and are in full
force and effect and are being complied with in all material respects.
4.15. Disclosure. No representation or warranty by Northland in this
Agreement, nor any statement, certificate, schedule, document or exhibit
hereto furnished or to be furnished by or on behalf of Northland pursuant
to this Agreement or in connection with transactions contemplated hereby,
contains or shall contain any untrue statement of material fact or omits or
shall omit a material fact necessary to make the statements contained
therein not misleading.
5. REPRESENTATIONS AND WARRANTIES OF CLIFFSTAR
Cliffstar makes the following representations and warranties to
Northland, each of which is true and correct on the date hereof, shall remain
true and correct to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Northland or any notice to
Northland, and shall survive the Closing of the transactions provided for
herein.
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5.1. Corporate.
5.1.(a) Organization. Cliffstar is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
5.1.(b) Corporate Power. Cliffstar has all requisite corporate
power to enter into this Agreement and the other documents and
instruments to be executed and delivered by Cliffstar and to carry out
the transactions contemplated hereby and thereby.
5.2. Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Cliffstar
pursuant hereto and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of
Cliffstar. No other corporate act or proceeding on the part of Cliffstar or
its shareholders is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by Cliffstar
pursuant hereto or the consummation of the transactions contemplated hereby
and thereby. This Agreement constitutes, and when executed and delivered,
the other documents and instruments to be executed and delivered by
Cliffstar pursuant hereto will constitute, valid and binding agreements of
Cliffstar, enforceable in accordance with their respective terms, except as
such may be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable principles.
5.3. No Brokers or Finders. Neither Cliffstar nor any of its
directors, officers, employees or agents have retained, employed or used
any broker or finder in connection with the transactions provided for
herein or the negotiation thereof.
5.4. No Violation. Except as set forth on Schedule 5.4, neither the
execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Cliffstar pursuant hereto, nor
the consummation by Cliffstar of the transactions contemplated hereby and
thereby (a) will violate any applicable Law or Order, (b) except for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), will require any authorization, consent, approval,
exemption or other action by or notice to any Government Entity (including,
without limitation, under any "plant-closing" or similar law), or (c)
subject to obtaining the consents referred to in Schedule 4.3, will violate
or conflict with, or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien (as defined in Section 4.7.(a)) upon any
of the assets of Cliffstar under, any term or provision of the Articles of
Incorporation or By-laws of Cliffstar or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or
character to which Cliffstar is a party or by which Cliffstar or any of its
assets or properties may be bound or affected.
5.5. Financial Statements. Cliffstar has made available for
Northland's review at the offices of Deloitte & Touche LLP copies of the
financial statements of Cliffstar consisting of (i) balance sheets of
Cliffstar as of January 2, 1999 and the related statements of
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income and cash flows for the years then ended (including the notes
contained therein or annexed thereto), which financial statements have been
reported on, and are accompanied by, the signed, unqualified opinions of
Deloitte & Touche LLP, independent auditors for Cliffstar for such years,
and (ii) an unaudited balance sheet of Cliffstar as of November 6, 1999,
and the related unaudited statements of income for the ten months then
ended and for the corresponding period of the prior year (including the
notes and schedules contained therein or annexed thereto) (the "Cliffstar
Financial Statements"). A copy of the Cliffstar Financial Statements that
were reviewed by Northland are being held by Deloitte & Touche LLP in
escrow. The Cliffstar Financial Statements held by Deloitte & Touche LLP
shall be released only in the event reasonably necessary in connection with
any court proceeding or governmental regulatory or agency proceeding
concerning or relating to Northland's performance of due diligence in
entering into this Agreement and the transactions contemplated hereby or in
connection with any Claim hereunder for breach of the representations
contained in this Section 5.5
5.6. Disclosure. No representation or warranty by Cliffstar in this
Agreement, nor any statement, certificate, schedule, document or exhibit
hereto furnished or to be furnished by or on behalf of Cliffstar pursuant
to this Agreement or in connection with transactions contemplated hereby,
contains or shall contain any untrue statement of material fact or omits or
shall omit a material fact necessary to make the statements contained
therein not misleading.
6. OTHER MATTERS
6.1. Noncompetition Agreement. At the Closing, Northland shall
execute and deliver to Cliffstar a Noncompetition Agreement, substantially
in the form of Exhibit B hereto (the "Noncompetition Agreement").
6.2. Confidential Information. Northland shall not at any time
subsequent to the Closing, except as explicitly requested by Cliffstar, use
for any purpose, disclose to any person, or keep or make copies of
documents, tapes, discs, programs or other information storage media
("records") containing, any confidential information relating exclusively
to the Private Label Juice Business or the Purchased Assets, all such
information being deemed to be transferred to Cliffstar hereunder, other
than documents and records retained and used by Northland solely for legal,
personnel, tax or financial reporting purposes. For purposes hereof,
"confidential information" shall mean and include, without limitation, (i)
all Private Label Intangibles, all customer and vendor lists and related
information, all information concerning Northland's processes, products,
costs, prices, sales, marketing and distribution methods relating
exclusively to the Private Label Juice Business and (ii) any financial
statements and other information of Cliffstar provided to or made available
for review by Northland as described in Section 5.5 of this Agreement. The
foregoing provisions shall not apply to any information which is an
"Excluded Asset" as defined in Section 1.2, or which relates to one or more
Excluded Assets.
6.3. HSR Act Filings. To the extent such filings have not been
completed prior to the execution of this Agreement, each of Northland and
Cliffstar shall, in cooperation
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with the other, file any reports or notifications that may be required to
be filed by it under the HSR Act, with the Federal Trade Commission and the
Antitrust Division of the Department of Justice, and shall furnish to the
other all such information in its possession as may be necessary for the
completion of the reports or notifications to be filed by the other. Prior
to making any communication, written or oral, with the Federal Trade
Commission, the Antitrust Division of the federal Department of Justice or
any other governmental agency or authority or members of their respective
staffs with respect to this Agreement or the transactions contemplated
hereby, Northland shall consult with Cliffstar.
6.4. Product Liability Matters. At or prior to the Closing, Northland
at its expense shall cause Cliffstar to be named as an additional insured
under each of its occurrence-type policy or policies of insurance insuring
against claims for personal injury and property damage arising out of or
resulting from any Products (as defined in Section 4.11) manufactured by
Northland prior to the Closing Date. At the Closing, Northland shall
deliver to Cliffstar one or more certificates of insurance evidencing that
the insurance to be obtained by it pursuant to this Section is in effect
and providing for notification to Cliffstar at least ten days prior to the
effective date of any termination or cancellation of such insurance. The
insurance coverage set forth in this Section shall be maintained by
Northland in an amount of not less than $25,000,000 for a period of five
years following the Closing, with no deductible. Following the Closing,
Cliffstar shall continue to utilize Northland's product serial number
system presently in effect or a similar system which will permit the
manufacturer of the products of the business to be determined.
6.5. Use of Minot's Name. Following the Closing, neither Northland
nor any Affiliate shall, without the prior written consent of Cliffstar,
make any use of the name "Minot Food Packers" or any other name confusingly
similar thereto, except as may be necessary for Northland to pay its
liabilities, prepare tax returns and other reports, and except for the use
permitted under the Trademark License Agreement described in Section 6.9
hereof.
6.6. Waiver of Bulk Sales Compliance. Cliffstar hereby waives
compliance by Northland with the applicable provisions of the bulk sales or
bulk transfer statutes of any state in which Inventory is located.
6.7. Cranberry Purchase and Supply Agreement. At the Closing,
Northland and Cliffstar shall execute and deliver a Cranberry Purchase and
Supply Agreement ("Cranberry Purchase and Supply Agreement") in
substantially the form of Exhibit C attached hereto.
6.8. [Intentionally Left Blank].
6.9. Trademark License Agreement. At the Closing, Cliffstar and
Northland shall execute and deliver a license agreement in substantially
the form attached as Exhibit D hereto providing to Northland the sole and
exclusive 99-year license to use the Minot trademark in association with
cranberry sauce, dried cranberries and other non-juice cranberry products
as provided therein.
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6.10. Co-Packing Agreement. At the Closing, Northland and Cliffstar
shall execute and deliver a Co-Packing Agreement (the "Co-Packing
Agreement") substantially in the form of Exhibit E attached hereto.
6.11. Cranberry Sauce Purchase Agreement. Prior to the Closing,
Northland and Cliffstar shall negotiate in good faith a Cranberry Sauce
Purchase Agreement (the "Sauce Agreement") to be executed at Closing
pursuant to which Northland would sell canned cranberry sauce to Cliffstar
packaged for resale by Cliffstar. The negotiation and execution of the
Sauce Agreement shall not be a condition to the obligations of either party
under this Agreement.
6.12. Opening Inventory. Cliffstar's inventories used in the
production of Cranberry Juice shall be valued at the lower of cost or
market in accordance with GAAP as of the Closing Date, which inventory so
determined, together with the Inventory and Purchased Concentrate purchased
from Northland hereunder, shall be used for purposes of determining
Cranberry Profits in accordance with Section 3.3 hereof.
7. FURTHER COVENANTS OF NORTHLAND
Northland covenants and agrees as follows:
7.1. Access to Information and Records.
7.1.(a) From and after the date of this Agreement through the
end of the Earnout Period, Northland shall, and shall cause its
officers, employees, agents, independent accountants and advisors to,
furnish to Cliffstar, its officers, employees, agents, independent
accountants and advisors, at reasonable times and places, all
information in their possession concerning the Private Label Juice
Business as may be requested, and give such persons access to all of
the inventories, books, records, contracts and other documents of or
pertaining to the Private Label Juice Business that Northland or its
officers, employees, agents, independent accountants or advisors shall
have in their custody.
7.1.(b) During the period prior to Closing and with the prior
consent of Northland in each instance (which consent shall not be
unreasonably withheld), Cliffstar and its officers, employees, agents,
independent accountants and advisors, shall have access to vendors,
customers, and others having business dealings with Northland in
connection with the Private Label Juice Business for the purpose of
performing Cliffstar's due diligence investigation.
7.2. Conduct of Business Pending the Closing. From the date hereof
until the Closing, except as otherwise approved in writing by Cliffstar:
7.2.(a) No Changes. Northland will carry on the Private Label
Juice Business diligently and in the same manner as heretofore and
will not make or institute any changes in its methods of purchase,
sale, management, accounting or operation.
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7.2.(b) No Breach. Northland will not do or omit any act, or
permit any omission to act, which may cause a breach of any material
contract, commitment or obligation relating to the Private Label Juice
Business, or any breach of any representation, warranty, covenant or
agreement made by Northland.
7.2.(c) No Material Contracts. No contract or commitment will
be entered into, and no purchase of raw materials or supplies and no
sale of goods or services (real, personal, or mixed, tangible or
intangible) will be made, by or on behalf of Northland with respect to
the Private Label Juice Business, except contracts, commitments,
purchases or sales which are in the ordinary course of business and
consistent with past practice, are not material to the Private Label
Juice Business (individually or in the aggregate) and would not have
been required to be disclosed in the Disclosure Schedule had they been
in existence on the date of this Agreement.
7.2.(d) Insurance. Northland shall maintain all of the
insurance relating to the Private Label Juice Business in effect as of
the date hereof.
7.2.(e) Retention of Business. It is acknowledged and
understood that the announcement of this Agreement and the sale of the
Private Label Juice Business to Cliffstar contemplated hereby may
result in the loss of business and/or loss of customers by Northland.
Northland shall use its reasonable best efforts to retain customers
and business through the Closing.
7.3. Consents. Northland will use its best efforts prior to Closing
to obtain all consents necessary for the consummation of the transactions
contemplated hereby.
7.4. Other Action. Northland shall use its best efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to
the parties' obligations to consummate the transactions contemplated in
this Agreement.
7.5. Disclosure. Northland shall have a continuing obligation to
promptly notify Cliffstar in writing with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Disclosure Schedule, but no such disclosure shall cure any breach of any
representation or warranty which is inaccurate.
8. CONDITIONS PRECEDENT TO CLIFFSTAR'S OBLIGATIONS
Each and every obligation of Cliffstar to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of each of
the following conditions:
8.1. Representations and Warranties True on the Closing Date. Each of
the representations and warranties made by Northland in this Agreement, and
the statements contained in the Disclosure Schedule or in any instrument,
list, certificate or writing delivered by Northland pursuant to this
Agreement, shall be true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the Closing
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Date as though such representations and warranties were made or given on
and as of the Closing Date, except for any changes permitted by the terms
of this Agreement or consented to in writing by Cliffstar.
8.2. Compliance With Agreement. Northland shall have in all material
respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with
by them prior to or on the Closing Date, including the delivery of the
closing documents specified in Section 11.1 (other than the Sauce Agreement
referred to in Section 11.1.(l)).
8.3. Absence of Litigation. No Litigation shall have been commenced
or threatened, and no investigation by any Government Entity shall have
been commenced, against Cliffstar, Northland or any of the affiliates,
officers or directors of any of them, with respect to the transactions
contemplated hereby that in the written judgment of Cliffstar's legal
counsel, based upon a reasoned assessment of the consequences of such
Litigation, it would be inadvisable to proceed with the transactions
contemplated by this Agreement.
8.4. Consents and Approvals. All approvals, consents and waivers set
forth on Schedule 8.4 shall have been received and executed counterparts
thereof shall have been delivered to Cliffstar not less than two business
days prior to the Closing. Receipt of the consent of any third party to the
assignment of a Contract which is not (and is not required to be) disclosed
in Schedule 8.4 shall not be a condition to Cliffstar's obligation to
close, provided that the aggregate of all such Contracts does not represent
a material portion of the Private Label Juice Business sales or
expenditures. After the Closing, Northland shall continue to use its
reasonable best efforts to obtain any consents and approvals not obtained
prior to Closing.
8.5. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
9. CONDITIONS PRECEDENT TO NORTHLAND'S OBLIGATIONS
Each and every obligation of Northland to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of the
following conditions:
9.1. Representations and Warranties True on the Closing Date. Each of
the representations and warranties made by Cliffstar in this Agreement
shall be true and correct in all material respects when made and shall be
true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made or given on and as of
the Closing Date.
9.2. Compliance With Agreement. Cliffstar shall have in all material
respects performed and complied with all of Cliffstar's agreements and
obligations under this Agreement which are to be performed or complied with
by Cliffstar prior to or on the Closing Date, including the delivery of the
closing documents specified in Section 11.2 (other than the Sauce Agreement
referred to in Section 11.2.(k)).
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9.3. Absence of Litigation. No Litigation shall have been commenced
or threatened, and no investigation by any Government Entity shall have
been commenced, against Cliffstar, Northland or any of the affiliates,
officers or directors of any of them, with respect to the transactions
contemplated hereby; provided that the obligations of Northland shall not
be affected unless, based upon a written reasoned assessment by Northland's
legal counsel of the consequences of such Litigation, there is a reasonable
likelihood that as a result of such Litigation Northland will be unable to
retain substantially all the consideration to which it is entitled under
this Agreement.
9.4. Hart-Scott-Rodino Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
10. INDEMNIFICATION
10.1. By Northland. Subject to the terms and conditions of this
Article 10, Northland hereby agrees to indemnify, defend and hold harmless
Cliffstar, and its directors, officers, employees and controlled and
controlling persons (hereinafter "Cliffstar's Affiliates"), from and
against all Claims asserted against, resulting to, imposed upon, or
incurred by Cliffstar, Cliffstar's Affiliates or the business and assets
transferred to Cliffstar pursuant to this Agreement, directly or
indirectly, by reason of, arising out of or resulting from
10.1.(a) the inaccuracy or breach of any representation or
warranty of Northland contained in or made pursuant to this Agreement;
10.1.(b) the breach of any covenant of Northland contained in
this Agreement;
10.1.(c) any Claim brought by or on behalf of any broker or
finder retained, employed or used by Northland or any of its
directors, officers, employees or agents in connection with the
transactions provided for herein or the negotiation thereof, whether
or not disclosed herein; or
10.1.(d) any Claim of or against Northland, the Purchased Assets
or the business of Northland not specifically assumed by Cliffstar
pursuant hereto.
10.1.(e) any Claim arising out of or resulting from
noncompliance with any applicable bulk sales or bulk transfer rules
pursuant to Section 6.6 hereof.
As used in this Article 10, the term "Claim" shall include (i) all
Liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, penalties and settlements; (iii)
all demands, claims, suits, actions, causes of action, proceedings and
assessments, whether or not ultimately determined to be valid; and (iv) all
costs and expenses (including, without limitation, interest (including
prejudgment interest in any litigated or arbitrated matter), court costs
and fees and expenses of attorneys and expert witnesses) of investigating,
defending or asserting any of the foregoing or of enforcing this Agreement.
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10.2. By Cliffstar. Subject to the terms and conditions of this
Article 10, Cliffstar hereby agrees to indemnify, defend and hold harmless
Northland, its directors, officers, employees and controlling persons, from
and against all Claims asserted against, resulting to, imposed upon or
incurred by any such person, directly or indirectly, by reason of or
resulting from (a) the inaccuracy or breach of any representation or
warranty of Cliffstar contained in or made pursuant to this Agreement
(regardless of whether such breach is deemed "material"); (b) the breach of
any covenant of Cliffstar contained in this Agreement (regardless of
whether such breach is deemed "material") including, without limitation,
the covenants set forth in Section 3.6 of this Agreement; or (c) all Claims
of or against Northland specifically assumed by Cliffstar pursuant hereto.
10.3. Indemnification of Third-Party Claims. The following provisions
shall apply to any Claim subject to indemnification which is (i) a suit,
action or arbitration proceeding filed or instituted by any third party, or
(ii) any other form of proceeding or assessment instituted by any
Government Entity:
10.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give
the party from whom indemnification is sought (the "Indemnifying
Party") prompt written notice of any such Claim, and the Indemnifying
Party will undertake the defense thereof by representatives chosen by
it. The assumption of defense shall constitute an admission by the
Indemnifying Party of its indemnification obligation hereunder with
respect to such Claim, and its undertaking to pay directly all costs,
expenses, damages, judgments, awards, penalties and assessments
incurred in connection therewith. Failure to give such notice shall
not affect the Indemnifying Party's duty or obligations under this
Article 10, except to the extent the Indemnifying Party is prejudiced
thereby. So long as the Indemnifying Party is defending any such Claim
actively and in good faith, the Indemnified Party shall not settle
such Claim without the Indemnifying Party's written consent, which
shall not be unreasonably withheld. The Indemnified Party shall make
available to the Indemnifying Party or its representatives all records
and other materials required by them and in the possession or under
the control of the Indemnified Party, for the use of the Indemnifying
Party and its representatives in defending any such Claim, and shall
in other respects give reasonable cooperation in such defense.
10.3.(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of
the Indemnifying Party, and the Indemnifying Party shall thereafter
have no right to challenge the Indemnified Party's defense,
compromise, settlement or consent to judgment.
10.3.(c) Indemnified Party's Rights. Anything in this Article
10 to the contrary notwithstanding, (i) if there is a reasonable
probability that a Claim may
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materially and adversely affect the Indemnified Party other than as a
result of money damages or other money payments, the Indemnified Party
shall have the right to defend, compromise or settle such Claim, and
(ii) the Indemnifying Party shall not, without the written consent of
the Indemnified Party, settle or compromise any Claim or consent to
the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all Liability in respect of such
Claim.
10.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 10, provided that in
the event Northland is the Indemnifying Party, Cliffstar shall have the
right, but not the obligation, to require that payment shall be made solely
by offset against the Promissory Note and to the installments of principal
thereunder in order of maturity. In the event that Cliffstar makes a claim
for satisfaction of an indemnification obligation under this Article 10
that is disputed by Northland, set-off may be made by Cliffstar only upon a
subsequent determination in an arbitration pursuant to Article 13 or by
final judgment not subject to appeal that all or a portion of such
indemnification obligation is owed to Cliffstar. Upon judgment,
determination, settlement or compromise of any third party Claim, the
Indemnifying Party shall pay promptly on behalf of the Indemnified Party,
and/or to the Indemnified Party in reimbursement of any amount theretofore
required to be paid by it, the amount so determined by judgment,
determination, settlement or compromise and all other Claims of the
Indemnified Party with respect thereto, unless in the case of a judgment an
appeal is made from the judgment. If the Indemnifying Party desires to
appeal from an adverse judgment, then the Indemnifying Party shall post and
pay the cost of the security or bond to stay execution of the judgment
pending appeal. Upon the payment in full by the Indemnifying Party of such
amounts, the Indemnifying Party shall succeed to the rights of such
Indemnified Party, to the extent not waived in settlement, against the
third party who made such third party Claim.
10.5. Limitations on Indemnification.
10.5.(a) Time Limitation. No claim or action shall be brought
under this Article 10 for breach of a representation or warranty after
the lapse of 18 months following the Closing. Regardless of the
foregoing, however, or any other provision of this Agreement, any
claim made by a party hereunder by a demand for arbitration in
accordance with Article 13 hereof for breach of a representation or
warranty prior to the termination of the survival period for such
claim shall be preserved despite the subsequent termination of such
survival period.
10.5.(b) Amount Limitation. Cliffstar shall not be entitled to
indemnification under this Article for breach of a representation or
warranty unless and only to the extent the aggregate of Northland
indemnification obligations to Cliffstar pursuant to this Article 10
(but for this Section 10.5.(b)) exceeds $150,000. Northland shall not
be required to indemnify Cliffstar for Claims under this Article 10
for breaches of warranties or representations to the extent that the
aggregate of such Claims exceeds $5,000,000.
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10.5.(c) Insurance Offset. The obligation of a party to
indemnify any Claim under this Article 10 shall be reduced by the full
amount of any insurance collectible by the Indemnified Party with
respect to such Claim or the underlying facts under any applicable
policy or policies, regardless of whether the Indemnified Party
chooses to submit a claim against such insurance policy.
10.6. No Waiver. The closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of
condition constituting the basis of the Claim at or before the Closing, and
regardless of whether such breach, violation or failure is deemed to be
"material".
11. CLOSING
The closing of this transaction ("the Closing") shall take place at
the offices of Foley & Lardner, 777 E. Wisconsin Avenue, Milwaukee, Wisconsin,
at 9:00 A.M. on February 29, 2000, or at such other time and place as the
parties hereto shall agree upon. Such date is referred to in this Agreement as
the "Closing Date".
11.1. Documents to be Delivered by Northland. At the Closing,
Northland shall deliver to Cliffstar the following documents, in each case
duly executed or otherwise in proper form:
11.1.(a) Bills of Sale. Bills of sale and such other
instruments of assignment, transfer, conveyance and endorsement as
will be sufficient in the opinion of Cliffstar and its counsel to
transfer, assign, convey and deliver to Cliffstar the Purchased Assets
as contemplated hereby.
11.1.(b) Compliance Certificate. A certificate signed by the
chief executive officer of Northland that each of the representations
and warranties made by Northland in this Agreement is true and correct
in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or
given on and as of the Closing Date (except for any changes permitted
by the terms of this Agreement or consented to in writing by
Cliffstar), and that Northland has performed and complied with all of
Northland's obligations under this Agreement which are to be performed
or complied with on or prior to the Closing Date.
11.1.(c) Opinion of Counsel. A written opinion of Foley &
Lardner, counsel to Northland, dated as of the Closing Date, addressed
to Cliffstar, in a form reasonably acceptable to Nixon Peabody LLP.
11.1.(d) Noncompetition Agreement. The Noncompetition Agreement
referred to in Section 6.1, duly executed by Northland.
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11.1.(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Northland authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
11.1.(f) Articles; By-laws. A copy of the By-laws of Northland
certified by the secretary of Northland, and a copy of the Articles of
Incorporation of Northland certified by the Department of Financial
Institutions of the State of Wisconsin.
11.1.(g) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered
to Cliffstar pursuant to the terms hereof.
11.1.(h) Cranberry Purchase and Supply Agreement. The Cranberry
Purchase and Supply Agreement referred to in Section 6.7 duly executed
by Northland.
11.1.(i) [Intentionally Left Blank]
11.1.(j) Trademark License Agreement. The Trademark License
Agreement referred to in Section 6.9 duly executed by Northland.
11.1.(k) Co-Packing Agreement. The Co-Packing Agreement referred
to in Section 6.10 duly executed by Northland.
11.1.(l) Sauce Agreement. The Sauce Agreement referred to in
Section 6.11 duly executed by Northland.
11.1.(m) Other Documents. All other documents, instruments or
writings required to be delivered to Cliffstar at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Cliffstar may reasonably request.
11.2. Documents to be Delivered by Cliffstar. At the Closing,
Cliffstar shall deliver to Northland the following documents, in each case
duly executed or otherwise in proper form:
11.2.(a) Cliffstar's Promissory Note. To Northland, Cliffstar's
Promissory Note dated as of the Closing Date as required by Section
3.2.(b) hereof.
11.2.(b) Assumption of Liabilities. Such undertakings and
instruments of assumption as will be reasonably sufficient in the
opinion of Northland and its counsel to evidence the assumption of
Assumed Liabilities as provided for in Article 2.
11.2.(c) Compliance Certificate. A certificate signed by the
chief executive officer of Cliffstar that the representations and
warranties made by Cliffstar
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in this Agreement are true and correct on and as of the Closing Date
with the same effect as though such representations and warranties had
been made or given on and as of the Closing Date (except for any
changes permitted by the terms of this Agreement or consented to in
writing by Northland), and that Cliffstar has performed and complied
with all of Cliffstar's obligations under this Agreement which are to
be performed or complied with on or prior to the Closing Date.
11.2.(d) Opinion of Counsel. A written opinion of Nixon, Peabody
LLP, counsel to Cliffstar, dated as of the Closing Date, addressed
to Northland, in a form reasonably acceptable to Foley & Lardner.
11.2.(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Cliffstar authorizing and
approving this Agreement and the consummation of the transactions
contemplated by this Agreement.
11.2.(f) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered
to Northland by Cliffstar pursuant to the terms hereof.
11.2.(g) Cranberry Purchase and Supply Agreement. The Cranberry
Purchase and Supply Agreement referred to in Section 6.7 duly executed
by Cliffstar.
11.2.(h) [Intentionally Left Blank]
11.2.(i) Trademark License Agreement. The Trademark License
Agreement referred to in Section 6.9 duly executed by Cliffstar.
11.2.(j) Co-Packing Agreement. The Co-Packing Agreement
referred to in Section 6.10 duly executed by Cliffstar.
11.2.(k) Sauce Agreement. The Sauce Agreement referred to in
Section 6.11 duly executed by Cliffstar.
11.2.(l) Other Documents. All other documents, instruments or
writings required to be delivered to Northland at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Northland may reasonably request.
12. TERMINATION
12.1. Right of Termination Without Breach. This Agreement may be
terminated without further liability of any party at any time prior to the
Closing:
12.1.(a) by mutual written agreement of Cliffstar and
Northland, or
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12.1.(b) by either Cliffstar or Northland if the Closing shall
not have occurred on or before July 1, 2000, provided the terminating
party has not, through breach of a representation, warranty or
covenant, prevented the Closing from occurring on or before such date.
12.2. Termination for Breach.
12.2.(a) Termination by Cliffstar. If (i) there has been a
material violation or breach by Northland of any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing by Cliffstar, or (ii) there has been a
failure of satisfaction of a condition to the obligations of Cliffstar
which has not been so waived, or (iii) Northland shall have attempted
to terminate this Agreement under this Article 12 or otherwise without
grounds to do so, then Cliffstar may, by written notice to Northland
at any time prior to the Closing that such violation, breach, failure
or wrongful termination attempt is continuing, terminate this
Agreement with the effect set forth in Section 12.2.(c) hereof.
12.2.(b) Termination by Northland. If (i) there has been a
material violation or breach by Cliffstar of any of the agreements,
representations or warranties contained in this Agreement which has
not been waived in writing by Northland, or (ii) there has been a
failure of satisfaction of a condition to the obligations of Northland
which has not been so waived, or (iii) Cliffstar shall have attempted
to terminate this Agreement under this Article 12 or otherwise without
grounds to do so, then Northland may, by written notice to Cliffstar
at any time prior to the Closing that such violation, breach, failure
or wrongful termination attempt is continuing, terminate this
Agreement with the effect set forth in Section 12.2.(c) hereof.
12.2.(c) Effect of Termination. Termination of this Agreement
pursuant to this Section 12.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or
other provisions of this Agreement prior to termination hereof. In
addition to the right of any party under common law to redress for any
such breach or violation, each party whose breach or violation has
occurred prior to termination shall jointly and severally indemnify
each other party for whose benefit such representation, warranty,
covenant, agreement or other provision was made ("indemnified party")
from and against all losses, damages (including, without limitation,
consequential damages), costs and expenses (including, without
limitation, interest (including prejudgment interest in any litigated
matter), penalties, court costs, and attorneys fees and expenses)
asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out
of or resulting from such breach or violation. Subject to the
foregoing, the parties' obligations under Section 14.8 of this
Agreement shall survive termination.
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13. RESOLUTION OF DISPUTES
13.1. Arbitration. After the Closing, any dispute, controversy or
claim arising out of or relating to this Agreement or the negotiation
hereof or entry hereunto or any contract or agreement entered into pursuant
hereto or the performance by the parties of its or their terms shall be
settled by binding arbitration held in Chicago, Illinois in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
then in effect, except as specifically otherwise provided in this Article
13. This Article 13 shall be construed and enforced in accordance with the
Federal Arbitration Act, notwithstanding any other choice of law provision
in this Agreement. Notwithstanding the foregoing:
13.1.(a) No party shall be required to submit to arbitration
hereunder unless all persons who are not parties to this Agreement,
but who are necessary parties to a complete resolution of the
controversy, submit to the arbitration process on the same terms as
the parties hereto. Without limiting the generality of the foregoing,
no claim under Article 10 for the indemnification of a third-party
claim shall be subject to arbitration under this Article 13 unless the
third party bringing such claim against the indemnitee shall agree in
writing to the application of this Article 14 of the resolution of
such claim.
13.1.(b) Without the express written consent of all parties,
this Article 13 shall not apply where the amount in controversy,
excluding attorney fees and expenses, exceeds $1,000,000.
13.2. Arbitrators. If the matter in controversy (exclusive of attorney
fees and expenses) shall appear, as at the time of the demand for
arbitration, to exceed $100,000, then the panel to be appointed shall
consist of three neutral arbitrators; otherwise, one neutral arbitrator.
13.3. Procedures; No Appeal. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the
circumstances and shall resolve the dispute as expeditiously as
practicable, and if reasonably practicable, within 60 days after the
selection of the arbitrator(s). The arbitrator(s) shall give the parties
written notice of the decision, with the reasons therefor set out, and
shall have 30 days thereafter to reconsider and modify such decision if any
party so requests within 10 days after the decision. Thereafter, the
decision of the arbitrator(s) shall be final, binding, and nonappealable
with respect to all persons, including (without limitation) persons who
have failed or refused to participate in the arbitration process.
13.4. Authority. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or
preliminary relief, and to allocate responsibility for the costs of the
arbitration and to award recovery of attorneys fees and expenses in such
manner as is determined to be appropriate by the arbitrator(s).
13.5. Entry of Judgment. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject
matter jurisdiction. Northland and Cliffstar hereby submit to the in
personam jurisdiction of the Federal and State
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courts in Illinois, for the purpose of confirming any such award and
entering judgment thereon.
13.6. Confidentiality. All proceedings under this Article 13, and all
evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties and by the arbitrators.
13.7. Continued Performance. The fact that the dispute resolution
procedures specified in this Article 13 shall have been or may be invoked
shall not excuse any party from performing its obligations under this
Agreement and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good faith, subject to
any rights to terminate this Agreement that may be available to any party.
13.8. Tolling. All applicable statutes of limitation shall be tolled
while the procedures specified in this Article 13 are pending. The parties
will take such action, if any, required to effectuate such tolling.
14. MISCELLANEOUS
14.1. Disclosure Schedule. Information set forth in the Disclosure
Schedule specifically refers to the article and section of this Agreement
to which such information is responsive and such information shall not be
deemed to have been disclosed with respect to any other article or section
of this Agreement or for any other purpose. The Disclosure Schedule shall
not vary, change or alter the language of the representations and
warranties contained in this Agreement and, to the extent the language in
the Disclosure Schedule does not conform in every respect to the language
of such representations and warranties, such language shall be disregarded
and be of no force or effect.
14.2. Further Assurance. From time to time, at the request of the
other party and without further consideration, each of Northland and
Cliffstar will execute and deliver to the other such documents, instruments
and consents and take such other action as such party may reasonably
request in order to consummate more effectively the transactions
contemplated hereby, to discharge the covenants of the parties and to vest
in Cliffstar good, valid and marketable title to the business and assets
being transferred hereunder.
14.3. Disclosures and Announcements. Both the timing and the content
of all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by either Northland or
Cliffstar shall be subject to the approval of the other in all essential
respects, except that Cliffstar's approval shall not be required as to any
statements and other information which Northland may submit to the
Securities and Exchange Commission, or Northland's stockholders or be
required to make pursuant to any rule or regulation of the Securities and
Exchange Commission or NASDAQ, or otherwise required by law, provided that
Northland shall use its best efforts to provide Cliffstar with an
opportunity to review any public statement that Northland is required to
make prior to the release thereof.
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14.4. Assignment; Parties in Interest.
14.4.(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the
other parties.
14.4.(b) Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person any
right or remedy under or by reason of this Agreement.
14.5. Law Governing Agreement. This Agreement shall be construed and
interpreted according to the internal laws of the State of Delaware,
excluding any choice of law rules that may direct the application of the
laws of another jurisdiction. Subject to the provisions of Article 13, the
parties hereby stipulate that any action or other legal proceeding arising
under or in connection with this Agreement may be commenced and prosecuted
in its entirety in the federal or state courts having jurisdiction over
Cook County, Illinois, each party hereby submitting to the personal
jurisdiction thereof, and the parties agree not to raise the objection that
such courts are not a convenient forum. Process and pleadings mailed to a
party at the address provided in Section 14.7 shall be deemed properly
served and accepted for all purposes.
14.6. Amendment and Modification. Cliffstar and Northland may amend,
modify and supplement this Agreement in such manner as may be agreed upon
by them in writing.
14.7. Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered;
(b) sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their
respective addresses indicated herein by registered or certified U.S. mail,
return receipt requested and postage prepaid, or by private overnight mail
courier service. The respective addresses to be used for all such notices,
demands or requests are as follows:
(a) If to Cliffstar or the Shareholder, to:
Cliffstar Corporation
One Cliffstar Avenue
Dunkirk, NY 14048
Attention: Sean P. McGirr, President
Facsimile: 716-366-6161
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(with a copy to)
Charles P. Jacobs, Esq.
Nixon Peabody LLP
1600 Main Place Tower
Buffalo, NY 14202
Facsimile: 716-853-8109
or to such other person or address as Cliffstar shall furnish to Northland
in writing.
(b) If to Northland, to:
Northland Cranberries, Inc.
800 First Avenue South
P.O. Box 8020
Wisconsin Rapids, WI 54495-8020
Attention: John Swendrowski
Facsimile: 715-422-6800
(with a copy to)
Jeffrey J. Jones, Esq.
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Facsimile: 414-297-4900
or to such other person or address as Northland shall furnish to Cliffstar
in writing.
If personally delivered, such communication shall be deemed
delivered upon actual receipt; if electronically transmitted pursuant to
this paragraph, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof
of delivery); if sent by overnight courier pursuant to this paragraph, such
communication shall be deemed delivered upon receipt; and if sent by U.S.
mail pursuant to this paragraph, such communication shall be deemed
delivered as of the date of delivery indicated on the receipt issued by the
relevant postal service, or, if the addressee fails or refuses to accept
delivery, as of the date of such failure or refusal. Any party to this
Agreement may change its address for the purposes of this Agreement by
giving notice thereof in accordance with this Section.
14.8. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
14.8.(a) Expenses to be Paid by Northland. Northland shall pay,
and shall indemnify, defend and hold Cliffstar harmless from and
against, each of the following:
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(i) Transfer Taxes. Any sales, use, excise,
transfer or other similar tax imposed with respect to the
transactions provided for in this Agreement, and any interest or
penalties related thereto.
(ii) Professional Fees. All fees and expenses of
Northland's legal, accounting, investment banking and other
professional counsel in connection with the transactions
contemplated hereby.
14.8.(b) Other. Except as otherwise provided herein, each of
the parties shall bear its own expenses and the expenses of its
counsel and other agents in connection with the transactions
contemplated hereby.
14.8.(c) Costs of Litigation or Arbitration. The parties agree
that (subject to the discretion, in an arbitration proceeding, of the
arbitrator as set forth in Section 13.4) the prevailing party in any
action brought with respect to or to enforce any right or remedy under
this Agreement shall be entitled to recover from the other party or
parties all reasonable costs and expenses of any nature whatsoever
incurred by the prevailing party in connection with such action,
including without limitation attorneys' fees and prejudgment interest.
14.9. Entire Agreement. This instrument and the agreements and
documents referenced herein represent the entire agreement between the
parties hereto with respect to the transactions contemplated herein, and
there have been and are no agreements, representations or warranties
between the parties other than those set forth or provided for herein.
14.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.11. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
14.12. Jointly Drafted. This Agreement and the agreements referred to
herein have been jointly drafted by the respective representatives of
Northland and Cliffstar and no party shall be considered as being
responsible for drafting of the Agreement or any of the other agreements
referred to herein for the purpose of construing ambiguities against the
drafter or otherwise. No draft of this Agreement or the other agreements
referred to herein shall be taken into account in construing the Agreement.
14.13. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Annual Earnout Amount" - Section 3.3.(c)
"Assumed Contracts" - Section 2.1.(b)
"Assumed Liabilities" - Section 2.1
"Cases" - Section 3.3.(a)
"Cliffstar's Affiliates" - Section 11.1
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"Claim" - Section 10.1
"Closing" - Preamble to Article 11
"Closing Date" - Section 11
"Contracts" - Section 1.1.(c)
"Cranberry Juice Products" - Section 3.3.(a)
"Cranberry Profits" - Section 3.3.(a)
"Direct Costs" - Section 3.3.(a)
"Disclosure Schedule" - Article 14.1
"Earnout Amount" - Section 3.3(a)(iv)
"Earnout Period" - Section 3.3.(a)
"Earnout Termination Payment" - Section 3.4
"Earnout Year" - Section 3.3.(a)
"Effective Time" - Section 3.3.(b)
"Excluded Assets" - Section 1.2
"Final Inventory Amount" - Section 3.5.(b)
"Government Entities" - Section 2.2.(k)
"HSR Act" - Section 4.3
"Indemnified Party" - Section 10.3.(a)
"Indemnifying Party" - Section 10.3.(a)
"Interim Inventory Amount" - Section 3.2.(d)(i)
"Inventory" - Section 1.1.(a)
"Laws" - Section 2.2.(k)
"Liability" - Section 2.1
"Lien" - Section 4.12(a)
"Litigation" - Section 2.2.(f)
"Minimum Annual Earnout Amount" - Section 3.4.(a)
"Minimum Earnout Amount" - Section 3.4.(a)
"Net Revenues" - Section 3.4.(a)
"Orders" - Section 2.2.(k)
"Products" - Section 4.11
"Purchased Assets" - Section 1.1
"Purchase Price" - Section 3.1
"Reference Balance Sheet" - Section 4.4
"Total Costs" - Section 3.3.(a)(x)
"Trade Rights" - Section 4.9
Where any group or category of items or matters is defined collectively in
the plural number, any item or matter within such definition may be
referred to using such defined term in the singular number.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
NORTHLAND CRANBERRIES, INC.
By: /s/ John Swendrowski
-----------------------------------
CLIFFSTAR CORPORATION
By: /s/ Sean P. McGirr
-----------------------------------
42
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT dated as of March 8, 2000,
by and between CLIFFSTAR CORPORATION, a Delaware corporation ("Cliffstar") and
NORTHLAND CRANBERRIES, INC., a Wisconsin corporation ("Northland").
RECITALS
A. Cliffstar and Northland have entered into that certain Asset
Purchase Agreement dated as of January 5, 2000 (the "Asset Purchase Agreement").
B. Cliffstar and Northland have agreed that the closing of the
transactions contemplated in the Asset Purchase Agreement shall occur on March
8, 2000 (the "Closing").
C. In order to address the transition of the operation and management
of the Private Label Juice Business to be acquired by Cliffstar pursuant to the
Asset Purchase Agreement, Cliffstar and Northland have agreed to enter into a
Transition Agreement at the Closing (the "Transition Agreement").
D. Cliffstar and Northland desire to amend the Asset Purchase
Agreement in certain respects.
NOW, THEREFORE, in consideration of the premises and mutual agreements
and covenants set forth herein, the parties hereto agree as follows:
1. Definitions. Any and all capitalized terms used herein shall have
the meanings ascribed to them in the Asset Purchase Agreement unless
specifically defined herein.
2. Amendment of Section 1.1.
(a) Section 1.1 of the Asset Purchase Agreement is hereby
amended by adding the following phrase after the parenthetical at the end
of the fourth line thereof:
"provided, however, that the transfer, sale and purchase of
Raw Materials Inventory and Work-In-Process Inventory (as
defined below) shall occur at the Termination Date as
defined and set forth in Section 13 of the Transition
Agreement:"
-1-
<PAGE>
(b) Section 1.1.(a)(iv) is hereby amended by replacing the
amount of 150,000 gallons with the amount of 135,000 gallons.
3. Amendment of Section 3.2.(b). Section 3.2.(b) of the Asset
Purchase Agreement is hereby amended by substituting the form of Promissory Note
attached as Exhibit A thereto with the form of Promissory Note attached hereto
as Exhibit A.
4. Amendment of Section 3.2.(c). Section 3.2.(c) of the Asset
Purchase Agreement is hereby amended by deleting the first two sentences thereof
and replacing them with the following:
"Within 10 business days after the final determination of
the Annual Earnout Payment pursuant to Section 3.3.(c)
below, Cliffstar shall pay to Northland an amount equal to
the Annual Earnout Amount reduced by principal payments made
to Northland on the Promissory Note due during such Earnout
Year. Earnout Amount payments with respect to an Earnout
Year in excess of principal payments made to Northland on
the Promissory Note due during such Earnout Year will be
credited against future principal payments due on the
Promissory Note in inverse order of maturity as provided in
the Promissory Note."
5. Amendment of Section 3.2.(d).
(a) Section 3.2.(d)(i) of the Asset Purchase Agreement is hereby
replaced with the following:
(i) Interim Inventory Amount. At the Closing, Cliffstar
shall deliver to Northland, by wire transfer of immediately available
funds (in accordance with appropriate wire transfer instructions
previously delivered by Northland to Cliffstar), an amount equal to
80% of the Finished Goods Inventory Purchase Price as shown on the
books of Northland as of the Effective Time. Such amount (the "Interim
Inventory Amount") shall be mutually agreed to by the parties on or
before the Closing Date; and
-2-
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(b) Section 3.2.(d)(ii) is hereby amended by inserting the words
"Finished Goods" before the word "Inventory" in the second line thereof.
6. Amendment of Section 3.3.(a)(vii). Section 3.3.(a)(vii) of the
Asset Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 3.3.(a)(vii):
(vii) [Intentionally Left Blank]
7. Amendment of Section 3.3.(a)(viii). Section 3.3.(a)(viii) of the
Asset Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 3.3.(a)(viii):
(viii) [Intentionally Left Blank]
8. Amendment of Section 3.3.(c)(i). Section 3.3.(c)(i) of the Asset
Purchase Agreement is hereby amended by deleting the words "the greater of (A)
the Minimum Annual Earnout Amount for such Year or (B)" from the second and
third lines thereof.
9. Amendment of Section 3.3.(c)(iii). Section 3.3.(c)(iii) is hereby
deleted in its entirety and replaced with the following:
"If Northland disagrees with any items on the Cranberry
Profits Statement or Annual Earnout Amount Statement,
Northland shall notify Cliffstar in writing of such
disagreement (such notice setting forth the basis for such
disagreement in reasonable detail) within 30 days of receipt
by Northland of the Cranberry Profits Statement and
Northland may request during such 30-day period any
additional information related thereto. Northland and
Cliffstar shall thereafter negotiate in good faith to
resolve any such disagreements. If Northland and Cliffstar
are unable to resolve any such disagreements within 15 days
of notification to Cliffstar of such disagreements, the
disagreement shall be submitted to an accounting firm of
nationally recognized standing to be mutually selected by
Northland and Cliffstar, or if no agreement on such firm is
reached, to such a firm selected by Northland's Accountants
and Cliffstar's Accountants (the accounting firm so
selected, shall be referred to herein as the "Resolving
Accounting Firm"). The resolution of such disagreements by
the Resolving Accounting Firm shall be final and binding on
Northland and Cliffstar. In the event that the final
determination of the Annual Earnout Amount by the Resolving
Accounting Firm differs from the
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Annual Earnout Amount Statement (the "Statement
Differential") by five percent or less, Northland shall pay
the fees and expenses of the Resolving Accounting Firm
relating to the resolution of any such disagreements. In the
event that the Statement Differential is greater than five
percent, such fees and expenses shall be paid by Cliffstar.
Within five days of resolution of the disagreements by the
Resolving Accounting Firm, Cliffstar or Northland, as the
case may be, shall pay to the other the additional amounts,
if any, determined to be owing as a result of such
resolution."
10. Amendment to Section 3.3.(e). Section 3.3.(e) of the Asset
Purchase agreement is hereby amended by deleting the words "Minimum Earnout
Amount less" in the sixth line thereof.
11. Amendment of Section 3.4.(a). Section 3.4.(a) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following:
3.4.(a) "Option. Provided that all payments of
principal and interest on the Promissory Note and all
payment of the Earnout Amount due Northland have been made,
Cliffstar shall have a one-time option to terminate the
Earnout Period. Such option shall be exercisable and
effective after exercise at any time on or before the last
day of the 30th calendar month of the Earnout Period and all
remaining obligations to make future payments of the Earnout
Amount upon written notice as provided below and payment to
Northland of the "Earnout Termination Payment." The Earnout
Termination Payment shall be an amount equal to $50,000,000
less the sum of all principal payments made on the
Promissory Note prior to the date of the Earnout Termination
Payment. In the event that Cliffstar elects to terminate the
Earnout Period and makes the Earnout Termination Payment to
Northland pursuant to this Section 3.4, no payment of the
Annual Earnout Amount shall be due for the Earnout Year
during which termination occurs or any succeeding Earnout
Year and this Agreement and all obligations of Cliffstar
under Sections 3.2.(b) and (c) and Section 3.6 hereof shall
terminate."
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12. Amendment of Section 3.5.
(a) Section 3.5.(a) is hereby deleted in its entirety and
replaced with the following:
3.5.(a) Inventory Purchase Price Defined. The
purchase price for the Inventory (the "Inventory Purchase
Price") shall be the lower of Northland's cost basis (on a
first-in, first-out ("FIFO") basis) or market determined in
accordance with generally accepted accounting principles
consistently applied for (i) the Finished Goods Inventory,
determined as of the Effective Time (the "Finished Goods
Inventory Purchase Price") and (ii) the Raw Materials and
Work-In-Process Inventory, determined as of the Termination
Date as provided in the Transition Agreement (the "Raw
Materials and WIP Inventory Purchase Price").
(b) Section 3.5.(b) of the Asset Purchase Agreement is hereby
deleted in its entirety and replaced with the following:
3.5.(b) Determination of Inventory Purchase Price.
(i) Finished Goods Inventory. A physical
inventory of the Finished Goods Inventory shall be
taken as of the Effective Time by representatives
of Northland, Cliffstar and Deloitte & Touche LLP.
Within 30 days following the Closing Date,
Cliffstar shall deliver to Northland an updated
detailed schedule of its calculation of the
Finished Goods Inventory Purchase Price based on
such physical inventory and a copy of the
workpapers used in the preparation of the
inventory and calculation of the Finished Goods
Inventory Purchase Price.
(ii) Raw Materials Inventory and
Work-In-Process Inventory. A physical inventory of
the Raw Materials Inventory and Work-In-Process
Inventory shall be taken at the time and in the
manner as provided in the Transition Agreement.
Within 30 days of the completion of such physical
inventory, Cliffstar shall deliver to Northland a
detailed schedule of its calculation of the Raw
Materials Inventory and Work-In-Process Inventory
Purchase Price based on such physical inventory
and a copy of the workpapers used in the taking of
the inventory
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and calculation of the Raw Materials and
Work-In-Process Inventory Purchase Price.
(iii) Resolution of Disputes. Northland
may notify Cliffstar in writing within 20 business
days following receipt of Cliffstar's calculation
of the Finished Goods Inventory Purchase Price
and/or for the Raw Materials and Work-In-Process
Inventory Purchase Price that it does not agree
with any values set forth thereon, in which case
Northland and Cliffstar will use good faith
efforts during the 30-day period following receipt
of such written notice or notices to resolve any
differences they may have as to the calculations
thereof. Any such written notice shall identify
with specificity the items or amounts with which
Northland disagrees. If Northland and Cliffstar
cannot reach agreement during such 30-day period,
their disagreements shall be promptly submitted to
Deloitte & Touche, which shall conduct such
additional review as is necessary to resolve the
specific disagreements referred to it. The review
of Deloitte & Touche will be restricted as to
scope to address only those specific disagreements
referred to it by Northland and Cliffstar. The
final form of the determination of the Purchase
Price for the inventories referred to in this
Section 3.5.(b) shall be determined by Deloitte &
Touche as promptly as practicable following its
engagement, shall confirmed in writing to, and
shall be final and binding upon, Northland and
Cliffstar for purposes of this Article 3. In the
event that Northland and Cliffstar agree on either
component of the Inventory Purchase Price, or
both, without submission of disagreements to
Deloitte & Touche, Cliffstar shall provide
Northland with written confirmation of the final
purchase price so agreed to, which, upon written
acknowledgement by Northland, shall become the
purchase price thereof for purposes of this
Section 3.5.
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(c) Section 3.5.(c) of the Asset Purchase Agreement is hereby
amended by replacing the amounts of $4,350,000 and $435,000 in the third
line thereof with the amounts of $3,915,000 and $391,500, respectively.
13. Amendment of Section 6.1. Section 6.1 of the Asset Purchase
Agreement is hereby amended by substituting the form of Noncompetition Agreement
attached hereto as Exhibit B thereto with the form of Noncompetition Agreement
attached hereto as Exhibit B.
14. Amendment of Section 6.7. Section 6.7 of the Asset Purchase
Agreement is hereby amended by substituting the form of Cranberry Purchase and
Supply Agreement attached as Exhibit C thereto with the form of Cranberry
Purchase and Supply Agreement attached hereto as Exhibit C.
15. Amendment of Section 6.8. Section 6.8 of the Asset Purchase
Agreement is hereby deleted in its entirety and replaced with the following new
Section 6.8:
6.8 Transition Agreement. At the Closing,
Northland and Cliffstar shall execute and deliver a
Transition Agreement ("Transition Agreement") in
substantially the form of Exhibit F attached hereto.
16. Amendment of Section 6.10. Section 6.10 of the Asset Purchase
Agreement is hereby amended by substituting the form of Co-Packing Agreement
attached as Exhibit E thereto with the form of Co-Packing Agreement attached
hereto as Exhibit E.
17. Amendment of Section 6.11. Section 6.11 of the Asset Purchase
Agreement is hereby amended by deleting the phrase "Prior to Closing," and
replacing it with the phrase "As soon as is reasonably practical following the
Closing,".
18. Creation of a New Section 6.13. A new Section 6.13 of the Asset
Purchase Agreement is created to read as follows:
6.13 Subordination Agreement. At the Closing,
Northland and Cliffstar shall enter into a Subordination
Agreement with HSBC Bank USA substantially in the form of
Exhibit G attached hereto (the "Subordination Agreement").
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19. Amendment of Section 11.1.(i). Section 11.1.(i) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.1.(i):
11.1.(i) Transition Agreement. The Transition
Agreement referred to in Section 6.8 duly executed by
Northland.
20. Amendment of Section 11.1.(l). Section 11.1.(l) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.1.(l):
11.1.(l) Subordination Agreement. The
Subordination Agreement referred to in Section 6.13, duly
executed by Northland.
21. Amendment of Section 11.2.(h). Section 11.2.(h) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.2.(h):
11.2.(h) Transition Agreement. The Transition
Agreement referred to in Section 6.8 duly executed by
Cliffstar.
22. Amendment of Section 11.2.(k). Section 11.2.(k) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.2.(k):
11.2.(k) Subordination Agreement. The
Subordination Agreement referred to in Section 6.13, duly
executed by Cliffstar and HSBC Bank USA.
23. Effective Time. The effective time for all legal, accounting and
tax purposes for the transactions contemplated by the Asset Purchase Agreement
shall be 11:59 p.m. on March 8, 2000.
24. Amendment of Section 14.13. Section 14.13 of the Asset Purchase
Agreement is hereby amended by deleting the definitions of "Minimum Annual
Earnout Amount" and "Minimum Earnout Amount".
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25. No Other Amendment. Except as expressly amended hereby, the Asset
Purchase Agreement shall remain unchanged and in full force and effect. To the
extent any words or provisions of the Amendment conflict with those of the Asset
Purchase Agreement, the terms and provisions of this Amendment shall control.
This Amendment shall be deemed a part of and hereby incorporated in the Asset
Purchase Agreement.
26. Counterparts. This Amendment may be executed by the parties
hereto by separate counterparts, each of which when so executed and delivered
shall be an original, but such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
NORTHLAND CRANBERRIES, INC.
By: /s/ John Swendrowski
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John Swendrowski
Chairman and Chief Executive Officer
CLIFFSTAR CORPORATION
By: /s/ Robert D. Gioia
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Robert D. Gioia
Chairman
