SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1999 Commission File Number 33-68956
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Specialty Foods Corporation
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(Exact name of registrant as specified in its charter)
State of Delaware 75-2488181
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(State or other jurisdiction (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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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
----
The number of shares outstanding of the Registrant's common stock
as of May 14, 1999 was 100 shares of common stock.
PAGE <1>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
INDEX
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PART I - FINANCIAL INFORMATION Page No.
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ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
as of March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations for
the three months ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 1998 5
Notes to Financial Statements 6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-11
PART II - OTHER INFORMATION 12
SIGNATURE 12
PAGE <2>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
1999 1998
---- ----
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 16,992 $ 5,880
Accounts receivable, net 20,915 19,327
Inventories 25,307 23,366
Net assets of discontinued operations 87,839 86,632
Other current assets 8,764 7,234
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Total current assets 159,817 142,439
Property, plant, and equipment, net 233,001 234,944
Intangible assets, net 110,281 113,438
Other noncurrent assets 30,171 39,338
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Total assets $ 533,270 $ 530,159
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt
(Note 5) $ 268,144 $ 3,450
Accounts payable 44,662 37,779
Accrued expenses 75,777 80,741
--------- ----------
Total current liabilities 388,583 121,970
Long-term debt 577,548 820,309
Due to Specialty Foods Acquisition Corporation 8,243 7,499
Other noncurrent liabilities 30,506 31,355
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Total liabilities 1,004,880 981,133
Stockholders' equity (471,610) (450,974)
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Total liabilities and
stockholders' equity $ 533,270 $ 530,159
========= ==========
See accompanying notes to condensed consolidated financial statements.
PAGE <3>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share data)
Three months ended March 31,
---------------------------
1999 1998
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Net sales $ 200,265 $ 170,924
Cost of sales 89,444 76,319
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Gross profit 110,821 94,605
Operating expenses:
Selling, distribution, general and
administrative 108,537 94,364
Amortization of intangibles 1,017 212
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Total operating expenses 109,554 94,576
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Operating profit 1,267 29
Other expenses:
Interest expense, net 23,493 19,630
Other expense, net 679 801
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Loss before income taxes (22,905) (20,402)
Provision for income taxes 130 29
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Loss from continuing operations (23,035) (20,431)
Discontinued operations:
Net income 3,810 2,362
Loss on disposal, net (412) -
-------- --------
3,398 2,362
-------- --------
Net loss $ (19,637) $ (18,069)
======== ========
See accompanying notes to condensed consolidated financial statements.
PAGE <4>
SPECIALTY FOODS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended March 31,
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1999 1998
---- ----
Cash flows from operating activities:
Loss from continuing operations $ (23,035) $ (20,431)
Adjustments to reconcile to net cash
from continuing operating activities
Depreciation and amortization 9,331 5,653
Debt issuance cost amortization 2,762 1,316
Changes in operating assets and liabilities, net
of effects from businesses acquired or sold (3,780) (17,699)
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Net cash used by continuing operating activites (14,722) (31,161)
Net cash provided (used) by discontinued
operations 2,191 (2,391)
---------- ----------
Net cash used by operating activites (12,531) (33,552)
Cash flows from investing activities:
Capital expenditures (3,658) (5,977)
Proceeds from the sale of business 3,800 -
Other 2,406 (764)
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Net cash provided (used) by
investing activities 2,548 (6,741)
Cash flows from financing activities:
Increase in revolving credit 22,801 -
Refinancing costs (586) (9,243)
Other (1,120) (712)
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Net cash provided (used) by
financing activities 21,095 (9,955)
Increase (decrease) in cash and cash equivalents 11,112 (50,248)
Cash - beginning of period 5,880 234,266
---------- ----------
Cash - end of period $ 16,992 $ 184,018
========== ==========
See accompanying notes to condensed consolidated financial statements.
PAGE <5>
NOTE 1 - Interim Financial Information
In the opinion of management, the accompanying unaudited
interim condensed financial information of Specialty
Foods Corporation (SFC) and its subsidiaries
(collectively, the Company) contains all adjustments,
consisting only of those of a recurring nature, necessary
to present fairly the Company's financial position and
results of operations. All significant intercompany
accounts, transactions and profits have been eliminated.
These financial statements are for interim periods and do
not include all information normally provided in annual
financial statements and should be read in conjunction
with the financial statements of the Company for the year
ended December 31, 1998 included in the annual report
filed on Form 10-K and any reports on Form 8-K filed
during the quarter. The results of operations for
interim periods are not necessarily indicative of the
results that may be expected for the full year.
Certain amounts in the 1998 financial statements have
been reclassified to conform to the manner in which the
1999 financial statements have been presented.
NOTE 2 - Inventories
The components of inventories are as follows:
March 31, December 31,
1999 1998
------ ------
(In thousands)
Raw materials and packaging $ 12,519 $ 12,244
Work in progress 588 264
Finished goods 9,282 8,593
Other 3,934 3,209
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26,323 24,310
Less obsolescence and other
allowances (1,016) (944)
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$ 25,307 $ 23,366
======== ========
Inventories are stated at the lower of cost or market.
Cost is determined principally by the first-in first-out
("FIFO") method.
PAGE <6>
NOTE 3 - Sale of H&M Food Systems, Inc. (H&M)
In March 1999, SFC signed a definitive agreement to sell
its subsidiary, H&M, for $132 million. H&M is a producer
of custom formulated, pre-cooked meat products that are
sold primarily to national restaurant chains and prepared-
food producers. The transaction closed on April 12,
1999. Accordingly, SFC will report the net gain on the
sale, expected to approximate $29 million, during the
second quarter of 1999. The Company realized net cash
proceeds of $110 million after it repurchased H&M's financed
receivables, established a $5 million one-year escrow
and paid transaction costs.
H&M is classified as a discontinued operation in the
accompanying financial statements. The net assets of H&M
are reported as a single line item in SFC's Balance
Sheets for March 31, 1999 and December 31, 1998, and the
results of H&M's operation are reported in the
discontinued operations section of the accompanying
Consolidated Statements of Operations.
NOTE 4 - Acquisition
On May 13, 1999, SFC announced that its wholly-owned
operating company, Metz Baking Company, signed a
definitive agreement to acquire Grocers Baking Company.
Grocers Baking Company, which had approximately $60
million of sales during 1998, is a privately-held
manufacturer and distributor of retail bread, buns, and
sweet goods based in Western Michigan. The transaction,
which is subject to certain regulatory approvals, is
expected to close during the second quarter of 1999.
NOTE 5 - Debt
On May 12, 1999, the Company commenced new private
exchange offers ("New Offers") for its publicly held debt
following the termination of its previous exchange offers
on April 30, 1999. Under the New Offers, holders of
existing debt of SFC and its Parent Company, Specialty
Foods Acquisition Corporation ("SFAC") are being offered
the opportunity to exchange their existing debt for the
debt of three new intermediate holding companies as
described below:
- Holders of SFAC 13% Senior Secured Discount Debentures are
being offered the opportunity to exchange their existing
securities for new 13% Senior Secured Discount Debentures ("New
Senior Debentures") of one of the new intermediate holding
companies. The New Senior Debentures include provisions that
will extend the initial cash pay interest date from February 2000
to December 2004, extend the maturity date from August 2005 to
June 2009, and provide the Company with the option to redeem the
New Senior Debentures at prescribed discounts of accreted value.
Consenting holders of the New Senior Debentures will also receive
up to an aggregate of ten percent of the equity interest of one
of the new intermediate holding companies. Additionally, holders
PAGE <7>
of SFAC's 11% Senior Subordinated Discount Debentures are being
offered the opportunity to exchange their existing securities for
new 11% Senior Subordinated Discount Debentures ("New 11%
Debentures") of one of the new intermediate holding companies.
The New 11% Debentures include provisions that
will extend the initial cash pay interest date from August 2001
to December 2005 and extend the maturity date from August 2006 to
December 2009.
- Holders of SFC Senior Subordinated Notes and Senior Notes
are being offered the opportunity to exchange their existing
securities for new notes ("New Notes") of one of the new
intermediate holding companies. The New Notes will have
substantially the same terms and covenants as the existing SFC
notes and will be structurally senior to the New Senior
Debentures. Senior Subordinated Note holders who exchange for
the New Notes will receive a consent fee of $35 per $1,000 note
and an increased coupon rate of 200 basis points of which 100
basis points will be paid in cash and 100 basis points payable in
kind. Senior Note holders who exchange for the New Notes will
receive a consent fee of $10 per $1,000 note and an increased
coupon rate of 100 basis points. In addition, consenting holders
of the New Notes will receive up to an aggregate of $28.2 million
of New 11% Debentures of one of the new intermediate holding
companies.
Concurrent with the above described offers, the Company
is seeking the consent for the Corporate organization
changes from its Revolving Credit, Term Loan, and
Accounts Receivable Facility lenders ("Senior Secured
Debt Lenders"). Additionally, the Company is seeking the
consent of its Senior Secured Debt Lenders to extend the
maturity of the facilities from January 2000 to January
2001. As of March 31, 1999, $ 264.7 million of the Revolving
Credit and Term Loan Facilities were reclassed to a
current liability based on the existing maturity date.
Consummation of the exchange offers and the extension of the Senior
Secured Debt facilities would result in a reclassification of
the amount outstanding under the Revolving Credit and Term Loan
Facilities back to a non-current liability.
The Company's management believes that completion of an
exchange offer and the extension of its senior secured
indebtedness are essential elements in continuing to
operate the Company's business as currently conducted.
PAGE <8>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Seasonality
The Company's businesses are moderately seasonal with lower
sales, operating profit, and cash flows generally occurring in
the first quarter of the year. This seasonality is due primarily
to higher bread and cookie sales in the summer and fall months,
as well as the holiday season.
Results of Operations
COMPARISON OF FIRST QUARTER 1999 TO FIRST QUARTER 1998
Consolidated net sales from continuing operations increased 17.2%
to $200.3 million in 1999 compared to $170.9 million in 1998.
The increase in net sales was primarily due to the inclusion of
Archway's sales in 1999, price increases taken at Metz and higher
cafe sales at Boudin.
The Company's gross profit margin remained constant at 55.4% in
1999 and 1998. Higher pricing, favorable product mix, and
moderately favorable commodities were offset by inflationary cost
increases and higher depreciation.
Selling, distribution, and general and administrative ("SDG&A)
expenses increased $14.1 million in 1999 to $108.5 million
primarily due to the inclusion of acquisitions completed in 1998.
However, as a percentage of sales, SDG&A expenses decreased one
percentage point to 54.2% in 1999 due to cost synergies resulting
from the 1998 acquisitions.
Interest expense, net increased $3.9 million in 1999 to $23.5
million from $19.6 million in 1998. The increase is primarily
due to higher interest expense on senior secured debt and lower
interest income in 1999.
Other expense, net in 1999 and 1998, consists principally of
discount expense on the Company's Accounts Receivable Facility.
As a result of the above factors, net loss from continuing
operations increased to $23.0 million in 1999 compared to $20.4
million in 1998.
The Company reports minimal state income tax and no federal
income tax due to its net operating loss position for tax
purposes.
Because of the highly leveraged status of the Company, earnings
before interest, taxes, depreciation, and amortization ("EBITDA")
is an important performance measure used by the Company and its
stakeholders. The Company believes that EBITDA provides
additional information for determining its ability to meet future
debt service requirements. However, EBITDA is not indicative of operating
PAGE <9>
income or cash flow from operations as determined under generally
accepted accounting principles. The Company's EBITDA from
continuing operations for the three months ended March 31, 1999
and 1998 is calculated as follows:
Three months ended March 31,
---------------------------
1999 1998
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(In thousands)
Operating profit (loss) $ 1,267 $ 29
Depreciation and amortization 9,331 5,653
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$ 10,598 $ 5,682
======== =======
Liquidity and Capital Resources
Net cash used in operating activities during the three months
ended March 31, 1999 totaled $12.5 million compared to $33.6
million for the same period in 1998. The decrease in net cash
used in operating activities in 1999 was primarily attributable
to improved cash flows from both continuing and discontinued
operating activities and decreased working capital requirements.
Net cash provided by investing activities totaled $2.5 million in
1999 and was principally due to the collection of a note
receivable from a previously divested business, offset by capital
expenditures. In 1998, net cash used by investing activities of
$6.7 million was primarily attributable to capital expenditures.
Net cash provided by financing activities amounted to $21.1
million in 1999 and was principally due to additional borrowings
under the Company's Revolving Credit Facility. In 1998, cash
used by financing activities of $10.0 million was principally due
to payments of debt refinancing costs.
Based upon the above, the net increase in cash in 1999 was $11.1
million as compared to a net decrease in cash of $50.2 million in 1998.
As of March 31, 1999, the Company had a cash balance of $17.0
million and had $97.8 million borrowings under its $122.8 million
Revolving Credit Facility. Outstanding letters of credit of
$10.6 million as of March 31, 1999 reduce available funds under
the facility. After the end of the quarter, the Company's
liquidity was significantly enhanced by the $110 million of net
cash proceeds received upon the closing of the H&M sale on April
12, 1999. Management believes that available funds and proceeds
from the sale of H&M should be adequate to fund the Company's
1999 operations, capital expenditures and acquisitions. However,
there can be no assurances that available funds will be adequate
to meet such needs.
The Revolving Credit Facility and Term Loan Facility mature in
January 2000. The Accounts Receivable Facility begins to
amortize December 15, 1999 and matures in January 2000.
Additionally, SFAC's 13% Senior Secured Discount Debentures are
currently scheduled to become cash pay interest obligations in
February 2000 and SFAC's ability to meet its cash debt service
obligations is dependent upon cash dividends from SFC.
Currently, due to covenant restrictions, SFC is unable to make
such dividends. By the year 2000, the Company's ability to meet
its cash debt service requirements will be
dependent upon refinancing a significant portion of its
indebtedness. Currently, the Company is pursuing amended
exchange offers, more fully described in Note 5 to the Condensed
Consolidated Financial Statements. The proposed exchange offers
would extend by four years the cash pay interest date of SFAC's
13% Senior Secured Discount Debentures. The Company is also
pursuing a one-year extension of the term of SFC's Revolving
PAGE <10>
Credit Facility, Term Loan Facility and Accounts Receivable
Facility. Management believes that completion of an exchange
offer and the extension of its senior secured indebtedness are
essential elements in continuing to operate the Company's
business as currently conducted. To date, the Company has
received support from over 50% of each bondholder class for the
revised exchange offers. Documents detailing the terms of the
revised exchange offers were distributed to bondholders on May
12, 1999. The offers will require consents by more than 50% of
each bondholder class to become effective. There can be no
assurance, however, that the Company will be successful in
completing the proposed exchange offers or extending the term of
its senior secured indebtedness.
Cautionary Statement for Purposes of the "Safe Harbor" Provision
of the Private Securities Litigation Reform Act of 1995
This Form 10-Q contains statements that constitute forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. When used in this Form 10-Q, the
words "anticipates", "intends", "plans", "believes", "estimates",
"expects", and similar expressions intended to identify forward-
looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which
may cause actual results, performance or achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-
looking statements. Such factors include, but are not limited
to: the Company's highly leveraged capital structure, its
substantial principal repayment obligations, weather, economic
and market conditions, cost and availability of raw materials,
competitive activities or other business conditions. Further,
any forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation
to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is
made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management
cannot assess the impact of each such factor on the Company's
actual business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
PAGE <11>
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) See Exhibit Index filed herewith.
(b) On March 10, 1999, the Company filed a Report on Form 8-K
announcing the signing of a definitive agreement to sell its
subsidiary, H&M Food Systems Company.
Item 8: Submission of Matters to a Vote of Security Holders
None.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SPECIALTY FOODS CORPORATION
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(Registrant)
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By:
Date: May 14, 1999 /s/ Robert L. Fishbune
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Robert L. Fishbune
Vice President and Chief
Financial Officer
EXHIBIT INDEX
Exhibit
Number Description of Document
- ----- ----------------------
10.86* Stock Purchase Agreement, dated as of March 9, 1999,
between SFC and IBP, inc
10.87* Executive Employment Agreement, dated as of May 1,
1999, by and among SFAC, SFC, Metz, Mother's, Archway,
and Boudin and David E. Schreibman.
10.88* Amended and Restated Retention Bonus Agreement, dated as of
May 1, 1999, by and between SFC and David E. Schreibman.
10.89* Amended and Restated Divestiture Award Agreement, dated
as of May 1, 1999, by and between Metz and David E.
Schreibman.
10.90* Amended and Restated Divestiture Award Agreement, dated
as of May 1, 1999, by and between Mother's and David E.
Schreibman.
PAGE <12>
10.91* Amended and Restated Divestiture Award Agreement, dated
as of May 1, 1999, by and between Boudin and David E.
Schreibman.
10.92* Participation Award Agreement, dated as of May 1, 1999,
between Mother's and Patrick J. O'Dea
27* Financial Data Schedule
*Filed Herewith.
EXHIBIT 10.86
STOCK PURCHASE AGREEMENT
BETWEEN
SPECIALTY FOODS CORPORATION
AND
IBP, inc.
Dated as of March 9, 1999
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
Section 1.1. Definitions 1
ARTICLE II PURCHASE AND SALE
Section 2.1. Purchase and Sale of the Shares 8
ARTICLE III PURCHASE PRICE
Section 3.1. Purchase Price and Payment 8
Section 3.2. Purchase Price Adjustment 8
ARTICLE IV CLOSING
Section 4.1. Closing Date 10
Section 4.2. Payment on the Closing Date 10
Section 4.3. Buyer's Additional Closing Date Deliveries 10
Section 4.4. Seller's Closing Date Deliveries 10
Section 4.5. Additional Closing Matters and Deliveries 12
ARTICLE VREPRESENTATIONS AND WARRANTIES OF SELLER
Section 5.1. Incorporation of Seller 12
Section 5.2. Incorporation; Capital Structure of the
Companies; Power and Authority 12
Section 5.3. Subsidiaries and Investments 13
Section 5.4. Authority of Seller; Conflicts 13
Section 5.5. Financial Statements 14
Section 5.6. Operations Since Financial Statement Date 14
Section 5.7. Taxes 14
Section 5.8. Governmental Permits 15
Section 5.9. Real Property 15
Section 5.10. Personal Property Leases 16
Section 5.11. Intellectual Property 16
Section 5.12. Title to Property 16
Section 5.13. No Violation, Litigation or Regulatory
Action 17
Section 5.14. Contracts 17
Section 5.15. Status of Contracts 18
Section 5.16. No Brokers 18
Section 5.17. ERISA and Employee Benefits 18
Section 5.18. Environmental Matters 20
Section 5.19. Employee Relations and Agreements 20
Section 5.20. Insurance 21
Section 5.21. Assets Used in the Business 21
Section 5.22. Capacity of the Business 21
Section 5.23. Transactions with Affiliates 21
ARTICLE VIREPRESENTATIONS AND WARRANTIES OF BUYER
Section 6.1. Incorporation of Buyer 22
Section 6.2. Authority of Buyer; Conflicts 22
Section 6.3. No Violation, Litigation or Regulatory
Action 23
ARTICLE VIIACTION PRIOR TO THE CLOSING DATE
Section 7.1. Access to Information 23
Section 7.2. Notifications 24
Section 7.3. Consents of Third Parties; Governmental
Approvals 24
Section 7.4. Operations Prior to the Closing Date 24
Section 7.5. Elimination of Inter-Company and Affiliate
Accounts 26
Section 7.6. Cash Management 26
Section 7.7. Property Transfers 26
Section 7.8. Antitrust Law Compliance 26
Section 7.9. Guaranties 26
ARTICLE VIII ADDITIONAL AGREEMENTS
Section 8.1. Insurance 27
Section 8.2. Tax Matters 27
Section 8.3. Employee Matters 32
Section 8.4. Covenant Not to Compete 32
Section 8.5. Release of Other Encumbrances 33
Section 8.6. Lease of Fort Worth Office Space 33
ARTICLE IXCONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Section 9.1. No Misrepresentation or Breach of Covenants
and Warranties 33
Section 9.2. No Restraint 34
Section 9.3. Necessary Approvals 34
Section 9.4. Accounts Receivable Purchase Agreement 34
Section 9.5. Release of Encumbrances 34
ARTICLE XCONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Section 10.1. No Misrepresentation or Breach of Covenants
and Warranties 35
Section 10.2. No Restraint 35
Section 10.3. Necessary Governmental Approvals 35
Section 10.4. Accounts Receivable Purchase Agreement 35
ARTICLE XI INDEMNIFICATION
Section 11.1. Indemnification by Seller 36
Section 11.2. Indemnification by Buyer 37
Section 11.3. Notice of Claims 37
Section 11.4. Third Person Claims 38
Section 11.5. Additional Limitations 40
ARTICLE XII TERMINATION
Section 12.1. Termination 41
Section 12.2. Notice of Termination 42
Section 12.3. Effect of Termination 42
Section 12.4. Employees 42
ARTICLE XIII GENERAL PROVISIONS
Section 13.1. Survival 42
Section 13.2. Confidential Nature of Information 43
Section 13.3. No Public Announcement 43
Section 13.4. Notices 43
Section 13.5. Successors and Assigns 44
Section 13.6. Access to Records after Closing 45
Section 13.7. Entire Agreement; Amendments 45
Section 13.8. Interpretation 46
Section 13.9. Waivers 47
Section 13.10. Expenses 47
Section 13.11. Partial Invalidity 47
Section 13.12. Execution in Counterparts 47
Section 13.13. Further Assurances 47
SECTION 13.14. GOVERNING LAW 48
Section 13.15. Disclaimer of Warranties 48
Section 13.16. Submission to Jurisdiction 48
List of Schedules
Schedules
I Excluded Real Property
3.2(b) Inventory Valuation Methods and Procedure
5.4 No Conflicts (Seller)
5.5 Financial Statements
5.6 Operations Since Financial Statement Date of the
Companies
5.7 Taxes
5.8 Governmental Permit Proceedings
5.9 Real Property
5.10 Personal Property Leases
5.11(a) Intellectual Property
5.11(b) Software
5.11(c) Right, Title and Interest in Intellectual Property
5.11(d) Infringement of Intellectual Property
5.11(e) Challenge to Intellectual Property Rights
5.11(f) Third Party Infringement
5.11(g) Superdice
5.12 Title to Property
5.13 Violation, Litigation or Regulatory Action of the
Companies
5.14 Contracts
5.15 Status of Contracts
5.17 ERISA and Employee Benefits
5.18 Environmental Matters
5.19 Employee Matters
5.21 Assets Used in the Business
5.23 Transactions with Affiliates
6.2 No Conflicts (Buyer)
6.3 Violation, Litigation or Regulatory Action of Buyer
7.4 Operations Prior to Closing Date
7.9 Guaranties
8.3 Special Payments
8.5 Other Encumbrances
9.3 Necessary Approvals (Seller)
11.1 Aggregate Limits
List of Exhibits
Exhibits
A Accounts Receivable Purchase Agreement
B Assignment and Assumption Agreement
C Escrow Agreement
D Legal Opinion of Counsel to Seller
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of March 9, 1999
between Specialty Foods Corporation, a Delaware corporation
("Seller"), and IBP, inc., a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, Seller is the owner of all the outstanding
shares of capital stock of HMFS Holdings, Inc., a Delaware
corporation ("Holdco"), and Holdco is the owner of all of the
outstanding shares of capital stock of H&M Food Systems Company,
Inc., a Delaware corporation ("Opco" and, together with Holdco,
the "Companies");
WHEREAS, Opco manufactures pre-cooked, customized
specialty meats and prepared foods for foodservice and food
manufacturer customers;
WHEREAS, Seller desires to sell to Buyer, and Buyer
desires to purchase from Seller, all of the capital stock of
Holdco, on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual cove
nants and agreements hereinafter set forth, it is hereby agreed
between Seller and Buyer as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. In this Agreement, the
following terms have the meanings specified or referred to in
this Section 1.1 and shall be equally applicable to both the
singular and plural forms. Any agreement referred to below shall
mean such agreement as amended, supplemented and modified from
time to time to the extent permitted by the applicable provisions
thereof and by this Agreement.
"Accounts Receivable Closing" has the meaning specified
in Section 1.04 of the Accounts Receivable Purchase Agreement.
"Accounts Receivable Purchase Agreement" means that
certain agreement in the form attached hereto as Exhibit A.
"Accounts Receivable Purchase Price" has the meaning
specified in Section 1.03(a) of the Accounts Receivable Purchase
Agreement.
"Affiliate" means, with respect to any Person, any
other Person that directly or indirectly controls, is controlled
by or is under common control with such Person.
"Assignment and Assumption Agreement" means an
assignment and assumption agreement between Opco and Seller
substantially in the form attached hereto as Exhibit B.
"Balance Sheet" means the audited consolidated balance
sheet of the Companies at December 31, 1998 included in Schedule
5.5.
"Business" means Opco's business of manufacturing pre-
cooked, customized specialty meats and prepared foods as
conducted on the date hereof at the Owned Real Property and the
Leased Real Property.
"Business Agreements" has the meaning specified in
Section 5.15.
"Buyer" has the meaning specified in the first
paragraph of this Agreement.
"Buyer Ancillary Agreements" means all agreements,
instruments and documents being or to be executed and delivered
by Buyer under this Agreement or in connection herewith,
including the Accounts Receivable Purchase Agreement.
"Buyer Group Member" means (i) Buyer and its
Affiliates, (ii) directors, officers, employees, agents,
attorneys and consultants of Buyer and its Affiliates and (iii)
the successors and assigns of the foregoing.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et
seq., any amendments thereto, any successor statutes, and any
regulations promulgated thereunder.
"Claim Notice" has the meaning specified in
Section 11.3(a).
"Closing" means the closing of the transfer of the
Shares from Seller to Buyer in exchange for the Purchase Price.
"Closing Date" has the meaning specified in
Section 4.1.
"Closing NOL Carryovers" has the meaning specified in
Section 5.7(d).
"Closing Statement" has the meaning specified in
Section 3.2(b).
"Code" means the Internal Revenue Code of 1986, as
amended.
"Companies" has the meaning specified in the first
recital of this Agreement.
"Confidentiality Agreement" means the Confidentiality
Agreement dated January 18, 1999 between Buyer and Seller.
"Copyrights" means United States and foreign registered
or unregistered copyrights, and pending applications to register
the same.
"Court Order" means any ruling, judgment, order, award
or decree of any foreign, federal, state, local or other court,
tribunal or Governmental Body and any award in any arbitration
proceeding.
"Encumbrance" means any lien, claim, charge, license,
right to use, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in
title or other restrictions.
"Environmental Laws" means any federal, state or local
law or regulation (a) relating to the management, control, and
reporting of pollutants, contaminants, hazardous wastes, solid
wastes, hazardous materials, hazardous substances, and petroleum
or petroleum-related substances in the environment (including,
without limitation, ambient air, surface water, groundwater, or
land) and within above- and below-ground structures and
facilities, (b) providing definitions of solid or hazardous waste
or hazardous or toxic substances or materials, including (without
limiting the generality of the foregoing) asbestos, petroleum
(including, without limitation, oil, used oil, waste oil,
gasoline, diesel and petroleum based fuels), petroleum products
and by-products, petroleum wastes, petroleum contaminated soils,
any substance, material or waste which is regulated as
"hazardous"or "toxic," (or under any similar designation under
federal, state or local law) any material, substance or waste
defined as a "hazardous waste" pursuant to Section 1004 of the
Resource Conservation and Recovery Act (42 U.S.C. 6901, et
seq.) ("RCRA"), any material, substance or waste defined as a
"hazardous substance" pursuant to Section 101 of CERCLA, or any
material, substance or waste defined as a "regulated substance"
pursuant to Subchapter IX of the solid Waste Disposal Act (42
U.S.C. 6991, et seq.) (collectively "Hazardous Substances")
and, (c) otherwise relating to emissions, discharges, releases
or threatened releases of pollutants or Hazardous Substances into
the environment, or otherwise regulating or imposing standards
with respect to the storage, handling, transport or disposal of
Hazardous Substances.
"Escrow Agreement" means an escrow agreement among
Buyer, Seller and LaSalle National Bank, as escrow agent (the
"Escrow Agent") substantially in the form attached hereto as
Exhibit C; subject to revisions and modifications made at the
request of the Escrow Agent.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Excluded Assets" means property owned by Opco located
in the City of Fort Worth, Tarrant County, State of Texas
described in Schedule I and all fixtures (but excluding any
personal property) owned by Opco and situated on, or located at,
such real property, which will be transferred to Seller pursuant
to the Assignment and Assumption Agreement.
"Excluded Liabilities" means all liabilities and
obligations pertaining to the Excluded Assets (excluding all
liabilities and obligations arising out of or relating to the
operation or conduct of the Business at any time on, at or
utilizing the Excluded Assets, but including all liabilities and
obligations arising out of or relating to environmental
conditions that relate to the real property comprising the
Excluded Assets), which will be assumed by Seller pursuant to the
Assignment and Assumption Agreement.
"Excluded Taxes" has the meaning specified in Section
8.2(a)(i).
"Expenses" means any and all reasonable expenses
incurred in connection with investigating, defending or asserting
any claim, action, suit or proceeding incident to any matter
indemnified against hereunder (including court filing fees, court
costs, arbitration fees or costs, witness fees and reasonable
fees and disbursements of legal counsel, investigators, expert
witnesses, accountants and other professionals).
"Financial Statement Date" means December 31, 1998.
"GAAP" means United States generally accepted
accounting principles, consistently applied by the Companies, in
effect at the date of the financial statement to which it refers.
"Governmental Body" means any foreign, federal, state,
local or other governmental authority or regulatory body.
"Governmental Permits" has the meaning specified in
Section 5.8.
"Guaranties" has the meaning specified in Section 7.9.
"Holdco" has the meaning specified in the first recital
to this Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning specified in
Section 11.3(a).
"Indemnitor" has the meaning specified in
Section 11.3(a).
"Independent Accounting Firm" has the meaning specified
in Section 3.2(d).
"Intellectual Property" means Copyrights, Patent
Rights, Trademarks and Trade Secrets.
"Intercompany Accounts" has the meaning specified in
Section 7.5.
"Knowledge of Seller" means, as to a particular matter,
the actual knowledge of Bob Fishbune, David Schreibman, Bill Day,
Mike Nittolo, Jeffrey Bledsoe, Art Wolf, John Southerland, John
Peters and Luke Rainboldt and shall include knowledge of facts
that any such person would have discovered after due inquiry.
"Leased Real Property" has the meaning specified in
Section 5.9.
"Losses" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines,
penalties, damages, deficiencies or other charges, but with
respect to any Buyer Group Member or any Seller Group Member
shall not under any circumstances include any special, exemplary,
punitive or consequential damages (including loss of profit or
revenues) suffered or incurred by such Buyer Group Member or
Seller Group Member; provided, however, that the exclusion of
special damages shall not be interpreted to include actual out-of-
pocket damages.
"Material Adverse Effect" means a material adverse
effect on the Business, results of operations or financial
condition of the Companies taken as a whole, but shall exclude
(a) any change or effect relating or due to general economic
conditions or industry-wide conditions, or (b) any change or
effect resulting from the announcement by Seller of its intention
to sell the Companies or relating to the identity of Buyer.
"Minimum NOL Amount" has the meaning specified in
Section 5.7(d).
"Opco" has the meaning specified in the first recital
to this Agreement.
"Owned Real Property" has the meaning specified in
Section 5.9.
"Patent Rights" means United States and foreign
patents, patent applications, continuations, continuations-in-
part, divisions or reissues.
"Pension Plan" means any pension plan, as defined in
Section 3(2) of ERISA.
"Permitted Encumbrances" means (a) liens for Taxes and
other governmental charges and assessments which are not yet due
and payable, (b) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens
arising in the ordinary course of business or arising in
connection with ongoing capital expenditure projects at the Owned
Real Property in accordance with the Companies' current business
plan for sums not yet due and payable, (c) liens disclosed in the
financial statements included in Schedule 5.5 and (d) other
Encumbrances or imperfections of title relating to an asset or
property which do not materially detract from the value of such
asset or property, and (e) all exceptions to title listed in
Schedule B (other than exceptions listed in numbers 2 through 8
of Schedule B of each policy and 9(h) and 9(i) of the Title
Commitment relating to the Lampassas property) reflected on the
TLTA Title Commitments previously delivered to Buyer with an
effective date of January 12, 1999 for the Lampassas property and
December 31, 1998 for the North Richland Hills property.
"Person" means any individual, corporation, partner
ship, limited liability company, joint venture, association,
joint-stock company, trust, unincorporated organization or
Governmental Body.
"Post-Closing Adjustment" has the meaning specified in
Section 3.2(a).
"Post-Closing Adjustment Calculation" has the meaning
specified in Section 3.2(b).
"Purchase Price" has the meaning specified in Sec
tion 3.1(a).
"Purchased Accounts Receivable" shall have the meaning
specified in Section 1.02(a) of the Accounts Receivable Purchase
Agreement.
"Requirements of Law" means any duty or obligation
imposed by or under any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted,
adopted, issued or promulgated by any Governmental Body.
"Security Documents" shall mean (i) that certain Term
Loan Agreement, dated as of March 16, 1998, among Seller, various
financial institutions party thereto, DLJ Capital Funding, Inc.,
as syndication agent and collateral agent, ABN Amro Bank, N.V.,
as administrative agent, and Summit Bank, as documentation agent
(the "Term Loan Agreement"), (ii) that certain Revolving Credit
Agreement, dated as of March 16, 1998, among Seller, Opco,
certain other subsidiaries of Seller, various financial
institutions party thereto, DLJ Capital Funding, Inc., as
syndication agent and collateral agent, ABN Amro Bank, N.V., as
administrative agent, and Summit Bank, as documentation agent
(the "Revolving Credit Agreement"), (iii) that certain Amended
and Restated Accounts Receivable Sale Agreement, dated as of
November 16, 1994, among SFFC, the Seller and certain
subsidiaries of the Seller (including Opco) (the "Accounts
Receivable Facility") and (iv) the collateral documents and
agreements entered into in connection with the foregoing Term
Loan Agreement, Revolving Credit Agreement and Accounts
Receivable Facility.
"Seller" has the meaning specified in the first
paragraph of this Agreement.
"Seller Ancillary Agreements" means all agreements,
instruments and documents being or to be executed and delivered
by Seller under this Agreement or in connection herewith,
including the Accounts Receivable Purchase Agreement.
"Seller Group Member" means (i) Seller and its
Affiliates, (ii) directors, officers, employees, agents,
attorneys and consultants of Seller and its Affiliates and (iii)
the successors and assigns of the foregoing.
"Seller Parent" means Specialty Foods Acquisition
Corporation, a Delaware corporation.
"Seller Tax Group" means the "affiliated group" (as
defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) that
includes Seller.
"SFFC" means Specialty Foods Finance Corporation, a
Delaware corporation.
"Shares" has the meaning specified in Section 2.1.
"Software" means computer software programs and
software systems, including, without limitation, all databases,
compilations, tool sets, compilers, higher level "proprietary"
languages, related documentation and materials, whether in source
code, object code or human readable form.
"Special Payments" has the meaning specified in
Section 8.3(b).
"Straddle Period" means any taxable year or period
beginning before and ending after the Closing Date.
"Tax" means any federal, state, local or foreign
income, alternative or add-on minimum, gross receipts, property,
sales, use, transfer, gains, license, excise, franchise,
employment, payroll, withholding, ad valorem or value-added tax,
or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed
by any Governmental Body.
"Tax Package" has the meaning specified in Section
8.2(b)(iii).
"Tax Return" means any return, report or similar
statement required to be filed with respect to any Tax (including
any attached schedules), including any information return, claim
for refund, amended return or declaration of estimated Tax.
"Tax Sharing Agreement" shall mean any written or
unwritten agreement or arrangement for the allocation or payment
of Tax liabilities or payment for Tax benefits with respect to a
consolidated, combined or unitary Tax Return which Tax Return
includes the Companies.
"Third Party Claim" has the meaning specified in
Section 11.4(a).
"TLTA Title Commitments" means the Commitments for
Title Insurance issued by Stewart Title Guaranty Company with
respect to the Owned Real Property (with an effective date of
January 12, 1999 for the Lampassas property and December 31, 1998
for the North Richland Hills property), true and correct copies
of which have previously been delivered to Buyer.
"Trademarks" means registered United States, state and
foreign trademarks, service marks and trade names, and pending
applications to register the foregoing.
"Trade Secrets" means confidential ideas, trade
secrets, know-how, concepts, methods, processes, inventions,
formulae, reports, data, customer lists, mailing lists, business
plans, or other proprietary information that provides the owner
with a competitive advantage.
"Welfare Plan" means any welfare plan, as defined in
Section 3(1) of ERISA.
"Working Capital" means the Total Current Assets of the
Companies, on a consolidated basis, less the Total Current
Liabilities of the Companies, on a consolidated basis determined
in accordance with GAAP consistently applied by the Companies.
Total Current Assets shall consist of (i) Cash, (ii) Trade
Accounts Receivable, net of applicable reserves (including,
without limitation, such Trade Accounts Receivable that have been
conveyed to SFFC by Opco pursuant to the Accounts Receivable
Facility), (iii) Current Inventories and (iv) Other Current
Assets but specifically excluding current Tax assets. Total
Current Liabilities shall (x) consist of (i) Accounts Payable,
(ii) Accrued Expenses and Other Current Liabilities and (iii)
Current portion of Capitalized Leases and (y) include those
payments listed under Retention Bonus A, Retention Bonus B and
Deferred Bonus on Attachment 1 to Schedule 5.19 and (z) exclude
those payments listed under Change of Control Severance on
Attachment 1 to Schedule 5.19.
ARTICLE II
PURCHASE AND SALE
Section 2.1. Purchase and Sale of the Shares. Upon
the terms and subject to the conditions of this Agreement, at
Closing, Seller shall sell, transfer, assign, convey and deliver
to Buyer, and Buyer shall purchase and accept from Seller, all of
the issued and outstanding shares of capital stock of Holdco
(collectively, the "Shares").
ARTICLE III
PURCHASE PRICE
Section 3.1. Purchase Price and Payment. Subject to
adjustment in accordance with Section 3.2, the purchase price for
the Shares (the "Purchase Price") shall be an amount equal to
$132,000,000, decreased dollar for dollar by the Accounts
Receivable Purchase Price paid to SFFC at the Accounts Receivable
Closing under Section 1.03(a) of the Accounts Receivable Purchase
Agreement.
Section 3.2. Purchase Price Adjustment. (a) Seller
and Buyer agree that the Purchase Price shall be adjusted
following the Closing (the "Post-Closing Adjustment") as follows:
(i) the Purchase Price shall be decreased dollar for
dollar by the amount, if any, by which Working Capital set
forth on the Closing Statement is less than $17,500,000; and
(ii) the Purchase Price shall be (x) increased dollar
for dollar by the amount, if any, by which the Accounts
Receivable Purchase Price for the Purchased Accounts
Receivable is decreased after the Closing pursuant to
Section 1.03(b) of the Accounts Receivable Purchase
Agreement, or (y) decreased dollar for dollar by the amount,
if any, by which the Accounts Receivable Purchase Price for
the Purchased Accounts Receivable is increased after the
Closing pursuant to Section 1.03(b) of the Accounts
Receivable Purchase Agreement.
(b) A statement of the Working Capital at the end of
business on the Closing Date (the "Closing Statement") shall be
prepared by Buyer and furnished to Seller within sixty (60) days
after the Closing and shall include a calculation of the amount
of the Post-Closing Adjustment, if any, required pursuant to the
provisions of Section 3.2(a) all determined in accordance with
GAAP consistently applied by the Companies (the "Post-Closing
Adjustment Calculation"). In connection with the preparation of
the Closing Statement, the parties shall jointly take a complete
physical count of the Inventories of the Business in accordance
with the terms of the policies and procedures set forth in
Schedule 3.2(b).
(c) Seller and its independent accountants, KPMG Peat
Marwick LLP, shall have the right to review the books and records
and supporting work papers of Buyer for the purpose of verifying
the Closing Statement and the Post-Closing Adjustment
Calculation. Seller shall have a period of thirty (30) days
after receipt of the Closing Statement and the Post-Closing
Adjustment Calculation to present in writing to Buyer any
objections thereto, setting forth the specific item on the
Closing Statement to which each such objection relates and the
specific basis for each such objection (the "Written
Objections"). The Closing Statement and the Post-Closing
Adjustment Calculation shall be deemed to be acceptable to
Seller, and shall become final and binding on the parties, except
to the extent that Seller shall have made a specific written
objection thereto within such thirty (30) day period. If Seller
shall raise any such objection within such thirty (30) day
period, then Buyer and Seller shall attempt in good faith to
resolve any dispute concerning the item(s) subject to such
objection. Upon failure to resolve any such dispute within
thirty (30) days after the date on which such objection is
delivered, at the request of either party, the same shall be
submitted to Ernst & Young LLP, certified public accountants, or,
if such firm declines to act in such capacity or at the time of
such dispute has a significant ongoing relationship with either
Seller or Buyer or their respective Affiliates, to such other
nationally recognized firm of independent public accountants,
then having no significant ongoing relationship with any such
Person, as shall be mutually acceptable to Seller and Buyer;
provided, however, that if Seller and Buyer shall fail to agree
on mutually acceptable independent public accountants within ten
(10) days after Ernst & Young LLP has declined to act in such
capacity, then such dispute shall be resolved by a nationally
recognized "Big Five" firm of independent public accountants
designated by the American Arbitration Association. Ernst &
Young LLP, or such other accounting firm, as the case may be, is
herein referred to as the "Independent Accounting Firm". The
Independent Accounting Firm shall be instructed to use its best
efforts to render a decision as to all items in dispute within
thirty (30) days of submission, and the parties agree to
cooperate with each other and each other's authorized
representatives and with the Independent Accounting Firm in order
that any and all items in dispute shall be resolved as soon as
practicable. The decision shall be based solely upon the
Post-Closing Adjustment Calculation, the Written Objections,
supporting work papers and any written position papers submitted
by the parties within five (5) days of submission of the dispute
to the Independent Accounting Firm. The determination of the
Independent Accounting Firm concerning any item in dispute shall
be final and binding on the parties without further right of
appeal. The fees and expenses of the Independent Accounting Firm
incurred in the resolution of such dispute shall be borne by the
parties in proportion to their relative success, as determined by
the Independent Accounting Firm, in connection with the final
disposition of the disputed items. Within ten (10) days after the
Post-Closing Adjustment is finally determined as hereinabove
provided, Buyer, in the case of an adjustment increasing the
Purchase Price, or Seller, in the case of an adjustment
decreasing the Purchase Price, shall pay to the other the amount
of the required Post-Closing Adjustment in accordance with
Section 3.2; provided that Buyer, in the case of an adjustment
decreasing the Purchase Price, shall have the right (but not the
obligation) to obtain the amount of the required Post-Closing
Adjustment by proper claim under the Escrow Agreement.
ARTICLE IV
CLOSING
Section 4.1. Closing Date. The Closing shall be
consummated on March 29, 1999, or as soon thereafter as
practicable, but in no event later than the first Monday after
the conditions set forth in Articles IX and X have been satisfied
or waived; provided that in the event the transactions
contemplated hereby receive "early termination" of the waiting
period under the HSR Act the closing shall be consummated no
later than the first Monday that is at least the third business
day after the conditions set forth in Articles IX and X have been
satisfied or waived, at the offices of Sidley & Austin, Chicago,
Illinois, or at such other place as shall be agreed upon by Buyer
and Seller. The date on which the Closing is actually held is
referred to herein as the "Closing Date."
Section 4.2. Payment on the Closing Date. Subject to
fulfillment or waiver of the conditions set forth in Article IX,
at Closing (i) Buyer shall pay Seller an amount equal to the
Purchase Price, less $5,000,000, by wire transfer of immediately
available funds to the account or accounts specified by Seller in
a written notice delivered to Buyer and (ii) Buyer shall make a
$5,000,000 escrow deposit under the Escrow Agreement by wire
transfer of immediately available funds to the account specified
in the Escrow Agreement.
Section 4.3. Buyer's Additional Closing Date
Deliveries. Subject to fulfillment or waiver of the conditions
set forth in Article IX, at Closing Buyer shall deliver to Seller
all of the following:
(a) Certificate of the secretary or an assistant
secretary of Buyer, dated the Closing Date, in form and
substance reasonably satisfactory to Seller, as to (i)
the resolutions of the board of directors of Buyer
authorizing the execution and performance of this
Agreement, any Buyer Ancillary Agreement and the
transactions contemplated hereby and thereby, and (ii)
incumbency and signatures of the officers of Buyer
executing this Agreement and any Buyer Ancillary
Agreement;
(b) The certificate contemplated by Section 10.1,
duly executed by a duly authorized officer of Buyer;
and
(c) If not previously delivered to Seller, all
other documents, certificates, instruments and writings
required pursuant hereto to be delivered by or on
behalf of Buyer at or before Closing.
Section 4.4. Seller's Closing Date Deliveries.
Subject to fulfillment or waiver of the conditions set forth in
Article X, at Closing Seller shall deliver to Buyer all of the
following:
(a) Certificate of the secretary or an assistant
secretary of Seller, dated the Closing Date, in form
and substance reasonably satisfactory to Buyer, as to
(i) the Certificate of Incorporation of Seller and the
lack of amendments thereto, (ii) the By-laws of Seller,
(iii) the resolutions of the board of directors of
Seller authorizing the execution and performance of
this Agreement, any Seller Ancillary Agreement and the
transactions contemplated hereby and thereby and (iv)
incumbency and signatures of the officers of Seller
executing this Agreement and any Seller Ancillary
Agreement;
(b) The certificates representing all of the
Shares, duly endorsed in blank or accompanied by duly
executed stock powers;
(c) The certificate contemplated by Section 9.1,
duly executed by a duly authorized officer of Seller;
(d) The written resignations of the officers
designated by Buyer at least three business days prior
to Closing and all directors of each of the Companies;
(e) The stock book, stock ledger, minute books,
corporate seal and other corporate books and records of
each of the Companies;
(f) Executed documents or other instruments in
form reasonably satisfactory to Buyer that release the
Encumbrances on the Shares and the assets of the
Companies and any further liabilities under the
Security Documents;
(g) If not previously delivered to Buyer, all
other documents, certificates, instruments and writings
required pursuant hereto to be delivered by or on
behalf of Seller at or before Closing;
(h) An executed termination of the Shared Space
and Services Agreement, dated November 16, 1998 between
SFFC and Opco, pursuant to which Opco shall be relieved
of any present or future obligation or liability
thereunder;
(i) Evidence of compliance by the Seller of its
agreement set forth in Section 5.7(c);
(j) Legal opinion of counsel to Seller substantially
in the form attached hereto as Exhibit D; and
(k) Evidence that Opco's participation in the Accounts
Receivable Facility will be terminated as of the Closing
Date and that, after the Closing Date, Opco shall no longer
be bound thereby nor have any liability thereunder.
Section 4.5. Additional Closing Matters and
Deliveries. (a) The transactions contemplated by the
Assignment and Assumption Agreement shall have been
consummated prior to the Closing or effective simultaneously
with the Closing.
(b) The transactions contemplated by the Accounts
Receivable Purchase Agreement shall be consummated effective
simultaneously with the Closing.
(c) The parties hereto and the Escrow Agent shall
enter into the Escrow Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Notwithstanding anything to the contrary in this
Article V, no representation or warranty is made in this
Agreement with respect to the Excluded Assets and Excluded
Liabilities.
As an inducement to Buyer to enter into this Agreement
and to consummate the transactions contemplated hereby, Seller
represents and warrants to Buyer and agrees as follows:
Section 5.1. Incorporation of Seller. Seller is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.
Section 5.2. Incorporation; Capital Structure of the
Companies; Power and Authority. (a) Each of the Companies is a
corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
Each of the Companies is duly qualified to transact business and
is in good standing in each jurisdiction in which the nature of
property owned or leased by it or the conduct of its business
requires it to be so qualified. Each of the Companies has the
power and authority to own or lease and operate its assets and to
carry on its business in the manner that it was conducted prior
to the date hereof. Seller has previously delivered or made
available to Buyer correct and complete copies of the certificate
of incorporation and by-laws, as currently in effect, of each of
the Companies.
(b) The authorized capital stock of Holdco consists of
10,000 shares of capital stock, par value $.01 per share, of
which 100 shares of common stock are issued and outstanding.
Except for this Agreement and the pledge of the Shares pursuant
to certain of the Security Documents, there are no agreements,
arrangements, options, warrants, calls, rights or commitments of
any kind relating to the issuance, sale, purchase or redemption
of any Shares. All of the Shares have been validly issued, are
fully paid, nonassessable and free of preemptive rights and are
owned by Seller free and clear from all Encumbrances, other than
the pledge of the Shares pursuant to certain of the Security
Documents, which pledge shall be released on or before the
Closing Date. The Shares are not subject to any voting trust,
dividend agreement or other contract, agreement or arrangement
relating to the voting, dividend or disposition of the Shares.
There are no calls, puts, options, warrants, subscriptions or any
other agreement relating to the capital stock of Holdco.
(c) The authorized capital stock of Opco consists of
200,000 shares, consisting of 100,000 shares of common stock, par
value $.01 per share, of which 1,000 shares are issued and
outstanding, and 100,000 shares of preferred stock, par value
$.01 per share, none of which are issued and outstanding. Except
for this Agreement and the pledge of the outstanding shares of
capital stock of Opco pursuant to certain of the Security
Documents, there are no agreements, arrangements, options,
warrants, calls, rights or commitments of any kind relating to
the issuance, sale, purchase or redemption of any shares of
capital stock of Opco. All of the outstanding shares of capital
stock of Opco have been validly issued, are fully paid,
nonassessable and free of preemptive rights and are owned by
Holdco free and clear from all Encumbrances, other than the
pledge of such shares of capital stock pursuant to certain of the
Security Documents, which pledge shall be released on or before
the Closing Date. The outstanding shares of capital stock of
Opco are not subject to any voting trust, dividend agreement or
other contract, agreement or arrangement relating to the voting,
dividend or disposition of such shares. There are no calls,
puts, options, warrants, subscriptions or any other agreement
relating to the capital stock of Opco.
Section 5.3. Subsidiaries and Investments. Except for
ownership of capital stock of Opco by Holdco, the Companies do
not, directly or indirectly, own, of record or beneficially, any
outstanding equity interests or investment in any Person.
Section 5.4. Authority of Seller; Conflicts. (a)
Seller has the power and authority to execute and deliver this
Agreement and each of the Seller Ancillary Agreements and to
perform its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Seller Ancillary
Agreements by Seller and the performance of Seller's obligations
hereunder and thereunder have been duly authorized and approved
by Seller's board of directors and do not require any further
authorization or consent of Seller or its stockholders. This
Agreement has been duly executed and delivered by Seller and
(assuming the valid authorization and due execution and delivery
of this Agreement by Buyer) is the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance
with its terms, and each of the Seller Ancillary Agreements, upon
execution and delivery by Seller will be (assuming the valid
authorization, execution and delivery by Buyer, where Buyer is a
party, or the other party or parties thereto) a legal, valid and
binding obligation of Seller, enforceable against Seller in
accordance with its terms, in each case subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of
general application relating to or affecting creditors' rights
and to general equity principles (regardless of whether in equity
or at law).
(b) Except as set forth in Schedule 5.4, the execu
tion, delivery and performance by Seller of this Agreement or any
of the Seller Ancillary Agreements will not:
(i) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute (with
or without the giving of notice, the passage of time or
both) a default, an event of default or an event
creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in
the creation or imposition of any Encumbrance upon any
of the Shares or any of the assets of either of the
Companies, under (1) the certificate of incorporation
or by-laws of Seller or either of the Companies, (2)
any material note, instrument, mortgage, lease,
franchise or financial obligation to which Seller or
either of the Companies is a party or any of their
respective properties is subject or by which Seller or
either of the Companies is bound, (3) any Court Order
to which Seller or either of the Companies is a party
or by which Seller or either of the Companies or any of
their respective properties or businesses is bound, (4)
any Requirements of Law affecting Seller or either of
the Companies or (5) any Business Agreement.
(ii) require the approval, consent, authorization
or act of, or the making by Seller or either of the
Companies of any notices, declaration, filing or
registration with, any Person, except for (A) in
connection, or in compliance, with the provisions of
the HSR Act, (B) those that become applicable solely as
a result of the specific regulatory status of Buyer or
its Affiliates and (C) such approvals, consents,
authorizations, declarations, filings or registrations
the failure of which to be obtained or made would not
prevent the consummation of any of the transactions
contemplated hereby or interfere with the operation of
the Business immediately after Closing.
(c) Upon consummation of the Closing as contemplated
by this Agreement, Seller will deliver to Buyer good title to the
Shares, free and clear of any Encumbrances.
Section 5.5. Financial Statements. Schedule 5.5
contains the audited financial statements of the Companies as of
December 31, 1998 and 1997 and for the years then ended. Except
as set forth therein (including the notes thereto), such
financial statements have been prepared in conformity with GAAP,
and such financial statements present fairly the consolidated
financial position and results of operations of the Companies, as
of their respective dates and for the respective periods covered
thereby.
Section 5.6. Operations Since Financial Statement
Date. Except as set forth in Schedule 5.6 or as contemplated by
this Agreement, since the Financial Statement Date, (i) there
have been no events or changes in the Business, results of
operations or financial condition of the Companies which has
resulted in or with the passage of time could reasonably be
expected to result in a Material Adverse Effect, (ii) there has
been no physical damage, destruction or loss that would prevent
the Company from supplying its customers in the ordinary course
of the Business, (iii) the Companies have conducted the Business
in the ordinary course in all material respects and (iv) there
has been no action or event that if occurring after the date
hereof would violate Section 7.4(b) (excluding
Section 7.4(b)(xii)).
Section 5.7. Taxes. (a) Except as set forth on
Schedule 5.7, (i) each of the Companies (or Seller Parent or
Seller on their behalf) has filed all Tax Returns required to be
filed on or before the date hereof and paid in full all Taxes
shown to be due on such Tax Returns; (ii) the Tax Returns
referred to in clause (i), to the extent related to federal and
state income Taxes, have been examined by the appropriate taxing
authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired;
(iii) all deficiencies asserted or assessments made as a result
of any examination of the Tax Returns referred to in clause (i)
by a taxing authority have been paid in full or are being
challenged in good faith through appropriate proceedings; (iv) no
statute of limitations has been waived in writing with respect to
Taxes of the Companies and no extension of time has been agreed
to in writing with respect to a Tax deficiency or assessment of
the Companies; (v) all Taxes which the Companies are required to
withhold or to collect for payment in respect of any employee,
independent contractor, creditor or stockholder have been duly
withheld and collected, and have been paid or accrued, reserved
against or entered on the books of the Companies; (vi) no consent
under Code 341(f) concerning collapsible corporations has been
filed with respect to either Company; (vii) neither Company has
made any payments, is obligated to make any payment, or is a
party to an agreement that could obligate such Company to make
any payment, in each case that will not be deductible under Code
280G by reason of the sale of Shares pursuant to this
Agreement; (viii) there are no liens for taxes upon the assets of
either Company except for liens for Taxes which are not yet due
or are being contested in good faith; and (ix) Seller has
provided to Buyer pro forma separate company federal income tax
returns for the Companies for their taxable years ended 1996 and
1997, and the information set forth thereon is exactly the same
as the related information set forth on the consolidated federal
income tax returns for the Seller Tax Group for such respective
taxable years.
(b) Neither Company has been a United States real
property holding corporation within the meaning of Code
897(c)(2) during the applicable period specified in Code
897(c)(1)(A)(ii).
(c) Each Company's participation in Tax Sharing
Agreements in which either Company participated on or prior to
the Closing Date (other than this Agreement) will be terminated
as of the Closing Date and, after the Closing Date, neither
Company shall be bound thereby nor have any liability thereunder.
(d) The aggregate federal net operating loss
carryovers of the Companies as of the close of their taxable
years ended on the Closing Date (determined after taking into
account the effects of the transactions contemplated by
Section 7.5, the sale of the Shares pursuant to this Agreement,
and the transactions contemplated by the Assignment and
Assumption Agreement, but determined without regard to the
effects of any transaction occurring after the Closing) (the
"Closing NOL Carryovers") will not be less than $40 million
(forty million dollars) (the "Minimum NOL Amount"). No Tax
Return relating in whole or in part to the Companies shall be
amended, refiled or otherwise modified if the effect of doing so
would be to reduce the Closing NOL Carryovers.
Section 5.8. Governmental Permits. The Companies own,
hold or possess all material licenses, franchises, permits,
privileges, immunities, approvals and other authorizations from a
Governmental Body to entitle them to own or lease, operate and
use their assets and to carry on and conduct the Business as
conducted prior to the date hereof (herein collectively called
"Governmental Permits"). Except as disclosed in Schedule 5.8,
each of the Companies has complied in all material respects with
all terms and conditions of the Governmental Permits and no
proceeding is pending or, to the Knowledge of Seller, threatened
seeking the revocation or limitations of any such Governmental
Permit.
Section 5.9. Real Property. Schedule 5.9 lists each
parcel of real property owned by either Company specifying
whether such real property is used in or relating to the
Business, other than Excluded Assets ("Owned Real Property"), and
each option held by either Company to acquire real property.
Copies of TLTA Title Commitments for each parcel of Owned Real
Property have previously been delivered to Buyer. Schedule 5.9
also sets forth as of the date hereof a list of each lease or
similar agreement under which either Company is lessee of, or
holds or operates, any real property owned by any third Person
("Leased Real Property").
Section 5.10. Personal Property Leases. Schedule 5.10
contains as of the date hereof a list of each lease or other
agreement or right under which either Company is lessee of, or
holds or operates, any machinery, equipment, vehicle or other
tangible personal property owned by a third Person, except those
which are terminable by the Companies without penalty on sixty
(60) days' (or less) notice or which provide for annual rental
payments of less than $25,000.
Section 5.11. Intellectual Property. (a)
Schedule 5.11(a) contains as of the date hereof a list of all
Copyrights, Patent Rights and Trademarks owned or used by or
licensed to the Companies in the conduct of the Business and
identifies if such Copyrights, Patent Rights and Trademarks are
owned or licensed.
(b) Schedule 5.11(b) contains as of the date hereof a
list of all Software owned by or licensed to the Companies which
is material to the conduct of the Business and identifies if such
Software is owned or licensed.
(c) Except as disclosed in Schedule 5.11(c), the
Companies either: (i) own the entire right, title and interest
in and to the Intellectual Property and Software listed in
Schedules 5.11(a) and 5.11(b) hereof, free and clear of any
Encumbrance; or (ii) have the right and license to use the same
in the Business.
(d) Except as disclosed in Schedule 5.11(d), to the
Knowledge of Seller, since January 1, 1997, no infringement by
the Companies of any Intellectual Property of any other Person
has occurred and the Companies have not had written notice of a
claim against the Companies that the operations of the Business
infringe any Intellectual Property of any other Person.
(e) Except as disclosed in Schedule 5.11(e), no
proceedings are pending or, to the Knowledge of Seller,
threatened against the Companies which challenge the validity or
ownership or right to use any Intellectual Property owned or used
by the Companies.
(f) Except as disclosed in Schedule 5.11(f), to the
Knowledge of Seller, no third party is infringing any of the
Intellectual Property.
(g) Except as set forth in Schedule 5.11(g), as of the
date hereof, the Companies have the right to use the trade
secrets relating to the diced pepperoni technology process
commonly referred to as "Superdice."
Section 5.12. Title to Property. Except as disclosed
in Schedule 5.12, and except for the Excluded Assets and any
assets disposed of in the ordinary course of business, Opco has
good and marketable title to or holds by valid and existing lease
or license, as applicable, free and clear of all Encumbrances,
each piece of Owned Real Property, Leased Real Property and each
material piece of personal property reflected on the Balance
Sheet, and each piece of Owned Real Property and each material
piece of personal property acquired by the Companies since the
Financial Statement Date that would, had it been acquired prior
to such date, be required to be reflected on the Balance Sheet,
except, in each case, for Permitted Encumbrances.
Section 5.13. No Violation, Litigation or Regulatory
Action. Except as set forth in Schedule 5.13:
(i) to the Knowledge of Seller, the Companies
have materially complied with, and the Owned Real
Property and Leased Real Property are in material
compliance with, all applicable Requirements of Law,
including (i) all applicable zoning laws and any
material use or occupancy restrictions, building code
or ordinance or public utility easement, (ii) all
rules, regulations and orders promulgated by the
Occupational Safety and Health Administration ("OSHA"),
including OSHA's requirements on process safety
management, (iii) all rules, regulations and orders
promulgated by the United States Department of
Agriculture ("USDA"), (iv) all rules, regulations and
orders promulgated under the Federal Meat Inspection
Act, the Federal Food Drug and Cosmetic Act, and the
Nutrition Labeling and Education Act, and (v) Court
Orders;
(ii) there are no lawsuits, actions,
administrative or arbitration or other proceedings or
governmental investigations pending or, to the
Knowledge of Seller, threatened against the Companies;
(iii) there is no action, suit or proceeding
pending or, to the Knowledge of Seller, threatened that
questions the legality or propriety of the transactions
contemplated by this Agreement or any of the Seller
Ancillary Agreements;
(iv) Seller has copies of all current blue prints
for the Owned Real Property and Leased Real Property,
as submitted to the USDA in connection with the
operation of the Business at each facility; and
(v) The facilities at the Owned Real Property and
Leased Real Property are approved for inspection by the
USDA's Food Safety and Inspection Service.
Section 5.14. Contracts. Except as set forth in
Schedule 5.14, any other Schedule hereto or as contemplated by
this Agreement, as of the date hereof, neither of the Companies
is a party to or bound by:
(i) any contract for the future purchase or sale
of real property;
(ii) any contract, agreement or arrangement
(other than purchase orders) obligating the Companies
to purchase or sell any products or services which (A)
is not terminable by the Companies without payment of
penalty or other liability upon ninety (90) days' (or
less) notice and (B) provides for annual payments by
the Companies aggregating $100,000 or more;
(iii) any advertising sales agency, brokerage or
distribution agreement which (A) is not terminable by
the Companies without payment of penalty or other
liability upon ninety (90) days' (or less) notice and
(B) provides for annual payments by the Companies
aggregating $100,000 or more;
(iv) any employment or consulting agreement
having a remaining term of at least one year and
requiring annual payments of base salary and bonus of
$60,000 or more;
(v) any note, mortgage, indenture or other
obligation or agreement or other instrument for or
relating to any lending or borrowing (including assumed
debt) of $100,000 or more (other than capitalized
leases reflected on the Balance Sheet) or which impose
any Encumbrances (other than Permitted Encumbrances) on
any assets or properties owned by the Companies; or
(vi) any confidentiality, noncompete or other
agreement restricting the ability of the Companies to
conduct the Business or use any information in their
possession.
Section 5.15. Status of Contracts. Except as set
forth in Schedule 5.15, to the Knowledge of Seller: (i) each of
the leases, contracts and other agreements required to be listed
in Schedules 5.9, 5.10 and 5.14, recognizing that there may be
agreements listed on Schedule 5.9, 5.10 and 5.14 that are not
required to be disclosed thereon, (collectively, the "Business
Agreements") is in full force and effect and (ii) neither of the
Companies nor to the Knowledge of Seller any third party to such
Business Agreements is in breach or default under any Business
Agreement and no event has occurred which, with the giving of
notice or the passage of time or both, would constitute a breach
or default under any Business Agreement, other than such
breaches, defaults or events which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect.
Section 5.16. No Brokers. Except for Donaldson,
Lufkin & Jenrette Securities Corporation, whose fees and expenses
shall be the responsibility of Seller, neither Seller, any
Affiliate of Seller nor any Person acting on their behalf has
paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement.
Section 5.17. ERISA and Employee Benefits. Except as
otherwise set forth on Schedule 5.17:
(a) The Companies do not currently sponsor, maintain
or participate in, and are not required to contribute to or
accrue a benefit under, any employee benefit plan as defined in
Section 3(3) of ERISA, any multiemployer plan as defined in
Section 3(37)(A) or (D) of ERISA (a "Multiemployer Plan"), any
incentive compensation plan, bonus plan, deferred compensation
agreement or arrangement, stock option, stock bonus, stock
purchase plan, post-retirement severance benefits or any other
employee benefit plan (whether or not subject to ERISA), program
or arrangement of any kind whatsoever which provides or is
obligated to provide any kind of benefit (such plans, benefit
programs and agreements (excluding Multiemployer Plans) are
collectively referred to herein as the "Benefit Plans").
(b) Each Welfare Plan is either (i) unfunded or (ii)
funded through insurance contracts.
(c) The Companies do not participate in any
Multiemployer Plan or in any employee Benefit Plan maintained by
a union which provides health, pension or welfare benefits. No
withdrawal liability exists with respect to any such
Multiemployer Plan or Benefit Plan. The Companies have not
committed any act or acts prior to or as a result of the Closing
which has effected, or could reasonably be expected to effect, a
partial or complete withdrawal (as such terms are defined in
ERISA) from any such Multiemployer Plan or Benefit Plan. All
Multiemployer Plans and Benefit Plans that are defined benefit
pension plans are fully funded and there is no unfunded liability
for any such plan as of the Closing Date.
(d) The Companies (i) have not experienced any
reportable event within the meaning of 4043 of ERISA or other
event or condition which presents a material risk of termination
of any pension Benefit Plan by the Pension Benefit Guaranty
Corporation ("PBGC"); (ii) have not had any tax imposed on them
by the Internal Revenue Service for any violation under Section
4975 of the Code or Section 406 of ERISA; and (iii) have not
engaged in any transaction which could reasonably be expected to
subject either Company or any such Benefit Plan to any material
liability for any such tax under Section 4975 of the Code or
Section 406 of ERISA.
(e) There is no audit or investigation relating to any
Benefit Plan which is pending before the Internal Revenue
Service, the Department of Labor or any other governmental agency
or court.
(f) The Companies have made available to Buyer, or
will make available to Buyer prior to the Closing, true and
complete copies of, to the extent such documents exist: (i) all
Benefit Plans (including amendments), (ii) the most recent
summary plan description for each such plan, if applicable, (iii)
the most recent determination letter received from the Internal
Revenue Service with respect to any such plan, if applicable and
(iv) the most recent actuarial valuation, if applicable.
(g) All reports relating to the Benefit Plans required
to be filed with or furnished to any Governmental Body or court
or to the participants or beneficiaries prior to the date hereof
have been timely filed or furnished in accordance with applicable
law, except where failure to do so would not have a Material
Adverse Effect.
(h) The terms of all Benefit Plans comply in all
material respects with ERISA, the Code and all applicable
statutes, orders or governmental rules and regulations.
(i) To the Knowledge of Seller, with respect to each
Welfare Plan and Pension Plan listed on Schedule 5.17, (i) each
such plan has been maintained and operated in substantial
compliance with the applicable requirements of the Code and ERISA
and the regulations thereunder and (ii) no material litigation or
written asserted claims against the Companies exist.
Section 5.18. Environmental Matters. Except as
disclosed on Schedule 5.18:
(a) The Companies since Seller's acquisition thereof:
(i) are and have been in compliance with all Environmental Laws
and there exist no environmental conditions resulting from the
Companies' operation of the Business since Seller's acquisition
thereof, or to Seller's Knowledge, any predecessor operating on
the Owned Real Property or the Leased Real Property, that could
reasonably give rise to any claim or liability under
Environmental Laws; (ii) have not generated, manufactured,
recycled, reclaimed, refined, transported, treated, stored,
handled, disposed of, transferred, produced or processed
Hazardous Substances except in compliance with Environmental
Laws, and there has been no release or threatened release of any
Hazardous Substances at or from any Owned Real Property or any
Leased Real Property by the Companies since Seller's acquisition
thereof, or to Seller's Knowledge, any other person, that could
reasonably give rise to any claim or liability under
Environmental Law; (iii) have not entered into or been subject to
any consent decree, compliance order, or administrative order,
received notice under the citizen suit provision of any
Environmental Laws, received from any source any written request
for information, notice, demand letter, administrative inquiry,
or formal or informal complaint or claim with respect to any
violation of Environmental Law or release of any Hazardous
Substance that has not been fully resolved, or been subject to or
threatened in writing with a governmental or citizen enforcement
action.
(b) Schedule 5.18 lists and Seller has provided Buyer
with complete copies of any and all reports, studies, tests and
other information prepared on Seller's behalf or otherwise known
to Seller unless Seller determined that such report, study or
other information was not material or was superceded by more
recent environmental reports prepared on Seller's behalf relating
to the presence or suspected presence of any Hazardous Substances
or relating to the existence of any underground storage tank on
any Owned Real Property or Leased Real Property (the
"Environmental Reports"). The Companies since Seller's
acquisition thereof have possessed and are in compliance with all
permits, licenses, approvals and authorizations required pursuant
to Environmental Laws for the Business as currently conducted.
(c) To Seller's Knowledge, except as disclosed in
Schedule 5.18, including the Environmental Reports listed
thereon, (i) there is no environmental condition existing on any
Owned Real Property or Leased Real Property, or any properties
previously owned or leased by the Companies, that could
reasonably give rise to a claim or liability under Environmental
Laws and (ii) there is no past or existing event, condition,
circumstance or practice or procedure involving or relating to
the Companies' compliance with Environmental Laws which, if not
corrected, changed, reported, monitored or remediated, or
relating to a release of Hazardous Substances by the Companies
which, if not remedied, could reasonably result in a claim or
liability under Environmental Laws.
Section 5.19. Employee Relations and Agreements. (a)
Seller has made available to Buyer a true and complete listing of
all employees of the Companies as of a recent date, their job
description and date of hire and (A) in the case of salaried
employees, their salary range, and (B) in the case of hourly
employees, their hourly wage. Except as set forth in Schedule
5.19, neither Company (i) is a party to any collective bargaining
agreements or (ii) is involved in or, to the Knowledge of Seller,
threatened with, any labor dispute, arbitration, lawsuit or
administrative proceeding relating to labor matters involving
current or past employees of the Companies (excluding routine
workers' compensation claims and grievances) that, individually
or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth on Schedule 5.19, no director,
officer or employee of either Company is a party to any
employment or other agreement that entitles him or her to
compensation or other consideration upon the acquisition by any
Person of control of the Companies.
Section 5.20. Insurance. Seller has made available
to Buyer a true and complete list of all material insurance
policies owned or held by Seller or the Companies on the date
hereof, which may cover the Companies or the Business. As of the
date hereof, all such policies are in full force and effect and
no written notice of cancellation or termination has been
received with respect to any such policy.
Section 5.21. Assets Used in the Business. (a)
Except as set forth on Schedule 5.21, the facilities and the
other assets and property owned or leased by the Companies
currently used in the conduct of the Business are in good
operating condition and repair in all material respects, subject
to normal wear and tear, and are suitable in all material
respects for the purposes for which they are currently used.
(b) There are no condemnation proceedings pending or,
to the Knowledge of Seller, threatened with respect to the
facilities comprising the Business.
Section 5.22. Capacity of the Business. In 1998,
Opco's total annual production volume sold was 200.3 million
pounds (the "1998 Production Level") and, except as set forth in
Schedules 5.8, 5.13 and 5.18, to the Knowledge of Seller, Opco
was in material compliance with all applicable Requirements of
Law, Court Orders and Governmental Permits producing at the 1998
Production Level.
Section 5.23. Transactions with Affiliates. Schedule
5.23 lists all agreements or arrangements currently in effect
between Holdco or Opco and any Affiliate of the Companies (other
than Holdco or Opco) (all such persons and entities encompassed
by this clause being sometimes referred to collectively herein as
the "Related Parties" and individually as a "Related Party")
involving the sale of goods or services or licensing of
Intellectual Property by or to the Companies and that provide for
annual payments in excess of $25,000. No property or any
interest in any property used in the Business as currently
conducted is owned by or leased or licensed by or to any Related
Party.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement
and to consummate the transactions contemplated hereby, Buyer
hereby represents and warrants to Seller and agrees as follows:
Section 6.1. Incorporation of Buyer. Buyer is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Buyer has the
corporate power and corporate authority to own or lease and
operate its assets and to carry on its businesses in the manner
that they were conducted immediately prior to the date hereof.
Section 6.2. Authority of Buyer; Conflicts. (a) Buyer
has the corporate power and corporate authority to execute and
deliver this Agreement and each of the Buyer Ancillary Agreements
and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Buyer Ancillary
Agreements by Buyer and the performance of Buyer's obligations
hereunder and thereunder have been duly authorized and approved
by Buyer's board of directors and do not require any further
authorization or consent of Buyer or its stockholders. This
Agreement has been duly executed and delivered by Buyer and
(assuming the valid authorization, execution and delivery of this
Agreement by Seller) is the legal, valid and binding agreement of
Buyer enforceable against Buyer in accordance with its terms, and
each of the Buyer Ancillary Agreements, upon execution and
delivery by Buyer will be (assuming the valid authorization,
execution and delivery by Seller, where a Seller is a party, or
the other party or parties thereto) a legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with
its terms, in each case subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to
general equity principles (regardless of whether in equity or at
law).
(b) Except as set forth in Schedule 6.2, the
execution, delivery and performance by Buyer of this Agreement or
any of the Buyer Ancillary Agreements will not:
(i) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute (with
or without the giving of notice, the passage of time or
both) a default, an event of default or an event
creating rights of acceleration, termination or
cancellation or a loss of rights under (1) the charter
or by-laws of Buyer, (2) any note, instrument,
mortgage, lease, franchise or financial obligation to
which Buyer is a party or any of its properties is
subject or by which Buyer is bound, (3) any Court Order
to which Buyer is a party or by which it is bound or
(4) any Requirements of Law affecting Buyer, other
than, in the case of clause (2), any such conflicts,
breaches, defaults or rights that, individually or in
the aggregate, would not prevent the consummation of
any of the transactions contemplated hereby; or
(ii) require the approval, consent, authorization
or act of, or the making by Buyer of any declaration,
filing or registration with, any Person, except for (A)
in connection, or in compliance, with the provisions of
the HSR Act, and (B) such approvals, consents,
authorizations, declarations, filings or registrations
the failure of which to be obtained or made,
individually or in the aggregate, would not impair the
ability of Buyer to perform its obligations hereunder
or prevent the consummation of any of the transactions
contemplated hereby.
Section 6.3. No Violation, Litigation or Regulatory
Action. Except as set forth in Schedule 6.3:
(i) there are no lawsuits, actions,
administrative or arbitration or other proceedings or
governmental investigations pending or, to the knowl
edge of Buyer, threatened against the Buyer or its
Affiliates which are reasonably expected, individually
or in the aggregate, to impair the ability of Buyer to
perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated
hereby; and
(ii) there is no action, suit or proceeding
pending or, to the knowledge of Buyer, threatened that
questions the legality or propriety of the transactions
contemplated by this Agreement or any of the Buyer
Ancillary Agreements.
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to
take the following actions between the date hereof and the Clos
ing Date:
Section 7.1. Access to Information. After the date
hereof, subject to any existing confidentiality restrictions and
to applicable law, Seller shall afford to the officers, employees
and authorized representatives of Buyer reasonable access during
normal business hours, upon reasonable advance notice, to the
offices, properties and business and financial records of the
Companies to the extent Buyer shall reasonably deem necessary or
desirable and shall furnish to Buyer or its authorized represen
tatives such additional information concerning the Companies as
shall be reasonably requested. Buyer agrees that such
investigation shall be conducted in a manner that shall not
interfere unreasonably with the personnel and operations of the
Companies or Seller. All Buyer requests for such access shall be
made to such representatives of Seller as Seller shall designate,
who shall be solely responsible for coordinating all such
requests and all such access hereunder. It is further understood
and agreed that neither Buyer nor its representatives shall
contact any employees, customers, suppliers or other associates
or Affiliates of Seller or the Companies in connection with the
transactions contemplated hereby, in any manner whatsoever,
without prior authorization of such representatives of Seller as
Seller may designate (which authorization shall not be
unreasonably withheld or delayed). If, as of the date hereof or
at anytime hereafter up to and including the Closing Date, Buyer
or its officers, employees or authorized representatives discover
any breach of any warranty or any inaccuracy of any
representation contained in this Agreement, Buyer covenants that
it will promptly so inform Seller in writing.
Section 7.2. Notifications. Each of Buyer and Seller
shall promptly notify the other of any action, suit or proceeding
that shall be instituted or threatened against such party to
restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement or the Accounts
Receivable Purchase Agreement.
Section 7.3. Consents of Third Parties; Governmental
Approvals. Subject to the terms and conditions of this
Agreement: (a) Seller and Buyer will act diligently and
reasonably to secure, before the Closing Date, the consent,
approval or waiver, in form and substance reasonably satisfactory
to the other party, required to be obtained from any Person
(other than a Governmental Body) to consummate the transactions
contemplated by this Agreement or to permit the operations of the
Business immediately after Closing.
(b) During the period prior to the Closing Date,
Seller and Buyer shall act diligently and reasonably, and shall
cooperate with each other, to secure any consents and approvals
of any Governmental Body required to be obtained by them in order
to permit the consummation of the transactions contemplated by
this Agreement or to permit the operations of the Business
immediately after Closing, or to otherwise satisfy the conditions
set forth in Section 9.3 and Section 10.3; and
(c) Each party shall use its commercially reasonable
best efforts to cause the Closing to occur.
Section 7.4. Operations Prior to the Closing Date.
(a) Subject to the terms and conditions of this Agreement,
Seller shall use reasonable efforts to cause the Companies to
conduct the Business in the ordinary course in all material
respects as operated prior to the date of this Agreement.
Consistent with the foregoing, Seller shall cause each of the
Companies to use its commercially reasonable best efforts
consistent with good business practice to preserve the goodwill
of the suppliers, contractors, licensors, employees, customers,
distributors and others having business relations with the
Companies.
(b) Notwithstanding Section 7.4(a), except as set
forth on Schedule 7.4, as contemplated by this Agreement or
except with the express written approval of Buyer (which Buyer
agrees shall not be unreasonably withheld or delayed), Seller
shall cause the Companies not to:
(i) make any material change in the Business or
its operations, except such changes as may be required
to comply with any applicable Requirements of Law;
(ii) enter into any contract or commitment (or a
series of related contracts or commitments) to make any
capital expenditure in excess of $250,000;
(iii) enter into any contract for the purchase of
real property or exercise any option to extend a lease
listed in Schedule 5.9;
(iv) create, incur, guarantee or assume, or
agree to create, incur, guarantee or assume, any
indebtedness for borrowed money (other than money
borrowed or advances from any of its Affiliates in the
ordinary course of the Business), except in the
ordinary course of business;
(v) make, or agree to make, any payment of cash
or distribution of assets to any of its Affiliates
(other than payments made in respect of cash realized
upon collection of receivables generated in the
ordinary course of the Business);
(vi) institute any increase in any profit-
sharing, bonus, incentive, deferred compensation,
insurance, pension, retirement, medical, hospital,
disability, welfare or other employee benefit plan with
respect to its employees, other than as required by any
such plan or Requirements of Law;
(vii) make any change in the compensation of its
employees, other than, in the case of employees who are
not executive officers of the Company, changes made in
accordance with normal compensation practices and
consistent with past compensation practices;
(viii) issue, sell or redeem or agree to issue,
sell or redeem (i) any shares of capital stock or (ii)
any securities convertible into, or options with
respect to, or warrants to purchase or rights to
subscribe for, any shares of capital stock of either
Company;
(ix) except in the ordinary course of business,
as required by law or contractual obligations existing
on the date hereof or as provided for in or
contemplated by this Agreement, (A) sell, transfer or
otherwise dispose of any of its assets other than
inventory in the ordinary course of business, (B)
create any new Encumbrance on its properties or assets
(other than Permitted Encumbrances), (C) enter into any
joint venture or partnership or (D) purchase any assets
or securities of any Person;
(x) make any change in the accounting policies
applied in the preparation of the audited financial
statements contained in Schedule 5.5 other than as
required by GAAP;
(xi) make any change in the charter or by-laws of
either Company; or
(xii) enter into, modify or amend any Business
Agreement.
Notwithstanding the provisions of this Section, nothing
in this Agreement shall be construed or interpreted to prevent
the Companies from (i) paying or making regular or special
dividends or other distributions, (ii) making, accepting, paying,
repaying or settling inter- or intracompany receivables,
payables, loans or advances to, from or with one another or with
Seller or any Affiliate, or (iii) engaging in any transaction
incident to the cash management procedures of Seller and its
Affiliates and borrowings for working capital purposes and
purposes of providing additional funds to the Companies in the
ordinary course of business.
Section 7.5. Elimination of Inter-Company and
Affiliate Accounts. Prior to Closing, all inter-company
receivables, payables and loans (collectively, "Intercompany
Accounts") then existing between Holdco and Opco, on the one
hand, and Seller and any of the Seller's subsidiaries (other than
the Companies), on the other hand, shall be settled by way of a
capital contribution in kind with respect to an intercompany
amount due from Holdco or Opco to the Seller or any of the
Seller's subsidiaries (other than Holdco or Opco) or by way of a
dividend in kind with respect to an intercompany amount due from
the Seller or any of the Seller's subsidiaries (other than Holdco
or Opco) to Holdco or Opco. Any such settlement shall be
accomplished in the manner reasonably selected by Seller.
Section 7.6. Cash Management. The Companies
participate in the Seller's central cash management system and
shall continue to so participate in accordance with prior
practice until the Closing at which time all liabilities and
obligations of the Companies relating to Seller's central cash
management system shall be terminated thereunder. Accordingly,
nothing contained in this Agreement shall prohibit the Companies
from distributing any cash on hand from time to time to the
Seller or any of its affiliates.
Section 7.7. Property Transfers. It is understood and
agreed that, on or prior to the Closing, Opco and Seller will
enter into and consummate the transactions contemplated by the
Assignment and Assumption Agreement.
Section 7.8. Antitrust Law Compliance. (a) Buyer and
Seller Parent shall use their commercially reasonable best
efforts to file by March 11, 1999 (and shall file no later than
March 12, 1999) with the Federal Trade Commission and the
Antitrust Division of the Department of Justice the notifications
and other information required to be filed under the HSR Act, or
any rules and regulations promulgated thereunder, with respect to
the transactions contemplated hereby (including the Accounts
Receivable Purchase Agreement). Each party agrees that if it or
any of its Affiliates receives a request for additional
information or documentary material in connection with their
filings under the HSR Act, then such party shall promptly notify
the other party and endeavor in good faith to make, as soon as
practicable and after consultation with the other party, an
appropriate response in compliance with such request. Buyer and
Seller shall each pay one-half of the HSR Act filing fees.
(b) In furtherance and not in limitation of subsection
(a), Buyer shall take all reasonable steps to resolve as promptly
as possible any objections that may be asserted with respect to
the transactions contemplated hereby under any antitrust laws or
regulations (federal, state or foreign). Buyer will advise
Seller promptly in respect of any understandings, undertakings
or agreements (written or oral) which Buyer proposes to make with
the Federal Trade Commission, the United States Department of
Justice or any other Governmental Body in connection with the
transactions contemplated hereby.
Section 7.9. Guaranties. Buyer shall cause itself to
be substituted in all respects for Seller or any Affiliate of
Seller (other than the Companies), and shall cause Seller and any
such Affiliate to be fully released, in each case, effective as
of the Closing (and if not released as of Closing, as soon
thereafter as possible), in respect of all obligations of Seller
and any such Affiliate under any guaranties, letters of credit,
letters of comfort, bid bonds and performance bonds obtained by
Seller or any of such Affiliates for the benefit of the Business
or any of the Companies set forth in Schedule 7.9 (individually,
a "Guaranty," and collectively, the "Guaranties") and Seller
shall cooperate with Buyer in connection therewith. If prior to
Closing, Buyer is unable to effect such a substitution and
release with respect to any Guaranty after using its commercially
reasonable best efforts to do so, Buyer shall at its option
either (i) obtain letters of credit, on terms and from financial
institutions reasonably acceptable to both Buyer and Seller, or
(ii) indemnify and hold harmless Seller with respect to the
obligations covered by each of the Guaranties for which Buyer
does not effect such substitution and release. Without limiting
the foregoing, after Closing, Buyer will not, and will not permit
any of its Affiliates to, renew, extend, amend or supplement any
loan, contract, lease or other obligation that is covered by a
Guaranty without providing Seller with evidence satisfactory to
Seller that Seller's Guaranty has been released. Any cash or
other collateral posted by Seller or one of its Affiliates (other
than Holdco or Opco) in respect of any Guaranty which has been
released shall be delivered to Seller.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1. Insurance. Seller will cause the
Companies to keep insurance policies currently maintained by the
Companies covering their respective businesses, assets and
current or former employees, as the case may be, or suitable
replacements therefor, in full force and effect through the close
of business on the Closing Date, and Buyer shall become solely
responsible for all insurance coverage and related risk of loss
based on events occurring after the Closing Date with respect to
the Companies and their respective businesses, assets and current
or former employees. To the extent that after the Closing any
party hereto requires any information regarding claim data,
payroll or other information in order to make filing with
insurance carriers or self insurance regulators from another
party hereto, the other party will promptly supply such
information.
Section 8.2. Tax Matters. (a) Liability for Taxes.
(i) Seller shall be liable for and shall pay, and pursuant to
Article XI (and subject to the limitations thereof) shall
indemnify each Buyer Group Member against, all Taxes (A) imposed
on the Companies pursuant to Treas. Reg. 1.1502-6 or similar
provision of state or local law solely as a result of the
Companies having been a member of the Seller Tax Group, or
(B) imposed on the Companies for any taxable year or period
ending on or prior to the Closing Date and, with respect to any
Straddle Period, the portion of such Straddle Period ending on
and including the Closing Date (including such Taxes imposed on
the transactions contemplated by the Assignment and Assumption
Agreement); provided, however, that Seller shall not be liable
for or pay and shall not indemnify any Buyer Group Member for,
(I) any Taxes up to the amount of such Taxes that are accrued on
the final Closing Statement (after resolution of all disputes),
(II) any Taxes that result from any actual or deemed election
under Section 338 of the Code or any similar provisions of any
other relevant Tax law relating to the purchase of the Shares, or
that result from Buyer, any Affiliate of Buyer or either Company
engaging in any activity or transaction that would cause the
transactions contemplated by this Agreement to be treated as a
purchase or sale of assets of either Company for federal, state,
local or other Tax purposes, and (III) any Taxes imposed on the
Companies as a result of transactions occurring on the Closing
Date that are properly allocable (based on, among other relevant
factors, factors set forth in Treas. Reg. 1.1502-
76(b)(1)(ii)(B)) to periods after the Closing (Taxes described in
this proviso, hereinafter "Excluded Taxes"). Buyer and Seller
agree that, with respect to any transaction described in clause
(III) of the preceding sentence, the Companies and all persons
related to the Companies under Section 267(b) of the Code
immediately after the Closing shall treat the transaction for all
federal income tax purposes (in accordance with Treas. Reg.
1.1502-76(b)(1)(ii)(B)), and (to the extent permitted) for other
income Tax purposes, as occurring at the beginning of the day
following the Closing Date. Seller shall be entitled to any
refund of (or credit for) Taxes allocable to any taxable year or
period that ends on or before the Closing Date and, with respect
to any Straddle Period, the portion of such Straddle Period
ending on and including the Closing Date. Neither Seller,
Seller's Parent nor any member of the Seller Tax Group shall
elect to retain any net operating loss carryovers of the
Companies under Regulations 1.1502-20(g).
(ii) Buyer shall be liable for and shall pay, and
pursuant to Article XI (and subject to the limitations thereof)
shall indemnify each Seller Group Member against, (A) all Taxes
imposed on the Companies for any taxable years or periods
beginning after the Closing Date and, with respect to any
Straddle Period, the portion of such Straddle Period beginning
after the Closing Date and (B) Excluded Taxes. Except as
otherwise provided herein, Buyer shall be entitled to any refund
of (or credit for) Taxes allocable to any taxable year or period
that begins after the Closing Date and, with respect to any
Straddle Period, the portion of such Straddle Period beginning
after the Closing Date.
(iii) For purposes of paragraphs (a)(i) and (a)(ii),
whenever it is necessary to determine the liability for Taxes of
the Companies for a portion of any Straddle Period, the
determination of the Taxes of the Companies for the portion of
the Straddle Period ending on and including, and the portion of
the Straddle Period beginning after, the Closing Date shall be
determined by assuming that the Straddle Period consisted of two
taxable years or periods, one which ended at the close of the
Closing Date and the other which began at the beginning of the
day following the Closing Date, and items of income, gain,
deduction, loss or credit of the Companies for the Straddle
Period shall be allocated between such two taxable years or
periods on a "closing of the books basis" by assuming that the
books of the Companies were closed at the close of the Closing
Date; provided, however, that (I) transactions occurring on the
Closing Date that are properly allocable (based on, among other
relevant factors, factors set forth in Treas. Reg.
1.1502-76(b)(1)(ii)(B)) to the portion of the Closing Date
after the Closing shall be allocated to the taxable year or
period that is deemed to begin at the beginning of the day
following the Closing Date, and (II) exemptions, allowances or
deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned between such two
taxable years or periods on a daily basis. Notwithstanding the
foregoing provisions of this paragraph (a)(iii), if the
transactions contemplated by this Agreement result in the
reassessment of the value of any property owned by the Companies
for property Tax purposes, or the imposition of any property
Taxes at a rate which is different than the rate that would have
been imposed if such transactions had not occurred, then (y) the
portion of such property Taxes for the portion of the Straddle
Period ending on and including the Closing Date shall be
determined on a daily basis, using the assessed value and Tax
rate that would have applied had such transactions not occurred,
and (z) the portion of such property Taxes for the portion of
such Straddle Period beginning after the Closing Date shall be
the total property Taxes for the Straddle Period minus the amount
described in clause (y) of this sentence.
(iv) If, as a result of any action, suit,
investigation, audit, claim, assessment or amended Tax Return,
there is any change after the Closing Date in an item of income,
gain, loss, deduction or credit or amount of Tax that results in
an increase in a Tax liability for which Seller would otherwise
be liable pursuant to paragraph (a)(i), and such change results
in a decrease in the Tax liability of the Companies, Buyer, or
any Affiliate or successor thereof for any taxable year or period
beginning after the Closing Date or for the portion of any
Straddle Period beginning after the Closing Date, Seller shall
not be liable pursuant to paragraph (a)(i) with respect to such
increase to the extent of such decrease (and, to the extent such
increase in Tax liability is paid to a taxing authority by Seller
or any Affiliate thereof, Buyer shall pay Seller an amount equal
to such decrease as an indemnification payment determined in
accordance with Article XI).
(v) Except as provided in Section 5.7(d) and the last
sentence of Section 8.2(a)(i), Seller and Buyer agree that Seller
makes no representation, warranty or covenant with respect to the
amount of, or the ability to utilize, any net operating loss
carryovers, net capital loss carryovers, credits or similar items
of either of the Companies at any time.
(vi) Notwithstanding anything herein to the contrary,
Buyer shall be liable for and shall pay, and pursuant to Article
XI (and subject to the limitations thereof) shall indemnify each
Seller Group Member against, any real property transfer or gains
Tax, stamp Tax, stock transfer Tax, or other similar Tax imposed
on the sale of the Shares pursuant to this Agreement, together
with any penalties or interest with respect to such Taxes.
(vii) Neither Buyer, Seller nor any of their
respective Affiliates shall make an election described in Section
338 of the Code, including Section 338(h)(10), or any
corresponding election under any other relevant Tax laws for
which a separate election is permissible with respect to the
Companies or the transactions contemplated hereby.
(b) Tax Returns. (i) Seller shall timely file or
cause to be timely filed when due (taking into account all
extensions properly obtained) all Tax Returns that are required
to be filed by or with respect to the Companies for taxable years
or periods ending on or before the Closing Date (in the case of
Tax Returns required to be filed by or with respect to the
Companies on a combined, consolidated or unitary basis with
Seller or any Affiliate thereof other than solely the Companies)
or due on or before the Closing Date (with respect to other Tax
Returns), and in each case Seller shall remit or cause to be
remitted any Taxes shown to be due in respect of such Tax
Returns, and Buyer shall timely file or cause to be timely filed
when due (taking into account all extensions properly obtained)
all other Tax Returns that are required to be filed by or with
respect to the Companies for taxable years or periods ending on
or prior to the Closing Date and for Straddle Periods and Buyer
shall remit or cause to be remitted any Taxes shown to be due in
respect of such Tax Returns. With respect to Tax Returns to be
filed by Buyer pursuant to the preceding sentence (x) such Tax
Returns shall be filed in a manner consistent with past practice
and no position shall be taken, election made or method adopted
that is inconsistent with positions taken, elections made or
methods used in prior periods in filing such Tax Returns which
would have any adverse effect on the Companies, Seller or any
Affiliate thereof or on any obligation of Seller under this
Agreement (including, without limitation, any position which
would have the effect of accelerating income to periods for which
Seller is liable or deferring deductions to periods for which
Buyer is liable) and (y) such Tax Returns and the workpapers and
calculations supporting the Taxes due in respect of such Tax
Returns shall be submitted to Seller not later than 20 days prior
to the due date for filing such Tax Returns (or, if such due date
is within 45 days following the Closing Date, as promptly as
practicable following the Closing Date) (in each case taking into
account all extensions properly obtained) for review and approval
by Seller, which approval may not be unreasonably withheld, but
may in all cases be withheld if such Tax Returns were not
prepared in accordance with clause (x) of this sentence. Seller
or Buyer shall pay the other party for the Taxes for which Seller
or Buyer, respectively, is liable pursuant to Section 8.2(a) but
which are payable with any Tax Return to be filed by the other
party pursuant to this paragraph (b) upon the written request of
the party entitled to payment, setting forth in detail the
computation of the amount owed by Seller or Buyer, as the case
may be. Such payment shall be made within 10 days of such
request, but in no event earlier than 10 days prior to the due
date for paying such Taxes.
(ii) Neither Buyer nor any Affiliate of Buyer shall
(or shall cause or permit the Companies to) amend, refile or
otherwise modify (or grant an extension of any statute of
limitation with respect to) any Tax Return relating in whole or
in part to the Companies (x) with respect to any taxable year or
period ending on or before the Closing Date without the prior
written consent of Seller, which consent may be withheld in the
sole discretion of the Seller or (y) with respect to any Straddle
Period except in accordance with the procedures set forth in
Section 8.2(b)(i) applicable upon the Buyer filing a Tax Return
for a Straddle Period.
(iii) With respect to the taxable year of each Company
ending December 31, 1998 and the period in 1999 on and prior to
the Closing Date, Buyer shall promptly cause the Companies to
prepare and provide to Seller a package of tax information
materials, including, without limitation, schedules and work
papers (the "Tax Package"), required by Seller to enable Seller
to prepare and file all Tax Returns required to be prepared and
filed by them pursuant to paragraph (b)(i). The Tax Package
shall be completed in accordance with past practice including
past practice as to providing such information, and as to the
method of computation of separate taxable income or other
relevant measure of income of each of the Companies. Buyer shall
cause the Tax Package to be delivered to Seller within sixty (60)
days after the Closing Date.
(c) Contest Provisions. Buyer shall promptly notify
Seller in writing upon receipt by Buyer, any of its Affiliates or
the Companies of notice of any pending or threatened federal,
state, local or foreign Tax audits, examinations or assessments
which may affect any Tax liability for which Seller is liable
pursuant to Section 5.7 or Section 8.2(a), provided that failure
to comply with this provision shall not affect Buyer's right to
indemnification hereunder except to the extent such failure
impairs Seller's ability to contest any such Tax liabilities.
Except as otherwise provided in this paragraph, Seller
shall have the sole right to represent each Company's interests
in any Tax audit or administrative or court proceeding relating
to taxable periods ending on or before the Closing Date (and any
audit or proceeding relating to the determination of the Closing
NOL Carryovers), and to employ counsel of its choice at its
expense. Seller shall keep Buyer reasonably informed as to any
material change or development in the status of any such audit or
proceeding to the extent such change or development would
reasonably be expected to have a material effect on the Taxes of
the Companies, or any Affiliate thereof, for any period after the
Closing Date. Seller shall have the sole right to settle, either
administratively or after the commencement of litigation, any
proceeding relating to Taxes of either Company for any taxable
period ending on or before the Closing Date (and any proceeding
relating to the determination of the Closing NOL Carryovers);
provided, however, that Seller shall not settle any claim for
Taxes which would have an adverse effect on the Companies, or any
Affiliate thereof, for periods after the Closing Date without the
prior written consent of Buyer, which consent shall not be
unreasonably withheld and shall not be withheld, in any event, if
Seller has indemnified Buyer against the effects of any such
settlement. In the case of any Straddle Period, Seller shall be
entitled to participate at its expense in any Tax audit or
administrative or court proceeding relating (in whole or in part)
to Taxes attributable to the portion of such Straddle Period
ending on and including the Closing Date and, with the written
consent of Buyer, and at Seller's sole expense, may assume the
entire control of such audit or proceeding. None of Buyer, any
of its Affiliates or either of the Companies may agree to settle
any Tax claim which may be the subject of indemnification by
Seller under Section 5.7 or paragraph (a) of this Section 8.2
without the prior written consent of Seller, which consent may be
withheld in the sole discretion of Seller.
(d) Assistance and Cooperation. After the Closing
Date, each of Seller and Buyer shall (and shall cause its
respective Affiliates to):
(i) assist the other party in preparing any Tax
Returns which such other party is responsible for
preparing and filing in accordance with paragraph (b)
of this Section 8.2;
(ii) cooperate fully in preparing for any audits
of, or disputes with taxing authorities regarding, any
Tax Returns of the Companies;
(iii) make available to the other and to any
taxing authority as reasonably requested all
information, records, and documents relating to Taxes
of the Companies;
(iv) subject to Section 8.2(c), provide timely
notice to the other in writing of any pending or
threatened Tax audits or assessments of the Companies
for taxable periods for which the other may have a
liability under Section 5.7 or this Section 8.2;
(v) furnish the other with copies of all
correspondence received from any taxing authority in
connection with any Tax audit or information request
with respect to any such taxable period;
(vi) timely sign and deliver such certificates or
forms as may be necessary or appropriate to establish
an exemption from (or otherwise reduce), or file Tax
Returns or other reports with respect to, Taxes
described in paragraph (a)(vi) of this Section 8.2
(relating to sales, transfer and similar Taxes); and
(vii) timely provide to the other powers of
attorney or similar authorizations necessary to carry
out the purposes of this Section 8.2.
Section 8.3. Employee Matters. (a) The Companies
shall terminate their participation in Seller's Travel Accident
Program as of the Closing Date. Seller shall retain the
responsibility for payment of all covered claims or expenses
incurred by any employee of the Companies under such plan prior
to the Closing Date, and Buyer shall not assume nor shall the
Companies be responsible for any liability with respect to such
claims (except with respect to the performance by the Companies
as a third-party administrator of such claims).
(b) Buyer agrees to indemnify and hold harmless Seller
and its Affiliates from and against any and all liabilities in
connection with or arising under the agreements, plans and
arrangements set forth in Schedule 8.3 (the "Special Payments").
Section 8.4. Covenant Not to Compete. (a) In
furtherance of the sale of the Shares to Buyer hereunder and to
protect more effectively the value and goodwill of the Business,
Seller covenants and agrees that, for a period commencing on the
Closing Date and ending on the fifth anniversary of the Closing
Date, none of Seller Parent, Seller or any of their respective
direct and indirect subsidiaries will directly or indirectly own,
manage, operate, control, or otherwise carry on, a business
directly competitive with the Business conducted by Opco on the
date hereof anywhere in the United States (it being understood by
the parties hereto that the prohibited activities are not limited
to any particular region because the Business has been conducted
by Opco throughout the United States and the prohibited
activities may be engaged in effectively from any location in the
United States; provided, that nothing set forth in this Section
8.4 shall prohibit Seller Parent, Seller or any of their
respective direct or indirect subsidiaries from (i) owning not in
excess of 5% of the securities of a corporation which engages in
such proscribed conduct if such securities are traded on a
national securities exchange or the NASDAQ National Market System
or are traded publicly in the over-the-counter market, (ii)
owning not in excess of a 5% interest in any Person which engages
in such proscribed conduct, (iii) having an ownership interest
otherwise proscribed by this Section 8.4 if such interest arises
as a result of the acquisition of, or merger or consolidation
with, a business not principally engaged in the proscribed
conduct, (iv) being acquired by, including by merger or
consolidation (other than a merger or consolidation in which
Seller Parent, Seller or any of their respective direct or
indirect subsidiaries is the surviving entity) with, any Person
which has total revenues greater than the total revenues of
Seller and which engages in the proscribed conduct, or (v) in
connection with an employee benefit plan, the assets of which are
managed by an independent investment advisor, invest in any
Person which engages in such proscribed conduct. For purposes of
clause (iii) above, an acquired business entity shall not be
principally engaged in the proscribed conduct if its revenues
from sales of products which would be proscribed hereunder
represent less than 20% of its total revenues.
(b) In the event Seller Parent, Seller or any of their
respective subsidiaries violates any of their obligations under
this Section 8.4, Buyer or Opco may proceed against Seller in law
or in equity for such damages or other relief as a court may deem
appropriate. Seller acknowledges that a violation of this
Section 8.4 may cause Buyer or Opco irreparable harm which may
not be adequately compensated for by money damages. Seller
therefore agrees that in the event of any violation of this
Section 8.4, Buyer or Opco shall be entitled, in addition to
other remedies that it may have, to a temporary restraining order
and to preliminary and final injunctive relief against Seller
Parent, Seller or such subsidiary to prevent any violations of
this Section 8.4.
(c) It is the intent and understanding of each party
hereto that if, in any action before any court or agency legally
empowered to enforce this Section 8.4, any term, restriction,
covenant or promise in this Section 8.4 is found to be
unreasonable and for that reason unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such court or agency.
Section 8.5. Release of Other Encumbrances. After the
Closing, Seller shall use commercially reasonable efforts to
cause to be released those encumbrances disclosed on
Schedule 5.11(a) and items 12, 20 and 21 listed in the Attachment
to Schedule 5.12. The parties hereby understand and agree that
such Encumbrances had secured indebtedness which is no longer
outstanding and that such Encumbrances do not materially affect
the properties or assets to which they relate.
Section 8.6. Lease of Fort Worth Office Space. Buyer
shall have the right to occupy and use the office space (the
"Premises") currently used by the Companies at the Fort Worth
facility (which is a part of the Excluded Assets) for a period
not to exceed 90 days after the Closing Date; provided, however
Buyer agrees to use the Premises only as office space. Buyer
agrees to (i) reimburse Seller for Seller's actual, direct
out-of-pocket costs incurred and related to Buyer's occupancy of
the Premises and (ii) indemnify Seller for any liability or
obligation incurred by Seller and related to Buyer's occupancy of
the Premises. Upon vacating the Premises, Buyer shall leave the
Premises in, or restore the Premises to, its condition
substantially as it existed on the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall, at
the option of Buyer (to the extent permissible under applicable
law), be subject to the satisfaction, on or prior to the Closing
Date, of the following conditions:
Section 9.1. No Misrepresentation or Breach of
Covenants and Warranties. (a) The covenants and agreements of
Seller to be performed on or before the Closing Date in
accordance with this Agreement shall have been performed in all
material respects.
(b) (i) The representations and warranties of Seller
contained in this Agreement that are qualified by Material
Adverse Effect shall be true and correct on the Closing Date as
though made on the Closing Date (except to the extent that they
expressly relate to an earlier date) and/or (ii) all other
representations and warranties of Seller contained in this
Agreement shall be true and correct (unless the failure of any
such representations or warranties to be true and correct would
not, individually or in the aggregate, have a Material Adverse
Effect), on the Closing Date as though made on the Closing Date
(except to the extent that they expressly relate to an earlier
date), except in the case of each of clause (i) and (ii) for
changes therein specifically permitted by this Agreement or
resulting from any transaction expressly consented to in writing
by Buyer or any transaction permitted by Section 7.4.
(c) There shall have been delivered to Buyer a
certificate dated the Closing Date and signed on behalf of Seller
by a duly authorized officer of Seller to the effect of
paragraphs (a) and (b) above.
Section 9.2. No Restraint. The waiting period under
the HSR Act shall have expired or been terminated; and no
preliminary or permanent injunction or decree or other order
shall have been issued by any court of competent jurisdiction and
be in effect which restrains or prohibits any material
transaction contemplated hereby; provided, however, that in the
case of any such injunction, decree or order, Buyer shall have
used its commercially reasonable best efforts to prevent the
entry thereof and to appeal as promptly as possible any such
injunction, decree or order.
Section 9.3. Necessary Approvals. All approvals,
actions and consents of or by all Persons listed on Schedule 9.3
shall have been obtained.
Section 9.4. Accounts Receivable Purchase Agreement.
Buyer, Seller and SFFC shall have entered into the Accounts
Receivable Purchase Agreement and the transactions contemplated
thereby shall be consummated effective simultaneously with the
Closing.
Section 9.5. Release of Encumbrances. The
Encumbrances on the Shares and the assets of the Companies under
the Security Documents shall have been released or shall be
positioned to be released simultaneously with the Closing and the
guarantees of Holdco and Opco guaranteeing obligations under the
Revolving Credit Facility shall have been terminated or shall be
positioned to terminate simultaneously with the Closing.
Notwithstanding the failure of any one or more of the
foregoing conditions, Buyer may proceed with the Closing without
satisfaction, in whole or in part, of any one or more of such
conditions and without written waiver. To the extent that at the
Closing Seller delivers to Buyer a written notice specifying in
reasonable detail the failure of any of such conditions or the
breach by Seller of any of the representations or warranties of
Seller herein, and Buyer nevertheless proceeds with the Closing,
Buyer shall be deemed to have waived for all purposes any rights
or remedies it may have against Seller by reason of the failure
of any such conditions or the breach of any such representations
or warranties to the extent fully described in such notice.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall,
at the option of Seller (to the extent permissible under
applicable law), be subject to the satisfaction, on or prior to
the Closing Date, of the following conditions:
Section 10.1. No Misrepresentation or Breach of
Covenants and Warranties. The covenants and agreements of Buyer
to be performed on or before the Closing Date in accordance with
this Agreement shall have been performed in all material
respects; each of the representations and warranties of Buyer
contained in this Agreement shall be true and correct in all
material respects on the Closing Date as though made on the
Closing Date, except for changes therein specifically permitted
by this Agreement or resulting from any transaction expressly
consented to in writing by Seller or any transaction contemplated
by this Agreement; and there shall have been delivered to Seller
a certificate to such effect, dated the Closing Date, signed on
behalf of Buyer by a duly authorized officer of Buyer.
Section 10.2. No Restraint. The waiting period under
the HSR Act shall have expired or been terminated; and no
preliminary or permanent injunction, decree or other order shall
have been issued by any court of competent jurisdiction and be in
effect which restrains or prohibits any material transaction
contemplated hereby; provided, however, that in the case of any
such injunction, decree or order, Seller shall have used its
commercially reasonable best efforts to prevent the entry thereof
and to appeal as promptly as possible such injunction, decree or
order.
Section 10.3. Necessary Governmental Approvals. All
approvals and actions of or by all Governmental Bodies which are
necessary to consummate the transactions contemplated hereby
shall have been obtained or taken place, other than those as to
which the failure to have been obtained or taken place would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
Section 10.4. Accounts Receivable Purchase Agreement.
Buyer, Seller and SFFC shall have entered into the Accounts
Receivable Purchase Agreement and the transactions contemplated
thereby shall be consummated effective simultaneously with the
Closing.
Notwithstanding the failure of any one or more of the
foregoing conditions, Seller may proceed with the Closing without
satisfaction, in whole or in part, of any one or more of such
conditions and without written waiver. To the extent that at the
Closing Buyer delivers to Seller a written notice specifying in
reasonable detail the failure of any of such conditions or the
breach by Buyer of any of the representations or warranties of
Buyer herein, and Seller nevertheless proceeds with the Closing,
Seller shall be deemed to have waived for all purposes any rights
or remedies it may have against Buyer by reason of the failure of
any such conditions or the breach of any such representations or
warranties to the extent fully described in such notice.
ARTICLE XI
INDEMNIFICATION
Section 11.1. Indemnification by Seller. (a) Seller
agrees to indemnify and hold harmless each Buyer Group Member
from and against any and all Losses and Expenses incurred by such
Buyer Group Member in connection with or arising from (i) any
breach of any representation, warranty, covenant or agreement (A)
made by Seller in this Agreement (other than representations and
warranties made by Seller in Sections 5.2(b), 5.2(c) and 5.4(c)
and covenants and agreements made by Seller in Section 8.2) or in
any certificate delivered by or on behalf of Seller pursuant
hereto or (B) made by Seller or SFFC in the Accounts Receivable
Purchase Agreement, (ii) any breach of any representation or
warranty made by Seller in Section 5.2(b), 5.2(c) and 5.4(c) and
any breach of any covenant or agreement made by Seller in
Section 8.2, (iii) any Excluded Liability and (iv) any failure by
Seller to pay the Post-Closing Adjustment, if applicable;
provided, however, that Seller shall be required to indemnify and
hold harmless any Buyer Group Member under clause (i) of this
Section 11.1(a) with respect to Losses and Expenses incurred
thereby only to the extent that the aggregate amount of all
Losses and Expenses incurred thereby under clause (i) exceeds the
amount set forth as the Basket Amount in Schedule 11.1 (the
"Basket Amount") (which Basket Amount is an aggregate deductible
amount which shall not be recoverable from Seller under
clause (i) of this Section 11.1); and provided, further, that the
aggregate amount required to be paid by Seller pursuant to
clause (i) of this Section 11.1(a) shall not exceed the amount
set forth as the Cap in Schedule 11.1 (the "Cap" and, together
with the Basket Amount, the "Aggregate Limits"). Seller's
obligation to indemnify any Buyer Group Member for Losses and
Expenses pursuant to clauses (ii), (iii) and (iv) of this Section
11.1(a) shall not be subject to the Basket Amount or the Cap.
(b) The indemnification provided for in Section
11.1(a) shall terminate one year after the Closing Date (and no
claims shall be made by any Buyer Group Member under
Section 11.1(a) thereafter), except that the indemnification by
Seller shall continue as to:
(i) the covenants of Seller set forth in
Section 13.6, which shall survive for the period of
time set forth therein;
(ii) the covenants of Seller set forth in
Section 8.2, which shall survive until the expiration
of the relevant statutory period of limitations
applicable to the underlying claim, giving effect to
any waiver, mitigation or extension thereof;
(iii) the representations and warranties of
Seller set forth in Section 5.7, which shall survive
until the expiration of the relevant statutory period
of limitations applicable to the underlying claim,
giving effect to any waiver, mitigation or extension
thereof;
(iv) the obligation of Seller with respect to the
Excluded Liabilities, as to which no time limit shall
apply;
(v) the representations and warranties set forth
in Section 5.2(b), 5.2(c) and 5.4(c), as to which no
time limit shall apply; and
(vi) any Losses or Expenses of which any Buyer
Group Member has notified Seller in accordance with the
requirements of Section 11.3 on or prior to the date
such indemnification would otherwise terminate in
accordance with this Section 11.1, as to which the
obligation of Seller shall continue until the liability
of Seller shall have been determined pursuant to this
Article XI, and Seller shall have reimbursed all Buyer
Group Members for such Losses and Expenses in
accordance with this Article XI.
Section 11.2. Indemnification by Buyer. (a) Buyer
agrees to indemnify and hold harmless each Seller Group Member
from and against any and all Losses and Expenses incurred by such
Seller Group Member in connection with or arising from any breach
of any representation, warranty, covenant or agreement made by
Buyer in this Agreement or in any certificate delivered by or on
behalf of Buyer pursuant hereto or in the Accounts Receivable
Purchase Agreement.
(b) The indemnification provided for in Section
11.2(a) shall terminate one year after the Closing Date (and no
claims shall be made by any Seller Group Member under
Section 11.2(a) thereafter), except that the indemnification by
Buyer shall continue as to:
(i) the covenants of Buyer set forth in Section
13.6 which shall survive for the period of time set
forth in such section;
(ii) the covenants of Buyer set forth in
Section 8.2, which shall survive until the expiration
of the relevant statutory period of limitations
applicable to the underlying claim, giving effect to
any waiver, mitigation or extension thereof; and
(iii) any Losses or Expenses of which any Seller
Group Member has notified Buyer in accordance with the
requirements of Section 11.3 on or prior to the date
such indemnification would otherwise terminate in
accordance with this Section 11.2, as to which the
obligation of Buyer shall continue until the liability
of Buyer shall have been determined pursuant to this
Article XI, and Buyer shall have reimbursed all Seller
Group Members for such Losses and Expenses in
accordance with this Article XI.
Section 11.3. Notice of Claims. (a) Any Buyer Group
Member or Seller Group Member (each, an "Indemnified Party")
seeking indemnification hereunder shall give to the party
obligated to provide indemnification to such Indemnified Party
(the "Indemnitor") a written notice (a "Claim Notice") promptly
after the Indemnified Party has knowledge of any claim which the
Indemnified Party has determined has given or could give rise to
a right of indemnification hereunder, in each case describing in
reasonable detail the facts giving rise to the claim for
indemnification hereunder and shall include in such Claim Notice
(if then known) the amount or the method of computation of the
amount of such claim, and a reference to the provision of this
Agreement or the Accounts Receivable Purchase Agreement upon
which such claim is based; provided, however, that a Claim Notice
in respect of any action at law or suit in equity by or against a
third Person as to which indemnification will be sought shall be
given promptly after the action or suit is commenced.
(b) After the giving of any Claim Notice pursuant
hereto, the amount of indemnification to which an Indemnified
Party shall be entitled under this Article XI shall be
determined: (i) by the written agreement between the Indemnified
Party and the Indemnitor; (ii) by a final judgment or decree of
any court of competent jurisdiction; or (iii) by any other means
to which the Indemnified Party and the Indemnitor shall agree.
The judgment or decree of a court shall be deemed final when the
time for appeal, if any, shall have expired and no appeal shall
have been taken or when all appeals taken shall have been finally
determined. The Indemnified Party shall have the burden of proof
in establishing the amount of Losses and Expenses suffered by it.
(c) No Claim Notice may be given in respect of a Loss
or Expense incurred by a Buyer Group Member in connection with or
arising from a breach of any representation or warranty of Seller
set forth in Section 5.7(d) or the covenant set forth in the last
sentence of Section 8.2(a)(i) earlier than the time such breach
causes such Buyer Group Member to actually pay incremental Taxes,
and no Claim Notice shall be made in respect of anticipated
incremental Tax payments. With respect to such breach, the
amount of a Buyer Group Member's Loss or Expense in respect of a
payment of a Tax shall equal (x) the excess, if any, of the
amount of such Tax payment (assuming utilization of all available
losses, credits and similar Tax attributes) over the amount such
Tax payment would have been if there had been no breach of any
representation or warranty of Seller set forth in Section 5.7(d)
or the covenant set forth in the last sentence of
Section 8.2(a)(i), (y) discounted at a rate of 7% per annum
(compounded annually) from the date of such payment of Tax to the
Closing Date. Seller's obligation to indemnify and hold harmless
a Buyer Group Member in respect of such amount of Loss or Expense
shall be subject to the Aggregate Limits in accordance with the
terms of Section 11.1(a) and the provisions of clauses (1) and
(3) of Section 11.5(a).
Section 11.4. Third Person Claims. (a) In order for
a party to be entitled to any indemnification provided for under
this Agreement in respect of, arising out of or involving any
legal proceeding, claim or demand (a "Third Party Claim") made by
any third Person against the Indemnified Party in respect of
which indemnity may be sought from the Indemnitor under this
Article XI, such Indemnified Party must notify the Indemnitor in
writing, and in reasonable detail, of the Third Party Claim
promptly after receipt by such Indemnified Party of written
notice of the Third Party Claim. Thereafter, the Indemnified
Party shall deliver to the Indemnitor, promptly after the
Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnitor
relating to the Third Party Claim. Notwithstanding the
foregoing, should a party be physically served with a complaint
with regard to a Third Party Claim, the Indemnified Party must
notify the Indemnitor with a copy of the complaint promptly after
receipt thereof and shall deliver to the Indemnitor promptly
after the receipt of such complaint copies of notices and
documents (including court papers) received by the Indemnified
Party relating to the Third Party Claim.
(b) In the event any legal proceeding shall be
threatened or instituted or any claim or demand shall be asserted
by any Person in respect of which payment may be sought by one
party hereto from the other party under the provisions of this
Article XI, the Indemnified Party shall promptly cause written
notice of the assertion of any such claim of which it has
knowledge which is covered by this indemnity to be forwarded to
the Indemnitor. Any notice of a claim shall contain a reference
to the provision of this Agreement or the Accounts Receivable
Purchase Agreement upon which such claim is based, the facts
giving rise to an alleged basis for the claim and the amount of
the liability asserted against the Indemnitor by reason of the
claim.
(c) The Indemnitor shall have the right to conduct and
control (so long as it does so diligently), at its expense and
with counsel of its choosing that is reasonably satisfactory to
such Indemnified Party, the defense, compromise or settlement of
any such Third Party Claim against such Indemnified Party as to
which indemnification will be sought by any Indemnified Party
from any Indemnitor hereunder, and in any such case the
Indemnified Party shall cooperate in connection therewith and
shall furnish and make available to the Indemnitor all witnesses,
records, information and testimony and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be
reasonably requested by the Indemnitor in connection therewith;
provided, that the Indemnified Party may participate, through
counsel chosen by it and at its own expense, in the defense of
any such Third Party Claim as to which the Indemnitor has so
elected to conduct and control the defense thereof. Except for
the settlement of a Third Party Claim which involves the payment
of money only (without the admission of liability), with respect
to which the Indemnitor has agreed to indemnify the Indemnified
Party, no Third Party Claim may be settled by the Indemnitor
without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, the Indemnified Party shall have
the right to pay, settle or compromise any such Third Party Claim
that Indemnitor has agreed to defend, provided that in such event
the Indemnified Party shall waive any right to indemnity therefor
hereunder. In the event Indemnitor has determined not to conduct
and control the defense of such Third Party Claim, the
Indemnified Party may defend, compromise or settle (or take or
fail to take any action with respect to) such Third Party Claim
without waiver of its rights against Indemnitor hereunder.
(d) After any final judgment or award shall have been
rendered by a court, arbitration board or administrative agency
of competent jurisdiction and the time in which to appeal
therefrom has expired, or a settlement shall have been
consummated, or the Indemnified Party and the Indemnitor shall
arrive at a mutually binding agreement with respect to each
separate matter alleged to be indemnified by the Indemnitor
hereunder, the Indemnified Party shall, subject to
Section 11.5(d), forward to the Indemnitor notice of any sums due
and owing by it with respect to such matter and the Indemnitor
shall pay all of the sums so owning to the Indemnified Party by
wire transfer, certified or bank cashier's check within thirty
(30) days after the date of such notice.
(e) To the extent of any inconsistency between this
Section 11.4 and Section 8.2(c) (relating to Tax contests), the
provisions of Section 8.2(c) shall control with respect to Tax
contests.
(f) The failure of an Indemnified Party to give any
notice required in Section 11.3 or this Section 11.4 shall not
relieve the Indemnitor of its obligations hereunder except to the
extent it shall have been prejudiced by such failure.
Section 11.5. Additional Limitations. (a) In
calculating any Loss or Expense there shall be deducted any
insurance recovery in respect thereof (and no right of
subrogation shall accrue hereunder to any insurer); provided,
however, that neither party shall be required to seek an
insurance recovery in any event. Any indemnity payment
hereunder with respect to any Loss or Expense shall be calculated
on an "After-Tax Basis," which shall mean an amount which is
sufficient to compensate the Indemnified Party for the event
giving rise to such Loss or Expense (the "Indemnified Event"),
determined after taking into account (1) all increases in
federal, state, local or other Taxes (including estimated Taxes)
payable by the Indemnified Party as a result of the receipt of
the indemnity payment (as a result of the indemnity payment being
included in income, resulting in a reduction of tax basis, or
otherwise); provided, however, that Buyer and Seller agree to
report each payment made in respect of a Loss or Expense as an
adjustment to the Purchase Price for federal income Tax purposes,
(2) all increases in federal, state, local and other Taxes
(including estimated Taxes) payable by the Indemnified Party for
all affected taxable years as a result of the Indemnified Event,
and (3) all reductions in federal, state, local and other Taxes
(including estimated Taxes) payable by the Indemnified Party as a
result of the Indemnified Event.
(b) In any case where an Indemnified Party recovers
from any third Person any amount in respect of a matter with
respect to which an Indemnitor has indemnified it pursuant to
this Article XI, such Indemnified Party shall promptly pay over
to the Indemnitor the amount so recovered (after deducting
therefrom the expenses incurred by it in procuring such
recovery), but not in excess of the sum of (i) any amount
previously so paid by the Indemnitor to or on behalf of the
Indemnified Party in respect of such matter and (ii) any amount
expended by the Indemnitor in pursuing or defending any claim
arising out of such matter.
(c) Except for Buyer's obligations under Sections 7.9
(if any), 8.3(b) and 8.6, fraud and remedies that cannot be
waived as a matter of law and injunctive and provisional relief,
if the Closing occurs, this Article XI shall be the exclusive
remedy for breaches of this Agreement (including any covenant,
obligation, representation or warranty contained in this
Agreement or in any certificate delivered pursuant to this
Agreement), the Accounts Receivable Purchase Agreement (including
any covenant, obligation, representation or warranty of Seller or
SFFC contained therein) or otherwise in respect of the
transactions contemplated hereby or thereby. After the Closing,
Buyer shall not be entitled to a recision of the sale of the
Shares hereunder or a rescission of the sale of the Purchased
Accounts Receivable under the Accounts Receivable Purchase
Agreement.
(d) Without limiting the generality of any other
provision hereof, with respect to all environmental matters
(other than those related to the Excluded Assets and Excluded
Liabilities): (i) the parties agree that their respective rights
and obligations as provided in this Agreement shall supersede any
rights and obligations that any party may have under any existing
or future law; (ii) Seller shall have no liability or obligation
under Section 11.1(a) for breaches of representations and
warranties that relate to the operations of the Companies prior
to Seller's acquisition thereof, or any prior operations on the
Owned Real Property or Leased Real Property, unless the subject
matter of such environmental claim was within the Knowledge of
Seller as of the date hereof; (iii) Seller will not be liable for
the costs of remedial or other actions more extensive than those
required under applicable Environmental Laws in effect on the
date hereof utilizing commercially reasonable and cost effective
measures and utilizing the least stringent cleanup standards
acceptable to relevant Governmental Authorities taking into
account the industrial use of the Owned Real Property or Leased
Real Property; (iv) no claim may be asserted pursuant to Section
11.1(a) to the extent that Losses and Expenses are incurred by
Buyer as a result of any voluntary investigation (unless such
investigation is (A) undertaken only where Buyer has a good faith
reasonable basis to believe that such investigation is necessary
to address a violation of Environmental Laws or (B) consistent
with Buyer's pre-existing environmental policies and standards in
place with respect to its other comparable facilities and is not
undertaken without a legitimate business purpose or in any
significant respect due to the indemnification provided in this
Article XI) or any remedial work not required by Environmental
Laws; and (v) Buyer waives, releases and agrees not to make any
claim or bring any contribution, cost recovery or other action
against Seller or any of its Affiliates or any of their
successors or assigns, under CERCLA, common law or any other
federal, state or local law or regulation now existing or
hereinafter enacted.
(e) The obligations of Seller in respect of a claim
for indemnification under this Article XI shall not include any
special, exemplary, punitive or consequential damages (including
loss of profit or revenue) suffered or incurred by such Buyer
Group Member; provided, however, that the exclusion of special
damages shall not be interpreted to include actual out-of-pocket
damages.
(f) Each of the parties agrees to take all reasonable
steps to mitigate their respective Losses upon and after becoming
aware of any event which could reasonably be expected to give
rise to any Losses that are indemnified hereunder.
(g) Upon making any indemnification payment, the
Indemnitor will, to the extent of such payment, be subrogated to
all rights of the Indemnified Party against any third party in
respect of the Loss to which the payment relates except against a
current customer of the Companies. Without limiting the
generality of any other provision hereof, each such Indemnitor
and Indemnified Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect such
subrogation rights.
(h) Notwithstanding anything to the contrary in this
Agreement, including Section 11.3(b) and Section 11.4(d), in the
event that Seller is obligated to make any payment with respect
to its indemnity obligations in accordance with the terms of this
Article XI, Buyer shall be required to recover such amounts under
the Escrow Agreement (to the full extent of any funds that are on
deposit thereunder) prior to any obligation of Seller to make any
such payment under this Article XI.
ARTICLE XII
TERMINATION
Section 12.1. Termination. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may
be terminated at any time prior to the Closing Date:
(a) By the mutual consent of Buyer and Seller;
(b) By Buyer or Seller if any court of competent
jurisdiction in the United States or other United States
Governmental Body shall have issued a final and non-
appealable order, decree or ruling permanently restraining,
enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby;
(c) By Seller if the Closing shall not have occurred
on or before the first Monday after the date on which the
waiting period under the HSR Act shall expire or terminate;
provided that in the event that the transactions
contemplated hereby receive "early termination" under the
HSR Act, Seller shall have the right to terminate this
Agreement if the Closing shall not have occurred on or
before the first Monday that is at least the third business
day after the date of such early termination of the waiting
period under the HSR Act; provided that the failure to
consummate the Closing on or before such date did not result
from the failure of Seller to fulfill any undertaking or
commitment provided for herein that Seller is required to
fulfill prior to Closing;
(d) By Seller at any time after Buyer or Seller or any
of their respective Affiliates has received a request for
additional information or documentary material pursuant to
15 USC 18(a) (subpart e) and the implementing regulations
thereto (commonly known as a second request); or
(e) By Buyer if the Closing shall not have occurred on
or before July 16, 1999 for any reason other than the
failure of Buyer to fulfill any undertaking or commitment
provided for herein that Buyer is required to fulfill prior
to Closing.
Section 12.2. Notice of Termination. Any party
desiring to terminate this Agreement pursuant to Section 12.1
shall give written notice of such termination to the other party
to this Agreement.
Section 12.3. Effect of Termination. In the event
that this Agreement shall be terminated pursuant to this Article
XII, all further obligations of the parties under this Agreement
(other than the parties' obligations under Sections 12.4, 13.2,
13.3 and 13.10) shall be terminated without further liability of
any party to the other, provided that nothing herein shall
relieve any party from liability for its willful breach of this
Agreement.
Section 12.4. Employees. If this Agreement is
terminated, Buyer agrees that the provisions of the
Confidentiality Agreement relating to Buyer's covenants regarding
the solicitation and hiring of employees of Seller or its
subsidiaries shall survive for the period set forth therein.
ARTICLE XIII
GENERAL PROVISIONS
Section 13.1. Survival. All representations and
warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement
through the period during which claims for indemnification may be
made pursuant to Article XI (at which time all representations
and warranties shall terminate).
Section 13.2. Confidential Nature of Information.
Each party hereto agrees that all documents, materials and other
information which it or its representatives shall have obtained
regarding the other party or its Affiliates during the course of
the negotiations leading to the consummation of the transactions
contemplated hereby (whether obtained before or after the date of
this Agreement), the investigation provided for herein and the
preparation of this Agreement and other related documents shall
be held in confidence pursuant to the Confidentiality Agreement
for the period set forth therein.
Section 13.3. No Public Announcement. Neither Buyer
nor Seller shall, without the approval of the other, make any
press release or other public announcement concerning the
transactions contemplated by this Agreement, except as and to the
extent that any such party shall be so obligated by law, in which
case the other party shall be advised and the parties shall use
their commercially reasonable best efforts to cause a mutually
agreeable release or announcement to be issued; provided,
however, that the foregoing shall not preclude communications or
disclosures necessary to implement the provisions of this
Agreement or to comply with the accounting and SEC disclosure
obligations or the rules of any securities exchange.
Section 13.4. Notices. All notices or other
communications required or permitted hereunder shall be
sufficiently given for all purposes hereunder if in writing and
delivered personally, sent by documented overnight delivery
service or, to the extent receipt is confirmed telephonically,
telecopy or other electronic transmission service, or after seven
(7) days if mailed by registered or certified mail to the
appropriate address or number set forth below:
If to Buyer, to:
IBP, inc.
P.O. Box 515
IBP Avenue
Dakota City, Nebraska 68731
Attention: Larry Shipley
President IBP Enterprise and
Chief Financial Officer
Telephone No.: (402) 241-3000
Telecopy No.: (402) 241-2946
with a copy to:
IBP, inc.
P.O. Box 515
IBP Avenue
Dakota City, Nebraska 68731
Attention: Nate Hodne
Senior Corporate Attorney
Telephone No.: (402) 241-2121
Telecopy No.: (402) 241-2427
If to Seller, to:
Specialty Foods Corporation
520 Lake Cook Road
Suite 550
Deerfield, Illinois 60015
Attention: David E. Schreibman
Vice President and General Counsel
Telephone No.: (847) 267-3037
Telecopy No.: (847) 405-5310
with a copy to:
Sidley & Austin
One First National Plaza
Attention: Kevin F. Blatchford
Telephone No.: (312) 853-7000
Telecopy No.: (312) 853-7036
or to such other address or number or such other person as such
party may indicate by a notice delivered to the other party
hereto.
Section 13.5. Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns;
provided, however, that neither this Agreement nor any rights,
interests or obligations under this Agreement shall be assigned
by any of the parties hereto without the express written consent
of the other parties hereto; provided, further, that Buyer may
assign its rights and interests under this Agreement to any
direct or indirect wholly owned subsidiary of Buyer (but no such
assignment shall relieve Buyer of any of its duties or
obligations hereunder). Except for Article XI, which is intended
to benefit, and to be enforceable by, the parties specified
therein, including any Buyer Group Member and any Seller Group
Member, as the case may be, nothing in this Agreement, expressed
or implied, is intended or shall be construed to confer upon any
Person other than the parties and successors and assigns
permitted by this Section 13.5 any right, remedy or claim under
or by reason of this Agreement.
Section 13.6. Access to Records after Closing. Buyer
agrees, and agrees to cause the Companies, for a period of six
years from the Closing Date, to hold all of the books and records
of or pertaining to the Companies existing on the Closing Date
and not to destroy or dispose of any such books and records. If
at any time Buyer proposes to destroy or dispose of any of such
books and records, Buyer agrees, and agrees to cause the
Companies, to offer first in writing at least sixty (60) days
prior to such proposed destruction or disposition to surrender
them to Seller. Buyer agrees, and agrees to cause the Companies,
at any time and from time to time following the Closing Date to
afford Seller, its accountants, and counsel, during normal
business hours, upon reasonable request, full access to such
books, records and other data and to the employees engaged in the
Business or any successor thereto to the extent that such access
may be requested for any legitimate purpose, including the
preparation of Tax Returns, the operations of the Business prior
to the Closing Date and any dispute or controversy arising out of
this Agreement, at no cost to Seller (other than for reasonable
out-of-pocket expenses); provided, however, that nothing herein
shall limit any of Seller's or its Affiliates' rights of
discovery. For a period of six years after the Closing, Buyer
will make available, and will cause the Companies to make
available, to Seller the employees of the Companies whom Seller
and its Affiliates may reasonably need in order to defend or
prosecute any legal or administrative action to which Seller or
any of its Affiliates is, or is threatened to be made, a party
and which relates to the conduct of the Business prior to the
Closing. Seller agrees to, and shall cause its accountants,
counsel and other representatives to, hold in confidence and not
to use except for the purposes provided above all books, records
and other data of the Companies, except to the extent the
disclosure of any information is required in connection with the
purposes for which such information is sought and then (except
with respect to any disclosure relating to Requirements of Law)
only after giving notice to Buyer of the portions to be disclosed
and the Person to whom such information is to be disclosed. If
Buyer reasonably requests, Seller will use its reasonable efforts
to maintain the confidentiality of such information to be filed
or provided to any other Person.
Seller agrees, for a period of six years from the
Closing Date, to hold all of the books and records of or
pertaining to the Companies existing on the Closing Date that are
retained by Seller and not to destroy or dispose of any such
books and records. If at any time Seller proposes to destroy or
dispose of any of such books and records, to offer first in
writing at least sixty (60) days prior to such proposed
destruction or disposition to surrender them to Buyer. Seller
agrees at any time and from time to time following the Closing
Date to afford Buyer, its accountants, and counsel, during normal
business hours, upon reasonable request, full access to such
books, records and other data to the extent that such access may
be requested for any legitimate purpose at no cost to Buyer
(other than for reasonable out-of-pocket expenses); provided,
however, that nothing herein shall limit any of Buyer's or its
Affiliates' rights of discovery.
Section 13.7. Entire Agreement; Amendments. This
Agreement, the Exhibits and Schedules referred to herein and the
documents delivered pursuant hereto (including all Buyer or
Seller Ancillary Agreements) and the Confidentiality Agreement
and the Accounts Receivable Purchase Agreement contain the entire
understanding of the parties hereto with regard to the subject
matter contained herein or therein, and supersede all other prior
agreements, understandings or letters of intent between or among
any of the parties hereto (whether written or oral). This
Agreement shall not be amended, modified or supplemented except
by a written instrument signed by an authorized representative of
each of the parties hereto.
Section 13.8. Interpretation. (a) Articles, titles
and headings to sections herein are inserted for convenience of
reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. All references
to sections or articles contained herein mean sections or
articles of this Agreement unless otherwise stated. The
Schedules and Exhibits referred to herein shall be construed with
and as an integral part of this Agreement to the same extent as
if they were set forth verbatim herein. Disclosure of any fact
or item in any Schedule hereto referenced by a particular section
in this Agreement shall be deemed to have been disclosed with
respect to every other section in this Agreement to the extent
that it is reasonably apparent from the face of such Schedule
that such disclosure relates to any other Section of this
Agreement. Neither the specification of any dollar amount in any
representation or warranty contained in this Agreement nor the
inclusion of any specific item in any Schedule hereto is intended
to vary the definition of "Material Adverse Effect" or to imply
that such amount, or higher or lower amounts, or the item so
included or other items, are or are not material, and no party
shall use the fact of the setting forth of any such amount or the
inclusion of any such item in any dispute or controversy between
the parties as to whether any obligation, item or matter not
described herein or included in any Schedule is or is not
material for purposes of this Agreement. Unless this Agreement
specifically provides otherwise, neither the specification of any
item or matter in any representation or warranty contained in
this Agreement nor the inclusion of any specific item in any
Schedule hereto is intended to imply that such item or matter, or
other items or matters, are or are not in the ordinary course of
business, and no party shall use the fact of the setting forth or
the inclusion of any such item or matter in any dispute or
controversy between the parties as to whether any obligation,
item or matter not described herein or included in any Schedule
is or is not in the ordinary course of business for purposes of
this Agreement. Seller may, from time to time prior to or at the
Closing, by notice in accordance with the terms of this
Agreement, supplement, amend or create any Schedule, in order to
add information with respect to any fact, circumstance or event
that has arisen or occurred on or after the date of this
Agreement. No such amendment shall be evidence, in and of
itself, that the representations and warranties in the
corresponding section are no longer true and correct in all
material respects. It is specifically agreed that such Schedules
may be so amended to add immaterial, as well as material, items
thereto. No such supplemental, amended or additional Schedule
shall be deemed to cure any breach for purposes of Section 9.1.
In the event that Seller amends or supplements any existing
Schedule or adds a Schedule on a date which is less than two
business days prior to the Closing, Buyer shall have the right to
extend the Closing Date to no later than the second business day
after the date of the receipt thereof in order to evaluate such
amended or supplemented or additional Schedule. If, however, the
Closing occurs, any such supplement, amendment or addition will
be effective to cure and correct for all other purposes any
breach of any representation, warranty or covenant which would
have existed if Seller had not made such supplement, amendment or
addition, and all references to any Schedule hereto which is
supplemented or amended as provided in this Section 13.8 shall
for all purposes after the Closing be deemed to be a reference to
such Schedule as so supplemented or amended.
(b) For the purposes of this Agreement, (i) words in
the singular shall be held to include the plural and vice versa
and words of one gender shall be held to include the other
genders as the context requires, (ii) the terms "hereof",
"herein" and "herewith" and words of similar import shall be
construed to refer to this Agreement in its entirety and to all
of the Schedules and not to any particular provision, unless
otherwise stated, and (iii) the term "including" shall mean
"including without limitation." The use of the phrase
"reasonable efforts" in provisions relating to the obligations of
any of the parties to seek required consents and approvals of any
Person shall in no event contemplate payment of any amount to any
such Person that is more than minimal or the incurrence of any
liability or the agreement to the modification of any existing
obligation or arrangement in a manner that would be adverse in
any material respect to any party hereto in order to obtain any
such consent or approval.
(c) This Agreement shall be construed without regard
to any presumption or rule requiring construction or
interpretation against the party drafting or causing any
instrument to be drafted.
Section 13.9. Waivers. Any term or provision of this
Agreement may be waived, or the time for its performance may be
extended, by the party or parties entitled to the benefit
thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any
party, it is authorized in writing by an authorized
representative of such party. The failure of any party hereto to
enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the
right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be
held to constitute a waiver of any other or subsequent breach.
Section 13.10. Expenses. Except as set forth in this
Agreement, whether or not the Closing is consummated, each party
hereto will pay all costs and expenses incident to its
negotiation and preparation of this Agreement and to its
performance and compliance with all agreements and conditions
contained herein on its part to be performed or complied with,
including the fees, expenses and disbursements of its counsel and
independent public accountants.
Section 13.11. Partial Invalidity. Wherever possible,
each provision hereof shall be interpreted in such manner as to
be effective and valid under applicable law, but in case any one
or more of the provisions contained herein shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect,
such provision shall be ineffective to the extent, but only to
the extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions
hereof, unless such a construction would be unreasonable.
Section 13.12. Execution in Counterparts. This
Agreement may be executed in one or more counterparts, each of
which shall be considered an original instrument, but all of
which shall be considered one and the same agreement, and shall
become binding when one or more counterparts have been signed by
each of the parties hereto and delivered to Seller and Buyer.
Section 13.13. Further Assurances. On and after the
Closing Date each party hereto shall take such other actions and
execute such other documents and instruments of conveyance and
transfer as may be reasonably requested by the other party hereto
from time to time to effectuate or confirm the transfer of the
Shares to Buyer in accordance with the terms of this Agreement.
SECTION 13.14. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO ANY CONFLICT OF
LAW PROVISIONS.
Section 13.15. Disclaimer of Warranties. EXCEPT AS TO
THOSE MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND
WARRANTIES IN THIS AGREEMENT AND THE CERTIFICATE DELIVERED BY
SELLER PURSUANT TO SECTION 4.4, SELLER IS SELLING THE SHARES (AND
THE BUSINESS AND ASSETS OF THE COMPANIES REPRESENTED THEREBY) ON
AN "AS IS, WHERE IS" BASIS AND SELLER DISCLAIMS ALL OTHER
WARRANTIES, REPRESENTATIONS AND GUARANTIES WHETHER EXPRESS OR
IMPLIED. SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AND NO
IMPLIED WARRANTIES WHATSOEVER. Buyer acknowledges that neither
Seller nor any of its representatives nor any other Person has
made any representation or warranty, express or implied, as to
the accuracy or completeness of any memoranda, charts, summaries,
schedules, projections, forecasts or forward-looking information
heretofore made available or provided by Seller or its
representatives to Buyer or any other information which is not
included in this Agreement or the Schedules hereto, and neither
Seller nor any of its representatives nor any other Person will
have or be subject to any liability to Buyer, any Affiliate of
Buyer or any other Person resulting from the distribution of any
such information to, or use of any such information by, Buyer,
any Affiliate of Buyer or any of their agents, consultants,
accountants, counsel or other representatives.
Section 13.16. Submission to Jurisdiction. Seller and
Buyer hereby irrevocably submit in any suit, action or proceeding
arising out of or related to this Agreement, the Accounts
Receivable Purchase Agreement or the Escrow Agreement or any of
the transactions contemplated hereby or thereby to the
jurisdiction of the United States District Court for the Northern
District of Illinois and the jurisdiction of any court of the
State of Illinois located in Chicago and waive any and all
objections to jurisdiction that they may have under the laws of
the State of Illinois or the United States.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
IBP, inc.
By: /s/ LARRY SHIPLEY
___________________________
Name: Larry Shipley
Title: President IBP
Enterprise and Chief Financial
Officer
SPECIALTY FOODS CORPORATION
By: /s/ DAVID E. SCHREIBMAN
___________________________
Name: David E. Schreibman
Title: Vice President
and General Counsel
EXHIBIT 10.87
Execution Copy
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), effective as of May
1, 1999, among SPECIALTY FOODS ACQUISITION CORPORATION, a
Delaware corporation ("SFAC"), SPECIALTY FOODS CORPORATION, a
Delaware corporation ("SFC"), METZ BAKING COMPANY, a Delaware
Corporation ("Metz"), MOTHER'S CAKE AND COOKIE CO., a California
corporation ("Mother's"), ARCHWAY COOKIES, L.L.C., a Delaware
limited liability company ("Archway") and ANDRE-BOUDIN BAKERIES,
INC., a California corporation ("Boudin") and DAVID E. SCHREIBMAN
(the "Executive"). SFAC and SFC are sometimes referred to herein
as the "Parent Companies" and SFAC, SFC, Metz, Mother's, Archway
and Boudin are each sometimes herein referred to individually as
an "Employer" and are sometimes referred to collectively as the
"Employers."
The Employers wish to employ the Executive, and the
Executive wishes to accept such employment, on the terms and
conditions set forth in this Agreement.
Accordingly, the Employers and the Executive hereby agree as
follows:
1. Employment, Duties and Acceptance.
1.1 Employment Duties. The Employers hereby employ
the Executive for the Term (as defined in Section 2), to render
exclusive and full-time services to the Employers, as Vice
President, Secretary and General Counsel of the Parent Companies,
and to perform such other duties (consistent with the customary
duties of a corporate officer) as may be assigned to the
Executive by the Board of Directors (collectively, the "Boards")
or Chief Executive Officer of the Parent Companies.
1.2 Acceptance. The Executive hereby accepts such
employment and agrees to render the services described above.
During the Term, the Executive agrees to devote the Executive's
entire business time, energy and skill to such employment, and to
use the Executive's best efforts, skill and ability to promote
the Employers' interests. The Executive further agrees to accept
election, and to serve during all or any part of the Term, as an
officer or director of any Employer or any subsidiary of any
Employer, without any compensation therefor other than that
specified in this Agreement, if elected to any such position by
the shareholders of any Employer, the Boards or the shareholders
or Board of Directors of any such subsidiary, as the case may be.
2. Terms of Employment.
2.1 The Term. The term of the Executive's employment
under this Agreement (the "Term") shall commence on January 1,
1999 (the "Effective Date") and shall, unless sooner terminated
pursuant to Section 2.3 hereof, end on December 31, 2000 or on
such later December 31 to which the Term is extended pursuant to
Section 2.2.
2.2 Extension. On June 30 of each calendar year
starting with June 30, 2000, the then scheduled expiration date
of the Term shall automatically be extended, without any action
required of either the Executive or the Employers, for twelve
additional months, unless the Executive, on the one hand, or the
Employers, on the other hand, shall have given written notice of
non-extension to the other no later than such June 30. If such
written notice of non-extension is given, the Term shall end on
the then-scheduled termination date (taking into account any
previous extensions pursuant to this Section 2.2). By way of
example, unless written notice of non-extension is given by June
30, 2000, the otherwise scheduled expiration date of December 31,
2000 shall be extended to December 31, 2001.
2.3 Early Termination. The Term shall end earlier
than the December 31 termination date scheduled in accordance
with the foregoing provisions of this Articles 2, if sooner
terminated pursuant to Article 4.
3. Compensation; Benefits.
3.1 Salary. As compensation for all services to be
rendered pursuant to this Agreement, the Employers agree to pay
the Executive during the 12 months of the Term ending on December
31, 1999, a base salary at an annual rate of $250,000 (the "Base
Salary") beginning May 1, 1999. The annual Base Salary rate may
be increased from time to time, in the sole discretion of the
Boards.
3.2 Bonus. In addition to the amounts to be paid to
the Executive pursuant to Section 3.1, the Executive will be
eligible to receive with respect to each fiscal year of the
Employers commencing with their fiscal year ending December 31,
1999, an incentive bonus (the "Incentive Bonus") equal to a
percentage of Base Salary for such fiscal year based on the
achievement of the Employers of performance targets ("Performance
Targets") to be set in the beginning of such fiscal year by the
compensation committee of the Boards, such that if the minimum
Performance Target is not achieved, the Incentive Bonus shall be
zero; if the intermediate Performance Target is achieved, the
Incentive Bonus shall be equal to 50% of Base Salary; and if the
maximum Performance Target is achieved, the Incentive Bonus shall
be equal to 100% of Base Salary (provisions for pro rata
Incentive Bonus amounts for achievements between the minimum
Performance Target and the intermediate Performance Target or
between the intermediate Performance Target and the maximum
Performance Target, as the case may be, shall also be
established). The Incentive Bonus for each fiscal year shall be
paid to the Executive within 30 days of the receipt by the
Employers of their audited financial statements for such fiscal
year.
3.3 Business Expenses. The Employers shall pay or
reimburse the Executive for all reasonable expenses actually
incurred or paid by the Executive during the Term in the
performance of the Executive's services under this Agreement,
upon presentation of expense statements or vouchers or such other
supporting information as the Employers customarily require of
their other senior executives.
3.4 Vacation. During the Term, the Executive shall be
entitled to a paid vacation period or periods taken in accordance
with the vacation policy of the Employers during each year of the
Term; provided, that the Executive shall be entitled to not less
than four (4) weeks paid vacation for each year of the Term.
3.5 Fringe Benefits; Securities Investment; Stock
Options.
3.5.1 Benefits. During the Term, the Executive
shall be entitled to all benefits for which the Executive shall
be eligible under any long term incentive plan, qualified pension
plan, 401(k) plan, annuity plan, group insurance plan or other so-
called "fringe" benefit plan which the Parent Companies provide
to their executive officers generally, including, without
limitation, the SFC Executive Retirement Annuity Plan. In
addition, the Employers shall pay the reasonable fees in
connection with personal financial counseling on behalf of the
Executive, including fees relating to tax return preparation.
3.5.3 Management Option and Bonus. The Executive
shall continue to participate in the management stock option plan
(the "Option Plan") of the Employers.
3.6 Automobile. In addition, the Executive will
receive an automobile allowance of $1,100.00 per month during the
term of this Agreement.
3.7 Withholding. All compensation of the Executive by
the Employers provided for in this Agreement, whether in the form
of cash, securities or "fringe" benefits, shall be subject to
such deductions or amounts to be withheld as required by
applicable law and regulations. Whenever compensation provided
for under this Agreement is to be delivered to the Executive in a
form other than cash, the Employers may require as a condition of
delivery that the Executive remit to the Employers an amount
sufficient to satisfy all federal, state and other governmental
withholding tax requirements related thereto. If the
compensation referred to in the preceding sentence is in the form
of securities (whether by the vesting of securities or
otherwise), the Employers shall, if the Executive so requests and
the Employers consent (such consent not to be withheld
unreasonably), satisfy the requirements of the preceding
sentence, to the extent permitted by applicable law, by deducting
from the number of securities otherwise deliverable to the
Executive, a number of securities having a fair market value
equal to the amount required to satisfy all federal, state and
other governmental withholding tax requirements related thereto.
3.8 Sources of Payment; Joint and several obligations;
Nature of Certain Payments. Any amounts payable to or on behalf
of the Executive under this Agreement shall be paid by the
Employers on an allocated basis in accordance with the services
rendered by the Executive to each Employer; provided that the
Employers shall be jointly and severally liable for all amounts
payable to or on behalf of the Executive hereunder. No payment
made to the Executive pursuant to Section 3.9 shall be deemed,
for any purpose, a payment of purchase price for Common Stock or
Subordinate Debentures.
3.9 Certain Additional Payments by the Employers.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event that (i) a Section 280G Change (as
defined below) occurs and (ii) any payment, distribution, other
compensation or benefit by any Employer to (or for the benefit
of) the Executive pursuant to the terms of this Agreement or any
other plan or agreement in which the Executive participates, as
now in effect or as amended from time to time (hereinafter, a
"Payment"), is determined (as hereinafter provided) to be subject
to the tax (the "Excise Tax") imposed by Section 4999 of the Code
(or any similar tax that may hereafter be imposed), the Employers
shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments (as
defined below) and any federal, state and local income tax and
Excise Tax upon the additional amount provided for by this
paragraph (a), shall be equal to the Total Payments; provided,
however, that the aggregate payments required to be paid to or
for the benefit of the Executive pursuant to this Section 3.9
shall not exceed 400% of the Base Salary in effect pursuant to
Section 3.1 in the year in which the Section 280G Change occurs,
plus an amount equal to the interest and penalties, if any,
attributable to the portion of the Excise Tax for which the Gross-
Up Payment, as limited by this provision, reimburses the
Executive.
(b) Subject to the provisions of Section 3.9(c),
all determinations required to be made under this Section 3.9
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and, subject to the provisions
below, the assumptions to be utilized in arriving at such
determination, shall be made by KPMG Peat Marwick (or other
independent auditor of the Employers at the time) (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Employers and the Executive within 15
business days of the receipt of notice from the Executive that
there has been a Payment with respect to which a Gross-Up Payment
is owing, or such earlier time as is requested by the Employers.
All fees and expenses of the Accounting Firm shall be paid solely
by the Employers. Any Gross-Up Payment, as determined pursuant
to this Section 3.9, shall be paid by the Employers to the
Executive within five business days of the receipt of the
Accounting Firm's determination. The parties acknowledge that
unless the Accounting Firm is able to provide the Executive with
the opinion described in the third following sentence with
respect to such Payment, the Accounting Firm shall determine the
amount of the Gross-Up Payment that is due at the time of any
Payment. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a
written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result
in the imposition of the negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the
Employers and the Executive. The parties hereto acknowledge
that, as a result of uncertainty in the application of Section
4999 of the Code, it is possible that Gross-Up Payments will not
have been made by the Employers that should have been made
(hereinafter, an "Underpayment"), consistent with the provisions
of this Section 3.9. In the event that the Executive is required
to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Employers to
or for the benefit of the Executive, unless the Executive has
failed to comply with Section 3.9(c) and such failure has
materially deprived the Employers of the right to contest any
claim by the Internal Revenue Service with respect to such
payments.
For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation for the calendar year in which the Gross-up Payment is
to be made and the applicable state and local taxes at the
highest marginal rate of taxation for the calendar year in which
the Gross-Up Payments is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of
such state and local taxes.
(c) The Executive shall notify the Employers in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Employers of a Gross-
Up Payment. Such notification shall be given as soon as
practicable but, in any event, no later than ten business days
after the Executive is informed in writing of such claim and
shall apprise the Employers of the nature of such claim and the
date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the
Employers (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Employers notify the Executive in writing prior to the expiration
of such period that they desire to contest such claim, and if the
Employers acknowledge in writing their liability, subject to the
limitations set forth in Section 3.9(a), to the Executive
pursuant to this Section 3.9 with respect to any amounts payable
in connection with such claim, the Executive shall:
(i) give the Employers any information
reasonably requested by the Employers and reasonably
available to the Executive relating to such claim;
(ii) take all such actions in
connection with contesting such claim as the Employers
shall reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney selected by the Employers and agreeing to
extend the statute of limitations as requested by the
Employers;
(iii) cooperate with the Employers in
good faith in order to effectively contest such claim;
and
(iv) permit the Employers to
participate in any proceeding related to such claim;
provided, however, that the Employers shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation of the foregoing provisions of this Section 3.9(c),
the Employers shall control all proceedings taken in connection
with such contest and, at their sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at their sole option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Employers shall determine; provided, however, that
if the Employers direct the Executive to pay such claim and sue
for a refund, the Employers shall advance the amount of such
payment to the executive, on an interest-free, after-tax basis.
Furthermore, the Employers' control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Employers pursuant to Section 3.9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Employers'
complying with the requirements of Section 3.9(c)), promptly pay
to the Employers the amount of such refund (together with any
interest received or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Employers pursuant to Section 3.9(c), a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Employers do not
notify the Executive in writing of their intent to contest such
denial of refund prior to the expiration of 30 days after such
determination, then to the extent of the Gross-Up Payment such
advance shall be forgiven and shall not be required to be repaid
and shall, to such extent, offset the amount of Gross-Up Payment
required to be paid, and the remaining portion of such advance
shall forthwith become due and payable.
(e) For purposes of this Agreement:
A "Section 280G Change" shall mean a "change
. . . in the ownership or effective control" of either Employer
or a "change . . . in the ownership of a substantial portion of
the assets" of either Employer, in each case within the meaning
of Section 280G(b)(2)(A)(i) of the Code.
A "Public Offering" shall mean an initial
public offering of stock of either Employer if at any time
thereafter stock of either Employer is "readily tradable on an
established securities market or otherwise" (within the meaning
of Section 280G(b)(5)(A)(ii) of the Code).
"Total Payments" shall mean any payments or
benefits received or to be received by the Executive under this
Agreement or any other plan or agreement in which the Executive
participates, as now in effect or as amended from time to time,
including the plans discussed in Section 3.5.3.
3.10 Performance Based Compensation. It is the
intention of the parties that, if Section 162(m) of the Code is
or will be applicable with respect to one or more payments
hereunder, the Executive will consider in good faith any requests
by the Employers to take actions to cause such payments to meet
the requirements of Section 162(m)(4)(B) or (C) of the Code, and
thus to be excluded from the definition of "applicable employee
remuneration" within the meaning of Section 162(m)(4) of the
Code.
4. Termination.
4.1 Death. If the Executive shall die during the
Term, upon the date of the Executive's death the Term shall
terminate and no further amounts or benefits shall be payable
hereunder, except that the Employers shall be obligated to pay to
the Beneficiary (as defined below) in exchange for a release in
form and substance acceptable to the Employers acting reasonably,
within 60 days of the date of the Executive's death, (i) all
unpaid Base Salary accrued through and including the date of the
Executive's death, (ii) a lump sum amount equal to Base Salary
for one year, at the rate in effect on the date of the
Executive's death (the "Annual Base Salary Upon Death"), and
(iii) an additional lump sum bonus amount equal to the sum of (x)
50% of Annual Base Salary Upon Death and (y) 50% of Annual Base
Salary Upon Death pro rated for the period commencing on the
first day of the fiscal year during which the Executive's death
occurred and ending on the date of Executive's death; it being
understood that such 50% bonus level has been agreed to because
it is impossible to determine the performance of the Employers
for future periods. The "Beneficiary" shall be (i) the
beneficiary designated by the Executive on a form prescribed for
such purpose by the Employers, or (ii) in the absence of such
designation, the Executive's executor or legal representative, in
such capacity.
4.2 Disability.
4.2.1 If during the Term the Executive shall
become physically or mentally disabled, whether totally or
partially, such that the Executive is unable to perform the
Executive's services hereunder for (i) a period of six
consecutive months, or (ii) for shorter periods aggregating six
months during any twelve month period, the Employers may on any
day (the "Disability Termination Date") after the last day of the
six consecutive months of disability or the day on which the
shorter periods of disability shall have equaled an aggregate of
six months (but, in each case, before the Executive has recovered
from such disability), by written notice to the Executive,
terminate the Term (a "Disability Termination") and no further
amounts or benefits shall be payable hereunder, except that the
Employers shall be obligated to pay to the Executive in exchange
for a release in form and substance acceptable to the Employers
acting reasonably, within 60 days of the Disability Termination
Date, (i) all unpaid Base Salary accrued through and including
the Disability Termination Date, (ii) a lump sum amount equal to
Base Salary for one year, at the rate in effect on the Disability
Termination Date (the "Annual Base Salary Upon Disability"), and
(iii) an additional lump sum bonus amount equal to the sum of (x)
50% of Annual Base Salary Upon Disability and (y) 50% of Annual
Base Salary Upon Disability prorated for the period commencing on
the first day of the fiscal year during which the Disability
Termination occurred and ending on the Disability Termination
Date; it being understood that such 50% bonus level has been
agreed to because it is impossible to determine the performance
of the Employers for future periods. If the Executive shall die
before receiving all amounts required to be paid by the Employers
in accordance with the foregoing, such amounts shall be paid to
the Beneficiary.
4.3 Cause; Voluntary Termination.
4.3.1 In the event of the conviction of the
Executive of any felony involving intentional conduct on the part
of the Executive, the conviction of the Executive of any lesser
crime or offense involving the illegal use or conversion of
property of the Employers or any of their subsidiaries or
affiliates, the willful misconduct by the Executive in connection
with the performance of the Executive's duties hereunder (which
shall not be deemed to include an action by the Executive taken
in good faith in the best interest of the Employers) or the
continued breach by the Executive of any material provision of
this Agreement after notice of such breach has been actually
received by the Executive from the Employers (the "deemed
receipt" provisions of Article 8 hereof being inapplicable to
this Section 4.3.1), the Employers may at any time, by written
notice to the Executive, terminate the Term (a "Termination For
Cause"), and upon such Termination For Cause, the Term shall
terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive in exchange
for a release in form and substance acceptable to the Employers
acting reasonably, within 60 days of the date of termination, all
unpaid Base Salary accrued, and provide the Executive with all
benefits and expense reimbursement to which the Executive would
otherwise be entitled, through and including the date of
termination.
4.3.2. Upon a voluntary termination of the term
by the Executive (a "Voluntary Termination") without Good Reason
(as defined in Section 4.4.2), the Term shall terminate and the
Executive shall be entitled to receive no further amounts or
benefits hereunder; provided, that the Employers shall be
obligated to pay to the Executive in exchange for a release in
form and substance acceptable to the Employers acting reasonably,
within 60 days of the date of termination, all unpaid Base Salary
accrued, and provide the Executive with all benefits and expense
reimbursement to which the Executive would otherwise be entitled,
through and including the date of termination.
4.4 Termination by Employers Without Cause;
Termination by the Executive for Good Reason.
4.4.1 Upon a Termination Without Cause (as
defined below) or a Voluntary Termination with Good Reason (as
defined below):
(a) the Employers shall pay to the
Executive, within 60 days of the date of termination, all unpaid
Base Salary accrued, and provide the Executive with all benefits
and expense reimbursement to which the Executive would otherwise
be entitled, through and including the date of termination,
(b) subject to Sections 4.4.4, the Employers
shall, in exchange for a release in form and substance acceptable
to the Employers acting reasonably, pay the following to the
Executive:
(i) the Employers shall continue
payments of Base Salary to the Executive (the
"Continued Salary"), at the rate and at such times as
are in effect on the date of termination (the "Base
Salary Upon Termination"), for the 12 month period
following the date of termination (the "Payment
Period"), except as provided in Section 4.4.4,
(ii) the Employers shall continue
health and life insurance benefits during the Payment
Period (the "Continued Benefits"), and
(iii) the Employers shall pay
to the Executive, at the end of the Payment Period, a
bonus (the "Continued Bonus," and together with the
Continued Salary and the Continued Benefits, the
"Continued Payments") in an amount equal to 50% of the
aggregate base salary paid to the Executive during the
period commencing on the day after the last day of the
last fiscal year completed prior to the date of
termination and ending on the last day of the Payment
Period; it being understood that such 50% bonus level
has been agreed to because it is impossible to
determine the performance of the Employers for future
periods,
4.4.2 Definitions:
(a) "Termination Without Cause" means the
termination of the Term by the Employer for reasons other than
those described in Sections 4.1, 4.2 or 4.3.
(b) "Good Reason" means:
(i) the continuation of any of the
following (without the Executive's express prior
consent) after written notice provided by the Executive
and failure by the Employers to remedy such event
within thirty (30) days after receipt of such notice:
(A) a reduction in the
Executive's Base Salary, as in effect at the date
hereof pursuant to Section 2.2 or as in effect
pursuant to increases from time to time made
during the Term;
(B) failure by the Employers
to pay to the Executive an Incentive Bonus, as
provided for in this Agreement;
(C) a failure by the
Employers to provide any benefit or compensation
plan (including any pension, profit sharing,
annuity, life insurance, health, accidental death
or dismemberment or disability plan), or any
substantially similar benefit or compensation
plan, which has been made available to other
comparable executives of the Employers on terms no
less favorable to the Executive than the terms
offered to such other executives; provided,
however, that nothing in this clause (iii) shall
be construed to mean that the Employers shall be
constrained from amending or eliminating any
benefit or compensation plan as such is applied to
the Executive and to other comparable executives
of the Employers; provided, further, that a
failure by the Employers to include the Executive
in any stock option plan or bonus plan shall not
constitute Good Reason hereunder;
(D) the assignment to the
Executive of any duties materially inconsistent
with the Executive's position as Vice President,
Secretary and General Counsel of the Parent
Companies;
(E) a materially adverse
change in the Executive's title or the line of
authority through which the Executive is required
to report, it being understood that the Executive
shall at all times report to the Chief Executive
Officer of the Parent Companies;
(F) failure by the Employers
to obtain the written agreement of any successor
in interest to the business of the Employers to
assume and perform the obligations of the
Employers under this Agreement;
(G) a relocation of the
corporate headquarters of the Employers requiring
the Executive to relocate to a place other than
the greater Chicago, Illinois metropolitan area;
or
(H) any material breach of
this Agreement by the Employers; or
(ii) termination at the Election of
the Executive within 180 days following a Change of
Control (as defined in Section 4.4.6).
4.4.3 In the event of a Termination Without Cause
or a Voluntary Termination for Good Reason, the Executive shall
not be required to mitigate his damages hereunder; provided,
however, that, notwithstanding the foregoing, if there are any
damages hereunder by reason of the events of termination
described above which are "contingent on" a Section 280G Change
in the meaning of Section 280G(b)(2)(A) of the Code after a
Public Offering (i) the Executive shall be required to mitigate
such damages hereunder, including any such damages theretofore
paid, but not in excess of the extent, if any, necessary to
prevent the Employers from losing any tax deductions to which
they would otherwise be entitled in connection with such damages
if they were not so "contingent on" a Section 280G Change
(provided, that, the parties agree that this clause (i) shall not
require the Executive to violate Section 5.2 hereof) and (ii) in
addition to any obligation under the preceding clause (i), and
without duplication of any amounts required to be paid to the
Employers thereunder, if any such termination occurs and the
Executive, whether or not required to mitigate his damages under
clause (i) above, thereafter obtains other employment, the total
compensation received in connection with such other employment,
whether paid to the Executive or deferred for his benefit, for
services prior to the end of the Modified Payment Period (as
defined below) (up to the aggregate amount of damages described
in Section 4.4.1(b)) shall be paid over to the Employers as
received with respect to such period. Notwithstanding the
provisions of this Section 4.4.3, the Employers shall not have
the right to enforce their rights under this Section 4.4.3 by set
off against or by otherwise withholding any amounts receivable by
the Executive (or payable on the Executive's behalf) under this
Agreement upon or following the time at which they are required
to be paid under this Agreement.
4.4.4 In the event that any amounts or other
benefit payable pursuant to Section 4.4 or 4.5 (including, but
not limited to, the Continued Payments, the receipt of any
security upon the exercise of any Option, or the lapse of any
direct or indirect restriction on the ability to transfer any
such security for the fair market value thereof) would be deemed
"contingent on" a Section 280G Change (within the meaning of
Section 280G(b)(2)(A) of the Code) that occurs subsequent to a
Public Offering:
(a) the Continued Salary shall be paid, the
Continued Bonus shall be calculated by reference to and the
Continued Benefits shall be provided for the shorter of (i) 12
months following the date of termination, and (ii) the remainder
of the Term (even if such remaining period is less than twelve
months) (the "Modified Payment Period"), and
(b) the Continued Salary and the Continued
Bonus (as modified in clause (a) of this Section 4.4.4) shall be
paid to the Executive by the Employers, within 60 days of the
date of termination, in a lump sum, which lump sum shall be
discounted to the present value, on the date of payment, of the
Continued Salary (as if paid at the times the Base Salary would
have been paid to the Executive under Section 2.2 if the
Executive had been employed by the Employers during the Modified
Payment Period) and the Continued Bonus (as if paid on the last
day of the Modified Payment Period) at the Discount Rate.
"Discount Rate" shall mean the discount rate described in Section
280G(d)(4) of the Code. The parties hereby elect, to the extent
permitted for purposes of such Section 280G(d)(4), to base the
Discount Rate on the applicable federal rate in effect on the
date hereof.
4.4.5 It is the intention of the parties that, if
there has been a Public Offering and a Section 280G Change
occurs, payments to be made to the Executive in the event of a
Termination Without Cause or a Voluntary Termination for Good
Reason qualify as "reasonable compensation for personal services
to be rendered on or after the date of the change" within the
meaning of Section 280G(b)(4)(A) of the Code and Q&A 42(b) of
Proposed Regulation Section 1.280G-1 thereunder (as amended from
time to time), and the provisions of this Agreement shall, in the
event of any ambiguity, be interpreted in a manner consistent
with the foregoing.
4.4.6 A "Change of Control" shall, for the purposes of
this Agreement, be deemed to have occurred upon the date, if any,
at which (i) with respect to SFAC, a person or group (as such
term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) other than Acadia Partners, L.P., Keystone,
Inc., HWP Partners, L.P. and their respective Affiliates (as
defined in Section 2.1(a) of the Principal Stockholders
Agreement) (such person or group being a Non- Affiliate) has the
collective ability to directly or indirectly designate a majority
of the members of the SFAC Board (whether by contract or
otherwise) or (ii), with respect to SFC, a transaction (including
a sale, merger or other similar transaction, but excluding any
transaction among only SFAC, SFC and/or their subsidiaries) (x)
pursuant to which all or substantially all of the assets of SFC
(as exist on the date hereof) are sold to Non-Affiliates (y)
pursuant to which Non-Affiliates acquire the collective ability
to designate directly or indirectly a majority of the Board of
Directors of SFC (by contact or otherwise) or (z) which the
compensation committee of the Board of Directors of SFC
determines, in its discretion, to constitute a change in control.
4.5 Termination by Non-Extension of Term. Upon a
termination of the Term by reason of the non-extension of the
Term pursuant to Section 2.2:
(a) without regard to whether notice of such
termination is given by the Employers or the Executive, the Term
shall terminate and the Executive shall be entitled to receive no
further amounts or benefits hereunder; provided, that the
Employers shall be obligated to pay to the Executive all unpaid
Base Salary accrued, and provide the Executive with all Base
Salary, benefits, bonuses and expense reimbursement to which the
Executive would otherwise be entitled, through and including the
date of termination of the Term;
(b) in addition to the provisions of clauses (a)
above, if the Employers give notice of non-extension pursuant to
Section 2.2:
(i) unless the notice of non-extension
would be deemed "contingent on" a Section 280G Change
(within the meaning of Section 280G(b)(2)(A) of the
Code) that occurs subsequent to a Public Offering, the
Employers shall, in exchange for a release in form and
substance acceptable to the Employers acting
reasonably, continue payments of Base Salary to the
Executive (the "Non-Renewal Continued Salary"), at the
rate and at such times as are in effect on the date of
the termination of the Term (the "Non-Renewal Base
Salary"), for the 12 month period following the date of
termination of the Term (the "Non-Renewal Payment
Period"); and
(ii) the Employers shall provide the
Continued Benefits during the Payment Period.
4.5.1 Certain Provisions Regarding Termination by
Non-Extension. Following a notice of termination of the term by
reason of the non-extension of the Term pursuant to Section 2.2,
the Executive shall remain entitled to the protection of Sections
4.1, 4.2 and 4.3 of this Agreement and shall receive the benefits
payable under such Sections in the event the Executive's death or
disability or a Termination Without Cause or a Voluntary
Termination with Good Reason occurs between the time the notice
of non-extension occurs pursuant to Section 2.2 and the end of
the Term.
5. Protection of Confidential Information: Non-
Competition; No Solicitation.
5.1 In view of the fact that the Executive's work for
the Employers will bring the Executive into close contact with
many confidential affairs of the Employers not readily available
to the public, and plans for future developments, the Executive
agrees:
5.1.1 To keep and retain in the strictest
confidence all confidential matters of the Employers, including,
without limitation, to the extent the following are confidential,
trade secrets, "know how," customer lists, pricing policies,
operational methods, technical processes, formulae, inventions
and research projects, and other business affairs of the
Employers, learned by the Executive heretofore or hereafter, and
not to disclose them to anyone outside of the Employers, either
during or after the Executive's employment with the Employers,
except in the course of performing the Executive's duties
hereunder or with the Employers' express written consent; and
5.1.2 To deliver promptly to the Employers on
termination of the Executive's employment by the Employers, or at
any time the Employers may so request, all memoranda, notes,
records, reports, manuals, drawings, blueprints and other
documents (and all copies thereof) relating to the Employers'
business and all property associated therewith, which the
Executive may then possess or have under the Executive's control
unless such information is necessary to enable the Executive to
file any federal or state tax return or make any other report or
filing or take any other action required by any law, regulation
or order of any court or regulatory commission, department or
agency.
Notwithstanding the foregoing, nothing contained
in this Section 5.1 shall restrict the Executive from using,
disclosing or retaining any information (i) which is in the
public domain or could readily be known or determined without
being employed by the Employers or which enters the public domain
through no breach of the Executive's obligations to the
Employers, (ii) which the Executive acquired prior to his
employment by the Employers, (iii) which the Executive properly
acquired or acquires from parties independent of the Employers,
(iv) which the Executive is required to disclose by law,
regulation, order or legal process, (v) which is desirable to
establish the Executive's claim or defense in any litigation
between the parties, provided that the Executive uses his best
efforts to ensure that confidential treatment will be afforded
such information.
5.2 During the term of the Executive's employment by
the Employers and, in the event of the termination of the
Executive's employment for any reason, for the 180-day period
immediately following the date of termination, the Executive
shall not, directly or indirectly, enter the employ of, or render
any services to, any person, firm or corporation engaged in any
business competitive with the business of the Employers or of any
of their subsidiaries; in any state in which any such business is
conducted or in which the Employers have specific plans to
conduct business at the time of such termination, the Executive
shall not engage in such business on the Executive's own account;
and the Executive shall not become interested in any such
business, directly or indirectly, as an individual, partner,
shareholder, director, officer, principal, agent, employee,
trustee, consultant, or in any other relationship or capacity;
provided, however, that nothing contained in this Section 5.2
shall be deemed to prohibit the Executive from acquiring, solely
as an investment, up to one percent (1%) of the outstanding
shares of capital stock of any public corporation. The Executive
shall not be deemed to be in breach of this Section 5.2 because
(i) a public corporation of which he owns more than 1% of the
outstanding capital stock begins to engage in any such prohibited
activities or (ii) his ownership interest in a public corporation
engaged in such activities increases to more than 1% of such
corporation's issued and outstanding capital stock in either case
without any volitional act on the part of the Executive, if, in
the case of either clause (i) or (ii) above, within sixty (60)
days of learning of such event, the Executive disposes of the
amount of capital stock necessary to cause his ownership to be
less than 1% of the amount of such capital stock issued and
outstanding.
5.3 When the Executive's employment by the Employers
terminates for any reason whatsoever, then during the period
commencing on the date of such termination and ending on the
second anniversary thereof, the Executive shall not without the
express written consent of SFAC, directly or indirectly, (i)
solicit any employee of the Employers or of any of their
subsidiaries to terminate his employment with the Employers or
with such subsidiary or (ii) hire any such employee.
5.4 If the Executive commits a breach, or threatens to
commit a breach, of any of the provisions of Sections 5.1, 5.2 or
5.3 hereof, the Employers shall have, in addition to any other
remedies they may have, the following rights and remedies:
5.4.1 The right and remedy to have the
provisions of this Agreement specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable
injury to the Employers and that money damages will not provide
an adequate remedy to the Employers; and
5.4.2 The right and remedy to require the
Executive to account for and pay over to the Employers all
compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by the
Executive as the result of any transactions constituting a breach
of any of the provisions of the preceding paragraph, and the
Executive hereby agrees to account for and pay over such Benefits
to the Employers.
5.4.3 Each of the rights and remedies
enumerated above shall be independent of the other, and shall be
severally enforceable, and all of such rights and remedies shall
be in addition to, and not in lieu of, any other rights and
remedies available to the Employers under law or in equity.
5.5 If any of the covenants contained in Section 5.1,
5.2 or 5.3, or any part thereof, hereafter is construed to be
invalid or unenforceable, the same shall not affect the remainder
of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions.
5.6 If any of the covenants contained in Section 5.1,
5.2 or 5.3 or any part thereof, is held to be unenforceable
because of the duration of such provision or the area covered
thereby, the parties agree that the court making such
determination shall have the power to reduce the duration and/or
area of such provision and, in its reduced form, said provision
shall then be enforceable.
5.7 The parties hereto intend to and hereby confer
jurisdiction to enforce the covenants contained in Sections 5.1,
5.2 and 5.3 upon the courts of any state within the geographical
scope of such covenants where the Executive is engaged in
activities in violation of such covenants or the Employers are
damaged or harmed in any way by the Executive's violation of such
covenants. In the event that the courts of any one or more of
such states shall hold such covenants wholly unenforceable by
reason of the breadth of such covenants or otherwise, it is the
intention of the parties hereto that such determination not bar
or in any way affect the Employers' right to the relief provided
above in the courts of any other states within the geographical
scope of such covenants as to breaches of such covenants in such
other respective jurisdictions, the above covenants as they
relate to each state being for this purpose severable into
diverse and independent covenants.
6. Inventions and Patents. The Executive agrees that all
processes, technologies and inventions (collectively
"Inventions"), including new contributions, improvements, ideas
and discoveries, whether patentable or not, conceived, developed,
invented or made by him while employed by the Employers shall
belong to the Employers, provided that such Inventions grew out
of the Executive's work with the Employers or any of their
subsidiaries or affiliates, are related in any manner to the
business (commercial or experimental) of the Employers or any of
their subsidiaries or affiliates or are conceived or made on the
Employers' time or with the use of the Employers' facilities or
materials. The Executive shall further: (a) promptly disclose
such Inventions to the Employers; (b) assign to the Employers,
without additional compensation, all patent and other rights to
such Inventions for the United States and foreign countries; (c)
sign all papers necessary to carry out the foregoing; and (d)
give testimony in support of the Executive's inventorship.
7. Intellectual Property. The Employers shall be the
exclusive owners of all the products and proceeds of the
Executive's services with the Employers, including, but not
limited to, all materials, ideas, concepts, formats, suggestions,
developments, arrangements, packages, programs and other
intellectual properties that the Executive may acquire, obtain,
develop or create in connection with and during the Executive's
employment by the Employers, free and clear of any claims by the
Executive (or anyone claiming under the Executive) of any kind or
character whatsoever (other than the Executive's right to receive
payments hereunder). The Executive shall, at the request of the
Employers, execute such assignments, certificates or other
instruments as the Employers may from time to time deem necessary
or desirable to evidence, establish, maintain, perfect, protect,
enforce or defend their right, title or interest in or to any
such properties.
8. Notices. All notices, requests, consents and other
communications required or permitted to be given hereunder shall
be in writing and shall be deemed to have been duly given if
delivered personally, sent by overnight courier or mailed first-
class, postage prepaid, by registered or certified mail (notices
mailed shall be deemed to have been given on the date mailed) or
sent by telecopier, as follows (or such other address as either
party shall designate by notice in writing to the other in
accordance herewith):
If to the Employers, to:
Specialty Foods Acquisition Corporation
Specialty Foods Corporation
Metz Baking Company
Mother's Cake and Cookie Co.
Archway Cookies
Andre-Boudin Bakeries
c/o Specialty Food Corporation
520 Lake Cook Road
Suite 550
Deerfield, Illinois 60015
Telecopier: 847/405-3310
Attention: Chief Executive Officer
If to the Executive, to:
Mr. David Schreibman
1830 N. Dayton
Chicago, Illinois 60614
9. General.
9.1 This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Illinois
applicable to agreements made and to be performed entirely in
Illinois.
9.2 The section headings contained herein are for
reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.3 This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, relating to the subject matter
hereof. No representation, promise or inducement has been made
by either party that is not embodied in this Agreement, and
neither party shall be bound by or liable for any alleged
representation, promise of inducement not so set forth.
9.4 This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive. The
Employers may assign their rights, together with their
obligations, hereunder (i) to any subsidiary of or successor-in-
interest to any of them, or (ii) to third parties in connection
with any sale, transfer or other disposition of all or
substantially all of the business or assets of any of them; in
any event the obligations of the Employers hereunder shall be
binding on their successors or permitted assigns, whether by
merger, consolidation or acquisition of all or substantially all
of either of their businesses or assets.
9.5 This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or
covenants hereof may be waived, only by a written instrument
executed by the parties hereto, or in the case of a waiver, by
the party waiving compliance. The failure of a party at any time
or times to require performance of any provision hereof shall in
no manner affect the right at a later time to enforce the same.
No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in
this Agreement.
9.6 This Agreement or any amendment hereto may be
signed in any number of counterparts, each of which shall be an
original, but all of which taken together shall constitute one
agreement (or amendment as the case may be).
9.7 This Agreement shall be of no force or effect
until it has been approved by the Boards.
10. Certain Definitions.
10.1 As used herein the term "subsidiary" shall mean
any corporation or other business entity controlled directly or
indirectly by the corporation or other business entity in
question, and the term "affiliate" shall mean and include any
corporation or other business entity directly or indirectly
controlling, controlled by or under common control with the
corporation or other business entity in question.
10.2 Survival. The provisions of Sections 5, 6 and 7
shall survive any termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of May 1, 1999.
SPECIALTY FOODS ACQUISITION
CORPORATION
By: /s/ Lawrence S. Benjamin
-----------------------
Name: Lawrence S. Benjamin
Title: President and Chief Executive Officer
SPECIALTY FOODS CORPORATION
By: /s/ Lawrence S. Benjamin
------------------------
Name: Lawrence S. Benjamin
Title: President and Chief Executive Officer
METZ BAKING COMPANY
By: /s/ Robert L. Fishbune
----------------------
Name: Robert L. Fishbune
Title: Vice President
MOTHER'S CAKE &COOKIE CO.
By: /s/ Robert L. Fishbune
-----------------------
Name: Robert L. Fishbune
Title: Vice President
ARCHWAY, L.L.C.
By: /s/ Robert L. Fishbune
-----------------------
Name: Robert L. Fishbune
Title: Vice President
ANDRE-BOUDIN BAKERIES, INC.
By: /s/ Robert L. Fishbune
-----------------------
Name: Robert L. Fishbune
Title: Vice President
/s/ David E. Schreibman
----------------------
DAVID E. SCHREIBMAN
EXHIBIT 10.88
Mr. David E. Schreibman
Page 4
May 1, 1999
May 1, 1999
Mr. David E. Schreibman
c/o Specialty Foods Corporation
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Dear David:
We are pleased to inform you that you are eligible to
participate in a retention bonus plan that has been adopted by
Specialty Foods Corporation (the "Company"). Under this plan,
you will receive bonus payments in consideration for your
continued employment by the Company or any affiliate or
subsidiary of the Company (collectively, the "SFC Companies").
This Agreement amends and restates that certain Retention Bonus
Agreement between you and the Company dated as of March 15, 1999.
The terms and conditions of this bonus are set forth below.
1. Retention Bonus Payment.
(a) Subject to the provisions of Section 2, you are
eligible to receive a one-time bonus (the "Retention Bonus") in
an amount equal to the aggregate gross amount of cash payments
which you receive from the SFC Companies for annual bonus
payments covering the fiscal years 1999 and 2000. In no event
shall any payments made to you (x) for base salary or (y) or
under any other plan, agreement, award or bonus, other than the
Annual Bonus Plan, be included in calculating the amount of the
Retention Bonus.
(b) The entire amount of the Retention Bonus shall be
paid on the earlier of (x) the date occurring ninety (90) days
after a Change of Control of SFAC or the Company and (y) March
31, 2001.
2. Conditions. The payment of all or any part of the
Retention Bonus potentially payable to you hereunder is expressly
conditioned upon your continued employment with the Company
through March 31, 2001, unless you are terminated by the Company
prior to such date for other than Cause or you Voluntarily
Terminate with Good Reason, as each such term is defined in your
Employment Agreement in effect with SFC on the date hereof.
3. Continued Employment. This Agreement is not a contract
of employment. Nothing expressed or implied in this Agreement
shall create any right or duty of your continued employment by
the Company or its successor. Except as otherwise provided in
your Employment Agreement in effect with SFC on the date hereof,
the Company reserves all rights to cause your employment to be
terminated at any time with or without cause.
4. Unfunded Plan. The Company's obligations under this
Agreement shall be unfunded. Neither the Company nor any of its
subsidiaries shall be required to establish any special or
separate fund or to make any other segregation of assets to
assure the payment of any award under this Agreement.
5. Successors Bound. The rights and obligations of the
Company hereunder shall inure to the benefit of and be binding
upon the successors of the Company.
6. Assignment. You shall not assign any rights or
benefits granted to you by the terms of this Agreement or
encumber in any way your interests herein; provided, however,
that in the event of your death, any payments then due and owing
will be made when due to the legal representative of your estate.
7. Notices and Other Documents. All payments, requests,
notices and the like may be made to you by mailing the same to
you at the address set forth below or at such other address as
you may file in writing with the Company for that purpose.
Notices, requests and the like sent by you to the Company shall
be sufficient if mailed to Specialty Foods Corporation, 520 Lake
Cook Road, Suite 550, Deerfield, IL 60015, Attention: Chief
Financial Officer, or to such other address as the Company may
furnish to you for this purpose from time to time in writing.
8. Employment Taxes. All payments made under this
Agreement shall be subject to withholding tax, other employment
taxes and other withholds and deductions as required by
applicable law or regulation, as in effect from time to time.
9. Effect of Agreement. This Agreement shall have a term
expiring on June 30, 2001, at which time it shall expire and be
of no further force or effect, except to the extent that rights
of payment have accrued to you hereunder prior to such date.
10. Governing Law/Jurisdiction. The substantive law (and
not the law of conflicts) of the State of Illinois will govern
all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the
obligations imposed by this Agreement. The parties hereby waive
their rights to request or demand a trial by jury in the event
controversy arises under this Agreement.
11. Definition of Change of Control. "Change of Control"
shall mean (i) with respect to Specialty Foods Acquisition
Corporation ("SFAC") or the Company, a transaction pursuant to
which a person or group (as such term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934), other than Acadia
Partners, L.P., Keystone, Inc., HWP Specialty Partners, L.P. and
their respective "affiliates" (as such term is defined in Section
2.1 of the Principal Stockholders Agreement, dated as of August
16, 1993, among SFAC and its principal stockholders) (such person
or group being a "Non-Affiliate"), acquires the collective
ability to designate directly or indirectly a majority of the
members of the board of directors of SFAC or SFC (whether by
contract or otherwise), and (ii) with respect to the Company, a
transaction (including a sale, merger, or other similar
transaction, but excluding any transaction among only SFAC, SFC
and/or their subsidiaries) (x) pursuant to which all or
substantially all the assets of the Company (as exist on the date
hereof) are sold to Non-Affiliates, (y) pursuant to which Non-
Affiliates acquire the collective ability to designate directly
or indirectly a majority of the Board of Directors of Holdings or
the Company (whether by contract or otherwise) or (z) which the
committee determines, in its discretion, to constitute a Change
of Control.
12. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the
subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement
has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any
illegal representation, promise or inducement not so set forth.
13. Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or
covenants hereof may be waived, only by a written instrument
executed by the parties hereto, or in the case of a waiver, by
the party waiving compliance. The failure of a party at any time
or times to require performance of any provision hereof shall in
no manner affect the right at a later time to enforce the same.
No waiver by either party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in
any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in
this Agreement.
14. Headings. The section headings contained herein are
for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
If the foregoing correctly sets forth your understanding of
the Agreement between us, please sign both copies of this
Agreement in the place indicated below and return one copy to us.
Very truly yours,
SPECIALTY FOODS CORPORATION
By: /s/ Lawrence S. Benjamin
------------------------
Name: Lawrence S. Benjamin
Title: President and Chief
Executive Officer
Agreed to this 1st day of May, 1999
/s/ David E. Schreibman
------------------------
Name: David E. Schreibman
Address:______________________
EXHIBIT 10.89
Mr. David E. Schreibman
Page 5
May 1, 1999
May 1, 1999
Mr. David E. Schreibman
c/o Specialty Foods Corporation
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Dear David:
Metz Baking Company (the "Company") is pleased to
inform you that you are eligible to receive the bonus payments
specified in this letter upon a sale occurring prior to December
31, 2000 (the "Sale") of the stock or substantially all or any
material portion of the assets of the Company to a purchaser,
subject to the terms and conditions set forth below. This
Agreement amends and restates that certain Divestiture Award
Agreement between you and the Company dated as of March 15, 1999.
1. Bonus and Payment Related to Purchase Price.
Subject to the provisions of Section 2, you are eligible to
receive a bonus (each, a "Sale Bonus") in an amount equal to
0.075% of the Purchase Consideration. For purposes of this
Agreement, "Purchase Consideration" shall mean the aggregate net
cash proceeds received by the Company or Specialty Foods
Corporation ("SFC") (after deducting all fees and expenses
incurred by the Company, SFC and/or their respective affiliates)
in connection with a Sale. By way of example, if the Purchase
Consideration equaled $600,000,000, your Sale Bonus would be
$450,000. Each Sale Bonus payable hereunder shall be paid to you
within three (3) months of the completion of a Sale.
2. Conditions. The payment of all or any part of any
Sale Bonus potentially payable to you hereunder is expressly
conditioned upon the satisfaction of the following conditions:
(a) Your continued employment with the Company or SFC
through the date any Sale is completed;
(b) The absence of any material deficiencies in the
performance of your duties and cooperation during any Sale
process as determined by the SFC Board of Directors in its sole
discretion. The factors considered in assessing whether your
performance and cooperation in any Sale process have been
materially deficient include (i) your continued focus on your
regular job responsibilities, (ii) your maintenance of the
confidentiality of non-public information, and (iii) your
positive attitude and cooperativeness;
(c) Your continued employment with the Company (or its
successor) or SFC until three (3) months after the date any Sale
is completed, unless you are terminated after any Sale for other
than Cause;
(d) Your execution and delivery of agreements prepared
by SFC waiving all claims which you have had or may have against
the Company, SFC and/or their respective affiliates other than
any rights granted to you pursuant to any annual bonus plan, long-
term incentive plan, stock option plan, deferred bonus plan,
written employment contract, written severance agreement or other
formal written compensation plan between you and the Company, SFC
and/or their respective affiliates; and
(e) The closing of any Sale being consummated by
December 31, 2000.
For purposes of this Agreement, "Cause" shall mean (i)
your continued failure to substantially perform your employment
duties (other than as a result of incapacity due to physical or
mental disability), (ii) your gross negligence or dishonesty,
(iii) your violation of any reasonable rule or regulation of the
Company or SFC after written notice; or (iv) your arrest or
conviction for the commission of any felony or other crime
involving dishonesty or moral turpitude.
3. Continued Employment. This Agreement is not a
contract of employment. Nothing expressed or implied in this
Agreement shall create any right or duty of your continued
employment by the Company (or its successor) or SFC. Except as
otherwise provided in your Employment Agreement in effect with
SFC on the date hereof, the Company and SFC reserve all rights to
cause your employment to be terminated at any time with or
without cause.
4. Unfunded Plan. The Company's obligations under
this Agreement shall be unfunded. Neither the Company, SFC nor
any of their subsidiaries shall be required to establish any
special or separate fund or to make any other segregation of
assets to assure the payment of any award under this Agreement.
5. Successors Bound. The rights and obligations of
the Company hereunder shall inure to the benefit of and be
binding upon the successors of the Company.
6. Assignment. You shall not assign any rights or
benefits granted to you by the terms of this Agreement or
encumber in any way your interests herein; provided, however,
that in the event of your death, any payments then due and owing
will be made when due to the legal representative of your estate.
7. Notices and Other Documents. All payments,
requests, notices and the like may be made to you by mailing the
same to you at the address set forth below or at such other
address as you may file in writing with the Company for that
purpose. Notices, requests and the like sent by you to the
Company shall be sufficient if mailed to Metz Baking Company, 520
Lake Cook Road, Suite 520, Deerfield, IL 60015, Attention: Vice
President - Human Resources, with a copy to Specialty Foods
Corporation, 520 Lake Cook Road, Suite 550, Deerfield, IL 60015,
Attention: Chief Financial Officer, or to such other address as
the Company may furnish to you for this purpose from time to time
in writing.
8. Employment Taxes. All payments made under this
Agreement shall be subject to withholding tax, other employment
taxes and other withholds and deductions as required by
applicable law or regulation, as in effect from time to time.
9. Effect of Agreement. This Agreement shall have a
term expiring on December 31, 2000, at which time it shall expire
and be of no further force or effect, except to the extent that
rights of payment have accrued to you hereunder prior to such
date.
10. Governing Law/Jurisdiction. The substantive law
(and not the law of conflicts) of the State of Illinois will
govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the
obligations imposed by this Agreement. The parties hereby waive
their rights to request or demand a trial by jury in the event
controversy arises under this Agreement.
11. Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties relating to the
subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement
has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any
illegal representation, promise or inducement not so set forth.
If the foregoing correctly sets forth your
understanding of the Agreement between us, please sign both
copies of this Agreement in the place indicated below and return
one copy to us.
Very truly yours,
Metz Baking Company
By: /s/ Lawrence S. Benjamin
-----------------------
Name: Lawrence S. Benjamin
Title: Vice President
Agreed to this 1st day of May, 1999
/s/ David E. Schreibman
-----------------------
Name: David E. Schreibman
Address:_______________________
EXHIBIT 10.90
Mr. David E. Schreibman
Page 5
May 1, 1999
May 1, 1999
Mr. David E. Schreibman
c/o Specialty Foods Corporation
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Dear David:
Mother's Cake & Cookie Co. (the "Company") is pleased
to inform you that you are eligible to receive the bonus payments
specified in this letter upon a sale occurring prior to December
31, 2000 (the "Sale") of the stock or substantially all of the
assets of the Company, or its subsidiaries, to a purchaser,
subject to the terms and conditions set forth below. This
Agreement amends and restates that certain Divestiture Award
Agreement between you and the Company dated as of March 15, 1999.
1. Bonus and Payment Related to Purchase Price.
Subject to the provisions of Section 2, you are eligible to
receive a one-time bonus (the "Sale Bonus") in an amount equal to
0.075% of the Purchase Consideration. For purposes of this
Agreement, "Purchase Consideration" shall mean the aggregate net
cash proceeds received by the Company or Specialty Foods
Corporation ("SFC") (after deducting all fees and expenses
incurred by the Company, SFC and/or their respective affiliates)
in connection with the Sale. By way of example, if the Purchase
Consideration equaled $300,000,000, your Sale Bonus would be
$225,000. The Sale Bonus shall be paid to you within three (3)
months of the completion of the Sale.
2. Conditions. The payment of all or any part of the
Sale Bonus potentially payable to you hereunder is expressly
conditioned upon the satisfaction of the following conditions:
(a) Your continued employment with the Company or SFC
through the date the Sale is completed;
(b) The absence of any material deficiencies in the
performance of your duties and cooperation during the Sale
process as determined by the SFC Board of Directors in its sole
discretion. The factors considered in assessing whether your
performance and cooperation in the Sale process have been
materially deficient include (i) your continued focus on your
regular job responsibilities, (ii) your maintenance of the
confidentiality of non-public information, and (iii) your
positive attitude and cooperativeness;
(c) Your continued employment with the Company (or its
successor) or SFC until three (3) months after the date the Sale
is completed, unless you are terminated after the Sale for other
than Cause;
(d) Your execution and delivery of agreements prepared
by SFC waiving all claims which you have had or may have against
the Company, SFC and/or their respective affiliates other than
any rights granted to you pursuant to any annual bonus plan, long-
term incentive plan, stock option plan, deferred bonus plan,
written employment contract, written severance agreement or other
formal written compensation plan between you and the Company, SFC
and/or their respective affiliates; and
(e) The closing of the Sale being consummated by
December 31, 2000.
For purposes of this Agreement, "Cause" shall mean (i)
your continued failure to substantially perform your employment
duties (other than as a result of incapacity due to physical or
mental disability), (ii) your gross negligence or dishonesty,
(iii) your violation of any reasonable rule or regulation of the
Company or SFC after written notice; or (iv) your arrest or
conviction for the commission of any felony or other crime
involving dishonesty or moral turpitude.
3. Continued Employment. This Agreement is not a
contract of employment. Nothing expressed or implied in this
Agreement shall create any right or duty of your continued
employment by the Company (or its successor) or SFC. Except as
otherwise provided in your Employment Agreement in effect with
SFC on the date hereof, the Company and SFC reserve all rights to
cause your employment to be terminated at any time with or
without cause.
4. Unfunded Plan. The Company's obligations under
this Agreement shall be unfunded. Neither the Company, SFC nor
any of their subsidiaries shall be required to establish any
special or separate fund or to make any other segregation of
assets to assure the payment of any award under this Agreement.
5. Successors Bound. The rights and obligations of
the Company hereunder shall inure to the benefit of and be
binding upon the successors of the Company.
6. Assignment. You shall not assign any rights or
benefits granted to you by the terms of this Agreement or
encumber in any way your interests herein; provided, however,
that in the event of your death, any payments then due and owing
will be made when due to the legal representative of your estate.
7. Notices and Other Documents. All payments,
requests, notices and the like may be made to you by mailing the
same to you at the address set forth below or at such other
address as you may file in writing with the Company for that
purpose. Notices, requests and the like sent by you to the
Company shall be sufficient if mailed to Mother's Cake & Cookie
Co., 810 81st Avenue, Oakland, CA 94621, Attention: Vice
President - Human Resources, with a copy to Specialty Foods
Corporation, 520 Lake Cook Road, Suite 550, Deerfield, IL 60015,
Attention: Chief Financial Officer, or to such other address as
the Company may furnish to you for this purpose from time to time
in writing.
8. Employment Taxes. All payments made under this
Agreement shall be subject to withholding tax, other employment
taxes and other withholds and deductions as required by
applicable law or regulation, as in effect from time to time.
9. Effect of Agreement. This Agreement shall have a
term expiring on December 31, 2000, at which time it shall expire
and be of no further force or effect, except to the extent that
rights of payment have accrued to you hereunder prior to such
date. Notwithstanding the foregoing, you shall only have the
right to collect the amounts hereunder on one occasion in
connection with the Sale of the stock or substantially all the
assets of the Company while the Company is owned by SFC. Once
such a Sale occurs, you shall have no further right to collect
additional amounts hereunder upon any subsequent sale.
10. Governing Law/Jurisdiction. The substantive law
(and not the law of conflicts) of the State of Illinois will
govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the
obligations imposed by this Agreement. The parties hereby waive
their rights to request or demand a trial by jury in the event
controversy arises under this Agreement.
11. Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties relating to the
subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement
has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any
illegal representation, promise or inducement not so set forth.
If the foregoing correctly sets forth your
understanding of the Agreement between us, please sign both
copies of this Agreement in the place indicated below and return
one copy to us.
Very truly yours,
Mother's Cake & Cookie Co.
By: /s/ Lawrence S. Benjamin
-------------------------
Name: Lawrence S. Benjamin
Title: Vice President
Agreed to this 1st day of May, 1999
/s/ David E. Schreibman
----------------------
Name: David E. Schreibman
Address:_______________________
EXHIBIT 10.91
Mr. David E. Schreibman
Page 5
May 1, 1999
May 1, 1999
Mr. David E. Schreibman
c/o Specialty Foods Corporation
520 Lake Cook Road, Suite 550
Deerfield, IL 60015
Dear David:
Andre-Boudin Bakeries, Inc. (the "Company") is pleased
to inform you that you are eligible to receive the bonus payments
specified in this letter upon a sale occurring prior to December
31, 2000 (the "Sale") of the stock or substantially all of the
assets of the Company to a purchaser, subject to the terms and
conditions set forth below. This Agreement amends and restates
that certain Divestiture Award Agreement between you and the
Company dated as of March 15, 1999.
1. Bonus and Payment Related to Purchase Price.
Subject to the provisions of Section 2, you are eligible to
receive a one-time bonus (the "Sale Bonus") in an amount equal to
0.075% of the Purchase Consideration. For purposes of this
Agreement, "Purchase Consideration" shall mean the aggregate net
cash proceeds received by the Company or Specialty Foods
Corporation ("SFC") (after deducting all fees and expenses
incurred by the Company, SFC and/or their respective affiliates)
in connection with the Sale. By way of example, if the Purchase
Consideration equaled $25,000,000, your Sale Bonus would be
$18,750. The Sale Bonus shall be paid to you within three (3)
months of the completion of the Sale.
2. Conditions. The payment of all or any part of the
Sale Bonus potentially payable to you hereunder is expressly
conditioned upon the satisfaction of the following conditions:
(a) Your continued employment with the Company or SFC
through the date the Sale is completed;
(b) The absence of any material deficiencies in the
performance of your duties and cooperation during the Sale
process as determined by the SFC Board of Directors in its sole
discretion. The factors considered in assessing whether your
performance and cooperation in the Sale process have been
materially deficient include (i) your continued focus on your
regular job responsibilities, (ii) your maintenance of the
confidentiality of non-public information, and (iii) your
positive attitude and cooperativeness;
(c) Your continued employment with the Company (or its
successor) or SFC until three (3) months after the date the Sale
is completed, unless you are terminated after the Sale for other
than Cause;
(d) Your execution and delivery of agreements prepared
by SFC waiving all claims which you have had or may have against
the Company, SFC and/or their respective affiliates other than
any rights granted to you pursuant to any annual bonus plan, long-
term incentive plan, stock option plan, deferred bonus plan,
written employment contract, written severance agreement or other
formal written compensation plan between you and the Company, SFC
and/or their respective affiliates; and
(e) The closing of the Sale being consummated by
December 31, 2000.
For purposes of this Agreement, "Cause" shall mean (i)
your continued failure to substantially perform your employment
duties (other than as a result of incapacity due to physical or
mental disability), (ii) your gross negligence or dishonesty,
(iii) your violation of any reasonable rule or regulation of the
Company or SFC after written notice; or (iv) your arrest or
conviction for the commission of any felony or other crime
involving dishonesty or moral turpitude.
3. Continued Employment. This Agreement is not a
contract of employment. Nothing expressed or implied in this
Agreement shall create any right or duty of your continued
employment by the Company (or its successor) or SFC. Except as
otherwise provided in your Employment Agreement in effect with
SFC on the date hereof, the Company and SFC reserve all rights to
cause your employment to be terminated at any time with or
without cause.
4. Unfunded Plan. The Company's obligations under
this Agreement shall be unfunded. Neither the Company, SFC nor
any of their subsidiaries shall be required to establish any
special or separate fund or to make any other segregation of
assets to assure the payment of any award under this Agreement.
5. Successors Bound. The rights and obligations of
the Company hereunder shall inure to the benefit of and be
binding upon the successors of the Company.
6. Assignment. You shall not assign any rights or
benefits granted to you by the terms of this Agreement or
encumber in any way your interests herein; provided, however,
that in the event of your death, any payments then due and owing
will be made when due to the legal representative of your estate.
7. Notices and Other Documents. All payments,
requests, notices and the like may be made to you by mailing the
same to you at the address set forth below or at such other
address as you may file in writing with the Company for that
purpose. Notices, requests and the like sent by you to the
Company shall be sufficient if mailed to Andre-Boudin Bakeries,
Inc., 132 Hawthorne Street, San Francisco, CA 94107, Attention:
Vice President - Human Resources, with a copy to Specialty Foods
Corporation, 520 Lake Cook Road, Suite 550, Deerfield, IL 60015,
Attention: Chief Financial Officer, or to such other address as
the Company may furnish to you for this purpose from time to time
in writing.
8. Employment Taxes. All payments made under this
Agreement shall be subject to withholding tax, other employment
taxes and other withholds and deductions as required by
applicable law or regulation, as in effect from time to time.
9. Effect of Agreement. This Agreement shall have a
term expiring on December 31, 2000, at which time it shall expire
and be of no further force or effect, except to the extent that
rights of payment have accrued to you hereunder prior to such
date. Notwithstanding the foregoing, you shall only have the
right to collect the amounts hereunder on one occasion in
connection with the Sale of the stock or substantially all the
assets of the Company while the Company is owned by SFC. Once
such a Sale occurs, you shall have no further right to collect
additional amounts hereunder upon any subsequent sale.
10. Governing Law/Jurisdiction. The substantive law
(and not the law of conflicts) of the State of Illinois will
govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the
obligations imposed by this Agreement. The parties hereby waive
their rights to request or demand a trial by jury in the event
controversy arises under this Agreement.
11. Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties relating to the
subject matter hereof, and supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the
subject matter hereof. No representation, promise or inducement
has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any
illegal representation, promise or inducement not so set forth.
If the foregoing correctly sets forth your
understanding of the Agreement between us, please sign both
copies of this Agreement in the place indicated below and return
one copy to us.
Very truly yours,
Andre-Boudin Bakeries, Inc.
By: /s/ Lawrence S. Benjamin
------------------------
Name: Lawrence S. Benjamin
Title: Vice President
Agreed to this 1st day of May, 1999
/s/ David E. Schreibman
----------------------
Name: David E. Schreibman
Address:_______________________
EXHIBIT 10.92
Date of Grant:
Participant: Patrick J. O'Dea
Participation Rate:
Control Number:
MOTHER'S CAKE & COOKIE CO.
SUPPLEMENTAL LONG TERM INCENTIVE PLAN
PARTICIPATION AWARD AGREEMENT dated as of May 1st, 1999
by and between MOTHER'S CAKE & COOKIE CO., a California
corporation (the "Company"), and Patrick J. O'Dea (the
"Participant").
All words and phrases not otherwise expressly defined
herein shall have the same meanings as are ascribed to such
words and phrases in the Mother's Cake & Cookie Co.
Supplemental Long Term Incentive Plan (the "Plan").
The Board of Directors has determined that the
objectives of the Plan will be furthered by granting to the
Participant Participation Units in the Plan.
In consideration of the foregoing and of the mutual
undertakings set forth in this Agreement, the Company and
the Participant agree as follows:
Section 1 Grant of Participation Unit. Subject to the
provisions of the Plan and this Agreement, the Company
hereby grants to the Participant a Threshold Participation
Rate and a Value Increase Participation Rate under the Plan
equal to the sum of the following:
a. an amount equal to one-half of one
percent (.005%) of the Threshold Value (the
"Threshold Participation Rate"); plus
b. an amount equal to three percent
(3%) of the Value Increase Amount (the "Value
Increase Participation Rate").
Notwithstanding anything herein to the contrary, the amount
of an award payable to a Participant under this Plan shall
be reduced by the amount of any payments made under the 1999-
2000 Retention Bonus Program to such Participant by the
Company or SFC.
Section 2 Plan Provisions to Prevail. This Agreement
shall be subject to all of the terms and provisions of the
Plan, which are incorporated hereby and made a part hereof.
In the event there is any inconsistency between the
provisions of this Agreement and the Plan, the provisions of
the Plan shall govern.
Section 3 Participant's Acknowledgments. The
Participant agrees and acknowledges that he has received and
read a copy of the Plan, and accepts this grant upon all of
the terms thereof.
Section 4 Non-Transferability. No grant to the
Participant under the Plan shall be assignable or
transferable by the Participant (whether by operation of law
or otherwise and whether voluntarily or involuntarily),
other than by will or by the laws of descent and
distribution. During the lifetime of the Participant, all
rights granted to the Participant under the Plan shall be
exercisable only by the Participant.
Section 5 Notices. Any notice to be given to SFC
hereunder shall be in writing and shall be addressed to
Specialty Foods Corporation, 520 Lake Cook Road, Deerfield,
IL 60015, Attention: Vice President and General Counsel or
at such other address as SFC may hereafter designate to the
Participant by notice as provided herein. Any notice to be
given to Mother's hereunder shall be in writing and shall be
addressed to Mother's Cake & Cookie Co., 810 81st Avenue,
Oakland, CA 94621, Attention: Vice President - Human
Resources. Any notice to be given to the Participant
hereunder shall be addressed to the Participant at the
address of the Participant's principal place of employment
or at such other address as the Participant may hereafter
designate to SFC by notice as provided herein. Notices
hereunder shall be deemed to have been duly given when
received by personal delivery or by registered or certified
mail to the party entitled to receive the same.
Section 6 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties
hereto and the successors and assigns of the Company and, to
the extent set forth in the Plan, the heirs and personal
representatives of the Participant.
Section 7 Modifications to Agreement. This Agreement
may not be altered, modified, changed or discharged, except
by a writing signed by or on behalf of both the Company and
the Participant.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date and year first above written.
MOTHER'S CAKE, & COOKIE CO.,
a California corporation
By: /s/ David E. Schreibman
---------------------------
Name: David E. Schreibman
Title: Vice President
Agreed to and Accepted:
/s/ Patrick O'Dea
- ----------------
Patrick O'Dea
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<PERIOD-END> MAR-31-1999
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0
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