<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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):
September 24, 1996 (September 9, 1996)
Suiza Foods Corporation
-----------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 340-28130 75-2559681
-------- --------- ----------
(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
INCORPORATION)
3811 Turtle Creek Blvd., Suite 1300
Dallas, Texas 75219
-------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(214) 528-0939
<PAGE>
ITEM 2. FINANCIAL STATEMENTS AND EXHIBITS.
On September 9, 1996, Suiza Foods Corporation (the "Registrant" or the
"Company"), through a wholly-owned acquisition subsidiary, completed the
acquisition of substantially all of the assets of Swiss Dairy, a Corporation
("Swiss Dairy"), for approximately $54 million in cash, excluding expenses,
plus the assumption of certain current liabilities. Swiss Dairy, which is based
in Riverside, California, manufactures and distributes fresh milk and certain
related products in Southern California and Nevada. Swiss Dairy reported sales
of $127 million during 1995.
In conjunction with the acquisition, the Company expanded its senior
credit facilities to provide for total borrowings of up to $250 million, as
compared to $160 million under the Company's preexisting facilities. The
amended facilities, which are provided by a group of banks led by First Union
National Bank and First National Bank of Chicago, include a $130 million term
loan facility, a $30 million revolving credit facility and a $90 million
acquisition facility, approximately $45 million of which was used to fund the
Swiss Dairy acquisition. The remaining cash used to pay for the Swiss Dairy
acquisiton was funded from borrowings under the Company's existing revolving
credit facility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
SWISS DAIRY
Report of Independent Auditors - Deloitte & Touche LLP. . . Page F-1
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . Page F-2
Statements of Earnings and Retained Earnings. . . . . . . . Page F-3
Statements of Cash Flows. . . . . . . . . . . . . . . . . . Page F-4
Notes to Financial Statements . . . . . . . . . . . . . . . Page F-5
(B) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements are
filed with this report:
Pro Forma Consolidated Statements of Earnings:
Year Ended December 31, 1995 . . . . . . . . . . . . . . Page F-11
Six Months Ended June 30, 1996 . . . . . . . . . . . . . Page F-12
Pro Forma Consolidated Balance Sheet as of June 30, 1996. . Page F-13
The unaudited pro forma financial data have been derived by the application of
pro forma adjustments to the consolidated financial statements of the Company.
The pro forma statement of earnings data represent income from continuing
operations for the year ended December 31, 1995 and for the six months ended
June 30, 1996 and give effect to the September 9, 1996
2
<PAGE>
acquisition of Swiss Dairy, the July 19, 1996 acquisition of Garrido and
Compania, Inc. ("Garrido") (see Form 8-K/A filed September 24, 1996 for the
financial statements of Garrido) and the related borrowings to fund the
acquisitions as if such transactions had been consummated as of January 1,
1995. The pro forma consolidated balance sheet data give effect to the
acquisitions of Swiss Dairy and Garrido and the related borrowings to fund
the acquisitions as if such transactions had been consummated as of June 30,
1996. The pro forma adjustments, which are described in the accompanying
notes, are based on available information and certain assumptions that
management of the Company believes are reasonable. The pro forma financial
data should not be considered indicative of actual results that would have
been achieved if the transactions given pro forma effect had been consummated
on the dates or for the periods indicated and do not purport to indicate
results of operations as of any future date or for any future period.
The unaudited pro forma financial data should be read in conjunction with the
historical consolidated financial statements of the Company, Swiss Dairy and
Garrido and the related notes thereto.
(C) EXHIBITS
2.1 Asset Purchase Agreement, dated as of September 5, 1996, among
Suiza Foods Corporation, a Delaware corporation, Swiss Dairy
Corporation, a Delaware corporation, Swiss Dairy, a Corporation,
a California corporation, and the principal stockholders of Swiss
Dairy identified therein.
23.1 Consent of independent auditors
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: September 24, 1996 SUIZA FOODS CORPORATION
By: /s/ Tracy L. Noll
-------------------------------
Tracy L. Noll
CHIEF FINANCIAL OFFICER
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Swiss Dairy, a Corporation
Riverside, California
We have audited the accompanying balance sheets of Swiss Dairy, a Corporation
(the Company) as of December 30, 1995 and December 31, 1994, and the related
statements of earnings and retained earnings and cash flows for each of the
three years in the period ended December 30, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Swiss Dairy, a Corporation at December 30,
1995 and December 31, 1994, and the results of its operations and cash flows for
each of the three years in the period ended December 30, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
August 28, 1996
F-1
<PAGE>
SWISS DAIRY, A CORPORATION
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 972 $ 449 $ 2,414
Accounts receivable 5,923 7,146 8,296
Note receivable from related party 600
Inventories 528 785 591
Prepaid expenses and other 259 309 305
---------- ---------- ----------
Total current assets 7,682 8,689 12,206
PROPERTY, PLANT AND EQUIPMENT, net 8,069 8,426 6,331
---------- ---------- ----------
$ 15,751 $ 17,115 $ 18,537
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,481 $ 6,352 $ 7,541
Accrued expenses 725 488 435
---------- ---------- ----------
Total current liabilities 5,206 6,840 7,976
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $10; 20,000 shares authorized;
6,500 shares issued and outstanding 65 65 65
Additional paid-in capital 6 6 6
Retained earnings 10,474 10,204 10,490
---------- ---------- ----------
Total stockholders' equity 10,545 10,275 10,561
---------- ---------- ----------
$ 15,751 $ 17,115 $ 18,537
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to financial statements.
F-2
<PAGE>
SWISS DAIRY, A CORPORATION
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED FOR THE YEARS ENDED
------------------------- ------------------------------------------
JUNE 15, JUNE 17, DECEMBER 30, DECEMBER 31, DECEMBER 23,
1996 1995 1995 1994 1993
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES $ 49,828 $ 67,332 $ 126,647 $ 149,153 $ 142,107
COST OF SALES 43,285 59,535 111,798 132,443 125,961
--------- --------- --------- --------- ---------
GROSS PROFIT 6,543 7,797 14,849 16,710 16,146
OPERATING COSTS AND EXPENSES:
Selling and distribution 3,454 3,914 7,852 8,168 8,266
General and administrative 954 1,178 2,483 2,892 2,423
--------- --------- --------- --------- ---------
Total operating costs and expenses 4,408 5,092 10,335 11,060 10,689
--------- --------- --------- --------- ---------
INCOME FROM OPERATIONS 2,135 2,705 4,514 5,650 5,457
OTHER INCOME (EXPENSE):
Interest expense, net (16) (10) (25)
Other income, net 195 295 270 511 612
--------- --------- --------- --------- ---------
Total other income 179 295 270 501 587
--------- --------- --------- --------- ---------
INCOME BEFORE FRANCHISE TAXES 2,314 3,000 4,784 6,151 6,044
FRANCHISE TAXES 36 45 65 99 127
--------- --------- --------- --------- ---------
NET EARNINGS 2,278 2,955 4,719 6,052 5,917
RETAINED EARNINGS, beginning
of period 10,204 10,490 10,490 10,443 8,431
DIVIDENDS (2,008) (4,109) (5,005) (6,005) (3,905)
--------- --------- --------- --------- ---------
RETAINED EARNINGS, end of period $ 10,474 $ 9,336 $ 10,204 $ 10,490 $ 10,443
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
NET EARNINGS PER SHARE $ 350.46 $ 454.62 $ 726.00 $ 931.07 $ 910.31
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
SWISS DAIRY, A CORPORATION
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-FOUR WEEKS ENDED FOR THE YEARS ENDED
------------------------- ------------------------------------------
JUNE 15, JUNE 17, DECEMBER 30, DECEMBER 31, DECEMBER 23,
1996 1995 1995 1994 1993
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,278 $ 2,955 $ 4,719 $ 6,052 $ 5,917
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 960 1,222 1,752 1,816 1,954
(Gain) loss on the sale of assets 68 (103) 186 (12) 7
Changes in operating assets and liabilities:
Accounts receivable 1,223 862 1,150 (1,757) 720
Inventories 257 (37) (194) 66 140
Prepaid expenses and other 50 36 (4) 35 18
Accounts payable (1,871) 1,955 (1,189) (3,675) (760)
Accrued expenses 237 233 53 324 (252)
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities 3,202 7,123 6,473 2,849 7,744
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections (advances) from note receivable 400 600 (316) 151
Additions to property, plant and equipment (750) (2,118) (4,215) (1,023) (2,237)
Proceeds from sale of property, plant
and equipment 79 132 182 156 256
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities (671) (1,586) (3,433) (1,183) (1,830)
CASH FLOWS FROM FINANCING ACTIVITIES -
Cash dividends (2,008) (4,109) (5,005) (6,005) (3,905)
---------- ---------- ---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 523 1,428 (1,965) (4,339) 2,009
CASH AND CASH EQUIVALENTS,
beginning of period 449 2,414 2,414 6,753 4,744
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $ 972 $ 3,842 $ 449 $ 2,414 $ 6,753
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Cash paid for interest $ 16 $ - $ - $ 10 $ 25
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
SWISS DAIRY, A CORPORATION
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Swiss Dairy, a Corporation (the Company), is a California
corporation which processes and distributes fluid milk products,
refrigerated ready-to-serve fruit drinks and bottled water throughout
Southern California under its own brand names and private labels. The
Company provides credit terms to customers, the majority of which are major
grocery chains, generally ranging to up to 30 days, performs ongoing credit
evaluations of their customers and maintains allowances for potential
credit losses based on historical experience. The preparation of financial
statements requires the use of significant estimates and assumptions by
management; actual results could differ from these estimates.
INVENTORIES - Pasteurized and raw milk inventories are stated at the lower
of average cost or market. Raw materials and merchandise for resale
inventories are stated at the lower of cost, using the first-in, first-out
(FIFO) method, or market. Manufactured finished goods inventories are
stated at the lower of average production cost or market. Production costs
include raw materials, direct labor, and indirect production and overhead
costs.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost. Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the assets, as follows:
ASSET USEFUL LIFE
Buildings and improvements 7 to 40 years
Machinery and equipment 3 to 20 years
Milk cases and carts 3 to 7 years
Sales and delivery equipment 3 to 7 years
Furniture and fixtures 3 to 7 years
Expenditures for repairs and maintenance which do not improve or extend the
life of the assets are expensed as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS - Effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment is
evaluated by comparing future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition to the carrying amount of the asset. The Company does not
anticipate a material impact on the financial statements of the Company as
a result of its adoption of this new accounting principle.
REVENUE - Revenue is recognized when the product is shipped to the
customer.
F-5
<PAGE>
SWISS DAIRY, A CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
INCOME TAXES - The Company is qualified as a small business corporation
under Section 1372 of Subchapter S of the Internal Revenue Code, which
results in the income of the Company being taxable to the individual
stockholders instead of at the corporate level. The Company pays a
franchise tax to the State of California at a rate of 1.5% of taxable
income. As a result, the financial statements of the Company do not
contain either a provision for federal income taxes or the related current
and deferred income tax liabilities, since such amounts are the
responsibility of the individual stockholders. Had the Company been
subject to state and federal income taxes at the corporate level, the
estimated income tax expense would have been approximately $1.9 million,
$2.4 million and $2.4 million for the years ended December 31, 1995, 1994
and 1993, respectively, and $.9 million and $1.2 million for the unaudited
twenty-four weeks ended June 15, 1996 and June 17, 1995, respectively,
based on a combined federal and state income tax rate of 40%.
CASH EQUIVALENTS - The Company considers all highly-liquid investments
purchased with a remaining maturity of three months or less to be cash
equivalents.
EARNINGS PER SHARE - The Company computes earnings per share based on the
weighted average number of common shares outstanding during the period.
FINANCIAL INSTRUMENTS - Pursuant to SFAS No. 107, DISCLOSURE ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, the Company is required to disclose an
estimate of the fair value of the Company's financial instruments; however,
due to their near-term maturities, the carrying amounts of the Company's
financial instruments, which consist of accounts receivable and accounts
payable, are considered equivalent to fair value.
UNAUDITED INTERIM FINANCIAL STATEMENTS - The Company's balance sheet as of
June 15, 1996 and the statements of earnings and retained earnings and cash
flows for the twenty-four weeks ended June 15, 1996 and June 17, 1995, have
been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal, recurring adjustments) necessary
to present fairly the balance sheet of the Company at June 15, 1996, and
the results of operations and cash flows of the Company for the twenty-four
weeks ended June 15, 1996 and June 17, 1995, have been made. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for the full year.
F-6
<PAGE>
SWISS DAIRY, A CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of:
JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)
Trade customers $ 5,623 $ 6,844 $ 7,852
Rebates and other 300 302 444
-------- -------- --------
Accounts receivable $ 5,923 $ 7,146 $ 8,296
-------- -------- --------
-------- -------- --------
3. INVENTORIES
Inventories consist of the following as of:
<TABLE>
<CAPTION>
JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Pasteurized and raw milk and raw materials $ 305 $ 228 $ 208
Finished goods 98 305 238
Merchandise purchased for resale 125 252 145
------ ------ ------
$ 528 $ 785 $ 591
------ ------ ------
------ ------ ------
</TABLE>
F-7
<PAGE>
SWISS DAIRY, A CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following as of:
JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)
Land $ 120 $ 120 $ 47
Buildings and improvements 3,939 4,005 2,768
Machinery and equipment 5,048 4,163 3,885
Milk cases and carts 1,210 1,210 1,202
Sales and delivery equipment 5,719 6,076 4,893
Furniture and fixtures 166 169 189
Construction in progress 139 581 0
-------- -------- --------
16,341 16,324 12,984
Less accumulated depreciation
and amortization (8,272) (7,898) (6,653)
-------- -------- --------
$ 8,069 $ 8,426 $ 6,331
-------- -------- --------
-------- -------- --------
5. ACCRUED EXPENSES
Accrued expenses consist of the following as of:
JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)
Accrued payroll and benefits $ 462 $ 455 $ 390
Accrued severance 160
Other 103 33 45
------ ------ ------
$ 725 $ 488 $ 435
------ ------ ------
------ ------ ------
6. LINE OF CREDIT
The Company has a credit facility with a bank of $1,500,000 with interest
due monthly at the bank's reference rate. This facility may be utilized as
a revolving line of credit or for the purchase of equipment.
F-8
<PAGE>
SWISS DAIRY, A CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The interest rate is the bank's reference rate. At December 30, 1995,
there was no outstanding balance on this loan.
The credit facility is secured by the assets of the Company.
7. EMPLOYEES 401(k) PLAN
The Company sponsors a 401(k) plan for eligible employees who have
completed one or more years of service and have met other requirements
pursuant to the plan. The employees participating in the plan can
generally make contributions to the plan of up to 15% of their annual
compensation, and the Company can elect to match such contributions.
During the unaudited period ended June 15, 1996, the Company expensed
contributions to the plan of approximately $53,000. No contributions were
made by the Company during each of the three years in the period ended
December 30, 1995, and during the unaudited period ended June 17, 1995.
8. COMMITMENTS AND CONTINGENCIES
The Company is a party in the ordinary course of business to certain claims
and litigation. In management's opinion, the outcome of such matters is
not expected to have a material impact on the financial statements.
The Company has a practice which provides for bonuses and termination of
benefits in certain circumstances, subject to the sole discretion of
management. No expenses were incurred by the Company during each of the
three years in the period ended December 30, 1995, and during the unaudited
period ended June 17, 1995, for these discretionary benefits. However,
during the unaudited period ended June 15, 1996, the Company expensed
$160,000 for severance benefits for certain employees who were terminated
prior to the transfer of ownership interests.
9. RELATED PARTY TRANSACTIONS
In 1993, the Company had a note receivable from a stockholder. This note
has been fully reimbursed in 1995.
10. MAJOR CUSTOMERS
During the years ended December 23, 1993, December 31, 1994 and
December 30, 1995, sales to four customers in the aggregate represented
approximately 95%, 96% and 96% of sales, respectively. A decision by a
significant customer to decrease the amount purchased from the Company or
to cease carrying the Company's products could have a material adverse
effect on the Company's financial condition and results of operations.
F-9
<PAGE>
SWISS DAIRY, A CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
11. TRANSFER OF OWNERSHIP INTERESTS
Subsequent to December 30, 1995, the Company transferred all of its assets
and liabilities pursuant to an agreement for the transfer of ownership
interests.
F-10
<PAGE>
SUIZA FOODS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
THE PRO FORMA
COMPANY GARRIDO SWISS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
Net sales $ 430,466 $ 26,226 $ 126,647 $ - $ 583,339
Costs of sales 312,633 17,242 111,798 (874) (a),(b) 440,799
---------- ---------- ---------- ----------
Gross profit 117,833 8,984 14,849 142,540
Operating expenses:
Selling and distribution 64,289 2,506 7,852 (409) (a),(b) 74,238
General and administrative 19,277 2,041 2,483 (731) (a),(b) 23,070
Amortization of intangibles 3,703 - - 1,499 (c) 5,202
---------- ---------- ---------- ----------
Total operating expenses 87,269 4,547 10,335 102,510
---------- ---------- ---------- ----------
Operating income 30,564 4,437 4,514 40,030
Other (income) expense
Interest expense 19,921 349 - 5,820 (d) 26,090
Merger and other costs 10,238 - 10,238
Other expense (469) (110) (270) (849)
---------- ---------- ---------- ----------
Total other (income) expense 29,690 239 (270) 35,479
---------- ---------- ---------- ----------
Income (loss) before income taxes 874 4,198 4,784 4,551
Income taxes 2,450 589 65 731 (e) 3,835
---------- ---------- ---------- ----------
Income (loss) from continuing operations $ (1,576) $ 3,609 $ 4,719 $ 716
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income (loss) per share from continuing operations $ (0.26) $ 0.11
---------- ----------
---------- ----------
Weighted average shares outstanding 6,109,398 6,782,907
---------- ----------
---------- ----------
</TABLE>
(a) Excess of historical depreciation expense over the depreciation of the
fair value of property and equipment acquired, as follows:
GARRIDO SWISS DAIRY TOTAL
Cost of sales $ (84) $ (170) $ (254)
Selling and distribution (15) (149) (164)
General and administration (13) (16) (29)
------ ------ ------
$ (112) $ (335) $ (447)
------ ------ ------
------ ------ ------
(b) Elimination of salaries and benefits paid primarily to former
shareholders of Swiss Dairy whose employment was terminated as part of
the purchase agreement, resulting in a pro forma reduction of
historical costs of sales, selling and distribution and general
administrative costs of $620, $245 and $702, respectively.
(c) Amortization of goodwill over 40 years.
(d) Pro forma interest expense on the average outstanding balance of new
borrowings used to fund the acquisitions at an assumed annual interest
rate of 7.25%, net of the reduction of historical interest expense
related to the historical debt repaid.
(e) Estimated pro forma adjustment to reflect income taxes at the
Company's estimated effective tax rate of 35% for Garrido and 40% for
Swiss Dairy.
F-11
<PAGE>
SUIZA FOODS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
THE PRO FORMA
COMPANY GARRIDO SWISS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
Net sales $ 225,307 $ 13,228 $ 49,828 $ - $ 288,363
Costs of sales 165,917 8,982 43,285 (527) (a),(b) 217,657
---------- ---------- ---------- ----------
Gross profit 59,390 4,246 6,543 70,706
Operating expenses:
Selling and distribution 32,682 1,428 3,454 (279) (a),(b) 37,285
General and administrative 9,805 1,163 954 (270) (a),(b) 11,652
Amortization of intangibles 1,960 - - 751 (c) 2,711
---------- ---------- ---------- ----------
Total operating expenses 44,447 2,591 4,408 51,648
---------- ---------- ---------- ----------
Operating income 14,943 1,655 2,135 19,058
Other (income) expense
Interest expense 8,488 131 16 2,687 (d) 11,322
Merger and other costs - -
Other expense (252) (237) (195) (684)
---------- ---------- ---------- ----------
Total other (income) expense 8,236 (106) (179) 10,638
---------- ---------- ---------- ----------
Income before income taxes 6,707 1,761 2,314 8,420
Income taxes 1,771 (478) 36 1,374 (e) 2,703
---------- ---------- ---------- ----------
Income from continuing operations $ 4,936 $ 2,239 $ 2,278 $ 5,717
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Income per share from continuing operations $ 0.58 $ 0.68
---------- ----------
---------- ----------
Weighted average shares outstanding 8,455,332 8,455,332
---------- ----------
---------- ----------
</TABLE>
(a) Excess of historical depreciation expense over the depreciation of the
fair value of property and equipment acquired, as follows:
GARRIDO SWISS DAIRY TOTAL
Cost of sales $ (42) $ (87) $ (129)
Selling and distribution (8) (75) (83)
General and administration (6) (8) (14)
------ ------- -------
$ (56) $ (170) $ (226)
------ ------- -------
------ ------- -------
(b) Elimination of salaries and benefits paid primarily to former
shareholders of Swiss Dairy whose employment was terminated as part of
the purchase agreement, resulting in a pro forma reduction of
historical costs of sales, selling and distribution and general
administrative costs of $398, $196 and $256, respectively.
(c) Amortization of goodwill over 40 years.
(d) Pro forma interest expense on the average outstanding balance of new
borrowings used to fund the acquisitions at an assumed annual interest
rate of 7.25%, net of the reduction of historical interest expense
related to the historical debt repaid.
(e) Estimated pro forma adjustment to reflect income taxes at the
Company's estimated effective tax rate of 35% for Garrido and 40% for
Swiss Dairy.
F-12
<PAGE>
SUIZA FOODS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
THE PRO FORMA
COMPANY GARRIDO SWISS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,179 $ 10,737 $ 972 $ (1,750) (a) $ 11,138
Accounts receivable, net 33,670 2,351 5,923 41,944
Inventories 12,245 1,894 528 500 15,167
Prepaid expenses and other current assets 1,644 29 259 1,932
Deferred income taxes 1,587 - - 1,587
---------- ---------- ---------- ----------
Total current assets 50,325 15,011 7,682 71,768
PROPERTY AND EQUIPMENT 95,955 1,528 8,069 5,028 (b) 110,580
INTANGIBLE AND OTHER ASSETS 91,693 132 - 59,668 (b) 151,493
---------- ---------- ---------- ----------
TOTAL ASSETS $ 237,973 $ 16,671 $ 15,751 $ 333,841
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 29,998 $ 1,083 $ 5,206 $ - $ 36,287
Income taxes payable 1,023 265 - 1,288
Current portion of long-term debt 9,556 3,015 - (2,015) (a) 10,556
---------- ---------- ---------- ----------
Total current liabilities 40,577 4,363 5,206 48,131
LONG TERM DEBT 134,334 1,968 - 86,288 (a) 222,590
DEFERRED INCOME TAXES 2,273 34 - 24 (b) 2,331
STOCKHOLDERS' EQUITY
Common stock 101 59 65 (124) (b) 101
Additional paid-in capital 79,593 - 6 (6) (b) 79,593
Retained earnings (deficit) (18,905) 10,247 10,474 (20,721) (b) (18,905)
---------- ---------- ---------- ----------
Total stockholders' equity 60,789 10,306 10,545 60,789
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND EQUITY $ 237,973 $ 16,671 $ 15,751 $ 333,841
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
(a) On July 19, 1996, the Company completed the acquisition of all the
outstanding common stock of Garrido for a total purchase price of
approximately $31.0 million, including expenses and acquired cash, net
of debt repaid; and on September 9, 1996, the Company completed the
acquisition of substantially all the net asset of Swiss Dairy for a
total purchase price of approximately $55.0 million, including
expenses and acquired cash, as follows (in thousands):
GARRIDO SWISS DAIRY TOTAL
Cash $ 600 $ 1,150 $ 1,750
Credit agreement borrowings
Current portion 1,000 1,000
Long-term portion 34,356 53,900 88,256
Repayment of existing indebtedness
Current portion (3,015) (3,015)
Long-term portion (1,968) - (1,968)
-------- -------- --------
$ 30,973 $ 55,050 $ 86,023
-------- -------- --------
-------- -------- --------
(b) The above purchases resulted in an excess of the purchase price over
the historical net assets acquired which was allocated to the net
assets acquired as follows:
<TABLE>
<CAPTION>
GARRIDO SWISS DAIRY TOTAL
<S> <C> <C> <C>
Total purchase price $ 30,973 $ 55,050 $ 86,023
Historical carrying value of net assets acquired 10,306 10,545 20,851
--------- --------- ---------
Excess of purchase price over historical carrying value $ 20,667 $ 44,505 $ 65,172
--------- --------- ---------
--------- --------- ---------
Allocation of excess purchase price:
Excess fair value of inventory $ - $ 500 $ 500
Excess fair value of property and equipment 861 4,167 5,028
Intangible assets, primarily goodwill 19,830 39,838 59,668
Deferred tax liabilities (24) - (24)
--------- --------- ---------
$ 20,667 $ 44,505 $ 65,172
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
2.1 Asset Purchase Agreement, dated as of September 5, 1996,
among Suiza Foods Corporation, a Delaware corporation,
Swiss Dairy Corporation, a Delaware corporation, Swiss
Dairy, a Corporation, a California corporation, and the
principal stockholders of Swiss Dairy identified therein.
23.1 Consent of Independent Auditors
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into as
of September 5, 1996, by and among Suiza Foods Corporation, a Delaware
corporation ("Suiza Foods"), Swiss Dairy Corporation, a Delaware corporation and
a wholly owned subsidiary of Suiza Foods (the "Buyer"), Swiss Dairy, a
Corporation, a California corporation (the "Company"), and the principal
stockholders of the Company identified on the signature pages hereto (the
"Principal Stockholders").
WHEREAS, the Company desires to sell substantially all of its assets to
Buyer, and Buyer desires to purchase such assets from the Company, on the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the Principal Stockholders will receive substantial direct and
indirect benefits from the transactions contemplated by this Agreement, and
Buyer has required that the Principal Stockholders agree to certain provisions
of this Agreement as a condition to Buyer's execution hereof;
WHEREAS, the parties desire that Suiza Foods join in and be jointly and
severally liable with Buyer with respect to all representations, warranties,
covenants and other obligations of Buyer under this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE OF ASSETS
1.1 PURCHASE OF ASSETS. At the Closing (as defined in Section 1.5), the
Company agrees to sell, transfer, assign and deliver to Buyer the Assets (as
defined below), and Buyer agrees to purchase and take the Assets, on the terms
and subject to the conditions set forth in this Agreement. Subject to the
provisions of Section l.2, the "Assets" mean all tangible and intangible assets
of the Company, including without limitation, all cash and cash equivalents,
accounts receivable, inventory, raw materials, equipment, real property,
fixtures, furnishings, leasehold rights, leasehold improvements, vehicles,
prepaid assets, contract rights, licenses and permits (to the extent such
licenses and permits are transferable), customer, prospect and marketing lists,
sales data, records, computer software and software licenses, proprietary
information, intellectual property, trade secrets, trademarks and trade names
(including all rights of the Company to the name "Swiss Dairy"), copyrights,
goodwill associated with such intellectual property, material and manufacturing
specifications, drawings and designs owned by the Company or acquired by the
Company after the date hereof and prior to the Closing except those sold or
otherwise disposed of in the ordinary course of business after the date hereof,
and specifically including (without limitation):
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(a) all assets described in Schedule 2.4(a), except for such assets
used by the Company under leases or licenses disclosed pursuant to
Section 2.19;
(b) all assets reflected on the Latest Balance Sheet (as defined in
Section 2.8) and all assets acquired by the Company after the date thereof,
except those sold or otherwise disposed of in the ordinary course of
business after the date thereof; and
(c) the Registered Intellectual Property (as defined in Section
2.21).
1.2 EXCLUDED ASSETS. Notwithstanding the provisions of Section l.1, the
Assets will exclude the following (the "Excluded Assets"):
(a) the specific accounts receivable, life insurance policies,
nontransferable casualty, liability and other insurance policies,
nontransferable permits and licenses and the bank credit agreement and
related documents identified in Schedule 1.2;
(b) the minute books, corporate seal and stock records of the
Company;
(c) the Company's rights under this Agreement and the other
agreements, certificates and instruments to be executed by the Company,
Buyer and Suiza Foods in connection with or pursuant to this Agreement; and
(d) the purchase price payable to the Company by Buyer at the Closing
and the bank account into which such purchase price is deposited, which, at
the Closing, will contain no funds other than such purchase price except
for the initial deposit not exceeding $100 necessary to establish the
account.
1.3 ASSUMED LIABILITIES. It is understood and agreed that Buyer will not
assume any direct or indirect debts, obligations or liabilities of the Company
of any nature, whether absolute, accrued, contingent, liquidated or otherwise,
and whether due or to become due, asserted or unasserted, known or unknown
(collectively, "Liabilities"), except for the following specifically identified
liabilities (the "Assumed Liabilities") which the Buyer will assume:
(a) trade payables and accrued but unpaid expenses incurred by the
Company prior to the Closing in the ordinary course of business and not in
breach of this Agreement, but excluding any expenses arising out of any
lawsuit, claim or proceeding against the Company that arises out of
personal injury, death or other events occurring prior to the Closing; and
(b) obligations to be performed after the Closing under the Material
Agreements identified in Schedule 2.19 (except those identified as Excluded
Assets in Schedule 1.2) and obligations to be performed after the Closing
under other agreements entered into by the Company in the ordinary course
of business that are not included within the definition of Material
Agreements set forth in Section 2.19, but excluding, in each case,
(i) obligations under any such agreement that result from any breach or
default prior to the Closing (or event occurring prior to the Closing that
with notice or lapse of
2
<PAGE>
time would constitute a breach or default) by the Company under such
agreement which is not a Known Breach (as defined in Section 6.1) and
(ii) all contracts and arrangements with stockholders of the Company or any
affiliate or family member thereof.
1.4 CONSIDERATION. As consideration for the acquisition of the Assets
from the Company, Buyer will assume the Assumed Liabilities and pay the Company
an aggregate of $53,900,000 minus the amount of all Company Expenses (as defined
in Section 4.8) paid by the Company prior to the Closing (the "Purchase Price").
The Purchase Price will be payable as follows:
(a) $3,900,000 of the Purchase Price will be deposited into escrow
pursuant to an escrow agreement substantially in the form of Exhibit A (the
"Escrow Agreement") as security for the indemnification obligations of the
Company under Article VI; and
(b) the remainder of the Purchase Price will be paid at the Closing
by wire transfer of immediately available funds (to an account specified in
writing by the Company to Buyer at least two days prior to the Closing).
1.5 CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of the Company's
counsel in Riverside, California (or such other place as the parties may agree)
on either (i) September 9, 1996 or, if later, on the third day after the
satisfaction or waiver of the conditions set forth in Sections 5.1(c) and (d)
and 5.2(c) and (d) but in no event later than October 15, 1996 or (ii) such
other day as the parties may mutually agree to in writing. Notwithstanding the
foregoing, the Closing shall not take place unless all of the conditions set
forth in Article V have been satisfied or waived on the date of the Closing
determined as provided above. The Company will notify Buyer in writing within
one business day after the consents, approvals, orders and authorizations
referred to in Sections 5.1(c) and 5.2(c) required to be obtained by the Company
have been obtained and, to the Company's knowledge, the condition in the last
sentence of the same Sections relating to the HSR Act has been satisfied or
waived. Likewise, Buyer will notify the Company in writing within one business
day after the consents, approvals, orders and authorizations referred to said
Sections required to be obtained by Buyer have been obtained and, to Buyer's
knowledge, the condition in the last sentence in those Sections has been
satisfied or waived and the conditions in Sections 5.1(d) and 5.2(d) have been
satisfied or waived.
1.6 CLOSING DELIVERIES. At the Closing,
(a) Buyer will pay the cash portion of the Purchase Price specified
in Section 1.4(b) to the Company and will deposit the remainder of the
Purchase Price into escrow pursuant to the Escrow Agreement in accordance
with Section 1.4(a);
(b) Buyer and the Company will execute and deliver the Escrow
Agreement;
(c) Buyer and William D. Richman will execute and deliver an
Employment Agreement, in the form of Exhibit B (the "Employment
Agreement");
3
<PAGE>
(d) the Company will execute and deliver to Buyer a Bill of Sale
conveying the Assets to Buyer, in the form of Exhibit C;
(e) the Company will execute and deliver to Buyer a grant deed
conveying the real estate included within the Assets, in the form of
Exhibit D (the "Deed");
(f) the Company will execute and deliver to Buyer an Assignment of
Trademarks conveying the Company's interest in all trademarks, trade names
and service marks included within the Assets, in the form of Exhibit E;
(g) the Company will endorse and deliver to Buyer any certificates of
title necessary to effect or record the transfer of any vehicles or other
Assets for which ownership is evidenced by a certificate of title;
(h) the Company will deliver to Buyer a certificate setting forth the
total amount of Company Expenses paid by the Company prior to the Closing;
(i) the Company will deliver to Buyer or otherwise make available the
originals or copies of all of the Company's books, records, ledgers, disks,
proprietary information and other data and all other written or electronic
depositories of information relating to the Assets;
(j) Buyer will deliver to the Company an Assumption of Liabilities,
in the form of Exhibit F hereto;
(k) Buyer, the Company and the plan administrator will execute and
deliver an Assignment and Assumption Agreement relating to the Company's
401(k) plan, in the form of Exhibit G hereto; and
(l) the Company will pay to Buyer all cash then held in the Company's
bank accounts other than the purchase price payable to the Company at the
Closing, the amount authorized for distribution to the Company's
stockholders pursuant to Section 4.1(i) and (if necessary) an amount
sufficient to cover outstanding checks.
1.7 FURTHER ASSURANCES. At or after the Closing, and without further
consideration, the Company, Buyer and Suiza Foods will execute and deliver to
each other such further instruments of conveyance and transfer as any party may
reasonably request in order more effectively to convey and transfer the Assets
to Buyer, to put Buyer in operational control of the business of the Company, or
to aid or assist the collecting and reducing to possession of any of the Assets
and exercising rights with respect thereto or to further evidence and satisfy
creditors and claimants with respect to the assumption of the Assumed
Liabilities, provided that no such instruments shall subject any party to any
loss, cost, liability, obligation, expense or risk not contemplated by this
Agreement.
1.8 ALLOCATION OF PURCHASE PRICE. Buyer and the Company agree that, for
all purposes relevant to the calculation of federal or state taxes, the Purchase
Price will be allocated among
4
<PAGE>
the Assets in the manner described in Schedule 1.8 on the respective income and
other tax returns and statements that each of them may file with any government
agency.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer as follows:
2.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of California and has full
corporate power to own its properties and to conduct its business as presently
conducted. The Company is duly authorized, qualified or licensed to do business
and is in good standing as a foreign corporation in each state or other
jurisdiction in which its assets are located or in which its business or
operations as presently conducted make such qualification necessary.
2.2 AUTHORITY. The Company and the Principal Stockholders have all
requisite power and authority to execute, deliver and perform under this
Agreement and the other agreements, certificates and instruments to be executed
by the Company or any Principal Stockholder in connection with or pursuant to
this Agreement (collectively, the "Company Documents"). The execution, delivery
and performance by the Company of each Company Document to which it is a party
have been duly authorized by all necessary action, corporate or otherwise, on
the part of the Company. This Agreement has been, and at the Closing the other
Company Documents will be, duly executed and delivered by the Company and the
Principal Stockholders (to the extent each is a party thereto). This Agreement
is, and, upon execution and delivery by the Company and the Principal
Stockholders at the Closing, each of the other Company Documents will be, a
legal, valid and binding agreement or other document of the Company and the
Principal Stockholders (to the extent each is a party thereto), enforceable
against the Company and the Principal Stockholders in accordance with their
respective terms.
2.3 MINUTE BOOKS. The Company has made available to Buyer true, correct
and complete copies of the Company's articles of incorporation, bylaws, minute
books, stock certificate books and stock record books, except that (i) the
minutes for meetings at which action has been taken with respect to the
transaction contemplated by this Agreement will be redacted to show only the
portions of such minutes reflecting action taken by the directors or
shareholders, as the case may be and (ii) the minute books may not reflect all
actions taken by the directors and stockholders unrelated to the transaction
contemplated by this Agreement.
2.4 TITLE TO ASSETS.
(a) Set forth in Schedule 2.4(a) is a complete list (including the
street address, where applicable) of (i) all real property owned by the
Company; (ii) all real property leased or otherwise used by the Company;
(iii) each vehicle owned or leased by the Company; and (iv) each asset of
the Company with a book value or fair market value greater than $20,000.
5
<PAGE>
(b) The Company has good and marketable title to all of the Assets
(excluding real estate, goodwill and Intellectual Property (as defined in
Section 2.21), as to which no such representation or warranty is made in
this paragraph) and owns all of the Assets (excluding real estate, goodwill
and Intellectual Property) free and clear of any liabilities, obligations,
liens, claims, security interests or, encumbrances of any nature
(collectively, "Liens"), other than (i) statutory Liens securing current
taxes and other obligations that are not yet delinquent; (ii) the Liens
described in Schedule 2.4(b) that are designated to survive the Closing;
and (iii) the Liens described in Schedule 2.4(b) that are designated to be
discharged prior to the Closing. The execution and delivery of the Company
Documents by the Company at the Closing will convey to and vest in Buyer
good and marketable title to the Assets (other than real estate, goodwill
and Intellectual Property), free and clear of any Liens except the Assumed
Liabilities and the Liens described in clauses (i) and (ii) of the
preceding sentence and will convey to and vest in Buyer all of the
Company's rights in and to the real estate, goodwill and Intellectual
Property included in the Assets.
(c) Except as set forth in Section 2.21 and except for warranties
implied by law in the delivery of the Deed, the Company makes no
representation or warranty as to the ownership or freedom from Liens of any
Assets constituting real estate, goodwill or Intellectual Property. Buyer
has received commitments for title insurance from Stewart Title with
respect to the real property owned by the Company, and Buyer will look
solely to the Deed and such title insurance with respect to all matters of
ownership and title to such real property.
2.5 INCLUSIVENESS OF ASSETS. Subject to the provisions of Section 2.4(c),
the Assets constitute all assets used by the Company in the conduct of its
business, except for assets held under leases or licenses disclosed pursuant to
Section 2.19 and the Excluded Assets.
2.6 NO VIOLATION. Except as described in Schedule 2.6, neither the
execution or delivery of the Company Documents nor the consummation of the
transactions contemplated thereby, including without limitation the sale of the
Assets to Buyer, will conflict with or result in the breach of any term or
provision of, or violate or constitute a default under, or result in the
creation of any Lien on the Assets pursuant to, or relieve any third party of
any obligation to the Company or give any third party the right to terminate or
accelerate any obligation under, any charter provision, bylaw, Material
Agreement, Permit (as defined in Section 2.14), order, law or regulation to
which the Company is a party or by which the Company or any of its assets is in
any way bound or obligated.
2.7 GOVERNMENT CONSENTS. Except as required in connection with the Hart
Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and
as described in Schedule 2.6, no consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
governmental or quasi-governmental agency, authority, commission, board or other
body (collectively, a "Governmental Body") is required on the part of the
Company in connection with the transfer of any Permits or other Assets to Buyer
or any of the other transactions contemplated by this Agreement. Buyer
acknowledges its
6
<PAGE>
understanding that the operation of the Company's business requires a
substantial number of Nontransferable Permits (as defined in Section 2.14),
which the Company cannot transfer to Buyer. Buyer will have sole responsibility
to, and will use commercially reasonable efforts to, obtain all Permits
necessary for Buyer to operate the Company's business, and the Company will use
commercially reasonable efforts, as requested by Buyer and at Buyer's expense,
to assist Buyer in obtaining such Permits.
2.8 FINANCIAL STATEMENTS.
(a) Attached as Schedule 2.8 are true and complete copies of (i) the
unaudited balance sheet of the Company (the "Latest Balance Sheet") as of
June 15, 1996 (the "Latest Balance Sheet Date") and the related unaudited
statements of operations and cash flow for the six four week periods then
ended, and (ii) the unaudited balance sheets of the Company as of
December 31, 1995 and 1994 and the related unaudited statements of
operations and cash flow for the years then ended (collectively, the
"Financial Statements"). The Financial Statements present fairly the
financial condition of the Company at the dates specified and the results
of its operations for the periods specified and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, subject (i) to the absence of footnote disclosure and other
presentation items, (ii) in the case of the interim statements, to changes
resulting from normal period-end adjustments for recurring accruals, which
will not be material individually or in the aggregate, and (iii) to the
fact that inventory, machinery and equipment may be understated on the
balance sheet and that, as a result, income may be overstated. The
Financial Statements do not contain any items required by generally
accepted accounting principles to be stated as an extraordinary item,
except as expressly stated therein. The Financial Statements have been
prepared from the books and records of the Company, which accurately and
fairly reflect the transactions of, acquisitions and dispositions of assets
by, and incurrence of liabilities by the Company in all material respects.
(b) Except for the Assumed Liabilities, the Company has no
Liabilities, known or unknown, that would be required to be reflected in a
balance sheet prepared in accordance with generally accepted accounting
principles, applied in a manner consistent with the Financial Statements.
(c) Except to the extent reserved for, all inventories and raw
materials reflected in the Latest Balance Sheet are of good and
merchantable quality and are salable in the ordinary course of business (in
the case of inventory held for sale) or currently usable (in the case of
other inventory and raw materials). The value of the inventories reflected
in the Latest Balance Sheet are stated in accordance with generally
accepted accounting principles, consistently applied.
(c) All accounts receivable reflected in the Latest Balance Sheet
arose in the ordinary course of business.
7
<PAGE>
2.9 REAL ESTATE MATTERS. The real property owned by the Company (the
"Real Property") is zoned for a classification that permits the continued use of
the Real Property in the manner currently used by the Company but only in
accordance with the conditional use permits identified as CU-055-878 and CU-041-
634 (the "Conditional Use Permits") and except that a portion of the Real
Property is zoned RA (Residential Agricultural zone) and another portion of the
Real Property is zoned RC (Residential Conservation zone) and the use of such
parcels in the Company's business is subject to certain limitations provided in
the ordinances of the City of Riverside (the "Nonconforming Use Limitations") as
a nonconforming use. The existing use of the Real Property by the Company
complies in all material respects with the Conditional Use Permits, the
Nonconforming Use Limitations and all other applicable laws, ordinances and
regulations related to zoning. To the knowledge of the Company, there are no
actions pending or threatened that would alter the current zoning classification
of the Real Property, the applicability of the Conditional Use Permits or the
use of the Real Property pursuant to the Conditional Use Permits or the
Nonconforming Use Limitations. To the knowledge of the Company, improvements
included in the Assets were constructed in compliance in all material respects
with all applicable laws, statutes, regulations, codes, covenants, conditions
and restrictions affecting the Real Property or any part thereof. To the
knowledge of the Company, no fact or condition exists that would result in the
discontinuation of necessary utilities or services to the Real Property or the
termination of current access to and from the Real Property. The Company is not
a "foreign person" as that term is defined in Section 1445 of the Internal
Revenue Code of 1986, as amended (the "Code"), and applicable regulations.
2.10 ABSENCE OF MATERIAL ADVERSE CHANGE. Since the Latest Balance Sheet
Date, except as specifically contemplated by this Agreement or as listed in
Schedule 2.10, there has not been: (a) any material adverse change in the
condition (financial or otherwise), results of operations, business, assets or
Liabilities of the Company or with respect to the manner in which the Company
conducts its business or operations or, to the knowledge of the Company, its
prospects; (b) any payment or transfer of assets (including without limitation
any dividend, stock repurchase or other distribution or any repayment of
indebtedness) to or for the benefit of any stockholder of the Company, other
than compensation (including bonuses) and expense reimbursements paid in the
ordinary course of business, consistent with past practice, and other than the
distribution to stockholders, retirement and severance arrangements and bonuses
contemplated by clauses (i), (ii), (iii) and (iv) of Section 4.1; (c) any breach
or default (or event that with notice or lapse of time would constitute a breach
or default), termination or threatened termination under any Material Agreement;
(d) any theft, damage, destruction, casualty loss, condemnation or eminent
domain proceeding affecting any of the Company's assets, whether or not covered
by insurance; (e) any sale, assignment or transfer of any of the assets of the
Company, except in the ordinary course of business; (f) any waiver by the
Company of any material rights related to the Company's business, operations or
assets; (g) any other transaction, agreement or commitment entered into by the
Company or affecting the Company's business, operations or assets, except in the
ordinary course of business; or (h) any agreement or understanding to do or
resulting in any of the foregoing.
2.11 TAXES. All required federal, state, local and other tax returns,
notices and reports (including without limitation income, property, sales, use,
franchise, withholding, social security
8
<PAGE>
and unemployment tax returns) relating to or involving transactions with the
Company have been accurately prepared and duly and timely filed, and all taxes
required to be paid with respect to the periods covered by any such returns have
been timely paid. No tax deficiency has been proposed or assessed against the
Company, and the Company has not executed any waiver of any statute of
limitations on the assessment or collection of any tax. No tax audit, action,
suit, proceeding, investigation or claim is now pending or, to the knowledge of
the Company, threatened against the Company, and to the knowledge of the Company
no issue or question has been raised (and is currently pending) by any taxing
authority in connection with any of the Company' tax returns or reports. The
Company has withheld or collected from each payment made to each of its
employees the full amount of all taxes required to be withheld or collected
therefrom and has paid the same to the proper tax receiving officers or
authorized depositories. Except for the transfer taxes (including sales, use
and deed taxes) associated with the transfer of the Assets to Buyer, which will
be allocated between Buyer and the Company as set forth in Section 4.8, Buyer
will not be responsible for any income, sales, use, excise or other tax that
arises out of or results from the operation of the Assets by the Company prior
to the Closing or any other transaction or activity of the Company, excluding
(in each case) taxes attributable to the income of Buyer after the Closing and
to the ownership and operation of the Assets by Buyer after the Closing.
2.12 LITIGATION. Except as described in Schedule 2.12, there are currently
no pending or, to the knowledge of the Company, threatened lawsuits,
administrative proceedings or reviews, or, to the knowledge of the Company, any
formal or informal complaints or investigations (other than reviews and
investigations carried out in the absence of any complaint or alleged violation
known to the Company) by any individual, corporation, partnership, Governmental
Body or other entity (collectively, a "Person") against or relating to the
Company or any of its directors, or employees or agents (in their capacities as
such) or to which any of the Assets are subject. There are no pending
complaints or investigations by any Person that will subject the Assets to any
Liability. The Company is not subject to or bound by any currently existing
judgment, order, writ, injunction or decree.
2.13 COMPLIANCE WITH LAWS. The Company is currently complying in all
material respects with and has at all times complied in all material respects
with each applicable statute, law, ordinance, decree, order, rule or regulation
of any Governmental Body, including without limitation all federal, state and
local laws relating to occupational health and safety, product quality and
safety and employment and labor matters but excluding Environmental Laws (as
defined in Section 2.15), as to which the Company's representations and
warranties are limited to those set forth in Section 2.15. The Company has
performed regular tests in accordance with industry practice to determine
whether its products comply in all material respects with applicable laws and
regulations. The Company has not recalled any of its products during the last
five years.
2.14 PERMITS. Except as described in Schedule 2.14, the Company has
obtained and possesses from each appropriate Governmental Body all permits,
licenses, authorizations, approvals, quality certifications, franchises or
rights (collectively, "Permits") issued by any Governmental Body necessary to
conduct its business. Each of such Permits is listed in
9
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Schedule 2.14 and is included within the Assets, except for those Permits
identified in Schedule 1.2 as being nontransferable (the "Nontransferable
Permits"). No loss or expiration of any such Permit is pending or, to the
knowledge of the Company, threatened, other than expiration in accordance with
the terms thereof of Permits that the Company believes may be renewed in the
ordinary course of business without lapsing and other than the Nontransferable
Permits, which Buyer will have to obtain from the appropriate Governmental Body
for itself in connection with the transactions contemplated by this Agreement.
2.15 ENVIRONMENTAL MATTERS.
(a) Except as described in Schedule 2.15, (i) the Company has not
used, stored, disposed of or released any Hazardous Substance in violation
of any applicable Environmental Law and, except as set forth in said
Schedule, the Company has not received any notices, demand letters or
requests for information from any Governmental Body or other Person
indicating that the Company or any of the Assets may be in violation of or
subject to liability under any Environmental Law; and (ii) to the knowledge
of the Company, none of the Real Property contains any Hazardous Substance
in amounts exceeding the levels permitted by applicable Environmental Laws,
and to the knowledge of the Company, no Person other than the Company has
used, stored, disposed of or released any Hazardous Substance in violation
of any applicable Environmental Law on, to or from any of the Real
Property.
(b) As used herein, "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, Permit, order,
judgment, decree, requirement or agreement with any Governmental Body
relating to (i) the protection, preservation or restoration of the
environment or (ii) the use, storage, generation, transportation,
processing, production, release or disposal of Hazardous Substances, in
each case as amended and in effect on the date of the Closing.
(c) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated
by any Governmental Body or any Environmental Law, including without
limitation any toxic waste, pollutant, toxic contaminant, hazardous
substance, toxic substance, hazardous waste, petroleum or any derivative or
by-product thereof, radon, radioactive material, asbestos or asbestos
containing material, urea formaldehyde, foam insulation, lead or
polychlorinated biphenyls.
(d) Buyer acknowledges its understanding and agreement that the
Company has not made any investigation of the Assets with respect to the
presence or absence of Hazardous Substances or the violation of any
Environmental Laws and that no reference to the knowledge of the Company in
this Section 2.15 or any other provision of this Agreement is intended to
imply or create any obligation to undertake any investigation as to those
or any other matters.
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2.16 EMPLOYEE MATTERS. Set forth on Schedule 2.16 is a complete list of
all current employees of the Company, including date of employment, current
title and compensation, and date and amount of last increase in compensation.
The Company is in substantial compliance in all material respects with all
provisions of each applicable collective bargaining agreement, and no complaint
alleging any material violation of such provisions has been filed or, to the
knowledge of the Company, threatened to be filed with or by any Governmental
Body. The Company has not experienced any strike, material labor trouble, work
stoppage, slow down or other interference with or impairment of the business of
the Company, nor has any of the foregoing been threatened within the last 60
months.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth in Schedule 2.17 is a complete list of all "employee
benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), all plans or policies
providing for fringe benefits (including without limitation vacation, paid
holidays, personal leave, employee discounts, educational benefits or
similar programs), and all other bonus, incentive, compensation, profit-
sharing, stock, severance, retirement, health, life, disability, group
insurance, employment, fringe benefit and other similar plans, agreements,
policies or understandings (whether written or oral, qualified or
nonqualified, currently effective or terminated), and any trust, escrow or
other agreement related thereto, which (i) is maintained or contributed to
by the Company, or with respect to which the Company has or may have any
liability, or (ii) provides benefits, or describes policies or procedures
applicable, to any employee or former employee or dependents thereof,
regardless of whether funded (the "Employee Plans"). The Company has made
available to Buyer accurate and complete copies of the documents, records
and other materials related thereto reasonably requested by Buyer in
writing. Except pursuant to the Company's collective bargaining agreements
and the Seller's Security Plan (as defined below), no written or oral
representations have been made to any employee or former employee of the
Company promising or guaranteeing any employer payment or funding for the
continuation of medical, dental, life or disability coverage for any period
of time beyond the end of the current plan year (except to the extent of
coverage required under Code Section 4980B). The consummation of the
transactions contemplated by this Agreement will not accelerate the time of
payment or vesting, or increase the amount of compensation due to any
employee or former employee of the Company. "ERISA Affiliate" means the
Company and each Person that is or has been treated as a single employer or
controlled group member with the Company pursuant to Section 414 of the
Code or Section 4001 of ERISA.
(b) With respect to each "employee benefit plan" (as defined in
ERISA) that is not a "multiemployer plan" or a "multiple employer plan" (as
such terms are defined in Sections 3(37)(A) and 3(40)(A) of ERISA
(multiemployer plans and multiple employer plans are hereinafter referred
to as "Multiemployer Plans")) and that is maintained or contributed to,
currently or in the past, by the Company or any ERISA Affiliate, or with
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respect to which the Company or any ERISA Affiliate has liability (the
"Controlled Group Plans"):
(i) with respect to each Controlled Group Plan that is a
"pension plan" (as defined in Section 3(2)(A) of ERISA), there are no
unfunded liabilities existing under any such plan;
(ii) each Controlled Group Plan could be terminated as of the
date of the Closing with no liability to Buyer, the Company or any
ERISA Affiliate;
(iii) there is no Controlled Group Plan that is a defined
benefit plan (as defined in Section 3(35) of ERISA); and
(iv) each Controlled Group Plan has been operated in compliance
with ERISA, applicable tax qualification requirements and all other
applicable laws.
(c) (i) the only Multiemployer Plans maintained by the
Company or any ERISA Affiliate are the Western Conference of Teamsters
Pension Trust (the "Pension Plan") and the Western Conference of
Teamsters Miscellaneous Security Trust (the "Security Plan");
(ii) the Company and each ERISA Affiliate has or will have, as
of the date of the Closing, made all contributions to the Pension Plan
and the Security Plan required by the terms of each such Plan or any
collective bargaining agreement;
(iii) the Company or Buyer would not be subject to any
withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA
if, as of the date of the Closing, the Company or any ERISA Affiliate
were to engage in a complete withdrawal (as defined in ERISA Section
4203) or a partial withdrawal (as defined in ERISA Section 4205) from
the Pension Plan or the Security Plan; and
(iv) the Company has delivered to Buyer current, accurate and
complete copies of all collective bargaining agreements requiring
contributions to be made to the Pension Plan or the Security Plan.
2.18 OWNERSHIP OF THE COMPANY. All of the issued and outstanding capital
stock of the Company is owned of record by the Persons and in the amounts
indicated in Schedule 2.18. There are no outstanding options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
obligating the Company or any other Person to issue or sell any securities or
ownership interests in the Company.
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2.19 MATERIAL AGREEMENTS.
(a) Schedule 2.19 lists each of the following types of agreements
(whether written or oral and including all amendments thereto) to which the
Company is a party or a beneficiary or by which the Company or any of the
Assets is bound (collectively, the "Material Agreements"): (i) agreements
pursuant to which the Company sells or distributes any products; (ii) real
estate leases; (iii) agreements evidencing, securing or otherwise relating
to any indebtedness for borrowed money for which the Company is liable;
(iv) agreements which create, or could require the creation of, any Lien on
any of the Assets; (v) capital or operating leases or conditional sales
agreements relating to vehicles, equipment or other Assets; (vi) agreements
pursuant to which the Company is entitled or obligated to acquire any
assets from a third party; (vii) insurance policies; (viii) employment,
consulting, noncompetition, separation, collective bargaining, union or
labor agreements or arrangements; (ix) agreements with or for the benefit
of any employee of the Company (other than those who are stockholders), or
any affiliate or immediate family member thereof; and (x) any other
agreement under the terms of which the Company could be required to make or
entitled to receive aggregate payments or other value in excess of $50,000.
(b) The Company has delivered to Buyer a copy of each Material
Agreement. Except as described in Schedule 2.19, (i) each Material
Agreement is valid, binding and in full force and effect and enforceable in
accordance with its terms in all respects material to such agreement;
(ii) the Company has performed all of its obligations under each Material
Agreement, and there exists no breach or default (or event that with notice
or lapse of time would constitute a breach or default) under any Material
Agreement; (iii) there has been no termination or notice of default or, to
the knowledge of the Company, any threatened termination under any Material
Agreement; and (iv) no consent of any Person is required in connection with
the transactions contemplated by this Agreement in order to assign any of
the Material Agreements to Buyer.
2.20 CUSTOMERS. Set forth in Schedule 2.20 is a complete list of each
customer of the Company that accounted for more than $600,000 of revenues during
the year ended December 31, 1995 or more than $300,000 of revenues during the
six four week periods ended on the Latest Balance Sheet Date (the "Material
Customers"), and indicating the amount of revenues attributable to each Material
Customer during such periods. Except as set forth in Schedule 2.20, none of the
Material Customers has threatened to, or notified the Company of any intention
to, terminate or materially alter its relationship with the Company, and there
has been no dispute with a Material Customer since January 1, 1995 which could
reasonably be expected to result in any such termination or alteration.
2.21 INTELLECTUAL PROPERTY RIGHTS. Set forth in Schedule 2.21 is a
complete list of all registered patents, trademarks, service marks, trade names
and copyrights, and applications for and licenses (to or from the Company) with
respect to any of the foregoing (collectively, "Registered Intellectual
Property") used in the Company's business. To the Company's knowledge, the
Company has the right to use all Registered Intellectual Property and other
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computer software and software licenses, trade secrets, trademarks, trade names,
manufacturing specifications, drawings and designs (collectively, "Intellectual
Property") used by the Company in connection with the operation of the Company's
business, without infringing on or otherwise acting adversely to the rights or
claimed rights of any Person, and, to the knowledge of the Company, the Company
is not obligated to pay any material royalty or other consideration to any
Person in connection with the use of any such Intellectual Property. To the
knowledge of the Company, except as described in Schedule 2.21, no other Person
is infringing the rights of the Company in any of its Intellectual Property.
2.22 SUBSIDIARIES AND INVESTMENTS. The Company does not own any direct or
indirect equity or debt interest in any other Person, including without
limitation any interest in a corporation, partnership or joint venture, and is
not obligated or committed to acquire any such interest.
2.23 COMPETING INTERESTS. Except as described in Schedule 2.23, none of
the Company, the Principal Stockholders, any affiliate or immediate family
member of any Principal Stockholder or any officer or director of the Company
owns, directly or indirectly, an interest in any Person that is a competitor,
customer or supplier of the Company or that otherwise has material business
dealings with the Company. Except as described in Schedule 2.23, to the
knowledge of the Company, no other stockholder of the Company or any affiliate
or immediate family member of such a stockholder or of any officer or director
of the Company owns, directly or indirectly, an interest in any Person that is a
competitor, customer or supplier of the Company or that otherwise has material
business dealings with the Company.
2.24 NO MISREPRESENTATIONS. The representations and warranties set forth
in Article II of this Agreement are true and correct in all material respects
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary to make any such representation or warranty or
statement, under the circumstances in which it is made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
3.1 ORGANIZATION. Buyer and Suiza Foods are each a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
3.2 AUTHORITY. Buyer and Suiza Foods each has all requisite power and
authority to execute, deliver and perform under this Agreement and the other
agreements, certificates and instruments to be executed by each of them in
connection with or pursuant to this Agreement (collectively, the "Buyer
Documents").The execution, delivery and performance by Buyer and Suiza Foods of
each Buyer Document have been duly authorized by all necessary action, corporate
or otherwise, on the part of each of them to the extent they are signatories
thereto. This Agreement has been, and at the Closing the other Buyer Documents
will be, duly executed and delivered by Buyer and Suiza Foods to the extent they
are signatories thereto. This Agreement
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is, and, upon execution and delivery by Buyer and Suiza Foods at the Closing to
the extent they are signatories thereto, each of the other Buyer Documents will
be, a legal, valid and binding agreement of each of them, enforceable against
each of them who is a signatory thereto in accordance with its respective terms.
3.3 NO VIOLATION. The execution, delivery and performance of the Buyer
Documents by Buyer and Suiza Foods will not conflict with or result in the
breach of any term or provision of, or violate or constitute a default under any
charter provision or bylaw or under any material agreement, instrument, order,
law or regulation to which either is a party or by which either is in any way
bound or obligated.
3.4 GOVERNMENTAL CONSENTS. Except as required in connection with the HSR
Act and except for the Nontransferable Permits, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Body is required on the part of Buyer or Suiza
Foods in connection with the transactions contemplated by this Agreement.
3.5 FINANCIAL CONDITION OF BUYER. Buyer is a newly organized corporation
having been incorporated solely for purposes of consummating the transactions
contemplated by this Agreement. Buyer has no assets or liabilities of any kind
except for a nominal amount of cash, and Buyer has had no operations of any kind
except for the execution and delivery of this Agreement and the performance of
the activities of Buyer contemplated hereby. All of the issued and outstanding
shares of capital stock of Buyer are owned of record and beneficially by Suiza
Foods.
3.6 NO MISREPRESENTATIONS. The representations and warranties set forth
in Article III of this Agreement are true, complete and correct in all material
respects. None of such representations, warranties or statements contains any
untrue statement of a material fact or omits to state any material fact
necessary to make any such representation, warranty or statement, under the
circumstances in which it is made, not misleading.
3.7 ACKNOWLEDGMENT BY BUYER. Buyer has been afforded an opportunity to
perform such investigations, inspections and other procedures as it determines
to be necessary or desirable with respect to the Assets, including without
limitation, such environmental surveys, soils tests and other procedures as it
determines to be necessary or desirable, but the parties acknowledge and agree
that the fact that Buyer has been afforded such opportunity in no way affects
the definition of Known Breach in Section 6.1, which (except as expressly set
forth therein with respect to audit results, related work papers and the
accounting due diligence report) is limited to matters actually known by the
specified individuals. Except for the specific warranties set forth in
Article II and in any certificate delivered at the Closing, Buyer is acquiring
the Assets "as is" without representation or warranty of any kind.
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ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 CONDUCT OF BUSINESS. Prior to the Closing, unless Buyer otherwise
consents in writing, the Company will (a) operate in the ordinary course of
business and consistent with past practices and use commercially reasonable
efforts to preserve the goodwill of the Company and of its employees, customers,
suppliers, Governmental Bodies and others having business dealings with the
Company; (b) except as specifically contemplated by this Agreement, not engage
in any transaction outside the ordinary course of business, including without
limitation by making any material expenditure, investment or commitment or
entering into any material agreement or arrangement that is outside the ordinary
course of its business or not consistent with past practice; (c) not increase
the compensation of any officer or key employee of the Company; (d) use
commercially reasonable efforts to maintain all insurance policies and all
Permits that are required for the Company to carry on its business; (e) maintain
books of account and records in the usual, regular and ordinary manner and
consistent with past practices; and (f) not intentionally take any action that
the Person taking the action on behalf of the Company knows, at the time the
action is taken, is reasonably likely to result in a breach (as of the Closing)
of the representations and warranties set forth in clauses (b), (e), (f), (g) or
(h) of Section 2.10 if they were made as of the Closing Date. Notwithstanding
the foregoing, (i) the Company may make a cash distribution to its stockholders
prior to the Closing in an aggregate amount not exceeding $432,000, if the
Closing occurs on or prior to September 10, 1996, or $1,100,000, if the Closing
occurs after September 10, 1996; (ii) the Company may make retirement and
severance arrangements with three of its employees involving payments to such
employees of approximately $190,000 in the aggregate; and (iii) the Company may
pay its employees bonus compensation in the ordinary course of business,
consistent with past practice, for all periods through the Closing.
4.2 ACCESS AND INFORMATION. Prior to the Closing the Company will permit
Buyer and its representatives to have reasonable access to the Company's assets
and properties and all relevant books, records and documents of or relating to
the business and assets of the Company during normal business hours and will
furnish to Buyer such information, financial records and other documents
relating to the Company and its operations and business as Buyer may reasonably
request. Prior to the Closing the Company will use commercially reasonable
efforts to permit Buyer and its representatives reasonable access to the
Company's directors, officers, employees, accountants, auditors, customers and
suppliers for consultation or verification of any information obtained by Buyer
and to cause such Persons to cooperate with Buyer and its representatives in
such consultations and in verifying such information. The Company will have the
right to participate in any contact with such Persons, and Buyer will give the
Company reasonable advance notice of any such contact in order to permit such
participation.
4.3 SUPPLEMENTAL DISCLOSURE. As soon as reasonably practicable, the
Company will supplement or amend each of the Schedules hereto with respect to
any matter known to it that arises or is discovered after the date hereof and
prior to the Closing that, if existing or known at the date hereof, would have
been required to be set forth or listed in the Schedules hereto. Any
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matters so disclosed will constitute Known Breaches (as defined in Section 6.1)
for purposes of this Agreement.
4.4 INFORMATION FOR FILINGS. The Company will furnish Buyer with all
information concerning the Company and the Principal Stockholders that is
required for inclusion in any application or filing made by Buyer to any
Governmental Body in connection with the transactions contemplated by this
Agreement to the extent that such information is reasonably available to the
Company. Nothing in this Section 4.4 shall require the Company to provide Buyer
with audited financial statements of the Company for any period.
4.5 FULFILLMENT OF CONDITIONS BY THE COMPANY . The Company agrees not to
intentionally take any action that the Person taking the action on behalf of the
Company knows, at the time the action is taken, is reasonably likely to cause
the conditions on the obligations of the parties to effect the transactions
contemplated hereby not to be fulfilled, including without limitation by taking
or causing to be taken any action that would cause the representations and
warranties made by the Company herein not to be true and correct as of the
Closing. The Company will take all commercially reasonable steps within its
power to cause to be fulfilled the conditions precedent to Buyer's obligations
to consummate the transactions contemplated hereby set forth in paragraphs (b),
(c) and (e) through (h) of Section 5.1, except that the Company shall have no
such obligation with respect to the Nontransferable Permits.
4.6 FULFILLMENT OF CONDITIONS BY BUYER. Buyer and Suiza Foods agree not
to intentionally take any action that the Person taking the action on behalf of
Buyer or Suiza Foods knows, at the time the action is taken, is reasonably
likely to cause the conditions on the obligations of the parties to effect the
transactions contemplated hereby not to be fulfilled, including without
limitation by taking or causing to be taken any action that would cause the
representations and warranties made by Buyer herein not to be true and correct
as of the Closing. Buyer will take all commercially reasonable steps within its
power to cause to be fulfilled the conditions precedent to the obligations of
the Company to consummate the transactions contemplated hereby that are set
forth in paragraphs (b) through (e) of Section 5.2, except that Buyer will have
no obligation to obtain any Permits that are transferable by the Company without
any action of Buyer.
4.7 PUBLICITY. Buyer and the Company will cooperate with each other in
the development and distribution of all news releases and other public
disclosures relating to the transactions contemplated by this Agreement.
Neither Buyer nor the Company will issue or make, or allow any of its employees
or agents to issue or make, any press release or public announcement concerning
the transactions contemplated by this Agreement without giving the other party a
reasonable opportunity to comment on such release or announcement in advance,
consistent with applicable legal and stock market requirements.
4.8 TRANSACTION COSTS. Buyer will pay all transaction costs and expenses
(including legal, accounting and other professional fees) that it incurs in
connection with the negotiation, execution and performance of this Agreement and
the transactions contemplated hereby, including the filing fees required under
the HSR Act and the costs of any real estate surveys and
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mortgagee policies of title insurance. Buyer will also pay one-half of any
transfer taxes (including sales, use and deed taxes) associated with the
transfer of the Assets to Buyer. The Company will pay (a) all legal, accounting
and other professional fees incurred by the Company in connection with the
negotiation, execution and performance of this Agreement or the transactions
contemplated hereby; (b) all costs and expenses associated with obtaining the
owner's policy of title insurance referenced in Section 5.1(d) (other than any
required surveys); and (c) one-half of any transfer taxes (including sales, use
and deed taxes) associated with the transfer of the Assets to Buyer
(collectively, the "Company Expenses"). In the event of any claim against
either party after the Closing for the payment of any item referred to in this
Section 4.8, each party will promptly pay to the other or to any third party
making a claim the amount of such item which that party is obligated to pay
pursuant to the preceding provisions of this Section 4.8, including without
limitation any claimed deficiency in the amount of any sales, use or other
transfer taxes.
4.9 NONDISCLOSURE. The Company acknowledges and agrees that all customer,
prospect and marketing lists, sales data, intellectual property, proprietary
information, trade secrets and other confidential information of the Company
(collectively, "Confidential Information") constitute part of the Assets and,
following the Closing, will be owned exclusively by Buyer. The Company agrees
to, and agrees to use commercially reasonable efforts to cause its
representatives to, treat the Confidential Information, together with any other
confidential information furnished to it by Buyer, as confidential (except as
may otherwise be required by law) and not to make use of such information for
its own purposes or for the benefit of any other Person (other than the Company
prior to the Closing or Buyer after the Closing), but nothing herein shall
require the Company to cause any of its employees to enter into confidentiality
agreements with the Company. Prior to the Closing, Buyer and Suiza Foods agree
to, and agree to use reasonable efforts to cause their representatives to, treat
the Confidential Information as confidential (except as may otherwise be
required by law) and not to make use of such information for their own purposes
or for the benefit of any other Person except in connection with the
transactions contemplated by this Agreement. If this Agreement is terminated
prior to the Closing, Buyer and Suiza Foods, on the one hand, and the Company,
on the other, agree that they will not thereafter use any confidential
information furnished to them by the other party for any purposes whatsoever or
permit any such information to be made available publicly, except to the extent
required by law, and that they will return any such written information to the
other party upon request.
4.10 REPURCHASE OF COMPANY ACCOUNTS. Following the Closing, Buyer will
attempt to collect the accounts receivable included within the Assets (the
"Company Accounts") in good faith in a manner consistent with that used in
attempting to collect Buyer's other accounts receivable. Payments from each
account debtor in respect of the Company Accounts and Buyer's other accounts
receivable from the operation of the Company's business after the Closing will
be applied as instructed by the account debtor or, if no such instructions are
provided, in the order in which the accounts were created. Neither party will,
nor will it permit any of its employees or agents to, request that any account
debtor issue any instruction with respect to the application of its payments.
So long as the Employment Agreement remains in effect, Buyer will delegate to
William D. Richman the responsibility for supervising the collection of all
Company Accounts.
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At Buyer's option, the Company will repurchase any Company Accounts that have
not been paid in full within 90 days after the Closing at a purchase price equal
to the face amount thereof, less any reserve applicable thereto reflected on the
Latest Balance Sheet, less any amount collected by Buyer in respect thereof.
Buyer may exercise such option (the "Repurchase Option") by delivering written
notice to the Company identifying the Company Accounts that have not been paid
in full and setting forth a calculation of the purchase price applicable
thereto, and the Company will repurchase such Company Accounts within three
business days after delivery of such notice. Such written notice will be
delivered to the Company not later than 120 days after the Closing Date, and the
Company shall have no obligation to repurchase any Company Accounts if such
notice is not given by that date. If the Company receives any payment in
respect of a Company Account after the Closing and prior to the exercise of the
Repurchase Option, the Company will promptly pay over the amount collected to
Buyer. If Buyer receives any payment in respect of a Company Account after
exercise of the Repurchase Option, Buyer will promptly pay over the amount
collected to the Company. The Company will be free to seek collection of any
Company Account it acquires upon exercise of the Repurchase Option in any
commercially reasonable manner.
4.11 NAME CHANGE. Within 15 days after the Closing, the Company will file
all documents necessary to change the Company's corporate name to a name bearing
no similarity to "Swiss Dairy Corporation."
4.12 AVAILABILITY OF BOOKS AND RECORDS OF THE COMPANY. After the Closing,
Buyer will permit the Company and the Principal Stockholders to have reasonable
access to the books, records and documents of the Company relating to time
periods before the Closing to the extent such access is reasonably determined by
any of them to be necessary or desirable in connection with the preparation of
income tax returns on behalf of the Company or any of the stockholders of the
Company or for any other reasonable purpose. Buyer shall maintain all such
books, records and documents for a period of seven years after the Closing.
4.13 EMPLOYMENT OF COMPANY EMPLOYEES. Promptly after the Closing, Buyer
will offer employment to all of the Company's employees identified in Schedule
2.16 at their existing base salary levels, seniority and length of service and
with benefits (other than bonus compensation and company cars) substantially
similar to those currently provided by the Company, except as indicated in
Schedule 2.16 with respect to employees who will not be employed by Buyer and
except for William D. Richman, whose employment by Buyer will be governed by the
Employment Agreement. By October 31, 1996, Buyer will pay bonus compensation
for the period from June 16 through the Closing to the individuals and in
amounts consistent with the Company's past practice.
ARTICLE V
CLOSING CONDITIONS
5.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer under
this Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions, but compliance with any such conditions may be waived by
Buyer in writing:
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(a) All representations and warranties of the Company contained in
this Agreement are true and correct in all material respects at and as of
the Closing with the same effect as though such representations and
warranties were made at and as of the Closing, except that the condition in
this clause (a) shall be deemed satisfied if the aggregate amount of Losses
(as defined in Section 6.1) that Buyer would be reasonably likely to suffer
as a result of all Known Breaches does not exceed $250,000.
(b) The Company has performed and complied in all material respects
with all the covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the Closing, including
without limitation the delivery of all items required to be delivered by
them pursuant to Section 1.6.
(c) All contractual and governmental consents, approvals, orders or
authorizations necessary to close the transaction contemplated by this
Agreement without breaching any contract or violating any law have been
obtained and all contractual or governmental notices necessary for that
purpose have been given. Without limiting the generality of the foregoing,
all filings pursuant to the HSR Act have been made by Buyer, the Company
and their respective affiliates and the required waiting period under the
HSR Act has expired or been terminated without any threat or commencement
of antitrust proceedings with respect to the transactions contemplated by
this Agreement.
(d) Buyer has received surveys with respect to the real property
included in the Assets that is owned by the Company that allow the removal
of any survey exception from the title insurance commitments referred to in
Section 2.4(c).
(e) The Company has delivered to Buyer executed UCC-3 Termination
Statements or other releases as reasonably requested by Buyer in writing
not less than five days prior to the Closing Date to evidence the release
of any Liens on the Assets other than Liens described in clauses (i) and
(ii) of Section 2.4(b).
(f) The Company has delivered to Buyer a closing certificate,
substantially in the form of Exhibit H hereto.
(g) The Company has delivered to Buyer a certificate of its
secretary, substantially in the form of Exhibit I hereto.
(h) The Company has delivered to Buyer a legal opinion of the
Company's counsel, Carney & Delany, LLP, substantially in the form of
Exhibit J hereto.
(i) The escrow holder has executed and delivered the Escrow
Agreement.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDERS. The obligations of the Company and the Principal Stockholders
under this Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions, but compliance with any such conditions may be
waived by the Company in writing:
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(a) All representations and warranties of Buyer contained in this
Agreement are true and correct in all material respects at and as of the
Closing with the same effect as though such representations and warranties
were made at and as of the Closing.
(b) Buyer has performed and complied in all material respects with
the covenants and agreements required by this Agreement to be performed or
complied with by it at or prior to the Closing, including without
limitation the delivery of all items required to be delivered by Buyer
pursuant to Section 1.6.
(c) All governmental consents, approvals, orders or authorizations
necessary to close the transaction contemplated by this Agreement without
breaching any contract or violating any law have been obtained and all
governmental notices necessary for that purpose have been given. Without
limiting the generality of the foregoing, all filings pursuant to the HSR
Act have been made by Buyer, the Company and their respective affiliates
and the required waiting period under the HSR Act has expired or been
terminated without any threat or commencement of antitrust proceedings with
respect to the transactions contemplated by this Agreement.
(d) Buyer's independent accountants have completed the audit of the
Company's historical financial statements that Buyer is required to include
in its filings with the Securities and Exchange Commission related to the
transactions contemplated by this Agreement, and Buyer has reviewed and
evaluated the results of such audit.
(e) Buyer has delivered to the Company a legal opinion of Buyer's
counsel, Hughes & Luce, L.L.P., substantially in the form of Exhibit K
hereto.
(f) The escrow holder has executed and delivered the Escrow
Agreement.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY THE COMPANY. The Company will indemnify and hold
Suiza Foods, Buyer, and their respective directors, officers and employees, in
their capacities as such (collectively, the "Buyer Parties"), harmless from any
and all liabilities, obligations, claims, damages, costs and expenses, including
all court costs and reasonable attorneys' fees (collectively, "Losses"), that
any Buyer Party may suffer or incur as a result of or relating to:
(a) the breach of any representation, warranty, covenant or agreement
made by the Company in this Agreement or any claim by a third party to the
extent based on allegations that, if true, would constitute such a breach;
(b) any Liability of the Company, known or unknown, other than the
Assumed Liabilities, it being understood that the matters referred to in
Section 6.5(b) (giving effect to the proviso thereto) do not constitute
Liabilities; or
21
<PAGE>
(c) the encroachment of the Company's conveyor system onto an
adjoining parcel of property that is not owned by the Company).
provided that (i) the Buyer Parties will not be entitled to indemnification
under paragraph (a) or (b) of this Section 6.1 unless the aggregate amount of
all Losses for which indemnification is sought by the Buyer Parties under
paragraph (a) and (b) of this Section 6.1 and Section 6.2 exceeds $250,000, in
which case the Buyer Parties will be entitled to indemnification for the full
amount of such Losses; (ii) the Buyer Parties will not be entitled to
indemnification under this Section 6.1 in an aggregate amount exceeding
$3,900,000 and such amount may be recovered only out of the funds deposited into
escrow pursuant to the Escrow Agreement; (iii) the Company's obligations under
paragraph (c) of this Section 6.1 will be fully satisfied if the Company obtains
(at its expense) an easement permitting the use of such adjoining property for
such conveyor system and any amendments to the Conditional Use Permits necessary
in connection therewith; and (iv) the Buyer Parties will not be entitled to
indemnification under paragraph (a) of this Section 6.1 in respect of any breach
of a representation or warranty that is known by Buyer prior to the Closing (a
"Known Breach").
For such purposes, a breach will be considered "known by Buyer" if a senior
executive of Suiza Foods or Buyer or an employee or agent of either of them
(including independent accountants, attorneys and consultants retained by either
of them) actively involved in the transactions contemplated by this Agreement is
actually aware of the existence of such breach prior to the Closing or if the
Company makes a supplemental written disclosure thereof pursuant to Section 4.3
or otherwise. The Company acknowledges its understanding and agreement that no
reference to the knowledge of Buyer or its employees or agents in this Section
6.1 or any other provision of this Agreement is intended to imply or create any
obligation on the part of Buyer to undertake any investigation as to any
particular matter; provided that a breach will be deemed to be "known by Buyer"
if its existence would be apparent to a skilled certified public accountant or a
senior executive experienced in the dairy industry from an examination of the
results of the audit referred to in Section 5.2(b), the related accounting work
papers or the written due diligence report delivered to Buyer by its independent
accountants.
Buyer will promptly notify Seller in writing whenever it discovers any
Known Breach (other than those disclosed to Buyer in writing by the Company).
At least two business days and not more than five business days prior to the
Closing, Buyer shall cause its representatives and a representative of its
independent accounting firm to meet with the Company and its accountant to
advise the Company as to the results of its investigation of the business and
affairs of the Company and of the audit of the Company's financial statements.
Also on that date and thereafter through the date of the Closing, Buyer will
make available to the Company and its accountant all work papers and other
documents prepared in connection with the audit of the Company's financial
statements by Buyer. If the Closing does not occur, Buyer will deliver to the
Company copies of any reports, surveys, soil tests and other similar items
prepared or caused to be prepared by Buyer relating to the real property owned
by the Company.
6.2 INDEMNIFICATION FOR TITLE AND TAXES. The Company and the Principal
Stockholders will indemnify and hold the Buyer Parties harmless from any and all
Losses that
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any Buyer Party may suffer or incur as a result of or relating to the breach of
any representation or warranty set forth in the first sentence of Section 2.4(b)
or Section 2.11 or any claim by a third party to the extent based on allegations
that, if true, would constitute such a breach; provided that (a) the
indemnification obligation of each Principal Stockholder under this Section 6.2
shall not exceed the amount distributed by the Company to such Principal
Stockholder after the Closing, (b) the Buyer Parties will not be entitled to
indemnification under this Section 6.2 in respect of any Known Breach and
(c) the limitations in Section 6.1(i) shall apply to Losses under Section 6.1
and this Section 6.2. The obligations of the Company and the Principal
Stockholders under this Section 6.2 shall be joint and several. Among
themselves, the obligations of the Principal Stockholders shall be several (and
not joint) based upon the percentage that the number of outstanding shares of
capital stock of the Company owned beneficially by each of them represents of
the total number of such shares owned beneficially by all of them, such
percentages being the Annette H. Richman Private Revocable Trust - 34.06%, the
W. D. Richman Family Private Revocable Trust - 31.90% and the G. M. Richman
Family Private Revocable Trust - 34.04%.
6.3 SURVIVAL. Buyer's right to indemnification with respect to the
matters referred to in Sections 6.1 and 6.2 will survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby until the second anniversary of the Closing; provided that (a) Buyer's
right to indemnification with respect to the representations and warranties of
the Company set forth in the first sentence of Section 2.4(b) and Section 2.11
will survive until the fourth anniversary of the Closing, and (b) any
representation or warranty the violation of which is made the basis of a claim
for indemnification pursuant to Section 6.1 or Section 6.2 will survive until
such claim is finally resolved if Buyer notifies the Company of such claim in
reasonable detail prior to the date on which such right of Buyer would otherwise
expire hereunder. Notwithstanding the foregoing, Buyer's right to
indemnification with respect to the matters referred to in Sections 6.1 and 6.2
will not survive beyond the fourth anniversary of the Closing unless, prior to
such fourth anniversary, Buyer has commenced a lawsuit with respect to such
claim for indemnification and served the Company and (if applicable) the
Principal Stockholders with notice of such lawsuit.
6.4 SOLE REMEDY. The indemnification provisions set forth in this Article
VI constitute Buyer's sole and exclusive remedy against the Company and the
Principal Stockholders in respect of the breach of any representation or
warranty of the Company in this Agreement or pursuant hereto, or any covenant
hereunder of the Company or any Principal Stockholder other than (a) the
covenants set forth in Sections 1.5, 1.7, 4.8, 4.9, 4.10 and Article VII, (b)
the covenant to deliver the documents and cash referred to in Section 1.6, and
(c) any claim by a third party based on allegations that, if true, would
constitute a breach of the covenants described in the preceding clause (a) or
(b). In no event may Buyer offset a claim for indemnification under this
Article VI against the Purchase Price payable at the Closing.
6.5 INDEMNIFICATION BY BUYER. Buyer will indemnify and hold the Company,
its directors, officers, employees and stockholders, in their capacities as such
(collectively, the "Company Parties"), harmless from any and all Losses that any
Company Party may suffer or incur as a result of or relating to (a) any failure
by Buyer to perform and discharge in full, in a
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<PAGE>
due and timely manner, the Assumed Liabilities, or any claim by a third party
based on allegations that, if true, would constitute such a failure, or (b) any
other debts, obligations, liabilities or claims of any nature incurred by Buyer
or arising out of the operation of the Assets and/or the business of Buyer
following the Closing; provided that the Company will not be entitled to
indemnification for any Losses for which Buyer is entitled to indemnification
under Section 6.1 or Section 6.2.
6.6 NOTICE. Any party entitled to receive indemnification under this
Article VI (the "Indemnified Party") agrees to give prompt written notice to the
party or parties required to provide such indemnification (the "Indemnifying
Parties") upon the occurrence of any indemnifiable Loss or the assertion of any
claim or the commencement of any action or proceeding in respect of which such a
Loss may reasonably be expected to occur (a "Claim"), but the Indemnified
Party's failure to give such notice will not affect the obligations of the
Indemnifying Party under this Article VI except to the extent that the
Indemnifying Party is prejudiced thereby. Such written notice will include a
reference to the event or events forming the basis of such Loss or Claim and the
amount involved, unless such amount is uncertain or contingent, in which event
the Indemnified Party will give a later written notice when the amount becomes
fixed.
6.7 DEFENSE OF CLAIMS. The Indemnifying Party may elect to assume and
control the defense of any Claim, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of expenses related
thereto, if (a) the Indemnifying Party acknowledges its obligation to indemnify
the Indemnified Party for any Losses resulting from such Claim and provides
reasonable evidence to the Indemnified Party of its financial ability to satisfy
such obligation and (b) the Claim does not seek to impose any liability or
obligation on the Indemnified Party other than for money damages. If such
conditions are satisfied and the Indemnifying Party elects to assume and control
the defense of a Claim, then (i) the Indemnifying Party will not be liable for
any settlement of such Claim effected without its consent, which consent will
not be unreasonably withheld; (ii) the Indemnifying Party may settle such Claim
without the consent of the Indemnified Party; and (iii) the Indemnified Party
may employ separate counsel and participate in the defense thereof, but the
Indemnified Party will be responsible for the fees and expenses of such counsel
unless the Indemnifying Party has failed to adequately assume the defense of
such Claim or to employ counsel with respect thereto, in which case the fees and
expenses of such separate counsel will be paid by the Indemnifying Party. If
such conditions are not satisfied, the Indemnified Party may assume and control
the defense of the Claim; provided that the Indemnified Party may not settle any
such Claim without the consent of the Indemnifying Party, which consent will not
be unreasonably withheld, and the Indemnifying Party will have the right to
participate in the defense of the Claim.
ARTICLE VII
NONCOMPETITION AGREEMENT
7.1 NONCOMPETITION. For a period of five years following the Closing,
neither the Company nor any of the beneficial owners identified on the signature
pages hereto (the "Beneficial Owners") will, directly or indirectly, on its own
behalf or as an officer, director,
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<PAGE>
employee, consultant or other agent of, or as a stockholder, partner or other
investor in, any Person (other than Buyer or Suiza Foods or its affiliates):
(a) engage in the business of manufacturing, processing,
distributing, marketing or selling dairy products or fruit drinks (the
"Business") within the geographic area currently served by the Company as
designated in Schedule 7.1 (the "Territory");
(b) directly or indirectly influence or attempt to influence any
customer or potential customer of Buyer located within the Territory to
purchase goods or services which are competitive with those presently being
offered by the Company from any Person other than Buyer; or
(c) employ, attempt to employ or solicit for employment in any
position related to the conduct of the Business in the Territory any
individual who is an employee of Buyer at such time or was an employee of
Buyer during the year prior to such time; provided that the foregoing will
not apply to any investment in publicly traded securities constituting less
than 1% of the outstanding securities in such class.
7.2 ENFORCEMENT.
(a) The Company and the Beneficial Owners acknowledge and agree that
their obligations under this Article VII are a material inducement and
condition to Buyer's entering into this Agreement and performing its
obligations hereunder and that the restrictions and remedies contained in
this Article VII are reasonable as to time, geographic area and scope of
activity and do not impose a greater restraint than is necessary to protect
the goodwill and other legitimate business interests of Buyer.
(b) If the provisions of this Article VI are found by a court of
competent jurisdiction to contain unreasonable or unnecessary limitations
as to time, geographic area or scope of activity, then such court is hereby
directed to reform such provisions to the minimum extent necessary to cause
the limitations contained therein as to time, geographical area and scope
of activity to be reasonable and enforceable.
(c) The Company and the Beneficial Owners acknowledge and agree that
Buyer would be irreparably harmed by any violation of their obligations
under this Article VII and that, in addition to all other rights or
remedies available at law or in equity, Buyer will be entitled to
injunctive and other equitable relief to prevent or enjoin any such
violation.
ARTICLE VIII
MISCELLANEOUS
8.1 TERMINATION. This Agreement and the transactions contemplated hereby
may be terminated and abandoned (a) at any time prior to the Closing by mutual
written consent of Buyer and the Company; (b) by Buyer if the aggregate Losses
that would be reasonably likely to result from all Known Breaches exceed
$250,000; or (c) by either Buyer or the Company if the
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<PAGE>
Closing has not occurred by the close of business on October 15, 1996. Any
termination pursuant to (c) above shall be without prejudice to any right any
party may have against the other for any misrepresentation or breach of warranty
or covenant under this Agreement, except that if the Agreement is terminated as
a result of a Known Breach, then neither the Company nor the Principal
Stockholders shall have any liability or obligation to Buyer or Suiza Foods with
respect to such Known Breach or any such termination.
8.2 NOTICES. All notices that are required or may be given pursuant to
this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
United States mail, postage prepaid, to the parties at the following addresses
(or to the attention of such other person or such other address as any party may
provide to the other parties by notice in accordance with this Section 8.2):
IF TO BUYER OR SUIZA FOODS: WITH COPIES TO:
Suiza Foods Corporation Hughes & Luce, L.L.P.
3811 Turtle Creek Boulevard, Suite 1300 1717 Main Street
Dallas, Texas 75219 Suite 2800
Attention: Gregg L. Engles Dallas, Texas 75201
Telecopy: (214) 5289-9929 Attention: William A.
McCormack
Telecopy: (214) 939-6100
IF TO THE COMPANY, ANY PRINCIPAL
STOCKHOLDER OR ANY BENEFICIAL OWNER PRIOR
TO THE CLOSING: WITH COPIES TO:
Swiss Dairy Corporation Jane W. Carney
12171 Madera Way Carney & Delany, LLP
Riverside, California 92503 3801 University Avenue,
Attention: William D. Richman Suite 650
Telecopy: (909) 734-3786 Riverside, California 92501
Telecopy: (909) 682-6591
if to the Company, any Principal
Stockholder or any Beneficial Owner after
the Closing:
to the addresses set forth in Schedule 8.2.
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
8.3 ATTORNEYS' FEES AND COSTS. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to
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obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing party will be entitled to recover reasonable attorneys' fees and
costs incurred in connection therewith.
8.4 NO BROKERS. Each party to this Agreement agrees that it will
indemnify and hold harmless the other party against any claim for brokerage and
finders' fees or agents' commissions in connection with the negotiation or
consummation of the transactions contemplated by this Agreement and against any
court costs and reasonable attorneys' fees incurred in connection therewith.
8.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
will constitute one and the same instrument.
8.6 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned or delegated by the Company, any
Principal Stockholder or Buyer without the prior written consent of the other
parties; except that Buyer may assign its rights and obligations under this
Agreement to any direct or indirect wholly-owned subsidiary of Suiza Foods
Corporation. This Agreement is not intended to confer any rights or benefits on
any Person other than the parties hereto, the Buyer Parties and the Company
Parties.
8.7 ENTIRE AGREEMENT. This Agreement and the related documents contained
as Exhibits and Schedules hereto or expressly contemplated hereby contain the
entire understanding of the parties relating to the subject matter hereof and
supersede all prior written or oral and all contemporaneous oral agreements and
understandings relating to the subject matter hereof. This Agreement may not be
modified or amended except in writing signed by the party against whom
enforcement is sought. All statements of the Company contained in the
certificates referenced in Sections 5.1(f) and 5.1(g) will constitute
representations and warranties of the Company under this Agreement. The
Exhibits and Schedules to this Agreement are hereby incorporated by reference
into and made a part of this Agreement for all purposes. Unless otherwise
expressly stated in this Agreement, no right or remedy described or provided in
this Agreement is intended to be exclusive or to preclude a party from pursuing
other rights and remedies to the extent available under this Agreement, at law
or in equity.
8.8 GOVERNING LAW. This Agreement will be governed by and construed and
interpreted in accordance with the substantive laws of the State of Texas,
without giving effect to any conflicts of law rule or principle that might
require the application of the laws of another jurisdiction.
8.9 DISPUTE RESOLUTION. If any dispute arises out of this Agreement or
any of the other documents to be delivered hereunder, the parties agree not to
commence any lawsuit with respect to such dispute until the following procedures
have been completed:
(a) The party believing a dispute to exist will give the other
parties written notice thereof, setting forth in reasonable detail the
facts alleged to give rise to such dispute, the relevant contractual
provisions, the nature of any claimed default or breach
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and a statement of the manner in which such party believes the dispute
should be resolved.
(b) Within 20 days after receipt of such notice, each party against
whom relief is sought in connection with such dispute will deliver a
written response, setting forth in reasonable detail its views of the facts
alleged to give rise to such dispute, the relevant contractual provisions,
the nature of the claimed default or breach and a statement of the manner
in which such party believes the dispute should be resolved.
(c) If the parties do not agree on the manner in which the dispute
should be resolved, they will arrange to hold a meeting within 10 days
after delivery of the response. Each party will have in attendance at such
meeting a representative. At the meeting (and any adjournments thereof),
the parties will negotiate in an attempt to agree as to whether a dispute
exists, the exact nature of the dispute and the manner in which the dispute
should be resolved. If deemed appropriate by the parties, a professional
mediator may be engaged to assist in resolving the dispute. Any resolution
of the dispute will be evidenced by a written agreement setting forth in
reasonable detail the actions to be taken by each party. If no such
written agreement is reached within 20 days after the first meeting, the
parties may pursue any legal remedies available to them with respect to
such dispute.
(d) Notwithstanding the foregoing, to the extent necessary to prevent
irreparable harm, any party may commence an action in a court of competent
jurisdiction seeking a temporary restraining order, preliminary injunction
or other injunctive relief without complying with the foregoing dispute
resolution procedures.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SWISS DAIRY CORPORATION,
a Delaware corporation
By: /s/ Gregg L. Engles
--------------------------------------------
Gregg L. Engles, Chairman of the Board
SWISS DAIRY, A CORPORATION,
a California corporation
By: /s/ William D. Richman
--------------------------------------------
William D. Richman, President
28
<PAGE>
The undersigned Suiza Foods hereby agrees to be jointly and severally
responsible and liable for the performance of all of the covenants and other
obligations of Buyer to the Company, the Principal Stockholders and the Company
Parties under this Agreement and for any misrepresentation or breach of warranty
of Buyer hereunder; provided that such agreement is not intended to confer any
rights or benefits on any Person other than the Company, the Principal
Stockholders and the Company Parties.
SUIZA FOODS CORPORATION,
a Delaware corporation
By: /s/ Gregg L. Engles
--------------------------------------------
Gregg L. Engles, Chairman of the Board
and Chief Executive Officer
The undersigned "Principal Stockholders" hereby join in this Agreement for
the limited purpose of agreeing to the provisions of Sections 6.2 through 6.7
and Article VIII to the extent such provisions are expressly applicable to them.
/s/ Annette H. Richman
---------------------------------------------
Annette H. Richman, Trustee of the Annette H.
Richman Private Revocable Living Trust Dated
October 28, 1987
/s/ William D. Richman
---------------------------------------------
William D. Richman, Co-Trustee of the W.D.
Richman Family Private Revocable Living Trust
Dated June 15, 1993
/s/ Wiltrut Richman
---------------------------------------------
Wiltrut Richman, Co-Trustee of the W.D. Richman
Family Private Revocable Living Trust Dated
June 15, 1993
/s/ George M. Richman
---------------------------------------------
George Michael Richman, Co-Trustee of the G.M.
Richman Family Private Revocable Living Trust
Dated December 9, 1992
29
<PAGE>
/s/ Michele F. Richman
---------------------------------------------
Michele F. Richman, Co-Trustee of the G.M.
Richman Family Private Revocable Living Trust
Dated December 9, 1992
The undersigned "Beneficial Owners" hereby join in this Agreement for the
limited purpose of agreeing to the provisions of Article VII and Article VIII to
the extent such provisions are expressly applicable to them.
/s/ Annette H. Richman
---------------------------------------------
Annette H. Richman
/s/ William D. Richman
---------------------------------------------
William D. Richman
/s/ George M. Richman
---------------------------------------------
George Michael Richman
30
<PAGE>
EXHIBITS
- --------
A Escrow Agreement
B Employment Agreement
C Bill of Sale
D Real Estate Deed
E Assignment of Trademarks
F Assumption Agreement
G Assignment and Assumption Agreement for 401(k) Plan
H Closing Certificate
I Secretary's Certificate
J Opinion of Company Counsel
K Opinion of Buyer's Counsel
SCHEDULES
- ---------
1.2 Excluded Assets
1.8 Allocation of Purchase Price
2.4(a) Assets
2.4(b) Liens
2.6 Contractual and Governmental Consents
2.8 Financial Statements
2.10 Changes Since Latest Balance Sheet Date
2.12 Litigation
2.14 Permits
2.15 Environmental Matters
2.16 Employees
2.17 Employee Benefit Plans
2.18 Stock Ownership
2.19 Material Agreements
2.20 Material Customers
2.21 Intellectual Property
2.23 Competing Interests
7.1 Territory
8.2 Post-Closing Address for the Company
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in Registration Statement
No. 333-11185 of Suiza Foods Corporation on Form S-8 of our report dated
August 28, 1996, with respect to the financial statements of Swiss Dairy, a
Corporation, included in the Current Report on Form 8-K of Suiza Foods
Corporation dated September 24, 1996.
DELOITTE & TOUCHE LLP
Costa Mesa, California
September 24, 1996
