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UNITED STATES
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) - May 31, 1996
----------------
THE J. M. SMUCKER COMPANY
(Exact name of registrant as specified in its charter)
Ohio 1-5111 34-0538550
---------------------- ---------------------- ----------------------
State of Incorporation Commission File Number IRS Identification No.
STRAWBERRY LANE
ORRVILLE, OHIO 44667
(330) 682-3000
This document consists of 7 pages. The Exhibit Index is located at page 6.
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Item 2. Disposition of Assets
---------------------
On May 31, 1996, The J. M. Smucker Company (the "Company") completed the sale of
its Mrs. Smith's frozen pie business to a subsidiary of Flowers Industries, Inc.
called Mrs. Smith's Bakeries, Inc. ("Flowers Industries") for a combination of
cash, notes receivable, and assumption of certain liabilities.
In return for the inventory, intangible assets, and certain components of
working capital of Mrs. Smith's, the Company received $15,000,000 in cash, a
$15,000,000 note, and a commitment by Flowers Industries to purchase during
fiscal 1997 approximately $29,900,000 in inventory. In connection with this
divestiture, the Company also has entered into agreements to lease property,
plant, and equipment of the Mrs. Smith's frozen pie business to Flowers
Industries under 10 year operating lease agreements, which include the
exclusive right and option to purchase such assets at not less than their fair
market value during the term of the leases. The future minimum rental revenue
from these leases is approximately $31,850,000.
Item 7. Financial Statements and Exhibits
---------------------------------
(b) Pro Forma Financial Information
Set forth below is pro forma consolidated financial information with respect to
the Company. Mrs. Smith's has been reflected as a discontinued operation in the
historical column of the accompanying unaudited financial statements, which
include a statement of consolidated income for the year ended April 30, 1996 and
a consolidated balance sheet as of April 30, 1996. The pro forma consolidated
balance sheet as of April 30, 1996 presents the Company's financial position as
if the divestiture had occurred on April 30, 1996. Since the results of
operations from Mrs. Smith's have been fully reflected as a discontinued
operation in the historical column of the statement of consolidated income, the
only pro forma adjustments to that statement are to eliminate the income from
discontinued operations and the loss on discontinuance, net of the applicable
income taxes, and to reflect the impact on interest income and interest expense
resulting from the reduction in debt and increase in notes receivable.
The pro forma information below is provided for informational purposes only and
is not necessarily indicative of what the actual financial position or results
of operations of the Company would have been had the transaction actually
occurred on April 30, 1996, nor does it purport to indicate the future financial
position or results of operations of the Company.
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The J. M. Smucker Company
Pro Forma Statement of Consolidated Income
For the Year Ended April 30, 1996
(Dollars in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 528,576 $ 528,576
Cost of products sold 337,095 337,095
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Gross Profit 191,481 191,481
Selling, distribution, and administrative expenses 137,487 137,487
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Operating Income 53,994 53,994
Interest income 1,173 921 (1) 2,094
Other expense - net (983) (983)
Interest expense
(2,393) (1,111)(1) (3,504)
Loss on disposal of foreign subsidiary (6,996) (6,996)
- ------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 44,795 (190) 44,605
Income Taxes 15,342 (79)(2) 15,263
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Income from Continuing Operations $ 29,453 (111) $ 29,342
Discontinued Operations:
Income from discontinued operations, net 1,284 (1,284) --
of income taxes
Loss on discontinuance, net of income taxes (1,424) 1,424 --
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Net Income 29,313 29 29,342
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Income per Common Share:
Continuing Operations $ 1.01 $ 1.01
Discontinued Operations -- -- --
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Net Income per Common Share $ 1.01 $ 1.01
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Shares used to compute income per share 29,166,124 29,166,124 29,166,124
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</TABLE>
See notes to pro forma financial statements.
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The J. M. Smucker Company
Pro Forma Consolidated Balance Sheet
As of April 30, 1996
(Dollars in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
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- ------------------------------------------------------------------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
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<S> <C> <C> <C>
Assets
Current Assets
Cash and cash
equivalents $ 17,647 $ 17,647
Trade receivables, less allowance for doubtful
accounts of $687 ($475 in 1995) 40,241 40,241
Income tax refundable 2,998 2,998
Inventories:
Finished products 37,381 37,381
Raw materials, containers, and supplies 58,114 58,114
- ------------------------------------------------------------------------------------------------------------
95,495 95,495
Assets of discontinued operations - net 42,250 (42,250) (3) ---
Assets held for sale --- 26,685 (4) 26,685
Other current assets 15,831 565 (6) 16,396
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Total Current Assets 214,462 (15,000) 199,462
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Property, Plant, and Equipment
Land and land improvements 13,719 13,719
Buildings and fixtures 73,400 73,400
Machinery and equipment 163,078 163,078
Construction in progress 2,615 2,615
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252,812 252,812
Accumulated depreciation (109,728) (109,728)
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Total Property, Plant, and Equipment 143,084 143,084
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Other Noncurrent Assets
Goodwill 31,336 31,336
Trademarks and patents 12,762 12,762
Assets of discontinued operations - net 13,875 (13,875) (3) ---
Note receivable --- 13,875 (5) 13,875
Other assets 9,433 9,433
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Total Other Noncurrent Assets 67,406 --- 67,406
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$424,952 (15,000) $409,952
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</TABLE>
See notes to pro forma financial statements.
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
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<S> <C> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $37,211 $37,211
Salaries, wages, and additional compensation 8,845 8,845
Accrued marketing and merchandising 9,750 9,750
Income taxes --- ---
Dividends payable 3,810 3,810
Other current liabilities 7,894 7,894
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Total Current Liabilities 67,510 67,510
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Noncurrent Liabilities
Long-term debt 60,800 (15,000) (7) 45,800
Postretirement benefits other than pensions 10,541 10,541
Deferred income taxes 8,488 8,488
Other noncurrent liabilities 1,272 1,272
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Total Noncurrent Liabilities 81,101 (15,000) 66,101
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Shareholders' Equity
Serial Preferred Shares - no par value:
Authorized--3,000,000 shares; outstanding--none --- ---
Common Shares - no par value:
Class A -Authorized--35,000,000 shares;
outstanding--14,387,639 in 1996 and 14,384,839 in
1995 (net of 1,824,649 and 1,827,449 treasury shares,
respectively), at stated value 3,597 3,597
Class B - (Non-voting) Authorized--35,000,000 shares;
outstanding--14,782,339 in 1996, and 14,778,839 in
1995 (net of 1,429,949 and 1,433,449 treasury shares,
respectively), at stated value 3,696 3,696
Additional capital 11,469 11,469
Retained income 269,036 269,036
Less:
Deferred compensation (727) (727)
Amount due from ESOP Trust (10,251) (10,251)
Currency translation adjustment (479) (479)
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Total Shareholders' Equity 276,341 276,341
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$424,952 $(15,000) $409,952
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See notes to pro forma financial statements.
</TABLE>
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Notes to Pro Forma Financial Statements (Unaudited)
(1) To reflect the impact on interest income and interest expense resulting
from the reduction in debt and increase in notes receivable.
(2) Income tax decrease due to the impact of Note 1 above.
(3) Elimination of the net assets as of April 30, 1996 that were agreed to be
sold to Flowers Industries.
(4) Represents the inventory balances at April 30, 1996 to be purchased for
cash by Flowers Industries during fiscal 1997.
(5) Represents a $15,000,000 note receivable from Flowers Industries less the
amount that will be received by the Company within 1 year.
(6) Represents the current portion of the $15,000,000 note receivable less the
net working capital assumed by Flowers Industries.
(7) Cash proceeds received used to reduce the Company's long-term debt.
(c) Exhibits
Exhibit Number
2.1 Acquisition Agreement, made as of May 1, 1996, by and among Flowers
Industries, Inc., Mrs. Smith's Bakeries, Inc., The J. M. Smucker Company
and Mrs. Smith's, Inc.
2.2 Exhibits to the Acquisition Agreement, made as of May 1, 1996, by and among
Flowers Industries, Inc., Mrs. Smith's Bakeries, Inc., The J. M. Smucker
Company and Mrs. Smith's, Inc. As permitted by Item 601(b)(4)(iii) of
Regulation S-K, copies of Exhibits to the Acquisition Agreement are not
filed herewithin; a copy of any or all Exhibits will be furnished to the
Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
June 14, 1996 THE J. M. SMUCKER COMPANY
BY STEVEN J. ELLCESSOR
Secretary
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement"), made as of the 1st day of May,
1996, by and among FLOWERS INDUSTRIES, INC., a Georgia corporation ("Flowers"),
MRS. SMITH'S BAKERIES, INC., a Georgia corporation ("Purchaser"), THE J.M.
SMUCKER COMPANY, an Ohio corporation (the "Parent"); and MRS. SMITH'S, INC., an
Ohio corporation (the "Seller");
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into this Agreement pursuant to
which Purchaser or its Affiliate, as permitted by Section 2.11, will (i)
purchase (x) from the Seller all of the Business (as hereinafter defined) and
the Seller's Trade Receivables, Other Receivables, Other Assets and Prepaid
Expenses (as hereinafter defined) and intangible assets and (y) from the Parent
the Trademarks, (ii) purchase certain Inventories (as hereinafter defined) on
behalf of the Seller, and (iii) lease from the Seller all of its plant,
property and equipment assets used in connection with or related to the
Business, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Parent and the Seller desire that Flowers be a party to this
Agreement to cause Purchaser to perform its obligations arising prior to the
Closing and agree that Flowers' obligations in this Acquisition Agreement shall
not survive the Closing, except as provided in Section 9.2;
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, agreements, representations, warranties and covenants hereinafter set
forth, and the sum of ten dollars and other good and valuable consideration,
the receipt and sufficiency of which is hereby specifically agreed to and
acknowledged, the parties hereto agree as follows:
I. DEFINITIONS.
------------
As used herein, the following terms shall have the following
meanings unless the context otherwise requires:
1.1 "Affiliate" shall mean any corporation, partnership,
limited partnership, limited liability company or other entity of which Flowers
owns, directly or indirectly, forty percent (40%) or more of the outstanding
voting securities.
1.2 "Agreement" shall mean this Acquisition Agreement.
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1.3 "Assets" shall mean the Purchased Assets, the Leased
Assets, the Inventories and the Trademarks.
1.4 "Assignee" shall have the meaning set forth in Section
2.11.
1.5 "Assumed Contracts" shall have the meaning set forth in
Section 2.1.2.
1.6 "Assumed Liabilities" shall have the meaning set forth
in Section 2.4.
1.7 "Assumed Product Liability Claim" shall mean a product
liability or product warranty claim against the Seller that relates to the
Business, arose prior to the Closing and which Purchaser reasonably believes
can be resolved for $250 or less.
1.8 "Bad Debt" shall mean, with respect to a Trade
Receivable or Other Receivable, a refusal by a customer of the Business to pay
such receivable for a reason other than such customer receiving an allowance
for a sales promotion program.
1.9 "Benefit Plans" shall have the meaning set forth in
Section 3.16.
1.10 "Business" shall mean the operations currently
conducted by the Seller related to the manufacturing, distribution and
marketing of branded frozen pies, frozen pie shells and "in-store/deli bakery"
pies and the production of aluminum pans for its pie operations and steel
magnetic shielding for sale to third parties.
1.11 "Closing" shall mean the consummation of the
transactions provided for in this Agreement.
1.12 "Closing Date" shall mean the date on which the Closing
occurs pursuant to Section 8.1 hereof.
1.13 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.14 "Compete" shall have the meaning set forth in Section
10.2.
1.15 "Confidential Data" shall have the meaning set forth in
Section 10.4.
1.16 "Current Liabilities" shall mean those liabilities that
are consistently categorized as Accounts Payable, Salaries, Wages and Vacations
Payable, Accrued Marketing and Merchandising
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(except for liabilities relating to coupon programs) and Other Accrued
Liabilities in the Interim Financial Statements.
1.17 "Effective Time" shall have the meaning set forth in
Section 8.1.
1.18 "Equipment Lease" shall mean the Equipment Lease among
Purchaser, the Parent and the Seller, substantially in the form of EXHIBIT
2.3(A).
1.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.20 "Financial Statement Date" shall mean March 31, 1996.
1.21 "Finished Goods" shall mean the Finished Goods (as such
items are consistently categorized in the Interim Financial Statements) of the
Business.
1.22 "Flowers" shall mean Flowers Industries, Inc., a
Georgia corporation, and ultimate parent of Purchaser.
1.23 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.24 "Intangibles Note" shall have the meaning set forth in
Section 2.2.1.
1.25 "Interim Financial Statements" shall have the meaning
set forth in Section 3.4.1.
1.26 "Inventories" shall mean those assets that are
consistently categorized as "Raw Materials and Supplies" or "Finished Goods" in
the Interim Financial Statements.
1.27 "Knowledge" shall mean the knowledge or awareness of
those individuals listed on EXHIBIT 1.27, which shall include such knowledge or
awareness as would be obtained by such individuals from appropriate discussions
with such personnel of the Parent, the Seller and their affiliates who may
reasonably be believed by such individuals to have actual knowledge of the
relevant matter.
1.28 "Leases" shall mean the Equipment Lease and the Real
Property Lease.
1.29 "Leased Assets" shall mean all of the assets of the
Seller that are subject to the Leases.
1.30 "Licensed Software" shall have the meaning set forth in
Section 3.14.2.
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1.31 "Maximum Aggregate Liability Amount" shall have the
meaning set forth in Section 9.3.
1.32 "Minimum Aggregate Liability Amount" shall have the
meaning set forth in Section 9.4.
1.33 "Multiemployer Plan" shall have the meaning set forth
in Section 2.10.5.
1.34 "Net Working Capital Amount" shall have the meaning set
forth in Section 2.2.2.
1.35 "1994 and 1995 Financial Statements" shall have the
meaning set forth in Section 3.4.1.
1.36 "1933 Act" shall mean the Securities Act of 1933, as
amended.
1.37 "Notes Receivable" shall mean the Notes Receivable (as
such items are consistently categorized in the Interim Financial Statements) of
the Business.
1.38 "Other Receivables" shall mean the Other Receivables
(as such items are consistently categorized in the Interim Financial
Statements) of the Business.
1.39 "Other Assets" shall mean the Other Assets (as such
items are consistently categorized in the Interim Financial Statements) of the
Business.
1.40 "Owned Software" shall have the meaning set forth in
Section 3.14.2.
1.41 "Parent" shall mean The J.M. Smucker Company, an Ohio
corporation.
1.42 "Prepaid Expenses" shall mean the Prepaid Expenses (as
such items are consistently categorized in the Interim Financial Statements) of
the Business.
1.43 "Promissory Notes" shall mean the Intangibles Note and
the Working Capital Note, as amended.
1.44 "Purchased Assets" shall have the meaning set forth in
Section 2.1.2.
1.45 "Purchaser" shall mean Mrs. Smith's Bakeries, Inc., a
Georgia corporation.
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1.46 "Raw Materials and Supplies" shall mean the Raw
Materials and Supplies (as such items are consistently categorized in the
Interim Financial Statements) of the Business.
1.47 "Real Property Lease" shall mean the Lease with Option
to Purchase among Purchaser, the Parent and the Seller, substantially in the
form of EXHIBIT 2.3(B).
1.48 "SEC" shall mean the Securities and Exchange
Commission.
1.49 "Security Agreement" shall mean the Security Agreement
between Purchaser and the Parent, substantially in the form attached as EXHIBIT
2.12.
1.50 "Seller" shall mean Mrs. Smith's, Inc., an Ohio
corporation.
1.51 "Seller's Software" shall have the meaning set forth in
Section 3.14.2.
1.52 "Territory" shall have the meaning set forth in Section
10.1.
1.53 "Trade Receivables" shall mean the Trade Receivables
(as such items are consistently categorized in the Interim Financial
Statements, but on a gross basis without deduction for allowances) of the
Business.
1.54 "Trademarks" shall mean those trademarks of the Parent
listed on EXHIBIT 3.14.1 and the goodwill related thereto.
1.55 "Transition Services Agreement" shall mean a transition
services agreement between Purchaser, the Seller and the Parent, as negotiated
by the parties pursuant to Section 2.16.
1.56 "Working Capital Note" shall have the meaning set forth
in Section 2.2.1.
II. COVENANTS AND UNDERTAKINGS.
---------------------------
2.1 PURCHASE AND SALE OF ASSETS.
2.1.1 Subject to the terms and conditions
hereinafter set forth:
(a) At the Closing the Seller shall, and the Parent shall
cause the Seller to, sell, assign, transfer, convey, and deliver to
Purchaser and Purchaser shall purchase and assume
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from the Seller, for the purchase price specified in Section 2.2 of
this Agreement, all of the Purchased Assets, free and clear of all
liens, claims, charges, and encumbrances of any nature whatsoever
except those Assumed Liabilities described in Section 2.4.
(b) At the Closing, the Parent shall sell, assign, transfer
and convey to Purchaser and Purchaser shall purchase from the
Parent, for the purchase price specified in Section 2.2 of this
Agreement, all of the Trademarks. In addition, with respect to any
interest the Parent may have in the Purchased Assets, the Parent
shall either (i) sell, assign, transfer and convey to the Seller
all of such interest prior to the Closing or (ii) sell, assign,
transfer and convey to Purchaser all of such interest at the
Closing.
2.1.2 The "Purchased Assets" shall include,
except as set forth in Section 2.1.3, the following assets of the Seller
relating to the Business:
(i) all rights of the Seller in
and to the Trademarks and the corporate, trade and
service names "Mrs. Smith's Frozen Foods Company,"
"Mrs. Smith's Pies," "Smart Style," "Old Fashioned" and
all other trade and service names, trademarks, trade
dress, service marks and copyrights utilized in or
related to the Business, and any abbreviations or
variations of such names or marks, including
applications for and licenses concerning any of them
(including such as are listed on EXHIBIT 3.14.1);
(ii) all formulae, trade secrets,
customer lists, confidential information, know-how,
broker lists, goodwill and all other intangible assets,
rights and documents owned, required for, or incident
to, the performance of the Business and all books and
records incident thereto, which, however, shall not
include any stock books and corporate minute books of
the Seller;
(iii) all Trade Receivables, Other
Receivables, Other Assets and Prepaid Expenses;
(iv) all Owned Software not
included in Leased Assets, and data bases, and
copyrights and patents and applications relating
thereto;
(v) except as provided in
Section 2.1.3, all rights of the Parent or the Seller
in and to
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contracts, purchase orders, leases, maintenance
agreements, service agreements, royalty agreements,
instruments, licenses, franchises, confidentiality
agreements, rights to enforce confidentiality
provisions in other agreements (whether or not such
agreements are part of the Purchased Assets), and other
agreements attributable or related to the Business,
listed in EXHIBITS 3.6.1.2, 3.12 (to the extent
assignable), 3.13 and 3.14.2 or that would be listed on
EXHIBIT 3.13 but for the exceptions contained in
clauses (i) or (ii) of the first sentence of Section
3.13 (the "Assumed Contracts");
(vi) all rights, title and
interests of Seller in and to Universal Product Code
Numbers; and
(vii) such rights as the Seller
has to use its present telephone numbers related to the
Business from and after the Closing Date.
2.1.3 Notwithstanding anything in this
Agreement to the contrary, Purchaser shall not purchase or receive (i) any
Leased Assets; (ii) Inventories and Notes Receivable; (iii) any contracts not
described in EXHIBITS 3.6.1.2, 3.12 (to the extent assignable), 3.13, and
3.14.2 (unless not required to be listed on EXHIBIT 3.13 pursuant to clauses
(i) or (ii) of the first sentence of Section 3.13); (iv) any contract or asset
listed on EXHIBIT 2.1.3; (v) any asset of the Parent other than the Trademarks;
or (vi) except as provided in Section 2.10, any Benefit Plans as defined in
Section 3.16 (but Purchaser shall purchase the rights to enforce any
confidentiality provisions contained therein).
2.1.4 If requested by the Seller following the
Closing, Purchaser agrees to review any contract of the Business that was not
assumed by Purchaser at the Closing (because it was not listed on EXHIBIT
3.6.1.2, 3.12, 3.13 or 3.14.2 (unless not required to be listed on EXHIBIT 3.13
pursuant to clauses (i) or (ii) of the first sentence of Section 3.13)) and
that is proposed by the Seller to be assumed by Purchaser. The assumption by
Purchaser of any such contract shall be in Purchaser's sole discretion.
2.2 PURCHASE PRICE.
2.2.1 In consideration of the sale, transfer,
conveyance, assignment and delivery of the Business and the Purchased Assets,
and in reliance upon the representations and warranties made herein by the
Parent and the Seller, Purchaser in payment for the Business and the Purchased
Assets (i) shall pay to the Parent the sum of Twenty-Two Million Dollars
($22,000,000.00)
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for the Trademarks (ii) shall pay to the Seller the sum of Eight Million
Dollars ($8,000,000.00) for the intangibles related to the Business other than
the Trademarks and (iii) shall pay to the Seller the Net Working Capital Amount
and assume from the Seller the Assumed Liabilities (as hereinafter defined), as
follows:
(a) Purchaser shall pay to the Parent Seven Million Dollars
($7,000,000.00) (which, in addition to the $15,000,000.00 described
in Section 2.2.1(b), shall be in payment for the Trademarks) and to
the Seller Eight Million Dollars ($8,000,000.00) (which shall be in
payment for the intangibles related to the Business other than the
Trademarks), in each case in cash by wire transfer at Closing;
(b) Purchaser shall pay to the Parent Fifteen Million Dollars
($15,000,000.00) in accordance with the terms of a promissory note
substantially in the form set forth on EXHIBIT 2.2.1(b) hereto (the
"Intangibles Note"), which will be secured by a security interest
in the Trademarks and certain other intangibles pursuant to a
Security Agreement substantially in the form attached hereto as
EXHIBIT 2.12;
(c) Purchaser shall pay to the Seller the Net Working
Capital Amount, if it is a positive number, in accordance with the
terms of a promissory note substantially in the form set forth on
EXHIBIT 2.2.1(c) hereto (the "Working Capital Note"), which note is
subject to amendment as provided in Section 2.2.2; and
(d) Purchaser shall assume the Assumed Liabilities of the Seller
in accordance with the Liabilities Undertaking substantially in the
form attached as EXHIBIT 2.2.1(d) hereto.
2.2.2 The Parent and the Seller shall deliver
to Purchaser no later than three (3) days prior to the Closing Date a balance
sheet of the Business as of a date as close to the Closing Date as is
practicable (the "Estimated Closing Balance Sheet"), which shall be prepared in
accordance with generally accepted accounting principles consistently applied
and in a manner consistent with the balance sheets attached hereto as EXHIBIT
3.4.1; provided, however, that the Estimated Closing Balance Sheet shall
reflect only Trade Receivables, Other Receivables, Prepaid Expenses, Other
Assets, Cash and Current Liabilities. The difference between (i) Trade
Receivables, Other Receivables, Prepaid Expenses and Other Assets less (ii) the
sum of (x) the amount by which Cash is negative and (y) Current Liabilities, as
reflected on the Estimated Closing Balance Sheet shall be referred to herein as
the "Estimated Net Working Capital Amount." The
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Parent and the Seller shall use their reasonable best efforts to cause Ernst &
Young LLP to audit the books and records of the Business as of May 31, 1996,
and to deliver to Purchaser and Price Waterhouse LLP as soon as practicable,
but in no event later than thirty (30) days after the Closing Date, a balance
sheet of the Business as of the Closing Date (the "Closing Date Balance
Sheet"), which shall be prepared in accordance with generally accepted
accounting principles consistently applied and in a manner consistent with the
balance sheets attached hereto as EXHIBIT 3.4.1; provided, however, that the
Closing Date Balance Sheet shall reflect only Trade Receivables, Other
Receivables, Prepaid Expenses, Other Assets, Cash and Current Liabilities. The
Parent and the Seller shall instruct Ernst & Young LLP to allow Price
Waterhouse LLP to participate in the preparation of the Closing Date Balance
Sheet. Purchaser shall have thirty (30) days after receipt of the Closing Date
Balance Sheet to advise the Parent in writing of any objections. The Parent
and Purchaser shall use their reasonable best efforts to resolve any such
objections. If such objections cannot be resolved within ten (10) days
following the delivery by Purchaser to the Parent of its objections to the
Closing Date Balance Sheet, the Parent and Purchaser shall jointly engage
Deloitte & Touche LLP in a jointly signed written engagement letter to resolve
the disputed portions of the Closing Date Balance Sheet in a manner consistent
with the provisions of this Section 2.2.2. The Parent and Purchaser shall each
have thirty (30) days after the date of such engagement to prepare its
respective presentation to Deloitte & Touche LLP. During such period, each of
the parties shall cooperate with the other parties to make reasonably available
all pertinent documents and records. At the end of such period, the parties
shall make their presentation to Deloitte & Touche LLP, which shall make its
determination based solely upon presentations by the Parent (and Ernst & Young
LLP) and Purchaser (and Price Waterhouse LLP) and not by independent review,
and which shall make such determination as soon as practicable, but in any
event within thirty (30) days from the date of the presentations by the Parent
and Purchaser. The determination of Deloitte & Touche LLP shall be in written
form and shall be final and binding upon the parties. The fees and expenses of
(i) Ernst & Young LLP relating directly to the work incremental to the current
audit of the Parent and its subsidiaries as of April 30, 1996 that is necessary
for the Seller to deliver an audited April 30, 1996 balance sheet and statement
of operating results and an opinion thereon as described in Section 6.11, (ii)
Ernst & Young LLP relating directly to the audit of the books and records as of
May 31, 1996, and (iii) Deloitte & Touche LLP relating to the determination of
the Closing Date Balance Sheet, shall be borne equally by the Parent on the one
hand, and Purchaser on the other hand. The difference between (i) Trade
Receivables, Other Receivables, Prepaid Expenses and Other Assets less (ii) the
sum of (x) the amount by which Cash is negative and (y) Current
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Liabilities as reflected on the Closing Date Balance Sheet, as finally agreed
to or determined, as the case may be, shall be referred to herein as the "Net
Working Capital Amount." Within five (5) business days from the date of the
final agreement or determination, as the case may be, of the Net Working
Capital Amount, Purchaser shall issue an amended and restated promissory note
substantially in the form of the Working Capital Note, but which shall reflect
the Net Working Capital Amount; provided, however, that if the Net Working
Capital Amount is a negative number, Purchaser may set off the Net Working
Capital Amount against payments due under Section 2.2.3. Within such five-day
period, the Seller shall return to Purchaser the original Working Capital Note
delivered on the Closing Date. The determination of Other Assets as provided
in this Section 2.2.2 shall take into account only one-half the book value of
the asset relating to the covenant not to compete in the Business of Kellogg
Company. The determination of Trade Receivables as provided in this Section
2.2.2 shall include an allowance for cash discount or other discount for early
payment but shall not include a reserve for Bad Debts.
2.2.3 To facilitate a smooth transition of the Business,
the parties agree as follows:
(a) Purchaser shall store the Raw Materials and Supplies as
of the Closing Date on behalf of the Seller at no cost. Purchaser
shall purchase all of the usable (as determined by general industry
practices) portions of such Raw Materials and Supplies from the
Seller at the time needed prior to purchasing raw materials and
supplies from third party vendors. Purchaser shall pay, as
provided below, the book value for such Raw Materials and Supplies
as and when used by Purchaser.
(b) Purchaser shall store the Finished Goods as of the
Closing Date on behalf of the Seller at no cost. Purchaser shall
purchase all of the salable (as determined by general industry
practices) portions of such Finished Goods as they are sold in the
conduct of the Business by Purchaser, and pay, as provided below,
the book value of the Finished Goods as and when sold by Purchaser.
All sales of Finished Goods by Purchaser shall be deemed to first
arise from the Finished Goods owned by the Seller.
(c) If Cash (as such item is consistently categorized in
the Interim Financial Statements) is a negative number on the
Closing Date Balance Sheet, the Seller shall send to Purchaser on a
monthly basis a listing of all checks paid by the Seller that
relate to such negative Cash. Purchaser shall reimburse the Seller
for all such amounts within (5)
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business days of the receipt of such listing; provided, however,
that Purchaser shall not be required to reimburse the Seller with
respect to any check that Purchaser in good faith is disputing.
(d) The Seller shall retain and be responsible for all
liabilities relating to Income Taxes (as such items are
consistently categorized in the Interim Financial Statements) of
the Business as of the Closing Date.
Within five (5) business days after the end of each of Purchaser's four-week
accounting periods, Purchaser shall submit to the Seller a detailed list of (i)
sales relating to Finished Goods and (ii) Raw Materials and Supplies used by
Purchaser, in each case for the preceding month, together with a check
representing the total of (x) the book value of the Finished Goods sold and (y)
the book value of Raw Materials and Supplies used. Purchaser agrees to provide
such additional information relating to Inventories as may be reasonably
requested by the Seller and reasonably obtainable by Purchaser. Within five
(5) business days after January 31, 1997, Purchaser shall remit to the Seller a
check representing the book value of any Finished Goods and Raw Materials and
Supplies that have not been paid for by Purchaser and the remaining negative
Cash that has not been funded by Purchaser.
2.3 LEASES. Purchaser, the Parent and the Seller shall
enter into an Equipment Lease and Real Property Lease substantially in the
forms of EXHIBITS 2.3(a) and 2.3(b), respectively, at the Closing.
2.4 LIABILITIES OF SELLER.
2.4.1 At the Closing, Purchaser shall assume
those liabilities that are categorized as Accounts Payable, Salaries, Wages and
Vacations Payable, Accrued Marketing and Merchandising (except for liabilities
relating to coupon programs) and Other Accrued Liabilities reflected on the
Closing Date Balance Sheet (as finally agreed to or determined, as the case may
be), the Assumed Product Liability Claims and the obligation to fund negative
Cash in accordance with Section 2.2.3(c) (all of such assumed liabilities being
collectively referred to herein as the "Assumed Liabilities") pursuant to the
Liabilities Undertaking attached as EXHIBIT 2.2.1(d) and the obligations of the
Seller thereafter to accrue or first be required to be performed under the
Assumed Contracts. Except for Purchaser's assumption at the Closing of the
Assumed Liabilities and Assumed Contracts, Purchaser will not assume or become
liable on any other agreement, contract or lease of the Seller or for any other
indebtedness, obligations or liabilities of the Parent or the Seller
whatsoever. Except for Assumed Liabilities and Assumed Contracts, Purchaser
shall not
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assume any indebtedness, obligation or liability for any litigation matter
arising from the conduct of the Business prior to the Closing, regardless of
whether such matter is disclosed in EXHIBIT 3.11. Except for Assumed
Liabilities and Assumed Contracts, Purchaser shall not assume any liability for
any legal fees or expenses of the Seller or any other party incurred for any
reason whatsoever, and the Assets shall not be utilized for or reduced by the
amount of any such fees or expenses. Except for Assumed Liabilities and
Assumed Contracts, Purchaser shall not assume any liability for federal, state
or local income, sales, use, excise, payroll, employment or other taxes, or for
wages, salaries or overtime, vacation pay, holiday pay or other employee
benefits, or other employee benefit plans on, arising out of, or attributable
to the Seller or to the conduct of the Business through the close of business
on the day prior to the Closing Date. The Parent and the Seller will pay with
funds that are not Assets all stamp, sales, income, realty transfer or other
taxes imposed on the Parent or the Seller, and Purchaser will pay all such
taxes imposed on it, in respect of any and all transfers pursuant to the terms
of this Agreement.
2.4.2 All property and ad valorem taxes,
leasehold rentals and other customarily proratable items relating to the Assets
payable subsequent to the Closing Date and relating to a period of time both
prior to and subsequent to the Closing Date will be prorated as of the close of
business on the day before the Closing Date between Purchaser and the Seller,
unless reflected in the Net Working Capital Amount. If the actual amount of
any such item is not known as of the Closing Date, the aforesaid proration
shall be based on the previous year's assessment of such item and the parties
agree to adjust said proration and pay any underpayment or reimburse for any
overpayment within thirty days after the actual amount becomes known.
2.5 CORPORATE ACTION. The Parent, the Seller, Flowers and
Purchaser agree to take all corporate action required in connection with the
authorization and approval of the transactions contemplated hereby.
2.6 EXAMINATION OF PROPERTY AND RECORDS. Between the date
of this Agreement and the Closing Date, the Seller shall allow, and the Parent
shall cause the Seller to allow, Flowers, Purchaser, their counsel and other
representatives full access to all the books, records, files, documents,
assets, properties, contracts and agreements of the Seller relating to the
Business which may be reasonably requested, and shall furnish Flowers,
Purchaser and their officers and representatives during such period with all
information concerning the affairs of the Business which may be reasonably
requested. Flowers and Purchaser will conduct any investigation in a manner
which will not unreasonably interfere
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with the business of the Seller. In the event the Closing does not occur, the
rights and obligations of the parties shall be governed by that certain Letter
Agreement regarding confidentiality dated January 19, 1996 between Flowers and
the Parent.
2.7 CONDUCT OF THE BUSINESS PRIOR TO CLOSING.
----------------------------------------
2.7.1 Except as set forth in EXHIBIT 2.7.1 or
with the prior consent in writing of Purchaser, the Parent and the Seller
covenant and agree that, between the date of this Agreement and the Closing
Date, the Seller will conduct the Business in the ordinary course, and it will:
(a) use its reasonable best efforts to preserve the organization of the
Business intact, to keep available the services of the present employees of the
Seller employed in connection with the Business, and to preserve the goodwill
of customers, suppliers and others having business relations with the Seller or
the Business; (b) maintain the Assets in the same working order and condition
as such Assets are in as of the date of this Agreement, reasonable wear and
tear excepted, and not liquidate such Assets to cash except in the ordinary
course of business; (c) keep in force at no less than their present limits all
existing bonds and policies of insurance insuring the Assets or the Business;
(d) (i) not enter into any contract, commitment, arrangement or transaction
which is not in the ordinary course of business, or (ii) suffer, permit or
incur any of the transactions or events described in Section 3.10 hereof
(except for the payment of any health, disability and life insurance premiums
which may become due and distributions required to be made pursuant to the
terms currently in effect of any Benefit Plans) to the extent such events or
transactions are within the control of the Seller; (e) not make or permit any
change in the Parent's or the Seller's respective Articles of Incorporation or
Code of Regulations, or in either of their authorized, issued or outstanding
securities, if such action would affect the ability of the Parent and the
Seller to consummate the transactions contemplated hereunder or would cause the
necessity of obtaining the consent of any individual or entity not disclosed in
EXHIBIT 3.9; (f) not grant any stock option or right to purchase any security
of the Parent or the Seller, issue any security convertible into such
securities, purchase, redeem, retire or otherwise acquire any of such
securities, or agree to do any of the foregoing, if such action would affect
the ability of the Parent of the Seller to consummate the transactions
contemplated hereunder or would cause the necessity of obtaining the consent of
any individual or entity not disclosed in EXHIBIT 3.9; nor declare, set aside
or pay any dividend or other distribution in respect of such securities out of
the Assets; (g) not make any contribution to or distribution from any employee
benefit plan, pension plan, stock bonus plan, 401(k) plan or profit sharing
plan if such contribution would be out of the Assets or such contribution or
distribution would create a liability to or
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obligation of the Business (except for the payment of any health, disability
and life insurance premiums which may become due and distributions required to
be made pursuant to the terms of any Benefit Plans); (h) not increase the
compensation payable or to become payable by the Seller to any officer,
employee or agent employed in connection with the Business and not make any
bonus payment or arrangement to any of such persons except for such increases
in compensation or bonus payments that are made at times and in amounts
consistent with historical practices of the Business; and (i) promptly advise
Purchaser in writing of any matters arising or discovered after the date of
this Agreement which, if existing or known at the date hereof, would be
required to be set forth or described in this Agreement or the Exhibits hereto.
2.7.2 Except with the prior consent in writing
of Purchaser, the Seller will not, between the date of this Agreement and the
Closing Date, make any material changes in the Seller's accounting methods or
practices relating to the Business.
2.8 CONSENT WAIVERS AND APPROVALS. The Parent and the
Seller agree to use their reasonable best efforts to obtain the waiver, consent
and approval of all persons whose waiver, consent or approval (i) is required
in order to consummate the transactions contemplated by this Agreement, or (ii)
is required by any agreement, lease, instrument, arrangement, judgment, decree,
order or license to which the Seller is a party or subject on the Closing Date,
and (a) which would prohibit, or require the waiver, consent or approval of any
person to such transactions or (b) under which, without such waiver, consent or
approval, such transactions would constitute an occurrence of default under the
provisions thereof, result in the acceleration of any obligation thereunder, or
give rise to a right of any party thereto to terminate its obligations
thereunder. All written waivers, consents and final approvals listed in
EXHIBIT 6.5 shall be produced at Closing in form and content reasonably
satisfactory to Purchaser. Both before and after the Closing, the Parent and
the Seller shall use their reasonable best efforts to cooperate with and assist
Purchaser in connection with the Purchaser's attempts to seek novations of the
Defense Commissary Agency contracts listed as items 1 and 2 of EXHIBIT 2.1.3
and the Purchaser's attempts to obtain those licenses listed on EXHIBIT 3.12
that cannot be assigned by the Seller. The Seller shall also use its
reasonable best efforts to obtain prior to the Closing terminations of the
financing statements described on EXHIBIT 2.8.
2.9 SUPPLYING OF FINANCIAL STATEMENTS; SALARY
MODIFICATIONS. (a) The Seller covenants to deliver to Purchaser all regularly
prepared unaudited financial statements of the Seller for the Business prepared
after the date of this Agreement through
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<PAGE> 15
the Closing Date, in the format historically utilized internally, as soon as
such financial statements are available.
(b) The Seller covenants to deliver to Purchaser a true
and complete list of any changes in the salaries or rates of the employees of
the Business since the date of this Agreement.
2.10 EMPLOYEES AND INDEPENDENT CONTRACTORS.
2.10.1 Purchaser agrees to offer employment to,
as of the Closing, all employees of the Business that are employed by the
Seller and either actively at work or on vacation on the Closing Date (the
"Retained Employees"). Purchaser shall offer employment to any employee of the
Seller who is on leave of absence, ill or otherwise not actively at work on the
Closing Date once Purchaser has been notified that such employee is willing and
able to work for Purchaser. Purchaser shall offer to the Retained Employees
health and welfare benefits that are substantially equivalent to those benefits
offered to employees of Flowers and its Affiliates in similar positions;
provided, however, that Purchaser may alter such benefits if Flowers determines
to alter benefits generally available to its employees. Each Retained Employee
shall receive credit for service with the Seller for vesting and eligibility
purposes (but not benefit accrual purposes) under all of Purchaser's benefit
plans that are subject to qualification and tax exemption under Sections 401(a)
and 501(a) of the Code and for all purposes with regard to health and welfare
benefits, vacation days, sick days and other similar benefits that are
determined by length of service. In the event the employment of any Retained
Employee who is not subject to a collective bargaining agreement is terminated
other than for cause by Purchaser prior to the first anniversary of the Closing
Date, Purchaser shall provide severance benefits to such Retained Employee that
are consistent with those severance benefits described on EXHIBIT 2.10.1
hereto.
2.10.2 The Parent and the Seller agree that
following the execution of this Agreement and continuing after the Closing,
Purchaser shall be allowed to discuss with the employees and independent
contractors of the Seller who perform services for the Business the terms of
employment to be offered by Purchaser or the possibility of contracting with
Purchaser, as the case may be. The Parent and the Seller covenant not to
interfere with any such efforts by Purchaser and to use their best efforts to
assist Purchaser in employing or contracting with such individuals. Nothing in
this Agreement shall be construed as conferring any right, as third party
beneficiary or otherwise, on any individual or entity not a party to this
Agreement as to the matters described in this Section 2.10.
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<PAGE> 16
2.10.3 [INTENTIONALLY DELETED]
2.10.4 Purchaser shall offer employment to
those managers of the Seller listed on EXHIBIT 2.10.4 hereto on substantially
the same terms as such managers are subject to immediately prior to the
Closing. The Seller agrees to amend the Note Receivable (as such item is
classified in the Interim Financial Statements) of each such manager so that
his employment with Purchaser pursuant to this Agreement is not deemed to be a
termination of employment with the Seller. The Parent and the Seller agree
that they shall not employ or attempt to employ such managers prior to the
first anniversary of the Closing Date, except as provided in this Section
2.10.4. In the event Purchaser determines not to employ, or to continue to
employ, any such manager at any time on or prior to the first anniversary of
the Closing Date, the Seller or the Parent shall use its reasonable best
efforts to offer employment (and give credit for services with Purchaser as
though it were the Parent or the Seller) to such manager on substantially the
same terms as such manager is then subject; provided, however, that if
Purchaser determines to continue to employ any such manager, Purchaser shall
have the right (but not the obligation) to purchase the Note Receivable for
each such manager retained. If the Seller and the Parent do not offer a
position to any such manager, or if any such manager refuses employment with
the Seller or the Parent, as the case may be, the Seller and the Parent shall
pay severance to such manager in accordance with the Parent's severance policy,
and such manager shall receive credit for service with the Seller and Purchaser
for purposes of calculating the amount of such severance, and the Seller and
the Parent shall pay for the reasonable expenses associated with relocating
such manager to the northeastern Ohio area in accordance with the Parent's
relocation policy in effect as of the date of this Agreement.
2.10.5 (i) Purchaser agrees to contribute to
the Bakery, Confectionery and Tobacco Workers Union and Industry International
Pension Fund (the "Multiemployer Plan") with respect to the Business for
substantially the same number of contribution base units, as defined in Section
4001(a)(11) of ERISA and the regulations thereunder (the "Regulations"), for
which the Seller had an obligation to contribute to the Multiemployer Plan with
respect to the Business for such period as shall satisfy the requirements of
Section 4204(a)(1)(A) of ERISA. Purchaser acknowledges that should it withdraw
from the Multiemployer Plan coincident with or following the Closing during the
period described in Section 4204(a)(1)(C) of ERISA, its liability to the
Multiemployer Plan shall be determined as if Purchaser had been required to
contribute to the Multiemployer Plan in the year in which the Closing occurs
and the four plan years of the Multiemployer Plan preceding such year in the
amount that the
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<PAGE> 17
Seller and Kellogg Company, prior to the acquisition of the Business by the
Seller from Kellogg Company, were required to contribute to the Multiemployer
Plan for such five plan years, but only with respect to the Business.
Purchaser and the Seller further agree to take such further reasonable actions
as will ensure compliance with Section 4204 of ERISA to prevent the Seller from
incurring on or after the Closing Date a complete or partial withdrawal from
the Multiemployer Plan, in respect to the Business, treating Purchaser for all
purposes as a "purchaser" referred to in such Section 4204.
(ii) Prior to the Multiemployer
Plan's first plan year beginning after the Closing, Purchaser shall apply to
the Multiemployer Plan and/or the Pension Benefit Guaranty Corporation ("PBGC")
as Purchaser shall determine, for an exemption or variance from the requirement
of Section 4204(a)(1)(B) of ERISA that a bond be obtained or an amount be held
in escrow as provided in said section. In the event that the Multiemployer
Plan or the PBGC determines that the request does not qualify for a variance,
Purchaser shall obtain a surety bond or establish an escrow agreement or other
arrangement satisfying the requirements of Section 4204(a)(1)(B) of ERISA,
within 30 days after the date on which it receives notice of the Multiemployer
Plan's or PBGC's decision, and shall maintain such bond or escrow until the
earliest of:
(a) the date a variance is obtained from the
Multiemployer Plan;
(b) the date a variance or exemption is
obtained from the PBGC; or
(c) the last day of the fifth plan year
commencing after the Closing;
which bond or escrow shall be paid to the Multiemployer Plan if Purchaser
withdraws therefrom or fails to make a contribution to the Multiemployer Plan
when due, at any time during the first five plan years of the Multiemployer
Plan beginning after the Closing Date. To the extent Purchaser is unable to
obtain any variance as set forth above, Purchaser shall be responsible for the
cost of any bond or escrow or other security required of Purchaser under
Section 4204 of ERISA, the amount of such bond or escrow to be calculated with
reference to the Seller's required contributions, but also with respect to the
contributions which were required to be made by Kellogg Company prior to the
acquisition of the Business by Seller from Kellogg Company for the period
required under Sections 4204(a)(1)(B)(i) and (ii) of ERISA. The Seller and
Purchaser shall jointly request, if available under ERISA, an exemption or
variance from Section 4204(a)(1)(C) of ERISA from the Multiemployer Plan or
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<PAGE> 18
the PBGC. Until such time as such exemption or variance is granted, and in the
event Purchaser withdraws in a complete withdrawal, as described in 4203 of
ERISA, or a partial withdrawal, as described in 4205 of ERISA, from the
Multiemployer Plan with respect to the Business and such withdrawal or partial
withdrawal occurs during the five plan years commencing with the first plan
year beginning after the Closing, the Seller shall be secondarily liable for
any withdrawal liability it would have had to the Multiemployer Plan as of the
Closing under Title IV of ERISA. Purchaser agrees to provide the Seller with
reasonable advance notice of its anticipated failure to pay any withdrawal
liability with respect to the Business and to furnish the Seller promptly with
a copy of any notice of withdrawal liability it may receive with respect to the
Multiemployer Plan, together with the pertinent details. If all, or
substantially all, of the Seller's assets are distributed, or if Seller is
liquidated, in either case within the meaning of Section 4204(a)(3) of ERISA,
before the end of the Multiemployer Plan's fifth plan year beginning after the
Closing, then Seller shall provide a bond, execute and fund an escrow agreement
or make other arrangements that satisfy the requirements of Section 4204(a)(3)
of ERISA.
(iii) Seller shall reimburse
Purchaser, promptly upon demand by Purchaser, for the amount which Purchaser
(or Purchaser's escrow or bond) may be required to pay to the Multiemployer
Plan as a consequence of Purchaser's complete or partial withdrawal from the
Multiemployer Plan to the extent that said amount is a consequence of
Purchaser's agreement embodied in this Section 2.10.5, which avoids the
Seller's experiencing a partial withdrawal from the Multiemployer Plan by
virtue of the transactions contemplated in this Agreement. The amount of said
reimbursement shall be the excess, if any, of (a) Purchaser's liability upon
said partial or complete withdrawal from the Multiemployer Plan as actually
imposed over (b) the amount of said liability calculated as if this agreement
to comply with Section 4204 of ERISA had not been entered into plus
$500,000.00.
(iv) In the event that Seller and
Purchaser determine that the amount of Seller's withdrawal liability to the
Multiemployer Plan as of the Closing Date would have been zero, had Seller
withdrawn in a complete withdrawal from the Plan on the Closing Date, the
foregoing provisions of this Section 2.10.5 shall be deemed to be of no further
force and effect with respect to the Multiemployer Plan, and both Seller's and
Purchaser's rights and duties thereunder with respect to the Multiemployer Plan
shall terminate, except that Seller shall be entitled to the return of any
monies deposited in escrow by it pursuant to the foregoing and Purchaser shall
be entitled to a return of any monies deposited in escrow by it pursuant to the
foregoing. Purchaser and the Seller agree that they will make,
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execute and deliver to each other and to the Multiemployer Plan and the PBGC,
without payment of any kind whatsoever, all documents and instruments which are
reasonably required to effectuate the terms and conditions of this Article and
to comply with the provisions of Section 4204 of ERISA and Regulations Sections
2643.1-.15.
2.11 ASSIGNMENT. Purchaser may assign all of its rights and
obligations hereunder to any Affiliate (an "Assignee") on or prior to the
Closing, provided that such Assignee assumes all of Purchaser's obligations
hereunder; provided, further, that Purchaser may separately assign the right to
purchase, and the obligation to pay for, the Trademarks to any Assignee on or
prior to the Closing. If Purchaser desires to make any such assignment,
Purchaser shall notify the Seller in writing of such transfer at least three
(3) days prior to such transfer and the Seller shall effectuate the Closing
with such Assignee or Assignees in lieu of Purchaser and the documents
described herein to be entered into at the Closing shall reflect such
assignment (including, without limitation, the Security Agreement). Upon the
assignment by Purchaser to an Assignee or Assignees of all of Purchaser's
rights and obligations hereunder, (i) Purchaser shall have no further
obligation or liability hereunder and (ii) such Assignee or Assignees shall be
deemed to be the Purchaser with respect to items purchased and liabilities
assumed by each such Assignee for all purposes hereunder and such Assignee or
Assignees shall be entitled to enforce the rights of Purchaser arising
hereunder in its or their own name.
2.12 SECURITY AGREEMENT. Purchaser and the Parent shall
enter into a Security Agreement substantially in the form of EXHIBIT 2.12 at
the Closing.
2.13 HSR ACT FILINGS. Prior to the date hereof, Flowers and
the Parent have filed a Notification and Report Form pursuant to the HSR Act.
Purchaser and the Parent each agrees promptly to supplement such information
and promptly use its reasonable best efforts to effect compliance with the
conditions specified in Sections 6.6 and 7.5 hereof. Each of the parties
hereto will furnish to the other parties hereto such necessary information and
reasonable assistance as such other party may reasonably request in connection
with its preparation of necessary filings or submissions pursuant to the HSR
Act.
2.14 TRADE RECEIVABLES AND OTHER RECEIVABLES. Purchaser
shall use its reasonable best efforts to collect the Trade Receivables and
Other Receivables in a manner consistent with the manner in which Purchaser
collects its own receivables; provided, however, that Purchaser shall have no
responsibility to institute or enforce collection procedures or actions.
Payments designated by a specific invoice shall be applied to such invoice. In
the
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absence of specific customer instructions to the contrary, other payments
received by Purchaser from customers of the Business shall be first applied to
the oldest account receivable of such customer. If any Trade Receivables or
Other Receivables remain uncollected on January 31, 1997 due to a Bad Debt,
Purchaser shall have the right to assign to the Seller the face amount of such
uncollected receivables (the "Uncollected Receivables Amount") and to offset
the Uncollected Receivables Amount against the outstanding amounts due under
the Working Capital Note in the order of maturity; provided, however, that if
the amount due under the Working Capital Note are less than the Uncollected
Receivables Amount, the Seller shall promptly pay Purchaser the difference
between the Uncollected Receivables Amount and the amount due under the Working
Capital Note, if any. All sales made on credit between March 31, 1996 and the
Closing shall be properly recorded by the Seller on the books of the Business.
2.15 BOOKS AND RECORDS. The parties shall retain the books
and records relating to the Business in accordance with their normal document
retention policies. For a period of five years after the Closing Date, the
Parent and the Seller agree to cooperate with and make available to Purchaser
and Purchaser agrees to cooperate with and make available to the Parent and the
Seller, during normal business hours, all books, records and information
relating to the Business (without substantial disruption of employment)
retained by the respective parties and remaining in existence after the Closing
Date that are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such books, records and information for any reasonable business
purpose. The party requesting any such books, records or information shall
bear all of the out-of-pocket costs and expenses (including, without
limitation, attorneys' fees, but excluding reimbursement for salaries and
employee benefits) reasonably incurred in connection with providing such books,
records, information or employees. Notwithstanding the provisions of this
Section 2.15, if the Parent or the Seller, on the one hand, or Purchaser, on
the other hand, desires to dispose of any such books, records or information
prior to the end of such five-year period, the party desiring to dispose of
such books, records and information shall give the other parties notice of such
action, and the parties receiving notice shall be entitled, at their own
expense and cost, to receive such books, records and information.
2.16 TRANSITION SERVICES AGREEMENT. Purchaser, the Parent
and the Seller shall negotiate in good faith a form of Transition Services
Agreement, which shall include, without limitation (i) services relating to
Canadian sales, (ii) the use of names, trademarks or service marks of the
Parent on packaging, (iii) purchasing of sweeteners, (iv) services relating to
sales
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management system information and (v) such other services relating to the
transition of the Business as the parties may agree.
2.17 CAPITALIZATION OF PURCHASER. Flowers agrees to cause
Purchaser and any Assignee or Assignees to have sufficient funds to effect the
Closing and, if the conditions set forth in Article VI are satisfied, to cause
Purchaser and any Assignee or Assignees to effect the Closing.
2.18 WORKERS COMPENSATION MATTERS. The parties agree that
the Seller shall pay (or to the extent insured, cause to be paid) all workers
compensation claims that relate to the Business, arose prior to the Closing and
that are either (a) filed before the Closing or (b) filed after the Closing but
relate to a specific identifiable incident occurring prior to the Closing. The
parties further agree that Purchaser shall pay (or to the extent insured, cause
to be paid) all workers compensation claims that relate to the Business, are
filed after the Closing and either (x) arise after the Closing or (y) arose
prior to the Closing, but do not relate to a specific identifiable incident
occurring prior to the Closing. Purchaser and any Assignee or Assignees shall
use its reasonable best efforts to manage the workers compensation claims
described above in a manner that is consistent with the manner in which Flowers
manages its own workers compensation claims and the parties shall cooperate in
taking actions to minimize the liability related to such claims.
2.19 NAME CHANGE. As soon as practicable after the Closing
Date, and in any event within five business days after the Closing Date, the
Parent shall cause the corporate name of the Seller to be changed to a name
that is not confusingly similar to the name of the Seller. If any state or
other entity shall require the written consent of the Seller or the Parent as a
prerequisite to the registration of such name by Purchaser following the
Closing, the Seller and the Parent shall grant such consent.
III. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLER
-----------------------------------------------------------
The Parent and the Seller, jointly and severally, represent and
warrant to, and for the benefit of, Flowers and Purchaser as follows:
3.1 ORGANIZATION AND STANDING. Each of the Parent and the
Seller is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Ohio, and the Seller has the full power and
authority (corporate and otherwise) to carry on the Business in the places and
as it is now being conducted and to own and lease the Assets. The Seller is
now, and will be at Closing, duly qualified and/or licensed to transact
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business and in good standing as a foreign corporation in all jurisdictions in
which the Business is conducted as listed in EXHIBIT 3.1 hereto, and the
character of the property relating to the Business owned or leased by the
Seller and the nature of the Business do not require such qualification and/or
licensing in any other jurisdiction, except where the failure to be so
qualified or licensed would not have a material adverse effect on the Business
or the Assets, taken as a whole.
3.2 AUTHORITY AND STATUS. Each of the Parent and the
Seller has the capacity and authority to execute and deliver this Agreement, to
perform hereunder, and to consummate the transactions contemplated hereby
without the necessity of any act or consent of any other person whomsoever.
The execution, delivery and performance by the Parent and the Seller of this
Agreement and each and every agreement, document and instrument provided for
herein have been duly authorized and approved by the respective Boards of
Directors of the Parent and the Seller. This Agreement and each and every
agreement, document and instrument to be executed, delivered and performed by
the Parent or the Seller in connection herewith, constitute or will, when
executed and delivered, constitute the valid and legally binding obligations of
the Parent and the Seller, as the case may be, enforceable against each of them
in accordance with their respective terms, except as enforceability may be
limited by applicable equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
3.3 ABSENCE OF EQUITY INVESTMENT. Except as described in
EXHIBIT 3.3 hereto, the Parent and the Seller do not, directly or indirectly,
own of record or beneficially any shares or other equity interests in any
corporation (except as a stockholder holding less than one percent (1%)
interest in a corporation whose shares are traded on a national or regional
securities exchange or in the over-the-counter market), partnership, limited
partnership, joint venture, trust, limited liability company or other business
entity, all or any portion of the business of which is competitive with that of
the Business.
3.4 LIABILITIES AND OBLIGATIONS OF THE SELLER.
------------------------------------------
3.4.1 Attached hereto as EXHIBIT 3.4.1 are
complete copies of the Seller's unaudited balance sheet for the Business as of
April 30, 1994 and the Seller's unaudited balance sheet for the Business as of
April 30, 1995 and the related statement of operating results for the year then
ended (the "1994 and 1995 Financial Statements", respectively). Also attached
hereto to EXHIBIT 3.4.1 is a complete copy of the Seller's unaudited balance
sheet for the Business as of March 31, 1996 (the
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"Financial Statement Date"), and the related statement of operating results for
the period then ended (the "Interim Financial Statements"). The 1994 and 1995
Financial Statements and Interim Financial Statements have been prepared from
and are in accordance with the accounting books and records of the Business,
are complete statements of the financial position and results of operations of
the Business as of their respective dates, have been prepared in accordance
with generally accepted accounting principles (except as disclosed on EXHIBIT
3.4.1) consistently applied (except that the 1994 and 1995 Financial Statements
and the Interim Financial Statements do not contain notes thereto and the
Interim Financial Statements are subject to normal year end audit adjustments
that will not deviate materially from the Interim Financial Statements), fairly
present in all material respects the financial position and results of
operations of the Business as of the respective dates thereof, and disclose all
liabilities of the Business, whether absolute, contingent, accrued or
otherwise, existing as of the respective dates thereof that are of a nature
required to be reflected in financial statements prepared in accordance with
generally accepted accounting principles.
3.4.2 Since the Financial Statement Date, the
Seller has incurred no liability or obligation related to the Assets or the
Business (whether accrued, absolute, contingent or otherwise), except for (i)
the liabilities and obligations of the Seller which are disclosed on EXHIBIT
3.4.2 hereto, to the extent and in the amounts so disclosed, and (ii)
liabilities incurred or accrued in the ordinary course of the Business.
3.5 TAXES. Except for the Assumed Liabilities, there is
not, and there will not be, any liability for federal, state or local income,
sales, use, excise, payroll, employment or other taxes arising out of, or
attributable to, or affecting the Assets or the conduct of the Business through
the close of business on the Closing Date, or attributable to the conduct of
the operations of the Seller at any time for which Purchaser will have any
liability for payment or otherwise. Except for the Assumed Liabilities or as
disclosed on EXHIBIT 3.5, after the Closing, there will not exist by virtue of
the transactions contemplated by this Agreement any liability for taxes (except
for sales taxes and realty transfer taxes, if any, incident to the consummation
of the transactions contemplated herein) which may be asserted by any taxing
authority against any of the Assets or the operations of the Business, and no
lien or other encumbrance for taxes will attach to the Assets or the operations
of the Business.
3.6 OWNERSHIP OF ASSETS AND LEASES.
-------------------------------
3.6.1 With respect to the Assets:
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(i) EXHIBIT 3.6.1.1 attached
hereto contains a list of all Inventories owned by the
Seller as of the Financial Statement Date.
(ii) The Seller has good title to
all of the Purchased Assets and Inventories subject to
no mortgage, pledge, lien, security interest,
conditional sale agreement, encumbrance, charge or
adverse claim whatsoever.
(iii) Except as shown on EXHIBIT
3.6.1.2, none of the properties or assets used by the
Seller in the Business are held under any lease, or as
conditional vendee under any conditional sale or other
title retention agreement. EXHIBIT 3.6.1.2 includes a
list of all leases of all machinery and equipment on
the books of, or used in connection with the operations
of, the Business of which the Seller is a lessee.
(iv) Each of the leases and
agreements described in EXHIBIT 3.6.1.2 is in full
force and effect and constitutes a legal, valid and
binding obligation of the Seller and the other
respective parties thereto, and there is not under any
of such leases or agreements existing any default of
the Seller or, to the Knowledge of the Seller, of any
other parties thereto (or event or condition which,
with notice or lapse of time, or both, would constitute
a default).
(v) None of the property of the
Seller shown on EXHIBITS 3.6.1.1 or 3.6.1.2 is leased
by the Seller to any other person or entity.
(vi) There are no items of
machinery, equipment, vehicles or real property (or
improvements or fixtures thereon) employed or used in
connection with the Business which are not described in
EXHIBIT 3.6.1.2 or are not Leased Assets. The Seller
either owns, licenses or leases all assets which are
necessary to conduct the Business as currently
conducted. All machinery and equipment owned or leased
by the Seller and presently in use are usable and
operable in the Business and are in good operating
condition and reasonable state of repair, subject only
to ordinary wear and tear.
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(vii) Except as set forth on
EXHIBIT 3.6.1.3, all Raw Materials and Supplies consist
only of items of a quality and quantity readily usable,
and all Finished Goods consist only of items of a
quality and quantity readily salable (at prices equal
to the values at which such items are reflected in the
Seller's books), in each case in the normal course of
the Seller's business and are valued so as to reflect
the normal valuation policy of the Seller, all in
accordance with generally accepted accounting
principles, applied on a basis consistent with prior
years, but not in excess of the lower of cost or net
realizable market value.
(viii) Except pursuant to this
Agreement, the Seller is not a party to any contract or
obligation whereby there has been granted to anyone an
absolute or contingent right to purchase, obtain or
acquire any rights in any of the assets, properties or
operations which are owned by the Seller and used in
connection with the Business.
3.6.2 [INTENTIONALLY DELETED]
3.7 [INTENTIONALLY DELETED]
3.8 TRADE RECEIVABLES AND OTHER RECEIVABLES. Attached
hereto as EXHIBIT 3.8 is a true and complete list of all of the Trade
Receivables and Other Receivables as of March 31, 1996.
3.9 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. Except
as listed in EXHIBIT 3.9, the execution and delivery of this Agreement by the
Parent and the Seller do not, and the consummation of the transactions
contemplated hereby will not, violate any provision of the respective Articles
of Incorporation, as amended, or Code of Regulations, as amended, of the Parent
and the Seller or violate or constitute an occurrence of default under any
provision of, or conflict with, or result in acceleration of any obligation
under, or give rise to a right by any party to terminate its obligations under,
any mortgage, deed of trust, conveyance to secure debt, note, loan, lien,
lease, agreement, instrument, or any order, judgment, decree or other
arrangement to which the Parent or the Seller is a party or is bound or by
which the Assets or the Business are affected. Except as listed or described
on EXHIBIT 3.9 attached hereto and except for approval under the HSR Act, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental entity is required to be obtained or made by or
with respect to the Parent, the Seller, any of the Assets or the Business, in
connection with the execution and delivery by the Parent and the Seller of this
Agreement or any
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of the agreements, certificates or other documents delivered or to be delivered
on or after the date hereof and at or prior to the Closing in connection with
the transactions contemplated hereby.
3.10 ABSENCE OF CHANGES. Since the Financial Statement
Date, the Seller has not, except as disclosed on EXHIBIT 3.10 attached hereto:
3.10.1 Transferred, assigned, conveyed or
liquidated any of the Assets or the Business or entered into any transaction or
incurred any liability or obligation which affects the Assets or the Business,
other than in the ordinary course of the Business;
3.10.2 Suffered any change in its business,
operations, or financial condition which may have a material adverse effect on
the Assets or the Business taken as a whole, and the Seller has not become
aware of any event which may result in any such adverse change;
3.10.3 Suffered any destruction, damage or
loss, relating to the Assets or the Business whether or not covered by
insurance, which in the aggregate exceeds five thousand dollars ($5,000.00);
3.10.4 Suffered, permitted or incurred the
imposition of any lien, charge, encumbrance (which as used herein includes,
without limitation, any mortgage, deed of trust, conveyance to secure debt or
security interest) or claim upon any of the Assets or the Business, except for
any current year lien with respect to personal or real property taxes not yet
due and payable;
3.10.5 Committed, suffered, permitted or
incurred any default in any liability or obligation which, in the aggregate,
would have an adverse effect upon Purchaser's use of the Assets or the conduct
of Business after the Closing;
3.10.6 Made or agreed to any change in the
terms of any contract or instrument to which it is a party which (i) is not in
the ordinary course of business or (ii) is in the ordinary course of business
but involves future payments or receipts, performance of services, or delivery
of goods to or by Purchaser of an amount or value in the aggregate in excess of
ten thousand dollars ($10,000.00);
3.10.7 Waived, cancelled, sold or otherwise
disposed of, for less than the face amount thereof, any claim or right relating
to the Assets or the Business which (i) is not in the ordinary course of
business or (ii) is in the ordinary course
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of business but involves an amount or value in the aggregate in excess of ten
thousand dollars ($10,000.00);
3.10.8 Declared, promised or made any
distribution from the Assets or other payment from such Assets to its
shareholders (other than reasonable compensation for services actually
rendered) or issued any additional shares or rights, options or calls with
respect to the capital stock of the Seller, or redeemed, purchased or otherwise
acquired any of the capital stock of the Seller, or made any change whatsoever
in the Seller's capital structure (if such action would affect the ability of
the Seller to consummate the transactions contemplated in this Agreement or
would cause the necessity of obtaining the consent of any individual or entity
not disclosed in EXHIBIT 3.9);
3.10.9 Paid, agreed to pay or incurred any
obligation for any payment for, any contribution or other amount to, or with
respect to, any employee benefit plan, or paid any bonus to, or granted any
increase in the compensation of, the Seller's officers, agents or employees
(unless made at times and in amounts consistent with the historical practices
of the Business), or made any increase in the pension, retirement or other
benefits of the Seller's directors, officers, agents, field representatives or
other employees of the Business;
3.10.10 Incurred any other liability or
obligation or entered into any transaction affecting the Assets or the Business
other than in the ordinary course of the Business;
3.10.11 Received any notices indicating, and the
Seller has no Knowledge, that any supplier of the Business has taken or intends
to take any steps which would reasonably be expected to disrupt the business
relationship of the Seller with said supplier or could result in the diminution
in the value of the Business as a going concern;
3.10.12 Paid, agreed to pay or incurred any
obligation for any payment of any indebtedness affecting the Assets or the
Business except current liabilities incurred in the ordinary course of the
Business; or
3.10.13 Delayed or postponed the payment of any
liabilities, whether current or long term, or failed to pay in the ordinary
course of the Business any liability on a timely basis consistent with prior
practice.
3.11 LITIGATION. Except as otherwise set forth in EXHIBIT
3.11 hereto, there is no suit, action, proceeding, claim or investigation
pending or, to the Knowledge of the Seller, threatened against, or affecting,
Purchaser's use of the Assets or
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conduct of the Business after the Closing and there exists no basis or grounds
for any such suit, action, proceedings, claim or investigation. None of the
items described in EXHIBIT 3.11, singly or in the aggregate, if pursued and/or
resulting in a judgment would have an adverse effect on Purchaser's use of the
Assets or the conduct of the Business after the Closing, or the right of the
Parent or the Seller to consummate the transactions contemplated hereby.
3.12 LICENSES AND PERMITS; COMPLIANCE WITH LAW. The Seller
holds all licenses, certificates, permits, franchises and rights from all
appropriate federal, state or other public authorities necessary for the
conduct of the Business as currently conducted and the use of the Assets. All
such licenses, certificates, permits, franchises and rights are listed on
EXHIBIT 3.12. Except as noted in EXHIBIT 3.12, to the Knowledge of the Seller,
the Seller is presently conducting the Business so as to comply in all respects
with all applicable statutes, ordinances, rules, regulations and orders of any
governmental authority including, but not limited to, any environmental or
health and safety related law, regulation, rule, ordinance, by-law, order or
determination of any governmental entity. Further, the Seller neither is
presently charged with nor is under governmental investigation with respect to
any actual or alleged violation of any statute, ordinance, rule or regulation,
nor is presently the subject of any pending or, to the Knowledge of the Seller,
threatened adverse proceeding by any regulatory authority having jurisdiction
over the Assets or the Business. Except as noted in EXHIBIT 3.12, neither the
execution nor delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will result in the termination of any such
license, certificate, permit, franchise or right held by the Seller which is to
be assigned pursuant to this Agreement, and all such assigned licenses,
certificates, permits, franchises and rights will inure to the benefit of
Purchaser after the transactions contemplated by this Agreement.
3.13 CONTRACTS, ETC.
3.13.1 EXHIBIT 3.13 contains a true and complete list
of all contracts, agreements and other instruments relating to the Business,
except for those contracts, agreements and other instruments listed in Exhibits
3.6.1.2, 3.8, 3.12, 3.14.2, 3.16, and 3.19, and except for (i) (a) contracts
that involve any obligation that can be performed or terminated within thirty
(30) days of the Closing Date without payment of penalty, and (b) contracts
that involve future payments or receipts, performance of services, or delivery
of goods to or by the Seller of an amount or value of less than $10,000.00, or
(ii) purchase orders for raw materials or supplies in the ordinary course of
business.
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Contemporaneously with the delivery of the Exhibits to this Agreement, the
Seller has delivered a true and complete copy of each such written contract,
agreement or instrument, including those listed in EXHIBITS 3.6.1.2, 3.12
(other than occupancy permits), 3.13 and 3.14.2.
3.13.2 All of the contracts, agreements,
policies of insurance or instruments described in EXHIBITS 3.6.1.2, 3.8, 3.12,
3.13, 3.14.2, 3.16, and 3.19 hereto and those contracts described in clauses
(i) and (ii) of the first sentence of Section 3.13.1 are valid and binding upon
the Seller and the other parties thereto and are in full force and effect, and
none of the Seller or, to the Knowledge of the Seller, any other party to any
such contract, commitment or arrangement has breached any provision of, or is
in default under, the terms thereof.
3.14 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
3.14.1 INTELLECTUAL PROPERTY.
(i) EXHIBIT 3.14.1 hereto sets
forth a complete and correct list and summary description of the Trademarks and
pending applications for registration. Except for the license between the
Parent and the Seller, neither the Parent nor the Seller have granted any
license with respect to the Trademarks. Except for the Trademarks, all
trademarks, trade names, service marks, service names, brand names, trade
dress, copyrights and patents and registrations therefor used in the Business
are owned by the Seller, free and clear of all liens, claims and encumbrances
of any nature whatsoever. Neither the Parent nor the Seller is currently in
receipt of any notice of any violation of, and the Parent and the Seller are
not violating, the rights of others in any trademark, trade name, service mark,
copyright, patent, trade secret, know-how or other intangible asset.
(ii) Attached hereto as EXHIBIT
3.14.1 are copies of the Certificates of Registration issued by the United
States Patent and Trademark Office for the Trademarks. The Trademarks are
owned exclusively by the Parent, free and clear of all liens, claims, security
interests and encumbrances of any nature whatsoever. The registrations of the
Trademarks are in full force and effect. Neither the Parent nor the Seller is
currently in receipt of any notice of any violation of, and neither the Parent
nor the Seller is infringing on, the rights of any other party in any
trademark, trade name, or service mark used in connection with the Business.
(iii) The Seller has the right to
use and transfer the trade dress currently used in connection with the
packaging and promotion of its products under said marks;
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(iv) Neither the Parent nor the
Seller has granted any license, permits on or other authorization to any other
person or entity to use said marks or trade names, or has made any conveyance
of any such rights, except for the license of the Trademarks by the Parent to
the Seller.
(v) There have been, and are, no
disputes, demands, or litigation challenging or casting doubt on the ownership
by the Parent of any of the said marks or challenging the validity of any of
the marks or the registration thereof.
(vi) There have been, and are, no
prior settlements, agreements, or administrative or judicial decisions
affecting ownership or validity of the assigned marks or limiting the right of
the Parent to use or register the marks or to grant this assignment.
(vii) There are no other
agreements, contracts or licenses granting, limiting, encumbering or otherwise
directly or indirectly affecting ownership or use or right to use or assign the
marks by the Seller.
(viii) To the Knowledge of the
Seller, there are no current infringements of the said marks by any third
party.
3.14.2 The Seller has sole, full and clear
title to that computer software described as "Owned Software" on EXHIBIT 3.14.2
hereto (the "Owned Software"), free of all claims, including claims or rights
of employees, agents, consultants or other parties involved in the development
or creation of such computer software. The Seller has the right and license to
use that software described as "Licensed Software" on EXHIBIT 3.14.2 free and
clear of any limitations or encumbrances except as may be set forth in any
license agreements listed in EXHIBIT 3.14.2. EXHIBIT 3.14.2 sets forth a list
of all license fees, rents, royalties or other charges that the Seller is
required or obligated to pay with respect to Licensed Software. The Seller is
in full compliance with all provisions of any license, lease or other similar
agreement pursuant to which it has rights to use the Licensed Software. Except
as disclosed on EXHIBIT 3.14.2, none of the Licensed Software has been
incorporated into or made a part of any Owned Software or any other Licensed
Software and none of the Owned Software is dependent on any Licensed Software
in order to freely operate in the manner in which it is intended. Except as
disclosed on EXHIBIT 3.14.2, the Owned Software and Licensed Software
constitute all software used in the Business (the "Seller's Software"), other
than commercially available, over-the-counter "shrinkwrap" software. The
Seller is not infringing any intellectual property rights of any other person
or entity with
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respect to the Owned Software. The Seller does not lease or license any of the
Seller's Software to third parties.
3.15 LABOR MATTERS. On or prior to the date of this
Agreement, the Seller has delivered a true and complete list of all employees
who are engaged in the Business and independent contractors of the Seller who
are engaged in the Business, their current salaries or rates and the Seller's
salary increase guidelines. EXHIBIT 3.15 also sets forth a list of all union
grievances and all union arbitrations in which the Seller has been involved
within the last two (2) years relating to the Business. Except as set forth on
EXHIBIT 3.15, within the last two (2) years the Seller has not been the subject
of any union activity or labor dispute, nor has there been any strike of any
kind called or threatened to be called against it; and, except as set forth on
EXHIBIT 3.15, to the Knowledge of the Seller, the Seller has not violated any
federal, state, or other governmental statutes, regulations, or ordinances
relating to employment and labor matters with regard to the Business,
including, without limitation, the provisions of Title VII of the Civil Rights
Act of 1964 (race, color, religion, sex, and national origin discrimination),
42 U.S.C. Section 1981 (discrimination), 42 U.S.C. Sections 621-634 (the Age
Discrimination in Employment Act), 29 U.S.C. Section 206 (equal pay),
Executive Order 11246 (race, color, religion, sex, and national origin
discrimination), Executive Order 11141 (age discrimination), Section 503 of
the Rehabilitation Act of 1973 (handicap discrimination), 42 U.S.C. Sections
12101-12213 (Americans with Disabilities Act), 29 U.S.C. Sections 2001-2654
(Family and Medical Leave Act), 29 U.S.C. Sections 651-678 (occupational safety
and health) and requirements relating to the documentation of the nationality
of employees. Assuming those positions described as "open" on EXHIBIT 3.15 are
filled, the staffing and employment levels of the Seller are now, and will be
at Closing, sufficient to run the Business at levels of production, sales,
marketing and administration consistent with the levels of production, sales,
marketing and administration for the prior fiscal year. Except for the
promissory notes, mortgages and letter agreements relating to the Notes
Receivable, neither the Seller nor the Parent is a party to any contract that
would impair the utility of the services of any employee or independent
contractor of the Seller to Purchaser or which would impose upon such employee
or independent contractor any monetary or other obligation to the Parent or the
Seller which otherwise would be occasioned by the termination of such
employee's or independent contractor's employment or relationship with the
Seller pursuant to this Agreement including, without limitation, any agreements
of noncompetition or confidentiality.
3.16 BENEFIT PLANS.
--------------
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3.16.1 EXHIBIT 3.16 lists every pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other incentive plan, any other
written or unwritten employee program, arrangement, agreement or understanding
(whether arrived at through collective bargaining or otherwise), any medical,
vision, dental or other health plan, any life insurance plan or any other
employee benefit plan or fringe benefit plan, including, without limitation,
any "employee benefit plan," as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 as amended ("ERISA") and any
multiemployer plan within the meaning of Section 3(37) of ERISA, currently
adopted, maintained, sponsored in whole or in part or contributed to by the
Seller or any current member of a commonly controlled group of trades or
businesses (as defined in Section 4001(b)(1) of ERISA) including the Seller for
the benefit of employees, retirees, dependents, spouses, independent
contractors or other beneficiaries of the Seller who are, or were, engaged in
the Business with respect to their services rendered to the Business and under
which employees, retirees, dependents, spouses, independent contractors or
other beneficiaries of the Seller who are, or were, engaged in the Business,
and dependents thereof, are eligible to participate or under or in connection
with which the Seller has any contingent or noncontingent liability of any kind
whether or not probable of assertion (collectively, the "Benefit Plans") which
would affect the Assets or the Business. Except as disclosed on EXHIBIT 3.16,
no Benefit Plan is or has been a multiemployer plan within the meaning of
Section 3(37) of ERISA.
3.16.2 EXHIBIT 3.16 also lists all trust
agreements or other funding arrangements, including insurance contracts, and
all amendments thereto applicable to the Benefit Plans.
3.16.3 All the Benefit Plans and the related
trusts subject to ERISA substantially comply with and have been administered in
substantial compliance with the provisions of ERISA, all provisions of the Code
relating to qualification and tax exemption under Code Sections 401(a) and
501(a) or otherwise applicable to secure intended tax consequences, all
applicable state or federal securities laws and all other applicable laws,
rules and regulations and collective bargaining agreements, and the Seller has
not received any notice from any governmental agency or instrumentality
questioning or challenging such compliance.
3.16.4 All Benefit Plans subject to section
4980B of the Code, as amended from time to time, or Part 6 of Subtitle B of
Title I of ERISA or both have been maintained in substantial compliance with
the requirements of such laws and any regulations (proposed or otherwise)
issued thereunder.
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3.16.5 None of the Assets nor the Business will
be subject after the Closing to any liability for the Seller's failure to make
any contributions to, to be in full compliance with ERISA or any other law
relating to, or otherwise as a consequence of the Seller's participation in,
the Benefit Plans, nor subject to any liens resulting from the participation in
any benefit plan affecting or for the benefit of employees of other employers
that are current or former members of a commonly controlled group of trades or
businesses (as defined in section 4001(b)(1) of ERISA) including the Seller.
3.17 CUSTOMERS AND BROKERS. EXHIBIT 3.17 attached hereto
consists of a true and complete list of all brokers utilized by, and all of the
customers served by, the Business as of the Financial Statement Date setting
forth as to each customer and broker its name and gross sales by dollar amounts
by each such customer and broker within the twelve months preceding the
Financial Statement Date. The Seller has not received any notice, nor has any
Knowledge, that any customer of the Business that has purchased more than
$500,000.00 from the Seller in the preceding twelve months or broker of the
Business has taken or intends to take any steps which would reasonably be
expected to disrupt the business relationship of the Business with such
customer or broker or could result in the diminution in the value of the
Business with such customer or broker.
3.18 [INTENTIONALLY DELETED]
3.19 INSURANCE. Set forth in EXHIBIT 3.19 is a complete
list of all insurance policies which the Parent or the Seller has maintained
with respect to the Business within the preceding two years. Except as set
forth in EXHIBIT 3.19, such policies are in full force and effect and no event
has occurred with respect to the Business which would give any insurance
carrier a right to terminate any such policy.
3.20 RELATED PARTY RELATIONSHIPS. Except as set forth in
EXHIBIT 3.20, no shareholder holding a five percent (5%) or more interest in
the Parent or the Seller or officer or director of the Parent or the Seller
possesses, directly or indirectly, any beneficial interest in, or is a
director, officer or employee of, any corporation, partnership, firm,
association or business organization which is a client, supplier, customer,
lessor, lessee, lender, creditor, borrower, debtor or contracting party with or
of the Seller with respect to the Business (except as a stockholder holding
less than a one percent interest in a corporation whose shares are traded on a
national or regional securities exchange or in the over-the-counter market).
3.21 [INTENTIONALLY DELETED]
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3.22 UNIVERSAL PRODUCT CODE. The products currently
produced, marketed, and sold by the Business carry the Universal Product Code
Numbers set forth opposite the listing of all such products on EXHIBIT 3.22
attached hereto.
3.23 SUPPLIERS. Attached hereto as EXHIBIT 3.23 is a
complete and correct list of all persons, partnerships, corporations or
entities from which the Business has purchased any ingredients or packaging
relating to its business within the last six (6) months.
3.24 EXHIBITS. Matters disclosed on each Exhibit shall be
deemed disclosed only for purposes of the matters to be disclosed in such
Exhibit and shall not be deemed to be disclosed for any other purpose unless
expressly provided therein.
3.25 DISCLOSURE. No representation or statement contained
herein or in any certificate, schedule, list, exhibit or other instrument
furnished to Purchaser pursuant to the provisions hereof contains or will
contain any untrue statement of any material fact.
IV. SECURITIES LAWS.
----------------
4.1 NO REGISTRATION STATEMENT REQUIRED. Each of the Parent
and the Seller represents that it understands that the respective Promissory
Notes to be issued and delivered to it pursuant to the provisions of this
Agreement will not be registered under the 1933 Act or any applicable "Blue
Sky" laws, in reliance upon the exemptions contained in (a) the 1933 Act and
the General Rules and Regulations under the 1933 Act promulgated by the SEC,
and (b) applicable "Blue Sky" laws and rules or regulations promulgated
thereunder.
4.2 INVESTMENT LETTERS. Each of the Parent and the Seller
acknowledges that the respective Promissory Notes to be issued and delivered to
it pursuant to the provisions of this Agreement will be, when issued and
delivered, acquired by the Parent or the Seller, as the case may be, for
investment for its own account and not with a view to the subsequent resale or
other distribution thereof as provided in the letter indicated below, and each
of the Parent and the Seller hereby agrees to execute and deliver to Purchaser
on the date of issuance of such Promissory Notes, a letter, substantially in
the form of EXHIBIT 4.2 attached hereto, to such effect. In the event the
Parent or Seller desires to transfer the Promissory Notes in liquidation or
otherwise, it shall obtain, as a condition to such transfer, either (i) a
letter, substantially in the form of EXHIBIT 4.2 attached hereto, dated as of
the proposed effective date of such transfer, from each such transferee or (ii)
an opinion of counsel reasonably satisfactory to
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Purchaser as to form and substance, from counsel reasonably acceptable to
Purchaser, that the proposed transfer can be effected under the 1933 Act or any
applicable "Blue Sky" laws.
4.3 CONDITIONS PRECEDENT TO TRANSFER OF PROMISSORY NOTES.
Each of the Parent and the Seller understands, consents and agrees that the
sale or other transfer of the Promissory Notes to be received under this
Agreement will be permitted and recognized only when such sale or other
transfer is made pursuant to an effective registration under the 1933 Act and
applicable "Blue Sky" laws or when such request for sale or other transfer is
accompanied by either (a) an opinion of counsel reasonably satisfactory to
Purchaser as to form and substance, from counsel reasonably acceptable to
Purchaser, that the proposed sale or transfer can be effected without
registration under the 1933 Act, or any applicable "Blue Sky" laws or (b) a "no
action" letter from the appropriate authorities with respect to the proposed
sale or transfer.
4.4 LEGENDS ON PROMISSORY NOTES. The Promissory Notes
issued and delivered under this Agreement shall bear on their face a legend to
the effect of the restrictions described in this Article IV until such time as
Purchaser receives an opinion of counsel reasonably satisfactory to Purchaser
as to form and substance from counsel reasonably acceptable to Purchaser that
the legend on such Promissory Notes may be removed under then applicable
federal and state securities laws.
V. REPRESENTATIONS AND WARRANTIES OF FLOWERS AND PURCHASER.
--------------------------------------------------------
Flowers and Purchaser, jointly and severally, represent and warrant
to, and for the benefit of, the Parent and the Seller as follows:
5.1 ORGANIZATION AND STANDING. Each of Flowers and
Purchaser is a duly organized and validly existing corporation in good standing
under the laws of the State of its incorporation and has the full power and
authority (corporate and otherwise) to carry on its business in the places and
as it is now being conducted and to own and lease the properties and assets
which it now owns or leases.
5.2 CORPORATE POWER AND AUTHORITY. Each of Flowers and
Purchaser has the capacity and authority to execute and deliver this Agreement,
to perform hereunder, and to consummate the transactions contemplated hereby
without the necessity of any act or consent of any other person whomsoever.
The execution, delivery and performance by Flowers and Purchaser of this
Agreement and each and every agreement, document and instrument provided for
herein have been duly authorized and approved by the respective Boards of
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Directors of Flowers and Purchaser. This Agreement, and each and every other
agreement, document and instrument to be executed, delivered and performed by
Flowers or Purchaser in connection herewith, constitute or will, when executed
and delivered, constitute the valid and legally binding obligations of Flowers
and Purchaser, as the case may be, enforceable against each of them in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws from time to time in effect
affecting the enforcement of creditors' rights generally.
5.3 AGREEMENT DOES NOT VIOLATE OTHER INSTRUMENTS. The
execution and delivery of this Agreement by Flowers and Purchaser do not, and
the consummation of the transactions contemplated hereby will not, violate any
provision of the respective Articles of Incorporation, as amended, or Bylaws,
as amended, of Flowers or Purchaser or violate or constitute an occurrence of
default under any provision of, or conflict with, or result in acceleration of
any obligation under, or give rise to a right by any party to terminate its
obligations under, any mortgage, deed of trust, conveyance to secure debt,
note, loan, lien, lease, agreement, instrument, or any order, judgment, decree
or other arrangement to which Flowers or Purchaser is a party or is bound or by
which their assets are affected. Except for approval under the HSR Act, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental entity is required to be obtained or made by or
with respect to Flowers, Purchaser or any of their assets, in connection with
the execution and delivery by Flowers and Purchaser of this Agreement or any of
the agreements, certificates or other documents delivered or to be delivered on
or after the date hereof and at or prior to the Closing in connection with the
transactions contemplated hereby.
5.4 CAPITALIZATION; SOLVENCY. Purchaser and each of its
Assignees has, or will have at the Closing, sufficient funds available to
enable Purchaser to effect the Closing. Immediately after the Closing,
Purchaser will be solvent and able to pay its debts as they mature, will have
capital sufficient to carry on its businesses and all businesses in which it is
about to engage and will have assets which will have a present fair salable
value greater than the probable amount of its total liabilities.
VI. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER TO CLOSE.
----------------------------------------------------------
All of the obligations of Purchaser to consummate the transactions
contemplated by this Agreement shall be contingent upon and subject to the
satisfaction, on or before the Closing
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Date, of each and every one of the following conditions, all or any of which
may be waived, in whole or in part, by Purchaser for purposes of consummating
such transactions, but without prejudice to any other right or remedy which
Purchaser may have hereunder as a result of any misrepresentations by, or
breach of any covenant or warranty of, the Parent or the Seller contained in
this Agreement or any other certificate or instrument furnished by the Parent
or the Seller hereunder; provided, however, that if it is reasonably
anticipated that the aggregate liability, loss, damage, injury or claim
(including reasonable counsel fees and costs of any suit related thereto)
relating to any misrepresentations by, or breach of any covenant or warranty
of, the Parent or the Seller contained in this Agreement which are known as of
the Closing is or will be less than or equal to One Million Dollars
($1,000,000.00), Purchaser shall be obligated to consummate the transactions
contemplated in this Agreement (but shall still have the right to
indemnification as provided in Article IX); provided, further, that if it is
reasonably anticipated that the aggregate liability, loss, damage, injury or
claim (including reasonable counsel fees and costs of any suit related
thereto) relating to any misrepresentations by, or breach of any covenant or
warranty of, the Parent or the Seller contained in this Agreement which are
known as of the Closing exceeds or will exceed One Million Dollars
($1,000,000.00), neither Purchaser, the Parent or the Seller shall be obligated
to consummate the transactions contemplated in this Agreement unless Purchaser
agrees to limit its right to indemnification for such misrepresentation or
breach to $1,000,000.00.
6.1 REPRESENTATIONS TRUE AT CLOSING. The representations
and warranties made by the Parent and the Seller to Purchaser in this Agreement
shall be true and correct on the Closing Date with the same force and effect as
though such representations and warranties had been made on and as of such time
(except for changes contemplated by this Agreement).
6.2 COVENANTS OF THE PARENT AND THE SELLER. The Parent and
the Seller shall have duly performed all of the covenants, acts and
undertakings to be performed by them on or prior to the Closing Date and a duly
authorized officer of the Parent and the Seller shall deliver to Purchaser a
certificate dated as of the Closing Date certifying to the fulfillment of this
condition and the condition set forth in Section 6.1 hereof.
6.3 NO INJUNCTION, ETC. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to
enjoin, restrain, prohibit, or obtain substantial damages in respect of, or
which is related to, or arises out of, this Agreement or the consummation of
the
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transactions contemplated hereby, or which is related to or arises out of the
Assets or the Business, if such action, proceeding, investigation, regulation
or legislation, in the reasonable judgment of Purchaser would make it
inadvisable to consummate such transactions.
6.4 OPINION OF COUNSEL. A favorable opinion of Steven J.
Ellcessor, Esq., General Counsel of the Parent, shall have been delivered to
Purchaser dated as of the Closing Date, substantially in form and substance of
the opinion attached hereto as EXHIBIT 6.4, which opinion shall be governed by
the Legal Opinion Accord of the ABA Section of Business Law (1991).
6.5 CONSENTS, APPROVALS AND WAIVERS. Purchaser shall have
received a true and correct copy of each and every consent, approval and waiver
to the transactions contemplated in this Agreement that are listed on EXHIBIT
6.5 and obtained new licenses to replace those licenses listed on EXHIBIT 6.5.
Purchaser shall have no reasonable basis to believe that Purchaser will not
obtain a novation of the Department of Defense contracts described in Section
2.8.
6.6 APPROVALS. The execution and the delivery of this
Agreement and the consummation of the transactions contemplated hereby shall
have been approved by all regulatory authorities whose approvals are required
by law and all applicable waiting periods under the HSR Act shall have expired
or been terminated.
6.7 ABSENCE OF CHANGES. Since the Financial Statement
Date, (a) the Seller shall not have suffered any change in its financial
condition, business, property or assets which would have an adverse effect upon
Purchaser's use of the Assets or the conduct of the Business after the Closing,
and (b) the Parent and the Seller shall not have permitted or suffered to occur
any transaction or event described in Section 3.10 hereof which is not
described in EXHIBIT 3.10 hereto.
6.8 LEASES. The Seller shall have entered into the Leases.
6.9 SECURITY AGREEMENT. The Parent shall have entered into
a Security Agreement substantially in the form of EXHIBIT 2.12.
6.10 TRANSITION SERVICES AGREEMENT. The Parent and the
Seller shall have entered into a Transition Services Agreement.
6.11 DELIVERY OF AUDITED FINANCIAL STATEMENTS. The Seller
shall have delivered to Purchaser an audited balance sheet and statement of
operating results of the Business as of April 30, 1996
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and for the year then ended, together with the report of Ernst & Young LLP
thereon, which balance sheet and statement of operating results do not deviate
materially and adversely from the Interim Financial Statements.
VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PARENT AND THE SELLER TO CLOSE.
----------------------------------------------
All of the obligations of the Parent and the Seller to consummate
the transactions contemplated by this Agreement shall be contingent upon and
subject to the satisfaction, on or before the Closing Date, of each and every
one of the following conditions, all or any of which may be waived, in whole or
in part, by the Parent and the Seller for purposes of consummating such
transactions but without prejudice to any other right or remedy which they may
have hereunder as a result of any misrepresentation by, or breach of any
covenant or warranty of Purchaser contained in this Agreement, or any
certificate or instrument furnished by it hereunder; provided, however, that if
it is reasonably anticipated that the aggregate liability, loss, damage, injury
or claim (including reasonable counsel fees and costs of any suit related
thereto) relating to any misrepresentations by, or breach of any covenant or
warranty of, the Parent or the Seller contained in this Agreement which are
known as of the Closing is or will be less than or equal to One Million Dollars
($1,000,000.00), the Parent and the Seller shall be obligated to consummate the
transactions contemplated in this Agreement; provided, further, that if it is
reasonably anticipated that the aggregate liability, loss, damage, injury or
claim (including reasonable counsel fees and costs of any suit related
thereto) relating to any misrepresentations by, or breach of any covenant or
warranty of, the Parent or the Seller contained in this Agreement which are
known as of the Closing exceeds or will exceed One Million Dollars
($1,000,000.00), neither Purchaser, the Parent or the Seller shall be obligated
to consummate the transactions contemplated in this Agreement unless Purchaser
agrees to limit its right to indemnification for such misrepresentation or
breach to $1,000,000.00.
7.1 REPRESENTATIONS TRUE AT CLOSING. The representations
and warranties made by Purchaser in this Agreement to the Parent and the Seller
or any document or instrument delivered to the Parent and the Seller or their
representatives hereunder shall be true and correct on the Closing Date with
the same force and effect as though such representations and warranties had
been made on and as of such date, except for changes contemplated by this
Agreement.
7.2 COVENANTS OF PURCHASER. Purchaser shall have duly
performed all of the covenants, acts and undertakings to be performed by it on
or prior to the Closing Date, and a duly authorized officer of Purchaser shall
deliver a certificate dated
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as of the Closing Date certifying to the fulfillment of this condition and the
condition set forth under Section 7.1 above.
7.3 NO INJUNCTION, ETC. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to
enjoin, restrain, prohibit, or obtain substantial damages in respect of, or
which is related to, or arises out of, this Agreement or the consummation of
the transactions contemplated hereby, or which is related to or arises out of
the business of Purchaser, if such action, proceeding, investigation,
regulation or legislation, in the reasonable judgment of the Parent and the
Seller would make it inadvisable to consummate same.
7.4 OPINION OF COUNSEL FOR PURCHASER. A favorable opinion
of G. Anthony Campbell, Esq., General Counsel of Flowers, shall have been
delivered to the Parent and the Seller dated as of the Closing Date,
substantially in form and substance of the opinion attached hereto as EXHIBIT
7.4, which opinion shall be governed by the Legal Opinion Accord of the ABA
Section of Business Law (1991).
7.5 APPROVALS. The execution and the delivery of this
Agreement and the consummation of the transactions contemplated hereby shall
have been approved by all regulatory authorities and all courts whose approvals
are required by law and all applicable waiting periods under the HSR Act shall
have expired or been terminated.
7.6 LEASES. Purchaser shall have entered into the Leases.
7.7 SECURITY AGREEMENT. Purchaser shall have entered into
a Security Agreement substantially in the form of EXHIBIT 2.12.
7.8 TRANSITION SERVICES AGREEMENT. Purchaser shall have
entered into a Transition Services Agreement.
7.9 BALANCE SHEET. Purchaser shall have delivered to the
Parent and the Seller a balance sheet as of a time immediately prior to the
Closing but which reflects the capitalization of Purchaser to effect the
Closing.
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7.10 PARTIAL TERMINATION LIABILITY. The potential liability
of Seller to Purchaser pursuant to Section 2.10.5(iii) shall be reasonably
anticipated to be less than $500,000.00 as a result of the consummation of the
transactions described in this Agreement.
VIII. CLOSING.
--------
8.1 TIME AND PLACE OF CLOSING.
8.1.1 The Closing shall be held at the offices
of Jones, Day, Reavis & Pogue, 3500 One Peachtree Center, 303 Peachtree Street,
N.E., Atlanta, Georgia 30308-3242, commencing at 10:00 am., Eastern Time, on
the later to occur of (i) May 31, 1996, or (ii) five (5) business days after
the expiration or early termination of all applicable waiting periods under the
HSR Act, unless another place or date is agreed to in writing by the Parent,
the Seller and Purchaser, but in no event will the Closing be held later or be
effective later than July 31, 1996. Physical possession and control of the
Purchased Assets shall be delivered to Purchaser as of 11:59 pm, Eastern Time
on the Closing Date (the "Effective Time"), and any employees of the Seller
retained or employed by Purchaser shall be deemed employed as of the Effective
Time.
8.2 TRANSACTIONS AT CLOSING. At the Closing, each of the
following transactions shall occur:
8.2.1 THE PARENT'S AND SELLER'S PERFORMANCE.
At the Closing, the Parent and the Seller shall deliver to Purchaser the
following:
(a) such good and sufficient bills
of sale, assignments, warranty deeds, deeds and other
good and sufficient instruments of sale, conveyance,
transfer and assignment as shall be required or as may
be appropriate in order to effectively vest in
Purchaser good and marketable title to the Purchased
Assets free and clear of all liens, security interests
and encumbrances of whatever nature;
(d) an assignment and assumption
agreement relating to the Assumed Contracts;
(b) the certificates of the duly
elected officers of the Parent and the Seller described
in Section 6.2;
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(c) copies of all consents,
approvals, acknowledgments and waivers listed on
EXHIBIT 6.5;
(d) Leases executed by the Seller,
substantially in the forms of EXHIBITS 2.3(A) and
2.3(B), respectively;
(e) if obtained by Closing,
terminations of the financing statements
described on EXHIBIT 2.8;
(f) audited financial statements
contemplated by Section 6.11;
(g) Security Agreement executed by
the Parent, substantially in the form of EXHIBIT 2.12;
(h) Transition Services Agreement
executed by the Parent and the Seller;
(i) satisfactory evidence of the
approvals described in Section 6.6;
(j) certificates of compliance or
certificates of good standing of the Parent and the
Seller, as of the most recent practicable date, from
the appropriate governmental authority of the
jurisdiction of its incorporation and any other
jurisdiction which is set forth in EXHIBIT 3.1 hereto;
(k) investment letter executed by
the Seller, substantially in the form of EXHIBIT
4.2 hereto;
(l) certified copies of resolutions
of the Boards of Directors of the Parent and the Seller
approving the transactions set forth in this Agreement;
(m) certificate of incumbency for
the officers of the Parent and the Seller who are
executing this Agreement and the other documents
contemplated hereunder;
(n) opinion of counsel in
substantially the form attached hereto as EXHIBIT 6.4;
(o) all books of account (excluding
minute books and stock books of the Seller), contracts,
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files and other data and documents pertaining to the
Assets and Business (which may be delivered at the
offices of the Business);
(p) physical possession of the
Purchased Assets where located; and
(q) such other evidence of the
performance of all covenants and satisfaction of all
conditions required of the Parent or the Seller by this
Agreement, at or prior to the Closing, as Purchaser or
its counsel may reasonably require.
8.2.2 PERFORMANCE BY PURCHASER. At the
Closing, Purchaser shall deliver to the Parent and the Seller the following:
(a) cash, by wire transfer, in the
amount to be paid to the Seller at Closing, as set
forth in Section 2.2.1(a);
(b) Promissory Notes executed by
Purchaser substantially in the forms of EXHIBITS
2.2.1(b) and 2.2.1(c), respectively;
(c) Liabilities Undertaking,
substantially in the form of EXHIBIT 2.2.1(d);
(d) an assignment and assumption
agreement relating to the Assumed Contracts;
(d) Leases executed by Purchaser,
substantially in the forms of EXHIBITS 2.3(a) and
2.3(B), respectively;
(e) Security Agreement executed by
Purchaser, substantially in the form of EXHIBIT 2.12
and any necessary financing statements related thereto;
(f) Transition Services Agreement
executed by Purchaser;
(g) the certificate of the
authorized officer described in Section 7.2;
(h) satisfactory evidence of the
approvals described in Section 7.5;
(i) opinion of counsel in
substantially the form attached hereto as EXHIBIT 7.4;
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(j) certificates of compliance or
certificates of good standing of Flowers and Purchaser,
as of the most recent practicable date, from the
appropriate governmental authority of the jurisdiction
of its incorporation;
(k) certificate of incumbency of
the officers of Purchaser who are executing this
Agreement and the other documents contemplated
hereunder;
(l) certificate of Purchaser
reasonably satisfactory to Purchaser, the Parent and
the Seller relating to Pennsylvania exemption for sales
tax on rent;
(m) certified copy of resolutions
of the Boards of Directors of Purchaser approving the
transactions set forth in this Agreement; and
(n) such other evidence of the
performance of all the covenants and satisfaction of
all of the conditions required of Purchaser by this
Agreement at or before the Closing as the Parent, the
Seller or their counsel may reasonably require.
IX. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION.
----------------------------------------------
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE
PARENT AND THE SELLER. All representations, warranties, agreements, covenants
and obligations made or undertaken by the Parent and the Seller in this
Agreement or in any document or instrument executed and delivered pursuant
hereto are material, have been relied upon by Purchaser and shall survive the
Closing hereunder for the applicable period set forth in Section 9.5 and shall
not merge in the performance of any obligation by any party hereto. The Parent
and the Seller, jointly and severally, agree to and shall indemnify and hold
harmless Purchaser or any assignee of Purchaser at all times after the date of
this Agreement from and against and in respect of, any liability, claim,
deficiency, loss, damage, or injury and all reasonable costs and expenses
(including reasonable counsel fees and costs of any suit related thereto)
suffered or incurred by Purchaser arising from (i) any misrepresentation or a
breach of any representation or warranty of the Parent or the Seller contained
in Article III of this Agreement, Section 6 of the Real Property Lease or
Section 18 of the Equipment Lease, or any claim by a third party (regardless of
whether the claimant is ultimately successful) which if true would
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be such a misrepresentation or breach, (ii) any nonfulfillment of any agreement
or breach of any covenant on the part of the Parent or the Seller under this
Agreement or any claim by a third party (regardless of whether the claimant is
ultimately successful) which if true would be such a nonfulfillment or breach,
(iii) any suit, action, proceeding, claim or investigation pending or
threatened against or affecting the Assets or the Business to the extent that
it arises from any matter or state of facts occurring prior to Closing,
regardless of whether it is disclosed on EXHIBIT 3.11, except for Assumed
Product Liability Claims and workers compensation claims that Purchaser has
agreed to pay pursuant to Section 2.18, (iv) any claim or debt, obligation or
liability of the Parent or the Seller which is not specifically assumed by
Purchaser pursuant to this Agreement, (v) any claim or right, or any alleged
claim or right, of third persons by virtue of application of bulk sales laws or
otherwise which may be asserted against any of the Assets by reason of the
transactions contemplated by this Agreement, (vi) any suit, action, proceeding,
claim or investigation pending or threatened against or affecting the Assets or
the Business that arises from the failure of the Parent or the Seller to comply
with applicable law, regardless of whether such noncompliance was known by the
Parent or the Seller, (vii) any claim against, or liability of, the Assets or
the Business that relates to a defect in the merchantability, quality or
character of the Finished Goods and which defect existed on the Closing Date,
or (viii) the failure of the Seller to obtain on or prior to the Closing the
termination of each of the financing statements described on EXHIBIT 2.8. In
addition to any other rights or remedies Purchaser may have, Purchaser shall be
entitled to withhold from the payments due under the Promissory Notes first,
and if the amounts to be withheld and which have been withheld exceed the
amounts outstanding under the Promissory Notes, to withhold from the Fixed Rent
(as defined in the Real Property Lease) and the Rent (as defined in the
Equipment Lease) the amount of any and all liabilities, losses, damages,
injuries, costs, expenses and counsel fees which it has sustained or which it
reasonably believes it may sustain, and to offset from such withheld amount any
amount ultimately determined to be due and owing to Purchaser by way of
indemnification pursuant to this Section, and Purchaser shall not be liable for
principal or interest under the Promissory Notes or amounts due under the
Leases on any amounts so set off. If the withholding of payments then due
under the Promissory Notes or the Leases has been based on a reasonable belief
of a future claim due to a specific allegation, Purchaser shall pay any such
amount withheld, plus interest related thereto at a rate equal to the
then-current rate on ten-year Treasury Notes plus five percent per annum, which
Purchaser has not offset pursuant to the preceding sentence, within one year of
the giving of the written notification of such claim to the Seller, unless a
lawsuit, arbitration or administrative proceeding based on
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such claim shall have been commenced within said period and is then pending.
If such a lawsuit, arbitration or administrative proceeding has commenced
within said one-year period, Purchaser shall pay within thirty days after a
final determination under such lawsuit, arbitration or administrative
proceeding, the difference, if any, between said withheld amount and the amount
of any liability, loss, damage or injury actually sustained, if the withheld
amount is larger, plus interest related thereto at a rate equal to the
then-current rate on ten-year Treasury Notes plus five percent per annum.
Any examination, inspection by audit of the properties,
financial condition or other matters of the Parent or the Seller and the
Business which is conducted pursuant to this Agreement shall in no way limit,
affect or impair the ability of Purchaser to rely upon the representations,
warranties, covenants and obligations of the Parent and the Seller set forth
herein.
9.2 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
FLOWERS; SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF PURCHASER. All
representations, warranties, agreements, covenants and obligations made or
undertaken by Flowers in this Agreement or in any document or instrument
executed and delivered pursuant hereto shall not survive the Closing, and
thereafter none of Flowers, its officers, directors or employees shall have any
liability whatsoever with respect to any such representations, warranties,
agreements, covenants and obligations; provided, however, that the
representations and warranties of Flowers contained in Section 5.4 shall
survive the Closing for a period of eighteen months thereafter. All
representations and warranties made by Purchaser in this Agreement or in any
document or instrument executed and delivered pursuant hereto are material,
have been relied upon by the Parent and the Seller, shall not merge in the
performance of any obligation by any party hereto and the representations and
warranties contained in Article V of this Agreement shall survive the Closing
hereunder for a period of eighteen (18) months. All agreements, covenants and
obligations undertaken by Purchaser in this Agreement or in any document or
instrument executed and delivered pursuant hereto are material, have been
relied upon by the Parent and the Seller, shall not merge in the performance of
any obligation by any party hereto and shall survive the Closing hereunder for
the longest period available under applicable law. Purchaser agrees to and
shall indemnify and hold harmless the Parent and the Seller at all times after
the date of this Agreement from and against and in respect of, any liability,
claim, deficiency, loss, damage or injury and all reasonable costs and expenses
(including reasonable counsel fees and costs of any suit related thereto)
suffered or incurred by the Parent or the Seller arising from (i) a breach of
any representation or warranty of Flowers or Purchaser contained in Article V
of this Agreement, or
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any claim by a third party (regardless of whether the claimant is ultimately
successful) which if true would be such a breach, (ii) any nonfulfillment of
any agreement on the part of Flowers or Purchaser under this Agreement, (iii)
an Assumed Liability or an Assumed Contract (to the extent assumed by
Purchaser), or (iv) the conduct or operation of the Business by Purchaser after
the Closing, except to the extent the matter or state of facts to which such
liability, claim, deficiency, loss, damage or injury existed prior to the
Closing.
9.3 MAXIMUM AGGREGATE LIABILITY AMOUNT. The maximum
aggregate liability of the Parent and the Seller for indemnification for a
breach of a representation or warranty contained in Article III of this
Agreement, Section 6 of the Real Property Lease or Section 18 of the Equipment
Lease shall be equal to the sum of Fifteen Million Dollars ($15,000,000.00)
(the "Maximum Aggregate Liability Amount"), and the obligation of the Parent
and the Seller for indemnification for breaches of such representations or
warranties will terminate when the Maximum Aggregate Liability Amount has been
paid; provided, however, that the Maximum Aggregate Liability Amount shall not
be charged for or reduced by, nor shall there be any Maximum Aggregate
Liability Amount for, any liability, loss, damage, injury or claim resulting
from a breach of the representations and warranties contained in Section
6.a.(ix) of the Real Property Lease.
9.4 MINIMUM AGGREGATE LIABILITY AMOUNT. Purchaser agrees
not to seek recourse against, and shall not recover from the Parent or the
Seller for indemnification for a breach of a representation or warranty
contained in Article III of this Agreement, Section 6 of the Real Property
Lease or Section 18 of the Equipment Lease, until the aggregate amount thereof
exceeds Seven Hundred Fifty Thousand Dollars ($750,000.00) (the "Minimum
Aggregate Liability Amount"), at which time claims may be asserted for amounts
in excess of the Minimum Aggregate Liability Amount; provided, however, that
the Minimum Aggregate Liability Amount shall not be charged for or reduced by,
nor shall there be any Minimum Aggregate Liability Amount for, any liability,
loss, damage, injury or claim resulting from a breach of the representations
and warranties contained in Section 6.a.(ix) of the Real Property Lease. The
Minimum Aggregate Liability Amount shall be charged for and reduced by payments
made by Purchaser relating to any Assumed Product Liability Claim.
9.5 SURVIVAL PERIOD FOR CLAIMS AGAINST THE PARENT AND THE
SELLER. Except as provided below, a claim for indemnification hereunder based
upon Section 9.1(i) of this Agreement against the Parent or the Seller shall be
forever barred unless made by notifying the Parent within eighteen (18) months
following the Closing Date. A claim for indemnification hereunder based upon
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Sections 6.a.(i), 6.a.(ii) or 6.a.(ix) of the Real Property Lease or Section
18.1.1 of the Equipment Lease may be made within the period provided for in the
Real Property Lease and the Equipment Lease, respectively. Any other claim for
indemnification hereunder against the Parent or the Seller may be made within
the longest period available under applicable law.
9.6 MEDIATION. If a dispute arises out of or relates to
this Agreement or any agreement that is an Exhibit hereto, or the breach
thereof, and if the dispute cannot be settled through negotiation, the parties
hereto agree first to try in good faith to settle the dispute by mediation
administered by the American Arbitration Association under its Commercial
Mediation Rules before resorting to litigation or some other dispute resolution
procedure. Notwithstanding the foregoing, (i) the parties obligation to
mediate shall terminate sixty (60) days after a request for mediation has been
made by one of the parties and (ii) a party may also seek redress from a court
of competent jurisdiction if the delay caused by mediation would prejudice any
rights such party may otherwise have.
X. COVENANT NOT TO COMPETE
-----------------------
10.1 NONCOMPETITION. Each of the Parent and the Seller covenants
and agrees that, for a period of five (5) years from the Closing Date, it will
not, within Mexico, Canada and the United States and its territorial
possessions (such areas being referred to herein as the "Territory"), directly
or indirectly, compete, as defined in Section 10.2 hereof, with Purchaser by
carrying on a business which is substantially similar to the Business, except
as specifically allowed in the Transition Services Agreement. Notwithstanding
the foregoing, the provisions of this Section 10.1 are subject to termination
as provided in the Security Agreement. The Parent and the Seller represent and
warrant to Purchaser that the Seller is and has been carrying on such business
throughout the Territory. Notwithstanding anything in this Agreement to the
contrary, nothing in this Article shall be construed to prohibit or restrict
the Parent or the Seller or their affiliates from engaging in the business of
producing and selling filling for frozen or unfrozen pies.
10.2 DEFINITION OF "COMPETE." For the purposes of this Article X,
the term "compete" shall mean with respect to the Business: (i) managing,
supervising or otherwise participating in the manufacturing, distribution or
sale of branded frozen pies, frozen pie shells and "in-store/deli bakery" pies
or the manufacturing, distribution or sale of aluminum pans and steel magnetic
shielding; (ii) calling on, soliciting, taking away, accepting as a client or
customer or attempting to call on, solicit, take away or accept as a client or
customer any
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individual, partnership, corporation or association that was a client or
customer of the Business during the twelve (12) calendar month period
immediately preceding any such act; (iii) soliciting, taking away or attempting
to hire, solicit or take away any employee of the Business either on Seller's
behalf or on behalf of any other person or entity (except as provided in
Section 2.10.4); or (iv) for the period set forth in Section 10.1, entering
into or attempting to enter into any business substantially similar to the
Business within the Territory, either alone or with any individual,
partnership, corporation or association.
10.3 DIRECT OR INDIRECT COMPETITION. For the purposes of this
Article X, the words "directly or indirectly" as they modify the word "compete"
shall mean (i) acting as an agent, representative, consultant, officer,
director, independent contractor, or employee of any entity or enterprise which
is competing (as defined in Section 10.2 hereof) with the Business; (ii)
participating in any such competing entity or enterprise as an owner, partner,
limited partner, joint venturer, creditor or stockholder (except as a
stockholder holding less than one percent (1%) interest in a corporation whose
shares are actively traded on a regional or national securities exchange or in
the over-the-counter market); and (iii) communicating to any such competing
entity or enterprise the names or addresses or any other information concerning
any past, present, or identified prospective client or customer of the Business
or any entity having title to the goodwill of the Seller with respect to the
Business.
10.4 CONFIDENTIAL DATA. Each of the Parent and the Seller further
agrees that it will keep confidential and not, directly or indirectly, divulge
to anyone nor use or otherwise appropriate for the Parent's or the Seller's own
benefit in a manner that would be detrimental to Purchaser's use of the Assets
and the conduct of the Business or otherwise competitive with the Business, any
pricing information, marketing information, sales technique of the Business, or
any other of the following confidential information or documents of or relating
to the Business: confidential records, computer software programs or any
portions or logic comprising said programs, client and customer lists,
information about client requirements, terms of license agreements, terms of
contracts with clients and customers, and planning and financial information of
the Business (hereinafter referred to as the "Confidential Data"); provided,
however, the term Confidential Data shall not include any information that
becomes available in the public domain other than as a result of acts by the
Parent, the Seller or their representatives. In the event that the Parent or
the Seller becomes legally compelled to disclose any Confidential Data, the
Parent or the Seller, as the case may be, shall provide Purchaser with prompt
notice so that Purchaser may seek a protective order or other appropriate
remedy and/or waive compliance with the
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provisions of this Section 10.4. In the event that such protective order or
other remedy is not obtained, or that Purchaser waives compliance with the
provisions of this Section 10.4, the Parent or the Seller, as the case may be,
shall furnish only that portion of the Confidential Data which is legally
required in the opinion of its counsel, and shall use its reasonable best
efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded to such Confidential Data. The Parent
and the Seller hereby acknowledge and agree that the prohibitions against
disclosure of Confidential Data recited herein are in addition to, and not in
lieu of, any rights or remedies which Purchaser may have available pursuant to
the laws of any jurisdiction or at common law to prevent the disclosure of
trade secrets or proprietary information, and the enforcement by Purchaser of
its rights and remedies pursuant to this Agreement shall not be construed as a
waiver of any other rights or available remedies which they may possess in law
or equity absent this Agreement.
XI. TAX EFFECT OF THE TRANSACTION.
-----------------------------
None of Purchaser, the Parent nor the Seller has made nor do any of
them make herein any representation or warranty as to the tax consequences of
the transactions contemplated or provided for herein to any party hereto. It
is understood and agreed that each party has looked to its own advisors for
advice and counsel as to such tax effects.
XII. TERMINATION.
-----------
12.1 METHOD OF TERMINATION. This Agreement constitutes the
binding and irrevocable agreement of the parties to consummate the transactions
contemplated hereby, the consideration for which is (a) the covenants set forth
in Article II hereof, and (b) expenditures and obligations incurred and to be
incurred by Purchaser and by the Parent and the Seller in respect of this
Agreement, and this Agreement may be terminated or abandoned only as follows:
12.1.1 By the mutual consent of the Boards of
Directors of the Parent, the Seller and Purchaser, notwithstanding prior
approval by the shareholders of any or all of such corporations;
12.1.2 By the Parent or the Seller after July
31, 1996 if any of the conditions set forth in Article VII hereof, to which its
obligations are subject, have not been fulfilled or waived, unless such
fulfillment has been frustrated or made
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impossible by any act or failure to act of the Parent or the Seller; or
12.1.3 By Purchaser after July 31, 1996 if any
of the conditions set forth in Article VI hereof, to which the obligations of
Purchaser are subject, have not been fulfilled or waived, unless such
fulfillment has been frustrated or made impossible by any act or failure to act
of Purchaser.
12.2 EFFECT OF TERMINATION. In the event of a termination
of this Agreement pursuant to Section 12.1 or 12.3 hereof, each party shall pay
the costs and expenses incurred by it in connection with this Agreement, and no
party (or any of its officers, directors, employees, agents, representatives or
shareholders) shall be liable to any other party for any costs, expenses,
damage or loss of anticipated profits hereunder.
12.3 RISK OF LOSS. The Parent and the Seller assume all
risk of condemnation, destruction, loss or damage due to fire or other casualty
from the date of this Agreement up to Effective Time. If the condemnation,
destruction, loss or damage is such that the Business is interrupted or
curtailed or the Assets are materially affected, then Purchaser on the one
hand, and the Parent and the Seller on the other hand, shall have the right to
terminate this Agreement.
XIII. GENERAL PROVISIONS.
------------------
13.1 NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand or
sent by Federal Express or similarly recognized overnight delivery service with
receipt acknowledged, addressed as follows:
13.1.1 If to the Parent or the Seller:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attn: Richard Smucker
and to:
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attn: Steven J. Ellcessor, Esq.
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13.1.2 If to Purchaser:
Flowers Industries, Inc.
200 U.S. Highway 19 South
Post Office Box 1338
Thomasville, Georgia 31799
Attn: G. Anthony Campbell, Esq.
and to:
Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
Attn: Barry J. Stein, Esq.
13.1.3 If delivered personally, the date on
which a notice, request, instruction or document is delivered shall be the date
on which such delivery is made and, if delivered by overnight delivery service,
the date on which such notice, request, instruction or document is received (as
evidenced by the overnight delivery receipt) shall be the date of delivery. In
the event any such notice, request, instruction or document is shipped by
overnight delivery service to a party in accordance with this Section 13.1 and
is returned to the sender as nondeliverable, then such notice, request,
instruction or document shall be deemed to have been delivered or received on
the fifth day following the delivery to the overnight delivery service as
evidenced by the returned document marked "Nondeliverable" or such similar
wording.
13.1.4 Any party hereto may change its address
specified for notices herein by designating a new address by notice in
accordance with this Section 13.1.
13.2 BROKERS.
13.2.1 The Parent and the Seller, jointly and
severally, represent and warrant to Purchaser that no investment banker, broker
or finder has acted for either of them in connection with this Agreement or any
of the transactions contemplated hereby, except for Ernst & Young LLP. The
Parent and the Seller, jointly and severally, agree to indemnify and hold
harmless Purchaser from and against any fee, claim, loss, or expense arising
out of any claim by any investment banker, broker or finder employed or alleged
to have been employed by either of them.
13.2.2 Purchaser and Flowers, jointly and
severally, represent and warrant to the Parent and the Seller that they have
not retained any investment banker, broker or finder in
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connection with this Agreement or any of the transactions contemplated hereby.
Purchaser agrees to indemnify and hold harmless the Parent and the Seller from
and against any fee, claim, loss, or expense arising out of any claim by any
investment banker, broker or finder employed or alleged to have been employed
by it.
13.3 FURTHER ASSURANCES. Each party covenants that at any
time, and from time to time, after the Closing Date, it will execute such
additional instruments and take such actions as may be reasonably requested by
the other parties to confirm or perfect or otherwise to carry out the intent
and purposes of this Agreement.
13.4 WAIVER. Any failure on the part of any party hereto to
comply with any of its obligations, agreements or conditions hereunder may be
waived by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
13.5 EXPENSES. All expenses incurred by the parties hereto
in connection with or related to the authorization, preparation and execution
of this Agreement and the Closing of the transactions contemplated hereby,
including, without limitation of the generality of the foregoing, all fees and
expenses of brokers, agents, representatives, counsel and accountants employed
by any such party, shall be borne solely and entirely by the party which has
incurred the same. All such fees and expenses of the Parent or the Seller
shall be borne by the Parent or the Seller from proceeds from the sale of the
Purchased Assets hereunder or from funds not included in the Assets. In no
event shall the Purchased Assets to be purchased by Purchaser be utilized for
or be reduced by the payment of any such fees or expenses. The Seller hereby
represents and warrants that no such fees or expenses have been paid by the
Parent or the Seller from any of the Assets prior to the date of this
Agreement, and hereby covenants that the Parent and the Seller will not so pay
any such fees or expenses from the Assets prior to the Closing.
13.6 DISCLOSURE. None of the parties shall make any
disclosure of the existence, substance or status of the subject matter hereof,
unless such disclosure is required by the federal securities laws or unless the
parties agree otherwise. If any party proposes to issue, make or distribute any
press release, public announcement or other written publicity or disclosure
prior to the Closing Date that refers to the transactions contemplated herein,
the party proposing to make such disclosure shall provide a copy of such
disclosure to the other parties and shall afford such other parties reasonable
opportunity (subject to any legal obligation of prompt disclosure) to comment
on such disclosure or the portion
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thereof which refers to the transactions contemplated herein prior to making
such disclosure.
13.7 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
legal representatives, executors, administrators, successors and assigns. In
the event that any provision of Article X of this Agreement or any word,
phrase, clause, sentence or other portion thereof (including, without
limitation, the geographical and temporal restrictions contained herein) should
be held to be unenforceable or invalid for any reason, such provision or
portion thereof shall be modified or deleted in such a manner so as to make
this Agreement as modified legal and enforceable to the fullest extent
permitted under applicable laws.
13.8 HEADINGS. The section and other headings in this
Agreement are inserted solely as a matter of convenience and for reference, and
are not a part of this Agreement.
13.9 ENTIRE AGREEMENT. This Agreement and the Letter
Agreement regarding confidentiality dated January 19, 1996 between Flowers and
the Parent constitute the entire agreement among the parties hereto and
supersedes and cancels any prior agreements, representations, warranties, or
communications, whether oral or written, among the parties hereto relating to
the transactions contemplated hereby or the subject matter herein. Neither
this Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
13.10 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Georgia.
13.11 EQUITABLE RELIEF. Each of the Parent and the Seller
acknowledges that its expertise in the Business described herein is of a
special, unique, unusual, extraordinary, and intellectual character, which
gives said expertise a peculiar value, and that a breach by the Parent or the
Seller of the provisions of Article X of this Agreement cannot reasonably or
adequately be compensated in damages in an action at law; and a breach of any
of the provisions contained in Article X of this Agreement will cause Purchaser
irreparable injury and damage. Each of the Parent and the Seller further
acknowledges that it possesses unique skills, knowledge or ability and that
competition in violation of Article X of this Agreement or any other breach of
the provisions of Article X of this Agreement would be extremely detrimental to
Purchaser. By reason thereof, each of the Parent and the Seller agrees that
Purchaser shall be entitled, in addition to any other remedies it may have
under this Agreement or otherwise, to preliminary and
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permanent injunctive and other equitable relief to prevent or curtail any
breach of Article X of this Agreement; provided, however, that no
specification in this Agreement of a specific legal or equitable remedy shall
be construed as a waiver or prohibition against the pursuing of other legal or
equitable remedies in the event of such a breach.
13.12 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.13 PRONOUNS. All pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter gender as the context requires.
13.14 EXHIBITS INCORPORATED. All Exhibits attached hereto
are incorporated herein by reference, and all blanks in such Exhibits, if any,
will be filled in as required in order to consummate the transactions
contemplated herein and in accordance with this Agreement.
13.15 TIME OF ESSENCE. Time is of the essence in this
Agreement.
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IN WITNESS WHEREOF, each party hereto has executed or caused this
Agreement to be executed on its behalf, all on the day and year first above
written.
FLOWERS INDUSTRIES, INC.
("FLOWERS")
By: /S/ G.A. CAMPBELL
-------------------------------
General Counsel and Secretary
MRS. SMITH'S BAKERIES, INC.
("PURCHASER")
By: /S/ G.A. CAMPBELL
-------------------------------
President
THE J.M. SMUCKER COMPANY
("PARENT")
By: /S/ R.K. SMUCKER
-------------------------------
President
MRS. SMITH'S, INC.
("SELLER")
By: /S/ STEPHEN J. ELLCESSOR
-------------------------------
Secretary
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LIST OF EXHIBITS
EXHIBITS
- --------
1.27 Persons Deemed to Have Knowledge.
2.1.3 List of Assets and Contracts Not Included in Assets
Being Sold.
2.2.1(b) Intangibles Note.
2.2.1(c) Working Capital Note.
2.2.1(d) Liabilities Undertaking.
2.3(a) Equipment Lease.
2.3(b) Real Property Lease.
2.7.1 Conduct of the Business.
2.8 Financing Statements Affecting the Leased Assets.
2.10.1 Severance Benefits.
2.10.4 List of Managers.
2.12 Security Agreement relating to Intangibles Note.
3.1 List of Jurisdictions Where There is Good Standing Status.
3.3 List of Equity Investments.
3.4.1 1994 and 1995 Financial Statements and Interim Financial
Statements.
3.4.2 List of Liabilities not disclosed in the Financial
Statements.
3.5 Tax Liens.
3.6.1.1 Inventories.
3.6.1.2 Leased Assets.
3.6.1.3 Inventory Matters.
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3.8 Accounts Receivable and Notes Receivable.
3.9 List of Consent Requirements.
3.10 List of Changes.
3.11 List of Litigation.
3.12 List of Licenses and Permits.
3.13 List of Contracts.
3.14.1 List of Trademarks, Trade Names, Service Marks, Service
Names, Etc.
3.14.2 List of Seller's Software.
3.15 List of Employees, Independent Contractors, Salaries,
Rates, Salary Increase Guidelines and Labor Matters.
3.16 List of Benefit Plans.
3.17 List of Customers and Brokers, Addresses, Telephone Numbers
and Principal Person of Contact and List of Problems with
Customers.
3.19 List of Insurance Matters.
3.20 List of Related Party Relationships.
3.22 UPC Codes.
3.23 Suppliers.
4.2 Seller Investment Letter.
6.4 Form of Opinion of the Parent's General Counsel.
6.5 Consents Required for Closing.
7.4 Form of Opinion of Purchaser's General Counsel.
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