<PAGE> 1
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): October 13, 1998
(September 28, 1998)
Flowers Industries, Inc.
------------------------
Georgia 1-9787 58-0244940
------- ------ ----------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
1919 Flowers Circle, P.O. Box 1338, Thomasville, GA 31757
- --------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (912) 226-9110
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
On September 28, 1998, Keebler Foods Company ("Keebler"), of which
Flowers Industries, Inc. ("Flowers") owns a 55% majority interest, purchased all
of the outstanding common stock of President International, Inc. ("President")
from President International Trade and Investment Corporation for a purchase
price of $450 million. The acquisition has been financed with cash and new bank
debt.
President, with annualized net sales of approximately $450 million, is
the fifth largest cookie marketer in the United States and is the leading
supplier of Girl Scout cookies. Its key brands include "Famous Amos",
"Plantation" and "Murray".
Item 7. Financial Statements and Exhibits.
(a), (b) Financial Statements of Business Acquired; Pro Forma
Financial Information. The historical and pro forma financial statements called
for by this Item 7 will be provided under cover of Form 8-K/A as soon as
practicable, but no later than December 14, 1998.
(c) Exhibits
2. Stock Purchase Agreement dated August 24, 1998.
<PAGE> 3
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/ Jimmy M. Woodward
--------------------------------------
Jimmy M. Woodward
Treasurer and Chief Accounting Officer
Date: October 13, 1998
----------------
<PAGE> 1
EXHIBIT 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August
24, 1998, by and among Keebler Foods Company, a Delaware corporation ("Buyer"),
President International, Inc., a Delaware corporation (the "Company"), and
President International Trade and Investment Corporation, a company limited by
shares under the International Business Companies Ordinance of the British
Virgin Islands ("Parent" and, together with the Company, "Seller").
W I T N E S S E T H:
WHEREAS, Parent owns all of the issued and outstanding shares
of common stock, $.01 par value, of the Company;
WHEREAS, Parent desires to sell to Buyer, and Buyer desires to
purchase from Parent, all of the issued and outstanding shares of common stock,
$.01 par value, of the Company (collectively, the "Shares").
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, on the basis of, and in reliance upon, the representations,
warranties, covenants, obligations and agreements set forth in this Agreement,
and upon the terms and subject to the conditions contained herein, hereby agree
as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 DEFINITIONS. In this Agreement, the following
terms have the meanings specified or referred to in this Section 1.1 and shall
be equally applicable to both the singular and plural forms. Any agreement
referred to below shall mean such agreement as amended, supplemented and
modified from time to time to the extent permitted by the applicable provisions
thereof and by this Agreement.
"ACCOUNTANTS" means the New York, New York office of Arthur
Andersen LLP, or any other independent accounting firm of nationally recognized
standing mutually acceptable to Parent and Buyer.
"ACTION" shall mean any civil, criminal or administrative
action, proceeding or suit or any appeal in respect thereof.
"AFFILIATED PARTIES" shall have the meaning specified in
Section 5.9.
<PAGE> 2
"AGREEMENT" means this Stock Purchase Agreement.
"ANTITRUST DIVISION" means the Antitrust Division of the
United States Department of Justice.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning
specified in Section 3.7.
"AUTHORITY" means any governmental, regulatory or
administrative body, agency or authority, any court of judicial authority or any
arbitrator, whether foreign, federal, state or local.
"BANKRUPTCY EXCEPTION" has the meaning specified in Section
3.3(a).
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday, or a day on which banks in New York, New York are authorized or
obligated by Law or executive order to close.
"BUYER" means Keebler Foods Company, a Delaware corporation.
"CASH ESCROW AMOUNT" shall mean an amount equal to Five
Million Dollars ($5,000,000), together with all interest and earnings thereon.
"CASH INDEMNIFICATION ESCROW AGREEMENT" shall mean the Cash
Indemnification Escrow Agreement between Buyer and Seller in substantially the
form of Exhibit A attached hereto.
"CAPITALIZED LEASE AMOUNT" shall mean the aggregate present
value of all unpaid rental obligations of the Company (or its Subsidiaries)
under the equipment leases for the Lake Bluff automated brownie line and the
Louisville automated mint line as of the Closing Date, through the end of the
current term of each such lease; such present value to be computed using a per
annum discount rate of seven and one-half percent (7 1/2%).
"CLOSING" has the meaning specified in Section 2.3.
"CLOSING BALANCE SHEET" has the meaning specified in Section
2.2(d).
"CLOSING DATE" has the meaning specified in Section 2.3.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means common stock of the Company, $0.01 par
value, of the Company.
"COMPANY" means President International, Inc., a Delaware
corporation.
"COMPANY SALE" has the meaning specified in Section 5.9.
2
<PAGE> 3
"COMPENSATION AND BENEFIT PLANS" shall have the meaning
specified in Section 3.15(a).
"COMPETING BUSINESS" shall have the meaning specified in
Section 3.18(a).
"CONFIDENTIALITY AGREEMENT" means that certain Confidentiality
Agreement dated July 24, 1998, by and among Buyer and Parent.
"CONTRACT" shall mean any agreement, contract, license, lease,
sublease, binding arrangement or commitment, or other similar agreement.
"DEBT AMOUNT" shall mean all Indebtedness as of the Closing
Date, and any accrued interest, prepayment penalties, fees, costs and other
charges related thereto, but excluding all intercompany debt owed among the
Company and its Subsidiaries, all obligations under interest rate swap
arrangements and all Letter of Credit Obligations.
"EMPLOYEES" has the meaning specified in Section 3.15(a).
"ENCUMBRANCE" means any lien (statutory or other), claim,
charge, security interest, mortgage, pledge, hypothecation, assignment,
encumbrance, preference, priority, reversionary interest, easement, conditional
sale or other title retention agreement, defect in title or other restrictions
of a similar kind.
"ENVIRONMENTAL LAW" shall mean all applicable federal, state
or local statutes, regulations, rules, permits and orders of any Authority
relating to the protection of human health and the environment, soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface strata,
ambient air, and any environmental medium existing as of the date hereof.
Environmental Law shall include, but not be limited to, the following: the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss.ss. 9601, et seq.) ("CERCLA"), as amended by the Superfund Amendments and
Reauthorization Act, Public Law 99-499, 100 Stat. 1613; the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. ss.
6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq.;
the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251, et seq.; the Clean
Air Act, 42 U.S.C. ss. 7401, et seq.; the Safe Drinking Water Act, 42 U.S.C. ss.
300f-300j; and the state and local analogs thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ESCROW AGENT" shall mean a bank of nationally recognized
standing, whose principal office shall be in New York, New York (but who shall
maintain the Cash Escrow Amount in an offshore account provided cash funds are
available in New York, New York upon a draw made upon its New York, New York
office), mutually acceptable to Seller and Buyer.
"ESTIMATED BALANCE SHEET" has the meaning specified in Section
2.2(b).
"EXPENSES" mean any and all reasonable expenses incurred in
connection with investigating, defending or asserting any Action incident to any
matter indemnified against
3
<PAGE> 4
hereunder (including, without limitation, court filing fees, court costs,
arbitration fees or costs, witness fees and reasonable fees and disbursements of
legal counsel, investigators, expert witnesses, accountants and other
professionals).
"FTC" shall mean the Federal Trade Commission.
"GAAP" shall mean generally accepted accounting principles in
the United States consistently applied and as in effect on December 27, 1997.
More specifically, as relates to financial statements of the Company as of any
date and for any period ending subsequent to December 27, 1997, GAAP shall
exclude the effects of any changes in accounting principles otherwise required
to be adopted subsequent to December 27, 1997 pursuant to new or existing
standards, interpretations or other pronouncements promulgated by the Financial
Accounting Standards Board, American Institute of CPA's, Securities and Exchange
Commission, Emerging Issues Task Force or any committees thereof. With respect
to the Closing Balance Sheet, GAAP shall have the same meaning as set forth
above and shall be applied on the same basis as that utilized in preparation of
the December 27, 1997 consolidated balance sheet of the Company as though the
Closing Date were a normal fiscal year end date of the Company.
"GOVERNMENTAL PERMITS" have the meaning specified in Section
3.10.
"HAZARDOUS SUBSTANCE" shall mean any substance: (i) the
presence of which requires investigation or remediation under any federal, state
or local statute, regulation, ordinance, order, permit or Action; (ii) which is
or has been identified as a hazardous waste, hazardous substance, pollutant or
contaminant under any applicable Environmental Law, or (iii) which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, reactive, or otherwise hazardous and has been identified as regulated
under any Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INCOME TAX" means any federal, state or local income,
alternative, minimum, franchise or other similar tax, duty, governmental charge
or assessment imposed by or on behalf of any Authority that is based on or
measured by income (including, interest and penalties on any of the foregoing).
"INDEBTEDNESS" means all indebtedness for borrowed money by
the Company and its Subsidiaries calculated in accordance with GAAP, including
(i) prepayment penalties, fees, costs or charges payable in connection with the
retirement of such indebtedness as of the Closing, and (ii) obligations
evidenced by bonds, debentures, notes or similar instruments, but excluding
obligations under capitalized or other leases regardless of how classified under
GAAP or by the Company, and excluding all Letter of Credit Obligations (which
shall be the responsibility of Buyer, including without limitation, the portion
of the Company's senior debt facility related thereto).
"INDEMNIFICATION ESCROW AGREEMENTS" shall mean collectively
the Cash Indemnification Escrow Agreement, Supplemental Letter of Credit
Indemnification Escrow Agreement and the Tax Letter of Credit Indemnification
Escrow Agreement.
4
<PAGE> 5
"INDEMNIFIED PARTY" shall have the meaning specified in
Section 8.3(b).
"INDEMNIFYING PARTY" shall have the meaning specified in
Section 8.3(a).
"INTELLECTUAL PROPERTY" shall have the meaning specified in
Section 3.11.
"INTERIM BALANCE SHEET" shall have the meaning specified in
Section 3.7 hereof.
"INTERIM FINANCIAL STATEMENTS" shall have the meaning
specified in Section 3.7 hereof.
"IRS" shall mean the United States Internal Revenue Service.
"KNOWLEDGE OR KNOWN" with respect to any Person, shall mean
the actual conscious awareness of such Person, and Knowledge or Known as to
Seller shall mean such awareness of Eric H. Wen, Steven B. Woolf, William G.
Bayers, Jerry Cavitt, Gerald V. DeFalco, Emmett E. Watson, Wendell Horner,
Donald W. Davis, Jr., Mark Murphy and Forest Ralph.
"LABOR DISPUTES" shall have the meaning specified in Section
3.20(b).
"LAW" shall mean any law, rule, regulation, order, ordinance,
requirement, treaty, statute or code or other binding action, requirement or
ruling of an Authority, other than any Environmental Law.
"LEASED REAL PROPERTY" means those certain parcels of land
more fully described on Schedule 3.12 to this Agreement under the heading
"Leased Real Property."
"LETTER OF CREDIT BANK" shall mean a bank of nationally
recognized standing with not less than an "A" rating having combined capital and
surplus of not less than $300,000,000 and an office in New York, New York,
mutually acceptable to Seller and Buyer.
"LETTER OF CREDIT OBLIGATIONS" shall mean all reimbursement
obligations of the Company in respect of letters of credit issued in connection
with distributor loans.
"LIABILITY" shall mean any debt, liability, commitment or
obligation of any kind, character or nature whatsoever, known or unknown,
secured or unsecured, accrued, fixed, absolute, contingent, and whether due or
to become due.
"LICENSES" means all licenses, franchises, certifications,
authorizations, approvals and permits issued or approved by any Authority and
relating to the operation, ownership, development and maintenance of the Real
Property or any part thereof, including elevator permits, machinery permits,
business licenses, ingress and egress permits and the like.
"LOSSES" mean any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges.
5
<PAGE> 6
"LTIP AMOUNT" shall mean all liabilities incurred in respect
of the sale of the Shares under the Company's 1998 Long-Term Incentive Plan
calculable as of the Closing Date.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the assets, business (including current business and prospects for continuation
of current business) or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.
"MATERIAL CONTRACTS" has the meaning specified in Section
3.14(a).
"MULTIEMPLOYER PLAN" shall have the meaning specified in
Section 3.15(a).
"NET WORKING CAPITAL" shall mean all current assets of the
Company and its Subsidiaries (excluding only cash and amounts owed to the
Company or any Subsidiary from Parent, any Subsidiary or the Company), minus all
current liabilities of the Company and its Subsidiaries (excluding amounts owed
by the Company or any Subsidiary to any Subsidiary, the Company or Parent), in
each case determined in accordance with GAAP, as further qualified by this
definition. Current liabilities of the Company and its Subsidiaries shall not
include any liability to the extent included in the Capitalized Lease Amount,
the Debt Amount, the LTIP Amount or the Tax Amount. Current liabilities shall
not include liabilities unknown to Seller or incurred out of the Ordinary Course
of Business, the existence of either of which constitutes the breach of any
representation or warranty contained in Article III whether or not giving effect
to any qualification contained therein as to materiality, Knowledge or by
reference to any Schedule. Current liabilities shall not include any reserves or
accruals for environmental liabilities of any nature. All reserves and other
accounts based on estimates shall be calculated in the same manner and shall be
based upon similar types of information, as was used by the Company in the
preparation of the Audited Financial Statements; provided that such calculation
shall not include the effects of any reversal or dimunition of such reserves
from those included in the June 27, 1998 balance sheet of the Company, except to
the extent of actual charges incurred in the Ordinary Course of Business.
Current assets and current liabilities shall include for purposes of the
computation of Net Working Capital, (i) any accelerated bonus payments made by
the Company at or immediately prior to Closing under the Company's Management
Incentive Plan, and (ii) Taxes other than Income Taxes (but only to the extent
historically included).
"NET WORKING CAPITAL DEFICIT" means the excess, if any, of (i)
(A) Thirty-Seven Million and One Hundred Thousand Dollars ($37,100,000), less
(B) the Swap Adjustment Amount, less (ii) the Net Working Capital as of the date
of the Closing Balance Sheet.
"NET WORKING CAPITAL EXCESS" means the excess, if any, of (i)
the Net Working Capital as of the date of the Closing Balance Sheet, less (ii)
(A) Thirty-Seven Million and One Hundred Thousand Dollars ($37,100,000), less
(B) the Swap Adjustment Amount.
"ORDER" shall mean any award, decision, injunction, judgment,
decree, stipulation, settlement, order, filing, subpoena, consent or verdict
(whether temporary, preliminary or permanent) entered, issued, made or rendered
by any Authority against the Company or its Subsidiaries.
"ORDINARY COURSE OF BUSINESS" shall mean in the ordinary
course of the Company's or any Subsidiary's business, in a manner consistent
with its past practice or in a
6
<PAGE> 7
manner the Company believes is in the commercial best interests of the Company
(including without limitation with respect to the purchase, development and
maintenance of inventory of a quantity and type to enable the Company and its
Subsidiaries to fulfill their respective obligations under Contracts with Girl
Scouts Councils in a full and timely manner).
"ORGANIZATIONAL DOCUMENTS" shall mean, collectively, a true,
complete and correct copy of the Certificate of Incorporation (or comparable
governing document) and Bylaws, each as amended to date, of a party as indicated
herein.
"OWNED REAL PROPERTY" means those certain parcels of land more
fully identified on Schedule 3.12 to this Agreement under the heading "Owned
Real Property," together with all privileges and appurtenances thereto and all
plants, buildings, structures, fixtures and improvements, together with all
easements and rights-of-way granted to the Company and its Subsidiaries in
connection therewith.
"PENSION PLAN" shall have the meaning specified in Section
3.15(a).
"PERMITTED ENCUMBRANCES" means (a) Encumbrances for Taxes and
other governmental charges and assessments for the year 1998 which are not yet
due and payable, (b) Encumbrances of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
Ordinary Course of Business for sums not yet due and payable, (c) other
Encumbrances on property which are not material in amount or do not materially
detract from the value of or materially impair the existing use of the property
affected by such Encumbrance and (d) all Encumbrances in favor of Chase
Manhattan Bank, N.A., as agent for the Company's senior lenders.
"PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or Authority.
"PRELIMINARY CAPITALIZED LEASE AMOUNT" means the Capitalized
Lease Amount as computed pursuant to Section 2.2(b).
"PRELIMINARY DEBT AMOUNT" means the Debt Amount as computed
pursuant to Section 2.2(b).
"PRELIMINARY LTIP AMOUNT" means the LTIP Amount computed
pursuant to Section 2.2(b).
"PRELIMINARY NET WORKING CAPITAL DEFICIT" means the excess, if
any, of (i) (A) Thirty-Seven Million and One Hundred Thousand Dollars
($37,100,000), less (B) the Swap Adjustment Amount, less (ii) the Net Working
Capital as reflected on the Estimated Balance Sheet.
"PRELIMINARY NET WORKING CAPITAL EXCESS" means the excess, if
any, of (i) the Net Working Capital as reflected on the Estimated Balance Sheet,
less (ii) (A) Thirty-Seven Million and One Hundred Thousand Dollars
($37,100,000), less (B) the Swap Adjustment Amount.
7
<PAGE> 8
"PRELIMINARY PURCHASE PRICE" shall have the meaning set forth
in Section 2.2(c).
"PRELIMINARY TAX AMOUNT" means the Tax Amount as reflected on
the Estimated Balance Sheet.
"PROPOSED FINAL PURCHASE PRICE" has the meaning specified in
Section 2.2(d).
"PURCHASE PRICE" has the meaning specified in Section 2.2(a).
"PURCHASE PRICE CERTIFICATE" has the meaning specified in
Section 2.2(d).
"REAL PROPERTY" means, collectively, the Owned Real Property
and the Leased Real Property.
"SHARES" means all of the issued and outstanding shares of
Common Stock.
"SUBSIDIARY" shall mean with respect to any Person, any
corporation or other entity of which such Person has, directly or indirectly,
ownership of securities or other interests having the power to elect a majority
of such corporation's Board of Directors (or similar governing body), or
otherwise having the power to direct the business and policies of that
corporation, and with respect to the Company shall include the corporations
listed on Schedule 3.1, but in no event shall include the Company's interests in
the Shanghai and Tainjin joint ventures.
"SUPPLEMENTAL LETTER OF CREDIT" shall mean the irrevocable
letter of credit issued by the Letter of Credit Bank and required to be
delivered to the Escrow Agent pursuant to the Supplemental Letter of Credit
Indemnification Escrow Agreement.
"SUPPLEMENTAL LETTER OF CREDIT ESCROW AMOUNT" shall mean Five
Million Dollars ($5,000,000), as may be adjusted in accordance with Section
6.2(a).
"SUPPLEMENTAL LETTER OF CREDIT INDEMNIFICATION ESCROW
AGREEMENT" shall mean the Supplemental Letter of Credit Indemnification Escrow
Agreement substantially in the form of Exhibit B attached hereto.
"SWAP ADJUSTMENT AMOUNT" means the lesser of (i) $250,000, or
(ii) the sum of all fees, penalties, costs and expenses incurred by the Company
in connection with the termination of the interest rate swap agreements as
required pursuant to Section 5.12.
"TAX AMOUNT" means all obligations as of the Closing Date as
accrued through such date of the Company and its Subsidiaries for Income Taxes
for periods ending on or before the Closing Date after giving effect to all Tax
write offs, benefits, deductions, credits and related Tax effects associated
with any payments actually made on, before or simultaneously with the Closing,
including without limitation, (i) the payment of accelerated bonuses by the
Company at or immediately prior to Closing under the Company's Management
Incentive Plan; (ii) all payments made by the Company in respect of the
termination of interest rate swap agreements at or prior to Closing as required
under Section 5.12; and (iii) the retirement of the Debt Amount.
8
<PAGE> 9
"TAX(ES)" shall mean all federal, state, local or foreign
income, capital gains, gross receipts, windfall or excess profits, severance,
property, production, sales, use, license, excise, franchise, employment,
withholding, goods and services, stamp, occupation, value added or other tax or
customs duties, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.
"TAX LETTER OF CREDIT" shall mean the irrevocable letter of
credit issued by the Letter of Credit Bank and required to be delivered to the
Escrow Agent pursuant to the Tax Letter of Credit Indemnification Escrow
Agreement.
"TAX LETTER OF CREDIT ESCROW AMOUNT" shall mean Five Million
Dollars ($5,000,000).
"TAX LETTER OF CREDIT INDEMNIFICATION ESCROW AGREEMENT" shall
mean the Tax Letter of Credit Indemnification Escrow Agreement between Buyer and
Seller substantially in the form of Exhibit C attached hereto.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"TAX WITHHOLDING" shall have the meaning specified in Section
5.10.
"TRADE SECRETS" shall have the meaning specified in Section
3.11.
"WARN ACT" shall mean the Worker Adjustment and Retraining
Notification Act of 1988, as amended.
"WELFARE PLAN" shall have the meaning specified in Section
3.15(a).
ARTICLE II.
PURCHASE AND SALE OF SHARES
SECTION 2.1 PURCHASE AND SALE OF SHARES. Subject to the terms
and conditions of this Agreement and in reliance upon the representations and
warranties, covenants and agreements made by each party hereto, at the Closing,
Parent shall sell, assign, transfer, convey and deliver to Buyer, and Buyer
shall purchase from Parent, the Shares, free and clear of any Encumbrances.
SECTION 2.2 PURCHASE PRICE.
(a) Consideration. In full consideration for the sale and
purchase of the Shares, Buyer shall pay to Parent, in the manner set forth in
this Section 2.2, subject to the adjustments set forth herein, an aggregate
purchase price (the "Purchase Price") equal to Four Hundred Fifty Million
Dollars ($450,000,000), plus (A) the Net Working Capital Excess, if any, or
minus (B) the Net Working Capital Deficit, if any, as the case may be. The
actual
9
<PAGE> 10
consideration to be paid to Parent shall be the Purchase Price less each of the
Debt Amount, the LTIP Amount, the Capitalized Lease Amount, and the Tax Amount.
(b) Preliminary Purchase Price. On each Tuesday
commencing on September 22, 1998, the Company shall prepare and deliver to Buyer
(i) an unaudited consolidated balance sheet of the Company prepared in
accordance with GAAP, estimated as of the Saturday prior to the Closing Date,
pro forma as to, and giving effect for, any transactions or operations
anticipated to occur subsequent to its preparation but on or before the Closing
Date (the "Estimated Balance Sheet"), and (ii) a calculation of (A) Net Working
Capital, (B) the Debt Amount, (C) the LTIP Amount, (D) the Capitalized Lease
Amount, and (E) the Tax Amount; provided that the Company shall not be required
to so deliver an Estimated Balance Sheet in the event the Company does not
reasonably anticipate that Closing will occur the following week but in any
event shall be required to deliver an Estimated Balance Sheet at least three (3)
Business Days prior to the Closing Date.
(c) Payment of Preliminary Purchase Price. At the
Closing, the Buyer shall deliver:
(i) to Parent by wire transfer of immediately
available federal funds to an account designated by Parent, an
aggregate amount equal to (A) Four Hundred Forty-Five Million Dollars
($445,000,000), minus (B) the Preliminary Net Working Capital Deficit
(if any), plus (C) the Preliminary Net Working Capital Excess (if any),
minus (D) the Preliminary Debt Amount, minus (E) the Preliminary LTIP
Amount, minus (F) the Preliminary Capitalized Lease Amount, minus (G)
the Preliminary Tax Amount; and
(ii) to the Escrow Agent, the Cash Escrow Amount
to be held in an escrow account pursuant to the terms of the Cash
Indemnification Escrow Agreement (the aggregate amount payable pursuant
to this Section 2.1(c) is the "Preliminary Purchase Price").
(d) Adjustment to Purchase Price. No later than thirty
(30) days after the Closing Date, Buyer shall prepare and deliver to Parent (i)
an unaudited consolidated balance sheet of the Company as of the Saturday prior
to the Closing Date prepared in accordance with GAAP, giving effect for any
transactions or operations occurring on or before the Closing Date (the "Closing
Balance Sheet"), (ii) a calculation of (A) Net Working Capital, (B) the Debt
Amount, (C) the LTIP Amount, (D) the Capitalized Lease Amount and (E) the Tax
Amount, in each case as of the Closing Date and (iii) a certificate (the
"Purchase Price Certificate") setting forth a proposed final Purchase Price
subject to the adjustments provided in Section 2.2(a) (the "Proposed Final
Purchase Price") which shall be calculated as (A) Four Hundred Fifty Million
Dollars ($450,000,000), minus (B) the Working Capital Deficit (if any), plus (C)
the Net Working Capital Excess (if any), minus (D) the Debt Amount, minus (E)
the LTIP Amount, minus (F) the Capitalized Lease Amount, minus (G) the Tax
Amount. Buyer will furnish and cause the Company to furnish to Parent and its
advisors access (and if requested, copies) of such documents, financial records,
work papers, financial management personnel and other information as Parent may
request that are available to or obtainable by Buyer or the Company and
reasonably deemed relevant by Parent to the preparation of the Closing Balance
Sheet and Purchase Price Certificate. If within thirty (30) days following
delivery of the Closing Balance Sheet and the Purchase Price Certificate, Parent
has not given Buyer written notice of its
10
<PAGE> 11
objection thereto (such notice must contain a statement of the basis of Parent's
objection), then Parent shall be deemed to have accepted and agreed to the
Closing Balance Sheet and the Purchase Price Certificate, and the Proposed Final
Purchase Price shall be deemed to be the Purchase Price as required to be
adjusted per Section 2.2(a). If Parent gives such notice of objection, then
Buyer and Parent shall cooperate with each other in an effort to come to an
agreement on the matters which are in dispute. If such dispute cannot be
resolved within thirty (30) days of Buyer's receipt of Parent's notice of
objection, then the issues in dispute will be submitted to the Accountants for
resolution. If issues in dispute are submitted to the Accountants for
resolution, (i) each party will be afforded the opportunity to present to the
Accountants any material relating to the determination and to discuss the
determination with the Accountants; (ii) the determination by the Accountants,
as set forth in a notice delivered to both parties by the Accountants, will be
binding and conclusive on the parties; and (iii) Buyer and Parent will each bear
one-half (1/2) of the fees and expenses of the Accountants for such
determination. The Final Purchase Price shall be deemed to be the final Purchase
Price (subject to and as required to be adjusted pursuant to Section 2.2(a))
determined in accordance with this Section 2.2(d), whether by the failure of
Parent to provide a notice of objection to the Proposed Final Purchase Price, by
resolution of all disputes by Buyer and Parent or by determination of the
Accountants.
(e) Post-Closing Payment. On the tenth (10th) Business
Day following the final determination of the Closing Balance Sheet and the
Purchase Price as provided hereinabove, if the Purchase Price as required to be
adjusted per Section 2.2(a) (as determined in accordance with Section 2.2(d)) is
greater than the Preliminary Purchase Price, Buyer will pay the difference to
Parent, and if the Purchase Price as required to be adjusted per Section 2.2(a)
(as determined in accordance with Section 2.2(d)) is less than the Preliminary
Purchase Price, Parent will pay the difference to Buyer. Payment must be made in
immediately available federal funds. Payment to Parent must be made in the
manner set forth in Section 2.2(c)(i). Payment to Buyer must be made by wire
transfer to such bank account as Buyer will specify. During the period from the
Closing Date until payment of the Purchase Price as provided in this Section
2.2(e), Parent and Buyer shall each maintain available cash or account balances
of at least $5,000,000 in a bank of nationally recognized standing whose
principal office shall be in New York, New York (but Parent may maintain such
balance in an offshore account provided the cash funds are available in New
York, New York) and each shall provide the other with account statements or
other documentation on a monthly basis evidencing compliance with this covenant.
SECTION 2.3 CLOSING. The closing of the purchase and sale of
the Shares and the other transactions provided for herein to occur coincident
therewith (the "Closing") shall occur on the Closing Date at the offices of
Winston & Strawn, New York, New York, commencing at 10:00 a.m. Eastern Time,
unless another date, time or place is mutually agreed to by Parent and Buyer.
The "Closing Date" shall mean the later of (i) September 28, 1998 or (ii) the
first Monday which is a Business Day subsequent to satisfaction or waiver of the
closing condition set forth in Section 6.3 or such other date as Buyer and
Parent may mutually agree in writing, in either case, upon which date the
parties agree to effect the Closing.
SECTION 2.4 DELIVERIES BY SELLER. On the Closing Date, Seller
shall deliver, or cause to be delivered, to Buyer the following:
(a) a certificate or certificates evidencing all of the
Shares, duly endorsed or accompanied by stock powers executed in blank;
11
<PAGE> 12
(b) (i) the certificate of incorporation of the Company
and each of its Subsidiaries certified by the Secretary of State of the State of
Delaware as of a date subsequent to the date hereof and (ii) the by-laws of the
Company certified by the Secretary or an Assistant Secretary of the Company as
of the Closing Date;
(c) certificates of good standing for the Company from
the State of Delaware and for each of its Subsidiaries in their respective
jurisdictions of incorporation;
(d) (i) the memorandum of association of Parent certified
by the appropriate governmental agency of the British Virgin Islands as of a
date subsequent to the date hereof and (ii) the articles of association of
Parent certified by the Secretary or an Assistant Secretary of Parent as of the
Closing Date;
(e) certificate of good standing (or comparable
equivalent) for Parent from its jurisdiction of incorporation to the extent such
certificate is issuable by such jurisdiction;
(f) the legal opinion of Jones, Day, Reavis & Pogue,
counsel for Parent and the Company, substantially in the proposed form attached
hereto as Exhibit 2.4(f), and in respect of matters concerning the British
Virgin Islands, the legal opinion of counsel qualified to practice law in such
jurisdiction;
(g) a copies of the Cash Indemnification Escrow
Agreement, Supplemental Letter of Credit Indemnification Escrow Agreement and
Tax Letter of Credit Indemnification Escrow Agreement duly executed by Parent;
(h) copies of the resolutions of the Board of Directors
of the Company and Parent authorizing the execution, delivery and performance of
this Agreement and certificates of the Secretary or any Assistant Secretary of
Parent and the Company, as the case may be, dated as of the Closing Date, to the
effect that such resolutions were duly adopted and are in full force and effect;
(i) the resignations of all directors of the Company;
(j) pay off letters from the Company's lenders with
respect to the Debt Amount in customary form reasonably satisfactory to Buyer;
(k) a copy of the Supplemental Letter of Credit and Tax
Letter of Credit; and
(l) an executed indemnity side letter by President
Enterprises Corp. for the benefit of Buyer indemnifying Buyer for any and all
Tax Liabilities associated with the operation or disposition of the Shanghai and
Tainjin joint ventures, and any payments owing to Buyer pursuant to Section
2.2(d), in the form attached hereto as Exhibit 2.4(l).
SECTION 2.5 DELIVERIES BY BUYER. On the Closing Date, Buyer
shall deliver to Parent the following:
(a) the Preliminary Purchase Price in accordance with
Section 2.2(c);
12
<PAGE> 13
(b) the legal opinion of Winston & Strawn, special
counsel for Buyer, substantially in the form attached hereto as Exhibit 2.5(b);
(c) the certificate of incorporation of Buyer certified
by the Secretary of State of the State of Delaware as of a date subsequent to
the date hereof;
(d) copies of the Cash Indemnification Escrow Agreement,
Supplemental Letter of Credit Indemnification Escrow Agreement and Tax Letter of
Credit Indemnification Escrow Agreement duly executed by Buyer; and
(e) copies of the resolutions of the Board of Directors
and a certificate of the Secretary or an Assistant Secretary of Buyer dated as
of the Closing Date, to the effect that such resolutions were duly adopted and
are in full force and effect.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE COMPANY
As an inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated hereby, and in consideration of the
covenants of Buyer contained herein, Parent and the Company, jointly and
severally, represent and warrant to, and for the benefit of, Buyer as set forth
hereinbelow. All references to the Company unless the context requires otherwise
shall include the Company and each of its Subsidiaries and references to Seller
include Parent, the Company and each of its Subsidiaries.
SECTION 3.1 CORPORATE ORGANIZATION AND QUALIFICATION. Each of
the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
as set forth on Schedule 3.1. The Company is duly qualified or licensed to do
business as a foreign corporation and is in good standing as a foreign
corporation in each jurisdiction, except for immaterial failures to be so
qualified, licensed or in goodstanding. The Company has full corporate power and
authority to own, lease, operate or otherwise hold its properties and assets and
to carry on its business as it is now being conducted. The Company has delivered
to Buyer a complete and correct copy of the Company's Organizational Documents.
SECTION 3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists
of one thousand (1,000) shares of Common Stock, of which only the Shares are
issued and outstanding. All of the Shares have been duly authorized and are
validly issued, fully paid and nonassessable. There are no options, conversion
rights, warrants, or other commitments by the Seller to issue additional shares
of capital stock of the Company.
(b) None of the Shares are subject to preemptive rights
or any outstanding subscriptions, options, warrants, calls, rights, convertible
securities or other agreements or other instruments outstanding or in effect
giving any Person the right to acquire any shares of capital
13
<PAGE> 14
stock or other securities of the Company or any commitments of any character
relating to the issued or unissued capital stock or other securities of the
Company, which have not been waived.
(c) Schedule 3.2 sets forth the authorized capital stock,
and shares issued and outstanding, of each Subsidiary of the Company, and
indicates the ownership of such shares.
SECTION 3.3 AUTHORITY; CONFLICTS.
(a) Each of the Company and Parent has the corporate
power and authority and has taken all corporate action necessary in order to
execute, deliver and perform this Agreement and each other agreement or
certificate delivered pursuant hereto and to consummate the transactions
contemplated in each such agreement. This Agreement and each other agreement or
certificate delivered pursuant hereto has been duly authorized, executed and
delivered by each of the Company and Parent and each such agreement constitutes
or will constitute (assuming the valid authorization, execution and delivery of
this Agreement and each other agreement or certificate delivered pursuant hereto
by Buyer) the legal, valid and binding obligation of each of the Company and
Parent enforceable in accordance with its terms, in each case subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws of general application relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy Exception").
(b) Assuming compliance with the HSR Act, neither the
execution and delivery of this Agreement by Seller or the consummation of any of
the transactions contemplated herein or in any other agreement or certificate
delivered pursuant hereto, nor compliance with or fulfillment of the terms,
conditions and provisions thereof, except as set forth on Schedule 3.3, will
conflict with, result in a breach of the terms, conditions or provisions of, or
constitute a default (or an event that with the passage of time will become a
default), an event of default or an event creating rights of acceleration,
termination or cancellation or a loss of rights under, or result in the creation
or imposition of any Encumbrance upon any of the Shares or any of the assets of
the Company, under (i) the Organizational Documents of either Parent or the
Company, (ii) any Material Contract (as defined in Section 3.14), franchise or
financial obligation to which Parent or the Company is a party or by which
Parent or the Company is bound, (iii) any Order to which Parent or the Company
is a party or by which Parent or the Company is bound or (iv) any Law by which
Parent or the Company is bound.
SECTION 3.4 REGULATORY FILINGS; NO VIOLATIONS. Other than the
filings and/or notices necessary to comply with the HSR Act, no notices,
declarations, registrations, reports or other filings are required to be made by
Seller with, nor are any consents, registrations, approvals, permits, expiration
of any applicable waiting periods or authorizations required to be obtained by
Seller or the Company (or any of its Subsidiaries) from, any Authority, in
connection with the execution or delivery of this Agreement or any other
agreement delivered in connection herewith by Seller, the performance by Seller
of its obligations hereunder or thereunder or the consummation by Seller of the
transactions contemplated hereby and thereby, other than notices, declarations,
registrations, reports, other filings, consents, approvals, permits, expirations
and authorizations that are immaterial.
SECTION 3.5 NO ACTIONS AGAINST SELLER. There is no Action
pending or to Seller's Knowledge threatened, against Seller which questions or
challenges the validity of this
14
<PAGE> 15
Agreement, any other agreement delivered pursuant hereto or any action taken or
proposed to be taken by the Seller pursuant hereto or thereto or in connection
with the transactions contemplated hereby and thereby.
SECTION 3.6 OWNERSHIP OF SHARES. Parent owns the Shares free
and clear of any Encumbrances and upon delivery of and payment by Buyer to
Parent of the Purchase Price, Buyer will acquire the Shares free and clear of
all Encumbrances.
SECTION 3.7 FINANCIAL STATEMENTS. The consolidated balance
sheets of the Company as of the fiscal years ended December 28, 1996 and
December 27, 1997 and the related consolidated income statements and statements
of cash flow of the Company for the fiscal years ended on such dates (in each
case audited by and accompanied by the report of Price Waterhouse LLP (n/k/a
PricewaterhouseCoopers LLP) (collectively, the "Audited Financial Statements"),
and the unaudited consolidated balance sheet as of June 27, 1998 (the "Interim
Balance Sheet") and the income statement for the accounting period ending on
such date (together with the Interim Balance Sheet, the "Interim Financial
Statements"), copies of which are attached hereto as Schedule 3.7, were prepared
from the books and records of the Company in accordance with GAAP as
consistently applied by the Company and present fairly in all material respects
the consolidated financial position and results of operations of the Company (a)
in the case of the Audited Financial Statements, as of and for the accounting
periods ended on December 28, 1996 and December 27, 1997, respectively, and (b)
in the case of the Interim Financial Statements, as of June 27, 1998 and for the
period ended on such date, except that the Interim Financial Statements have
been prepared using practices customarily followed in the preparation of interim
financial statements by the Company and exclude a statement of cash flows and
informative disclosures customarily required in notes to the financial
statements.
SECTION 3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Schedule 3.8, since the date of the Interim Financial Statements through the
date of this Agreement, the Company has conducted its business only in, and has
not engaged in any transaction other than according to, the Ordinary Course of
Business, or if not in the Ordinary Course of Business, not reasonably likely to
have a Material Adverse Effect. In addition, except as set forth in Schedule
3.8, there has not been any:
(a) (i) change in the authorized or issued capital stock of
the Company; (ii) grant of any stock option, warrant, subscription, calls or
other right to purchase shares of capital stock of the Company; (iii) issuance
of any security convertible into the capital stock of the Company; (iv) grant of
any registration rights in respect of the capital stock of the Company; (v)
reclassification, combination, split, subdivision, purchase, redemption,
retirement, issuance, sale, or any other acquisition or disposition, directly or
indirectly, by the Company of any shares of the capital stock of the Company;
(vi) any amendment of any material terms of any outstanding security of the
Company; or (vii) sale or pledge of any stock or other equity interests owned by
the Company;
(b) amendment or other change to the Company's
Organizational Documents;
(c) (i) increase by the Company in the agreement of any bonus,
salary or other compensation payable to any officer or employee of the Company,
other than increases in the Ordinary Course of Business; (ii) entry into any
employment, consulting, termination,
15
<PAGE> 16
settlement, severance or similar Contracts with any existing or former officer
or employee of the Company or the payment of any severance or termination pay to
such Person, other than as required by existing contractual obligations
described on Schedule 3.8(c); (iii) adoption or amendment in any material
respect of, or material increase or acceleration in the payments to or benefits
under, any profit sharing, bonus, thrift, stock option, deferred compensation,
savings, insurance, restricted stock, pension, retirement, or other employee
benefit plan for or with any officer or employee of the Company; or (iv)
establishment or adoption of, or material amendment to, any collective
bargaining agreement;
(d) (i) sale or lease (except for sales or disposition of
inventory or sale or lease of other property in the Ordinary Course of
Business), alteration, or other disposition of, or write down in excess of
$250,000 of the book value of (except under accounting practices and principles
applied for amortization and depreciation thereof for the period ending the date
of the Audited Financial Statements), any asset of the Company, except to the
extent replaced by a comparable asset; (ii) mortgage, pledge or imposition of
any Encumbrance (other than a Permitted Encumbrance) upon any asset of the
Company; (iii) sale, lease or other disposition of, or termination, lapse or
other expiration of the rights to the use of, any of the Intellectual Property;
or (iv) entry into any transaction, arrangement, agreement or understanding
between the Company, Parent or any officer, director or shareholder thereof
other than the payment of cash dividends in accordance with Section 5.6(b)(iii)
or in connection with the distribution of the Company's interests in the
Shanghai and Tainjin joint ventures;
(e) (i) acquisition (including by merger, consolidation
or acquisition of stock or assets) by the Company of any Person or any division
thereof or portion of the assets thereof (other than the repurchase of routes in
the Ordinary Course of Business); (ii) liquidation, dissolution or winding up of
the Company; or (iii) organization of any new Subsidiary;
(f) entry into, amendment to, termination of, or receipt
of notice of termination of any Contract involving the commitment of the Company
involving a total remaining commitment by the Company of at least $250,000;
(g) settlement or compromise of any Action, other than
such Actions in which the amount paid in settlement or compromise, including the
cost to the Company of complying with any provision of such settlement or
compromise other than cash payments, does not exceed $100,000, in excess of any
amount covered by insurance;
(h) material change in the accounting practices, methods
or principles used by the Company;
(i) effectuation of (i) a "plant closing" (as defined in
the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the business of the
Company or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site
of employment or one or more facilities or operating units within any site of
employment or facilities of the business of the Company, except, in either case,
after fully complying with the notice and other requirements of the WARN Act;
and
(j) agreement (whether written or oral and express or
implied) by the Company to do any of the foregoing.
16
<PAGE> 17
SECTION 3.9 TAXES.
(a) Except as provided in Schedule 3.9:
(i) The Company has timely filed (or prior to
Closing will timely file) all Tax Returns that it is required to file
on or before the Closing Date in all jurisdictions in which it is
required to file Tax Returns. All such returns were prepared in
accordance with applicable Laws, and are true, correct, and complete in
all material respects. All Taxes, as due and payable in respect of such
Tax Returns have been paid, and there is no current liability for any
Taxes due in connection with any such returns. As of the Closing Date,
all material Taxes not yet due and payable have been fully accrued on
the books of the Company and adequate reserves have been established
for Taxes. There are no unpaid assessments for additional Taxes for any
period . All federal and state income Tax Returns filed by the Company
for the past three years have been provided to the Buyer;
(ii) The Company has not been a member of any
consolidated, combined or unitary group for federal, state, local or
foreign Tax purposes within the last four (4) years other than the
consolidated group that includes the Company and its Subsidiaries;
(iii) the Company is not a party to any joint
venture, partnership or other arrangement that could be treated as a
partnership for federal income Tax purposes;
(iv) Except for failures that are immaterial, the
Company has (A) withheld all required amounts from its employees,
agents, contractors and nonresidents and remitted such amounts to the
proper agencies; (B) paid all employer contributions and premiums; and
(C) filed all federal, state, local, and foreign returns and reports
required with respect to employee income Tax withholding, social
security unemployment Taxes and premiums;
(v) The federal income Tax Returns of the
Company have been examined by the IRS, or have been closed by the
applicable statute of limitations, for all periods through 1994; no
deficiencies or reassessments of any Taxes have been proposed, asserted
or assessed against the Company by any federal, state, local or foreign
taxing authority which remain outstanding;
(vi) The Company has not executed or filed with
any taxing authority (whether federal, state, local or foreign) any
agreement or other document extending or having the effect of extending
the period for assessment, reassessment or collection of any Taxes,
that remains outstanding or in force and no power of attorney granted
by the Company with respect to any Taxes is currently in force;
(vii) No federal, state, local or foreign Tax
audits or other administrative proceedings, discussions or court
proceedings are presently pending with regard to any Taxes or Tax
Returns of the Company and no additional issues has been asserted in
writing against the Company in connection with any existing audits of
the Company;
17
<PAGE> 18
(viii) The Company has not entered into any closing
agreement with the IRS or any other agreement with any taxing Authority
relating to Taxes which affects any taxable year ending after the
Closing Date;
(ix) The Company has not agreed to and it is not
required to make any adjustment by reason of a change in accounting
methods that affects any taxable year ending after the Closing Date.
Neither the IRS nor any other agency has proposed any such adjustment
or change in accounting methods that affects any taxable year ending
after the Closing date. The Company has no application pending with any
taxing authority requesting permission for any changes in accounting
methods that relate to its business or operations and that affects any
taxable year ending after the Closing Date;
(x) The Company is not a party to any tax
sharing agreement or similar arrangement for the sharing of Tax
liabilities or benefits that will be in effect with respect to the
Company after the Closing Date for which the Company will have any
liability after the Closing Date;
(xi) The Company is not a foreign person within
the meaning of Code section 1445;
(xii) The Company has not consented to the
application of Code section 341(f);
(xiii) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company,
that individually or collectively, could give rise to the payment of
the Company of any amount that would not be deductible by reason Code
section 280G;
(xiv) No asset of the Company is tax-exempt use
property under Code section 168(h);
(xv) No portion of the cost of any asset of the
Company has been financed directly or indirectly from the proceeds of
any tax-exempt state or local government obligation described in Code
section 103(a) that are currently outstanding.
(xvi) The Company does not have and has not had a
permanent establishment in any foreign country and does not and has not
engaged in a trade or business in any foreign country; and
(xvii) None of the assets of the Company is
property that the Company is required to treat as being owned by any
other person pursuant to the safe harbor lease provision.
SECTION 3.10 GOVERNMENTAL PERMITS. The Company owns, holds or
possesses all licenses, franchises, permits, privileges, immunities, approvals
and other authorizations from any Authority that are necessary to entitle it to
own or lease, operate and use its assets and to carry on and conduct its
business substantially as conducted immediately prior to the date of this
18
<PAGE> 19
Agreement (herein collectively called "Governmental Permits"), except for such
Governmental Permits which are immaterial.
SECTION 3.11 INTELLECTUAL PROPERTY. Schedule 3.11 sets forth
(a) a true and complete list of each patent and each patent application therefor
which has been issued to or is held by the Company or any of its Subsidiaries,
(b) a true and accurate identification of each United States federal and foreign
registered and material unregistered trademark, service mark, trade name, and
slogan, and each registration and application for any of the foregoing issued to
or held or used by the Company or any of its Subsidiaries, (c) a true and
complete list of each registered copyright, and each registration and
application for any of the foregoing, issued to or held by the Company or any of
its Subsidiaries, and (d) a true and complete list of all Contracts to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
either as licensee or licensor relating to any item of intellectual property
described in clauses (a) through (c) above that is material to the business of
the Company and its Subsidiaries (collectively, together with all trade secrets
and proprietary technology, designs, know-how and processes owned by the Company
or any of its Subsidiaries ("Trade Secrets"), being referred to as the
"Intellectual Property"). The consummation of the transactions contemplated
herein will not impair the rights of the Company and its Subsidiaries to any
item of the Intellectual property. Except as indicated in Schedule 3.11:
(a) the Company or a Subsidiary of the Company is the
owner of all right, title and interest in and to each item of Intellectual
Property, free and clear of all Encumbrances other than Permitted Encumbrances
or is a licensee of the Intellectual Property pursuant to a license agreement
that is a valid and binding obligation of the parties thereto enforceable in
accordance with its terms, except where the lack of ownership or the existence
of Encumbrance would be immaterial;
(b) all patents, copyrights, trademarks, service marks
and other state and federal registrations and all applications therefor listed
in Schedule 3.11 are valid and in full force and effect in each of the listed
jurisdictions, except where invalidity would be immaterial;
(c) there are no pending or threatened Actions concerning
any item of the Intellectual Property material to the business of the Company
and its Subsidiaries, and no such action, proceeding, dispute or disagreement
has been threatened in writing;
(d) to the Knowledge of the Company, the use or other
exploitation of each item of the Intellectual Property, either alone or in any
combination used or useful in the business of the Company or any of its
Subsidiaries does not conflict with, infringe upon or violate any patent,
copyright, trademark, trade secret or other proprietary right of any other
Person;
(e) with respect to each Trade Secret comprising a part
of the Intellectual Property, such Trade Secret is valid and protectable, except
where its invalidity or unprotectability would be immaterial;
(f) to the Knowledge of the Company, no copying or
reproduction of any material copyrighted in the name of the Company or any
Subsidiary of the Company has occurred or been allowed that would materially
diminish the value thereof, or limit the ability of the Company or a Subsidiary
of the Company to enforce its rights thereto;
19
<PAGE> 20
(g) the trademark registrations set forth in Schedule
3.11 to the Knowledge of the Seller are not being infringed by others, except
where such infringement is not material or the Company has taken commercially
reasonable action in respect of such infringement;
(h) the Company or one of its Subsidiaries has been
assigned and owns or has obtained licenses for any Intellectual Property that
was developed by any third-party contractor of, or consultant to, the Company or
such Subsidiary, except where the failure to obtain such assignment or license
would be immaterial.
SECTION 3.12 REAL PROPERTY.
(a) A list of all Real Property of the Company other than
immaterial Real Property with an aggregate fair market value of less than
$250,000 is set forth on Schedule 3.12(a) under the headings "Owned Real
Property" and "Leased Real Property." Except for the Leased Real Property listed
on Schedule 3.12(a), the Company owns, and has good title to, all of the Real
Property, free and clear of all Encumbrances, except for Permitted Encumbrances.
To the Seller's Knowledge, except as set forth on Schedule 3.12(a), the use and
operation of the Real Property does not violate any instrument of record or
agreement or order of any Authority affecting or relating to the Real Property,
or any building, zoning, subdivision or other land use or similar Law affecting
the Real Property.
(b) The plants, buildings, structures, fixtures and
improvements which are a part of the Real Property are generally in good
operating condition and repair, consistent with industry practices, normal wear
and tear excepted, taking into account age and usage and are generally adequate
for the uses to which they are being put.
(c) There is no existing or pending, or, to the Seller's
Knowledge, contemplated, threatened or anticipated (i) condemnation of any part
of the Real Property, except as provided on Schedule 3.12(c), (ii) special tax
or assessment to be levied against the Real Property, or (iii) change in the
zoning classification of the Real Property.
SECTION 3.13 LITIGATION. Except as set forth in Schedule 3.13,
there are no (i) Actions, or (ii) Orders by which the Company or any of its
assets, properties or business are bound, other than immaterial Actions or
Orders, pending, or to the Seller's Knowledge, threatened against the Company or
any of its assets, properties or businesses.
SECTION 3.14 CONTRACTS.
(a) Schedule 3.14(a) contains (A) a true and complete
list of each Contract to which the Company is party or by which it or any of its
properties or assets are bound (or as the case may be a summary of any binding
arrangement or commitment involving the Company), which (i) is an employment
contract, or material consulting agreement; (ii) is an indenture, mortgage,
note, installment obligation, agreement or other instrument relating to the
borrowing of money in excess of $250,000 by the Company or the guaranty of any
obligation for the borrowing of money in excess of $250,000 by the Company;
(iii) imposes any Encumbrance (other than Permitted Encumbrances); (iv) has a
remaining term as of the date hereof of over one year in length of obligation on
the part of the Company and involves the receipt or payment by
20
<PAGE> 21
the Company of more than $250,000, except for agreements with suppliers or
customers entered into in the Ordinary Course of Business; (v) is a co-pack
agreement; (vi) is an agreement with one or more Girl Scouts Councils or any
representative or agent thereof; or (vii) has been entered into with an officer,
director of affiliate of the Company or Parent, and (B) a true and correct list
of not less than 95% of all broker distribution, franchise and distributor
agreements (and the remainder are of the same quality and tenor) to which the
Company is a party or by which it or any of its properties or assets are bound
(collectively, the "Material Contracts").
(b) Except as set forth in Schedule 3.14(b), the Company
is not a party to or bound by any Contract:
(i) prohibiting or limiting the ability of the
Company to (A) engage in any line of business, (B) compete with any
Person or (C) carry on or expand the nature or geographical scope of
the business of the Company anywhere in the world;
(ii) providing for the acquisition or disposition
after the date of this Agreement of any portion of the business or
assets (except for sales of inventory or other disposition of property
or assets in the Ordinary Course of Business) of the Company;
(iii) relating to product warranties, guaranties,
and/or other similar undertakings with respect to contractual
performance extended by the Company other than in the Ordinary Course
of Business;
(iv) involving the grant by the Company to any
Person of any right of first refusal to purchase any rights, assets or
property of the Company;
(v) to or with any labor union or other employee
representative of a group of employees relating to wages, hours, and
any other conditions of employment; or
(vi) which, in the case of broker Contracts, may
not be terminated by the Company at will or without penalty, subject to
current obligations thereunder and state law restrictions.
(c) Except as set forth in Schedule 3.14(c), (i) each
Material Contract is a valid and binding obligation of the Company, and to the
Seller's Knowledge, of each of the other parties thereto, and is enforceable
against each party in accordance with its terms, except for the Bankruptcy
Exception, (ii) the Company is not in violation or breach of, or in default
under, any Material Contract and, to the Seller's Knowledge, no other party to
any Material Contract is in violation or breach thereof, or in default
thereunder, other than immaterial breaches or defaults, and (iii) to the
Seller's Knowledge, other than the transactions contemplated by this Agreement
and except for or by reason of violations, breaches or defaults referred to in
clause (ii) above, no event has occurred that, with the passage of time or the
giving of notice or both, would permit the unilateral modification, acceleration
or termination of any Material Contract.
21
<PAGE> 22
SECTION 3.15 EMPLOYEE BENEFITS; ERISA.
(a) Except as set forth in Schedule 3.15(a), the Company
(including, for purposes of this Section 3.15, its Subsidiaries), either
directly or indirectly through any other Person or entity, has not sponsored,
established, maintained, contributed to or become obligated under any
"Compensation and Benefit Plan" (as defined herein) on behalf of any current or
former employee of the Company (the "Employees"). The term "Compensation and
Benefit Plan" includes any pension, retirement, savings, profit-sharing,
deferred compensation, stock purchase, stock option, bonus (including without
limitation any stay or retention bonuses), incentive, disability, medical,
dental, health, vacation pay, severance pay or benefit commitment, life, death
benefit, group insurance, collective bargaining or other employee benefit plan,
trust, arrangement, contract, agreement, policy or commitment (including,
without limitation, any pension plan as defined in ERISA Section 3(2) ("Pension
Plan"), any welfare plan as defined in ERISA Section 3(1) ("Welfare Plan"), and
any multiemployer plan as defined under ERISA Sections 3(37) and 4001
("Multiemployer Plan")) and any other compensation arrangement, other than for
current compensation, whether or not any of the foregoing is funded or insured
and whether written or oral, which is intended to provide or does in fact
provide a benefit to any Employee, and to which the Company is a party or is
bound, either (i) at any time since December 31, 1992, or (ii) if prior to that
date, with respect to which the Company has any liability (whether or not it
still maintains such plan, trust, arrangement, contract, agreement, policy or
commitment).
(b) With respect to each Compensation and Benefit Plan
listed on Schedule 3.15(a), Seller has provided or made available to Buyer
current, accurate and complete copies of (i) all material plan documents,
amendments, trust agreements, insurance contracts and other written materials
describing the substantive terms, conditions, benefits, rights and features of
such Compensation and Benefit Plan, and (ii) the most recent Form 5500 (with
schedules), actuarial valuation (for each defined benefit pension plan), and
audited financial statements (to the extent required by law to be prepared).
(c) Each Pension Plan that is intended to be qualified
under Code Section 401(a) (as amended by the Tax Reform Act of 1986) and
subsequent relevant legislation) has received a favorable determination letter
from the IRS for "TRA '86" (within the meaning of Revenue Procedure 93-39)
stating that the Pension Plan satisfies applicable requirements of the Code and
that the trust associated with the Pension Plan is tax-exempt under Code Section
501(a), or applications for such determination letters have been timely filed
with the IRS in accordance with IRS procedures. To the best of Seller's
Knowledge, no facts exist that could reasonably be expected to affect adversely
the tax-qualified status of any Pension Plan that has received a favorable
determination letter of the IRS or to otherwise cause the revocation of any such
letter. Seller has provided or made available to Buyer a copy of the most
current favorable determination letter issued by the IRS as to each Compensation
and Benefit Plan that is intended to constitute a tax-qualified retirement plan.
(d) Notwithstanding the standards of compliance set forth
on Schedule 3.16, each Compensation and Benefit Plans provided on Schedule
3.15(a) conforms to, and has been maintained, administered and operated in
substantial compliance with its terms and applicable Laws (including, without
limitation, the substantive and procedural requirements of ERISA and the Code).
In addition, no act or omission has occurred nor condition or fact exists, as of
the Closing with respect to the Compensation and Benefit Plans that could have
any Material Adverse Effect on the Company (either directly or by reason of its
affiliation with any member of
22
<PAGE> 23
its "controlled group" within the meaning of Code Sections 414(b), (c), (m) and
(o)) or Buyer, or any Compensation and Benefit Plan participant, beneficiary or
alternate payee, or in a lien upon the Company.
(e) All contributions required to be made under
applicable Law or under the terms of any Compensation and Benefit Plan have been
timely made or have been reflected on the Company's financial statements.
Neither any Pension Plan, nor the pension plan of any member of the Company's
"controlled group" (within the meaning of ERISA Section 4001(a)(14)) (such
controlled group member being referred to in this subsection (e) as an "ERISA
Affiliate" and such pension plan being referred to in this subsection (e) as an
"ERISA Affiliate Plan"), other than any multiemployer plan not maintained by the
Company or any ERISA Affiliate and that is contained in or contributed to
pursuant to a collective bargaining agreement, has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Code Section 412 and
ERISA Section 302, and all required payments with respect to each such Pension
Plan or ERISA Affiliate Plan have been made on or before the respective due
dates for such payments.
(f) Except as set forth in Schedule 3.15(f), the Company
has not at any time contributed, nor been obligated to contribute, to any
Multiemployer Plan with respect to any Employee. With respect to any
Multiemployer Plan listed in Scheduled 3.15(f), (i) neither the Company nor any
member of its controlled group (within the meaning of Code Sections 414(b), (c),
(m) and (o)) has incurred any withdrawal Liability under Title IV of ERISA for
which the Company is liable; (ii) the Company has not received written
notification from the trustees or other administrator of the Multiemployer Plan
that such Multiemployer Plan is in reorganization or insolvent (within the
meaning of ERISA Sections 4241 and 4245, respectively), and the Company has not
taken any action or failed to take any action that was not in substantial
compliance with the provisions of a Multiemployer Plan, collective bargaining
agreement, ERISA, the Code or any applicable Law.
(g) Except as set forth in Schedule 3.15(g), the Company
has no obligation to provide retiree health and life insurance or other retiree
benefit (including, without limitation, retiree death benefits) under any
Compensation and Benefit Plan with respect to any Employee, except as mandated
under Code Section 4980B. Except to the extent set forth in Schedule 3.15(g),
any retiree health benefit at all times has been, by its terms and
administration, secondary to benefits provided under the Medicare program. To
the extent that retiree health and/or life insurance benefits were at any time
reduced or eliminated by the Company, such reduction or elimination complied
with then-applicable plan documents and Law, and no claim or threat of claim has
at any time been made by any Employee (or by a dependent of any such Employee)
for retiree health and/or life insurance benefits that are no longer available.
(h) Except as set forth in Schedule 3.15(h), with respect
to any Compensation and Benefit Plan, (i) no "reportable event" within the
meaning of ERISA Section 4043) has occurred, (ii) to the best of Seller's
Knowledge no "prohibited transaction" (within the meaning of Code section
4975(c)) has occurred, and (iii) no breach of "fiduciary duty (within the
meaning of ERISA Section 404) has occurred.
(i) Except as set forth in Schedule 3.15(i), to the
Seller's Knowledge, no Action (other than routine claims for benefits) to, or
by, any Person or governmental entity have
23
<PAGE> 24
been filed, are pending or threatened, and no facts or contemplated events exist
that reasonably could be expected to give rise to any such Action (other than a
routine claim for benefits) with respect to any Compensation and Benefit Plan.
(j) Seller has no Liabilities for any accrued but unused
paid-time off (including without limitation vacation pay, holiday pay,
short-term disability pay and sick pay) for any period prior to the twelve (12)
month period preceding the Closing Date.
(k) Except as set forth in Schedule 3.15(k), Seller does
not maintain, nor does it have any Liability for, any severance pay plans,
policies, arrangements or programs (including individual severance
arrangements).
(l) Seller does not maintain, nor does it have any
Liability for, any nonqualified deferred compensation arrangements, "top hat"
plans (within the meaning of Department of Labor Regulation Section
2520.104-23), supplemental executive retirement plan, or stock-based or
equity-based plans.
(m) Except as set forth in Schedule 3.15(m), the
consummation of the transaction contemplated hereunder would not (i) entitle any
Employee to any payment (including severance pay or similar compensation) or any
increase in compensation, (ii) result in the vesting or acceleration of any
benefits under any Compensation and Benefit Plan, or (iii) result in any
material increase in benefits payable under any Compensation and Benefit Plan.
SECTION 3.16 COMPLIANCE WITH LAWS. Except as set forth in
Schedule 3.16, and except with respect to any Environmental Law and except for
immaterial matters:
(a) The Company is in compliance with each Law that is or
was applicable to it or to the conduct or operation of the business of the
Company or the ownership or use of any of its assets;
(b) To the Seller's Knowledge, no investigation or review
by any Authority with respect to the Company or any of its businesses,
facilities, operations, agreements or products is pending or threatened, nor has
any Authority indicated an intention to conduct the same;
(c) During the twenty-four (24) months preceding the date
hereof, the Company has not received any notice or written communication
alleging any noncompliance by the Company with any Law, Order or approval that
has not been cured or otherwise resolved, and the Company is not subject to any
unpaid fine or any continuing sanction for any such noncompliance;
(d) The Company is not in violation of or in default
under, and to the Seller's Knowledge, no event has occurred which, with the
lapse of time or the giving of notice or both, would result in the violation of
or default under, the terms of any Order; and
(e) The Company has not received any notice, citation,
claim, assessment or proposed assessment as to or alleging any violation of any
federal, state or local occupational safety and health Laws relating to its
business nor to the Company's Knowledge has the
24
<PAGE> 25
Company been subject to any investigation relating to its business by any
occupational safety and health Authority within the twenty-four (24) months
preceding the date hereof.
SECTION 3.17 INSURANCE. Schedule 3.17 contains a true,
complete and current list of (i) all material insurance policies currently
insuring the property, assets or business Liabilities of the Company and all
bonds required to be maintained with respect to the operation of its business,
and (ii) any agreements, arrangements or commitments by or relating to the
Company under which the Company indemnifies any other Person or is required to
carry insurance for the benefit of any other Person, except for indemnity
agreements with customers or lessees in the Ordinary Course of Business. Such
policies and bonds are in full force and effect, no notice of cancellation or
termination has been received with respect to any such policy, and the Company
has complied in all material respects with such policies and bonds.
SECTION 3.18 INTERESTS OF RELATED PERSONS. Except as set forth
in Schedule 3.18:
(a) Neither Parent, any director or officer of Seller or
any affiliate of Seller (i) has any interest in any property, real or personal,
tangible or intangible, of the Company, (ii) to the Seller's Knowledge, has any
cause of action or other claim whatsoever against the Company or its assets or
properties, (iii) other than for travel, meals and similar reimbursable
expenses, owes any amount to, or is owed any amount by, the Company or (iv)
other than Parent owns, directly or indirectly, any debt, equity or other
interest or investment in any Person that has (x) had business dealings or a
material financial interest in any transaction with the Company (other than
business dealings or transactions conducted in the Ordinary Course of Business
with the Company at substantially prevailing market prices and on substantially
prevailing market terms), or (y) engaged in competition with the Company with
respect to the business of the Company or any line of the products or services
of the Company (a "Competing Business") in any market presently served by the
Company (except for less than one percent (1%) of the outstanding capital stock
of any Competing Business that is publicly traded on any recognized exchange or
in the over-the-counter market).
(b) There are no Contracts, indebtedness, arrangements,
understandings, obligations or other rights or obligations in effect between the
Company, on the one hand, and any director, officer, stockholder or other
affiliate of Parent or the Company, on the other hand, other than employment
relationships.
(c) There will be as of Closing no obligations of the
Company outstanding or accruing in connection with the distribution of the
Company's interests in the Shanghai and Tainjin joint ventures to Parent.
SECTION 3.19 ENVIRONMENTAL MATTERS. Except as disclosed on
Schedule 3.19,
(a) The Company, and the operation of its business, is in
substantial compliance with all applicable Environmental Laws and, in addition,
the Company has not received during the preceding thirty-six (36) months or, to
the Company's Knowledge, prior to that time any written notice, demand, or claim
that it may be in violation of or liable under any Environmental Law. There is
no civil, criminal, or administrative action, suit, demand, claim, notice of
violation, notice of investigation, or proceeding pending relating to the
property or
25
<PAGE> 26
business of the Company, or to the Company's Knowledge, threatened against the
business or property of the Company or relating to any formerly-owned properties
for which the Company has retained or assumed liability either contractually or
by operation of law, relating in any way to Environmental Laws. The Company has
no material Liability for any indemnity or other agreement with any third party
relating to Liability under any Environmental Law.
(b) The Company possesses all permits, licenses,
authorizations, and approvals required under Environmental Law ("Environmental
Permits") to operate its business in substantial compliance with such
Environmental Laws and all such Environmental Permits are currently maintained
in full force and effect. The Company has received no written notice or other
written communication and has no Knowledge of any facts or circumstances that
any such Environmental Permits may be suspended, revoked, or modified by any
Authority. Schedule 3.19(b) contains a true and complete listing of all material
Environmental Permits.
(c) The Company has not, nor to the Knowledge of the
Company has any other person, placed, stored, buried, released, dumped or
disposed of any Hazardous Substances in quantities requiring investigation or
cleanup, or otherwise in a manner that could form the basis of liability under
Environmental Laws, on the properties owned or operated by the Company or to the
Company's Knowledge, at any formerly-owned properties for which the Company has
retained or assumed liability either contractually or by operation of law, or at
any offsite storage, treatment or disposal facility, except for inventories of
such substances to be used, and wastes generated therefrom, in the Ordinary
Course of Business (which inventories and wastes, if any, were stored or
disposed of in accordance with Environmental Laws and in a manner such that
there was no material release of any such substances into the environment) and
the Company has received no request for information nor any notice of potential
liability from any Authority or individual with respect to Hazardous Substances
or contamination at any such properties. No cleanup has occurred at any property
owned or operated by the Company that could reasonably be expected to result in
the assertion or creation of a lien on such property by any Authority with
respect thereto, nor has any such assertion of a lien been made by any
Authority.
(d) Except as set forth on Schedule 3.19, to the
Company's Knowledge there is not at, on or in any property owned or operated by
the Company (i) any friable asbestos-containing material or (ii) any
poly-chlorinated biphenyls which, with respect to either (i) or (ii) are present
in concentrations that would impose regulatory obligations on the Company that
requires under Law corrective or cleanup action.
(e) Except as set forth on Schedule 3.19, there are no
underground storage tanks or regulated surface impoundments at, on or in any
property owned or operated by the Company, including to the Seller's Knowledge,
any former property of the Company for which the Company has retained or assumed
liability either contractually or by operation of law.
(f) The Seller and the Company have provided Buyer copies
of all environmental reports, studies, assessments, and sampling data within its
possession that have been issued in the past three (3) years relating to the
Company or any of its current or former properties or operations.
26
<PAGE> 27
SECTION 3.20 LABOR MATTERS. As of the date hereof and during
the prior twenty-four (24) months, except as set forth in Schedule 3.20:
(a) The Company has not been a party to, or bound by, any
collective bargaining agreement or other labor Contract nor is any collective
bargaining agreement or other labor Contract currently being negotiated, nor are
there any activities or proceedings of any labor union or labor organization to
organize any of the employees of the Company.
(b) There has not been, there is not presently pending or
existing, and there is not threatened any strike, slowdown, picketing, work
stoppage, material labor difficulty, labor arbitration or other proceeding in
respect of the grievance of any employee, application or complaint filed by an
employee or union with the National Labor Relations Board or any comparable
Authority, organizational activity or other material labor dispute against or
affecting the Company or its premises (collectively, "Labor Disputes"), and no
application for certification of a collective bargaining agent is pending or, to
the Company's Knowledge, is threatened.
SECTION 3.21 ASSETS USED IN THE CONDUCT OF THE BUSINESS.
Except for assets disposed of in the Ordinary Course of Business and except as
set forth on Schedule 3.21(a), the Company, or as the case may be, the Company's
Subsidiaries, have good and marketable title to each item of equipment and other
property reflected in the Interim Financial Statements, free and clear of all
Encumbrances, except for Permitted Encumbrances. The assets of the Company as of
the date hereof are sufficient for the conduct of the business of the Company as
conducted on the date hereof. All of the assets reflected in the Interim
Financial Statements are generally in good operating condition and repair,
consistent with industry practices, normal wear and tear excepted, taking into
account age and usage, and are generally adequate for the uses to which they are
being put. Attached hereto as Schedule 3.21(b) are certifications or other
undertakings from certain software vendors to the Company in respect of software
licensed by the Company regarding the ability of such software to process date
data between the 20th and 21st centuries, and such certifications and
undertakings have not been amended or withdrawn.
SECTION 3.22 BANK ACCOUNTS. Schedule 3.22 contains a true,
correct and complete schedule setting forth the name of every bank in which the
Company or any Subsidiary has one or more accounts, savings or other
certificates, or safe deposit boxes; the names of every Person authorized to
draw on such accounts, redeem such certificates or have access to such boxes;
and the principal terms of such certificates and the contents of such boxes.
SECTION 3.23 NO BROKERS. Except as set forth in Schedule 3.23,
neither the Seller nor any Person acting on its behalf has paid or become
obligated to pay any fee or commission to any broker, finder or intermediary for
or on account of the transactions contemplated by this Agreement.
SECTION 3.24 GIRL SCOUT RELATIONSHIP. To the Company's and
Parent's Knowledge, there is no fact, circumstance, information, development or
event in existence which could result in an adverse change other than an
immaterial adverse change in the Company's current or prospective relationship
with the Girl Scouts of America relating to the sale of cookies thereto or the
Contract entered in connection therewith. Schedule 3.24 sets forth the current
Girl Scouts production schedule through December 31, 1998.
27
<PAGE> 28
SECTION 3.25 PARENT OPERATIONS. Except as disclosed on
Schedule 3.25, there are no operations, offices, employees, assets or
Liabilities of Parent associated with the Company's Los Angeles office.
SECTION 3.26 GRANNY GOOSE RELATIONSHIP. The Company is
currently distributing certain of its products through the Granny Goose
distribution network. Other than fulfilling current orders for product, the
Company has no contractual commitment to continue such distribution arrangement.
SECTION 3.27 CERTAIN LIABILITIES. As of June 27, 1998, neither
the Company nor any Subsidiary of the Company had any Liability with respect to
its business of any nature of the type required to be reflected on a balance
sheet prepared in accordance with GAAP using practices customarily followed in
preparation of interim financial statements of the Company (inclusive without
limitation of the practice of not preparing footnotes) which was not fully
disclosed, reflected or reserved against in the Interim Financial Statements
including, without limitation, such Liabilities arising in connection with any
distribution agreement (although excluding any obligations under leases,
capitalized or otherwise); and, except for Liabilities which have been incurred
since such date in the Ordinary Course of Business, the Company has not incurred
any such Liability except as disclosed on Schedule 3.8 or as would be included
in the Debt Amount or the LTIP Amount, or in respect of leases, capitalized or
otherwise with obligations in excess of $250,000 in the aggregate. At the
Closing Date neither the Company nor any Subsidiary of the Company will have any
Indebtedness other than the Debt Amount and intercompany debt owned among the
Company and its Subsidiaries.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, and in consideration of the
covenants of Seller contained herein, Buyer hereby represents and warrants to
the Seller as follows:
SECTION 4.1 ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has the corporate power and corporate authority to own, lease,
operate or otherwise hold its properties and assets and to carry on its business
as it is now being conducted.
SECTION 4.2 AUTHORITY OF BUYER; CONFLICTS.
(a) Buyer has the corporate power and authority to
execute, deliver and perform this Agreement and each other agreement or
certificate delivered pursuant hereto and to consummate the transactions
contemplated in each such agreement. This Agreement and each other agreement or
certificate delivered pursuant hereto by Buyer has been duly authorized and
approved by Buyer's board of directors and do not require any further
authorization or consent of Buyer or its shareholders. This Agreement and each
other agreement or certificate delivered pursuant hereto has been duly
authorized, executed and delivered by Buyer and (assuming the valid
authorization, execution and delivery of this Agreement and each other agreement
or certificate delivered pursuant hereto by Seller) each such agreement is the
legal, valid and
28
<PAGE> 29
binding agreement of Buyer enforceable in accordance with its terms, subject to
the Bankruptcy Exception.
(b) Neither the execution and delivery of this Agreement
each other agreement or certificate delivered herewith by Buyer or the
consummation of any of the transactions contemplated hereby and thereby nor
compliance with or fulfillment of the terms, conditions and provisions hereof
and thereof will:
(i) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute a default, an event
of default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under (A) the Organizational Documents
of Buyer, (B) any material note, instrument, mortgage, lease, franchise
or financial obligation to which Buyer is a party or any of its
properties is subject or by which Buyer is bound, (C) any Order to
which Buyer is a party or by which it is bound or (D) any Law by which
Buyer is bound, or
(ii) require the approval, consent, authorization
or act of, or the making by Buyer of any declaration, filing or
registration with, any Person, except for (A) in connection, or in
compliance, with the provisions of the HSR Act, and (B) such approvals,
consents, authorizations, declarations, filings or registrations the
failure of which to be obtained or made would not materially impair the
ability of Buyer to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
SECTION 4.3 NO PROCEEDING. There is no Action pending or, to
the Knowledge of Buyer, threatened that questions the legality or propriety of
the transactions contemplated by this Agreement.
SECTION 4.4 NO FINDERS OR BROKERS. Except as set forth in
Schedule 4.4, neither Buyer nor any Person acting on its behalf has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement.
SECTION 4.5 FINANCIAL ABILITY. Buyer has ready access to
sufficient funds or has received written commitments from responsible financial
institutions to provide sufficient funds on the Closing Date to pay the
Preliminary Purchase Price.
SECTION 4.6 INVESTMENT INTENT. Buyer is acquiring the Shares
as an investment for its own account and not with a view to the distribution
thereof. Buyer shall not sell, transfer, assign, pledge or hypothecate any of
the Shares in the absence of registration under, or pursuant to an applicable
exemption from, federal and applicable state securities Laws.
29
<PAGE> 30
ARTICLE V.
ACTIONS PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the
following actions between the date hereof and the Closing Date set forth
hereinbelow. All references to the Company, unless the context requires
otherwise, shall include the Company and each of its Subsidiaries.
SECTION 5.1 ACCESS TO INFORMATION. The officers, employees and
authorized representatives of Buyer (including, without limitation, independent
public accountants and attorneys) shall have reasonable access, during normal
business hours and upon reasonable advance notice, to the offices, properties,
employees and business and financial records of the Company, to the extent Buyer
shall reasonably deem necessary or desirable and the Company shall furnish to
Buyer or its authorized representatives such additional information concerning
the Company as shall be reasonably requested and shall reasonably promptly
respond to reasonable inquiries by Seller; provided, however, that the Seller
shall not be required to violate any obligation of confidentiality to which it
is subject in discharging its obligations pursuant to this Section 5.1. Buyer
agrees that such investigation shall be conducted in such a manner as not to
interfere unreasonably with the operations of the Seller. No such access,
examination or review shall in any way affect, diminish, terminate or mitigate
any of the representations, warranties or covenants of Seller set forth herein.
If in the course of any investigation pursuant to this Section 5.1 the Buyer's
officers, employees or authorized representatives discover any breach of any
representation or warranty contained in this Agreement that is not immaterial,
or any circumstance or condition that upon Closing would constitute such a
breach, Buyer covenants that it will use its best efforts to promptly inform
Seller in writing; provided, the failure by Buyer to so inform Seller shall not
in any way affect, diminish, terminate or mitigate Seller's liability for such
breach..
SECTION 5.2 PUBLICITY. The initial press release announcing
the transactions contemplated herein shall be released jointly after mutual
agreement between the parties hereto and thereafter except for making customary
communications by the Company and Buyer to employees, shareholders, financial
analysts, customers or suppliers, the parties hereto shall obtain the prior
approval of each party hereto prior to issuing any press releases or otherwise
making public announcements with respect to the transactions contemplated herein
and prior to making any filings with any Authority or with any national
securities exchange with respect thereto, except as may be required by Law or by
obligations pursuant to any listing agreement with or rules of any national
securities exchange.
SECTION 5.3 CERTAIN NOTIFICATIONS. Each party shall promptly
notify the other of any Action that shall be instituted or threatened against
such party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Each party hereto shall promptly
notify the other of any lawsuit, claim, proceeding or investigation that may be
threatened, brought, asserted or commenced against the Company or Buyer, as the
case may be, that would have been listed in Schedule 3.13 or constitute an
exception to Section 4.3, as the case may be, if such lawsuit, claim, proceeding
or investigation had arisen prior to the date hereof. Seller shall promptly
notify Buyer in writing of any event following the date hereof of which Seller
is or becomes aware that could have a Material Adverse Effect or adversely
affect the performance by Seller of its obligations under the Agreement.
30
<PAGE> 31
SECTION 5.4 REQUIRED APPROVALS. Each party hereto hereby
agrees to cooperate with the other and use its reasonable efforts to promptly
prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents and to obtain as
promptly as practicable all necessary permits, consents, approvals and
authorizations of all third parties and Authorities that are necessary to the
consummation of the transactions contemplated herein. Each party shall have the
right to review in advance, and to the extent practicable each will consult with
the other on, in each case subject to applicable Laws relating to the exchange
of information, all the information relating to the other party that appears in
any filing made with, or written materials submitted to, all third parties and
Authorities in connection with the transactions contemplated in this Agreement.
In exercising the foregoing right, Buyer and the Seller shall act reasonably and
as promptly as practicable. Buyer and the Seller agree that they will keep the
other apprised of the status of matters relating to completion of the
transactions contemplated herein, including promptly furnishing the other with
copies of notices or other communications received from all third parties and
Authorities with respect to the transactions contemplated herein.
SECTION 5.5 HSR ACT. Buyer and Seller each agree to prepare
and file the Notification and Report Form required pursuant to the HSR Act with
the FTC and the Antitrust Division if reasonably practicable on the date hereof,
and otherwise by no later than the first (1st) Business Day following the date
hereof. The Notification and Report Form shall be in accordance with the
requirements of the HSR Act. Each such party hereby covenants (i) to request
early termination of the waiting period required by the HSR Act; (ii) to
promptly furnish to the other party hereto such necessary or appropriate
information and reasonable assistance, including access to each other's
documents and personnel, as such other party may reasonably request in
connection with its preparation of necessary or voluntary filings and other
submissions, communications or presentations pursuant to the HSR Act; (iii) to
promptly keep the other party apprised of the status of any communications with
and any inquiries by the FTC or Antitrust Division; and (iv) to comply with a
request for additional information issued by the FTC, the Antitrust Division or
any other Authority, as the case may be, as promptly and expeditiously as
practicable. The parties shall use best efforts and cooperate to expedite the
termination of the waiting period under the HSR Act. Buyer and Seller each agree
that they will not undertake any unilateral contacts with either the FTC or
Antitrust Division without the prior approval of the other party. Buyer shall
pay the HSR Act filing fee. If any administrative, judicial or legislative
action or proceeding is instituted (or threatened to be instituted) challenging
the transactions contemplated by this Agreement as violative of any antitrust
Law, Buyer and Seller shall each use best efforts and cooperate to contest and
vigorously resist any such action or proceeding, and to have vacated, lifted,
reversed or overturned as promptly and expeditiously as practicable any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the transactions contemplated by this Agreement, including,
without limitation, by pursuing all reasonable avenues of administrative and
judicial appeal.
SECTION 5.6 OPERATIONS PRIOR TO THE CLOSING DATE.
(a) The Company shall operate and carry on its business
in the Ordinary Course of Business including, without limitation, the processing
of cash receipts and disbursements. The Company shall use all commercially
reasonable efforts consistent with good
31
<PAGE> 32
business practice to preserve its goodwill, prospects, rights, properties,
assets and business, and to preserve and protect the Company's relationships
with its suppliers, contractors, employees, customers, including without
limitation, its current and prospective relationship with the Girl Scouts
Councils with whom it has a Contract, relating to the sale of cookies thereto.
(b) Notwithstanding Section 5.6(a), except as expressly
contemplated by this Agreement or except with the express written approval of
Buyer (which Buyer agrees shall not be unreasonably withheld or delayed), the
Company shall not, except as allowed on Schedule 5.6:
(i) other than is required pursuant to
applicable Laws, take any act listed in subparagraph (a) through (j) of
Section 3.8; or
(ii) other than in the Ordinary Course of
Business, enter into or terminate any Material Contract;
(iii) not issue any shares of its capital stock or
issue any distribution or dividend thereon of property or capital
stock; provided, however, notwithstanding anything herein to the
contrary, the Company shall be entitled to (i) distribute or forgive
the promissory note received from Parent in respect of the Shanghai and
Tainjin joint ventures, and (ii) make distributions from available cash
on hand from time to time in any amount or amounts to Parent on or
prior to the end of business on the Friday prior to the Closing Date;
(iv) enter into or contract for any hedging or
similar derivative transaction other than in the Ordinary Course of
Business;
(v) engage in the offering of special programs
whether written or oral including, without limitation, trade discounts,
special payment terms, consignment programs, pricing changes or
announced price increases which will be effective in the future other
than in the Ordinary Course of Business; or
(vi) enter into or issue letter of credit
guarantees in connection with route man loans other than in the
Ordinary Course of Business.
(c) As of the Closing Date, any net intercompany
receivables, payables, loans and any other corporate charges then existing
between the Company, Parent and any affiliate (excluding the Company's
Subsidiaries) shall be settled or forgiven (implementing whichever action is
most tax advantageous to the Company) and any intercompany agreement between
such parties shall be terminated.
SECTION 5.7 BOOKS AND RECORDS. Buyer agrees to, and shall
cause the Company to, retain all books, records and other documents pertaining
to the Company's business in existence on the Closing Date for a period of four
(4) years (or such longer period of the applicable statutes of limitation
relating to claims relative to such matters or such longer period as is required
by Law) after the Closing and to make the same available after the Closing Date
for inspection and copying by Parent or Parent's agents, upon reasonable request
and upon reasonable notice.
32
<PAGE> 33
SECTION 5.8 FURTHER ASSURANCES. At any time and from time to
time after the Closing Date, the parties hereto agree to (a) furnish upon
request to each other such further assurances, information, documents,
instruments of transfer or assignment, files and books and records as reasonably
requested, (b) promptly execute, acknowledge, and deliver any such further
assurances, documents, instruments of transfer or assignment, files and books
and records as reasonably requested, and (c) do all such further acts and things
all as such other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to herein.
SECTION 5.9 EXCLUSIVITY. Unless this Agreement has been
terminated in accordance with Article VII, and except as provided on Schedule
5.9, Seller agrees that from the date hereof neither it nor any of Seller's
officers, directors, shareholders, affiliates or other representatives
(collectively the "Affiliated Parties") will invite, solicit or encourage
proposals or offers or entertain, accept, negotiate, discuss or otherwise
participate in a possible merger, combination, sale or other disposition of the
Shares or substantially all the assets of Parent or the Company or any business
combination or change in control of the Company (a "Company Sale") with any
other party. Seller represents that it is not a party to or bound by any
agreement with respect to a Company Sale other than this Agreement. Seller shall
cause the Affiliated Parties to immediately cease and terminate any existing or
prior existing activities, discussions or negotiations with any persons or
entities conducted heretofore with respect to any Company Sale, and shall
promptly request each such person or entity who has heretofore entered into a
confidentiality agreement in connection with a Company Sale or has otherwise
received information in connection with a Company Sale to (a) return to the
Seller all confidential information heretofore furnished to such person or
entity by or on behalf of the Seller and (b) destroy (and certify to the Seller
as to the destruction) all notes, analyses, compilations, reports, forecasts,
studies, memoranda, computer-stored data or other documents which contain, or
are based in whole or in part or otherwise reflect, confidential information
received in connection with a Company Sale. It is intended by the parties hereto
that so long as the terms of this Section 5.9 are in effect, Buyer shall have
the exclusive right to purchase the Shares on the terms and conditions herein
contained.
SECTION 5.10 TAX WITHHOLDING. The Company and Seller shall
take all actions necessary to comply with sections 897, 1446, and 3406 of the
Code and any rules, regulations, and orders promulgated thereunder. In the event
that the Company or Parent fails to provide Buyer, at or prior to Closing (a) an
affidavit in the form attached hereto as Exhibit 5.10, or (b) other evidence
satisfactory to Buyer that the transactions contemplated by this Agreement are
exempt from any Taxes which may apply by reason of sections 897, 1446, or 3406
of the Code, Buyer shall have the right to withhold the required portion of the
Purchase Price ("Tax Withholding"). The amount of Tax Withholding shall be
credited against the Purchase Price and Parent shall not have recourse against
Buyer for the amount of the Tax Withholding.
SECTION 5.11 EMPLOYMENT MATTERS. Buyer covenants and agrees
after Closing to timely discharge all Liabilities under the 1998 Long Term
Incentive Plan as directed by Parent. Parent shall reimburse the Company for any
Liabilities so discharged to the extent not reflected in the LTIP Amount. Buyer
also covenants and agrees that for a period of one (1)
33
<PAGE> 34
year after Closing, the Company shall continue the employment of Messrs. Woolf,
Cavitt and Bayers at their current salary and bonus opportunity levels with
generally comparable terms and conditions of employment (other than job title
and specific duties) and fringe benefits; provided, that long-term incentive and
other programs (severance, etc.) will be determined by the Company after Closing
in its discretion.
SECTION 5.12 INTEREST RATE SWAP AGREEMENTS. Seller covenants
and agrees to terminate all interest rate swap agreements to which the Company
is a party at or prior to Closing.
SECTION 5.13 LOS ANGELES OFFICE. The Company covenants and
agrees to close the Company's Los Angeles office prior to Closing and any
expense, cost or liability in connection therewith shall either be discharged by
the Company prior to Closing or accrued as a current liability on the Closing
Balance Sheet.
ARTICLE VI.
CONDITIONS TO OBLIGATION OF PARTIES TO CLOSE
SECTION 6.1 CONDITIONS TO OBLIGATIONS OF SELLER TO CLOSE. The
obligations of the Seller to consummate the sale and transfer of the Shares and
the other transactions set forth herein shall be subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Representations, Warranties and Agreements. Each of
the representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the Closing Date, except that
such representations and warranties made as of a specific date need only be true
as of such specified date, and each of the covenants and agreements of Buyer to
be performed on or prior to the Closing Date shall have been duly performed in
all material respects.
(b) Opinion of Buyer's Counsel. Seller shall have
received from Winston & Strawn, counsel to Buyer, an opinion dated as of the
Closing Date to the effect set forth in Exhibit 2.5(b).
(c) Preliminary Purchase Price. Buyer shall have made
payment of the Preliminary Purchase Price in the amount and manner provided for
in Section 2.2(c).
(d) Secretary's Certificate. Seller shall have received
copies of the resolutions of the Board of Directors of Buyer, authorizing the
execution, delivery and performance of this Agreement and certificates of the
secretary or any assistant secretary of the Buyer dated as of the Closing Date,
to the effect that such resolutions were duly adopted and are in full force and
effect, together with copies of the Organizational Documents of the Buyer
certified by such secretary or assistant secretary.
(e) Indemnification Escrow Agreements. The Buyer shall
have entered into Indemnification Escrow Agreements.
34
<PAGE> 35
(f) No Order. No Order shall be in effect which would
prohibit or restrict the consummation of any of the transactions contemplated
hereby.
(g) Closing Documents. Buyer shall have delivered all
agreements, certificates, instruments, opinions and other documents required to
be delivered by it on the Closing Date pursuant to Section 2.5.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF BUYER TO CLOSE. The
obligations of the Buyer to consummate the purchase and sale of the Shares and
the other transactions set forth herein shall be subject to the satisfaction or
waiver on or prior to the Scheduled Closing Date of the following conditions:
(a) Representations, Warranties and Agreements. Each of
the representations and warranties of the Seller contained in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date, in each case with the same effect as
though such representations and warranties had been made on and as of such date,
except that such representations and warranties made as of a specific date need
only be true as of such specified date, and each of the covenants and agreements
of the Seller to be performed on or prior to the Closing Date shall have been
duly performed in all material respects; provided, however, that,
notwithstanding the failure of such representations and warranties to be true
and correct, and such covenants and agreements to be performed, the condition
provided in this Section 6.2(a) shall be deemed satisfied if the aggregate
Losses and Expenses that could reasonably be expected (as determined as
indicated below) to result to Buyer by reason of the failure of such
representations and warranties to be true and correct and such covenants and
agreements to be performed, if the Closing would be effected, is (i) less than
or equal to $2 million, or (ii) greater than $2 million, only if the Seller
elects, in its discretion, by a notice to Buyer, to increase the then effective
Supplemental Letter of Credit Escrow Amount by the amount that such Losses and
Expenses exceed $2 million, provided that such increase may not exceed $15
million in the aggregate. In the event Buyer in good faith at any time believes
that the amount of such Losses and Expenses exceed $2 million, Buyer shall
provide the Seller a certificate to such effect, which certificate shall set
forth the details on which such belief is based. If the Seller does not agree in
writing within ten (10) Business Days of the issuance of Buyer's certificate
that the amount of the Losses and Expenses determined pursuant to this Section
6.2(a) exceed $2 million, the issue shall be settled by arbitration in
accordance with the arbitration procedures set forth in Section 9.12 hereof. The
decision resulting from such arbitration shall be final regarding the issue of
whether such Losses and Expenses exceed $2 million and whether the condition
provided in this Section 6.2(a) is satisfied. Any claim for indemnification
(including claims for Losses and Expenses identified pursuant to this Section
6.2(a)) which may be asserted by Buyer relative to the failure of such
representations or warranties to be true and correct and such covenants and
agreements to be performed shall be determined in accordance with the provisions
of Article VIII hereto regarding indemnification, and upon a determination in
accordance therewith, the Supplemental Letter of Credit Escrow Amount shall be
reduced by the amount, if any, by which the Supplemental Letter of Credit Escrow
Amount was increased in respect of such claim, less the amount disbursed to
Buyer pursuant to such determination.
35
<PAGE> 36
(b) Opinion of Seller's Counsel. Buyer shall have
received from Jones, Day, Reavis & Pogue, an opinion dated as of the Closing
Date to the effect set forth in Exhibit 2.4(f).
(c) Share Certificates. Parent shall have delivered to
Buyer the certificates evidencing the Shares, accompanied by stock powers duly
executed in blank.
(d) Secretary's Certificates. Buyer shall have received
copies of the resolutions of the respective Boards of Directors of each of the
Parent and the Company (and the Parent as sole shareholder of the Company)
authorizing the execution, delivery and performance of this Agreement and
certificates of the secretary or any assistant secretary of each of Parent and
the Company dated as of the Closing Date, to the effect that such resolutions
were duly adopted and are in full force and effect, together with copies of the
Organizational Documents of each of the Parent and the Company certified by
their respective secretaries or assistant secretaries.
(e) Indemnification Escrow Agreements. The Parent shall
have entered into the Indemnification Escrow Agreements.
(f) No Order. No Order shall be in effect which would
prohibit or restrict the consummation of any of the transactions contemplated
hereby.
(g) Closing Documents. Seller shall have delivered all
agreements, certificates, instruments, opinions and other documents required to
be delivered by it on the Closing Date pursuant to Section 2.4.
SECTION 6.3 CONDITION TO OBLIGATIONS OF THE PARTIES TO CLOSE.
The respective obligations of the Seller and Buyer to consummate the purchase
and sale of the Shares and the other transactions set forth herein shall be
subject to the satisfaction or waiver on or prior to the Scheduled Closing Date
of the following condition:
The waiting period applicable to the purchase and sale of the Shares
provided for herein under the HSR Act shall have expired or been
terminated, and there shall be no order or injunction of any court of
competent jurisdiction that prohibits the purchase and sale of the
Shares provided for herein.
SECTION 6.4 EFFECT OF WAIVER OF CONDITIONS, ETC. Any of the
foregoing conditions may be waived, in whole or in part, by any party as to whom
such condition is a condition precedent to such party's performance, for
purposes of consummating the purchase and sale of the Shares and the other
transactions provided for herein. Should the condition provided for in Section
6.2(a) be satisfied by reason of a determination by the parties or by
arbitration that the amount of the Damage Proviso has not been exceeded, and the
Closing occurs, although the Seller may have nonetheless breached a
representation, warranty or covenant hereunder, nothing provided in Section
6.2(a) shall obviate or diminish Buyer's right to seek indemnification therefor
in accordance with the provisions of Article VIII hereto regarding
indemnification, subject to the conditions and limitations therein.
36
<PAGE> 37
ARTICLE VII.
TERMINATION OF AGREEMENT
SECTION 7.1 TERMINATION. This Agreement constitutes the
binding and irrevocable agreement of the parties to consummate the transactions
contemplated hereby, and this Agreement may be terminated prior to the Closing
only as follows:
(a) By mutual written consent of Buyer and Seller;
(b) By the Seller by written notice to Buyer given
subsequent to December 26, 1998, if the Closing shall not have been consummated
on or prior to such date, regardless of whether the condition provided in
Section 6.3 has been satisfied, unless any of the conditions precedent to the
obligation of Buyer to effect the Closing set forth in Section 6.2 shall not
have been satisfied or waived; or
(c) By the Buyer by written notice to Seller given
subsequent to December 26, 1998, if the Closing shall not have been consummated
on or prior to such date, regardless of whether the condition provided in
Section 6.3 has been satisfied, unless any of the conditions precedent to the
obligations of Seller to effect the Closing set forth in Section 6.1 shall not
have been satisfied or waived.
SECTION 7.2 EFFECT OF TERMINATION.
(a) In the event of a termination of this Agreement
pursuant to Section 7.1 hereof, each party shall pay the Expenses incurred by it
in connection with the Agreement and no party hereto shall have any liability or
obligation to any other party to this Agreement under or in connection with this
Agreement, but except that nothing herein will relieve any party from liability
for any breach of this Agreement prior to such termination; provided, however,
that if this Agreement is terminated by a party because of the breach of this
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply in all material respects with its
obligations under this Agreement, the terminating party's rights to pursue all
legal remedies will survive such termination unimpaired.
(b) Notwithstanding any termination of this Agreement,
the obligations of the parties with respect to Section 5.2 (Publicity), Section
9.11 (Governing Law), and in the Confidentiality Agreement shall survive.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION BY THE PARENT. From and after the
Closing, Parent shall defend, indemnify, hold harmless and waive any claim for
contribution against the Buyer, the Company and all of their officers,
directors, employees, agents and affiliates from and against and in respect of
any and all Losses and Expenses arising out of or due to a breach of any
representation, warranty or covenant of the Seller contained in this Agreement,
provided, that
37
<PAGE> 38
Parent shall have no obligation to indemnify Buyer (other than for
indemnification claims with a respect to a breach of the representations or
warranties contained in Sections 3.6 and 3.9 hereof which shall not be subject
to this proviso) until the aggregate Losses and Expense to which it would be
entitled to be indemnified pursuant to this sentence shall equal or exceed Two
Million Dollars ($2,000,000), in which event Parent shall be obligated only for
Losses and Expenses in excess of such sum; and provided further, that the
liability of Parent for indemnification hereunder shall be limited to, and all
such claims for indemnification hereunder shall be payable solely from (and to
the extent of), (i) the Cash Escrow Amount pursuant to the terms and conditions
of the Cash Indemnification Escrow Agreement for any indemnification claim other
than with respect to a breach of the representations or warranties contained in
Section 3.9, (ii) the Tax Letter of Credit Escrow Amount pursuant to the terms
and conditions of the Tax Letter of Credit Indemnification Escrow Agreement for
any indemnification claim with respect to a breach of the representations
contained in Section 3.9, and (iii) the Supplemental Letter of Credit Escrow
Amount pursuant to the terms and conditions of the Supplemental Letter of Credit
Indemnification Escrow Agreement, if and only if (A) the Cash Escrow Amount has
been exhausted (and not in any event with respect of a claim for a breach of the
representations in Section 3.9), or (B) a claim for indemnification is made with
respect to a breach of the representations in Section 3.19 after the date that
is fifteen (15) months after the Closing Date. The indemnification provided for
in this Section 8.1 shall terminate on the date that is fifteen (15) months
after the Closing Date and no claim may be made by Buyer hereunder or pursuant
to the Cash Indemnification Escrow Agreement, the Supplemental Letter of Credit
Indemnification Escrow Agreement, the Tax Letter of Credit Indemnification
Escrow Agreement or otherwise thereafter, except for (x) indemnification claims
with respect to a breach of the representations or warranties contained in
Section 3.19 which may be made pursuant to the Supplemental Letter of Credit
Indemnification Escrow Agreement prior to the date that is thirty (30) months
after the Closing Date, and (y) indemnification claims with respect to a breach
of the representations or warranties contained in Section 3.9 which may be made
pursuant to the Tax Letter of Credit Indemnification Escrow Agreement prior to
the date that is thirty-six (36) months after the Closing Date. Notwithstanding
anything herein to the contrary, an indemnification claim in respect of a breach
of the representations or warranties in Sections 3.6 and 3.18(c) and the
covenants set forth in Section 5.11 shall not be subject to any of the
limitations in this Section 8.1.
SECTION 8.2 INDEMNIFICATION BY BUYER. From and after the
Closing, Buyer agrees to defend, indemnify, hold harmless and waive any claim
for contribution against Parent and all of its officers, directors, employees,
agents, and affiliates from and against any and all Losses and Expenses incurred
by Parent or arising out of or due to a breach of any representation, warranty
or covenant of Buyer contained in this Agreement. The maximum amount payable by
Buyer pursuant to this Section 8.2 shall not exceed $10 million. Buyer's
obligation to make payments hereunder shall expire fifteen (15) months after the
Closing Date.
SECTION 8.3 PROCEDURE FOR INDEMNIFICATION.
(a) Promptly after the receipt by a party hereto of
notice of any claim or the commencement of any action or proceeding, such party
(the "Indemnified Party") will, if a claim with respect thereto is to be made
against the other party pursuant to Section 8.1 or 8.2, give the indemnifying
party (the "Indemnifying Party") written notice of such claim or the
commencement of such action or proceeding and shall permit the Indemnifying
Party to assume
38
<PAGE> 39
the defense of any such claim or any litigation resulting from such claim;
provided that no failure or delay in delivery of any notice shall impair the
rights of the Indemnified Party, except to the extent the Indemnifying Party is
prejudiced thereby. If the Indemnifying Party assumes the defense of any such
claim or litigation resulting therefrom, the obligations of the Indemnifying
Party as to such claim shall be limited to taking all steps necessary in the
defense or settlement of such claim or litigation resulting therefrom and to the
extent required by Section 8.1 or 8.2, and subject to its terms, conditions and
limitations, to holding the Indemnified Party harmless from and against any and
all Losses and Expenses caused by or arising out of any settlement approved by
the Indemnifying Party or any judgment in connection with such claim or
litigation resulting therefrom. The Indemnified Party may participate, at its
expense, in the defense of such claim or litigation provided that the attorney
selected by the Indemnifying Party to represent the Indemnifying Party shall
direct and control the defense of such claim or litigation. The Indemnifying
Party shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment, or enter into any settlement,
except with the written consent of the Indemnified Party, which does not include
as an unconditional term thereof the giving by the claimant or the plaintiff to
the Indemnified Party of a release from all liability in respect of such claim
or litigation or which provides for a settlement payment in excess of the
remaining amount held pursuant to the Indemnification Escrow Agreement.
(b) If the Indemnifying Party shall not assume the
defense of any such claim or litigation resulting therefrom, the Indemnified
Party may defend against such claim or litigation in such manner as it may deem
appropriate. The Indemnified Party may not settle such claim or litigation as to
which it seeks indemnification hereunder without the written consent of the
Indemnifying Party (which consent shall not be unreasonably withheld).
SECTION 8.4 EXCLUSIVE REMEDY. Other than a claim for breach
should the Closing not occur, the parties hereto acknowledge and agree that the
remedies provided in this Article VIII shall be the sole and exclusive remedies
of such parties (or any Person claiming by or through such party) for breach,
misrepresentation or default by any party under or in respect to this Agreement,
or in respect of the transactions provided for herein. In particular, and not in
limitation of the foregoing, each party hereto waives in respect of, and
covenants not to sue, each other party hereto, as to any claim, right or remedy
against or in respect of (including without limitation any right of
contribution) as to each such other party under any Environmental Law, including
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1989, as amended.
SECTION 8.5 EXCLUSION OF CERTAIN DAMAGES. Except as provided
for in this Agreement, for purposes of this Article VIII, no party shall have
any liability under this Agreement or any agreement, document or instrument
delivered pursuant to this Agreement, or in connection with the transactions
contemplated hereby or thereby, for indirect, consequential or incidental
damages of any kind or nature, including, without limitation, loss of profits or
loss of business, howsoever caused.
SECTION 8.6 MITIGATION, ETC. Any party seeking indemnification
for any damages for which it is entitled to seek indemnification shall use all
commercially reasonable efforts to mitigate its damages in connection with such
indemnity claim. The indemnification obligation of any party shall be adjusted
so as to give credit to such party for any tax benefits, or
39
<PAGE> 40
any other recovery available to the party being indemnified, including without
limitation insurance and contractual or other rights to indemnification
available from third parties.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1 CONFIDENTIAL NATURE OF INFORMATION. Buyer agrees
that all documents, materials and other information which it shall have obtained
regarding the Company during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether obtained before or
after the date of this Agreement), the inves tigation provided for herein and
the preparation of this Agreement and other related documents shall be held in
confidence pursuant to terms, conditions and limitations set forth in the
Confidentiality Agreement.
SECTION 9.2 NON-COMPETITION AGREEMENT.
(a) From the date of Closing for a period of one (1) year
Parent shall not, directly or indirectly, or as the agent of another Person or
through other Persons as an agent:
(i) engage, directly or indirectly, within the
United States in a business the same as, or substantially similar to,
the business currently conducted by the Company and Buyer;
(ii) own, manage or operate any other business
directly or indirectly engaged in the promotion, sale or distribution,
within the United States, of products or services competitive with
those of the business currently conducted by the Company and Buyer,
except that an interest of less than five percent (5%) of a
publicly-held corporation that is engaged in a business competitive
with the business currently conducted by the Company and Buyer within
the United States shall be permitted; or
(iii) directly or indirectly solicit for
employment any employee of Buyer or the Company within the United
States, or request, induce or advise any employee to leave the employ
of Buyer or the Company, unless Buyer consents to said employee leaving
the employ of the Buyer or the Company.
(b) The necessity of protection against the competition
of Parent against Buyer or the Company and the nature and scope of such
protection has been carefully considered by the parties hereto. The parties
hereto agree and acknowledge that the duration, scope and geographic areas
applicable to the covenant not-to-compete described in this Section 9.2 are
fair, reasonable and necessary and that adequate compensation has been received
by Sellers for such obligations. If, however, for any reason any court
determines that the restrictions in this Section 9.2 are not reasonable or that
consideration is inadequate, such restrictions shall be interpreted, modified or
rewritten to include as much of the duration, scope and geographic area
identified in this Section 9.2 as will render such restrictions valid and
enforceable.
40
<PAGE> 41
(c) In the event of a breach or threatened breach of this
Section 9.2, Buyer shall be entitled, without the posting of a bond, to an
injunction restraining such breach. Nothing herein contained shall be construed
as prohibiting any party from pursuing any other remedy available to it for such
breach or threatened breach.
SECTION 9.3 NOTICES. All notices or other communications
required or permitted hereunder shall be in writing and shall be deemed given or
delivered when delivered personally or when sent by registered or certified mail
or by private courier addressed as follows:
If to Buyer, to:
Keebler Foods Company
677 Larch Avenue
Elmhurst, Illinois 60126
Attention: Sam K. Reed
with a copy to:
Keebler Foods Company
677 Larch Avenue
Elmhurst, Illinois 60126
Attention: Thomas E. O'Neill
and:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Bruce A. Toth
Oscar A. David
If to Seller, and prior to Closing, to:
President International Trade and Investment Corporation
c/o 41 Perimeter Center East
Suite 400
Atlanta, Georgia 30346
Attention: Eric H. Wen
41
<PAGE> 42
or, if to Seller, and subsequent to Closing, to:
President International Trade and Investment Corporation
c/o President Enterprises Corporation
301 Chung Chen Rd. Yan Harng
Yeong Kang Shiano
Tainan Hsien, Taiwan
Republic of China
Attention: C. S. Lin
with a copy, in either case, to:
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attention: John E. Zamer
and
Jones, Day, Reavis & Pogue
8th Floor
No. 2 Tun Hwa South Road
Section 2, Taipei
Taiwan, R.O.C.
Attention: Jack J. T. Huang
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
SECTION 9.4 SUCCESSORS AND ASSIGNS. The rights of either party
under this Agreement shall not be assignable by such party without the written
consent of the other party. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon any Person other than the parties and successors and
assigns permitted by this Section 9.4 any right, remedy or claim under or by
reason of this Agreement.
SECTION 9.5 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, the
Exhibits and Schedules referred to herein and the documents delivered pursuant
hereto and the Confidentiality Agreement contain the entire understanding of the
parties hereto with regard to the subject matter contained herein or therein,
and supersede all other prior agreements, under standings or letters of intent
between or among any of the parties hereto. This Agreement shall not be amended,
modified or supplemented except by a written instrument signed by an authorized
representative of each of the parties hereto.
SECTION 9.6 INTERPRETATION. Articles, titles and headings to
sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The Schedules and Exhibits referred to herein shall be construed with
and as an integral part of this Agreement to the same extent as if they were set
42
<PAGE> 43
forth verbatim herein. Neither the specification of any dollar amount in any
representation or warranty contained in this Agreement nor the inclusion of any
specific item in any Schedule hereto is intended to imply that such amount, or
higher or lower amounts, or the item so included or other items, are or are not
material, and no party shall use the fact of the setting forth of any such
amount or the inclusion of any such item in any dispute or controversy between
the parties as to whether any obligation, item or matter not described herein or
included in any Schedule or Exhibit is or is not material for purposes of this
Agreement. Unless this Agreement specifically provides otherwise, neither the
specification of any item or matter in any representation or warranty contained
in this Agreement nor the inclusion of any specific item in any Schedule hereto
is intended to imply that such item or matter, or other items or matters, are or
are not in the ordinary course of business, and no party shall use the fact of
the setting forth or the inclusion of any such item or matter in any dispute or
controversy between the parties as to whether any obligation, item or matter not
described herein or included in any Schedule is or is not in the ordinary course
of business for purposes of this Agreement.
SECTION 9.7 WAIVERS. Any term or provision of this Agreement
may be waived, or the time for its performance may be extended, by the party or
parties entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
SECTION 9.8 EXPENSES. The Buyer on the one hand, and the
Parent, with respect to the costs and expenses of Parent and the Company, on the
other hand, will pay all costs and expenses incident to its negotiation and
preparation of this Agreement and to its performance and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with, including the fees, expenses and disbursements of its counsel and
independent public accountants.
SECTION 9.9 PARTIAL INVALIDITY. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective and
valid under applicable Law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective to the extent,
but only to the extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or unenforceable
provision or provisions or any other provisions hereof, unless such a
construction would be unreasonable.
SECTION 9.10 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties hereto and delivered to Seller and Buyer.
SECTION 9.11 FURTHER ASSURANCES. On and after the Closing Date
each party hereto shall take such other actions and execute such other documents
and instruments of
43
<PAGE> 44
conveyance and transfer as may be reasonably requested by the other party hereto
from time to time to effectuate or confirm the transfer of the Shares to Buyer
in accordance with the terms of this Agreement.
SECTION 9.12 GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement shall be governed by and construed in accordance with the internal
laws (as opposed to the conflicts of law provisions) of the State of New York.
The parties hereby irrevocably and unconditionally agree that except as provided
in Section 9.13 hereof, any legal action or proceeding arising out of or
relating to this Agreement may be brought in the United States District Court
for the Southern District of New York; provided, however, in the event such
court shall not then have jurisdiction over such action or proceeding, each
party hereby irrevocably and unconditionally agrees that such action or
proceeding may be brought in any state court in the State of New York. By the
execution and delivery of this Agreement, each party hereby irrevocably submits
to the exclusive jurisdiction of such court(s). Each party hereby waives any
objection which it may hereafter have to the laying of venue of any proceeding
arising out of or relating to this Agreement brought in the United States
District Court for the Southern District of New York (or in any state court in
the State of New York in the event said United States District Court shall not
then have jurisdiction) and further waives any claim that any such proceeding
brought in such court(s) has been brought in an inconvenient forum.
SECTION 9.13 CONSULTATION AND ARBITRATION.
(a) The parties hereto agree that they shall attempt to
resolve in good faith disputes arising in connection with the proviso set forth
in Section 6.2(a) of this Agreement. Parent and Buyer shall designate one
officer for this purpose who is expressly authorized to make decisions. A
dispute shall be referred by a party for consultation between the parties by
delivering written notice to the other party briefly stating the nature of the
dispute and requesting consultation.
(b) In the event that, upon the expiration of ten (10)
calendar days after receipt of the notice referred to in subsection (a) of this
Section, the parties are unable to resolve the matter in dispute, and if the
matter relates to any alleged breach of any representation, warranty, covenant
or agreement in this Agreement hereto, then the dispute shall be resolved in the
manner provided in subsection (c) of this Section.
(c) Any dispute with respect to the proviso set forth in
Section 6.2(a) of this Agreement, including any dispute relating to the
construction or interpretation of the rights and obligations of any party, which
is not resolved through consultation as provided in subsection (a) and (b) of
this Section, shall be resolved by an arbitration proceeding conducted in
accordance with the following:
(i) The arbitration proceeding shall be governed
by the commercial rules of the American Arbitration Association
("AAA");
(ii) The arbitrators shall be qualified by
education and training to pass upon the particular matter to be
decided;
44
<PAGE> 45
(iii) There shall be three (3) arbitrators, one of
whom shall be selected by the party seeking to initiate arbitration,
one by the other party and the third by the two arbitrators so
selected;
(iv) The arbitration proceeding shall take place
in Atlanta, Georgia;
(v) The parties shall agree in advance as to the
manner in which the arbitration panel shall promptly hear witnesses and
arguments, review documents and otherwise conduct the arbitration
proceedings. Both parties shall receive notice of the subject of the
arbitration and the arbitration shall not be binding on the parties
with respect to any matters not specified in such notice. Should the
parties fail to reach an agreement as to the conduct of such
proceedings, the arbitration panel shall formulate its own procedural
rules and promptly commence the arbitration proceedings;
(vi) The arbitration proceedings shall be
conducted as expeditiously as possible with due consideration for the
complexity of the dispute in question. The arbitration panel shall
issue its decision in writing within fifteen (15) days from the hearing
of final arguments by the parties.
(vii) The arbitration award shall be given in
writing and shall be final and binding on the parties with respect to
the subject matter identified in the notice called for by subjection
(c)(v) of this Section, and not subject to any appeal and shall deal
with the question of costs of arbitration;
(viii) Judgment upon the award may be entered in
any court having jurisdiction or, application may be made to such court
for a judicial recognition of the award or an order of enforcement
thereof, as the case may be;
(ix) The parties shall not submit a dispute
subject to this subsection (c) of this Section to any federal, state,
local or foreign court or arbitration association except as may be
necessary to enforce the arbitration procedures of this subsection (c)
of this Section or to enforce the award of the arbitration panel, and
if court proceedings to stay litigation or compel arbitration under the
Federal Arbitration Act (Title 9, U.S.C.) or similar state or foreign
legislation are necessary, the party who unsuccessfully opposes such
proceedings shall pay all associated costs, expenses and attorneys'
fees which are reasonably and actually incurred by the other party; and
(x) The parties shall keep confidential the
arbitration proceedings and the terms of any arbitration award, except
as may be otherwise required by Law.
SECTION 9.14 DISCLAIMER OF WARRANTIES. Seller makes no
representations or warranties with respect to any projections, forecasts or
forward-looking information provided to Buyer. There is no assurance that any
projected or forecasted results will be achieved. EXCEPT AS TO THOSE MATTERS
EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS AGREEMENT,
SELLER IS SELLING THE SHARES (AND THE BUSINESS AND ASSETS OF THE COMPANY
REPRESENTED THEREBY) ON AN "AS IS, WHERE IS" BASIS AND DISCLAIM ALL OTHER
WARRANTIES, REPRESENTATIONS AND GUARANTIES WHETHER EXPRESS OR IMPLIED. EXCEPT
45
<PAGE> 46
FOR THOSE REPRESENTATIONS OR WARRANTIES SET FORTH IN THIS AGREEMENT, SELLER
MAKES NO REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER. Buyer acknowledges that
neither Seller nor any of its representatives nor any other Person has made any
representation or warranty, express or implied, as to the accuracy or
completeness of any memoranda, charts, summaries or schedules heretofore made
available by Seller or its respective representatives to Buyer or any other
information which is not included in this Agreement or the Schedules hereto, and
neither Seller nor any of its representatives nor any other Person will have or
be subject to any liability to Buyer, any affiliate of Buyer or any other Person
resulting from the distribution of any such information to, or use of any such
information by, Buyer, any affiliate of Buyer or any of their agents,
consultants, accountants, counsel or other representatives.
46
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PRESIDENT INTERNATIONAL TRADE
AND INVESTMENT CORPORATION
By: /s/ Eric H. Wen
---------------------------------------
Name: Eric H. Wen
--------------------------------
Title: President
--------------------------------
PRESIDENT INTERNATIONAL, INC.
By: /s/ Eric H. Wen
---------------------------------------
Name: Eric H. Wen
--------------------------------
Title: Vice Chairman and CEO
--------------------------------
KEEBLER FOODS COMPANY
By: /s/ Sam K. Reed
---------------------------------------
Name: Sam K. Reed
--------------------------------
Title: President and CEO
--------------------------------
47
