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) February 24, 1995
(February 10, 1995)
Seneca Foods Corporation
(Exact name of registrant as specified in its charter)
New York 0-1989 16-0733425
(State or other jurisdiction of (Commission (I. R. S. Employer
incorporation or organization) File Number) Identification No.)
1162 Pittsford-Victor Road, Pittsford, New York 14534
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 716/385-9500
Not Applicable
Former name, former address and former fiscal year,
if changed since last report
Form 8-K
Seneca Foods Corporation
Item 2. Acquisition or Disposition of Assets
As previously announced on December 8, 1994, on February 10, 1995 Seneca
Foods Corporation ("Registrant") acquired certain assets of the Green Giant
division of The Pillsbury Company, a subsidiary of Grand Metropolitan
Incorporated (referred to as "Pillsbury"). Under an Alliance Agreement
concurrently executed by the Registrant, Pillsbury and Grand Metropolitian
Incorporated, Pillsbury will continue to be responsible for all of the
sales, marketing and customer service functions for the Green Giantr brand,
while the Registrant will handle vegetable processing and canning
operations. Pillsbury continues to own all the trademark rights to the
Green Giantr brand and its proprietary seed varieties. The assets acquired
include certain raw material and supplies inventory and six manufacturing
facilities located in the Midwest and Northwest. The purchase price was
based on the book value of the assets acquired. The purchase price of
$87,025,000 was funded by a subordinated note issued by the Registrant for
$73,025,000 and the balance is being settled on March 10, 1995 and will be
funded out of working capital. The purchase price is subject to adjustment
to reflect the book value of the assets transferred as of January 31, 1995.
. The agreements related to this acquisition are included with this
submission as exhibits.
In conjunction with this acquisition, the Registrant has entered into a
revolving credit facility for up to $150,000,000 from a syndicate of eleven
banks organized by Chase Mahattan Bank, to provide the borrowing capability
needed for the acquisition and the Registrant's existing business. In
addition, the Registrant issued two new senior debt notes. The first is a
$75,000,000 unsecured note issued to The Prudential Insurance Company of
America, with repayment due beginning in March 1998, a final maturity date
of February 2005, and an interest rate of 10.78%. The second is a
$50,000,000 unsecured note issued to the John Hancock Mutual Life Insurance
Company, with repayment due beginning March 2001, a final maturity of
January 2009, and an interest rate of 10.81%. The proceeds of these two
notes will be used to finance the following: 1)capital expenditures of
$50,000,000 related to the Alliance Agreement with Pillsbury; 2)repayment
of two notes due an insurance company, one repaid in July 1994 for
$13,800,000, the other repaid when the new debt was issued for $26,600,000;
3)three small acquisitions made over the last fifteen months totaling
$15,589,000; and 4)the balance, $19,011,000, for capital expenditures made
over the last three years.
The agreements related to the long-term debt above are not yet available.
The closing related to these documents was February 23. These agreements
will be filed with the Registrant's next periodic report.
Item 7. Financial Statements and Exhibits
Financial Statements
The Registrant believes that what was purchased does not constitute a
business for purposes of Article 11 of Regulation S-X. Pillsbury retained
the market distribution system, the sales force, the customer base, the
operating rights related to the proprietary seed, and the trade names. The
Registrant acquired some of the physical facilities (others were closed),
some of the employee base, and the production techniques. The Registrant
believes the Statement of Income for the Green Giant Division of Pillsbury
does not accurately reflect the income and operations of the acquired
assets, because it relects revenue and promotion amounts that relate to
sales by Pillsbury to its industrywide customers, whereas the Registant's
sales will be to the Green Giant Division. Accordingly, the Pro Forma
financial statements are not based on historical data, but the estimated
results based on the financial terms of the Alliance Agreement.
Pro Forma Financial Information
The pro forma financial information required by Article 11 of Regulation S-
X follows:
<TABLE>
Item 7(b)
SENECA FOODS CORPORATION AND
SUBSIDIARIES
PRO FORMA CONSOLIDATED
CONDENSED BALANCE SHEETS
OCTOBER 29, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
Consolidated Pro Forma Pro Forma
Historical Adjustments Balance
__________ ___________ _________
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Short Term Invest. $2,514 $2,514
Accounts Receivable, Net 35,274 10,854 (a) 46,128
Inventories 142,771 199,000 (a) 341,771
Off Season Reserve (16,181) (2,700)(a) (18,881)
Deferred Tax Asset , Net 1,194 1,194
Other Current Assets 2,425 (664) (b) 1,761
Total Current Assets 167,997 206,490 374,487
Prop., Plant and Eq., Net 79,877 73,025 (a) 152,902
Common Stock of Moog Inc. 6,483 6,483
Other Assets 191 191
________ ________ ________
$254,548 $279,515 $534,063
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $38,700 $80,355 (c) 119,055
Accounts Payable 42,970 20,000 (a) 62,970
Accrued Expenses 18,223 8,000 (a) 26,223
Income Taxes
Current Portion of Long Term Debt
and Capital Lease Obligation 6,233 (540) (a) 5,693
_______ _______ _______
Total Current Liabilities 106,126 107,815 213,941
Long Term Debt 50,576 169,570 (a) 220,146
Capital Lease Obligations 832 832
Deferred Income Taxes 10,741 1,000 11,741
Stockholder's Equity:
Preferred Stock 70 70
Common Stock 1,880 1,880
Net Unrealized Gain 255 255
Retained Earnings 84,068 1,130 (a) 85,198
_______ _______ ________
Stockholders' Equity 86,273 1,130 87,403
________ ________ ________
$254,548 $279,515 $534,063
======== ======== ========
</TABLE>
[FN]
The accompanying notes are an integral part of these unaudited
Pro Forma Condensed Financial Statements.
<TABLE>
SENECA FOODS CORPORATION, AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED OCTOBER 29, 1994
(Unaudited)
(In thousands, except share data)
<CAPTION>
Consolidated Pro Forma Pro Forma
Historical Adjustments Balance
__________ ___________ _________
<S> <C> <C> <C> <C>
Net Sales $88,827 $70,555 (a) $159,382
Costs and Expenses:
Cost of Product Sold 77,982 63,210 (a) 141,192
Selling and Administrative 8,240 (a) 8,240
Interest Expense 1,441 5,550 (a) 6,991
_______ _______ ________
Total Costs and Expenses 87,663 68,761 156,424
Income Before Income Taxes and 1,164 1,794 (a) 2,958
Extraordinary Item
Income Taxes 431 664 (a) 1,095
______ ______ ________
Earnings from Continued Operations
less Appl. Income Taxes $733 $1,130 $1,863
====== ====== ========
Net Earnings Applicable to Common Stock $727 $1,130 $1,857
====== ====== ========
Earnings from Continuing
Operations Per Share $0.26 $0.40 $0.66
====== ====== ========
Weighted Average Common Shares
Outstanding 2,796,555 2,796,555 2,796,555
========= ========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these unaudited
Pro Forma Condensed Financial Statements.
<TABLE>
SENECA FOODS CORPORATION, AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF INCOME
TWELVE MONTHS ENDED JULY 31, 1994
(Unaudited)
(In thousands, except share data)
<CAPTION>
Consolidated Pro Forma Pro Forma
Historical Adjustments Balance
__________ ___________ _________
<S> <C> <C> <C> <C>
Net Sales $290,185 $282,220 (a) $572,405
Costs and Expenses:
Cost of Product Sold 247,158 252,842 (a) 500,000
Selling and Administrative 28,824 (a) 28,824
Interest Expense 6,046 22,201 (a) 28,247
________ ________ ________
Total Costs and Expenses 282,028 275,043 557,071
Income Before Income Taxes and 8,157 7,178 (a) 15,335
Extraordinary Item
Income Taxes 2,816 2,478 (a) 5,294
________ ________ ________
Earnings from Continued Op. $5,341 $4,700 $10,041
======== ======== ========
Net Earnings- Common Stock $5,318 $4,700 $10,018
======== ======== ========
Earnings Per Share $1.84 $1.62 $3.47
======== ======== ========
Wtd Ave. Common Shares O/S 2,898,863 2,898,863 2,898,863
========= ========= =========
</TABLE>
[FN]
The accompanying notes are an integral part of these unaudited
Pro Forma Condensed Financial Statements.
SENECA FOODS CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
October 29, 1994 Statements (Last previous fiscal quarter):
(a) The Pro Forma adjustments referenced as (a) reflect the
addition of the assets and liabilities and related
income and expense accounts as if the Alliance
Agreement with of the Green Giant Division of
Pillsbury was in effect from the beginning of the
period.
(b) The Pro Forma adjustment referenced as (b) reflect the
the estimated federal and state income tax effect of
aforementioned acquisition.
(c) The Pro Forma adjustments referenced as (c) reflect the
source of the funds used by the aforementioned
purchases.
July 31, 1994 Statements (Last previous year end):
The Pro Forma adjustments reflect the addition of the
July 31, 1994 assets and liabilities and related
income and expense accounts as if the Alliance
Agreement with the Green Giant Division of
Pillsbury was in effect from the beginning of the
period.
Exhibits
The Asset Purchase Agreement, the Alliance Agreement, and the Secured
Nonrecourse Subordinated Promissory Note related to the transaction with
the Green Giant Division of Pillsbury are attached hereto as Exhibits 2(A),
2(B), 2(C), respectively. The Registrant has requested confidental
treatment of certain portions of the Alliance Agreement.
Item 8. Change in Fiscal Year
In conjunction with the acquisition of the Green Giant facilities,
the Registrant determined on February 10 that March 31 is a more
appropriate year end for the Registrant rather than the current year end of
July 31. The July year end falls in the middle of the pack season for
certain commodities. A transition Form 10-K will be filed within 90 days
of the Registrant's new fiscal year end (March 31).
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.
Seneca Foods Corporation
(Registrant)
/s/Kraig H. Kayser
February 24, 1995 Kraig H. Kayser
President and
Chief Executive Officer
Exhibit 2 (A) CONFORMED COPY
FIRST AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
by and between
SENECA FOODS CORPORATION
and
THE PILLSBURY COMPANY
December 8, 1994,
as amended February 10, 1995
FIRST AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this
"Agreement"), dated as of December 8, 1994, is made and entered
into by and between The Pillsbury Company, a Delaware corporation
("Seller"), and Seneca Foods Corporation, a New York corporation
("Buyer").
WHEREAS, Seller is engaged, among other
things, in the business of acquiring, processing, manufacturing,
packaging, marketing and selling certain categories of
shelf-stable vegetable products (the "Products") under its Green
Giantr brand (the "Business");
WHEREAS, Buyer is engaged, among other
things, in a business similar to the Business;
WHEREAS, Seller has particular expertise
in the marketing and selling functions of the Business and Buyer
has particular expertise in the acquiring, processing,
manufacturing and packaging of products similar to the Products;
WHEREAS, Seller has determined that it
would be beneficial to Seller and its stockholder for Seller to
exit the portions of the Business involving acquiring,
processing, manufacturing and packaging of the Products, while
retaining the marketing and selling functions of the Business;
WHEREAS, Buyer has determined that it
would be beneficial to Buyer and its stockholders for Buyer to
expand its capacities with respect to the portions of the
Business involving acquiring, processing, manufacturing and
packaging of the Products;
WHEREAS, Buyer and Seller have
determined that it would be mutually beneficial to effect a
transfer of the assets of Seller identified herein to Buyer, in
conjunction with the creation of an alliance of the parties for
the continuation of the Business in which Buyer would engage in
the acquisition, processing, manufacturing and packaging
functions of the Business and Seller would market and sell the
Products, in the manner contemplated in the Alliance Agreement
attached hereto as Exhibit A (the "Alliance Agreement"); and
WHEREAS, Seller desires to sell and
assign to Buyer, and Buyer desires to purchase and assume from
Seller, on the terms and subject to the conditions set forth in
this Agreement (including the entry into and performance of the
Alliance Agreement by such parties), certain identified assets
and liabilities of Seller that are currently used in conjunction
with or related to the Business.
NOW, THEREFORE, in consideration of the
mutual covenants, representations, warranties and agreements and
the conditions set forth in this Agreement, Buyer and Seller
hereby agree as follows:
ARTICLE I
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
1.01 Transfer of Assets. On the terms
and subject to the conditions set forth in this Agreement, Seller
shall, at the "Closing" (as defined in Section 3.01 hereof),
sell, transfer and assign to Buyer, and Buyer shall purchase and
acquire from Seller, all of Seller's right, title and interest,
as of the "Closing Date" (as defined in Section 3.01 hereof), in
and to the following assets of Seller, all of which are related
to, or used in conjunction with, the Business (collectively, the
"Assets"):
(a) The manufacturing plants of Seller,
and spray fields and other wastewater capacity rights
related thereto, all as identified in Schedule 1.01(a)
hereto (collectively, the "Plants"), including any
agricultural shops used in connection with the
operation of the Plants (the "Farm Shops"), and also
including, for this purpose only, Seller's Farm Shop
located at Ripon, Wisconsin;
(b) Fee title to the real property
owned by Seller on which the Plants are located and all
buildings (including the Plants) and other improvements
and all easements and appurtenances relating thereto,
as more fully described in Schedule 1.01(b) hereto;
(c) All of the equipment, machinery,
furniture, fixtures, furnishings, trucks, tractors and
other motor vehicles, hardware, tools, spare and
replacement parts and all other items of tangible
personal property owned by Seller and located at any of
the Plants and the Farm Shops (including, for this
purpose only, Seller's Farm Shops located at Ripon,
Wisconsin and Belvidere, Illinois), of which such
assets material to the operation of the Plants are
identified in Schedule 1.01(c) hereto, and all of the
"Transferred Equipment" (as defined in Section 10.01(b)
hereof);
(d) Seller's interest as lessee, to the
extent assignable, in all real property leases with
respect to real property on which any of the Plants is
located and all leasehold improvements thereon, of
which the leases material to the operation of the
Plants are identified in Schedule 1.01(d) hereto;
(e) Seller's interest, to the extent
assignable, in all personal property leases to which
Seller is a party with respect to personal property
which is located at any of the Plants (other than motor
vehicles which constitute part of any of Seller's
fleets of motor vehicles), of which the leases material
to the operation of the Plants are identified in
Schedule 1.01(e) hereto;
(f) All of Seller's inventories of (i)
supplies (including cans and other containers,
packaging materials, labels and ingredients used or
planned for use in the Business) and raw materials
(including vegetable seed (but subject to the
restrictions on use of proprietary seed as set forth in
the Alliance Agreement) located at the Plants and the
Closed Plants (as such term is defined Section 10.01),
but specifically excluding any of Seller's inventories
in existence on the Closing Date of peas, green beans,
corn, asparagus and dry beans and any other vegetable
raw materials), (ii) Seller's interest, to the extent
assignable, in all orders or contracts for the purchase
of such supplies and raw materials and (iii) fuels and
other miscellaneous items used in the maintenance or
operation of any of the Plants ("Non-Product Supplies")
(collectively, the "Inventory Assets"). The estimated
(as of the date hereof) aggregate amounts (in United
States funds) of the Inventory Assets are described in
Schedule 1.01(f) hereto. Seller agrees to provide
Buyer at the Closing with an updated estimate of
Schedule 1.01(f), revised to the Closing Date (such
updated Schedule 1.01(f) being referred to herein as
the "Inventory Schedule"). As to any Non-Product
Supplies located at the Closed Plants, Buyer and Seller
shall mutually agree upon on the disposition thereof;
(g) The contracts and agreements of
Seller that are identified or described in Schedule
1.01(g) hereto, to the extent such contracts and
agreements are assignable;
(h) All prepaid expenses and deposits
made by Seller with respect to the Assets, which
expenses and deposits are described in Schedule 1.01(h)
hereto;
(i) all personal property relating to
Seller's corn seed treating and distribution center and
Seller's knife center located at Le Sueur, Minnesota;
(j) The right to use the telephone
numbers currently being used at the offices or
facilities located at the Plants (but specifically
excluding the right to use any "800" numbers relating
to Seller customer service or emergency response
matters);
(k) All permits, licenses and other
governmental approvals held by Seller with respect to
the Assets, to the extent they are assignable; and
(l) Copies or originals of all of
Seller's books and records relating to its ownership,
operation or maintenance of the Assets (but
specifically excluding all books and records relating
to Seller's operations of the Business, including the
assets referred to in Section 1.02(f) hereof).
1.02 Excluded Assets. Notwithstanding
the terms of Section 1.01, the following assets shall be retained
by Seller and shall not be sold, transferred or assigned to Buyer
in connection with the purchase of the Assets:
(a) All assets of Seller associated
with the Business and not specifically transferred to
Buyer hereby including, without limitation:
(i) all assets relating to Seller's
agricultural research and development centers and
associated agronomic services operations located
at Seller's Technical Centers in Minneapolis and
Le Sueur, Minnesota; and
(ii) all inventories of finished goods
and work-in-process (including frozen bulk
vegetables) for Products located at any of the
Plants on the Closing Date;
(b) All corporate certificates of
authority and corporate minute books and the corporate
stock record or register of Seller, and all bank
accounts of Seller;
(c) All documents or other tangible
materials embodying technology or intellectual property
rights owned by, licensed to or otherwise controlled by
Seller and used in connection with the Business,
wherever located (including, without limitation, any
such properties located at any of the Plants);
(d) Except as provided in Section
10.04(b), all rights in patents, patent applications,
copyrights, trade secrets or other intellectual
property rights (other than those described in Section
1.02(e) hereof) owned by, licensed to or otherwise
controlled by Seller or used or useful in, developed
for use in or necessary to the conduct of the Business;
(e) All of Seller's trademarks, service
marks, trade names, brand names, corporate names and
logos, including without limitation, the names and
logos listed on Schedule 1.02(e) hereof, or any rights
associated with such names and logos and all rights to
use any of such names or logos in all jurisdictions in
which Seller either currently uses any of such names or
logos or has any right to use any of such names or
logos, except as provided in Section 10.04(a) hereof;
(f) All of Seller's books, records and
other documents and information relating to the
Business, including, without limitation, all customer,
prospect, dealer and distributor lists, sales
literature, inventory records, purchase orders and
invoices, sales orders and sales order log books,
customer information, commission records,
correspondence, employee personnel records, product
data, price lists, product demonstrations, quotes and
bids and all product catalogs and brochures; provided
that, Seller shall provide to Buyer on the Closing Date
copies of Seller's inventory records and purchase
orders (under which Seller is the purchaser) relating
to the Business;
(g) All accounts or notes receivable
owing to Seller that relate to the Business;
(h) All cash and cash equivalents of
Seller with respect to the Business;
(i) Any rights to recovery by Seller
arising out of litigation with respect to the Business
that relates to activities occurring prior to the
Closing Date;
(j) All insurance policies of Seller
obtained in connection with the Business and all rights
of Seller (including rights to receive dividends) under
or arising out of such insurance policies;
(k) Rights to receive refunds with
respect to any and all taxes paid by Seller in
connection with the Business, including interest
payable with respect thereto, for Business activity
conducted prior to the Closing Date;
(l) Such licenses, permits,
governmental approvals or other certificates of
authority relating to the Assets which, by their terms,
are nonassignable, and which, to Seller's knowledge,
are described on Schedule 1.02(l) hereto;
(m) Seller's interests in any real
property leases, personal property leases, orders,
contracts or agreements which, by the terms thereof,
are not assignable, and which, to Seller's knowledge,
are described on Schedule 1.02(m) hereto; and
(n) Goodwill (including all goodwill
associated with and symbolized by the name or names and
logos identified in subsection (e) above as used as a
trademark or service mark and all goodwill associated
with and symbolized by any other trademark or service
mark, trade name, logo or corporate name used in the
conduct of the Business as now conducted) and all
related intangibles which Seller uses in the conduct of
the Business.
1.03 Assumption of Liabilities. Buyer
shall assume, pay, perform in accordance with their terms or
otherwise satisfy, as of the Closing Date, Seller's obligations
to be performed or satisfied on or after the Closing Date under
the leases, agreements, contracts, arrangements and licenses
assigned to Buyer pursuant to Section 1.01 hereof, and all
payments of taxes and installments of special assessments with
regard to the Real Estate Assets (which payments and assessments
shall be prorated for calendar year 1995 effective as of the
Closing Date); except to the extent that any such obligations
constitute payments in arrears for benefits received in full by
Seller prior to the Closing Date.
1.04 Excluded Liabilities. Other than
as set forth above in Section 1.03, Seller shall retain, and
Buyer shall not assume, any liabilities, obligations or
undertakings of Seller of any nature whatsoever, whether accrued,
absolute, fixed or contingent, known or unknown due or to become
due, unliquidated or otherwise (collectively, "Liabilities").
Seller shall be responsible for all of the Liabilities of Seller
not assumed by Buyer pursuant to Section 1.03 hereof.
1.05 Assumption of Contractual Rights
and Obligations Related Thereto. As of the Closing Date, Buyer
shall assume the rights and obligations (to the extent the
obligations are to be performed following the Closing Date) of
Seller in, to and under the real and personal property leases and
the contracts being assigned and assumed pursuant to Section 1.01
hereof (collectively, the "Transferred Rights, Obligations and
Agreements"); except to the extent that any such obligations
constitute payments in arrears for benefits received in full by
Seller prior to the Closing Date. Buyer shall use commercially
reasonable efforts to assume and perform all of the obligations
thereunder. To the extent that the assignment hereunder of any
of the Transferred Rights, Obligations and Agreements shall
require the consent of any other party (or in the event that any
of the same shall be nonassignable), neither this Agreement nor
any action taken pursuant to its provisions shall constitute an
assignment or an agreement to assign if such assignment or
attempted assignment would constitute a breach thereof or result
in the loss or diminution thereof; provided, however, that in
each such case, Buyer and Seller shall use commercially
reasonable efforts to obtain the consent of such other party to
an assignment to Buyer. If such consent is not obtained, Seller
shall cooperate with Buyer in any reasonable arrangement designed
to provide Buyer with the benefits under any such Transferred
Rights, Obligations and Agreements, as the case may be, including
appointing Buyer to act as its agent to perform all of Seller's
obligations under such Transferred Rights, Obligations and
Agreements and collecting and promptly remitting to Buyer all
compensation payable pursuant to those Transferred Rights,
Obligations and Agreements and enforcing, for the account and
benefit of Buyer, any and all rights of Seller against any other
person arising out of the breach or cancellation of such
Transferred Rights, Obligations and Agreements by such other
person or otherwise (any and all of which arrangements shall
constitute, as between the parties hereto, a deemed assignment or
transfer); provided that, to the extent that Buyer requires
Seller to undertake any services or take any action in
furtherance of the performance of such Transferred Rights,
Obligations and Agreements, any such services or actions shall be
the subject of a separate agreement that the parties shall, in
good faith, negotiate as promptly as possible and that shall be
mutually acceptable to the parties. The "Purchase Price" (as
defined in Section 2.01 hereof) shall not be reduced by reason of
the inability to transfer (by assignment, subcontract or
otherwise) to Buyer any of the Transferred Rights, Obligations
and Agreements on or after the Closing Date. Each party shall be
responsible for all of its internal costs and expenses incurred
by it in connection with the actions required by it under this
Section 1.05; Seller shall not be obligated to incur any
out-of-pocket expenses in connection therewith unless Buyer
agrees to reimburse Seller for such expenses; and Buyer shall not
be required to incur any out-of-pocket expenses to secure the
consent of any other party to any assignment hereunder. Buyer
shall bear the risk, from and after the Closing Date, of breach
or nonperformance of, and shall indemnify, defend and hold
harmless Seller in full from and after the Closing Date with
respect to, any loss, damage, liability or expense (including,
without limitation, any reasonable attorney's fees and expenses)
that Seller may suffer as a result of any failure to perform any
of the Transferred Rights, Obligations and Agreements after the
Closing Date; provided that, Buyer shall not be required to
indemnify, defend or hold harmless Seller from any claim that the
actions of the parties hereunder violated any prohibition against
the transfer of any of the Transferred Rights, Obligations and
Agreements or violated any right of a third party to prevent any
such transfer by withholding its consent.
1.06 Certain Leases. Seller hereby
agrees to negotiate in good faith with Buyer and enter into lease
agreements with respect to Seller's Farm Shop located at
Belvidere, Illinois, Seller's corn seed treating and distribution
center located at Le Sueur, Minnesota, and Seller's knife center
located at Le Sueur, Minnesota, which lease agreements shall be
consistent with the business purpose of the transactions
contemplated by this Agreement.
ARTICLE II
PURCHASE PRICE
2.01 Amount. The total purchase price
for the Assets (the "Purchase Price") shall be equal to the book
value, as of the Closing Date, of the Assets, as determined from
the "Final Asset Valuation Sheet" (as defined in Section 2.03
hereof).
2.02 Manner of Payment.
(a) The portion of the Purchase Price
relating to the Assets identified in Section 1.01
hereof (other than in subsection (f) of Section 1.01)
shall be paid for by delivery to Seller, no later than
two business days following the date on which the final
determination of the Final Asset Valuation Sheet is
made (the "Final Valuation Date"), of a secured,
subordinated promissory note of Buyer substantially in
the form of Exhibit B hereto (the "Note"). The Note
shall have a principal amount equal to the aggregate
value (denominated in United States funds) of such
Assets, as determined from the Final Asset Valuation
Sheet (such principal amount being referred to herein
as the "Final Amount"), a simple interest rate of 8%
per annum and a term of 15 years, shall be secured by
the Assets and shall have such other terms and
conditions as are set forth in Exhibit B hereto. At
the Closing, Buyer shall deliver to Seller the Note
having a principal amount of Seventy-Two Million United
States Dollars ($72,000,000 U.S.), which amount (the
"Estimated Amount") constitutes the parties' good faith
estimate of the Final Amount as of the date hereof.
The Note shall, by its terms, be amended by Buyer
solely to replace the Estimated Amount with the Final
Amount no later than two business days following the
Final Valuation Date.
(b) The portion of the Purchase Price
relating to the Assets identified in subsection (f) of
Section 1.01 hereof (collectively, the "Inventory
Assets") shall be paid for as follows:
(i) on or before March 10, 1995, Buyer
shall deliver to Seller, by wire transfer (in
accordance with appropriate wire transfer
instructions previously delivered by Seller to
Buyer), an amount equal to the aggregate book
value (denominated in United States funds) of such
Assets in existence on, and as of, the Closing
Date, and for purposes of calculating such
aggregate book value of the Assets, the
Non-Product Supplies from the Plants and the
Closed Plants shall be written down by Seller and
have an aggregate book value of zero on the
Closing Date. Such amount (the "Interim Inventory
Amount") shall be mutually agreed to by the
parties no later than two business days prior to
the Closing Date; and
(ii) within five business days after the
Final Valuation Date:
(A) if the amount reflected
on the Final Asset Valuation Sheet for
the Inventory Assets exceeds the Interim
Inventory Amount, then Buyer shall pay
to Seller by wire transfer (in
accordance with appropriate wire
transfer instructions previously
delivered by Seller to Buyer) the amount
of such excess (in United States funds),
and
(B) if the Interim Inventory
Amount exceeds the amount reflected on
the Final Asset Valuation Sheet for the
Inventory Assets, then Seller shall pay
to Buyer by wire transfer (in accordance
with appropriate wire transfer
instructions previously delivered by
Buyer to Seller) the amount of such
excess (in United States funds).
2.03 Closing Date Valuation. The value
of the Assets, and the Purchase Price, shall be finally
determined in accordance with this Section 2.03.
(a) Within 18 months following the
Closing Date, Seller shall cause to be delivered to
Buyer (i) an unaudited, partial balance sheet of the
Business reflecting only the value of the Assets
(specifically including all of the Transferred
Equipment) immediately prior to the Closing (the
"Unaudited Asset Valuation Sheet"), (ii) a copy of the
work papers used in the preparation of the Unaudited
Asset Valuation Sheet and (iii) an updated Inventory
Schedule, if necessary, correcting any errors in the
Inventory Schedule as delivered on the Closing Date,
which conforms in aggregate amount to the Unaudited
Asset Valuation Sheet line item for inventory. Seller
shall make the persons in charge of the preparation of
the Unaudited Asset Valuation Sheet available for
reasonable inquiry by Buyer. If Buyer fails timely to
notify Seller of its disagreement with any values set
forth in the Unaudited Asset Valuation Sheet in
accordance with the first sentence of Section 2.03(b),
the Unaudited Asset Valuation Sheet shall be final and
binding on Buyer and Seller, and shall be deemed the
"Final Asset Valuation Sheet," for purposes of this
Section 2.03.
(b) Buyer may notify Seller in writing
within 20 business days following receipt of the
Unaudited Asset Valuation Sheet that it does not agree
with any values set forth thereon, in which case Buyer
and Seller will use good faith efforts during the
20-day period following the date of such written notice
to resolve any differences they may have as to the
Unaudited Asset Valuation Sheet. Such written notice
will identify with specificity the calculations with
which Buyer disagrees. If Buyer and Seller cannot
reach agreement during that 20-day period, their
disagreements shall be promptly submitted to an
independent accounting firm as shall be mutually
acceptable to the parties ("Auditor"), which shall
conduct such additional review as is necessary to
resolve the specific disagreements referred to it. The
review of Auditor will be restricted as to scope to
address only those specific disagreements referred to
it by Seller and Buyer. The final form of the Closing
Date Asset valuation sheet (the "Final Asset Valuation
Sheet") shall be determined by Auditor as promptly as
practicable following its selection, shall be confirmed
by Auditor in writing to, and shall be final and
binding on, Buyer and Seller for purposes of this
Section 2.03.
(c) The fees of and expenses incurred
by Auditor shall be shared equally by Buyer and Seller.
(d) All partial balance sheets prepared
in accordance with this Section 2.03 shall be prepared
in accordance with generally accepted accounting
principles used in the United States, as consistently
applied by Seller, and shall be prepared in a manner
consistent with Seller's past practice in connection
with the preparation of financial statements of the
Business, except that such partial balance sheets do
not and shall not include footnotes as may be required
by such accounting principles.
2.04 Transfer Taxes and Other Closing
Costs. Buyer shall pay any and all sales, use, transfer, deed or
excise taxes that shall become due and payable as a result of the
sale of the Assets as contemplated under Section 1.01, including
any sales tax assessed by governmental authorities after filing
of the applicable sales tax return or returns. Buyer shall file
all sales or use tax returns and pay to the appropriate taxing
authority all such tax as is required by law to be paid in
connection herewith. In addition, Buyer shall pay any and all
recording fees and other closing costs involved with the transfer
of the "Owned Parcels" (as defined in Section 4.06(a) hereof),
but excluding any costs and expenses of Seller incurred in
connection with the transactions contemplated hereby. Seller
shall be responsible for and pay (i) all costs and expenses
associated with making filings under the Uniform Commercial Code
(the "UCC") and other filings with governmental authorities in
connection with perfecting its security interest in the Assets
pursuant to the Security Agreement, (ii) all taxes related to the
filing of mortgages with respect to the Assets, and (iii) all
recording fees and closing costs incurred in connection with
removing liens and encumbrances that are not Permitted
Encumbrances.
2.05 Allocation of Purchase Price.
Buyer and Seller shall mutually agree upon the allocation of the
Purchase Price among the Assets as of the Closing Date, after
taking into account the applicable Treasury Regulations of the
United States Internal Revenue Service and the fair market value
of the Assets. Seller and Buyer shall file all federal, state,
local and foreign returns and tax information on a basis that is
consistent with such allocations and shall execute such other
documentation as may be reasonably necessary with respect to such
allocations.
In addition to the foregoing, Seller and
Buyer shall pro rate, as of the Closing Date, all costs of
operating the Assets (including real estate taxes for the Owned
Parcels and rents for the properties subject to the Leases) as
soon as reasonably practicable after the Closing, and shall
promptly thereafter settle any amounts due between such parties.
ARTICLE III
CLOSING
3.01 Closing. The closing of the
transactions contemplated by this Agreement (the "Closing") will
take place at the offices of Dorsey & Whitney, 220 South Sixth
Street, Minneapolis, Minnesota at 8:30 a.m., Minneapolis time, on
February 10, 1995, or at such other place and on such other date
as is mutually agreeable to Buyer and Seller. For all purposes
hereof, the Closing shall be deemed to have occurred on February
1, 1995, or such other date as is mutually agreed by the parties
(which date is referred to herein as the "Closing Date"), and the
Closing shall be deemed effective as of 12:01 a.m., Minneapolis
time, on the Closing Date.
3.02 General Procedure. At the Closing,
each party shall deliver to the party entitled to receipt thereof
the documents required to be delivered pursuant to Article VIII
hereof and such other documents, instruments and materials (or
complete and accurate copies thereof, where appropriate) as may
be reasonably required in order to effectuate the intent and
provisions of this Agreement, and all such documents, instruments
and materials shall be satisfactory in form and substance to
counsel for the receiving party. The conveyance, transfer,
assignment and delivery of the Assets to Buyer shall be effected
by Seller's execution and delivery of a bill of sale,
substantially in the form attached hereto as Exhibit C (the "Bill
of Sale"), the assignment and assumption of the designated
Liabilities of Seller to Buyer shall be effected by the parties'
execution and delivery of an assignment and assumption agreement,
substantially in the form attached hereto as Exhibit D (the
"Assignment and Assumption"), the warranty deeds to the Owned
Parcels referred to in Section 8.01(j)(i) and such other
instruments of conveyance, transfer, assignment and delivery as
Buyer or Seller shall reasonably request to cause Seller to
transfer, convey, assign and deliver the Assets and assumed
Liabilities to Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to
Buyer that, except as set forth in the Disclosure Schedule
delivered by Seller to Buyer on the date hereof (the "Disclosure
Schedule") (which Disclosure Schedule sets forth the exceptions
to the representations and warranties contained in this Article
IV and which shall constitute disclosure of all items described
for all purposes of this Agreement):
4.01 Incorporation and Corporate Power.
Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to enter into this
Agreement and perform its obligations hereunder.
4.02 Subsidiaries. The Assets do not
include any stock, partnership interest, joint venture interest
or any other security or ownership interest issued by any other
corporation, organization or entity.
4.03 Execution, Delivery; Valid and
Binding Agreement. The execution, delivery and performance of
this Agreement by Seller and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
requisite corporate action of Seller, and no other corporate
proceedings on its part are necessary to authorize the execution,
delivery or performance of this Agreement. This Agreement has
been duly executed and delivered by Seller and, assuming that
this Agreement is the valid and binding agreement of Buyer,
constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms.
4.04 No Breach. The execution, delivery
and performance of this Agreement by Seller and the consummation
of the transactions contemplated hereby do not conflict with or
result in any breach of any of the provisions of, or constitute a
default under, result in a violation of, result in the creation
of a right of termination or acceleration or any lien, security
interest or charge or require any authorization, consent,
approval, exemption or other action by or notice to any court or
other governmental body, under the provisions of the Certificate
of Incorporation or Bylaws of Seller or any indenture, mortgage,
lease, loan agreement or other agreement or instrument by which
Seller or the Assets are bound or affected (other than consents
required under Section 8.01(c) hereof, which Seller undertakes to
use commercially reasonable efforts to obtain prior to the
Closing Date), or any law, statute, rule or regulation or order,
judgment or decree to which Seller or the Assets are subject; in
each case, and in the aggregate, in which the breach, default,
violation, right of termination or acceleration or any other
action or event described herein would have a material adverse
effect on the ability of Buyer to operate the Assets (taken as a
whole) immediately after the Closing in substantially the same
manner as they were operated by Seller immediately prior to the
Closing.
4.05 Governmental Authorities; Consents.
Except for the applicable requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), Seller is not
required to submit any notice, report or other filing with any
governmental authority in connection with the execution or
delivery by it of this Agreement or the consummation of the
transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority is
required to be obtained by Seller in connection with its
execution, delivery and performance of this Agreement or the
transactions contemplated hereby.
4.06 Title to Properties.
(a) The real property owned by Seller
constituting part of the Assets (the "Owned Parcels")
and the real property demised by the leases described
under the caption referencing this Section 4.06 in the
Disclosure Schedule (the "Leases") together constitute
all of the real property owned, used or occupied by
Seller on which the Plants are located (collectively,
the "Real Property"). To the extent that Seller has in
its possession any surveys with respect to the Real
Property, Seller shall provide copies thereof to Buyer.
The Real Property has access, sufficient for the
conduct of the Business as now conducted at any given
location, to public roads and to all utilities,
including electricity, sanitary and storm sewer,
potable water, natural gas and other utilities, used in
the operation of the Business at such location.
(b) The Leases are in full force and
effect, and Seller holds a valid and existing leasehold
interest under each of the Leases for the term set
forth under such caption in the Disclosure Schedule.
Seller will deliver to Buyer, within 15 business days
after the date hereof, complete and accurate copies of
each of the Leases in Seller's possession, and none of
the Leases has been modified in any material respect,
except to the extent that such modifications are
disclosed by the copies delivered to Buyer. Seller has
not received written notice of any default of any
material provision of any Lease.
(c) Seller owns good and marketable
title to the Assets, including each of the Owned
Parcels, free and clear of all liens and encumbrances,
except for (i) liens for current taxes not yet due and
payable, (ii) liens set forth under the caption
referencing this Section 4.06 in the Disclosure
Schedule, (iii) lessors' interests in the real property
leased under the Leases (and the personal property
subject to leases constituting part of the Assets),
(iv) liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to
carriers, warehousemen, laborers and materialmen, (v)
liens in respect of pledges or deposits under workers'
compensation laws and (vi) easements and other
encumbrances which do not materially adversely affect
the manner in which the Plants are operated on the date
hereof (clauses (i) through (vi) being referred to
herein, collectively, as the "Permitted Encumbrances").
(d) Except as otherwise described in
the Disclosure Schedule under the caption referencing
this Section 4.06, to Seller's knowledge, there are no
defects in the buildings, machinery and equipment
located at any of the Plants, that, taken as a whole at
any Plant, would, if not promptly corrected, materially
adversely affect the operation of such Plant. Seller
owns, or leases under valid leases, all buildings,
machinery and equipment located at each of the Plants
and all of the Transferred Equipment.
(e) Seller has not received any written
notice of any violation of any applicable zoning
ordinance or other law, regulation or requirement
relating to the operation of any of the Plants or the
Real Property, and Seller has not received any notice
of any such violation, or the existence of any
condemnation proceeding with respect to any of the Real
Property, and to Seller's knowledge, no such violations
exist, except, in each case, with respect to violations
or proceedings the known potential consequences of
which do not or would not be reasonably deemed to have
a material adverse effect on the ability of Buyer to
operate the Plants at such locations immediately after
the Closing in substantially the same manner as they
were operated by Seller immediately prior to the
Closing.
(f) There are no liens for taxes upon
any of the Assets, except liens for taxes not yet due.
(g) Seller has not received any written
notice of any material improvements made or
contemplated to be made by any public or private
authority, the costs of which are to be assessed as
special taxes or charges against any of the Real
Property, and there are no present assessments of a
material amount with respect to the Real Property.
4.07 Inventory. Seller's inventory of
supplies and raw materials constituting the Inventory Assets
consists of items of a quality and quantity usable in the
ordinary course of the Business. As of the Closing Date, the
values at which such Inventory Assets will be reflected in
Schedule 1.01(f) hereto will be in accordance with United States
generally accepted accounting principles.
4.08 Contracts and Commitments.
(a) The Disclosure Schedule, under the
caption referencing this Section 4.08, lists the
following agreements to which Seller is a party, which
are currently in effect, and which relate to the
operation of the Plants or the other Assets: (i) any
contract or group of related contracts with the same
party for the purchase of products (other than
vegetables) or services relating to the operations or
maintenance of the Plants or the other Assets under
which the undelivered balance of such products or
services exceeds $500,000; (ii) any contract or
commitment, or group of related contracts or
commitments, for capital expenditures at any of the
Plants for an amount in excess of $500,000; (iii) any
contract or commitment, or group of related contracts
or commitments, with one or more growers of vegetables
to be processed at any of the Plants after the Closing
Date; (iv) any collective bargaining agreement or
contract with any labor union covering Seller's
employees at any of the Plants; (v) any written
employment contracts with any of Seller's employees at
any of the Plants; (vi) any agreement or indenture
relating to mortgaging, pledging or otherwise placing a
lien on any of the Assets; and (vii) any other material
lease or material agreement to which Seller is a party
and which relates to or affects the Plants or the other
Assets.
(b) Seller has performed, in all
material respects, all obligations required to be
performed by it in connection with the contracts,
agreements, indentures, leases or commitments disclosed
in the Disclosure Schedule under the caption
referencing this Section 4.08 and is not in receipt of
any written claim of material default under any such
contract or commitment.
(c) Prior to the date of this
Agreement, Buyer has been supplied with a true and
correct copy of each contract, agreement, indenture,
lease or commitment referred to under the caption
referencing this Section 4.08 in the Disclosure
Schedule, together with all amendments thereto.
4.09 Litigation. Except as set
forth in the Disclosure Schedule under the caption referencing
this Section 4.09, there are no actions, suits, proceedings,
orders or investigations pending or, to the best knowledge of
Seller, threatened against Seller with respect to the Assets, at
law or in equity, which, if determined adversely to Seller's
interests, would have a material adverse effect on (i) Seller's
ability to transfer the Assets, taken as a whole, to Buyer, or
(ii) Buyer's ability to operate the Assets, taken as a whole,
immediately after the Closing in substantially the same manner as
they were operated by Seller immediately prior to the Closing.
4.10 Employees. Except as set forth in
the Disclosure Schedule under the caption referencing this
Section 4.10 and only with respect to employees of Seller who
perform functions in connection with the operation of the Plants
and the other Assets:
(a) Seller has complied in all material
respects with all federal, state and local laws, rules,
guidelines and regulations (collectively, and for purposes
of this Section 4.10(a) only, "laws") which regulate
employment of employees and the terms and conditions of
employment, including without limitation, laws regulating or
prohibiting discrimination on account of age, sex, race,
religion, national origin or handicap or disability; civil
rights and employment opportunity of employees and
applicants for employment; wages, hours and overtime
compensation; occupational safety and health; employment and
discrimination with respect to persons with military
service; and payment of social security and other taxes
related to employment. Seller has complied in all material
respects with the Immigration Reform and Control Act of
1986. There are no pending suits, claims or other
proceedings alleging violation of the laws by Seller with
respect to employees at any of the Plants; and there are no
material workers' compensation claims pending against Seller
with respect to employees at any of the Plants which claims
are not covered by insurance.
(b) Seller has complied in all material
respects with all federal and state laws, rules and
regulations with respect to labor relations, union
organizing activities and collective bargaining rights of
employees. To Seller's knowledge, none of the employees of
the Plants is represented by a union or other collective
bargaining agent, and there is no pending request for
recognition of a collective bargaining agent or any pending
union organizing drive. There are no pending claims against
Seller alleging violations of any federal or state laws
respecting labor relations and collective bargaining.
(c) Seller has no written contracts of
employment with any employee working at any of the Plants.
Seller has not issued or distributed any employee handbook
or manual for any Plant which, to Seller's knowledge, is
reasonably likely to be deemed materially inconsistent with
employment at-will.
4.11 Insurance. The Disclosure
Schedule, under the caption referencing this Section 4.11, lists
and briefly describes each insurance policy maintained by Seller
with respect to the Assets and operations of the Business and
sets forth the date of expiration of each such insurance policy.
All of such insurance policies are in full force and effect and
are issued by insurers of recognized responsibility. Seller has
not received any written notice that it is in material default
with respect to its obligations under any of any insurance
policies relating to the Assets, taken as a whole.
4.12 Compliance with Laws; Permits.
(a) Seller has complied in all material
respects with all applicable federal, state and local
laws, ordinances, rules, regulations and other
requirements pertaining to occupational safety and
health and building and zoning codes, which materially
affect the operation of the Assets, taken as a whole,
and no claims have been filed against Seller alleging a
material violation of any such laws, regulations or
other requirements. Seller has not received any
written notice of any action, pending or threatened, to
change the zoning or building ordinances or any other
laws, rules, regulations or ordinances that, if
successful, would materially adversely affect the
Assets, taken as a whole. Seller has not received any
written notice of any violations on the part of Seller
of any zoning or building ordinances with respect to
the Plants. Seller has complied in all material
respects with the Federal Food, Drug and Cosmetic Act
and all applicable state and local laws and regulations
with respect to the wholesomeness and fitness for human
consumption of food.
(b) Seller has, in full force and
effect, all material licenses, permits and
certificates, from federal, state and local authorities
(including, without limitation, federal and state
agencies regulating occupational health and safety)
necessary to conduct the Business at the Plants and own
and operate the Assets (other than "Environmental
Permits," as such term is defined in Section 4.13
hereof) (collectively, the "Permits") as presently
conducted or operated.
4.13 Environmental Matters.
(a) Seller's operation of the Plants
and the present condition of the Real Property are in
material compliance with all applicable federal, state
and local laws, rules, regulations, ordinances, codes,
orders, decrees and judgments relating to pollution,
contamination, hazardous substance remediation or
handling, or protection of the environment, including,
without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act,
the Clean Water Act and the Clean Air Act
(collectively, and as in effect on the date hereof,
"Environmental Laws").
(b) Seller has obtained and maintained
all environmental permits, licenses, certificates of
compliance, approvals and other authorizations
necessary to conduct the Business at the Plants and own
or operate the Real Property (collectively, the
"Environmental Permits"). Seller has conducted the
Business at the Plants in compliance in all material
respects with the terms of the Environmental Permits,
taken as a whole with respect to each Plant. Seller
has filed all reports and notifications with respect to
the Plants and the Real Property required to be filed
under and pursuant to all material requirements of
Environmental Laws.
(c) Except as disclosed on the
Disclosure Schedule under the caption referencing this
Section 4.13, Seller has not: (i) generated, treated,
contained, handled, located, used, manufactured,
processed, buried, incinerated, deposited, disposed of,
stored, or released on or under the Real Property, any
"Hazardous Materials" (as hereinafter defined), (ii)
utilized on the Real Property any asbestos,
polychlorinated biphenyls ("PCBs") or pesticides or
(iii) constructed, installed or placed aboveground or
underground Hazardous Materials storage tanks on or
under the Real Property, or removed or filled any such
tanks. To Seller's knowledge: (i) no Hazardous
Materials have been generated, treated, contained,
handled, located, used, manufactured, processed,
buried, incinerated, deposited, disposed of, stored,
originated from or released on or under the Real
Property by Seller, (ii) the Real Property and any
improvements thereon contain no asbestos, radon at
levels materially above natural background, PCBs or
pesticides, and (iii) no aboveground or underground
Hazardous Materials storage tanks are located on or
under the Real Property, or have been located on or
under the Real Property and then subsequently been
removed or filled. If any such storage tanks exist on
or under the Real Property, such storage tanks have
been duly registered, if required, with all appropriate
governmental entities and are otherwise in material
compliance with all applicable Environmental Laws.
(d) Seller has not received written
notice alleging in any manner that Seller is, or might
potentially be, responsible for any past release of
Hazardous Materials on or under the Real Property.
(e) To the knowledge of Seller, the
Real Property is not listed on the United States
Environmental Protection Agency National Priorities
List of Hazardous Waste Sites, or any other similar
list of hazardous waste sites maintained by any similar
state agency.
(f) No part of the Real Property has
been used by Seller as a landfill, dump or other
disposal, storage, transfer, handling or treatment area
for Hazardous Materials, except as disclosed on the
Disclosure Schedule under the caption referencing this
Section 4.13.
(g) Seller has not received any written
notice of the existence of any lien against Seller or
the Real Property in favor of any governmental entity
for: (i) any liability or imposition of costs under or
violation of any applicable Environmental Law with
respect to the Real Property, or (ii) any release of
Hazardous Materials on or under the Real Property.
(h) As used in this Section 4.13,
"Hazardous Materials" shall mean any dangerous, toxic
or hazardous pollutant, contaminant, chemical, waste,
material or substance as defined in or governed by any
Environmental Law.
4.14 Brokerage. No third party shall be
entitled to receive any brokerage commissions, finder's fees,
fees for financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of
Seller.
4.15 Certain Taxes. Seller has filed
all returns of federal, state, county and local taxes and has
paid all such taxes and interest and penalties with respect to
taxes, if any, which are owed by it and the non-payment of which
would permit the taxing entity to assert under applicable law a
claim against Buyer by reason of the transactions contemplated
under this Agreement and the Alliance Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to
Seller that:
5.01 Incorporation and Corporate Power.
Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of New York, and has
the requisite corporate power and authority to enter into this
Agreement and perform its obligations hereunder.
5.02 Execution, Delivery; Valid and
Binding Agreement. The execution, delivery and performance of
this Agreement by Buyer and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
requisite corporate action of Buyer, and no other corporate
proceedings on its part are necessary to authorize the execution,
delivery or performance of this Agreement. This Agreement has
been duly executed and delivered by Buyer and, assuming that this
Agreement is the valid and binding agreement of Seller,
constitutes the valid and binding obligation of Buyer,
enforceable in accordance with its terms.
5.03 No Breach. The execution, delivery
and performance of this Agreement by Buyer and the consummation
by Buyer of the transactions contemplated hereby do not conflict
with or result in any breach of any of the provisions of, or
constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any
lien, security interest, charge or encumbrance upon any assets of
Buyer, or require any authorization, consent, approval, exemption
or other action by or notice to any court or other governmental
body, under the provisions of the Certificate of Incorporation or
Bylaws of Buyer or any indenture, mortgage, lease, loan agreement
or other agreement or instrument by which Buyer is bound or
affected, or any law, statute, rule or regulation or order,
judgment or decree to which Buyer is subject; in each case, in
which the breach, default, violation, right of termination or
acceleration or any other action or event described herein would
have a material adverse effect on the ability of Buyer to operate
the Assets (taken as a whole) immediately after the Closing in
substantially the same manner as they were operated by Seller
immediately prior to the Closing.
5.04 Governmental Authorities; Consents.
Except for the applicable requirements of the HSR Act, Buyer is
not required to submit any notice, report or other filing with
any governmental authority in connection with the execution or
delivery by it of this Agreement or the consummation of the
transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory authority or any
other party or person is required to be obtained by Buyer in
connection with its execution, delivery and performance of this
Agreement or the transactions contemplated hereby.
5.05 Brokerage. No third party shall be
entitled to receive any brokerage commissions, finder's fees,
fees for financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of
Buyer.
ARTICLE VI
COVENANTS OF SELLER
6.01 Conduct of the Business. In
connection with the ownership and use of the Assets, Seller
agrees to observe each term set forth in this Section 6.01 and
agrees that, from the date hereof until the Closing Date, unless
otherwise consented to by Buyer in writing:
(a) Seller shall operate and maintain
the Assets only in the ordinary course of the Business
as presently conducted by Seller, in accordance in all
material respects with Seller's past custom and
practice;
(b) Seller shall not, directly or
indirectly, sell, pledge, dispose of or encumber any of
the Assets, except in the ordinary course of the
operation of the Business by Seller;
(c) Seller shall not cancel or
terminate its current insurance policies described in
the Disclosure Schedule under the caption referencing
Section 4.11, or cause any of the coverage thereunder
to lapse unless, simultaneously with such termination,
cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under
the canceled, terminated or lapsed policies for
substantially similar premiums are in full force and
effect; and
(d) Seller shall (i) use commercially
reasonable efforts to keep available the services of
those officers and employees of Seller responsible for
operating the Plants; (ii) confer on a regular and
frequent basis with representatives of Buyer to report
on operational matters and the general status of
ongoing operations with respect to the Plants; (iii)
not intentionally take any action which would render,
or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement
untrue in any material respect at the Closing; (iv)
notify Buyer of any emergency or other change in the
normal operation of the Plants and of any governmental
or third party complaints, investigations or hearings
(or communications indicating that the same may be
contemplated) if such emergency, change, complaint,
investigation or hearing would be material,
individually or in the aggregate, to the operations of
the Plants or to Seller's or Buyer's ability to
consummate the transactions contemplated by this
Agreement; and (v) promptly notify Buyer in writing if
Seller shall discover that any representation or
warranty made by it in this Agreement was when made, or
has subsequently become, untrue in any material
respect.
6.02 Environmental Investigations.
Between the date hereof and the Closing Date, Seller shall
conduct, at its cost, and with an environmental consultant
selected by Seller ("Consultant") and reasonably approved by
Buyer, at each Plant and at Seller's Farm Shop located at Ripon,
Wisconsin, a Phase I Environmental Site Assessment that satisfies
the ASTM Standard for Phase I Site Assessments (E 1527) (the
"Phase I Investigation") and, if the Consultant determines that
the results of such Phase I Investigations suggest further
investigation is needed to determine whether air, water or soil
contamination in violation of applicable Environmental Laws is
identified at any such parcel, a Phase II Site Assessment. The
Phase II Site Assessment may include sampling of building
materials, soil and/or groundwater and shall be designed to
confirm or refute the contamination identified in the Phase I
Investigation. If such investigations disclose any contamination
which, if unremedied, would constitute a breach of the
representations set forth in Section 4.13 hereof (the
"Environmental Representations"), then Seller agrees, at its
cost, to cause the Consultant to develop a written scope of work
(the "Remediation Plan") with respect to the remediation of such
contamination. The Remediation Plan will be designed such that,
following its planned remediation, Seller would not be in breach
of the Environmental Representations. Seller further agrees to
cause all actions specified by the Remediation Plan to be
completed at Seller's cost and expense. Buyer shall have the
opportunity to review the Remediation Plan with Seller, and to
cause changes that are mutually agreeable to Buyer and Seller to
be made thereto, prior to its implementation by Seller. Buyer
agrees that such remediation, if required, may occur following
the Closing Date in such manner, and at such times, as are
reasonable to both parties.
Seller agrees to deliver to Buyer,
promptly after Seller's receipt thereof, copies of all final,
written reports prepared by Consultant and delivered to Seller in
connection with the matters described in this Section 6.02.
6.03 Ripon Tanks. Seller will cause to
be removed and placed aboveground the two underground storage
tanks located at the Ripon, Wisconsin Closed Plant, and will also
replace such underground storage tanks, all in such a manner as
to permit the continuing operation of the Farm Shop located at
such Closed Plant and all in material compliance with applicable
Environmental Laws.
6.04 Access to Books and Records.
Between the date hereof and the Closing Date, Seller shall afford
to Buyer and its authorized representatives full access at all
reasonable times and upon reasonable notice to the offices,
properties, books, records, officers, employees and other items
of Seller (but only insofar as such items related primarily to
the Assets or the operation of the Business at the Real Property)
and otherwise provide such assistance as is reasonably requested
by Buyer in order that Buyer may have a full opportunity to make
such investigation and evaluation as it shall reasonably desire
to make of the Assets. Buyer acknowledges and agrees that all
information it obtains pursuant to such investigation shall
constitute "Business Information," as defined in that certain
Confidentiality Agreement between the parties hereto dated July
28, 1994 (the "Confidentiality Agreement"), and that Buyer and
its authorized representatives shall continue to be subject to
the terms thereof.
6.05 Regulatory Filings. To the
extent not filed as of the date hereof, as promptly as
practicable after the execution of this Agreement, Seller shall
make or cause to be made all filings and submissions under the
HSR Act and any other laws or regulations applicable to the
Assets for the consummation of the transactions contemplated
herein. Seller will coordinate and cooperate with Buyer in
exchanging such information, will not make any such filing
without providing to Buyer a final copy thereof for its review
and consent at least two full business days in advance of the
proposed filing and will provide such reasonable assistance as
Buyer may request in connection with all of the foregoing.
6.06 Conditions. Seller shall take
all commercially reasonable actions necessary or desirable to
cause the conditions set forth in Section 8.01 to be satisfied
and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but, in any
event, within five business days of such date).
ARTICLE VII
COVENANTS OF BUYER
Buyer covenants and agrees with Seller
as follows:
7.01 Regulatory Filings. To the
extent not filed as of the date hereof, as promptly as
practicable after the execution of the Agreement, Buyer shall
make or cause to be made all filings and submissions under the
HSR Act and any other laws or regulations applicable to Buyer for
the consummation of the transactions contemplated herein. Buyer
will coordinate and cooperate with Seller in exchanging such
information, will not make any such filing without providing to
Seller a final copy thereof for its review and consent at least
two full business days in advance of the proposed filing and will
provide such reasonable assistance as Seller may request in
connection with all of the foregoing.
7.02 Conditions. Buyer shall take
all commercially reasonable actions necessary or desirable to
cause the conditions set forth in Section 8.02 to be satisfied
and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but, in any
event, within five business days of such date).
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 Conditions to Buyer's
Obligations. The obligation of Buyer to consummate the
transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing
Date:
(a) The representations and warranties
of Seller set forth in Article IV hereof shall be true
and correct in all material respects at and as of the
Closing Date as though then made and as though the
Closing Date had been substituted for the date of this
Agreement throughout such representations and
warranties, except that any such representation or
warranty made as of a specified date (other than the
date hereof) shall only need to have been true on and
as of such date;
(b) Seller shall have performed in all
material respects all of the covenants and agreements
required to be performed and complied with by it under
this Agreement prior to the Closing;
(c) Seller shall have obtained, or
caused to be obtained, each consent or approval of
nongovernmental third parties necessary for Seller to
transfer beneficial ownership of the Assets, taken as a
whole, to Buyer substantially in the manner
contemplated hereby;
(d) The applicable waiting periods
under the HSR Act shall have expired or been
terminated, and all other material governmental
filings, authorizations and approvals that are required
for the consummation of the transactions contemplated
hereby will have been duly made and obtained;
(e) There shall not be pending any
action or proceeding before any judicial or
governmental body having proper jurisdiction thereof:
(i) challenging or seeking to make illegal, or to delay
substantially or restrain materially or prohibit, the
consummation of the transactions contemplated hereby or
seeking to obtain material damages in connection with
such transactions, (ii) seeking to prohibit direct or
indirect ownership or operation by Buyer of all or a
material portion of the Assets, or to compel Buyer or
any of its subsidiaries to dispose of or to hold
separately all or a material portion of the business or
assets of Buyer and its subsidiaries, taken as a whole,
as a result of the transactions contemplated hereby,
(iii) seeking to invalidate or render unenforceable any
material provision of this Agreement or the Alliance
Agreement or (iv) otherwise relating to and materially
adversely affecting the transactions contemplated
hereby;
(f) There shall not be any action
taken, or any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the
transactions contemplated hereby by any federal, state
or foreign court, government or governmental authority
or agency, which would reasonably be expected to
result, directly or indirectly, in any of the
consequences referred to in Section 8.01(e) hereof;
(g) There shall have been no damage,
destruction or loss of or to the Assets, whether or not
covered by insurance, which, in the aggregate, has, or
would be reasonably likely to have, a material adverse
effect on the aggregate value of the Assets or the
ability of Buyer to operate them, as a whole,
immediately after the Closing in substantially the same
manner as Seller was operating them, as a whole,
immediately prior to the Closing;
(h) Buyer shall have obtained such
third party financing as is necessary in order to
consummate the transactions contemplated hereby and in
the Alliance Agreement on terms reasonably satisfactory
to Buyer; provided that, the obtaining of such third
party financing shall not be a condition to Buyer's
obligation to consummate the transactions contemplated
hereby unless Buyer shall have used its best efforts to
obtain such financing;
(i) Seller shall have delivered all
Schedules (and all Exhibits to the Alliance Agreement) in
form and substance reasonably satisfactory to Buyer; and
(j) On the Closing Date, Seller shall have
delivered to Buyer all of the following:
(i) separate warranty deeds in form
reasonably satisfactory to Buyer selling,
conveying and transferring to Purchaser title to
each of the Owned Parcels, free and clear of all
mortgages, liens, charges and encumbrances (except
the Permitted Encumbrances), and warranting such
title;
(ii) the Bill of Sale executed by Seller
and such other instruments of conveyance,
transfer, assignment and delivery as Buyer shall
have reasonably requested pursuant to Section 3.02
hereof;
(iii) the Assignment and Assumption
executed by Seller;
(iv) the Alliance Agreement executed by
Seller;
(v) a certificate of a Senior Vice
President of Seller, dated the Closing Date, in
form and substance reasonably acceptable to Buyer,
stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(vi) copies of the third party and
governmental consents and approvals referred to in
subsections (c) and (d) above;
(vii) a copy of the text of the
resolutions adopted by the Board of Directors of
Seller authorizing the execution, delivery and
performance of this Agreement and the consummation
of the transactions contemplated by this
Agreement, along with a certificate, executed on
behalf of Seller by its corporate secretary,
certifying to Buyer that such copy is a true and
complete copy of such resolutions, and that such
resolutions were duly adopted and have not been
amended or rescinded; and
(viii) such other certificates,
documents and instruments as Buyer reasonably
requests related to the transactions contemplated
hereby.
8.02 Conditions to Seller's
Obligations. The obligation of Seller to consummate the
transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing
Date:
(a) The representations and warranties
of Buyer set forth in Article V hereof will be true and
correct in all material respects at and as of the
Closing as though then made and as though the Closing
Date had been substituted for the date of this
Agreement throughout such representations and
warranties;
(b) Buyer shall have performed in all
material respects all the covenants and agreements
required to be performed by it under this Agreement
prior to the Closing;
(c) The applicable waiting periods
under the HSR Act shall have expired or been terminated
and all other material governmental filings,
authorizations and approvals that are required for the
consummation of the transactions contemplated hereby
will have been duly made and obtained;
(d) There shall not be pending any
action or proceeding before any judicial or
governmental body having proper jurisdiction thereof:
(i) challenging or seeking to make illegal, or to delay
substantially or restrain materially or prohibit, the
consummation of the transactions contemplated hereby or
seeking to obtain material damages in connection with
such transactions, (ii) seeking to invalidate or render
unenforceable any material provision of this Agreement
or the Alliance Agreement, or (iii) otherwise relating
to and materially adversely affecting the transactions
contemplated hereby;
(e) There shall not be any action
taken, or any statute, rule, regulation, judgment,
order or injunction, enacted, entered, enforced,
promulgated, issued or deemed applicable to the
transactions contemplated hereby by any federal, state
or foreign court, government or governmental authority
or agency, which would reasonably be expected to
result, directly or indirectly, in any of the
consequences referred to in Section 8.02(d) hereof; and
(f) On the Closing Date, Buyer will
have delivered to Seller:
(i) [Intentionally Omitted.];
(ii) the Note executed by Buyer;
(iii) the Assignment and Assumption
executed by Buyer;
(iv) the Alliance Agreement executed by
Buyer;
(v) a Security Agreement, dated as of
the Closing Date, between Buyer and Seller,
securing Buyer's obligations to Seller under the
Note and Articles V, VI and XIX of the Alliance
Agreement, executed by Buyer in substantially the
form attached hereto as Exhibit E (the "Security
Agreement");
(vi) one or more mortgages or deeds of
trust, each dated the Closing Date, with respect
to each Owned Parcel (other than Seller's Farm
Shop located in Belvidere, Illinois), executed by
Buyer, in substantially the form attached hereto
as Exhibit F, as modified to comply with
applicable law (the "Mortgage");
(vii) UCC-1 Financing Statements and
other documents necessary to perfect Seller's
security interests set forth in the Security
Agreement and all of the Mortgages, all of which
documents shall be dated the Closing Date and
shall have been executed by Buyer;
(viii) a copy of the text of the
resolutions adopted by the Board of Directors of
Buyer authorizing the execution, delivery and
performance of this Agreement and the consummation
of the transactions contemplated by this
Agreement, along with a certificate, executed on
behalf of Buyer by its corporate secretary,
certifying to Seller that such copy is a true and
complete copy of such resolutions, and that such
resolutions were duly adopted and have not been
amended or rescinded;
(ix) a certificate of the Chief
Executive Officer of Buyer, dated the Closing
Date, in form and substance reasonably
satisfactory to Seller, stating that the
conditions precedent set forth in subsections (a)
and (b) above have been satisfied; and
(x) such other certificates, documents
and instruments as Seller reasonably requests
related to the transactions contemplated hereby.
8.03 Conditions Subsequent. The Closing
shall be subject to the following conditions subsequent:
(a) On or before March 10, 1995, Buyer
shall have paid to Seller, by wire transfer in
immediately available United States funds, the Interim
Inventory Amount, and
(b) On or before March 10, 1995, Buyer
shall have closed on such of its senior creditor
lending facilities as would provide funding in amounts
sufficient to enable Buyer to perform its obligations
under the Alliance Agreement as contemplated by the
parties thereto. Seller shall continue to cooperate
with Buyer in the same manner as it has prior to the
Closing in order to assist Buyer in obtaining such
senior credit facilities.
ARTICLE IX
TERMINATION
9.01 Termination. This Agreement
may be terminated at any time prior to the Closing:
(a) by the mutual consent of Buyer and
Seller;
(b) by either Buyer or Seller if there
has been a material misrepresentation, breach of
warranty or breach of covenant on the part of the other
in the representations, warranties and covenants set
forth in this Agreement and such misrepresentation or
breach has not been cured within ten business days
after receipt by the misrepresenting or breaching party
of written notice from the other party of the
misrepresentation or breach (which notice shall
describe the problem in sufficient detail to enable the
misrepresenting or breaching party to cure the problem
identified); or
(c) by either Buyer or Seller if the
transactions contemplated hereby have not been
consummated by December 30, 1994; provided that,
neither Buyer nor Seller will be entitled to terminate
this Agreement pursuant to this Section 9.01(c) if such
party's willful breach of this Agreement has prevented
the consummation of the transactions contemplated
hereby.
9.02 Effect of Termination. In the
event of termination of this Agreement by either Buyer or Seller
as provided in Section 9.01, this Agreement shall become void and
there shall be no liability on the part of either Buyer or
Seller, or their respective stockholders, officers, or directors,
except that (a) Sections 12.01, 12.02 and 12.10 hereof shall
survive indefinitely, (b) each party shall be liable to the other
party hereto for willful breaches of this Agreement prior to the
time of such termination, and (c) Seller shall be obligated to
purchase at cost or assume any contract with respect to the
assets and equipment described in Schedule 9.02.
9.03 Effect of Failure of Conditions
Subsequent.
(a) In the event of a failure of the
condition subsequent set forth in Section 8.03(a)
hereof, and in the event that Section 9.03(b) hereof
does not apply, Seller shall have the right to set-off
against the unpaid Interim Inventory Amount any
payments Seller may owe to Buyer under the Alliance
Agreement on or after March 10, 1995.
(b) In the event of a failure of the
condition subsequent set forth in Section 8.03(b)
hereof, the parties shall declare this Agreement null
and void, in which event: (i) Buyer shall be deemed to
have immediately returned to Seller all Assets Buyer
purchased hereunder, Buyer shall terminate all
employees working at the Plants (and any related
facility being transferred back as part of the Assets)
effective as of the effective date of such property
re-transfers, and Seller shall offer employment to all
such employees and Seller shall indemnify, defend and
hold harmless Buyer against any claim by employees at
the Plants or any related facility under the Worker
Adjustment and Retraining Notification Act or any
successor federal statute or similar state statute),
and Buyer shall take such other actions and execute
such documents and instruments of reconveyance as
Seller shall reasonably deem necessary or appropriate
to effect such reconveyance, (ii) Seller shall return
the Note to Buyer marked "Void," (iii) Seller and Buyer
shall mark "Void" all executed copies of the Security
Agreement, the Mortgages and the Alliance Agreement,
(iv) Seller shall reimburse Buyer for the operating
expenses incurred by Buyer in operating the Plants from
February 1, 1995 through March 10, 1995 (or such
earlier date as the parties shall have mutually
determined that the condition subsequent set forth in
Section 8.03(b) cannot be satisfied by Buyer), and (v)
the other effects set forth in Section 9.02 shall
thereafter apply in accordance with the terms thereof.
ARTICLE X
ADDITIONAL AGREEMENTS
10.01 Plant Closings. Seller
intends to close five of its plants currently being operated with
respect to the Business, all of which are identified on Schedule
10.01(a) hereto (collectively, the "Closed Plants"). The
following subsections set forth the parties' understandings with
respect to the Closed Plants.
(a) General Understandings. Buyer
acknowledges that none of the Closed Plants is included
in the Plants, and Seller will bear all costs
(including the costs of write-downs of assets and
employee severance) with respect to the closing of the
Closed Plants. Seller shall bear all responsibility
for, and related costs associated with, complying with
the terms of the federal Worker Adjustment and
Retraining Notification Act (the "WARN Act") and any
similar, applicable state laws with respect to all
employees of the Closed Plants. In addition, Seller
shall remain responsible for the management and
operation of each Closed Plant until the date of
closure of such Closed Plant. Any proceeds resulting
from the sale or other disposition of the Closed
Plants, or any assets contained therein, shall belong
to Seller and not to Buyer.
(b) Transferred Equipment. Seller will
be responsible for the costs and management of the
dismantling and transportation of the equipment
identified in Schedule 10.01(b) hereto which is located
at the Closed Plants identified thereon (the
"Transferred Equipment") from such Closed Plant to the
Plant identified in such Schedule 10.01(b), but not for
the installation of the Transferred Equipment at the
identified Plants (which shall be Buyer's
responsibility), all as in accordance with the "RCP"
(as defined in the Alliance Agreement). If, for any
reason, Seller shall be unable to complete the
dismantling and transportation of the Transferred
Equipment to the identified Plants in accordance with
the time schedules set forth in the Sailboat Operations
Plan, Seller shall not be liable for any special,
indirect, incidental, punitive, consequential or other
damages as a result of any interruption or loss of
business of Buyer due to such inability to complete
such dismantling and transportation of the Transferred
Equipment in accordance with the RCP. Seller will not,
to the extent permitted by applicable law and its
applicable corporate policies and/or benefit plans or
programs, make any severance payments to Seller's
employees who will be necessary to enable Seller to
fulfill its responsibilities with respect to the
Transferred Equipment under this Section 10.01(b) until
such time as Seller has fulfilled its responsibilities
with respect to the Transferred Equipment.
The Transferred Equipment constitutes
part of the Assets and will be sold to Buyer on, and
effective as of, the Closing Date.
10.02 Employee Matters. The
following subsections set forth the parties' agreements with
respect to the treatment of Seller's employees who are employed
at the Plants (the "Plant Employees"). Except as otherwise
specifically set forth in this Section 10.02 (and only for the
limited purposes described therein), effective as of the day
immediately preceding the Closing Date, all Plant Employees shall
cease to be participants in or otherwise covered by Seller's
pension and welfare benefit plans, including plans, programs,
policies and arrangements which provide retirement benefits,
medical and dental coverage, accident and life insurance,
disability coverage, vacation and severance pay.
(a) Termination; Rehire. Effective as
of the day immediately preceding the Closing Date,
Seller shall terminate the employment of all Plant
Employees. Effective as of the Closing Date, Buyer
shall make offers of employment (which shall include
Buyer's agreements set forth below with respect to
participation in Buyer's employee benefit plans) to all
Plant Employees who are actively at work or on
vacation. As to Plant Employees who are on leave,
Buyer shall make offers of employment to such Plant
Employees effective upon their return to work. Buyer
shall pay Plant Employees who are hired by Buyer (a
"Hired Plant Employee") the same rate of base pay as
was paid to such Hired Plant Employee by Seller
immediately prior to the Closing Date. Seller shall
bear all responsibility for, and related costs
associated with, complying with the WARN Act and
similar state laws to the extent that the same apply to
employees at the Plants.
(b) Pension Plans. Effective as of the
end of the day immediately preceding the Closing Date,
Plant Employees shall cease to accrue benefits, but
will continue to be participants, under the Seller's
employee benefit pension plans ("Seller's Pension
Plans") as that term is defined in the Employee
Retirement Income Security Act of 1974 ("ERISA"), as
amended. Plant Employees shall cease being
participants under Seller's Pension Plans upon final
payment of all vested benefits payable thereunder in
accordance with the terms of the Seller's Pension
Plans.
Effective as of the Closing Date, Buyer
shall include Hired Plant Employees in its applicable
employee benefit pension plans ("Buyer's Pension
Plans"). Hired Plant Employees (other than seasonal
employees) shall be given credit for all service with
Seller under Buyer's Pension Plans in which they become
participants for purposes of participation and vesting.
(c) Health Coverage. Effective as of
the end of the day immediately preceding the Closing
Date, Plant Employees shall no longer be covered by
Seller's medical and dental plans. Seller shall be
responsible for providing Plant Employees who terminate
or otherwise become subject to a "qualifying event" (as
defined in Section 4980B of the Internal Revenue Code
of 1986, as amended (the "Code")) prior to the Closing
Date the election of group health continuation coverage
required by Section 4980B of the Code ("Continuation
Coverage"), under the terms of the health plans
maintained by Seller.
Effective as of the Closing Date, Hired
Plant Employees (other than seasonal employees) will be
eligible for coverage under Buyer's medical and dental
plans. Buyer's medical and dental plans shall provide
for waiver of preexisting conditions if Seller's
medical and/or dental plans covered the Hired Plant
Employee for such condition prior to the Closing Date.
Buyer shall perform the duties required of an employer
with respect to Continuation Coverage, including, but
not limited to, making such coverage available to Hired
Plant Employees upon their termination of employment
with Buyer on or after the Closing Date to the extent
required by law.
(d) Vacation. Buyer shall recognize
all earned, but unused vacation of the Hired Plant
Employees under Seller's existing vacation policy and
shall permit the Hired Plant Employees to use such
earned, but unused vacation during calendar year 1995
in accordance with Buyer's vacation policy in effect on
the date hereof. Seller shall reimburse Buyer (in
United States funds) for all unused vacation earned
through December 31, 1994 by the Hired Plant Employees
and used by them as Buyer's employees during calendar
year 1995. As promptly as possible following the
Closing, Buyer and Seller shall agree upon the total
amount of earned, but unused vacation for which Seller
is potentially responsible hereunder. Buyer shall
maintain appropriate books and records accurately
reflecting such used vacation and shall invoice Seller
once, following December 31, 1995, for the full amount
of the reimbursement due Buyer under this Section
10.02(d). Buyer shall permit Seller to review such
books and records and any related work papers of Buyer
and to meet with Buyer's officers or employees
responsible for maintaining such records. Unless there
is any dispute with respect to the amount of earned,
but unused vacation used, Seller shall pay the invoiced
amount within 15 business days of Seller's receipt of
such invoice. If Seller disputes the invoiced amount,
it shall notify Buyer within such 15 business day
period and pay to Buyer the undisputed amount. Buyer
and Seller will then attempt to resolve such dispute in
good faith as promptly as possible thereafter. If the
parties are unable to resolve such dispute within a
reasonable time thereafter, they shall submit the
dispute to arbitration in the same manner as disputes
are resolved pursuant to the terms of Section 2.03(b)
hereof.
(e) Workers' Compensation. Seller
shall remain responsible for all workers' compensation
claims made by Plant Employees based on occurrences
prior to the Closing Date, and Buyer shall be
responsible for all workers' compensation claims made
by Hired Plant Employees based on occurrences on and
after the Closing Date. The costs of post-Closing
workers' compensation claims shall be allocated to the
"Central Division Plants" and the "Eastern Division
Plants" (as defined in Schedule 1.01(a) hereof) in
accordance with the terms of the Alliance Agreement.
(f) Other Employee Benefit Plans.
Effective as of the end of the day immediately
preceding the Closing Date, and except as otherwise
provided herein, Plant Employees shall cease to be
covered by Seller's employee welfare benefit plans,
including, but not limited to, disability, life
insurance, severance, employee assistance and vacation.
Effective as of the Closing Date, Buyer
shall include Hired Plant Employees (other than
seasonal employees) in its employee welfare benefit
plans (including its long-term disability insurance and
life insurance programs). Such Hired Plant Employees
shall be given credit for all service with Seller under
the employee benefit plans of Buyer in which they
become participants for purposes of participation in
such plans of Buyer.
(g) Severance. Buyer shall maintain,
for one year following the Closing Date, a severance
plan for Hired Plant Employees who are involuntarily
terminated by Buyer because of job elimination or
workforce reduction, except "for cause," that provides
severance benefits that, in the aggregate, are
comparable to those severance benefits provided by
Seller to similarly situated Plant Employees who are
involuntarily terminated due to workforce reductions or
job eliminations immediately prior to the Closing Date.
(h) Retiree Health Plans. Seller shall
be responsible for payment of retiree benefits for
those Plant Employees who are eligible for retiree
health benefits under Seller's retiree health plan as
of the end of the day immediately preceding the Closing
Date, in accordance with the terms of such retiree
health plan as then in effect or as subsequently
amended. In the case of Hired Plant Employees who are
eligible for health benefits under both Seller's
retiree health plan and Buyer's health plan, Buyer's
health plan shall have primary responsibility for such
Hired Plant Employee's health claims and Seller's
retiree health plan shall have secondary
responsibility.
(i) Other Employment-Related
Liabilities. The parties agree that, except as
explicitly set forth above, Seller shall be liable for
all employment-related liabilities of the employer of
the Plant Employees through the day immediately
preceding the Closing Date, and Buyer shall be and
become liable for all employment-related liabilities of
the employer of the Plant Employees who accept
employment with Buyer from and after the Closing Date
(or from and after the date of hire, if later, in the
case of Plant Employees on leave).
(j) No Transfer of Seller Plan Assets
or Liabilities. All of Seller's pension and welfare
benefit plans and assets retained for the funding of
benefits through such plans, and any corresponding
liabilities, are specifically excluded from any assets
and liabilities transferred to Buyer pursuant to this
Agreement. Seller shall remain liable, and Buyer shall
not assume or otherwise have any Liability, under any
employee benefit plan or program (whether or not
subject to ERISA) (including all plans) of Seller.
(k) Limitation on Enforcement. This
Section 10.02 is an agreement solely between Seller and
Buyer. Nothing in this Section 10.02, whether express
or implied, confers upon any employee of Buyer or
Seller (including the Plant Employees and the Hired
Plant Employees) or any other person, any rights or
remedies, including, but not limited to (i) any right
to employment or recall, (ii) any right to continued
employment for any specified period or (iii) any right
to claim any particular compensation, benefit or
aggregation of benefits, of any kind or nature
whatsoever, as a result of this Section 10.02.
10.03 Bulk Sales Laws. The parties
hereby agree to waive compliance with the provisions of all
applicable bulk sales laws (if any are applicable).
10.04 License.
(a) Seller hereby grants to Buyer, effective
as of the Closing Date, a non-exclusive,
non-transferable, fully paid license to use the trademarks
of Seller set forth on Schedule 10.04 hereto (the
"Trademarks") on such signs on the Plants as are being used
by Seller in the operation of the Business on the date
hereof. Buyer shall have no right to use the Trademarks in
any other place or for any other purpose and shall grant no
sublicense, in whole or in part, of the license granted
pursuant to this Section 10.04, without Seller's prior
written consent. Buyer shall make no modifications to the
Trademarks on such signs without Seller's prior written
consent. Buyer recognizes Seller's ownership of the
Trademarks and shall not at any time take any action that
might in any way impair Seller's rights in and to the
Trademarks and shall not claim any right or interest in or
to the Trademarks, except such rights as are expressly
granted by this Section 10.04. Buyer hereby agrees to take,
at Seller's cost and expense, all such actions as Seller may
reasonably request in order to protect and enforce the
Trademarks. The license granted by this Section 10.04 shall
terminate automatically upon any termination of the Alliance
Agreement and may otherwise be terminated at any time by
Seller by providing written notice thereof to Buyer.
(b) If and when needed by Buyer in order to
perform its obligations under the Alliance Agreement for
Seller's benefit, Seller hereby agrees to grant to Buyer a
limited license to use such of the intellectual property
described in Section 1.02(d) as is necessary to conduct the
Business in the same manner in which it was conducted
immediately prior to the Closing Date. Such limited license
shall be upon substantially similar terms as are set forth
in Section 10.04(a), and upon such other reasonable terms
and conditions as Seller and Buyer shall mutually agree.
10.05 Quiet Enjoyment. Seller
covenants that, notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any of the warranty
deeds or otherwise (except for Buyer's obligations under Sections
1.03 and the Transferred Rights, Obligations and Agreements, all
of which obligations shall remain Buyer's after the Closing
Date), if any person or entity (other than Buyer or persons
claiming under Buyer) shall disturb or seek to disturb the quiet
and peaceable possession of Buyer of any of the Real Property,
the Plants and Farm Shops thereon sold hereunder (collectively
the "Real Estate Assets"), or shall interfere or seek to
interfere with the use or operation of such Real Estate Assets
by Buyer in substantially the same manner as Seller used or
operated the Real Estate Assets prior to Closing, including
without limitation if any such person or entity shall commence
any action for a claim of damages or foreclosure by reason of any
lien, charge, encumbrance, defect in or failure of title to the
Real Estate Assets or the use thereof not being permitted by
applicable zoning or land use laws or regulations (collectively
a "Title Defect") which Title Defect existed on or before the
Closing or the date of delivery of a deed (whether or not Buyer
had knowledge of any such lien, encumbrance, defect in or failure
of title prior to such transfer), whichever is later, whether or
not the Title Defect is a Permitted Encumbrance, then Seller
shall commence and diligently proceed to pay such claim or
remove, cure or terminate such Title Defect so as to eliminate
such Title Defect and shall defend, indemnify and hold Buyer
harmless from and against any and all loss, liability, claims ,
damages, causes of action, cost or expense, including but not
limited to reasonable attorneys fees, arising in connection
therewith. This covenant is supplemental to, and not in
limitation of, any warranty contained in any deed given at, in
connection with, or after the Closing, shall survive the
Closing, and shall continue throughout the term of the Alliance
Agreement.
10.06 Certain Post-Closing Real
Estate Transfers. As soon as practicable following the Closing,
Seller shall take all appropriate action and execute any
documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to:
(a) cause all of Seller's right, title
and interest in and to Seller's Farm Shop located at
Ripon, Wisconsin, and the associated silage stack
located approximately two miles away from such Farm
Shop, to be transferred and assigned to Buyer, and
(b) complete the exchange of parcels of
real property located near the Glencoe, Minnesota
Plant, which exchange is commonly known by the parties
as the "Schofield Exchange," to occur between Seller
and adjoining landowners named James L. and Helen
Schofield, and to transfer and assign to Buyer all of
Seller's right, title and interest in and to such
exchanged property. The property to be received by
Seller in the Schofield Exchange constitutes two
parcels located in Sections 16 and 21, respectively, of
Township 115, Range 28 of Glencoe, Minnesota.
Buyer understands and agrees that, effective as of the date or
dates of such transfers of property to Buyer, Seller shall be
entitled to, and Buyer shall take all appropriate action and
execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to, amend the
Mortgage or Mortgages governing the adjoining real property
acquired by Buyer hereunder to include in, and make such
transferred parcels subject to the terms of, such Mortgage or
Mortgages.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01 Survival of Representations
and Warranties. The representations and warranties contained in
Article IV and Article V hereof shall survive the Closing for a
period of two years following the Closing Date; provided that,
Seller's representations set forth in Section 4.13(a) relating
specifically to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and any similar state
"superfund" law, all as amended from time to time ("Seller's
CERCLA Representations"), and Seller's covenants set forth in
Section 10.05 and 10.06 hereof (collectively, "Seller's Real
Property Covenants") shall survive the Closing indefinitely.
11.02 Indemnification by Seller.
(a) Subject to the limitations of
Section 11.02(b), Seller agrees to indemnify in full
Buyer and its officers, directors, employees, agents
and stockholders (collectively, the "Buyer Indemnified
Parties") and hold them harmless against any loss,
Liability, deficiency, damage, expense or cost
(including reasonable legal expenses), (collectively,
"Losses"), which Buyer Indemnified Parties may suffer,
sustain or become subject to, as a result of (i) any
misrepresentation in any of the representations and
warranties of Seller contained in this Agreement or in
any certificate or other document delivered or to be
delivered by or on behalf of Seller pursuant to the
terms of Section 8.01(j) of this Agreement, (ii) any
breach of, or failure to perform, any agreement of
Seller contained in this Agreement, or (iii) any
"Claims" (as defined in Section 11.04(a) hereof) or
threatened Claims against Buyer arising out of the
actions or inactions of Seller with respect to the
ownership or operation of the Assets or the Business
prior to the Closing (collectively, "Buyer Losses").
(b) Seller shall be liable to Buyer
Indemnified Parties for any Buyer Losses (i) only if
Buyer or another Buyer Indemnified Party delivers to
Seller written notice, setting forth in reasonable
detail the identity, nature and amount of Buyer Losses
related to such claim or claims prior to the second
anniversary of the Closing Date, and (ii) only if the
aggregate amount of all Buyer Losses exceeds $250,000
U.S. (the "Basket Amount"), in which case Seller shall
be obligated to indemnify the Buyer Indemnified Parties
only for the excess of the aggregate amount of all such
Buyer Losses over the Basket Amount up to a total of
$10,000,000 U.S. (the "Maximum Amount"), which shall
constitute the maximum aggregate liability of Seller to
Buyer under this Agreement; provided that, any breach
by Seller of Sellers' CERCLA Representations or of
Seller's Real Property Covenants shall not be subject
to the time limitation of clause (i) of this sentence,
the Basket Amount or the Maximum Amount limitation, and
provided further, that, any breach by Seller of its
covenants in Section 6.02 hereof shall not be subject
to the time limitation of clause (i) of this sentence
or the Maximum Amount limitation. A Buyer Indemnified
Party's failure to provide the detail required by
clause (i) in the preceding sentence shall not
constitute either a breach of this Agreement by the
Buyer Indemnified Party or any basis for Seller to
assert that the Buyer Indemnified Party did not comply
with the terms of this Section 11.02 sufficient to
cause the Buyer Indemnified Party to have waived its
rights under this Section 11.02, unless Seller
demonstrates that its ability to defend against any
Claims with respect thereto has been materially
adversely affected.
11.03 Indemnification by Buyer.
(a) Subject to the limitations of
Section 11.03(b), Buyer agrees to indemnify in full
Seller, and its officers, directors, employees, agents
and stockholders (collectively, the "Seller Indemnified
Parties") and hold them harmless against any Losses
which any of the Seller Indemnified Parties may suffer,
sustain or become subject to as a result of (i) any
misrepresentation in any of the representations and
warranties of Buyer contained in this Agreement or in
any certificate or other document delivered or to be
delivered by Buyer pursuant to the terms of Section
8.02(f) of this Agreement, (ii) any breach of, or
failure to perform, any agreement of Buyer contained in
this Agreement, (iii) any Claims or threatened Claims
against Seller arising out of the actions or inactions
of Buyer with respect to the ownership or operation of
the Assets or the Business after the Closing, or (iv)
any Claims or threatened Claims against Seller arising
out of any breach, violation or failure to comply by
Buyer after the Closing Date with CERCLA or any similar
state "superfund" law, all as amended from time to time
(collectively, "Seller Losses").
(b) Buyer shall be liable to the Seller
Indemnified Parties for any Seller Losses (i) only if
Seller or another Seller Indemnified Party delivers to
Buyer written notice, setting forth in reasonable
detail the identity, nature and amount of Seller Losses
related to such claim or claims prior to the second
anniversary of the Closing Date, and (ii) only if the
aggregate amount of all Seller Losses exceeds the
Basket Amount, in which case Buyer shall be obligated
to indemnify the Seller Indemnified Parties only for
the excess of the aggregate amount of all such Seller
Losses over the Basket Amount up to the Maximum Amount,
which shall constitute the maximum aggregate liability
of Buyer to Seller under this Agreement; provided that,
any obligation of Buyer to indemnify Seller pursuant to
clause (iv) of Section 11.03(a) shall not be subject to
the time limitation of clause (i) of this sentence, the
Basket Amount or the Maximum Amount limitation. A
Seller Indemnified Party's failure to provide the
detail required by clause (i) in the preceding sentence
shall not constitute either a breach of this Agreement
by the Seller Indemnified Party or any basis for Buyer
to assert that the Seller Indemnified Party did not
comply with the terms of this Section 11.03 sufficient
to cause the Seller Indemnified Party to have waived
its rights under this Section 11.03, unless Buyer
demonstrates that its ability to defend against any
Claims with respect thereto has been materially
adversely affected.
11.04 Method of Asserting Claims.
As used herein, an "Indemnified Party" shall refer to a "Buyer
Indemnified Party" or "Seller Indemnified Party," as applicable,
the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder,
and the "Indemnifying Party" shall refer to the party hereto
obligated to indemnify such Notifying Party's Indemnified
Parties.
(a) In the event that any of the
Indemnified Parties is made a defendant in or party to
any action or proceeding, judicial or administrative,
instituted by any third party, the liability or the
costs or expenses of which are Buyer Losses or Seller
Losses (any such third party action or proceeding being
referred to as a "Claim"), the Notifying Party shall
give the Indemnifying Party prompt notice thereof. The
failure to give such notice shall not affect any
Indemnified Party's ability to seek reimbursement
unless such failure has materially and adversely
affected the Indemnifying Party's ability to defend
successfully a Claim. The Indemnifying Party shall be
entitled to contest and defend such Claim; provided
that, the Indemnifying Party (i) has a reasonable basis
for concluding that such defense may be successful and
(ii) diligently contests and defends such Claim.
Notice of the intention so to contest and defend shall
be given by the Indemnifying Party to the Notifying
Party within 20 business days after the Notifying
Party's notice of such Claim (but, in all events, at
least five business days prior to the date that an
answer to such Claim is due to be filed). Such contest
and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying
Party shall be entitled at any time, at its own cost
and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that
the Indemnifying Party is not adequately representing
or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified
Parties, and only to the extent that such expenses are
reasonable), to participate in such contest and defense
and to be represented by attorneys of its or their own
choosing. If the Notifying Party elects to participate
in such defense, the Notifying Party will cooperate
with the Indemnifying Party in the conduct of such
defense. Neither the Notifying Party nor the
Indemnifying Party may concede, settle or compromise
any Claim without the consent of the other party, which
consent will not be unreasonably withheld.
Notwithstanding the foregoing, (i) if a Claim seeks
equitable relief or (ii) if the subject matter of a
Claim relates to the ongoing business of any of the
Indemnified Parties, which Claim, if decided against
any of the Indemnified Parties, would materially
adversely affect the ongoing business or reputation of
any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled
to contest, defend and settle such Claim in the first
instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying
Party shall then have the right to contest and defend
(but not settle) such Claim.
(b) In the event any Indemnified Party
should have a claim against any Indemnifying Party that
does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable
promptness to the Indemnifying Party. If the
Indemnifying Party notifies the Notifying Party that it
does not dispute the claim described in such notice or
fails to notify the Notifying Party within 30 days
after delivery of such notice by the Notifying Party
whether the Indemnifying Party disputes the claim
described in such notice, the Buyer Loss or Seller Loss
in the amount specified in the Notifying Party's notice
will be conclusively deemed a liability of the
Indemnifying Party and the Indemnifying Party shall pay
the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed
its Liability with respect to such claim, the Chief
Financial Officers of each of the Indemnifying Party
and the Notifying Party will proceed in good faith to
negotiate a resolution of such dispute, and if not
resolved through the negotiations of such Chief
Financial Officers within 60 days after the delivery of
the Notifying Party's notice of such claim, such
dispute shall be resolved fully and finally in Chicago,
Illinois by an arbitrator selected pursuant to, and an
arbitration governed by, the Commercial Arbitration
Rules of the American Arbitration Association. The
arbitrator shall resolve the dispute within 30 days
after selection and judgment upon the award rendered by
such arbitrator may be entered in any court of
competent jurisdiction.
(c) After the Closing, the rights set
forth in this Article XI shall be each party's sole and
exclusive remedies against the other party hereto for
misrepresentations or breaches of covenants contained
in this Agreement (except as otherwise specifically set
forth in the Note or the Alliance Agreement).
Notwithstanding the foregoing, nothing herein shall
prevent any of the Indemnified Parties from bringing an
action based upon allegations of fraud or other
intentional breach of an obligation of or with respect
to either party in connection with this Agreement or
the transactions contemplated hereby. In the event
such action is brought, the prevailing party's
attorneys' fees and costs shall be paid by the
nonprevailing party.
ARTICLE XII
MISCELLANEOUS
12.01 Press Releases and Announcements. Prior to
the Closing Date, neither party hereto shall issue any press
release (or make any other public announcement) related to this
Agreement or the transactions contemplated hereby or make any
announcement to the employees, customers or suppliers of Seller
without prior written approval of the other party hereto, except
as may be necessary, in the opinion of counsel to the party
seeking to make disclosure, to comply with the requirements of
this Agreement or applicable law. If any such press release or
public announcement is so required, the party making such
disclosure shall consult with the other party prior to making
such disclosure, and the parties shall use all reasonable
efforts, acting in good faith, to agree upon a text for such
disclosure which is satisfactory to both parties.
Buyer understands that Grand Metropolitan plc, the
indirect sole stockholder of Seller ("Parent"), is a publicly
held corporation subject to disclosure rules and regulations of
federal and foreign securities laws. Similarly, Seller
understands that Buyer is a publicly held corporation subject to
such disclosure rules and regulations. Each of Buyer (with
respect to Seller) and Seller (with respect to Buyer)
acknowledges the right of the other public company to disclose
the transactions contemplated by this Agreement at any time if
such disclosure is deemed by such other public company, in its
reasonable opinion, to be required by law. In the event that
either public company determines to make such disclosure, Buyer
or Seller, as the case may be, agrees to notify the other party
hereto of such public company's intention to make such disclosure
and to provide such other party with the text of the disclosure
sufficiently in advance of its release to the public to enable
such other party to have a reasonable opportunity to comment
thereon.
12.02 Expenses. Except as otherwise expressly
provided for herein, Seller and Buyer will pay all of their own
expenses (including attorneys' and accountants' fees), in
connection with the negotiation of this Agreement, the
performance of their respective obligations hereunder and the
consummation of the transactions contemplated by this Agreement
(whether consummated or not).
12.03 Further Assurances. Seller agrees that, on
and after the Closing Date, it shall take all appropriate action
and execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any
of the provisions hereof, including, without limitation, putting
Buyer in possession and operating control of, and vesting in
Buyer title to (subject to Section 1.05), the Assets.
12.04 Amendment and Waiver. This Agreement may not
be amended or waived except in a writing executed by the party
against which such amendment or waiver is sought to be enforced.
No course of dealing between or among any persons having any
interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
12.05 Notices. All notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this Agreement will be in writing and will be
deemed to have been given when personally delivered or three
business days after being mailed by registered or certified U.S.
mail, return receipt requested, or when receipt is acknowledged,
if sent by facsimile, telecopy or other electronic transmission
device. Notices, demands and communications to Buyer and Seller
will, unless another address is specified in writing, be sent to
the address indicated below:
Notices to Buyer: with a copy to:
Seneca Foods Corporation Jaeckle, Fleischmann & Mugel
1162 Pittsford-Victor Road Norstar Building
Pittsford, New York 14534 Twelve Fountain Plaza
Attention: Arthur S. Wolcott
Buffalo, New York 14202-2292
Chairman of the Board
Attention: William I. Schapiro
Facsimile: (716) 954-7508
Facsimile: (716) 856-0432
Notices to Seller: with a copy to:
The Pillsbury Company Dorsey & Whitney
200 South Sixth Street 220 South Sixth Street
Minneapolis, Minnesota 55402 Minneapolis, Minnesota
55402
Attention: Thomas A. Debrowski
Attention: Robert A. Rosenbaum
Senior Vice President, Facsimile: (612)
340-8738
Operations
Facsimile: (612) 330-4737
12.06 Assignment. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns, except that neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the
other party hereto.
12.07 Severability. Whenever possible, each provision
of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of
this Agreement.
12.08 Complete Agreement. This Agreement, the Exhibits
and Schedules attached hereto, the Disclosure Schedule, the
Confidentiality Agreement and the other documents referred to
herein contain the complete agreement between the parties and
supersede any prior understandings, agreements or representations
by or between the parties, written or oral, which may have
related to the subject matter hereof in any way.
12.09 Counterparts. This Agreement may be executed in
one or more counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts
taken together will constitute one and the same instrument.
12.10 Governing Law. The internal law, without regard
to conflicts of laws principles, of the State of Minnesota will
govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the
obligations imposed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
SENECA FOODS CORPORATION
By /s/ ARTHUR S. WOLCOTT
Arthur S. Wolcott
Chairman of the Board
THE PILLSBURY COMPANY
By /s/ THOMAS A. DEBROWSKI
Thomas A. Debrowski
Senior Vice President,
Operations
TABLE OF CONTENTS
Page
ARTICLE I TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES 2
1.01 Transfer of Assets 2
1.02 Excluded Assets 4
1.03 Assumption of Liabilities 6
1.04 Excluded Liabilities 6
1.05 Assumption of Contractual Rights and Obligations Related
Thereto 6
1.06 Certain Leases 7
ARTICLE II PURCHASE PRICE 8
2.01 Amount 8
2.02 Manner of Payment 8
2.03 Closing Date Valuation 9
2.04 Transfer Taxes and Other Closing Costs 10
2.05 Allocation of Purchase Price 11
ARTICLE III CLOSING 11
3.01 Closing 11
3.02 General Procedure 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER 12
4.01 Incorporation and Corporate Power 12
4.02 Subsidiaries 12
4.03 Execution, Delivery; Valid and Binding Agreement 12
4.04 No Breach 12
4.05 Governmental Authorities; Consents 13
4.06 Title to Properties 13
4.07 Inventory 15
4.08 Contracts and Commitments 15
4.09 Litigation 16
4.10 Employees 16
4.11 Insurance 17
4.12 Compliance with Laws; Permits 17
4.13 Environmental Matters 17
4.14 Brokerage 19
4.15 Certain Taxes 19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER 19
5.01 Incorporation and Corporate Power 20
5.02 Execution, Delivery; Valid and Binding Agreement 20
5.03 No Breach 20
5.04 Governmental Authorities; Consents 20
5.05 Brokerage 20
ARTICLE VI COVENANTS OF SELLER 21
6.01 Conduct of the Business 21
6.02 Environmental Investigations 22
6.03 Ripon Tanks 22
6.04 Access to Books and Records 22
6.05 Regulatory Filings 23
6.06 Conditions 23
ARTICLE VII COVENANTS OF BUYER 23
7.01 Regulatory Filings 23
7.02 Conditions 23
ARTICLE VIII CONDITIONS TO CLOSING 24
8.01 Conditions to Buyer's Obligations 24
8.02 Conditions to Seller's Obligations 26
8.03 Conditions Subsequent 28
ARTICLE IX TERMINATION 29
9.01 Termination 29
9.02 Effect of Termination 29
9.03 Effect of Failure of Conditions Subsequent 29
ARTICLE X ADDITIONAL AGREEMENTS 30
10.01 Plant Closings 30
(a) General Understandings 30
(b) Transferred Equipment 31
10.02 Employee Matters 31
(a) Termination; Rehire 32
(b) Pension Plans 32
(c) Health Coverage 32
(d) Vacation 33
(e) Workers' Compensation 33
(f) Other Employee Benefit Plans 34
(g) Severance 34
(h) Retiree Health Plans 34
(i) Other Employment-Related Liabilities 34
(j) No Transfer of Seller Plan Assets or
Liabilities 35
(k) Limitation on Enforcement 35
10.03 Bulk Sales Laws 35
10.04 License 35
10.05 Quiet Enjoyment 36
10.06 Certain Post-Closing Real Estate Transfers 36
ARTICLE XI SURVIVAL; INDEMNIFICATION 37
11.01 Survival of Representations and Warranties 37
11.02 Indemnification by Seller 37
11.03 Indemnification by Buyer 38
11.04 Method of Asserting Claims 39
ARTICLE XII MISCELLANEOUS 42
12.01 Press Releases and Announcements 42
12.02 Expenses 42
12.03 Further Assurances 42
12.04 Amendment and Waiver 43
12.05 Notices 43
12.06 Assignment 43
12.07 Severability 43
12.08 Complete Agreement 44
12.09 Counterparts 44
12.10 Governing Law 44
EXHIBITS:
Exhibit A Alliance Agreement
Exhibit B Secured Subordinated Note of Buyer
Exhibit C Bill of Sale
Exhibit D Assignment and Assumption Agreement
Exhibit E Security Agreement
Exhibit F Form of Mortgage
SCHEDULES:
Schedule 1.01(a) Plants
Schedule 1.01(b) Real Property
Schedule 1.01(c) Equipment, Machinery, Furniture, Fixtures and
Furnishings
Schedule 1.01(d) Real Property Leases
Schedule 1.01(e) Personal Property Leases
Schedule 1.01(f) Inventory Schedule
Schedule 1.01(g) Assumed Contracts
Schedule 1.01(h) Prepaid Expenses and Deposits
Schedule 1.02(e) Seller Proprietary Names
Schedule 1.02(l) Nonassignable Authorizations
Schedule 1.02(m) Nonassignable Leases and Contracts
Schedule 9.02 Assets and Equipment to be Repurchased
Schedule 10.01(a) Closed Plants
Schedule 10.01(b) Transferred Equipment
Schedule 10.04 Seller's Trademarks
Disclosure Schedule
Exhibit 2(B)
CONFORMED COPY
FIRST AMENDED AND RESTATED
ALLIANCE AGREEMENT
by and among
SENECA FOODS CORPORATION,
THE PILLSBURY COMPANY
and
GRAND METROPOLITAN INCORPORATED
December 8, 1994,
as amended February 10, 1995
FIRST AMENDED AND RESTATED
ALLIANCE AGREEMENT
This Alliance Agreement (the "Agreement") is entered into this
8th day of December, 1994, to be made effective as of the Effective Date
(as hereinafter defined), by and among THE PILLSBURY COMPANY, having its
principal offices at Pillsbury Center, 200 South Sixth Street, Minneapolis,
Minnesota 55402 ("Pillsbury"), SENECA FOODS CORPORATION, having its
principal offices at 1162 Pittsford-Victor Road, Pittsford, New York 14534
("Seneca") and, solely for the purposes set forth in Section 23.8 hereof,
GRAND METROPOLITAN INCORPORATED, having its principal offices at Pillsbury
Center, 200 South Sixth Street, Minneapolis, Minnesota 55402 ("GMI").
W I T N E S S E T H
WHEREAS, Pillsbury owns 11 vegetable processing and manufacturing
facilities located in the Midwest and Northwest areas of the United States
(collectively, the "Pillsbury Plants"). Pillsbury manufactures certain
shelf-stable and frozen vegetable products (consisting, on the date hereof,
of peas, green beans, corn, asparagus and dry bean products among others)
under the Green Giantr brands (the "Products") at the Pillsbury Plants;
WHEREAS, Seneca owns 16 fruit and/or vegetable processing and
manufacturing facilities located in the West, Midwest and Northeast areas
of the United States (the "Seneca Plants") and is engaged in businesses
similar to the manufacture of the Products;
WHEREAS, Pillsbury has particular expertise in the marketing and
selling functions and Seneca has particular expertise in the acquiring,
processing, manufacturing and packaging of products similar to the
Products;
WHEREAS, each of Pillsbury and Seneca has determined that it
would be mutually beneficial to create a strategic alliance of the parties
through which Seneca would engage in the sourcing, processing,
manufacturing and packaging of the Products, and Pillsbury would
distribute, market and sell the Products, as contemplated herein;
WHEREAS, in order to effect the first stage of the alliance, on
the date hereof, Pillsbury and Seneca entered into an Asset Purchase
Agreement (the "Sale Agreement") which provides for the sale by Pillsbury
to Seneca of six of the Pillsbury Plants (the "Sold Plants"), and the
closing of the remaining five Pillsbury Plants, on the condition that,
among other things, Pillsbury and Seneca enter into this Alliance
Agreement;
WHEREAS, upon such sale, Pillsbury desires to have, and Seneca
desires to provide to Pillsbury, a long-term, strategic supply alliance for
the Products;
WHEREAS, following such sale, Seneca intends to provide Pillsbury
with such long-term, strategic alliance supply from the Seneca Plants and
the Sold Plants under this Agreement. As identified on Exhibit A hereto,
the Seneca Plants and the Sold Plants located in the Midwest and Northwest
are collectively referred to herein as the "Central Division Plants," the
Seneca Plants located in the Northeast which will be producing Products
under the terms of this Agreement are collectively referred to herein as
the "Eastern Division Plants" and the Central Division Plants and the
Eastern Division Plants are collectively referred to herein as the
"Alliance Plants";
WHEREAS, Pillsbury understands that, to improve the cost
structure of the strategic alliance, the parties need to maximize
production of Product through the Central Division Plants. Pillsbury
intends to use the Alliance Plants as the primary provider of Product, so
long as the Central Division Plants are the low-cost provider of Product in
the aggregate to Pillsbury, in order to assist in maximizing such
production;
WHEREAS, Pillsbury and Seneca wish to set forth herein their
agreement with respect to the terms and conditions under which Seneca will
supply the Products to Pillsbury from the Alliance Plants; and
WHEREAS, the parties understand that their relationship is
strategic in nature and is intended to provide long-term value for each
party; and that the parties desire a strategic alliance that recognizes the
importance of flexibility, open communication, and management time and
commitment.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
DEFINITIONS
As used herein, the following terms shall have the
following meanings:
"Acceptable Cases" means Equivalent Cases of
Product from an Approved Plant, which Equivalent Cases Pillsbury has
determined meet or exceed all of the requirements set forth in the Quality
Documents.
"Accounting Procedures" means, collectively, the
accounting principles and procedures governing all aspects of accounting
for the expenses, depreciation, overhead charges, pricing of the Products
and any other accounting elements of the parties' arrangements under this
Agreement, as set forth in Exhibit B hereto.
"Agreement" means this Alliance Agreement.
"Alliance Plants" means, collectively, the Central
Division Plants and the Eastern Division Plants, as described on Exhibit A
hereto.
"Ancillary Services" means special services such
as sample requests and other activities not directly contributing to
Product production which are requested by Pillsbury and performed by
Seneca.
"Annual Incentive Payment" means the annual
incentive payment payable by Pillsbury to Seneca in accordance with the
terms of Section 8.1 hereof.
"Annual Pack Plan" means Pillsbury's annual
projected volume requirements for all Products to be produced at the
Alliance Plants for any Fiscal Year, identifying such requests separately
for each Division and by seed type for each major crop category, in the
form delivered by Pillsbury to Seneca on or before December 1 of the
immediately preceding Fiscal Year.
"Approved Plant" means Alliance Plants approved by
Pillsbury pursuant to Section 10.2 hereof.
"ARB" means the Alliance Review Board to be
established by the parties pursuant to Section 18.1 hereof. The ARB shall
have the authority, except as to matters with respect to which the SRB has
authority, to make tactical decisions regarding the business arrangements
between the parties.
"Balance Amount" has the meaning set forth in
Section 6.4 hereof.
"Central Division" means the operations and
business conducted at the Central Division Plants.
"Central Division Plants" means, collectively, the
Seneca Plants and the Sold Plants located in the Midwest and Northwest,
which are identified on Exhibit A hereto.
"Central Product Cases" means the actual number of
Acceptable Cases of all Products produced by Seneca for Pillsbury at the
Central Division Plants and shipped therefrom during the Initial Period
and, thereafter, the immediately preceding Fiscal Year.
"Central Seneca Cases" means, for the Central
Division, the actual number of Equivalent Cases of all products produced by
Seneca for itself and for third parties at the Central Division Plants
during the Initial Period and, thereafter, each immediately preceding
Fiscal Year.
"Change in Control" shall mean:
(a) the public announcement (which, for purposes
of this definition, shall include, without limitation, a report
filed pursuant to Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that any person, entity or
"group," within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, which is not, on the date hereof, the
beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of the combined voting
power of Seneca's then outstanding voting securities has become
such a beneficial owner in a transaction or series of
transactions; or
(b) the shareholders of a corporation shall have
approved: (i) any consolidation or merger in which such
corporation is not the continuing or surviving corporation or
pursuant to which shares of such corporation's stock would be
converted into cash, securities or other property, other than a
merger of such corporation in which shareholders immediately
prior to the merger continue to be the beneficial owner of voting
securities sufficient to maintain voting control of the surviving
corporation immediately after the merger; (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets
of such corporation; or (iii) any plan of liquidation or
dissolution of such corporation.
"Conversion Schedule" means the conversion
schedule set forth in Exhibit D hereto.
"Divisions" means the Central Division and the
Eastern Division, collectively.
"Eastern Division" means the operations and
business conducted at the Eastern Division Plants.
"Eastern Division Plants" means, collectively,
the Seneca Plants located in the Northeast which will be producing Products
under the terms of this Agreement, all of which are identified on Exhibit A
hereto.
"Eastern Product Cases" means the actual number of
Acceptable Cases of all Products produced by Seneca for Pillsbury at the
Eastern Division Plants and shipped therefrom during the Initial Period
and, thereafter, the immediately preceding Fiscal Year.
"Eastern Seneca Cases" means the actual number of
Equivalent Cases of all products produced by Seneca for itself and for
third parties at the Eastern Division Plants during the Initial Period and,
thereafter, each immediately preceding Fiscal Year.
"ED Can Differential" means, to the extent can
supplies are manufactured, or purchased by Seneca especially for use, in
the Eastern Division, the incremental cost (on a per Equivalent Case basis)
of such cans over the actual Central Division can costs of Seneca for the
Products (identified by SKU) produced at the Eastern Division Plants.
"Effective Date" means the date on which this
Agreement becomes effective in accordance with Section 2.2 of this
Agreement.
"Equivalent Case" shall mean a case containing 24
cans each, having standard 300 x 407 dimensions, or an equivalent amount of
Product determined pursuant to the Conversion Schedule.
"Fiscal Year" means the consecutive 12-month
period beginning on April 1 and ending on the following March 31 of each
year following the Initial Period.
"FME" means, for any Product (identified by SKU),
the aggregate fixed manufacturing expenses plus the aggregate warehousing
costs for such Product at the Central Division Plant or Plants at which
such Product was produced for a Fiscal Year, as more particularly described
in the Accounting Procedures.
"FME Holiday Amount" has the meaning set forth in
Section 3.4(b) hereof.
"Freight Charge" means the cost to Seneca of
shipping Product from any Alliance Plant to the destination designated by
Pillsbury. The Freight Charge shall apply only to Product with respect to
which Pillsbury requests Seneca to arrange shipping.
"Fully Allocated Costs" means, for any Product
(identified by SKU) produced at a Central Division Plant, the sum of the
(i) FME allocated to such Product per Equivalent Case for the Fiscal Year
in which the Product is produced plus (ii) Variable Costs per Equivalent
Case to manufacture such Product for such Fiscal Year.
"GMI" means Grand Metropolitan Incorporated, a
Delaware corporation.
"Information" means, collectively, specifications,
designs, plans, drawings, information, data, formulas, or other business or
technical information whether such information is provided in writing,
orally, by samples or by observation.
"Initial Period" means the period between the
Effective Date and March 31, 1996.
"Initial Product Inventory" means all finished
goods and frozen bulk inventory of Products located at any of the Sold
Plants as of the Effective Date.
[Section deleted per application for confidental treatment]
"Mandatory Capital" means capital expenditures
required to be made in any Sold Plant pursuant to any law, rule,
regulation, order or decree issued by any federal, or state or local
governmental authority having proper jurisdiction over such Sold Plant,
including the Environmental Protection Agency, the Department of Labor
(enforcing the Occupational Health and Safety Act) and the Food and Drug
Administration. The SRB shall decide whether a particular expenditure
constitutes a Mandatory Capital expenditure, and shall resolve all disputes
with respect thereto.
"Marks" means, collectively, each party's trade
names, logos, trademarks, service marks, trade devices, symbols, codes
specifications, abbreviations or registered marks or contractions or
simulations thereof.
"MIS" means management information systems.
"Net Free Cash Flow" means for any Fiscal Year,
the depreciation recognized in the Central Division, less the principal
payments made by Seneca on the Note during such Fiscal Year, less any
capital expenditures made by Seneca at any Central Division Plant during
such Fiscal Year that have been approved by the SRB.
"NonRCP Projects" means any capital expenditure
projects affecting any of the Central Division Plants that are not
specifically contemplated by the RCP.
"Note" means that certain promissory note defined
in the Sale Agreement as the "Note."
"Pack" means the annual harvest for each major
crop category.
[Section deleted per application for confidental treatment]
"Performance Goals" means the performance goals
relating to certain production and planning processes that are critically
important for Pillsbury's business requirements, which goals shall be
determined in accordance with the terms of Article XIII hereof.
"Pillsbury" means The Pillsbury Company, a
Delaware corporation.
"Pillsbury's Annual Commitment" means all
Acceptable Cases of Product produced by Seneca in conformity with the
Annual Pack Plan, as modified through May 15 of any Fiscal Year, agreed to
be purchased by Pillsbury in such Fiscal Year.
"Pillsbury Can Contracts" means the can supply
contracts identified in Exhibit E hereto.
"Pillsbury Plants" means, collectively, 11
vegetable processing and manufacturing facilities owned by Pillsbury and
located in the Midwest and Northwest areas of the United States.
"Private Label Product" means all vegetable
product produced by Seneca for resale to any third party, which is labelled
with a generic or other store brand name for such third party, and which is
intended to be sold to institutions or, ultimately, to retail consumers
primarily in supermarkets (or other retail food distribution outlets) owned
or operated by such third party.
"Processes" means production processes.
"Product Inventory" means the inventory of
finished Product produced at any Alliance Plant during the term hereof and
held by Seneca prior to sale to Pillsbury.
"Product Specifications" means those
specifications for producing Product constituting part of the Quality
Documents previously delivered by Pillsbury to Seneca, as such
specifications may be modified in accordance with the terms of this
Agreement.
"Products" means certain shelf-stable and frozen
vegetable products (consisting, on the date hereof, of peas, green beans,
corn, asparagus and dry bean products among others) under the Green Giantr
brands (the "Products") manufactured by Pillsbury at the Sold Plants as of
the date hereof.
"Proprietary Seed" means all vegetable seed
products developed by or for Pillsbury in which Pillsbury claims a
proprietary interest and which are used for growing raw vegetables for
Products.
"Quality Documents" means, collectively, the
Product Specifications, quality systems manual and other quality documents
provided to Seneca by Pillsbury and incorporated by reference herein.
"RCP" means that certain capital restructuring
program, a copy of which is attached hereto as Exhibit C, as modified from
time to time by the SRB.
"RCP Principal Balance" has the meaning set forth
in Section 7.2 hereof.
"Released Orders" means the production schedule
(of Product) developed by Seneca based upon Pillsbury's rolling, 12-week
demand forecast.
"Sale Agreement" means that certain Asset Purchase
Agreement, dated December 8, 1994, by and between Pillsbury and Seneca, as
amended as of February 10, 1995.
"Seneca" means Seneca Corporation, a New York
corporation.
"Seneca Effective Tax Rate" means Seneca's
effective United States and New York State combined corporate income tax
rate for any Fiscal Year.
"Seneca Inventory" means the following items of
inventory owned by Seneca: (i) inventories of supplies (including cans and
other containers, packaging materials, labels and ingredients) and
vegetable raw materials (including vegetable seed) in existence on the date
of termination of this Agreement that would have been used by Seneca to
fulfill its obligations to Pillsbury hereunder with respect to Pillsbury's
Annual Commitment then in effect if this Agreement were not terminated
(including all of Seneca's outstanding orders or contracts for the purchase
of such supplies and vegetable raw materials, which Seneca shall assign to
Pillsbury and Pillsbury shall accept and assume, to the extent assignable),
and (ii) fuels and other miscellaneous items located at the Sold Plants and
used in the maintenance or operation of any of the Sold Plants.
"Seneca Plants" means the 16 fruit and/or
vegetable processing and manufacturing facilities owned by Seneca and
located in the West, Midwest and Northeast areas of the United States.
"Seneca Projection" means, for any Fiscal Year,
the projection of vegetable products that Seneca projects to produce, both
for itself and for all third party entities contracting with Seneca to
manufacture, produce or package vegetable products at the Alliance Plants,
for such Fiscal Year.
"Services" means, collectively, sourcing the seed,
contracting with the growers, supervising the Pack, processing the
harvested vegetables, acquiring the Supplies, packaging, warehousing,
acquiring the labels, labeling and, as requested by Pillsbury, shipping the
Products.
"Sold Plants" means the six Pillsbury Plants to be
sold by Pillsbury to Seneca pursuant to the Sale Agreement.
"SRB" means the Strategic Review Board to be
established by the parties pursuant to Section 18.2 hereof. The SRB shall
have the authority to make all relevant decisions concerning RCP and NonRCP
Projects under consideration (including without limitation, budget,
timetable, scope of work and the effect, if any, upon Transfer Price
components), and to review and resolve all business, financial, strategic
or other unresolved issues or disputes arising under or related to this
Agreement.
"Standard Cost" means the estimated Fully
Allocated Costs of each Product (identified by SKU), as determined by the
parties as of each December 15th.
"Supplies" means all packaging materials
(including cans, slipsheets and labels) and operating supplies, such as
glue, tape, fumigants, in-plant materials, stretchwrap, tooling and set-up
charges, and any other supplies used in, or necessary for, the operations
of the Alliance Plants or the production of the Products.
"Total Pack" means the sum of the projected
volumes of all vegetable products identified in the Annual Pack Plan and
the Seneca Projections for a Fiscal Year, in each case, as initially
delivered on or before December 1 of the preceding Fiscal Year.
"Transfer Price" means, for any Product
(identified by SKU), the sum of (i) either the Fully Allocated Cost (if
known) or, if not known, the Standard Cost per Equivalent Case, for such
Product, plus (ii) the Per Case Tolling Fee.
"US GAAP" means generally accepted accounting
principles of the United States.
"Variable Costs" means, as calculated in
accordance with the Accounting Procedures, for any Product (identified by
SKU) produced at a Central Division Plant, the sum of all raw product costs
(from sourcing of seed to harvesting of vegetables) for such Product, plus
the cost of all ingredients used to process such Product at such Central
Division Plant, plus the costs of all Supplies used to package and label
such Product at such Central Division Plant, plus the direct labor used in
the production of such Product at such Central Division Plant.
ARTICLE I
SERVICES, SPECIFICATIONS AND ACCOUNTING PRINCIPLES
1.1 The Services. Seneca agrees to perform the
Services for Pillsbury at the Alliance Plants in strict compliance with all
of Pillsbury's specifications and requirements as provided by Pillsbury to
Seneca, as the same may be modified by Pillsbury from time to time in order
to anticipate or respond to (i) internal product development or marketing
factors or (ii) external customer requests or requirements or market
forces; provided that, Seneca shall have a commercially reasonable period
of time to adjust to the foregoing modifications. The parties agree that
the Services with respect to frozen vegetable Products include bulk frozen
vegetable handling for further use at other plants (including the Alliance
Plants) designated by Pillsbury, but do not include the process of putting
frozen vegetables into final form for sale to customers (which process may
be the subject of a separate agreement between the parties).
1.2 Specifications. Seneca agrees to provide the
Services for the Products in accordance with all specifications (including
the Product Specifications) provided by Pillsbury to Seneca as part of the
Quality Documents, which specifications may be amended by Pillsbury from
time to time in accordance with the first sentence of Section 1.1 hereof.
1.3 Additional Products. Upon mutual agreement,
additional products may be included within this Agreement from time to
time.
1.4 Accounting Principles. The Accounting
Procedures contemplate modifications thereto from time-to-time, as the
parties shall mutually agree. In general, the following principles shall
be included in, and be deemed a part of, the Accounting Procedures, until
further amended by the parties:
(a) The FME for the Central Division shall
include an "off-season" reserve to cover operational
contingencies which are a part of Seneca's operating budgets for
the Central Division. The off-season reserve shall be consistent
with similar reserves created by Seneca for the Seneca Plants
prior to the date of this Agreement. The off-season reserves
shall not exceed a specified amount to be agreed by the parties
on or before each December 15th (in accordance with the terms of
the Accounting Procedures) with respect to each Fiscal Year
immediately following such December 15th.
(b) The operating principle for the parties is
that Seneca will operate the Central Division during the term
hereof as a "cost center."
(c) Pillsbury's existing accounting policies
regarding capitalization of capital investments shall be adopted
by Seneca for purposes of calculating the effects on the Fully
Allocated Costs at the Central Division of Seneca's capital
investments in the Central Division Plants, as contemplated by
Article VII of this Agreement. Such policies may be changed from
time to time by mutual agreement of the parties.
ARTICLE II
TERM; EFFECTIVE DATE
2.1 Term. This Agreement shall become effective
on the Effective Date, shall continue for an initial term ending on
December 31, 2014, and shall automatically be extended for additional terms
of five years unless terminated in writing by one of the parties (other
than as provided in Section 19.1 hereof) upon written notice delivered by
one party to the other hereto, with the consequences set forth in Section
19.2(a) hereof. Such written notice shall, except as set forth below, be
effective upon the 12-month anniversary thereof and may be delivered at any
time, but must be delivered at least 12 months in advance of the last day
of the initial term or any additional five-year term. Accordingly, if
either party gives written notice of termination (other than pursuant to
Section 19.1) when the remaining period of the initial term or any
five-year extension thereof is less than 12 months, this Agreement shall
automatically be extended for an additional five-year term.
2.2 Effective Date. This Agreement shall become
effective as of the "Closing" on the "Closing Date" (as each such term is
defined in the Sale Agreement). In the event the Sale Agreement is
terminated prior to the Closing, this Agreement shall be void.
ARTICLE III
PRICE AND PAYMENT TERMS
3.1 General Pricing Principles. The following
principles shall apply to determining all Transfer Prices hereunder:
(a) The Transfer Prices paid by Pillsbury to
Seneca for Acceptable Cases of Products [Section deleted per
application for confidental treatment] and shall be calculated
separately for each type of Product (identified by SKU) produced
at the Central Division Plants, all as further described in this
Article III.
(b) Standard Costs for each type of Product
(identified by SKU) shall be based upon Seneca's good faith
estimates (as determined in accordance with the Accounting
Procedures) of the Fully Allocated Costs prior to the start of
each Fiscal Year based on the prior Fiscal Year's Fully Allocated
Costs (as adjusted for inflation and reasonable projections of
future costs) for such Product, and of the Annual Pack Plan and
the Seneca Projection for the Central Division for such Fiscal
Year. On or before the April 1st of each Fiscal Year, the parties
shall agree on the Standard Costs for each Product (identified by
SKU), and the ED Can Differential, for the Fiscal Year.
(c) As soon as is reasonably practicable, the
Fully Allocated Costs of a Product (identified by SKU) shall
replace the Standard Cost in the Transfer Price for such
Product.
(d) On or before May 31 of the following Fiscal
Year, the parties shall calculate the actual amount of Acceptable
Cases of each Product (identified by SKU) produced, the actual
Transfer Price therefor and the ED Can Differential in the
immediately preceding Fiscal Year, and reconcile the overpayments
or underpayments made during the preceding Fiscal Year in the
manner set forth in Section 3.6(c) hereof.
(e) All frozen vegetable Products (and third
party frozen vegetable products) produced by the Central Division
shall be converted to Equivalent Cases in accordance with the
Conversion Schedule. All other Products produced by the Central
Division that are not packaged in standard-sized cans of 300 x
407 dimensions shall also be converted into Equivalent Cases in
accordance with the terms of the Conversion Schedule. The
Conversion Schedule shall also be used, as necessary, with
respect to frozen vegetable and other Products produced by the
Eastern Division.
(f) All Fully Allocated Cost factors shall be
determined from the books and records of Seneca maintained in
accordance with US GAAP, as more specifically described in the
Accounting Procedures.
(g) Notwithstanding anything to the contrary set
forth in this Agreement, all corporate overhead costs of Seneca
incurred through or on behalf of Seneca's Pittsford, New York
corporate headquarters, including without limitation, the costs
incurred by its corporate management, sales and marketing
organization (wherever located) and its finance, customer
service, MIS, legal, accounting, human resource and other,
similar groups shall be excluded, for all purposes, from the
calculations and determinations of all Product costs and Transfer
Prices hereunder.
3.2 Central Division Transfer Prices. The price
charged by Seneca to Pillsbury for all Acceptable Cases of Products
(identified by SKU) produced at the Central Division Plants shall be equal
to the Transfer Prices for such Products then in effect, and the Fully
Allocated Costs with respect to each such Transfer Price shall be the same
for identical products (identified by SKU) produced by Seneca at the
Central Division Plants for use in Seneca's business. Freight Charges, if
any, applicable to the invoiced Acceptable Cases of Product will be
invoiced separately by Seneca. In addition, as described in Section 3.6(b)
below, Pillsbury shall separately pay the Management Fee.
3.3 Eastern Division Transfer Prices. The price
charged by Seneca to Pillsbury for all Acceptable Cases of Products
(identified by SKU) produced at any Eastern Division Plant shall be
calculated by [Section deleted per application for confidental
treatment]adding per Equivalent Case to the
Transfer Prices for such Products then in effect. In addition, to the
extent can supplies are manufactured, or purchased by Seneca especially for
use, in the Eastern Division, Seneca shall include in its invoice to
Pillsbury the ED Can Differential.
3.4 Special Pricing Exceptions.
(a) Non-Vegetable Costs. Notwithstanding any
other provision of this Agreement to the contrary, all costs and
expenses of the Central Division (including without limitation,
FME, variable manufacturing costs, overhead and depreciation
charges) that are not related to the delivery of the Services to
Pillsbury (with respect to the Products) or to the manufacture
and production of vegetable products for Seneca or other, third
party customers of Seneca shall, for purposes of this Agreement,
be deemed not to constitute a part of the costs of the Central
Division and shall, instead, be allocated by Seneca to the costs
of the Eastern Division. The determination of whether any costs
constitute "non-vegetable costs" for purposes of this Section
3.4(a) shall be made by the SRB. The calculation of such
non-vegetable product costs shall be made in accordance with the
Accounting Procedures.
[Section deleted per application for confidental treatment]
[Section deleted per application for confidental treatment]
(d) Bulk Asparagus Transfers. Seneca understands
that Pillsbury currently transfers bulk, trimmed and unprocessed
asparagus from the Sold Plant located in Dayton, Washington to
Pillsbury's Canadian division at cost. Seneca hereby agrees to
continue to provide bulk, trimmed and unprocessed asparagus to
the Canadian division of Pillsbury as and when requested by the
Canadian division (in the same manner as the Canadian division
currently makes such request) at a price equal to Fully Allocated
Cost for such bulk asparagus, in accordance with the Accounting
Procedures.
3.5 Price Assumptions; Title Transfer.
(a) Seneca shall provide, at its expense (to be
included in the Transfer Price), all components of Variable
Costs.
(b) The Transfer Prices include all costs of
maintaining and operating the Alliance Plants, including all
production costs, packaging and packing services, Supplies,
materials, receiving services, administrative services, quality
assurance testing and inventory control procedures needed to
source, process, manufacture, package and label the Products and
provide information to Pillsbury in accordance with all of
Pillsbury's specifications and requirements as provided by
Pillsbury to Seneca. There are no fees, equipment costs or
facility costs of the Alliance Plants (other than Pillsbury's pro
rata share of those incurred by the Central Division, which are
included in the Transfer Prices) to be paid by Pillsbury, other
than the inventory warehousing charges described in Article VI
hereof and other than for Ancillary Services, as defined in 3.7
below.
(c) Seneca shall pay for ingredients and
Supplies, and, except as otherwise expressly set forth in the
second sentence of Section 6.1 hereof, or in Section 6.2 hereof
or in the last sentence of Section 6.3 hereof, or in Section 6.4
hereof, freight, warehouse storage and handling, and Product
storage and handling. Except as otherwise set forth in Section
6.3 hereof, title to the finished Products delivered by Seneca to
Pillsbury shall transfer [Section deleted per application for
confidental treatment] (whether shipment is by truck or rail).
3.6 Payment Terms.
(a) Product Invoices. Except as otherwise
contemplated by Section 6.3 hereof, Seneca shall invoice
Pillsbury at the time of shipment of Products from any Alliance
Plant for all Acceptable Cases of Product produced hereunder.
The invoice shall identify the applicable Transfer Prices for the
shipped Product. Terms of payment shall be net fifteen (15) days
from the date of invoice. Payment shall be made by wire transfer
of immediately available funds to an account designated by
Seneca. Invoices not paid within 15 days of the date thereof
shall accrue interest at the rate of one percent (1%) per month.
Accrued interest will be paid by wire transfer of immediately
available funds to an account designated by Seneca; such accrued
interest will not be accounted for as revenues of the Central
Division, but shall be deemed corporate revenues of Seneca. The
invoice will reference item code and product name, number of
Acceptable Cases, Transfer Prices and amount due.
(b) Management Fee Invoices. In addition to the
invoices described in Section 3.6(a) above, Seneca shall invoice
Pillsbury on a calendar quarterly basis for the aggregate
Management Fee for the preceding calendar quarter, as reconciled
for each calendar quarter in accordance with this Section 3.6(b).
Each quarterly payment shall be made by wire transfer of
immediately available United States funds (to an account
designated by Seneca to Pillsbury) on the first business day of
the calendar month immediately following the end of each such
calendar quarter (i.e., April 1, July 1, October 1, January 1, or
the next business day thereafter). On or before the 15th day of
the calendar month following the end of each calendar quarter
hereafter, Seneca and Pillsbury shall reconcile any material
overpayment or underpayment of the Management Fee for the
preceding calendar quarter.
(c) Year-End Reconciliation Procedures. On or
before the May 31st following the end of the Initial Period, and
of each Fiscal Year thereafter, Seneca shall compute (and
Pillsbury shall approve), in accordance with the Accounting
Procedures, the Central Product Cases, the Eastern Product Cases,
the Central Seneca Cases and the Eastern Seneca Cases. In
addition, on or before May 31st of each Fiscal Year, Seneca shall
determine (and Pillsbury shall approve) the actual Transfer
Prices for each Product (by SKU) in accordance with the terms of
the Accounting Procedures, utilizing the Central Product Cases
and Central Seneca Cases for such relevant time period. If
Pillsbury has underpaid Seneca for the aggregate of all
Acceptable Cases of Products produced in the preceding Fiscal
Year (or Initial Period) by Seneca at the Alliance Plants and
shipped therefrom, then Seneca will invoice Pillsbury for the
amount of such underpayment and Pillsbury will (subject to its
rights to audit and dispute such amounts set forth in the
Accounting Procedures) pay such amount within thirty (30) days of
the invoice date. If Pillsbury has overpaid Seneca for the
aggregate of such Acceptable Cases, Seneca shall refund such
overpaid amounts within 30 days after such computation. No
interest shall accrue to either party for any amount that the
actual aggregate Transfer Prices have been overpaid or underpaid
for such period. The parties intend that the result of the
aggregate payments made by Pillsbury to Seneca for any Fiscal
Year, after giving effect to the foregoing year-end
reconciliation, is that Seneca shall have realized a profit of
[Section deleted per application for confidental treatment]
per Acceptable Case of Product produced for such Fiscal Year
(exclusive of any Annual Incentive Payments paid pursuant to
Section 8.1 hereof).
(d) "Open Book Policy". Seneca understands and
agrees that this Agreement requires Seneca to maintain complete
and accurate books and records with respect to the Central
Division (and, solely to enable Pillsbury to audit the ED Can
Differential determinations, the Eastern Division) in accordance
with US GAAP, and to maintain them on an "open book" basis.
Therefore, for a period of at least seven years after each March
31st during the term of this Agreement, Seneca shall maintain
complete and accurate accounting books and records in accordance
with standard accounting practices to substantiate all Transfer
Price components for the Central Division, and the ED Can
Differential for the Eastern Division, for the Fiscal Year ending
on such March 31st, and any proposed year-end adjustments
thereto. Seneca shall make such records available to Pillsbury
or Pillsbury's agents to the extent necessary to enable Pillsbury
to verify, to Pillsbury's satisfaction, the Transfer Prices and
the ED Can Differential and otherwise support all Transfer Price
components, all as more fully described in the Accounting
Procedures.
(e) Shrinkage. Product shrinkage during the
packaging and warehousing stages of production occurring within
the aggregate limits set forth in Exhibit F will be charged to
Variable Costs, for purposes of calculating Fully Allocated
Costs, in accordance with the terms of the Accounting Procedures.
Seneca shall be responsible for Product shrinkage during the
packaging and warehousing stages of production in excess of the
aggregate limits set forth in the attached Exhibit F (and shall
not include costs related thereto in Fully Allocated Costs). Any
Product that is not accepted by Pillsbury for failure to meet the
Product Specifications required for Acceptable Cases will not be
paid for by Pillsbury and the costs thereof shall be excluded
from the Central Division costs, to the extent said costs exceed
the agreed upon shrinkage rate. The parties agree that such
amounts shall initially be similar to Pillsbury's actual
experience for similar products at the Sold Plants prior to the
date hereof. On or before each December 1st, the parties shall
agree upon the expected shrinkage performance amounts for the
upcoming Fiscal Year and such amounts shall be attached hereto
and incorporated herein as amended Exhibit F.
(f) Yields and Recoveries. Seneca agrees to use
its best efforts to maximize yields and recoveries of raw
materials used in the production of Products for each Product
(identified by SKU) in each geographic area. Pillsbury
understands that force majeure events, the most common of which
is weather, may affect Seneca's ability to achieve specific
yields and recoveries for any Product in any given Pack.
Therefore, the parties agree that Seneca shall be obligated at
all times during the term of this Agreement to achieve, for any
Pack, yields and recoveries for each Product (identified by SKU)
in each geographic area that are at least equal to normal
industry standards for such Products in such geographic areas.
3.7 Ancillary Services and Other Special
Services. The Product prices described above exclude costs of the
Ancillary Services. The SRB shall agree in writing on prices for Ancillary
Services. Invoices for Ancillary Services shall be paid net thirty (30)
days from the date of invoice, provided that an explanation of charges and
supporting documents accompany the invoice.
3.8 Pillsbury Right of Offset. During the term
of this Agreement, and so long as the Note (including any refinancing
thereof) remains outstanding, Pillsbury shall have the right, without
notice or demand therefor, to offset against any payment or payments to be
made by Pillsbury to Seneca under this Agreement the full amount of all
interest due and owing at any time under the terms of the Note (and any
refinancing thereof). Delay or failure to act by Pillsbury shall not
preclude the exercise or enforcement of Pillsbury's rights and remedies
under this Section 3.8, and no waiver of such rights and remedies shall be
effective unless such waiver is delivered in a writing duly executed by an
authorized officer of Pillsbury.
As set forth in the preceding paragraph, Pillsbury
shall be entitled to offset, in accordance with the terms of such preceding
paragraph, any accrued but unpaid interest under the Note that has become
due and payable. Pillsbury, however, shall not, under any circumstances,
be entitled to offset any payments of principal under the Note (whether or
not past due) pursuant to such preceding paragraph, or, so long as any
"Senior Indebtedness" (as defined in the Note) is outstanding, any common
law, contractual or statutory right (including any such right pursuant to
the Bankruptcy Code of 1978, as amended (the "Bankruptcy Code")) or
otherwise, nor, so long as any Senior Indebtedness is outstanding, may any
principal obligation under the Note be satisfied pursuant to any
counterclaim against Seneca held by Pillsbury; and Pillsbury hereby
irrevocably waives (solely for the benefit of the "Senior Creditors" (as
defined in the Note) and not for the benefit of Seneca) any right to assert
any such rights of offset or counterclaim as they relate to the repayment
or recovery of principal due under the Note (but the foregoing waiver shall
not affect Pillsbury's rights, if any, to offset or counterclaim with
respect to any other amounts owed to Pillsbury by Seneca under any other
instrument or agreement).
ARTICLE IV
VOLUME
4.1 Annual Pack Plan. Pillsbury shall deliver to
Seneca its projected Product volume requirements from the Alliance Plants
for each Fiscal Year as follows:
(a) On or before December 1st of each Fiscal Year
after the date hereof, Pillsbury shall supply to Seneca
Pillsbury's Annual Pack Plan for the next succeeding Fiscal Year.
(b) On or before the January 10th following the
initial submission of the Annual Pack Plan, Pillsbury will
provide Seneca with all significant adjustments to the projected
volumes set forth in such Annual Pack Plan.
(c) On or before the immediately succeeding March
15th (and, in all events, before planting of the vegetable crops
for that Fiscal Year's Products has begun), Pillsbury will
complete its review of the projected Product mix set forth in the
Annual Pack Plan and will notify Seneca of changes to the
projected Product mix resulting from such review. Pillsbury
acknowledges that, by March 15th, there will be little
opportunity for Seneca to alter the acreage under contract to be
planted with respect to the Products for such Fiscal Year.
(d) On or before the immediately succeeding May
15th (and, in all events, before the Pack for that Fiscal Year's
Products has begun), Pillsbury will submit to Seneca its
additional, minor adjustments to the Product mix (identifying all
such changes by seed type and Division).
(e) Thereafter, as the Pack for such Fiscal Year
is progressing, Pillsbury shall be entitled to seek further
adjustments in the Product mix as circumstances warrant.
(f) Seneca shall identify and provide reasonable
written notice to Pillsbury of any potential capacity or
operational conflicts as a result of the Annual Pack Plan. The
parties agree to use all reasonable efforts to alleviate such
conflicts, including altering inventory targets, building or
depleting inventory and switching production to other Alliance
Plants or facilities. However, Pillsbury shall, at all times
during the term of this Agreement, have first priority for
production capacity in the Alliance Plants for volume as set
forth in Exhibit G.
4.2 Seneca Projection. Seneca shall follow the
same requirements as are set forth in Section 4.1(a) above with respect to
the annual Seneca Projection. The Seneca Projection for the Initial Period
shall be delivered on or before the Effective Date.
4.3 Pillsbury's Purchase Commitment. For any
Fiscal Year, Pillsbury agrees to purchase Pillsbury's Annual Commitment.
4.4 Pack and Commitment Variations. The parties
understand and agree that the parties' ability to meet the projected volume
of product set forth in the Total Pack (and, therefore, Pillsbury's Annual
Commitment) are subject to variations due to force majeure events, the most
common of which is weather. Therefore, the parties agree to pro rate both
shortages and surpluses (in each case, of "Extra-Standard" and/or "Fancy"
quality product (as such terms are commonly understood in the vegetable
processing industry)) in the Total Pack for any Fiscal Year in direct
proportion to the parties' respective Annual Pack Plan and Seneca
Projections in effect on the December 1 of the preceding Fiscal Year.
Shortages and surpluses (in each case, of "Extra-Standard" and/or "Fancy"
quality product (as such terms are commonly understood in the vegetable
processing industry)) in the Total Pack shall be measured by major crop
category covered by this Agreement and separately for each of the Central
Division and the Eastern Division.
Seneca shall use its good faith efforts to
cooperate closely with Pillsbury to revise Product mix in years of Product
shortages, as may be reasonably requested by Pillsbury. In addition, at
Pillsbury's request, Seneca agrees to sell any "Extra-Standard" quality
Product upon terms to be mutually agreed.
4.5 Dry Bean Production. Pillsbury shall be
responsible for the production of dry bean Products until Pillsbury's
production of dry bean Products in 1995 has ceased. Thereafter, at
Pillsbury's request, Seneca shall be responsible for production of dry bean
Products after allowing for a reasonable period of time to transfer the
equipment with respect to dry bean Products to one or more Central Division
Plants.
ARTICLE V
FINISHED PRODUCT SCHEDULING
5.1 Finished Product Scheduling.
(a) Seneca shall be responsible for producing
sufficient labelled Product to maintain Pillsbury's demand
forecast.
(b) Pillsbury shall provide Seneca, on a daily
basis, with a rolling 12-week demand forecast, specified by
individual Product at the SKU level. Seneca shall then calculate
the Released Orders for each Alliance Plant that will meet the
demand forecast for each Product. Seneca shall transmit to
Pillsbury each day, via electronic data interchange, daily
production and labeling performance, as well as the Released
Orders for the next one-to-two week time period.
(c) Seneca shall use its best efforts to produce
according to the Released Orders transmitted to Pillsbury.
Seneca shall notify Pillsbury promptly if the actual case fill
rate of Acceptable Cases for any Released Order is less than
100%.
(d) Seneca shall take all necessary steps to
produce Product to meet Pillsbury's demand forecast. The parties
agree to submit for SRB review and assessment Pillsbury's
increased costs or expenses that result from Seneca's failure to
maintain adequate labelled inventory levels to meet demand
forecasts, and Seneca's increased costs that result from
extraordinary steps taken by Seneca to maintain adequate labelled
inventory levels to meet demand forecasts.
5.2 Labelling Capacity Requirements. Pillsbury
shall provide Seneca on a monthly basis a rolling 12-month labelled
finished Product demand forecast. Seneca shall identify and provide
reasonable written notice to Pillsbury of any potential labelling capacity
issues. The parties agree to use all reasonable efforts to alleviate such
issues, including altering labelled finished Product Inventory targets,
building or depleting inventory and switching production to other plants or
facilities. However, Pillsbury shall at all times have first priority for
labelled finished Product production capacity in the Alliance Plants as set
forth in Exhibit H.
5.3 Packaging Supplies.
(a) Seneca shall maintain at each Alliance Plant
appropriate inventory to ensure that packaging Supplies are
available to support the production of Released Orders.
(b) Seneca shall notify Pillsbury of any
packaging Supplies which do not conform to the Product
Specifications. In addition, Seneca shall notify Pillsbury of
any supplier problems or inventory difficulties, but Seneca shall
not be responsible for expenses incurred by Pillsbury with
respect to packaging Supplies for causes beyond Seneca's control.
(c) Unless otherwise requested, Seneca shall
receive all packaging Supplies upon arrival at the Plants and
shall transmit to Pillsbury on a daily basis all requested
information regarding receipt of packaging Supplies at each
Plant, including but not limited to the following:
(i) receipt date;
(ii) vendor name;
(iii) quantity received;
(iv) Pillsbury specification number;
(v) Pillsbury purchase order number; and
(vi) such other information as is reasonably
requested by Pillsbury.
ARTICLE VI
INVENTORY MANAGEMENT
6.1 Initial Product Inventory. Pursuant to the
terms of the Sale Agreement, all Initial Product Inventory shall remain the
property of Pillsbury. The cost of labelling and handling the Initial
Product Inventory shall be charged to Pillsbury when the Initial Product
Inventory is shipped to Pillsbury.
Seneca shall maintain all Initial Product
Inventory at the respective Sold Plant at which it is presently located in
conformity with the terms therefor contained in the "Quality Documents"
(defined in Section 9.1 hereof) previously delivered by Pillsbury to
Seneca. So long as Seneca observes such terms, the risk of loss for the
Initial Product Inventory shall remain with Pillsbury. Seneca shall ship
the Initial Product Inventory in accordance with Section 6.4 hereof.
6.2 Warehousing Cost. Except as otherwise set
forth in Section 6.1 above or in Section 6.3 below, Seneca shall retain
title to all Product Inventory until the date of shipment thereof from an
Alliance Plant to the destination designated by Pillsbury. Until such
shipment, Seneca shall store and handle all Product Inventory in conformity
with the terms contained in the Quality Documents. The warehousing cost
charged hereunder for each Product in the Pack to occur in each Fiscal Year
shall be included in the Standard Cost for such Product for such Fiscal
Year.
6.3 Sale of Products to Pillsbury. Product
Inventory from the prior Pack which remains unsold as of the dates set
forth in Exhibit I hereto shall be sold, and title shall pass, to Pillsbury
as of each such date at the actual Transfer Prices for the applicable
Products (identified by SKU) in effect for such prior Fiscal Year
(determined pursuant to the terms of Section 3.6(c) hereof and the
Accounting Procedures). Terms of payment shall be net fifteen (15) days
of the date of invoice. The risk of loss and insurance liability for all
Product Inventory sold to Pillsbury pursuant to the terms of this Section
6.3 shall remain with Seneca after the date of sale hereunder, until such
Product Inventory is shipped [Section deleted per application for
confidental treatment]; provided that, Seneca
shall not be responsible for degradation in quality of frozen bulk
vegetable Product Inventory due solely to the passage of time so long as
Seneca observes the terms contained in the Quality Documents with respect
to storage and handling of such Product. The monthly warehousing cost for
Product Inventory from the prior Pack which remains unsold as of the dates
set forth in Exhibit I hereto will be equal to [Section deleted per
application for confidental treatment] of the annual
warehousing costs (including insurance costs applicable thereto) agreed
upon pursuant to Section 6.2 above.
6.4 Inventory Shipping. In general, Pillsbury
intends to have Product Inventory shipped [Section deleted per application
for confidental treatment]. As and when
requested by Pillsbury, however, Seneca shall ship designated Product from
the identified Alliance Plant to the destination designated by Pillsbury in
strict compliance with Pillsbury's notice. Pillsbury's notice shall
designate the carrier, the amount of Product (by SKU) to be shipped, pallet
or shipment configuration, date and time of shipment and delivery, and
destination point. If applicable, Seneca will invoice Pillsbury at the
time of shipment in the amount of the applicable Freight Charge for the
Product shipped pursuant to Seller's request. If applicable, terms of
payment shall be net fifteen (15) days of the date of invoice.
6.5 Negative Pledge. During the term of this
Agreement and except as otherwise required by applicable federal law,
Seneca shall not agree with or consent to or otherwise permit any third
party to take or maintain any lien, security interest, mortgage, pledge or
other encumbrance upon any (i) finished Product or (ii) frozen bulk
vegetables held for use by Pillsbury.
ARTICLE VII
CAPITAL EXPENDITURES
7.1 Restructuring Capital Plan. In order to
achieve the operating and production goals of the parties under this
Agreement, Seneca acknowledges that significant, long-term capital
investment will be required to be made in the Sold Plants. The RCP
contemplates a capital expense of approximately $50 million (U.S.) over a
period of two years. Subject to any differing determination of the SRB,
Seneca shall be solely responsible for managing the capital projects
outlined in the RCP at the Alliance Plants.
The aggregate estimated capital costs of the RCP
include, for each project, the costs of purchasing and installing new
equipment and any refurbishment of the Sold Plants necessary to accommodate
such equipment. With respect to any identified RCP project, the SRB shall
prepare and agree (prior to the commencement of such project) upon a
project memorandum which sets forth the total capital cost of such project,
a timetable, milestones and a project cash flow. If actual costs for the
RCP projects in the aggregate exceed $50 million (U.S.), Seneca shall be
solely responsible for such costs and shall not, directly or indirectly,
include such costs in its bills, invoices or other requests for payment
(including Product invoices) to Pillsbury under this Agreement. In
addition, if actual costs for the RCP projects with respect to any Central
Division Plants, in the aggregate, exceed [Section deleted per application
for confidental treatment], Seneca shall be solely
responsible for all depreciation charges with respect thereto and shall
not, directly or indirectly, include such costs in its bills, invoices or
other requests for payment (including Product invoices) to Pillsbury under
this Agreement.
7.2 Amortization of RCP Investment. Any Annual
Incentive Payments received by Seneca pursuant to Section 8.1 hereof shall,
after deducting taxes payable thereon (using the Seneca Effective Tax Rate
for the Initial Period or such Fiscal Year), be deemed to have been used by
Seneca to repay, on the date received by Seneca, principal on any amounts
of indebtedness then outstanding with respect to the RCP ("RCP Principal
Balance"). From January 1, 2001 until the RCP Principal Balance has been
fully retired by Seneca, Seneca shall be deemed to have repaid, on March 31
of each Fiscal Year, the RCP Principal Balance by an amount equal to the
Net Free Cash Flow generated from the preceding Fiscal Year. From January
1, 2005 until the RCP Principal Balance has been fully retired by Seneca,
Seneca shall be deemed to have repaid, on March 31 of each Fiscal Year
thereafter, in addition to Net Free Cash Flow, the following amount to
repay the RCP Principal Balance: an amount equal to (i) the aggregate
amount of the Per Case Tolling Fee for all Acceptable Cases of Product
invoiced by Seneca to Pillsbury in the preceding Fiscal Year less (ii) the
product of such aggregate amount multiplied by the Seneca Effective Tax
Rate for such Fiscal Year.
7.3 NonRCP Projects. Approval of any NonRCP
Projects shall be the sole responsibility of the SRB. Seneca shall fund
the costs of such projects. To the extent agreed by the SRB, the
depreciation related to such NonRCP capital expenditures shall be included
in the Transfer Price calculations more fully described in Article III of
this Agreement.
7.4 Mandatory Capital Investments. If Seneca is
required to make a Mandatory Capital investment during the term of this
Agreement, then Seneca shall just satisfy such investment from Net Free
Cash Flow. If such source provides insufficient funds to satisfy the
required Mandatory Capital investment, Pillsbury shall make a cash payment
to Seneca in an amount equal to such funding deficiency (the "Balance
Amount"). As Seneca depreciates the Balance Amount portion of such
Mandatory Capital investment (which depreciation shall be determined in
accordance with the terms of the Accounting Procedures), it shall provide
Pillsbury with a credit against Pillsbury's purchases of Products hereunder
up to the full amount of such depreciation.
7.5 Sales Tax Refunds. Seneca agrees to apply
for any refunds or rebates available to it under applicable state or local
laws, regulations or ordinances with respect to the payment of sales taxes
related to any capital expenditures contemplated by the RCP or as otherwise
approved by the SRB (including NonRCP Project). To the extent that Seneca
obtains any such refunds or rebates, Seneca shall apply them, on the books
and records of Seneca in accordance with US GAAP as consistently applied,
to reduce the value of the capital asset in the Central Division for which
the subject capital expenditure was made, and shall be deemed to have
reduced the outstanding principal balance (if any) of the indebtedness
which funded such capital expenditure.
ARTICLE VIII
COST REDUCTIONS
8.1 Cost Reduction Incentives. During the period
beginning on the Effective Date and ending March 31, 2000 (and assuming
this Agreement is still in effect), Seneca shall receive an Annual
Incentive Payment from Pillsbury if Seneca exceeds, in the aggregate,
certain annual cost-saving targets for the operations of the Central
Division Plants and savings from logistics benefits which accrue to
Pillsbury from production in the Eastern Division Plants. The Annual
Incentive Payments for the Initial Period or Fiscal Year shall equal
[Section deleted per application for confidental treatment]
of the amount by which Seneca exceeds the annual cost savings targets for
the Initial Period or for such Fiscal Year. Attached hereto as Exhibit J
is a schedule of the annual targeted cost-savings and a related schedule of
Annual Incentive Payments. The Initial Period and each Fiscal Year
thereafter shall be treated as separate time periods (with no carryforward
or carry-back of cost-savings across time periods), for purposes of
calculating the Annual Incentive Payment due Seneca for each period. The
calculations of the costs for each targeted category shall be determined in
accordance with the Accounting Procedures.
[Section deleted per application for confidental treatment]
ARTICLE IX
INSURANCE, TITLE AND RISK OF LOSS
9.1 Title; Risk of Loss. Seneca shall have title
to all ingredients, Supplies, work-in-progress and finished Products. In
addition, Seneca shall have the risk of loss of ingredients and Supplies.
Seneca shall also have the risk of loss of work-in-progress and finished
Products until the finished Products are in transit for delivery to the
destination designated by Pillsbury. The costs of the insurance deductible
payable by Seneca for lost product and all other casualty losses shall, to
the extent properly allocable to the Central Division, be included in the
Fully Allocated Cost of Products produced at the Central Division Plants.
9.2 Insurance. Until completion of the Services
to be provided hereunder, Seneca shall maintain at all times and at its own
expense (which expense, to the extent properly allocable to the Central
Division, shall be included in the Fully Allocated Costs of Products
produced at the Central Division) the following described minimum amounts
of insurance, all on the "occurrence form":
(a) Worker's Compensation Insurance, including
occupational disease coverage, all as required by law, and
Employer' s Liability Insurance with a limit of $500,000 for each
employee.
(b) Commercial General and Excess Liability
Insurance, including products, completed operations and
contractual liability, insuring against personal injuries and
property damage with limits, in the aggregate, of not less than
$5,000,000 general aggregate and each occurrence; $5,000,000
products/completed operations aggregate and each occurrence;
$500,000 fire damage on any one fire; and $500,000 medical
expense on any one person.
(c) Automobile Public Liability Insurance
insuring against personal injuries and against property damage,
with limits of no less than $1,000,000 per occurrence. All such
automobile public liability insurance shall cover any and all
motor vehicles engaged in operations under this Agreement whether
on or off the worksite.
All policies with respect to the foregoing
insurance shall specifically name Pillsbury as an additional insured party
as Pillsbury's interests may appear with respect to this Agreement. Before
commencing work, Seneca shall furnish to Pillsbury's Risk Manager with an
insurance certificate or certificates showing Seneca's compliance with the
requirements of this provision, as determined in the discretion of
Pillsbury. Such certificate or certificates shall specifically provide
that Seneca's comprehensive general liability insurance includes a contract
liability rider covering the agreements and covenants of Seneca under and
in connection with this Agreement and further, that said insurance shall
not be canceled or changed until at least thirty (30) days' written notice
has been given to Pillsbury by the insurance company.
Seneca agrees that the insurance limits stated in
this Section 9.2 are the minimum requirement and that Pillsbury does not in
any way represent that the insurance or the limits required herein are
sufficient or adequate to protect Seneca's interests or liabilities.
ARTICLE X
QUALITY PERFORMANCE REQUIREMENTS
10.1 General. Seneca shall be responsible for
quality assurance and food safety compliance with respect to all aspects of
the provision of the Services for all Products hereunder and, in the
fulfillment of its obligations under this Article X, shall meet or exceed
all requirements specified herein and comply with all operating standards
in the Quality Documents or such other comparable quality systems manuals
of Seneca as are approved in writing by Pillsbury. Pillsbury may make
reasonable changes to the Quality Documents from time-to-time; provided
that, Seneca is able reasonably to accommodate the change and is given
reasonable time to implement the change.
10.2 Plant Inspection and Assessment. Pillsbury
and its authorized representatives shall have the right to inspect the
Alliance Plants and observe all procedures prior to and during any period
of the provision of any Services with respect to the Products. In
addition, Pillsbury or its agents shall have the right to conduct an
assessment of each Alliance Plant and its quality management system at
least once per year to determine the level of compliance with the Quality
Documents. Pillsbury shall be responsible for all out-of-pocket expenses
related to such inspections, audits and assessments. Pillsbury hereby
warrants to Seneca that each of the Sold Plants will be an Approved Plant
as of the Effective Date.
(a) Pillsbury shall use the inspection or
assessment findings to determine the approval status of each
Alliance Plant. Pillsbury shall not assess any Plant as
"Approved" if there are any compliance deviations from the
Quality Documents which materially compromise the safety or
quality of the Products.
(b) If Pillsbury rates any Alliance Plant as
"Conditionally Approved," Seneca shall submit a written
corrective action plan to Pillsbury within ten working days for
Pillsbury's approval. In the absence of such an approved
corrective action plan within 10 days, Pillsbury may cease
production or acceptance of any Products from that Plant and
Seneca shall be responsible for Pillsbury's extra costs, if any,
directly related to the absence of the plan until that Plant has
corrected the conditions causing the "Conditional Approval"
rating. Costs of such corrective action, other than capital
expenditures approved by the SRB (which shall be treated as
NonRCP Projects approved by the SRB) for such purpose, shall be
treated as corporate overhead cost in the manner described in
Section 3.1(g).
(c) If Pillsbury rates any Alliance Plant
"Unapproved," Pillsbury shall have the right to cease production
or acceptance of all Products from that Plant and Seneca shall be
responsible for Pillsbury's extra costs directly related to the
Unapproved rating at that Plant until the conditions causing the
"Unapproved" rating are corrected at Seneca's expense. Pillsbury
agrees to give reasonable assistance to Seneca to correct the
cause(s) for the "Unapproved" rating. Costs of such corrective
action, other than capital expenditures approved by the SRB
(which shall be treated as NonRCP Projects approved by the SRB)
for such purpose, shall be treated as corporate overhead cost in
the manner described in Section 3.1(g).
10.3 Product Quality.
(a) Approved Varieties. Seneca shall utilize
only crop varieties approved by Pillsbury for Products not
utilizing Proprietary Seed. (See Article XI, pertaining to
Proprietary Seed). Seneca shall take actions necessary or
appropriate to ensure that Proprietary Seed is not mixed, either
with commercial or any third party's commercial variety products.
In Alliance Plants in which Products will be packed for Seller
and any other third party customer of Seneca, Seneca shall use
its best efforts to use only vegetables grown from the seed
designated by Pillsbury (including, but not limited to,
Proprietary Seed) for Products and only vegetables grown from
commercial seed (or third party proprietary seed) for all third
party products; provided that, both parties recognize that,
because of force majeure events (the primary one of which is
weather) affecting agricultural crops, such as corn, there may be
times when the overlapping use of Proprietary Seed and commercial
seed may be necessary in order to enable Seneca to continue
operating the Central Division Plants (or to avoid bypass).
(b) Thermal Processing. Thermally processed
Product will be produced in compliance with all relevant FDA
regulations and will comply with the standards and follow the
procedures set forth in the Quality Documents with regard to
thermal process management. Seneca will certify the use of all
acceptable production codes and provide approved code lists as
requested by Pillsbury.
(c) Product Specifications. Product shall meet or
exceed all criteria specified in the Product Specifications or the
Product shall not be deemed Acceptable Cases.
(d) Acceptance of Product. If Product is not
deemed to be Acceptable Cases pursuant to Section 10.3(c) above,
then Pillsbury shall not be obligated to accept such Product,
with the consequences set forth in Section 3.6(e) hereof. Seneca
shall remove all Green Giantr brand labels from unaccepted
labelled, finished Product (and may re-label such Product with
labels that do not contain any proprietary names of Pillsbury).
Seneca shall be responsible for all expenses and losses,
including resale and/or disposal costs, ingredient costs and
Supplies costs resulting from the production of unaccepted
finished Product.
(e) Release of Product. Seneca shall be
responsible for adequate control of all non-conforming or
unacceptable Product and shall take all appropriate actions in
order to prevent unauthorized release of such Product. Seneca's
responsibility under this Article X continues until the Product
disposition has been determined and accomplished, and does not
end when Product has been delivered to Pillsbury.
(f) Samples. Samples may be requested by
Pillsbury at any time for purposes of quality evaluation. Seneca
shall invoice Pillsbury for the special samples at the price
agreed to by the parties pursuant to Section 3.7.
ARTICLE XI
PROPRIETARY SEED
11.1 General Rules. During the term of this
Agreement, Seneca shall only acquire seed for the growth of vegetable raw
materials for the Products as directed by Pillsbury in accordance with the
information set forth in Exhibit K hereto, which Exhibit identifies the
type of seed, by code, for each Product (identified by SKU). Except as
otherwise set forth herein, all such seed shall be Proprietary Seed.
Except as Pillsbury otherwise agrees in writing in its sole discretion, all
Proprietary Seed shall be used by Seneca only for the production of
Products for sale to Pillsbury hereunder. Pillsbury agrees to work with
Seneca to determine which types of Proprietary Seed may be used (but not
sold) by Seneca for the production of products for third parties.
Pursuant to the Sale Agreement, Seneca shall
acquire Pillsbury's current inventories of processed and unprocessed
production seed, which seed comprises part of the Proprietary Seed. Should
Pillsbury develop new types of Proprietary Seed, Pillsbury intends to
transfer to Seneca, at no cost to Seneca, sufficient quantities of such new
seed in order that Seneca may acquire production quantities of such new
seed for Seneca's use, but not for sale to any third party.
11.2 Limited License. Pillsbury hereby grants to
Seneca, effective as of the date hereof, a nonexclusive, nontransferable,
fully-paid license to make and/or have made through third party
contractors, and/or use the Proprietary Seed identified by seed code on
Exhibit K (and any modifications thereto) for the sole and exclusive
purpose of producing Products for sale to Pillsbury, as contemplated by
this Agreement. Seneca shall have no right to make or use such Proprietary
Seed for any other purpose and shall grant no sublicense, in whole or in
part, of the license granted pursuant to this Section 11.2, without
Pillsbury's written consent (which may be granted or withheld by Pillsbury
in its sole discretion). Seneca shall make no modifications to the
Proprietary Seed, conduct no experiments involving the Proprietary Seed,
perform no genetic analysis on the Proprietary Seed, nor shall Seneca
utilize any of the Proprietary Seed in any breeding program without
Pillsbury's written consent. Seneca recognizes Pillsbury's ownership of
the Proprietary Seed and shall not at any time take any action that might
in any way impair Pillsbury's rights in and to the Proprietary Seed and
shall not claim any right or interest in or to the Proprietary Seed, except
such as are expressly granted by this Section 11.2. Seneca hereby agrees
to take all such actions as Pillsbury may reasonably request, at
Pillsbury's expense, in order to protect and enforce Pillsbury's rights in
and to the Proprietary Seed. The license granted by this Section 11.2
shall terminate automatically upon any termination of this Agreement and
may otherwise be terminated at any time by Pillsbury by providing written
notice thereof to Seneca.
11.3 Third Party Contractors. Seneca recognizes
that the Proprietary Seed represents a valuable trade secret of Pillsbury,
and that special care will be required when Seneca contracts with
third-party seed producers and/or growers. Seneca agrees that it will take
all precautions necessary to maintain the Proprietary Seed as a trade
secret, including notifying each third party contractor that the
Proprietary Seed comprises a trade secret, and requiring each third-party
seed producer to execute the "Agreement for Protection of Trade Secrets" in
the form attached hereto as Exhibit M, and requiring each third-party
grower to enter into Seneca's form of grower contract, which contract shall
contain (as an addendum thereto, or otherwise) the terms and conditions set
forth in Exhibit N attached hereto. Seneca shall provide an executed copy
of every such agreement to Pillsbury within thirty (30) days of its
execution.
ARTICLE XII
WARRANTIES, CLAIMS AND LIABILITIES
12.1 Pure Food Guaranty. Seneca hereby warrants
that its obligations hereunder shall be performed in full compliance with
the Federal Food, Drug and Cosmetic Act and applicable state and municipal
laws and regulations. Seneca further warrants that Ingredients used in
Products shall conform to said laws and regulations. Seneca warrants that
Products manufactured and packaged by it shall not, at the time of delivery
thereof, be adulterated or contaminated within the meaning of said
regulations nor shall such Products constitute an article prohibited from
the introduction into interstate commerce under the provisions of Section
404 and 505 of the Federal Food, Drug and Cosmetic Act.
12.2 Good Manufacturing Practices. Seneca hereby
represents and warrants that it shall operate the Alliance Plants in
accordance with "Good Manufacturing Practices," as such term is defined in
the Quality Documents.
12.3 Indemnification.
(a) Seneca. Seneca agrees to indemnify, defend,
and hold harmless, Pillsbury, its officers, directors, employees
and affiliates, from and against any claims, liabilities,
actions, losses, or expenses (including reasonable attorney's
fees) arising out of or related to the action or inaction of
Seneca, its officers, directors, employees, agents, contractors,
or affiliates including but not limited to, any claims, including
claims for bodily injury or property damage, relating to the
condition of the Products prior to delivery to Pillsbury.
(b) Pillsbury. Pillsbury agrees to indemnify,
defend, and hold harmless, Seneca, its officers, directors,
employees and affiliates, from and against any claims,
liabilities, actions, losses, or expenses (including reasonable
attorney's fees) arising out of or related to the action or
inaction of Pillsbury, its officers, directors, employees,
agents, contractors, or affiliates including but not limited to,
any claims, including claims for bodily injury or property
damage, relating to changes in the condition of the Product which
result from the acts of Pillsbury or its agents after delivery of
the Product to Pillsbury.
12.4 Survival. The warranties and indemnification
obligations provided in this Agreement shall survive any termination of
this or any supplementary Agreements.
ARTICLE XIII
PERFORMANCE GOALS
Seneca acknowledges that certain production and
planning processes are critically important for Pillsbury's business
requirements. The parties therefore agree that Performance Goals shall be
determined by the parties within 90 days after the Effective Date initially
and amended within 60 days prior to the commencement of each Fiscal Year.
The Performance Goals shall be incorporated by reference herein. The SRB
shall conduct a quarterly review of Seneca's performance measured against
the Performance Goals. Seneca agrees to submit to Pillsbury for approval a
written corrective action plan within 30 days of each review for each
Performance Goal not met or exceeded. Performance Goals shall include, but
not be limited to the following areas of measurement:
(a) Case fill to order, on-time, damage-free
[Section deleted per application for confidental treatment],
per shipment orders; and
(b) specification compliance and agreed upon
quality improvement goals.
ARTICLE XIV
CONTINUITY
If the parties are unable to agree on new
exhibit(s) before the beginning of any Fiscal Year, the parties shall use
the appropriate exhibit(s) from the prior Fiscal Year until the new
exhibit(s) are decided. The new exhibit(s) shall then be effective as of
the start of the current Fiscal Year and the parties shall have thirty (30)
days to effect any resulting invoicing adjustments, credits or set-offs
required to implement the new exhibit(s)) as of such effective date.
ARTICLE XV
INFORMATION SYSTEMS
15.1 MIS.
(a) In exchange for the use of Pillsbury's
Diamond MIS System (for its operations at the Seneca Plants and
other Seneca plants), in the form in which they currently exist,
at their current location and subject to the usage and other
limitations set forth in this Article XV, for a period beginning
on the Effective Date and ending on March 31, 2000, Seneca shall
pay to Pillsbury a service fee of [Section deleted per
application for confidental treatment] per the Initial
Period and each Fiscal Year thereafter; provided that, Seneca's
right to use the Diamond MIS System under this Section 15.1(a)
shall terminate upon the termination of this Agreement. Such
service fee will be considered part of the Fully Allocated Costs
of Products produced at the Central Division. This MIS
arrangement will terminate upon the expiration of the period
ending March 31, 2000. Thereafter, during the remaining term of
this Agreement (including any extensions hereof), Pillsbury shall
grant a license described in Section 15.1(b) below. During the
term of such license, Pillsbury shall not be obligated to expend
any funds, or devote any management time or resources, to
maintaining, upgrading or otherwise modifying its Diamond MIS
System so licensed.
(b) Effective as of March 31, 2000, Pillsbury
shall grant to Seneca a non-exclusive, non-transferable, fully
paid license to use (for its operations at the Seneca Plants and
other Seneca plants) the Diamond MIS System, in the form in which
it exists on such date. Seneca shall have no right to use the
Diamond MIS System in any other place or for any other purpose
and shall grant no sublicense, in whole or in part, of the
license granted pursuant to this Section 15.1(b), without
Pillsbury's prior written consent. Seneca shall not make any
unreasonable modifications to the Diamond MIS System without
Pillsbury's prior consent. Seneca recognizes Pillsbury's
ownership of the Diamond MIS System and shall not at any time
take any action that might in any way impair Pillsbury's rights
in and to the Diamond MIS System and shall not claim any right or
interest in or to the Diamond MIS System, except such rights as
are expressly granted by this Section 15.1(b). Seneca hereby
agrees to take all such actions as Pillsbury may reasonably
request in order to protect and enforce Pillsbury's ownership of
the Diamond MIS System. The license granted by this Section
15.1(b) shall terminate automatically upon any termination of
this Agreement.
(c) Pillsbury understands and agrees that, if
Seneca determines that it may more efficiently account for the
Central Division operations by using another accounting system,
it may cease using the Diamond MIS System at such time, upon
prior written notice to Pillsbury.
15.2 Pillsbury Property. All files, input and
output materials, the media upon which they are located and all software
programs or packages (together with any related documentation, source code,
object code, and upgrades or modifications) which contain Pillsbury data or
which are utilized or developed for, and paid for by, Pillsbury in
connection with this Agreement and which may or may not be confidential or
proprietary shall be the property of Pillsbury.
15.3 Software Warranties.
(a) With respect to the Diamond MIS System,
Pillsbury hereby makes the following representations to Seneca as
of the Effective Date:
(i) that there are no timers, clocks, counters,
or other limiting designs or routines designed to disable
the software automatically with the passage of time or after
the occurrence of any triggering event known by Pillsbury to
be contained within such software; and
(ii) that Pillsbury has disclosed to Seneca the
existence and operation of any "back door" routines designed
to permit unauthorized access; and
(iii) that such software contains no virus,
Trojan horse, worm or other surreptitious code designed to
disable, erase or otherwise harm software, hardware or data.
(b) For all software used by Seneca in the
performance of any Services hereunder, Seneca warrants, during
the term of this Agreement:
(i) that there are no timers, clocks, counters,
or other limiting designs or routines designed to disable
the software automatically with the passage of time or after
the occurrence of any triggering event known by Seneca to be
contained within such software; and
(ii) that Seneca has disclosed to Pillsbury the
existence and operation of any "back door" routines designed
to permit unauthorized access; and
(iii) that Seneca will not use any such "back
door" routines for entry into any such software or hardware
without prior authorization by Pillsbury; and
(iv) that unless Seneca has obtained written
verification from Pillsbury that no testing procedure is
available, prior to each initial use at Seneca's facilities
and again prior to each initial use at Pillsbury's
facilities of any software used in the provision of services
hereunder, Seneca has tested all such software for the
presence of any virus or other surreptitious code using
surreptitious-code-detection software approved by Pillsbury
and has provided Pillsbury with written verification of the
test results; and
(v) that such software contains no virus, Trojan
horse, worm or other surreptitious code designed to disable,
erase or otherwise harm software, hardware or data.
15.4 Software Security. Seneca shall provide
adequate security, including restricted computer or telecommunications
equipment access and systems usage passwords, to prevent unauthorized entry
into Pillsbury systems or data files, including any transmission of such
data files to Pillsbury or any request of data from Pillsbury. Seneca
shall not be responsible for unauthorized entry into Pillsbury systems or
data files by persons other than Seneca employees or agents if such
unauthorized entry involves equipment or systems access at locations not
owned or leased by Seneca.
15.5 Indemnification. Seneca agrees to defend,
indemnify and hold Pillsbury harmless against any claim, loss or expense
arising out of any breach of the above warranties and responsibilities of
Seneca.
ARTICLE XVI
CONFIDENTIALITY
16.1 Acknowledgement. Each party acknowledges and
agrees that certain information, including but not limited to, the
production processes and methodology, equipment designs, business plans,
quality assurance information, product specifications, raw ingredients
specifications and other technical and nontechnical information given to it
by the other party in connection with this Agreement belong to and are
proprietary and confidential information of the other party. Each party
agrees that it did not have any of the above-referenced confidential
information prior to the establishment of a relationship with the other
party.
16.2 Disclosure of Confidential Information. Both
parties, for their mutual benefit, desire to disclose or have disclosed to
the other, certain Information which is proprietary to the disclosing party
or its affiliated companies. The receiving party shall hold such
Information in confidence, shall reproduce or copy such Information only to
the extent necessary for its authorized use, shall restrict disclosure of
such Information to its employees who have a need to know, shall advise
such employees of the obligations assumed under this Section, and shall not
disclose such Information to any third party without the prior written
approval of the other party.
16.3 Unprotected Data or Disclosures. These
restrictions on the use or disclosure of Information shall not apply to any
Information:
(a) that is independently developed by the
receiving party or its affiliated companies as evidenced in
writing or lawfully received free of restriction from another
source having the right to so furnish such Information; or
(b) that is or becomes publicly available by
other than unauthorized disclosure; or
(c) that, at the time of disclosure to the
receiving party, was known to such party or its affiliated
companies free of restriction as evidenced by documentation in
such party's possession; or
(d) that the disclosing party agrees in writing
is free of restrictions stated in this Agreement.
16.4 No License Granted By Disclosure. No license
to a party, under any trademark, patent, or other intellectual property
right, is either granted or implied by the conveying of Information to such
party. None of the Information which may be disclosed or exchanged by the
parties shall constitute any representation, warranty, assurance, guarantee
or inducement by either party to the noninfringement of trademarks,
patents, any other intellectual property rights, or other rights of third
persons or of either party.
16.5 No Independent Use Contemplated. Each party
agrees that it will not use any of the Information except as is
specifically contemplated by the Agreement. Without limiting the
generality of the foregoing, Seneca agrees that it will not use the product
specifications and formulas disclosed by Pillsbury except to produce
Products hereunder. Seneca further agrees that it will not use Pillsbury's
patented or trade secret production processes as long as patent protection
or trade secret status continues except as may be contemplated by this
Agreement.
16.6 Additional Protection. The parties agree
that each party's Processes are highly confidential and especially valuable
trade secrets of such party which may be difficult to protect within the
framework of the business arrangement herein. The parties further
acknowledge that Pillsbury particularly desires to protect the trade secret
status of such Processes with respect to retail brands because the benefit
of such Processes is visually apparent to consumers and therefore generates
consumer loyalty and added value to Pillsbury's retail brands.
Furthermore, each party acknowledges that any proprietary Processes that
are improved upon during the term of this Agreement shall continue to be
owned exclusively by the party originally owning such Processes, but may be
used by the other party hereto (subject to such other party's
confidentiality obligations hereunder).
16.7 Survival of Obligations After Agreement
Termination. The obligations of confidentiality and non-use of proprietary
information shall continue for five years after termination of this
Agreement but shall not per se prevent the use of equipment by the parties
after the termination of the Agreement.
16.8 No Disclosure of Agreement. The existence
and terms and conditions of this Agreement are confidential and considered
Information and shall not be disclosed by either party without the other
party's prior written consent; provided that, Pillsbury acknowledges that
Seneca may disclose such Information to its prospective lender (and Seneca
shall be responsible to Pillsbury for any failure of such prospective
lender to comply with the terms of this Article XVI).
16.9 Remedies. Both parties acknowledge that the
remedies at law for the breach of the covenants contained in this Article
XVI may be inadequate and that each party shall be entitled to injunctive
relief for any such breach without the need for the posting of any bond (or
that if a bond is nonetheless required, it may be the corporate bond of a
party without the requirement of any surety thereon); provided that nothing
contained herein shall be construed as limiting either party's rights to
other remedies under law with respect to breach of this Article XVI,
including the recovery of damages.
ARTICLE XVII
TRADEMARKS, TRADENAMES, SERVICE MARKS AND REGISTERED MARKS
17.1 General Rules. Each party agrees not to
display or use any of the other party's Marks, without the prior written
consent of the other, and will not permit the same to be displayed or used
by anyone else. Any use by a party of the other party's Marks shall be
subject to the prior, written approval by the other party. Nothing in this
Agreement creates in any party any rights in the Marks of the other party.
Upon termination of this Agreement, any and all rights or privileges of
either party to use the other's Marks previously granted in writing shall
terminate, and each party shall discontinue the use of the other's Marks.
17.2 Marks at Sold Plant. Notwithstanding the
terms of Section 17.1 hereof, during the term of this Agreement, Seneca
shall be entitled to use Pillsbury's proprietary names and logos on the
exterior signage for each of the Sold Plants solely in strict compliance
with the terms of Section 10.04 of the Sale Agreement.
In addition, this Section 17.2 shall also constitute Pillsbury's written
consent, pursuant to such Section 10.04, to Seneca's use of Pillsbury's
proprietary names and logos at the three Seneca Plants included in the
Central Division in the same manner as they are currently being used at the
Sold Plants and otherwise in strict compliance with the terms of such
Section 10.04.
ARTICLE XVIII
DISPUTE RESOLUTION
18.1 Alliance Review Board. The ARB shall be
composed of one employee designated by Pillsbury and one employee
designated by Seneca. The ARB shall meet as often as the members deem
necessary or appropriate, but no less frequently than quarterly to resolve
operational issues under this Agreement. Additionally, the ARB shall meet,
in person or by phone, at any time upon request of either of the members of
the ARB. The parties shall agree as to the location and timing of the ARB
meetings.
18.2 Strategic Review Board. The SRB shall be
composed of either two or four persons, an equal number of whom shall be
selected by each of Seneca and Pillsbury. Each member of the SRB shall be
from a level of management higher than the members of the ARB. The SRB,
which shall have the authority to settle any controversy between the
parties, shall meet at such times and places as requested by the ARB and at
other times as agreed by the SRB. The members of the SRB shall each use
their best good faith efforts to resolve any such disputes arising out of
or relating to this Agreement to their mutual satisfaction. If the members
of the SRB are able to resolve any such dispute to their mutual
satisfaction, such resolution shall be binding upon the parties. If the
members of the SRB are unable to resolve any such dispute to their mutual
satisfaction within 15 business days of commencing their review thereof,
then the matter shall be submitted to mediation in accordance with Section
18.3 hereof.
18.3 Mediation. If the members of the SRB are
unable to resolve any dispute in accordance with Section 18.2 hereof, then
the parties shall attempt to settle the dispute by mediation under the then
current Center for Public Resources ("CPR") Model Procedure for Mediation
of Business Disputes. Unless the parties otherwise agree, a neutral third
party will be selected from the CPR Panel of Neutrals, with the assistance
of CPR, and to the extent possible, such neutral third party shall be
experienced in and knowledgeable with respect to the business of providing
the Services with respect to, and marketing, distributing and selling
packaged food products. The parties shall use their best good faith
efforts to resolve, with the assistance of such neutral third party, any
disputes submitted to mediation to their mutual satisfaction, and shall
cooperate with the mediator in attempting to resolve such disputes. If the
parties are able to resolve the dispute through mediation, such resolution
shall be binding upon the parties. If the parties are unable to settle the
dispute by mediation in accordance with this Section 18.3 within 20
business days after submitting the matter to mediation, then either party
may submit the matter to arbitration in accordance with Section 18.4
hereof.
18.4 Arbitration. Except as otherwise provided
herein, any controversy, claim or dispute between the parties arising out
of or relating to this Agreement, or the breach hereof, or the subject
matter hereof shall be finally settled by arbitration as provided herein;
provided, however, that before any dispute can be submitted for
arbitration, the ARB (if applicable) and the SRB must have first attempted
in good faith to resolve such dispute and the matter must have been
submitted to mediation pursuant to Section 18.3 hereof. Such arbitration
shall be held in Chicago, Illinois and, except as otherwise provided herein
shall be governed by the Commercial Arbitration Rules of the American
Arbitration Association and heard by a single arbitrator who must be a
retired federal judge. Judgment upon the arbitration award may be entered
by any court of competent jurisdiction. No later than ten (10) calendar
days after arbitration is initiated, the parties shall jointly select and
appoint an arbitrator. If the parties are unable to agree on the selection
of an arbitrator, the parties shall apply to the United States District
Court for the Northern District of Illinois or the Cook County, Illinois
Circuit Court for appointment of an arbitrator. The decision of the
arbitrator shall be final and binding on both parties and the arbitrator's
decision shall be implemented immediately or in accordance with its terms.
ARTICLE XIX
TERMINATION
19.1 Termination Rights.
(a) Either party may terminate this Agreement:
(i) by giving written notice to the other party
hereto at least 12 months in advance of the effective date
of such termination (provided that, such notice must also
comply with the terms of Article II hereof),
(ii) upon sixty (60) days written notice for a
substantial and continuing material breach of the other
party; provided, that:
(A) the terminating party has provided
written notice to the breaching party and the
breaching party has not cured the breach within
sixty (60) days, or if the breach cannot be cured
within sixty (60) days, has not commenced good
faith efforts towards such cure or has not
diligently pursued such cure to completion; and
(B) neither the SRB nor the mediation
process described in Section 18.3 hereof have been able to
resolve the breach to the terminating party's reasonable
satisfaction, or
(iii) if a petition is filed by or against the
non-terminating party in bankruptcy or the non-terminating
party makes any assignment for the benefit of creditors.
(b) Pillsbury may terminate this Agreement at any
time within the 30-day period after receiving written notice from
Seneca that a Change of Control of Seneca has occurred.
(c) If there is an acceleration of the Note
(including, for this purpose, a payment default of the final
principal payment when due thereunder), this Agreement shall
automatically terminate.
(d) Seneca may terminate this Agreement if GMI is
liquidated for the purpose of dissolving the consolidated
entities of GMI.
19.2 Effects of Termination. The foregoing events
of termination shall have the following consequences:
(a) If the Agreement is terminated pursuant to
Section 19.1(a)(i) above, then, on the effective date of such
termination notice:
(i) the party delivering such notice of
termination shall pay, by wire transfer to an account
designated by the recipient, [Section deleted per
application for confidental treatment] to the other party
(except as otherwise set
forth in Section 22.1 hereof), and
(ii) legal title to and beneficial ownership of
the "Assets" (as defined in the Sale Agreement) (including
the real property, plant and equipment, fixtures,
furnishings, motor vehicles, other personal property and all
contracts related thereto, but specifically excluding the
Seneca Inventory and the "Transferred Equipment" (as such
quoted term is defined in the Sale Agreement) located at any
Alliance Plant that is not a Sold Plant) shall transfer to
Pillsbury automatically, free and clear of all liens and
encumbrances except for (a) "Title Defects," including but
not limited to "Permitted Encumbrances" (as each such term
is defined in the Sale Agreement) in existence immediately
prior to the transfer of the Real Estate Assets from
Pillsbury to Seneca pursuant to the Sale Agreement, which
Title Defects have not been extinguished as of the
termination date of this Agreement and (b) liens for taxes
which have accrued but are not yet due or are being
contested by Pillsbury in good faith (and Seneca shall
execute such warranty deeds, bills of sale and other
conveyancing instruments as Pillsbury shall reasonably
request to effect such transfers); Seneca shall terminate
all employees working at the Sold Plants (and any related
facility being transferred as part of the Assets) effective
as of such effective date, and Pillsbury shall offer
employment to all employees of Seneca working at the Sold
Plants and any related facility being transferred as part of
the Assets and Pillsbury shall indemnify, defend and hold
harmless Seneca against any claim by employees at the Sold
Plants or any related facility under the Worker Adjustment
and Retraining Notification Act or any successor federal
statute or similar state statute,
[Section deleted per application for confidental treatment]
(iv) Seneca shall pay to Pillsbury, by wire
transfer to an account designated by Pillsbury (to the
extent such value exceeds the FME Holiday Amount), the
remaining undepreciated value (if any) of the Transferred
Equipment located at any Alliance Plant that is not a Sold
Plant, as properly reflected on the most recent quarterly
balance sheet of the Central Division (as determined in
accordance with US GAAP for Seneca's books and records),
(v) the outstanding principal balance and accrued
interest on the Note, if outstanding at such time, shall be
forgiven by Pillsbury, and
(vi) from and after such effective date, Pillsbury
shall honor its obligations to purchase (from Product
Inventory in existence at the Alliance Plants on the
effective date of termination) Acceptable Cases of Product
in accordance with the terms of Pillsbury's Annual
Commitment in effect at the time of such termination.
(b) If the Agreement is terminated pursuant to
Section 19.1(a)(ii) above, then the consequences set forth in
paragraphs (ii), (iii), (iv), (v) and (vi) of Subsection 19.2(a)
above shall immediately ensue.
(c) If the Agreement is terminated pursuant to
Section 19.1(b) above, then Seneca shall pay to Pillsbury, by
wire transfer to an account designated by Pillsbury, [Section
deleted per application for confidental treatment]
on the effective date of such termination, and
the consequences set forth in paragraphs (ii), (iii), (iv), (v)
and (vi) of Subsection 19.2(a) above shall immediately ensue.
(d) If the Agreement is terminated pursuant to
Section 19(c) above, then the consequences set forth in
paragraphs (ii), (iii), (iv), (v) and (vi) of Subsection 19.2(a)
above shall immediately ensue.
(e) If the Agreement is terminated pursuant to
Section 19.1(d) hereof, then Seneca shall retain title to the
Sold Plants and the outstanding principal balance and accrued
interest on the Note, if outstanding at such time, shall be
forgiven by Pillsbury.
(f) If the Agreement is terminated for any reason
hereunder, Pillsbury shall pay to Seneca, on the effective date
of termination and by wire transfer to an account designated by
Seneca, an amount equal to the FME Holiday Amount, without
interest; provided that, Pillsbury shall be entitled to offset
against this payment obligation an amount equal to the
undepreciated value (if any) of the Transferred Equipment located
at any Alliance Plant that is not a Sold Plant, as such amount
shall be determined in accordance with paragraph (iv) of
Subsection 19.2(a) above.
ARTICLE XX
FORCE MAJEURE
Neither party, its affiliates, subsidiaries or
parent corporations shall be liable in any way for delay, failure in
performance, loss or damage due to any of the following force majeure
conditions: fire, embargo, explosion, power blackout, earthquake, volcanic
action, flood, war, water, drought, hurricanes, tornadoes, pestilence, the
elements, civil or military authority, acts of God, public enemy, acts or
omissions of third party carriers or other causes beyond their reasonable
control; provided, however, that such occurrences shall not suspend
obligations to keep information confidential or to comply with obligations
which can reasonably be accomplished in spite of such force majeure event.
ARTICLE XXI
EXCLUSIVITY
As a material inducement to Pillsbury to enter
into this Agreement and the Sale Agreement and to consummate the
transactions contemplated hereby and thereby, Seneca hereby agrees to the
following exclusivity covenants, which Seneca acknowledges are reasonable
and necessary under the circumstances of such contemplated transactions:
21.1 Seneca Exclusivity. During the term of this
Agreement, and without Pillsbury's written consent, which may be given or
withheld in Pillsbury's sole discretion, Seneca shall not provide any
Services using any portion of any facilities, including the Alliance
Plants, owned, leased or operated by Seneca at any time during such term
for purposes of producing any proprietary-brand-name, shelf-stable or
frozen, vegetable product, other than the Products under the Green Giantr
brand, for retail sale, except such product as is currently being produced
and packaged by Seneca under the existing brand names identified in Exhibit
L hereto. The foregoing restriction shall not apply to any Private-Label
Products produced by Seneca, and shall not apply to up to one million
Equivalent Cases of shelf-stable product used by Seneca for intercanner
packing purposes.
ARTICLE XXII
ASSIGNMENT AND RELATIONSHIP
22.1 Assignment to Affiliates. Either party to
this Agreement may assign this Agreement to a subsidiary or parent
corporation without the consent of the other party; provided that, the
assigning party shall remain liable for and will guarantee its assignee's
performance under this Agreement. Either party shall provide notice to the
other party of such assignment. Other than such permitted assignment and
except as set forth in the next paragraph of this Section 22.1, neither
party shall assign this Agreement without the prior written consent of the
other party. Subject to these restrictions, the provisions of this
Agreement shall be binding upon and shall inure to the benefit of the
parties and their permitted assigns.
Notwithstanding the foregoing assignment
limitation, and only during the period during which "Senior Indebtedness"
(as hereinafter defined) is outstanding, Seneca hereby assigns to the
"Senior Creditors" (as hereinafter defined), and grants to the Senior
Creditors a security interest in, Seneca's rights to receive the payments
from Pillsbury contemplated by, and under the circumstances described, in
Section 19.2 hereof to secure all amounts owing from time to time under the
Senior Indebtedness, and Pillsbury hereby consents to such assignment and
security interest. If Pillsbury makes such a payment under the
circumstances described in Section 19.2 hereof at a time at which Pillsbury
has not received written notice from the "Collateral Agent" (as hereinafter
defined), on behalf of the Senior Creditors, to the effect that there is no
Senior Indebtedness outstanding, Pillsbury and Seneca agree that such
payment shall be made by Pillsbury to a single account specified in writing
to Pillsbury in advance of such payment date by the Collateral Agent, on
behalf of the Senior Creditors or, if the Collateral Agent has notified
Pillsbury in writing that the Senior Indebtedness has been irrevocably paid
in full, to Seneca. Pillsbury shall not be liable for any action taken in
reliance upon any notice or other document purported to be delivered
hereunder and reasonably believed by Pillsbury to be genuine. The
foregoing security interest and assignment to the Senior Creditors shall
not, and shall not be deemed to, affect in any manner Pillsbury's rights of
offset under the terms of Sections 3.8 and/or 19.2(f) hereof, and the
rights of the Secured Creditors under such security interest and assignment
are subject to all the terms of this Agreement and any defense or claim
arising therefrom. As used herein, the terms "Senior Indebtedness," and
"Senior Creditors" and "Collateral Agent" shall have the meanings given to
them in Section 9 of the Note.
22.2 Relationship of Independent Contractors. The
parties hereto are independent contractors. Nothing herein shall be deemed
to create the relationship of partnership or joint venture. Neither party
shall have the right to incur any obligation to third parties which shall
be binding upon the other and neither party shall have any interest
whatever in the profits and liabilities of the other arising out of or
resulting from the subject matter of this Agreement.
22.3 Independent Labor Obligations. Neither party
hereto shall have the right or authority to employ, supervise or discharge
any person on behalf of the other. Each party shall have the exclusive
right to employ, manage and discharge all persons hired by it for the
performance of obligations hereunder, and shall with respect to such
persons, perform all obligations and discharge all persons hired by it for
the performance of obligations hereunder, and shall with respect to such
persons, perform all obligations and discharge all liabilities imposed upon
employers under labor, wage and hour laws, worker' s compensation,
unemployment compensation insurance, social security and other applicable
federal, state and municipal laws and regulations.
ARTICLE XXIII
MISCELLANEOUS
23.1 Notices. All notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly made and received when
personally served, or when mailed by registered or certified first class
mail, postage prepaid and return receipt requested, or by telecopier or
facsimile, by the most rapid practical manner to the addressees indicated
on the signature page. The names and addresses may be changed on ten (10)
days' written notice.
23.2 Publicity. Except as set forth below, no
public statements or announcements relating to this Agreement shall be
issued by either party, without the prior consent of the other. Seneca
understands that Grand Metropolitan plc, the indirect sole stockholder of
Pillsbury ("Parent"), is a publicly held corporation subject to disclosure
rules and regulations of federal and foreign securities laws. Similarly,
Pillsbury understands that Seneca is a publicly held corporation subject to
disclosure rules and regulations of federal securities laws. Each of
Seneca (with respect to Parent) and Pillsbury (with respect to Seneca)
acknowledges the right of the other public company to make disclosures with
respect to this Agreement at any time if such disclosure is deemed by such
other public company, in its reasonable opinion, to be required by law. In
the event either public company determines to make such disclosure,
Pillsbury or Seneca, as the case may be, agrees to notify the other party
hereto of such public company's intention to make such disclosure and to
provide such other party with the text of the disclosure sufficiently in
advance of its release to the public to enable such other party to have a
reasonable opportunity to comment thereon.
23.3 Survival. Provisions of this Agreement that
by their sense and context may require performance by either or both
parties after the termination or expiration of this Agreement shall so
survive the expiration or termination.
23.4 Severability. If any portion of this
Agreement is found to be invalid or unenforceable, the remaining portions
shall remain in effect and the parties will begin negotiations for a
replacement of the invalid or unenforceable portion.
23.5 Section Headings. The headings of the
sections hereunder are for convenience only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
23.6 Governing Law. This Agreement shall be
construed in accordance with and governed by the laws of the State of
Minnesota, excluding its choice of law rules, provided, however, that all
issues relating to the arbitrability or the enforcement of the agreement to
arbitrate contained herein, shall be governed by the Federal Arbitration
Act (9 U.S.C. 1, et seq).
23.7 Compliance with Law. Seneca shall comply
with all applicable local, county, state and federal laws, codes and
ordinances of any description, including, without limitation all laws
regarding occupational health or safety issues, labor laws, product safety
laws, fire codes, and hazardous waste or toxic substances management,
handling or disposal laws, and Seneca shall forthwith remedy any breach of
such laws.
(a) Fair Labor Standards Act. Without limiting
the generality of the foregoing, Seneca agrees that the goods
produced under this Agreement will be produced in compliance with
all applicable requirements of Sections 6,7, and 12 of the Fair
Labor Standards Act, as amended and of regulations and orders of
the United States Department of Labor issued under Section 14
thereof.
(b) Equal Opportunity Employment and Affirmative
Action. Without limiting the generality of the foregoing, Seneca
agrees that during the fulfillment of this Agreement insofar as
such is required by applicable laws or regulations, the contract
provisions set forth in 41 CFR 60-741.4 (a)-(f), 41 CFR 60.250.4
(a)-(m), 41 CFR 60-1.4a (1)-(7), and in paragraphs A (a)-(d) of
the Policy Letter 80-2 published in 45 FR 35810 on May 28, 1980
shall be incorporated by reference in this Agreement if it is not
exempt from the federal contracting requirements. Seneca agrees
to comply with the provisions of 41 CFR 60-2 and incorporates by
reference in this Agreement a certificate of non-segregated
facilities as provided in 41 CFR 60-1.8 in the form described by
the Director of the office of Federal Contract Compliance and
Contractor further agrees that it will obtain a similar
certificate from its subcontractor and suppliers prior to the
award of any subcontract that is not exempt from the federal
contracting provisions.
23.8 GMI Obligations. GMI, the ultimate U.S.
parent company of Pillsbury, hereby agrees, during the term of this
Agreement, to be obligated, to the same degree and in the same manner as
Pillsbury, to make all payments due to Seneca under Sections 3.6, 4.3, 6.2,
6.3. 7.4, 8.1 and 19.2 of this Agreement, and to be entitled to the same
rights as Pillsbury under such Sections.
23.9 Board Observation Rights. Seneca hereby
agrees that a representative of Pillsbury shall be permitted to attend and
observe all meetings (regular and special) of the Board of Directors at
Seneca and any committee thereof. Such representative shall be entitled to
receive notice of all such meetings and copies of all documents and other
materials provided or distributed in connection with such meetings, all in
the same manner as is provided to the directors of Seneca.
23.10 Entire Understanding. This Agreement
shall consist of this document, the following exhibits (which may be
amended from time-to-time in accordance with this Agreement) attached
thereto and all other materials incorporated within by reference:
[the following exhibits have been deleted per
application for confidental treatment](a) Exhibits
Exhibit A - Alliance Plants (Recitals)
Exhibit B - Accounting Procedures (Definitions)
Exhibit C - RCP (Definitions)
Exhibit D - Can/Frozen Bulk Conversion
Schedule (Definitions)
Exhibit E - Pillsbury Can Contracts (Section 3.4(c))
Exhibit F - Shrinkage ( Section 3.6(e))
Exhibit G - First Priority for Production
Capacity--Volume (Section 4.1(f))
Exhibit H - First Priority for Production
Capacity--labelled finished Product (Section 5.2)
Exhibit I - Schedule of Product Inventory
Mandatory Sale Dates (Section 6.3)
Exhibit J - Annual Incentive Payment Schedule
(Section 8.1)
Exhibit K - Proprietary Seed (Section 11.1)
Exhibit L - Sunrise Permitted Brand Names (Section
21.1)
Exhibit M - Agreement for Protection of Trade
Secrets (Section 11.3)
Exhibit N - Addendum to Seneca's Form of Grower's
Contract (Section 11.3)
(b) Quality Documents
Product Specifications
Manufacturing Control Plans
Quality Systems Manual
(c) Performance Goals
23.11 No Seneca Breach. The parties hereto agree
that the failure by Seneca to perform under this Agreement, but only to the
extent arising substantially as a result of Pillsbury's failure to perform
its obligations under either of Sections 10.05 or 10.06 of the Sale
Agreement, shall not be deemed a breach by Seneca of its obligations under
this Agreement.
THIS IS THE ENTIRE AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE
PRODUCT OR ITS PRODUCTION AND IT SUPERSEDES ALL PRIOR AGREEMENTS,
PROPOSALS, REPRESENTATIONS, STATEMENTS, OR UNDERSTANDINGS, WHETHER WRITTEN
OR ORAL, CONCERNING THE PRODUCT OR ITS PRODUCTION. No change, modification
or waiver of any of the terms of this Agreement shall be binding unless
included in a written agreement and signed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers or
representatives.
SENECA FOODS CORPORATION THE PILLSBURY COMPANY
By: /s/ ARTHUR S. WOLCOTT_ By: /s/ THOMAS A. DEBROWSKI
Arthur S. Wolcott Thomas A. Debrowski
Chairman of the Board Senior Vice President, Operations
ADDRESS FOR NOTICES:
Seneca Foods Corporation The Pillsbury Company
1162 Pittsford-Victor Road Pillsbury Center
Pittsford, New York 14534 200 South Sixth Street
Minneapolis, Minnesota 55402
with a copy to:
The Pillsbury Company
Pillsbury Center
200 South Sixth Street
Minneapolis, Minnesota 55402
Attention: General Counsel
GRAND METROPOLITAN
INCORPORATED
By: /s/ JEROME J. JENKO
Jerome J. Jenko
Senior Vice President
ADDRESS FOR NOTICES:
Grand Metropolitan Incorporated
c/o The Pillsbury Company
Pillsbury Center
200 South Sixth Street
Minneapolis, Minnesota 55402
Attention: General Counsel
TABLE OF CONTENTS
DEFINITIONS 2
ARTICLE I SERVICES, SPECIFICATIONS AND ACCOUNTING PRINCIPLES 10
1.1 The Services 10
1.2 Specifications 10
1.3 Additional Products 10
1.4 Accounting Principles 10
ARTICLE II TERM; EFFECTIVE DATE 11
2.1 Term 11
2.2 Effective Date 11
ARTICLE III PRICE AND PAYMENT TERMS 11
3.1 General Pricing Principles 11
3.2 Central Division Transfer Prices 13
3.3 Eastern Division Transfer Prices 13
3.4 Special Pricing Exceptions 13
(a) Non-Vegetable Costs 13
(b) One-Time FME Calculation 13
(c) Pillsbury Can Contracts 14
(d) Bulk Asparagus Transfers 14
3.5 Price Assumptions; Title Transfer 14
3.6 Payment Terms 15
(a) Product Invoices 15
(b) Management Fee Invoices 15
(c) Year-End Reconciliation Procedures
16
(d) "Open Book Policy" 16
(e) Shrinkage 17
(f) Yields and Recoveries 17
3.7 Ancillary Services and Other Special Services 17
3.8 Pillsbury Right of Offset 17
ARTICLE IV VOLUME 18
4.1 Annual Pack Plan 18
4.2 Seneca Projection 19
4.3 Pillsbury's Purchase Commitment 19
4.4 Pack and Commitment Variations 19
4.5 Dry Bean Production 20
ARTICLE V FINISHED PRODUCT SCHEDULING 20
5.1 Finished Product Scheduling 20
5.2 Labelling Capacity Requirements 21
5.3 Packaging Supplies 21
ARTICLE VI INVENTORY MANAGEMENT 22
6.1 Initial Product Inventory 22
6.2 Warehousing Cost 22
6.3 Sale of Products to Pillsbury 22
6.4 Inventory Shipping 22
6.5 Negative Pledge 23
ARTICLE VII CAPITAL EXPENDITURES 23
7.1 Restructuring Capital Plan 23
7.2 Amortization of RCP Investment 24
7.3 NonRCP Projects 24
7.4 Mandatory Capital Investments 24
7.5 Sales Tax Refunds 24
ARTICLE VIII COST REDUCTIONS 25
8.1 Cost Reduction Incentives 25
8.2 Cost Reduction in Supply Procurement 25
ARTICLE IX INSURANCE, TITLE AND RISK OF LOSS 25
9.1 Title; Risk of Loss 25
9.2 Insurance 25
(a) Worker's Compensation Insurance 26
(b) Commercial General and Excess Liability
Insurance 26
(c) Automobile Public Liability Insurance
26
ARTICLE X QUALITY PERFORMANCE REQUIREMENTS 26
10.1 General 26
10.2 Plant Inspection and Assessment 27
10.3 Product Quality 28
(a) Approved Varieties 28
(b) Thermal Processing 28
(c) Product Specifications 28
(d) Acceptance of Product 28
(e) Release of Product 29
(f) Samples 29
ARTICLE XI PROPRIETARY SEED 29
11.1 General Rules 29
11.2 Limited License 29
11.3 Third Party Contractors 30
ARTICLE XII WARRANTIES, CLAIMS AND LIABILITIES 30
12.1 Pure Food Guaranty 30
12.2 Good Manufacturing Practices 30
12.3 Indemnification 31
(a) Seneca 31
(b) Pillsbury 31
12.4 Survival 31
ARTICLE XIII PERFORMANCE GOALS 31
ARTICLE XIV CONTINUITY 32
ARTICLE XV INFORMATION SYSTEMS 32
15.1 MIS 32
15.2 Pillsbury Property 33
15.3 Software Warranties 33
15.4 Software Security 34
15.5 Indemnification 35
ARTICLE XVI CONFIDENTIALITY 35
16.1 Acknowledgement 35
16.2 Disclosure of Confidential Information 35
16.3 Unprotected Data or Disclosures 35
16.4 No License Granted By Disclosure 36
16.5 No Independent Use Contemplated 36
16.6 Additional Protection 36
16.7 Survival of Obligations After Agreement Termination
36
16.8 No Disclosure of Agreement 36
16.9 Remedies 36
ARTICLE XVII TRADEMARKS, TRADENAMES, SERVICE MARKS AND REGISTERED
MARKS 37
17.1 General Rules 37
17.2 Marks at Sold Plant 37
ARTICLE XVIII DISPUTE RESOLUTION 37
18.1 Alliance Review Board 37
18.2 Strategic Review Board 37
18.3 Mediation 38
18.4 Arbitration 38
ARTICLE XIX TERMINATION 39
19.1 Termination Rights 39
19.2 Effects of Termination 40
ARTICLE XX FORCE MAJEURE 42
ARTICLE XXI EXCLUSIVITY 42
21.1 Seneca Exclusivity 42
ARTICLE XXII ASSIGNMENT AND RELATIONSHIP 43
22.1 Assignment to Affiliates 43
22.2 Relationship of Independent Contractors 44
22.3 Independent Labor Obligations 44
ARTICLE XXIII MISCELLANEOUS 44
23.1 Notices 44
23.2 Publicity 44
23.3 Survival 45
23.4 Severability 45
23.5 Section Heading 45
23.6 Governing Law 45
23.7 Compliance with Law 45
(a) Fair Labor Standards Act 45
(b) Equal Opportunity Employment and
Affirmative Action 45
23.8 GMI Obligations 46
23.9 Board Observation Rights 46
23.10 Entire Understanding 46
(a) Exhibits 46
(b) Quality Documents 47
(c) Performance Goals 47
23.11 No Seneca Breach 47
Exhibit 2(c) 2/11 Draft
EXHIBIT B
8% SECURED NONRECOURSE SUBORDINATED PROMISSORY NOTE
$73,025,000.00 February 1, 1995
EXCEPT AS OTHERWISE SET FORTH IN SECTION 10 HEREOF, THE INDEBTEDNESS
EVIDENCED BY THIS PROMISSORY NOTE IS NOT A GENERAL OBLIGATION OF THE DEBTOR
(AS HEREINAFTER DEFINED) AND IS PAYABLE ONLY OUT OF THE ASSETS (AS
HEREINAFTER DEFINED).
EXCEPT AS OTHERWISE SET FORTH IN SECTIONS 2, 9(c), 9(e), 9(l), 10 AND 11
HEREOF, THE INDEBTEDNESS EVIDENCED BY THIS PROMISSORY NOTE IS SUBORDINATE AND
SUBJECT IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL IN CASH OR CASH
EQUIVALENTS (TO THE EXTENT ACCEPTABLE TO THE SENIOR MAJORITY OF EACH "SENIOR
TRANCHE") OF ALL "SENIOR INDEBTEDNESS" (AS HEREINAFTER DEFINED), IN THE
MANNER AND TO THE EXTENT SET FORTH IN SECTION 9 BELOW.
THE TERMS OF THIS PROMISSORY NOTE MAY NOT BE CHANGED, ALTERED OR AMENDED
(EXCEPT FOR THE AMENDMENT DESCRIBED IN THE SECOND PARAGRAPH OF SECTION 1
HEREOF) WITHOUT THE PRIOR WRITTEN CONSENT OF THE HOLDERS OF THE NECESSARY
PERCENTAGE OR PERCENTAGES OF THE THEN OUTSTANDING PRINCIPAL BALANCE OF EACH
"SENIOR TRANCHE" (AS HEREINAFTER DEFINED). (SUCH PERCENTAGE OR PERCENTAGES,
AS DETERMINED IN ACCORDANCE WITH THE TERMS OF THE RESPECTIVE LOAN DOCUMENTS
GOVERNING EACH SUCH "SENIOR TRANCHE" ARE REFERRED TO HEREIN AS THE "SENIOR
MAJORITY" OF SUCH SENIOR TRANCHE).
FOR VALUE RECEIVED, Seneca Foods Corporation, a New York
corporation ("Debtor" or "Seneca"), promises to pay to the order of The
Pillsbury Company, a Delaware corporation ("Pillsbury," and together with its
successors and assigns and any other transferee or successor then becoming
the holder of this Promissory Note, "Payee"), at Pillsbury Center, 200 South
Sixth Street, Minneapolis, Minnesota 55402, or such other place as Payee may
from time to time designate in writing, in lawful money of the United States
of America, the principal sum of Seventy-Three Million Twenty-Five Thousand
Dollars and No Cents ($73,025,000.00), which amount, Debtor and Payee agree,
constitutes the parties' good faith estimate of the portion of the Purchase
Price for the Assets described in 2.02(a) of the "Agreement" (as defined
below) being sold to Debtor by Payee.
1. Asset Purchase Agreement. This Promissory Note
("Note") is the "Note" referred to in the Asset Purchase Agreement dated
December 8, 1994 between Debtor and Payee (together with all amendments,
modifications and supplements thereto, the "Agreement"). Any capitalized
term used herein and not otherwise defined herein shall have the meaning
ascribed thereto in the Agreement. The holder and Payee of this Note are
entitled to the benefits of the Agreement to which reference is hereby made
for a statement of the terms and conditions under which this Note is issued.
Pursuant to and in accordance with the terms of Section
2.02(a) of the Agreement, Debtor and Payee acknowledge that the principal
amount of this Note shall be amended within two Business Days after the Final
Valuation Date, and any change in the principal amount hereof shall be
reflected solely by changing the amount of the principal payment due
hereunder on September 30, 2009 under Section 6 hereof.
2. Security. This Note is secured by, and is subject
to the terms of, the Security Agreement and the Mortgages referred to in the
Agreement. The Security Agreements and the Mortgages grant Payee
purchase money liens on the Assets (other than the Inventory Assets), which
liens are intended to be duly perfected first priority liens. The priority
or parity of the rights of Payee and any other creditors with respect to the
Assets (other than the Inventory Assets) and any lien therein shall not be
affected or impaired by any terms of this Note, specifically including, but
not limited to, Section 9 hereof. The attachment, perfection and priority of
the respective liens (if any) of Payee and any other creditors in the Assets
(other than the Inventory Assets) shall be determined under the Uniform
Commercial Code or other applicable law in effect from time to time.
3. Principal. The principal balance of this Note shall
be due and payable in accordance with the terms of Section 6 hereof. Except
as otherwise specifically set forth herein, the entire principal amount of
this Note shall be fully paid on or before September 30, 2009 (the "Final
Maturity Date").
4. Optional Prepayment. Except as provided below,
Debtor may not prepay this Note, in whole or in part, at any time; provided
that, any exercise by Payee of its rights under Sections 10 (except to the
extent such rights are subject to Section 9) or 11 hereof shall not be deemed
a prepayment of this Note for purposes of this Section 4, and Debtor may make
prepayments of this Note using "Permitted Proceeds" (as defined in Section
9(f) hereof) of the Assets at any time and from time to time. Prepayments
from Permitted Proceeds shall be applied first to the unpaid principal
balance of the Note, and second to accrued but unpaid interest, but such
payments shall not excuse or defer Debtor's obligation to continue to make
any other required payments when due until this Note is paid in full.
5. Interest. The unpaid principal balance due
hereunder shall bear simple interest at the rate of eight percent (8.0%) per
annum. Interest shall be computed and shall accrue daily on the basis of a
365-day year for the actual number of days elapsed (including the first day
and the last day of the period for which interest is due) beginning on the
date hereof. Interest shall be paid quarterly on each of the last days of
March, June, September and December (payable on the next succeeding "Business
Day" (as defined below), if such day is not a Business Day), with the first
interest payment due hereunder on March 31, 1995. For purposes of
calculating the first three quarterly payments of each "Calendar Year" (as
defined below), the unpaid principal balance amount shall be deemed to be the
principal balance outstanding on the first day of each Calendar Year (except
that interest payments made through September 30, 1995, shall be calculated
based on the original principal balance as of the date hereof). Interest due
for any calendar quarter shall be determined in relationship to the annual
packing commitment of Pillsbury (as more fully described in the Alliance
Agreement, the "Annual Pack Plan") in effect as of the December 1st
immediately preceding the Calendar Year in which such calendar quarter
occurs, as follows: the amount of interest payable in any quarter shall be
equal to the product resulting from multiplying 100% of the interest accrued
or to accrue for the Calendar Year in which such quarter occurs by a
fraction, the numerator of which is equal to the volume of Products scheduled
to be manufactured by Seneca for Pillsbury at the "Alliance Plants" (as
defined in the Alliance Agreement) during such quarter pursuant to the Annual
Pack Plan and the denominator of which is the volume of Products to be
manufactured by Seneca for Pillsbury at the Alliance Plants during such
Calendar Year pursuant to the Annual Pack Plan; provided that, under all
circumstances, Seneca shall pay all interest that has accrued and is unpaid
for any Calendar Year on or before December 31st of such Calendar Year. As
used herein, the term "Calendar Year" shall mean the twelve-month period
beginning on January 1st and ending on December 31st of any calendar year.
As used herein, the term "Business Day" shall mean a day on which federally
chartered banks in New York, New York and Minneapolis, Minnesota are open for
business.
On the Final Maturity Date of this Note, all accrued but
unpaid interest shall be due and payable in full.
Payee shall be entitled to offset, in accordance with the
terms of Section 3.8 of the Alliance Agreement, any accrued but unpaid
interest that has become due and payable. Payee, however, shall not, under
any circumstances, be entitled to offset any payments of principal hereunder
(whether or not past due) pursuant to such Section 3.8, or, so long as any
Senior Indebtedness is outstanding, any common law, contractual or statutory
right (including any such right pursuant to the Bankruptcy Code of 1978, as
amended) or otherwise, nor, so long as any Senior Indebtedness is
outstanding, may any principal obligation be satisfied pursuant to any
counterclaim against Payee held by Debtor; and Payee hereby irrevocably
waives (solely for the benefit of the Senior Creditors and not for the
benefit of Debtor) any right to assert any such rights of offset or
counterclaim as they relate to the repayment or recovery of principal due
under this Note (but the foregoing waiver shall not affect Payee's rights, if
any, to offset or counterclaim with respect to any other amounts owed to
Debtor by Payee under any other instrument or agreement against any other
amounts owed to Payee by Debtor under any such other instrument or
agreement).
6. Repayment of Principal. Debtor will repay the
principal amount of this Note according to the following schedule (or on the
next Business Day thereafter, if any of the following dates is not a Business
Day):
Principal
Date Payment
10/20/95 $ 3,000,000
10/20/96 $ 3,000,000
10/20/97 $ 3,000,000
10/20/98 $ 3,500,000
10/20/99 $ 3,500,000
10/20/2000 $ 3,500,000
10/20/2001 $ 3,625,000
10/20/2002 $ 3,625,000
10/20/2003 $ 3,625,000
10/20/2004 $ 3,625,000
10/20/2005 $ 3,500,000
10/20/2006 $ 3,500,000
10/20/2007 $ 3,500,000
10/20/2008 $ 3,500,000
9/30/2009 $ 25,025,000
$73,025,000
7. Financial Reporting. So long as this Note shall
remain outstanding, Debtor shall deliver to Payee all financial statements,
certifications and other reports required under the terms of the documents
governing each Senior Tranche to be delivered to the providers of such
credit, as and when required to be delivered thereunder to such providers of
credit. In the event that Debtor does not have a Senior Tranche facility
during any period when this Note is outstanding, Debtor shall deliver to
Payee: (a) within 45 days after the end of each fiscal quarter of Debtor,
unaudited balance sheets and income statements showing the financial
condition and results of operations of Debtor as of the end of each such
quarter, a statement of shareholders' equity and a statement of cash flow,
each statement to be as of the end of each such fiscal quarter, all of which
shall be prepared and certified by the Chief Financial Officer or Chief
Accounting Officer of Debtor as presenting fairly the financial condition and
results of operations of Debtor and its subsidiaries and as having been
prepared in accordance with United States generally accepted accounting
principles consistently applied ("US GAAP"), in each case subject to normal
year-end adjustments and the absence of footnotes; and (b) (to the extent not
otherwise covered in paragraph (a) above) promptly after the same become
publicly available, copies of such registration statements, annual, periodic
and other reports, and such proxy statements and other information, if any,
as shall be filed by the Debtor with the Securities and Exchange Commission
("SEC") pursuant to the requirements of the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "1934 Act")
(and, if Debtor is no longer subject to the 1934 Act reporting requirements,
financial statements and reports substantially equivalent to the foregoing,
including audited annual financial statements, to be delivered at such times
as Debtor currently delivers such financial statements and reports to the
SEC).
8. Default. An "Event of Default" with respect to this
Note means the occurrence or existence of one or more of the following events
or conditions (whatever the reason for the Event of Default and whether
voluntary, involuntary or effected by operation of law):
(a) the failure of Debtor to make due and punctual
payment of any installment of principal hereof, as the same shall
become due and payable pursuant to the terms of Section 6 hereof;
provided that, notwithstanding the foregoing, so long as any
"Senior Indebtedness" (as defined in Section 9(d) hereof) remains
outstanding, Payee shall not be entitled to exercise any remedy
hereunder with respect to such event until 180 days have passed
after Debtor has failed to pay, when due and payable pursuant to
the terms of Section 6 hereof, all or any portion of any two
installments of principal hereunder such that, on any date after
the date hereof, all or any portions of any two installments of
principal hereunder are outstanding 180 days after the date on
which the latter of the two installments became due and payable
hereunder; provided further that, under all circumstances Debtor's
failure to make due and punctual payment of the entire principal
amount of this Note on September 30, 2009 shall be an immediate
Event of Default hereunder on such date;
(b) the termination, following the expiration of
the applicable notice period or any extension thereof (after
delivery of an unrevoked notice by either party thereto), of the
Alliance Agreement (other than termination pursuant to Sections
19.1(a)(i) or 19.1(d) thereof); provided that, the failure of
Debtor to comply with the terms of Section 19.2 of the Alliance
Agreement following the expiration of the applicable notice period
or any extension thereof (after delivery of an unrevoked notice by
either party thereto) with respect to a termination pursuant to
Section 19.1(a)(i) thereof shall constitute an Event of Default
hereunder;
(c) the failure of Debtor timely and properly to
observe, keep or perform the covenant set forth in Section 7 hereof
for two consecutive quarters, which failure shall continue for 30
days after Payee shall have given Debtor written notice specifying
such default; provided that, so long as any Senior Indebtedness
remains outstanding, the foregoing shall not constitute an "Event
of Default" hereunder and Payee shall not be entitled to exercise
any remedy hereunder;
(d) Debtor makes an assignment for the benefit of
creditors, or admits in writing its inability to pay its debts as
they become due;
(e) a receiver, trustee or custodian is appointed
for, or takes possession of, all or substantially all of the assets
of Debtor, either in a proceeding brought by Debtor or in a
proceeding brought against Debtor, and such appointment is not
discharged or such possession is not terminated within 60 days
after the effective date thereof, or Debtor consents to or
acquiesces in such appointment or possession;
(f) Debtor files a petition for relief under the
Federal Bankruptcy Code (11 U.S.C. 101 et seq., as amended) or
any other present or future federal or state insolvency, bankruptcy
or similar law (all of the foregoing laws, collectively, being
"Applicable Bankruptcy Law") or an involuntary petition for relief
is filed against Debtor under any Applicable Bankruptcy Law and
such petition is not dismissed within 60 days after the filing
thereof, or an order for relief naming Debtor is entered under any
Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or
hereafter existing is requested or consented to by Debtor;
(g) Debtor fails to have discharged, suspended or
stayed any attachment, sequestration or similar writ levied upon
any property of Debtor having a value in excess of $500,000.00
within 30 days after Debtor is notified of such levy; provided
that, so long as any Senior Indebtedness remains outstanding, the
occurrence of any of the foregoing with respect to any property of
Debtor other than the Assets shall not constitute an "Event of
Default" hereunder and Payee shall not be entitled to exercise any
remedy hereunder;
(h) Debtor fails to pay, suspend or stay, within 30
days after Debtor is notified thereof, any final money judgment in
excess of $500,000.00 against Debtor; provided that, so long as any
Senior Indebtedness remains outstanding, the foregoing shall not
constitute an "Event of Default" hereunder and Payee shall not be
entitled to exercise any remedy hereunder;
(i) Debtor defaults under the Security Agreement or
any of the Mortgages, which default continues beyond any applicable
notice and any applicable cure and, as a result of which, Payee
would be entitled to exercise its rights with respect to the
collateral covered by such Security Agreement or Mortgage; or
(j) The occurrence of any defaults, events of
default, breaches or similar terms in any documents governing any
single note or credit facility evidencing an amount of indebtedness
of Debtor in excess of $10,000,000, including the Senior
Indebtedness, as a result of which, the holder of such other
indebtedness (including the Senior Creditors) has accelerated the
maturity thereof. For the purposes of this Section 8(j), any
letter of credit securing obligations of Debtor under any single
credit facility shall be treated the same as the credit facility
itself, regardless of whether a draw against or default under any
such letter of credit may constitute a default, event of default,
breach or acceleration event under Debtor's reimbursement
obligations related to letters of credit securing other single
credit facilities and regardless of whether the issuer of any such
letter of credit may demand cash collateral or a prepayment under
more than one such reimbursement obligation.
9. Subordination.
(a) The payment of any and all "Subordinated
Indebtedness" (as defined in Section 9(d) hereof) is expressly
subordinated to the extent and in the manner set forth in this
Section 9 to "Senior Indebtedness" (as defined in Section 9(d)
hereof). The provisions of this Section 9 are intended and are
solely for the purpose of defining the relative rights of the
holder or holders hereof (including the Payee, herein sometimes
called collectively, "Junior Creditors," and individually, a
"Junior Creditor") and any holders of Senior Indebtedness, so long
as they are holders of Senior Indebtedness (hereinafter called
collectively, "Senior Creditors" and individually, a "Senior
Creditor") and shall be for the sole benefit of the Junior
Creditors and the Senior Creditors and their respective successors
and assigns, and no other person or entity, including without
limitation Debtor, shall have any right, benefit, priority or
interest thereunder.
(b) If Payee ever receives any payment on account
of this Note other than a "Permitted Payment" (as defined in
Section 9(c) hereof) or an 'Unauthorized Binding Payment' (as
defined in Section 9(l) hereof), it will hold any amount so
received in trust for the Senior Creditors and will forthwith turn
over such payment, in the form received, to the "Collateral Agent"
(as defined in the "Intercreditor Agreement" (as defined below))
for the account of the Senior Creditors, to be applied to Senior
Indebtedness as provided in the Collateral Agency and Intercreditor
Agreement (the "Intercreditor Agreement") among the Debtor and the
Senior Creditors; provided that, Payee shall be entitled to rely
upon all notices received from "Chase" (as hereinafter defined), or
any successor to Chase as Collateral Agent, until Payee receives a
notice from Chase (or the person named in the immediately preceding
such notice) that another entity named therein is now the
Collateral Agent; and provided, however, that, notwithstanding
anything to the contrary in this Note, Junior Creditors shall have
no responsibility for, and shall not be liable in any manner to any
party for, the application of any payments made by Junior Creditors
to the Collateral Agent pursuant to the terms of this Note. Any
amount so turned over to the Senior Creditors, or otherwise set
aside, recovered, rescinded or returned for any reason (including,
without limitation, the bankruptcy, insolvency or reorganization of
Debtor or any other person) shall be deemed never to have been
applied to the amount outstanding under this Note, and the amount
so turned over, set aside, recovered, rescinded or returned shall
continue to be owing under this Note and to be secured by the liens
in the Assets described in Section 2 hereof. If any amount so
turned over, set aside, recovered, rescinded or required to be
returned is, notwithstanding this Section 9(b), determined by a
court of competent jurisdiction to have reduced the principal
amount outstanding under this Note, then, subject to the payment in
full of the Senior Indebtedness, the Junior Creditors will be
subrogated to the rights of the Senior Creditors to receive
payments or distributions of assets of Debtor to the extent that
such amounts turned over, set aside, recovered, rescinded or
returned by or from the Junior Creditors have been applied to
payment of the Senior Indebtedness until the principal of and
interest on this Note are paid in full. For the purposes of such
subrogation, no payment or distribution to the Senior Creditors of
any cash, property or securities to which the Junior Creditors
would be entitled except for the terms of this Section 9 shall, as
between Debtor, its creditors other than the Senior Creditors and
the Junior Creditors, be deemed to be a payment by Debtor to or on
account of Senior Indebtedness.
(c) Notwithstanding the provisions of Sections 9(a)
or (b) or (e) hereof, until the occurrence of an "event of default"
(or similar term, however denominated) with respect to either
Senior Tranche, Debtor shall pay to the Junior Creditors, and the
Junior Creditors shall be entitled to retain, the interest and
principal payments when due under this Note or prepayments (in
accordance with Section 4 hereof) thereof (together with Permitted
Proceeds received at any time, the "Permitted Payments"). If the
Junior Creditors receive written notice from the agent for the
Banks under the Revolver (the "Bank Agent"), the Collateral Agent
or any Senior Creditor under the Note Purchasers Tranche of the
occurrence of an "event of default" (or similar term, however
denominated) under any of the documents evidencing such Senior
Creditor's Senior Tranche, or acquire "actual knowledge" (as
defined below) of the existence of such an "event of default," the
Junior Creditors shall be subject to the terms of Sections 9(a) and
(b) hereof, except as otherwise permitted by Sections 9(e), 9(l)
and 11 hereof. Following the receipt of written notice or the
acquisition of "actual knowledge" (whichever is earlier) as
described in the previous sentence:
(i) the Junior Creditors will not ask, demand, sue
for, take or receive from Debtor the whole or any part of any
principal payments or other monies (other than interest
payments offset pursuant to Section 3.8 of the Alliance
Agreement) owing under this Note, except that (x) if an Event
of Default hereunder occurs, the Junior Creditors shall be
entitled to exercise all of their rights and remedies with
respect to the Assets permitted by Section 11 hereof, and to
enforce such rights and remedies, and (y) the Junior Creditors
may continue accepting Permitted Proceeds, and may resume
accepting other Permitted Payments upon their receipt of
written notice from the Bank Agent, the Collateral Agent or
any Senior Creditor under the Note Purchasers Tranche or upon
their acquisition of "actual knowledge" (whichever is earlier)
that all "events of default" with respect to the Senior
Tranche under which such "events of default" occurred have
been cured; and
(ii) the Junior Creditors shall pay over to the
Collateral Agent, for distribution pursuant to the
Intercreditor Agreement, any amount received from Debtor
during the Clawback Period minus the sum of all interest
payments made by offset pursuant to Section 3.8 of the
Alliance Agreement during the Clawback Period.
The Junior Creditors shall be deemed to have acquired
"actual knowledge" of the existence of an "event of default" under
any of the documents evidencing any Senior Tranche as of the date
that the existence of such "event of default" is known by one or
more Junior Creditors' Chief Financial Officer or General Counsel,
any employee or officer of the Junior Creditors that is a member of
the 'SRB' (as defined in the Alliance Agreement) or by the
individual or individuals managing the relationship with Debtor
that is evidenced by this Note (each, a "Responsible Officer"), or
that the existence of such "event of default" would have been known
by a Responsible Officer had the Junior Creditors "exercised due
diligence." The Junior Creditors shall provide, once a year, to
the Collateral Agent, a written notice identifying the names and/or
titles held by each person who shall constitute a Responsible
Officer for purposes of this Note. The Junior Creditors shall be
deemed to have "exercised due diligence" if they have maintained
reasonable routines for communicating significant information with
respect to matters related to this Note to such Responsible
Officers and there was reasonable compliance with such routines.
"Exercising due diligence" shall not require the Junior Creditors
to conduct any inquiry into the existence or nonexistence of an
"event of default" under any of the documents evidencing any Senior
Tranche nor shall "exercising due diligence" require any individual
acting for the Junior Creditors to communicate the existence of
such an "event of default" to any Responsible Officer unless such
communication is part of that individual's regular duties or unless
that individual has reason to know of this Note and that such an
'event of default' affects the Junior Creditors' rights under this
Note.
The term "Clawback Period" shall mean, with respect
to any "event of default" under documents evidencing any Senior
Tranche, the period ending on the date the Junior Creditors receive
written notice or acquire "actual knowledge" of such "event of
default," whichever is earlier, and beginning on the later of: (A)
the earliest date on and after which such "event of default" has
continuously existed, and (B) fourteen calendar months prior to the
date the Junior Creditors first receive written notice or acquire
"actual knowledge" of such "event of default." To the extent the
Junior Creditors receive any insurance or condemnation proceeds
with respect to any Collateral, which proceeds are delivered to
Debtor to repair, replace or rebuild such Collateral pursuant to
the terms of the Security Agreeement and/or any of the Mortgages,
such proceeds shall not be deemed to have been received by the
Junior Creditors for purposes of this Note, including this Section
9. Except as provided in Section 9(b), this Section 9(c) or
Section 9(e) hereof, payment of the principal of and interest on
the indebtedness evidenced by this Note will be paid to the Junior
Creditors in accordance with its terms. The Junior Creditors shall
be entitled to retain any payment made prior to the beginning of a
Clawback Period, even if an "event of default" existed under
documents evidencing one or more of the Senior Tranches at the time
such payment was received.
(d) For purposes of this Note, the term "Senior
Indebtedness" shall mean and include all obligations of Debtor to
the Senior Creditors, direct or contingent, joint, several or
independent, now or hereafter existing, due or to become due to, or
held or to be held by, the Senior Creditors, whether created
directly or acquired by assignment or otherwise, including any
interest at the rate stated in the instrument or instruments
evidencing Senior Indebtedness from the date of filing any petition
under any Applicable Bankruptcy Law to the date of payment under
such instrument or instruments ("Post-Petition Interest"), in each
case, relating solely to the indebtedness of Debtor for money
borrowed (and, in the case of the Revolver (as defined below) any
commitment by one or more Banks to lend to Debtor) from: (i)
Prudential, Hancock, or any additional or replacement lender in
connection with any refinancing, whether borrowed pursuant to that
certain Note Agreement, dated the date hereof, by and among Debtor,
Prudential and Hancock, including any amendments thereto, and
extensions, renewals, refundings or refinancings thereof, whether
or not the principal amount is increased (and any notes defined
therein and issued thereunder), or borrowed pursuant to any other
facility entered into by Debtor after the date hereof with
Prudential, Hancock or any additional or replacement lender in
connection with any refinancing (collectively, the "Note Purchasers
Tranche"), and (ii) the Banks, whether borrowed pursuant to that
certain Revolving Credit Facility, dated the date hereof, by and
among Debtor, the Banks and the Chase Manhattan Bank, N.A.
("Chase"), for itself and as Agent for the other lenders named
therein, including any amendments thereto, and extensions,
renewals, refundings and replacements thereof, whether or not the
principal amount is increased, and whether or not any or all of the
Banks presently named therein is removed or replaced and any
promissory notes issued thereunder (the "Revolver"), (the "Bank
Tranche"); provided, however that no additional or other lender
added in a refinancing of the Note Purchasers Tranche, nor any
additional lender added to the Bank Tranche after a replacement of
the Bank Agent, shall be a Senior Creditor, nor shall Debtor's
obligations to such lender be Senior Indebtedness, until Payee has
received written notice or acquired "actual knowledge" of such
additional or other lender under the Note Purchasers Tranche or of
such replacement of the Bank Agent. So long as any of the Banks
has a commitment to lend under the Revolver, the Senior
Indebtedness under the Bank Tranche shall be deemed to remain
outstanding and unpaid. As used herein, the term "Senior Tranche"
shall refer to either of the Note Purchasers Tranche and the Bank
Tranche, and the term "Senior Tranches" shall refer to both of such
Tranches.
The term "Subordinated Indebtedness" shall mean and
include the principal of and interest on the indebtedness evidenced
by this Note, and shall specifically include amounts owed by Debtor
pursuant to Section 10 to the extent such amounts are made subject
to this Section 9 by Section 10, but shall specifically exclude any
amounts owed by Debtor pursuant to Section 10 hereof which
constitute Permitted Proceeds (which amounts shall not be subject
to the subordination provisions of this Section 9).
(e) Subject to the next sentence of this Section
9(e), the Junior Creditors will not commence any action or
proceeding against Debtor to recover all or any part of the
Subordinated Indebtedness or join with any creditor, unless the
Senior Majority of any Senior Tranche shall also join, in bringing
any proceedings against Debtor under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt,
receivership, liquidation or insolvency law or statute of the
Federal or any State government unless and until Senior
Indebtedness shall be paid in full. Notwithstanding the foregoing
restrictions in Section 9(e), however, the Junior Creditors may
take any action necessary or desirable, in the Junior Creditors'
opinion, to foreclose any lien on, or exercise any other remedies
with respect to, the Assets or any portion thereof, including but
not limited to seeking the appointment of a receiver for the
collection and management of the Assets and the Permitted Proceeds
thereof. In the event of any liquidation, dissolution or other
winding up of the Debtor, or in the event of any receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization or arrangement with creditors, whether or not
pursuant to bankruptcy laws, sale of all or substantially all of
the assets or any other marshalling of the assets and liabilities
of the Debtor, Senior Indebtedness shall first be paid in full
before the Junior Creditors shall be entitled to receive any
moneys, dividends or other assets (other than the Assets and the
Permitted Payments [collectively, the "Collateral"]) in any such
proceeding with respect to the Subordinated Indebtedness. Subject
to the limitations contained in the next sentence, if the Junior
Creditors are determined, in any such proceeding, to have an
unsecured, recourse claim with respect to any portion of the
Subordinated Indebtedness (an "Unsecured Subordinated Claim"), then
the Junior Creditors will, at the request of the Senior Majority of
any Senior Tranche, file any claim, proof of claim or other
instrument of similar character necessary to enforce the
obligations of the Debtor in respect of such Unsecured Subordinated
Claim, vote such Unsecured Subordinated Claim as directed by such
Senior Majority with respect to acceptance or rejection of any plan
of reorganization or arrangement, and will hold in trust for the
Senior Creditors and assign, transfer and pay over to the
Collateral Agent, in the form received, to be applied on Senior
Indebtedness (including Post-Petition Interest) by the Collateral
Agent pursuant to the Intercreditor Agreement, any and all moneys,
dividends or other assets received in any such proceeding on
account of such Unsecured Subordinated Claim, unless and until
Senior Indebtedness (including Post-Petition Interest) shall be
paid in full. In the event that the Junior Creditors shall fail to
take such action requested by the Senior Majority of any Senior
Tranche, such Senior Majority may, as attorney-in-fact for the
Junior Creditors, take such action on behalf of the Junior
Creditors, and the Junior Creditors hereby appoint the Collateral
Agent as attorney-in-fact for the Junior Creditors to demand, sue
for, collect and receive any and all such moneys, dividends or
other assets (other than the Collateral) and give acquittance
therefor and to file any claim, proof of claim or other instrument
of similar character and to take such other action (including
acceptance or rejection of any plan of reorganization or
arrangement, but specifically excluding any such action involving
the Collateral) in the name of the Collateral Agent on behalf of
the Senior Creditors or in the name of the Junior Creditors as the
Collateral Agent may deem necessary or advisable for the
enforcement of the agreement contained in this Section 9; and the
Junior Creditors will execute and deliver to the Collateral Agent
on behalf of the Senior Creditors such other and further powers of
attorney or other instruments as the Collateral Agent may request
in order to accomplish the foregoing; provided that, under no
circumstances shall the foregoing powers of attorney extend to, nor
shall the Junior Creditors be obligated to execute or deliver, any
documents or other instruments the effect of which would be to
diminish or otherwise adversely effect either the Junior Creditors'
rights with respect to the Collateral or the value of the
Collateral.
Except as provided in the next sentence, nothing in
this Section 9(e) shall limit the Junior Creditors' rights: (i)
with respect to any obligations of the Debtor under the Alliance
Agreement; (ii) with respect to any obligations of the Debtor that
are recourse obligations with respect to Permitted Proceeds under
Section 10 of this Note; (iii) with respect to the Assets, the
Permitted Proceeds or any other Collateral, or any Unauthorized
Binding Payment; or (iv) with respect to any claim of the Junior
Creditors in any such proceeding that is secured by all or part of
the Collateral, or any amount paid or instrument or other security
received on account of such a claim. The restrictions on (and
exceptions thereto of) the Junior Creditors joining in any
bankruptcy petition or taking certain other actions that are
contained in the first two sentences of this Section 9(e) shall
apply to the Junior Creditors' rights described in the preceding
sentence.
(f) As used in this Note, the term "Permitted Proceeds"
shall include:
(i) all proceeds resulting from the conversion into
proceeds of any of the Assets during the term (including any
extensions thereof) of this Note, in an amount equal to the
lesser of: (A) such proceeds minus the remaining
undepreciated value (if any) of the capital improvements made
by Debtor since the "Effective Date" (as defined in the
Agreement) to the Asset or Assets converted to such proceeds,
as properly reflected on the most recent quarterly balance
sheet of the "Central Division" (as defined in the Alliance
Agreement) (as determined in accordance with US GAAP from
Debtor's books and records), or (B) the remaining balance of
the principal due under this Note that was originally
allocated on the Effective Date to the Asset or Assets
converted to such proceeds (which allocation is set forth in a
schedule dated as of the Closing Date and prepared in
accordance with Section 2.05 of the Agreement); and
(ii) any item of value (whether in the form of cash,
a new debt security, capital stock in Debtor or other entity,
or other property of Debtor) distributed to Payee on account
of its secured claim with respect to the Collateral in any
liquidation, dissolution or other winding up of Debtor, or any
receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, whether or not pursuant to any
Applicable Bankruptcy Law, or to the sale of all or
substantially all of the assets or to any other marshalling of
the assets and liabilities of Debtor, and any proceeds of any
such item of value received by Payee pursuant to such
distribution.
(g) The Senior Creditors may, at any time and from
time to time, without the consent of or notice to the Junior
Creditors, without incurring responsibility to the Junior
Creditors, and without impairing or releasing any of the Senior
Creditors' rights, or any of the obligations or rights of the
Junior Creditors hereunder:
(i) Change the amount, manner, place or terms of
payment or change or extend the time of payment of or renew or
alter Senior Indebtedness or amend the Note Agreements or the
Revolver in any manner or enter into or amend in any manner
any other agreement relating to Senior Indebtedness; provided,
however that, none of such changes, extensions, renewals,
alterations or amendments shall in any manner amend the terms
of this Note;
(ii) Sell, exchange, release or otherwise deal with
any property (other than the Assets) by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing, Senior
Indebtedness; provided, however, that, Debtor shall not (and
the Senior Creditors shall not take (or require Debtor to
take) any action contradictory thereto) pledge, mortgage or
otherwise use as collateral the Assets to secure any
indebtedness other than the Junior Indebtedness;
(iii) Release anyone liable in any manner for the
payment or collection of Senior Indebtedness;
(iv) Exercise or refrain from exercising any rights
against the Debtor and others (including the Junior
Creditors); and
(v) Apply any sums (other than the sums resulting
from Permitted Proceeds, including the Permitted Proceeds
identified in clauses (ii), (iii) and/or (iv) of Section 10
hereof)) by whomsoever paid or however realized to Senior
Indebtedness.
(h) Notice of acceptance of the agreement contained
in this Section 9 is hereby waived.
(i) The Junior Creditors hereby acknowledge that
The Prudential Insurance Company of America (together with its
successors and assigns, "Prudential"), and John Hancock Mutual Life
Insurance Company (together with its successors and assigns,
"Hancock"), who are original parties to their Note Agreement with
Debtor, in entering into such Note Agreement and in purchasing
notes and making other financial accommodations thereunder, and
Chase, for itself and as Agent, and the other Banks (together with
their respective successors, assigns and participants,
(collectively the "Banks")) who are original parties to the
Revolver, in entering into the Revolver and in purchasing notes and
making other financial accommodations thereunder, have relied and
are entitled to continue to rely (and any future Agent and other
Banks who become parties to the Revolver (also "Banks") and other
lenders of Senior Indebtedness shall be entitled to rely) upon the
terms of this Note. The Senior Creditors shall have no liability
to the Junior Creditors, and the Junior Creditors hereby waive any
claim which they may have now or hereafter against the Senior
Creditors, arising from any actions which any of the Senior
Creditors may take or omit to take in accordance with the terms of
their respective Note Agreements and Revolver; provided that,
notwithstanding the foregoing limitation of liability and waiver of
claims, the Senior Creditors shall not hereby be absolved of
liability for, and the Junior Creditors shall not hereby have
waived any claims against any of the Senior Creditors for, any
action or actions taken or omitted to be taken by such Senior
Creditors if such actions or inactions: (i) would impair the
Junior Creditors' rights hereunder with respect to the Assets or
rights under the Security Agreement or the Mortgage with respect to
the Assets, or (ii) would otherwise constitute gross negligence or
willful misconduct with respect to the Senior Creditors' rights
under the terms of this Note. The Junior Creditors further agree
to enter into appropriate subordination agreements with any future
lenders of Senior Indebtedness containing provisions reasonably
necessary to confirm that such future lenders of Senior
Indebtedness (and the Junior Creditors with respect to such
parties) are entitled to rely upon the terms set forth in this
Section 9.
(j) Debtor covenants and agrees to provide Payee
with copies of any written notice sent to or by Debtor with respect
to the occurrence of an "event of default," as that term is or may
be defined in any document governing Senior Indebtedness. Payee
covenants and agrees to provide the Collateral Agent (or the Senior
Creditors, if the Payee has received written notice or acquired
'actual knowledge' (as defined in Section 9(c)) that there is no
Collateral Agent) with copies of any written notice sent to or by
Payee with respect to the occurrence of an Event of Default under
this Note. Debtor also covenants and agrees to use its best efforts
to cause the Senior Creditors to provide written notice to Payee
upon any such event of default being cured.
(k) The Junior Creditors will cause all
Subordinated Indebtedness to be evidenced by a note or other
instrument which shall bear upon its face a statement or legend
substantially in the form of each legend appearing on the first
page of this Note.
(l) If and only if each of the following conditions is
satisfied:
(i) the Alliance Agreement has been terminated (except
that a termination of the Alliance Agreement pursuant to Section
19.1(d) of the Alliance Agreement shall not be deemed to satisfy
this condition);
(ii) a final order is entered by any court or arbitrator
(which ruling is final and binding) having proper jurisdiction to
the effect that Debtor is entitled, contrary to the provisions of
this Note, to obtain the release or other termination of all of the
liens created by the Security Agreement and the Mortgages in
exchange for a payment or payments to Payee (which must constitute
payment in full of all amounts secured by those liens and/or result
in Payee's compliance with clause (v) below);
(iii) Payee made a good faith effort to enforce: (x) the
provisions of this Note prohibiting the payment(s) referenced in
clause (ii) above, and (y) its right to obtain possession of the
Collateral under the Security Agreement, the Mortgage and the
Alliance Agreement;
(iv) Debtor has not returned the Assets and makes the
payment or payments described in clause (ii) above (collectively,
if all of the conditions set forth in this Section 9(l) are
satisfied, 'Unauthorized Binding Payments');
(v) all of the liens created by the Security Agreement and
the Mortgages are released or otherwise terminated, and (if any
amount secured by those liens was not paid in full), Payee releases
any claim that was secured by those liens; and
(vi) Payee gave the Collateral Agent (or the Senior
Creditors, if the Payee has received written notice or acquired
'actual knowledge' (as defined in Section 9(c)) that there is no
Collateral Agent) written notice reasonably promptly after: (x)
Debtor or any other individual or entity (other than a Senior
Creditor) first asserted in a court or arbitration proceeding that
Debtor was entitled to obtain the release or other termination of
the liens created by the Security Agreement and the Mortgage in
exchange for a payment or payments to Payee; (y) the commencement
by Payee of any court or arbitration proceeding to enforce Payee's
rights with respect to the Assets under this Note, the Security
Agreement, any Mortgage or the Alliance Agreement; or (z) the first
assertion in a court or arbitration proceeding to which Payee is a
party or in which Payee is a participant of a claim that Payee's
lien in the Assets pursuant to the Security Agreement and the
Mortgages, or its right to repossess the Assets pursuant to this
Note, the Security Agreement, the Mortgages and the Alliance
Agreement, is unenforceable,
then Payee shall be entitled to retain the entire amount of such
Unauthorized Binding Payments, anything to the contrary in this Section
9 or elsewhere in this Note notwithstanding. Nothing in this Section
9(l) shall be construed to be a waiver of any of: the prohibition of
prepayments; the limitations on setoff; any subordination provisions set
forth herein (except to the extent this Section 9(l) explicitly
authorizes Payee to retain Unauthorized Binding Proceeds); or Payee's
right to retain Permitted Payments. It is the intention of the parties
that Debtor shall have no right to prepay this Note except to the extent
Debtor makes prepayments out of Permitted Proceeds, and Debtor shall
have no right to obtain the release of the Collateral or any portion
thereof except by paying all obligations under this Note and the
Alliance Agreement in full. The Senior Creditors shall have the right
to intervene in any judicial or arbitration proceeding in which an order
described in clause (ii) above is sought, and to oppose the entry of
such an order and otherwise defend and protect their interests. Payee
shall not consent to any order directing it to accept a payment or
payments (other than a Permitted Payment) and release its lien on all or
any portion of the Collateral or initiate any proceeding seeking such an
order, and shall not object to any intervention by the Senior Creditors
in any judicial or arbitration proceeding in which an order described in
clause (ii) above is sought.
10. Limitation on Recourse. Notwithstanding anything to
the contrary elsewhere in this Note or otherwise (except to the extent
permitted by Section 9(l) and in the next sentence), Debtor's obligations to
Payee under this Note: (x) prior to an Event of Default, shall be satisfied
by Debtor in accordance with the terms of Sections 5, 6 and 9 hereof, and (y)
after (but only during the continuance of) an Event of Default, principal
payment obligations hereunder shall be payable (or otherwise satisfied)
solely from, and Payee agrees that it will collect (or otherwise obtain
satisfaction) solely from, the Assets and the other Collateral subject to the
Security Agreement and the Mortgages, and after (but only during the
continuance of) an Event of Default, Payee shall not have recourse to any
other assets of Debtor. Any obligations for actual damages arising out of
any of the following four circumstances shall be general obligations of
Debtor: (i) Debtor's fraud or intentional misconduct (provided that, any
actual damages resulting therefrom and determined to be owed by Debtor to
Payee shall be subject to the terms of Section 9 hereof), or (ii) Debtor's
failure (whether voluntary or involuntary) to turn over to Payee, within 10
days after written notice from Payee requesting such amounts, any insurance
or condemnation proceeds (paid with respect to the Collateral subject to the
Security Agreement and/or the Mortgages) received by or on behalf of Debtor
after the date hereof, which proceeds constitute Permitted Proceeds
payable to Payee under this Note (provided that, any other such insurance or
condemnation proceeds and any damages related thereto shall be subject to the
terms of Section 9 hereof), or (iii) Debtor's failure (whether voluntary or
involuntary) to comply with the provisions of Article XIX of the Alliance
Agreement (provided that, any actual damages resulting therefrom and
determined to be owed by Debtor to Payee that are not recovered from the
Assets or Permitted Proceeds shall be subject to the terms of Section 9
hereof), or (iv) Debtor's failure (whether voluntary or involuntary) to
transfer the Assets to Payee free and clear of all liens and encumbrances
pursuant to clause (i) of the second sentence of Section 11 hereof (provided
that, any actual damages resulting therefrom and determined to be owed by
Debtor to Payee that are not recovered from the Assets or Permitted Proceeds
shall be subject to the terms of Section 9 hereof). Nothing herein shall
preclude a proper party in interest from seeking and obtaining specific
performance against Debtor (to the extent not inconsistent with this Note)
for any failure to comply with any term, condition, covenant or agreement
(other than any promise to pay money) herein or in any of the Security
Agreement, the Mortgages and/or Articles V, VI and/or XIX of the Alliance
Agreement. This Section 10 shall not be construed to release or impair the
indebtedness or any other obligations created under the Alliance Agreement,
the Security Agreement, any of the Mortgages or this Note, or the lien or
security interests securing such obligations or any other rights of Payee,
except as set forth in any of the foregoing instruments.
11. Remedies. If (a) any Event of Default described in
Sections 8(d), (e) or (f) shall occur with respect to Debtor, this Note and
all other obligations related thereto shall automatically become immediately
due and payable; or (b) any other Event of Default shall occur and be
continuing, then, Payee shall be entitled to declare the outstanding unpaid
principal balance of the Note, the accrued and unpaid interest thereon and
all other obligations related thereto to be forthwith due and payable,
whereupon the Note, all accrued and unpaid interest thereon and all such
obligations related thereto shall immediately become due and payable, in each
case without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, anything in this Note to the contrary
notwithstanding. Upon this Note becoming due and payable as described in
clauses (a) or (b) of the preceding sentence, or upon a termination,
following the expiration of the applicable notice period or any extension
thereof (after delivery of an unrevoked notice by either party thereto), of
the Alliance Agreement pursuant to Section 19.1(a)(i) thereof, Payee and
Debtor shall cause each of the following immediately to occur: (i) title to
and beneficial ownership of the Assets (including the real property, plant
and equipment, fixtures, furnishings, motor vehicles, other personal property
and all contracts related thereto but specifically excluding the "Inventory
Assets" and the "Transferred Equipment" located at any "Alliance Plant" that
is not a "Sold Plant" (as each such quoted term is defined in the Agreement))
and the 'Seneca Inventory' (as that term is defined in the Alliance
Agreement) shall transfer to Payee automatically, free and clear of all liens
and encumbrances except for (a) "Title Defects" (as defined in the
Agreement), which Title Defects have not been extinguished as of the
termination date of the Alliance Agreement and (b) liens for taxes which have
accrued but are not yet due or are being contested by Debtor in good faith
(and Debtor shall execute such warranty deeds, bills of sale and other
conveyancing instruments as Payee shall reasonably request to evidence,
confirm and effect such transfers); Debtor shall terminate all employees
working at the Plants (and any related facility being transferred as part of
the Assets) effective as of the effective date of such property transfers,
and Payee shall offer employment to all employees of Debtor working at the
Plants and any related facility being transferred as part of the Assets and
Payee shall indemnify, defend and hold harmless Debtor against any claim by
employees at the Plants or any related facility under the Worker Adjustment
and Retraining Notification Act or any successor federal statute or similar
state statute, (ii) Payee shall pay to Debtor, by wire transfer to an account
designated by Debtor (provided that, so long as any Senior Indebtedness is
outstanding, the Collateral Agent, on behalf of the Senior Creditors, may
designate to which account such payment shall be wired), an amount equal to
the sum of (A) the remaining undepreciated value (if any) of the capital
improvements made by Debtor to the Assets being transferred by Debtor to
Payee since the date hereof, plus (B) the book value of the Seneca Inventory,
(iii) from and after such effective date, Payee shall honor its obligations
to purchase (from "Product Inventory" (as defined in the Alliance Agreement)
in existence at the Alliance Plants on the effective date of termination)
"Acceptable Cases of Product" (as defined in the Alliance Agreement) in
accordance with the terms of Payee's Annual Commitment in effect at the time
of such termination, (iv) the outstanding principal balance and accrued
interest on this Note shall be forgiven by Payee, and (v) upon consummation
of such Asset transfer and all such purchases and payments, the Alliance
Agreement shall automatically terminate (if not previously terminated) in
accordance with its terms (with the consequences set forth therein, including
Payee's obligation to purchase Acceptable Cases of Product pursuant to
Section 19.2(a)(vi) thereof). If and only if Payee attempts in good faith to
comply with the previous sentence and Debtor does not (whether voluntarily or
involuntarily) transfer title to the Assets as required by clause (i) of the
preceding sentence, then Payee shall be entitled to exercise all rights and
remedies available to it under any of the Security Agreement and the
Mortgages.
If the Alliance Agreement is terminated pursuant to
Section 19.1(d) thereof, the outstanding principal balance and accrued
interest on this Note shall be forgiven by Payee in accordance with the terms
of Section 19.2(e) thereof.
The failure of Payee to exercise or delay in exercising
any right or remedy hereunder shall not be construed as a waiver or release
thereof.
12. Waivers. Debtor, its permitted successors or
assigns, and all persons liable hereon or liable for the payment of this
Note, waive presentment for payment, demand, protest, and notice of demand,
protest, and nonpayment, and consent to any and all renewals, extensions or
modifications that might be made by Payee as to the time of payment of this
Note from time to time.
13. Further Assurances.
(a) Debtor shall take all appropriate action and
execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the
provisions hereof, including, without limitation, putting Payee in
possession and operating control of, and vesting in Payee title to,
the Assets.
(b) Subject to the last sentence of this Section
13(b), the Junior Creditors agree to execute any further documents
or amendments and take such other actions as may be reasonably
necessary to effect the purposes of Sections 9 and 10 hereof, all
as requested by the Senior Majority of either Senior Tranche,
including the filing of any instruments in any applicable public
records and the execution of a statement of election pursuant to
section 1111(b) of the Bankruptcy Code of 1978, as amended, when
the Section 1111(b) election would be available and not prohibited
by Section 1111(b)(1)(B), to and for the benefit of Debtor and the
Senior Creditors, in form and substance reasonably satisfactory to
the Senior Majority of each Senior Tranche, confirming the
nonrecourse treatment of the indebtedness evidenced by this Note in
conformity with, and subject to the exceptions contained in,
Section 10 hereof. The Junior Creditors shall not be required to
execute any document or amendment or take any action that would
impair the Junior Creditors' rights with respect to the Assets or
any Permitted Payments.
14. Limitations on Interest. This Note is hereby
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Payee for the use, forbearance
of detention of the money advanced or to be advanced hereunder exceed the
highest lawful rate permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision hereof or of any other
agreement evidencing or securing the indebtedness, at the time performance of
such provision occurs, shall involve the payment of interest in excess of
that authorized by applicable law, the obligation to be fulfilled shall be
reduced to the limit so authorized by applicable law, and if, from any
circumstances, Payee shall ever receive as interest an amount which would
exceed the highest lawful rate applicable to Debtor, such amount which would
be excessive interest shall be applied to the reduction of the unpaid
principal balance of the indebtedness evidenced hereby and not the payment of
interest.
15. Evidence of Indebtedness. This Note is given and
accepted as evidence of indebtedness only, and not in payment or satisfaction
of any indebtedness or obligation.
16. CHOICE OF LAW. THIS NOTE SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MINNESOTA, BUT WITHOUT REGARD TO ITS CONFLICT OF LAWS PROVISIONS.
17. Severability. If any provision of this Note shall
be invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if such invalid or unenforceable provision
were not contained herein.
18. Notice. Any notice or other communication required
or permitted by this Note shall be deemed duly given and received on the
third business day following the day of mailing thereof by registered or
certified United States mail, postage prepaid and return receipt requested,
or when receipt acknowledged, if sent by facsimile transmission, or when
personally delivered as follows:
(i) if to Debtor, at 1162 Pittsford-Victor Road,
Pittsford, New York 14534, Attention: Chief Financial
Officer, or at such other place as Debtor shall have
designated by notice as herein provided to Payee; and
(ii) if to Payee, at Pillsbury Center, 200 South
Sixth Street, Minneapolis, Minnesota 55402, Attention: Office
of General Counsel, or at such other place as Payee shall have
designated by notice as herein provided to Debtor.
19. Amendments. This Note may not be modified or
amended, or any term or provision hereof waived, except in a writing executed
by Debtor and Payee with the prior written consent of the Senior Majority of
each Senior Tranche, and except in accordance with the terms of the second
paragraph of Section 1 hereof.
20. Successors and Assigns. This Note shall be binding
upon and inure to the benefit of Debtor and Payee, except that Debtor may not
delegate its obligations or assign its rights hereunder without the prior
written consent of Payee. Payee covenants that it will not transfer or
assign this Note except: (i) in conjunction with any transfer of Payee's
rights and obligations under the Alliance Agreement, or (ii) to any
subsidiary, parent corporation or other affiliate of Payee. In the event
that this Note is assigned or transferred, Payee shall require, prior to any
transfer or assignment, the transferee or assignee to agree to be bound by
the subordination provisions set forth herein.
21. Third Party Beneficiaries. Payee and Debtor agree
that the terms of this Note are intended to benefit the Senior Creditors, and
that the Senior Creditors are intended, and shall be deemed, to be third
party beneficiaries of the terms of this Note.
IN WITNESS WHEREOF, intending to be legally bound, Debtor
has caused this Note to be executed and delivered on the date first above
written.
SENECA FOODS CORPORATION
By /s/Arthur S. Wolcott
Arthur S. Wolcott
Chairman of the Board
The terms of this Note, including
those limiting Payee's rights of
enforcement, those placing duties
and obligations on the Payee and the
Junior Creditors, and those obligating
Payee to subordinate this Note, are
hereby acknowledged and agreed to by
Payee, for the benefit of the Senior
Creditors, this 1st day February, 1995.
THE PILLSBURY COMPANY
By /s/Thomas J. Ryan
Thomas J. Ryan
Vice President
