SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 26, 1998
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Specialty Foods Corporation
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(Exact name of registrant as specified in its charter)
State of Delaware 33-68956 75-2488181
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or organization) Identification No.)
520 Lake Cook Road, Suite 550, Deerfield, IL 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 405-5300
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 26, 1998, Specialty Foods Corporation ("SFC"), a
wholly owned subsidiary of Specialty Foods Acquisition
Corporation ("SFAC"), acquired all of the outstanding
capital stock of Archway Cookies, Inc. ("Archway"), a
privately held Michigan corporation, from the previous
stockholders. The purchase price totaled approximately $90
million. In addition, SFC used approximately $26 million to
repay certain indebtedness of Archway. The acquisition was
funded by a combination of cash and borrowings under SFC's
existing revolving credit facility.
Archway bakes cookies and distributes its products through
a network of independent distributors and franchisees that
resell to retail food outlets and chain stores throughout
the United States and Canada. Archway will operate as a
subsidiary of SFC.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Description
---------- -----------
10.75* Stock Purchase Agreement dated as
of October 13, 1998 by and among
Specialty Foods Corporation, Archway
Cookies, Inc., and the Archway
Shareholders
99.6* Press Release dated October 26, 1998 of SFC
SIGNATURES
Pursuant to requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
SPECIALTY FOODS CORPORATION
(Registrant)
Date: November 9, 1998 By: /s/ Robert L. Fishbune
-------------------------
Robert L. Fishbune
Vice President and Chief
Financial Officer
_______________
*Filed herewith.
EXHIBIT 99.6
FOR IMMEDIATE RELEASE: October 26, 1998
SPECIALTY FOODS CLOSES ARCHWAY COOKIES ACQUISITION;
ALSO ACQUIRES IOWA BAKERY
DEERFIELD, Ill. -- Specialty Foods Corporation today announced
that it has completed its previously-announced acquisition of
Archway Cookies, Inc., creating the nation's third largest cookie
company.
The company also announced that its Metz Baking Company
subsidiary has acquired Clear Lake Bakery, Inc. of Clear Lake,
Iowa, from private owners.
Terms of both purchases were not disclosed.
"The addition of Archway to our Mother's cookie business
gives us significant opportunities for growth," said Lawrence
Benjamin, president and chief executive officer of Specialty
Foods. "The Clear Lake Bakery strengthens Metz's service to our
many customers throughout the state of Iowa."
Clear Lake Bakery bakes a variety of bread, buns, rolls,
doughnuts and sweet rolls that are distributed throughout Iowa
under the Bill's Bake Shop brand name.
Archway produces more than a billion cookies annually at two
company-owned bakeries in Ashland, Ohio, and Boone, Iowa, and
four licensed bakeries in the U.S. and Canada.
Specialty Foods Corporation, one of the nation's leading
food manufacturers, is a group of companies engaged primarily in
baked goods with additional operations in prepared meats.
# # #
EXHIBIT 10.75
_________________________________________________________________
STOCK PURCHASE AGREEMENT
by and among
SPECIALTY FOODS CORPORATION,
ARCHWAY COOKIES, INC.,
and
THE ARCHWAY SHAREHOLDERS
October 13, 1998
_________________________________________________________________
TABLE OF CONTENTS
ARTICLE I
SALE OF SHARES -1-
1.01 Purchase and Sale of Shares-1-
ARTICLE II
PURCHASE PRICE -1-
2.01 Amount-1-
2.02 Manner of Payment-2-
2.03 Determination of Purchase Price at Closing-3-
2.04 Post Closing Adjustments to Purchase Price-4-
2.05 Escrow-7-
ARTICLE III
CLOSING -7-
3.01 Closing-7-
3.02 General Procedure-8-
3.03 Accounting Convention-8-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE ARCHWAY SHAREHOLDERS -8-
4.01 Incorporation and Corporate Power-8-
4.02 Execution, Delivery; Valid and Binding Agreements-8-
4.03 Approval of Agreement-9-
4.04 No Breach-9-
4.05 Governmental Authorities; Consents-9-
4.06 Ownership and Sale of Capital Stock-9-
4.07 Subsidiaries-10-
4.08 Capital Stock-10-
4.09 Financial Statements-10-
4.10 Absence of Undisclosed Liabilities-11-
4.11 No Material Adverse Changes-11-
4.12 Absence of Certain Developments-11-
4.13 Title to Properties-14-
4.14 Accounts Receivable-16-
4.15 Inventory-16-
4.16 Tax Matters-17-
4.17 Contracts and Commitments-19-
4.18 Intellectual Property Rights-21-
4.19 Litigation-22-
4.20 Warranties; Products-23-
4.22 Employee Benefit Plans-24-
4.23 Insurance-28-
4.24 Affiliate Transactions-28-
4.25 Customers and Suppliers-28-
4.26 Officers and Directors; Bank Accounts-29-
4.27 Compliance with Laws; Permits-29-
4.28 Environmental Matters-30-
4.29 Brokerage-30-
4.30 Disclosure-30-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SFC -31-
5.01 Incorporation and Corporate Power-31-
5.02 Execution, Delivery; Valid and Binding Agreement-31-
5.03 Approval of Agreement-31-
5.04 No Breach-31-
5.05 Governmental Authorities; Consents-32-
5.06 Litigation-32-
5.07 Brokerage-32-
5.08 Disclosure-32-
ARTICLE VI
COVENANTS OF SELLERS -32-
6.01 Conduct of the Archway Business-32-
6.02 Access to Books and Records-35-
6.03 Regulatory Filings-35-
6.04 Conditions-36-
6.05 No Negotiations-36-
6.06 Notification-36-
6.07 Title Insurance-36-
6.08 Surveys-36-
6.09 Insider Indebtedness-36-
ARTICLE VII
COVENANTS OF SFC -37-
7.01 Regulatory Filings-37-
7.02 Conditions-37-
7.03 Health Plan Continuation-37-
7.04 Taxes; 1377(a)(2) Election-37-
7.05 No Section 338 Election -38-
7.06 Environmental Reporting -38-
7.07 Employment Covenant -38-
7.08 Directors' and Officers' Insurance -38-
7.09 1998 Bonus Payments -38-
ARTICLE VIII
CONDITIONS TO CLOSING -38-
8.01 Conditions to SFC's Obligations-38-
8.02 Conditions to Sellers' Obligations-42-
ARTICLE IX
TERMINATION -43-
9.01 Termination-43-
9.02 Final Disclosure Letter-44-
9.03 Effect of Termination -44-
ARTICLE X
ADDITIONAL AGREEMENTS -44-
10.01 Severance and Noncompetition Agreements -44-
10.02 Deferred Compensation -45-
10.03 Employment Agreements -45-
10.04 Personal Property -45-
10.05 Right of First Refusal -46-
10.06 Archival Items -46-
10.07 Omnibus Assignment -46-
ARTICLE XI
SURVIVAL; INDEMNIFICATION -46-
11.01 Survival of Representations and Warranties -46-
11.02 Indemnification by the Sellers -46-
11.03 Indemnification by SFC -48-
11.04 Method of Asserting Claims; Payment of
Claims -48-
ARTICLE XII
DISPUTE RESOLUTION -51-
12.01 Arbitration -51-
ARTICLE XIII
MISCELLANEOUS -52-
13.01 Press Releases and Announcements -52-
13.02 Expenses -52-
13.03 Further Assurances -52-
13.04 Amendment and Waiver -52-
13.05 Notices -53-
13.06 Binding Effect; Assignment -53-
13.07 Severability -53-
13.08 Complete Agreement; No Third Party
Beneficiaries -54-
13.09 Counterparts -54-
13.10 Governing Law -54-
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as
of October 13, 1998, is made and entered into by and among
Specialty Foods Corporation, a Delaware corporation ("SFC"),
Archway Cookies, Inc., a Michigan corporation ("Archway"), and
the shareholders of Archway set forth on Schedule 1.01, who are
referred to herein collectively as "Sellers" and individually as
a "Seller."
WHEREAS, the Sellers together own 3,080 shares of Class A
Voting Common Stock of Archway and 27,720 shares of Class B Non-
Voting Common Stock of Archway, constituting all the issued and
outstanding shares of capital stock of Archway (such shares being
referred to herein as the "Shares");
WHEREAS, the Sellers desire to sell, and SFC desires to
purchase the Shares on the terms and subject to the conditions
set forth in this Agreement (the "Stock Purchase"); and
WHEREAS, the parties hereto desire to make certain
representations, warranties, covenants, indemnities and
agreements in connection with, and establish various conditions
precedent to, the Stock Purchase.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE III
SALE OF SHARES
1.01 Purchase and Sale of Shares.01 Purchase and Sale of
Shares.01 Purchase and Sale of Shares. The Sellers (as disclosed
on Schedule 1.01) agree to sell to SFC, and SFC agrees to
purchase from the Sellers, all of the right, title and interest
of the Sellers in and to the Shares at the Closing (as defined in
Section 3.01) on the terms and subject to the conditions set
forth in this Agreement.
ARTICLE IIIIII
PURCHASE PRICE
2.01 Amount.01 Amount.01 Amount. The aggregate
consideration payable by SFC for the Shares shall be $116,000,000
less the amount of the Archway Debt (as defined in Section 2.03)
at Closing, and subject to certain Closing and post-Closing
adjustments as described in Sections 2.03 and 2.04. The
aggregate consideration shall consist of the following payments:
(a) $7,957,304 representing the obligation for
Deferred Compensation Liabilities (as defined in Section
10.02);
(b) $8,600,000 representing the obligations for
Noncompetition Payments (as defined in Section 10.01);
(c) $3,500,000 representing the Severance Payments (as
defined in Section 10.01); and
(d) the remainder of the consideration (the "Balance")
will be paid to the Sellers in accordance with Section 2.02.
The Deferred Compensation Liabilities together with the
Noncompetition Payments, the Severance Payments and the Balance
are collectively referred to herein as the purchase price (the
"Purchase Price").
2.02 Manner of Payment.02 Manner of Payment.02
Manner of Payment. The Purchase Price shall be paid by SFC as
follows:
(a) the Deferred Compensation Liabilities owing
pursuant to Section 10.02 will be paid immediately prior to
the Closing by Archway to the recipients specified therein;
(b) a cash payment of $8,600,000 (the "Security Escrow
Amount" as defined in Section 2.05) will be paid immediately
prior to the Closing by Archway to the Security Escrow Agent
pursuant to the Security Escrow Agreement (as such terms are
defined in Section 2.05) to secure the Noncompetition
Payments;
(c) the Severance Payments owing pursuant to the
Severance and Noncompetition Agreements attached hereto as
Exhibit 10.01 will be paid immediately prior to the Closing
by Archway to the recipients specified therein;
(d) a cash payment of $4,000,000 will be paid to the
Escrow Agent at Closing pursuant to the Escrow Agreement (as
such term is defined in Section 2.05), of which $3,000,000
will constitute the Indemnification Escrow Amount, $750,000
will constitute the Adjustment Escrow Amount and $250,000
will constitute the Reserve Escrow Amount (as such terms are
defined in Section 2.05); and
(e) the balance of the Purchase Price after deduction
of the amounts in subsections (a), (b), (c) and (d) will be
paid to the Sellers in accordance with Schedule 2.02
attached hereto.
The Purchase Price shall be paid by SFC on the Closing Date (as
defined in Section 3.01) by wire transfer of immediately
available funds to the applicable account as Sellers' Designees
(as defined in Section 11.02(c)) may specify in writing to SFC at
least three business days prior to the Closing Date (other than
the Adjustment Escrow Amount, Indemnification Escrow Amount and
Reserve Escrow Amount which will be paid by wire transfer to the
Escrow Agent on the Closing Date and the Security Escrow Amount
which will be paid by wire transfer to the Security Escrow Agent
on the Closing Date).
2.03 Determination of Purchase Price at Closing.03
Determination of Purchase Price at Closing.03 Determination
of Purchase Price at Closing. The Purchase Price to be paid by
SFC at Closing shall be based in part on agreed upon estimates of
the Archway Debt and the Working Capital Adjustment determined as
follows:
(a) As used herein, "Archway Debt" shall mean, without
duplication, (i) all indebtedness of or any obligation of
Archway for borrowed money, whether current, short-term, or
long-term, secured or unsecured, (ii) all indebtedness of
Archway for the deferred purchase price for purchases of
property outside the ordinary course which is not evidenced
by trade payables, provided the parties agree that no such
deferred purchase price exists with respect to the
Production Agreement between Archway and Ellison Bakery,
Inc. and Cookies, Inc., dated August 2, 1997, and provided
that, Archway Debt shall exclude distributor deposits at
Closing, which deposits shall be no more than $2,400,000,
(iii) all lease obligations of Archway under leases which
are capital leases in accordance with generally accepted
accounting principles as has been historically and
consistently applied by Archway ("GAAP") (other than
customary operating leases), provided the parties agree that
the computer lease between Archway and IBM Credit
Corporation, dated September 21, 1993, as supplemented
through March 26, 1998, is not a capital lease, (iv) all off-
balance sheet financings of Archway including, without
limitation, synthetic leases and project financing (other
than customary operating leases), (v) any payment
obligations of Archway in respect of banker's acceptances or
letters of credit (other than stand-by letters of credit in
support of ordinary course trade payables), (vi) any
liability of Archway with respect to interest rate swaps,
collars, caps and similar hedging obligation, (vii) any
present, future or contingent obligations of Archway under
(A) any phantom stock or equity appreciation rights, plan or
agreement, (B) any consulting, deferred pay-out or earn-out
arrangements in connection with the purchase of any business
or entity or (C) any noncompetition agreement (other than
the Noncompetition Payments paid pursuant to Section 10.01),
(viii) an amount equal to Archway's expenses associated with
the negotiation, documentation and closing of the
transactions contemplated hereby, if any, (ix) the amount of
any liability of Archway as of the Closing under deferred
compensation plans (including but not limited to, deferred
compensation liability to Thomas Olin, Jr., James P.
Baldwin, Eugene H. McKay, III and John B. McKay) and (x) any
accrued and unpaid interest or any contractual prepayment
premiums, penalties or similar contractual charges resulting
from the transactions contemplated hereby or the discharge
of such obligations with respect to any of the foregoing.
Within three business days prior to the Closing Date,
Sellers' Designees and SFC shall agree upon an estimated amount
of the Archway Debt at Closing (the "Estimated Debt"), which
amount shall be used for calculating the Purchase Price pursuant
to Section 2.01.
(b) As used herein, "Net Working Capital" shall mean
current assets of Archway less current liabilities of
Archway, as calculated in accordance with the procedures set
forth in Schedule 2.03(b) attached hereto. Within three
business days prior to the Closing Date, Sellers' Designees
and SFC shall agree upon an estimated amount of the Net
Working Capital at Closing (the "Estimated Working
Capital"), which amount shall be used for calculating the
Purchase Price paid at Closing. The Purchase Price paid at
Closing shall be increased or decreased based on the
Estimated Working Capital as follows:
(i) if the Estimated Working Capital is in
excess of $11,629,636 (being the Net Working Capital on
the July 18, 1998 unaudited balance sheet of Archway,
as calculated in accordance with the procedures set
forth in Schedule 2.03(b)), then the Purchase Price
paid at Closing shall increase by the amount of such
excess; and
(ii) if the Estimated Working Capital is less
than $11,629,636 (being the Net Working Capital on the
July 18, 1998 unaudited balance sheet of Archway, as
calculated in accordance with the procedures set forth
in Schedule 2.03(b)), then the Purchase Price paid at
Closing shall decrease by the amount of such shortfall.
2.04 Post Closing Adjustments to Purchase Price.04 Post
Closing Adjustments to Purchase Price.04 Post Closing
Adjustments to Purchase Price. The Purchase Price paid by SFC
pursuant to Section 2.02 shall be subject to two post-Closing
adjustments, the Archway Debt Adjustment and the Working Capital
Adjustment both as defined below (collectively the "Adjustment
Amounts", as further defined in this Section 2.04):
(a) Following the Closing Date, the actual amount of
Archway Debt shall be conclusively determined in accordance
with the procedure described in Section 2.03(a) and Section
2.04(d). The Purchase Price shall be increased or decreased
by the difference between the amount of the Estimated Debt
and the amount of the Archway Debt. This difference shall
be a post-Closing adjustment (the "Archway Debt Adjustment")
to the Adjustment Escrow Amount (as defined in Section 2.05)
as follows:
(i) if the Archway Debt is less than the
Estimated Debt, SFC will pay to the Escrow Agent the
amount of such difference by wire transfer within five
(5) business days after determination of a Final
Closing Balance Sheet (as defined in Section 2.04(d)),
as an increase in the Adjustment Escrow Amount; and
(ii) if the Archway Debt is in excess of the
Estimated Debt, the Escrow Agent will pay by wire
transfer to SFC upon demand the amount of such excess
from the Adjustment Escrow Amount.
(b) Following the Closing Date, the actual amount of
Net Working Capital shall be conclusively determined
utilizing the line item categories set forth in Schedule
2.03(b) and Section 2.04(d). The Purchase Price shall be
increased or decreased based on the amount of the Net
Working Capital at Closing (the "Working Capital
Adjustment") as follows:
(i) if the Net Working Capital at Closing is
in excess of the Estimated Working Capital, SFC shall
pay to the Escrow Agent by wire transfer within five
(5) business days after determination of a Final
Closing Balance Sheet, as an increase the Adjustment
Escrow Amount, the amount of such excess; and
(ii) if the Net Working Capital at Closing is
less than the Estimated Working Capital, the Escrow
Agent will pay by wire transfer to SFC upon demand the
amount of such shortfall from the Adjustment Escrow
Amount.
(c) Immediately following the payment of any
Adjustment Amount pursuant to Section 2.04(a) or (b) above
the Escrow Agent shall deliver the balance, if any, of the
Adjustment Escrow Amount to the Sellers as provided in the
Escrow Agreement.
In the event the net effect of the foregoing purchase price
adjustments results in a reduction of the Adjustment Escrow
Amount and such amount is insufficient to fully satisfy such
reduction, Sellers' Designees shall cause to be paid to SFC
by wire transfer, within five (5) business days after demand
by SFC, the amount of such insufficiency.
Notwithstanding any provision to the contrary contained in
Sections 11.01 and 11.02, as to Basket Amount limitations,
or any limitations on the amount of any indemnity, whether
in the aggregate or otherwise, any claim arising out of the
Adjustment Amounts shall not be subject to, or included for
purposes of calculating any amounts under, any Basket Amount
or any maximum indemnification amount.
(d) The actual amounts as of the Closing Date of the
Archway Debt and the Net Working Capital will be determined
as follows:
(i) Within 60 days after the Closing Date,
Sellers' Designees (as defined in Section 11.02(c))
shall: (A) prepare a balance sheet of Archway as of
the Closing Date (the "Proposed Closing Balance
Sheet"), in accordance with GAAP and on a basis
consistent with Schedule 2.03(b), (B) prepare a report
("Sellers' Designees' Report") calculating the amount
of each of the Archway Debt Adjustment and Working
Capital Adjustment (collectively and as finally
determined pursuant to this Section, the "Adjustment
Amounts") and (C) provide a copy of the Proposed
Closing Balance Sheet and Sellers' Designees Report to
SFC. At all times during the preparation of the
Proposed Closing Balance Sheet and the Seller's
Designees' Report, Sellers' Designees and their agents,
auditors and accountants involved in the preparation
thereof shall cooperate with and permit SFC and its
agents and accountants, to be physically present at and
to observe such preparation.
(ii) SFC shall have 30 days after receipt of
the Proposed Closing Balance Sheet and Sellers'
Designees' Report to review such documents and
determine whether it agrees with Sellers' Designees'
determination of the Adjustment Amounts. During such
period of time and in order to further enable SFC to
conduct such review, Sellers' Designees shall make
available to SFC, at reasonable times during normal
business hours, (A) the books and records (including
relevant workpapers) used by Sellers' Designees and (B)
Sellers' Designees' personnel, agents or accountants
responsible for the preparation of the Proposed Closing
Balance Sheet or Seller's Designees' Report. In the
event that SFC disagrees with Sellers' Designees'
Report or the Proposed Closing Balance Sheet as to the
determination of the Adjustment Amounts, SFC shall
notify Sellers' Designees in writing of such
disagreement and provide their own determination of the
Adjustment Amounts within such 30-day period ("SFC
Report"); failure by SFC to so notify Sellers'
Designees shall constitute acceptance by SFC of
Sellers' Designees' determination of the Adjustment
Amounts.
(iii) If SFC and the Sellers' Designees
disagree as to the accuracy of the Proposed Closing
Balance Sheet or the Adjustment Amounts, then Robert L.
Fishbune or other appointed representative of SFC, and
Sellers' Designees shall attempt to resolve such
disagreement by meeting and conferring in good faith
during the 10-day period following SFC's delivery to
Sellers' Designees of the SFC Report. During such
period of time and in order for Sellers' Designees to
review the SFC Report, SFC shall make available to
Sellers' Designees, at reasonable times during normal
business hours, (A) the books and records (including
relevant workpapers) used by SFC in preparation of the
SFC Report and its independent accountant's calculation
of the Adjustment Amounts and the Proposed Closing
Balance Sheet, if applicable, and (B) SFC's independent
accountant's personnel responsible for the calculation
thereof.
If SFC and the Sellers' Designees are unable to
resolve their disagreement within such 10-day period,
SFC and Sellers' Designees agree to retain the Chicago
office of Ernst & Young LLP (the "Accounting Mediator")
to mediate the dispute. The Accounting Mediator shall
conduct such mediation by reviewing only the Proposed
Closing Balance Sheet, Sellers' Designees' Report,
SFC's Report and any related workpapers of either
party, this Agreement, including Schedule 2.03(b) and
any written statements of SFC or Sellers' Designees
supporting its position if such statement is submitted
within ten (10) days after appointment of the
Accounting Mediator. Within 30 days of its retention,
the Accounting Mediator shall render a decision
regarding the disputed Adjustment Amounts, which
decision shall be final and binding, and judgment upon
the award rendered by the Accounting Mediator may be
entered by any court of competent jurisdiction. Each
party shall bear its own costs associated with such
proceeding and shall pay one-half of the fees and
expenses of the Accounting Mediator; provided, however,
that in the event one party's determination (the "First
Party") of the aggregate amount of the disputed
Adjustment Amounts is within 5% of the aggregate of
such amounts determined by the Accounting Mediator and
the other party's determination (the "Second Party") of
the aggregate amount of the disputed Adjustment Amounts
is less than or greater than the aggregate of such
amounts determined by the Accounting Mediator by more
than 10%, then the Second Party shall bear the fees and
expenses of the Accounting Mediator. The Proposed
Closing Balance Sheet shall be the "Final Closing
Balance Sheet" unless SFC timely disputes its accuracy,
in which case the "Final Closing Balance Sheet" shall
be the Proposed Closing Balance Sheet as adjusted as a
result of the foregoing dispute resolution process.
2.05 Escrow.05 Escrow.05 Escrow. On the Closing Date, SFC
shall withhold from the Purchase Price and deliver by wire
transfer of immediately available funds to (a) LaSalle National
Bank, as Escrow Agent (the "Escrow Agent"), to be held pursuant
to the terms of an Escrow Agreement in the form of Exhibit
2.05(a) hereto (the "Escrow Agreement") cash in the amount of
$4,000,000 consisting of (i) $750,000 which may be used to
satisfy any Adjustment Amount pursuant to Section 2.04 (the
"Adjustment Escrow Amount"), (ii) $3,000,000 which may be used to
satisfy amounts due to SFC after the Closing pursuant to Article
XI hereof (the "Indemnification Escrow Amount") and (iii)
$250,000 which may be used to satisfy any disputed obligations
which gave rise to the chain store space reserve on Archway's
July 18, 1998 balance sheet (the "Reserve Escrow Amount"), and
(b) LaSalle National Bank, as Security Escrow Agent (the
"Security Escrow Agent"), to be held pursuant to the terms of an
Escrow Agreement in the form of Exhibit 2.05(b) hereto (the
"Security Escrow Agreement") cash in the amount of $8,600,000
which shall be used to satisfy the Noncompetition Payments as
defined in Section 10.01 (the ?Security Escrow Amount?). The
Adjustment Escrow Amount, the Indemnification Escrow Amount, the
Reserve Escrow Amount and the Security Escrow Amount are
collectively called the Escrow Amount. The Adjustment Escrow
Amount shall be released from escrow in accordance with the terms
of the Escrow Agreement upon final resolution of the Post-Closing
Adjustments pursuant to Section 2.04(d). The Escrow Agent shall
deliver the balance of the Indemnification Escrow Amount and
Reserve Escrow Amount in accordance with the terms of the Escrow
Agreement and the Security Escrow Agent shall deliver the
Security Escrow Amount in accordance with the terms of the
Security Escrow Agreement.
ARTICLE IIIIIIIII
CLOSING
3.01 Closing.01 Closing.01 Closing. The closing of
the transactions contemplated by this Agreement (the "Closing")
will take place at the offices of Varnum, Riddering, Schmidt &
Howlett, 333 Bridge Street, Grand Rapids, Michigan 49501, on the
second business day after all of the conditions in Article VIII
have been satisfied or waived (the "Closing Date"), or at such
other place and on such other date as is mutually agreeable to
SFC and Sellers. The Closing will be effective as of the close
of business on the Closing Date.
3.02 General Procedure.02 General Procedure.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 Articles VIII and X 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. Sellers will assign and transfer to SFC good
and valid title in and to the Shares, free and clear of all
liens, by delivering to SFC a stock certificate or certificates
representing the Shares, duly endorsed for transfer or
accompanied by duly executed stock powers endorsed in blank with
requisite stock transfer tax stamps, if any, attached.
3.03 Accounting Convention.03 Accounting Convention.03
Accounting Convention. The parties shall mutually agree on a
date that shall serve as the cut-off date for all financial
accounting and tax accounting purposes hereunder, unless the
Closing Date is a Friday or Monday in which case such cut-off
shall be on the intervening Saturday.
ARTICLE IVIVIV
REPRESENTATIONS AND WARRANTIES OF
THE ARCHWAY SHAREHOLDERS
The Sellers hereby represent and warrant to SFC that, except
as set forth in the Disclosure Letter delivered by Sellers to SFC
on the date hereof, as modified by the delivery of a revised
Disclosure Letter on or before October 16, 1998 (the "Disclosure
Letter") (which Disclosure Letter sets forth the exceptions to
the representations and warranties contained in this Article IV
under captions referencing the Sections to which such exceptions
apply, but disclosure in any Section shall constitute disclosure
under all applicable Sections thereof to the extent that such
cross-reference would be readily apparent from the context of
such Section):
4.01 Incorporation and Corporate Power.01 Incorporation
and Corporate Power.01 Incorporation and Corporate Power.
Archway is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan, and has
the requisite corporate power and authority to (i) own, lease and
operate its assets and properties and to carry on its business as
it is now being conducted and (ii) execute and deliver this
Agreement and to perform its obligations hereunder. The copies
of Archway's articles of incorporation and bylaws that have been
furnished by Archway to SFC prior to the date hereof reflect all
amendments made thereto and are correct and complete as of the
date hereof. Archway is qualified to do business as a foreign
corporation in Iowa and Ohio and every other jurisdiction in
which the nature of its business or its ownership of property
requires it to be so qualified, except where the failure to so
qualify would not have a material adverse effect on the business,
assets, properties, condition (financial or otherwise), results
of operations or prospects of Archway (a "Material Adverse
Effect").
4.02 Execution, Delivery; Valid and Binding Agreements.02
Execution, Delivery; Valid and Binding Agreements.02 Execution,
Delivery; Valid and Binding Agreements. The execution, delivery
and performance of this Agreement by Archway and the consummation
of the transactions contemplated hereby have been duly and
validly authorized by all requisite action, and no other
proceedings on its part are necessary to authorize the execution,
delivery and performance of this Agreement. This Agreement has
been duly executed and delivered by Archway and constitutes the
valid and binding obligation of Archway, enforceable in
accordance with its terms except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether
such enforceability is considered in a proceeding at law or in
equity.
4.03 Approval of Agreement.03 Approval of Agreement.03
Approval of Agreement. Archway's board of directors has, by
resolutions duly adopted on October 9, 1998, authorized and
approved this Agreement and the transactions contemplated hereby.
None of the resolutions described in this Section has been
rescinded, amended or otherwise modified in any respect since the
date of adoption thereof, and all such resolutions remain in full
force and effect.
4.04 No Breach.04 No Breach.04 No Breach. The
execution, delivery and performance of this Agreement by Archway
and the consummation of the transactions contemplated hereby do
not conflict with or result in any breach of any of the
provisions of, 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 of the Shares or any assets of Archway, or
require any authorization, consent, approval, exemption or other
action by or notice to any court, other governmental body or
other "Person" (such term shall mean an individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization or government or political
subdivision thereof) under the provisions of the articles of
incorporation or bylaws of Archway or any indenture, mortgage,
lease, loan agreement or other agreement or instrument by which
Archway is bound or affected, or any law, statute, rule or
regulation or order, judgment or decree to which Archway is
subject, except for compliance with the provisions of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act").
4.05 Governmental Authorities; Consents.05 Governmental
Authorities; Consents.05 Governmental Authorities; Consents.
Except for the HSR Act, none of the Sellers nor Archway is
required to submit any notice, report or other filing with any
governmental authority in connection with the execution or
delivery by them of this Agreement or the consummation of the
transactions contemplated hereby. Except for the HSR Act, no
consent, approval or authorization of any governmental or
regulatory authority or any other party or person is required to
be obtained by Archway or any of the Archway Shareholders in
connection with his/her/its execution, delivery and performance
of this Agreement or the transactions contemplated hereby.
4.06 Ownership and Sale of Capital Stock.06 Ownership and
Sale of Capital Stock.06 Ownership and Sale of Capital Stock.
The Sellers own, beneficially and of record, all right, title and
interest in and to the Shares free and clear of any security
interests, claims, liens, pledges, options, encumbrances,
charges, agreements, voting trusts, proxies or other
arrangements, restrictions or limitations of any kind ("Liens"),
and, on the Closing Date, the delivery by such Sellers of a
certificate or certificates in the manner set forth in Section
3.02 hereof will transfer good and valid title to the Shares to
SFC, free and clear of any Liens. The execution, delivery and
performance of this Agreement by the Sellers and the consummation
of the transactions contemplated hereby do not conflict with or
result in any breach of any of the provisions of, 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 of the Shares or any
assets of the Sellers, or require any authorization, consent,
approval, exemption or other action by or notice to any court,
other governmental body or other Person under the provisions of
any indenture, mortgage, lease, loan agreement or other agreement
or instrument by which any of the Sellers is bound or affected,
or any law, statute, rule or regulation or order, judgment or
decree to which any of the Sellers is subject. The execution,
delivery and performance of this Agreement by each Seller and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite action, and no other
proceedings on his/her part are necessary to authorize the
execution, delivery and performance of this Agreement. This
Agreement has been duly executed and delivered by each Seller and
constitutes the valid and binding obligation of each Seller,
enforceable in accordance with its terms except as the same may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles
regardless of whether such enforceability is considered in a
proceeding at law or in equity.
4.07 Subsidiaries.07 Subsidiaries.07 Subsidiaries.
Archway does not own any stock, partnership interest, joint
venture interest or any other security or ownership interest
issued by any other corporation, organization or entity.
4.08 Capital Stock.08 Capital Stock.08 Capital Stock.
The authorized capital stock of Archway consists of 50,000 shares
of common stock without par value, divided into two classes,
comprised of 3,080 shares of Class A Voting Common Stock and
46,920 shares of Class B Non-Voting Common Stock, of which, as of
the date hereof, 3,080 shares of Class A Voting Common Stock and
27,720 shares of Class B Non-Voting Common Stock are issued and
outstanding, all of which are owned beneficially and of record by
the Archway Shareholders, free and clear of any Liens. All of
the shares of Archway common stock (a) have been duly authorized
and are validly issued, fully paid and nonassessable, (b) are not
subject to preemptive rights created by statute, Archway's
articles of incorporation or bylaws or any other agreement to
which Archway is bound and (c) were not issued in violation of
any applicable securities laws that would subject SFC to fines,
penalties or rescission or civil damages. Archway has no other
equity securities or securities containing any equity features
authorized, issued or outstanding. There are no agreements or
other rights or arrangements existing that provide for the sale
or issuance of capital stock by Archway, and there are no rights,
subscriptions, warrants, options, conversion rights or agreements
of any kind outstanding to purchase or otherwise acquire from
Archway any shares of capital stock or other securities of
Archway of any kind.
4.09 Financial Statements.09 Financial Statements.09
Financial Statements. Archway has delivered to SFC copies of the
audited balance sheets, as of January 3, 1998 and January 4, 1997
of Archway (the "Audited Balance Sheets") and the audited
statements of earnings, shareholders' equity and cash flows of
Archway for the years ended January 3, 1998, January 4, 1997, and
December 30, 1995 (collectively, with the Audited Balance Sheets,
the "Audited Financial Statements"). Archway has also delivered
copies of the unaudited balance sheet as of July 18, 1998 of
Archway and the unaudited statements of earnings, shareholders'
equity and cash flows of Archway for the period ended July 18,
1998 (collectively such balance sheet, and such financial
statements are referred to herein as the "1998 Financial
Statements"). The Audited Financial Statements and the 1998
Financial Statements are based upon the information contained in
the books and records of Archway, have been prepared in
accordance with GAAP throughout the periods indicated (except as
indicated therein or the notes thereto), and fairly present the
financial condition of Archway as of the dates thereof and
results of operations and cash flows for the periods referred to
therein.
4.10 Absence of Undisclosed Liabilities.10 Absence of
Undisclosed Liabilities.10 Absence of Undisclosed Liabilities.
Except as reflected in the Audited Financial Statements, this
Agreement, the Disclosure Letter, the Schedules and Exhibits
attached hereto, Archway has no liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or
to become due, whether known or unknown, and regardless of when
asserted) arising out of transactions or events heretofore
entered into, or any action or inaction, or any state of facts
existing, with respect to or based upon transactions or events
heretofore occurring, except liabilities that have arisen after
January 3, 1998 in the ordinary course of business and consistent
with past practices.
4.11 No Material Adverse Changes.11 No Material Adverse
Changes.11 No Material Adverse Changes. Since January 3,
1998, there has been no Material Adverse Effect on Archway.
4.12 Absence of Certain Developments.12 Absence of Certain
Developments.12 Absence of Certain Developments. Since
January 3, 1998, Archway has not:
(a) borrowed any amount or incurred or become subject
to any liability in excess of $50,000, except (i) current
liabilities incurred in the ordinary course of business,
(ii) liabilities under contracts (e.g., purchase orders)
entered into in the ordinary course of business, and (iii)
as otherwise disclosed in this Agreement or the Schedules
attached hereto;
(b) mortgaged, pledged or subjected to any lien,
charge or any other encumbrance, any of its assets with a
fair market value in excess of $50,000, except (i) (A) liens
imposed by law and incurred in the ordinary course of
business for obligations not yet due with respect to claims
by carriers, warehousemen, laborers, materialmen and the
like, (B) liens in respect of pledges or deposits under
workers' compensation laws and (C) liens voluntarily created
in the ordinary course of business, all of which liens total
less than $100,000; and (ii) liens for current property
taxes not yet due and payable;
(c) discharged or satisfied any lien or encumbrance,
in each case with a value in excess of $100,000, other than
current liabilities paid in the ordinary course of business;
(d) sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or
shareholders) any tangible assets with a fair market value
in excess of $100,000, or canceled any debts or claims, in
each case, except in the ordinary course of business and
except to Insiders either as disclosed in the Disclosure
Letter or at the Closing under the express terms of this
Agreement;
(e) sold, assigned or transferred (including, without
limitation, transfers to any employees, affiliates or
shareholders) any patents, trademarks, trade names,
copyrights, trade secrets or other intangible assets;
(f) disclosed, to any person other than SFC and
authorized representatives of SFC, any proprietary
confidential information, other than pursuant to a
confidentiality agreement prohibiting the use or further
disclosure of such information, which agreement is
identified in the Disclosure Letter under the caption
referencing this Section and is in full force and effect on
the date hereof;
(g) waived any rights of material value or suffered
any extraordinary losses or material adverse changes in
collection loss experience, whether or not in the ordinary
course of business or consistent with past practice;
(h) declared or paid any dividends or other
distributions with respect to any shares of Archway's
capital stock or redeemed or purchased, directly or
indirectly, any shares of Archway's capital stock or any
options, warrants or other rights to purchase the same;
(i) issued, sold or transferred any of its equity
securities, securities convertible into or exchangeable for
its equity securities or warrants, options or other rights
to acquire its equity securities or any bonds or debt
securities;
(j) taken any other action or entered into any other
transaction other than in the ordinary course of business
and in accordance with past custom and practice or entered
into any transaction with any Insider (as defined in Section
4.24) other than employment arrangements otherwise disclosed
in this Agreement and the Disclosure Letter, or the
transactions expressly contemplated by this Agreement;
(k) to the best of the knowledge of the Sellers,
suffered any material theft, damage, destruction or loss of
or to any property or properties owned or used by it,
whether or not covered by insurance;
(l) made or granted any bonus or any wage, salary or
compensation increase to any director, officer or employee
or consultant whose annual compensation from Archway in 1997
exceeded $60,000, or made or granted any increase in any
employee benefit plan or arrangement, or amended or
terminated any existing employee benefit plan or
arrangement, or adopted any new employee benefit plan or
arrangement or made any commitment or incurred any liability
to any labor organization;
(m) made any single capital expenditure or commitment
therefor in excess of $100,000;
(n) made any loans or advances to, or guarantees for
the benefit of, any persons in excess of $10,000;
(o) made charitable contributions or pledges in excess
of $10,000;
(p) experienced any work stoppage or labor dispute
with respect to its manufacturing operations;
(q) experienced any amendment, modification or
termination of any existing, or entered into any new,
contract, agreement, plan, lease, license, permit or
franchise other than in the ordinary course of business;
(r) made any change in accounting principles or
practices from those utilized in the preparation of the
Audited Financial Statements;
(s) experienced any change in any assumption
underlying or method of calculating, any bad debt,
inventory, contingency or other reserve;
(t) written off as uncollectible any note or account
receivable, or canceled any debts, other than in the
ordinary course of business and consistent with past
practice;
(u) failed to replace or replenish inventory or
supplies as such inventory or supplies may have been
depleted from time to time, collect accounts receivable, pay
accounts payable or shortened or lengthened the customary
payment cycles for any of its payables or receivables or
otherwise managed its working capital accounts other than in
the ordinary course of business and in a manner consistent
with past practice;
(v) experienced any writedown or writeup of (or failed
to writedown or writeup in accordance with GAAP) the value
of any inventories, receivables or other assets, or revalued
any of its assets;
(w) failed to maintain all material assets in
accordance with good business practice and in satisfactory
operating condition and repair, ordinary wear and tear
excepted;
(x) experienced any lapse or termination of any permit
that was issued or relates to it or its business, including
any failure to renew any such permit;
(y) discontinued or altered its advertising or
promotional activities or its pricing and purchasing
policies of Archway; or
(z) been a party to any transaction with any of the
Sellers or any affiliate thereof.
As used in this Agreement, the phrases "to the best of the
knowledge of the Sellers", "to the knowledge of Sellers," or
other phrases or words having similar import shall mean the
knowledge, after due inquiry, of Insiders (as such term is
defined in Section 4.24). As used in this Agreement, the term
"after due inquiry" shall mean a diligent review of this
Agreement and the Disclosure Letter by the Insiders and an
inquiry by the Insiders of (i) the plant managers in Ashland,
Ohio and Boone, Iowa, respectively, and (ii) the National Office
Department Heads, each of whom shall also have reviewed the
Purchase Agreement and the Disclosure Letter. To the extent such
inquiry and review reveal matters which are the subject of the
disclosures contained in the Agreement and Disclosure Letter, the
inquiry reflects the considered opinion of such individuals of
the necessity for making further inquiry or amending or modifying
the Agreement and Disclosure Letter.
4.13 Title to Properties.13 Title to Properties.13 Title
to Properties.
(a) The real property owned ("Owned Property") or
leased ("Leased Property") by Archway is listed in the
Disclosure Letter and constitutes all of the real property
owned, used or occupied by Archway or in which Archway has
any other interest (the "Real Property"). Such Disclosure
Letter includes the record title holder, location, uses
thereof and indebtedness of Archway thereon, if any, for all
Real Property. Except as may be disclosed in the Disclosure
Letter, (i) Archway has good and marketable fee simple title
to all Owned Property, except for recorded easements,
covenants and other restrictions, utility easements, and
other easements, covenants and restrictions existing
generally with respect to properties of a similar character,
all of which are shown on such Disclosure Letter, (ii) there
are no outstanding options to purchase the Owned Property or
any other Real Property in which Archway has an interest,
(iii) the Real Property has access, sufficient for the
conduct of the business of Archway as now conducted 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 of
Archway at that location, (iv) all structures, fixtures and
other improvements on all Owned Property of Archway are
within the lot lines and do not encroach on the properties
of any other Person, (v) the use and operation of all Owned
Property are not in violation of any applicable building,
zoning, subdivision and other laws, ordinances, regulations,
codes, permits, licenses and certificates and all
restrictions and conditions affecting title, (vi) no portion
of any Owned Property is located in a flood plain, flood
hazard area or designated wetlands area, and (vii) no
special assessments for public improvements have been levied
against any Owned Property. Since January 1, 1993, neither
Archway nor any of the Sellers have received any written
notice of assessments for public improvements against any
Owned Property or any written or oral notice or order by any
governmental body, any insurance company that has issued a
policy with respect to any of such properties or any board
of fire underwriters or other body exercising similar
functions (other than as disclosed in the insurance reports
disclosed hereunder) that (i) relates to any violation of
building, safety or fire ordinances or regulations, (ii)
claims any defect or deficiency with respect to any of such
properties or (iii) requests that performance of any
repairs, alterations or other work to or in any of such
properties or in the streets bounding the same. Complete
and correct copies of all written reports on such matters
from any insurance company that has issued a policy with
respect to any Owned Property since January 1, 1993, have
been delivered to SFC. There is no pending, and to the best
of Archway and the Sellers' knowledge, no threatened
condemnation, expropriation, eminent domain or similar
proceeding affecting all or any portion of the Owned
Property.
(b) The leases for the Leased Property (the "Leases")
are in full force and effect, and Archway holds a valid and
existing leasehold interest under each of the Leases for the
term set forth in the Disclosure Letter. Archway has
delivered to SFC complete and accurate copies of each of the
Leases, and none of the Leases has been modified in any
respect, except to the extent that such modifications are
disclosed by the copies delivered to SFC. Archway is not in
default, and to the best of Sellers' knowledge, no
circumstances exist that, if unremedied, would, either with
or without notice or the passage of time or both, result in
such default under any of the Leases; nor is any other party
to any of the Leases in default.
(c) Archway owns good and marketable title to each of
the tangible properties and tangible assets reflected on the
Audited Balance Sheets or acquired since the date thereof,
free and clear of all liens and encumbrances, except for (i)
liens for current Taxes (as defined in Section 4.16) not yet
delinquent, (ii) liens set forth in the Disclosure Letter,
(iii) the properties subject to the Leases, (iv) assets
disposed of since January 3, 1998 in the ordinary course of
business, (v) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to
carriers, warehousemen, laborers and materialmen and (vi)
liens in respect of pledges or deposits under workers'
compensation laws, all of which liens (except in clause (i)
above) aggregate less than $25,000.
(d) All of the buildings, machinery, equipment, tools,
jigs, fixtures, vehicles and other tangible assets necessary
for the conduct of the business of Archway are in
satisfactory operating condition and repair, ordinary wear
and tear excepted, and are usable in the ordinary course of
business. Archway owns or leases under valid leases
disclosed in the Disclosure Letter, all buildings,
machinery, equipment and other tangible assets necessary for
the conduct of its business as presently conducted.
(e) To the best of the knowledge of the Sellers,
Archway is not in violation of any applicable zoning
ordinance or other law, regulation or requirement relating
to the operation of any properties used in the operation of
its business, and neither Archway nor any of the Sellers has
received any written notice of any such violation.
(f) Except as may be disclosed in the Disclosure
Letter, each Owned Property included in the Real Property is
assessed for real estate tax purposes as a wholly
independent tax lot, separate from any adjoining land or
improvements not constituting a part of such property.
(g) Except as may be disclosed in the Disclosure
Letter, there are no encroachments or other facts or
conditions affecting the Real Property that would be
revealed by an accurate survey or careful physical
inspection thereof which would, individually or in the
aggregate, interfere in any material respect with, or
materially increase the cost of, the use, occupancy or
operation thereof as currently used, occupied and operated.
4.14 Accounts Receivable.14 Accounts Receivable.14
Accounts Receivable. The accounts receivable reflected on the
January 3, 1998 balance sheet and those arising thereafter arose
from bona fide sale transactions, are not subject to valid
counterclaims or set-offs and to the best of the knowledge of the
Sellers are collectible in the ordinary course of business,
except to the extent of the bad debt reserve reflected on the
January 3, 1998 balance sheet as adjusted since the date of the
January 3, 1998 balance sheet in the ordinary course of business
consistent with past practices. The Disclosure Letter contains a
complete and accurate accounts receivables aging report as of
September 12, 1998.
4.15 Inventory.15 Inventory.15 Inventory. All
inventories reflected on the January 3, 1998 balance sheet
(including without limitation, finished goods, work-in-process,
raw materials and supplies) were as of January 3, 1998 and all
inventories as of the Closing Date will be (a) properly valued in
accordance with GAAP; (b) valued so as to include no material
amounts that are not of good and merchantable quality, salable at
the normal profit levels obtained by Archway consistent with past
practices and usable for the purposes intended in the ordinary
course of business; (c) in conformity with warranties customarily
given to purchasers of like products, (d) not slow-moving as
determined in accordance with past practices, obsolete or damaged
and merchantable and fit for their particular use; and (e) at
levels adequate and not excessive in relation to the
circumstances of Archway's business and in accordance with past
inventory stocking practices. Archway has on hand or has ordered
and expects timely delivery of such quantities of raw materials,
and has on hand such quantities of work in process and finished
goods, in each case as are reasonably required to maintain the
manufacture and shipment of products at their normal level of
operations in light of seasonal fluctuations consistent with
Archway?s past practices. The Disclosure Letter contains a
materially complete and accurate summary of Archway's inventory
of raw materials, work in progress, finished goods and reserve
for obsolete and other inventory allowance or accrual calculation
schedules as of September 12, 1998. Except as set forth on
Schedule 4.15, no inventory is held on consignment by or for
Archway. All ingredients and finished products in inventory (i)
comply in all material respects with the Food, Drug and Cosmetics
Act and all acts amending or supplementing the Food, Drug and
Cosmetics Act (including the Food Additive Act of 1958), and with
the pure food and drug laws of each and all states of the United
States into which any such product would normally be shipped by
Archway, (ii) are not adulterated or misbranded within the
meaning of the Food, Drug and Cosmetic Act or such state laws,
(iii) are not prohibited from introduction into interstate
commerce under the provisions of Section 302(d), 404, 405 or 505
of the Food, Drug and Cosmetic Act and (iv) do not contain a
hazardous substance or a banned substance. To the best of the
knowledge of the Sellers, all packaging inventory complies with,
and is not in material violation of, applicable laws, ordinances,
rules, regulations, and orders of federal, state, local and
foreign jurisdictions, regulatory bodies and courts.
4.16 Tax Matters.16 Tax Matters.16 Tax Matters.
(a) From January 1, 1992 through the Closing, each of
Archway and any affiliated, combined or unitary group of
which Archway is or was a member, any predecessor of Archway
and any Plan (as defined in Section 4.22 hereof), as the
case may be (each a "Tax Affiliate" and, collectively, the
"Tax Affiliates"), has: (i) timely filed or extended (or
has had timely filed or extended on its behalf) all returns,
declarations, reports, estimates, information returns, and
statements ("Returns") required to be filed or sent by it in
respect of any Taxes or required to be filed or sent by it
by any taxing authority having jurisdiction and all such
Returns are true and correct in all material respects; (ii)
timely and properly paid (or has had paid on its behalf) all
Taxes due and payable with respect to the periods covered by
such Returns; (iii) established on the Audited Balance
Sheets and the Closing Date Balance Sheet, in accordance
with GAAP except as otherwise specified in Schedule 2.03(b),
reserves that are adequate for the payment of any Taxes not
yet due and payable for all Tax periods or portions thereof
ending on or prior to January 3, 1998, and in the case of
the Closing Date Balance Sheet, the Closing Date (which
reserve amount is listed in the Disclosure Letter under the
caption referencing this Section); and (iv) complied with
all applicable laws, rules and regulations relating to the
withholding of Taxes and the payment thereof (including,
without limitation, withholding of Taxes under Sections 1441
and 1442 of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar provisions under any foreign laws),
and timely and properly withheld from individual employee
wages or other payments to employees and paid over to the
proper governmental authorities all amounts required to be
so withheld and paid over under all applicable laws. True
and correct copies of all Returns filed by any Tax Affiliate
have been provided to SFC.
(b) There are no liens for Taxes upon any assets of
Archway or of any Tax Affiliate, except liens for Taxes not
yet due. Archway is not a party to any tax sharing
agreement or similar arrangement for the payment or
reimbursement of Taxes.
(c) No deficiency for any Tax has been asserted,
assessed or, to the Sellers' knowledge, proposed against
Archway or the Tax Affiliates that has not been resolved and
paid in full. No waiver, extension or comparable consent
given by Archway or the Tax Affiliates regarding the
application of the statute of limitations with respect to
any Tax or Return is outstanding, nor is any request for any
such waiver or consent pending. From January 1, 1992
through the Closing, there has been no Tax audit or other
administrative proceeding or court proceeding with regard to
any Tax or Return, nor is any such Tax audit or other
proceeding pending, nor has there been any notice to the
Sellers or Archway by any Taxing authority regarding any
such Tax, audit or other proceeding, nor is any such Tax
audit or other proceeding threatened with regard to any
Taxes or Returns. The Sellers and Archway are not aware of
any condition that would result in the assessment of any
additional Taxes of Archway or the Tax Affiliates and are
not aware of any unresolved questions, claims or disputes
concerning the liability for Taxes of Archway or the Tax
Affiliates which would exceed the estimated reserves
established on their respective books and records.
(d) Neither Archway nor any Tax Affiliate is a party
to any agreement, contract or arrangement that would result,
separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section
280G of the Code, and the consummation of the transactions
contemplated by this Agreement will not be a factor causing
payments to be made by Archway or any Tax Affiliate that are
not deductible (in whole or in part) under Section 280G of
the Code.
(e) From January 1, 1992 through the Closing, neither
Archway nor any Tax Affiliate has failed to file any Return
on a timely basis.
(f) No property of Archway or any Tax Affiliate is
property that Archway or any Tax Affiliates is or will be
required to treat as being owned by another person under the
provisions of Section 168(f)(8) of the Code (as in effect
prior to amendment by the Tax Reform Act of 1986) or is "tax-
exempt use property" within the meaning of Section 168 of
the Code.
(g) Neither Archway nor any Tax Affiliate is required
to include in income any adjustment under Section 481(a) of
the Code by reason of a voluntary change in accounting
method initiated by Archway or any Tax Affiliate as a result
of the Tax Reform Act of 1986 and neither Archway nor any
Tax Affiliate has knowledge that the Internal Revenue
Service has proposed any such adjustment or change in
accounting method.
(h) All transactions that could give rise to an
understatement of federal income tax (within the meaning of
Section 6661 of the Code as it applied prior to repeal) or
an underpayment of tax (within the meaning of Section 6662
of the Code) were reported in a manner for which there is
substantial authority or were adequately disclosed (or, with
respect to Returns filed before the Closing Date, will be
reported in such a manner or adequately disclosed) on the
Returns required in accordance with Sections 6661(b)(2)(B)
and 6662(d)(2)(B) of the Code.
(i) Neither Archway nor any Tax Affiliate has engaged
in any transaction that would result in a deemed election
under Section 338(e) of the Code, and neither Archway nor
any Tax Affiliate will engage in any such transaction within
any applicable "consistency period" (as such term is defined
in Section 338 of the Code).
(j) Neither Archway nor any Tax Affiliate has filed
any consent under Section 341(f) of the Code.
(k) Archway has made a valid election ("S Election")
to be treated as an "S Corporation" as defined in Section
1361(a) of the Code, which S Election has been in effect
from January 1, 1992 and no event has occurred which would
violate the S Election or result in a revocation or
termination of the S Election.
(l) All deductions claimed or reported on all Returns
of Archway and any Tax Affiliate on account of royalties or
similar fees payable with respect to any intellectual
property of Archway or any other party are allowable in
full.
(m) For purposes of this Agreement, the term "Tax" or
"Taxes" means all taxes, charges, fees, levies, or other
assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, excise,
estimated, severance, stamp, occupation, property, or other
taxes, customs duties, fees, assessments, or charges of any
kind whatsoever, including, without limitation, all interest
and penalties thereon, and additions to tax or additional
amounts imposed by any taxing authority, domestic or
foreign, upon Archway or any Tax Affiliate.
4.17 Contracts and Commitments.17 Contracts and
Commitments.17 Contracts and Commitments.
(a) The Disclosure Letter, under the caption
referencing this Section, lists the following agreements,
whether written or oral, to which Archway is a party (or by
which Archway or its assets are bound): (i) collective
bargaining agreement or contract with any labor union; (ii)
bonus, pension, profit sharing, retirement or other form of
deferred compensation plan; (iii) hospitalization insurance
or other welfare benefit plan or practice, whether formal or
informal; (iv) stock purchase or stock option plan; (v)
contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis
or relating to severance pay for any such person, other than
Archway's normal employment practices generally affecting
all employees or classes of employees (such as hourly or
salaried classes of employees); (vi) agreement with
employees and with consultants, vendors, customers or other
third parties requiring confidential treatment of Archway's
confidential information and/or transfer to Archway of
intellectual property rights created by employees or with
consultants, vendors, customers or other third parties;
(vii) contract, agreement or understanding relating to the
voting of Archway's capital stock or the election of
directors of Archway; (viii) agreement or indenture relating
to the borrowing of money, to letters of credit or to
mortgaging, pledging or otherwise placing a lien on any of
the assets of Archway; (ix) guaranty of any obligation for
borrowed money or otherwise; (x) lease or agreement under
which Archway is lessee of, or holds or operates any
property, real or personal, owned by any other party; (xi)
lease or agreement under which Archway is lessor of, or
permits any third party to hold or operate, any property,
real or personal, for which the annual rental exceeds
$25,000; (xii) contract or group of related contracts with
the same party (other than any contract or group of related
contracts for the purchase or sale of products or services)
continuing over a period of more than six months from the
date or dates thereof, not terminable by Archway on 30 days'
or less notice without penalty and involving more than
$50,000; (xiii) contract which prohibits Archway from freely
engaging in business anywhere in the world; (xiv) contract
for the distribution of the products of Archway (including
any distributor, sales and original equipment manufacturer
contract); (xv) franchise agreement; (xvi) license agreement
or agreement providing for the payment of royalties or other
compensation by Archway in connection with intellectual
property rights licensed from third parties; (xvii) license
agreement or agreement providing for the receipt of
royalties or other compensation by Archway in connection
with intellectual property rights owned, controlled or
otherwise licensable by Archway; (xviii) contract or
commitment for capital expenditures in excess of $100,000,
(xix) agreement for the sale of any capital asset in excess
of $25,000; (xx) contract with any Insider which in any way
relates to Archway (other than for employment on customary
terms); (xxi) agreement with vendors, customers or other
third parties requiring confidential treatment of
confidential information of such vendors, customers or other
third parties; (xxii) joint venture or profit sharing
agreement; or (xxiii) other agreement that is either
material to the business of Archway or was not entered into
in the ordinary course of business.
(b) The Disclosure Letter lists the following
agreements, whether oral or written, to which Archway is a
party or by which Archway or its assets are bound: (i)
contract or group of related contracts with the same party
for the purchase of products or services by Archway under
which the undelivered balance of such products or services
is in excess of $10,000; (ii) contract or group of related
contracts with the same party for the sale of products or
services by Archway under which the undelivered balance of
such products or services has a sales price in excess of
$10,000; and (iii) sales agreement or other customer
commitment (other than the standard form of purchase order)
which entitles any purchaser to a rebate or right of set-
off, to return any product of Archway after acceptance
thereof or to delay the acceptance thereof, to receive
future services, upgrades or enhancements, or which varies
in any material respect from Archway's standard form
agreements for sales.
(c) Archway has performed all material obligations
required to be performed through the date hereof by it in
connection with the contracts or commitments required to be
disclosed in the Disclosure Letter and has not been notified
of any claim of default under any contract or commitment
required to be disclosed in the Disclosure Letter; Archway
has no present expectation or intention of not fully
performing any material obligation pursuant to any contract
or commitment required to be disclosed in the Disclosure
Letter; and Archway has no knowledge of any breach or
anticipated breach by any other party to any contract or
commitment required to be disclosed in the Disclosure
Letter.
(d) At or before the Closing, SFC has been supplied
with a correct and complete copy of each written contract or
commitment, and a written description of each oral contract
or commitment, referred to in the Disclosure Letter,
together with all amendments, waivers or other changes
thereto.
4.18 Intellectual Property Rights.18 Intellectual
Property Rights.18 Intellectual Property Rights.
(a) The Disclosure Letter, under the caption
referencing this Section, describes: (i) all issued patents
and all registrations for trademarks, service marks, trade
names, corporate names, and copyrights that have been issued
to Archway; (ii) each pending patent application or
application for registration of trademarks, service marks,
trade names, corporate names, and copyrights that Archway
has made with respect to intellectual property owned by, or
otherwise controlled by, Archway and used in, developed for
use in or necessary to the conduct of the business of
Archway as now conducted or as currently planned to be
conducted; (iii) all common law or unregistered trademarks,
service marks, trade names, corporate names, and copyrights
owned by, or otherwise controlled by, Archway and used in,
developed for use in or necessary to the conduct of the
business of Archway as now conducted or as currently planned
to be conducted; (iv) all trade secrets of Archway,
including without limitation recipes, production know-how
and bakery know-how, whether documented or undocumented (the
"Owned Intellectual Property Rights"); and (v) all computer
software which is material to the business in any media or
form, including the source code and object code (the
"Software"). Except as disclosed in this Agreement or the
Schedules attached hereto, Archway owns and possesses all
right, title and interest, or holds such other interest as
is identified in the Disclosure Letter, in and to the rights
set forth under such caption free and clear of all liens,
security interests, third party obligations or other
encumbrances and has the full right to exploit and license
such Owned Intellectual Property Rights without payment of
compensation to any other party.
(b) The Disclosure Letter, under the caption
referencing this Section, describes all agreements granting
to Archway rights in patents, patent applications,
trademarks, service marks, trade names, corporate names,
copyrights, trade secrets or other intellectual property
rights used in or necessary to the conduct of the business
of Archway as now conducted or as currently planned to be
conducted (the "Licensed-In Intellectual Property Rights").
All such agreements are in force and Archway is not in
breach of any such agreement.
(c) The Disclosure Letter, under the caption
referencing this Section, describes all products marketed or
that have been marketed by Archway from January 1, 1996
until the date of this Agreement.
(d) The Disclosure Letter, under the caption
referencing this Section, describes all agreements granting
to third parties any rights in Owned Intellectual Property
Rights and any agreements to grant intellectual property
rights that Archway may acquire in the future.
(e) Archway has taken what it believes to be
commercially reasonable steps to acquire, protect and
maintain the Owned Intellectual Property Rights. Without
limiting the generality of the foregoing, (i) all
maintenance, annuity, renewal and other such fees and
filings, including without limitation all Section 8 and
Section 15 affidavits under the Lanham Act, due on Owned
Intellectual Property Rights have been paid or made; and
(ii) to the best knowledge of the Sellers, there are no
defects in the Owned Intellectual Property Rights that would
lead to any of them becoming invalid or unenforceable.
(f) Neither Archway nor any of the Sellers have
received any notice of, nor are there any facts known to
them that indicate a likelihood of, any infringement or
misappropriation by, any third party with respect to the
Owned Intellectual Property Rights or any Licensed-In
Intellectual Property Rights; and no claim by any third
party contesting the validity of any Owned Intellectual
Property Rights has been made, is currently outstanding or
is threatened.
(g) Neither Archway nor any of the Sellers have
received any notice of any infringement, misappropriation or
violation by Archway of any intellectual property rights of
any third parties. Archway has not infringed or
misappropriated or otherwise violated any trademark rights
of other parties and, to the best knowledge of the Sellers,
(A) Archway has not infringed, misappropriated or otherwise
violated any other intellectual property rights and (B) no
infringement, misappropriation or violation of any other
intellectual property rights of any third parties has
occurred or will occur with respect to products currently
being sold by Archway or with respect to the products
currently under development or with respect to the conduct
of the business of Archway as now conducted.
(h) Neither Archway nor any of the Sellers have
entered into any agreement restricting Archway from selling,
leasing, licensing or otherwise distributing any of its
current products or products under development to any class
of customers, in any geographic area, during any time period
or in any segment of the market for such products.
(i) Archway has the right to make available to SFC all
Owned Intellectual Property Rights.
(j) All trademarks currently used by Archway in its
business which are being transferred pursuant to this
Agreement have been continuously in use and have not been
abandoned.
4.19 Litigation.19 Litigation.19 Litigation. Except for
those workers? compensation claims, unemployment claims, or other
claims set forth on the Disclosure Letter, there are no claims,
suits, actions or proceedings pending, or to the knowledge of
Archway or any of the Sellers, threatened against, Archway or any
Seller, before any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator that seek
to restrain the transactions contemplated by this Agreement or
seek other relief or remedy and which could be reasonably
expected, either alone or in the aggregate with all such claims,
actions or proceedings, to have a Material Adverse Effect.
4.20 Warranties; Products.20 Warranties; Products.20
Warranties; Products. Each of the products produced or sold by
Archway is, and at all times up to and including the Closing Date
has been, (a) in compliance with all applicable federal, state,
local and foreign laws and regulations and (b) in conformance
with any promises or affirmations of fact made in any
advertisement or on the container or label for such product or in
connection with its sale (including warranties implied by
applicable laws). To the best of the knowledge of the Sellers,
there is no pending or threatened warranty claim with respect to
any of such products that would have a Material Adverse Effect,
and each of such products have labels, presented in accordance
with applicable laws, rules and regulations and current industry
practice, with respect to their contents. The Disclosure Letter,
under the caption referencing this Section, discloses the terms
of all express product warranties issued by Archway from January
1, 1993 until the date of this Agreement. The total value of all
warranty claims for products sold by Archway during any of the
fiscal years in the period from January 1, 1993 until December
31, 1997 did not exceed 2% of Archway's total sales in any such
fiscal year.
4.21A Employees. (a) To the best knowledge of the
Sellers, except for Sellers, no employee named in Section 10.03
and no group of Archway's employees has any plans to terminate
their employment; (b) to the best knowledge of the Sellers,
Archway has complied, in all material respects, with all laws
relating to the employment of labor, including provisions thereof
relating to wages, hours, equal opportunity, collective
bargaining and the payment of social security and other Taxes;
(c) Archway's labor relations are satisfactory in light of the
conduct of Archway's business, consistent with past practices;
(d) there are no controversies pending or, to the knowledge of
Archway, threatened between Archway and any employee, or
representative of Archway's employees; (e) to the knowledge of
Archway, there are no organizational efforts presently being made
involving any of the presently unorganized employees of Archway;
(f) there are no workers' compensation claims pending against
Archway nor is Archway aware of any facts that would give rise to
such a claim; (g) to the best knowledge of the Sellers, no
employee of Archway is subject to any secrecy or noncompetition
agreement or any other agreement or restriction of any kind that
would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the
business of Archway; and (h) no employee or former employee of
Archway has any claim with respect to any Owned Intellectual
Property Rights. Archway has delivered lists, prior to or as of
the Closing, identifying each employee of Archway and the
position, title, remuneration (including any scheduled salary or
remuneration increases), date of employment and accrued vacation
pay of each such employee as of such date and such lists identify
each employee of Archway who is not an "at will" employee, except
as "at will" status may be modified by employee handbooks or
employment practices applicable generally to all employees or
categories of employees (such as hourly and salaried categories).
4.21B Distributors. (a) To the best knowledge of the
Sellers, no distributor named in Schedule 4.21B and no group of
Archway's distributors (defined as persons who purchase and
resell Archway's cookies under the terms of Archway's distributor
guidebook) has any plans to terminate their relationship; (b)
Archway has complied, in all material respects, with all laws
relating to the distributors, including the payment of social
security and other Taxes; (c) Archway's relations with
distributors are satisfactory in light of the conduct of
Archway's business, consistent with past practices; (d) there are
no controversies pending or, threatened between Archway and any
distributor, or representative of Archway's distributors; (e)
there are no workers' compensation claims pending against Archway
by its distributors nor is Archway aware of any facts that would
give rise to such a claim; (f) to the best knowledge of the
Sellers, no distributor of Archway is subject to any secrecy or
noncompetition agreement or any other agreement or restriction of
any kind that would impede in any way the ability of such
distributor to carry out fully all activities of such distributor
in furtherance of the business of Archway; and (g) no distributor
or former distributor of Archway has any claim with respect to
any Owned Intellectual Property Rights. Archway has delivered
lists, prior to or as of the Closing, identifying each
distributor of Archway and the date of engagement.
4.22 Employee Benefit Plans.22 Employee Benefit Plans .22
Employee Benefit Plans.
(a) For the purpose of this Agreement, "ERISA" means
the Employee Retirement Income Security Act of 1974, as
amended, and the term "Plan" means every employee benefit
plan (whether or not covered by Section 3(3) of ERISA) that
is maintained or contributed to by Archway for the benefit
of present or former employees, including those intended to
provide: (i) medical, surgical, health care,
hospitalization, dental, vision, workers' compensation, life
insurance, death, disability, legal services, severance,
sickness or accident benefits, (ii) pension, profit sharing,
stock bonus, retirement, supplemental retirement or deferred
compensation benefits (whether or not tax qualified), (iii)
bonus, incentive compensation, stock option, stock
appreciation right, restricted stock, phantom stock or stock
purchase benefits, or (iv) salary continuation,
unemployment, moving expense reimbursement, benefits
relating to company automobiles, supplemental unemployment,
termination pay, vacation or holiday benefits.
(b) The term "Plan" shall also include every such
plan: (i) that Archway has committed to implement,
establish, adopt or contribute to in the future, (ii) for
which Archway is or may be financially liable as a result of
the direct sponsor's affiliation to Archway or its owners
(whether or not such affiliation exists at the date of this
Agreement and notwithstanding that the plan is not
maintained by Archway for the benefit of its employees or
former employees), (iii) that has been terminated or is in
the process of terminating (but such term does not include
any plan that has been terminated such that Archway has no
present or potential liability with respect to such
arrangement), or (iv) for or with respect to which Archway
is liable under any common law successor doctrine, express
successor liability provisions of law, provisions of a
collective bargaining agreement, labor or employment law or
agreement with a predecessor employer.
(c) The Disclosure Letter sets forth under the caption
referencing this Section all Plans by name and brief
description identifying: (i) the type of Plan, (ii) the
funding arrangements for the Plan, (iii) the sponsorship of
the Plan, and (iv) the participating employees in the Plan.
(d) Each Plan identified in the Disclosure Letter is
further identified on such Disclosure Letter by reference to
such of the following characteristics as may apply to such
Plan: (i) defined contribution plan as defined in Section
3(34) of ERISA or Section 414(i) of the Code, (ii) defined
benefit plan as defined in Section 3(35) of ERISA or Section
414(j) of the Code, (iii) plan that is or is intended to be
tax qualified under Section 401(a) or 403(a) of the Code,
(iv) plan that is or is intended to be an employee stock
ownership plan as defined in Section 4975(e)(7) of the Code
(and whether or not such plan has entered into an exempt
loan), (v) nonqualified deferred compensation arrangement,
(vi) employee welfare benefit plan as defined in Section
3(1) of ERISA, (vii) multiemployer plan as defined in
Section 3(37) of ERISA or Section 414(f) of the Code, (viii)
plan maintained by more than one employer as defined in
Section 413(c) of the Code, (ix) plan providing benefits
after separation from service or termination of employment,
(x) plan maintained or contributed to by Archway that owns
Archway or other employer securities as an investment, (xi)
plan that provides benefits (or provides increased benefits
or vesting) as a result of a change in control of Archway,
(xii) plan that is maintained pursuant to collective
bargaining and (xiii) a plan funded, in whole or in part,
through a voluntary employees' beneficiary association
exempt from tax under Section 501(c)(9) of the Code.
(e) The Disclosure Letter sets forth the identity of
each corporation, trade or business (separately for each
category below that applies): (i) that is (or was during
the preceding five years) under common control with Archway
within the meaning of Section 414(b) or (c) of the Code,
(ii) that is (or was during the preceding five years) in an
affiliated service group with Archway within the meaning of
Section 414(m) of the Code, (iii) that is (or was during the
preceding five years) the legal employer of persons
providing services to Archway as leased employees within the
meaning of Section 414(n) of the Code and (iv) with respect
to which Archway is a successor employer for purposes of
group health or other welfare plan continuation rights
(including Section 601 et. seq. of ERISA) or the Family and
Medical Leave Act.
(f) To the extent that such documents exist, Archway
has furnished SFC with true and complete copies of: (i) the
most recent determination letter, if any, received by
Archway from the Internal Revenue Service (the "IRS")
regarding each Plan, (ii) all pending applications for
rulings, determinations, opinions, no action letters and the
like filed with respect to any Plan with any governmental
agency (including but not limited to the Department of
Labor, IRS, Pension Benefit Guaranty Corporation (the
"PBGC") and the SEC), (iii) the financial statements for
each Plan for the three most recent fiscal or Plan years (in
audited form if required by ERISA) and, where applicable,
Annual Report/Return (Form 5500) with disclosure schedules,
if any, and attachments for each Plan, (iv) Form PBGC-1, the
most recently prepared actuarial valuation report for each
Plan (including but not limited to reports prepared for
funding, deduction and financial accounting purposes), (v)
Plan documents, trust agreements, amendments to the Plan
documents and trust agreements, insurance contracts, service
agreements and all related contracts and documents
(including any summary plan descriptions and material
employee communications) with respect to each Plan, and (vi)
collective bargaining agreements (including side agreements
and letter agreements) relating to the establishment,
maintenance, funding and operation of any Plan. In the case
of any Plan listed on the Disclosure Letter which is not in
written form, Archway has furnished SFC with an accurate
description of such Plan.
(g) The Disclosure Letter identifies each employee of
Archway who is: (i) absent from active employment due to
short or long term disability, (ii) absent from active
employment on a leave pursuant to the Family and Medical
Leave Act or a comparable state law, (iii) absent from
active employment on any other leave or approved absence
(together with the reason for such leave or absence), or
(iv) absent from active employment due to military service
(under conditions that give the employee rights to re-
employment).
(h) With respect to continuation rights arising under
federal or state law as applied to Plans that are group
health plans (as defined in Section 601 et. seq. of ERISA),
the Disclosure Letter identifies: (i) each employee, former
employee or qualifying beneficiary who has elected
continuation and (ii) each employee, former employee or
qualifying beneficiary who has not elected continuation
coverage but is still within the period in which such
election may be made.
(i) (i) all Plans intended to be tax qualified under
Section 401(a) or Section 403(a) of the Code are so
qualified and nothing has occurred since the date of the
last such determination which resulted or is likely to
result in the revocation of such qualification; (ii) all
Plans comply and have in the past complied in form and
operation in all material respects with all applicable
requirements of law and regulation; (iii) all reports and
filings with governmental agencies (including but not
limited to the Department of Labor, IRS, PBGC and the SEC)
required in connection with each Plan have been timely made
and there have been no material changes in the financial
conduction of such plans from that stated in the annual
report most recently filed for each such plan; (iv) all
disclosures and notices required by law or Plan provisions
to be given to participants and beneficiaries in connection
with each Plan have been properly and timely made; and (v)
no Plan, separately or in the aggregate, requires or would
result in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code, and the
consummation of the transactions contemplated by this
Agreement will not be a factor in causing payments to be
made by SFC or any Acquired Company that are not deductible
(in whole or in part) because of the application of Section
280G of the Code.
(j) (i) all contributions, premium payments and other
payments required to be made in connection with the Plans as
of the date of this Agreement have been made; (ii) all
contributions, premium payments and other payments due from
Archway in connection with the Plans but not made as of the
date of this Agreement have been accounted for in accordance
with GAAP on the Audited Balance Sheets; (iii) no
contribution, premium payment or other payment has been made
in support of any Plan that is in excess of the allowable
deduction for federal income tax purposes for the year with
respect to which the contribution was made (whether under
Section 162, Section 280G, Section 404, Section 419 or
Section 419A of the Code or otherwise); and (iv) with
respect to each Plan that is subject to Section 301 et. seq.
of ERISA or Section 412 of the Code, Archway is not liable
for any accumulated funding deficiency as that terms is
defined in Section 412 of the Code, and the projected
benefit obligations determined as of the date of this
Agreement do not exceed the assets of the Plan.
(k) (i) no action, suit, charge, complaint,
proceeding, hearing, investigation or claim is pending with
regard to any Plan other than routine uncontested claims for
benefits; (ii) except as based upon plans maintained by SFC
or its affiliates, the consummation of the transactions
contemplated by this Agreement will not cause any Plan to
increase benefits payable to any participant or beneficiary;
(iii) there are no negotiations, demands or proposals that
are pending or have been made which concern matters now
covered, or that would be covered by the plans listed in the
Disclosure Letter; (iv) there have been no reportable events
as described in Section 4043 of ERISA with respect to any
plan covered under Title IV of ERISA; (v) except as based
upon plans maintained by SFC or its affiliates, the
consummation of the transactions contemplated by this
Agreement will not: (A) entitle any current or former
employee of Archway to severance pay, unemployment
compensation or any other payment, benefit or award, or (B)
accelerate or modify the time of payment or vesting, or
increase the amount of any benefit, award or compensation
due any such employee; (vi) no Plan is currently under
examination or audit by the Department of Labor, the IRS or
the PBGC; (vii) Archway does not have any actual or
potential liability arising under Title IV of ERISA as a
result of any Plan that has terminated or is in the process
of terminating; (viii) Archway does not have any actual or
potential liability under Section 4201 et seq. of ERISA for
either a complete withdrawal or a partial withdrawal from a
multiemployer Plan; and (ix) with respect to the Plans,
Archway does not have any liability (either directly or as a
result of indemnification) for (and the transaction
contemplated by this Agreement will not cause any liability
for): (A) any excise Taxes under section 4971 through
section 4980B, section 4999, section 5000 or any other
section of the Code, (B) any penalty under section 502(i),
section 502(l), Part 6 of Title I or any other provision of
ERISA, or (C) any excise Taxes, penalties, damages or
equitable relief as a result of any prohibited transaction,
breach of fiduciary duty or other violation under ERISA or
any other applicable law.
(l) (i) no condition, agreement or Plan provision
limits the right of Archway to amend, cut back or terminate
any Plan (except to the extent such limitation arises under
ERISA); and (ii) except as set forth on the Disclosure
Letter, Archway does not have any liability for life
insurance, death or medical benefits after separation from
employment other than (A) death benefits under the Plans set
forth in the Disclosure Letter or (B) health care
continuation benefits described in section 4980B of the
Code.
4.23 Insurance.23 Insurance.23 Insurance. The
Disclosure Letter, under the caption referencing this Section,
lists and briefly describes each insurance policy maintained by
Archway with respect to the properties, assets and operations of
Archway and sets forth the date of expiration of each such
insurance policy. All of such insurance policies are in full
force and effect. To the best of the knowledge of the Sellers,
Archway is not in default with respect to its obligations under
any of such insurance policies.
4.24 Affiliate Transactions.24 Affiliate Transactions.24
Affiliate Transactions. Other than pursuant to this Agreement,
no officer, director, employee or shareholder of Archway or any
member of the immediate family of any such officer, director,
employee or shareholder, or any entity in which any of such
persons owns any beneficial interest (other than any publicly
held corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than one
percent of the stock of which is beneficially owned by any of
such persons) (collectively "Insiders"), has any agreement with
Archway (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or
intangible, used in or pertaining to the business of Archway
(other than ownership of capital stock of Archway). None of the
Insiders has any direct or indirect interest (other than
beneficial ownership of less than one percent of the stock of a
publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market) in any
competitor, supplier or customer of Archway or in any person,
firm or entity from whom or to whom Archway leases any property.
For purposes of this Section, the members of the immediate family
of an Insider shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-
law, and brothers- and sisters-in-law of such Insider. All
agreements and transactions between Archway and any Insider
identified in the Disclosure Letter were made for bona fide
business purposes on terms comparable to what could be obtained
from an unaffiliated third party.
4.25 Customers and Suppliers.25 Customers and
Suppliers.25 Customers and Suppliers. The Disclosure Letter,
under the caption referencing this Section, lists the 10 largest
customers (each a "Material Customer") and the 10 largest
suppliers (each a "Material Supplier") of Archway for the year
ended January 3, 1998 and sets forth opposite the name of each
such customer or supplier the approximate amount of Archway's
gross sales or purchases attributable to such customer or
supplier for such period. No Material Customer or Material
Supplier has canceled or otherwise terminated, or to the
knowledge of Archway, threatened to cancel or otherwise
terminate, its relationship with Archway, or has during the last
twelve months materially decreased or limited or threatened to
materially decrease or limit, its business with Archway, and
Archway has not received notice that any such Material Customer
or Material Supplier intends to cancel or otherwise modify in any
material adverse manner its relationship with Archway. The
Sellers have not received any notice or information that the
transactions contemplated by this Agreement will not adversely
affect the relationship of the Company with any Material Customer
or Material Supplier. There are no enforceable agreements with
any customer. Each customer of Archway may be terminated without
penalty or other liability upon written notice.
4.26 Officers and Directors; Bank Accounts.26 Officers
and Directors; Bank Accounts.26 Officers and Directors; Bank
Accounts. The Disclosure Letter, under the caption referencing
this Section, lists all officers and directors of Archway and all
of the bank accounts of Archway (designating each authorized
signer).
4.27 Compliance with Laws; Permits.27 Compliance with
Laws; Permits.27 Compliance with Laws; Permits.
(a) Each of Archway and its respective officers,
directors, agents and employees has complied in all material
respects with all applicable laws, regulations and other
requirements, including, but not limited to, federal, state,
local and foreign laws, ordinances, rules, regulations and
other requirements pertaining to product labeling, consumer
products safety, and to the best knowledge of the Sellers
equal employment opportunity, employee retirement,
affirmative action and other hiring practices, occupational
safety and health, workers' compensation and unemployment
laws to which Archway (including any product of Archway) may
be subject, and, since January 1, 1993, neither Archway nor
the Sellers has received notice of any allegation or claim
of any noncompliance and no claims have been filed against
Archway alleging a violation of any such laws, regulations
or other requirements. Archway and the Sellers have no
knowledge of any action, pending or threatened, to change
the zoning or building ordinances or any other laws, rules,
regulations or ordinances affecting the Real Property.
(b) Archway has, in full force and effect, all
material licenses, permits and certificates, from federal,
state, local and foreign authorities (including, without
limitation, federal and state agencies regulating
occupational health and safety) necessary to conduct its
business and own and operate its properties (collectively,
the "Permits"). Archway has conducted its business in
substantial compliance with all terms and conditions of the
Permits.
(c) Archway has not made or agreed to make gifts of
money, other property or similar benefits (other than
incidental gifts of articles or general promotion and
entertainment expenditures of nominal value) to any actual
or potential customer, supplier, governmental employee or
any other person in a position to assist or hinder Archway
in connection with any actual or proposed transaction.
(d) Archway has not received a notice or charge
asserting any violation of or liability under, and, to the
best knowledge of Sellers, is in material compliance with,
the federal Occupational Safety and Health Act of 1970 or
any other federal or state acts (including rules and
regulations thereunder) regulating or otherwise affecting
employee health and safety.
4.28 Environmental Matters.28 Environmental Matters.28
Environmental Matters. Except as disclosed on the Disclosure
Letter, Sellers hereby represent and warrant as their sole and
exclusive representation and warranty regarding environmental
issues to SFC as follows:
(a) To the best of the knowledge of the Sellers, the
Real Property is operating in compliance with all applicable
federal, state and local laws and regulations related to air
quality, water quality, waste disposal or management,
hazardous substances, and the protection of public health
and the environment ("Environmental Laws"), and there is no
friable asbestos or asbestos containing material located in
any food preparation, manufacturing or handling areas of any
production facilities located on the Real Property.
(b) To the best of the knowledge of the Sellers,
neither Sellers nor Archway have spilled, released or
otherwise disposed of any hazardous substances on or in the
Real Property, and, to the best of the knowledge of the
Sellers, the Real Property and the groundwater beneath the
Real Property are free from environmental contamination
caused by Archway contrary to Environmental Laws.
(c) To the best of the knowledge of the Sellers: there
are no "underground storage tanks," as that term is defined
in section 9001 of the Solid Waste Disposal Act, 42 U.S.C.
?6991(1), located on the Real Property; Archway has
obtained, and maintains in full force and effect, all
permits, licenses, registrations, approvals and other
authorizations necessary to conduct its business in
accordance with applicable Environmental Laws; Archway has
conducted its business in compliance with all terms and
conditions of any such permits, and has filed all reports or
notifications and has kept all records required under or
pursuant to applicable Environmental Laws.
(d) Archway and Sellers have not received any notice
or demand alleging in any manner that Archway is potentially
responsible for any environmental investigation or response
costs relating to the release of any hazardous substance at
any location or any costs, penalties or expenses arising
under or for violation of any Environmental Law; and
(e) Archway and Sellers have disclosed and delivered
to SFC all environmental reports and investigations that
Archway or Sellers have in their possession, custody or
control with respect to the business of Archway and the Real
Property and all such documents are listed in Schedule
4.28(e) hereto.
4.29 Brokerage.29 Brokerage.29 Brokerage. No 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 Sellers.
4.30 Disclosure.30 Disclosure.30 Disclosure. Neither this
Agreement nor any of the Exhibits hereto nor any of the documents
delivered by or on behalf of Sellers pursuant to Article VIII
hereof nor the Disclosure Letter nor any of the financial
statements referred to in Section 4.09 hereof, taken as a whole,
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in
which they were made, not misleading, regarding Archway or its
business or any of the other matters dealt with in this Article
IV relating to Archway or the transactions contemplated by this
Agreement.
ARTICLE VVV
REPRESENTATIONS AND WARRANTIES OF SFC
SFC hereby represents and warrants to Sellers that:
5.01 Incorporation and Corporate Power.01 Incorporation
and Corporate Power.01 Incorporation and Corporate Power. SFC
is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with the
requisite corporate power and authority to enter into this
Agreement and perform its obligations hereunder.
5.02 Execution, Delivery; Valid and Binding Agreement.02
Execution, Delivery; Valid and Binding Agreement.02 Execution,
Delivery; Valid and Binding Agreement. The execution, delivery
and performance of this Agreement by SFC and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action, and no other
corporate proceedings are necessary to authorize the execution,
delivery or performance of this Agreement. This Agreement has
been duly executed and delivered by SFC and constitutes the valid
and binding obligation of SFC, enforceable in accordance with its
terms except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and general
equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity.
5.03 Approval of Agreement.03 Approval of Agreement.03
Approval of Agreement. SFC hereby represents that its board of
directors has, by resolutions duly adopted on October 13, 1998,
authorized and approved this Agreement and the transactions
contemplated hereby. None of the resolutions described in this
Section has been rescinded, amended or otherwise modified in any
respect since the date of adoption thereof, and all such
resolutions remain in full force and effect.
5.04 No Breach.04 No Breach.04 No Breach. The
execution, delivery and performance of this Agreement by SFC and
the consummation by SFC of the transactions contemplated hereby
do not conflict with or result in any breach of any of the
provisions of, 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 SFC, 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 SFC or any indenture,
mortgage, lease, loan agreement or other agreement or instrument
by which SFC is bound or affected, or any law, statute, rule or
regulation or order, judgment or decree to which SFC is subject,
except for compliance with the provisions of the HSR Act.
5.05 Governmental Authorities; Consents.05 Governmental
Authorities; Consents.05 Governmental Authorities; Consents.
Except for the HSR Act, SFC 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.
Except for the HSR Act, no consent, approval or authorization of
any governmental or regulatory authority or any other party or
person is required to be obtained by SFC in connection with its
execution, delivery and performance of this Agreement or the
transactions contemplated hereby.
5.06 Litigation.06 Litigation.06 Litigation. There are no
actions, suits, proceedings, orders or investigations pending or,
to the best knowledge of SFC, threatened against SFC, at law or
in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign that would have a material
adverse effect on the business, operations or financial condition
of SFC.
5.07 Brokerage.07 Brokerage.07 Brokerage. SFC shall be
responsible for 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
SFC; provided, however, that no person who is currently both an
Officer of Archway and either a Seller or a Trustee of a Seller
shall be entitled to receive any such brokerage commission,
finder's fee, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by
this Agreement.
5.08 Disclosure.08 Disclosure.08 Disclosure. Neither this
Agreement nor any of the Exhibits hereto nor any of the documents
delivered by or on behalf of SFC pursuant to Article VIII hereof,
taken as a whole, contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, regarding
SFC or its business or any of the other matters dealt with in
this Article V relating to SFC or the transactions contemplated
by this Agreement.
ARTICLE VIVIVI
COVENANTS OF SELLERS
6.01 Conduct of the Archway Business.01 Conduct of the
Archway Business.01 Conduct of the Archway Business. Archway
agrees to, and the Sellers agree to cause Archway to, observe
each term set forth in this Section and agree that, from the date
hereof until the Closing Date, unless otherwise consented to by
SFC in writing:
(a) The business of Archway shall be conducted only
in, and Archway and the Sellers shall not take any action
except in, the ordinary course of business of Archway, on an
arm's-length basis and in accordance with all applicable
laws, rules and regulations and Archway's past custom and
practice;
(b) All transactions between Archway, any Seller or
any family member or affiliate of any of them shall be at
fair market value unless consented to in writing by SFC, and
all proposed contracts or other legally binding commitments
having a value greater than $50,000 or having a term
extending beyond October 20, 1998 shall be approved by SFC
prior to their execution (other than purchase orders entered
into in the ordinary course of business);
(c) Archway shall not, directly or indirectly, do or
permit to occur any of the following: (i) issue or sell any
additional shares of capital stock, or any options,
warrants, conversion privileges or rights of any kind to
acquire any shares of, any of its capital stock, (ii) sell,
pledge, dispose of or encumber any of its assets, except in
the ordinary course of business or as permitted by this
Agreement (iii) amend or propose to amend its articles of
incorporation or bylaws or other governing documents; (iv)
split, combine or reclassify any outstanding shares of
capital stock, or declare, set aside or pay any dividend or
other distribution payable in cash, stock, property or
otherwise with respect to shares of capital stock; (v)
redeem, purchase or acquire or offer to acquire any shares
of capital stock or other securities; (vi) acquire (by
merger, exchange, consolidation, acquisition of stock or
assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or
material assets thereof; (vii) incur any indebtedness for
borrowed money or issue any debt securities except the
borrowing of working capital in the ordinary course of
business and consistent with past practice and except for
the borrowing of money, with SFC's consent, for the payment
of the Severance Payments, the Noncompetition Payments and
Deferred Compensation Liabilities (which approval shall not
be unreasonably withheld or delayed); (viii) accelerate or
defer the payment of undisputed accounts payable or other
accrued expenses owed to trade creditors or other third
parties having business relationships with Archway other
than in the ordinary course of business and consistent with
past practice; (ix) accelerate or defer, beyond the normal
collection cycle, or defer collection of manufacturers'
rebates, promotional allowances and other accounts
receivable; (x) enter into or propose to enter into, or
modify or propose to modify, any Lease or exercise or waive
any option, or consent to any modification, act or omission
by any landlord requiring Archway's consent under any Lease;
(xi) purchase inventories or supplies for its business other
than in the ordinary course of business; (xii) engage in any
"field loading" inventory plan (e.g., Archway will not
provide sales or other incentives to its distributors or
customers to encourage them to order Archway's products in
order to artificially inflate or accelerate Archway's sales
of such products, except those incentives consistent with
past practice); (xiii) sell, lease, license or otherwise
dispose of any assets or properties, other than in the
ordinary course of business or as permitted by this
Agreement; (xiv) accelerate or defer the construction of
improvements at any of the locations of its business; (xv)
accelerate or defer the purchase of fixtures, equipment,
leasehold improvements, vehicles, other items of machinery
and equipment and other capital expenditures; (xvi) make any
payment to the Sellers or any Insider or any affiliate of
any of them except reasonable salary compensation in the
ordinary course of business of Archway or as permitted by
this Agreement; (xvii) make any individual capital
expenditures in excess of $100,000; or (xviii) enter into or
propose to enter into or modify or propose to modify any
agreement, arrangement or understanding with respect to any
of the matters set forth in this Section;
(d) Except as contemplated herein, Archway shall not,
directly or indirectly, (i) enter into or modify any
employment, severance or similar agreements or arrangements
with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors or
consultants; or (ii) in the case of employees, officers or
consultants who earn in excess of $60,000 per year, take any
action with respect to the grant of any bonuses, salary
increases, severance or termination pay or with respect to
any increase of benefits payable in effect on the date
hereof;
(e) Except as required by applicable law or as
approved by SFC, Archway shall not adopt or amend any bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other
employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus, profit
sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit
plan, agreement, trust, fund or arrangements for the benefit
or welfare of any director;
(f) Archway shall not cancel or terminate its current
insurance policies 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;
(g) Each of Archway and the Sellers shall (i) use its
best efforts to preserve intact Archway's business
organization and goodwill, keep available the services of
Archway's officers and employees as a group and maintain
satisfactory relationships with suppliers, distributors,
customers and others having business relationships with
Archway; (ii) confer on a regular and frequent basis with
representatives of SFC to report operational matters and the
general status of ongoing operations; (iii) not
intentionally take any action which would render any
representation or warranty made by it in this Agreement
untrue at the Closing; (iv) notify SFC of any emergency or
other change in the normal course of Archway's business or
in the operation of Archway's properties 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 business, operations or financial
condition of Archway or to Archway's or SFC's ability to
consummate the transactions contemplated by this Agreement;
and (v) promptly notify SFC in writing if the Sellers or
Archway shall discover that any representation or warranty
made by him/her or it in this Agreement was when made, or
has subsequently become, untrue in any respect;
(h) The Sellers and Archway shall (i) file or properly
extend the filing of any Returns, elections or information
statements with respect to any liabilities for Taxes of
Archway or other matters relating to Taxes of Archway that
pursuant to applicable law must be filed prior to the
Closing Date, provided, however, that neither the Sellers
nor Archway shall file any such Returns, or other elections,
claims for refund or information statements with respect to
any liabilities for Taxes of Archway (other than federal,
state or local sales, use, withholding or employment Returns
or Tax statements) for any Tax period, or consent to any
adjustment or otherwise compromise or settle any matters
with respect to Taxes, without prior consultation with and
consent of SFC; (ii) promptly upon filing provide copies of
any such Returns, extensions, elections or information
statements to SFC; (iii) make or rescind any such Tax
elections or other discretionary positions with respect to
Taxes taken by or affecting Archway only upon prior
consultation with and consent of SFC; (iv) not amend any
Return; (v) not change the rate or policy for any accrual or
reserve for Taxes or otherwise accrue therefor in a manner
inconsistent with its practices for previous periods as
reflected in the Audited Financial Statements; (vi) not take
any action which could result in a revocation or termination
of Archway's Subchapter S election; and (vii) not change any
of its methods of reporting income or deductions for federal
income Tax purposes from those employed in the preparation
of the federal income Tax Returns for the taxable year ended
December 3, 1998, except for changes required by changes in
law or as approved by SFC; and
(i) Archway shall not perform any act referenced by
(or omit to perform any act which omission is referenced by)
the terms of Section 4.12, except as stated in the
Disclosure Letter under the caption referencing such Section
or as otherwise permitted under this Agreement.
6.02 Access to Books and Records.02 Access to Books and
Records.02 Access to Books and Records. Between the date
hereof and the Closing Date, Sellers shall afford to SFC and its
authorized representatives ("SFC's Representatives") full access
at all reasonable times and upon reasonable notice to the
offices, properties, books, records, officers, employees and
other items of Archway and otherwise provide such assistance as
is reasonably requested by SFC in order that SFC may have a full
opportunity to make such investigation and evaluation as it shall
reasonably desire to make of the business and affairs of Archway.
In addition, Sellers shall cause Archway and their respective
officers and directors to cooperate fully (including providing
introductions where necessary) with SFC to enable SFC to contact
such third parties, including distributors, customers,
prospective customers, specifying agencies, vendors or suppliers
of Archway, as SFC deems reasonably necessary; provided that SFC
agrees not to initiate such contacts without the prior approval
of Archway, which approval will not be unreasonably withheld.
6.03 Regulatory Filings.03 Regulatory Filings.03
Regulatory Filings. As promptly as practicable after the
execution of this Agreement, Sellers shall make or cause to be
made all filings and submissions under any laws or regulations
applicable to Archway for the consummation of the transactions
contemplated herein. Sellers will coordinate and cooperate with
SFC in exchanging such information, will not make any such filing
without providing to SFC 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
SFC may request in connection with all of the foregoing.
6.04 Conditions.04 Conditions.04 Conditions. Sellers
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.
Without limiting the generality of the foregoing, Archway shall
use its best efforts to obtain, prior to the Closing, all
consents or waivers to the transactions contemplated herein that
may be required under any of the agreements or commitments of
Archway that are material to the business of Archway.
6.05 No Negotiations.05 No Negotiations.05 No
Negotiations. Except as consented to in writing by SFC, from the
date hereof until December 31, 1998, neither Archway nor any
Seller shall, directly or indirectly, through any officer,
director, agent, affiliate, employee, or otherwise, solicit,
initiate or encourage submission of any proposal or offer from
any person, group or entity relating to any acquisition of the
capital stock or business of Archway, or all or a material
portion of the assets of Archway, or other similar transaction or
business combination involving the business of Archway, and shall
not participate in any negotiations or discussions regarding or
furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage any effort or attempt by any other person
or entity to do or seek such acquisition or other transaction.
Archway and Sellers also agree that they shall take the necessary
steps to promptly inform any such third party of the obligations
undertaken in this Agreement and this Section. Sellers agree
that they (a) immediately shall disclose to SFC the existence of
all offers, including the identity of the offeror and (b) shall
notify SFC, on a current basis, of the status and terms of any
such proposals or offers and the status of any such discussions
or negotiations.
6.06 Notification.06 Notification.06 Notification.
Sellers shall give prompt notice to SFC of (i) the occurrence or
failure to occur of any event or the discovery of any
information, which occurrence, failure or discovery causes any
representation or warranty contained in Article IV of this
Agreement to be untrue, inaccurate or incomplete after the date
hereof in any material respect and (ii) any material failure of
Sellers to comply with or satisfy any covenant or agreement to be
complied with or satisfied by Sellers hereunder.
6.07 Title Insurance.07 Title Insurance.07 Title
Insurance. SFC shall be entitled to obtain, at its sole cost and
expense, title insurance commitments, issued by a title insurance
company or companies satisfactory to SFC, agreeing to issue to
Archway standard form owner's (or lessee's, as the case may be)
policies of title insurance with respect to all Real Property
(collectively, the "Title Policies"), together with a copy of
each document to which reference is made in such commitments.
6.08 Surveys.08 Surveys.08 Surveys. SFC shall be
entitled to obtain, at its sole cost and expense, surveys of all
Real Property.
6.09 Insider Indebtedness.09 Insider Indebtedness.09
Insider Indebtedness. Sellers shall take all action such that
each account receivable and all other indebtedness of Insiders to
Archway shall have been paid or satisfied.
ARTICLE VIIVIIVII
COVENANTS OF SFC
SFC covenants and agrees with Sellers as follows:
7.01 Regulatory Filings.01 Regulatory Filings.01
Regulatory Filings. As promptly as practicable after the
execution of this Agreement, SFC shall make or cause to be made
all filings and submissions under any laws or regulations
applicable to SFC for the consummation of the transactions
contemplated herein. SFC will coordinate and cooperate with
Sellers in exchanging such information, will not make any such
filing without providing to Sellers a final copy thereof for
their review and consent at least two full business days in
advance of the proposed filing and will provide such reasonable
assistance as Sellers may request in connection with all of the
foregoing.
7.02 Conditions.02 Conditions.02 Conditions. SFC 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 three business days after such date).
7.03 Health Plan Continuation.03 Health Plan
Continuation.03 Health Plan Continuation. From the Closing
Date through the date eighteen (18) months thereafter, SFC agrees
solely for the benefit of Gloria J. Olin, Thomas F. Olin, Jr.,
James P. Baldwin, Eugene H. McKay, Jr., John B. McKay and Eugene
H. McKay, III and their immediate families that all medical,
surgical, hospitalization, dental, vision, or other health care
plans set forth on Schedule 7.03 (which Schedule shall exclude,
among any other mutually agreed plans, the Lincoln National
Executive Medical Reimbursement Policy), shall be maintained or,
at SFC's discretion, plans which in the aggregate have benefits
comparable to the Archway plans (the "Alternate Plans"), in which
case the Alternate Plans will be made available at a cost to each
such Seller which does not exceed the cost such Seller would have
been required to pay if the Seller and his or her family had been
covered under benefits with regard to health care continuation as
set forth in Section 4980B of the Code of the plans in place
immediately prior to the Closing.
7.04 Taxes; 1377(a)(2) Election.04 Taxes; 1377(a)(2)
Election.04 Taxes; 1377(a)(2) Election. (a) Sellers and SFC
agree that SFC shall cause, and Sellers shall consent to, an
election to be made under Sections 1377(a)(2) and/or 1362(e)(3)
of the Code for the purpose of allocating income to the Sellers
as if the taxable year had consisted of two (2) taxable years,
rather than on a pro-rata basis. For the purpose of the
preceding sentence, the first taxable year shall run from January
4, 1998 through the Closing Date, and the second taxable year
shall run from the immediately succeeding day through December
31, 1998; and (b) Sellers shall be responsible for all federal
income taxes which relate to periods prior to the Closing Date.
Notwithstanding any provision to the contrary contained in
Sections 11.01 and 11.02, whether as to time limits or
expirations, Basket Amount limitations, or any limitations on the
maximum amount of any indemnity, whether in the aggregate or
otherwise, any claim or demand for indemnification arising from a
breach of this Section 7.04 may be made at any time by SFC and
shall not be subject to, or included for purposes of calculating
any amounts under, any Basket Amount or any maximum
indemnification amount. PriceWaterhouse Coopers in
Battle Creek Michigan will prepare the short year return for the
short year ending on the Closing Date and will provide K-1's to
the Sellers promptly upon the completion of the short year
return, at the sole cost and expense of the Sellers.
7.05 No Section 338 Election 7.05 No Section 338 Election
7.05 No Section 338 Election. SFC agrees that it shall not make
or permit any other party to make an election under Section
338(a) of the Code with respect to the transactions contemplated
or completed under this Agreement.
7.06 Environmental Reporting 7.06 Environmental Reporting
7.06 Environmental Reporting. SFC agrees that it shall not,
prior to the Closing, without the prior written consent of the
Sellers, submit any environmental site assessment or
environmental summary, report, or information regarding the
environmental condition or status of any of the Real Property to
any state or federal office, agency, or department; provided that
if SFC believes that it is required by law to submit any such
information to any such office or agency or department, SFC shall
notify the Sellers and the Sellers' Designees in advance of such
requirement and permit the Sellers, at their cost and expense and
after providing adequate security to SFC, to challenge the
required submission of such information.
7.07 Employment Covenant 7.07 Employment Covenant 7.07
Employment Covenant. Except as set forth on Schedule 7.07,
neither SFC nor Archway shall employ, after the Closing, any
person who is currently both an Officer of Archway and either a
Seller or a Trustee of a Seller.
7.08 Directors' and Officers' Insurance 7.08 Directors' and
Officers' Insurance 7.08 Directors' and Officers' Insurance. SFC
shall not, and shall not permit Archway to, terminate the current
policy of the directors' and officers' liability insurance
currently maintained by Archway with a term through March 1999.
7.09 1998 Bonus Payments 7.09 1998 Bonus Payments 7.09 1998
Bonus Payments. SFC shall permit Archway to pay immediately
prior to the Closing, accrued bonuses payable to Thomas F. Olin,
Jr., James P. Baldwin, Eugene H. McKay, Jr., Eugene H. McKay, III
and John B. McKay in the amounts payable pursuant to the existing
formula, with the amounts due at September 12, 1998, being set
forth on Schedule 7.09(a). Additionally, SFC shall cause Archway
to pay to John Aldrich and Roy Jasper the amount of their 1998
bonuses in accordance with the terms of the bonus plans in which
they participate (the accrued amount of such bonus through
September 12, 1998 is set forth on Schedule 7.09(b)).
ARTICLE VIIIVIIIVIII
CONDITIONS TO CLOSING
8.01 Conditions to SFC's Obligations.01 Conditions to SFC's
Obligations.01 Conditions to SFC's Obligations. The obligation
of SFC 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 the Sellers and
Archway contained in this Agreement 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 (without taking into account any disclosures by
Sellers of discoveries, events or occurrences arising on or after
the date hereof); provided 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) Archway and the Sellers shall have performed in all
material respects all of the covenants and agreements required to
be performed and complied with by each of them under this
Agreement prior to the Closing;
(c) Sellers shall have obtained, or caused to be obtained,
each consent and approval necessary in order that the
transactions contemplated herein not constitute a breach or
violation of, or result in a right of termination or acceleration
of, or creation of any encumbrance on any of the Archway assets
pursuant to the provisions of, any agreement, arrangement or
undertaking of or affecting Archway or any license, franchise or
permit of or affecting Archway set forth on Schedule 8.01(c) or
if the same would have a Material Adverse Effect on Archway;
(d) This Agreement shall have been duly and validly
authorized by the board of directors of Archway, and Sellers
shall have delivered to SFC evidence, in form satisfactory to
SFC's legal counsel, of such authorization and approval;
(e) All material governmental filings, authorizations and
approvals that are required for the consummation of the
transactions contemplated hereby will have been duly made and
obtained;
(f) There shall not be threatened, instituted or pending
any action or proceeding, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or
seeking to make illegal, or to delay or otherwise directly or
indirectly restrain 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 SFC of all
or a material portion of the business or assets of Archway, or to
cause SFC or any of its subsidiaries or Archway to dispose of or
to hold separately all or a material portion of the business or
assets of SFC and its subsidiaries or Archway, as a result of the
transactions contemplated hereby, (iii) seeking to require direct
or indirect transfer or sale by SFC of any of the Shares, (iv)
seeking to invalidate or render unenforceable any material
provision of this Agreement or any of the other agreements
attached as Exhibits hereto (collectively, the "Related
Agreements"), or (v) otherwise relating to and materially
adversely affecting the transactions contemplated hereby;
(g) 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(f) hereof;
(h) There shall have been no damage, destruction or loss of
or to any property owned or used by Archway, whether or not
covered by insurance, which, in the aggregate, has, or would be
reasonably likely to have, individually or in the aggregate, a
material adverse effect on the business, operations or financial
condition of Archway;
(i) Each account receivable generated by sales to any
Insiders shall have been satisfied (except for the account
receivable described in Schedule 8.01(i));
(j) SFC shall have received from counsel for Sellers a
written opinion, dated as of the Closing Date, addressed to SFC
and satisfactory to SFC's counsel, substantially in the form as
set forth in Exhibit 8.01(j);
(k) On the Closing Date, Sellers shall have delivered to
SFC all of the following:
(i) certificate of Archway dated the Closing Date,
stating that the conditions precedent set forth in
subsections (a) and (b) above have been satisfied;
(ii) copies of the third party and governmental
consents and approvals, if any, referred to in subsections
(c), (d) and (e) above;
(iii) the stock certificates issued to the Sellers,
representing the Shares, duly endorsed for transfer or
accompanied by a duly executed stock power, with requisite
stock transfer stamps, if any, attached;
(iv) the minute books, stock transfer, corporate seal
and other materials related to Archway's administration;
(v) resignations (effective as of the Closing Date)
from all of the officers and directors of Archway;
(vi) a copy of the articles of incorporation of
Archway, certified by the Secretary of State of the State of
Michigan, and a Certificate of Good Standing from the
Secretary of State of the State of Michigan evidencing the
good standing of each of Archway in such jurisdiction;
(vii) a copy of each of (A) the texts of the resolutions
adopted by the board of directors of Archway authorizing the
execution, delivery and performance of this Agreement and
the consummation of all of the transactions contemplated by
this Agreement and (B) the bylaws of Archway as then in
effect; along with certificates executed on behalf of
Archway by its corporate secretary certifying to SFC that
such copies are correct and complete copies of such
resolutions and bylaws, respectively, and that such
resolutions and bylaws were duly adopted and have not been
amended or rescinded;
(viii) incumbency certificates executed on behalf of
Archway, by its corporate secretary, certifying the
signature and office of each officer, executing this
Agreement or any of the Related Agreements;
(ix) an executed copy of each of the Related
Agreements; and
(x) such other certificates, documents and instruments
as SFC reasonably requests related to the transactions
contemplated hereby.
(l) The Title Insurance Commitments and Title Policies
shall be acceptable to SFC. In the case of Owned Property, such
policies shall be standard ALTA Form B-1992 owner's policies in
the full fair market value thereof, insuring good and marketable
title thereto (expressly including all easements and other
appurtenances) with all standard and general exceptions deleted
so as to afford full "extended coverage". In the case of Leased
Property, such policies shall be upon standard ALTA Form B-1992
leasehold owner's policies and in such amounts as such shall be
reasonably acceptable to SFC, insuring good and marketable title
to the leasehold interest, with all standard and general
exceptions deleted so as to afford full "extended coverage". In
either case, all policies shall insure title in full accordance
with the representations and warranties set forth herein and
shall be subject only to such conditions and exceptions as shall
be reasonably acceptable to SFC, and shall include an ALTA
Restriction Endorsement No. 1, ALTA Zoning Endorsement No. 3.1
(including parking), an endorsement certifying that the bills for
the real estate taxes pertaining to the Owned Property and
Improvements do not include taxes pertaining to any other real
estate, an access endorsement, a contiguity endorsement, if
applicable, a creditors' rights endorsement, and such other
property-specific endorsements, if any, as SFC shall reasonably
request. As a condition to SFC's obligation to close the
transaction described in this Agreement, the title commitment(s)
shall be later-dated to cover the Closing and the recording of
the Deed(s), and the title companies shall deliver the Title
Policies to SFC concurrently with the Closing. The cost of the
Title Policy and all related charges, premiums and endorsements,
including all search, continuation and later-date fees shall be
paid by SFC.
(m) The surveys of all Real Property shall be acceptable to
SFC and shall be prepared in accordance with the 1992 Minimum
Standard Detail Requirement for ALTA/ASCM Land Title Surveys
(including Table A items 1-4, 6, 7(a), and 8-13) and pursuant to
the accuracy standards of an Urban Class A Survey, each dated no
more than ninety (90) days prior to the Closing, each containing
a surveyor certificate acceptable to SFC and the title insurance
companies, and each prepared by a registered land surveyor
satisfactory to SFC. Each of the surveys shall be certified to
SFC and its assigns, SFC's designated lender(s), if any, and the
title company issuing the pertinent Title Policy.
(n) Sellers and all officers and directors of Archway shall
have executed mutual releases in the form and substance
satisfactory to SFC.
(o) Each of the Shareholders Agreement (Voting Stock) dated
March 1, 1991 between Archway and Thomas F. Olin and Eugene H.
McKay, Jr. and the Shareholders Agreement (Non-Voting Stock)
dated March 1, 1991, between Archway and Thomas F. Olin and
Eugene H. McKay, Jr. (collectively, the "Shareholder Agreements")
shall have been terminated at and as of the Closing.
(p) The recipients of the Deferred Compensation Liabilities
under Section 10.02 (with the exception of Gloria J. Olin and
Eugene H. McKay, Jr. who have already consented to take cash)
shall have consented to take cash payments in the amounts set
forth in Schedule 10.02 in full satisfaction of any deferred
compensation obligations owing to such individuals.
8.02 Conditions to Sellers' Obligations.02 Conditions to
Sellers' Obligations.02 Conditions to Sellers' Obligations. The
obligations of Sellers to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of
the following conditions on or before the Closing Date:
(a) The representations and warranties of SFC contained in
this Agreement 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) SFC 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) All 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 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,
(i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain 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 any of the Related Agreements, or
(iii) otherwise relating to and materially adversely affecting
the transactions contemplated hereby;
(e) Sellers shall have received from Holleb & Coff a
written opinion, dated as of the Closing Date, addressed to
Sellers and satisfactory to Sellers' counsel, in form and
substance substantially as set forth in Exhibit 8.02(e); and
(f) At or prior to the Closing, SFC shall have delivered to
Sellers (i) a certificate of appropriate officer(s) of SFC dated
as of the Closing Date, stating that to the knowledge of such
officer(s) the conditions precedent set forth in subsections (a)
and (b) above have been satisfied, (ii) an executed copy of each
of the Related Agreements and (iii) incumbency certificates
executed on behalf of SFC by its corporate secretary certifying
the signature and office of each officer executing this Agreement
or any of the Related Agreements.
(g) The Severance Payments and those Deferred Compensation
Payments due prior to Closing shall have been paid prior to
Closing or shall be paid at Closing by SFC.
ARTICLE IXIXIX
TERMINATION
9.01 Termination.01 Termination.01 Termination. This
Agreement may be terminated at any time prior to the Closing:
(a) by the mutual consent of SFC and Sellers'
Designees;
(b) by SFC if there has been a material
misrepresentation, a material breach of warranty or a
material breach of covenant on the part of any Seller or
Archway under this Agreement and such default or
misrepresentation continues for fifteen (15) days after
written notice specifying the default or misrepresentation
from SFC to Sellers' Designees;
(c) by Sellers' Designees if there has been a material
misrepresentation, a material breach of warranty or a
material breach of covenant on the part of SFC under this
Agreement and such default or misrepresentation continues
for fifteen (15) days after written notice specifying the
default or misrepresentation from Sellers' Designees to SFC;
(d) by SFC or Sellers' Designees if there shall be a
final nonappealable order of a federal or state court in
effect preventing consummation of the Stock Purchase or
there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Stock Purchase by any governmental
authority or agency, foreign or domestic, which would make
the consummation of the Stock Purchase illegal and such
action, statute, rule, regulation or order shall have become
final and unappealable;
(e) by SFC if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or
issued or deemed applicable to the Stock Purchase by any
governmental authority or agency that would compel SFC to
dispose of or hold separate all or a portion of the Shares,
or the business or assets of Archway or SFC as a result of
the Stock Purchase;
(f) by SFC or Sellers' Designees if the transactions
contemplated hereby have not been consummated on or before
December 31, 1998, provided that neither will be entitled to
terminate this Agreement pursuant to this Section if such
party's willful breach of this Agreement has prevented the
consummation of the transactions contemplated hereby;
(g) by SFC or Sellers' Designees if any of the
conditions to SFC's or Sellers' obligations to consummate
the Stock Purchase described in Article VIII become
impossible to satisfy;
(h) by SFC if, after the date hereof, there shall have
been a Material Adverse Effect, or if an event shall have
occurred which, so far as reasonably can be foreseen, would
result in a Material Adverse Effect; or
9.02 Final Disclosure Letter.02 Final Disclosure
Letter.02 Final Disclosure Letter. Archway shall have delivered
the final Disclosure Letter to SFC on or prior to October 16,
1998 and after the delivery of the final Disclosure Letter to
SFC, SFC shall have three (3) business days to review such
Disclosure Letter and notify the Sellers' Designees whether such
Disclosure Letter is acceptable. In the event such Disclosure
Letter contains additions or modifications to the original
Disclosure Letter which are unsatisfactory to SFC, SFC and the
Sellers shall negotiate in good faith to resolve any issues
regarding the Disclosure Letter. If following such negotiations,
SFC, based on its reasonable belief, determines in SFC's sole
judgement, that such additions or modifications reflect facts
which are material to Archway, SFC or the transactions
contemplated by this Agreement, SFC shall have the right to
terminate this Agreement at any time prior to the end of the
fifth (5) business day following delivery of the final Disclosure
Letter.
9.03 Effect of Termination.03 Effect of Termination.03
Effect of Termination. In the event of termination of this
Agreement by either SFC on the one hand or Sellers' Designees on
the other hand as provided in Section 9.01, this Agreement shall
become void and there shall be no liability on the part of SFC or
Sellers' Designees, or their respective stockholders, officers or
directors, except (a) Sections 13.01 (press releases and
announcements), 13.02 (expenses) and 13.10 (governing law) hereof
shall survive indefinitely, and (b) the parties shall remain
liable for willful breaches of this Agreement prior to the time
of such termination.
ARTICLE XXX
ADDITIONAL AGREEMENTS
10.01 Severance and Noncompetition Agreements.01 Severance
and Noncompetition Agreements.01 Severance and Noncompetition
Agreements. At the Closing, Thomas Olin, Jr., James P. Baldwin,
Eugene H. McKay, III and John B. McKay shall enter into severance
and noncompetition agreements in the form attached hereto as
Exhibit 10.01 (the "Severance and Noncompetition Agreements").
Pursuant to the terms of these agreements, the parties thereto
shall receive, to the extent not previously received, (i)
aggregate cash payments at or prior to Closing of $3,500,000 (the
"Severance Payments") and (ii) $8,600,000 to be paid pursuant to
the Escrow Agreement (the "Noncompetition Payments") it being
agreed by the parties hereto that the sole recourse for any
liabilities with respect to the Noncompetition Payments shall be
the Security Escrow Agreement. The Severance Payments and
Noncompetition Payments shall be allocated and structured in
accordance with the Severance and Noncompetition Agreements and
the Noncompetition Payments shall be secured by the Security
Escrow Amount within the Escrow Agreement. Such amounts paid
into the Security Escrow Agreement shall be the sole recourse for
any payments required pursuant to the Noncompetition Agreements.
10.02 Deferred Compensation.02 Deferred Compensation.02
Deferred Compensation. Immediately prior to the Closing, SFC
shall permit Archway to fund all deferred compensation
liabilities owing to the current and former Archway employees or
their spouses listed on Schedule 10.02 with a payment as
described below of not more than $7,957,304 (the "Deferred
Compensation Liabilities"). SFC shall offer and Sellers'
Designees shall select on behalf of each individual identified on
Schedule 10.02 a choice of whether to satisfy the Deferred
Compensation Liabilities with respect to such individual through
payment of cash (with the exception of Gloria J. Olin and Eugene
H. McKay, Jr. who have already consented to take cash); provided,
however, that with respect to any person identified on Schedule
10.02 entitled to a payment on account of the Deferred
Compensation Liabilities who does not take cash at Closing, SFC
agrees that such Deferred Compensation Liabilities will remain
obligations of Archway and the Purchase Price will accordingly be
reduced by the net present value of such Deferred Compensation
Liabilities as measured by the cost of individual annuities which
could be purchased by SFC on the Closing Date on reasonable terms
and conditions to match a stream of payments equal to the
Deferred Compensation Liabilities. Any deferred compensation
liabilities of Archway to Thomas F. Olin, Jr., James P. Baldwin,
Eugene H. McKay, III and John B. McKay shall be terminated prior
to or at Closing without compensation of any kind.
10.03 Employment Agreements.03 Employment Agreements.03
Employment Agreements. SFC and Sellers will use their best
efforts to cause Archway to execute and deliver:
(a) an employment agreement in the form attached
hereto as Exhibit 10.03(a) (the "Aldrich/Jasper Employment
Agreements") with each John Aldrich and Roy Jasper.
(b) an employment agreement in a form to be mutually
agreed upon by the parties (the "Clark/Goodman Employment
Agreements") with each of Paul Clark and Terry Goodman; and
(c) an employment agreement in a form to be mutually
agreed upon by the parties (collectively, the "Employment
Agreements") with each of Sue Albrecht, Dwight Bird, Tina
Koski and Donna Pape.
10.04 Personal Property.04 Personal Property.04 Personal
Property. Immediately prior to Closing, Archway will (i)
transfer title to the automobiles listed on Schedule 10.04(a) to
the parties listed on such Schedule, (ii) transfer title to the
office furniture listed on Schedule 10.04(b), to the parties
listed on such Schedule, (iii) transfer the life insurance
policies, with an aggregate cash surrender value of approximately
$5,800,000, listed on Schedule 10.04(c), and (iv) make certain
distributions to Sellers in the nature of those set forth on
Schedule 10.04(d) as are necessary to make all distributions pro
rata (cumulatively for all periods that Archway has made an S
Election) to the Sellers in proportion to their stock of Archway,
such other distributions being subject or the approval of SFC
(such approval not to be unreasonably withheld). The aggregate
book value of the automobiles and furniture distributed will not
exceed $250,000.
10.05 Right of First Refusal.05 Right of First Refusal.05
Right of First Refusal. The execution by each Seller of this
Agreement shall constitute the written waiver by such Seller of
his/her/its rights of first refusal granted pursuant to Archway's
bylaws with respect to the purchase of any other Sellers' capital
stock in connection with the transactions contemplated by this
Agreement. Further, the execution by each Seller and by Archway
of this Agreement shall constitute a written waiver by all
parties to each of the Shareholder Agreements of any rights of
first refusal, options to purchase shares or equity securities,
or other rights or obligations in favor of any of the parties
thereto, including any right to receive notices for any reason,
as may be set forth in either of the Shareholder Agreements, to
the extent that any of the aforesaid rights or obligations may
arise as a result of the transactions contemplated by, or the
execution of, this Agreement.
10.06 Archival Items.06 Archival Items.06 Archival Items.
Each of the personal property items described in Schedule 10.06
shall, from and after the Closing Date, continue to be displayed
on the premises of Archway or SFC or, upon permanent termination
of such display as to any of said items, such undisplayed item
shall promptly be delivered to Sellers' Designees.
10.07 Omnibus Assignment.07 Omnibus Assignment.07 Omnibus
Assignment. At Closing, Sellers will deliver an Omnibus
Assignment of Intellectual Property Rights executed by those
Sellers or other persons designated by SFC on Schedule 10.07
assigning to Archway any intellectual property rights which may
be owned or retained by such Sellers in the Owned Intellectual
Property Rights.
ARTICLE XIXIXI
SURVIVAL; INDEMNIFICATION
11.01 Survival of Representations and Warranties.01
Survival of Representations and Warranties.01 Survival of
Representations and Warranties. Notwithstanding any
investigation made by or on behalf of any of the parties hereto
or the results of any such investigation and notwithstanding the
participation of such party in the Closing, the representations
and warranties of the Sellers or SFC contained in this Agreement
shall survive the Closing until the expiration of the periods
indicated below:
(a) Except with respect to representations and warranties
contained in Sections 4.06 and 4.08, all representations and
warranties will expire March 31, 2000; and
(b) Representations and warranties contained in Sections
4.06 and 4.08 will survive indefinitely.
11.02 Indemnification by the Sellers.02 Indemnification by
the Sellers.02 Indemnification by the Sellers.
(a) Subject to the limitations of Sections 11.01 and
Section 11.02(b), (d), and 11.04(b) each Seller agrees to
indemnify in full SFC and its officers, directors, employees and
agents (collectively, the "SFC Indemnified Parties") and hold
them harmless against any loss, liability, deficiency, damage,
expense or cost (including reasonable legal expenses but not
including a claim for interest by the SFC Indemnified Parties
from the date of such loss, liability, deficiency, damage,
expense or cost) (collectively, "Losses"), which the SFC
Indemnified Parties may suffer, sustain or become subject to, as
a result of (i) any misrepresentation in any of the
representations and warranties of Sellers contained in this
Agreement or in any Exhibits or Schedules to this Agreement, (ii)
any breach of, or failure to perform, any agreement of Archway or
Sellers contained in this Agreement, or (iii) any losses arising
out of or relating to the disputed obligations which gave rise to
the chain space reserve on the July 18, 1998 unaudited balance
sheet (collectively, the "SFC Losses"). Such Losses shall be
reduced by the tax savings, advantages, or benefits which the SFC
Indemnified Parties actually realize through a net reduction in
taxes payable during the tax year in which such Losses are
incurred.
(b) The Sellers shall be liable to the SFC Indemnified
Parties for any SFC Losses (i) only if SFC or another SFC
Indemnified Party delivers to the Sellers' Designees written
notice, setting forth in reasonable detail the identity, nature
and amount of SFC Losses related to such claim or claims on or
before March 31, 2000 except for claims made under Sections 4.06
and 4.08, and (ii) only if the aggregate amount of all SFC Losses
exceeds $100,000 (the "Basket Amount"), in which case Archway and
Sellers shall be obligated to indemnify the SFC Indemnified
Parties only for the excess of the aggregate amount of all such
SFC Losses over the Basket Amount; provided, however, that any
Losses with respect to matters covered under Sections 4.06, 4.08
or 11.02(a)(iii) shall not be subject to the Basket Amount.
(c) The Sellers hereby designate Eugene H. McKay, III and
James P. Baldwin or their successor (the "Sellers' Designees") to
monitor the defense of any Losses or Claim (as defined in Section
11.04(a)) against the Sellers and to otherwise act on behalf of
the Sellers in respect thereto, in respect of Section 2.04(d) and
in respect of Section 9.01 and their actions shall constitute the
actions and decisions of the Sellers and shall bind all such
Sellers. The Sellers hereby indemnify the Sellers' Designees and
hold them harmless from any Losses arising out of or in
connection with their position as Sellers' Designees, including
claims arising out of any action taken or omitted to be taken by
the Sellers' Designees.
(d) The obligations of the Sellers to indemnify the SFC
Indemnified Parties hereunder shall not be joint or several, but
shall be proportional based upon Seller's Percentage Share (as
defined below). Except for SFC Losses arising out of a breach or
misrepresentation under Sections 4.06 or 4.08, the obligation of
each Seller to indemnify the SFC Indemnified Parties under this
Agreement shall be limited to the lesser of (i) the amount of the
funds in the Indemnification Escrow Account and the Reserve
Escrow Amount with respect to claims under Section 11.02(a)(iii)
or (ii) the amount of the SFC Loss for which the SFC Indemnified
Parties are entitled to be indemnified hereunder, multiplied by a
fraction (the ?Seller?s Percentage Share") of which the numerator
is the number of Shares transferred to SFC at the Closing by such
Seller and the denominator is the sum of all Shares transferred
to SFC at the Closing by all of the Sellers. With respect to any
SFC Losses arising out of Section 4.06, the obligation of each
Seller to indemnify the SFC Indemnified Parties shall be limited
to the amount of the SFC Loss which arises as a result of such
Seller's breach or misrepresentation. In no case shall any claim
made pursuant to Sections 4.06 or 4.08 exceed seventy-seven
percent (77%) of the payment received by any such Seller in
exchange for Shares. (d) The obligations of the Sellers to
indemnify the SFC Indemnified Parties hereunder shall not be
joint or several, but shall be proportional based upon Seller's
Percentage Share (as defined below). Except for SFC Losses
arising out of a breach or misrepresentation under Sections 4.06
or 4.08, the obligation of each Seller to indemnify the SFC
Indemnified Parties under this Agreement shall be limited to the
lesser of (i) the amount of the funds in the Indemnification
Escrow Account and the Reserve Escrow Amount with respect to
claims under Section 11.02(a)(iii) or (ii) the amount of the SFC
Loss for which the SFC Indemnified Parties are entitled to be
indemnified hereunder, multiplied by a fraction (the ?Seller?s
Percentage Share") of which the numerator is the number of Shares
transferred to SFC at the Closing by such Seller and the
denominator is the sum of all Shares transferred to SFC at the
Closing by all of the Sellers. With respect to any SFC Losses
arising out of Section 4.06, the obligation of each Seller to
indemnify the SFC Indemnified Parties shall be limited to the
amount of the SFC Loss which arises as a result of such Seller's
breach or misrepresentation. In no case shall any claim made
pursuant to Sections 4.06 or 4.08 exceed seventy-seven percent
(77%) of the payment received by any such Seller in exchange for
Shares. (d) The obligations of the Sellers to indemnify the
SFC Indemnified Parties hereunder shall not be joint or several,
but shall be proportional based upon Seller's Percentage Share
(as defined below). Except for SFC Losses arising out of a
breach or misrepresentation under Sections 4.06 or 4.08, the
obligation of each Seller to indemnify the SFC Indemnified
Parties under this Agreement shall be limited to the lesser of
(i) the amount of the funds in the Indemnification Escrow Account
and the Reserve Escrow Amount with respect to claims under
Section 11.02(a)(iii) or (ii) the amount of the SFC Loss for
which the SFC Indemnified Parties are entitled to be indemnified
hereunder, multiplied by a fraction (the ?Seller?s Percentage
Share") of which the numerator is the number of Shares
transferred to SFC at the Closing by such Seller and the
denominator is the sum of all Shares transferred to SFC at the
Closing by all of the Sellers. With respect to any SFC Losses
arising out of Section 4.06, the obligation of each Seller to
indemnify the SFC Indemnified Parties shall be limited to the
amount of the SFC Loss which arises as a result of such Seller's
breach or misrepresentation. In no case shall any claim made
pursuant to Sections 4.06 or 4.08 exceed seventy-seven percent
(77%) of the payment received by any such Seller in exchange for
Shares.
11.03 Indemnification by SFC.
(a) Subject to the limitations of Section 11.03(b), SFC
agrees to indemnify in full the Sellers, and their respective
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 SFC contained in this Agreement or (ii) any breach
of, or failure to perform, any agreement of SFC contained in this
Agreement or in any Exhibits or Schedules to this Agreement
(collectively, "Seller Losses"). Such Losses shall be reduced by
the tax savings, advantages, or benefits which the Seller
Indemnified Parties actually received through a net reduction in
taxes payable during the tax year in which such Losses are
incurred.
(b) SFC shall be liable to the Seller Indemnified Parties
for any Seller Losses (i) only if Archway or another Seller
Indemnified Party delivers to SFC written notice, setting forth
in reasonable detail the identity, nature and amount of Seller
Losses related to such claim or claims and (ii) only if the
aggregate amount of all Seller Losses exceeds the Basket Amount,
in which case SFC 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.
11.04 Method of Asserting Claims; Payment of Claims.04
Method of Asserting Claims; Payment of Claims.04 Method of
Asserting Claims; Payment of Claims. As used herein, an
"Indemnified Party" shall refer to a "SFC Indemnified Party" or a
"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) (i) In the event any Indemnified Party should have a
controversy or claim that arises out of or relates to this
Agreement against any Indemnifying Party (for the purposes of
this subparagraph (a), referred to as 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 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 in accordance with
the procedures set forth in Section 11.04(b). If the
Indemnifying Party has timely disputed its liability with respect
to such Claim, the duly authorized representatives of each of the
Indemnifying Party and the Notifying Party will proceed in good
faith to consult and negotiate a resolution of such dispute. If
such representatives have not been able to agree upon a
resolution of the dispute within 30 days after the date the
Indemnifying Party gave such notice of dispute, the matter shall
be promptly reviewed jointly by SFC's President and the Sellers?
Designees. In the event the dispute is not resolved by such
joint review within 60 days after the date the Indemnifying Party
gave such notice of dispute, such dispute shall be resolved in
Chicago, Illinois by final and binding arbitration in accordance
with the procedures described in Article XIII.
(ii) Notwithstanding the procedure set forth above in
paragraph 11.04(a)(i), if any such indemnity obligation hereunder
shall arise out of any claim from a third party ("Third Party
Claim"), the Notifying Party shall deliver a notice of such Third
Party Claim with reasonable promptness to the Indemnifying Party.
Upon such notice, the Indemnifying Party shall be entitled to
assume the defense of any such Third Party Claim or any
litigation resulting from such Third Party Claim, provided such
claim is solely for monetary damages and does not seek specific
performance or other injunctive relief affecting the operations
of Archway and provided further that the Indemnifying Party
acknowledges, in writing, that if such claim is adversely
determined the Indemnifying Party is responsible for all
liabilities arising out of such claim to the extent provided in
this Agreement. Failure by the Indemnifying Party to notify the
Notifying Party of its election to defend any such Third Party
Claim or action within fourteen (14) days after notice thereof
shall have been given to the Notifying Party, shall be deemed a
waiver by the Indemnifying Party of its right to defend such
Third Party Claim or action. If the Indemnifying Party assumes
the defense of a Third Party Claim, the Indemnifying Party shall
take all steps reasonably necessary in the defense or settlement
of such claim or litigation resulting therefrom including the
retaining of counsel reasonably satisfactory to the Notifying
Party, and shall hold the Notifying Party harmless from and
against any and all claims caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment in
connection with such Third Party Claim or litigation resulting
therefrom. Without the prior written consent of the Notifying
Party, the Indemnifying Party shall not, in the defense of any
such Third Party Claim or litigation, consent to the entry of any
judgement or enter into any settlement which (a) does not include
as an unconditional term thereof the giving by the claimant or
the plaintiff to the Notifying Party a release, in form
reasonably satisfactory to the Notifying Party, from all
liability in respect of such Third Party Claim or litigation and
(b) involves the payment to the claimant of any amounts in excess
of the amounts currently remaining at such time in the
Indemnification Escrow Account. Notwithstanding the foregoing,
the Notifying Party shall be entitled to participate in the
defense of such Third Party Claim or litigation at its own
expense. Each party will cooperate with the other in resolving or
attempting to resolve any Third Party Claim and will permit the
other party access to all books and records which might be
necessary or useful for such purpose during normal business hours
and at the place where the same are normally kept with full right
to make copies thereof or extracts therefrom at the cost of the
copying party.
(iii) Notwithstanding the procedures set forth above
in Sections 11.04(a)(i) and 11.04(a)(ii), SFC shall have
exclusive control over all actions taken and expenses incurred in
connection with any environmental matters pursuant to which SFC
is asserting rights of indemnification hereunder ("Environmental
Matters"). To the extent that any such Environmental Matter,
together with all previous claims, does not exceed the
Indemnification Escrow Amount, SFC shall take only the minimum
action necessary to comply with applicable law and to maintain
the business operations as they were previously conducted without
unreasonable interference. In responding to any such
Environmental Matter, SFC agrees to notify Sellers of such
Environmental Matter within a reasonable period of time under the
circumstances. SFC further agrees to provide Sellers with copies
of all data and reports generated by SFC or its consultants or
contractors or any other person during the course of any
investigation or remediation of any Environmental Matter, to
provide periodic status reports to Sellers concerning such
Environmental Matter and to permit Sellers a reasonable
opportunity to comment on such Environmental Matter; provided,
however, that SFC may not settle or resolve any Environmental
Matter without the consent of Sellers (such consent not to be
unreasonably withheld); provided, further that SFC may settle any
Environmental Matter without the consent of Sellers to the extent
that such Environmental Matter requires prompt action in order to
comply with any Environmental Laws or for the protection of
public health or other emergency matter. SFC shall not be
subject to any of the limitations set forth in this Section
11.04(a)(iii) to the extent of Sellers' common law fraud or
intentional breach, as contemplated by Section 11.04(c), or to
the extent that the Environmental Matter exceeds the
Indemnification Escrow Amount.
(b) The payment by the Sellers of any SFC Losses as
determined in accordance with Section 11.04(a) shall be effected
solely as an offset against the amount of any then outstanding
Indemnification Escrow Amount so long as it is held by the Escrow
Agent and the payment by Sellers of any SFC Losses as determined
in accordance with Section 11.02(a)(iii) shall be effected solely
as an offset against the amount of any then outstanding Reserve
Escrow Amount so long as it is held by the Escrow Agent; provided
that in the event the SFC Losses arose with respect to matters
covered under Sections 4.06, and 4.08 then as long as the Escrow
Agent continues to hold any of the Indemnification Escrow Amount,
SFC, at its option, may effect an offset against the
Indemnification Escrow Amount. In the event the offset results
in a reduction of the Indemnification Escrow Amount such that the
Indemnification Escrow Amount is insufficient to fully satisfy
SFC for SFC Losses unrelated to Sections 4.06 or 4.08 then SFC
shall be entitled to have a Claim for indemnification pursuant to
Section 11.04(a) against the Sellers for such SFC Losses provided
that such claim shall not exceed the amount which SFC could have
recovered hereunder if SFC had not used the Indemnification
Escrow Amount to cover SFC Losses arising out of Sections 4.06
and 4.08 and further provided that any such claim shall be
subject to the terms and limits set forth in Sections 11.02(b)
and (d).
(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. Notwithstanding the
foregoing, nothing herein shall prevent any of the Indemnified
Parties from bringing an action based upon allegations of common
law fraud or other intentional breach of an obligation of or with
respect to either party in connection with this Agreement. In
the event such action is brought, the prevailing party's
attorneys' fees and costs shall be paid by the nonprevailing
party.
(d) Any indemnification payable under this Article XI shall
be, to the extent permitted by law, an adjustment to the Purchase
Price. Any Investment Income (as defined in the Escrow
Agreement) associated with such indemnifiable Loss will be paid
to the SFC Indemnified Parties.
ARTICLE XIIXIIXII
DISPUTE RESOLUTION
12.01 Arbitration.01 Arbitration.01 Arbitration. For
purposes of this Section, the SFC Indemnified Parties shall be
deemed to be one party, and the Seller Indemnified Parties shall
be deemed to be one party.
(a) In General. Except as otherwise expressly set forth
herein, any controversy or claim arising out of or relating to
this Agreement, or breach thereof, that is not resolved under
Section 11.04(b), shall be settled by arbitration administered by
the American Arbitration Association under its Commercial
Arbitration Rules in effect on the date first written above (the
"Arbitration Rules"). The place of arbitration shall be Chicago,
Illinois, U.S.A. The arbitration shall be conducted in the
English language by a sole arbitrator appointed in accordance
with the Arbitration Rules.
(b) Attorney's Fees. All reasonable attorney's fees and
costs incurred by the prevailing party in any arbitration
pursuant to this Agreement, and the cost of such arbitration,
shall be paid by the other party to the arbitration within thirty
(30) days after receipt of written demand therefor from the
prevailing party following the rendition of the written decision
of the arbitrator, or as otherwise ordered by the arbitrator. On
the application of such prevailing party before or after the
initial decision of the arbitrator, and proof of its attorneys'
fees and costs, the arbitrator shall order the other party to the
arbitration to make the payments provided for in the preceding
sentence; provided, however, that if neither party prevails
entirely, the arbitrator may, in his or her sole discretion,
assess any part of such attorneys' fees and costs against a
specified party.
(c) Binding Character. Any decision rendered by any
arbitrator pursuant to this Section shall be final and binding on
the parties thereto, and judgment thereon may be entered by any
court of competent jurisdiction. The parties specifically agree
that any arbitrator shall be empowered to award and order
equitable or injunctive relief with respect to matters brought
before it.
(d) Confidentiality. Neither party, nor the arbitrator
shall disclose the existence, content or results of any
arbitration hereunder without the prior written consent of both
parties.
(e) Exclusivity. Except as provided in Sections 11.04(c)
and 12.01(f), arbitration shall be the exclusive method available
for resolution of controversies and claims described in this
Section, and the parties stipulate that the provisions hereof
shall be a complete defense to any suit, action or proceeding in
any court or before any administrator or arbitrator with respect
to any such controversy or claim. The provisions of this Section
shall survive the termination or expiration of this Agreement.
(f) Certain other Remedies. Notwithstanding the terms of
this Section or any provision to the contrary in the Arbitration
Rules, at any time before and after arbitration is initiated
pursuant to the Arbitration Rules, the parties shall be free to
apply to any court of competent jurisdiction for interim or
conservatory measures (including temporary conservatory
injunctions). The parties acknowledge and agree that any such
action by a party shall not be deemed to be a breach of such
party's obligation to arbitrate all disputes under this Section
or infringe upon the powers of any arbitrator. The parties
hereby consent to the non-exclusive jurisdiction of the U.S.
District Court for the Northern District of Illinois.
ARTICLE XIIIXIIIXIII
MISCELLANEOUS
13.01 Press Releases and Announcements.01 Press Releases
and Announcements.01 Press Releases and Announcements. No 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 either party without prior written
consent of the other party hereto (which in the case of SFC shall
be Sellers' Designees) which consent shall not be unreasonably
withheld or delayed; provided, however, that nothing contained
herein shall limit the right of SFC to make a legally required
filing or communication, provided that, to the extent possible,
SFC shall consult with Sellers' Designees before making such
filing or communication.
13.02 Expenses.02 Expenses.02 Expenses. Except as
otherwise expressly provided for herein, Sellers and SFC will
each pay all of his/her/its own expenses (including attorneys',
financial advisors' and accountants' fees) in connection with the
negotiation of this Agreement, the performance of their
respective obligations under this Agreement and the consummation
of the transactions contemplated hereby (whether consummated or
not). SFC shall pay the applicable filing fee under the HSR Act.
Each party will indemnify and hold harmless the other against the
claims of any brokers or finders in respect of the Stock
Purchase.
13.03 Further Assurances.03 Further Assurances.03 Further
Assurances. Sellers agree that, on and after the Closing Date,
they 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, transferring all permits and
environmental permits to SFC that are transferable.
13.04 Amendment and Waiver.04 Amendment and Waiver.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.
13.05 Notices.05 Notices.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 days after being mailed, if mailed by first
class mail, return receipt requested, or when receipt is
acknowledged, if sent by facsimile or other electronic
transmission device. Notices, demands and communications to SFC
and Sellers will, unless another address is specified in writing
to the other party, be sent to the address indicated below:
Notices to SFC: with a copy to:
Specialty Foods Corporation Holleb & Coff
520 Lake Cook Road 55 East Monroe Street
Suite 550 Suite 4100
Deerfield, Illinois 60015 Chicago, Illinois 60603
Attn: Robert L. Fishbune Attn: Harold W. Nations
Chief Financial Officer Facsimile: (312) 807-3900
Facsimile: (847) 405-5310
Notices to Sellers Designees: with a copy to:
James P. Baldwin Varnum, Riddering, Schmidt &
164 West Hamilton Lane Howlett LLP
Battle Creek, Michigan 49015 Bridgewater Place
Facsimile: (616) 963-6901 P.O. Box 352
and Grand Rapids, Michigan 49501-0352
Eugene H. McKay, III Attn: Daniel C. Molhoek
498 E. Timberwood Drive Facsimile: (616) 336-7000
Hasting, Michigan 49058
Facsimile: (616) 945-0309
13.06 Binding Effect; Assignment.06 Binding Effect;
Assignment.06 Binding Effect; 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. This Agreement and the rights, interests
or obligations hereunder may be assigned by SFC to an affiliate
of SFC without the prior written consent of Archway or the
Sellers; provided, however, SFC shall remain primarily liable for
such obligations under this Agreement and under all other
agreements executed or delivered in connection with the
transactions contemplated by this Agreement.
13.07 Severability.07 Severability.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.
13.08 Complete Agreement; No Third Party Beneficiaries.08
Complete Agreement; No Third Party Beneficiaries.08 Complete
Agreement; No Third Party Beneficiaries. This Agreement and the
agreements in the Exhibits hereto 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; provided, that the confidentiality agreement between SFC
and Archway, dated August 3, 1998, shall remain in force and
effect without modification thereof. Nothing in this Agreement,
expressed or implied, is intended to confer upon any person,
other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason
of this Agreement.
13.09 Counterparts.09 Counterparts.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. Any such counterpart may be delivered by
facsimile. Any party delivering a counterpart by facsimile shall
deliver an original copy within 48 hours, provided that the
failure to so deliver an original shall not effect the
enforceability of this agreement against such party.
13.10 Governing Law.10 Governing Law.10 Governing Law.
The internal law, without regard for conflicts of laws
principles, of the State of Michigan will govern all questions
concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this
Agreement.
[Signatures on next pages]
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
SPECIALTY FOODS CORPORATION
By /s/ Lawrence S. Benjamin
Lawrence S. Benjamin
President and Chief Executive
Officer
ARCHWAY COOKIES, INC.
By /s/ Eugene H. McKay, III
Eugene H. McKay, III
Co-President and Chief
Executive Officer
By /s/ Thomas F. Olin, Jr
Thomas F. Olin, Jr.
Co-President and Chief
Executive Officer
SELLERS
SHAREHOLDERS VOTING SHARES NON-VOTING SHARES
Living Trust of Eugene H. McKay III
By /s/ Eugene H. McKay III 770
Eugene H. McKay III, Trustee
Living Trust of John B. McKay
By /s/ John B. McKay 770
John B. McKay, Trustee
Qualified Terminable Interest
Property Trust, a Separate Trust
Established Under the Living Trust
of Thomas F. Olin
By /s/ Gloria J. Olin
Gloria J. Olin, Co-Trustee 788
By /s/ Chris T. Christ
Chris T. Christ, Co-Trustee
Living Trust of Susan Olin Baldwin
By /s/ Susan Olin Baldwin 188
Susan Olin Baldwin, Trustee
Living Trust of Deborah L. Nemesi
By /s/ Deborah L. Nemesi 188
Deborah L. Nemesi, Trustee
Living Trust of Thomas F. Olin, Jr.
By /s/ Thomas F. Olin, Jr., 188
Thomas F. Olin, Jr., Trustee
Living Trust of Rebeccah A. Cunningham
By /s/ Rebeccah A. Cunningham 188
Rebeccah A. Cunningham, Trustee
Living Trust of Eugene H. McKay, Jr.
By /s/ Eugene H. McKay, Jr., 4,523
Eugene H. McKay, Jr., Trustee
Grantor Retained Annuity Trust I
of Eugene H. McKay, Jr.
By /s/ Eugene H. McKay III 2,481
Eugene H. McKay III, Co-Trustee
By /s/ John B. McKay
John B. McKay, Co-Trustee
Grantor Retained Annuity Trust II
of Eugene H. McKay, Jr.
By /s/ Eugene H. McKay III 2,000
Eugene H. McKay III, Co-Trustee
By /s/ John B. McKay
John B. McKay, Co-Trustee
Grantor Retained Annuity Trust III
of Eugene H. McKay, Jr.
By /s/ Eugene H. McKay, Jr 2,000
Eugene H. McKay, Jr., Trustee
Living Trust of Eugene H. McKay, Jr. and
Janice L. McKay
By /s/ Eugene H. McKay, Jr., 1,000
Eugene H. McKay, Jr., Co-Trustee
By /s/ Janice L. McKay
Janice L. McKay, Co-Trustee
Living Trust of Eugene H. McKay III
By /s/ Eugene H. McKay, III, 262
Eugene H. McKay, III, Trustee
Living Trust of John B. McKay
By /s/ John B. McKay 362
John B. McKay, Trustee
/s/ Heather M. (McKay) Reevs 1,132
Heather M. (McKay) Reevs
Non-revocable Trust for the Benefit of the
Children of Eugene H. McKay III and
Melissa S. McKay
By /s/ Harry Vaughn 100
Harry Vaughn, Co-Trustee
By /s/ Edna Vaughn
Edna Vaughn, Co-Trustee
Gloria J. Olin Grantor Retained Income
Trust II
By /s/ Thomas F. Olin, Jr. 1,740
Thomas F. Olin, Jr., Co-Trustee
By /s/ Susan Olin Baldwin
Susan Olin Baldwin, Co-Trustee
Grantor Retained Annuity Trust I
of Gloria J. Olin
By /s/ Thomas F. Olin, Jr. 3,396
Thomas F. Olin, Jr., Co-Trustee
By /s/ Susan Olin Baldwin
Susan Olin Baldwin, Co-Trustee
By /s/ Deborah L. Nemesi
Deborah L. Nemesi, Co-Trustee
By /s/ Rebeccah A. Cunningham
Rebeccah A. Cunningham, Co-Trustee
Grantor Retained Annuity Trust II of
Gloria J. Olin
By /s/ Thomas F. Olin, Jr., 3,396
Thomas F. Olin, Jr., Co-Trustee
By /s/ Susan Olin Baldwin
Susan Olin Baldwin, Co-Trustee
By /s/ Deborah L. Nemesi
Deborah L. Nemesi, Co-Trustee
By /s/ Rebeccah A. Cunningham
Rebeccah A. Cunningham, Co-Trustee
Living Trust of Susan Olin Baldwin
By /s/ Susan Olin Baldwin 1,332
Susan Olin Baldwin, Trustee
Living Trust Deborah L. Nemesi
By /s/ Deborah L. Nemesi 1,332
Deborah L. Nemesi, Trustee
Living Trust of Thomas F. Olin, Jr.
By /s/ Thomas F. Olin, Jr. 1,192
Thomas F. Olin, Jr., Trustee
Living Trust of Rebeccah A. Cunningham
By /s/ Rebeccah A. Cunningham 1,332
Rebeccah A. Cunningham, Trustee
Non-Revocable Trust for the Benefit of the
Children of Thomas F. Olin, Jr. and
Tammy Ann Olin
By /s/ Deborah L. Nemesi 140
Deborah L. Nemesi, Trustee
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