STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and
entered into as of October 16, 1992, by and between CHOCK FULL
O'NUTS CORPORATION, a New York corporation ("Buyer"), and NESTLe
BEVERAGE COMPANY, a Delaware corporation ("Seller"), the holder of
all of the issued and outstanding shares of common stock of Cain's
Coffee Co., a Delaware corporation (the "Company").
RECITALS
A. Seller owns all 15,000 of the issued and outstanding
shares of common stock, $100.00 par value (the "Shares") of the
Company.
B. Seller desires to sell the Shares to Buyer, and Buyer
desires to purchase the Shares from Seller, for the consideration
and on the terms and conditions set forth in this Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants, agreements, representations and warranties
contained in this Agreement, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Sale and Purchase of Shares. Upon the terms and subject
to all of the conditions contained herein, Seller hereby agrees to
sell, assign, transfer and deliver the Shares to Buyer on the
Closing Date (as defined in Section 2.4 hereof), and Buyer hereby
agrees to purchase and accept the Shares from Seller on the Closing
Date.
2. Purchase Price and Payment Thereof.
2.1 Purchase Price. The aggregate purchase price for
the Shares being purchased pursuant to Section 1 and for Seller's
agreement as set forth in Section 5.7 (which shall be allocated
between the Shares and the covenant in the manner required by
Section 5.10) shall be Forty Seven Million Dollars ($47,000,000)
adjusted by that amount (the "Adjustment Amount"), which may be a
positive or a negative number, as determined pursuant to Section
2.2 hereof (together, the "Purchase Price").
2.2 Calculation of Adjustment Amount. Commencing
promptly after the Closing Date, Buyer shall prepare and deliver,
within the ninety (90) days following the Closing Date, to Seller
an unaudited statement of net assets of the Company as of the
Closing Date (the "Closing Statement of Net Assets"), in the form
(including, without limitation, the line items, columns and
headings) of the unaudited Statement of Net Assets at June 30, 1992
attached hereto as Schedule 2.2 (the "Opening Statement"). In
addition, Buyer shall prepare and deliver a calculation of the
amount, if any, payable under Section 2.3.2 (the "Payment
Calculation") which calculation shall be based on the working
capital accounts (i.e. current assets and current liabilities)
shown on both the Closing Statement of Net Assets and the Opening
Statement. Buyer shall prepare the Closing Statement of Net Assets
using United States generally accepted accounting principles,
except as modified to take into account the first three items
listed on Schedule 3.7.1B, applied on a basis which is consistent
with the Opening Statement. The parties acknowledge that the
Closing Statement of Net Assets will be adjusted to include an
accrual relating to 1992 employee bonuses which is the fourth item
on Schedule 3.7.1B. The parties also acknowledge that the Closing
Statement shall not include any liability of the Company for which
Seller has agreed to be solely responsible for the payment thereof
pursuant to the terms of this Agreement or the Tax Indemnity
Agreement. Seller and its representatives shall be entitled to
review the work papers, schedules, memoranda and other documents
used in the preparation by Buyer of the Closing Statement of Net
Assets and the Payment Calculation. In the event that Seller shall
in good faith disagree with the Closing Statement of Net Assets or
the Payment Calculation, Seller and Buyer shall, during the sixty
(60) days after delivery to Seller of the Closing Statement of Net
Assets and the Payment Calculation, negotiate in good faith to
resolve any disagreements with respect thereto. If at the end of
such 60-day period no such resolution is reached, such
disagreements shall be resolved by a nationally recognized firm of
independent public accountants agreed upon by Buyer and Seller.
The determination made by such firm shall be conclusive, binding
on, and non-appealable by, the parties hereto. The fees and
disbursements of such firm of independent public accountants shall
be divided and borne equally by Seller and Buyer. The fact that
Seller's accountants may have made adjustments or determinations in
order to prepare the financial statements referred to in Section
5.5 shall not be disclosed to independent accountants employed to
resolve any disagreement under this Section 2.2.
2.3 Payment of Purchase Price. The Purchase Price is
payable as follows:
2.3.1 Payment at Closing. On the Closing Date,
Buyer shall pay Forty Seven Million Dollars ($47,000,000) to Seller
by wire transfer in immediately available funds to such account as
shall be specified by Seller.
2.3.2 Payment of Adjustment Amount.
(a) If the amount of total current assets
less total current liabilities ("Net Working Capital") shown on the
Closing Statement of Net Assets shall be less than $11,385,000,
Seller shall pay to Buyer an amount equal to the difference between
such Net Working Capital and $11,385,000, together with interest on
such amount from the Closing Date to the date of payment of such
amount at a rate of six percent (6%) per annum, such payment to be
made within two (2) business days after the final determination of
the Adjustment Amount (which determination shall be in accordance
with the procedures set forth in Section 2.2. hereof) by wire
transfer of immediately available funds to an account designated by
Buyer.
(b) If the amount of Net Working Capital
shown on the Closing Statement of Net Assets shall be greater than
$11,385,000, Buyer shall pay to Seller an amount equal to the
difference between such Net Working Capital and $11,385,000,
together with interest on such amount from the Closing Date to the
date of payment of such amount at a rate of six percent (6%) per
annum, such payment to be made within two (2) business days after
the final determination of the Adjustment Amount (which
determination shall be in accordance with the procedures set forth
in Section 2.2 hereof) by wire transfer of immediately available
funds to an account designated by Seller.
2.4 Delivery of Purchased Shares. At the Closing (as
defined in Section 2.5 hereof), Seller shall deliver or cause to be
delivered to Buyer a stock certificate(s) representing all 15,000
of the outstanding shares of Common Stock of the Company, duly
executed in blank or accompanied by a stock power(s) duly executed
in blank, in proper form for transfer. Title to the Shares will be
as provided in Section 3.4.2 hereof.
2.5 Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at
the offices of Seller at 345 Spear Street, San Francisco,
California on November 30, 1992, or on such other date and/or place
as may hereafter be agreed upon in writing by the parties hereto
(the "Closing Date").
3. Representations and Warranties of Seller. Seller hereby
represents and warrants to and agrees with Buyer as follows:
3.1 Authority. The Company has the full corporate power
and authority to own, lease and operate its assets, properties and
business as it is now being conducted. This Agreement constitutes
the legal, valid and binding obligation of Seller, enforceable
against it in accordance with its terms, except as enforceability
may be limited by laws relating to insolvency or bankruptcy or by
equitable principles. Seller has the absolute and unrestricted
right, power, authority and capacity to execute and deliver this
Agreement, and to perform its obligations hereunder. Except for
(i) the filing required by the provisions of the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976 (the "HSR Act"), and (ii) the
filing required by the Federal Trade Commission's Consent Order, a
copy of which is attached hereto as Schedule 3.1 (the "Consent
Order"), no consent, authorization or approval of, exemption by, or
filing with, any domestic governmental or administrative authority,
or any court is required to be obtained or made by Seller in
connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated
hereby.
3.2 Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company is duly
qualified or otherwise authorized as a foreign corporation to
transact business and is in good standing in each jurisdiction in
which the nature of its business or the character of its properties
require such qualification wherein the failure so to qualify or be
authorized could have a material adverse effect on the business or
properties of the Company. The jurisdictions in which the Company
is so qualified are set forth on Schedule 3.2 attached hereto.
3.3 Interested Parties. Except as set forth on Schedule
3.3 attached hereto, no material asset used in the Company's
business is owned by Seller or by any affiliate of Seller other
than the Company. Except as set forth on Schedule 3.3 and except
for supply arrangements entered into in the ordinary course of the
Company's business, there are no material contracts, agreements or
other arrangements which will continue following the Closing
between the Company and Seller or the Company and any affiliate of
Seller.
3.4 Capital Stock.
3.4.1 Outstanding Stock. The total authorized
capital stock of the Company consists of 50,000 shares of common
stock, $100 par value per share, of which 15,000 shares are issued
and outstanding; all of which issued and outstanding Shares are
owned by Seller. No other class of capital stock of the Company is
authorized or outstanding. All of the Shares are duly authorized
and are validly issued, fully paid and nonassessable.
3.4.2 Title to Purchased Shares. Seller owns
beneficially and of record, free and clear of any lien, security
interest, option or other encumbrance, the Shares and, upon
delivery of and payment for such Shares as herein provided, Seller
will convey to Buyer good and valid title thereto, free and clear
of any lien, security interest, option or other encumbrance of any
kind.
3.5 Options or Other Rights. There are no outstanding
rights, subscriptions, warrants, calls, unsatisfied preemptive
rights, options, conversion rights, commitments or other agreements
of any kind to purchase or otherwise to receive from the Company
any of the outstanding, authorized but unissued, unauthorized or
treasury shares of the capital stock of the Company, including the
Shares, or any other security of the Company, and there is no
outstanding security of any kind convertible into such capital
stock, including the Shares.
3.6 Certificate of Incorporation; By-Laws. Attached
hereto as Schedule 3.6 are true, complete and correct copies of (a)
the Certificate of Incorporation, as amended to date, of the
Company and (b) the By-Laws, as currently in effect, of the
Company.
3.7 The Company's Financial Condition.
3.7.1 Financial Information. Seller has
delivered to Buyer: (a) unaudited statements of operations and cash
flows for the Company for each of the four years ended on or about
December 31, 1988 through December 31, 1991, and for the six month
period ended June 30, 1992 and (b) unaudited statements of net
assets for each of the four years ended on or about December 31,
1988 through December 31, 1991, and at June 30, 1992, copies of
which are attached hereto as Schedule 3.7.1A. Such financial
statements fairly present the financial condition and results of
operations of the Company as of the respective dates thereof and
for the periods therein referred to. Such financial statements
were prepared in accordance with International Accounting
Principles consistently applied and on a basis consistent with
prior periods. Such financial statements comply with United States
generally accepted accounting principles ("GAAP") in all material
respects except as set forth on Schedule 3.7.1B, attached hereto.
In addition, Seller has delivered to Buyer the Opening Statement,
a copy of which is attached hereto as Schedule 2.2. Such Opening
Statement has been prepared in a manner which is consistent with
the financial statements for the six months ended June 30, 1992,
except that the Opening Statement has been adjusted as set forth on
Schedule 3.7.1C to reflect obligations of the Company which have
terminated, obligations which will be the sole responsibility of
Seller after the sale of the Company, adjustments for over accruals
or accounting reclassifications.
3.7.2 Absence of Certain Changes. Except as set
forth on Schedule 3.7.2 attached hereto, since the date of the
Opening Statement, there has not been (i) any transaction not in
the ordinary course of the Company's business; (ii) any change in
the Company's accounting methods or practices (including, but not
limited to, any change in depreciation or amortization policies or
rates); (iii) any sale or transfer of any of the assets of the
Company or any cancellation of any debts, claims or any amendments
to any contracts, except in the ordinary course of business and
consistent with past practice; (iv) the incurrence by the Company
of any liability whatsoever which would in accordance with GAAP be
classified as anything other than a current liability; (v) any
increase in the salary or compensation of any of the employees of
the Company other than in the ordinary course of business
consistent with past practice; or (vi) any other event or condition
of any character which has materially and adversely affected the
assets or the business of the Company, with the possible exception
of general business and economic conditions which are also
applicable to companies situated in similar businesses.
3.7.3 No Undisclosed Liabilities. The Opening
Statement summarizes the Company's liabilities using the accounting
principals described in Section 3.7.1, applied on a consistent
basis with prior periods. To the best of Seller's knowledge, (i)
the summary of liabilities shown on the Opening Statement is true
and correct in all material respects and (ii) the Company has no
contingent liabilities except those which may arise out of those
matters disclosed elsewhere in this Agreement and the schedules
attached hereto.
3.7.4 Disclaimer Regarding Projections. In
connection with Buyer's investigation of the Company, Buyer
received from Seller certain projections, estimates and other
forecasts. Buyer acknowledges that there are uncertainties
inherent in attempting to make such projections, estimates and
forecasts, that Buyer is familiar with such uncertainties, that
Buyer is taking full responsibility for making its own evaluation
of the adequacy and accuracy of all projections, estimates and
other forecasts so furnished to it, and that Buyer shall have no
claim against Seller with respect thereto. Accordingly, neither
Seller nor any of its agents or representatives makes any
representation or warranty with respect to such projections,
estimates and forecasts.
3.8 Title to Assets. Except as set forth in Schedule
3.8 attached hereto, the Company has good title to all of the
assets owned by it (other than the Real Property as to which
Section 3.18 relates), including without limitation, all assets
shown on the Opening Statement but excluding assets disposed of in
the ordinary course of business since the date of the Opening
Statement, free and clear of all liens, security interests and
other encumbrances of any kind other than (i) liens, if any, for
personal property taxes and assessments not yet due and payable,
(ii) leasehold interests or other possessory interests incurred by
the Company in the ordinary course of its business, and (iii) other
liens, security interests incurred in the ordinary course of the
Company's business which individually and in the aggregate do not
have a materially adverse affect on the business or financial
condition of the Company.
3.9 Books and Records. The minute books and other
records of the Company are complete and correct and have been
maintained in accordance with sound business practices. The minute
books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the Company's
stockholder, the Board of Directors and committees of the Board of
Directors of the Company and no meetings of the Company's
stockholder, the Board of Directors of the Company or any committee
thereof has been held for which minutes have not been prepared and
are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
3.10 Compliance with Law. Except as set forth on
Schedule 3.10A attached hereto and except with respect to any and
all environmental laws, rules and regulations as to which no
representations are being made except as set forth below or as may
be set forth in Section 9 hereof and except with respect to
intellectual property matters as to which the sole representations
are set forth in Section 3.22, the Company and its use and
occupancy of its properties are in compliance with all applicable
laws, rules and regulations to which the Company or its properties
are subject, including, without limitation, laws, rules and
regulations relating to occupancy, health, safety or employment.
The Company has not failed to obtain or adhere to any license,
permit or authorization (including any license permit or
authorization required by environmental laws) required by it to
operate its business or to occupy or use any of its properties or
assets, which failure individually or in the aggregate has had or
will have a material cost or material adverse effect on the
Company. A list of all such material licenses or permits is
attached hereto as Schedule 3.10B.
3.11 Products. Schedule 3.11 attached hereto, contains
a list of all categories of products presently manufactured or sold
by the Company. None of the products manufactured or sold by the
Company in the past five (5) years has been subject to recall or
recalled by the Company.
3.12 Condition and Sufficiency of Assets. Except as set
forth on Schedule 3.12 attached hereto, any and all machinery and
equipment which is material to the business of the Company is in
good operating condition and repair, normal wear and tear excepted,
and is adequate for the uses to which such machinery and equipment
are being put. The Company's equipment is sufficient for the
continued conduct of the Company's business after the Closing in
substantially the same manner as conducted prior to the Closing.
3.13 No Brokerage or Finder's Fees. Neither the Company
nor Seller has incurred any liability to any broker, finder or
agent other than Lazard Freres & Company for any brokerage fees,
finder's fees or commissions with respect to the transactions
contemplated by this Agreement. Any such fee payable to Lazard
Freres & Company will be the sole and exclusive obligation of
Seller.
3.14 No Violation. Except as set forth in Schedule 3.14,
neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated
hereby will, directly or indirectly: (a) contravene, conflict with
or result (with or without notice or lapse of time) in a violation
of (i) any of the provisions of the current certificate of
incorporation or the Bylaws of the Company or (ii) any resolution
adopted by the Board of Directors or the stockholder of the
Company; (b) contravene, conflict with or result (with or without
notice or lapse of time) in a violation of any federal or state
law, statute or ordinance, or any order, judgment, injunction,
ruling, decision, writ or sentence rendered by any court, agency or
other governmental body applicable to or binding upon the Company
or Seller, or any of the assets owned or used by the Company which
would have a material adverse effect on the Company or its
properties taken as a whole; (c) contravene, conflict with or
result (with or without notice or lapse of time) in a violation or
breach of any of the provisions of, or give any person or entity
the right (with or without notice or lapse of time) to declare a
default or to accelerate the maturity or performance of, to amend
the terms of, or terminate any contract, license or permit which,
if terminated, would have a material adverse effect on the Company
or its properties taken as a whole, and to which the Company is a
party or under which the Company has any rights, or by which the
Company or any of the assets owned or used by the Company may be
bound; or (d) result in the creation or imposition or any security
interest, lien or other encumbrance upon the property or assets of
the Company.
3.15 Consents to Assignment. No consent, approval or
other action of any third party is required to be obtained by the
Company or Seller in connection with the transactions contemplated
in this Agreement except as set forth in Schedule 3.15 attached
hereto; provided, however, that this Section 3.15 shall not apply
with respect to any consent or approval which may be required if
the failure to obtain such consent or approval would not have a
material adverse effect on the business or the properties of the
Company.
3.16 No Litigation. Except as set forth in Schedule 3.16
attached hereto, there are no legal, administrative, arbitration or
other proceedings, or claims, actions or investigations ("Legal
Proceedings") pending and, to the best of Seller's knowledge (based
solely upon the knowledge of Tom Donnell, John Masters, Seller's
General Counsel and the knowledge of the staff members of Seller's
legal department who have direct responsibility for monitoring the
legal affairs of the Company), no other Legal Proceedings are
currently threatened against the Company which, if adversely
determined would have a material adverse effect on the business or
financial condition of the Company. Other than as set forth in
Schedule 3.16 attached hereto, neither the Company nor Seller is
subject to any judgment, order or decree entered in any lawsuit or
proceeding which has had or may have, if adversely determined, a
material adverse effect on the business or financial condition of
the Company. Except as set forth on Schedule 3.16, neither the
Company nor any insurance carrier of the Company has, since January
1, 1991, paid or reserved an amount in excess of $25,000 with
respect to any third-party liability claim (including, without
limitation, product liability claim), for personal injury or
property damage made or threatened against the Company.
3.17 Benefit Plans.
3.17.1 Except as set forth in Schedule 3.17
attached hereto, the Company is not a party to (i) any "employee
benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (an
"Employee Benefit Plan"), (ii) any profit sharing, pension,
deferred compensation, bonus, stock option, stock purchase,
severance, health, welfare or incentive plan or agreement, (iii)
any written plan or policy providing for "fringe benefits" to its
employees, including but not limited to vacation, paid holidays,
personal leave, employee discount, educational benefit or similar
programs, or (iv) any written employment agreement (individually a
"Plan" and collectively the "Plans").
3.17.2 Except as set forth in Schedule 3.17, the
Company has made no contributions to any multiemployer plan
described in Section 3(37) of ERISA (a "Multiemployer Plan") or any
Employee Benefit Plan.
3.17.3 To the best of Seller's knowledge, each
Plan which is an "employee benefit plan", as defined in Section
3(3) of ERISA, complies in all material respects with the
requirements provided by any and all statutes, orders or
governmental rules or regulations currently in effect and
applicable to the Plan, including but not limited to ERISA and the
Code.
3.17.4 All reports, forms and other documents
required to filed with any government entity with respect to any
Plan (including without limitation, summary plan descriptions,
Forms 5500 and summary annual reports) have been timely filed and
are accurate in all material respects.
3.17.5 The Company has no liability nor is it
threatened with any liability (i) for the termination of any single
employer plan under Section 4062 or 4064 of ERISA or any multiple
employer plan under Section 4063 of ERISA, (ii) for any lien
imposed under Section 302(f) of ERISA or Section 412(n) of the
Code, (iii) for any interest payments required under Section 302(e)
or any taxes imposed by Sections 4971, 4975, 4976, 4977 or 4979 of
the Code, (iv) for a fine under Section 501 of ERISA, or (v) for an
transaction within the meaning of Section 4069 of ERISA.
3.17.6 The Company has no current liabilities with
respect to withdrawals from any Multiemployer Plans which could
subject Seller to any controlled group liability under Section
4001(b) of ERISA.
3.17.7 All of the Plans, to extent applicable, are
in compliance with the continuation of group health coverage
provisions contained in Section 4980B of the Code and Sections 601
through 608 of ERISA.
3.17.8 Except for the Central States, Southeast
and Southwest Area Pension Plan, from and after the Closing Date,
neither Buyer nor the Company shall have any obligation under nor
incur any liability whatsoever with respect to any of the plans
listed on Schedule 3.17 or under any unidentified Plan which may
have been maintained by or on behalf of Seller or the Company or to
which Seller or the Company made contributions prior to the Closing
Date.
3.18. Real Property. Schedule 3.18A contains a complete
and accurate legal description of all real property owned by the
Company (the "Real Property") and Schedule 3.18B contains a
complete list of all real property as to which the Company is a
party as lessee. All the leases pertaining to properties described
in Schedule 3.18B are in full force and effect, and there does not
exist any material default or event that with notice or lapse of
time, or both, would constitute a material default by the Company
or, to the best of Seller's knowledge, by any lessor, under any of
these leases. The Company has good title to the Real Property,
free and clear of all mortgages, deeds of trust, encumbrances,
liens and charges of every kind and character, except for (i) liens
for taxes and assessments not yet due and payable, and (ii)
covenants, conditions, restrictions, rights, easements and other
matters which do not materially interfere with the current use of
the Real Property by the Company. Except as set forth on Schedule
3.18C, attached hereto, all buildings on the Real Property are in
good condition and repair, normal wear and tear excepted, and
conform in all material respects with all applicable ordinances,
regulations and building, zoning and other laws. All buildings
located on the Real Property are located within the record property
lines.
3.19 Accounts Receivable. All accounts receivable
reflected on the Opening Statement and all accounts and other
receivables acquired by the Company subsequent to June 30,1992 to
and including the Closing Date arose and/or will arise from bona-
fide transactions in the ordinary course of business. The reserve
for bad debts included in computing amounts set forth on the
Opening Statement was computed in a manner consistent with past
practice.
3.20 Insurance. Schedule 3.20 attached hereto contains
an accurate and complete description of all current material
policies of fire, liability, workers' compensation and other forms
of insurance including, without limitation, surety bonds maintained
with respect to the Company. Such policies are carried by insurers
of recognized responsibility and are in full force and effect. All
such insurance shall be in effect through the Closing Date and
shall be terminated as of midnight on the Closing Date. Except as
set forth on Schedule 3.20, no insurance coverage of the Company is
maintained through self-insurance.
3.21 Ownership of Machinery and Equipment. All of the
machinery, equipment, furniture, vehicles, related capitalized
items and other tangible personal property which are material to
the business of the Company are, and on the Closing Date will be,
owned by the Company, except as otherwise indicated on Schedule
3.21 attached hereto. For purposes of this Section 3.21, tangible
personal property shall not be considered material to the business
of the Company if it is leased pursuant to a lease which may be
cancelled on ninety (90) days notice or less without penalty or if
it is subject to payment of not more than $50,000 prior to
termination.
3.22 Intellectual Properties.
3.22.1 Ownership of Intellectual Properties.
Schedule 3.22A attached hereto contains a complete and correct list
of all patents, patent rights, patent applications, licenses, shop
rights, trademarks, trademark applications, tradenames, copyrights
and similar rights (collectively "Rights") currently owned by the
Company or licensed to the Company for use in the conduct of the
business of the Company, indicating the registered and beneficial
owner and the renewal date thereof. Except as otherwise set forth
in this Section 3.22, the Company owns or has a valid license to
use all Rights necessary to the conduct of its business as such
business is currently being conducted. To Seller's knowledge, the
conduct of the business of the Company, as such business is
currently being conducted, does not materially conflict with valid
intellectual property rights of others, except as otherwise set
forth in this Section 3.22. The Company has entered into a License
Agreement with Societe des Produits Nestle S.A. ("SPN") pursuant to
which it has the right to use such trademarks, tradenames and other
intellectual property rights as are designated on Schedule 3.22B
attached hereto (the "Marks"), subject to the provisions of Section
3.22.2, below which License Agreement will be cancelled on or prior
to the Closing Date.
3.22.2 Interest of Others in Marks. Seller has
disclosed to Buyer, and Buyer acknowledges receipt of, that
material information known or possessed by Seller, which, to the
best of Seller's knowledge (based solely upon the knowledge of
Seller's General Counsel), relates to the trademarks, tradenames,
or other intellectual property rights which are material to the
Company's business, including without limitation, the fact that:
(i) the "CAIN'S" trademark, Registration No. 682,261 with the U.S.
Patent and Trademark Office is restricted to use in the U.S. States
of Oklahoma, Texas, Arkansas, Missouri, Kansas, California, New
Mexico, Arizona, Mississippi and Colorado but is also being used by
the Company in the States of Louisiana, Georgia, Alabama, Iowa,
Wisconsin, Illinois, Kentucky, Tennessee, and Indiana; (ii) John E.
Cain Co., a Massachusetts corporation which has no affiliation with
the Company, owns a registration for "CAIN'S" trademark
Registration No. 992,196 relating to certain food items; (iii)
there are certain state registrations for the "CAIN'S" trademark
which are owned by John E. Cain Co. in the states of Rhode Island,
Connecticut, Delaware, Florida, Maryland, Maine, New Hampshire, New
Jersey, Ohio, Pennsylvania, Virginia, Vermont, New York and
Massachusetts, (iv) Borden Inc. sells a potato chip product under
the "Cain's" name, although Seller knows of no registration by
Borden; and (v) Seller is aware of other current uses of the "CAIN"
or "CAIN'S" name which do not appear to be closely related to
products which are similar to those sold by the Company. Buyer
further acknowledges that there may be other material information
relating to the trademarks or other intellectual property rights
which Seller is not aware of, and has not investigated, which may
affect such trademarks, tradenames or other intellectual property
rights.
3.22.3 Transfer of Marks. Based on the
foregoing, Seller represents and warrants that the Agreement for
the Purchase and Sale of Trademarks, a copy of which is attached
hereto as Exhibit C, and this Agreement, taken together, are
sufficient to transfer to Buyer all of the Company's and SPN's
right, title and interest in and to the Marks, without
representation of any kind as to the scope or extent of the rights
associated with such Marks.
3.23 Inventory. All Inventory reflected on the Opening
Statement and all inventory acquired by the Company subsequent to
June 30, 1992 to and including the Closing Date was and will be
acquired in the ordinary course of business. The inventory
reflected on the Opening Statement has been accounted for using the
first in, first out inventory method; however, there has been no
analysis to determine if any adjustments should be made to take
into account inventories which may have a cost higher than current
market values. The inventory to be reflected on the Closing
Statement of Net Assets will be accounted for, at the lower of cost
(first-in, first-out) or market of such inventory, in accordance
with GAAP.
3.24 Capital Projects and Expenditures. All capital
projects and capital expenditures undertaken by the Company, or to
which the Company is committed, which have not been completed by
the date hereof and which involve an expected expenditure on or
after the date hereof of more than $50,000 to complete are set
forth on Schedule 3.24 attached hereto.
3.25 Subsidiaries. Except as set forth in Schedule 3.25,
the Company does not, directly or indirectly, own any stock or
other equity interest in any other person or entity.
3.26 Compensation, Vacation Time, Bonuses. Attached
hereto as Schedule 3.26A is (i) a list of the names, titles and
annual compensation (including bonus) of each employee of the
Company who, as of the Closing Date, are entitled to receive base
compensation in excess of $50,000 per annum; and (ii) the accrued
vacation time of each such employee. The policies of the Company
do not permit employees to carryover accrued vacation time from
year to year provided, however, under limited circumstances the
Company has allowed employees to carry over up to one-half of their
annual accrued vacation until the end of May the following year.
Traditionally, bonuses paid to employees of the Company have been
calculated and paid in the manner set forth on Schedule 3.26B
attached hereto.
3.27 Bank Accounts. Attached hereto as Schedule 3.27 is
a list of each financial institution in which the Company maintains
an account or safety deposit box, the number of such account or
safety deposit box, and the names of all persons holding check
signing or withdrawal powers or other authority with respect
thereto.
3.28 Suppliers, Distributors and Customers. Schedule
3.28, attached hereto, lists the five largest suppliers of the
Company by dollar amount for the twelve months ending on June 30,
1992, and the five largest direct purchasers of the Company's
products by dollar amount for the six months ending on June 30,
1992. In the last twelve months no such supplier or customer of
the Company has notified the Company in writing that it has
cancelled or otherwise terminated, or threatened in writing to
cancel or otherwise terminate, its relationship with the Company.
3.29 Material Contracts and Other Agreements.
Schedule 3.29A, attached hereto, sets forth all of the (i)
contracts and other agreements with any current officer or
director, and material agreements with affiliates of the Company;
(ii) contracts and other agreements with any labor union or
association representing any employee; (iii) any contracts and
other agreements between the Company and any person which relate to
the sale, distribution or marketing of any of the products of the
Company where the Company's sales to such person in the twelve (12)
month period ending June 30, 1992 exceeded $100,000 except for
purchase orders received from customers of the Company in the
ordinary course of business; (iv) material contracts and other
material agreements pursuant to which any party is required to
purchase or sell a stated portion of its requirements or output
from or to another party; (v) material contracts and other material
agreements for the sale of any of its assets or for the grant to
any person of any preferential rights to purchase any of its
assets; (vi) joint venture agreements; (vii) contracts and other
agreements restraining the Company in any respect from engaging or
competing in any line of business or with any person or in any
geographical area; (viii) contracts and other agreements relating
to the acquisition by the Company of any operating business or the
capital stock of any other person; (ix) contracts and other
agreements relating to the borrowing of money, other than those
relating to the financing of automobiles or other vehicles not in
excess of $100,000; (x) contracts or agreements wherein the Company
has guaranteed the obligation, or agreed to be responsible for the
negligence, of any other person or entity; or (xi) any other
contracts or other agreements pursuant to which payments in excess
of $100,000 have been made or which are for terms longer than
ninety (90) days. The items listed on Schedule 3.29A (hereinafter
the "Material Contracts") have been listed by subsections which
correspond to the subsections used above. True and complete copies
of all of the Material Contracts have been made available to Buyer.
Except as set forth on Schedule 3.29B, all of such Material
Contracts are valid and binding upon the Company. Except as set
forth on Schedule 3.29C, the Company is not in default in any
material respect under any of the Material Contracts, nor, to the
best of Seller's knowledge, is any other party to any of the
Material Contracts in default thereunder in any material respect.
For purposes of this Section 3.29, a contract shall not be
considered material if it is terminable on ninety (90) days notice
or less without penalty or is subject to payment of not more than
$100,000 prior to termination. Except as set forth on Schedule
3.29D attached hereto, no such Material Contract contains any
requirement with which there is a reasonable likelihood that (i)
the Company or any other party thereto will be unable to comply or
(ii) compliance therewith by the Company would have a material
adverse effect on the business of the Company.
3.30 Renegotiation Act. Since January 1, 1990, the
Company has not made any repayments pursuant to the provisions of
the Federal Renegotiation Act on account of any contract with the
United States Government or any agency, department or subdivision
thereof.
3.31 Material Misstatements or Omissions. No
representation or warranty by Seller contained in this Agreement or
the Schedules attached hereto, and no document or certificate
furnished or to be furnished to Buyer in connection herewith or
with the transactions contemplated hereby, contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements of fact contained herein or
therein at the time such statement was made not misleading.
4. Representations and Warranties of Buyer. Buyer hereby
further represents and warrants to Seller as follows:
4.1 Authority. This Agreement has been adopted, and its
execution and delivery to Seller and the performance thereof have
been duly authorized by the Board of Directors of Buyer, and no
further action is necessary on the part of Buyer to make this
Agreement valid and binding upon it. Except for the filing
required by the provisions of the HSR Act, no consent,
authorization or approval of, exemption by, or filing with, any
domestic governmental or administrative authority, or any court, is
required to be obtained or made by Buyer in connection with the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
4.2 Organization and Good Standing. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of New York.
4.3 Brokerage or Finder's Fees. Buyer has not incurred
any liability to any broker, finder or agent other than Alex. Brown
& Sons Incorporated for any brokerage fees, finder's fees or
commissions with respect to the transactions contemplated by this
Agreement. Any such fee payable to Alex. Brown & Sons Incorporated
will be the sole and exclusive obligation of Buyer.
5. Seller's Covenants and Agreements. Seller hereby affords
Buyer the following affirmative and negative covenants, thereby
agreeing to the following:
5.1 No Corporate Borrowings. From the date hereof
through the Closing Date, Seller will use its best efforts to
ensure that the Company shall not, except in the ordinary course of
business, without the prior written consent of Buyer, borrow monies
for any reason or draw down on any line of credit or long-term debt
obligation, or become the guarantor, surety or endorser of the
obligation of any other person, partnership, corporation or other
business entity.
5.2 Conduct of Business.
5.2.1 Diligent Conduct. From the date hereof
through the Closing Date, Seller will use its best efforts to
ensure that the Company shall (i) conduct its business diligently
and in the ordinary course, (ii) preserve intact its business and
marketing organization, (iii) retain in its employ all of its key
employees and (iv) preserve its relationships with its suppliers,
customers, sales representatives, and others having business
relations with it.
5.2.2 Capital Commitments. From the date hereof
through the Closing Date, Seller will use its best efforts to
ensure that the Company shall not, without the prior written
consent of Buyer, make commitments for capital expenditures in
excess of an aggregate of $100,000; provided, however, that the
Company may make expenditures in the event of an emergency without
the prior written consent of Buyer.
5.2.3 Properties and Assets. From the date
hereof through the Closing Date, Seller will use its best efforts
to ensure that the Company shall not, without the prior written
consent of Buyer, sell or transfer the Real Property or any other
assets, cancel any debts or claims, or mortgage, pledge or subject
to lien, charge or encumbrance of any kind (other than liens for
taxes and assessments not delinquent) any of its assets, except in
the ordinary course of business.
5.2.4 Contracts. From the date hereof
through the Closing Date, Seller will use its best efforts to
ensure that the Company shall not, without the prior written
consent of Buyer, enter into, amend or terminate any Material
Contract other than in the ordinary course of business.
5.2.5 Insurance. From the date hereof through
the Closing Date, Seller will not cancel any of the insurance
policies described in Schedule 3.17 attached hereto.
5.2.6 Compensation of Employees. From the date
hereof through the Closing Date, the Company may, in the ordinary
course of business and consistent with past practice, increase the
compensation payable or to become payable to any of its officers,
employees or agents, or make any bonus payment or similar
arrangement with any such person.
5.2.7 Long Term Liabilities. On or prior to the
Closing Date, Seller shall have caused the Company to pay any and
all liabilities of the Company that would be classified as long-
term liabilities of the Company in accordance with GAAP except as
modified by Schedule 3.7.1B, such that on the Closing Date the
Company shall have no liabilities except for liabilities that would
be classified as current liabilities in accordance with GAAP except
as modified by Schedule 3.7.1B; it being understood that Seller
shall have no obligation to pre-pay lease payments thereafter due
on leased vehicles.
5.3 Access and Information. Subject to the Buyer's
continuing compliance with the provisions of Section 6, prior to
the Closing, Seller shall afford to Buyer and Buyer's counsel,
accountants and other representatives, reasonable access to all
properties, books, contracts, records and personnel of the Company
and any records concerning the Company maintained and accumulated
by its counsel, accountants and other representatives. In
addition, Seller shall use its reasonable efforts to provide Buyer
with all reasonably obtainable information relating to any matter
involving the Company's insurance coverages, exposures and claims
with respect to any claim since January 1, 1989.
5.4 Disposition of Employee Benefit Plans.
5.4.1 Retirement Plans. Seller shall continue
to maintain the employee benefit plans set forth in Schedule 3.17,
attached hereto, for the benefit of the employees of the Company
until the Closing Date. Thereafter Seller shall treat the employees
of the Company as terminated employees in accordance with the
current terms and provisions of such plans; provided, however, that
on the Closing Date Seller agrees to fully vest those employees who
are not vested in the Nestle USA, Inc. Retirement Plan or the
Nestle USA, Inc. Retirement Savings Plan (401K) as of the Closing
Date and who on such date have a minimum of thirty (30) months of
service as determined under the terms of such plans, in those
benefits accrued by them under such plans to and including the
Closing Date. Seller shall have no further obligation with respect
to employees of the Company with less than thirty (30) months of
service.
5.4.2 Disability. Seller shall continue to
provide both short-term and long-term disability and related health
benefits to employees of the Company until the Closing Date, and,
from and after the Closing Date, to each employee or former
employee of the Company who, as of the Closing Date, is receiving
or is entitled to receive such benefits pursuant to any of Seller's
disability plans.
5.4.3 Retiree Health Benefits. Until the
Closing Date Seller shall continue to provide health benefits to
retired employees of the Company who had retired prior to the
Closing Date and, from and after the Closing Date Seller shall
continue to provide health benefits to such retired employees, and
after they retire from the employ of the Company and the Buyer, to
those employees of the Company who were qualified for post
retirement health benefits on the Closing Date (except for the fact
that they were not retired), all of whom are listed on Schedule
5.4.3 attached hereto, on the terms on which they were qualified on
the Closing Date to the extent Seller provides such benefits to
other qualified retirees of Seller. If it is finally determined by
a court of competent jurisdiction that any person employed by the
Company at any time prior to the Closing Date is entitled to post-
retirement health benefits as a result of actions taken by Seller
or the Company prior to the Closing Date relating to conditions of
employment, Seller shall be liable therefore.
5.4.4 Severance Obligations. If any person
employed by the Company on the Closing Date is terminated after the
Closing Date, and it is finally determined by a court of competent
jurisdiction that such person is entitled to severance benefits of
more than two weeks of compensation as a result of actions taken by
Seller or the Company on or prior to the Closing Date relating to
conditions of employment, Seller shall be liable for that portion
of the severance payable to such person which exceeds two weeks of
compensation.
5.4.5 Health Benefits. Seller shall continue to
be responsible for medical expenses incurred by an employee of the
Company following the Closing Date provided such employee was
hospitalized in accordance with the terms of Seller's welfare
benefit plans prior to midnight on the Closing Date. Seller's
obligation under this Section 5.4.5 shall terminate when such
employee is discharged from the hospital and Seller shall have no
liability for such employee's subsequent medical expenses,
including any follow-up doctor's visits or additional
hospitalizations.
5.5 Audited Financial Statements. On or before the
second day prior to the Closing Date, Seller shall use its best
efforts to deliver to Buyer financial statements of the Company for
the years ended December 31, 1991, and December 31, 1990 and the
nine months ended September 30, 1992, which financial statements
(the "Audited Statements") shall have been reported on by a
nationally recognized firm of certified public accountants and
shall be in form satisfactory to meet the rules and regulations of
the Securities and Exchange Commission ("SEC") applicable to Buyer,
including, without limitation, the provisions of Regulation S-X
promulgated by the SEC, using, to the extent permitted under such
rules, accounting principles previously used by the Company applied
in a manner which is consistent with the Company's prior use. Any
failure by Seller to deliver such financial statements shall not
constitute a breach of this Agreement provided Seller has used its
best efforts to fulfill its obligations under this Section 5.5 and
such failure shall not give rise to any damages of any kind, but
shall give Buyer the right to terminate this Agreement as a
consequence of the failure of the condition set forth in Section
8.1.12. Seller's obligation to use its best efforts shall not
require the expenditure of more than $350,000. Buyer will not
unreasonably withhold its consent to any request for a reasonable
extension of time to complete the preparation of the Audited
Statements. Buyer and its accountants shall be afforded reasonable
access to and shall be entitled to review such work papers,
schedules, memoranda and other documents as may have been prepared
by the Company or the accountants in connection with the
preparation of the Audited Statements.
5.6 Intentionally Omitted.
5.7 Covenant Not to Compete. For a period of five (5)
years from and after the Closing Date, neither Seller nor any
affiliate of Seller will compete with the Company in the
foodservice direct store delivery coffee business in those
localities which are serviced by the Company on the Closing Date
(the "Restricted Service Areas"), provided, however, that during
the two (2) year period commencing on the third anniversary of the
Closing Date and terminating on the fifth anniversary of the
Closing Date, Seller, or any affiliate of Seller, may acquire a
company which engages in the foodservice direct store delivery
coffee business in the Restricted Service Areas, and may continue
such business, provided that the sales and revenues derived from
the foodservice direct store delivery coffee business represent no
more than twenty-five percent (25%) of the overall sales and
revenues of the company being acquired in any of the previous three
years before the date of acquisition. Buyer and Seller expressly
acknowledge and agree that, from and after the Closing Date, Seller
may continue its Sark's Coffee retail direct store delivery
business in such areas as it is currently conducted or may
hereafter be expanded. Buyer and Seller expressly acknowledge and
agree that, from and after the Closing Date, Nestle Brands
Foodservice Company, an affiliate of Seller, may continue its
current distribution of foodservice products, as such business may
hereafter be expanded or modified. Except as otherwise authorized
by the terms of this Section 5.7, Seller will not in competition
with the Company (i) solicit or deal with any customer of the
Company; or (ii) hire away, interfere with or attempt to hire away
any employee of the Company. In the event that the provisions of
this Section 5.7 should ever be deemed to exceed the time or
geographic limitations or any other limitations permitted by
applicable laws, then such provisions shall be deemed reformed to
the maximum permitted by applicable laws. Seller specifically
acknowledges and agrees that (i) the foregoing covenant is an
essential element of this Agreement and that, but for the agreement
of Seller to comply with such covenant, Buyer would not have
entered into this Agreement; (ii) the remedy of law for any breach
of the foregoing covenant will be inadequate; and (iii) Buyer, in
addition to any other relief available to it, shall be entitled to
temporary and permanent injunctive relief in the event the Seller
or any affiliate of the Seller violates the provisions of this
Section 5.7.
5.8 HSR Filing. On or prior to October 28, 1992, Seller
shall file with the Federal Trade Commission ("FTC") and the U.S.
Department of Justice ("DofJ") the notification to be filed under
the HSR Act with respect to the transactions contemplated by this
Agreement. Seller shall use its best efforts (a) to respond to any
request for additional information made by such agencies, and (b)
to resist vigorously any assertion that the actions contemplated by
the Agreement constitute a violation of the anti-trust laws of the
United States or any State; provided, however, that Seller shall
not be obligated to litigate any such assertion and shall be deemed
to have complied with the requirements of this Section 5.8 even
though it elects not to pursue litigation if it has pursued all
other reasonable methods of resistance.
5.9 Section 338(h)(10) Election. Seller will join with
Buyer in making an election under Sections 338(g) and 338(h)(10) of
the Internal Revenue Code of 1986, as amended (the "Code") and any
corresponding elections under state and local tax law (collectively
a "Section 338(h)(10) Election") with respect to the purchase and
sale of the stock of the Company hereunder. A regular exclusion
election under Reg. Section 1.338-5T(c)(2) will be made. Seller
will pay any federal tax (including, without limitation, income
tax) attributable to the making of the Section 338(h)(10) Election.
Seller will also pay any state or local tax (including without
limitation, income tax) attributable to an election under state or
local law similar to the election available under Section 338(g) of
the Code (or which results from the making of an election under
Section 338(g) of the Code) with respect to the purchase and sale
of the stock of the Company hereunder where the state or local
jurisdiction (i) does not provide or recognize a Section 338(h)(10)
Election or (ii) does not apply its provisions corresponding to
Section 338(h)(10) of the Code to the purchase and sale of the
stock of the Company.
5.10 Allocation of Purchase Price. The parties agree
that the Purchase Price and the liabilities of the Company will be
allocated to the assets of the Company for all purposes (including
tax and financial accounting purposes) in the manner set forth on
Schedule 5.10 attached hereto. Seller agrees to file all tax
returns (including amended returns and claims for refund) and
information reports in a manner consistent with such allocation.
5.11 Inter-Company Product Sales. For a period of five
(5) years from and after the Closing Date Seller agrees to supply
to the Company, for its use, those products listed on Schedule 5.11
attached hereto, which products represent all of the products
currently sold by Seller (or its affiliates) to the Company.
Seller agrees to sell such products to the Company at prices
calculated in the same manner as the prices for such inter-company
product sales were calculated prior to the Closing. The price for
those products to be co-packed by Seller shall continue to be based
primarily on Seller's cost of ingredients plus an amount which
represents a portion of Seller's fixed overhead costs. Seller
acknowledges that the Company may, but shall not be required to,
purchase some or all of such products at its sole option. Seller
shall provide Buyer with a draft of a contract manufacturing
agreement with respect to those products to be co-packed by Seller
which incorporates the terms specified in this Section 5.11 and
shall use its best efforts to reach an agreement with Buyer as to
the terms thereof on or before the Closing Date and to execute such
agreement on the Closing Date, it being understood and agreed that
Seller's obligations hereunder are not conditioned upon the prior
execution of such agreement.
5.12 Assumption of Future's Contracts. On the Closing
Date and prior to preparation of the Closing Statement of Net
Assets, Seller will assume, and shall be entitled to the benefit
of, any and all open contracts for the future delivery of green
coffee or raw tea to the Company, excepting only those contracts
which cover such raw materials which may then be in transit to the
Company and where title to such raw materials has passed to the
Company. Prior to Closing, Seller will cooperate with Buyer in
Buyer's efforts to assure that the supply of raw materials to the
Company will not be interrupted immediately after the Closing Date,
and upon request, Seller will supply to Buyer from time to time the
list of open contracts entered into by or on behalf of the Company,
including the date of the contract, the price, the amounts covered
by the contract and the scheduled delivery date or dates, and the
amount of inventories on hand at, and in transit to, the Company.
5.13 Assumption of Liability for Claims of Common
Carriers. The parties acknowledge that the Company has received
and may hereafter receive a number of claims from bankruptcy
trustees who represent various common carriers to the effect that
such carriers undercharged the Company for shipping product by
failing to charge the appropriate ICC tariff fee. Seller agrees to
defend the Company against any such claims to the extent the claim
relates to services provided prior to the Closing Date and to
assume liability for amounts which it is finally determined that
the Company owes to any bankrupt common carrier provided such
amounts relate to services provided to the Company prior to the
Closing Date. If Buyer or the Company shall admit liability for
any such claim or take any action which has a material adverse
impact on Seller's ability to defend itself against such claims,
this covenant shall terminate with respect to the claims so
involved.
6. Buyer's Covenants and Agreements. Buyer hereby affords
Seller the following affirmative and negative covenants, thereby
agreeing to the following:
6.1 Nondisclosure of Confidential Information of the
Company. Buyer acknowledges that it remains bound by the terms of
the confidentiality agreement heretofore signed by it and attached
hereto as Exhibit A.
6.2 Employee Terminations.
6.2.1 Severance Benefits. Buyer agrees that if
any person employed by the Company on the Closing Date is
terminated, other than for cause, Buyer shall be responsible for
paying to each such employee as a severance benefit two weeks of
compensation if such person had been employed by the Company for
more than one year and one week of compensation if such person had
been employed by the company for three or more months but not more
than one year.
6.2.2 Warn Notice. Buyer acknowledges that it
shall be Buyer's responsibility to provide any notice of layoff or
plant closing that might be required pursuant to the Worker
Adjustment and Retraining Notification Act of 1988 with respect to
any plant closings or terminations from and after the Closing Date.
6.3 Consent Order. Buyer agrees to be bound by the
terms of the Federal Trade Commission's Consent Order attached
hereto as Schedule 3.1.
6.4 Assumption of Leases. Buyer agrees to assume all of
Seller's obligations arising from and after the Closing Date (i)
under the fleet vehicles leases with respect to those vehicles
disclosed on Schedule 6.4 attached hereto, and (ii) under the AS400
computer lease; provided that Buyer is receiving the benefits
thereof. If either of the lessors of such vehicles or the AS400
lessor fails to consent to an assignment of such leases, Seller
agrees either (i) to continue to provide Buyer with the benefits of
such lease in which event Buyer shall continue to pay all of
Seller's obligations thereunder or (ii) to terminate such leases
and to pay any penalties imposed as a result of such early
termination.
6.5 Disposition of Employee Benefit Plans. Buyer agrees
that except as otherwise contemplated by Section 5.4 hereof, from
and after midnight on the Closing Date, the Company and each of its
salaried employees and hourly employees shall cease participating
in the welfare benefit plans maintained by Seller and commence
participation in the welfare benefit plans presently maintained by
Buyer to the extent, if any, that each such employee qualifies for
such participation pursuant to the terms of such plans. Buyer
further agrees that Seller's medical and dental insurance plans
shall only be responsible for medical and dental expenses incurred
before the Closing Date or covered by Section 5.4 hereof.
6.6 HSR Filing. On or prior to October 28, 1992, Buyer
shall file with the FTC and the DofJ the notification required to
be filed under the HSR Act with respect to the transactions
contemplated by this Agreement accompanied by the appropriate
filing fee. Buyer shall use its best efforts (a) to respond to any
request for additional information made by such agencies, and (b)
to resist vigorously any assertion that the actions contemplated by
this Agreement constitute a violation of the anti-trust laws of the
United States or any State; provided, however, that Buyer shall not
be obligated to litigate any such assertion and shall be deemed to
have complied with the requirements of this Section 6.6 even though
it elects not to pursue litigation if it has pursued all other
reasonable methods of resistance.
6.7 Allocation of Purchase Price. The parties agree
that the Purchase Price and the liabilities of the Company will be
allocated to the assets of the Company for all purposes (including
tax and financial accounting purposes) in the manner set forth on
Schedule 5.10 attached hereto. Buyer agrees to file and to cause
the Company to file, all tax returns (including amended returns and
claims for refund) and information reports in a manner consistent
with such allocation.
6.8 Access to Records. Buyer agrees to allow
representatives of Seller, during a reasonable time following the
Closing, access to the original books and records being transferred
to Buyer for the purpose of defending any claim or cause of action
which may be alleged or filed against Seller relative to the
Company. Buyer further agrees that it will cooperate with Seller
in such matters to the extent requested by Seller, at the cost of
Seller, including compensation for time spent by personnel of Buyer
and the reimbursement of Buyer's out-of-pocket costs. Buyer also
agrees to notify Seller prior to the destruction of records
relating to periods prior to the Closing.
6.9 Inter-Company Product Sales. Buyer shall use its
best efforts to reach an agreement with Seller as to the terms of
the contract manufacturing agreement referred to in Section 5.11
hereof on or before the Closing Date and to execute such agreement
on the Closing Date.
7. Termination of Agreement. From and after December 30,
1992 either party who is not otherwise in default under this
Agreement may terminate this Agreement by giving a written notice
of termination to the other party. In addition, at any time the
parties may mutually agree to an early termination. No party by
its own actions may intentionally delay the Closing beyond December
30 in order to have a right of termination. Any intentional delay
by a party shall result in an extension of the December 30 date
insofar as that party (but not the other party) is concerned. A
termination shall be effective on the date that a termination
notice is properly given, a party exercises a right to terminate
at Closing because of the failure of a material condition (if the
Closing is on or after December 30, 1992) or the effective
termination date under a mutual agreement (the "Termination Date").
From and after the Termination Date this Agreement shall become
void and shall have no further force or effect whatsoever, except
that the provisions of this Section 7 and of Section 6.1 shall
survive the termination and shall continue in full force and
effect. If this Agreement is terminated by other than mutual
agreement, and the non-terminating party is not in material breach
of its obligations contained in this Agreement, then the
terminating party shall pay to the non-terminating party, an amount
equal to all reasonable expenses actually incurred by the non-
terminating party in connection with this transaction.
8. Conditions Precedent to Closing.
8.1 Conditions Precedent to Obligations of Buyer. The
Closing shall not take place unless all of the following conditions
are either waived by Buyer or fulfilled.
8.1.1 Correctness of Representations and
Warranties. The representations and warranties of Seller contained
in this Agreement or any other document delivered to Buyer at the
Closing in connection with this Agreement shall be true on and as
of the Closing Date, as if made on and as of the Closing Date.
8.1.2 Performance of Covenants and Agreements.
Seller shall have performed and complied with all covenants,
obligations and agreements to be performed or complied with by it
on or before the Closing Date pursuant to this Agreement.
8.1.3 Opinion of Seller's Counsel. Buyer shall
have received an opinion from Seller's General Counsel dated the
Closing Date substantially in the form of Exhibit B attached
hereto. In rendering such opinion such counsel may rely on
governmental advice, factual certificates, opinions of local
counsel and such other matters as such counsel may deem reasonably
appropriate and as are acceptable to Buyer's counsel. Such opinion
may also contain such assumptions and qualifications as such
counsel deems appropriate and as are acceptable to Buyer's counsel.
8.1.4 Good Title to Shares. Seller shall have
transferred all the Shares to Buyer, free and clear of all liens,
encumbrances or restrictions. No claim shall have been filed, made
or threatened by any person or entity asserting that he or she is
entitled to any part of the Purchase Price paid for the Shares.
8.1.5 No Prohibition of Transaction. No
proceeding or regulation or legislation shall have been instituted,
threatened or proposed before, nor any order issued by, any
governmental body to enjoin, restrain or prohibit or obtain
substantial damages (a) in respect of, or which is related to, or
arises out of, this Agreement or the consummation of these
transactions, or (b) which, in the reasonable judgment of Buyer,
could have a materially adverse effect on the assets, liabilities,
business prospects, results of operations or financial condition of
the Company.
8.1.6 Compliance with Law. Seller and Company
shall have obtained any and all permits, approvals and consents of
any governmental body which counsel for Buyer may reasonably deem
necessary or appropriate so that consummation of these transactions
will be in compliance with applicable requirements, including
without limitation those specifically set forth on Schedule 8.1.6
attached hereto.
8.1.7 FIRPTA Affidavit. Buyer shall have
received from Seller an affidavit declaring that it is not a
foreign corporation, foreign partnership, foreign trust or foreign
estate as those terms are defined in the Internal Revenue Code and
Income Tax Regulations.
8.1.8 Consents. On or prior to the Closing
Date, Seller shall furnish Buyer with evidence of such consents as
are listed on Schedule 3.15 attached hereto; provided, however,
that although Seller shall use its best efforts to obtain the
consent of the lessors of the vehicles referred to on Schedule 6.4
attached hereto and of the lessor of the AS400 computer equipment,
the parties hereto agree that Seller shall have no liability if it
is unable to secure such consent and that Buyer will assume the
obligations established by Section 6.4 hereof.
8.1.9 Sale of Marks. Buyer and Societe des
Produits Nestle S.A. ("SPN"), the owner of the Marks, shall have
entered into a purchase and sale agreement substantially in the
form of Exhibit C attached hereto, pursuant to which SPN shall sell
and Buyer shall purchase the Marks and such purchase and sale shall
have been completed simultaneously with the Closing.
8.1.10 Tax Indemnity Agreement. Buyer, Seller,
the Company and Nestle Holdings, Inc. shall have entered into a Tax
Indemnity Agreement substantially in the form of Exhibit D attached
hereto.
8.1.11 HSR Filing Period. The applicable waiting
period under the HSR Act shall have expired.
8.1.12 Financial Information. Seller has
delivered to Buyer the audited financial statements referred to in
Section 5.5.
8.2 Conditions Precedent to Obligations of Seller. The
Closing shall not take place unless all of the following conditions
are either waived by Seller or fulfilled:
8.2.1 Correctness of Representations and
Warranties. The representations and warranties of Buyer contained
in this Agreement or any other document delivered by Buyer to
Seller at the Closing in connection with this Agreement shall be
true on and as of the Closing Date, as if made on and as of the
Closing Date.
8.2.2 Performance of Covenants and Agreements.
Buyer shall have performed and complied with all covenants,
obligations and agreements to be performed or complied with by it
on or before the Closing Date pursuant to this Agreement.
8.2.3 Opinion of Buyer's Counsel. Seller shall
have received from Dreyer and Traub, counsel for Buyer, an opinion
dated the Closing Date, substantially in the form of Exhibit E
attached hereto. In rendering such opinion such counsel may rely
on governmental advice, factual certificates, opinions of local
counsel and such other matters as such counsel may deem reasonably
appropriate and as are acceptable to Seller's counsel. Such
opinion may also contain such assumptions and qualifications as
such counsel deems appropriate and as are acceptable to Seller's
counsel.
8.2.4 Compliance with Law. Buyer shall have
obtained any and all permits, approvals and consents of any
governmental body which counsel for Seller may reasonably deem
necessary or appropriate so that consummation of these transactions
will be in compliance with applicable requirements, including
without limitation those specifically set forth in Schedule 8.2.4.
8.2.5 No Litigation. No suit, action,
arbitration or legal administrative or other proceeding or
governmental investigation shall be pending or threatened against
the Company or Seller in relation to or affecting consummation of
the transactions contemplated herein.
8.2.6 Tax Indemnity Agreement. Buyer, Seller
the Company and Nestle Holdings, Inc. shall have entered into a Tax
Indemnity Agreement substantially in the form of Exhibit D attached
hereto.
8.2.7 HSR Filing Period. The applicable waiting
period under the HSR Act shall have expired.
8.2.8 Sale of Marks. Buyer and SPN shall have
entered into a purchase and sale agreement substantially in the
form of Exhibit C attached hereto, pursuant to which SPN shall sell
and Buyer shall purchase the Marks and such purchase and sale shall
have been completed simultaneously with the Closing.
9. Mutual Covenants.
9.1 Public Statements. Except as may be required by
law, from the date of this Agreement until the Closing Date, the
parties hereto will not make, issue or release any oral or written
public announcement or statement concerning, or acknowledgment of
the existence of, or reveal the terms, conditions and status of the
transaction contemplated by this Agreement, without first making a
good-faith attempt to obtain the prior approval of, or concurrence
in, the contents of such announcement, acknowledgement or statement
by the other parties, which approval or concurrence will not be
unreasonably withheld or delayed.
9.2 Assumption of Certain Potential Environmental Liabilities
of the Company by Seller and Buyer. The parties agree that this
Section 9.2 is intended merely to provide an allocation of
potential exposure as between the parties hereto, and nothing in
this Section 9.2 shall constitute an admission of any liability,
responsibility, wrongful or negligent conduct or bad faith by the
Company or by any of the parties hereto.
9.2.1 Seller's Assumption. Upon the terms and
subject to all of the conditions contained in this Agreement, and
for the consideration Seller has received from Buyer under this
Agreement on the date hereof, Seller agrees that Seller shall
assume and shall indemnify Buyer and the Company from and against
any and all Indemnified Losses (as defined in Section 10.1) up to
the Maximum Environmental Liability Amount (as defined in Section
10.4) relating to:
(i) the matters set forth as Items 4 and 5 on Schedule
3.16
(ii) On-site Environmental Liability (as hereinafter
defined) existing on the Closing Date and/or arising from
activities of the Company occurring prior to the Closing
Date, and
(iii) Off-site Environmental LiabilitY (as hereinafter
defined) existing on the Closing Date and/or arising from
activities of the Company occurring prior to the Closing
Date.
Seller's obligation under this Subsection 9.2.1 shall be
to pay Indemnified Losses with respect to remediation or
investigation of the matters described in clauses (i), (ii) and
(iii) of the preceding sentence. Remediation and investigation
costs shall be deemed to include applicable fines and penalties and
damages to third parties arising from On-site Environmental
Liability and Off-site Environmental Liability. In undertaking to
fulfill any obligation to remediate or investigate any On-site
Environmental Liability or Off-site Environmental Liability, Seller
either shall employ qualified third party providers to perform the
work on a timely basis in a workmanlike manner in accordance with
all laws, and in a manner which shall not unreasonably interfere
with the operations of the Company, or shall pay to unrelated third
parties the Company's share of costs incurred by them to complete
the required remediation or investigation. Seller shall not in any
event be responsible for or pay consequential, punitive or other
costs or damages incurred by the Company or Buyer over and above
the actual costs necessary to effect Seller's obligations under
clauses (i), (ii) or (iii) of the first sentence of this
Subsection, except for consequential damages of the Company or
Buyer arising as a direct result of a Governmental Shutdown (as
hereinafter defined). The term "On-site Environmental Liability"
shall mean liabilities with respect to the remediation and
investigation of Hazardous Substances (as hereinafter defined)
deposited, stored or buried under any of the Real Property
described on Schedule 3.18A or the leased property described on
Schedule 3.18B or any other property owned or occupied by the
Company at any time prior to the Closing Date pursuant to (i) any
valid governmental request, claim, directive or order based upon
any requirement of law existing on the date of this Agreement,
whether issued before or after the date of this Agreement, or (ii)
any liability (whether incurred before or after the date of this
Agreement) to any other person or entity arising from any
requirement of law existing on the date of this Agreement. The
term "Off-site Environmental Liability" shall mean amounts incurred
to pay the Company's share of any costs which arise as a result of
(i) any valid governmental request, claim, directive or order based
upon any requirement of law existing on the date of this Agreement,
whether issued before or after the date of this Agreement, or (ii)
any liability (whether incurred before or after the date of this
Agreement) to any other person or entity arising from any
requirement of law existing on the Date of this Agreement which
requires the Company to pay or share in the costs associated with
the clean-up of Hazardous Substances (as hereinafter defined) which
were removed from the Company's premises and which were disposed of
by or on behalf of the Company or by a contractor employed by the
Company. If any On-site Environmental Liability or Off-site
Environmental Liability relates to activities conducted both before
and after the Closing Date, Seller shall be responsible only for
the proportionate share of the Indemnified Losses relating to
activities occurring prior to the Closing Date. The term
"Governmental Shutdown" means the closure of a Company plant or
other significant facility for a period of three or more months as
a consequence of a court or administrative order issued on the
basis of a violation of an environmental law existing on the date
of this Agreement. The term "Hazardous Substances" shall mean
flammable explosives, radioactive materials, hazardous, toxic or
dangerous wastes, petroleum or waste oil products, asbestos and
urea formaldehyde.
9.2.2 Buyer's Obligation to Cooperate. Buyer on
behalf of itself and the Company hereby agrees (i) to cooperate
fully and in good faith and to do any and all such things as
Seller, its agents, employees and technical professionals may
reasonably request as being necessary or desirable to effect the
obligation to be undertaken by Seller pursuant to Subsection 9.2.1,
and (ii) to provide Seller assistance in undertaking to reduce the
Company's exposure with respect to any environmental liabilities
which may be covered by Subsection 9.2.1 or to prove that the
Company is not obligated or has only a limited obligation with
respect to any such exposure. Without limiting the foregoing,
Buyer shall cause the Company and its employees to cooperate fully
with the Seller and to afford the Seller, its agents, employees and
technical professionals access to relevant records relating to
matters which may be Seller's responsibility under Subsection
9.2.1. Nothing in this Section 9.2.2 shall be deemed to require
that Buyer or the Company incur any third party expenses; provided,
however that neither Buyer nor the Company shall be entitled to
reimbursement for any costs or expenses incurred by them or by
their agents or employees or by any technical professionals they
elect to employ in connection with their obligations under this
Subsection 9.2.2. If Seller believes that Buyer and/or Company
have failed to co-operate in the manner required by this Section
9.2.2, Seller shall give Buyer written notice specifying the basis
for such non-cooperation and Buyer shall have thirty (30) days
within which to remedy such failure to cooperate. At the end of
such thirty (30) day period, if Buyer is materially in violation of
its obligations under the provisions of this Section 9.2.2,
Seller's obligations under this Subsection 9.2.2 shall terminate
with respect to the particular environmental liability with respect
to which the non-cooperation notice was given ("Non-Cooperation
Liability"), and from and after such termination all Indemnified
Losses incurred in connection with such Non-Cooperation Liability
shall be the sole obligation and responsibility of the Buyer and
the Company.
9.2.3 Notice of Remediation. If Buyer believes that
Seller is obligated to remedy an On-Site Environmental Liability or
an Off-site Liability under clause (ii) or clause (iii) of the
first sentence of Subsection 9.2.1, Buyer shall give Seller prompt
written notice specifying in reasonable detail the nature of the
On-site Environmental Liability or the Off-site Environmental
Liability, as the case may be (an "Environmental Notice"). If
Seller is required to remedy the alleged On-site Environmental
Liability or the alleged Off-site Environmental Liability described
in an Environmental Notice the parties shall meet to establish a
reasonable plan of remediation. If either Seller does not believe
it is required to remedy the alleged On-site Environmental
Liability or alleged Off-site Environmental Liability described in
an Environmental Notice or the parties are unable to agree upon a
plan of remediation, either party may request arbitration under
Section 11 to resolve the matter.
9.2.4 Expiration. All of the Seller's obligations
under this Section 9.2 shall lapse and shall be of no further force
or effect whatsoever from and after the earliest of (i) the date
when the Company has made the payments or has otherwise incurred
costs under this Section 9.2 in an aggregate amount which equals or
exceeds the Maximum Environmental Liability Amount, (ii) the date
when the Company is no longer an affiliate of the Buyer (provided,
however, that Seller's obligations hereunder shall not expire if
the Company is merged into Buyer). In addition, Seller's
obligations under this Section 9.2.1 shall terminate in their
entirety and shall be of no further force and effect with respect
to any On-site Environmental Liability unless an Environmental
Notice with respect thereto has been given to the Seller on or
before the fifth (5th) anniversary of the Closing Date and Seller's
obligations under this Section 9.2.1 shall terminate in their
entirety and shall be of no further force or effect with respect to
any Off-site Environmental Liability unless an Environmental Notice
with respect thereto has been given to the Seller on or before the
tenth (10th) anniversary of the Closing Date.
9.3 Other Actions. Each party hereto agrees to execute and
to deliver such instruments, in form and substance mutually
agreeable to the other party hereto, as such other party may
reasonably require in order to carry out the terms of this
Agreement or the transactions contemplated by this Agreement.
9.4 Best Efforts. Each party hereto will use those
efforts that a prudent person desirous of achieving a result would
use under similar circumstances to ensure that such result is
achieved as expeditiously as possible in order to cause all
conditions to the consummation of the transactions contemplated
hereby to be satisfied, and shall not take any action that would
cause any of its representations and warranties in this Agreement
not to be true and correct as of the Closing Date.
10. Indemnifications.
10.1 Seller's Promise to Indemnify. Subject to Section
10.4 hereof, Seller agrees to indemnify, defend and hold harmless
Buyer and the Company against any and all losses, claims,
liabilities, damages, actions, penalties, fines, costs and
expenses, including attorneys' fees and costs (the "Indemnified
Losses"), arising from, in connection with or with respect to the
following items: (i) any misrepresentation, breach or inaccuracy
of any representation or warranty set forth in Section 3 hereof
(except Section 3.17.8), or (ii) any nonfulfillment of or failure
to comply with any agreement, condition or covenant on the part of
Seller under this Agreement (except Sections 5.4, 5.7, 5.10, 5.11
and 9.2) or in any agreement or document delivered pursuant hereto
or in connection herewith or with the Closing of the transactions
contemplated hereby, (iii) any claim against Buyer or the Company
for liability based upon those items which Seller has assumed
liability for pursuant to Sections 3.17.8, 5.4, 5.7, 5.10, 5.11 and
9.2 hereof and the Tax Indemnity Agreement, or (iv) any claim for
bodily injury or property damage against Buyer or the Company
relating to any product sold or distributed by the Company prior to
the Closing Date; provided, however, that as a condition precedent
to any indemnification pursuant to clause (i) or (ii) hereof, the
Indemnitor (as hereinafter defined) shall have received written
notice of a claim from the Indemnified Party (as hereinafter
defined) pursuant to Section 10.3 within sixty (60) days of the
expiration of an eighteen month period following the Closing Date,
and provided further that as a condition precedent to any
indemnification pursuant to clause (iv) hereof, the Indemnitor
shall have received written notice of a claim from the Indemnified
Party (as hereinafter defined) within sixty (60) days of the fifth
anniversary of the Closing Date.
10.2 Buyer's Promise to Indemnify. Buyer agrees to
indemnify, defend and hold harmless Seller against any and all
Indemnified Losses, arising from, in connection with or with
respect to the following items: (i) any misrepresentation, breach
or inaccuracy of any representation or warranty set forth in
Section 4 hereof, or (ii) any nonfulfillment of or failure to
comply with any agreement, condition or covenant on the part of
Buyer under this Agreement or in any agreement or document
delivered pursuant hereto or in connection herewith or with the
Closing of the transactions contemplated hereby, or (iii) any claim
against Seller for liability based upon those items which Seller
has not assumed liability for pursuant to Section 9.2 hereof, or
(iv) any loss, cost, claim, liability or expense arising out of the
operation or ownership of the Company's business from and after the
Closing Date, including, but not limited to, any claim for (a)
wrongful discharge or (b) breach of any employment contract or
union agreement listed on any schedule attached hereto which arises
from any termination which occurs on or after the Closing Date or
any claim of failure to provide severance benefits or notice of
layoffs or plant closings as required by Section 6.2 hereof;
provided, however, that as a condition precedent to any
indemnification pursuant to clause (i) or (ii) of this Section
10.2, the Indemnitor (as hereinafter defined) shall have received
written notice of a claim from the Indemnified Party (as
hereinafter defined) pursuant to Section 10.3 within sixty (60)
days of the expiration of an eighteen month period following the
Closing Date; provided, further, that the indemnification
obligation set forth in clauses (iii) and (iv) of this Section 10.2
shall survive in perpetuity.
10.3 Procedure for Indemnification. If there is
asserted any claim, liability or obligation that in the judgment of
a party indemnified above (the "Indemnified Party") may give rise
to any Indemnified Losses, or if the Indemnified Party determines
the existence of the foregoing whether or not the same shall have
been asserted, such Indemnified Party shall give the party from
whom indemnity is sought (the "Indemnitor") notice within thirty
(30) business days of the assertion of any claim, liability or
obligation, or within fifteen (15) business days of receipt of
notice of the filing of any lawsuit based upon such assertion, or,
with respect to a claim not yet asserted against the Indemnified
Party, within fifteen (15) days after the determination by an
executive officer of the Indemnified Party of the same, and shall
give Indemnitor a reasonable opportunity of assuming the defense of
such claim, liability or obligation, using counsel acceptable to
the Indemnified Party; provided, however, that the Indemnified
Party shall have the right to participate in such defense, except
that if the Indemnified Party retains separate counsel, other than
in the event of a conflict of interest requiring the retention of
separate counsel, the Indemnified Party shall assume the expense of
the separate counsel. Failure by the Indemnified Party to give
timely notice pursuant to this Section 10.3 shall not relieve the
Indemnitor of its obligations, except to the extent that the
Indemnitor is actually prejudiced by such failure to give timely
notice. No settlement or adjustment shall be made without the
Indemnified Party's prior written consent, which consent will not
be unreasonably withheld. If Indemnitor fails to contest in good
faith any such claim, liability or obligation, the Indemnified
Party shall have the right to defend, settle or pay the same and
pursue its remedies against Indemnitor hereunder. The Indemnified
Party shall cooperate with Indemnitor in any such defense which
Indemnitor elects to assume in the event Indemnitor makes such
request to the Indemnified party and such request is reasonable,
provided Indemnitor will hold the Indemnified Party harmless from
all its out-of-pocket expenses, including attorneys' fees, incurred
in connection with the Indemnified Party's cooperation. If there
is a disagreement among the parties as to whether any claim,
liability or obligation may give rise to any Indemnified Loss, then
the Indemnified Party shall have the right to defend, settle or pay
the same, or to pursue its remedies against Indemnitor hereunder;
provided, however, Indemnitor shall have the right to participate
in such defense and no settlement or adjustment shall be made
without Indemnitor's prior written consent, which consent shall not
be unreasonably withheld.
10.4 Limitations on Seller's Liability. Except for
Indemnified Losses incurred as a consequence of Seller's breach of
a representation or warranty contained in any one or more of
Sections 3.13 or 3.17.8 or Seller's covenants and agreements
contained in Sections 5.2.8, 5.4, 5.7, 5.9, 5.10, 5.11, 9.2 or the
Tax Indemnity Agreement (the "Fully Indemnified Provisions"), which
Indemnified Losses Seller shall pay or reimburse without regard to
a minimum amount, until such time as it is determined that
Indemnified Losses which would be Seller's responsibility under
this Section 10 arising as a consequence of any other provisions
other than the Fully Indemnified Provisions of this Agreement,
calculated by excluding amounts paid under the Fully Indemnified
Provisions, exceed $750,000, Seller shall have no responsibility
under this Section 10. However, once the $750,000 amount has been
exceeded, Seller's responsibility shall extend to the full
indemnified amount, including the items which were encompassed in
the first $750,000. Notwithstanding any other provision of this
Agreement or any provision of law, Seller's maximum liability for
indemnification, breach of contract, or under any other theory of
law, under this Agreement or in any other way related to the
transactions contemplated by this Agreement shall not exceed
$26,000,000 (the "Maximum Liability Amount"). The maximum amount
for which Seller will have responsibility under this Section 10
will equal the Maximum Liability Amount. The maximum amount for
which Seller will have responsibility under Section 9.2 (the
"Maximum Environmental Liability Amount") will equal the Maximum
Liability Amount, less any amounts incurred or payable by Seller
under this Section 10.4 and less any other amounts which may be
credited against the Maximum Liability Amount as provided in this
Section 10.4.
10.5 No Double Benefit. No amount which results in a
downward adjustment under Section 2.3.2 or caused Nine Month
Operating Profit to be reduced below $6,688,000 under Section
12.4.3 shall be counted as an Indemnified Loss under this Section
10.
11. Arbitration.
11.1 Binding Arbitration of All Disputes. Any and all
disputes or claims between the parties hereto arising out of or
relating to the validity, interpretation, enforceability, or
performance of this Agreement, including, without limitation, this
arbitration clause, shall be solely and finally settled by binding
arbitration in New York, New York and, except as otherwise provided
in this Section 11, in accordance with the then prevailing
commercial arbitration rules (the "Rules"), but not under the
auspices, of the American Arbitration Association, provided that in
any case where the rules of the American Arbitration Association or
its successor do not exist or in the opinion of the arbitrators
cannot be equitably applied, the arbitration shall proceed in
accordance with the laws relating to arbitration then in effect in
the State of New York. The parties hereto expressly agree that
binding arbitration is intended by the parties to be the sole
procedure available to either party for the resolution of any and
all disputes or claims between the parties, and each party hereby
waives the right to pursue any other procedure, including, without
limitation, litigation, mediation, or any other form of dispute
resolution other than that procedure described in this Section 11.
Each party irrevocably waives any and all rights to trial by judge
or jury relating to any such disputes or claims.
11.2 Demand and Designation of Arbitrator. By written
notice to the other party (the "Demand Notice"), either party may
demand that a disputed matter be submitted to arbitration. In the
Demand Notice, the party shall specify the nature of the dispute
and shall list not less than three persons who the party believes
to possess the Required Qualifications (as hereinafter defined) to
serve as an arbitrator. Within twenty (20) days of the notice,
both parties shall agree upon the selection of an arbitrator, who
may or may not have appeared in the list in the Demand Notice but
who has the Required Qualifications. If at the end of the twenty
(20) day period the parties have been unable to agree upon a single
arbitrator, then (i) within (30) days of the Demand Notice, each
party shall nominate an arbitrator who has the Required
Qualifications, (ii) if at the end of the thirty (30) day period
one of the parties has failed to nominate an arbitrator, the party
who has made a nomination shall have an additional five (5) days to
designate on behalf of the party who failed to make a nomination an
additional arbitrator who has the Required Qualifications on behalf
of the party who failed to make a nomination, and (iii) within the
later of ninety (90) days following the Demand Notice or forty-five
(45) days following their appointment, the two arbitrators shall
select a third arbitrator who also possesses the qualifications
specified below. If the two arbitrators are not able to agree on
a third arbitrator, one shall be appointed by the American
Arbitration Association. The parties agree that the "Required
Qualifications" for any arbitrator shall include the following
characteristics: (i) each arbitrator must be reasonably
knowledgeable (through employment, education, general business or
professional experience, or otherwise) about the food and beverage
business being conducted by the Company; (ii) each arbitrator must
be reasonably familiar with acquisitions of businesses of similar
nature; (iii) each arbitrator must be reasonably proficient at
analyzing financial information; and (iv) each arbitrator shall
have no current or prior record of employment on a full or part
time basis or as a consultant with any party or affiliate of a
party. Any objections to the qualifications of the arbitrators not
resolved by mutual agreement shall also be a proper subject of
arbitration.
11.3 Discovery Procedures and Evidence. The
arbitrator(s) shall permit discovery, and upon application to the
arbitrator the parties may conduct discovery reasonably necessary
for full understanding of any legitimate issue raised in the
arbitration in accordance with the discovery rules of the Federal
Rules of Civil Procedure (the "FRCP") then in effect. However, the
arbitrators shall not be bound to follow formal rules of evidence
and may impose time limits during which discovery procedures may be
pursued.
11.4 Decision and Enforcement. The arbitrator(s) shall
decide the dispute or claim in accordance with the Rules applying
the substantive law of the State of New York; provided, however,
the arbitrators shall not be empowered to award punitive damages,
and their powers shall be further limited solely to the provision
of compensatory damages (except as specifically authorized by
Section 9.2) to the extent the arbitrator is, or the arbitrators
are, satisfied, as the case may be, that the claiming party has
adequately demonstrated actual direct damages. Compensatory
damages may include all costs of arbitration, including reasonable
attorney's fees and costs incurred in connection with the
arbitration or enforcement or collection of the arbitration award.
Judgment upon the arbitration award may be entered in or enforced
by any court having jurisdiction over the parties or their assets.
No party shall take any dispute or claim subject to arbitration
hereunder to any court until an arbitration decision has been made.
11.5 Fees of Arbitrators. If one arbitrator has been
selected by both the parties, each party shall pay 50% of the costs
and expenses of the arbitration. If three arbitrators have been
selected, each party shall bear the full cost of the arbitrator
that the party originally selected (or which was selected by the
other party on that party's behalf), and shall pay 50% of the cost
of the third arbitrator and 50% of the other costs of arbitration.
All such fees and costs shall be paid promptly as incurred, but
nothing in this paragraph shall preclude the arbitrators from
awarding such fees and costs as a part of compensatory damages as
provided in Section 11.4 in which case a prevailing party may
become entitled to partial or complete reimbursement of fees and
costs previously advanced.
11.6 Service of Process. The parties agree that service
of process and any notices required under this Section 11 or in
connection with any arbitration conducted under this Section 11 may
be given in the manner provided for the giving of notices under
this Agreement as provided in Section 12.3.
11.7 Conflict in Governing Standards. In the event of
any conflict between the provisions of (i) this Section 11, (ii)
the Rules, or (iii) the FRCP, the provisions of this Section 11
shall prevail. Only the discovery provisions of the FRCP are
referred to herein, but in the event such provisions are not
inconsistent with the provisions of this Section 11 but are
inconsistent with the Rules, the provisions of the FRCP shall
prevail. The arbitrator or arbitrators, as the case may be, shall
have the sole and exclusive right to interpret the provisions of
this Section 11.
12. General Provisions.
12.1 Schedules. The disclosures in the Schedules hereto
are to be taken as relating to the representations and warranties
as a whole without regard to reference to a specific section of the
Agreement.
12.2 Further Assurances. Each party hereto will, from
time to time after the Closing, execute and deliver, and use their
best efforts to cause other persons to execute and deliver, any
such further documents and instruments, and will do or use their
best efforts to cause to be done such other acts, as any party may
reasonably request more completely to consummate and make effective
the contemplated transactions.
12.3 Notices. Notices and other communications provided
for herein shall be in writing, shall be sent via overnight
courier, shall be deemed to have been given when received and shall
be sent to the following addresses, or such other addresses as may
be hereafter specified in a notice given in accordance with the
terms of this Section 12.3, and, in any event, a copy of all such
notices and communications shall be sent via telecopier to the fax
number set forth below:
Seller: Nestle Beverage Company
345 Spear Street
San Francisco, CA 94105
Attn: Legal Department
Fax: (415) 546-1412
Buyer: Chock Full O'Nuts Corporation
370 Lexington Avenue
New York, New York 10017
Attn: Mr. Joseph Breslin,
Chairman of the Board
Fax: (212) 679-9737
With a Copy to: Dreyer and Traub
101 Park Avenue
New York, New York 10178
Attn: George Lander, Esq.
Fax: (212) 984-6262
12.4 Assignment. This Agreement shall not be assignable
by any party without the prior written consent of the other party.
Nothing contained in this Agreement, express or implied, is
intended to confer upon any person or entity other than the parties
hereto and their successors in interest and permitted assignees,
any rights or remedies under or by reason of this Agreement unless
expressly so stated to the contrary.
12.5 Time is of the Essence. Time is of the essence in
respect to all provisions of this Agreement in which a definite
time for performance is specified, provided, however, that the
foregoing shall not be construed to limit or deprive a party of the
benefit of any grace or use period provided for in this Agreement.
12.6 Entire Agreement. This Agreement and the schedules,
exhibits and certificates specifically referred to herein or
required to be delivered pursuant to the terms hereof represent the
entire agreement of the parties hereto with respect to the subject
matter hereof, superseding all prior agreements, understandings,
discussions, negotiations and commitments of any kind. This
Agreement may not be amended or supplemented, nor may any rights
hereunder be waived, except in a writing signed by each of the
parties affected thereby.
12.7 Expenses. Except as set forth below or as otherwise
specified herein, each party hereto shall pay its own legal,
accounting, out-of-pocket and other expenses incident to this
Agreement and to any action taken by such party in preparation for
carrying this Agreement into effect. In addition, Seller shall be
responsible for payment of the fees charged by Lazard Freres &
Company in connection with this transaction.
12.8 Section Headings. The section headings in this
Agreement are included for convenience only, are not a part of this
Agreement and shall not be used in construing it.
12.9 Severability. In the event that any provision or
any part of any provision of this Agreement is held to be illegal,
invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the validity or enforceability of
any other provision or part hereof.
12.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
12.11 Governing Law. The validity, interpretation,
enforceability, and performance of this Agreement shall be governed
by and construed in accordance with the laws of the State of New
York.
12.12 Survival of Representations and Covenants. The
respective representations and warranties and covenants of each
party to this Agreement shall: (a) not be deemed waived or
otherwise affected by any investigation made by or on behalf of the
other party, and (b) survive the Closing and the consummation of
the transactions contemplated hereby for eighteen (18) months
following the Closing, at which time they shall be of no further
force or effect, unless otherwise specified herein.
12.13 Definition of Knowledge. For purposes of Section
3 of this Agreement, all representations which are made as to the
"knowledge of Seller" shall be deemed to have been made based upon
the knowledge of either Tom Donnell, the President of the Company,
or John Masters, the Vice President of Seller in charge of Seller's
coffee division.
12.14 Special Adjustment with Respect to September
1992 Statements.
12.14.1 Operating Profit. The term "Operating Profit"
shall mean Gross Sales by the Company less only (i) discounts and
allowances, (ii) cost of goods (manufactured and purchased),
including variable distribution costs and factory fixed overheads,
(iii) depreciation on factory plant and equipment, vehicles,
buildings and fixtures and restaurant equipment, (iv) fixed
distribution and selling expenses, and (v) general and
administrative expenses. Intercompany charges, including royalties
and operational interest, have not been deducted from operating
profit in order to reflect the Company's stand alone results. Any
calculation of Operating Profit shall be computed in accordance
with GAAP, except as modified by the provisions of Schedule 3.7.1B,
in a manner which is consistent with the Opening Statement and with
historical financial information previously supplied by Seller to
Buyer. This calculation shall include adjustments which are
required or permitted by GAAP which management has normally made at
year end and which management believes are necessary to conform the
results to the requirements of GAAP. The parties hereto agree that
notwithstanding the preceding provisions of this Section, Operating
Profit will not be reduced for any amount relating to annual
bonuses paid or to be paid with respect to the 1992 year and no
amount shall be accrued or expensed with respect to such bonuses.
12.14.2 Preparation. Seller shall prepare and deliver
to Buyer at least two days prior to the Closing Date an Operating
Profit statement for the nine months ended September 30, 1992 (the
"Nine Month Operating Statement"). Buyer and its representatives
shall be entitled to review the work papers, schedules and
memoranda and other documents used in the preparation by Seller of
the Nine Month Operating Statement.
12.14.3 Price Adjustment. If the Operating Profit
shown on the Nine Month Operating Statement (the "Nine Month
Operating Profit") is less than $6,688,000, then the Purchase Price
shall be reduced by an amount equal to the difference between
$6,688,000 and the greater of the (i) the Nine Month Operating
Profit and (ii) $6,200,000. If the Nine Month Operating Profit is
less than $6,200,000, then the Purchase Price shall be further
reduced by the amount determined by multiplying (A) the difference
between $6,200,000 and the greater of (x) the Nine Month Operating
Profit and (y) $5,600,000 by (B) five. If the Nine Month Operating
Profit is less than the $5,600,000, then there shall be no further
reduction in the Purchase Price, but until the earlier of the tenth
day following Buyer's receipt of the Nine Month Operating Statement
or the Closing Date Buyer shall have the option exercisable by
written notice to Seller to terminate this Agreement. If a
termination occurs pursuant to the provisions of the preceding
sentence, neither party shall have any further obligation under
this Agreement of any kind and each shall bear any and all costs or
expenses incurred by it. If Buyer fails to exercise its right to
terminate in accordance with the preceding provisions of this
Section 12.14 on a timely basis, such right shall terminate and
shall be of no further force or effect.
12.14.4 Disputes. If Buyer shall in good faith
disagree with the calculation of the Nine Month Operating Profit
and the parties are unable to resolve the issues within three
business days following the Seller's receipt of a written notice of
objection setting forth in reasonable detail the nature of Buyer's
disagreement, then the matter shall be resolved by a nationally
recognized firm of independent public accountants agreed upon by
Buyer and Seller. The determination made by such firm shall be
conclusive, binding on, and non-appealable by, the parties hereto.
The fees and disbursements of such firm of independent public
accountants shall be divided and borne equally by Seller and Buyer.
12.15 Definition of Affiliate. For purposes of this
Agreement, the term "affiliate" when used in connection with a
company (e.g., Seller) shall mean a company (i) which is owned by
such company, either directly or indirectly, (ii) which owns such
company, either directly or indirectly, or (iii) which is under
common control with such company. For purposes of this definition,
a company shall be deemed to be in a position of ownership or
control of a company if it holds at least 51% of the outstanding
stock of such company.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above mentioned.
BUYER: SELLER:
CHOCK FULL O'NUTS CORPORATION NESTLe BEVERAGE COMPANY,
a New York corporation a Delaware corporation
By: By:
Title: Title: