SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) DECEMBER 21, 1995
Commission file number 0-2258
SMITHFIELD FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of Incorporation)
0-2258 52-0845861
(Commission File Number) (I.R.S. Employer
Identification No.)
501 North Church Street Smithfield, Virginia 23430
(Address of principal executive offices)
Registrant's telephone number, including area code (804) 357-4321
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 20, 1995, Smithfield Foods, Inc. ("Smithfield Foods" or the
"Company") acquired from Chiquita Brands International, Inc. ("Chiquita") all of
the outstanding capital stock of John Morrell & Co. ("John Morrell"), for a
total purchase price of $58 million, consisting of $25 million in cash (borrowed
under the Company's $200 million revolving credit facility with a group of six
banks) and the issuance of 1,094,273 shares of its common stock, par value $.50
per share. In addition, Smithfield Foods assumed all of John Morrell's
liabilities. The parties determined the terms of the transaction pursuant to
arms length negotiations, there having been no prior relationships between them.
John Morrell is a large fresh pork and processed meats processor located in
the Midwest, with sales of $1.4 billion in the year ended December 31,
1994. John Morrell markets a full line of processed meats primarily in the
Midwest and Western U.S. under a variety of brand names, including John Morrell,
Kretschmar, Tobin's First Prize, Peyton's and Dinner Bell.
John Morrell's principal production facilities are located in Sioux Falls,
South Dakota; Sioux City, Iowa; Cincinnati, Ohio; and Great Bend, Kansas. The
Sioux Falls facility produces processed meats as well as fresh pork; Sioux City
is a fresh pork plant; and the Cincinnati and Great Bend locations produce
processed meats. The Morrell facility at Sioux Falls slaughters 17,000 hogs per
day and the facility at Sioux City slaughters 13,000 per day. John Morrell also
operates a spice plant in Chicago, Illinois.
Smithfield Foods will maintain Morrell as a separate subsidiary. John O.
Nielson, President and Chief Operating Officer of Smithfield Foods, will assume
the additional duties of Chairman and Chief Executive Officer of John Morrell.
Joseph B. Sebring will continue as President and Chief Operating Officer of John
Morrell and will report to Mr. Nielson, who from 1983 to 1989 served at John
Morrell in various management positions, including President and Chief
Operating Officer from April 1988 to June 1989.
Smithfield Foods is a leading hog producer, pork processor and fresh pork and
processed meats marketer with significant market presence in the Mid-Atlantic
and Southeast and increasing market positions in other regions of the United
States. The Company's brands include Smithfield, Smithfield Lean Generation
Pork, Gwaltney, Patrick Cudahy, Luter's, Esskay, Hamilton's, Valleydale, Mash's,
Jamestown, Realean, Patrick's Pride and Great. Smithfield Foods had sales of
$1.5 billion in the fiscal year ended April 30, 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
It is impracticable for the registrant to file the financial statements
required by this Item 7(a) at the time of filing of this Current Report on Form
8-K; the registrant expects to file such financial statements by amendment on or
before February 1, 1996, and in any case within 60 days from the date of filing
of this report.
(b) PRO FORMA FINANCIAL INFORMATION.
It is impracticable for the registrant to file the financial statements
required by this Item 7(b) at the time of filing of this Current Report on Form
8-K; the registrant expects to file such financial statements by amendment on or
before February 1, 1996, and in any case within 60 days from the date of filing
of this report.
(c) EXHIBITS
The following exhibits are filed herewith in accordance with the
provisions of Item 601 of Regulation S-K.
2.1 Stock Purchase Agreement dated as of December 20, 1995, between
Smithfield Foods, Inc. as Purchaser and Chiquita Brands International,
Inc. as Seller, relating to All Issued and Outstanding Shares of
Capital Stock of John Morrell & Co. (exhibits and schedules omitted).
2.2 Registration Rights Agreement dated as of December 20, 1995,
between Smithfield Foods, Inc. and Chiquita Brands International, Inc.
2.3 Indemnification Agreement dated as of December 20, 1995, between
Chiquita Brands International, Inc. and John Morrell & Co.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SMITHFIELD FOODS, INC.
/s/ Aaron D. Trub
Aaron D. Trub
Vice President, Secretary and
Treasurer
Date: January 4, 1996
STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 20, 1995,
BETWEEN
SMITHFIELD FOODS, INC.
AS PURCHASER
AND
CHIQUITA BRANDS INTERNATIONAL, INC.
AS SELLER
RELATING TO ALL ISSUED AND
OUTSTANDING SHARES OF CAPITAL STOCK OF
JOHN MORRELL & CO.
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS....................................... 1
1.1 Certain Defined Terms...................................... 1
ARTICLE 2 PURCHASE AND SALE................................. 11
2.1 Purchase and Sale of Shares................................ 11
2.2 The Purchase Price......................................... 11
2.3 Purchaser's Shares......................................... 11
2.4 Payment of Balance of the Purchase Price................... 11
ARTICLE 3 CLOSING, ITEMS TO BE DELIVERED AND
FURTHER ASSURANCES................................ 11
3.1 Closing.................................................... 11
3.2 Items to be Delivered at Closing by Seller................. 11
3.3 Items to be Delivered at Closing by Purchaser.............. 14
3.4 Indemnity Agreement........................................ 15
3.5 Further Assurances......................................... 15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES RELATING TO
THE COMPANY AND THE SUBSIDIARIES.................. 15
4.1 Corporate Existence........................................ 15
4.2 [Intentionally Left Blank]................................. 16
4.3 Capital Stock and Ownership of Shares;
Subsidiaries; Officers and Directors....................... 16
4.4 Validity of Contemplated Transactions, etc................. 17
4.5 No Third Party Options..................................... 18
4.6 Intentionally Left Blank................................... 18
4.7 Tax and Other Returns and Reports.......................... 18
4.8 Real Property.............................................. 20
4.9 Litigation................................................. 21
4.10 Insurance.................................................. 23
4.11 Contracts and Commitments.................................. 24
4.12 Labor Matters.............................................. 26
4.13 Employee Benefit Plans and Arrangements.................... 29
4.14 Environmental Matters...................................... 32
4.15 Compliance With Laws; Operating Permits, etc............... 34
4.16 Intellectual Property...................................... 34
4.17 Accounts; Lockboxes; Safe Deposit Boxes.................... 35
4.18 Conduct of Business Since December 31, 1994................ 36
4.19 Affiliate Transactions..................................... 39
4.20 Payments................................................... 39
4.21 Tangible Personal Property................................. 39
4.22 Products................................................... 40
4.23 Customers and Vendors...................................... 40
4.24 Absence of Undisclosed Liabilities......................... 40
4.25 Schedules.................................................. 40
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES RELATING
TO SELLER AND CERTAIN FINANCIAL MATTERS........... 41
5.1 Corporate Existence........................................ 41
5.2 Corporate Power; Authorization; Enforceable
Obligations................................................ 41
5.3 Validity of Contemplated Transactions, etc................. 41
5.4 Title to Shares............................................ 42
5.5 Litigation................................................. 42
5.6 FIRPTA..................................................... 42
5.7 Disclaimer of Disclosure................................... 42
5.8 Financial Information...................................... 42
5.9 Investment Purpose......................................... 43
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER....... 44
6.1 Corporate Existence........................................ 44
6.2 Capitalization............................................. 44
6.3 Corporate Power and Authorization.......................... 44
6.4 Validity of Contemplated Transactions, etc................. 44
6.5 Investment Purpose......................................... 45
6.6 Litigation................................................. 45
6.7 Purchaser Reports.......................................... 45
6.8 Indebtedness............................................... 45
6.9 Knowledge of Purchaser..................................... 46
6.10 [Intentionally left blank]................................. 46
6.11 Bonds and Letters of Credit................................ 46
6.12 Stock Market Listing....................................... 46
ARTICLE 7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES........ 46
7.1 Survival of Representations and Warranties................. 46
ARTICLE 8 ADDITIONAL AGREEMENTS............................. 47
8.1 Access to Information; Cooperation......................... 47
8.2 Confidentiality............................................ 48
8.3 Regulatory and Other Authorizations; Notices
and Consents............................................... 48
8.4 Use of Intellectual Property............................... 48
8.5 Operations under the Consent Decree........................ 49
8.6 Additional Covenants....................................... 49
8.7 Registration Rights Agreement.............................. 50
8.8 Board of Directors......................................... 50
8.9 Further Action............................................. 50
8.10 Noncompetition............................................. 50
ARTICLE 9 TAX MATTERS....................................... 52
9.1 Termination of Existing Tax-Sharing Agreements............. 52
9.2 Post-Closing Adjustment to Tax Sharing Payments............ 52
9.3 Seller Indemnity........................................... 53
9.4 Purchaser Indemnity........................................ 54
9.5 Allocation Between Partial Periods......................... 54
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9.6 Filing of Tax Returns...................................... 54
9.7 Post-Closing Audits and Other Procedures................... 56
9.8 Closing Date Tax Balance Sheets............................ 56
9.9 Cooperation................................................ 56
9.10 Section 338(h)(10)......................................... 57
ARTICLE 10 [INTENTIONALLY LEFT BLANK]........................ 58
ARTICLE 11 INDEMNIFICATION................................... 58
11.1 General Indemnification Obligation of Seller............... 58
11.2 General Indemnification Obligation of Purchaser............ 59
11.3 Third Party Claims - Indemnification....................... 60
11.4 Provisions Regarding Indemnity............................. 61
11.5 Payment.................................................... 61
11.6 Limits Upon Indemnification Claims by Purchaser............ 61
11.7 Limits Upon Indemnification Claims by Seller............... 62
11.8 Sole Remedy................................................ 63
ARTICLE 12 MISCELLANEOUS..................................... 63
12.1 [Intentionally Left Blank]................................. 63
12.2 Brokers' and Finders' Fees................................. 63
12.3 Expenses................................................... 64
12.4 Binding Effect............................................. 64
12.5 Waiver..................................................... 64
12.6 Notices.................................................... 64
12.7 Headings and Gender........................................ 65
12.8 Schedules and Exhibits..................................... 65
12.9 Right to Specific Performance.............................. 66
12.10 Severability............................................... 66
12.11 Counterparts............................................... 66
12.12 Entire Agreement........................................... 66
12.13 Amendments................................................. 67
12.14 Exclusive Benefits......................................... 67
12.15 Delays or Omissions........................................ 67
12.16 Construction............................................... 67
12.17 Governing Law.............................................. 67
EXHIBITS
Exhibit A Partial Consent Decree
Exhibit B [Intentionally Omitted]
Exhibit C Registration Rights Agreement
Exhibit D Opinion of Counsel to Purchaser
Exhibit E Opinion of Counsel to Seller
Exhibit F Indemnity Agreement
Exhibit G Interim Services Agreement
Exhibit H Illustrative Counsel Memo
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Schedules
Schedule Description
1.1(a) Purchaser Officers
1.1(b) Company Officers
1.1(c) Property Tax Returns
5.8 Financial Information
6.2 Capitalization
Disclosure Schedule Description
4.1 Corporate Existence; Subsidiaries; Jurisdictions
4.3 Capital Stock Ownership of Shares; Subsidiaries;
Officers and Directors
4.4 Validity of Contemplated Transactions
4.5 Third Party Options
4.7 Tax and Other Returns and Reports
4.8 Real Property
4.9 Litigation
4.10 Insurance
4.11 Contracts and Commitments
4.12 Labor Matters
4.13 Employee Benefit Plans and Arrangements
4.14 Environmental Matters
4.15 Compliance with Laws; Operating Permits, Etc.
4.16 Intellectual Property
4.17 Accounts; Lockboxes; Safe Deposit Boxes
4.18 The Company - Conduct of Business
4.19 Affiliate Transactions
4.21 Tangible Personal Property
4.23 Customers and Vendors
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 20, 1995, by and between
CHIQUITA BRANDS INTERNATIONAL, INC., a New Jersey corporation ("Seller"), and
SMITHFIELD FOODS, INC., a Delaware corporation ("Purchaser"), with reference to
the following RECITALS:
A. Seller owns all of the issued and outstanding shares of stock (the
"Shares") of JOHN MORRELL & CO., a Delaware corporation (the "Company"),
consisting of the number and classes as set forth in this Agreement.
B. Subject to the terms and conditions hereinafter set
forth, Seller desires to sell and Purchaser desires to purchase at
the Closing on the Closing Date (as those terms are hereinafter
defined) all of the Shares.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings, unless otherwise expressly provided or
unless the context clearly requires otherwise:
"Action" means any claim, action, litigation, suit, arbitration,
inquiry, proceeding or investigation by or before any Governmental Authority,
including without limitation, an action initiated by the filing of a notice of
intent to terminate a Pension Plan pursuant to Section 4041(c)(2) of ERISA or a
proceeding under Section 4042, 4069 or 4212(c) of ERISA.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such specified
Person.
"Agreement" or "this Agreement" means this Stock Purchase Agreement,
dated as of December 20, 1995, between Seller and Purchaser (including all of
the Exhibits and Schedules hereto), and all amendments hereto made in accordance
with the provisions of Section 12.13, as in effect from time to time.
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"Audited Financial Statements" has the meaning specified in
Section 5.8.
"Average Value" means the average of the mean of the quoted high and
low sales prices of Purchaser's Common Stock on the NASDAQ/NMS Market for each
of the last thirty (30) trading days immediately preceding the second day before
the Closing Date which is $30.157 per share.
"Business" means the business of the Company and the Subsidiaries
consisting, without limitation, of slaughtering, processing, marketing,
distributing and selling fresh pork and lamb, processed meat products, including
sausages, frankfurters, bacon, hams and luncheon meats, chemicals and spices,
under private labels and under the Company Names.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are closed in the City of Cincinnati, Ohio, or in the City of
Norfolk, Virginia.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended through the date hereof.
"Closing" has the meaning specified in Section 3.1.
"Closing Date" has the meaning specified in Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
"Commission" means the Securities and Exchange Commission.
"Company" has the meaning specified in the recitals to this
Agreement.
"Company Multiemployer Plan" means any Multiemployer Plan to which the
Company or any of the Subsidiaries contributes, has an obligation to contribute,
or contributed to or had an obligation to contribute to and has Liability with
respect to such contributions or obligations.
"Company Names" has the meaning specified in Section 8.4.
"Company Plans" has the meaning specified in Section 4.13(a).
"Company's Accountants" means Ernst & Young, L.L.P., independent
accountants of the Company.
"Confidentiality Agreements" means that certain letter agreement dated
October 4, 1995, between Seller and Purchaser relating to information regarding
the Company, that certain
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agreement dated October 19, 1995, between Seller and Purchaser relating to
information regarding Purchaser, that certain PBGC Investigation Joint Defense
Agreement dated October 13, 1995, that certain Environmental Matters Joint
Defense Agreement dated October 26, 1995, as amended, and that certain Joint
Defense and Confidentiality Agreement Regarding Antitrust Matters dated November
7, 1995.
"Consent Decree" means that certain Partial Consent Decree in the form
of Exhibit A attached hereto by and among the Company, the United States
Department of Justice and the United States Environmental Protection Agency.
"Control" (including the terms "Controlled by" and "under common
Control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, by contract or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such Person.
"Disclosure Schedules" has the meaning specified in Section
12.8(a).
"Disposed Real Property" means all real property previously, but not
currently, owned, leased or otherwise in the possession and/or control of the
Company or any Subsidiary at any time during the ten (10) year period
immediately preceding the date hereof as to which either (a) to Seller's
Knowledge, the Company or such Subsidiary has a contractual obligation regarding
Environmental Liabilities relating to such real property, (b) the Company or
such Subsidiary used such real property as a plant or distribution center, or
(c) an Environmental Claim has been made against the Company or such Subsidiary,
or to Seller's Knowledge, conditions existed on such property at the time of
disposal which would support such an Environmental Claim, which Environmental
Claim is or would be Materially adverse (collectively "Disposed Real Property").
"Dollars" and "$" means the lawful currency of the United
States of America.
"Employee Plan" means (i) any "employee benefit plan" within the
meaning of Section 3(3) of ERISA; (ii) any Multiemployer Plan; and (iii) any
"fringe benefit plan" within the meaning of Section 6039D of the Code.
"Employee Plan Event" means a "reportable event" within the
meaning of Section 4043 of ERISA for which the requirement of
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either 30-days advance or subsequent notice to the PBGC is not waived.
"Encumbrance(s)" means any security interest, claim, pledge, mortgage,
lien, charge, or encumbrance.
"Environment" means surface waters, groundwaters, soil, subsurface
strata and ambient air.
"Environmental Claims" means any and all Actions, demands, demand
letters, Encumbrances, notices of non-compliance or violation, judgments, fines,
fees, requirements, penalties, consent orders or consent agreements relating in
any way to any Environmental Law or Environmental Permit including, without
limitation, (i) any and all Environmental Claims by Governmental Authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law and (ii) any and all Environmental
Claims by any Person seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Substances
or arising from alleged injury or threat of injury to health, safety or the
Environment.
"Environmental Laws" means all applicable federal, state, territorial,
local or foreign statutes, laws and ordinances as in effect on the date hereof
relating to pollution and protection of the Environment, including federal,
state, territorial, local or foreign statutes, laws and ordinances relating to
Releases or threatened Releases of Hazardous Substances into the Environment and
federal, state, territorial, local or foreign statutes, laws and ordinances
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances and all
regulations, rules, executive orders, codes, governmental restrictions and other
requirements of law promulgated under any such statute, law or ordinance and any
judicial or administrative interpretation thereof, including, but not limited
to, the following federal laws: CERCLA, the Resources Conservation and Recovery
Act ("RCRA"), the Hazardous Materials Transportation Act, the Clean Water Act,
the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Emergency Planning and Community Right to Know
Act, the Superfund Amendment and Reauthorization Act, the Solid Waste Disposal
Act and the Federal Insecticide, Fungicide and Rodenticide Act.
"Environmental Liabilities" means any and all debts, claims,
liabilities and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured, or undetermined, determined or determinable, arising under
or with respect to any Environmental Laws, Environmental Claims or any
Environmental Permits.
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"Environmental Permits" means all permits, certificates, approvals,
identification numbers, licenses and other authorizations required under any
applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
the related regulations, in each case as amended as of the date hereof and as
the same may be amended or modified from time to time. References to titles,
subtitles, sections, paragraphs or other provisions of ERISA and the related
regulations also refer to successor provisions.
"GAAP" means generally accepted accounting principles and practices as
in effect in the United States at the times and for the periods involved.
Accounting terms used in this Agreement which are not defined herein shall be
defined in accordance with GAAP.
"Governmental Authority" means any United States federal, state,
territorial, local or foreign government, any governmental, regulatory or
administrative authority, agency or commission or any court, tribunal, or
judicial or arbitral body.
"Hazardous Substances" means all petroleum and petroleum products and
all substances, wastes, pollutants, contaminants and materials regulated or
defined or designated as hazardous, extremely or imminently hazardous,
dangerous, or toxic pursuant to any Law, by any Governmental Authority, or with
respect to which such Governmental Authority otherwise requires environmental
investigation, monitoring, reporting, or remediation.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income and Property Taxes" means for taxable periods ending on or
before the Closing Date and Pre-Closing Partial Periods, any federal income
taxes of the Company and its Subsidiaries, any state income or franchise taxes
of the Company and its Subsidiaries, and the property taxes of the Company and
its Subsidiaries as set forth in Schedule 1.1(c), which are the property taxes
for which returns of the Company and its Subsidiaries are prepared by the tax
department of Seller and shall include, without limitation, any state or
franchise taxes or any property taxes for taxable periods beginning prior to the
Closing Date for which the Company or the Subsidiaries file a separate
stand-alone tax return or a combined or unitary return which includes only the
Company and/or one or more of the Subsidiaries for such tax periods.
"Indebtedness" means, with respect to any Person, the following,
without duplication: (i) all indebtedness for borrowed money of such Person,
whether or not contingent, (ii) all obligations of such Person for the deferred
purchase price of property or
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services except trade accounts payable and accrued liabilities that arise in the
ordinary course of business, (iii) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (iv) all indebtedness
created or arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (v) all obligations of
such Person as lessee under leases that have been recorded as capital leases in
accordance with GAAP, (vi) all obligations, contingent or otherwise, of such
Person under acceptance, letter of credit or similar facilities, (vii) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, (viii) all Indebtedness of others
referred to in clauses (i) through (vii) above guaranteed directly or indirectly
in any manner by such Person, or in effect guaranteed directly or indirectly by
such Person through an agreement (A) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (B) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of
such Indebtedness or to assure the holder of such Indebtedness against loss, (C)
to supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered) or (D) otherwise to assure a creditor
against loss, and (ix) all Indebtedness referred to in clauses (i) through (vii)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Encumbrance on property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness.
"Indemnity Agreement" has the meaning specified in Sec-
tion 3.4(e).
"Initial Payment" means the sum of $3,000,000, which was paid
to Seller on October 6, 1995.
"Intellectual Property" means (i) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, including without
limitation rights in designs, specifications and plans for specialized equipment
utilized in the Business, (ii) national (including the United States) and
multinational statutory invention registrations, patents, patent registrations
and patent applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all improvements to
the inventions disclosed in each
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such registration, patent or application, (iii) trademarks, service marks, trade
dress, trade names, and corporate names, including without limitation, the
Company Names and including all applications and registrations, (iv) copyrights
and all applications and registrations thereof, and all rights therein provided
by international treaties or conventions, (v) trade secrets, and (vi) know-how.
"Inventory" means all livestock, meat products, processed meat
products, spices, finished goods, work-in-process, raw materials, packaging,
supplies and similar property owned by the Company or any Subsidiary, related to
the Business and maintained, held or stored by or for the Company or any
Subsidiary as of a particular date.
"IRS" means the Internal Revenue Service of the United States.
"Knowledge of Purchaser" and the term "to Purchaser's Knowledge" or
similar phrases, mean the actual knowledge of those employees of Purchaser
listed on Schedule 1.1(a) after Reasonable Inquiry.
"Knowledge of Seller" and the term "to Seller's Knowledge" or similar
phrases, mean the actual knowledge of those employees of Seller or the Company
listed on Schedule 1.1(b) after Reasonable Inquiry.
"Law" means any federal, state, territorial, local or foreign statute,
law, ordinance, regulation, rule, executive order, code, governmental
restriction or other requirement of law or any judicial or administrative
interpretation thereof, except Environmental Laws.
"Leased Real Property" means the real property leased by the Company or
any Subsidiary, either as landlord or as tenant, together with all buildings and
other structures, facilities or improvements located thereon and all easements
and other rights appurtenant thereto.
"Liabilities" means any and all debts, liabilities, claims and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured, or determined or determinable, including, without limitation, those
arising under any Law or Action and those arising under any contract, lease,
Operating Permit, agreement, arrangement, commitment or undertaking, except for
Environmental Liabilities.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Company or any Subsidiary from a third party,
including Seller and any Affiliate of Seller.
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"Material" and "Materially," with respect to any matter, shall mean a
matter of a magnitude such that it had, has or is reasonably likely to have an
economic effect with respect to the Company, any of the Subsidiaries, the
Business or assuming the consummation of the transactions contemplated
hereunder, Purchaser, individually in excess of $250,000 or together with
similar matters, in excess of $500,000 in the aggregate. For purposes hereof,
examples of similar matters are described on the illustrative counsel memo
attached hereto as Exhibit H.
"Multiemployer Plan" means an Employee Plan that is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA.
"Operating Permits" means all permits, licenses, authorizations,
certificates, exemptions and approvals of Governmental Authorities, except for
Environmental Permits.
"OSHA" means the Occupational Safety and Health Act of 1970, as the
same may have been amended from time to time.
"Owned Intellectual Property" means all Intellectual Property in and to
which the Company or any Subsidiary holds, or has a right to hold, right, title
and interest.
"Owned Real Property" means the real property owned by the Company or
the Subsidiaries, together with all buildings and other structures, facilities
or improvements located thereon and all easements and other rights appurtenant
thereto.
"PBGC" means the United States Pension Benefit Guaranty
Corporation.
"Pension Plan" means an Employee Plan, other than a Multiemployer Plan,
that is covered by Title IV of ERISA.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (i) liens for taxes, assessments and governmental charges or
levies not yet due and payable; (ii) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations
that (A) are not overdue for a period of more than thirty (30) days, and (B) are
not in excess of $200,000 in the case of a single property; (iii) bonds, letters
of credit, pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory obligations; and
(iv) minor survey exceptions, minor reciprocal easement agreements and other
minor customary encumbrances on title to real property, in each case under
clauses (i) through (iv), that (A) were not incurred in connection with any
Indebtedness or trade payables of the Company or any Subsidiary, (B) do not
render title
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to the property encumbered thereby unmarketable or unusable as a Business
facility consistent with past practices, and (C) are not Materially adverse.
"Person" means any individual, partnership, firm, corporation, limited
liability company, association, trust, unincorporated organization, other entity
or Governmental Authority.
"Plan Assets" has the meaning specified in Section 4.13(a).
"Post-Closing Partial Period" has the meaning specified in
Section 9.5.
"Pre-Closing Partial Period" has the meaning specified in
Section 9.3.
"Purchase Price" has the meaning specified in Section 2.2.
"Purchaser" has the meaning specified in the preamble to this
Agreement.
"Purchaser Documents" means the agreements, certificates and other
documents to be delivered by Purchaser pursuant to Section 3.3 of this
Agreement.
"Purchaser Reports" has the meaning specified in Section 6.7.
"Purchaser's Common Stock" means the $.50 par value common
stock of Purchaser.
"Purchaser's Shares" means 1,094,273 shares which is the number of
shares of Purchaser's Common Stock determined by dividing $33,000,000 by the
Average Value.
"Qualified Plan" means any Pension Plan and any other Employee Plan
which is intended to satisfy the requirements of Section 401(a) of the Code.
"Real Property" means, collectively, the Leased Real Property
and the Owned Real Property.
"Reasonable Inquiry" has the meaning specified in Section
4.25.
"Registration Rights Agreement" means the Registration Rights Agreement
to be executed by Purchaser and Seller attached hereto as Exhibit C.
"Release" means discharging, injecting, spilling, leaking, leaching,
dumping, emitting, escaping, emptying, seeping or otherwise disposing into or
upon any land, water or air or otherwise entering into the Environment.
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<PAGE>
"Seller" has the meaning specified in the preamble to this
Agreement.
"Seller Documents" means the agreements, certificates and other
documents to be delivered by Seller pursuant to Section 3.2 of this Agreement.
"Shares" has the meaning specified in the recitals to this
Agreement.
"Subsidiaries" means the corporations which are subsidiaries
of the Company; individually, a "Subsidiary."
"Substantial Contracts" has the meaning specified in Section
4.11.
"Tax" or "Taxes" means all federal, state, territorial, local, foreign
and other taxes, or assessments including, without limitation, income, estimated
income, business, occupation, franchise, property, sales, employment, gross
receipts, use, transfer, ad valorem, fuel, vehicle, profits, license, capital,
payroll, escheat, excise, goods and services, severance, stamp, and including,
without limitation, interest, penalties and additions in connection therewith
for which the Company and/or any Subsidiary is or may be liable.
"Tax-Sharing Agreement" has the meaning specified in Section
4.7(i).
"Third Party Consents" shall mean consents from (i) Nathan's Famous
Systems, Inc. relating to the Nathan's Spice Agreement dated March 17, 1986 as
amended by Amendment to Nathan's Spice Agreement dated February 28, 1994; (ii)
General Electric Capital Corporation relating to the Credit Agreement dated
October 31, 1995; (iii) South Dakota Economic Development Authority relating to
the Agreement for Economic Development Incentive Loan dated November 3, 1994;
(iv) Indiana Packers Corp. relating to the Agreement dated September 6, 1995 for
the purchase of chilled pork products; and (v) the other party to Total Safety
Management Agreement dated July 1, 1993.
"Unaudited Financial Statements" has the meaning specified in
Section 5.8.
"USTs" means underground storage tanks, as such term is defined in the
RCRA, as amended, and the regulations promulgated thereunder or any state
equivalent thereof.
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ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of Shares. At the Closing, Seller shall grant,
sell, convey, assign, transfer and deliver to Purchaser, and Purchaser shall
purchase, upon and subject to the terms and conditions of this Agreement, the
Shares, free and clear of all Encumbrances.
2.2 The Purchase Price. The purchase price (the "Purchase
Price") shall be:
(a) $25,000,000 in cash (including the $3,000,000
Initial Payment), and
(b) the Purchaser's Shares.
2.3 Purchaser's Shares. No fractional share of Purchaser's Shares shall
be issued to Seller, and, in lieu thereof, Seller shall receive an amount in
cash determined by multiplying the Average Value by the fraction of a share
otherwise issuable.
2.4 Payment of Balance of the Purchase Price. On the Closing Date,
Purchaser shall pay to Seller $22,000,000, being the balance of the cash portion
of the Purchase Price, by wire transfer of immediately available funds to such
account as Seller shall designate and shall deliver to Seller a certificate or
certificates for the Purchaser's Shares, which certificates shall bear the
legend as described in Section hereof.
ARTICLE 3
CLOSING, ITEMS TO BE DELIVERED AND FURTHER ASSURANCES
3.1 Closing. The closing (the "Closing") of the sale and purchase of
the Shares shall take place at 3:00 PM, local time, on the day of execution
hereof (the "Closing Date") at the offices of Keating, Muething & Klekamp, 1800
Provident Tower, One East Fourth Street, Cincinnati, Ohio, 45202, or on such
other date or time or at such other location as may be mutually agreed upon in
writing by Purchaser and Seller.
3.2 Items to be Delivered at Closing by Seller. At the Closing and
subject to the terms and conditions herein contained, Seller shall deliver or
cause to be delivered to Purchaser the following:
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(a) Stock certificates representing all of the Shares, duly
endorsed in blank or accompanied by stock powers duly endorsed in
blank, in proper form for transfer;
(b) All of the written resignations, effective on the Closing
Date, from those officers and directors of the Company and the
Subsidiaries, and trustees under Company Plans, which Purchaser shall
have requested prior to the Closing;
(c) All corporate and other records of the Company and the
Subsidiaries held by Seller or its agents, including but not limited
to, minute books, stock books and registers, books of account, leases,
contracts, financial records, and personnel records of the Company and
the Subsidiaries;
(d) Certificates or Articles of Incorporation or other
appropriate charter documents, of the Company and the Subsidiaries,
certified as of a date not earlier than ten (10) days prior to the
Closing Date by the appropriate governmental office;
(e) For each of the Company and the Subsidiaries, certificates
dated not more than ten (10) days prior to the Closing Date issued by
the Secretary of State of the state of incorporation and each state
where such entity is qualified to do business as a foreign corporation,
certifying in accordance with such state's practices such entity's good
standing, status or compliance with all corporate organizational or
qualification requirements of such state;
(f) By-Laws of each of the Company and the Subsidiaries
certified, as of the Closing Date, by the corporate secretary or other
appropriate corporate officer of such entity;
(g) Copies of minutes or unanimous written consents of the
Board of Directors or the Executive Committee of the Board of Directors
of Seller approving the execution, delivery and performance of this
Agreement and all other agreements and documents to be executed in
connection herewith and the consummation of the transactions
contemplated under this Agreement, together with copies of minutes or
unanimous written consents of the Board of Directors of Seller
authorizing the Executive Committee to approve such actions, certified
to be true and complete by the Secretary or an Assistant Secretary of
Seller;
(h) Terminations of the applicable Tax-Sharing Agree-
ments as required by the terms of Section 9.1 hereof;
(i) A general release in form and substance satisfactory to
Purchaser dated as of the Closing Date and executed by Seller whereby
Seller (for itself and those Affiliates
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Controlled by Seller) shall release any and all claims Seller or such
Affiliates, or any of them, may have against the Company or the
Subsidiaries, or any of them, as of the Closing Date including, without
limitation, any claim for loans or advances made to the Company or any
Subsidiary by Seller or any such Affiliate of Seller, but excluding any
claims arising from the Indemnity Agreement or this Agreement, claims
specifically provided in this Agreement to remain in effect and claims
of the Company or any Subsidiary to each other;
(j) An Interim Services Agreement, in the form attached hereto
as Exhibit G, duly executed by Seller and the Company, under which
Seller shall continue to provide to the Company after Closing at the
cost of the Company such data processing and other services as the
Company may request on terms and conditions consistent with current
terms and reasonably satisfactory to Purchaser;
(k) Such documents as may be necessary to complete the
transfer to accounts of Employee Plans maintained by the Company and/or
any Subsidiary, of the assets attributable to those Employee Plans
maintained for the benefit of employees and former employees of the
Company and/or any of the Subsidiaries. The assets to be transferred
shall be determined by dividing each asset attributable to such
Employee Plans substantially on a pro rata basis between the Employee
Plans maintained by the Company and/or any Subsidiary for the benefit
of employees and former employees of the Company and/or any of the
Subsidiaries and the Employee Plan otherwise maintained by Seller;
(l) An opinion of Keating, Muething & Klekamp, counsel for
Seller, dated the Closing Date, in the form of Exhibit D attached
hereto with only such changes as shall be in form and substance
reasonably satisfactory to Purchaser and its counsel;
(m) Estoppel Certificates executed by the landlord and any
master landlord of the Leased Real Property designated as numbers IIA
1, IIC 1, IIC 5, IIC 13 and IIC 14 on Schedule 4.8 attached hereto, in
form and substance reasonably satisfactory to Purchaser, and stating,
at a minimum, that (i) attached to each such Estoppel Certificate is a
true and correct copy of the Lease, including any amendments thereto;
(ii) the Lease is in full force and effect and has not been amended,
except for any amendments attached to the Estoppel Certificate; and
(iii) the Company (or a Subsidiary, as the case may be) is not in
default under the terms of such Lease nor, to the best of such parties'
knowledge, has any event or action occurred, is pending or threatened
(including, without limitation, the transactions contemplated
hereunder) which, after the giving of notice or the expiration of any
applicable grace period, or
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both, will constitute or result in a breach or default by the
Company (or such Subsidiary) under such Lease;
(n) All Third Party Consents;
(o) Payment of all amounts owed by Seller or any Affiliate
Controlled by Seller to the Company or any Subsidiary, net of amounts
owed by the Company or any Subsidiary to Seller or any such Affiliate
of Seller;
(p) Satisfactions, termination statements and releases in form
and substance satisfactory to Purchaser and its counsel sufficient to
release the Encumbrances relating to the loan to the Company from The
Equitable Life Assurance Company of the United States in the original
principal amount of $35,000,000 and the Encumbrances granted to
Northwestern National Bank of Minneapolis pursuant to The Trust
Indenture for Bond Issue dated August 1, 1973 relating to a bond issue
in the original principal amount of $4,050,000; and
(q) Such other documents to be delivered by Seller hereunder
or as Purchaser or its counsel may reasonably request to carry out the
purpose of this Agreement.
3.3 Items to be Delivered at Closing by Purchaser. At the Closing and
subject to the terms and conditions herein contained, Purchaser shall deliver or
shall cause to be delivered to Seller the following:
(a) The balance of the Purchase Price in accordance with
Section 2.4 hereof;
(b) A certificate or certificates for the Purchaser's
Shares;
(c) Copies certified as true and complete by the Secretary or
an Assistant Secretary of Purchaser of minutes or unanimous written
consents of the Board of Directors of Purchaser approving the
execution, delivery and performance of this Agreement, the consummation
of the transactions contemplated under this Agreement and the election
of a person designated by Seller to the Board of Directors of
Purchaser;
(d) The Registration Rights Agreement as contemplated in
Section 8.7 hereof, duly executed by Purchaser;
(e) An opinion of Godfrey & Kahn, S.C., counsel to Purchaser,
dated the Closing Date, in the form of Exhibit E hereto with only such
changes as shall be in form and substance reasonably satisfactory to
Seller and its counsel; and
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(f) Such other documents to be delivered by Purchaser
hereunder or as Seller or its counsel may reasonably request to carry
out the purposes of this Agreement.
3.4 Indemnity Agreement. Immediately following the Closing, Purchaser
shall cause the Company to execute and deliver to Seller an Indemnity Agreement
in the form attached hereto as Exhibit F, duly executed by the Company (the
"Indemnity Agreement").
3.5 Further Assurances. After the Closing, each of the parties hereto
will cooperate with the other and execute and deliver to the other parties
hereto such other instruments and documents and take such other actions as may
be reasonably requested from time to time by the other party hereto as necessary
to carry out, evidence and confirm the intended purposes of this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
RELATING TO THE COMPANY AND THE SUBSIDIARIES
Seller hereby represents and warrants to Purchaser as follows:
4.1 Corporate Existence. Each of the Company and the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the state where it is organized. Each has the corporate power and lawful
authority and possesses all rights, privileges, franchises, Operating Permits
and Environmental Permits, necessary to entitle it to use its corporate name and
to own, lease or otherwise hold its properties and to transact the Business,
except where the failure to possess any such right, privilege, franchise,
Operating Permit or Environmental Permit would not be Materially adverse. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the conduct of
its business or the ownership of its properties requires it to be so qualified,
except to the extent the failure to be so qualified would not be Materially
adverse. Schedule 4.1 hereto contains a true and complete list of all the
Subsidiaries and all jurisdictions in which the Company and each of the
Subsidiaries is qualified to do business as of the date hereof. There have been
delivered or made available to Purchaser true, correct and complete copies of
the articles or certificates of incorporation and bylaws, each as amended
through the date hereof, and the stock certificate and transfer books and minute
books for the Company and each of the Subsidiaries.
4.2 [Intentionally Left Blank].
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4.3 Capital Stock and Ownership of Shares; Subsidiaries;
Officers and Directors.
(a) The authorized capital stock of the Company consists of
1,000 shares of common stock, no par value, of which 1,000 shares are
issued and outstanding, and 1,000 shares of preferred stock, $1.00 par
value, of which no shares are issued or outstanding. Seller is the
beneficial and record owner of all of such shares of common stock,
which constitute the Shares as defined herein. The Company is not
authorized to issue any other class of capital stock. The Company holds
no shares of capital stock in its treasury. No shares of the capital
stock or any other securities issued by the Company have been issued in
violation of any preemptive rights or any applicable securities or
other Laws, and there are no existing options, warrants, rights, calls,
puts, contracts, demands or commitments of any character relating to
authorized but unissued shares of the Company's capital stock, to any
of the Company's issued and outstanding capital stock or to any other
securities issued or to be issued by the Company or which could require
the issuance of capital stock by the Company. Except for this Agreement
and except for the rights provided in the Company's Certificate of
Incorporation and By-laws, there are no voting agreements, proxies,
understandings or other arrangements, whether written or oral, which
govern the voting of the Company's capital stock, the management of the
Company or the sale or transfer of the Company's capital stock and
there are no restrictions on the transfer of shares of the Company's
capital stock. On the Closing Date, the Shares will be transferred to
Purchaser free and clear of any and all Encumbrances and restrictions
on transfer.
(b) Schedule 4.3 sets forth the number, class and series of
the shares of capital stock each Subsidiary is authorized to issue, the
number of such shares issued and outstanding, and the par value
thereof. All of such issued and outstanding shares are validly issued
and outstanding, fully paid and nonassessable. Except as set forth on
Schedule 4.3, the Company has good and marketable title to such shares,
free and clear of all Encumbrances and transfer restrictions of any
kind. None of the Subsidiaries is authorized to issue any other class
of capital stock. None of the Subsidiaries holds shares of its capital
stock in its treasury. No shares of the capital stock or any other
securities issued by any of the Subsidiaries have been issued in
violation of any preemptive rights or any applicable securities or
other Laws, and there are no existing options, warrants, rights, calls,
puts, contracts, demands or commitments of any character relating to
authorized but unissued shares of such Subsidiary's capital stock, to
any of such Subsidiary's issued and outstanding capital stock or to any
other securities issued or to be issued by such Subsidiary or which
could require the issuance
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<PAGE>
of capital stock by any Subsidiary. Except as set forth in the
respective charter documents and by-laws of the Subsidiaries, there are
no voting agreements, understandings or arrangements, whether written
or oral, which govern the voting of the capital stock of any
Subsidiary, the management of any Subsidiary or the sale or transfer of
the capital stock of any Subsidiary, and there are no existing
restrictions on the transfer of shares of the capital stock of any
Subsidiary, except as set forth on Schedule 4.3. Except as set forth on
Schedule 4.3, neither the Company nor any Subsidiary owns any capital
stock of, any equity in, or any other ownership or investment interest
in, any corporation, limited liability company, partnership, joint
venture or other business entity, other than a Subsidiary. Except as
set forth on Schedule 4.3, none of the Company nor any of the
Subsidiaries has any liability as a general partner of any partnership
or as a party to any joint venture. Except as set forth on Schedule
4.3, since December 31, 1994, no corporation or other business entity
has been acquired by, merged with or consolidated into the Company or
any Subsidiary.
(c) Schedule 4.3 sets forth a true, complete and correct list
of all of the officers and directors of the Company and each
Subsidiary.
4.4 Validity of Contemplated Transactions, etc. Except as set forth on
Schedule 4.4 and except for the Third Party Consents and for filings necessary
to comply with the HSR Act and necessary to comply with a "reportable event"
notice (within the meaning of Section 4043 of ERISA), neither the execution,
delivery and performance of this Agreement or any of the Seller Documents nor
the consummation of the transactions contemplated hereby violates, conflicts
with, results in the breach or default of or gives rise to any right of
termination, cancellation or acceleration under any term, condition or provision
of, results in the imposition or creation of any Encumbrance or requires the
consent or approval of or filing with any Person under (a) any Law or
Environmental Law to which the Company or any Subsidiary is subject, (b) any
judgment, order, writ, injunction, decree or award of any Governmental Authority
which is applicable to the Company or any Subsidiary, (c) the charter documents
or bylaws of or any securities issued by the Company or any Subsidiary, or (d)
any Substantial Contract, any Operating Permit or any Environmental Permit to
which the Company or any Subsidiary is a party or by which any of them or their
assets may otherwise be bound. Except as aforesaid, no authorization, approval
or consent of, and no registration or filing with, any Governmental Authority is
required in connection with the execution, delivery or performance of this
Agreement by the Company. Neither the Company nor any Subsidiary has received
any notice of any objection by any Governmental Authority to the terms of this
Agreement or the consummation of the transactions contemplated by this
Agreement.
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4.5 No Third Party Options. Except as set forth on Schedule 4.5, there
are no existing agreements, options, commitments or rights with, of or to any
Person to acquire any assets, properties or rights of the Company or any of the
Subsidiaries or any interest therein, except for those contracts entered into in
the ordinary course of business consistent with past practice for the sale of
Inventory or for the sale of excess, obsolete or surplus assets not currently
used in the Business.
4.6 Intentionally Left Blank.
4.7 Tax and Other Returns and Reports.
(a) Filing of Tax Returns. Except as set forth on Schedule
4.7, each of the Company and the Subsidiaries (and any affiliated group
of which the Company and any of the Subsidiaries is now or has been a
member) has timely filed with the appropriate taxing authorities all
returns (including, without limitation, information returns and other
material information) in respect of Taxes required to be filed through
the date hereof and has paid the amount of Taxes shown to be due on
such returns. To Seller's Knowledge, except for adjustments by
Governmental Authorities, at the time they were filed and as of the
date hereof, all such returns were and are complete and accurate in all
Material respects, provided, however, that notwithstanding the
foregoing, Seller makes no representations or warranties that the
Company's tax basis in assets, its net operating losses, or its net
operating loss carryovers and carrybacks, or any other tax attributes
of the Company that carryover into the tax returns of the Company after
the Closing Date, are complete and accurate. For purposes of this
Section 4.7, the term "Company" shall be deemed to include any
predecessor of the Company or any Subsidiary or any Persons from which
the Company or any Subsidiary incurs a liability for Taxes as a result
of transferee liability. Except as specified in Schedule 4.7, neither
the Company nor any of the Subsidiaries nor any group of which the
Company and/or any of the Subsidiaries is now or was a member, has
requested any extension of time within which to file returns
(including, without limitation, information returns) in respect of any
Taxes.
(b) Payment of Taxes. Except as set forth on Schedule 4.7, all
Taxes, in respect of periods beginning before the Closing Date, have
been paid, or an adequate reserve on the Unaudited Financial Statements
has been established by the Company therefor, and the Company and the
Subsidiaries do not have any liability for Taxes in excess of the
amounts so paid or reserves so established. Since December 31, 1994,
neither the Company nor any Subsidiary has paid any amounts to any
Governmental Authority or to Seller or established a reserve on the
Unaudited Financial Statements in excess of the amount
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<PAGE>
of Taxes owed by the Company or such Subsidiary under applicable Law or
the Tax-Sharing Agreement, except for any refund which is not in excess
of $25,000 applied toward estimated tax or as set forth on Schedule
4.7.
(c) Audit History. Schedule 4.7 sets forth all claims for
deficiencies for Taxes including description, amount, and with respect
to resolved claims, the resolution thereof, asserted by any
Governmental Authority against the Company or any Subsidiary which
remain unresolved as of the date hereof or were resolved since the date
of the 1994 Audited Financial Statements. Except as set forth in
Schedule 4.7, no deficiencies for Taxes have been claimed, proposed or
assessed by any taxing or other Governmental Authority, which
deficiencies have not been paid. Except as set forth in Schedule 4.7,
there are no pending or, to Seller's Knowledge, threatened audits,
investigations or claims for or relating to any liability in respect of
Taxes, and there are no matters under discussion with one or more
Governmental Authorities with respect to Taxes that will result in an
obligation by the Company or any Subsidiary to pay additional Taxes
which are Material and, to Seller's Knowledge, no Governmental
Authority is asserting any claims for Taxes. Except as set forth in
Schedule 4.7, neither the Company nor any Subsidiary has received any
notice that any taxing authority intends to audit a return for any
other period. Except as set forth in Schedule 4.7, no extension of a
statute of limitations relating to Taxes is in effect with respect to
the Company or any Subsidiary.
(d) Affiliated Groups. Except as set forth on Schedule 4.7,
the Company and the Subsidiaries have not been a member of any
consolidated, combined or unitary group for federal, state,
territorial, local or foreign Tax purposes other than the affiliated
group of which Seller or one of its Affiliates is the parent
corporation for any tax periods, which remain subject to assessment.
(e) Joint Ventures, Etc. Except as set forth on Schedule 4.7,
since January 1, 1989, the Company and each of the Subsidiaries is not
and has not been a party to any joint venture, partnership or other
arrangement that could be treated as a partnership for Tax purposes.
(f) Section 341(f). Neither the Company nor any
Subsidiary has consented to the application of Code Sec-
tion 341(f).
(g) Foreign Operations. Except as set forth on Sched-
ule 4.7, since January 1, 1993, the Company and each Subsid-
iary has not had a permanent establishment in any foreign
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country and has not engaged in a trade or business in any
foreign country.
(h) Withholding Requirements. Neither the Code nor any
other provision of Law requires Purchaser to withhold any
portion of the Purchase Price.
(i) Tax-Sharing Agreement. Schedule 4.7 summarizes the manner
in which the tax-sharing arrangement under which Seller and the Company
have been allocating Income and Property Taxes as such arrangement has
been consistently applied since January 1, 1993 (the "Tax-Sharing
Agreement") and sets forth an accounting of the amounts paid under the
Tax-Sharing Agreement since January 1, 1995 (including credits used to
reduce the amounts paid). Attached to Schedule 4.7 is a schedule
setting forth (i) the amount of Seller's and the Company's liability
for Taxes to the other under the TaxSharing Agreement as of December
31, 1994, and (ii) the amount of and a brief description of any
adjustments to such amount since December 31, 1994. Except as
specifically described on attached Schedule 4.7, the Company and
Subsidiaries will not owe Seller under the Tax-Sharing Agreement or
otherwise for any federal income Taxes or state income Taxes for which
combined returns are filed attributable to operations of the Company
and Subsidiaries since December 31, 1994.
(j) Tax Balance Sheets. Attached to Schedule 4.7 are true and
complete (as of the date of this Agreement) copies of the respective
federal income tax balance sheets of each of the Company and the
Subsidiaries as of December 31, 1994 setting forth (i) the tax basis of
the Company's and the Subsidiaries' assets and liabilities which were
used in the preparation of Seller's, the Company's and the
Subsidiaries' federal and state income tax returns as originally filed
for the tax period ending December 31, 1994 and (ii) the deferred tax
workpapers reflecting the conversion of the book balance sheets of the
Company and the Subsidiaries as of such date to such tax balance
sheets. Except as described in Schedule 4.7, such returns have not been
amended and Seller has no current intention to amend such returns or
change the tax basis of any assets.
4.8 Real Property.
(a) Schedule 4.8 hereto contains a true and complete list as
of December 1, 1995, of all Owned Real Property, all Leased Real
Property (except Leased Real Property used exclusively for warehouse
and storage purposes where the Company has no fixed payment obligation
or contractual commitment to use such property for more than 60 days,
but including all such Leased Real Property where the Company or any of
the Subsidiaries has breached or defaulted under the
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<PAGE>
lease for such Leased Real Property) and, to Seller's Knowledge, all
Disposed Real Property. With respect to each property listed on
Schedule 4.8, such schedule properly identifies whether it is Owned
Real Property, Leased Real Property or Disposed Real Property. True and
complete copies of all leases, including all amendments thereto,
relating to any of the Leased Real Property have been delivered to
Purchaser, which leases are either Substantial Contracts or have a
remaining term of two years or more. Except as set forth on Schedule
4.8, no parcel of Owned Real Property encroaches upon any abutting
property and no abutting property encroaches upon any parcel of Owned
Real Property. The Company has good, valid and marketable fee simple
title to each parcel of Owned Real Property, subject to no Encumbrance,
except for (i) Permitted Encumbrances, (ii) liens set forth on Schedule
4.8 attached hereto, and (iii) liens reflected in detail in the notes
to the 1994 Audited Financial Statements. The leasehold interest of
each parcel of Leased Real Property is held by the Company or a
Subsidiary, subject to no Encumbrance, except for (i) Permitted
Encumbrances, (ii) liens set forth on Schedule 4.8 attached hereto, and
(iii) liens reflected in detail in the notes to the 1994 Audited
Financial Statements.
(b) Except as set forth on Schedule 4.8, to Seller's
Knowledge, each of the other parties to the leases for the Leased Real
Property is in compliance in all respects with all terms and conditions
of such leases applicable to such party, except to the extent such
non-compliance is not and will not be Materially adverse.
4.9 Litigation.
(a) Except for those matters set forth on Schedules 4.7, 4.9,
4.12 and/or 4.13 attached hereto, or as disclosed in writing to counsel
for Purchaser pursuant to the terms of the Confidentiality Agreements
and labeled as responsive to this Section 4.9, Section 4.11(a)(xi) or
Section 4.14, no Action is pending or, to the Knowledge of Seller,
threatened against, relating to or affecting: (i) the transactions
contemplated by this Agreement; or (ii) the Company, any Subsidiary,
any director, officer, Affiliate Controlled by Seller or employee
thereof in his capacity as such, the Business, or the assets or
properties of the Company or any of the Subsidiaries which is or is
reasonably likely to be Materially adverse. Seller's disclosure with
respect to workmens' compensation claims, consumer complaints, auto
liability claims, general liability claims and product liability claims
is as of the dates set forth with respect to such matters on such
Schedule 4.9(a).
(b) Except for those matters set forth on Schedules 4.7,
4.9, 4.12 or 4.13 attached hereto, neither the Company nor any
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of the Subsidiaries nor any of their respective existing officers,
directors or employees, currently is or has been permanently or
temporarily enjoined or prohibited by any order, judgment or decree of
any Governmental Authority from engaging in or continuing any conduct
or practice in connection with the Business.
(c) Except for those matters set forth on Schedules 4.7, 4.9,
4.12, and/or 4.13 attached hereto or as disclosed in writing to counsel
for Purchaser pursuant to the terms of the Confidentiality Agreements
and labeled as responsive to this Section 4.9 or Section 4.14, there is
not in existence any order, judgment or decree of any Governmental
Authority, enjoining or prohibiting the Company or any Subsidiary from
taking, or requiring the Company or any Subsidiary to take, any action
of any kind or to which the Company, any Subsidiary or any of their
properties or assets or the Business are subject or bound, except where
the failure to comply with any such order, judgment or decree would not
result in a Material adverse effect.
(d) Neither the Company nor any Subsidiary is in default under
any order, writ, injunction or decree of any Governmental Authority,
except where the effect of such default is not and will not be
Materially adverse.
(e) Schedule 4.9 hereto contains a true and complete list and
description as of December 1, 1995 of all product liability claims made
or, to the Knowledge of Seller, threatened against the Company and the
Subsidiaries, or any of them, which are pending or unresolved or which
were made or threatened since December 31, 1994. Schedule 4.9 hereto
lists, attaches or refers to all written communications received by
Seller, the Company or any of the Subsidiaries from the United States
Department of Agriculture ("USDA") or the Food and Drug Administration
("FDA") and any proceedings against the Company or any Subsidiary by
the USDA or FDA pending or, to Seller's Knowledge, threatened, the
subject matter of which has not been remedied in full and the failure
to remedy would be Materially adverse with respect to the Company's or
the Subsidiaries' respective products, facilities, or licenses or any
of their respective processes or procedures, including, without
limitation, any communications or proceedings relating to any actual or
proposed recall or withdrawal of any product from the market.
4.10 Insurance.
(a) Schedule 4.10 sets forth as of December 1, 1995, a list of
each insurance policy (including policies providing property, casualty,
liability, product liability, workers' compensation, director and
officer liability, and bond and
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surety arrangements and including the policy period for each) under
which the Company or any Subsidiary, or any of them, is an insured, a
named insured or otherwise a principal beneficiary of coverage,
including, without limitation, policies which remain in effect and
provide liability coverage for acts or events which previously occurred
and all bonds and letters of credit whether provided by Seller or the
Company or any Subsidiary. True and correct copies of each have been
provided to Purchaser. Except as set forth on Schedule 4.10, the
Company, Seller or applicable Subsidiary has paid or accrued all
premiums and charges due with respect to such policies except for
periodic adjustments to retrospectively rated insurance plans and
premium taxes incurred in the ordinary course of business which in any
event will not result in Material liability to the Company or any
Subsidiary.
(b) With respect to each such insurance policy, bond or
letter of credit:
(i) except for policies that have expired under their
terms in the ordinary course and are identified as such on
Schedule 4.10, each such policy, bond or letter of credit is
in full force and effect;
(ii) neither Seller, the Company nor any of the
Subsidiaries is in breach or default of such policy, bond or
letter of credit (including any breach or default with respect
to the payment of premiums or the giving of notice), and no
event has occurred which, with notice or the lapse of time, or
both, would constitute such a breach or default or permit
termination or modification under the policy, bond or letter
of credit except where such breach, default or termination is
not and will not be Materially adverse;
(iii) no party to the policy, bond or letter of
credit has repudiated, or given notice of an intent to
repudiate, any provision thereof; and
(iv) to Seller's Knowledge, neither Seller nor the
Company nor any Subsidiary has failed to present any claim or
give any notice, or compromised or waived any benefits or
coverage, under any insurance policy listed on attached
Schedule 4.10, or otherwise released any insurer under any
such policy of any liability for claims of coverage, of the
Company or any Subsidiary, or their respective employees,
property or assets with respect to acts or omissions, for
which the liability of the Company and the Subsidiaries for
all such claims and lost benefits is Material.
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<PAGE>
4.11 Contracts and Commitments.
(a) Schedule 4.11, together with respect to those matters
described in Section 4.11(a)(xi) as disclosed in writing to counsel for
Purchaser pursuant to the terms of the Confidentiality Agreements and
labeled as responsive to Section 4.11(a)(xi), contains as of December
1, 1995, a complete and accurate list of each of the following written
and to Seller's Knowledge oral contracts and agreements under which the
Company or any of the Subsidiaries is a party or under which the
Company, any of the Subsidiaries or any of their assets are bound (such
contracts and agreements being herein referred to as "Substantial
Contracts"):
(i) each contract and agreement for the purchase of
livestock, meat products, processed meat products, spices, raw
materials, packaging, supplies and similar property under the
terms of which the Company or any Subsidiary: (A)(1) is
required to pay or otherwise give consideration of $200,000 or
more in the aggregate during calendar year 1995 or in any
subsequent calendar year, or (2) is required to pay or
otherwise give consideration of $1,000,000 or more in the
aggregate over the remaining term of such contract, and (B)
cannot be cancelled by the Company or such Subsidiary without
penalty and without more than thirty (30) days' notice;
(ii) each contract and agreement for the sale of
Inventory or for the furnishing of services by the Company or
any Subsidiary pursuant to which the Company or such
Subsidiary: (A)(1) is to receive consideration of $200,000 or
more in the aggregate during calendar year 1995 or in any
subsequent calendar year, or (2) is to receive consideration
of $1,000,000 or more in the aggregate over the remaining term
of such contract, and (B) which cannot be cancelled by the
Company or such Subsidiary without penalty and without more
than thirty (30) days' notice;
(iii) each employment agreement and other contract
(including without limitation, severance agreements and
arrangements) with employees, independent contractors,
consultants or similar individuals or entities to which the
Company or any of the Subsidiaries is a party or is bound and
which requires or may require the payment of $100,000 or more
per contract per year and cannot be cancelled without penalty
and without more than ninety (90) days' notice;
(iv) each contract and agreement relating to
Indebtedness of the Company or the Subsidiaries where the
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<PAGE>
outstanding principal amount of such Indebtedness is
$1,000,000 or more;
(v) all powers of attorney and all contracts and
agreements with any Governmental Authority to which the
Company or any of the Subsidiaries is a party, including
without limitation, record retention agreements;
(vi) all contracts and agreements that limit or
purport to limit the ability of the Company or any of the
Subsidiaries to compete in any line of business or with any
Person or in any geographic area or during any period of time
or to use, transfer or disclose any information obtained from
or concerning any Person;
(vii) each contract and agreement between or among
the Company or the Subsidiaries and Seller or any Affiliate of
Seller which requires the payment of $100,000 or more per
year, including without limitation contingent requirements
under any guarantees, and which cannot be cancelled without
penalty with less than ninety (90) days' notice;
(viii) each hedging arrangement, futures contract and
other derivative product which involves or exposes the Company
or its Subsidiaries to liability of $200,000 or more or was
entered into otherwise than in the ordinary course of
business;
(ix) each lease for any parcel of Leased Real
Property (A) which parcel is used for a production facility,
or (B) under the terms of which lease, the Company or any
Subsidiary: (1) (a) is required to pay or otherwise give or is
to receive consideration of $200,000 or more in the aggregate
during any calendar year after December 31, 1994, or (b) is
required to pay or otherwise give or is to receive
consideration of $1,000,000 or more in the aggregate over the
remaining term of such lease, including all renewal terms, and
(2) cannot cancel such lease without penalty and without more
than thirty (30) days' notice;
(x) all collective bargaining and labor agreements;
(xi) each contract or agreement pursuant to which the
Company or any Subsidiary assumed or retained any
Environmental Liabilities with respect to any Real Property or
any Disposed Real Property; and
(xii) each other contract, lease and agreement to
which the Company or a Subsidiary is a party or is bound:
(A) which requires payment or performance by the Company
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<PAGE>
or a Subsidiary in an amount or value in excess of (1)
$200,000 during calendar year 1995 or in any subsequent
calendar year or (2) $1,000,000 in the aggregate over the
remaining term of such contract or agreement and (B) which
cannot be cancelled by the Company or the Subsidiary without
penalty with less than ninety (90) days' notice and without
payment under such contract or agreement in excess of $200,000
during the required notice period.
(b) Except as disclosed in Schedule 4.11, each Substan-
tial Contract:
(i) is valid and binding on and enforceable against
the Company or the Subsidiaries, as the case may be, and, to
Seller's Knowledge, on the other respective parties thereto
and to Seller's Knowledge, is in full force and effect; and
(ii) to Seller's Knowledge, no other party to any
Substantial Contract is in breach thereof or default
thereunder, and no event or action has occurred, is pending or
threatened which after the giving of notice, or the lapse of
any applicable grace period, or both, will constitute or
result in a breach or default by such other party of any
Substantial Contract, except for such breaches or defaults
which are not and will not be Materially adverse.
(c) A true and complete copy of each written Substantial
Contract and a true and complete description, to Seller's Knowledge, of
each oral Substantial Contract, including copies or descriptions of
each amendment, modification, consent or waiver thereto, have been
delivered to Purchaser.
(d) Neither the Company nor any Subsidiary is a party to any
hedging or similar contract, except as described in Schedule 4.11 and
those contracts entered into in the normal and ordinary course for the
purpose of hedging the price of livestock purchase commitments of the
Company and/or any Subsidiary.
4.12 Labor Matters. Schedule 4.12 is as of December 1, 1995, a correct
and complete list of all written and to Seller's Knowledge, oral collective
bargaining agreements, employee handbooks, employment agreements, separation and
severance agreements (with respect to which the Company or any Subsidiary has
Material liability for future payments under any such agreement), plant closing
agreements, severance pay plans (other than any Employee Plans) and employee
policies and plans, to which the Company or any of the Subsidiaries is a party
or by which any of them is bound regarding their respective employees, former
employees or indepen-
26
<PAGE>
dent contractors. True, correct and complete copies (or descriptions, with
respect to oral agreements, policies and plans), of all such agreements,
handbooks, policies and plans have been delivered to Purchaser. True and correct
copies of financial information regarding liability of the Company or any
Subsidiary related to any of their respective obligations under such agreements,
policies and plans, together with any actuarial statements respecting such
liabilities, have been delivered to Purchaser. Except as set forth on Schedule
4.12, the Company and the Subsidiaries have complied, in all Material respects,
with their respective obligations related to, and none of them is in Material
default under, any such agreement, handbook, policy or plan. Except as set forth
on Schedule 4.12, the Company and the Subsidiaries are in Material compliance
with all Laws respecting employment or termination of employment, employment
policies, plans, practices, terms and conditions of employment, including,
without limitation, those affected by or respecting civil rights, minimum wages,
overtime, child labor, government contracting, employee safety or health,
immigration matters, wrongful termination, employee leave, affirmative action or
rights respecting concerted activity. Except as set forth on Schedule 4.12:
(a) There is no unfair labor practice charge or complaint
against Seller, the Company or any of the Subsidiaries pending or, to
Seller's Knowledge, threatened or asserted before the National Labor
Relations Board which if determined adverse to the Company or any
Subsidiary could result in Material liability or otherwise be
Materially adverse to the Company, any Subsidiary or the Business;
(b) There are no pending or, to the Knowledge of Seller,
threatened, labor strikes, requests for representation, work stoppages,
slowdowns or lockouts at any facility of the Company or any Subsidiary;
(c) There is no representation, claim or petition pending
before the National Labor Relations Board respecting the employees of
the Company or any of the Subsidiaries nor, to the Knowledge of Seller,
are there any asserted or pending demands for recognition or any
organizational efforts on behalf of the employees of the Company or any
Subsidiary;
(d) As of December 1, 1995, no grievance arising out of any
collective bargaining agreement to which the Company or any Subsidiary
is a party is pending or, to the Knowledge of Seller, has been asserted
or threatened;
(e) As of December 1, 1995, no arbitration proceeding arising
out of any collective bargaining agreement to which the Company or any
Subsidiary is a party is pending or, to the Knowledge of Seller, has
been asserted or threatened;
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<PAGE>
(f) To Seller's Knowledge, the pending grievances and
arbitration proceedings arising out of any collective bargaining
agreement to which the Company or any Subsidiary is a party will not
result, in Material liability to the Company and the Subsidiaries and,
to Seller's Knowledge, there are no such grievances or proceedings
threatened which will result in such liability;
(g) No charges with respect to or relating to the Company or
any Subsidiary are pending or, to Seller's Knowledge, asserted or
threatened, before the Equal Employment Opportunity Commission or any
other Governmental Authority responsible for the prevention of unlawful
employment practices;
(h) No Actions relating to employment, loss of employment,
refusal to hire or rehire with the Company or any Subsidiary are
pending and, to Seller's Knowledge, no such Actions have been asserted
or threatened, which Actions if determined adversely to the Company or
any Subsidiary could result in Material liability or otherwise be
Materially adverse;
(i) Neither Seller, the Company nor any Subsidiary has
received notice, either written or to Seller's Knowledge, oral, from
any Governmental Authority responsible for the enforcement of labor or
employment regulations to challenge any policy, practice or terms or
condition of employment or to conduct an investigation of, or relating
to, the Company or any Subsidiary which will result in Material
liability to the Company and the Subsidiaries, and to Seller's
Knowledge, no such Governmental Authority intends to conduct such
investigation and no such investigation is in progress;
(j) Neither the Company nor any Subsidiary (A) provides any
medical or life insurance benefits to retired or other former employees
of the Company or any Subsidiary, (B) is subject to any asserted or, to
Seller's Knowledge, threatened claims alleging a denial of benefits
alleged to be due to such retired or other former employee, or (C) has,
except as provided on Schedule 4.12, agreed or is otherwise required to
provide such benefits to current employees of the Company or any
Subsidiary upon their retirement or other termination of employment
and, with respect to such benefits disclosed on Schedule 4.12, except
as described in the documents identified on Schedule 4.12 relating to
such benefits (and assuming no commitment is made by the Company after
the Closing with respect thereto), the Company is under no legal
impediment, as interpreted under existing law, to terminate such
benefits for all such retired and other former employees at any time in
the future and will incur no liability for such benefits as a result of
such a termination;
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<PAGE>
(k) To Seller's Knowledge, the Company and each of the
Subsidiaries is in compliance with OSHA and all other Laws regulating
or otherwise affecting health and safety of the workplace, except to
the extent such noncompliance would not be Materially adverse;
(l) Since December 31, 1994, neither the Company nor any
Subsidiary has had any Material adverse change in its contribution rate
in any state unemployment compensation fund respecting the Company or
any Subsidiary, and no such fund has a negative balance, and since
December 31, 1994, neither the Company nor any Subsidiary has
experienced any Material adverse change in connection with any of their
respective workers' compensation insurance plans; and
(m) The Company and each Subsidiary is in compliance in all
Material respects with the immigration and naturalization Laws relating
to the employment of Persons not citizens of the United States and all
other Laws relating to wages, bonuses, collective bargaining and equal
pay, and no Actions with respect thereto are pending or, to Seller's
Knowledge, asserted or threatened.
4.13 Employee Benefit Plans and Arrangements.
(a) Schedule 4.13 contains as of December 1, 1995 a true and
complete list of each Employee Plan currently maintained by Seller, the
Company and/or any Subsidiary or contributed to or required to be
contributed to by Seller, the Company and/or any Subsidiary for the
benefit of the employees or former employees (including beneficiaries
of employees or former employees) of the Company and/or any Subsidiary,
including without limitation, each Pension Plan and Qualified Plan
(collectively, the "Company Plans" and individually a "Company Plan").
True, current, and complete copies of such Company Plans, all
amendments and written interpretations of such plans, if any, lists of
the plan assets as of December 31, 1994 allocated to each such plan
("Plan Assets"), and to the extent applicable and in the possession of
Seller, the Company, the Subsidiaries or any of their agents, but not
including any unions, copies of the most recent of the following have
been furnished to Purchaser: (i) favorable determination letter of the
IRS and any outstanding request for a determination letter; (ii) IRS
Form 5500 or 5500-C/R and Schedule B to IRS Form 5500 (including any
related actuarial valuation report) with respect to the latest plan
year of each Company Plan subject to Section 412 of the Code, and (iii)
any summary plan description.
(b) Except as set forth on Schedule 4.13, neither Seller, the
Company nor any Subsidiary has breached any obligation required to be
performed by them under any Company
29
<PAGE>
Plan except where the failure to so perform or comply would not be
Materially adverse.
(c) Except as set forth on Schedule 4.13, no Employee Plan
Events exist with respect to any Company Plans which are or will be
Materially adverse. Except as set forth on Schedule 4.13, neither
Seller, the Company nor any Subsidiary has engaged in any transaction
which has given rise to any liability under Section 4069 or 4212(c) of
ERISA or has any liability to the PBGC other than liability for premium
payments which may hereinafter become due.
(d) Except as disclosed on Schedule 4.13, each Company Plan
and any trust or other funding vehicle related to such plan has been
administered and operated in all Material respects in compliance with
all applicable Laws, including, where applicable, ERISA and the Code,
including, but not limited to, the preparation and filing of all
required reports and returns with respect to such plan, the submission
of such reports and returns to the appropriate governmental
authorities, the timing, preparation, and distribution of all required
employee communications (including, without limitation, any notice of
plan amendments which is required prior to the effectiveness of such
amendments), and the proper and timely disposition of all benefit
claims.
(e) Neither Seller nor Company nor any of its Subsidiaries has
received notice of, nor to Seller's Knowledge has a Qualified Plan of
Company or its Subsidiaries been operated or administered in a manner
that would cause the failure of any Qualified Plan which is a Company
Plan to qualify under Section 401(a) of the Code, or the failure of any
trust forming a part of any such Qualified Plan to fail to qualify for
exemption from taxation under Section 501(a) of the Code, or which
might adversely affect the qualification of any Company Plan which is
intended to be a "qualified plan" as described in Section 401(a) of the
Code (or for which a timely application for such determination has been
submitted to the IRS).
(f) Each Company Plan which is an employee pension benefit
plan or pension plan as described in Section 3(1) of ERISA which has
been terminated, has been terminated in compliance with the terms of
the plan and applicable Laws and not in a manner which has resulted or
will result in any liability of the Company or any Subsidiary to the
PBGC or any other party. No liability arising from the termination of
any such plan under ERISA or otherwise has been, or may reasonably be
expected to be, incurred by the Company or any Subsidiary with respect
to any such plan.
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<PAGE>
(g) There is no accumulated funding deficiency, as defined in
Section 302 of ERISA or Section 412 of the Code with respect to any
Company Plan that is a defined benefit plan as described in Section
3(35) of ERISA and no Encumbrance has been imposed on any assets of the
Company or any Subsidiary pursuant to Sections 401(a)(29) or 412(n) of
the Code.
(h) With respect to each Company Multiemployer Plan that is
described in Section 4001(a)(3) of ERISA, there is, to Seller's
Knowledge, no accumulated funding deficiency, except as set forth on
Schedule 4.13. Except as set forth on Schedule 4.13, no withdrawal by
Seller or Company or any Subsidiary, complete or partial, within the
meaning of Title IV of ERISA, has occurred with respect to such Company
Multi-employer Plan, which has created, or which may create, a Material
liability for Seller or the Company or any Subsidiary.
(i) Seller, the Company or a Subsidiary has made all
contributions required under Section 412(m) of the Code to each Company
Plan, and has made, or will make, prior to the Closing Date, all
payments and contributions (including insurance premiums) due and
payable as of the Closing Date, to each Company Plan, as required under
such section and the terms of such plan.
(j) With respect to each Company Plan that is subject to Title
IV of ERISA, as of the Closing Date, neither the present value of all
benefit liabilities, as defined in Section 4001(a)(16) of ERISA, nor
the projected benefit obligation for such plan under FASB 87, exceed
the fair market value of the plan's assets, except for the John Morrell
& Co. Hourly Employees Pension Plan and except as set forth in Schedule
4.13.
(k) With respect to all affected Company Plans and related
trusts or other funding vehicles, to Seller's Knowledge, no "prohibited
transactions", as described in Section 406 of ERISA, have occurred
which are likely to subject any such plan, trust or other funding
vehicle, or party dealing with such plan, trust, or related funding
vehicle, to any tax or penalty on prohibited transactions imposed by
Section 501(i) of ERISA or Section 4975 of the Code, except such taxes
and penalties which are not Materially adverse, and, to Seller's
Knowledge, the consummation of the transaction contemplated by this
Agreement will not constitute a prohibited transaction.
(l) As of December 1, 1995, there are no Actions (other than
routine claims for benefits by employees, former employees,
beneficiaries, alternate payees, or dependents arising in the normal
course of operations of any Company Plan) pending,
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or to Seller's Knowledge, threatened, with respect to any Company Plan,
or against any fiduciary or sponsor of such plan with respect to their
duties under such plan or with respect to the assets of any trust or
other funding vehicle under such plan, except as disclosed on Schedule
4.13.
(m) Except as set forth on Schedule 4.13, there are no
unfunded obligations under any Company Plan providing benefits after
termination of employment to any employee of the Company or any
Subsidiary; neither Seller, the Company nor any Subsidiary has made any
commitment to the employees or former employees of the Company or any
Subsidiary, or their beneficiaries under which they, or any of them,
would be obligated to provide any benefit or payment which is not
adequately funded through a trust or otherwise.
(n) Each Company Plan which is a group health plan maintained,
sponsored, established or contributed to, by Seller, the Company, or
any Subsidiary has at all times been in compliance with the
requirements contained in Sections 601 through 609 of ERISA, Sections
104, 105, 106, and 4980B of the Code, and Section 1862(b) of the Social
Security Act, except to the extent such noncompliance is not and will
not be Materially adverse.
(o) Except as set forth on Schedule 4.13, since December 31,
1994, neither Seller, the Company nor any Subsidiary has directed or
otherwise caused the trustee of any Company Plan to sell or transfer
any Plan Assets in violation of the terms of the Company Plan or the
fiduciary duties of such trustee.
4.14 Environmental Matters.
(a) To Seller's Knowledge, Schedule 4.14 lists all
Environmental Permits presently held by the Company or any Subsidiary.
Except as disclosed in writing to counsel for Purchaser pursuant to the
terms of the Confidentiality Agreements and labeled as responsive to
this Section 4.14, to Seller's Knowledge, the Company and the
Subsidiaries currently hold all Environmental Permits necessary or
proper for the conduct of the Business where the failure to have and
maintain such Environmental Permits would be Materially adverse, and
all such Environmental Permits are in full force and effect. Except as
disclosed in writing to counsel for Purchaser pursuant to the terms of
the Confidentiality Agreements and labeled as responsive to this
Section 4.14, to Seller's Knowledge, neither Seller, the Company nor
any Subsidiary has received any written notice from any Governmental
Authority revoking, cancelling, rescinding, Materially and adversely
modifying or refusing to renew any Environmental Permit or providing
written notice of violations under any Environmental
32
<PAGE>
Law or any Environmental Permit, which revocation, cancellation,
rescission, modification or refusal to renew remains in effect or which
violation has not been remedied in full. Except as disclosed in writing
to counsel for Purchaser pursuant to the terms of the Confidentiality
Agreements, to Seller's Knowledge, the Company and each Subsidiary
presently is in all Material respects in compliance with the
Environmental Permits and the requirements of the Environmental
Permits.
(b) Except as disclosed in writing to counsel for Purchaser
pursuant to the terms of the Confidentiality Agreements and labeled as
responsive to this Section 4.14:
(i) to Seller's Knowledge, since December 31, 1994,
no Hazardous Substances have been Released from any Real
Property and no Hazardous Substances have been generated,
used, handled or stored on, or transported to or from, any
Real Property, except in Material compliance with all
applicable Environmental Laws;
(ii) to Seller's Knowledge, since December 31, 1994,
the Company and the Subsidiaries have disposed of all
Hazardous Substances in Material compliance with all
applicable Environmental Laws and Environmental Permits;
(iii) to Seller's Knowledge, since December 31, 1994,
the Company and the Subsidiaries have complied, in all
Material respects, with all Environmental Laws;
(iv) there are no pending or, to Seller's Knowledge,
threatened Environmental Claims against the Company or any
Subsidiary or any Real Property;
(v) to Seller's Knowledge, there are no pending or
threatened Environmental Claims against the Disposed Real
Property or any owner or operator thereof which relate to
events which occurred or conditions which arose prior to the
disposition of such Disposed Real Property by the Company or a
Subsidiary, as the case may be.
(c) Schedule 4.14 contains a complete list of all
environmental audit reports which have been provided to Purchaser. True
and complete copies of all such reports have been provided to
Purchaser. Such reports describe certain environmental conditions and
practices at or on the Real Property to which such reports relate.
Notwithstanding any other provisions of this Agreement to the contrary,
it is expressly understood and agreed by the parties that the Company
makes no representations or warranties with respect to any of the
matters addressed in such reports including, without limitation, the
legal compliance status of any such matters. To Seller's Knowledge,
there are no other environ-
33
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mental audit reports in the possession of Seller or the Company, or any
agent or representative thereof, related to any Real Property or
Disposed Real Property.
(d) Except as disclosed in Schedule 4.14 or as disclosed in
writing to counsel for Purchaser pursuant to the terms of the
Confidentiality Agreements and labelled as responsive to this
subparagraph (d), to Seller's Knowledge, (i) there are not currently
any USTs located on any Real Property and (ii) no USTs were located on
Disposed Real Property at the time of disposal.
4.15 Compliance With Laws; Operating Permits, etc. Except as set forth
on Schedules 4.7, 4.12, 4.13 or 4.15 hereof, or as disclosed in writing to
counsel for Purchaser pursuant to the terms of the Confidentiality Agreements
and labeled as responsive to this Section 4.15 or Section 4.14, to Seller's
Knowledge, neither the Company nor any Subsidiary is in violation of any Laws,
except for violations, if any, which do not, and are not reasonably likely to be
Materially adverse. Except as disclosed in Schedule 4.15, to Seller's Knowledge,
the Company and the Subsidiaries currently hold all Operating Permits necessary
for the conduct of the Business and all such Operating Permits are in full force
and effect. Except as disclosed in Schedule 4.15, or as disclosed in writing to
counsel for Purchaser pursuant to the terms of the Confidentiality Agreements
and labeled as responsive to this Section 4.15 or Section 4.14, neither the
Company nor any Subsidiary has received any written notice from any Governmental
Authority revoking, cancelling, rescinding, Materially and adversely modifying
or refusing to renew any Operating Permit, or providing written notice of
violations under any Law. Except as disclosed in Schedule 4.15, to Seller's
Knowledge, the Company and the Subsidiaries are each in all Material respects in
compliance with all their Operating Permits.
4.16 Intellectual Property.
(a) Schedule 4.16 sets forth a true and complete list and a
brief description of all Owned Intellectual Property, including,
without limitation, all Company Names, but exclusive of trade secrets,
know-how, trade dress, trade names, unpatentable or unpatented
inventions and corporate names not susceptible to recitation in such
Schedule. Neither the Company nor any Subsidiary has any Licensed
Intellectual Property. Except as otherwise described in Schedule 4.16,
in each case where a registration or application for registration
listed in Schedule 4.16 is held by assignment, the assignment has been
duly recorded. Except as disclosed in Schedule 4.16, to Seller's
Knowledge, the rights of the Company and/or any Subsidiary in or to
such Intellectual Property do not conflict with or infringe on the
rights of any other Person where the effect of such infringement is, or
would reasonably likely be,
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Materially adverse. Neither Seller nor the Company nor any Subsidiary
has at any time received any claim or notice of any infringement from
any Person which remains unresolved. To Seller's Knowledge, no such
claim has been threatened, orally or in writing.
(b) Except as disclosed in Schedule 4.16:
(i) all the Owned Intellectual Property is owned by
the Company or the Subsidiaries free and clear of all
Encumbrances, except Permitted Encumbrances; and
(ii) no Actions are pending (nor, to Seller's
Knowledge, have been threatened) against the Company or the
Subsidiaries either (A) based upon, or challenging, or seeking
to deny or restrict, the use by the Company or any Subsidiary
of any of their respective Intellectual Property, or (B)
alleging that any services provided or products sold by the
Company or the Subsidiaries are being provided or sold in
violation of any patents, trademarks, trade names, copyrights
or other intellectual property rights of any Person. To
Seller's Knowledge, no Person is using any patents,
copyrights, trademarks, service marks, trade names or trade
secrets that infringe upon the Intellectual Property or upon
the rights of the Company and the Subsidiaries therein. The
consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of
any of the Owned Intellectual Property or any of the rights of
the Company or any Subsidiary in any of the Licensed
Intellectual Property.
(c) The Intellectual Property described in Schedule 4.16,
together with the trade secrets, know-how, trade dress, trade names,
patentable or unpatentable inventions and corporate names not
susceptible to recitation in such Schedule, constitutes all the
Material Intellectual Property used or held by the Company or any
Subsidiary in the conduct of the Business and there are no other items
of Intellectual Property which are Material to the existing operations
of the Company, the Subsidiaries or the Business.
4.17 Accounts; Lockboxes; Safe Deposit Boxes. Schedule 4.17
is a true and complete list of:
(a) The names of each bank, savings and loan association,
securities or commodities broker or other financial institution in
which the Company or any of the Subsidiaries has an account, including
cash contribution accounts, and the names of all persons authorized to
draw thereon or have access thereto;
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(b) The location of all lockboxes and safe deposit boxes of
the Company or the Subsidiaries and the names of all Persons authorized
to draw thereon or have access thereto; and
(c) The names of all Persons, if any, holding powers of
attorney from the Company or the Subsidiaries.
4.18 Conduct of Business Since December 31, 1994. Except as disclosed
on Schedule 4.18, since December 31, 1994 (except as otherwise specified), the
Company and the Subsidiaries have conducted their respective businesses only in
the ordinary course, and, except as contemplated by this Agreement, there has
not been any:
(a) Events which are Materially adverse to the Company
and the Subsidiaries;
(b) Sale, assignment, transfer, mortgage, pledge or lease of
any assets of the Company or any Subsidiary, except sales of Inventory
in the ordinary course of business, sales of excess, obsolete or
surplus assets not used in the Business, and sales of other fixed
assets, aggregating for all such other fixed asset sales book value of
less than $100,000;
(c) Issuance, sale or other disposition by the Company or any
Subsidiary of any stock, stock options, bonds, notes or other
securities of such corporation, and neither Seller, the Company nor any
Subsidiary has entered into any agreement or otherwise become bound to
do any of the foregoing;
(d) Payment of a cash dividend, redemption of stock or other
similar distribution by the Company, and the Company has not declared
any dividend or agreed to redeem any stock or make any other such
distributions;
(e) Increase in the rates of direct compensation payable or to
become payable by the Company or any Subsidiary to any officer,
employee, agent or consultant, other than routine increases made in the
ordinary course of business, or any bonus, percentage compensation,
service award or other like benefit, granted, made or agreed to for any
such officer, employee, agent or consultant, or any welfare, pension,
retirement or similar payment or arrangement made or agreed to which is
greater than any such bonus, percentage compensation, service award or
other like benefit or any welfare, pension, retirement or similar
payment or arrangement existing or made pursuant to arrangements,
agreements, or plans existing at December 31, 1994, except as required
by existing agreements or applicable law, all of which are listed in
attached Schedules 4.11, 4.12 or 4.13 and except for the payment of
1995 bonuses which in the aggregate did not exceed $1,900,000;
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(f) Damage, destruction or loss affecting the properties or
assets of the Company or any Subsidiary or the Business having an
effect which is Materially adverse;
(g) Indebtedness with a principal amount of $1,000,000 or more
or other obligations or liabilities, absolute, accrued, contingent or
otherwise, whether due or to become due, incurred by the Company or any
Subsidiaries, except current liabilities accrued in the ordinary course
of business, none of which is Materially adverse;
(h) Except as disclosed on Schedule 4.7 with respect to Taxes,
cancellation or compromise of, or agreement to cancel or compromise,
any debt or claim of the Company or any Subsidiary (including, without
limitation, any Tax Claim), or waiver or release, or agreement to waive
or release, any right of Material value relating to the assets or
properties of the Company or the Subsidiaries or the Business, other
than any cancellation or compromise of Taxes which would result in a
payment by the Company or the Subsidiaries of less than $50,000;
(i) Transfer or grant, or agreement to transfer or grant, any
rights under, or entrance into or agreement to enter into, any
settlement regarding the breach or infringement of any Intellectual
Property of the Company or any Subsidiary, or modification or agreement
to modify any existing rights with respect thereto other than in the
ordinary course of business;
(j) Forward purchase commitments by the Company or any
Subsidiary in excess of the requirements of the Business for normal
operating inventories of quantity and quality consistent with past
practices, or at prices higher than current market prices;
(k) Write-down or write-up of the value of any Inven-
tory, plants, property, equipment or intangibles of the
Company or any Subsidiary;
(l) Change in the accounting methods or practices, including,
without limitation, changes in methods of accounting followed by the
Company or any Subsidiary or any change in depreciation or amortization
policies or rates theretofore adopted by the Company or any Subsidiary;
(m) Material adverse change in the assets, properties,
liabilities or financial condition or business of the Company, not
including ordinary wear and tear, sales in the ordinary course of
business and depreciation, provided, however, that notwithstanding the
foregoing, Seller makes no representation or warranty that the
Company's tax basis in assets, its net
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operating losses, or its net operating loss carryover and carrybacks or
other tax attributes have not changed since December 31, 1994;
(n) Since December 1, 1995, change in the advertising
and promotional activities, and pricing and purchasing
policies of the Company and the Subsidiaries;
(o) Since December 1, 1995, discontinuance or material
modification of any policies or binders of insurance maintained in
respect of the Company, each Subsidiary and the Business, or failure to
present any claims or provide any notices with respect thereto;
(p) Since December 1, 1995, failure to exercise
any rights of renewal pursuant to the terms of any lease
disclosed on Schedule 4.11;
(q) Except for contract and agreements listed on Schedule
4.11, since December 1, 1995, contract or agreement of the Company or
any Subsidiary not in the ordinary course of business or any contract
or agreement which would, if entered into prior to December 1, 1995,
have been classified as a Substantial Contract, or any act or omission
to do any act, which would cause a Material breach of any Substantial
Contract of the Company or any Subsidiary; or change, amendment or
termination or other modification of any Substantial Contract of the
Company or any Subsidiary, other than such change, amendment or
termination in the normal and ordinary course of the Business and which
would not have a Material adverse effect;
(r) Since December 1, 1995, collective bargaining agreement,
employment agreement, separation agreement, severance agreement, plant
closing agreement, severance pay agreement or Employee Plan entered
into by the Company or any Subsidiary;
(s) Since December 1, 1995, except as set forth on Schedule
4.9, action pending or to the knowledge of Seller, threatened with
respect to workmens' compensation claims, consumer complaints, auto
liability claims, general liability claims and product liability claims
against the Company which if determined adversely would have a
Materially adverse affect on the Company or its Subsidiaries;
(t) Since December 1, 1995, except as set forth on Schedule
4.12, arbitration proceeding arising out of any collective bargaining
agreement to which the Company or any Subsidiary is a party is pending
or to the Knowledge of Seller, is threatened or asserted, which if
determined
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adversely to the Company or a Subsidiary would be Materially
adverse; or
(u) Since December 1, 1995, actions pending or to Seller's
Knowledge, threatened with respect to any Company Plan or against any
fiduciary or sponsor of such plan with respect to their duties under
such plan or with respect to the assets of any trust or funding vehicle
under such plan which would be Materially adverse to Company or a
Subsidiary.
4.19 Affiliate Transactions. Except as set forth on Schedule 4.19 and
for Substantial Contracts, there is no agreement or other arrangement between
Seller, on the one hand, and the Company and/or any Subsidiary, on the other,
which is not on commercially reasonable terms.
4.20 Payments. To Seller's Knowledge, neither Seller, the Company nor
any of the Subsidiaries nor any of their respective officers, directors,
employees or agents, has, directly or indirectly, given or made, or agreed to
give or make, any illegal political contributions or any illegal commission,
payment, gratuity, gift, or similar benefit, in each case on behalf of the
Company or any Subsidiary, to any candidate, government official, customer,
supplier or other person (foreign or domestic) who is in or may be in a position
to help or hinder the business of the Company and/or any Subsidiary or to assist
the Company and/or any Subsidiary with any actual or proposed transaction.
4.21 Tangible Personal Property.
(a) To Seller's Knowledge, all of the tangible personal
property owned or leased by the Company and the Subsidiaries is
currently in the possession of the Company and the Subsidiaries.
(b) Except for leased property, the Company or the
Subsidiaries have good and marketable title to all tangible personal
property used in the conduct of the Business, free and clear of all
Encumbrances, except for:
(i) Permitted Encumbrances; and
(ii) liens set forth in Schedule 4.21 hereto as of
the dates identified on Schedule 4.21, and other liens since
such dates created in the ordinary course, which will not have
a Materially adverse affect.
(c) To the Knowledge of Seller, the inventory of maintenance
spare parts of the Company and the Subsidiaries are adequate in all
Material respects for the operation of the Business in the ordinary
course and consistent with past practices.
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4.22 Products. To the Knowledge of Seller, no deficiency or inadequacy
exists in the manufacturing or formulation of any of the Company's products
which is reasonably likely to give rise to any general failure of products
manufactured or marketed by the Company and its Subsidiaries or result in any
claims against the Company or any Subsidiary.
4.23 Customers and Vendors. Except as set forth on Schedule 4.23, to
Seller's Knowledge, neither Seller, the Company nor any Subsidiary has received
any notice, oral or written, that any of the suppliers, customers or
distributors of the Company and/or any of the Subsidiaries will not continue to
be suppliers, customers or distributors of the Company or the Subsidiaries, as
the case may be, after Closing except to the extent such discontinuance would
not be Materially adverse. Solely for purposes of this Section 4.23,
"Materially" shall refer to matters with an economic effect of $1,000,000 or
more individually.
4.24 Absence of Undisclosed Liabilities. To the best of Seller's
Knowledge, there are no Material Liabilities or Material Environmental
Liabilities, including, without limitation, any Material Tax liabilities due or
to become due, of or relating to the Business or the assets or properties of the
Company or any Subsidiary, except for: (i) the liabilities and obligations
disclosed on the Disclosure Schedules or reflected or reserved for on the
Audited Financial Statements; (ii) liabilities or obligations incurred in the
normal and ordinary course of the Business since the date of the Audited
Financial Statements as permitted under Section 4.18 hereof; or (iii) matters
set forth on Schedule 4.24; provided, however, that notwithstanding the
foregoing, Seller makes no representation or warranty that the Company's tax
basis in assets, its net operating losses or its net operating loss carryover
and carrybacks or other tax attributes of the Company as of the Closing Date
will not change after the Closing Date, as a result of a tax audit or otherwise.
4.25 Schedules. To Seller's Knowledge, the Disclosure Schedules are
true and complete as of the date of this Agreement (except to the extent they
specifically refer to an earlier date). Seller represents and warrants that it
has required each of the employees listed on Schedule 1.1(b) to conduct
Reasonable Inquiry. For purposes hereof, "Reasonable Inquiry" shall mean that
each of such employees has been provided with and asked to review those portions
of this Agreement and the Schedules hereto relevant to such person as set forth
on Schedule 1.1(b), and has inquired of such employees and agents of Seller, the
Company or any Subsidiary, if any, and reviewed such documents in the possession
of Seller, the Company, the Subsidiaries or any of their agents, if any, as such
employee in good faith deems appropriate, given such person's area of
responsibility as identified on Schedule 1.1(b), in order to respond to the best
of such employee's knowledge that the
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warranties and representations of Seller included in such relevant portions of
this Agreement are true, correct and complete.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES RELATING TO SELLER
AND CERTAIN FINANCIAL MATTERS
Seller hereby represents and warrants to Purchaser as follows:
5.1 Corporate Existence. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
Seller is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where it owns or leases properties and where
the conduct of its business requires it to be so qualified, except to the extent
the failure to be so qualified would not have a material adverse effect on
Seller or its business or assets.
5.2 Corporate Power; Authorization; Enforceable Obligations. Seller has
the corporate power, authority and legal right to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement by
Seller has been duly authorized by all necessary corporate and shareholder
action. This Agreement has been, and the Seller Documents will be, duly executed
and delivered by Seller, and this Agreement constitutes, and the Seller
Documents when executed and delivered will constitute, the legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms.
5.3 Validity of Contemplated Transactions, etc. Except for filings
necessary to comply with the HSR Act and necessary to comply with a "reportable
event" notice (within the meaning of Section 4043 of ERISA), neither the
execution, delivery and performance of this Agreement or the Seller Documents by
Seller nor the consummation of the transactions contemplated hereby or thereby
violates, conflicts with or results in the breach of any term, condition or
provision of, or requires the consent of any other person under, (a) any
existing Law or Environmental Law to which Seller is subject, (b) any judgment,
order, writ, injunction, decree or award of any Governmental Authority which is
applicable to Seller, (c) the charter documents or Bylaws of or any securities
issued by Seller, or (d) any material mortgage, indenture, agreement, contract
or commitment to which Seller is a party or by which Seller is otherwise bound.
Except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Authority is required in
connection with the execution, delivery or performance of this Agreement and the
Seller Documents by Seller.
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5.4 Title to Shares. Seller shall deliver to Purchaser at the Closing,
good and marketable title to the Shares, free and clear of any and all
Encumbrances and transfer restrictions of any kind. The Shares have been duly
and validly issued, are fully paid and nonassessable, and Seller has and will at
Closing have good and marketable title to such Shares, free and clear of all
Encumbrances and transfer restrictions of any kind.
5.5 Litigation. Seller is not a party to or subject to any Action,
judgment, order, writ, injunction, decree or award before any Governmental
Authority, nor are any such Actions pending or to the Knowledge of Seller,
threatened which, if adversely determined, would prevent the consummation of the
transactions contemplated hereby.
5.6 FIRPTA. Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code.
5.7 Disclaimer of Disclosure. Seller does not make, and has not made,
any representation or warranty relating to Seller, the Company or the Business
or otherwise in connection with the transactions contemplated hereby other than
those expressly set out herein or in the Seller Documents which are made by
Seller. It is understood that any cost estimates, projections or other
predictions, or any other data not included herein are not and shall not be
deemed to be or to include representations or warranties of Seller. Except as
set forth herein or in the Seller Documents, no person has been authorized by
Seller to make any representation or warranty relating to Seller, the Company,
the Business or otherwise in connection with the transactions contemplated
hereby and, if made, such representation or warranty must not be relied upon as
having been authorized by Seller.
5.8 Financial Information.
(a) The Company has delivered to Purchaser true and complete
copies of (i) the consolidated balance sheets of the Company for the
fiscal years ended on or about December 31 in the years 1990, 1991,
1992, 1993 and 1994; and (ii) the related statements of income, cash
flow and shareholder's equity for the fiscal years then ended, audited
by the Company's Accountants (the "Audited Financial Statements"). The
Company has delivered to Purchaser true and complete copies of all
management letters issued by Company's Accountants since December 31,
1990. Except as set forth on Schedule 5.8, the Audited Financial
Statements, including the related notes, fairly present, in all
Material respects, the consolidated financial position of the Company
and the Subsidiaries at the dates indicated and the consolidated
results of operations, cash flows and shareholder's equity of the
Company and the Subsidiaries for the periods then ended, in conformity
with GAAP, consistently applied throughout all
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periods except as specifically stated in the Audited Financial
Statements or the notes thereto. Except as set forth on Schedule 5.8,
to Seller's Knowledge, subject to the use of estimates, assumptions and
judgments by the Company which Seller warrants are reasonable, the
Audited Financial Statements are true and correct in all Material
respects.
(b) The Company has delivered to Purchaser unaudited
consolidated balance sheets and unaudited statements of income and cash
flows of the Company for the months ended January through November of
1995 (the "Unaudited Financial Statements"). Except as set forth on
Schedule 5.8, the Unaudited Financial Statements have been prepared in
accordance with the Company's interim accounting practices as in effect
for the previous fiscal year and fairly present, in all Material
respects, the financial position and results of operations of the
Company and the Subsidiaries as of the dates and for the periods
covered thereby, and, to Seller's Knowledge, subject to the use of
estimates, assumptions and judgments by the Company which Seller
warrants are reasonable, the Unaudited Financial Statements are true
and correct in all Material respects.
5.9 Investment Purpose. Seller is acquiring the Purchaser's Shares for
investment only and not with a view to resale or other disposition. Seller
acknowledges that the Purchaser's Shares are not registered under the securities
laws of the United States or any state thereof in reliance upon one or more
exemptions from the registration requirements made available under such laws.
Seller covenants and agrees that it will not offer, sell or otherwise transfer
the Purchaser's Shares unless and until the Purchaser's Shares or the offer,
sale or transfer thereof are registered pursuant to the securities laws of all
applicable jurisdictions, or unless the Purchaser's Shares are otherwise exempt
from registration thereunder. Seller has acquired the Purchaser's Shares for its
own account and not for the account of others and not with a view to the
distribution of the Purchaser's Shares and has no present intention of reselling
or dividing the Purchaser's Shares, except as may be permitted by the terms of
the Registration Rights Agreement. All certificates for the Purchaser's Shares
shall contain or otherwise be imprinted with a legend in substantially the
following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state securities laws and may not be sold or otherwise
transferred except as may be permitted by the Registration
Rights Agreement and in compliance with said act and
applicable state securities laws.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller and the Company as follows:
6.1 Corporate Existence. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Purchaser is duly qualified to do business and is in good standing as a foreign
corporation in Virginia, which is the only jurisdiction where it owns or leases
properties and where the conduct of its business requires it to be so qualified,
except to the extent the failure to be so qualified would not have a material
adverse effect.
6.2 Capitalization. The authorized capital stock of Purchaser consists
of (i) 25,000,000 shares of Common Stock, 16,437,526 of which were issued and
outstanding on December 19, 1995, and (ii) 1,000,000 shares of preferred stock,
$1.00 par value, of which 1,000 shares of Series B 6 3/4% cumulative convertible
redeemable preferred stock and 2,000 shares of Series C 6 3/4% cumulative
convertible preferred stock were issued and outstanding on December 19, 1995.
All issued and outstanding shares of Purchaser's Common Stock have been duly and
validly issued and are fully paid and non-assessable and free of any claim of
preemptive rights. Each share of Purchaser's Common Stock has one Right (as
described on Schedule 6.2) attached to it. Except as disclosed on Schedule 6.2
attached hereto, there are no outstanding rights granted by Purchaser to
purchase or receive, or options, warrants, puts, calls, contracts, commitments
or demands of any character granted by Purchaser relating to the Purchaser's
Shares.
6.3 Corporate Power and Authorization. Purchaser has the corporate
power, authority and legal right to execute, deliver and perform this Agreement.
The execution, delivery and performance of this Agreement by Purchaser has been
duly authorized by all necessary corporate and shareholder action. This
Agreement has been, and the Purchaser Documents will be, duly executed and
delivered by Purchaser and this Agreement constitutes and the Purchaser
Documents when executed and delivered will constitute, the legal, valid and
binding obligations of Purchaser enforceable against Purchaser in accordance
with their respective terms.
6.4 Validity of Contemplated Transactions, etc. Except for filings
necessary to comply with HSR Act and consents which have been obtained, neither
the execution, delivery and performance of this Agreement by Purchaser nor the
consummation of the transactions contemplated hereby violates, conflicts with or
results in the breach of any term, condition or provision of, or requires the
consent of any other Person under (i) any existing Law
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or Environmental Law to which Purchaser is subject, (ii) any judgment, order,
writ, injunction, decree or award of any Governmental Authority which is
applicable to Purchaser, (iii) the charter documents or By-Laws of, or any
securities issued by, Purchaser, or (iv) any material mortgage, indenture,
agreement, contract or commitment to which Purchaser is a party or by which
Purchaser is otherwise bound. Except as aforesaid and for filings with the
Securities and Exchange Commission and the NASDAQ, no authorization, approval or
consent of, and no registration or filing with, any Governmental Authority is
required in connection with the execution, delivery and performance of this
Agreement by Purchaser.
6.5 Investment Purpose. Purchaser is purchasing the Shares for
investment only and not with a view to resale or other disposition. Purchaser
acknowledges that the Shares are not being registered under the securities laws
of the United States or any state thereof in reliance upon one or more
exemptions from the registration requirements made available under such laws.
6.6 Litigation. Purchaser is not a party to or subject to any Action,
judgment, order, writ, injunction, decree or award before any Governmental
Authority, nor are any such Actions pending or to the Knowledge of Purchaser,
threatened which, if adversely determined, would have a material adverse effect
on Purchaser or prevent the consummation of the transactions contemplated
hereby, including the issuance or registration of the Purchaser's Shares.
6.7 Purchaser Reports. The Annual Report to the Commission on Form 10-K
for the fiscal year ended April 30, 1995 and all other reports of Purchaser
filed with the Commission pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, since the end of the fiscal year ended April
30, 1995 (collectively, the "Purchaser Reports") complied, when filed, as of the
respective dates of their filing with the Commission, in all material respects
with the rules and regulations of the Commission and did not, to Purchaser's
Knowledge, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
6.8 Indebtedness. Since September 28, 1995, the Purchaser has not
incurred any Indebtedness except borrowing under Purchaser's existing line of
credit facility for purposes connected with Purchaser's past usage of the line
of credit facility and additional borrowings not to exceed $25,000,000.
6.9 Knowledge of Purchaser. Purchaser represents and warrants that it
has required each of the employees listed on Schedule 1.1(a) to conduct
Reasonable Inquiry. For purposes hereof, Reasonable Inquiry shall mean that each
of such employees
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has been provided with and asked to review this Agreement and the schedules
hereto and has inquired of such employees and agents of Purchaser, if any, and
has reviewed such documents in the possession of Purchaser or its agents, if
any, as such employee in good faith deems appropriate in order to respond to the
best of their knowledge that the warranties and representations of Purchaser
included in this Agreement are true, correct and complete.
6.10 [Intentionally left blank].
6.11 Bonds and Letters of Credit. Purchaser has made arrangements to
release Seller of liability as of Closing under the Packers and Stockyards bond
previously issued by the Company and guaranteed by Seller.
6.12 Stock Market Listing. Purchaser has listed the
Purchaser Shares on the NASDAQ Stock Market as a national market
security.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 Survival of Representations and Warranties. The warranties and
representations of Seller and Purchaser herein contained shall survive the
Closing for the periods set forth below:
(a) the warranties and representations set forth in Sections
4.7, 4.20, 5.6 and 5.9 hereof shall survive for the applicable statutes
of limitations, plus thirty (30) days;
(b) the warranties and representations set forth in Sections
4.1 through 4.5, the last three sentences of Section 4.8(a), Section
4.21(b), the second sentence of Section 4.25, (except as further
limited, if any, by the Section to which such warranty relates)
Sections 5.1 through 5.4 and Sections 6.5 and 6.9 (except as further
limited, if any, by the Section to which such warranty relates) of this
Agreement shall survive indefinitely;
(c) the warranties and representations set forth in
Sections 4.14 and 4.15 hereof shall survive until December 31,
2000; and
(d) the remaining warranties and representations set forth in
this Agreement, in any of the Seller Documents or in any of the
Purchaser Documents shall survive until December 31, 1998.
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ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Access to Information; Cooperation.
(a) In order to facilitate the resolution of any claims made
by or against or incurred by Seller, Purchaser or the Company, for a
period of ten (10) years following the Closing or such longer period as
may be required by the record retention regulations, policies and
procedures of the IRS, Purchaser and Seller shall, and Purchaser shall
cause the Company to:
(i) retain the books and records of the Company and
the Subsidiaries in its possession which relate to periods
prior to the Closing in a manner reasonably consistent with
the prior practice of the Company or Seller, as the case may
be;
(ii) upon reasonable notice, afford the officers,
employees and authorized agents and representatives of the
other party reasonable access (including the right to make, at
the noticing party's expense, photocopies), during normal
business hours, to such books and records in accordance with
Section 9.9 hereof; and
(iii) cooperate with each other fully with respect to
acts occasionally requested to be taken after Closing to
assist in the full realization of the rights and benefits of
each party hereunder.
(b) In order further to facilitate the resolution of any
claims made by or against or incurred by Seller, Purchaser or the
Company, for such period as claims may be submitted under the insurance
policies listed or referred to on Schedule 4.10, Seller shall fully
cooperate with the Company and Purchaser in securing insurance company
reimbursement of any claims of coverage of the Company or any
Subsidiary, or their respective employees, property or assets with
respect to acts or omissions prior to Closing covered under such
insurance policies. Seller shall not compromise or waive any benefits
or coverage under any such insurance policy, or otherwise release any
insurer under any such policy of any liability for claims of coverage,
of the Company or any Subsidiary, or their respective employees,
property or assets with respect to events, losses, acts or omissions
prior to Closing. This provision, however, shall not be deemed to
require Seller to renew or extend the term of any such policy beyond
the Closing Date.
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(c) After Closing, Seller shall deliver to Purchaser within
thirty (30) days after completion all amendments to tax returns of
Seller which affect the federal or any state income tax balance sheets
of the Company or the Subsidiaries as of the Closing Date and all
schedules employed in connection therewith to the extent they impact
such tax balance sheets.
(d) On or before January 31, 1996, Seller shall deliver to
Purchaser copies of all schedules and other information used in the
preparation of the state and federal income tax returns of the Company
and the Subsidiaries for the period ended December 31, 1994.
(e) After Closing, Seller shall assign to the Company title to
all assets, including without limitation, Real Property, tangible
personal property and Intellectual Property primarily or exclusively
used in the Business and owned by Seller or an Affiliate of Seller
(other than Company or Subsidiary) except for those assets used by
Seller in connection with providing service to Company under the
Interim Service Agreement.
8.2 Confidentiality. Seller and Purchaser acknowledge the terms of the
Confidentiality Agreements and further agree to remain bound by the terms of
such agreements after Closing.
8.3 Regulatory and Other Authorizations; Notices and
Consents.
(a) After Closing, Purchaser shall use its best efforts to
maintain the currency and effectiveness of any of the listings of
Purchaser's Shares on the NASDAQ Stock Market as a national market
security, or such other securities exchange on which the Purchaser's
Common Stock may be listed.
(b) Seller shall request the Company's Accountants to grant
their consent to the inclusion of the Audited Financial Statements,
including the report of the Company's Accountants, in filings of
Purchaser with the Securities and Exchange Commission made after
Closing.
8.4 Use of Intellectual Property.
(a) Seller acknowledges that from and after the Closing, the
name "John Morrell & Co." and all similar or related names, marks and
logos (the "Company Names") shall be owned by the Company, that neither
Seller nor any of its Affiliates shall have any direct or indirect
rights in or to any of the Company Names or will contest the ownership
or validity of any rights of Purchaser or the Company in or to the
Company Names. The foregoing notwithstanding, from and after the
Closing,
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Seller may use, solely for interoffice purposes, any remaining supply
of Seller stationery bearing any Company Name.
(b) From and after the Closing, neither Seller nor any of its
Affiliates (not including the Company and its Subsidiaries) shall use
any of the Owned Intellectual Property or any of the Licensed
Intellectual Property, including the Company Names. Seller and each of
its Affiliates which own any of the Licensed Intellectual Property used
primarily or exclusively in the Business shall assign such Licensed
Intellectual Property to the Company at the Closing.
8.5 Operations under the Consent Decree. After the Closing, Purchaser
shall cause the Company in all material respects to fulfill any and all
obligations under, and to operate in compliance with, the Consent Decree and the
Clean Water Act, including any capital expenditures reasonably necessary to
comply with the Consent Decree.
8.6 Additional Covenants. Purchaser agrees that, during the
period of five (5) years immediately after the Closing, it will:
(a) Maintain the Company as a separate corporation or
other trade or business within the meaning of Sections 414(b)
and 414(c) of the Code;
(b) Cause the Company to maintain at all times a minimum of
either a $10,000,000 cash balance or a $10,000,000 unrestricted
availability under the Company's then available credit facility;
(c) Not permit the Company to declare or pay any dividend, in
cash or otherwise, or make any other distribution to its shareholders,
redeem or repurchase any outstanding equity securities or take any
other similar action (i) unless, after giving effect thereto, the
Company will be in compliance with, and after giving effect to normal
seasonal demands on the Company's cash flow, the Company reasonably
expects to remain in compliance with, the provisions of subsection (b),
above, or (ii) which would involve the distribution of all or
substantially all of the assets of the Company; or
(d) Not declare or pay any dividend, in cash or otherwise, or
make any other distribution to its stockholders, redeem or repurchase
any outstanding equity securities or take any other similar action if,
after giving effect thereto, Purchaser's consolidated net worth would
be less than $150,000,000. For purposes hereof, "Purchaser's
consolidated net worth" shall mean, as of the time of any determination
thereof, the excess of (i) the sum of (A) the par value (or value
stated on the books of Purchaser) of the capital stock of all classes
of Purchaser, plus (or minus in case of a
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surplus deficit) (B) the amount of the sum of surplus, whether capital
or earned, of Purchaser, over (ii) the sum of any treasury stock of
Purchaser, all as determined in accordance with GAAP on a consolidated
basis.
Purchaser agrees that there is no adequate remedy at law for the damage which
Seller might sustain for the failure of Purchaser to comply with the foregoing
covenants and, accordingly, that in the event of any breach or violation, or
threatened breach or violation of the foregoing covenants, Seller shall be
entitled, in addition to any other rights or remedies available to it, at law or
in equity, to obtain preliminary and permanent injunctive relief, including a
temporary restraining order and also specific performance.
8.7 Registration Rights Agreement. At the Closing, Seller and Purchaser
shall execute the Registration Rights Agreement in the form attached hereto as
Exhibit C, which contains provisions relating to, among other matters, certain
covenants of Purchaser with respect to registration of the Purchaser's Shares
under the securities laws.
8.8 Board of Directors. On and at all times after the Closing Date, so
long as the Purchased Shares held by Seller represent at least Five Percent (5%)
of the issued and outstanding Common Stock of Purchaser, if requested to do so
by Seller, Purchaser shall take all reasonable good faith efforts as may be
available to cause a representative, nominated by Seller, to be elected to the
Board of Directors of Purchaser.
8.9 Further Action. Each of the parties hereto shall after Closing use
all best reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law or Environmental Law, and to execute and deliver such documents
and other instruments or papers as may be required to carry out the provisions
of this Agreement and to consummate and render effective the transactions
contemplated by this Agreement.
8.10 Noncompetition. Seller agrees that at no time for a period of
three (3) years after the Closing (the "Non-Competition Period") shall it,
either directly or indirectly:
(a) Except for the interest in Purchaser's Shares acquired
hereunder and Seller's interest in Friday Canning Corporation (to the
extent it currently competes), acquire an ownership interest in, engage
in or render advice or assistance to any business competitive with the
Packing Business (as defined below), except for the incidental
acquisition of such ownership interest as part of an acquisition not
otherwise prohibited hereby provided the sales of such incidentally
acquired competitive business do not exceed twenty-five
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percent (25%) of the total sales of the business so acquired and such
incidentally acquired competitive business is sold by Seller within two
years, or such longer period as to which Purchaser may consent, of the
date of acquisition of such business;
(b) Divert, or attempt to divert, any business whatsoever from
the Business or solicit or entice, or attempt to solicit or entice, any
of the customers or suppliers of the Business so as to cause any such
customers or suppliers not to do business with the Business; or
(c) Except as required by law, disclose to any person other
than an employee or agent of the Business having a need to know such
information in the ordinary course of business, or any other person to
whom such disclosure has been authorized by the President of Purchaser,
any information not generally known to the public relating to the
Business; or
(d) Contact or solicit for employment any person now or
hereafter employed by the Business at an executive level or entice, or
attempt to solicit or entice, any such person to leave the employment
of the Business unless such person shall have ceased to be an employee
of the Business not less than six (6) months prior to any such contact,
solicitation or enticement. For purposes hereof, the hiring of any such
person as a result of such person's response to published
advertisements in general circulation regarding such employment shall
not be deemed to be restricted hereby.
Seller recognizes that irreparable injury may result to Seller and the Business
in the event of a breach by it of the restrictions imposed by this Section 8.10,
and that its acceptance of such restrictions was a material factor in
Purchaser's decision to enter into this Agreement. In the event that Seller
shall engage in any act in violation of the provisions of this Section 8.10,
Purchaser shall be entitled, in addition to such other remedies and damages as
may be available to it, to an injunction prohibiting Seller from engaging in
such acts. For purposes hereof, the "Packing Business" means the business of the
Company and the Subsidiaries of slaughtering, processing, marketing,
distributing and selling fresh pork and lamb and processed meat products,
including sausages, frankfurters, bacon, hams and luncheon meats.
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ARTICLE 9
TAX MATTERS
9.1 Termination of Existing Tax-Sharing Agreements. Subject to the
provisions of this Article 9, all tax-sharing agreements or similar arrangements
with respect to or involving the Company and the Subsidiaries shall be
terminated as of the Closing Date, and, after the Closing Date, Seller, the
Company and the Subsidiaries shall have no rights or obligations thereunder.
9.2 Post-Closing Adjustment to Tax Sharing Payments. No later than
February 28, 1996, Purchaser and the Company shall deliver to Seller financial
statements for the Company for the tax period ending on the Closing Date which
shall be consistent with the Company's financial statements for the year ended
December 31, 1995, which are delivered to the Company's creditors pursuant to
its credit agreements (the "Closing Financial Statements"). No later than thirty
(30) days after receiving such Closing Financial Statements from Purchaser and
the Company, Seller shall prepare and deliver to Purchaser a written calculation
of any remaining tax sharing payments due from the Company to Seller, or from
Seller to the Company, as the case may be, with respect to any Income and
Property Tax returns of the Company for all tax periods ending on or before the
Closing Date for which tax returns have not yet been filed (the "Final
Pre-Closing Period Tax Returns"). Any tax sharing payments for any Income Tax
returns for the tax periods ending on the Closing Date shall be calculated based
upon the Company's income as reported in such Closing Financial Statements and
any tax sharing payments for any Income Tax returns for the tax period ending
December 31, 1994, shall be calculated using the Company's income as reported in
the Company's audited financial statements for the year ended December 31, 1994
and such 1994 and 1995 income, as the case may be, shall be adjusted in a manner
consistent with past practice to reflect hypothetical taxable income for the
Company as if the Company were filing separate stand alone tax returns and
taking into account any amounts previously paid by the parties through the
Closing Date, as reflected on Schedule 4.7 of the Stock Purchase Agreement.
Notwithstanding the foregoing, if Purchaser objects to such calculation of all
tax sharing payments due hereunder, Purchaser shall so notify Seller in writing
no later than thirty (30) days after such calculation has been delivered to
Purchaser and shall state the nature of such objection. If the parties are
unable to resolve their differences regarding the amount of any payments due,
then Company's Accountants shall review the tax sharing payment calculation and
any related workpapers and position papers of the parties and decide what
amounts are due from which parties, provided that the Company's Accountants
shall take into account that any such hypothetical tax returns must be prepared
on a basis consistent with prior hypothetical tax returns and the tax sharing
payment
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calculations must be made in accordance with this Article 9 and consistent with
the description of the Tax Sharing arrangement set forth in Schedule 4.7(i) of
this Agreement. The determination of the Company's Accountants shall be binding
on the parties. The Company or Seller, as the case may be, shall pay the other
party the amount due pursuant to such calculation by bank check or wire transfer
of immediately available funds no later than two (2) days after the delivery of
such calculation, or if there is a dispute, no later than two (2) days after the
final determination of the Company's Accountants. No other Income Tax sharing
payments under this Section 9.2 shall be due, now or in the future, between
Seller and the Company.
9.3 Seller Indemnity. Seller shall indemnify and hold harmless
Purchaser, the Company, the Subsidiaries and each of their respective officers,
directors, employees, agents and successors and assigns, from and against all
Income and Property Taxes including, without limitation, all assessments and
adjustments from audits by any Tax authorities (a) with respect to all periods
ending on or prior to the Closing Date, (b) with respect to any period beginning
before the Closing Date and ending after the Closing Date, but only with respect
to the portion of such period up to and including the Closing Date (such
portion, a "Pre-Closing Partial Period"), or (c) of Seller and any other entity,
other than the Company and the Subsidiaries, which is or has been affiliated
with Seller, as a result of Treasury Regulation ss.1.1502-6(a) or otherwise due
to the affiliated relationship. Notwithstanding the foregoing, Seller shall not
be required to indemnify Purchaser, the Company or any Subsidiary for additional
Taxes payable as a result of an election made (or deemed made) under Section 338
of the Code, or any comparable provision of state or local law. Seller shall be
entitled to any net refunds of Income and Property Taxes (including interest
thereon less any Taxes payable by the Company thereon and less costs of
collection) with respect to the periods described in clauses (a) and (b) above,
except those reflected on the 1994 Audited Financial Statements of the Company
or a Subsidiary as of December 31, 1994. The Company and the Subsidiaries may
carry back any loss or other tax benefit into tax returns of Seller and its
Affiliates for tax periods ending on or before (or which include) the Closing
Date; provided, however, that: (i) Seller shall be entitled to retain any
refunds generated as a result of such carryback, (ii) Purchaser shall indemnify
and hold harmless Seller and each of its officers, directors, employees, agents
and successors and assigns, from and against the loss of any tax benefits Seller
or its Affiliates would have otherwise been entitled to if such carryback had
not occurred, to the extent such loss exceeds the refund retained by Seller, and
(iii) Purchaser shall pay Seller an administrative charge for the preparation of
any amended filings to utilize such carrybacks at the rate of $150 per hour to
the extent such cost exceeds the refund retained by Seller which is not taken
into account in clause (ii), above. Seller's indemnity to pay Income and
Property Taxes under this
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Section (whether arising before, on or after the Closing and whether paid with
returns when due or as the result of audits or assessments) shall be after the
application (only if required to be applied to the Tax being indemnified) of all
applicable credits, net operating or capital loss deductions related to the
Company and the Subsidiaries, which credits, net operating or capital loss
deductions arose in the period ending on or prior to the Closing Date or in the
Pre-Closing Partial Period and are available to reduce the Tax deficiency for
which Seller has an indemnification obligation. In addition to the foregoing,
Seller shall indemnify and hold harmless Purchaser, the Company and the
Subsidiaries from and against any and all attorneys' fees and expenses incurred
by any of them with respect to the matters covered by such indemnity and/or the
enforcement thereof.
9.4 Purchaser Indemnity. Purchaser and the Company will indemnify and
hold harmless Seller and each of its officers, directors, employees and agents
and successors and assigns, from and against (i) all Taxes with respect to
periods beginning after the Closing Date; (ii) all taxes with respect to any
period beginning before the Closing Date and ending after the Closing Date, but
only with respect to Taxes attributable to the period after the Closing Date;
(iii) all Taxes attributable to and arising out of any transaction directed to
occur by Purchaser after Closing even if such transaction occurs on the Closing
Date; and (iv) any Taxes attributable to an election pursuant to Section 338(g)
of the Code.
9.5 Allocation Between Partial Periods. For purposes of this Agreement,
any Taxes for a period beginning before the Closing Date and ending after the
Closing Date, shall be apportioned between the Pre-Closing Partial Period and
the period following the Closing Date (a "Post-Closing Partial Period"), based,
in the case of real and personal property Taxes, on a per diem basis and, in the
case of other Taxes, on the actual activities, taxable income or taxable loss of
the Company and the Subsidiaries during such Pre-Closing Partial Period and such
Post-Closing Partial Period.
9.6 Filing of Tax Returns. To the extent permitted by Law, Seller shall
include the Company and the Subsidiaries in the consolidated federal and
consolidated or unitary state income tax returns filed by Seller for periods
prior to and including the Closing Date and shall include the activity of the
Company and the Subsidiaries up through and including the Closing Date in such
returns. The returns shall be prepared on a basis consistent with past practices
and shall not make or change any election applicable to the Company or any
Subsidiary without Purchaser's written consent. Seller shall provide the Company
with separate pro forma returns for the Company and the Subsidiaries not less
than thirty (30) days prior to the filing date and accommodate reasonable
comments made by the Company within fifteen (15) days after the delivery of such
proforma returns to the Company. Seller, with the
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assistance of the Company, shall prepare books and working papers (including a
closing of the books) which will clearly demonstrate the income and activities
of the Company and the Subsidiaries for the period ending on the Closing Date
and any Pre-Closing Partial Period. Purchaser shall include the activity of the
Company and the Subsidiaries for periods beginning after the Closing Date in the
consolidated federal income tax return filed by Purchaser.
As set forth in this Agreement in more detail below, Seller shall
prepare any and all Final Pre-Closing Period Tax Returns, as well as any Income
and Property Tax returns of the Company for taxable periods which begin prior to
the Closing Date and which end after the Closing Date (the "Final Stand Alone
Tax Returns") (the Final Pre-Closing Period Tax Returns and the Final Stand
Alone Tax Returns in the aggregate shall be referred to as the "Final Income and
Property Tax Returns").
Seller shall prepare and file all Final Pre-Closing Period Tax Returns
on a basis consistent with the Income and Property Tax returns of the Company
for all previous years. Subject to Seller's right, if any, to any tax sharing
payments pursuant to Section 9.2 of this Agreement, Seller shall pay the amount,
if any, due with such Final Pre-Closing Period Tax Returns.
Seller shall prepare all Final Stand Alone Tax Returns on a basis
consistent with the Income and Property Tax returns of the Company for all
previous years. Notwithstanding the foregoing, with respect to the Final Stand
Alone Tax Returns, to the extent there are any new elections to be made by the
Company or tax returns positions with respect to new issues to be taken by the
Company which have not been previously addressed in the Company's prior tax
returns, Seller shall give Purchaser notice of such event and Purchaser shall be
entitled to instruct Seller as to whether or not to make any such elections or
take any such tax return position in the Final Stand Alone Tax Returns that
Seller is preparing.
Seller shall deliver each Final Stand Alone Tax Return to Purchaser no
later than thirty (30) days prior to the due date of such return for Purchaser's
review. Purchaser shall review, approve (which approval may not be unreasonably
withheld), sign and timely file such tax return with the appropriate taxing
authority. Purchaser or the Company shall be responsible for and shall make the
payment of any remaining taxes due with the return, if any; provided, however,
Seller shall deliver to Company any payments made with respect to such returns
under any tax sharing arrangement to the extent such amounts were not delivered
to the respective taxing authorities. If Purchaser shall object to the return as
prepared, Purchaser shall so notify Seller in writing no later than fifteen (15)
days after such return has been delivered to Purchaser as to the nature of such
objection. If the parties are unable to resolve their differences regarding the
preparation of the return, then Company's Accountants shall review the returns
and any related
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workpapers and position papers of the parties and decide how the tax return
should properly be filed, provided that the Company's Accountants shall take
into account that such returns must be prepared on a basis consistent with prior
tax returns subject to any elections by Purchaser pursuant to the immediately
preceding paragraph. The determination of the Company's Accountants shall be
binding on the parties. Notwithstanding anything in this Agreement to the
contrary, if Purchaser or the Company files any return which is inconsistent
with the return as prepared by Seller, as mutually agreed by Seller and
Purchaser, or as determined by the Company's Accountants, as the case may be,
Seller shall no longer have any indemnification obligation pursuant to this
Agreement with respect to any Taxes or other damages arising out of, or related
to, the item or issues so altered on such tax return.
Purchaser shall prepare and file all other Tax returns of the Company,
other than the Final Income and Property Tax Returns, which have not yet been
filed prior to the Closing Date and shall be responsible for and make any
remaining tax payments due with such returns, if any.
Any expenses incurred by the parties in connection with the use of the
Company's Accountants in connection with a resolution of a dispute under this
Article 9 shall be shared equally by the parties.
9.7 Post-Closing Audits and Other Procedures. Seller, on the one hand,
and Purchaser, on the other hand, agree to give prompt notice to each other of
any proposed adjustment to Taxes for periods ending on or prior to the Closing
Date or any Pre-Closing Partial Period. Seller shall have the right to control
the conduct of any audit or proceeding with respect to Income and Property Taxes
and Seller may settle any such audit or proceedings for such periods.
9.8 Closing Date Tax Balance Sheets. No later than thirty (30) days
after Seller files its consolidated federal income tax return for the tax period
ending on December 31, 1995 (and for the tax period ended December 31, 1996, if
Closing occurs after December 31, 1995), Seller shall deliver to Purchaser
copies of the respective federal income tax balance sheets of each of the
Company and the Subsidiaries as of the Closing Date setting forth (a) the tax
bases of the Company's and the Subsidiaries' assets and liabilities which were
used in the preparation of Seller's, the Company's and the Subsidiaries' federal
and state income tax returns for the tax period ending on the Closing Date; (b)
the deferred tax workpapers reflecting the conversion of the book balance sheets
of the Company and the Subsidiaries as of such date to such tax balance sheets;
and (c) such other schedules and information used in the preparation of the
state and federal income tax returns of the Company and the Subsidiaries for
such period.
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9.9 Cooperation. Seller, on the one hand, and Purchaser, the Company
and the Subsidiaries, on the other hand, agree to furnish or cause to be
furnished to each other upon request, as promptly as practicable, such
information, records and assistance (including access to books and records)
relating to the Company and the Subsidiaries as is reasonably necessary for the
preparation of any return for Taxes, audit or examination, claim for refund or
audit, and the prosecution or defense of any claim, suit or proceeding relating
to any proposed Tax adjustment.
Such assistance shall include making employees available on a mutually
convenient basis to provide additional information and explanation of any
material to be provided hereunder and shall include furnishing to or permitting
the copying by the requesting party of any records, returns, schedules,
documents, workpapers or other relevant materials which might reasonably be
expected to be of use in connection with such return, audit, examination or
proceedings. The party requesting assistance hereunder shall reimburse the party
whose assistance is requested for the reasonable out-of-pocket expenses incurred
by it in providing such assistance, but shall not be required to reimburse the
party providing such assistance with respect to time of employees made available
pursuant to this section.
9.10 Section 338(h)(10). Upon the request of Purchaser and subject to
receipt of the payment set forth in this Section , Seller shall join in the
election under Section 338(h)(10) of the Internal Revenue Code (and similar
state elections in the jurisdictions requested by Purchaser); provided, however,
that Purchasers request to make such election must be received no later than
sixty (60) days prior to the due date of such election. Purchaser shall deliver
to Seller at the time of such request an allocation of the Purchase Price to be
used for purposes of any such Section 338(h)(10) election, which allocation must
be reasonably acceptable to Seller. Within thirty (30) days of the later of such
request or the date on which the parties mutually agree on a Purchase Price
allocation (provided that Seller shall be deemed to have accepted such
allocation herewith unless Seller objects within 30 days after receipt and
provides to Purchaser an allocation acceptable to Seller within such 30 day
period), Seller shall deliver to Purchaser a written calculation of the
following estimated amounts: (a) an amount equal to the excess of the Taxes
incurred by Seller and any consolidated group or unitary group of which Seller
or any Affiliate of Seller is the common parent ("Affiliated Group") if a
Section 338(h)(10) election is made with respect to the acquisition of the
Company by Purchaser over the amount of such Taxes of Seller and the Affiliated
Group if such Section 338(h)(10) election is not made, (b) an amount equal to
the tax benefits of the excess of any net operating losses or other tax
attributes of Seller and the Affiliated Group available after offsetting any
income or gain on the sale if a Section 338(h)(10) election is not made over the
amount of such items if such election is made, and (c) the amount
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necessary to gross-up Seller such that the receipt of any amount due Seller
pursuant to the clauses (a) and (b), above, will be received by Seller net of
any tax effect to Seller (including the use of any net operating losses or other
tax attributes to offset such additional tax liability incurred as a result of
such gross-up payments) (the amounts in clauses (a), (b) and (c) collectively,
the "Section 338 Payment"). For purposes of the foregoing sentence, all
calculations of Taxes and the tax benefits of any net operating losses and other
tax attributes shall be made based on the highest marginal tax rates as shown in
the actual tax returns filed by Seller, the Affiliated Group and the Company, as
the case may be, with respect to which such calculation is being made.
If after receiving the foregoing computations Purchaser decides to
proceed with an election, Purchaser shall pay to Seller an amount equal to the
estimated Section 338 Payment at the time Seller delivers the election to
Purchaser. Seller shall deliver to Purchaser the executed election not more than
forty-five (45) days after Purchaser's request therefor. No later than one (1)
year following the Closing Date, Seller's independent outside public accountants
shall compute any adjustments to the amount of the Section 338 Payment based on
the tax returns of Seller and its Affiliates as actually filed (including any
amendments or audit adjustments thereto), Purchaser's independent public
accountants shall review and approve such calculation, and Purchaser shall pay
Seller or Seller shall pay Purchaser, as the case may be, the amount of any such
adjustment no later than seven (7) days after receipt of such accountants'
approval thereof.
ARTICLE 10
[INTENTIONALLY LEFT BLANK]
ARTICLE 11
INDEMNIFICATION
11.1 General Indemnification Obligation of Seller. From and after the
Closing, Seller will reimburse, indemnify and hold harmless the Company and
Purchaser, and their respective officers, directors, employees, agents, and
successors and assigns against and in respect of:
(a) any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by Purchaser or the Company or
any of the Subsidiaries that result from, relate to or arise out of the
breach or inaccuracy or nonfulfillment of any representation or
warranty, covenant or agreement on the part of Seller under this
Agreement or any
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Seller Document, including without limitation, any such breach,
inaccuracy or nonfulfillment of any covenant or agreement existing on
the Closing;
(b) any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by Purchaser or the Company or
any Subsidiary that result from, relate to or arise out of the
nonfulfillment on or after the Closing Date of any agreement or
covenant on the part of Seller under this Agreement or any Seller
Document; and
(c) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses (including, without limitation, reasonable legal
fees and expenses) incident to the foregoing or to the enforcement of
this Section 11.1.
11.2 General Indemnification Obligation of Purchaser. From and after
the Closing, Purchaser will reimburse, indemnify and hold harmless Seller, its
officers, directors, employees, agents and successors or assigns against and in
respect of:
(a) any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by Seller that result from,
relate to or arise out of the breach or inaccuracy or nonfulfillment of
any representation or warranty on the part of Purchaser under this
Agreement or any material breach or inaccuracy of any representation,
warranty or covenant of Purchaser in any Purchaser Document;
(b) any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by Seller that result from,
relate to or arise out of the nonfulfillment on or after the Closing
Date of any agreement or covenant on the part of Purchaser under this
Agreement;
(c) any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by Seller that relate to the
failure of the Company to pay, perform or discharge any of the
Liabilities or the Environmental Liabilities of the Company or any of
its Subsidiaries arising prior to, at or after the Closing, excluding
Income and Property Taxes, but including, without limitation,
Liabilities or Environmental Liabilities arising from the condition of
any Real Property or Disposed Real Property, other than Disposed Real
Property acquired by Seller from the Company;
(d) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses (including, without limitation, reasonable legal
fees and expenses) incident to any of the foregoing or to the
enforcement of this Section 11.2.
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11.3 Third Party Claims - Indemnification.
(a) If a claim by a third party is made against an indemnified
party (i.e. a Seller indemnified party or Purchaser indemnified party),
the indemnified party shall promptly notify the indemnifying party of
such claim or demand, specifying the nature of such claim or demand and
the amount or the estimated amount thereof to the extent then feasibly
determinable (which estimate shall not be conclusive of the final
amount of such claim and demand) (the "Claim Notice"). The indemnifying
party shall have ten (10) business days from the personal delivery or
mailing of the Claim Notice (the "Notice Period") to notify the
indemnified party, (A) whether or not it disputes its liability to the
indemnified party hereunder with respect to such claim or demand and
(B) notwithstanding any such dispute, whether or not it desires, at its
sole cost and expense, to defend the indemnified party against such
claims or demand. If the indemnifying party fails to undertake the
defense of any claim or demand, the indemnified party may undertake
such matter at the expense of the indemnifying party.
(b) If such claim, demand, action or proceeding is a third
party claim, demand, action or proceeding, the indemnifying party will
have the right at its expense to assume the defense thereof using
counsel reasonably acceptable to the indemnified party. The indemnified
party shall have the right to participate, at its own expense, with
respect to any such third party claim, demand, action or proceeding. In
connection with any such third party claim, demand, action or
proceeding the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession. No
such third party claim, demand, action or proceeding shall be settled
without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld. It shall be deemed not
unreasonable if a party is unwilling to consent to a settlement if the
settlement results in additional liability to the indemnified party as
a result of such settlement or if such party is required to be enjoined
or otherwise similarly restricted or bound under the terms of the
settlement. Except in instances where a settlement restricts or
negatively impacts the indemnified party or its business after such
settlement or results in additional liability to such party as a result
of such settlement, if a firm written offer is made to settle any such
third party claim, demand, action or proceeding and the indemnifying
party proposes to accept such settlement, then: (i) the indemnifying
party shall be excused from, and the indemnified party shall be solely
responsible for, all further defense of such third party claim, demand,
action or proceeding; (ii) the maximum liability of the indemnifying
party relating to such third party claim, demand, action or proceed-
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ing shall be the amount of the proposed settlement if the amount
thereafter recovered from the indemnified party on such third party
claim, demand, action or proceeding is greater than the amount of the
proposed settlement; and (iii) the indemnified party shall pay all
attorneys' fees and legal costs and expenses incurred after rejection
of such settlement by the indemnified party. Notwithstanding the
foregoing, the provisions of Section 9.7 shall control with respect to
the defense of any Income or Property Tax audit or proceeding.
(c) In the event an indemnified party should have a claim
against the indemnifying party hereunder that does not involve a claim
or demand being asserted against or sought to be collected from it by a
third party, the indemnified party shall promptly send a Claim Notice
with respect to such claim to the indemnifying party. If the
indemnifying party does not notify the indemnified party within the
Notice Period that it disputes such claim, the amount of such claim
shall be conclusively deemed a liability of the indemnifying party
hereunder.
11.4 Provisions Regarding Indemnity. The amounts for which the
indemnifying party shall be liable under Sections 11.1 and 11.2 and Article 9 of
this Agreement shall be net of any tax benefit realized, if necessary, by the
indemnified party as a result of the facts and circumstances giving rise to the
liability of the indemnifying party, and shall also be net of any insurance
proceeds received by the indemnified party (retroactively, if necessary) in
connection with the facts giving rise to the right of indemnification (net of
any expenses (including legal fees) incurred by the indemnified party in
collecting such proceeds) and plus any taxes incurred as a result of such
indemnification or insurance recovery. The indemnified party shall be obligated
in connection with any claim for indemnification under this Article 11 to use
all commercially reasonable efforts to obtain any insurance proceeds available
to such indemnified party with regard to the applicable claim.
11.5 Payment. Upon the determination of the liability under Section
11.3 hereof and after exhaustion of insurance coverage as required by Section
11.4 and actual receipt of any such insurance proceeds, the appropriate party
shall pay to the other, as the case may be, within ten (10) business days, the
amount of any claim for indemnification made hereunder. Upon the payment in full
of any claim, the entity making payment shall be subrogated to the rights of the
indemnified party against any Person with respect to the subject matter of such
claim.
11.6 Limits Upon Indemnification Claims by Purchaser. Except
as otherwise provided in Article 9 with respect to Taxes, Purchaser
and its successors and assigns shall not have the right to assert
any claim against Seller for indemnification under this Agreement
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for a breach of any warranty or representation set forth in
Article 4 or Sections unless and until either:
(a) the aggregate amount of damages suffered by Purchaser, the
Company or the Subsidiaries as a result of the breach or breaches of
such warranties and representations is equal to or exceeds $3,000,000,
in which event Purchaser shall be entitled to indemnification hereunder
for all damages suffered by Purchaser, the Company or the Subsidiaries;
or
(b) the aggregate amount of damages suffered by Purchaser, the
Company or the Subsidiaries as a result of the breach or breaches of
such warranties and representations is less than $3,000,000, in which
event Purchaser shall be entitled to indemnification hereunder for
damages suffered by Purchaser, the Company or the Subsidiaries which
equal or exceed $1,000,000 as a result of any individual breach,
provided, however, that in either event, Purchaser shall be entitled to
indemnification hereunder only to the extent of the aggregate excess of such
claims over $500,000. Solely for purposes of the indemnification sections of
this Agreement, the qualifications of certain representations and warranties as
to Materiality shall be disregarded for purposes of determining the amount of
damages suffered by Purchaser, the Company or the Subsidiaries as a result of a
breach. Notwithstanding the above, Purchaser shall be entitled to
indemnification without regard to any minimum amount of damages set forth herein
as an offset to any indemnification sought by Seller pursuant to Section 11.2
hereof with respect to a matter for which Seller has breached a warranty and
representation in the Agreement. Notwithstanding the foregoing, any
indemnification claims or payment under Article 9 shall not be considered in
determining whether any minimum amount of damages has been suffered for purposes
of this Section 11.6.
11.7 Limits Upon Indemnification Claims by Seller. Seller and its
successors and assigns shall not have the right to assert any claim against
Purchaser for indemnification under this Agreement for a breach of any warranty
or representation set forth in Section unless and until either:
(a) the aggregate amount of damages suffered by Seller as a
result of the breach or breaches of such warranties and representations
is equal to or exceeds $3,000,000, in which event Seller shall be
entitled to indemnification hereunder for all damages suffered by
Seller; or
(b) the aggregate amount of damages suffered by Seller as a
result of the breach or breaches of such warranties and representations
is less than $3,000,000, in which event Seller shall be entitled to
indemnification hereunder for damages
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suffered by Seller which equal or exceed $1,000,000 as a
result of any individual breach,
provided, however, that in either event, Seller shall be entitled to
indemnification hereunder only to the extent of the aggregate excess of such
claims over $500,000. Solely for purposes of the indemnification sections of
this Agreement, the qualifications of certain representations and warranties as
to materiality shall be disregarded for purposes of determining the amount of
damages suffered by Seller as a result of a breach.
11.8 Sole Remedy. All claims made by any party hereto against another
party hereto shall be made and brought pursuant to the provisions of this
Article 11 or Articles 9 or 12. The indemnification provisions contained in this
Article 11 or in Articles 9 or 12 shall be the sole remedy available against the
parties hereto or the Company for any damages arising from the breach of any
representation or warranty contained herein.
ARTICLE 12
MISCELLANEOUS
12.1 [Intentionally Left Blank].
12.2 Brokers' and Finders' Fees.
(a) Seller represents and warrants to Purchaser that all
negotiations relative to this Agreement have been carried out by them
and their representatives without the intervention of any other person
who may be entitled to any brokerage or finder's fee or other
commission in respect of this Agreement or the consummation of the
transactions contemplated hereby, and Seller agrees to indemnify and
hold harmless Purchaser against any and all claims, losses, liabilities
and expenses which may be asserted against or incurred by it as a
result of Seller's or the Company's dealings, arrangements or agreement
with any representative or agent hired by Seller or the Company.
(b) Purchaser represents and warrants that all negotiations
relative to this Agreement have been carried out by it directly without
the intervention of any person who may be entitled to any brokerage or
finder's fee or other commission in respect of this Agreement or the
consummation of the transactions contemplated hereby, and Purchaser
agrees to indemnify and hold Seller harmless against any and all
claims, losses, liabilities and expenses which may be asserted against
or incurred by it as a result of Purchaser's dealings,
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arrangements or agreements with any representative or agent
hired by Purchaser.
12.3 Expenses. Except as otherwise provided in this Agreement, each
party hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby, except that Seller shall
bear any out-of-pocket expenses of the Company relating solely to the
transactions contemplated hereby without charge to the Company.
12.4 Binding Effect. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of Seller and Purchaser.
12.5 Waiver. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
12.6 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if (i) delivered personally or by courier or (ii)
sent by registered or certified mail, postage prepaid, or (iii) sent by
confirmed facsimile with the original to follow by first class mail, postage
prepaid, as follows:
If to Purchaser, to:
Smithfield Foods, Inc.
501 North Church Street
Smithfield, Virginia 23430
Attention: Joseph W. Luter, III
Facsimile No.: (804) 357-1331
and
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Attention: Peter M. Sommerhauser
or Thomas A. Myers
Facsimile No.: (414) 273-5198
and
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McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
Richmond, VA 23219
Attention: Sam Young Garrett
Facsimile No.: (804) 775-1061
If to Seller, to:
Chiquita Brands International, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Attention: General Counsel
Facsimile No.: (513) 784-6691
With a required copy to:
JLM Financial, Inc.
Suite 521, Dixie Terminal Building
49 East Fourth Street
Cincinnati, Ohio 45202
Attention: Joseph A. Pedoto
Facsimile No.: (513) 579-6374
and
Keating, Muething & Klekamp
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Paul V. Muething
Facsimile No.: (513) 579-6957
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, mailed or received by facsimile transmission.
12.7 Headings and Gender. All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires.
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12.8 Schedules and Exhibits.
(a) Contemporaneously with the execution and delivery of this
Agreement, Seller has or has caused the Company to have delivered the
disclosure schedules referred to in Article 4 (the "Disclosure
Schedules") to Purchaser.
(b) All descriptions or listings of documents contained in the
Disclosure Schedules are qualified in their entirety by reference to
the documents so described, to the extent, true, correct and complete
copies of which have been heretofore received by Purchaser.
(c) All Exhibits and Schedules and attachments thereto
referred to herein are intended to be and hereby are specifically made
a part of this Agreement. If a document or matter is disclosed in any
of the Disclosure Schedules, it shall be deemed to be disclosed for all
purposes of Article 4 and on all other Disclosure Schedules for which
the same is fairly disclosed without the necessity of specific
repetition or cross-reference. The foregoing notwithstanding, no
document or matter disclosed in any Disclosure Schedule shall be deemed
an exception or disclosure to any representation or warranty set forth
in Article 5 (unless specifically indicated to be a disclosure under
Article 5 and labeled separately as an Article 5 disclosure) or in any
Seller Document. All capitalized terms used in any Exhibit to this
Agreement or in any Schedule shall have the definitions specified in
this Agreement.
12.9 Right to Specific Performance. The parties agree that the Shares
constitute unique property, that there is no adequate remedy at law for the
damage which Purchaser might sustain for the failure of Seller to consummate the
transactions contemplated in this Agreement, and, accordingly, that Purchaser is
entitled to the remedy of specific performance to enforce such consummation.
12.10 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
12.11 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It
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shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
12.12 Entire Agreement. This Agreement, including the Exhibits,
Schedules and attachments thereto and other documents referred to herein which
form a part hereof, and the Confidentiality Agreements, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter other
than the Confidentiality Agreements.
12.13 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by each of the parties hereto. Any provision of
this Agreement can be waived, amended, supplemented or modified by written
agreement of each of the parties hereto.
12.14 Exclusive Benefits. Nothing in this Agreement is intended to
confer any rights or remedies, whether express or implied, under or by reason of
this Agreement, on any persons other than the parties hereto and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement.
12.15 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party hereto, under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or in any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.
12.16 Construction. This Agreement is to be deemed to have been
prepared jointly by the parties hereto after arms-length negotiations, and any
uncertainty or ambiguity existing herein shall not be interpreted against the
party which prepared the initial draft, but according to the application of the
rules of interpretation of contracts.
12.17 Governing Law. The Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
SMITHFIELD FOODS, INC.
By:
Name: Robert A. Sharpe II
Title: Vice President
CHIQUITA BRANDS INTERNATIONAL, INC.
By:
Name: Robert W. Olson
Title: Vice President
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT entered into this 20th day
of December, 1995 between SMITHFIELD FOODS, INC., a Delaware corporation
("Company"), and CHIQUITA BRANDS INTERNATIONAL, INC., a New Jersey corporation
("Holder").
W I T N E S S E T H:
WHEREAS, the Holder is the owner of 1,094,273 shares of the
Company's issued and outstanding common stock, par value Fifty Cents ($.50) per
share received from the Company as partial consideration for the transfer of
certain shares in John Morrell & Co. ("Common Stock" or "Shares") at the date
hereof;
WHEREAS, in connection with the issuance of such Shares to the
Holder, the Company agreed to provide the Holder with certain rights to require
the Company to register the sale by the Holder of such Shares with the
Securities and Exchange Commission (the "Commission") and applicable state
securities agencies.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties agree as follows:
1. Demand Registration Rights.
1.1. On any two (2) separate occasions, upon the written
request of the Holder given on or before December 31, 2000, the Company will
prepare and file, promptly after such request and in no case more than sixty
(60) days after receipt of such request, and thereafter use its best efforts to
cause to become effective a registration statement ("Registration Statement") on
a proper form to be selected by the Company under and complying with the
Securities Act of 1933, as amended (the "Act"), covering such number of Shares
of Common Stock as shall be specified in the Holder's request; provided,
however, that the Company shall not be obligated to register Shares with a
market value of less than Five Million and 00/100 Dollars ($5,000,000.00)
pursuant to any such request, market value to be measured based on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") last
sales price on the day two (2) days prior to the date of such request.
1.2. If the Holder so requests, the offering or distribution
of Shares under this Section 1 shall be pursuant to a firm commitment
underwriting. The managing underwriter shall be a nationally recognized
investment banking firm selected by the Holder, but subject to the approval of
the Company, which approval shall not be unreasonably withheld. The Company will
enter into an underwriting agreement with such managing underwriter containing
representations, warranties and agreements not substantially
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different from those customarily included by an issuer in underwriting
agreements with respect to secondary distribution; provided, however, that the
Holder shall be entitled to negotiate the underwriting discounts and commissions
and other fees of such underwriter payable by the Holder.
1.3. No securities to be sold by the Company or any security
holder of the Company shall be included in any Registration Statement filed
pursuant to this Section 1, unless (i) the offering is pursuant to a firm
commitment underwriting and the managing or principal underwriter shall have
consented to the inclusion of such other securities; and (ii) all the Shares
requested to be included by the Holder shall be so included.
1.4. The Company shall be entitled to postpone the filing of
any Registration Statement otherwise required to be prepared and filed by it
pursuant to this Section 1 if, at the time it receives a request for
registration, (a) (i) the Company would, in accordance with the written advice
of its outside counsel, find it appropriate to disclose in the Prospectus
information not otherwise then required by law to be publicly disclosed and (ii)
in the judgment of the Company's Board of Directors, as such judgment is set
forth in a resolution of the Board of Directors (or the executive committee
thereof), there is a reasonable likelihood that such disclosure, or any other
action to be taken in connection with the Prospectus, would materially and
adversely affect any existing or prospective material business situation,
transaction or negotiation or otherwise materially and adversely affect the
Company, or (b) the Company or any of its Subsidiaries would be required to
prepare any financial statements other than those which it customarily prepares
in the ordinary course of its business, or (c) it would be materially
detrimental to the Company and its shareholders for the Company to immediately
proceed with the filing of a Registration Statement; provided, that the duration
of such delay shall not exceed ninety (90) days; and provided further, that the
Company shall promptly make such filing as soon as the conditions which permit
it to delay such filing no longer exist; and provided further that in the event
of any such deferral, the Holder shall have the right to withdraw its request
for Registration and such withdrawn request shall not be considered one of the
Holder's two permitted requests for registration under Section 1.1 hereof.
1.5. As to each Registration Statement, insofar as the methods
of distribution proposed to be used are not reflected in the last prospectus
(including any amendments or supplements thereto) filed by the Company under the
Act, the Holder will provide the Company with a description of the method or
methods of distribution of Shares from time to time contemplated by the Holder
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and the Company shall file any and all amendments and supplements necessary to
include such description in such Registration Statement. Nothing in this
Agreement, however, shall be construed to require the Company to register any
proposed offering pursuant to "shelf registration" procedures contemplated by
Rule 415 under the Act, or any successor provision.
1.6. As to each Registration Statement, in the event that the
Company believes the last prospectus (including any amendments or supplements
thereto) filed under the Act may contain misleading statements or material
omissions, the Company shall notify the Holder in writing and the Holder hereby
agrees to immediately cease utilizing such prospectus for the sale of Shares,
and the Company agrees, as soon thereafter as may be practicable, to amend or
supplement such prospectus so as to meet the requirements of the Act, and to
notify the Holder of such action.
2. Piggy-Back Registration Rights.
2.1. If at any time prior to December 31, 2000, the Company
shall propose to file a Registration Statement for the purpose of effecting a
primary offering under the Act on Form S-1, S-2 or S-3 or any equivalent general
form for registration of equity securities under the Act with respect to a
public offering of any Company Common Stock, the Company shall, as promptly as
practicable but, in no event later than thirty (30) days prior to the proposed
filing date, give notice of such intention to the Holder and shall include in
such Registration Statement all Shares as the Holder shall request, within ten
(10) days of the giving of such notice, subject to the limitations that the
Company shall not be obligated to register for the Holder fewer than the lesser
of (i) Shares with a market value of less than Five Million and 00/100 Dollars
($5,000,000.00), market value to be measured as of the date of such request, or
(ii) the aggregate number of Shares still held by the Holder, and the inclusion
of such Shares may be conditioned or restricted if, in the good faith opinion of
the managing underwriter (or underwriters) of the securities to be sold (or, in
the absence thereof, of the principal investment banker acting on behalf of the
Company in effecting such sale) for which such Registration Statement is being
filed, such inclusion can reasonably be expected to have a material adverse
impact on the offering of the securities being so registered. If the number of
Shares is so restricted, then no Shares nor any securities of other
securityholders shall be included in the offering unless all securities which
the Company is attempting to sell are included therein, and any reduction
required thereafter shall be made pro rata among the Holder and the other
selling securityholders; provided, however, that such rights of the Holder to
share pro rata
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shall be subject to any prior rights which the Company may have granted to
others before the date of this Agreement.
2.2. The Company may, without the consent of the Holder,
withdraw any Registration Statement filed pursuant to this Section 2 and abandon
any such proposed offering in which the Holder requested to participate. The
Holder may withdraw any or all of the Shares held by the Holder from a
Registration Statement filed or proposed to be filed pursuant to this Section 2
at any time prior to the effectiveness of such Registration Statement.
2.3. The notice from the Company to the Holder under this
Section 2 shall specify whether the Securities to be included in such
registration for a sale by the Company are to be sold through underwriters in a
firm commitment offering. If Shares of the Holder are included in such an
offering, they shall be included on the same terms (including the same
underwriting discount or commission) applicable to the securities of the
Company.
3. Covenants of the Holder.
3.1. Any request for registration made by the Holder shall
specify the number of Shares as to which such request relates, express the
Holder's present intention to offer such Shares for distribution and contain an
undertaking to provide all such information and materials and take all such
actions and execute all such documents as may be required in order to permit the
Company to comply with all applicable requirements of the Commission and to
obtain acceleration of the effective date of the Registration Statement.
3.2. The Holder agrees that in disposing of any Common Stock,
it will comply with all applicable securities laws, including Rules 10b-5, 10b-6
and 10b-7 promulgated under the Securities Exchange Act of 1934, as amended. The
Holder agrees to deliver the current prospectus contained in the Registration
Statement, and such supplements thereto, if any, as may be appropriate, to all
persons as required by the Act, the rules promulgated thereunder, and any
applicable "blue sky" laws and regulations in connection with the disposition of
its Common Stock.
4. Covenants of the Company.
So long as the Company is under an obligation pursuant to the
provisions of Section 1 hereof, the Company shall:
4.1. Prepare and file with the Commission such amend-
ments and supplements to such Registration Statement and the
prospectus forming part of such Registration Statement as may be
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necessary to keep such Registration Statement effective for such period as shall
be necessary to complete the marketing of the Shares included therein, but in no
event for longer than three (3) months after the date the Shares may first be
sold, not including any period during which the Holder is prohibited from
selling any Shares;
4.2. Furnish to the Holder such number of copies of a
prospectus including, without limitation, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or other
disposition of such Shares;
4.3. Use reasonable efforts (i) to register or qualify, not
later than the effective date of any Registration Statement filed pursuant to
this Agreement, the Shares covered by such Registration Statement under the
securities or Blue Sky laws of such jurisdictions within the United States as
the Holder may reasonably request, and (ii) to do any and all other reasonable
acts or things which may be necessary or advisable to enable the Holder to
consummate the public sale or other disposition in such jurisdiction of such
Shares; provided, however, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to general service of process or
taxation in any jurisdiction where it is not then so subject;
4.4. Promptly notify the Holder, at any time when a prospectus
relating to the Shares being distributed is required to be delivered under the
Act, of the happening of any event as a result of which the prospectus included
in such Registration Statement, as then in effect, includes an untrue statement
of material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing and, at the request of the Holder, prepare as soon
as practicable thereafter, file with the Commission and furnish to the Holder a
reasonable number of copies of a supplement to, or an amendment of, such
prospectus as may be necessary, or make any other appropriate filing with the
Commission pursuant to the Securities Exchange Act of 1934, as amended, which
will be incorporated by reference into the Registration Statement so that, as
thereafter delivered to the purchasers of such Shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
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4.5. Use reasonable efforts to furnish, at the request of the
Holder or any underwriter of any distribution of the Shares, an opinion of legal
counsel to the Company, covering such matters as are typically covered by
opinions of issuer's counsel in underwritten offerings under the Act; and
4.6. Enter into an agreement with the underwriters for such
offering in which the Company shall provide indemnities similar to those
described in Section 6 hereof to the underwriters and in which the Company shall
make the usual warranties and representations made by issuers of equity
securities to underwriters.
5. Costs and Expenses.
5.1. With respect to the initial demand registration under
Section 1.1 hereof, the Company shall bear all Registration Costs (as defined
below) and Holder shall bear all Offering Costs (as defined below).
5.2. With respect to the second demand registration under
Section 1.1 hereof, Holder shall bear all reasonable Registration Costs not in
excess of $100,000.00 and all Offering Costs. The balance of the Registration
Costs, if any, shall be paid by the Company.
5.3. For purposes hereof, (a) "Registration Costs" means the
entire cost and expense of any registration made pursuant to this Agreement,
including, without limitation, all registration and filing fees, printing
expenses, the fees and expenses of the Company's counsel and its independent
accountants and all other out-of-pocket expenses incident to the preparation,
printing and filing under the Act of the Registration Statement and all
amendments and supplements thereto, the cost of furnishing copies of each
preliminary prospectus, each final prospectus and each amendment or supplement
thereto to underwriters, brokers and dealers and other purchasers of the
securities so registered, and the costs and expenses incurred in connection with
the qualification of the securities so registered under "blue sky" or other
state securities laws, and (b) "Offering Costs" means the fees and expenses of
counsel and accountants of the Holder, all transfer taxes, underwriting
discounts and commissions attributable to Shares registered at the request of
the Holder, and in any registration made pursuant to Section 2 hereof, all
filing fees attributable to Shares registered at the request of the Holder.
5.3. All such fees and expenses payable by Holder shall,
if appropriate, be prorated among all selling securityholders.
<PAGE>
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6. Indemnification.
6.1. In connection with any registration effected pursuant to
this Agreement, the Company will indemnify the Holder, its officers, directors
and each underwriter of Common Stock as well as any person who controls the
Holder or such underwriters against all claims, losses, damages, liabilities and
expenses resulting from any untrue statement or alleged untrue statement of a
material fact contained in a prospectus or in any related Registration
Statement, notification or similar filing under the securities laws of any
jurisdiction or from any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same may have been based upon
information furnished in writing to the Company by the Holder or such
underwriter expressly for use therein and used in accordance with such writing.
6.2. The Holder, by requesting any such registration, agrees
to furnish to the Company such information concerning it as may be requested by
the Company and which, in the reasonable opinion of counsel for the Company, is
necessary or required by then applicable securities laws and the rules and
regulations thereunder in connection with any Registration or qualification of
the Common Stock and to indemnify the Company, its officers and directors and
each underwriter (and any persons who control the Company or the underwriter) of
the Shares, if any, against all claims, losses, damages, liabilities and
expenses resulting from the utilization of such information furnished to the
Company expressly for use therein and from any omission or alleged omission
therefrom.
6.3. If any action is brought or any claim is made against any
party entitled to be indemnified pursuant to this Section 6 in respect of which
indemnity may be sought against the indemnitor pursuant to this Section 6, such
party shall promptly notify the indemnitor in writing of the institution of such
action or the making of such claim and the indemnitor shall assume the defense
of such action or claim, including the employment of counsel and payment of
expenses. Such indemnified party shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such party unless the employment of such counsel shall have been
authorized in writing by the indemnitor in connection with the defense of such
action or claim or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to those available to the indemnitor (in which case the
indemnitor shall not have the right to direct any different or additional
<PAGE>
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defense of such action or claim on behalf of the indemnified party or parties),
in any of which events such fees and expenses of not more than one additional
counsel for the indemnified parties shall be borne by the indemnitor. Except as
expressly provided above, if the indemnitor shall not previously have assumed
the defense of any such action or claim, at such time as the indemnitor does
assume the defense of such action or claim, the indemnitor shall thereafter be
liable to any person indemnified pursuant to this Agreement for any legal or
other expenses subsequently incurred by such person in investigating, preparing
or defending against such action or claim. Anything in this Section 6 to the
contrary notwithstanding, the indemnitor shall not be liable for any settlement
of any such claim or action effected without its written consent.
6.4. If the indemnification provided for in this Agreement is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities or actions referred to therein, as
determined by a court of competent jurisdiction, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or actions in such proportion as is appropriate to reflect
the relative fault of the indemnifying party, on the one hand, and the
indemnified party, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations. The relevant fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
indemnifying party, on the one hand, or the indemnified party on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Holder agree that it would not be just and equitable if contributions
pursuant to this Section 6 were determined by pro rata allocation or by any
other method of allocation which would not take account of the equitable
considerations referred to in this Section 6. The amount paid or payable by an
indemnifying party as a result of the losses, claims, damages, liabilities or
actions in respect thereof referred to in this Section 6 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is not
also guilty of such fraudulent misrepresentation.
<PAGE>
- 9 -
7. Miscellaneous.
7.1. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if (i) delivered personally or by courier or (ii)
sent by registered or certified mail, postage prepaid, or (iii) sent by
confirmed facsimile with the original to follow by first class mail, postage
prepaid, as follows:
If to the Company: Chiquita Brands International, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Attention: General Counsel
Facsimile No: (513) 784-6691
With a copy to: Mr. Paul V. Muething
Keating, Muething & Klekamp
1800 Provident Tower
One East Fourth Street
Cincinnati, OH 45202
Facsimile No: (513) 579-6956
If to the Holder: Smithfield Foods, Inc.
501 North Church Street
Smithfield, Virginia 23431
Attention: Joseph W. Luter III
Facsimile
No: (804) 357-1331
With a copy to: Mr. Peter M. Sommerhauser
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
Facsimile No: (414) 273-5198
Mr. Sam Young Garrett
McGuire, Woods, Battle & Booth, LLP
One James Center
901 East Cary Street
Richmond, VA 23219
Facsimile: (804) 775-7456
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, mailed or received by facsimile transmission.
<PAGE>
- 10 -
7.2. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective permitted successors and
assigns.
7.3. This Agreement shall be governed by and construed
under the laws of the State of Virginia.
7.4. The provisions of this Agreement: (a) apply only to
Shares of Common Stock received as a result of the transaction described in this
Agreement; and (b) except as provided in Paragraphs 7.5 and 7.6, below, are (i)
personal to the Holder and shall not be assignable in whole or in part, and (ii)
shall terminate as to any shares of Common Stock sold by the Holder.
7.5. Holder (or any successor to its rights hereunder) may
transfer all or any portion of the Shares to one or more Affiliates and such
Affiliate or Affiliates shall be entitled to all of the benefits of this
Agreement subject to the following conditions:
(a) So long as any of the Shares shall be registered
to Holder, Holder shall be entitled to exercise all of the rights of
the Holder hereunder (the "Rights") on behalf of itself and each of its
Affiliates; provided, however, upon written notice to Company, Holder
may transfer the Rights to any Affiliate who owns Shares and in such
event such Affiliate shall act as the substitute Holder for purpose of
this Agreement and thereafter such substitute Holder shall hold and
exercise all Rights on behalf of itself, Holder and each of the
Affiliates.
(b) The Company shall only be required to give notice
to and to accept direction from the Holder or substitute Holder as set
forth above, and such direction shall be binding on Holder and each of
its Affiliates.
For purposes of Paragraphs 7.5 and 7.6 hereof, "Holder" means Holder and its
successors and assigns, and "Affiliate" means an Affiliate (as defined in the
Purchase Agreement) of Chiquita Brands International, Inc.
7.6. Subject to the limitations set forth below, Holder (or
any successor to its rights hereunder) may also transfer some or all of the
Rights in connection with a sale of the Shares, or a portion thereof, provided
that the following conditions shall have been satisfied:
<PAGE>
- 11 -
(a) If Holder desires to transfer any Shares (the
"Subject Shares") together with any of the Rights (the "Subject
Interest") to a party other than an Affiliate, Holder shall notify the
Company ("Holder's Notice") in writing that Holder desires to transfer
the Subject Interest, which notice shall set forth the number of Shares
desired to be transferred and specify which Rights are to be
transferred.
(b) During the 30-day period following the Company's
receipt of Holder's Notice (the "Notice Period"), Holder will not
transfer the Subject Interest to an entity (a "Transferee") that has
not been approved by the Company, which approval shall not be
unreasonably withheld. The Company shall give Holder written notice of
its approval or disapproval of any proposed Transferee (the "Transfer
Notice") within 2 business days after receipt of written notice from
Holder of the identity of any proposed Transferee (a "Transferee
Notice"). If the Company does not give a Transfer Notice within 2
business days, the proposed Transferee identified in the Transferee
Notice shall be conclusively deemed to have been approved by the
Company. There shall be no limit on the number of Notices which Holder
may give during the Notice Period. A Notice may identify more than one
potential Transferee.
(c) Following the Notice Period, Holder shall be
entitled to transfer the Subject Interest to any entity, including any
entity previously disapproved by the Company; provided, that if the
Subject Interest has not been transferred by Holder within one year
after the Notice Period, the provisions of Subparagraph (a) and (b)
above will once again apply to any proposed transfer of the Subject
Interest.
(d) Subject to the provisions of Subparagraph (b)
above, and the restrictions set forth in this subparagraph, Holder
shall have the right to transfer to any Transferee all of the Rights
accorded by this Agreement with respect to any Subject Shares while
retaining to Holder all of the Rights accorded by this Agreement with
respect to any Shares not included in the Subject Shares (the
"Remaining Shares"). The Rights appurtenant to any Remaining Shares
shall continue to be subject to the provisions of Subparagraph (b),
above. Holder shall have the right to determine the extent of the
Rights to be transferred to any Transferee, including whether any
transfer shall entitle the Transferee to one, two or no demand
registrations under Section 1.1 hereof and, if the entitlement is one
demand registration, whether it is governed by Section 5.1 or Section
5.2; provided that under no circumstances shall (i) the Company be
required to effectuate more
<PAGE>
- 12 -
than a total of two demand registrations pursuant to Section 1.1 of
this Agreement; and (ii) no more than two (2) parties may hold
piggyback registration rights granted under Paragraph 2, above.
(e) The provisions of this Section 7.6 shall only
apply to the transfer of the Subject Shares with appurtenant Rights and
shall not be construed to limit or restrict Holder's right to sell or
otherwise transfer Shares without Rights or in any way require the
Company's approval of thereof.
7.7. If the Common Stock of the Company covered by this
Agreement is converted into any other security of the Company or any other
corporation, the terms of this Agreement shall apply with full force and effect
to any such other security and the obligations of the Company to effect
registration shall include such other filings, qualifications, notices and
similar acts as may be necessary to enable the Holder to realize the benefits of
registration provided by this Agreement.
7.8. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
WITNESSES: SMITHFIELD FOODS, INC.
______________________________ By: __________________________
Robert A. Sharpe II,
Vice President
CHIQUITA BRANDS INTERNATIONAL,
INC.
______________________________ By: __________________________
Robert W. Olson,
Vice President
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT is made as of the 20th day of
December, 1995, by and between CHIQUITA BRANDS INTERNATIONAL, INC., a New Jersey
corporation ("Seller") and JOHN MORRELL & CO., a Delaware corporation (the
"Company").
W I T N E S S E T H
WHEREAS, Seller and Smithfield Foods, Inc., a Delaware
corporation ("Purchaser"), have entered into a Stock Purchase Agreement dated as
of December 20, 1995 (the "Purchase Agreement"), pursuant to which Purchaser has
agreed to purchase from Seller all of the issued and outstanding shares of stock
of the Company (capitalized terms used but not defined herein shall have the
meanings set forth in the Purchase Agreement); and
WHEREAS, the Company continues to remain liable for all of its
Liabilities and has agreed to indemnify Seller against the possibility that any
Liability of the Company could be asserted against Seller.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth and other good and valuable consideration, the parties
hereby agree as follows:
1. Indemnification Obligations of the Company.
1.1. The Company will reimburse, indemnify and hold harmless
Seller, its officers, directors, employees, agents and successors or assigns
(each, a "Seller Indemnified Party") against and in respect of any and all
damages, losses, deficiencies, liabilities, costs and expenses incurred or
suffered by such party that relate to the failure of the Company to pay, perform
or discharge any of the Liabilities or the Environmental Liabilities of the
Company or any of its Subsidiaries arising prior to, at or after the Closing,
excluding Income and Property Taxes, but including, without limitation, existing
Liabilities of the Company guaranteed by Seller and Liabilities or Environmental
Liabilities arising from the condition of any Real Property or Disposed Real
Property, other than Disposed Real Property acquired by Seller from the Company.
1.2. As partial consideration for the indemnity herein, Seller
has agreed that Company may rely on the warranties and representations made by
Seller in the Purchase Agreement as if stated herein and Company shall be
entitled to be indemnified (the
<PAGE>
- 2 -
"Company Indemnified Party") therefore to the same extent and under the same
terms as Purchaser as set forth in the Purchase Agreement.
1.3. The Company shall indemnify and hold harmless the Seller
Indemnified Parties from and against (i) all Taxes with respect to all periods
beginning after the Closing Date, and (ii) all Taxes with respect to any period
beginning before the Closing Date and ending after the Closing Date, but only
with respect to Taxes attributable to the period after the Closing Date; (iii)
all Taxes attributable to and arising out of any transaction directed to occur
by the Purchaser after the Closing even if such transaction occurs on the
Closing Date; and (iv) any Taxes attributable to an election pursuant to Section
338(g) of the Code.
2. Third Party Claims - Indemnification
2.1 If a claim by a third party is made against an indemnified
party (i.e. a Seller Indemnified Party or the Company), the indemnified party
shall promptly notify the indemnifying party of such claim or demand, specifying
the nature of such claim or demand and the amount or the estimated amount
thereof to the extent then feasibly determinable (which estimate shall not be
conclusive of the final amount of such claim and demand) (the "Claim Notice").
The indemnifying party shall have ten (10) business days from the personal
delivery or mailing of the Claim Notice (the "Notice Period") to notify the
indemnified party, (A) whether or not it disputes its liability to the
indemnified party hereunder with respect to such claim or demand and (B)
notwithstanding any such dispute, whether or not it desires, at its sole cost
and expense, to defend the indemnified party against such claims or demand. If
the indemnifying party fails to undertake the defense of any claim or demand,
the indemnified party may undertake such matter at the expense of the
indemnifying party.
2.2 If such claim, demand, action or proceeding is a third
party claim, demand, action or proceeding, the indemnifying party will have the
right at its expense to assume the defense thereof using counsel reasonably
acceptable to the indemnified party. The indemnified party shall have the right
to participate, at its own expense, with respect to any such third party claim,
demand, action or proceeding in connection with any such third party claim,
demand, action or proceeding, the parties shall cooperate with each other and
provide each other with access to relevant books and records in their
possession. No such third party claim, demand, action or proceeding shall be
settled without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld. It shall be deemed not unreasonable
if a party is unwilling to consent to a settlement if the settlement results in
additional liability to the indemnified
<PAGE>
- 3 -
party as a result of such settlement or if such party is required to be enjoined
or otherwise similarly restricted or bound under the terms of the settlement.
Except in instances where a settlement restricts or negatively impacts the
indemnified party or its business after such settlement or results in additional
liability to such party as a result of such settlement, if a firm written offer
is made to settle any such third party claim, demand, action or proceeding and
the indemnifying party proposes to accept such settlement, then: (i) the
indemnifying party shall be excused from, and the indemnified party shall be
solely responsible for, all further defense of such third party claim, demand,
action or proceeding; (ii) the maximum liability of the indemnifying party
relating to such third party claim, demand, action or proceeding shall be the
amount of the proposed settlement if the amount thereafter recovered from the
indemnified party on such third party claim, demand, action or proceeding is
greater than the amount of the proposed settlement; and (iii) the indemnified
party shall pay all attorneys' fees and legal costs and expenses incurred after
rejection of such settlement by the indemnified party.
2.3 In the event an indemnified party should have a claim
against the indemnifying party hereunder that does not involve a claim or demand
being asserted against or sought to be collected from it by a third party, the
indemnified party shall promptly send a Claim Notice with respect to such claim
to the indemnifying party. If the indemnifying party does not notify the
indemnified party within the Notice Period that it disputes such claim, the
amount of such claim shall be conclusively deemed a liability of the
indemnifying party hereunder.
3. Provisions Regarding Indemnity. The amounts for which a
party shall be liable under Paragraph 1 or 2 of this Agreement shall be net of
any tax benefit realized by the indemnified party as a result of the facts and
circumstances giving rise to the liability of the indemnifying party and shall
also be net of any insurance proceeds received by the indemnified party
(retroactively, if necessary) in connection with the facts giving rise to the
right of indemnification (net of any expenses (including legal fees) incurred by
the indemnified party in collecting such proceeds) and plus any taxes incurred
as a result of such indemnification or insurance recovery. The indemnified party
shall be obligated in connection with any Claim for indemnification under this
Agreement to use all commercially reasonable efforts to obtain any insurance
proceeds available to such indemnified party with regard to the applicable
Claim.
4. Payment. Upon the determination of the liability under Paragraph 2
hereof and after exhaustion of insurance coverage as required by Paragraph 3
hereof and receipt of any such insurance
<PAGE>
- 4 -
proceeds, the Indemnifying Party shall pay to the indemnified party within ten
(10) business days, the amount of any Claim for indemnification made hereunder.
Upon the payment in full of any Claim, the indemnifying party shall be
subrogated to the rights of the indemnified party against any Person (including
without limitation any insurer) with respect to the subject matter of such
Claim.
5. Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given upon receipt only if (i) delivered
personally or by courier or (ii) sent by registered or certified mail, postage
prepaid, or (iii) sent by confirmed facsimile with the original to follow by
first class mail, postage prepaid, as follows:
If to the Company, to:
John Morrell & Co.
c/o Smithfield Foods, Inc.
501 North Church Street
Smithfield, Virginia 23431
Attention: Joseph Luter, III, President
Facsimile No: (804) 357-1331
With a required copy to:
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Attention: Peter M. Sommerhauser
or Thomas A. Myers
Facsimile No: (414) 273-5198
If to Seller, to:
Chiquita Brands International, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Attention: General Counsel
Facsimile No: (513) 784-6691
<PAGE>
- 5 -
Keating, Muething & Klekamp
1800 Provident Tower
One East Fourth Street
Cincinnati, Ohio 45202
Attention: Paul V. Muething
Facsimile No: (513) 579-6957
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, mailed or received by facsimile transmission.
6. Binding Effect. This Agreement shall be binding upon
the parties hereto and their respective heirs, successors, assigns
and legal representatives.
7. Exclusive Benefits. Nothing in this Agreement is intended
to confer any rights or remedies, whether express or implied, under or by reason
of this Agreement, on any persons other than the parties hereto and their
respective successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement.
8. Applicable Law. This Agreement and the rights and
remedies of the parties hereto shall be governed by and construed
in accordance with the internal laws of Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day, month and year first above written.
SELLER:
CHIQUITA BRANDS INTERNATIONAL, INC.
By: _______________________________
Robert W. Olson, Vice President
THE COMPANY:
JOHN MORRELL & CO.
By: _______________________________
(Title)
