<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 27, 1994
Rykoff-Sexton, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
0-8105 95-2134693
(Commission File Number) (IRS Employer Identification No.)
761 Terminal Street, Los Angeles, California 90021
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (213) 622-4131
Not Applicable
(Former name or former address, if changed since last report)
1
<PAGE> 2
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 27, 1994 (the "Closing Date"), Rykoff-Sexton, Inc.
("Rykoff") sold all of the outstanding capital stock of Tone
Brothers, Inc., an Iowa corporation ("Tone"), to Burns Philp
Food Inc., a California corporation and wholly owned
subsidiary of Burns Philp & Company Limited ("Burns"),
pursuant to a Stock Purchase Agreement dated September 8, 1994
(the "Agreement"). Tone is a processor and marketer of
spices, extracts and food colorings. As a result of the sale
of Tone, self-manufactured sales of Rykoff will now represent
approximately 13.4% of net sales compared to the historical
rate of approximately 18% for the fiscal year ended April 30,
1994.
On the Closing Date, Rykoff received $96,000,000 in cash from
Burns in payment of the purchase price and subject to certain
post-closing purchase price adjustments. The proceeds will be
used to repay outstanding indebtedness under the Company's
bank credit facility and for other general corporate purposes.
The terms of the sale are more fully described in the
Agreement, a copy of which is attached as an exhibit hereto.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Pro forma financial information.
1. Pro forma financial statements.
Introduction
The pro forma condensed financial statements present the
historical financial statements of Rykoff, adjusted to give effect to the sale
of Tone along with the pro forma adjustments necessary to arrive at the pro
forma condensed financial statements of Rykoff.
The pro forma condensed balance sheet is presented as of July
30, 1994. The pro forma adjustments reflect the proceeds from the sale of
Tone, the set up of estimated expenses and the flow of the estimated gain on
the sale, net of taxes, through the equity section of the balance sheet.
The pro forma statements of income are presented for the year
ended April 30, 1994 and the three months ended July 30, 1994 and July 31,
1993. The pro forma
2
<PAGE> 3
adjustments reflect the net effect of interest expense and the tax effect of
the interest expense adjustment.
The pro forma data is based upon various other assumptions and
includes adjustments as explained therein and in the notes thereto. Pro forma
information presented is for informational purposes only and is not necessarily
indicative of future earnings and financial position or of what past earnings
and financial position would have been if the sale of Tone had been consummated
at the beginning of the respective periods or as of any date for which such pro
forma information is presented.
(c) Exhibits.
Stock Purchase Agreement, dated September 8, 1994, by and
among Rykoff-Sexton, Inc., Tone Brothers, Inc. and Burns Philp
Food Inc.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
RYKOFF-SEXTON, INC.
Date: November 10, 1994 By: /s/ MARK VAN STEKELENBURG
-------------------------
Mark Van Stekelenburg,
President and Chief
Executive Officer
Date: November 10, 1994 By /s/ RICHARD J. MARTIN
-------------------------
Richard J. Martin
Senior Vice President and
Chief Financial Officer
Date: November 10, 1994 By /s/ VICTOR B. CHAVEZ
-------------------------
Victor B. Chavez
Vice President and Chief
Accounting Officer
4
<PAGE> 5
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Subsequently
Numbered
Page
------------
<S> <C> <C>
(a) Pro Forma Financial Statements
Pro Forma Condensed Balance Sheet as of
July 30, 1994 7
Explanation of adjustments to the
Pro Forma Condensed Balance
Sheet 8
Pro Forma Statement of Income
for the three months ended
July 30, 1994 9
Pro Forma Statement of Income
for the year ended April 30, 1994 10
Pro Forma Statement of Income
for the three months ended
July 31, 1993 11
Explanations of adjustments to
the Pro Forma Statements of Income 12
(b) Statements of Operations restated to reflect
discontinued operations
Introduction 13
For the three month period ended
July 30, 1994 14
For each of the five years in the period
ended April 30, 1994 15
For each quarter in the fiscal year
ended April 30, 1994 16
For each quarter in the fiscal year
ended May 1, 1993 17
Notes to the Statements of Operations 18
</TABLE>
5
<PAGE> 6
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2 Stock Purchase Agreement dated September 8, 1994 by and among
Rykoff-Sexton, Inc., Tone Brothers, Inc., and Burns Philp Food Inc.(1)
</TABLE>
- -----------------
(1) Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to the
agreement are not filed with this exhibit. Rykoff-Sexton, Inc. agrees to
furnish supplementally to the Securities and Exchange Commission a copy of any
omitted schedule upon request.
6
<PAGE> 7
RYKOFF-SEXTON, INC.
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
JULY 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS
REPORTED PRO FORMA
------- ----------------------------
RYKOFF- TONE RYKOFF-
ASSETS SEXTON BROTHERS ADJUSTMENTS SEXTON
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 2,555 $ (167) $ 96,000 (1) $ 42,722
(56,000)(2)
ACCOUNTS RECEIVABLE, NET 153,069 11,393 5,868 (1) 148,393
849 (3)
INVENTORIES 140,252 12,392 127,860
PREPAID EXPENSES 17,696 (30,042) (32,834)(1) 14,754
(150)(1)
-------- -------- -------- --------
TOTAL CURRENT ASSETS 313,572 (6,424) 13,733 333,729
PROPERTY, PLANT AND EQUIPMENT, NET 172,647 26,176 146,471
OTHER ASSETS, NET 22,429 14,294 (350)(1) 7,785
-------- -------- -------- --------
TOTAL ASSETS $508,648 $ 34,046 $ 13,383 $487,985
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $130,652 $ 17,514 (10,761)(1) $143,626
(849)(3)
(4,000)(1)
(14,878)(1)
-------- -------- -------- --------
LONG-TERM DEBTS, LESS CURRENT PORTION 186,171 - 56,000 (2) 130,171
-------- -------- -------- --------
DEFERRED INCOME TAXES 7,320 996 - 6,324
-------- -------- -------- --------
OTHER LONG-TERM LIABILITIES 9,164 - - 9,164
-------- -------- -------- --------
SHAREHOLDERS' EQUITY
COMMON STOCK, AT STATED VALUE 1,194 54 (54)(1) 1,194
ADDITIONAL PAID-IN CAPITAL 92,093 483 (483)(1) 92,093
RETAINED EARNINGS 86,676 14,999 (23,359)(1) 110,035
(14,999)(1)
-------- -------- -------- --------
179,963 15,536 (38,895) 203,322
LESS: TREASURY STOCK, AT COST 4,622 - - 4,622
-------- -------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 175,341 15,536 (38,895) 198,700
-------- -------- -------- --------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $508,648 $ 34,046 $(13,383) $487,985
======== ======== ======== ========
</TABLE>
The accompanying introduction and explanation of adjustments to the pro forma
condensed balance sheet are an integral part of this statement.
7
<PAGE> 8
RYKOFF-SEXTON, INC.
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
EXPLANATION OF ADJUSTMENTS
(1) To record the sale of Tone and the preliminary estimate of the gain on
the sale which is subject to a post-closing audit.
(2) To reflect the payment of outstanding indebtedness under the bank
credit facility.
(3) To eliminate the effect of intercompany balances.
8
<PAGE> 9
RYKOFF-SEXTON, INC.
PRO FORMA STATEMENT OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED JULY 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- -------------------------
Rykoff- Tone Rykoff-
Sexton Brothers Adjustments Sexton
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales $399,727 $21,267 $(1,918)(3) $380,378
Cost of Sales 312,063 15,068 1,918 (3) 298,913
-------- ------- ------- --------
Gross Profit 87,664 6,199 - 81,465
Warehouse, Selling, General and
Administrative Expenses 80,927 6,148 - 74,779
-------- ------- ------- --------
Income from Operations 6,737 51 - 6,686
Interest Expense 3,433 14 (1,028)(1) 2,391
-------- ------- ------- --------
Income Before Provision
for Income Taxes 3,304 37 1,028 4,295
Provision for Income Taxes 1,355 15 420 (2) 1,760
-------- ------- ------- --------
Net Income $ 1,949 $ 22 $ 608 $ 2,535
======== ======= ======= ========
Earnings Per Share $ 0.17 $ 0.22
======== ========
</TABLE>
The accompanying introduction and explanation of adjustments to the pro forma
statements of income are an integral part of this statement.
9
<PAGE> 10
RYKOFF-SEXTON, INC.
PRO FORMA STATEMENT OF INCOME
(UNAUDITED)
FOR THE YEAR ENDED APRIL 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
As Reported Pro Forma
------------- -----------------------------
Rykoff-Sexton Tone Brothers Adjustments Rykoff-Sexton
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Net Sales $1,524,672 $87,754 $(7,308)(3) $1,444,226
Cost of sales 1,177,377 56,820 7,308 (3) 1,127,865
---------- ------- ------- ----------
Gross profit 347,295 30,934 - 316,361
Warehouse, selling, general
and administrative expenses 321,682 24,193 - 297,489
---------- ------- ------- ----------
Income from operations 25,613 6741 - 18,872
Interest expense 13,239 17 (1,820)(1) 11,402
---------- ------- ------- ----------
Income before provision
for income taxes 12,374 6,724 1,820 7,470
Provision for income taxes 5,012 2,690 703 (2) 3,025
---------- ------- ------- ----------
Net income before
extraordinary item 7,362 4,034 1,117 4,445
Extraordinary item, net of
income taxes (1,444) - - (1,444)
---------- ------- ------- ----------
Net income $ 5,918 $ 4,034 $ 1,117 $ 3,001
========== ======= ======= ==========
Earnings per share
Income before
extraordinary item $ 0.63 $ 0.38
Extraordinary item (0.12) (0.12)
---------- ----------
Net income $ 0.51 $ 0.26
========== ==========
</TABLE>
The accompanying introduction and explanation of adjustments to the pro forma
statements of income are an integral part of this statement.
10
<PAGE> 11
RYKOFF-SEXTON, INC.
PRO FORMA STATEMENT OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED JULY 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- --------------------------
Rykoff- Tone Rykoff-
Sexton Brothers Adjustments Sexton
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales $366,391 $19,687 $(1,730)(3) $348,434
Cost of Sales 280,423 13,179 1,730 (3) 268,974
-------- ------- ------- --------
Gross Profit 85,968 6,508 - 79,460
Warehouse, Selling, General and
Administrative Expenses 81,005 5,505 - 75,500
-------- ------- ------- --------
Income from Operations 4,963 1,003 - 3,960
Interest Expense 3,036 0 (416)(1) 2,620
-------- ------- ------- --------
Income Before Provision
for Income Taxes 1,927 1,003 416 1,340
Provision for Income Taxes 790 401 160 (2) 549
-------- ------- ------- --------
Net Income $ 1,137 $ 602 $ 256 $ 791
======== ======= ======= ========
Earnings Per Share $ 0.10 $ 0.07
======== ========
</TABLE>
The accompanying introduction and explanation of adjustments to the pro forma
statements of income are an integral part of this statement.
11
<PAGE> 12
RYKOFF-SEXTON, INC.
PRO FORMA STATEMENTS OF INCOME
(UNAUDITED)
EXPLANATION OF ADJUSTMENTS
(1) These adjustments have been made to reflect the interest savings that
Rykoff would have earned had Tone been sold at the beginning of each
of the respective periods for which the pro forma statements of income
have been presented. The reduction in interest expense results from
the elimination of borrowings under the bank credit line, interest
earned on excess funds received on the sale of Tone, net of
capitalized interest and interest expense related to additional
borrowings without Tone's cash flows.
(2) To adjust for the tax effect of the interest expense adjustment in
note (1) above.
(3) To adjust for intercompany sales elimination.
12
<PAGE> 13
RYKOFF-SEXTON, INC.
INTRODUCTION TO RESTATED FINANCIAL STATEMENTS
TO REFLECT DISCONTINUED OPERATIONS
On October 27, 1994, Rykoff-Sexton, Inc. ("Rykoff") sold all of the
outstanding capital stock of Tone Brothers, Inc. ("Tone"), to Burns Philp &
Company Limited ("Burns"), pursuant to a stock purchase agreement. Rykoff
received $96,000,000 in cash from Burns in payment of the purchase price and
subject to certain post-closing purchase price adjustments.
The following financial statements have been restated to present Tone
as a discontinued operation:
1. For the three month period ended July 30, 1994.
2. For each of the five years in the period ended April 30, 1994.
3. For each quarter in the fiscal year ended April 30, 1994.
4. For each quarter in the fiscal year ended May 1, 1993.
13
<PAGE> 14
RYKOFF-SEXTON, INC.
RESTATED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTH PERIOD ENDED JULY 30, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Net sales $380,378
Cost of sales 298,913
--------
Gross profit 81,465
Warehouse, selling, general and
administrative expenses 74,779
--------
Income from operations 6,686
Interest expense 3,089
--------
Income from continuing operations
before income taxes 3,597
Provision for income taxes 1,475
--------
Income from continuing operations 2,122
Discontinued operations (Note 1):
(Loss) from discontinued operations,
net of benefit for income taxes (173)
--------
Net income $ 1,949
========
Earnings per share:
Income from continuing operations $ 0.18
(Loss) from discontinued operations (0.01)
--------
Net income $ 0.17
========
</TABLE>
The accompanying notes to the Statements of Operations are an integral part of
this statement.
14
<PAGE> 15
RYKOFF-SEXTON, INC.
RESTATED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
4/30/94 5/1/93 5/2/92 4/27/91 4/28/90
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $1,444,226 $1,412,943 $1,447,305 $1,404,770 $1,356,561
Cost of sales 1,127,865 1,099,120 1,110,142 1,075,657 1,031,547
---------- ---------- ---------- ---------- ----------
Gross profit 316,361 313,823 337,163 329,113 325,014
Warehouse, selling, general and
administrative expenses 297,489 308,774 313,646 299,131 295,773
Restructuring costs - 31,000 - - -
---------- ---------- ---------- ---------- ----------
Income (loss) from operations 18,872 (25,951) 23,517 29,982 29,241
Interest expense 11,946 12,401 10,301 8,512 9,706
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations
before income taxes 6,926 (38,352) 13,216 21,470 19,535
Provision (benefit) for income taxes 2,805 (14,202) 5,286 8,588 7,814
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations 4,121 (24,150) 7,930 12,882 11,721
Discontinued operations (Note 1):
Income from discontinued operations,
net of income taxes 3,241 4,458 2,076 941 (428)
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary item and
change in accounting 7,362 (19,692) 10,006 13,823 11,293
Extraordinary item, net of income taxes (1,444) - - - -
Cumulative effect of change in accounting
for income taxes - 732 - - -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 5,918 $ (18,960) $ 10,006 $ 13,823 $ 11,293
========== ========== ========== ========== ==========
Earnings per share:
Income (loss) from continuing operations $ 0.35 $ (2.08) $ 0.68 $ 1.11 $ 0.99
Income from discontinued operations 0.28 0.39 0.18 0.08 (0.03)
---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary item
and change in accounting 0.63 (1.69) 0.86 1.19 0.96
Extraordinary item (0.12) - - - -
Change in accounting - 0.06 - - -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 0.51 $ (1.63) $ 0.86 $ 1.19 $ 0.96
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes to the Statements of Operations are an integral part of
these statements.
15
<PAGE> 16
RYKOFF-SEXTON, INC.
RESTATED CONSOLIDATED STATEMENTS OF INCOME
BY QUARTER FOR FISCAL YEAR 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FY 1994 FY 1994 FY 1994 FY 1994
1ST QTR 2ND QTR 3RD QTR 4TH QTR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $348,434 $367,731 $352,892 $375,169
Cost of sales 268,974 284,817 276,310 297,764
-------- -------- -------- --------
Gross profit 79,460 82,914 76,582 77,405
Warehouse, selling, general and
administrative expenses 75,500 76,152 74,065 71,772
-------- ------- -------- --------
Income from operations 3,960 6,762 2,517 5,633
Interest expense 2,754 2,893 3,167 3,131
-------- ------ -------- --------
Income (loss) from continuing operations
before income taxes 1,206 3,869 (650) 2,502
Provision (benefit) for income taxes 494 1,586 (267) 992
-------- ------- -------- --------
Income (loss) from continuing operations 712 2,283 (383) 1,510
Discontinued operations (Note 1):
Income from discontinued operations,
net of income taxes 425 1,502 744 569
-------- ------- -------- --------
Income before extraordinary item 1,137 3,785 361 2,079
Extraordinary item, net of income taxes - (1,444) - -
-------- ------- -------- --------
Net income $ 1,137 $ 2,341 $ 361 $ 2,079
======== ======= ======= ========
Earnings per share:
Income (loss) from continuing operations $ 0.06 $ 0.19 $ (0.03) $ 0.13
Income from discontinued operations 0.04 0.13 0.06 0.05
-------- ------- -------- --------
Income before extraordinary item 0.10 0.32 0.03 0.18
Extraordinary item - (0.12) - -
-------- ------- -------- --------
Net income $ 0.10 $ 0.20 $ 0.03 $ 0.18
======== ======= ======== ========
</TABLE>
The accompanying notes to the Statements of Operations are an integral part of
these statements.
16
<PAGE> 17
RYKOFF-SEXTON, INC.
RESTATED CONSOLIDATED STATEMENTS OF OPERATIONS
BY QUARTER FOR FISCAL YEAR 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FY 1993 FY 1993 FY 1993 FY 1993
1ST QTR 2ND QTR 3RD QTR 4TH QTR
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $355,841 $368,933 $343,459 $344,710
Cost of sales 275,828 286,966 267,413 268,913
-------- -------- -------- --------
Gross profit 80,013 81,967 76,046 75,797
Warehouse, selling, general and
administrative expenses 77,900 78,041 78,872 73,961
Restructuring costs - - 31,000 -
-------- -------- -------- --------
Income (loss) from operations 2,113 3,926 (33,826) 1,836
Interest expense 3,249 3,172 3,174 2,806
-------- -------- -------- --------
Income (loss) from continuing operations
before income taxes (1,136) 754 (37,000) (970)
Provision (benefit) for income taxes (455) 302 (13,708) (341)
-------- -------- -------- --------
Income (loss) from continuing operations (681) 452 (23,292) (629)
Discontinued operations (Note 1):
Income from discontinued operations,
net of income taxes 550 2,107 843 958
-------- -------- -------- --------
Income (loss) before change
in accounting (131) 2,559 (22,449) 329
Cumulative effect of change in accounting
for income taxes 732 - - -
-------- -------- -------- --------
Net income (loss) $ 601 $ 2,559 $(22,449) $ 329
======== ======== ======== ========
Earnings per share:
Income (loss) from continuing operations $ (0.06) $ 0.04 $ (2.01) $ (0.05)
Income from discontinued operations 0.05 0.18 0.08 0.08
-------- -------- -------- --------
Income (loss) before change in accounting (0.01) 0.22 (1.93) 0.03
Change in accounting 0.06 - - -
-------- -------- -------- --------
Net income (loss) $ 0.05 $ 0.22 $ (1.93) $ 0.03
======== ======== ======== ========
</TABLE>
The accompanying notes to the Statements of Operations are an integral part of
these statements.
17
<PAGE> 18
RYKOFF-SEXTON, INC.
NOTES TO RESTATED STATEMENTS OF OPERATIONS
On October 27, 1994, the Company sold all of the outstanding capital stock of
Tone Brothers, Inc. ("Tone") to Burns Philp & Company Limited ("Burns"),
pursuant to a stock purchase agreement. The Company received $96 million in
cash in payment of the purchase price. The purchase price is subject to a
post-closing audit.
The accompanying statements of operations have been restated to exclude Tone's
sales and expenses from the Company's continuing operations for each of the
periods presented. Tone's net sales and the related provision (benefit) for
income taxes for each of the fiscal years from 1990 to 1994 and for the first
quarter of fiscal year 1995 are listed below (amounts in thousands):
<TABLE>
<CAPTION>
FISCAL YEARS QUARTER
--------------------------------------------------- ENDED
1990 1991 1992 1993 1994 JULY 30, 1994
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $50,720 $60,140 $78,747 $82,491 $87,754 $21,267
======= ======= ======= ======= ======= =======
Provision (benefit) for
income taxes $ (284) $ 625 $ 1,384 $ 2,783 $ 2,207 $ (120)
======= ======= ======= ======= ======= =======
</TABLE>
18
<PAGE> 19
STOCK PURCHASE AGREEMENT
by and among
RYKOFF-SEXTON, INC.,
A Delaware corporation,
TONE BROTHERS, INC.,
AN Iowa corporation,
and
BURNS PHILP FOOD INC.,
A California corporation
September 8, 1994
<PAGE> 20
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Description Page Number
----------- -----------
<S> <C> <C>
1. Certain Definitions; Sale and Purchase of Shares; Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Payment on the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.5 Closing Date Balance Sheet; Post-Closing Payment Based on Purchase Price . . . . . . . . . . . . . . . . . 5
1.6 Post-Closing Increase of Purchase Price if Section 338 Elections Occur . . . . . . . . . . . . . . . . . . 7
(a) 338 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Calculation of Seller's Additional Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Other Payment Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Allocation of Section 338 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. Representations and Warranties of the Seller and the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2 Ownership of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.8 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.9 Accounts Receivable and Trade Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Patents, Trademarks and Certain Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.15 Litigation; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.16 Noncontravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.17 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.18 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.21 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.22 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.23 Material Misstatements or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.24 Prohibited Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.25 Slotting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.26 Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.27 Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.28 Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.29 Contribution to Capital of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.30 Material Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.31 Compliance by Seller with Other Instruments and Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.32 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<TABLE>
<S> <C> <C>
2.33 Covenants Performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.34 Tortious Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.35 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.36 Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.37 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.38 Sysco Lawsuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3. Disclaimer of Representations and Warranties Regarding Financial Projections . . . . . . . . . . . . . . . . . . . 26
4. Representations and Warranties of the Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Noncontravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.6 Material Misstatements or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.7 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.8 Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.9 Covenants Performed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5. Covenants of the Buyer and the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 No Access to Employees, Properties or Records of the Corporation . . . . . . . . . . . . . . . . . . . . . 27
5.2 Interim Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3 Additional Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.4 Legal Requirements and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.6 Compliance with Contracts and Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.7 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.8 Employees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.9 Additional Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10 Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.12 Sysco Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.13 Survival of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.14 BA Lease Novation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.15 CEBA Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6. Conditions to Obligations of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Complete Performance by the Seller and the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.6 Contribution to Capital of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7 HSR Waiting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.9 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.12 Rykoff Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.13 Agreement Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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6.14 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.15 Delivery of Other Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7. Conditions to Obligations of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Complete Performance by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3 Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 HSR Waiting Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.7 Delivery of Other Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.1 Indemnification by the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2 Indemnification by the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3 Survival of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) Upset Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Legal Restraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.1 Parties and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.2 Confidentiality; Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.10 Convenience of Forums; Consent to Jurisdiction 44
10.11 Resolution of Disputes 44
(a) Negotiation Between Executives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.12 Waivers and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.13 Further Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.14 Disclosure in Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1(a) . . . . . . . . . Disclaimer Agreement
Schedule 1.1(b) . . . . . . . . . 1994 Balance Sheet
Schedule 1.5 . . . . . . . . . . Form of Escrow Agreement
Schedule 1.6 . . . . . . . . . . Calculation of Seller's Additional Taxes
Schedule 2.3 . . . . . . . . . . Subsidiaries, Investments and Ownership
Interests
Schedule 2.7 . . . . . . . . . . Title Exceptions
Schedule 2.8 . . . . . . . . . . Properties
Schedule 2.10 . . . . . . . . . . Intellectual Property
Schedule 2.11 . . . . . . . . . . Contracts
Schedule 2.12 . . . . . . . . . . Bank Accounts
Schedule 2.13 . . . . . . . . . . Insurance
Schedule 2.14 . . . . . . . . . . Tax Matters
Schedule 2.15 . . . . . . . . . . Litigation
Schedule 2.16 . . . . . . . . . . Noncontravention and Consents - Seller
Schedule 2.20 . . . . . . . . . . Employee Benefit Matters
Schedule 2.21 . . . . . . . . . . Liabilities
Schedule 2.22 . . . . . . . . . . Employee Matters
Schedule 2.25 . . . . . . . . . . Slotting Agreements
Schedule 2.26 . . . . . . . . . . Loan Agreements
Schedule 2.27 . . . . . . . . . . Cochin Joint Venture
Schedule 2.37 . . . . . . . . . . Inventory
Schedule 4.4 . . . . . . . . . . Noncontravention and Consents - Buyer
Schedule 5.5 . . . . . . . . . . Third Party Consents
Schedule 5.8 . . . . . . . . . . Employee Compensation Matters
Schedule 6.4 . . . . . . . . . . Form of Supply Agreement
Schedule 6.5 . . . . . . . . . . Form of Opinion of Maslon Edelman Borman &
Brand
Schedule 6.9 . . . . . . . . . . Approvals
Schedule 6.12 . . . . . . . . . . Form of Rykoff Supply Agreement
Schedule 6.13 . . . . . . . . . . Form of Agreement Not To Compete
Schedule 7.4(a) . . . . . . . . . Form of Opinion of Pillsbury Madison &
Sutro
</TABLE>
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<TABLE>
<S> <C>
Schedule 7.4(b) . . . . . . . . . Form of Opinion of General Counsel to
Buyer
</TABLE>
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<PAGE> 25
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made this 8th day
of September, 1994, by and among RYKOFF-SEXTON, INC., a Delaware corporation
(the "Seller"), TONE BROTHERS, INC., an Iowa corporation (the "Corporation"),
and BURNS PHILP FOOD INC., a California corporation (the "Buyer").
WHEREAS, Seller owns all of the issued and outstanding shares of
common stock, par value $.01 per share, of the Corporation (the "Shares"),
constituting all of its issued and outstanding Shares of capital stock; and
WHEREAS, Seller desires to sell the Shares to Buyer and Buyer desires
to purchase the Shares from Seller on the terms and subject to the conditions
set forth in this Agreement:
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Certain Definitions; Sale and Purchase of Shares; Closing.
1.1 Certain Definitions. The following definitions apply throughout
this Agreement:
"Aged" shall have the meaning set forth in Section 2.37 hereof.
"Agreement" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Allocation Schedule" shall have the meaning set forth in Section
1.6(d) hereof.
"Applicable Claim Termination Date" shall have the meaning set forth
in Section 8.3 hereof.
"ASTA Standards" shall have the meaning set forth in Section 2.37
hereof.
"BA Lease" shall have the meaning set forth in Section 2.26 hereof.
"Buyer" shall have the meaning set forth in the introductory paragraph
of this Agreement.
"Buyer Sysco Expenses" shall have the meaning set forth in Section
5.12 hereof.
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<PAGE> 26
"Buyer's 338 Election" shall have the meaning set forth in Section
1.6(a) hereof.
"CEBA Agreement" shall have the meaning set forth in Section 2.26
hereof.
"Closing Date Balance Sheet" means an audited balance sheet prepared
in accordance with GAAP consistently applied without explanatory footnotes of
the Corporation as of the opening of business on the Closing Date (except that
the "Due S. E. Rykoff" will be separately disclosed), which shall be prepared
by the Seller and the Corporation and delivered to the Buyer pursuant to
Section 1.5 and which shall include such adjustments as are consistent with
those made in the preparation of the Corporation's 1994 Balance Sheet. These
adjustments include (a) the netting of the "Due from S.E. Rykoff" against the
"Due S.E. Rykoff" amounts and (b) the addition to "Shareholders' Equity" and
the subtraction from "Due S.E. Rykoff" of an amount equal to (i) after-tax
allocated interest of $925,000 (assuming a 40% income tax rate) for fiscal 1994
plus (ii) after-tax allocated interest (assuming a 40% income tax rate) for the
period from May 1, 1994 through the Closing Date.
"Closing Date" means the date on which the Closing occurs.
"Closing" means the consummation of the sale and purchase of the
Shares which shall take place at 11:00 a.m. California time on the first
Monday which falls at least five days after receipt of final HSR approval from
the FTC at the offices of Pillsbury Madison & Sutro or at such other place,
time and date as may be mutually agreed upon in writing by the Buyer and the
Seller.
"COBRA" shall have the meaning set forth in Section 2.20 hereof.
"Cochin" shall have the meaning set forth in Section 2.27 hereof.
"Code" shall have the meaning set forth in Section 2.20(c)(iv).
"Confidentiality Agreement" means the Confidentiality Letter
Agreement, dated as of June 10, 1994, between the Seller and the Burns Philp
Inc.
"Contingent Fee Agreement" shall have the meaning set forth in Section
5.12 hereof.
"Corporation" shall have the meaning set forth in the introductory
paragraph of this Agreement.
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<PAGE> 27
"Disclaimer Agreement" means the Disclaimer Agreement, dated as of
June 24, 1994, between the Seller and the Buyer, which is attached hereto as
Schedule 1.1(a).
"Effective Date" means the date of this Agreement.
"Election Period" shall have the meaning set forth in Section 1.6(a)
hereof.
"EPA" shall have the meaning set forth in Section 2.35 hereof.
"ERISA" shall have the meaning assigned thereto in Section 2.20(a)(i).
"ERISA Affiliate" means each person (as defined in section 3(9) of
ERISA that, together with the Corporation, would be treated as a single
employer under section 4001(b) of ERISA or that would be deemed to be a member
of the same "controlled group" within the meaning of section 414(b) or (c) of
the Code.
"Excess" shall have the meaning set forth in Section 2.37 hereof.
"FDA" shall have the meaning set forth in Section 2.35 hereof.
"Financial Statements" means the internally prepared balance sheets
and related internally prepared statements of income and statements of cash
flow for the Corporation for the three years ended May 2, 1992, May 1, 1993 and
April 30, 1994, respectively.
"FTC" means the Federal Trade Commission.
"GAAP" means United States generally accepted accounting principles.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"IRCA" shall have the meaning set forth in Section 2.22 hereof.
"Material Adverse Effect" means a material adverse effect on the
business or condition (financial or otherwise), assets, liabilities or results
of operations of the applicable party.
"1994 Balance Sheet" means the internally prepared balance sheet of
the Corporation as of April 30, 1994, as adjusted, a copy of which is set forth
in Schedule 1.1(b).
"OSHA" shall have the meaning set forth in Section 2.35 hereof.
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<PAGE> 28
"Payment Adjustment" shall have the meaning set forth in Section 1.5
hereof.
"Plans" shall have the meaning set forth in Section 2.20 hereof.
"Purchase Price" has the meaning set forth in Section 1.3.
"Related Cost" means any reasonable fee, cost or expense paid to third
parties (including, without limitation, any reasonable expenses of
investigation and attorneys' and accountants' fees so paid) other than an item
of Tax, which arises out of the imposition or assessment of any Tax.
"Section 338 Purchase Price" shall have the meaning set forth in
Section 1.3 hereof.
"Seller" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Seller's 338 Election" shall have the meaning set forth in Section
1.6(a) hereof.
"Seller's Additional Taxes" has the meaning set forth in Section
1.6(b) hereof.
"Seller's Group" shall have the meaning set forth in Section 5.11(e)
hereof.
"Shares" has the meaning set forth in the first recital hereof.
"Slotting Agreement" means agreements between the Corporation and its
customers pursuant to which the Corporation makes payment either in cash,
product or other inducement in an aggregate of at least $10,000 to obtain shelf
space for new products or to maintain shelf space for existing products.
"Sysco Litigation" has the meaning set forth in Section 2.38 hereof.
"Tax Indemnitee" shall have the meaning set forth in Section 8.4
hereof.
"Tax Indemnitor" shall have the meaning set forth in Section 8.4
hereof.
"Tax Return" means any return, report, information return or other
document (including any related or supporting information) with respect to
Taxes that is either filed or required to be filed with a taxing authority or
required by applicable tax law to be provided to any other person.
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"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any taxing authority, including, but not limited to, income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad valorem,
value added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated, severance and stamp taxes
(including any interest, fines, penalties or additions to, or imposed on or
with respect to, any such taxes, charges, fees, levies or other assessments).
"To the best knowledge" or words of similar import mean the actual
knowledge of each of the corporate officers and directors of the applicable
party, after due inquiry or investigation, provided that with respect to the
directors of Seller, no inquiry or investigation shall be required.
1.2 Sale and Purchase of Shares. Subject to the terms and conditions
set forth in this Agreement, on the Closing Date the Seller agrees to sell to
the Buyer, and the Buyer agrees to purchase from the Seller, the Shares.
1.3 Purchase Price. The consideration to be paid for the Shares (the
"Purchase Price") shall be $96,000,000: (a) plus the amount, if any by which
$29,879,000 is exceeded by the sum of "Due S.E. Rykoff" and "Accounts Payable-B
of A Lease" appearing on the Closing Date Balance Sheet, (b) minus the amount,
if any, by which the sum of "Due S.E. Rykoff" and "Accounts Payable-B of A
Lease" appearing on the Closing Date Balance Sheet is exceeded by $29,879,000,
(c) plus the amount, if any, by which $16,623,000 is exceeded by the
"Shareholders' Equity" appearing on the Closing Date Balance Sheet and (d)
minus the amount, if any, by which the "Shareholders' Equity" appearing on the
Closing Date Balance Sheet is exceeded by $16,623,000. In the event that the
Buyer makes the Buyer's 338 Election in accordance with Section 1.6 hereof, the
Purchase Price shall be further increased by the Seller's Additional Taxes (the
Purchase Price plus the Seller's Additional Taxes is referred to herein as the
"Section 338 Purchase Price").
1.4 Payment on the Closing Date. On the Closing Date, the Buyer
shall pay $96,000,000 by wire transfer of same day U.S. Dollar funds to an
account designated by the Seller.
1.5 Closing Date Balance Sheet; Post-Closing Payment Based on Purchase
Price. As soon as practicable but in no event later than thirty-five (35) days
after the Closing Date, the Seller and the Corporation shall prepare and
deliver to the Buyer by air courier or other method of personal delivery (a)
the Closing Date Balance Sheet, which shall be prepared in accordance with GAAP
consistently applied, and shall be audited by Arthur Andersen & Co., together
with supporting calculations and such other supporting detail as Buyer may
reasonably require, and (b) a calculation setting forth such detail as Buyer
may reasonably require of the Purchase Price. The Buyer shall
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afford the Seller and Arthur Andersen & Co. without charge the assistance of
the Corporation's employees and access to the Corporation's facilities, books,
records, work papers and computations to the extent necessary in order to
prepare the Closing Date Balance Sheet. Within fifteen (15) days of Buyer's
receipt of the Closing Date Balance Sheet, Buyer shall notify Seller of any
items of dispute with respect to the Closing Date Balance Sheet. In the event
that Buyer disputes any items with respect to the Closing Date Balance Sheet,
within thirty (30) days of Buyer's receipt of the Closing Date Balance Sheet,
Buyer shall (a) obtain a letter from KPMG Peat Marwick LLP ("KPMG") (after
their review of the Closing Date Balance Sheet and the supporting work papers
and schedules) which indicates KPMG's concurrence with respect to such items of
dispute and their effect on the Purchase Price calculation as proposed by Buyer
and (b) shall notify Seller of the contents of such letter. If the parties are
unable to resolve the dispute through negotiation within fifteen (15) days of
Seller's receipt of the notification described in the preceding sentence,
either party may refer such dispute for final and conclusive determination to
Deloitte & Touche at 50 Fremont Street, San Francisco, CA 94105, and such
determination shall be made within thirty (30) days after such referral.
Seller and Buyer shall bear equally the expenses arising in connection with
such determination. Seller and Buyer and their respective agents and
representatives shall have complete access to the work papers and schedules
relating to the preparation of the Closing Date Balance Sheet or any dispute in
connection therewith of Arthur Andersen & Co., Deloitte & Touche, and any other
accounting firm employed in connection with the preparation of the Closing Date
Balance Sheet. If the Purchase Price exceeds ninety six million dollars
($96,000,000), then the Buyer shall pay to the Seller the difference between
the Purchase Price and ninety six million dollars ($96,000,000); if the
Purchase Price is less than ninety six million dollars ($96,000,000), then the
Seller shall pay to the Buyer the difference (any such payment by Buyer or
Seller, a "Payment Adjustment"). Any payment required to be made pursuant to
this Section 1.5 shall be made within sixteen (16) days of the delivery of the
Closing Date Balance Sheet to the Buyer by wire transfer of same day U.S.
Dollar funds to an account designated by the recipient; provided, however, that
in the event Buyer disputes the Purchase Price determined by the Closing Date
Balance Sheet, then (X) in the case where the parties agree that the Purchase
Price either exceeds or is less than the $96,000,000, the party making the
Payment Adjustment shall pay to the other party only that portion of the
Payment Adjustment as to which the parties agree and shall deposit the balance
of the Payment Adjustment into escrow, and (Y) in the case where the Purchase
Price based on the Closing Date Balance Sheet exceeds $96,000,000, and Buyer
asserts that the Purchase Price is less than $96,000,000, then Seller shall
deposit into escrow the amount by which Buyer's asserted Purchase Price is less
than $96,000,000, and Buyer shall deposit into escrow an amount by which the
Purchase Price based on the Closing Date
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Balance Sheet exceeds $96,000,000. Notwithstanding the foregoing, neither
party shall be obligated in any event to deposit more than five million dollars
($5,000,000) into escrow. All amounts paid into escrow shall be deposited
pursuant to an Escrow Agreement in substantially the form attached hereto as
Schedule 1.5. If the amount deposited into escrow (together with the interest
accrued thereon pursuant to the Escrow Agreement) by either party is less than
the amount necessary to fully pay the amount finally determined to be due to
the other party by Deloitte & Touche, the party obligated to pay shall pay the
amount of such shortfall to the other party within five (5) days of final
determination by Deloitte & Touche by wire transfer of same day U.S. Dollar
funds to an account designated by the recipient. Any amounts paid (or
deposited into escrow) by either party pursuant to the terms hereof shall
include interest on such amounts from the Closing Date to the date of such
payment (or the deposit of such funds into escrow) at a rate per annum equal to
the rate offered for deposits of U.S. Dollars for three-month periods in
amounts substantially similar to the amounts due hereunder by prime banks in
the London Interbank Eurocurrency Market on or about 11:00 A.M. London time on
the Closing Date, plus one and one-half percent (1.5%).
1.6 Post-Closing Increase of Purchase Price if Section 338
Elections Occur.
(a) 338 Elections. At its option, Buyer may make an election
under Code Section 338 (or any successor provision thereof and any comparable
provision of state or local law) ("Buyer's 338 Election") with respect to its
purchase of the Shares from Seller; provided, however, that Buyer's 338
Election shall be made, if at all, within the period permitted under the Code
(the "Election Period").
If Buyer decides to make Buyer's 338 Election, Buyer shall deliver a
copy of the proposed Buyer's 338 Election to Seller no later than fifteen (15)
days before the end of the Election Period, by air courier or other method of
personal delivery, and Buyer and Seller shall cooperate fully and each shall
take all actions necessary for Seller to make (within the Election Period) a
corresponding election under Code Section 338(h)(10) (or any successor
provision thereof and any comparable provision of state or local law) with
respect to Buyer's purchase of the Shares from Seller ("Seller's 338 Election")
(together with the Buyer's 338 Election, referred to herein as the "Joint 338
Election"); provided, however, that Seller shall not be required to execute and
deliver the Joint 338 Election to Buyer unless and until Buyer shall have paid
to Seller the present value of the estimated amount of Seller's Additional
Taxes determined under the first paragraph of Section 1.6(b), discounted at the
rate of interest set forth in Section 1.5, in effect as of the date of such
payment, for the period of time between the payment date and the due date
(without any extensions) for the filing of Seller's consolidated federal income
tax return for the taxable
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year in which the sale of Shares takes place, and such payment shall be made in
the manner provided in Section 1.6(c). If such payment is made by Buyer,
Seller shall deliver to Buyer the Joint 338 Election at least five (5) days
before the end of the Election Period, and Buyer shall then file the Joint 338
Election before the end of the Election Period.
(b) Calculation of Seller's Additional Taxes. Within thirty (30)
days after the Purchase Price is finally determined under Section 1.5, Seller
shall deliver to Buyer a written statement containing Seller's good faith
estimate of the net amount of additional Taxes and Related Costs (after taking
into account the net effect of Taxes and such Related Costs that are deductible
in the calculation of Taxes) that, if the Joint 338 Election is made and the
Buyer's payments (net of any refunds made by Seller to Buyer) under this
Section 1.6 are also made, would ultimately be incurred by Seller and the
Corporation (to the extent Seller is responsible hereunder or otherwise for
payment of such Taxes) solely as a result of the Joint 338 Election and Buyer's
net payments to Seller under this Section 1.6, but only to the extent the Taxes
and Related Costs so incurred would exceed the Taxes and Related Costs that
would be incurred in the absence of the Joint 338 Election and such payments by
Buyer (the total amount of such additional Taxes and Related Costs is herein
referred to as "Seller's Additional Taxes"). Schedule 1.6 contains the general
method and formula for calculation of Seller's Additional Taxes; provided,
however, that such method and formula shall be subject to refinement for the
purpose of increasing the accuracy of such calculation.
If the Joint 338 Election is made within the Election Period, then by
no later than fifteen (15) days before the due date (as duly extended) for the
filing of Seller's consolidated federal income tax return for the taxable year
in which the sale of Shares takes place, Seller shall calculate the amount of
Seller's Additional Taxes, based on the facts to be shown on or underlying that
return (and any state and local Tax Returns affected by the sale) and Seller
shall deliver to Buyer a revised statement of Seller's Additional Taxes.
Furthermore, if the Taxes of Seller or the Corporation (to the extent
Seller is responsible hereunder or otherwise for payment of such Taxes) are
finally adjusted at any time by a government agency or court of competent
jurisdiction in any manner that would affect the amount of Seller's Additional
Taxes, Seller shall re-calculate Seller's Additional Taxes based on that
adjustment and deliver to Buyer a revised statement of Seller's Additional
Taxes, within fifteen (15) days after Seller receives written notice of the
final Tax adjustment described above. If Seller reasonably anticipates that a
proposed adjustment of the Taxes of Seller or Corporation would result in an
increase of Seller's Additional Taxes payable by Buyer under Section 1.6(c),
and such increase would exceed one hundred thousand dollars ($100,000), Seller
shall notify Buyer of such
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proposed adjustment and provide Buyer with a reasonable opportunity to assist
(at Buyer's own expense) in the defense and settlement of such adjustment;
provided, however, that Seller shall not settle either administratively or
after the commencement of litigation, any such proposed adjustment without
Buyer's prior written consent, which consent shall not be unreasonably
withheld. In the event that Buyer does not consent to a settlement proposed in
good faith by Seller, Seller may tender the defense of such proposed adjustment
to Buyer, which shall continue such defense at its own expense, keeping Seller
advised as to all steps taken by Buyer in such defense; and Buyer shall
indemnify Seller for any Taxes and Related Costs imposed upon Seller (under
this Agreement or otherwise) as a result of such adjustment, to the extent such
amounts exceed the amounts of Taxes and Related Costs that would have been
imposed on Seller if such settlement had been accepted by the applicable taxing
authority as of the date such settlement proposal was tendered to Buyer by
Seller.
Each statement of Seller's Additional Taxes shall be prepared in
reasonable detail sufficient to permit Buyer to verify the accuracy of the
calculations and shall be accompanied by a certification by an officer of
Seller that, to the best knowledge of Seller, the facts supporting the
calculation are true and correct. Each such statement shall be delivered by
air courier or other method of personal delivery.
Within fifteen (15) days of Buyer's receipt of any estimated or
revised statement of Seller's Additional Taxes, Buyer shall notify Seller in
writing of any items of dispute with respect to the statement. If the parties
are unable to resolve the dispute through negotiation within the fifteen (15)
day period after Seller's receipt of such notice, either party may refer such
dispute for determination to Deloitte & Touche at 50 Fremont Street, San
Francisco, CA 94105, and such determination shall be made within thirty (30)
days after such referral. Buyer shall bear the expenses arising in connection
with such determination; provided, however, that such determination shall be
without prejudice to the recalculation of Seller's Additional Taxes
contemplated in the second preceding paragraph. Notwithstanding the foregoing,
payments or refunds of Taxes taken into account in the determination of
Seller's Additional Taxes shall be conclusive and not subject to dispute to the
extent the amount of such Taxes is no longer subject to adjustment by the
applicable taxing authority.
(c) Other Payment Procedures. If the amount of Seller's
Additional Taxes is increased in any revised statement of Seller's Additional
Taxes, as determined under Section 1.6(b), Buyer shall pay the amount of the
increase to Seller in the manner provided below. If the amount of Seller's
Additional Taxes is decreased in any revised statement of Seller's Additional
Taxes, as determined under Section 1.6(b), Seller
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shall pay the amount of such decrease to Buyer in the manner provided below.
Any payment required to be made pursuant to this Section 1.6 shall be
made by wire transfer. Any payment resulting from a revised statement of
Seller's Additional Taxes shall be made within fifteen (15) days of delivery of
such statement.
(d) Allocation of Section 338 Purchase Price. If the Joint 338
Election is made within the Election Period, Buyer shall allocate the Section
338 Purchase Price among the various categories of assets, as set forth in a
schedule (the "Allocation Schedule") delivered by Buyer to Seller within the
Election Period. Whenever the amount of Seller's Additional Taxes is
redetermined pursuant to Section 1.6(b), Buyer shall revise the Allocation
Schedule and deliver a copy to Seller within fifteen (15) days of such final
determination.
Within fifteen (15) days of Seller's receipt of the initial or any
revised Allocation Schedule, Seller shall notify Buyer of any items of dispute
with respect to the Allocation Schedule. If the parties are unable to resolve
the dispute through negotiation within the fifteen (15) day period after
Seller's receipt of such schedule, either party may refer such dispute for a
final resolution under the procedures described in Section 1.5.
If the Joint 338 Election is made within the Election Period, each
party shall provide its federal taxpayer identification number to the other
party and (for purposes of state and federal Taxes) each of the parties agrees
to report the sale of Shares under this Agreement in accordance with the
Allocation Schedule (as revised through the date of filing of the relevant
return for changes in the amount of Seller's Additional Taxes pursuant to
Section 1.6(b)), and such reports shall also be consistent with the Joint 338
Election.
2. Representations and Warranties of the Seller and the
Corporation.
The Seller and the Corporation, jointly and severally, hereby
represent and warrant to the Buyer as follows:
2.1 Corporate Status. The Corporation is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Iowa and has all necessary corporate powers to own or lease its properties
and assets and to carry on its business as now conducted, and is authorized to
transact business and is in good standing in each state in which its ownership
of assets or conduct of business requires such qualification except where such
failure would not have a Material Adverse Effect. True and complete copies of
the Articles of Incorporation, Bylaws, minutes and stock books of the
Corporation, as amended to date, have been made available to
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the Buyer for inspection. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all necessary corporate powers to own or lease its properties and assets and to
carry on its business as now conducted, and is authorized to transact business
and is in good standing in the State of California.
2.2 Ownership of Stock. The Corporation's entire authorized capital
consists of the following: 1,000,000 shares of preferred stock, $1.00 par
value per share, of which no shares are issued and outstanding, and 50,000,000
shares of common stock, $.01 par value, of which 5,350,638 shares are issued
and outstanding. The Shares are owned beneficially and of record by Seller.
The Shares are duly authorized, validly issued, fully paid and nonassessable
and are presently outstanding in the Seller's name. There are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements or commitments obligating the Corporation, or the Seller or any
other entity to acquire, sell, issue or to transfer from treasury any
additional shares of the Corporation's capital stock of any class.
2.3 Subsidiaries. Except as described in Schedule 2.3, the
Corporation does not own any capital stock, bonds or other securities of, or
have any proprietary interest in, any corporation, firm, partnership, joint
venture, trust or other entity.
2.4 Title to Shares. The Seller has good and marketable title to the
Shares, free and clear of all liens, encumbrances, security interests, claims
or other contractual restrictions of any kind, and the transfer and delivery of
the Shares by Seller to Buyer as contemplated by this Agreement will transfer
good and marketable title to the Shares to Buyer.
2.5 Authorization. Each of the Seller and the Corporation has full
power and authority, to enter into this Agreement and to consummate the
transactions contemplated herein. The execution and delivery of this Agreement
by Seller and the Corporation and the performance of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Seller and the Board of Directors of the Corporation. This Agreement has been
duly executed and delivered by Seller and the Corporation and assuming due
authorization, execution and delivery by Buyer, constitutes the valid and
binding agreement of Seller and the Corporation, enforceable in accordance with
the terms hereof except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforceability of creditors' rights
generally and except that the remedy of specific performance or similar
equitable relief may be subject to equitable defenses.
2.6 Financial Statements. The Seller has delivered to the Buyer the
Financial Statements, which have been prepared in accordance with GAAP
consistently followed by the Corporation
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throughout the periods indicated (except that such statements do not contain
any footnotes required by GAAP), and such Financial Statements fairly present
(a) the financial position of the Corporation as of the respective dates of the
balance sheets included therein and (b) the results of operations of the
Corporation for the respective periods indicated.
2.7 Title to Properties. The Corporation has good and marketable
title to, or a valid leasehold interest in, all of the properties and assets
reflected in the 1994 Balance Sheet and all other properties and assets owned
or used by the Corporation in the conduct of its business, free and clear of
any security interest, lien, encumbrance, charge, equity or restriction, except
as otherwise disclosed in the 1994 Balance Sheet or Schedule 2.7 and except for
(a) those properties and assets disposed of after April 30, 1994 in the
ordinary course of business, (b) minor imperfections of title and encumbrances
that do not detract from the value or use of the property or asset subject
thereto, (c) the lien of current taxes not yet due and payable and (d)
mechanics', carriers', sellers' and other similar liens arising in the ordinary
course of business.
2.8 Properties. Attached hereto as Schedule 2.8 is a list of all real
property owned by or leased to the Corporation, together with a brief
description of each such property and the buildings and other major
improvements located thereon. The items of equipment and other tangible
personal property which are included in Schedule 2.8 include all material items
of equipment used in the Corporation's business. The books and records of the
Corporation contain a complete description of all tangible personal property
owned by, in the possession of or used by the Corporation. To the best
knowledge of Seller and Corporation, all equipment and other tangible personal
property of the Corporation included in the list on Schedule 2.8 which are
necessary for the conduct of the Corporation's business are in good condition,
are operable in the ordinary course of business, and have been regularly
maintained, repaired and replaced in accordance with Corporation's ordinary
business practice.
2.9 Accounts Receivable and Trade Discounts. All accounts receivable
of the Corporation shown on the 1994 Balance Sheet arose from bona fide sales
in the ordinary course of business. To the best knowledge of the Seller and
the Corporation, the 1994 Balance Sheet reflects adequate reserves for doubtful
accounts in accordance with generally accepted accounting principles. Adequate
accruals have been provided for trade discounts in accordance with GAAP
consistently applied.
2.10 Patents, Trademarks and Certain Intangibles. Schedule 2.10
contains a complete and correct list including country, registration number or
application number, explanation of status, and expiration date (whenever such
data or explanation is applicable) of all trademarks, copyrights and
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patents which are owned or acquired by or registered in the name of, or applied
for by, the Corporation or any of its employees for the Corporations's benefit
for the Corporation's business, or have been licensed by or to the Corporation
for the Corporation's business. Except as disclosed in Schedule 2.10, the
Corporation is the beneficial owner of the registered trademarks, copyrights
and patents, and applications therefor, listed on Schedule 2.10 as owned by it,
free and clear of any royalty, lien, security interest, encumbrance or charge,
and all such trademarks, copyrights, patents and applications therefor are
currently subsisting. Except as disclosed in Schedule 2.10, to the best
knowledge of the Corporation, the Corporation is the beneficial owner of the
unregistered trademarks listed on Schedule 2.10 as owned by it, free and clear
of any royalty, lien, security interest, encumbrance or charge, and all such
unregistered trademarks are currently subsisting. To the best knowledge of
Seller and the Corporation, the Corporation has not taken or omitted to take
any action which would have the effect of waiving any of the rights of the
Corporation to use or practice any patent, copyright or trademark listed on
Schedule 2.10 currently used by the Corporation in its Business. Except as set
forth in Schedule 2.10 the Corporation is not under obligation to pay any
license fee or royalty to any other party with respect to the manufacture, sale
or use of any of the Corporation's products. Each license, contract and
commitment identified on Schedule 2.10 is a valid, legally binding obligation
of the Corporation and, to the Corporation's knowledge, of the other parties
thereto, without any material default (or any event which, with notice or lapse
of time or both, or the happening or occurrence of any other event, would
constitute a material default) by the Corporation or, to the Corporation's
knowledge, of any other parties thereto. Except as disclosed in Schedule 2.10,
the Corporation does not know of any claim or the basis for any claim that the
Corporation's business is or may be infringing on any valid trademark, patent,
copyright or other intellectual property rights of others. The Corporation has
not asserted any claim of infringement, misappropriation, misuse or superior
rights to any intellectual property rights against any other person in
connection with the Corporation's business except as set forth in Schedule 2.10
or Schedule 2.15. Unregistered trademarks, service marks, copyrights and trade
names utilized or presently planned for utilization by the Corporation for its
business are listed in Schedule 2.10. Except as disclosed on Schedule 2.10,
the Corporation knows of no material facts which would bar registration of the
Corporation's unregistered trademarks, service marks, trade names or copyrights
now in use related to the Corporation's business or bar or impede the issuance
of any patent related to the Corporation's business. The Corporation has the
right to use any software which the Corporation uses in its business.
2.11 Contracts. Attached hereto as Schedule 2.11 is a list of (a) all
contracts with customers that were among the top 50 customers of the
Corporation for the fiscal year ended
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April 30, 1994 and all contracts with customers entered into since April 30,
1994 which involve anticipated sales of at least $250,000 and (b) all other
contracts (including all employment and collective bargaining agreements and
all pension, bonus, profit-sharing, stock option and other agreements providing
for employee remuneration or benefits, real and personal property leases and
other commitments to which the Corporation is a party or by which it is bound
that call for a payment by the Corporation in excess of $100,000 or that
require performance over a period in excess of one year. All such contracts,
leases and other commitments are in full force and effect, and to the best of
the Corporation's and the Seller's knowledge, there is no default under any
such contract, agreement, lease or commitment.
2.12 Bank Accounts. Attached hereto as Schedule 2.12 is a list of all
banks and other financial institutions in which the Corporation has an account,
deposit or safe deposit box, together with a list of all authorized signatories
relating to each account.
2.13 Insurance. Attached hereto as Schedule 2.13 is a list of all
insurance policies presently maintained by the Corporation.
2.14 Tax Matters.
(a) Except as set forth in Schedule 2.14, attached hereto, all Tax
Returns required to be filed for taxable periods ending on or prior to the
Closing Date by or with respect to the Corporation or its business, employees,
sales, operations or assets, have been or will be properly and correctly
completed and filed on a timely basis. All such Tax Returns were or will be
correct and complete in all respects.
(b) All Taxes whether or not shown on any Tax Return required to be
paid or to be withheld and remitted by the Corporation (including, without
limitation, all Taxes required to be withheld and remitted in connection with
amounts paid or owing to any shareholder, employee, creditor, independent
contractor or other third party) have been duly and timely paid in full or
properly withheld and remitted. There has not been communicated to Seller or
the Corporation the assertion of any claim with respect to any Taxes required
to be paid or withheld by or on behalf of the Corporation and there are no
encumbrances upon any of its property or assets that arose in connection with
any failure (or alleged failure) to pay any Taxes other than liens for current
property taxes not yet due.
(c) Schedule 2.14 lists those states where the Corporation has filed
or, to the best knowledge of Seller or the Corporation, is required to file a
Tax Return. No claim which remains outstanding has ever been made to Seller or
the Corporation by a taxing authority in a jurisdiction where the
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Corporation does not file a Tax Return that the Corporation is or may be
subject to taxation by that jurisdiction due to its activities or business.
(d) All Taxes attributable to the Corporation's operations through
and including the Closing Date, but for which no Tax Return is yet required,
will be paid as provided in Sections 5.11 and 8.4.
(e) Except as set forth in Schedule 2.14, no extension of time within
which to file any Tax Return has been requested with respect to or by or
granted to the Corporation, except with respect to Tax Returns that were
subsequently filed or Tax Returns specified on Schedule 2.14 as not yet filed
but otherwise due.
(f) Except as set forth in Schedule 2.14, no restrictions on
assessment or collection of Taxes have been waived with respect to the
Corporation and neither Seller, the Corporation nor any other person has
consented to or requested the extension of any statute of limitations relating
to Taxes.
(g) Except for Tax Returns for the taxable years listed on Schedule
2.14, the Corporation has not been audited by any relevant taxing authority
(other than audits that have been completed), the Corporation remains subject
to audit in every taxing jurisdiction except as provided otherwise by
applicable statutes of limitation, and no notification of intention to audit or
examine has been received from the Internal Revenue Service or any other taxing
authority with respect to the Taxes of the Corporation. Any deficiencies
resulting from such audits have been paid in full. No issue was raised by any
taxing authority and communicated to Seller or the Corporation with respect to
any such audit that, if raised with respect to any Tax Return filed for a
subsequent taxable period ending on or prior to the Closing Date, could result
in a deficiency of Taxes or other adjustment for such subsequent period. No
unsatisfied deficiency, delinquency, or default for any Taxes has been proposed
to or assessed against the Corporation nor has it received notice of any such
deficiency, delinquency or default. No currently pending issues have been
raised by any taxing authority and communicated to Seller or the Corporation in
connection with any Tax Return relating to Taxes of the Corporation. There are
no Tax rulings, requests for rulings or closing agreements relating to the
Corporation in which either Seller or the Corporation is explicitly named that
could affect their liability for Taxes for any period after the Closing Date.
(h) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(i) Seller has not filed any consent under Code section 341(f) with
respect to the Corporation or its property. Except as set forth in Schedule
2.14, the Corporation has not
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made any payments, is not obligated to make any payments, and is not a party to
any agreement that under certain circumstances could obligate it to make any
payments (including, without limitation, any payments that have been or will be
made in connection with the transactions contemplated by this Agreement) that
will not be deductible by virtue of Code Section 280G. There has been
adequately disclosed in the federal income Tax Returns filed by the Corporation
or in the filing of which the Corporation has joined all positions taken
therein with respect to the income, assets, business or operations of the
Corporation which otherwise could give rise to a substantial understatement of
federal Taxes within the meaning of Code Section 6662.
(j) Except as set forth in Schedule 2.14, the Corporation has neither
agreed nor been required to make an adjustment under section 481 of the Code by
reason of a change in accounting method or otherwise. No material taxable
income economically attributable to transactions occurring on or before the
Closing Date will be required to be recognized by the Corporation after the
Closing Date, whether by reason of it reporting income on the cash method of
accounting, the completed contract method, the percentage of
completion-capitalized cost method, the installment method of accounting or by
reason of Income Tax Regulations section 1.1502-13 (deferred intercompany
transactions) or 1.1502-19 (excess losses) or otherwise.
(k) Schedule 2.14 sets forth the following information with respect
to the Corporation as of the most recent practicable date (as well as on an
estimated pro forma basis as of the Closing giving effect to the consummation
of the transactions contemplated hereby): (i) the adjusted basis of the
Corporation in its assets on an asset-by-asset basis (excluding assets which
have been depreciated to a zero basis for book and tax accounting purposes),
(ii) the amount of any net operating loss, net capital loss, unused investment
or other credit, unused foreign tax, or excess charitable contribution
allocable to the Corporation, (iii) the amount of any deferred gain or loss
allocable to the Corporation arising out of any deferred intercompany
transaction (within the meaning of section 1.1502-13(a)(2) of the Income Tax
Regulations) and (iv) detail of the Corporation's accrued taxes by taxable
periods and jurisdictions. There shall be delivered to Buyer, concurrently
with delivery of the Closing Date Balance Sheet, a supplemental Schedule 2.14
setting forth the foregoing information as of the Closing Date.
(l) Except as set forth in Schedule 2.14, the Corporation is not a
party to any allocation or sharing arrangement or agreement (whether written or
unwritten) with respect to Taxes. Any such arrangement or agreement shall be
terminated no later than the Closing Date and any and all amounts due and
payable thereunder shall either be paid prior to the Closing Date or properly
reflected on the Closing Date Balance Sheet.
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(m) The Corporation will realize no taxable income as a result of the
contribution to the Corporation's capital by Seller contemplated in Section 6.6
hereof.
2.15 Litigation; Compliance with Laws. Attached hereto as
Schedule 2.15 is a list of all material litigation to which the Corporation is
a party. No legal, administrative or regulatory action, suit or proceeding
(other than in connection with HSR) involving the Corporation as a party which
if adversely determined could reasonably be expected to have a Material
Adverse Effect on the Corporation or restrict the ability of the Seller or the
Corporation to consummate the transactions contemplated herein is pending or,
to the best knowledge of the Seller and the Corporation, threatened. The
Corporation has not received notice of any violation of any applicable federal,
state or local law, ordinance or regulation (including any applicable
building, zoning or environmental protection law, ordinance or regulation)
materially affecting its properties or its business. The Corporation is in
compliance with all statutes, orders, rules, ordinances, charters and by-laws
and regulations applicable to it or to the ownership of its assets or the
operation of its business, except for any failure to do so which would not
have a Material Adverse Effect on the Corporation. The Corporation is not
subject to any judicial injunction or mandate or any quasi-judicial order or
quasi-judicial restriction directed to or against it, nor has any governmental
agency at any time challenged the Corporation in writing or commenced or given
notice to the Corporation of intention to commence any investigation or
administrative proceeding, relating to the legal right to operate its business
as presently or heretofore operated, except to the extent that any of the
foregoing would not have a Material Adverse Effect on the Corporation. To the
best knowledge of the Seller and the Corporation, except as otherwise
disclosed pursuant to Schedule 2.15, there are no (a) consumer, customer or
distributor complaints or regulatory complaints or investigations relating to
the Corporation's business, nor is there the basis for any such complaint or
(b) claims which Seller has put in the hands of its insurance carriers since
January 1, 1992 seeking damages for personal or other injuries or loss
resulting from the manufacture, sale or use of any of the products
manufactured or sold by the Corporation, except to the extent that any of the
foregoing would not have a Material Adverse Effect on the Corporation. Except
as disclosed in Schedule 2.15, the Corporation knows of no strikes, work
stoppages undertaken or threatened or demands for recognition or petitions for
representation since January 1, 1992 by any of the employees of the
Corporation or grievances or other claims by any union representing any
employees of the Corporation.
2.16 Noncontravention; Consents. Except as set forth in Schedule 2.16,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (a) violate any provisions of the
Seller's or Cor-
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poration's Articles of Incorporation or By-laws; (b) violate, or require any
notice, filing, consent, permit, authorization or approval, under any law or
any regulation, order, judgment or decree of any court or governmental
instrumentality, except for the applicable provisions of HSR or (c) violate any
agreement to which the Seller or the Corporation is a party or by which either
of them is bound or result in the creation of any lien, claim, encumbrance or
restriction on any of the Corporation's assets or properties, the effect of all
of which violations, creations and imposition would result, in the aggregate,
in subjecting the Corporation to liabilities in excess of $100,000.
2.17 Conduct of Business. Since April 30, 1994, there has not been any
change in the Corporation which would have a Material Adverse Effect.
2.18 Brokers. Neither the Seller nor the Corporation, nor any
stockholder, officer, director or agent of either of them has incurred on
behalf of the Seller or the Corporation any liability to any broker, finder or
agent for any brokerage fees, finders' fees or commissions with respect to the
transactions contemplated hereby, except to Salomon Brothers Inc. Such fees
and commissions will be paid by the Seller.
2.19 Environmental Matters. Neither Seller nor the Corporation has
received written notice from any governmental agency of any violation of
environmental laws by the Corporation. To the best knowledge of Seller and
Corporation, there exists no writ, injunction, decree, order or judgment,
claim, suit, proceeding, citation, directive, summons or governmental
investigation relating to potential violations by Corporation of environmental
laws as a result of the Corporation's use, maintenance or operation of any of
its assets or its business, except for any such matter as could not reasonably
be expected to have a Material Adverse Effect on the Corporation. The Seller
and the Corporation each warrants to the Buyer that no past activity could
cause or constitute environmental harm or could (i) affect the value of the
property listed in Schedule 2.8 or (ii) result in liability to the Buyer.
This includes but is not limited to, any and all management of hazardous waste
and hazardous materials from the site or by or on behalf of the Seller or
Corporation.
2.20 Employee Benefit Plans.
(a) Except for the plans and agreements listed in Schedule 2.20
(collectively, the "Plans"), the Corporation does not maintain, is not a party
to, does not contribute to and is not obligated to contribute to, and the
Corporation's employees or former employees and their dependents or survivors
do not receive benefits under, any of the following (whether or not set forth
in a written document):
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(i) Any employee benefit plan, as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA");
(ii) Any bonus, deferred compensation, incentive, restricted
stock, stock purchase, stock option, stock appreciation right, phantom
stock, supplemental pension, executive compensation, fringe benefit,
severance, termination pay or similar plan, program, policy,
perquisite or arrangement not disclosed pursuant to (i) above (other
than any such item provided solely pursuant to the terms of a written
or oral contract with any individual employee); or
(iii) Any plan, program, agreement, policy, commitment or
other arrangement relating to the provision of any benefit described
in section 3(1) of ERISA to former employees or directors or to their
survivors, other than procedures intended to comply with the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").
(b) Neither the Corporation nor any ERISA Affiliate has, since
January 1, 1988, terminated, suspended, discontinued contributions to or
withdrawn from any employee pension benefit plan, as defined in section 3(2) of
ERISA, including (without limitation) any multiemployer plan, as defined in
section 3(37) of ERISA.
(c) The Corporation or Seller has provided to Buyer or will
provide or make available to Buyer prior to the Closing complete, accurate and
current copies of each of the following:
(i) The text (including amendments) of each of the Plans, to
the extent reduced to writing;
(ii) A summary of each of the Plans, to the extent not
previously reduced to writing;
(iii) With respect to each Plan that is an employee benefit
plan (as defined in section 3(3) of ERISA), the following:
(A) The most recent summary plan description, as
described in section 102 of ERISA;
(B) Any summary of material modifications that
has been distributed to participants or filed with the U.S.
Department of Labor but that has not been incorporated in an
updated summary plan description furnished under
Subparagraph (A) above; and
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(C) The annual report, as described in section
103 of ERISA, and where applicable actuarial reports, for the
three most recent plan years for which an annual report or
actuarial report has been prepared; and
(iv) With respect to each Plan that is intended to qualify
under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), the most recent determination letter concerning the
plan's qualification under section 401(a) of the Code, as issued by
the Internal Revenue Service, and any subsequent determination letter
application.
(d) With respect to each Plan that is an employee benefit plan (as
defined in section 3(3) of ERISA), the requirements of ERISA applicable to such
Plan have been satisfied, except to the extent that a failure to satisfy any of
such requirements would not have a Material Adverse Effect.
(e) Each Plan that is intended to qualify under section 401(a) of
the Code meets in all material respects the requirements for qualification
under section 401(a) of the Code and the regulations thereunder, except to the
extent that such requirements may be satisfied by adopting retroactive
amendments under section 401(b) of the Code and the regulations thereunder.
Each such Plan has been administered in accordance with its terms (or, if
applicable, such terms as will be adopted pursuant to a retroactive amendment
under section 401(b) of the Code) and the applicable provisions of ERISA and
the Code and the regulations thereunder, except to the extent that a failure to
be so administered would not have a Material Adverse Effect.
(f) Neither the Corporation nor any ERISA Affiliate has any
accumulated funding deficiency under section 412 of the Code or any termination
or withdrawal liability under Title IV of ERISA, except to the extent that any
such liability would not have a Material Adverse Effect. For purposes of
determining any accumulated funding deficiency under section 412 of the Code,
the term "ERISA Affiliate" shall include any entity that would be deemed to be
a member of the same "controlled group" within the meaning of section 414(m) or
(o) of the Code.
(g) All contributions, premiums or other payments due from the
Corporation to (or under) any Plan have been fully paid or adequately provided
for on the books and financial statements of the Corporation. All accruals
(including, where appropriate, proportional accruals for partial periods) have
been made in accordance with prior practices.
2.21 Liabilities. Except as reflected on the 1994 Balance Sheet or
Schedule 2.21, the Corporation has no liabilities or obligations of any nature,
whether absolute, accrued, contingent or otherwise, that would be of a type and
nature required to be
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reported on a financial statement (including the notes thereto) prepared in
accordance with GAAP consistently applied and would be material (whether
individually or in the aggregate) to the financial condition or business of the
Corporation, other than liabilities or obligations arising in the ordinary
course of business since April 30, 1994.
2.22 Employees. Schedule 2.22 sets forth a true and complete list of
all individuals employed by the Corporation (other than those subject to a
collective bargaining agreement) as of the Effective Date hereof and the
position and base compensation payable to each such individual, together with a
description of any written or oral employment contracts, commitments,
consulting or termination agreements to which the Corporation is a party. The
Corporation is not a party to or subject to a labor union or a collective
bargaining agreement or arrangement and is not a party to any labor or
employment dispute, except as described on Schedule 2.22. Except as disclosed
on Schedule 2.22 hereof, the consummation of the transactions contemplated
herein will not result in any payment in the nature of severance pay or in any
cost becoming due or accruing to the Corporation or the Buyer with respect to
any employees of the Corporation. To the best knowledge of the Seller and the
Corporation, no employee of the Corporation has been injured in the workplace
or in the course of his or her employment except for injuries which are covered
by insurance or for which a claim has been made under Workers' Compensation or
similar laws. The Corporation has complied in all material respects with the
verification requirements and the recordkeeping requirements of the Immigration
Reform and Control Act of 1986 ("IRCA"); to the best knowledge of the
Corporation, the information and documents on which the Corporation relied to
comply with IRCA are true and correct; and there have not been any
discrimination complaints filed against the Corporation pursuant to IRCA, and
to the best knowledge of the Corporation, there is no basis for the filing of
such a complaint. Except as set forth in Schedule 2.22, the Corporation has
not received or been notified of any complaint by any employee, applicant,
union or other party of any discrimination or other conduct forbidden by law or
contract, nor to the best knowledge of the Corporation, is there a basis for
any complaint, except such complaints as could not reasonably be expected to
have a Material Adverse Effect. Neither Seller's nor the Corporation's action
in complying with the terms of this Agreement will violate any agreements with
any of the Corporation's employees. The Corporation has filed all required
reports and information with respect to its employees that are due prior to the
Closing Date and otherwise has complied in its hiring, employment, promotion,
termination and other labor practices with all applicable federal and state law
and regulations, including without limitation those within the jurisdiction of
the United States Equal Employment Opportunity Commission, United States
Department of Labor and state and local human rights or civil rights agencies,
except to the extent that any such failure to
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file or comply would not have a Material Adverse Effect on the Corporation.
The Corporation has filed and shall file any such reports and information that
are required to be filed prior to the Closing Date.
2.23 Material Misstatements or Omissions. Neither the Seller nor the
Corporation has made any material misstatement of fact or omitted to state any
material fact necessary to make complete, accurate and not misleading every
representation and warranty set forth herein.
2.24 Prohibited Payments. To the best knowledge of Seller and
Corporation, Seller has not, with respect to the Corporation's business and the
Corporation has not, entered into any understanding, agreement or arrangement,
written or oral, under or pursuant to which bribes, kickbacks, illegal rebates,
payoffs or other forms of illegal payments have been or will be made, provided
for or suffered.
2.25 Slotting Agreements. Seller has not, with respect to the
Corporation's business, and the Corporation has not entered into any Slotting
Agreement with any distributors which are in effect or to which the Corporation
is legally bound on the date hereof except as disclosed on Schedule 2.25.
2.26 Loan Agreement. Seller has delivered to Buyer a true and correct
copy of that certain CEBA Loan Agreement (the "CEBA Agreement") dated as of
June 18, 1992 among the Iowa Department of Economic Development, City of Ankeny
and the Corporation together with all documents related thereto. The principal
and interest under the CEBA Agreement will be forgiven under the terms thereof.
Seller has delivered to Buyer a true and correct copy of that certain
Participation Agreement (together with all documents related thereto, the "BA
Lease") dated as of April 29, 1994, by and among Seller, the Corporation, BA
Leasing & Capital Corporation, as Agent, and the Lessors listed thereto.
Except as disclosed on Schedule 2.26 hereto, the Corporation is not a borrower,
guarantor or indemnitor under any other loan agreement, instrument, note,
financing lease or other evidence of indebtedness.
2.27 Joint Venture. Seller has delivered to Buyer a true and correct
copy of that certain Collaboration Agreement between Corporation and Devon
Plantations and Industries Limited together with all documents listed on
Schedule 2.27. Cochin Spices Limited ("Cochin") is a corporation duly formed
and organized in India. Cochin is in good standing under the laws of India and
has all necessary corporate powers to own or lease its properties and assets
and to carry on its business as now conducted, and is authorized to transact
business and is in good standing in each jurisdiction in which authorization is
required except where failure thereof would not have a Material Adverse Effect.
Neither the execution and delivery of this Agreement nor the consummation of
the transaction contemplated hereby will
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violate any organizational document relating to Cochin or violate any agreement
to which Cochin is a party. No material contingent obligation is owed to
Cochin by the Corporation which has not been disclosed to the Buyer. Cochin is
in compliance with all laws and regulations related to its formation, existence
and operation except where the failure to comply would not have a Material
Adverse Effect. The Corporation owns 50% of Cochin. The Corporation has no
other investments, joint ventures or stock ownership in any other company.
2.28 Truth of Representations and Warranties. All representations and
warranties made by the Seller and the Corporation are true and correct on the
Effective Date and on the Closing Date.
2.29 Contribution to Capital of the Corporation. As of the Closing
Date, the Seller has taken all action necessary to effect a contribution to the
capital of the Corporation in an amount equal to the "Due S.E. Rykoff" amount
shown on the Closing Date Balance Sheet.
2.30 Material Customers. To the best knowledge of the Seller and the
Corporation, there are no facts indicating that any of the Corporation's
material customers intend to cease buying or materially restrict their
purchases from the Corporation.
2.31 Compliance by Seller with Other Instruments and Laws. The
Corporation has, and is in compliance with, all necessary consents, permits,
licenses, orders, ratings, authorizations and approvals of, or registration or
declaration with, all governmental authorities, agencies, bureaus, commissions
or regulatory bodies for it to operate the properties and facilities comprising
the business presently being operated, except for those which would not have a
Material Adverse Effect on the Corporation. All labels and packaging materials
and all specifications and procedures used in the manufacture and packaging of
the Corporation's products are in material compliance with all applicable laws
in any jurisdiction in which its products are packaged, shipped or sold, except
where any such non-compliance would not have a Material Adverse Effect on the
Corporation.
2.32 Permits. The Corporation has all permits, licenses, approvals,
orders or authorizations of, or registrations, declarations, qualifications,
designations or filings with, any governmental authority, agency, bureau or
commission, or any third party (including without limitation, Kosher
validation), which are required to be obtained or made by the Corporation in
connection with the operation of its business as presently being conducted,
except for those which would not have a Material Adverse Effect on the
Corporation.
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2.33 Covenants Performed. As of the Closing Date, Seller and
Corporation have performed their respective obligations and covenants contained
herein which by their terms are to be performed on or before the Closing Date,
except to the extent any such obligations or covenants are waived in writing by
the Buyer.
2.34 Tortious Conduct. Except as otherwise disclosed in the schedules
hereto, covered by insurance or reflected on the Closing Date Balance Sheet, on
and as of the Closing Date, the Corporation is not liable to any third party or
entity for any damages resulting in whole or in part from the negligent,
reckless or willful acts or omissions of the Corporation, whether such
liability may arise in tort, strict liability or for breach of contract, nor
has the Corporation acted or failed to act so as to result in such liability,
except to the extent that any such liability would not have a Material Adverse
Effect on the Corporation.
2.35 Regulatory Matters. The Corporation has filed or otherwise
provided all reports, data, other information and applications with respect to
its business or products which are required to be filed with or otherwise
provided to the U.S. Food and Drug Administration ("FDA"), the U.S.
Environmental Protection Agency ("EPA"), the U.S. Occupational Safety and
Health Administration ("OSHA"), and any other federal, state, local or foreign
governmental authorities with jurisdiction over the manufacture, use and sale
of such products, and, all regulatory approvals in respect thereof are in full
force and effect on the date hereof, except to the extent that the failure of
any of the foregoing would not have a Material Adverse Effect on the
Corporation. Subject to the last sentence of Section 2.37, the manufacture,
use, sale and distribution by the Corporation of the products comply in all
material respects with all applicable laws and published governmental rules,
regulations and interpretations thereof, as in effect on the date hereof or on
the Closing Date, except to the extent that any such non- compliance or
liability would not have a Material Adverse Effect on the Corporation and the
methods of quality control employed by the Corporation are reasonably
sufficient to ensure such compliance.
2.36 Products. Subject to the last sentence of Section 2.37, all
products manufactured, distributed or sold by the Corporation on or before the
Closing Date meet published or quoted specifications, are not defective, are
not contaminated or spoiled, do not contain any foreign objects and are in
compliance with and were manufactured in compliance with all applicable laws
and regulations (including without limitation the regulations promulgated by
the FDA), such that the Corporation does not and will not have any uninsured
liabilities to third parties with respect thereto. Subject to the last
sentence of Section 2.37, the products are packaged in
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appropriate containers which comply in all material respects with all FDA
regulations, including labeling regulations.
2.37 Inventory. Except as otherwise described herein, the inventories
of the Corporation consist of items of a quality and quantity usable and
suitable in the ordinary course of business, and are in all material respects
salable in the market for which such products were manufactured or produced to
be sold and include no items which require governmental approvals to be sold.
To the extent the values of items were below standard quality or quantity or
were obsolete or otherwise unsalable, such items were accounted for on the 1994
Balance Sheet at net realizable value in accordance with GAAP. As of the
Closing Date, there will be a supply of raw materials and goods in process in
the inventory at their customary location (together with supplies) adequate to
manufacture, in the ordinary course of business as generally conducted by the
Corporation prior to the Closing, finished products in amounts which, together
with the finished products in the inventory as of the Closing, will be
sufficient to meet the Corporation's requirements in the ordinary course of
business as generally conducted by the Corporation prior to the Closing, except
to the extent of variations caused by events beyond the Corporation's or
Seller's control. Except for items undergoing routine rework, items not
salable in the normal course of business (including but not limited to
discontinued items, damaged goods or items not meeting quality assurance
guidelines), shall be accounted for in the Closing Date Balance Sheet at their
net realizable value in accordance with GAAP. Items shall be deemed "Aged" if,
as of the end of the fiscal month immediately preceding the Closing Date (or as
of the Closing Date if the Closing Date coincides with the last day of a fiscal
month), they have a remaining shelf life of less than six (6) months according
to Schedule 2.37. Such items deemed "Aged" shall be accounted for at no value.
After the Closing, Buyer shall cause the Corporation to either (i) deliver to
Seller the proceeds from the sale of the "Aged" inventory, net of all selling
and administrative expenses relating to such sale, or (ii) deliver the "Aged"
inventory to Seller at Seller's direction and at Seller's expense. Items shall
be deemed "Excess" if, as of the end of the fiscal month immediately preceding
the Closing Date (or as of the Closing Date if the Closing Date coincides with
the last day of a fiscal month), there is more than twenty-four (24) months
supply on hand in the Corporation's inventory unless reasonably economical
minimum orders are for greater than twenty-four (24) months supply. The amount
deemed "Excess" shall be accounted for at salvage value. Packaging materials
will be valued at cost except that no value shall be attributable to packaging
not usable in the normal course of business (e.g., damaged, obsolete,
discontinued, faded or shaded) or packaging not meeting current FDA
requirements. All raw materials and goods-in-process shall be suitable and
processable for the production of products in accordance with the Corporation's
standard quality and yield specifications as now in effect. Raw
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materials shall be of Fair Average Quality (as such term is defined by the
American Spice Trade Association standards ("ASTA Standards")), and meet all
appropriate ASTA Standards for cleanliness. All items shall meet all U.S. Food
and Drug Administration and U.S. Bureau of Alcohol, Tobacco and Firearms
requirements in the same manner that the Buyer's like products meet the same
requirements.
2.38 Sysco Lawsuit. To the best knowledge of the Corporation and
Seller, the Corporation and Seller have disclosed all material facts which
pertain to or bear upon the pending litigation entitled Tone Brothers Inc. v.
Sysco Corporation, Civil Action No. 4:90-CV-60011 (the "Sysco Litigation").
3. Disclaimer of Representations and Warranties
Regarding Financial Projections.
All provisions of the Disclaimer Agreement are incorporated herein by
this reference and made a part hereof.
4. Representations and Warranties of the Buyer.
The Buyer hereby represents and warrants to the Seller the following:
4.1 Corporate Status. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of California.
4.2 Authorization. The Buyer has full power and authority to enter
into this Agreement and to consummate the transactions contemplated herein.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action. The execution and delivery of this Agreement by Buyer and
the performance of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Buyer. This Agreement has been duly
executed and delivered by Buyer and, assuming due authorization, execution and
delivery by Seller and the Corporation, constitutes the valid and binding
agreement of Buyer, enforceable in accordance with the terms hereof except as
the same may be limited by bankruptcy, insolvency, reorganization or other laws
affecting the enforceability of creditors' rights generally and except that the
remedy of specific performance or similar equitable relief may be subject to
equitable defenses.
4.3 Litigation. No legal, administrative or regulatory action, suit
or proceeding against the Buyer which if adversely determined could reasonably
be expected to restrict the Buyer's ability to consummate the transactions
contemplated herein is pending or, to the best knowledge of the Buyer,
threatened.
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4.4 Noncontravention; Consents. Except as set forth in Schedule 4.4,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (a) violate any provisions of the
Buyer's Articles of Incorporation or By-laws; (b) violate, or require any
notice, filing, consent, permit, authorization or approval, under any law or
any regulation, order, judgment or decree of any court or governmental
instrumentality, except for the applicable provisions of HSR; or (c) violate
any agreement to which the Buyer is a party or is bound or result in the
creation of any lien, claim, encumbrance or restriction on any of the Buyer's
assets or properties, the effect of all of which violations, creations and
impositions would be to adversely affect or restrict the Buyer's ability to
consummate the transactions contemplated herein.
4.5 Brokers. Neither the Buyer nor any stockholder, officer, director
or agent of the Buyer has incurred on behalf of the Buyer any liability to any
broker (other than Kurt Kalm of Arnold and S. Bleichroeder, Inc. for which
Buyer shall pay all fees and commissions), finder or agent for any brokerage
fees, finders' fees or commissions with respect to the transactions
contemplated hereby.
4.6 Material Misstatements or Omissions. Buyer has not made any
material misstatement of fact or omitted to state any material fact necessary
to make complete, accurate and not misleading every representation and warranty
of Buyer set forth herein.
4.7 Financial Condition. Buyer has adequate financial and other
resources to pay the Section 338 Purchase Price and otherwise to perform its
obligations hereunder.
4.8 Truth of Representations and Warranties. All representations
and warranties made by the Buyer are true and correct on the Effective Date and
on the Closing Date.
4.9 Covenants Performed. As of the Closing Date, Buyer has performed
its obligations and covenants herein which by their terms are to be performed
on or before the Closing Date, except to the extent any such obligations or
covenants are waived in writing by the Seller.
5. Covenants of the Buyer and the Seller.
The Buyer and the Seller mutually covenant to the other as follows:
5.1 No Access to Employees, Properties or Records of the Corporation.
Buyer acknowledges and agrees that the Seller and the Corporation have
heretofore furnished the Buyer with all documents, reports, other information
and data (including financial statements) of the Corporation which have been
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requested by Buyer in connection with the transactions contemplated by this
Agreement and that Seller and the Corporation have made the Corporation's
plant, properties, inventories, personnel, books, records, tax returns or
corporate, stock and other records available for examination and inspection by
the Buyer and its agents or representatives. Except as otherwise provided in
Section 5.3, Seller and Corporation shall have no further obligation after the
Effective Date to furnish Buyer with access to the Corporation's plant,
properties, inventories, personnel, books, records, Tax Returns or corporation,
stock and other records.
5.2 Interim Operations. Until the Closing Date, except as otherwise
provided herein or as otherwise approved by the Buyer, (a) the Corporation will
conduct its business only in accordance with its ordinary course of business
and consistent with past practice, including without limitation using
reasonable efforts to preserve the Corporation's business organization and keep
available the services of the Corporation's present officers and key employees
and to preserve the goodwill of those having business relationships with the
Corporation, to preserve inventory at customary levels and to preserve existing
relationships with customers, suppliers and others having business
relationships with the Corporation, and to add customers in the ordinary course
of business, (b) the Corporation will not make any change in its Articles of
Incorporation or Bylaws, as amended and (c) the Corporation will not declare,
set aside, pay or make any dividend or other distribution with respect to, or
purchase or redeem, any shares of its capital stock, and shall pay no debt or
other liability or obligation other than in the ordinary course of business;
provided, however, that the Corporation and the Seller may enter into the
transaction contemplated under Section 2.29 hereof pursuant to which Seller is
to make a capital contribution to the Corporation in the amount of the "Due
S.E. Rykoff" amount as shown on the Closing Date Balance Sheet. On the Closing
Date, Seller agrees to take all actions necessary to make a capital
contribution to the Corporation of the "Due S.E. Rykoff" amount as shown on the
Closing Date Balance Sheet.
5.3 Additional Financial Statements. Prior to the Closing Date, the
Corporation shall furnish to the Buyer as soon as practicable after the close
of each successive accounting period ending after April 30, 1994 internally
prepared balance sheets and related internally prepared statements of income
for the Corporation for each such period. Such financial statements shall be
prepared in all material respects in accordance with GAAP consistently followed
by the Corporation throughout the periods indicated (except that such
statements shall not contain changes in financial position or any footnotes
required by generally accepted accounting principles), and such Financial
Statements shall fairly present (a) the financial position of the Corporation
as of the respective dates of the balance sheets included therein and (b) the
results of operations of the
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Corporation for the respective periods indicated. Promptly after the
preparation thereof, if and to the extent requested by Buyer the Corporation
shall deliver to Buyer true and complete copies of any cash flow or other
financial reports, marketing reports, and other operational data regularly
prepared by the Corporation for its internal use; provided that Corporation
shall not be deemed to make any representation or warranty concerning the
accuracy of the contents of any such information delivered to Buyer. The
Corporation shall make available to Buyer at reasonable times the Corporation's
management to explain and elaborate on the financial statements described in
this Section 5.3.
5.4 Legal Requirements and Filings. Subject to the terms and
conditions of this Agreement, each party will use its best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated under this Agreement. Without
limiting the foregoing, if not already completed before execution of this
Agreement, the Seller and the Buyer agree to make the necessary filings under
HSR as promptly as possible after the date hereof. The parties further agree
to respond as promptly as possible to any request for additional information
made pursuant to HSR.
5.5 Third Party Consents. The Seller and the Corporation will use
their best efforts to obtain the written consents of the persons described in
Schedule 5.5 on or prior to the Closing Date. The Buyer will cooperate with
the Seller and the Corporation in obtaining such consents and will promptly
execute and deliver any documents and instruments that may be reasonably
required in connection therewith.
5.6 Compliance with Contracts and Laws.
(a) From the Effective Date until the Closing Date, the
Corporation shall keep in full force and effect and shall comply with all
governmental licenses, permits, franchises, consents and certificates and all
leases, contracts, agreements and commitments to which it is a party or by
which it or its assets may be bound, unless failure to do so would not have a
Material Adverse Effect on the Corporation.
(b) From the Effective Date until the Closing Date, the
Corporation shall comply with all applicable requirements of law, including
without limitation, the requirements of all federal, state, municipal or local
laws, codes, statutes, ordinances, orders, judgments, decrees, injunctions,
approvals, rules, regulation and authorizations of all nations, states,
provinces or other political subdivisions thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and shall make all required governmental filings and
submissions and pay
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all required governmental filings and submissions and pay all required
governmental fees, assessments and costs arising in connection with the
operation and maintenance of its assets and the business, unless failure to do
any of the foregoing would not have a Material Adverse Effect on the
Corporation.
5.7 Maintenance of Insurance. From the Effective Date hereof until
the Closing Date, the Corporation shall continue to carry and maintain in full
force and effect the existing property, casualty (including, without
limitation, stop loss coverage for employee medical claims) and liability
insurance as set forth in Schedule 2.13.
5.8 Employees and Compensation. Except as disclosed on Schedule 5.8,
from the Effective Date hereof until the Closing Date, the Corporation shall
not, with respect to employees, sales agents, representatives, consultants or
other agents or contractors employed by the Corporation with respect to its
business: (a) grant any increase in compensation payable to or to become
payable by it to any such person, other than usual and ordinary compensation
increases in accordance with historical practices of the Corporation or as
provided under any collective bargaining agreement identified in Schedule 2.22
or permitted under subparagraph (c) of this Section; (b) increase benefits
payable to any such person under any existing, or introduce or announce the
introduction of any new, bonus, pension, profit sharing, retirement, credit
union, deferred compensation, group health, major medical or life insurance
plan or other similar plan, contract or commitment providing benefits to the
employees, if such increases, plans or benefits would continue after the
Closing Date, other than any bonus payments payable or to become payable to any
of the employees of the Corporation in conjunction with this transaction where
the cost thereof is borne by Seller or under any collective bargaining
agreement permitted under subparagraph (c) of this Section; or (c) enter into
any collective bargaining agreement other than a collective bargaining
agreement with Local Union No. 147 affiliated with the International
Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America.
5.9 Additional Transactions. From the Effective Date hereof until the
Closing Date, the Corporation shall not do or agree to do any of the following:
(a) Enter into any lease, contract, agreement, commitment or
transaction, other than in the usual and ordinary course of business.
(b) Sell, lease, assign, hypothecate or otherwise transfer or
dispose of any of its assets, other than in the usual and ordinary course of
business; provided that the foregoing shall not apply to the replacement of
existing assets which are expended, rendered obsolete or retired if replaced
with assets of comparable or better quality.
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(c) Modify, amend, cancel, terminate, forfeit, fail to renew,
assign or encumber in any material manner, other than in the ordinary course of
business, any existing governmental license, permit, consent or franchise or
any lease, contract, agreement or commitment of the Corporation or affecting
its business or assets, unless such action would not have a Material Adverse
Effect on the Corporation.
5.10 Adverse Changes. From the Effective Date hereof until the Closing
Date, the Seller and the Corporation shall promptly notify the Buyer in writing
of (a) any adverse developments affecting the Corporation, its assets or
business which became or become known to the Corporation or the Seller and
which could reasonably be expected to result in a material adverse change in
the condition, financial or otherwise of the business of the Corporation; (b)
any damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting any of the assets of the Corporation or its
business; (c) any notice of material violation, forfeiture or complaint under
any permanent license, consent, authority, operating right, franchise, lease,
contract, agreement, commitment or arrangement; or (d) anything which if not
corrected prior to the Closing Date could prevent Seller or the Corporation
from fulfilling any condition precedent to the Closing described in this
Agreement.
5.11 Tax Matters.
(a) Whenever it is necessary for purposes of this Agreement to
determine the Tax liability of a taxable entity for a taxable year or period
that begins before and ends after the Closing Date, the determination shall be
made (i) in the case of Taxes that are not based on income or gross receipts
(e.g., property taxes), by apportioning such Taxes on a per diem basis and (ii)
in the case of Taxes based on income or on gross receipts, by apportioning the
total Tax liability for such taxable year or period on the assumption that the
taxable year or period ended as of the close of the Closing Date, with income
(or other applicable measure) apportioned as provided in Income Tax Regulations
section 1.1502-76(b)(4), provided that any deferred gain or loss on deferred
intercompany transactions which must be restored to income by the Corporation
by reason of the purchase by Buyer of the Shares (or any analogous state, local
or foreign tax effects) shall be allocated entirely to the period ending with
the Closing Date.
(b) Seller shall be responsible for preparing and filing all Tax
Returns for the Corporation for Tax periods ending prior to or on the Closing
Date and making any required Tax payments due on or prior to the Closing Date
with respect to such Tax Returns. Such returns will report the operations of
the Corporation consistent with past practice. Buyer agrees that Seller's
representatives shall have access to all records of the
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Corporation necessary to accurately prepare the aforementioned Tax Returns.
(c) Buyer shall be responsible for preparing and filing all Tax
Returns for taxable years or periods ending after the Closing Date (including
Tax Returns for those states that require twelve (12) month returns covering
the Closing Date) and shall remit any Taxes due in respect of such Tax Returns.
Seller agrees that Buyer's representatives shall have access to all records of
the Corporation necessary to accurately prepare the aforementioned Tax Returns.
Seller shall pay Buyer any Taxes for which Seller is liable pursuant to Section
8.4(a) but which are payable with Tax Returns to be filed by Buyer pursuant to
this Section 5.11(c) within ten business days prior to the due date for the
filing of such Tax Returns.
(d) Except as provided in Section 5.11(e), Seller shall be
entitled to all refunds of Taxes received with respect to the Corporation for
any Tax period ending on or prior to the Closing Date, but if any amount of
such refund is later determined to be repayable to the appropriate taxing
authority, such amount shall continue to be indemnifiable under Section 8.4(a).
(e) In the event that there is (i) a carryback of losses, credits
or similar items (including, without limitation, net operating losses, capital
losses, and unused business, foreign and other tax credits) that is
attributable to a taxable year or period of the Corporation that begins after
the Closing Date, (ii) such carryback is to a Tax Return of a consolidated,
combined, unitary or other similar filing group of Seller or any successor to
Seller ("Seller's Group") or to a separate return of a member of any Seller's
Group and (iii) as a result of such carryback Seller or any member of Seller's
Group becomes entitled to and receives a refund of any Taxes for any period for
which it is liable under Section 8.4(a) to indemnify Buyer, or benefits from a
credit of Taxes for such a period (through the reduction of either Taxes
previously paid by Seller or any member of Seller's Group or a then current Tax
liability), then Seller shall promptly pay to Buyer the amount of such refund
or credit together with any interest thereon received by Seller or any member
of Seller's Group or credited, in each case, to its account. At the request of
Buyer or the Corporation, Seller agrees to prepare and file claims for refund
of federal income taxes on behalf of the Corporation under Income Tax
Regulations section 1.1502-77 and to provide the information necessary for the
Corporation to prepare and file a tentative carryback adjustment under Income
Tax Regulations sections 1.1502-78(a) (and to take similar action as to any
states in which Seller is filing consolidated or combined reports), and Buyer
shall reimburse Seller for any Related Costs arising therefrom.
(f) Seller shall be responsible for handling all Tax matters
related to the Corporation, including dealing with and resolving audit issues,
for Tax periods ending prior to or on
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the Closing Date; provided that (i) Seller shall notify Buyer in writing within
thirty (30) days as to any examination by or disputes with taxing authorities
with respect to the Corporation that relate both to taxable periods ending on
or prior to the Closing Date and to taxable periods ending thereafter, (ii)
Buyer's representative shall be allowed to participate therein, (iii) Seller
shall indemnify Buyer and its subsidiaries, including the Corporation, for any
increase in Tax liability (whether such increase in Tax liability occurs prior
to, contemporaneously with or in a year after the year in which the relevant
activities occur) that results from Seller's activities under this Section
5.11(f) and (iv) Buyer shall remit to Seller any Tax benefit realized by Buyer
resulting from Seller's activities under this Section 5.11(f) but only at the
time and to the extent such Tax benefit is actually realized.
(g) Buyer shall have the right and responsibility to direct the
handling of matters related to Taxes of the Corporation for Tax periods ending
after the Closing Date; provided that (i) Buyer shall notify Seller in writing
within thirty (30) days as to any examination by or disputes with taxing
authorities with respect to the Corporation that relate both to taxable periods
ending on or prior to the Closing Date and to taxable periods ending
thereafter, (ii) Seller's representative shall be allowed to participate
therein and (iii) Buyer shall not settle, either administratively or after the
commencement of litigation, any claim for Taxes which would give rise to a
material indemnification obligation on the part of Seller under Section 8.4
unless either (i) Buyer agrees in writing to release Seller from that specific
indemnification obligation or (ii) Buyer obtains Seller's prior written
consent, which written consent shall not be unreasonably withheld.
(h) Seller and Buyer shall, and each shall, as applicable cause
their respective affiliates to, use its best efforts to provide each other with
such assistance as may reasonably be requested by any of them in connection
with Tax matters, including providing information with respect to the
preparation of any Tax Return or other document required to be filed by any
taxing authority, any audit or other examination by any taxing authority, any
judicial or administrative proceeding or dispute relating to liability for
Taxes or any claim arising under this Section 5.11 or Section 8.4, and each
shall retain and provide to the other access to such records and other
information as may be relevant to such Return, audit, examination, proceeding
or determination; provided that a party shall be entitled to be reimbursed by
the other party for its Related Costs in complying with the provisions of this
Section 5.11(h) with respect to taxable periods the Taxes for which are to be
borne by such other party under Section 8.4.
5.12 Sysco Litigation. Buyer shall indemnify and hold harmless
Seller for all expenses, costs, fees and liabilities payable to Zarley, McKee,
Thonte, Voorhees & Sease, P.L.C.
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pursuant to that certain Contingent Fee Agreement executed by the Corporation
on November 14, 1990 (the "Contingent Fee Agreement) relating to the Sysco
Litigation. In the event of any cash recovery as a result of a settlement or
judgment in the Sysco Litigation, the parties agree that any such recovery
shall be applied as follows: (a) first, to all payments due to Zarley, McKee,
Thonte, Voorhees & Sease, P.L.C. pursuant to the Contingent Fee Agreement; (b)
second, to the parties in the following proportion: for each dollar received
until Seller has recovered a total of three hundred sixty thousand dollars
($360,000) pursuant to this subparagraph (b) and Buyer has recovered the total
amount of costs, expenses, fees, and other payments or liabilities paid or
incurred by Buyer or the Corporation after the Closing Date (other than amounts
paid pursuant to subparagraph (a) of this Section) (the "Buyer Sysco Expenses")
pursuant to this subparagraph (b) the sum of: (i) to Seller, (A) three hundred
sixty thousand dollars ($360,000) divided by (B) three hundred sixty thousand
dollars ($360,000) plus the Buyer Sysco Expenses; and (ii) to Buyer, (A) the
Buyer Sysco Expenses divided by three hundred sixty thousand dollars ($360,000)
plus the Buyer Sysco Expenses; and (c) finally, any remaining recovery shall be
divided equally between Seller and Buyer.
5.13 Survival of Covenants. Seller and Buyer shall have no obligation
under the covenants contained in this Article 5 after the Closing, except those
covenants contained in sections 5.4, 5.5, 5.11, 5.12, 5.14 and 5.15.
5.14 BA Lease Novation. Within sixty (60) days after the Closing Date,
Buyer will enter into a novation with the parties to the BA Lease the effect of
which is to release Seller from all future obligations arising under the BA
Lease. Buyer will indemnify Seller from any and all costs and expenses arising
under the BA Lease from and after the Closing Date until such novation becomes
effective. Seller will indemnify Buyer from any fees, charges or expenses
charged by or payable to the parties to the BA Lease in connection with such
novation for the sole purpose of substituting Buyer as lessee in place of
Seller under the BA Lease.
5.15 CEBA Loan. From and after the Closing Date, Buyer shall not, and
shall not permit the Corporation to, frustrate or interfere with the process of
obtaining total forgiveness of the loan to the Corporation under the CEBA
Agreement, and Buyer and the Corporation shall use their reasonable efforts to
cooperate in obtaining such forgiveness; provided, however, that nothing in
this Section 5.15 shall be construed to limit or impede the Corporation's or
the Buyer's exercise of business judgment in determining the location of assets
or operations, hiring practices or needs, or in otherwise operating the
business of the Buyer and the Corporation.
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6. Conditions to Obligations of the Buyer.
The obligations of the Buyer under this Agreement are subject to the
satisfaction of all of the following conditions, unless waived by the Buyer in
writing:
6.1 Representations and Warranties. All of the representations and
warranties by the Seller and the Corporation contained in this Agreement shall
be true and complete in all material respects as of the Closing Date, and the
Buyer shall have received certificates from each of the Seller and the
Corporation, each dated the Closing Date and signed by the President or a Vice
President, to such effect.
6.2 Complete Performance by the Seller and the Corporation. The
Seller and the Corporation shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or
complied with by each of them prior to, on, or as of the Closing Date, and the
Buyer shall have received certificates from each of the Seller and the
Corporation, each dated the Closing Date and signed by the President or a Vice
President, to such effect.
6.3 Corporate Action. The Buyer shall have received certified copies
of the resolutions of the respective boards of directors of the Seller and the
Corporation which authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
6.4 Supply Agreement. The Seller shall have executed and delivered a
supply agreement in the form of Schedule 6.4.
6.5 Opinion of Counsel. The Seller shall have delivered to the Buyer
an opinion of counsel to the Seller in the form of Schedule 6.5.
6.6 Contribution to Capital of the Corporation. The Seller shall have
(a) taken all actions necessary to contribute to the capital of the
Corporation, effective as of the Closing Date, the "Due S.E. Rykoff" amount
shown on the Closing Date Balance Sheet and (b) delivered to the Buyer a
certificate, dated the Closing Date and signed by the President or a Vice
President, evidencing such contribution.
6.7 HSR Waiting Period. All applicable filing and waiting periods
under HSR shall have expired without action taken to prevent consummation of
the transactions contemplated by this Agreement.
6.8 Absence of Changes. During the period from the date of this
Agreement to and including the Closing Date, the Corporation shall not have
sustained any loss or damage to its assets or its business, whether or not
insured, which materially
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and adversely affects the ability of the Corporation to conduct its business as
a whole.
6.9 Approvals. Seller shall have obtained and delivered to Buyer the
consents listed on Schedule 6.9 required for the performance of this Agreement
without conditions or restrictions unacceptable to Buyer in its reasonable
determination.
6.10 Litigation. As of the Closing Date, no action or proceeding shall
be completed or pending that has or may result in a judgment, decree or order
that will prevent or make unlawful the consummation of the transactions
contemplated under this Agreement or will have a Material Adverse Effect on the
Corporation, its assets, or its business. As of the Closing Date, there shall
be in effect no order restraining or prohibiting the consummation of the
transactions contemplated by this Agreement or any proceedings pending with
respect thereto.
6.11 Delivery of Documents. Seller and the Corporation shall have
tendered to Buyer all documents required to be delivered hereunder to Buyer,
including the certificates representing the Shares, and such assignments and
other good and sufficient instruments of conveyance as shall be effective to
vest in Buyer good and marketable title in and to the Shares.
6.12 Rykoff Supply Agreement. The Seller shall have executed and
delivered the Rykoff Supply Agreement in the form of Schedule 6.12 hereto.
6.13 Agreement Not to Compete. The Seller shall have executed and
delivered the Agreement Not to Compete in the form of Schedule 6.13 hereto.
6.14 [Intentionally Omitted]
6.15 Delivery of Other Closing Documents. The Seller shall have
delivered to the Buyer:
(a) The written resignations of each of the directors of
the Corporation;
(b) Duly issued certificates representing the Shares,
which shall be duly endorsed by the Seller for transfer to the Buyer;
and
(c) The stock books, stock ledgers, minute books and
corporate seals of the Corporation.
7. Conditions to Obligations of the Seller.
The obligations of the Seller under this Agreement are subject to the
satisfaction of all of the following conditions, unless waived by the Seller in
writing:
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7.1 Representations and Warranties. All representations and
warranties by the Buyer contained in this Agreement shall be true and complete
in all material respects as of the Closing Date, and the Seller shall have
received a certificate from the Buyer, dated the Closing Date and signed by the
President or a Vice President, to such effect.
7.2 Complete Performance by the Buyer. The Buyer shall have performed
and complied with all agreements and conditions on its part required by this
Agreement to be performed and complied with prior to, on, or as of the Closing
Date, and the Seller shall have received a certificate from the Buyer, dated
the Closing Date and signed by the President or a Vice President, to such
effect.
7.3 Corporate Action. The Seller shall have received a certified copy
of the resolutions of the board of directors of the Buyer which authorize the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
7.4 Opinion of Counsel. The Buyer shall have delivered to the Seller
opinions of counsel to the Buyer in the form of Schedules 7.4(a) and 7.4(b) and
an opinion of counsel in form and substance reasonably satisfactory to Seller
as to the enforceability of the guaranty delivered by Burns, Philp & Company
Limited.
7.5 HSR Waiting Period. All applicable filing and waiting periods
under HSR shall have expired without action taken to prevent consummation of
the transactions contemplated by this Agreement.
7.6 Litigation. As of the Closing Date, no action or proceeding
shall be completed or pending that has or may result in a judgment, decree or
order that will prevent or make unlawful the consummation of the transactions
contemplated under this Agreement or will have a Material Adverse Effect on the
Corporation, its assets, or its business. As of the Closing Date, there shall
be in effect no order restraining or prohibiting the consummation of the
transactions contemplated by this Agreement or any proceedings pending with
respect thereto.
7.7 Delivery of Other Closing Documents. The Buyer shall have
delivered to the Seller:
(a) Guaranty executed by Burns, Philp & Company Limited;
(b) Evidence reasonably satisfactory to Seller as to the
authorization of (i) such guaranty and (ii) the execution, delivery
and performance by Buyer of this Agreement and the transactions
contemplated thereby; and
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(c) All other documents required to be delivered
hereunder.
8. Indemnification.
8.1 Indemnification by the Seller. The Seller shall indemnify, defend
and hold harmless the Buyer and its affiliates, shareholders, officers and
employees from and against any and all claims, demands, actions, losses,
damages, liabilities, costs and expenses (including reasonable attorneys' fees
and expenses) in excess of three hundred thousand dollars (US $300,000) in the
aggregate, which arise out of or in connection with: (i) the inaccuracy of any
of the representations and warranties of Seller contained in this Agreement, or
any certificate or agreement delivered pursuant hereto or (ii) the breach by
Seller of any of the covenants made by it in this Agreement. Neither Buyer nor
the Corporation shall be deemed to have sustained a loss to the extent it is
entitled to be indemnified by insurance carried by Buyer or the Corporation, or
would have been entitled to be indemnified by the Corporation's insurance if
the insurance carried by the Corporation as of the Effective Date had remained
in effect until the loss occurs. The Seller's liability under this paragraph
shall not, however, exceed the aggregate amount of $25,000,000. In computing
the amount to be paid by the Seller under this paragraph, there shall be
deducted an amount equal to any Tax benefits realized by the Buyer, or the
Corporation (or their successors, assigns or affiliates), as a result of the
event giving rise to Seller's obligation to make such payment, after taking
into account the income tax treatment of the Buyer's receipt of such payment.
The Buyer shall promptly notify the Seller of the existence of any claim or
other matter to which the Seller's indemnification obligations would apply.
Immediately upon Seller being notified of a claim by a third party (other than
a taxing authority) that may result in indemnification, Seller shall have the
right, but not the duty, to compromise or defend any such claim through counsel
of the Seller's choice and at the expense of the Seller. The notice and
opportunity to compromise or defend such claim, if applicable, shall be a
condition precedent to any liability of the Seller. In the event that the
Seller undertakes to compromise or defend such claim, the Seller shall notify
the Buyer of the Seller's intention to do so, and in such event the Buyer shall
cooperate fully with the Seller. If the Seller does not undertake to
compromise or defend such claim after notification, the Buyer may compromise or
defend any such matter through counsel of the Buyer's choice and at the
Seller's expense. In no event shall Seller be liable for any indirect,
incidental, special or consequential damages arising out of any circumstance
which gives rise to an indemnification obligation of Seller hereunder. The
indemnification contemplated in Section 8.4 hereof relating to Taxes, the
indemnification contemplated in Section 5.14 hereof relating to the BA Lease,
and any indemnification resulting from the breach of the
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representation and warranty in Section 2.26 hereof relating to the CEBA
Agreement shall not be subject to the dollar limitations or minimums set forth
herein.
8.2 Indemnification by the Buyer. The Buyer shall indemnify, defend
and hold harmless the Seller and its affiliates, shareholders, officers and
employees from and against any and all claims, demands, actions, losses,
damages, liabilities, costs and expenses (including reasonable attorneys' fees
and expenses) in excess of three hundred thousand dollars (US $300,000) in the
aggregate, which arise out of or in connection with: (i) the inaccuracy of any
of the representations and warranties of Buyer contained in this Agreement, or
any document, certificate or agreement delivered pursuant hereto; or (ii) the
breach by Buyer of any of the covenants made by it in this Agreement. The
Buyer's liability under this paragraph shall not, however, exceed the aggregate
amount of $25,000,000. In computing the amount to be paid by the Buyer under
this paragraph, there shall be deducted an amount equal to any Tax benefits
realized by the Seller (or its successors, assigns or affiliates) as a result
of the event giving rise to Buyer's obligation to make such payment, after
taking into account the income tax treatment of the Seller's receipt of these
payments. The Seller shall promptly notify the Buyer of the existence of any
claim or other matter to which the Buyer's indemnification obligations would
apply. Seller shall not be deemed to have sustained the loss to the extent it
is entitled to be indemnified by its insurance. Immediately upon Buyer being
notified of the claim by a third party (other than a taxing authority) that may
result in indemnification, Buyer shall have the right, but not the duty, to
compromise or defend any such claim through counsel of the Buyer's choice and
at the expense of the Buyer. The notice and opportunity to compromise or
defend such claim, if applicable, shall be a condition precedent to any
liability of the Buyer. In the event that the Buyer undertakes to compromise
or defend such claim, the Buyer shall notify the Seller of the Buyer's
intention to do so and in such event, the Seller shall cooperate fully with the
Buyer. If the Buyer does not undertake to compromise or defend such claim
after notification, the Seller may compromise or defend any such matter through
counsel of the Seller's choice and at the Buyer's expense. In no event shall
Buyer be liable for any indirect, incidental, special or consequential damages
arising out of any circumstances which give rise to an indemnification
obligation of Buyer hereunder. The indemnification contemplated in Section 8.4
hereof relating to Taxes, the indemnification contemplated in Section 1.6(b)
relating to Buyer's settlement of certain Tax disputes, the indemnification
contemplated in Section 5.14 hereof relating to the BA Lease, and the
indemnification contemplated in Section 5.12 relating to the Sysco Litigation
shall not be subject to the dollar limitations or minimums set forth herein.
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8.3 Survival of Indemnification. The right to make a claim for
indemnification pursuant to Sections 8.1, 8.2 and 8.4 of this Agreement shall
survive the Closing Date for a period with respect to Tax matters, equal to the
applicable statutory limitation period for the applicable Tax Returns required
to be filed for taxable years or periods for which indemnification is due
hereunder, with respect to environmental matters under Section 2.19, equal to
three (3) years and with respect to all other matters, equal to two (2) years.
The last day of each such period shall be, with respect to the applicable
matter, referred to herein as the "Applicable Claim Termination Date." No
claim or action for indemnification under this Agreement shall be asserted or
maintained by any party hereto after the Applicable Claim Termination Date
except that if there shall be pending on the Applicable Claim Termination Date
any claim asserted by a party in writing to the party alleged to be responsible
for such claim under this Article 8, on or prior to the Applicable Claim
Termination Date, then the party asserting that claim shall thereafter have the
right to continue to assert that claim and to be indemnified with respect
thereto, if due under this Article 8.
8.4 Taxes.
(a) Seller shall be responsible for and shall indemnify and hold
harmless Buyer, its affiliates and their directors, officers, agents and
representatives on an after-tax basis from and against (i) any and all Taxes
and Related Costs of the Corporation (or any predecessor thereto) for any
taxable year or period ending on or before the Closing Date and the portion of
any and all Taxes and Related Costs for any taxable year or period beginning
before and ending after the Closing Date that is attributable to the portion of
such year or period through the Closing Date (in each case, except to the
extent that such liability is properly reflected as a current liability in the
Closing Date Balance Sheet), (ii) any and all Taxes and Related Costs (for any
taxable period, whether beginning before, on or after the Closing Date) of or
attributable to any person, other than the Corporation, Buyer and Buyer's
affiliates, which is or has been affiliated with the Corporation or with which
the Corporation files or has filed any combined, consolidated or unitary or
other similar Tax Return, (iii) any and all Taxes and Related Costs imposed on
account of the transactions contemplated by this Agreement (including, without
limitation, the election contemplated by Section 1.6); provided that nothing in
this Section 8.4(a) shall relieve Buyer of any of its obligations under Section
1.6); and (iv) the inaccuracy of any of the representations and warranties of
Seller or Corporation contained in this Agreement related to Taxes. In
computing the amount to be paid by the Seller under this paragraph, there shall
be deducted an amount equal to any Tax benefits realized by the Buyer, or the
Corporation (or their successors, assigns or affiliates), as a result of the
event giving rise to Seller's obligation to make such payment, after taking
into account the
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income tax treatment of the Buyer's receipt of such payment. In no event shall
Seller be liable for any indirect, incidental, special or consequential damages
arising out of any circumstance which gives rise to an indemnification
obligation of Seller hereunder.
(b) Buyer shall be responsible for and shall indemnify and hold
harmless Seller, its affiliates and their directors, officers, agents and
representatives on an after-tax basis from and against any and all Taxes and
Related Costs of the Corporation (or any predecessor thereto) for any taxable
year or period beginning after the Closing Date and the portion of any and all
Taxes and Related Costs for any taxable year or period beginning before and
ending after the Closing Date that is attributable to the portion of such year
or period beginning after the Closing Date. In computing the amount to be paid
by the Buyer under this paragraph, there shall be deducted an amount equal to
any Tax benefits realized by the Seller (or its successors, assigns or
affiliates) as a result of the event giving rise to Buyer's obligation to make
such payment, after taking into account the income tax treatment of the
Seller's receipt of these payments. In no event shall Buyer be liable for any
indirect, incidental, special or consequential damages arising out of any
circumstances which give rise to an indemnification obligation of Buyer
hereunder.
(c) Except as provided in Section 5.11(c), if any Tax for which
one party (the "Tax Indemnitor") is to indemnify the other (the "Tax
Indemnitee") pursuant to this Section 8.4 is payable (whether as a payment of
estimated Tax, in satisfaction of a deficiency or otherwise) after the Closing
Date, the Tax Indemnitor shall pay or cause to be paid to the Tax Indemnitee
the amount of such Tax no later than the later of (i) the tenth business day
after the Tax Indemnitor receives notice from the Tax Indemnitee that such Tax
is due and (ii) ten business days before the date such Tax is due and payable.
9. Termination.
Notwithstanding anything in this Agreement to the contrary:
(a) Mutual Consent. This Agreement may be terminated by
the mutual consent of the parties hereto. The parties agree that this
Agreement shall be deemed terminated by the mutual consent of the
parties if, at or before 1:00 P.M. on Tuesday, September 13, 1994,
Buyer shall have delivered a notice to Seller to the effect that the
Agreement is so terminated based upon Buyer's due diligence review of
the Corporation's customer relationship with Sam's Warehouse Club
proving unsatisfactory to Buyer in its sole and absolute discretion.
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(b) Default. If, notwithstanding the terms of this
Agreement, a party hereto shall intentionally fail or refuse to
consummate the transactions contemplated herein or otherwise fail to
perform its obligations hereunder, then the nondefaulting party, after
affording the defaulting party a ten (10) day period after notice in
which to cure such breach or default, shall have the right, to
terminate this Agreement by written notice given to the other party
hereto.
(c) Upset Date. If the Closing shall not have occurred
on or before October 31, 1994 then, unless otherwise agreed to in
writing between the parties hereto, this Agreement may be terminated
by either party at any time upon notice to the other party; provided,
however, that the conduct or failure to act by the party electing to
terminate this Agreement shall not have prevented the Closing from
occurring.
(d) Legal Restraint. Any party may, by written notice to
the other party, terminate this Agreement if at the time the written
notice of termination is given, there is in effect a permanent
injunction enjoining the transaction contemplated hereunder.
10. Miscellaneous.
10.1 Parties and Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that this Agreement may not be
assigned by any party without the consent of the other parties hereto, except
that the Buyer may designate a wholly owned subsidiary as the purchaser of the
Shares, but such designation shall not relieve the Buyer of any of its
obligations hereunder. Nothing in this Agreement shall confer upon any person
or entity not a party to this Agreement (other than the legal representatives
and agents of the parties to this Agreement) any rights, remedies of any nature
or kind whatsoever, and no such person or entity shall be construed to be a
third party beneficiary or shall be entitled to rely upon any provision of this
Agreement or any agreement, instrument, certificate or document executed
pursuant to or in connection with this Agreement.
10.2 Confidentiality; Press Releases. Except as otherwise required by
law, from and after the Effective Date and until the Closing Date each of the
parties hereto agrees that all press releases and other announcements, whether
written or oral, to be made by any of them with respect to the transactions
contemplated hereby shall be subject to the agreement and consent of all
parties hereto prior to the dissemination thereof. Until the Closing Date,
each of the parties hereto shall comply with the terms of the Confidentiality
Agreement.
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10.3 Expenses. The Seller and the Buyer shall share (a) the legal
fees of Pillsbury Madison & Sutro relating to the HSR aspects of the
transactions contemplated hereby in accordance with the Agreement between the
parties and Pillsbury Madison & Sutro and (b) equally the audit fees of Arthur
Andersen & Co. for the Closing Date Balance Sheet. Subject to the foregoing,
the parties hereto shall pay all of their own expenses relating to the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of their respective counsel, financial advisors, accountants,
brokers, finders, and investment bankers, and any filing or other fees or
charges. Any sales or use tax assessed or imposed in connection with the
transfer of the Shares hereunder shall be borne by Seller.
10.4 Notices. Any notices, requests, demands or other communications
hereunder, shall be in writing and shall be deemed to have been duly given when
personally delivered, whether by hand, air courier or by facsimile confirmed by
receiving party or five (5) days after being mailed by United States registered
or certified mail, return receipt requested, postage prepaid, to the following
addresses:
If to the Seller: Rykoff-Sexton, Inc.
761 Terminal Street
Los Angeles, CA 90012
Attn: Mark Van Stekelenburg, President
and Chief Executive Officer
Fax: (213) 486-9760
with a copy to: Maslon Edelman Borman & Brand
3300 Norwest Center
Minneapolis, MN 55402
Attn: Neil I. Sell, Esq.
Fax: (612) 672-8397
If to the Buyer: Burns Philp Food, Inc.
222 Sutter Street, 9th Floor
San Francisco, CA 94108
Attn: Lorraine E. Vega, Esq.
Fax: (415) 296-5746
with a copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Attn: Mark J. Coleman, Esq.
Fax: (415) 983-1200
or to such other addresses as either party may specify in writing to the other.
10.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
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10.6 Headings. The headings of the sections and paragraphs hereunder
are for convenience and reference only and shall not be deemed a part of this
Agreement.
10.7 Entire Agreement. This Agreement, which includes the Schedules
and Exhibits hereto, sets forth the parties' final and entire agreement with
respect to its subject matter and supersedes any and all understandings and
agreements, and may not be contradicted, explained or supplemented by evidence
of any prior agreement, any contemporaneous oral agreement or any consistent
additional terms; provided, however, the Confidentiality Agreement, the
Disclaimer Agreement and the Agreement between the parties and Pillsbury
Madison & Sutro shall remain in full force and effect in accordance with their
respective terms.
10.8 Severability. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining provisions of this Agreement
or affecting the validity or enforceability of any provision of this Agreement
in any other jurisdiction. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that there shall be
added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.
10.9 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of California (without regard to principles of
conflicts of laws) applicable to contracts made and to be performed within such
state.
10.10 Convenience of Forums; Consent to Jurisdiction. The parties to
this Agreement, acting for themselves and for their respective successors and
assigns, without regard to domicile, citizenship or residence, hereby agree to
submit themselves to the nonexclusive jurisdiction of the courts of the State
of California located in San Francisco, the United States District Court for
the Northern District of California, in respect of any matter arising under
this Agreement. Service of process, notices and demands of such courts may be
made upon any party to this Agreement by personal service at any place where it
may be found or by giving notice to such party herein.
10.11 Resolution of Disputes.
(a) Negotiation Between Executives. The parties shall attempt in
good faith to resolve any dispute arising out of or relating to this Agreement,
or the breach, termination or validity thereof, by negotiations between
executives who have authority to settle the controversy. Any party may give
the other party written notice of any dispute not resolved in the normal course
of business. Within 20 days after delivery of
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such notice, executives of both parties shall meet at a mutually acceptable
time and place, and thereafter as often as they reasonably deem necessary, to
exchange relevant information and to attempt to resolve the dispute. If the
matter has not been resolved within 60 days of the disputing party's notice, or
if the parties fail to meet within 20 days, either party may initiate
arbitration of the controversy or claim as provided hereinafter.
If a negotiator intends to be accompanied at a meeting by an attorney,
the other negotiator shall be given at least three working days' notice of such
intention and may also be accompanied by an attorney. All negotiations
pursuant to this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence and state
rules of evidence.
(a) Arbitration. If a dispute arising out of or relating to this
Agreement, or the breach, termination or validity thereof, has not been
resolved by negotiation as provided herein, it shall be settled by arbitration
in accordance with the Center for Public Resources Institute for Dispute
Resolution Rules for Non-Administered Arbitration of Business Disputes. The
arbitration shall take place in San Francisco, California, shall be governed by
the United States Arbitration Act, 9 U.S.C. Section Section 1-16, and judgment
upon the award rendered by the arbitrator may be entered by any court having
jurisdiction thereof.
10.12 Waivers and Amendments. Each of Seller and Buyer may by written
notice to the other (a) extend the time for the performance of any of the
obligations or other actions of the other; (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement; (c)
waive performance of any of the covenants or obligations of the other created
under this Agreement; or (d) waive fulfillment of any of the conditions to its
own obligations under this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach, whether or not similar, and shall not
constitute a waiver by either party of any rights or remedies under this
Agreement or otherwise in law or equity. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.13 Further Acts. If, at any time after the Closing Date, any
further action by the Seller is necessary or appropriate to more effectively
convey, transfer and assign to Buyer the Shares or for aiding and assisting and
collecting and reducing to possession and exercising rights with respect
thereto, Seller shall promptly and at its own expense cause such action to be
taken.
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10.14 Disclosure in Schedules. Each schedule attached to this
Agreement shall be deemed to incorporate all information contained in all
other schedules to the extent applicable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
RYKOFF-SEXTON, INC.
By /s/ MARK VAN STEKELENBURG
Its President and CEO
TONE BROTHERS, INC.
By /s/ GARTH B. THOMAS
Its Vice President
BURNS PHILP FOOD INC.
By /s/ ADAM S. FERRIF
Its Vice President
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