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): June 13, 1996
(May 31, 1996)
Flowers Industries, Inc.
Georgia 1-9787 58-0244940
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
U.S. Highway 19, P.O. Box 1338, Thomasville, GA 31799
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (912)226-9110
Item 2. Acquisition of Assets
On May 31, 1996, Flowers Industries, Inc., through a
wholly-owned subsidiary, acquired from Mrs. Smith's Inc. and its
parent company, the J.M. Smucker Company, certain of the assets
and all of the branded frozen pies, frozen pie shells,
"in-store/deli-bakery," aluminum pans and steel magnetic
shielding business of Mrs. Smith's, Inc. Under the terms of the
acquisition agreement, Flowers paid $30,000,000.00, consisting of
$15,000,000.00 in cash at closing and a $15,000,000.00 note
payable to the J.M. Smucker Company. Flowers' subsidiary also
acquired from Mrs. Smith's, Inc. certain of its current assets
and assumed certain of its current liabilities. There will be a
net working capital determination following closing and the
purchase price will be increased if such amount is positive or
decreased if such amount is negative. In addition, Flowers'
subsidiary entered into ten (10) year leases for all of the
property, plant and equipment used in the business. The leased
assets shall continue to be used in the business. All funds for
this transaction were from Flowers' general funds.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
The required financial statements will be filed by
amendment as soon as practicable and in any event not later than
sixty days after the date upon which this Form 8-K is required to
be filed.
(b) Pro forma financial information
The required pro forma financial information will be
filed by amendment as soon as practicable and in any event not
later than sixty days after the date upon which this Form 8-K is
required to be filed.
(c) Exhibits
2 Acquisition Agreement dated as of May 1, 1996 among Flowers
Industries, Inc., Mrs. Smith's Bakeries, a wholly-owned
subsidiary of Flowers Industries, Inc., The J.M. Smucker
Company, and Mrs. Smith's, Inc., a wholly-owned subsidiary
of The J.M. Smucker Company.*
99 Press release dated May 31, 1996, announcing the
acquisition.
* Pursuant to Item 601 of Regulation S-K, Flowers has excluded
from Exhibit 2 the Exhibits to the Acquisition Agreement which
are listed following the Table of Contents. Flowers agrees to
furnish copies of such Exhibits to the Securities and Exchange
Commission upon request.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
FLOWERS INDUSTRIES, INC.
By:/s/C. Martin Wood, III
C. Martin Wood, III
Senior Vice President,
Chief Financial Officer
Date: June 13, 1996
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement"), made as of
the 1st day of May, 1996, by and among FLOWERS INDUSTRIES, INC.,
a Georgia corporation ("Flowers"), MRS. SMITH'S BAKERIES, INC., a
Georgia corporation ("Purchaser"), THE J.M. SMUCKER COMPANY, an
Ohio corporation (the "Parent"); and MRS. SMITH'S, INC., an Ohio
corporation (the "Seller");
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into this
Agreement pursuant to which Purchaser or its Affiliate, as
permitted by Section 2.11, will (i) purchase (x) from the Seller
all of the Business (as hereinafter defined) and the Seller's
Trade Receivables, Other Receivables, Other Assets and Prepaid
Expenses (as hereinafter defined) and intangible assets and (y)
from the Parent the Trademarks, (ii) purchase certain Inventories
(as hereinafter defined) on behalf of the Seller, and (iii) lease
from the Seller all of its plant, property and equipment assets
used in connection with or related to the Business, upon the
terms and subject to the conditions set forth herein; and
WHEREAS, the Parent and the Seller desire that Flowers be a
party to this Agreement to cause Purchaser to perform its
obligations arising prior to the Closing and agree that Flowers'
obligations in this Acquisition Agreement shall not survive the
Closing, except as provided in Section 9.2;
NOW, THEREFORE, for and in consideration of the premises and
the mutual promises, agreements, representations, warranties and
covenants hereinafter set forth, and the sum of ten dollars and
other good and valuable consideration, the receipt and
sufficiency of which is hereby specifically agreed to and
acknowledged, the parties hereto agree as follows:
I. DEFINITIONS.
As used herein, the following terms shall have the
following meanings unless the context otherwise requires:
1.1 "Affiliate" shall mean any corporation,
partnership, limited partnership, limited liability company or
other entity of which Flowers owns, directly or indirectly, forty
percent (40%) or more of the outstanding voting securities.
1.2 "Agreement" shall mean this Acquisition Agreement.
1.3 "Assets" shall mean the Purchased Assets, the
Leased Assets, the Inventories and the Trademarks.
1.4 "Assignee" shall have the meaning set forth in
Section 2.11.
1.5 "Assumed Contracts" shall have the meaning set
forth in Section 2.1.2.
1.6 "Assumed Liabilities" shall have the meaning set
forth in Section 2.4.
1.7 "Assumed Product Liability Claim" shall mean a
product liability or product warranty claim against the Seller
that relates to the Business, arose prior to the Closing and
which Purchaser reasonably believes can be resolved for $250 or
less.
1.8 "Bad Debt" shall mean, with respect to a Trade
Receivable or Other Receivable, a refusal by a customer of the
Business to pay such receivable for a reason other than such
customer receiving an allowance for a sales promotion program.
1.9 "Benefit Plans" shall have the meaning set forth in
Section 3.16.
1.10 "Business" shall mean the operations currently
conducted by the Seller related to the manufacturing,
distribution and marketing of branded frozen pies, frozen pie
shells and "in-store/deli bakery" pies and the production of
aluminum pans for its pie operations and steel magnetic shielding
for sale to third parties.
1.11 "Closing" shall mean the consummation of the
transactions provided for in this Agreement.
1.12 "Closing Date" shall mean the date on which the
Closing occurs pursuant to Section 8.1 hereof.
1.13 "Code" shall mean the Internal Revenue Code of
1986, as amended.
1.14 "Compete" shall have the meaning set forth in
Section 10.2.
1.15 "Confidential Data" shall have the meaning set
forth in Section 10.4.
1.16 "Current Liabilities" shall mean those liabilities
that are consistently categorized as Accounts Payable, Salaries,
Wages and Vacations Payable, Accrued Marketing and Merchandising
(except for liabilities relating to coupon programs) and Other
Accrued Liabilities in the Interim Financial Statements.
1.17 "Effective Time" shall have the meaning set forth
in Section 8.1.
1.18 "Equipment Lease" shall mean the Equipment Lease
among Purchaser, the Parent and the Seller, substantially in the
form of Exhibit 2.3(a).
1.19 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.20 "Financial Statement Date" shall mean March 31,
1996.
1.21 "Finished Goods" shall mean the Finished Goods (as
such items are consistently categorized in the Interim Financial
Statements) of the Business.
1.22 "Flowers" shall mean Flowers Industries, Inc., a
Georgia corporation, and ultimate parent of Purchaser.
1.23 "HSR Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
1.24 "Intangibles Note" shall have the meaning set forth
in Section 2.2.1.
1.25 "Interim Financial Statements" shall have the
meaning set forth in Section 3.4.1.
1.26 "Inventories" shall mean those assets that are
consistently categorized as "Raw Materials and Supplies" or
"Finished Goods" in the Interim Financial Statements.
1.27 "Knowledge" shall mean the knowledge or awareness
of those individuals listed on Exhibit 1.27, which shall include
such knowledge or awareness as would be obtained by such
individuals from appropriate discussions with such personnel of
the Parent, the Seller and their affiliates who may reasonably be
believed by such individuals to have actual knowledge of the
relevant matter.
1.28 "Leases" shall mean the Equipment Lease and the
Real Property Lease.
1.29 "Leased Assets" shall mean all of the assets of the
Seller that are subject to the Leases.
1.30 "Licensed Software" shall have the meaning set
forth in Section 3.14.2.
1.31 "Maximum Aggregate Liability Amount" shall have the
meaning set forth in Section 9.3.
1.32 "Minimum Aggregate Liability Amount" shall have the
meaning set forth in Section 9.4.
1.33 "Multiemployer Plan" shall have the meaning set
forth in Section 2.10.5.
1.34 "Net Working Capital Amount" shall have the meaning
set forth in Section 2.2.2.
1.35 "1994 and 1995 Financial Statements" shall have the
meaning set forth in Section 3.4.1.
1.36 "1933 Act" shall mean the Securities Act of 1933,
as amended.
1.37 "Notes Receivable" shall mean the Notes Receivable
(as such items are consistently categorized in the Interim
Financial Statements) of the Business.
1.38 "Other Receivables" shall mean the Other
Receivables (as such items are consistently categorized in the
Interim Financial Statements) of the Business.
1.39 "Other Assets" shall mean the Other Assets (as such
items are consistently categorized in the Interim Financial
Statements) of the Business.
1.40 "Owned Software" shall have the meaning set forth
in Section 3.14.2.
1.41 "Parent" shall mean The J.M. Smucker Company, an
Ohio corporation.
1.42 "Prepaid Expenses" shall mean the Prepaid Expenses
(as such items are consistently categorized in the Interim
Financial Statements) of the Business.
1.43 "Promissory Notes" shall mean the Intangibles Note
and the Working Capital Note, as amended.
1.44 "Purchased Assets" shall have the meaning set forth
in Section 2.1.2.
1.45 "Purchaser" shall mean Mrs. Smith's Bakeries, Inc.,
a Georgia corporation.
1.46 "Raw Materials and Supplies" shall mean the Raw
Materials and Supplies (as such items are consistently
categorized in the Interim Financial Statements) of the Business.
1.47 "Real Property Lease" shall mean the Lease with
Option to Purchase among Purchaser, the Parent and the Seller,
substantially in the form of Exhibit 2.3(b).
1.48 "SEC" shall mean the Securities and Exchange
Commission.
1.49 "Security Agreement" shall mean the Security
Agreement between Purchaser and the Parent, substantially in the
form attached as Exhibit 2.12.
1.50 "Seller" shall mean Mrs. Smith's, Inc., an Ohio
corporation.
1.51 "Seller's Software" shall have the meaning set
forth in Section 3.14.2.
1.52 "Territory" shall have the meaning set forth in
Section 10.1.
1.53 "Trade Receivables" shall mean the Trade
Receivables (as such items are consistently categorized in the
Interim Financial Statements, but on a gross basis without
deduction for allowances) of the Business.
1.54 "Trademarks" shall mean those trademarks of the
Parent listed on Exhibit 3.14.1 and the goodwill related thereto.
1.55 "Transition Services Agreement" shall mean a
transition services agreement between Purchaser, the Seller and
the Parent, as negotiated by the parties pursuant to Section
2.16.
1.56 "Working Capital Note" shall have the meaning set
forth in Section 2.2.1.
II. COVENANTS AND UNDERTAKINGS.
2.1 Purchase and Sale of Assets.
2.1.1 Subject to the terms and conditions
hereinafter set forth:
(a) At the Closing the Seller shall, and the Parent shall
cause the Seller to, sell, assign, transfer, convey, and
deliver to Purchaser and Purchaser shall purchase and assume
from the Seller, for the purchase price specified in Section
2.2 of this Agreement, all of the Purchased Assets, free and
clear of all liens, claims, charges, and encumbrances of any
nature whatsoever except those Assumed Liabilities described
in Section 2.4.
(b) At the Closing, the Parent shall sell, assign,
transfer and convey to Purchaser and Purchaser shall
purchase from the Parent, for the purchase price specified
in Section 2.2 of this Agreement, all of the Trademarks. In
addition, with respect to any interest the Parent may have
in the Purchased Assets, the Parent shall either (i) sell,
assign, transfer and convey to the Seller all of such
interest prior to the Closing or (ii) sell, assign, transfer
and convey to Purchaser all of such interest at the Closing.
2.1.2 The "Purchased Assets" shall include,
except as set forth in Section 2.1.3, the following assets of the
Seller relating to the Business:
(i) all rights of the Seller in and to
the Trademarks and the corporate, trade and service
names "Mrs. Smith's Frozen Foods Company," "Mrs.
Smith's Pies," "Smart Style," "Old Fashioned" and
all other trade and service names, trademarks,
trade dress, service marks and copyrights utilized
in or related to the Business, and any
abbreviations or variations of such names or marks,
including applications for and licenses concerning
any of them (including such as are listed on
Exhibit 3.14.1);
(ii) all formulae, trade secrets,
customer lists, confidential information, know-how,
broker lists, goodwill and all other intangible
assets, rights and documents owned, required for,
or incident to, the performance of the Business and
all books and records incident thereto, which,
however, shall not include any stock books and
corporate minute books of the Seller;
(iii) all Trade Receivables, Other
Receivables, Other Assets and Prepaid Expenses;
(iv) all Owned Software not included in
Leased Assets, and data bases, and copyrights and
patents and applications relating thereto;
(v) except as provided in Section
2.1.3, all rights of the Parent or the Seller in
and to contracts, purchase orders, leases,
maintenance agreements, service agreements, royalty
agreements, instruments, licenses, franchises,
confidentiality agreements, rights to enforce
confidentiality provisions in other agreements
(whether or not such agreements are part of the
Purchased Assets), and other agreements
attributable or related to the Business, listed in
Exhibits 3.6.1.2, 3.12 (to the extent assignable),
3.13 and 3.14.2 or that would be listed on Exhibit
3.13 but for the exceptions contained in clauses
(I) or (ii) of the first sentence of Section 3.13
(the "Assumed Contracts");
(vi) all rights, title and interests of
Seller in and to Universal Product Code Numbers;
and
(vii) such rights as the Seller has to
use its present telephone numbers related to the
Business from and after the Closing Date.
2.1.3 Notwithstanding anything in this Agreement
to the contrary, Purchaser shall not purchase or receive (i) any
Leased Assets; (ii) Inventories and Notes Receivable; (iii) any
contracts not described in Exhibits 3.6.1.2, 3.12 (to the extent
assignable), 3.13, and 3.14.2 (unless not required to be listed
on Exhibit 3.13 pursuant to clauses (i) or (ii) of the first
sentence of Section 3.13); (iv) any contract or asset listed on
Exhibit 2.1.3; (v) any asset of the Parent other than the
Trademarks; or (vi) except as provided in Section 2.10, any
Benefit Plans as defined in Section 3.16 (but Purchaser shall
purchase the rights to enforce any confidentiality provisions
contained therein).
2.1.4 If requested by the Seller following the
Closing, Purchaser agrees to review any contract of the Business
that was not assumed by Purchaser at the Closing (because it was
not listed on Exhibit 3.6.1.2, 3.12, 3.13 or 3.14.2 (unless not
required to be listed on Exhibit 3.13 pursuant to clauses (i) or
(ii) of the first sentence of Section 3.13)) and that is proposed
by the Seller to be assumed by Purchaser. The assumption by
Purchaser of any such contract shall be in Purchaser's sole
discretion.
2.2 Purchase Price.
2.2.1 In consideration of the sale, transfer,
conveyance, assignment and delivery of the Business and the
Purchased Assets, and in reliance upon the representations and
warranties made herein by the Parent and the Seller, Purchaser in
payment for the Business and the Purchased Assets (i) shall pay
to the Parent the sum of Twenty-Two Million Dollars
($22,000,000.00) for the Trademarks (ii) shall pay to the Seller
the sum of Eight Million Dollars ($8,000,000.00) for the
intangibles related to the Business other than the Trademarks and
(iii) shall pay to the Seller the Net Working Capital Amount and
assume from the Seller the Assumed Liabilities (as hereinafter
defined), as follows:
(a) Purchaser shall pay to the Parent Seven Million
Dollars ($7,000,000.00) (which, in addition to the
$15,000,000.00 described in Section 2.2.1(b), shall be in
payment for the Trademarks) and to the Seller Eight
Million Dollars ($8,000,000.00) (which shall be in payment
for the intangibles related to the Business other than the
Trademarks), in each case in cash by wire transfer at
Closing;
(b) Purchaser shall pay to the Parent Fifteen Million
Dollars ($15,000,000.00) in accordance with the terms of a
promissory note substantially in the form set forth on
Exhibit 2.2.1(b) hereto (the "Intangibles Note"), which
will be secured by a security interest in the Trademarks
and certain other intangibles pursuant to a Security
Agreement substantially in the form attached hereto as
Exhibit 2.12;
(c) Purchaser shall pay to the Seller the Net Working
Capital Amount, if it is a positive number, in accordance
with the terms of a promissory note substantially in the
form set forth on Exhibit 2.2.1(c) hereto (the "Working
Capital Note"), which note is subject to amendment as
provided in Section 2.2.2; and
(d) Purchaser shall assume the Assumed Liabilities of
the Seller in accordance with the Liabilities Undertaking
substantially in the form attached as Exhibit 2.2.1(d)
hereto.
2.2.2 The Parent and the Seller shall deliver to
Purchaser no later than three (3) days prior to the Closing Date
a balance sheet of the Business as of a date as close to the
Closing Date as is practicable (the "Estimated Closing Balance
Sheet"), which shall be prepared in accordance with generally
accepted accounting principles consistently applied and in a
manner consistent with the balance sheets attached hereto as
Exhibit 3.4.1; provided, however, that the Estimated Closing
Balance Sheet shall reflect only Trade Receivables, Other
Receivables, Prepaid Expenses, Other Assets, Cash and Current
Liabilities. The difference between (i) Trade Receivables, Other
Receivables, Prepaid Expenses and Other Assets less (ii) the sum
of (x) the amount by which Cash is negative and (y) Current
Liabilities, as reflected on the Estimated Closing Balance Sheet
shall be referred to herein as the "Estimated Net Working Capital
Amount." The Parent and the Seller shall use their reasonable
best efforts to cause Ernst & Young LLP to audit the books and
records of the Business as of May 31, 1996, and to deliver to
Purchaser and Price Waterhouse LLP as soon as practicable, but in
no event later than thirty (30) days after the Closing Date, a
balance sheet of the Business as of the Closing Date (the
"Closing Date Balance Sheet"), which shall be prepared in
accordance with generally accepted accounting principles
consistently applied and in a manner consistent with the balance
sheets attached hereto as Exhibit 3.4.1; provided, however, that
the Closing Date Balance Sheet shall reflect only Trade
Receivables, Other Receivables, Prepaid Expenses, Other Assets,
Cash and Current Liabilities. The Parent and the Seller shall
instruct Ernst & Young LLP to allow Price Waterhouse LLP to
participate in the preparation of the Closing Date Balance Sheet.
Purchaser shall have thirty (30) days after receipt of the
Closing Date Balance Sheet to advise the Parent in writing of
any objections. The Parent and Purchaser shall use their
reasonable best efforts to resolve any such objections. If
such objections cannot be resolved within ten (10) days following
the delivery by Purchaser to the Parent of its objections to the
Closing Date Balance Sheet, the Parent and Purchaser shall
jointly engage Deloitte & Touche LLP in a jointly signed written
engagement letter to resolve the disputed portions of the Closing
Date Balance Sheet in a manner consistent with the provisions of
this Section 2.2.2. The Parent and Purchaser shall each have
thirty (30) days after the date of such engagement to prepare its
respective presentation to Deloitte & Touche LLP. During such
period, each of the parties shall cooperate with the other
parties to make reasonably available all pertinent documents and
records. At the end of such period, the parties shall make their
presentation to Deloitte & Touche LLP, which shall make its
determination based solely upon presentations by the Parent (and
Ernst & Young LLP) and Purchaser (and Price Waterhouse LLP) and
not by independent review, and which shall make such
determination as soon as practicable, but in any event within
thirty (30) days from the date of the presentations by the Parent
and Purchaser. The determination of Deloitte & Touche LLP shall
be in written form and shall be final and binding upon the
parties. The fees and expenses of (i) Ernst & Young LLP relating
directly to the work incremental to the current audit of the
Parent and its subsidiaries as of April 30, 1996 that is
necessary for the Seller to deliver an audited April 30, 1996
balance sheet and statement of operating results and an
opinion thereon as described in Section 6.11, (ii) Ernst & Young
LLP relating directly to the audit of the books and records as of
May 31, 1996, and (iii) Deloitte & Touche LLP relating to the
determination of the Closing Date Balance Sheet, shall be borne
equally by the Parent on the one hand, and Purchaser on the other
hand. The difference between (i) Trade Receivables, Other
Receivables, Prepaid Expenses and Other Assets less (ii) the sum
of (x) the amount by which Cash is negative and (y) Current
Liabilities as reflected on the Closing Date Balance Sheet, as
finally agreed to or determined, as the case may be, shall be
referred to herein as the "Net Working Capital Amount." Within
five (5) business days from the date of the final agreement or
determination, as the case may be, of the Net Working Capital
Amount, Purchaser shall issue an amended and restated promissory
note substantially in the form of the Working Capital Note, but
which shall reflect the Net Working Capital Amount; provided,
however, that if the Net Working Capital Amount is a negative
number, Purchaser may set off the Net Working Capital Amount
against payments due under Section 2.2.3. Within such five-day
period, the Seller shall return to Purchaser the original Working
Capital Note delivered on the Closing Date. The determination of
Other Assets as provided in this Section 2.2.2 shall take into
account only one-half the book value of the asset relating to the
covenant not to compete in the Business of Kellogg Company. The
determination of Trade Receivables as provided in this Section
2.2.2 shall include an allowance for cash discount or other
discount for early payment but shall not include a reserve for
Bad Debts.
2.2.3 To facilitate a smooth transition of the
Business, the parties agree as follows:
(a) Purchaser shall store the Raw Materials and
Supplies as of the Closing Date on behalf of the Seller at
no cost. Purchaser shall purchase all of the usable (as
determined by general industry practices) portions of such
Raw Materials and Supplies from the Seller at the time
needed prior to purchasing raw materials and supplies from
third party vendors. Purchaser shall pay, as provided
below, the book value for such Raw Materials and Supplies
as and when used by Purchaser.
(b) Purchaser shall store the Finished Goods as of the
Closing Date on behalf of the Seller at no cost.
Purchaser shall purchase all of the salable (as determined
by general industry practices) portions of such Finished
Goods as they are sold in the conduct of the Business by
Purchaser, and pay, as provided below, the book value of
the Finished Goods as and when sold by Purchaser. All
sales of Finished Goods by Purchaser shall be deemed to
first arise from the Finished Goods owned by the Seller.
(c) If Cash (as such item is consistently categorized
in the Interim Financial Statements) is a negative number
on the Closing Date Balance Sheet, the Seller shall send
to Purchaser on a monthly basis a listing of all checks
paid by the Seller that relate to such negative Cash.
Purchaser shall reimburse the Seller for all such amounts
within (5) business days of the receipt of such listing;
provided, however, that Purchaser shall not be required to
reimburse the Seller with respect to any check that
Purchaser in good faith is disputing.
(d) The Seller shall retain and be responsible for all
liabilities relating to Income Taxes (as such items are
consistently categorized in the Interim Financial
Statements) of the Business as of the Closing Date.
Within five (5) business days after the end of each of
Purchaser's four-week accounting periods, Purchaser shall submit
to the Seller a detailed list of (i) sales relating to Finished
Goods and (ii) Raw Materials and Supplies used by Purchaser, in
each case for the preceding month, together with a check
representing the total of (x) the book value of the Finished
Goods sold and (y) the book value of Raw Materials and Supplies
used. Purchaser agrees to provide such additional information
relating to Inventories as may be reasonably requested by the
Seller and reasonably obtainable by Purchaser. Within five (5)
business days after January 31, 1997, Purchaser shall remit to
the Seller a check representing the book value of any Finished
Goods and Raw Materials and Supplies that have not been paid for
by Purchaser and the remaining negative Cash that has not been
funded by Purchaser.
2.3 Leases. Purchaser, the Parent and the Seller shall
enter into an Equipment Lease and Real Property Lease
substantially in the forms of Exhibits 2.3(a) and 2.3(b),
respectively, at the Closing.
2.4 Liabilities of Seller.
2.4.1 At the Closing, Purchaser shall assume
those liabilities that are categorized as Accounts Payable,
Salaries, Wages and Vacations Payable, Accrued Marketing and
Merchandising (except for liabilities relating to coupon
programs) and Other Accrued Liabilities reflected on the Closing
Date Balance Sheet (as finally agreed to or determined, as the
case may be), the Assumed Product Liability Claims and the
obligation to fund negative Cash in accordance with Section
2.2.3(c) (all of such assumed liabilities being collectively
referred to herein as the "Assumed Liabilities") pursuant to the
Liabilities Undertaking attached as Exhibit 2.2.1(d) and the
obligations of the Seller thereafter to accrue or first be
required to be performed under the Assumed Contracts. Except for
Purchaser's assumption at the Closing of the Assumed Liabilities
and Assumed Contracts, Purchaser will not assume or become liable
on any other agreement, contract or lease of the Seller or for
any other indebtedness, obligations or liabilities of the Parent
or the Seller whatsoever. Except for Assumed Liabilities and
Assumed Contracts, Purchaser shall not assume any indebtedness,
obligation or liability for any litigation matter arising from
the conduct of the Business prior to the Closing, regardless of
whether such matter is disclosed in Exhibit 3.11. Except for
Assumed Liabilities and Assumed Contracts, Purchaser shall not
assume any liability for any legal fees or expenses of the Seller
or any other party incurred for any reason whatsoever, and the
Assets shall not be utilized for or reduced by the amount of any
such fees or expenses. Except for Assumed Liabilities and
Assumed Contracts, Purchaser shall not assume any liability for
federal, state or local income, sales, use, excise, payroll,
employment or other taxes, or for wages, salaries or overtime,
vacation pay, holiday pay or other employee benefits, or other
employee benefit plans on, arising out of, or attributable to
the Seller or to the conduct of the Business through the close of
business on the day prior to the Closing Date. The Parent and
the Seller will pay with funds that are not Assets all stamp,
sales, income, realty transfer or other taxes imposed on the
Parent or the Seller, and Purchaser will pay all such taxes
imposed on it, in respect of any and all transfers pursuant to
the terms of this Agreement.
2.4.2 All property and ad valorem taxes,
leasehold rentals and other customarily proratable items relating
to the Assets payable subsequent to the Closing Date and relating
to a period of time both prior to and subsequent to the Closing
Date will be prorated as of the close of business on the day
before the Closing Date between Purchaser and the Seller, unless
reflected in the Net Working Capital Amount. If the actual
amount of any such item is not known as of the Closing Date, the
aforesaid proration shall be based on the previous year's
assessment of such item and the parties agree to adjust said
proration and pay any underpayment or reimburse for any
overpayment within thirty days after the actual amount becomes
known.
2.5 Corporate Action. The Parent, the Seller, Flowers
and Purchaser agree to take all corporate action required in
connection with the authorization and approval of the
transactions contemplated hereby.
2.6 Examination of Property and Records. Between the
date of this Agreement and the Closing Date, the Seller shall
allow, and the Parent shall cause the Seller to allow, Flowers,
Purchaser, their counsel and other representatives full access to
all the books, records, files, documents, assets, properties,
contracts and agreements of the Seller relating to the Business
which may be reasonably requested, and shall furnish Flowers,
Purchaser and their officers and representatives during such
period with all information concerning the affairs of the
Business which may be reasonably requested. Flowers and
Purchaser will conduct any investigation in a manner which will
not unreasonably interfere with the business of the Seller. In
the event the Closing does not occur, the rights and obligations
of the parties shall be governed by that certain Letter Agreement
regarding confidentiality dated January 19, 1996 between Flowers
and the Parent.
2.7 Conduct of the Business Prior to Closing.
2.7.1 Except as set forth in Exhibit 2.7.1 or
with the prior consent in writing of Purchaser, the Parent and
the Seller covenant and agree that, between the date of this
Agreement and the Closing Date, the Seller will conduct the
Business in the ordinary course, and it will: (a) use its
reasonable best efforts to preserve the organization of the
Business intact, to keep available the services of the present
employees of the Seller employed in connection with the Business,
and to preserve the goodwill of customers, suppliers and others
having business relations with the Seller or the Business; (b)
maintain the Assets in the same working order and condition as
such Assets are in as of the date of this Agreement, reasonable
wear and tear excepted, and not liquidate such Assets to cash
except in the ordinary course of business; (c) keep in force at
no less than their present limits all existing bonds and policies
of insurance insuring the Assets or the Business; (d) (i) not
enter into any contract, commitment, arrangement or transaction
which is not in the ordinary course of business, or (ii) suffer,
permit or incur any of the transactions or events described in
Section 3.10 hereof (except for the payment of any health,
disability and life insurance premiums which may become due and
distributions required to be made pursuant to the terms currently
in effect of any Benefit Plans) to the extent such events or
transactions are within the control of the Seller; (e) not make
or permit any change in the Parent's or the Seller's respective
Articles of Incorporation or Code of Regulations, or in either of
their authorized, issued or outstanding securities, if such
action would affect the ability of the Parent and the Seller
to consummate the transactions contemplated hereunder or would
cause the necessity of obtaining the consent of any individual or
entity not disclosed in Exhibit 3.9; (f) not grant any stock
option or right to purchase any security of the Parent or the
Seller, issue any security convertible into such securities,
purchase, redeem, retire or otherwise acquire any of such
securities, or agree to do any of the foregoing, if such action
would affect the ability of the Parent of the Seller to
consummate the transactions contemplated hereunder or would cause
the necessity of obtaining the consent of any individual or
entity not disclosed in Exhibit 3.9; nor declare, set aside or
pay any dividend or other distribution in respect of such
securities out of the Assets; (g) not make any contribution to or
distribution from any employee benefit plan, pension plan, stock
bonus plan, 401(k) plan or profit sharing plan if such
contribution would be out of the Assets or such contribution or
distribution would create a liability to or obligation of the
Business (except for the payment of any health, disability and
life insurance premiums which may become due and distributions
required to be made pursuant to the terms of any Benefit Plans);
(h) not increase the compensation payable or to become payable by
the Seller to any officer, employee or agent employed in
connection with the Business and not make any bonus payment or
arrangement to any of such persons except for such increases in
compensation or bonus payments that are made at times and in
amounts consistent with historical practices of the Business; and
(i) promptly advise Purchaser in writing of any matters arising
or discovered after the date of this Agreement which, if existing
or known at the date hereof, would be required to be set forth or
described in this Agreement or the Exhibits hereto.
2.7.2 Except with the prior consent in writing
of Purchaser, the Seller will not, between the date of this
Agreement and the Closing Date, make any material changes in the
Seller's accounting methods or practices relating to the
Business.
2.8 Consent Waivers and Approvals. The Parent and the
Seller agree to use their reasonable best efforts to obtain the
waiver, consent and approval of all persons whose waiver, consent
or approval (i) is required in order to consummate the
transactions contemplated by this Agreement, or (ii) is required
by any agreement, lease, instrument, arrangement, judgment,
decree, order or license to which the Seller is a party or
subject on the Closing Date, and (a) which would prohibit, or
require the waiver, con sentor approval of any person to such
transactions or (b) under which, without such waiver, consent or
approval, such transactions would constitute an occurrence of
default under the provisions thereof, result in the acceleration
of any obligation thereunder, or give rise to a right of any
party thereto to terminate its obligations thereunder. All
written waivers, consents and final approvals listed in Exhibit
6.5 shall be produced at Closing in form and content reasonably
satisfactory to Purchaser. Both before and after the Closing,
the Parent and the Seller shall use their reasonable best efforts
to cooperate with and assist Purchaser in connection with the
Purchaser's attempts to seek novations of the Defense Commissary
Agency contracts listed as items 1 and 2 of Exhibit 2.1.3 and the
Purchaser's attempts to obtain those licenses listed on Exhibit
3.12 that cannot be assigned by the Seller. The Seller shall
also use its reasonable best efforts to obtain prior to the
Closing terminations of the financing statements described
on Exhibit 2.8.
2.9 Supplying of Financial Statements; Salary
Modifications. (a) The Seller covenants to deliver to Purchaser
all regularly prepared unaudited financial statements of the
Seller for the Business prepared after the date of this Agreement
through the Closing Date, in the format historically utilized
internally, as soon as such financial statements are available.
(b) The Seller covenants to deliver to Purchaser a
true and complete list of any changes in the salaries or rates of
the employees of the Business since the date of this Agreement.
2.10 Employees and Independent Contractors.
2.10.1 Purchaser agrees to offer employment to,
as of the Closing, all employees of the Business that are
employed by the Seller and either actively at work or on vacation
on the Closing Date (the "Retained Employees"). Purchaser shall
offer employment to any employee of the Seller who is on leave of
absence, ill or otherwise not actively at work on the Closing
Date once Purchaser has been notified that such employee is
willing and able to work for Purchaser. Purchaser shall offer to
the Retained Employees health and welfare benefits that are
substantially equivalent to those benefits offered to employees
of Flowers and its Affiliates in similar positions; provided,
however, that Purchaser may alter such benefits if Flowers
determines to alter benefits generally available to its
employees. Each Retained Employee shall receive credit for
service with the Seller for vesting and eligibility purposes (but
not benefit accrual purposes) under all of Purchaser's benefit
plans that are subject to qualification and tax exemption under
Sections 401(a) and 501(a) of the Code and for all purposes with
regard to health and welfare benefits, vacation days, sick days
and other similar benefits that are determined by length of
service. In the event the employment of any Retained Employee
who is not subject to a collective bargaining agreement is
terminated other than for cause by Purchaser prior to the first
anniversary of the Closing Date, Purchaser shall provide
severance benefits to such Retained Employee that are consistent
with those severance benefits described on Exhibit 2.10.1 hereto.
2.10.2 The Parent and the Seller agree that
following the execution of this Agreement and continuing after
the Closing, Purchaser shall be allowed to discuss with the
employees and independent contractors of the Seller who perform
services for the Business the terms of employment to be offered
by Purchaser or the possibility of contracting with Purchaser, as
the case may be. The Parent and the Seller covenant not to
interfere with any such efforts by Purchaser and to use their
best efforts to assist Purchaser in employing or contracting with
such individuals. Nothing in this Agreement shall be construed
as conferring any right, as third party beneficiary or otherwise,
on any individual or entity not a party to this Agreement as to
the matters described in this Section 2.10.
2.10.3 [INTENTIONALLY DELETED]
2.10.4 Purchaser shall offer employment to those
managers of the Seller listed on Exhibit 2.10.4 hereto on
substantially the same terms as such managers are subject to
immediately prior to the Closing. The Seller agrees to amend the
Note Receivable (as such item is classified in the Interim
Financial Statements) of each such manager so that his employment
with Purchaser pursuant to this Agreement is not deemed to be a
termination of employment with the Seller. The Parent and the
Seller agree that they shall not employ or attempt to employ such
managers prior to the first anniversary of the Closing Date,
except as provided in this Section 2.10.4. In the event
Purchaser determines not to employ, or to continue to employ, any
such manager at any time on or prior to the first anniversary of
the Closing Date, the Seller or the Parent shall use its
reasonable best efforts to offer employment (and give credit for
services with Purchaser as though it were the Parent or the
Seller) to such manager on substantially the same terms as such
manager is then subject; provided, however, that if Purchaser
determines to continue to employ any such manager, Purchaser
shall have the right (but not the obligation) to purchase the
Note Receivable for each such manager retained. If the Seller
and the Parent do not offer a position to any such manager, or if
any such manager refuses employment with the Seller or the
Parent, as the case may be, the Seller and the Parent shall pay
severance to such manager in accordance with the Parent's
severance policy, and such manager shall receive credit for
service with the Seller and Purchaser for purposes of calculating
the amount of such severance, and the Seller and the Parent shall
pay for the reasonable expenses associated with relocating such
manager to the northeastern Ohio area in accordance with the
Parent's relocation policy in effect as of the date of this
Agreement.
2.10.5 (i) Purchaser agrees to contribute to the
Bakery, Confectionery and Tobacco Workers Union and Industry
International Pension Fund (the "Multiemployer Plan") with
respect to the Business for substantially the same number of
contribution base units, as defined in Section 4001(a)(11) of
ERISA and the regulations thereunder (the "Regulations"), for
which the Seller had an obligation to contribute to the
Multiemployer Plan with respect to the Business for such period
as shall satisfy the requirements of Section 4204(a)(1)(A) of
ERISA. Purchaser acknowledges that should it withdraw from the
Multiemployer Plan coincident with or following the Closing
during the period described in Section 4204(a)(1)(C) of ERISA,
its liability to the Multiemployer Plan shall be determined as if
Purchaser had been required to contribute to the Multiemployer
Plan in the year in which the Closing occurs and the four plan
years of the Multiemployer Plan preceding such year in the amount
that the Seller and Kellogg Company, prior to the acquisition of
the Business by the Seller from Kellogg Company, were required to
contribute to the Multiemployer Plan for such five plan years,
but only with respect to the Business. Purchaser and the Seller
further agree to take such further reasonable actions as will
ensure compliance with Section 4204 of ERISA to prevent the
Seller from incurring on or after the Closing Date a complete or
partial withdrawal from the Multiemployer Plan, in respect to the
Business, treating Purchaser for all purposes as a "purchaser"
referred to in such Section 4204.
(ii) Prior to the Multiemployer Plan's
first plan year beginning after the Closing, Purchaser shall
apply to the Multiemployer Plan and/or the Pension Benefit
Guaranty Corporation ("PBGC") as Purchaser shall determine, for
an exemption or variance from the requirement of Section
4204(a)(1)(B) of ERISA that a bond be obtained or an amount be
held in escrow as provided in said section. In the event that
the Multiemployer Plan or the PBGC determines that the request
does not qualify for a variance, Purchaser shall obtain a surety
bond or establish an escrow agreement or other arrangement
satisfying the requirements of Section 4204(a)(1)(B) of ERISA,
within 30 days after the date on which it receives notice of the
Multiemployer Plan's or PBGC's decision, and shall maintain such
bond or escrow until the earliest of:
(a) the date a variance is obtained from the
Multiemployer Plan;
(b) the date a variance or exemption is
obtained from the PBGC; or
(c) the last day of the fifth plan year
commencing after the Closing;
which bond or escrow shall be paid to the Multiemployer Plan if
Purchaser withdraws therefrom or fails to make a contribution to
the Multiemployer Plan when due, at any time during the first
five plan years of the Multiemployer Plan beginning after the
Closing Date. To the extent Purchaser is unable to obtain any
variance as set forth above, Purchaser shall be responsible for
the cost of any bond or escrow or other security required of
Purchaser under Paragraph 4204 of ERISA, the amount of such bond
or escrow to be calculated with reference to the Seller's
required contributions, but also with respect to the
contributions which were required to be made by Kellogg Company
prior to the acquisition of the Business by Seller from Kellogg
Company for the period required under Sections 4204(a)(1)(B)(i)
and (ii) of ERISA. The Seller and Purchaser shall jointly
request, if available under ERISA, an exemption or variance from
Section 4204(a)(1)(C) of ERISA from the Multiemployer Plan or
the PBGC. Until such time as such exemption or variance is
granted, and in the event Purchaser withdraws in a complete
withdrawal, as described in 4203 of ERISA, or a partial
withdrawal, as described in 4205 of ERISA, from the Multiemployer
Plan with respect to the Business and such withdrawal or partial
withdrawal occurs during the five plan years commencing with the
first plan year beginning after the Closing, the Seller shall be
secondarily liable for any withdrawal liability it would have had
to the Multiemployer Plan as of the Closing under Title IV of
ERISA. Purchaser agrees to provide the Seller with reasonable
advance notice of its anticipated failure to pay any withdrawal
liability with respect to the Business and to furnish the Seller
promptly with a copy of any notice of withdrawal liability it may
receive with respect to the Multiemployer Plan, together with the
pertinent details. If all, or substantially all, of the Seller's
assets are distributed, or if Seller is liquidated, in either
case within the meaning of Section 4204(a)(3) of ERISA, before
the end of the Multiemployer Plan's fifth plan year beginning
after the Closing, then Seller shall provide a bond, execute and
fund an escrow agreement or make other arrangements that satisfy
the requirements of Section 4204(a)(3) of ERISA.
(iii) Seller shall reimburse Purchaser,
promptly upon demand by Purchaser, for the amount which Purchaser
(or Purchaser's escrow or bond) may be required to pay to the
Multiemployer Plan as a consequence of Purchaser's complete or
partial withdrawal from the Multiemployer Plan to the extent that
said amount is a consequence of Purchaser's agreement embodied in
this Section 2.10.5, which avoids the Seller's experiencing a
partial withdrawal from the Multiemployer Plan by virtue of the
transactions contemplated in this Agreement. The amount of said
reimbursement shall be the excess, if any, of (a) Purchaser's
liability upon said partial or complete withdrawal from the
Multiemployer Plan as actually imposed over (b) the amount of
said liability calculated as if this agreement to comply with
Section 4204 of ERISA had not been entered into plus $500,000.00.
(iv) In the event that Seller and
Purchaser determine that the amount of Seller's withdrawal
liability to the Multiemployer Plan as of the Closing Date would
have been zero, had Seller withdrawn in a complete withdrawal
from the Plan on the Closing Date, the foregoing provisions of
this Section 2.10.5 shall be deemed to be of no further force and
effect with respect to the Multiemployer Plan, and both Seller's
and Purchaser's rights and duties thereunder with respect to the
Multiemployer Plan shall terminate, except that Seller shall be
entitled to the return of any monies deposited in escrow by it
pursuant to the foregoing and Purchaser shall be entitled to a
return of any monies deposited in escrow by it pursuant to the
foregoing. Purchaser and the Seller agree that they will make,
execute and deliver to each other and to the Multiemployer Plan
and the PBGC, without payment of any kind whatsoever, all
documents and instruments which are reasonably required to
effectuate the terms and conditions of this Article and to comply
with the provisions of Section 4204 of ERISA and Regulations
Paragraphs 2643.1-.15.
2.11 Assignment. Purchaser may assign all of its rights
and obligations hereunder to any Affiliate (an "Assignee") on or
prior to the Closing, provided that such Assignee assumes all of
Purchaser's obligations hereunder; provided, further, that
Purchaser may separately assign the right to purchase, and the
obligation to pay for, the Trademarks to any Assignee on or prior
to the Closing. If Purchaser desires to make any such
assignment, Purchaser shall notify the Seller in writing of such
transfer at least three (3) days prior to such transfer and the
Seller shall effectuate the Closing with such Assignee or
Assignees in lieu of Purchaser and the documents described herein
to be entered into at the Closing shall reflect such assignment
(including, without limitation, the Security Agreement). Upon
the assignment by Purchaser to an Assignee or Assignees of all of
Purchaser's rights and obligations hereunder, (i) Purchaser shall
have no further obligation or liability hereunder and (ii) such
Assignee or Assignees shall be deemed to be the Purchaser with
respect to items purchased and liabilities assumed by each such
Assignee for all purposes hereunder and such Assignee or
Assignees shall be entitled to enforce the rights of Purchaser
arising hereunder in its or their own name.
2.12 Security Agreement. Purchaser and the Parent shall
enter into a Security Agreement substantially in the form of
Exhibit 2.12 at the Closing.
2.13 HSR Act Filings. Prior to the date hereof, Flowers
and the Parent have filed a Notification and Report Form pursuant
to the HSR Act. Purchaser and the Parent each agrees promptly to
supplement such information and promptly use its reasonable best
efforts to effect compliance with the conditions specified in
Sections 6.6 and 7.5 hereof. Each of the parties hereto will
furnish to the other parties hereto such necessary information
and reasonable assistance as such other party may reasonably
request in connection with its preparation of necessary filings
or submissions pursuant to the HSR Act.
2.14 Trade Receivables and Other Receivables. Purchaser
shall use its reasonable best efforts to collect the Trade
Receivables and Other Receivables in a manner consistent with the
manner in which Purchaser collects its own receivables; provided,
however, that Purchaser shall have no responsibility to institute
or enforce collection procedures or actions. Payments designated
by a specific invoice shall be applied to such invoice. In the
absence of specific customer instructions to the contrary, other
payments received by Purchaser from customers of the Business
shall be first applied to the oldest account receivable of such
customer. If any Trade Receivables or Other Receivables remain
uncollected on January 31, 1997 due to a Bad Debt, Purchaser
shall have the right to assign to the Seller the face amount of
such uncollected receivables (the "Uncollected Receivables
Amount") and to offset the Uncollected Receivables Amount against
the outstanding amounts due under the Working Capital Note in the
order of maturity; provided, however, that if the amount due
under the Working Capital Note are less than the Uncollected
Receivables Amount, the Seller shall promptly pay Purchaser the
difference between the Uncollected Receivables Amount and the
amount due under the Working Capital Note, if any. All sales
made on credit between March 31, 1996 and the Closing shall be
properly recorded by the Seller on the books of the Business.
2.15 Books and Records. The parties shall retain the
books and records relating to the Business in accordance with
their normal document retention policies. For a period of five
years after the Closing Date, the Parent and the Seller agree to
cooperate with and make available to Purchaser and Purchaser
agrees to cooperate with and make available to the Parent and the
Seller, during normal business hours, all books, records and
information relating to the Business (without substantial
disruption of employment) retained by the respective parties and
remaining in existence after the Closing Date that are necessary
or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any
other matter requiring any such books, records and information
for any reasonable business purpose. The party requesting any
such books, records or information shall bear all of the
out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and
employee benefits) reasonably incurred in connection with
providing such books, records, information or employees.
Notwithstanding the provisions of this Section 2.15, if the
Parent or the Seller, on the one hand, or Purchaser, on the other
hand, desires to dispose of any such books, records or
information prior to the end of such five-year period,
the party desiring to dispose of such books, records and
information shall give the other parties notice of such action,
and the parties receiving notice shall be entitled, at their own
expense and cost, to receive such books, records and information.
2.16 Transition Services Agreement. Purchaser, the
Parent and the Seller shall negotiate in good faith a form of
Transition Services Agreement, which shall include, without
limitation (I) services relating to Canadian sales, (ii) the use
of names, trademarks or service marks of the Parent on packaging,
(iii) purchasing of sweeteners, (iv) services relating to sales
management system information and (v) such other services
relating to the transition of the Business as the parties may
agree.
2.17 Capitalization of Purchaser. Flowers agrees to
cause Purchaser and any Assignee or Assignees to have sufficient
funds to effect the Closing and, if the conditions set forth in
Article VI are satisfied, to cause Purchaser and any Assignee or
Assignees to effect the Closing.
2.18 Workers Compensation Matters. The parties agree
that the Seller shall pay (or to the extent insured, cause to be
paid) all workers compensation claims that relate to the
Business, arose prior to the Closing and that are either (a)
filed before the Closing or (b) filed after the Closing but
relate to a specific identifiable incident occurring prior to the
Closing. The parties further agree that Purchaser shall pay (or
to the extent insured, cause to be paid) all workers compensation
claims that relate to the Business, are filed after the Closing
and either (x) arise after the Closing or (y) arose prior to the
Closing, but do not relate to a specific identifiable incident
occurring prior to the Closing. Purchaser and any Assignee or
Assignees shall use its reasonable best efforts to manage the
workers compensation claims described above in a manner that is
consistent with the manner In which Flowers manages its own
workers compensation claims and the parties shall cooperate in
taking actions to minimize the liability related to such claims.
2.19 Name Change. As soon as practicable after the
Closing Date, and in any event within five business days after
the Closing Date, the Parent shall cause the corporate name of
the Seller to be changed to a name that is not confusingly
similar to the name of the Seller. If any state or other entity
shall require the written consent of the Seller or the Parent as
a prerequisite to the registration of such name by Purchaser
following the Closing, the Seller and the Parent shall grant such
consent.
III. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE
SELLER
The Parent and the Seller, jointly and severally,
represent and warrant to, and for the benefit of, Flowers and
Purchaser as follows:
3.1 Organization and Standing. Each of the Parent and
the Seller is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Ohio, and the
Seller has the full power and authority (corporate and otherwise)
to carry on the Business in the places and as it is now being
conducted and to own and lease the Assets. The Seller is now,
and will be at Closing, duly qualified and/or licensed to
transact business and in good standing as a foreign corporation
in all jurisdictions in which the Business is conducted as listed
in Exhibit 3.1 hereto, and the character of the property relating
to the Business owned or leased by the Seller and the nature of
the Business do not require such qualification and/or licensing
in any other jurisdiction, except where the failure to be so
qualified or licensed would not have a material adverse effect on
the Business or the Assets, taken as a whole.
3.2 Authority and Status. Each of the Parent and the
Seller has the capacity and authority to execute and deliver this
Agreement, to perform hereunder, and to consummate the
transactions contemplated hereby without the necessity of any act
or consent of any other person whomsoever. The execution,
delivery and performance by the Parent and the Seller of this
Agreement and each and every agreement, document and instrument
provided for herein have been duly authorized and approved by the
respective Boards of Directors of the Parent and the Seller.
This Agreement and each and every agreement, document and
instrument to be executed, delivered and performed by the Parent
or the Seller in connection herewith, constitute or will, when
executed and delivered, constitute the valid and legally binding
obligations of the Parent and the Seller, as the case may be,
enforceable against each of them in accordance with their
respective terms, except as enforceability may be limited by
applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in
effect affecting the enforcement of creditors' rights generally.
3.3 Absence of Equity Investment. Except as described
in Exhibit 3.3 hereto, the Parent and the Seller do not, directly
or indirectly, own of record or beneficially any shares or other
equity interests in any corporation (except as a stockholder
holding less than one percent (1%) interest in a corporation
whose shares are traded on a national or regional securities
exchange or in the over-the-counter market), partnership, limited
partnership, joint venture, trust, limited liability company or
other business entity, all or any portion of the business of
which is competitive with that of the Business.
3.4 Liabilities and Obligations of the Seller.
3.4.1 Attached hereto as Exhibit 3.4.1 are
complete copies of the Seller's unaudited balance sheet for the
Business as of April 30, 1994 and the Seller's unaudited balance
sheet for the Business as of April 30, 1995 and the related
statement of operating results for the year then ended (the "1994
and 1995 Financial Statements", respectively). Also attached
hereto to Exhibit 3.4.1 is a complete copy of the Seller's
unaudited balance sheet for the Business as of March 31, 1996
(the "Financial Statement Date"), and the related statement of
operating results for the period then ended (the "Interim
Financial Statements"). The 1994 and 1995 Financial Statements
and Interim Financial Statements have been prepared from and are
in accordance with the accounting books and records of the
Business, are complete statements of the financial position and
results of operations of the Business as of their respective
dates, have been prepared in accordance with generally accepted
accounting principles (except as disclosed on Exhibit 3.4.1)
consistently applied (except that the 1994 and 1995 Financial
Statements and the Interim Financial Statements do not contain
notes thereto and the Interim Financial Statements are subject to
normal year end audit adjustments that will not deviate
materially from the Interim Financial Statements), fairly present
in all material respects the financial position and results of
operations of the Business as of the respective dates thereof,
and disclose all liabilities of the Business, whether absolute,
contingent, accrued or otherwise, existing as of the respective
dates thereof that are of a nature required to be reflected in
financial statements prepared in accordance with generally
accepted accounting principles.
3.4.2 Since the Financial Statement Date, the
Seller has incurred no liability or obligation related to the
Assets or the Business (whether accrued, absolute, contingent or
otherwise), except for (i) the liabilities and obligations of the
Seller which are disclosed on Exhibit 3.4.2 hereto, to the extent
and in the amounts so disclosed, and (ii) liabilities incurred or
accrued in the ordinary course of the Business.
3.5 Taxes. Except for the Assumed Liabilities, there
is not, and there will not be, any liability for federal, state
or local income, sales, use, excise, payroll, employment or other
taxes arising out of, or attributable to, or affecting the Assets
or the conduct of the Business through the close of business on
the Closing Date, or attributable to the conduct of the
operations of the Seller at any time for which Purchaser will
have any liability for payment or otherwise. Except for the
Assumed Liabilities or as disclosed on Exhibit 3.5, after the
Closing, there will not exist by virtue of the transactions
contemplated by this Agreement any liability for taxes (except
for sales taxes and realty transfer taxes, if any, incident to
the consummation of the transactions contemplated herein) which
may be asserted by any taxing authority against any of the Assets
or the operations of the Business, and no lien or other
encumbrance for taxes will attach to the Assets or the operations
of the Business.
3.6 Ownership of Assets and Leases.
3.6.1 With respect to the Assets:
(i) Exhibit 3.6.1.1 attached hereto
contains a list of all Inventories owned by the
Seller as of the Financial Statement Date.
(ii) The Seller has good title to all of
the Purchased Assets and Inventories subject to no
mortgage, pledge, lien, security interest,
conditional sale agreement, encumbrance, charge or
adverse claim whatsoever.
(iii) Except as shown on Exhibit 3.6.1.2,
none of the properties or assets used by the Seller
in the Business are held under any lease, or as
conditional vendee under any conditional sale or
other title retention agreement. Exhibit 3.6.1.2
includes a list of all leases of all machinery and
equipment on the books of, or used in connection
with the operations of, the Business of which the
Seller is a lessee.
(iv) Each of the leases and agreements
described in Exhibit 3.6.1.2 is in full force and
effect and constitutes a legal, valid and binding
obligation of the Seller and the other respective
parties thereto, and there is not under any of such
leases or agreements existing any default of the
Seller or, to the Knowledge of the Seller, of any
other parties thereto (or event or condition which,
with notice or lapse of time, or both, would
constitute a default).
(v) None of the property of the Seller
shown on Exhibits 3.6.1.1 or 3.6.1.2 is leased by
the Seller to any other person or entity.
(vi) There are no items of machinery,
equipment, vehicles or real property (or
improvements or fixtures thereon) employed or used
in connection with the Business which are not
described in Exhibit 3.6.1.2 or are not Leased
Assets. The Seller either owns, licenses or leases
all assets which are necessary to conduct the
Business as currently conducted. All machinery and
equipment owned or leased by the Seller and
presently in use are usable and operable in the
Business and are in good operating condition and
reasonable state of repair, subject only to
ordinary wear and tear.
(vii) Except as set forth on Exhibit
3.6.1.3, all Raw Materials and Supplies consist
only of items of a quality and quantity readily
usable, and all Finished Goods consist only of
items of a quality and quantity readily salable (at
prices equal to the values at which such items are
reflected in the Seller's books), in each case in
the normal course of the Seller's business and are
valued so as to reflect the normal valuation policy
of the Seller, all in accordance with generally
accepted accounting principles, applied on a basis
consistent with prior years, but not in excess of
the lower of cost or net realizable market value.
(viii) Except pursuant to this Agreement,
the Seller is not a party to any contract or
obligation whereby there has been granted to anyone
an absolute or contingent right to purchase, obtain
or acquire any rights in any of the assets,
properties or operations which are owned by the
Seller and used in connection with the Business.
3.6.2 [INTENTIONALLY DELETED]
3.7 [INTENTIONALLY DELETED]
3.8 Trade Receivables and Other Receivables. Attached
hereto as Exhibit 3.8 is a true and complete list of all of the
Trade Receivables and Other Receivables as of March 31, 1996.
3.9 Agreement Does Not Violate Other Instruments.
Except as listed in Exhibit 3.9, the execution and delivery of
this Agreement by the Parent and the Seller do not, and the
consummation of the transactions contemplated hereby will not,
violate any provision of the respective Articles of
Incorporation, as amended, or Code of Regulations, as amended, of
the Parent and the Seller or violate or constitute an occurrence
of default under any provision of, or conflict with, or result in
acceleration of any obligation under, or give rise to a right by
any party to terminate its obligations under, any mortgage, deed
of trust, conveyance to secure debt, note, loan, lien, lease,
agreement, instrument, or any order, judgment, decree or other
arrangement to which the Parent or the Seller is a party or is
bound or by which the Assets or the Business are affected.
Except as listed or described on Exhibit 3.9 attached hereto and
except for approval under the HSR Act, no consent, approval,
order or authorization of, or registration, declaration or filing
with, any governmental entity is required to be obtained or made
by or with respect to the Parent, the Seller, any of the Assets
or the Business, in connection with the execution and delivery by
the Parent and the Seller of this Agreement or any of the
agreements, certificates or other documents delivered or to be
delivered on or after the date hereof and at or prior to the
Closing in connection with the transactions contemplated hereby.
3.10 Absence of Changes. Since the Financial Statement
Date, the Seller has not, except as disclosed on Exhibit 3.10
attached hereto:
3.10.1 Transferred, assigned, conveyed or
liquidated any of the Assets or the Business or entered into any
transaction or incurred any liability or obligation which affects
the Assets or the Business, other than in the ordinary course of
the Business;
3.10.2 Suffered any change in its business,
operations, or financial condition which may have a material
adverse effect on the Assets or the Business taken as a whole,
and the Seller has not become aware of any event which may result
in any such adverse change;
3.10.3 Suffered any destruction, damage or loss,
relating to the Assets or the Business whether or not covered by
insurance, which in the aggregate exceeds five thousand dollars
($5,000.00);
3.10.4 Suffered, permitted or incurred the
imposition of any lien, charge, encumbrance (which as used herein
includes, without limitation, any mortgage, deed of trust,
conveyance to secure debt or security interest) or claim upon any
of the Assets or the Business, except for any current year lien
with respect to personal or real property taxes not yet due and
payable;
3.10.5 Committed, suffered, permitted or incurred
any default in any liability or obligation which, in the
aggregate, would have an adverse effect upon Purchaser's use of
the Assets or the conduct of Business after the Closing;
3.10.6 Made or agreed to any change in the terms
of any contract or instrument to which it is a party which (i) is
not in the ordinary course of business or (ii) is in the ordinary
course of business but involves future payments or receipts,
performance of services, or delivery of goods to or by Purchaser
of an amount or value in the aggregate in excess of ten thousand
dollars ($10,000.00);
3.10.7 Waived, cancelled, sold or otherwise
disposed of, for less than the face amount thereof, any claim or
right relating to the Assets or the Business which (i) is not in
the ordinary course of business or (ii) is in the ordinary course
of business but involves an amount or value in the aggregate in
excess of ten thousand dollars ($10,000.00);
3.10.8 Declared, promised or made any
distribution from the Assets or other payment from such Assets to
its shareholders (other than reasonable compensation for services
actually rendered) or issued any additional shares or rights,
options or calls with respect to the capital stock of the Seller,
or redeemed, purchased or otherwise acquired any of the capital
stock of the Seller, or made any change whatsoever in the
Seller's capital structure (if such action would affect the
ability of the Seller to consummate the transactions contemplated
in this Agreement or would cause the necessity of obtaining the
consent of any individual or entity not disclosed in Exhibit
3.9);
3.10.9 Paid, agreed to pay or incurred any
obligation for any payment for, any contribution or other amount
to, or with respect to, any employee benefit plan, or paid any
bonus to, or granted any increase in the compensation of, the
Seller's officers, agents or employees (unless made at times and
in amounts consistent with the historical practices of the
Business), or made any increase in the pension, retirement or
other benefits of the Seller's directors, officers, agents, field
representatives or other employees of the Business;
3.10.10 Incurred any other liability or obligation
or entered into any transaction affecting the Assets or the
Business other than in the ordinary course of the Business;
3.10.11 Received any notices indicating, and the
Seller has no Knowledge, that any supplier of the Business has
taken or intends to take any steps which would reasonably be
expected to disrupt the business relationship of the Seller with
said supplier or could result in the diminution in the value of
the Business as a going concern;
3.10.12 Paid, agreed to pay or incurred any
obligation for any payment of any indebtedness affecting the
Assets or the Business except current liabilities incurred in the
ordinary course of the Business; or
3.10.13 Delayed or postponed the payment of any
liabilities, whether current or long term, or failed to pay in
the ordinary course of the Business any liability on a timely
basis consistent with prior practice.
3.11 Litigation. Except as otherwise set forth in
Exhibit 3.11 hereto, there is no suit, action, proceeding, claim
or investigation pending or, to the Knowledge of the Seller,
threatened against, or affecting, Purchaser's use of the Assets
or conduct of the Business after the Closing and there exists no
basis or grounds for any such suit, action, proceedings, claim or
investigation. None of the items described in Exhibit 3.11,
singly or in the aggregate, if pursued and/or resulting in a
judgment would have an adverse effect on Purchaser's use of the
Assets or the conduct of the Business after the Closing, or the
right of the Parent or the Seller to consummate the transactions
contemplated hereby.
3.12 Licenses and Permits; Compliance With Law. The
Seller holds all licenses, certificates, permits, franchises and
rights from all appropriate federal, state or other public
authorities necessary for the conduct of the Business as
currently conducted and the use of the Assets. All such
licenses, certificates, permits, franchises and rights are listed
on Exhibit 3.12. Except as noted in Exhibit 3.12, to the
Knowledge of the Seller, the Seller is presently conducting the
Business so as to comply in all respects with all applicable
statutes, ordinances, rules, regulations and orders of any
governmental authority including, but not limited to, any
environmental or health and safety related law, regulation, rule,
ordinance, by-law, order or determination of any governmental
entity. Further, the Seller neither is presently charged with
nor is under governmental investigation with respect to any
actual or alleged violation of any statute, ordinance, rule or
regulation, nor is presently the subject of any pending or, to
the Knowledge of the Seller, threatened adverse proceeding by any
regulatory authority having jurisdiction over the Assets or the
Business. Except as noted in Exhibit 3.12, neither the execution
nor delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will result in the termination
of any such license, certificate, permit, franchise or right held
by the Seller which is to be assigned pursuant to this Agreement,
and all such assigned licenses, certificates, permits, franchises
and rights will inure to the benefit of Purchaser after the
transactions contemplated by this Agreement.
3.13 Contracts, Etc.
3.13.1 Exhibit 3.13 contains a true and complete
list of all contracts, agreements and other instruments relating
to the Business, except for those contracts, agreements and other
instruments listed in Exhibits 3.6.1.2, 3.8, 3.12, 3.14.2, 3.16,
and 3.19, and except for (i) (a) contracts that involve any
obligation that can be performed or terminated within thirty (30)
days of the Closing Date without payment of penalty, and (b)
contracts that involve future payments or receipts, performance
of services, or delivery of goods to or by the Seller of an
amount or value of less than $10,000.00, or (ii) purchase orders
for raw materials or supplies in the ordinary course of business.
Contemporaneously with the delivery of the Exhibits to this
Agreement, the Seller has delivered a true and complete copy of
each such written contract, agreement or instrument, including
those listed in Exhibits 3.6.1.2, 3.12 (other than occupancy
permits), 3.13 and 3.14.2.
3.13.2 All of the contracts, agreements, policies
of insurance or instruments described in Exhibits 3.6.1.2, 3.8,
3.12, 3.13, 3.14.2, 3.16, and 3.19 hereto and those contracts
described in clauses (i) and (ii) of the first sentence of
Section 3.13.1 are valid and binding upon the Seller and the
other parties thereto and are in full force and effect, and none
of the Seller or, to the Knowledge of the Seller, any other party
to any such contract, commitment or arrangement has breached any
provision of, or is in default under, the terms thereof.
3.14 Intellectual Property; Computer Software.
3.14.1 Intellectual Property.
(i) Exhibit 3.14.1 hereto sets forth a
complete and correct list and summary description of the
Trademarks and pending applications for registration. Except for
the license between the Parent and the Seller, neither the Parent
nor the Seller have granted any license with respect to the
Trademarks. Except for the Trademarks, all trademarks, trade
names, service marks, service names, brand names, trade dress,
copyrights and patents and registrations therefor used in the
Business are owned by the Seller, free and clear of all liens,
claims and encumbrances of any nature whatsoever. Neither the
Parent nor the Seller is currently in receipt of any notice of
any violation of, and the Parent and the Seller are not
violating, the rights of others in any trademark, trade name,
service mark, copyright, patent, trade secret, know-how or other
intangible asset.
(ii) Attached hereto as Exhibit 3.14.1
are copies of the Certificates of Registration issued by the
United States Patent and Trademark Office for the Trademarks.
The Trademarks are owned exclusively by the Parent, free and
clear of all liens, claims, security interests and encumbrances
of any nature whatsoever. The registrations of the Trademarks
are in full force and effect. Neither the Parent nor the Seller
is currently in receipt of any notice of any violation of, and
neither the Parent nor the Seller is infringing on, the rights of
any other party in any trademark, trade name, or service mark
used in connection with the Business.
(iii) The Seller has the right to use and
transfer the trade dress currently used in connection with the
packaging and promotion of its products under said marks;
(iv) Neither the Parent nor the Seller
has granted any license, permits on or other authorization to any
other person or entity to use said marks or trade names, or has
made any conveyance of any such rights, except for the license of
the Trademarks by the Parent to the Seller.
(v) There have been, and are, no
disputes, demands, or litigation challenging or casting doubt on
the ownership by the Parent of any of the said marks or
challenging the validity of any of the marks or the registration
thereof.
(vi) There have been, and are, no prior
settlements, agreements, or administrative or judicial decisions
affecting ownership or validity of the assigned marks or limiting
the right of the Parent to use or register the marks or to grant
this assignment.
(vii) There are no other agreements,
contracts or licenses granting, limiting, encumbering or
otherwise directly or indirectly affecting ownership or use or
right to use or assign the marks by the Seller.
(viii) To the Knowledge of the Seller,
there are no current infringements of the said marks by any third
party.
3.14.2 The Seller has sole, full and clear title
to that computer software described as "Owned Software" on
Exhibit 3.14.2 hereto (the "Owned Software"), free of all claims,
including claims or rights of employees, agents, consultants or
other parties involved in the development or creation of such
computer software. The Seller has the right and license to use
that software described as "Licensed Software" on Exhibit 3.14.2
free and clear of any limitations or encumbrances except as may
be set forth in any license agreements listed in Exhibit 3.14.2.
Exhibit 3.14.2 sets forth a list of all license fees, rents,
royalties or other charges that the Seller is required or
obligated to pay with respect to Licensed Software. The Seller
is in full compliance with all provisions of any license, lease
or other similar agreement pursuant to which it has rights to use
the Licensed Software. Except as disclosed on Exhibit 3.14.2,
none of the Licensed Software has been incorporated into or made
a part of any Owned Software or any other Licensed Software and
none of the Owned Software is dependent on any Licensed Software
in order to freely operate in the manner in which it is intended.
Except as disclosed on Exhibit 3.14.2, the Owned Software and
Licensed Software constitute all software used in the Business
(the "Seller's Software"), other than commercially available,
over-the-counter "shrinkwrap" software. The Seller is not
infringing any intellectual property rights of any other person
or entity with respect to the Owned Software. The Seller does
not lease or license any of the Seller's Software to third
parties.
3.15 Labor Matters. On or prior to the date of this
Agreement, the Seller has delivered a true and complete list of
all employees who are engaged in the Business and independent
contractors of the Seller who are engaged in the Business, their
current salaries or rates and the Seller's salary increase
guidelines. Exhibit 3.15 also sets forth a list of all union
grievances and all union arbitrations in which the Seller has
been involved within the last two (2) years relating to the
Business. Except as set forth on Exhibit 3.15, within the last
two (2) years the Seller has not been the subject of any union
activity or labor dispute, nor has there been any strike of any
kind called or threatened to be called against it; and, except as
set forth on Exhibit 3.15, to the Knowledge of the Seller, the
Seller has not violated any federal, state, or other governmental
statutes, regulations, or ordinances relating to employment and
labor matters with regard to the Business, including, without
limitation, the provisions of Title VII of the Civil Rights Act
of 1964 (race, color, religion, sex, and national origin
discrimination), 42 U.S.C. Paragraph 1981 (discrimination), 42
U.S.C. Paragraphs 621-634 (the Age Discrimination in Employment
Act), 29 U.S.C. Paragraph 206 (equal pay), Executive Order 11246
(race, color, religion, sex, and national origin discrimination),
Executive Order 11141 (age discrimination), Paragraph 503 of the
Rehabilitation Act of 1973 (handicap discrimination), 42 U.S.C.
Paragraphs 12101-12213 (Americans with Disabilities Act), 29
U.S.C. Paragraphs 2001-2654 (Family and Medical Leave Act), 29
U.S.C. Paragraphs 651-678 (occupational safety and health) and
requirements relating to the documentation of the nationality of
employees. Assuming those positions described as "open" on
Exhibit 3.15 are filled, the staffing and employment levels of
the Seller are now, and will be at Closing, sufficient to run the
Business at levels of production, sales, marketing and
administration consistent with the levels of production, sales,
marketing and administration for the prior fiscal year. Except
for the promissory notes, mortgages and letter agreements
relating to the Notes Receivable, neither the Seller nor the
Parent is a party to any contract that would impair the utility
of the services of any employee or independent contractor of the
Seller to Purchaser or which would impose upon such employee or
independent contractor any monetary or other obligation to the
Parent or the Seller which otherwise would be occasioned by the
termination of such employee's or independent contractor's
employment or relationship with the Seller pursuant to this
Agreement including, without limitation, any agreements of
noncompetition or confidentiality.
3.16 Benefit Plans.
3.16.1 Exhibit 3.16 lists every pension,
retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus or other
incentive plan, any other written or unwritten employee program,
arrangement, agreement or understanding (whether arrived at
through collective bargaining or otherwise), any medical, vision,
dental or other health plan, any life insurance plan or any other
employee benefit plan or fringe benefit plan, including, without
limitation, any "employee benefit plan," as that term is defined
in Section 3(3) of the Employee Retirement Income Security Act of
1974 as amended ("ERISA") and any multiemployer plan within the
meaning of Section 3(37) of ERISA, currently adopted, maintained,
sponsored in whole or in part or contributed to by the Seller or
any current member of a commonly controlled group of trades or
businesses (as defined in Section 4001(b)(1) of ERISA) including
the Seller for the benefit of employees, retirees, dependents,
spouses, independent contractors or other beneficiaries of the
Seller who are, or were, engaged in the Business with respect to
their services rendered to the Business and under which
employees, retirees, dependents, spouses, independent contractors
or other beneficiaries of the Seller who are, or were, engaged in
the Business, and dependents thereof, are eligible to participate
or under or in connection with which the Seller has any
contingent or noncontingent liability of any kind whether or not
probable of assertion (collectively, the "Benefit Plans") which
would affect the Assets or the Business. Except as disclosed on
Exhibit 3.16, no Benefit Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA.
3.16.2 Exhibit 3.16 also lists all trust
agreements or other funding arrangements, including insurance
contracts, and all amendments thereto applicable to the Benefit
Plans.
3.16.3 All the Benefit Plans and the related
trusts subject to ERISA substantially comply with and have been
administered in substantial compliance with the provisions of
ERISA, all provisions of the Code relating to qualification and
tax exemption under Code Sections 401(a) and 501(a) or otherwise
applicable to secure intended tax consequences, all applicable
state or federal securities laws and all other applicable laws,
rules and regulations and collective bargaining agreements, and
the Seller has not received any notice from any governmental
agency or instrumentality questioning or challenging such
compliance.
3.16.4 All Benefit Plans subject to section 4980B
of the Code, as amended from time to time, or Part 6 of Subtitle
B of Title I of ERISA or both have been maintained in substantial
compliance with the requirements of such laws and any regulations
(proposed or otherwise) issued thereunder.
3.16.5 None of the Assets nor the Business will
be subject after the Closing to any liability for the Seller's
failure to make any contributions to, to be in full compliance
with ERISA or any other law relating to, or otherwise as a
consequence of the Seller's participation in, the Benefit Plans,
nor subject to any liens resulting from the participation in any
benefit plan affecting or for the benefit of employees of other
employers that are current or former members of a commonly
controlled group of trades or businesses (as defined in section
4001(b)(1) of ERISA) including the Seller.
3.17 Customers and Brokers. Exhibit 3.17 attached
hereto consists of a true and complete list of all brokers
utilized by, and all of the customers served by, the Business as
of the Financial Statement Date setting forth as to each customer
and broker its name and gross sales by dollar amounts by each
such customer and broker within the twelve months preceding the
Financial Statement Date. The Seller has not received any
notice, nor has any Knowledge, that any customer of the Business
that has purchased more than $500,000.00 from the Seller in the
preceding twelve months or broker of the Business has taken or
intends to take any steps which would reasonably be expected to
disrupt the business relationship of the Business with such
customer or broker or could result in the diminution in the value
of the Business with such customer or broker.
3.18 [INTENTIONALLY DELETED]
3.19 Insurance. Set forth in Exhibit 3.19 is a complete
list of all insurance policies which the Parent or the Seller has
maintained with respect to the Business within the preceding two
years. Except as set forth in Exhibit 3.19, such policies are in
full force and effect and no event has occurred with respect to
the Business which would give any insurance carrier a right to
terminate any such policy.
3.20 Related Party Relationships. Except as set forth
in Exhibit 3.20, no shareholder holding a five percent (5%) or
more interest in the Parent or the Seller or officer or director
of the Parent or the Seller possesses, directly or indirectly,
any beneficial interest in, or is a director, officer or employee
of, any corporation, partnership, firm, association or business
organization which is a client, supplier, customer, lessor,
lessee, lender, creditor, borrower, debtor or contracting party
with or of the Seller with respect to the Business (except as a
stockholder holding less than a one percent interest in a
corporation whose shares are traded on a national or regional
securities exchange or in the over-the-counter market).
3.21 [INTENTIONALLY DELETED]
3.22 Universal Product Code. The products currently
produced, marketed, and sold by the Business carry the Universal
Product Code Numbers set forth opposite the listing of all such
products on Exhibit 3.22 attached hereto.
3.23 Suppliers. Attached hereto as Exhibit 3.23 is a
complete and correct list of all persons, partnerships,
corporations or entities from which the Business has purchased
any ingredients or packaging relating to its business within the
last six (6) months.
3.24 Exhibits. Matters disclosed on each Exhibit shall
be deemed disclosed only for purposes of the matters to be
disclosed in such Exhibit and shall not be deemed to be disclosed
for any other purpose unless expressly provided therein.
3.25 Disclosure. No representation or statement
contained herein or in any certificate, schedule, list, exhibit
or other instrument furnished to Purchaser pursuant to the
provisions hereof contains or will contain any untrue statement
of any material fact.
IV. SECURITIES LAWS.
4.1 No Registration Statement Required. Each of the
Parent and the Seller represents that it understands that the
respective Promissory Notes to be issued and delivered to it
pursuant to the provisions of this Agreement will not be
registered under the 1933 Act or any applicable "Blue Sky" laws,
in reliance upon the exemptions contained in (a) the 1933 Act and
the General Rules and Regulations under the 1933 Act promulgated
by the SEC, and (b) applicable "Blue Sky" laws and rules or
regulations promulgated thereunder.
4.2 Investment Letters. Each of the Parent and the
Seller acknowledges that the respective Promissory Notes to be
issued and delivered to it pursuant to the provisions of this
Agreement will be, when issued and delivered, acquired by the
Parent or the Seller, as the case may be, for investment for its
own account and not with a view to the subsequent resale or other
distribution thereof as provided in the letter indicated below,
and each of the Parent and the Seller hereby agrees to execute
and deliver to Purchaser on the date of issuance of such
Promissory Notes, a letter, substantially in the form of Exhibit
4.2 attached hereto, to such effect. In the event the Parent or
Seller desires to transfer the Promissory Notes in liquidation or
otherwise, it shall obtain, as a condition to such transfer,
either (i) a letter, substantially in the form of Exhibit 4.2
attached hereto, dated as of the proposed effective date of such
transfer, from each such transferee or (ii) an opinion of counsel
reasonably satisfactory to Purchaser as to form and substance,
from counsel reasonably acceptable to Purchaser, that the
proposed transfer can be effected under the 1933 Act or any
applicable "Blue Sky" laws.
4.3 Conditions Precedent to Transfer of Promissory
Notes. Each of the Parent and the Seller understands, consents
and agrees that the sale or other transfer of the Promissory
Notes to be received under this Agreement will be permitted and
recognized only when such sale or other transfer is made pursuant
to an effective registration under the 1933 Act and applicable
"Blue Sky" laws or when such request for sale or other transfer
is accompanied by either (a) an opinion of counsel reasonably
satisfactory to Purchaser as to form and substance, from counsel
reasonably acceptable to Purchaser, that the proposed sale or
transfer can be effected without registration under the 1933 Act,
or any applicable "Blue Sky" laws or (b) a "no action" letter
from the appropriate authorities with respect to the proposed
sale or transfer.
4.4 Legends on Promissory Notes. The Promissory Notes
issued and delivered under this Agreement shall bear on their
face a legend to the effect of the restrictions described in this
Article IV until such time as Purchaser receives an opinion of
counsel reasonably satisfactory to Purchaser as to form and
substance from counsel reasonably acceptable to Purchaser that
the legend on such Promissory Notes may be removed under then
applicable federal and state securities laws.
V. REPRESENTATIONS AND WARRANTIES OF FLOWERS AND PURCHASER.
Flowers and Purchaser, jointly and severally, represent
and warrant to, and for the benefit of, the Parent and the Seller
as follows:
5.1 Organization and Standing. Each of Flowers and
Purchaser is a duly organized and validly existing corporation in
good standing under the laws of the State of its incorporation
and has the full power and authority (corporate and otherwise) to
carry on its business in the places and as it is now being
conducted and to own and lease the properties and assets which it
now owns or leases.
5.2 Corporate Power and Authority. Each of Flowers and
Purchaser has the capacity and authority to execute and deliver
this Agreement, to perform hereunder, and to consummate the
transactions contemplated hereby without the necessity of any act
or consent of any other person whomsoever. The execution,
delivery and performance by Flowers and Purchaser of this
Agreement and each and every agreement, document and instrument
provided for herein have been duly authorized and approved by the
respective Boards of Directors of Flowers and Purchaser. This
Agreement, and each and every other agreement, document and
instrument to be executed, delivered and performed by Flowers or
Purchaser in connection herewith, constitute or will, when
executed and delivered, constitute the valid and legally binding
obligations of Flowers and Purchaser, as the case may be,
enforceable against each of them in accordance with their
respective terms, except as enforceability may be limited by
applicable equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in
effect affecting the enforcement of creditors' rights generally.
5.3 Agreement Does Not Violate Other Instruments. The
execution and delivery of this Agreement by Flowers and Purchaser
do not, and the consummation of the transactions contemplated
hereby will not, violate any provision of the respective Articles
of Incorporation, as amended, or Bylaws, as amended, of Flowers
or Purchaser or violate or constitute an occurrence of default
under any provision of, or conflict with, or result in
acceleration of any obligation under, or give rise to a right by
any party to terminate its obligations under, any mortgage, deed
of trust, conveyance to secure debt, note, loan, lien, lease,
agreement, instrument, or any order, judgment, decree or other
arrangement to which Flowers or Purchaser is a party or is bound
or by which their assets are affected. Except for approval under
the HSR Act, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity
is required to be obtained or made by or with respect to Flowers,
Purchaser or any of their assets, in connection with the
execution and delivery by Flowers and Purchaser of this Agreement
or any of the agreements, certificates or other documents
delivered or to be delivered on or after the date hereof and at
or prior to the Closing in connection with the transactions
contemplated hereby.
5.4 Capitalization; Solvency. Purchaser and each of
its Assignees has, or will have at the Closing, sufficient funds
available to enable Purchaser to effect the Closing. Immediately
after the Closing, Purchaser will be solvent and able to pay its
debts as they mature, will have capital sufficient to carry on
its businesses and all businesses in which it is about to engage
and will have assets which will have a present fair salable value
greater than the probable amount of its total liabilities.
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO
CLOSE.
All of the obligations of Purchaser to consummate the
transactions contemplated by this Agreement shall be contingent
upon and subject to the satisfaction, on or before the Closing
Date, of each and every one of the following conditions, all or
any of which may be waived, in whole or in part, by Purchaser for
purposes of consummating such transactions, but without prejudice
to any other right or remedy which Purchaser may have hereunder
as a result of any misrepresentations by, or breach of any
covenant or warranty of, the Parent or the Seller contained in
this Agreement or any other certificate or instrument furnished
by the Parent or the Seller hereunder; provided, however, that if
it is reasonably anticipated that the aggregate liability, loss,
damage, injury or claim (including reasonable counsel fees and
costs of any suit related thereto) relating to any
misrepresentations by, or breach of any covenant or warranty of,
the Parent or the Seller contained in this Agreement which are
known as of the Closing is or will be less than or equal to One
Million Dollars ($1,000,000.00), Purchaser shall be obligated to
consummate the transactions contemplated in this Agreement (but
shall still have the right to indemnification as provided in
Article IX); provided, further, that if it is reasonably
anticipated that the aggregate liability, loss, damage, injury or
claim (including reasonable counsel fees and costs of any suit
related thereto) relating to any misrepresentations by, or breach
of any covenant or warranty of, the Parent or the Seller
contained in this Agreement which are known as of the Closing
exceeds or will exceed One Million Dollars ($1,000,000.00),
neither Purchaser, the Parent or the Seller shall be obligated to
consummate the transactions contemplated in this Agreement unless
Purchaser agrees to limit its right to indemnification for such
misrepresentation or breach to $1,000,000.00.
6.1 Representations True at Closing. The
representations and warranties made by the Parent and the Seller
to Purchaser in this Agreement shall be true and correct on the
Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such
time (except for changes contemplated by this Agreement).
6.2 Covenants of the Parent and the Seller. The Parent
and the Seller shall have duly performed all of the covenants,
acts and undertakings to be performed by them on or prior to the
Closing Date and a duly authorized officer of the Parent and the
Seller shall deliver to Purchaser a certificate dated as of the
Closing Date certifying to the fulfillment of this condition and
the condition set forth in Section 6.1 hereof.
6.3 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been
instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain, prohibit, or
obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, or which is related to or
arises out of the Assets or the Business, if such action,
proceeding, investigation, regulation or legislation, in the
reasonable judgment of Purchaser would make it inadvisable to
consummate such transactions.
6.4 Opinion of Counsel. A favorable opinion of Steven
J. Ellcessor, Esq., General Counsel of the Parent, shall have
been delivered to Purchaser dated as of the Closing Date,
substantially in form and substance of the opinion attached
hereto as Exhibit 6.4, which opinion shall be governed by the
Legal Opinion Accord of the ABA Section of Business Law (1991).
6.5 Consents, Approvals and Waivers. Purchaser shall
have received a true and correct copy of each and every consent,
approval and waiver to the transactions contemplated in this
Agreement that are listed on Exhibit 6.5 and obtained new
licenses to replace those licenses listed on Exhibit 6.5.
Purchaser shall have no reasonable basis to believe that
Purchaser will not obtain a novation of the Department of Defense
contracts described in Section 2.8.
6.6 Approvals. The execution and the delivery of this
Agreement and the consummation of the transactions contemplated
hereby shall have been approved by all regulatory authorities
whose approvals are required by law and all applicable waiting
periods under the HSR Act shall have expired or been terminated.
6.7 Absence of Changes. Since the Financial Statement
Date, (a) the Seller shall not have suffered any change in its
financial condition, business, property or assets which would
have an adverse effect upon Purchaser's use of the Assets or the
conduct of the Business after the Closing, and (b) the Parent and
the Seller shall not have permitted or suffered to occur any
transaction or event described in Section 3.10 hereof which is
not described in Exhibit 3.10 hereto.
6.8 Leases. The Seller shall have entered into the
Leases.
6.9 Security Agreement. The Parent shall have entered
into a Security Agreement substantially in the form of Exhibit
2.12.
6.10 Transition Services Agreement. The Parent and the
Seller shall have entered into a Transition Services Agreement.
6.11 Delivery of Audited Financial Statements. The
Seller shall have delivered to Purchaser an audited balance sheet
and statement of operating results of the Business as of April
30, 1996 and for the year then ended, together with the report of
Ernst & Young LLP thereon, which balance sheet and statement of
operating results do not deviate materially and adversely from
the Interim Financial Statements.
VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PARENT AND THE SELLER TO CLOSE.
All of the obligations of the Parent and the Seller to
consummate the transactions contemplated by this Agreement shall
be contingent upon and subject to the satisfaction, on or before
the Closing Date, of each and every one of the following
conditions, all or any of which may be waived, in whole or in
part, by the Parent and the Seller for purposes of consummating
such transactions but without prejudice to any other right or
remedy which they may have hereunder as a result of any
misrepresentation by, or breach of any covenant or warranty of
Purchaser contained in this Agreement, or any certificate or
instrument furnished by it hereunder; provided, however, that if
it is reasonably anticipated that the aggregate liability, loss,
damage, injury or claim (including reasonable counsel fees and
costs of any suit related thereto) relating to any
misrepresentations by, or breach of any covenant or warranty of,
the Parent or the Seller contained in this Agreement which are
known as of the Closing is or will be less than or equal to One
Million Dollars ($1,000,000.00), the Parent and the Seller shall
be obligated to consummate the transactions contemplated in this
Agreement; provided, further, that if it is reasonably
anticipated that the aggregate liability, loss, damage, injury or
claim (including reasonable counsel fees and costs of
any suit related thereto) relating to any misrepresentations by,
or breach of any covenant or warranty of, the Parent or the
Seller contained in this Agreement which are known as of the
Closing exceeds or will exceed One Million Dollars
($1,000,000.00), neither Purchaser, the Parent or the Seller
shall be obligated to consummate the transactions contemplated in
this Agreement unless Purchaser agrees to limit its right to
indemnification for such misrepresentation or breach to
$1,000,000.00.
7.1 Representations True at Closing. The
representations and warranties made by Purchaser in this
Agreement to the Parent and the Seller or any document or
instrument delivered to the Parent and the Seller or their
representatives hereunder shall be true and correct on the
Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such
date, except for changes contemplated by this Agreement.
7.2 Covenants of Purchaser. Purchaser shall have duly
performed all of the covenants, acts and undertakings to be
performed by it on or prior to the Closing Date, and a duly
authorized officer of Purchaser shall deliver a certificate dated
as of the Closing Date certifying to the fulfillment of this
condition and the condition set forth under Section 7.1 above.
7.3 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been
instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain, prohibit, or
obtain substantial damages in respect of, or which is related to,
or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, or which is related to or
arises out of the business of Purchaser, if such action,
proceeding, investigation, regulation or legislation, in the
reasonable judgment of the Parent and the Seller would make it
inadvisable to consummate same.
7.4 Opinion of Counsel for Purchaser. A favorable
opinion of G. Anthony Campbell, Esq., General Counsel of Flowers,
shall have been delivered to the Parent and the Seller dated as
of the Closing Date, substantially in form and substance of the
opinion attached hereto as Exhibit 7.4, which opinion shall be
governed by the Legal Opinion Accord of the ABA Section of
Business Law (1991).
7.5 Approvals. The execution and the delivery of this
Agreement and the consummation of the transactions contemplated
hereby shall have been approved by all regulatory authorities and
all courts whose approvals are required by law and all applicable
waiting periods under the HSR Act shall have expired or been
terminated.
7.6 Leases. Purchaser shall have entered into the
Leases.
7.7 Security Agreement. Purchaser shall have entered
into a Security Agreement substantially in the form of Exhibit
2.12.
7.8 Transition Services Agreement. Purchaser shall
have entered into a Transition Services Agreement.
7.9 Balance Sheet. Purchaser shall have delivered to
the Parent and the Seller a balance sheet as of a time
immediately prior to the Closing but which reflects the
capitalization of Purchaser to effect the Closing.
7.10 Partial Termination Liability. The potential
liability of Seller to Purchaser pursuant to Section 2.10.5(iii)
shall be reasonably anticipated to be less than $500,000.00 as a
result of the consummation of the transactions described in this
Agreement.
VIII. CLOSING.
8.1 Time and Place of Closing.
8.1.1 The Closing shall be held at the offices
of Jones, Day, Reavis & Pogue, 3500 One Peachtree Center, 303
Peachtree Street, N.E., Atlanta, Georgia 30308-3242, commencing
at 10:00 am., Eastern Time, on the later to occur of (i) May 31,
1996, or (ii) five (5) business days after the expiration or
early termination of all applicable waiting periods under the HSR
Act, unless another place or date is agreed to in writing by the
Parent, the Seller and Purchaser, but in no event will the
Closing be held later or be effective later than July 31, 1996.
Physical possession and control of the Purchased Assets shall be
delivered to Purchaser as of 11:59 pm, Eastern Time on the
Closing Date (the "Effective Time"), and any employees of the
Seller retained or employed by Purchaser shall be deemed employed
as of the Effective Time.
8.2 Transactions at Closing. At the Closing, each of
the following transactions shall occur:
8.2.1 The Parent's and Seller's Performance. At
the Closing, the Parent and the Seller shall deliver to Purchaser
the following:
(a) such good and sufficient bills of
sale, assignments, warranty deeds, deeds and other
good and sufficient instruments of sale,
conveyance, transfer and assignment as shall be
required or as may be appropriate in order to
effectively vest in Purchaser good and marketable
title to the Purchased Assets free and clear of all
liens, security interests and encumbrances of
whatever nature;
(d) an assignment and assumption
agreement relating to the Assumed Contracts;
(b) the certificates of the duly elected
officers of the Parent and the Seller described in
Section 6.2;
(c) copies of all consents, approvals,
acknowledgments and waivers listed on Exhibit 6.5;
(d) Leases executed by the Seller,
substantially in the forms of Exhibits 2.3(a) and
2.3(b), respectively;
(e) if obtained by Closing, terminations
of the financing statements described on Exhibit
2.8;
(f) audited financial statements
contemplated by Section 6.11;
(g) Security Agreement executed by the
Parent, substantially in the form of Exhibit 2.12;
(h) Transition Services Agreement
executed by the Parent and the Seller;
(i) satisfactory evidence of the
approvals described in Section 6.6;
(j) certificates of compliance or
certificates of good standing of the Parent and the
Seller, as of the most recent practicable date,
from the appropriate governmental authority of the
jurisdiction of its incorporation and any other
jurisdiction which is set forth in Exhibit 3.1
hereto;
(k) investment letter executed by the
Seller, substantially in the form of Exhibit 4.2
hereto;
(l) certified copies of resolutions of
the Boards of Directors of the Parent and the
Seller approving the transactions set forth in this
Agreement;
(m) certificate of incumbency for the
officers of the Parent and the Seller who are
executing this Agreement and the other documents
contemplated hereunder;
(n) opinion of counsel in substantially
the form attached hereto as Exhibit 6.4;
(o) all books of account (excluding
minute books and stock books of the Seller),
contracts,files and other data and documents
pertaining to the Assets and Business (which may be
delivered at the offices of the Business);
(p) physical possession of the Purchased
Assets where located; and
(q) such other evidence of the
performance of all covenants and satisfaction of
all conditions required of the Parent or the Seller
by this Agreement, at or prior to the Closing, as
Purchaser or its counsel may reasonably require.
8.2.2 Performance by Purchaser. At the
Closing, Purchaser shall deliver to the Parent and the Seller the
following:
(a) cash, by wire transfer, in the amount
to be paid to the Seller at Closing, as set forth
in Section 2.2.1(a);
(b) Promissory Notes executed by
Purchaser substantially in the forms of Exhibits
2.2.1(b) and 2.2.1(c), respectively;
(c) Liabilities Undertaking,
substantially in the form of Exhibit 2.2.1(d);
(d) an assignment and assumption
agreement relating to the Assumed Contracts;
(d) Leases executed by Purchaser,
substantially in the forms of Exhibits 2.3(a) and
2.3(b), respectively;
(e) Security Agreement executed by
Purchaser, substantially in the form of Exhibit
2.12 and any necessary financing statements related
thereto;
(f) Transition Services Agreement
executed by Purchaser;
(g) the certificate of the authorized
officer described in Section 7.2;
(h) satisfactory evidence of the
approvals described in Section 7.5;
(i) opinion of counsel in substantially
the form attached hereto as Exhibit 7.4;
(j) certificates of compliance or
certificates of good standing of Flowers and
Purchaser, as of the most recent practicable date,
from the appropriate governmental authority of the
jurisdiction of its incorporation;
(k) certificate of incumbency of the
officers of Purchaser who are executing this
Agreement and the other documents contemplated
hereunder;
(l) certificate of Purchaser reasonably
satisfactory to Purchaser, the Parent and the
Seller relating to Pennsylvania exemption for sales
tax on rent;
(m) certified copy of resolutions of the
Boards of Directors of Purchaser approving the
transactions set forth in this Agreement; and
(n) such other evidence of the
performance of all the covenants and satisfaction
of all of the conditions required of Purchaser by
this Agreement at or before the Closing as the
Parent, the Seller or their counsel may reasonably
require.
IX. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION.
9.1 Survival of Representations and Warranties of the
Parent and the Seller. All representations, warranties,
agreements, covenants and obligations made or undertaken by the
Parent and the Seller in this Agreement or in any document or
instrument executed and delivered pursuant hereto are material,
have been relied upon by Purchaser and shall survive the Closing
hereunder for the applicable period set forth in Section 9.5 and
shall not merge in the performance of any obligation by any party
hereto. The Parent and the Seller, jointly and severally, agree
to and shall indemnify and hold harmless Purchaser or any
assignee of Purchaser at all times after the date of this
Agreement from and against and in respect of, any liability,
claim, deficiency, loss, damage, or injury and all reasonable
costs and expenses (including reasonable counsel fees and costs
of any suit related thereto) suffered or incurred by Purchaser
arising from (i) any misrepresentation or a breach of any
representation or warranty of the Parent or the Seller contained
in Article III of this Agreement, Section 6 of the Real Property
Lease or Section 18 of the Equipment Lease, or any claim by a
third party (regardless of whether the claimant is ultimately
successful) which if true would be such a misrepresentation or
breach, (ii) any nonfulfillment of any agreement or breach of any
covenant on the part of the Parent or the Seller under this
Agreement or any claim by a third party (regardless of whether
the claimant is ultimately successful) which if true would be
such a nonfulfillment or breach, (iii) any suit, action,
proceeding, claim or investigation pending or threatened
against or affecting the Assets or the Business to the extent
that it arises from any matter or state of facts occurring prior
to Closing, regardless of whether it is disclosed on Exhibit
3.11, except for Assumed Product Liability Claims and workers
compensation claims that Purchaser has agreed to pay pursuant to
Section 2.18, (iv) any claim or debt, obligation or liability of
the Parent or the Seller which is not specifically assumed by
Purchaser pursuant to this Agreement, (v) any claim or right, or
any alleged claim or right, of third persons by virtue of
application of bulk sales laws or otherwise which may be asserted
against any of the Assets by reason of the transactions
contemplated by this Agreement, (vi) any suit, action,
proceeding, claim or investigation pending or threatened against
or affecting the Assets or the Business that arises from the
failure of the Parent or the Seller to comply with applicable
law, regardless of whether such noncompliance was known by the
Parent or the Seller, (vii) any claim against, or liability of,
the Assets or the Business that relates to a defect in the
merchantability, quality or character of the Finished Goods and
which defect existed on the Closing Date, or (viii) the failure
of the Seller to obtain on or prior to the Closing the
termination of each of the financing statements described on
Exhibit 2.8. In addition to any other rights or remedies
Purchaser may have, Purchaser shall be entitled to withhold from
the payments due under the Promissory Notes first, and if the
amounts to be withheld and which have been withheld exceed the
amounts outstanding under the Promissory Notes, to withhold from
the Fixed Rent (as defined in the Real Property Lease) and the
Rent (as defined in the Equipment Lease) the amount of any and
all liabilities, losses, damages, injuries, costs, expenses and
counsel fees which it has sustained or which it reasonably
believes it may sustain, and to offset from such withheld amount
any amount ultimately determined to be due and owing to Purchaser
by way of indemnification pursuant to this Section, and Purchaser
shall not be liable for principal or interest under the
Promissory Notes or amounts due under the Leases on any amounts
so set off. If the withholding of payments then due under the
Promissory Notes or the Leases has been based on a reasonable
belief of a future claim due to a specific allegation, Purchaser
shall pay any such amount withheld, plus interest related thereto
at a rate equal to the then-current rate on ten-year Treasury
Notes plus five percent per annum, which Purchaser has not offset
pursuant to the preceding sentence, within one year of the giving
of the written notification of such claim to the Seller, unless a
lawsuit, arbitration or administrative proceeding based on such
claim shall have been commenced within said period and is then
pending. If such a lawsuit, arbitration or administrative
proceeding has commenced within said one-year period, Purchaser
shall pay within thirty days after a final determination under
such lawsuit, arbitration or administrative proceeding, the
difference, if any, between said withheld amount and the amount
of any liability, loss, damage or injury actually sustained, if
the withheld amount is larger, plus interest related thereto at a
rate equal to the then-current rate on ten-year Treasury Notes
plus five percent per annum.
Any examination, inspection by audit of the
properties, financial condition or other matters of the Parent or
the Seller and the Business which is conducted pursuant to this
Agreement shall in no way limit, affect or impair the ability of
Purchaser to rely upon the representations, warranties, covenants
and obligations of the Parent and the Seller set forth herein.
9.2 Nonsurvival of Representations and Warranties of
Flowers; Survival of Representations and Warranties of Purchaser.
All representations, warranties, agreements, covenants and
obligations made or undertaken by Flowers in this Agreement or in
any document or instrument executed and delivered pursuant hereto
shall not survive the Closing, and thereafter none of Flowers,
its officers, directors or employees shall have any liability
whatsoever with respect to any such representations, warranties,
agreements, covenants and obligations; provided, however, that
the representations and warranties of Flowers contained in
Section 5.4 shall survive the Closing for a period of eighteen
months thereafter. All representations and warranties made by
Purchaser in this Agreement or in any document or instrument
executed and delivered pursuant hereto are material, have been
relied upon by the Parent and the Seller, shall not merge in the
performance of any obligation by any party hereto and the
representations and warranties contained in Article V of this
Agreement shall survive the Closing hereunder for a period of
eighteen (18) months. All agreements, covenants and obligations
undertaken by Purchaser in this Agreement or in any document or
instrument executed and delivered pursuant hereto are material,
have been relied upon by the Parent and the Seller, shall not
merge in the performance of any obligation by any party hereto
and shall survive the Closing hereunder for the longest period
available under applicable law. Purchaser agrees to and shall
indemnify and hold harmless the Parent and the Seller at all
times after the date of this Agreement from and against and in
respect of, any liability, claim, deficiency, loss, damage or
injury and all reasonable costs and expenses (including
reasonable counsel fees and costs of any suit related thereto)
suffered or incurred by the Parent or the Seller arising from (i)
a breach of any representation or warranty of Flowers or
Purchaser contained in Article V of this Agreement, or
any claim by a third party (regardless of whether the claimant is
ultimately successful) which if true would be such a breach, (ii)
any nonfulfillment of any agreement on the part of Flowers or
Purchaser under this Agreement, (iii) an Assumed Liability or an
Assumed Contract (to the extent assumed by Purchaser), or (iv)
the conduct or operation of the Business by Purchaser after the
Closing, except to the extent the matter or state of facts to
which such liability, claim, deficiency, loss, damage or injury
existed prior to the Closing.
9.3 Maximum Aggregate Liability Amount. The maximum
aggregate liability of the Parent and the Seller for
indemnification for a breach of a representation or warranty
contained in Article III of this Agreement, Section 6 of the Real
Property Lease or Section 18 of the Equipment Lease shall be
equal to the sum of Fifteen Million Dollars ($15,000,000.00) (the
"Maximum Aggregate Liability Amount"), and the obligation of the
Parent and the Seller for indemnification for breaches of such
representations or warranties will terminate when the Maximum
Aggregate Liability Amount has been paid; provided, however, that
the Maximum Aggregate Liability Amount shall not be charged for
or reduced by, nor shall there be any Maximum Aggregate Liability
Amount for, any liability, loss, damage, injury or claim
resulting from a breach of the representations and warranties
contained in Section 6.a.(ix) of the Real Property Lease.
9.4 Minimum Aggregate Liability Amount. Purchaser
agrees not to seek recourse against, and shall not recover from
the Parent or the Seller for indemnification for a breach of a
representation or warranty contained in Article III of this
Agreement, Section 6 of the Real Property Lease or Section 18 of
the Equipment Lease, until the aggregate amount thereof exceeds
Seven Hundred Fifty Thousand Dollars ($750,000.00) (the "Minimum
Aggregate Liability Amount"), at which time claims may be
asserted for amounts in excess of the Minimum Aggregate Liability
Amount; provided, however, that the Minimum Aggregate Liability
Amount shall not be charged for or reduced by, nor shall there be
any Minimum Aggregate Liability Amount for, any liability, loss,
damage, injury or claim resulting from a breach of the
representations and warranties contained in Section 6.a.(ix) of
the Real Property Lease. The Minimum Aggregate Liability Amount
shall be charged for and reduced by payments made by Purchaser
relating to any Assumed Product Liability Claim.
9.5 Survival Period for Claims Against the Parent and
the Seller. Except as provided below, a claim for
indemnification hereunder based upon Section 9.1(i) of this
Agreement against the Parent or the Seller shall be forever
barred unless made by notifying the Parent within eighteen (18)
months following the Closing Date. A claim for indemnification
hereunder based upon Sections 6.a.(i), 6.a.(ii) or 6.a.(ix) of
the Real Property Lease or Section 18.1.1 of the Equipment Lease
may be made within the period provided for in the Real Property
Lease and the Equipment Lease, respectively. Any other claim for
indemnification hereunder against the Parent or the Seller may be
made within the longest period available under applicable law.
9.6 Mediation. If a dispute arises out of or relates
to this Agreement or any agreement that is an Exhibit hereto, or
the breach thereof, and if the dispute cannot be settled through
negotiation, the parties hereto agree first to try in good faith
to settle the dispute by mediation administered by the American
Arbitration Association under its Commercial Mediation Rules
before resorting to litigation or some other dispute resolution
procedure. Notwithstanding the foregoing, (i) the parties
obligation to mediate shall terminate sixty (60) days after a
request for mediation has been made by one of the parties and
(ii) a party may also seek redress from a court of competent
jurisdiction if the delay caused by mediation would prejudice any
rights such party may otherwise have.
X. COVENANT NOT TO COMPETE
10.1 Noncompetition. Each of the Parent and the Seller
covenants and agrees that, for a period of five (5) years from
the Closing Date, it will not, within Mexico, Canada and the
United States and its territorial possessions (such areas being
referred to herein as the "Territory"), directly or indirectly,
compete, as defined in Section 10.2 hereof, with Purchaser by
carrying on a business which is substantially similar to the
Business, except as specifically allowed in the Transition
Services Agreement. Notwithstanding the foregoing, the
provisions of this Section 10.1 are subject to termination as
provided in the Security Agreement. The Parent and the Seller
represent and warrant to Purchaser that the Seller is and has
been carrying on such business throughout the Territory.
Notwithstanding anything in this Agreement to the contrary,
nothing in this Article shall be construed to prohibit
or restrict the Parent or the Seller or their affiliates from
engaging in the business of producing and selling filling for
frozen or unfrozen pies.
10.2 Definition of "Compete." For the purposes of this
Article X, the term "compete" shall mean with respect to the
Business: (i) managing, supervising or otherwise participating in
the manufacturing, distribution or sale of branded frozen pies,
frozen pie shells and "in-store/deli bakery" pies or the
manufacturing, distribution or sale of aluminum pans and steel
magnetic shielding; (ii) calling on, soliciting, taking away,
accepting as a client or customer or attempting to call on,
solicit, take away or accept as a client or customer any
individual, partnership, corporation or association that was a
client or customer of the Business during the twelve (12)
calendar month period immediately preceding any such act; (iii)
soliciting, taking away or attempting to hire, solicit or take
away any employee of the Business either on Seller's behalf or on
behalf of any other person or entity (except as provided in
Section 2.10.4); or (iv) for the period set forth in Section
10.1, entering into or attempting to enter into any business
substantially similar to the Business within the Territory,
either alone or with any individual, partnership, corporation or
association.
10.3 Direct or Indirect Competition. For the purposes of
this Article X, the words "directly or indirectly" as they modify
the word "compete" shall mean (i) acting as an agent,
representative, consultant, officer, director, independent
contractor, or employee of any entity or enterprise which is
competing (as defined in Section 10.2 hereof) with the Business;
(ii) participating in any such competing entity or enterprise as
an owner, partner, limited partner, joint venturer, creditor or
stockholder (except as a stockholder holding less than one
percent (1%) interest in a corporation whose shares are actively
traded on a regional or national securities exchange or in the
over-the-counter market); and (iii) communicating to any such
competing entity or enterprise the names or addresses or any
other information concerning any past, present, or identified
prospective client or customer of the Business or any entity
having title to the goodwill of the Seller with respect to the
Business.
10.4 Confidential Data. Each of the Parent and the
Seller further agrees that it will keep confidential and not,
directly or indirectly, divulge to anyone nor use or otherwise
appropriate for the Parent's or the Seller's own benefit in a
manner that would be detrimental to Purchaser's use of the Assets
and the conduct of the Business or otherwise competitive with the
Business, any pricing information, marketing information, sales
technique of the Business, or any other of the following
confidential information or documents of or relating to the
Business: confidential records, computer software programs or any
portions or logic comprising said programs, client and customer
lists, information about client requirements, terms of license
agreements, terms of contracts with clients and customers, and
planning and financial information of the Business (hereinafter
referred to as the "Confidential Data"); provided, however, the
term Confidential Data shall not include any information that
becomes available in the public domain other than as a result of
acts by the Parent, the Seller or their representatives. In the
event that the Parent or the Seller becomes legally compelled to
disclose any Confidential Data, the Parent or the Seller, as the
case may be, shall provide Purchaser with prompt notice so that
Purchaser may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Section 10.4.
In the event that such protective order or other remedy is not
obtained, or that Purchaser waives compliance with the provisions
of this Section 10.4, the Parent or the Seller, as the case may
be, shall furnish only that portion of the Confidential Data
which is legally required in the opinion of its counsel, and
shall use its reasonable best efforts to obtain a protective
order or other reliable assurance that confidential treatment
will be accorded to such Confidential Data. The Parent
and the Seller hereby acknowledge and agree that the prohibitions
against disclosure of Confidential Data recited herein are in
addition to, and not in lieu of, any rights or remedies which
Purchaser may have available pursuant to the laws of any
jurisdiction or at common law to prevent the disclosure of trade
secrets or proprietary information, and the enforcement by
Purchaser of its rights and remedies pursuant to this Agreement
shall not be construed as a waiver of any other rights or
available remedies which they may possess in law or equity absent
this Agreement.
XI. TAX EFFECT OF THE TRANSACTION.
None of Purchaser, the Parent nor the Seller has made nor
do any of them make herein any representation or warranty as to
the tax consequences of the transactions contemplated or provided
for herein to any party hereto. It is understood and agreed that
each party has looked to its own advisors for advice and counsel
as to such tax effects.
XII. TERMINATION.
12.1 Method of Termination. This Agreement constitutes
the binding and irrevocable agreement of the parties to
consummate the transactions contemplated hereby, the
consideration for which is (a) the covenants set forth in Article
II hereof, and (b) expenditures and obligations incurred and to
be incurred by Purchaser and by the Parent and the Seller in
respect of this Agreement, and this Agreement may be terminated
or abandoned only as follows:
12.1.1 By the mutual consent of the Boards of
Directors of the Parent, the Seller and Purchaser,
notwithstanding prior approval by the shareholders of any or all
of such corporations;
12.1.2 By the Parent or the Seller after July 31,
1996 if any of the conditions set forth in Article VII hereof, to
which its obligations are subject, have not been fulfilled or
waived, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of the Parent or the
Seller; or
12.1.3 By Purchaser after July 31, 1996 if any of
the conditions set forth in Article VI hereof, to which the
obligations of Purchaser are subject, have not been fulfilled or
waived, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of Purchaser.
12.2 Effect of Termination. In the event of a
termination of this Agreement pursuant to Section 12.1 or 12.3
hereof, each party shall pay the costs and expenses incurred by
it in connection with this Agreement, and no party (or any of its
officers, directors, employees, agents, representatives or
shareholders) shall be liable to any other party for any costs,
expenses, damage or loss of anticipated profits hereunder.
12.3 Risk of Loss. The Parent and the Seller assume all
risk of condemnation, destruction, loss or damage due to fire or
other casualty from the date of this Agreement up to Effective
Time. If the condemnation, destruction, loss or damage is such
that the Business is interrupted or curtailed or the Assets are
materially affected, then Purchaser on the one hand, and the
Parent and the Seller on the other hand, shall have the right to
terminate this Agreement.
XIII. GENERAL PROVISIONS.
13.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be
delivered by hand or sent by Federal Express or similarly
recognized overnight delivery service with receipt acknowledged,
addressed as follows:
13.1.1 If to the Parent or the Seller:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attn: Richard Smucker
and to:
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attn: Steven J. Ellcessor, Esq.
13.1.2 If to Purchaser:
Flowers Industries, Inc.
200 U.S. Highway 19 South
Post Office Box 1338
Thomasville, Georgia 31799
Attn: G. Anthony Campbell, Esq.
and to:
Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attn: Barry J. Stein, Esq.
13.1.3 If delivered personally, the date on which
a notice, request, instruction or document is delivered shall be
the date on which such delivery is made and, if delivered by
overnight delivery service, the date on which such notice,
request, instruction or document is received (as evidenced by the
overnight delivery receipt) shall be the date of delivery. In
the event any such notice, request, instruction or document is
shipped by overnight delivery service to a party in accordance
with this Section 13.1 and is returned to the sender as
nondeliverable, then such notice, request, instruction or
document shall be deemed to have been delivered or received on
the fifth day following the delivery to the overnight delivery
service as evidenced by the returned document marked
"Nondeliverable" or such similar wording.
13.1.4 Any party hereto may change its address
specified for notices herein by designating a new address by
notice in accordance with this Section 13.1.
13.2 Brokers.
13.2.1 The Parent and the Seller, jointly and
severally, represent and warrant to Purchaser that no investment
banker, broker or finder has acted for either of them in
connection with this Agreement or any of the transactions
contemplated hereby, except for Ernst & Young LLP. The Parent
and the Seller, jointly and severally, agree to indemnify and
hold harmless Purchaser from and against any fee, claim, loss, or
expense arising out of any claim by any investment banker, broker
or finder employed or alleged to have been employed by either of
them.
13.2.2 Purchaser and Flowers, jointly and
severally, represent and warrant to the Parent and the Seller
that they have not retained any investment banker, broker or
finder in connection with this Agreement or any of the
transactions contemplated hereby. Purchaser agrees to indemnify
and hold harmless the Parent and the Seller from and against any
fee, claim, loss, or expense arising out of any claim by any
investment banker, broker or finder employed or alleged to have
been employed by it.
13.3 Further Assurances. Each party covenants that at
any time, and from time to time, after the Closing Date, it will
execute such additional instruments and take such actions as may
be reasonably requested by the other parties to confirm or
perfect or otherwise to carry out the intent and purposes of this
Agreement.
13.4 Waiver. Any failure on the part of any party
hereto to comply with any of its obligations, agreements or
conditions hereunder may be waived by any other party to whom
such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any
other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver.
13.5 Expenses. All expenses incurred by the parties
hereto in connection with or related to the authorization,
preparation and execution of this Agreement and the Closing of
the transactions contemplated hereby, including, without
limitation of the generality of the foregoing, all fees and
expenses of brokers, agents, representatives, counsel and
accountants employed by any such party, shall be borne solely and
entirely by the party which has incurred the same. All such fees
and expenses of the Parent or the Seller shall be borne by the
Parent or the Seller from proceeds from the sale of the Purchased
Assets hereunder or from funds not included in the Assets. In no
event shall the Purchased Assets to be purchased by Purchaser be
utilized for or be reduced by the payment of any such fees or
expenses. The Seller hereby represents and warrants that no such
fees or expenses have been paid by the Parent or the Seller from
any of the Assets prior to the date of this Agreement, and hereby
covenants that the Parent and the Seller will not so pay any such
fees or expenses from the Assets prior to the Closing.
13.6 Disclosure. None of the parties shall make any
disclosure of the existence, substance or status of the subject
matter hereof, unless such disclosure is required by the federal
securities laws or unless the parties agree otherwise. If any
party proposes to issue, make or distribute any press release,
public announcement or other written publicity or disclosure
prior to the Closing Date that refers to the transactions
contemplated herein, the party proposing to make such disclosure
shall provide a copy of such disclosure to the other parties and
shall afford such other parties reasonable opportunity (subject
to any legal obligation of prompt disclosure) to comment on such
disclosure or the portion thereof which refers to the
transactions contemplated herein prior to making such disclosure.
13.7 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, executors,
administrators, successors and assigns. In the event that any
provision of Article X of this Agreement or any word, phrase,
clause, sentence or other portion thereof (including, without
limitation, the geographical and temporal restrictions contained
herein) should be held to be unenforceable or invalid for any
reason, such provision or portion thereof shall be modified or
deleted in such a manner so as to make this Agreement as modified
legal and enforceable to the fullest extent permitted under
applicable laws.
13.8 Headings. The section and other headings in this
Agreement are inserted solely as a matter of convenience and for
reference, and are not a part of this Agreement.
13.9 Entire Agreement. This Agreement and the Letter
Agreement regarding confidentiality dated January 19, 1996
between Flowers and the Parent constitute the entire agreement
among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or communications,
whether oral or written, among the parties hereto relating to the
transactions contemplated hereby or the subject matter herein.
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by an agreement
in writing signed by the party against whom or which the
enforcement of such change, waiver, discharge or termination is
sought.
13.10 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Georgia.
13.11 Equitable Relief. Each of the Parent and the
Seller acknowledges that its expertise in the Business described
herein is of a special, unique, unusual, extraordinary, and
intellectual character, which gives said expertise a peculiar
value, and that a breach by the Parent or the Seller of the
provisions of Article X of this Agreement cannot reasonably or
adequately be compensated in damages in an action at law; and a
breach of any of the provisions contained in Article X of this
Agreement will cause Purchaser irreparable injury and damage.
Each of the Parent and the Seller further acknowledges that it
possesses unique skills, knowledge or ability and that
competition in violation of Article X of this Agreement or any
other breach of the provisions of Article X of this Agreement
would be extremely detrimental to Purchaser. By reason thereof,
each of the Parent and the Seller agrees that Purchaser shall be
entitled, in addition to any other remedies it may have under
this Agreement or otherwise, to preliminary and permanent
injunctive and other equitable relief to prevent or curtail any
breach of Article X of this Agreement; provided, however, that
no specification in this Agreement of a specific legal or
equitable remedy shall be construed as a waiver or prohibition
against the pursuing of other legal or equitable remedies in the
event of such a breach.
13.12 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
13.13 Pronouns. All pronouns used herein shall be deemed
to refer to the masculine, feminine or neuter gender as the
context requires.
13.14 Exhibits Incorporated. All Exhibits attached
hereto are incorporated herein by reference, and all blanks in
such Exhibits, if any, will be filled in as required in order to
consummate the transactions contemplated herein and in accordance
with this Agreement.
13.15 Time of Essence. Time is of the essence in this
Agreement.
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed or
caused this Agreement to be executed on its behalf, all on the
day and year first above written.
FLOWERS INDUSTRIES, INC.
("FLOWERS")
By: /s/ G.A. Campbell
General Counsel and Secretary
MRS. SMITH'S BAKERIES, INC.
("PURCHASER")
By: /s/ G.A. Campbell
President
THE J.M. SMUCKER COMPANY
("PARENT")
By: /s/ R.K. Smucker
President
MRS. SMITH'S, INC.
("SELLER")
By: /s/ Stephen J. Ellcessor
Secretary
LIST OF EXHIBITS
EXHIBITS
1.27 Persons Deemed to Have Knowledge.
2.1.3 List of Assets and Contracts Not Included in Assets
Being Sold.
2.2.1(b) Intangibles Note.
2.2.1(c) Working Capital Note.
2.2.1(d) Liabilities Undertaking.
2.3(a) Equipment Lease.
2.3(b) Real Property Lease.
2.7.1 Conduct of the Business.
2.8 Financing Statements Affecting the Leased Assets.
2.10.1 Severance Benefits
2.10.4 List of Managers.
2.12 Security Agreement relating to Intangibles Note.
3.1 List of Jurisdictions Where There is Good Standing
Status.
3.3 List of Equity Investments.
3.4.1 1994 and 1995 Financial Statements and Interim
Financial Statements.
3.4.2 List of Liabilities not disclosed in the Financial
Statements.
3.5 Tax Liens.
3.6.1.1 Inventories.
3.6.1.2 Leased Assets.
3.6.1.3 Inventory Matters.
3.8 Accounts Receivable and Notes Receivable.
3.9 List of Consent Requirements.
3.10 List of Changes.
3.11 List of Litigation.
3.12 List of Licenses and Permits.
3.13 List of Contracts.
3.14.1 List of Trademarks, Trade Names, Service Marks,
Service
Names, Etc.
3.14.2 List of Seller's Software
3.15 List of Employees, Independent Contractors, Salaries,
Rates, Salary Increase Guidelines and Labor Matters.
3.16 List of Benefit Plans.
3.17 List of Customers and Brokers, Addresses, Telephone
Numbers and Principal Person of Contact and List of
Problems with Customers.
3.19 List of Insurance Matters
3.20 List of Related Party Relationships
3.22 UPC Codes.
3.23 Suppliers.
4.2 Seller Investment Letter.
6.4 Form of Opinion of the Parent's General Counsel.
6.5 Consents Required for Closing.
7.4 Form of Opinion of Purchaser's General Counsel.
Contact: Mary Krier
Manager of Communications
(912) 226-9110
For Immediate Release
FLOWERS INDUSTRIES COMPLETES ACQUISITION OF MRS. SMITH'S PIES
THOMASVILLE, GA.; May 31, 1996--Flowers Industries, Inc.
announced today that it has completed its acquisition of the Mrs.
Smith's pie business from The J.M. Smucker Company. Terms were
not disclosed.
Mrs. Smith's, with annual sales of approximately $140
million, is the nation's leading brand of frozen retail dessert
pies. With the transaction completed, Mrs. Smith's, located in
Pottstown, Pa., becomes a part of Flowers' Specialty Foods Group.
This group produces and markets fresh and frozen specialty
breads, fresh snack cakes and pastries, gourmet decorated cakes
and pies, and frozen cobblers, fruits, breaded vegetables, and
quiches.
"Mrs. Smith's outstanding consumer franchise and national
distribution network allow Flowers to dramatically enhance its
frozen branded retail presence through increased pie sales and
product line extensions in frozen baked foods," noted Amos R.
McMullian, chairman of the board and chief executive officer of
Flowers Industries.
Flowers Industries, Inc. (NYSE:FLO), headquartered in
Thomasville, Ga., produces and markets a variety of specialty
branded food products for retail and foodservice customers.
Flowers operates 51 production and sales companies in 17 states.
For its most recent fiscal year ended July 1, 1995, Flowers
Industries reported $1.13 billion in annual sales. The company
also has an equity investment in the Elmhurst, Illinois-based
Keebler Company, the nation's second largest cookie and cracker
business.
