Execution Copy
STOCK PURCHASE AGREEMENT
among
NONNI'S FOOD COMPANY, INC.
B&G FOODS, INC.
and
BURNS & RICKER, INC.
Dated as of January 17, 2001
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF THE SHARES...........................1
1.1. Purchase and Sale of the Shares.............................1
1.2. Post-Closing Inventory Adjustment...........................1
1.3. Closing Date, Time and Place................................3
1.4. Assignment and Assumption of Contracts......................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER..................5
2.1. Organization................................................5
2.2. Authorization and Enforceability............................5
2.3. No Violations of Laws or Agreements.........................6
2.4. Capital Structure...........................................6
2.5. Subsidiaries................................................7
2.6. Financial Information.......................................7
2.7. Taxes.......................................................7
2.8. Properties..................................................9
2.9. Intellectual Property.......................................9
2.10. Material Contracts..........................................9
2.11. Litigation.................................................10
2.12. Insurance..................................................11
2.13. Employee and Labor Matters.................................11
2.14. Benefit Plans..............................................12
2.15. Absence of Changes or Events...............................13
2.16. Compliance with Applicable Laws............................15
2.17. Licenses and Permits.......................................15
2.18. Environmental Matters......................................16
2.19. Inventory..................................................17
2.20. Equipment..................................................17
2.21. Brokers....................................................17
2.22. No Liabilities.............................................17
2.23. Major Customers............................................18
2.24. Related Party Transactions.................................18
2.25. Sale of Products; Promotions...............................19
2.26. Certain Payments...........................................19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER..................19
3.1. Organization...............................................19
3.2. Authorization and Enforceability...........................20
3.3. No Violations of Laws or Agreements........................20
3.4. Purchase for Investment....................................20
3.5. Brokers....................................................21
2
ARTICLE IV COVENANTS................................................21
4.1. Confidentiality............................................21
4.2. Financial Information......................................21
4.3. Solicitations of Employees.................................21
4.4. Employees..................................................22
4.5. Taxes......................................................23
4.6. Trade Discounts............................................23
4.7. Returns....................................................24
4.8. Accounts Payable...........................................24
4.9. Prepaid Expenses...........................................24
4.10. USPTO Filings..............................................24
4.11. Further Assurances.........................................24
4.12. Press Releases.............................................24
ARTICLE V INDEMNIFICATION..........................................25
5.1. Indemnification by Seller..................................25
5.2. Indemnification by Buyer...................................25
5.3. Indemnification Limitations and Procedures.................25
5.4. Procedures Relating to Indemnification.....................27
ARTICLE VI MISCELLANEOUS............................................28
6.1. Expenses...................................................28
6.2. Construction of this Agreement.............................29
6.3. Assignment.................................................29
6.4. No Third-Party Beneficiaries...............................29
6.5. Amendments.................................................29
6.6. Notices....................................................29
6.7. Consent to Jurisdiction....................................30
6.8. Severability...............................................31
6.9. Waiver.....................................................31
6.10. Counterparts...............................................31
6.11. Entire Agreement...........................................31
6.12. Governing Law..............................................31
6.13. Certain Defined Terms......................................31
6.14. Time is of the Essence.....................................32
3
Schedules
---------
Schedule 2.1 - Directors and Executive Officers
Schedule 2.3. - Violations of Laws or Agreements; Consents
Schedule 2.4. - Capital Structure
Schedule 2.6. - Financial Information
Schedule 2.7. - Taxes
Schedule 2.8. - Properties; Liens
Schedule 2.9. - Intellectual Property
Schedule 2.10 - Material Contracts
Schedule 2.11 - Litigation
Schedule 2.12 - Insurance
Schedule 2.13 - Employee and Labor Matters
Schedule 2.14 - Benefit Plans
Schedule 2.15 - Absence of Changes or Events
Schedule 2.16 - Compliance with Applicable Laws
Schedule 2.17 - Licenses and Permits
Schedule 2.18 - Environmental Matters
Schedule 2.19 - Inventory
Schedule 2.20 - Equipment
Schedule 2.23 - Major Customers
Schedule 2.24 - Related Party Transactions
Schedule 2.25 - Sale of Products; Promotions
Schedule 4.4. - Employees
Schedule 6.13 - Executive Management
4
TABLE OF EXHIBITS
Exhibit A - Form of Noncompetition Agreement
Exhibit B - Form of Transitional Services Agreement
Exhibit C - Form of Release Agreement
Exhibit D - Form of License Agreement
Exhibit E - Form of Direct to Store Delivery Agreement
Exhibit F - Form of Opinion of Dechert
Exhibit G - Form of Certificate of the Secretary of the Company
Exhibit H - Form of Certificate of the Secretary of Seller
Exhibit I - Form of Opinion of Cooley Godward LLP
Exhibit J - Form of Opinion of Greenberg Traurig, P.A.
Exhibit K - Form of Certificate of the Secretary of Buyer
5
DEFINED TERMS
Page
Adjustment Amount.............................................................2
Agreement.....................................................................1
Ancillary Agreements..........................................................6
Benefit Plans................................................................12
BRS..........................................................................18
Buyer.........................................................................1
Buyer Indemnified Parties....................................................24
Buyer's Returns..............................................................23
Buyer's Welfare Plans........................................................22
CERCLA.......................................................................17
Closing.......................................................................3
Closing Date..................................................................3
Closing Inventory Amount......................................................1
Closing Inventory Statement...................................................1
Code..........................................................................7
Common Stock..................................................................1
Company.......................................................................1
Confidentiality Agreement....................................................21
Employee.....................................................................12
Environmental Laws...........................................................17
ERISA........................................................................12
FDC Act......................................................................17
finally determined............................................................3
Financial Information.........................................................7
GAAP..........................................................................7
GAHL.........................................................................18
Governmental Authority........................................................6
Hazardous Substances.........................................................17
Hazardous Waste..............................................................17
HSR Act.......................................................................6
Indemnified Party............................................................27
Indemnifying Party...........................................................27
Initial Cash Consideration....................................................1
Intellectual Property.........................................................9
Inventory....................................................................17
Leases........................................................................9
License Agreement.............................................................4
6
Liens.........................................................................9
Losses.......................................................................25
Material Adverse Effect......................................................31
Material Contracts...........................................................10
Noncompetition Agreement......................................................4
Notice.......................................................................27
Obsolete Inventory............................................................2
Permitted Liens...............................................................9
petroleum products...........................................................17
Prepaid Expense Amount.......................................................24
Product Contribution Statement................................................7
Purchase Price................................................................1
RCRA.........................................................................17
Reference Amount..............................................................2
Release Agreement.............................................................4
Remediation..................................................................28
Returns......................................................................24
Review Period.................................................................2
Securities Act...............................................................21
Seller........................................................................1
Seller's Returns.............................................................23
Seller's Welfare Plans.......................................................22
Shares........................................................................1
Slow-Moving Closing Inventory.................................................2
Slow-Moving Closing Inventory Amount..........................................2
Statement of Assets...........................................................7
Stockholder Indemnified Parties..............................................25
Tax...........................................................................8
Tax Proceeding...............................................................23
Tax Return....................................................................9
Tax Returns...................................................................9
Taxes.........................................................................8
Third Accounting Firm.........................................................2
Third Party Claim............................................................27
Trade Discounts..............................................................24
Transferred Employees........................................................22
Transitional Services Agreement...............................................4
7
STOCK PURCHASE AGREEMENT
THIS IS A STOCK PURCHASE AGREEMENT, dated as of January 17, 2001 (the
"Agreement"), by and among Nonni's Food Company, Inc., a Florida corporation
("Buyer"), B&G Foods, Inc., a Delaware corporation ("Seller"), and Burns &
Ricker, Inc., a Delaware corporation (the "Company").
Background
A. Seller owns all of the issued and outstanding capital stock of the
Company, consisting of one (1) share of Common Stock, $0.01 par value per share
(the "Common Stock"). The issued and outstanding shares of the Common Stock are
collectively referred to herein as the "Shares."
B. Subject to the terms and conditions set forth in this Agreement, Buyer
desires to purchase from Seller, and Seller desires to sell to Buyer, all of the
Shares.
THEREFORE, intending to be legally bound hereby, the parties hereto agree
as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
1.1. Purchase and Sale of the Shares. (a) Subject to the terms and
conditions of this Agreement, at the Closing referred to in Section 1.3 below,
Seller will sell, transfer and deliver to Buyer all of the Shares, free and
clear of any Liens (as such term is defined in Section 2.8), and Buyer will
purchase such Shares from Seller for the Purchase Price referred to below.
(a) The aggregate purchase price (the "Purchase Price") for the Shares
shall be $26,000,000 (the "Initial Cash Consideration"), subject to adjustment
pursuant to Section 1.2.
1.2. Post-Closing Inventory Adjustment. (a) Within thirty (30) days after
the Closing, Seller shall prepare and deliver to Buyer a statement (the "Closing
Inventory Statement") stating the amount of inventory of the Company as of the
close of business on the Closing Date (the "Closing Inventory Amount"), together
with a calculation of the Adjustment Amount, the Slow-Moving Closing Inventory
Amount and the Obsolete Inventory Amount, and a statement of the actual cost
used for each product in calculating the Closing Inventory Amount and the
Slow-Moving Inventory Amount. The Closing Inventory Amount shall include the
Slow-Moving Inventory Amount, but shall exclude the Obsolete Inventory Amount.
The Closing Inventory Statement shall be prepared on a rolled-up, actual basis
and shall present fairly the Closing Inventory Amount and shall be prepared in
conformity with and in a manner consistent with the Statement of Assets. Buyer
and/or its independent accounting firm shall have the right to be present to
observe the taking of any physical inventory in conjunction with the preparation
of the Closing Inventory Statement. For purposes hereof, (i) "Adjustment Amount"
means the dollar amount by which the Closing Inventory Amount, as set forth on
the Closing Inventory Statement, is more or less than $2,500,000 (the "Reference
Amount"), (ii) "Slow-Moving Closing Inventory Amount" means the forecasted
dollar amount (based on the lower of cost or
market value using the "first-in, first-out" method) of finished goods inventory
of the Company as of the close of business on the Closing Date which is not
saleable within six (6) months from the date on which such inventory shall have
been placed in finished goods inventory ("Slow-Moving Closing Inventory") and
(iii) "Obsolete Inventory" means inventory that has a useful life of less than
ninety (90) days. The calculation of Slow-Moving Closing Inventory shall be made
using the Company's forecasted usage, based upon the Company's most recent
twelve (12)-month average sales of applicable finished goods inventory and with
consideration of the Company's historical seasonality trends. Buyer agrees to
cooperate, and agrees to cause its agents and representatives to cooperate, with
Seller and its agents and representatives in connection with the preparation of
the Closing Inventory Statement and related information, and shall provide to
Seller and such agents and representatives books, records and information as may
be reasonably requested from time to time. Seller agrees to cooperate, and
agrees to cause its agents to cooperate, with Buyer and its accountants in
connection with Buyer's observation of the preparation of the Closing Inventory
Statement and related information, and shall provide to Buyer and its
accountants such books, records and information as may be reasonably requested
by Buyer and its accountants.
(a) Subject to this Section 1.2, the Closing Inventory Statement, the
Closing Inventory Amount calculation and the Slow-Moving Closing Inventory
Amount calculation delivered by Seller to Buyer shall be deemed to be and shall
be final, binding and conclusive on the parties hereto. Buyer may dispute any
amounts reflected on the Closing Inventory Statement or in the calculation of
the Closing Inventory Amount, the Slow-Moving Inventory Amount, the Obsolete
Inventory Amount or the Adjustment Amount calculation, but only on the basis
that such amounts were not calculated in accordance with the Statement of Assets
(or math errors); provided, however, that Buyer shall notify Seller in writing
of each disputed amount, and specify the amount thereof in dispute, within
thirty (30) days of Buyer's receipt of the Closing Inventory Statement (such
thirty (30) day period hereinafter referred to as the "Review Period"). In the
event of a dispute with respect to the Closing Inventory Statement, or the
calculation of the Closing Inventory Amount, the Adjustment Amount or the
Slow-Moving Inventory Amount, Buyer and Seller shall attempt to reconcile their
differences and any resolution by them as to any disputed amounts shall be
final, binding and conclusive on the parties. If Buyer and Seller are unable to
reach a resolution to such effect within fifteen (15) days of receipt of Buyer's
written notice of dispute to Seller, Buyer and Seller shall submit the amounts
remaining in dispute for resolution to an independent accounting firm (other
than Buyer's accountants or Seller's accountants) of national reputation
mutually appointed by Seller and Buyer (such independent accounting firm being
herein referred to as the "Third Accounting Firm"), which shall, within thirty
(30) days after such submission, determine and report to the parties upon such
remaining disputed amounts, and such report shall be final, binding and
conclusive on the parties hereto with respect to the amounts disputed. The fees
and disbursements of the Third Accounting Firm shall be allocated between Buyer
and Seller so that Buyer's share of such fees and disbursements shall be in the
same proportion that the aggregate amount of such remaining disputed amounts so
submitted by Buyer to the Third Accounting Firm that is unsuccessfully disputed
by Buyer (as finally determined by the Third Accounting Firm) bears to the total
amount of such remaining disputed amounts so submitted by Buyer to the Third
Accounting Firm. Each party shall pay the fees and expenses of its accountants
incurred in connection with this Section 1.2.
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(c) If the Adjustment Amount as finally determined is positive (i.e., the
Closing Inventory Amount exceeds the Reference Amount), then the Purchase Price
shall be increased, on a dollar-for-dollar basis, by the lesser of such
Adjustment Amount and $100,000, and Buyer shall pay Seller the lesser of such
Adjustment Amount and $100,000 in cash by federal or other wire transfer, or
certified or bank cashier's check. If the Adjustment Amount is negative (i.e.,
the Reference Amount exceeds the Closing Inventory Amount), then the Purchase
Price shall be decreased, on a dollar-for-dollar basis, by such Adjustment
Amount and Seller shall pay Buyer the Adjustment Amount in cash by federal or
other wire transfer, or certified or bank cashier's check. Buyer or Seller, as
the case may be, shall make any payment required pursuant to this Section 1.2(c)
within ten (10) business days after the Adjustment Amount has been finally
determined in accordance with this Section 1.2 (it being understood that with
respect to any portion of the Adjustment Amount which is not subject to dispute,
the phrase "finally determined" shall mean the expiration of the Review Period).
(d) If the Slow-Moving Closing Inventory as finally determined shall
include more than twenty-five (25) cases of any SKU, then Buyer shall have the
right, exercisable in its sole discretion, to require Seller to purchase from
the Company such SKU of inventory included within the Slow-Moving Closing
Inventory at the cost attributed to such inventory in the calculation of the
Slow-Moving Closing Inventory Amount. Seller shall pay the Company or Buyer the
Slow-Moving Closing Inventory Amount in cash by federal or other wire transfer,
or certified or bank cashier's check, such amount to be paid within ten (10)
business days after delivery to Seller of such SKU of inventory included within
the Slow-Moving Closing Inventory. After such purchase, Seller shall have the
right to sell or dispose of the Slow-Moving Closing Inventory in its sole
discretion. In addition, Buyer and Seller agree that the inventory represented
by the Obsolete Inventory Amount shall be retained by Seller and Seller shall
have the right to sell or dispose of such inventory in its sole discretion.
1.3. Closing Date, Time and Place. (a) Subject to the terms and conditions
hereof, the closing (the "Closing") of the purchase and sale of the Shares shall
be held at the offices of Dechert, 30 Rockefeller Plaza, New York, New York, at
10:00 a.m. on the date hereof. The date on which the Closing occurs is referred
to herein as the "Closing Date."
(b) Subject to the terms and conditions hereof, at the Closing:
(i) Seller and Buyer will execute and deliver the Noncompetition
Agreement in the form attached hereto as Exhibit A (the "Noncompetition
Agreement");
(ii) Seller and Buyer will execute and deliver the Transitional
Services Agreement in the form attached hereto as Exhibit B (the "Transitional
Services Agreement");
(iii) Seller and Buyer will execute and deliver the Release
Agreement in the form attached hereto as Exhibit C (the "Release Agreement");
(iv) Seller and Buyer will execute and deliver the License
Agreement in the form attached hereto as Exhibit D (the "License Agreement");
3
(v) Seller and Buyer will execute and deliver the Direct to Store
Delivery Agreement in the form attached hereto as Exhibit E (the "Direct to
Store Delivery Agreement");
(vi) Seller will deliver the certificates representing the Shares
being purchased hereunder, accompanied by instruments of transfer or assignment
endorsed in blank and dated the Closing Date. To the extent any transfer stamps
are required under applicable law, Seller will, at its expense, obtain and affix
such stamps to the foregoing certificates in the appropriate amounts and
cancelled as of the Closing Date;
(vii) Seller will pay all recording fees (other than those relating
to any financing of Buyer obtained in connection herewith) and other sales,
transfer, use, purchase or similar Taxes (as defined in Section 2.7), if any,
resulting from the transactions contemplated hereby;
(viii) Seller will deliver the consents, approvals and waivers from third
parties, governmental authorities and other parties set forth on Schedule 2.3;
(ix) Seller will deliver to Buyer (a) a copy of the Certificate of
Incorporation, including all amendments thereto, of the Company, certified by
the Secretary of State of the State of Delaware; and (b) a certificate from the
Secretary of State of the State of Delaware to the effect that the Company is in
good standing in such jurisdiction;
(x) Seller will deliver to Buyer the written resignations of the
officers and directors of the Company;
(xi) Seller will deliver to Buyer executed financing statements
and an executed termination and release of security interest in trademarks,
which, when filed, will release all security interests of Lehman Commercial
Paper Inc. on the Shares and in the Intellectual Property;
(xii) Seller will deliver to Buyer an opinion letter from Dechert,
dated the Closing Date, in the form attached hereto as Exhibit F;
(xiii) Seller will deliver to Buyer certificates of the Secretaries
of the Company and Seller, in the forms attached hereto as Exhibit G and Exhibit
H, respectively, certifying as to certain corporate matters, together with all
the attachments referred to therein;
(xiv) Buyer will pay the Initial Cash Consideration and the Prepaid
Expense Amount (as defined in Section 4.9 below) to Seller (or any designee in
writing of Seller) by wire transfer of immediately available funds to a bank
account designated by Seller;
(xv) Buyer will replace and cause to be released to Seller the
letter of credit issued by The Bank of New York for the benefit of Southview
Properties LLC;
(xvi) Buyer will deliver to Seller an opinion letter from Cooley
Godward LLP, dated the Closing Date, in the form attached hereto as Exhibit I;
4
(xvii) Buyer will deliver to Seller an opinion letter from Greenberg
Traurig, P.A., dated the Closing Date, in the form attached hereto as Exhibit J;
(xviii) Buyer will deliver to Seller a certificate of the Secretary of
Buyer, in the form attached hereto as Exhibit K, certifying as to certain
corporate matters, together with all the attachments referred to therein.
1.4. Assignment and Assumption of Contracts. Effective as of the Closing,
Seller shall assign and transfer to Buyer all of Seller's rights and interests
in and to the Material Contracts listed as items 6, 7 and 8 on Schedule 2.10,
and Buyer shall accept the foregoing assignment and transfer and assume all of
Seller's obligations and liabilities under such Material Contracts.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants, as of the date of this Agreement, to Buyer
as follows:
2.1. Organization. (a) Each of Seller and the Company is a corporation duly
incorporated and validly existing under the laws of the State of Delaware. Each
of Seller and the Company has the requisite corporate power and authority to
carry on its business as presently conducted and to own and operate the
properties and assets now owned and being operated by it. The Company is duly
qualified or registered as a foreign corporation to do business, and is in good
standing, in all jurisdictions in which the character of the properties owned by
the Company or the nature of its activities require such qualification, except
where a failure to so qualify or be in good standing would not, individually or
in the aggregate, have a Material Adverse Effect (as defined in Section 6.13).
Schedule 2.1 sets forth a true and complete list of the names and titles of the
directors and executive officers of the Company.
(b) Seller has delivered to Buyer true and complete copies of the
Certificate of Incorporation and the Bylaws of the Company, each as in effect on
the date hereof.
2.2. Authorization and Enforceability. Each of Seller and the Company has
the requisite corporate power and authority to enter into this Agreement and the
Ancillary Agreements (as defined below) to which it is a party and to consummate
the transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by Seller and the Company to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which they are a party by Seller and the Company, and the
consummation of the transactions contemplated hereby and thereby by Seller and
the Company have been duly taken. This Agreement and the Ancillary Agreements to
which they are a party have been duly executed and delivered by Seller and the
Company and, when duly executed and delivered by the other parties hereto and
thereto, will constitute the legal, valid and binding obligation of Seller and
the Company, as applicable, enforceable against them in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency or other laws affecting creditor's rights generally and except for
5
equitable remedies. As used in this Agreement, "Ancillary Agreements" mean the
Noncompetition Agreement, the Transitional Services Agreement, the Release
Agreement, the License Agreement and the Direct to Store Delivery Agreement.
2.3. No Violations of Laws or Agreements. Except as set forth in Schedule
2.3, the execution, delivery and performance by Seller and the Company of this
Agreement will not (a) violate any provision of federal, state, local or foreign
law, rule or regulation or any listing rule of any stock exchange to which
Seller or the Company is subject or by which any of their respective properties
are bound or affected (it being understood that the necessity for filings and
consents is dealt with separately in the following paragraph), (b) conflict with
or violate any order, judgment, injunction, award or decree binding upon Seller
or the Company, (c) conflict with or violate the Certificate of Incorporation,
Bylaws or other similar governing documents of Seller or the Company, (d)
constitute a default in any respect, or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Seller or the Company
under any provision of any agreement, contract or other instrument binding upon
Seller or the Company, or any license, franchise, permit or other similar
authorization held by the Company, (e) result in the creation or imposition of
any Lien (as defined in Section 2.8) upon any of the assets of the Company, or
(f) give any United States federal, state or local governmental or regulatory
agency or authority ("Governmental Authority") the right to revoke, withdraw,
suspend, cancel, terminate or modify, any licenses, permits or authorizations
from such Governmental Authority that is held by the Company or that otherwise
relates to the business of the Company or to any of the assets owned or used by
the Company, except, in the case of any of the foregoing clauses (a), (d), (e)
or (f), for any such conflict, violation, default, right, Lien, revocation,
withdrawal, suspension, cancellation, termination or modification which would
not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth in Schedule 2.3, the execution, delivery and
performance by Seller and the Company of this Agreement and the Ancillary
Agreements and the consummation by Seller and the Company of the transactions
contemplated hereby do not require any consent from, or filing with, any
governmental or regulatory authority or any third party, except for (a) the
filing of a report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the expiration of the applicable waiting
period thereunder, (b) any action, consent or filing that Buyer is required to
obtain or make, and (c) consents and filings which, if not obtained or made,
will not, individually or in the aggregate, have a Material Adverse Effect or
have a material adverse effect on the ability of Seller and the Company to
consummate the transactions contemplated hereby.
2.4. Capital Structure. The authorized capital stock of the Company
consists of two thousand (2,000) shares of preferred stock, par value $.01 per
share, none of which is issued and outstanding, and two thousand (2,000) shares
of Common Stock, of which one hundred (100) shares are issued and outstanding.
All of the foregoing issued and outstanding shares are duly authorized, validly
issued, fully paid and nonassessable. Except as set forth in Schedule 2.4, there
are no outstanding warrants, options, arrangements, agreements, subscriptions,
pre-emptive rights, rights of first refusal, convertible or exchangeable
securities or other binding commitments pursuant to which the Company or Seller
is obligated to issue, sell, purchase, return or redeem any shares of capital
stock or other securities of the Company. Except as set forth on Schedule 2.4,
all of the issued and outstanding shares of capital stock of the Company
6
are owned of record and, except insofar as this Agreement or the transactions
contemplated hereby may affect beneficial ownership, beneficially by Seller,
free and clear of Liens (other than any Lien arising pursuant to this Agreement
and other than restrictions on transfer pursuant to applicable securities laws).
Seller has, subject to compliance with applicable securities laws, the requisite
corporate power and authority to sell, assign, transfer and deliver the Shares
to Buyer in accordance with this Agreement. Assuming that Buyer acquires the
Shares being sold to it pursuant to this Agreement without notice of an adverse
claim thereto, upon (a) the delivery to Buyer of the Shares, (b) the payment
therefor in accordance with the terms of this Agreement and (c) the acquisition
by Buyer of control of the Shares, Buyer will acquire good and valid title to
the Shares, free and clear of all Liens, other than any Lien arising pursuant to
this Agreement and other than restrictions on transfer pursuant to applicable
securities laws.
2.5. Subsidiaries. The Company does not own, directly or indirectly, any
stock of, or any other equity interest in, any corporation or business entity.
2.6. Financial Information. Schedule 2.6 contains (a) the unaudited
Statement of Assets as of January 2, 1999, January 1, 2000 and September 30,
2000 (the "Statement of Assets") and (b) the unaudited Statement of Product
Contribution before Depreciation for the fiscal years ended January 2, 1999 and
January 1, 2000 and for the first thirty-nine weeks of 1999 and 2000 (the
"Product Contribution Statement," and, together with the Statement of Assets,
the "Financial Information"). The Financial Information was derived from the
internal books and records of the Company, which have been maintained in a
manner consistent with the Company's current accounting policies and which are
in accordance with U.S. generally accepted accounting principles ("GAAP"). The
Company has not made any false or fictitious entry, or failed to make any entry
that should have been made, in any of the internal books and records of the
Company. The amounts reflected as "Inventory" and "Fixed Assets" on the
Statement of Assets have been valued in accordance with GAAP. The Financial
Information presents fairly, in all material respects, the information purported
to be shown therein as of the date of such Financial Information and for
applicable periods then ended.
2.7. Taxes. (a) The Company has filed or caused to be filed in a timely
manner (within any applicable extension periods) all Tax Returns required to
have been filed pursuant to the Internal Revenue Code of 1986, as amended (the
"Code"), or pursuant to applicable state, local or foreign Tax laws. Schedule
2.7 accurately identifies all Federal and state income Tax Returns filed by or
on behalf of the Company prior to the date of this Agreement with any
governmental entity with respect to any taxable period beginning on or after
January 1, 1995 and ending on or before the Closing Date. Except as set forth on
Schedule 2.7, all such Federal and state income Tax Returns have been prepared
in all material respects in accordance with the Code and applicable state and
local Tax laws, and all Taxes shown to be due on such Tax Returns have duly paid
in full on a timely basis to the appropriate governmental entity, unless the Tax
which was not duly paid in full was not a material liability. Any Tax required
to have been withheld or collected by the Company has been duly withheld and
collected, unless the Tax which was not duly withheld and collected was not a
material liability, and (to the extent required) each such Tax has been paid to
the appropriate governmental entity. Except as set forth on Schedule 2.7, Seller
has delivered to Buyer accurate and complete copies of all Federal and state
income Tax Returns (in the case of consolidated, combined, or unitary Tax
Returns,
7
prepared on a pro forma basis reflecting solely the operations of the Company)
filed by the Company since January 1, 1995.
(b) Except as set forth in Schedule 2.7, no action, claim, suit or
other proceeding with respect to Taxes is ongoing, pending or, to the knowledge
of Seller or the Company, has been threatened against or with respect to the
Company. There are no unsatisfied liabilities for Taxes with respect to any
written notice of deficiency or similar document received by the Company. Seller
has delivered to Buyer accurate and complete copies of all audit reports and
similar documents relating to the Federal or state Tax Returns filed by the
Company (so far as they relate to the Company) for any taxable period beginning
on or after January 1, 1995. Except as set forth in Schedule 2.7, no extension
or waiver of the limitation period applicable to any of the Tax Returns of the
Company has been granted (by the Company or any other Person), and no such
extension or waiver has been requested from the Company.
(c) The Company has not entered into or become bound by any agreement
or consent pursuant to Section 341(f) of the Code.The Company has not been, and,
to the knowledge of Seller or the Company, the Company will not be required to
include any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable provision under
state or foreign Tax laws as a result of transactions or events occurring, or
accounting methods employed, prior to the Closing.
(d) There is no agreement, plan or arrangement covering any employee or
independent contractor or former employee or independent contractor of the
Company that, individually or collectively, could give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G of the Code. Except as set forth on Schedule 2.7, the Company is
not, and since January 1, 1995 has not ever been, a party to or bound by any tax
indemnity agreement, tax sharing agreement or tax allocation agreement. Neither
the Company nor the Buyer will incur a liability for taxes resulting from the
Company ceasing to be a member of a consolidated or combined group that has
previously filed consolidated, combined or unitary Tax Returns or ceasing to be
a party to any tax sharing arrangement.
(e) For purposes of this Agreement, "Tax" or "Taxes shall mean any tax
(including any income tax, franchise tax, capital gains tax, estimated tax,
gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
occupation tax, inventory tax, occupancy tax, withholding tax or payroll tax),
levy, assessment, tariff, impost, imposition, toll, duty (including any customs
duty), deficiency or fee, and any related charge or amount (including any fine,
penalty or interest), that is, has been or may in the future be (a) imposed,
assessed or collected by or under the authority of any Federal, state, local or
foreign governmental entity, or (b) payable pursuant to any tax-sharing
agreement or similar agreement. "Tax Return" or "Tax Returns" shall mean any
return (including any information return), report, statement, declaration,
estimate, schedule, notice, notification, form, election, certificate or other
document or information that is, has been or may in the future be filed with or
submitted to, or required to be filed with or submitted to, any governmental
entity in connection with the determination, assessment, collection or payment
of any Tax.
8
2.8. Properties. The Company does not own any real property in fee simple.
Schedule 2.8 contains a list of all real property leases pursuant to which the
Company leases or has leased any real property (the "Leases"). Schedule 2.8
provides an accurate description of the premises covered in each such Lease and
the facilities located on such premises. The Company has good and valid title to
(a) the properties and assets they purport to own, whether real or personal,
tangible or intangible, and (b) the leasehold estates conveyed under each Lease,
free and clear of all mortgages, liens, attachments, pledges, claims, charges,
restrictions, encumbrances or security interests of any nature whatsoever
("Liens"), except (i) Liens for current Taxes not yet due and payable or which
may hereafter be paid without penalty, (ii) Liens described in Schedule 2.8,
(iii) Liens of any landlord created or imposed by the Leases, (iv) zoning,
building and other similar governmental restrictions and Liens imposed by
operation of law (including mechanics', carriers', workmen's, repairmen's,
landlord's liens or other similar liens arising from or incurred in the ordinary
course of business and for which the underlying payments are not yet
delinquent), (v) in the case of any leasehold estate held under any Lease, Liens
(not created by the Company) encumbering the underlying fee title to the demised
property, and (vi) other easements, covenants, encroachments, rights-of-way or
other similar restrictions and imperfections of title, which do not materially
impair the use of the property subject thereto in the business of the Company as
presently conducted (the foregoing items (i) through (vi) being referred to
herein collectively as "Permitted Liens"). To Seller's knowledge, each Lease is
in full force and effect. The Company is not (with or without the lapse of time
or the giving of notice, or both) in breach or default under a Lease to which it
is a party, and to Seller's knowledge, no other party to any such Lease is (with
or without the lapse of time or the giving of notice, or both) in breach or
default thereunder, except, in either case, for such breaches or defaults which
would not, individually or in the aggregate, have a Material Adverse Effect.
Neither the Company nor Seller has received any notice or other communication
(including, without limitation, in electronic form) regarding any actual or
threatened termination of any Lease.
2.9. Intellectual Property. Schedule 2.9 contains a list of all patents and
patent applications, trademark and service mark registrations and applications,
material unregistered trademarks and copyright registrations and applications
owned by the Company or necessary to conduct the business of the Company as
presently conducted (the "Intellectual Property"). Except as set forth in
Schedule 2.8, the Intellectual Property is free and clear of all Liens, other
than Permitted Liens. Except as set forth in Schedule 2.9, the Company has no
knowledge of any claim in writing that the operation of the business of the
Company as currently conducted infringes the intellectual property rights of any
third party. Except as set forth in Schedule 2.9, the Company either owns or has
a valid and binding license to use, all Intellectual Property. Except as set
forth in Schedule 2.9, there are no actions or proceedings pending or, to the
knowledge of Seller, threatened, challenging the rights of the Company to use
the Intellectual Property and, to the knowledge of Seller, no person or entity
is infringing the Intellectual Property, except infringements which could not
reasonably be expected to have a material adverse effect on the value of the
Intellectual Property that is the subject of such infringement or otherwise is
likely to have a Material Adverse Effect.
2.10. Material Contracts. (a) Except as described in Schedule 2.10 and
except for purchase orders in the ordinary course of business, the Company is
not a party to or bound by any:
9
(i) employee collective bargaining agreement or other contract with any
labor union;
(ii) employment agreements with any director, officer or employee;
(iii) (A)lease or similar agreement (other than the Leases) under which
the Company is lessee of, or holds or uses, any machinery, equipment, vehicle or
other tangible personal property owned by a third party, (B) continuing contract
for the future purchase of materials, supplies or equipment, (C) consulting or
similar contract, or (D) non-trade advertising agreement or arrangement, which
(with respect to each of the foregoing clauses (A) - (D)) has an aggregate
future liability on the part of the Company in excess of $100,000 or which is
not terminable by the Company (1) on not more than 90 days' notice without
penalty or premium or (2) for a cost of less than $25,000;
(iv) agreement or contract under which the Company has borrowed or
loaned any money or issued any note, bond, indenture or other evidence of
indebtedness or guaranteed indebtedness, liabilities or obligations of others,
in each case for an amount in excess of $50,000;
(v) mortgage, pledge, security agreement, deed of trust or other
document, in each case granting a Lien (including Liens upon properties acquired
under conditional sales, capital leases or other title retention or security
devices) securing an obligation in excess of $50,000;
(vi) agreement or contract concerning noncompetition; or
(vii) other contract or agreement (other than the Leases) which is
material to the business of the Company.
(b) To the knowledge of Seller, each agreement, contract, lease, license or
instrument described on Schedule 2.10 (the "Material Contracts") is in full
force and effect. The Company is not (with or without the lapse of time or the
giving of notice, or both) in breach or default under a Material Contract to
which it is a party, no such breach or default will give any person or entity
the right to accelerate the maturity or performance of, or the right to cancel
or terminate, any such Material Contract and, to the knowledge of Seller, no
other party to any such Material Contract is (with or without the lapse of time
or the giving of notice, or both) in breach or default thereunder, except, in
each such case, for such breaches or defaults which would not, individually or
in the aggregate, have a Material Adverse Effect. Neither the Company nor Seller
has received any notice or other communication (including, without limitation,
in electronic form) regarding any actual or threatened termination of any
Material Contract.
2.11. Litigation. Schedule 2.11 contains a list of all lawsuits, claims,
proceedings or investigations before any court or any Governmental Authority
pending or, to the knowledge of Seller, threatened against the Company, or any
of its properties, assets, operations or business, which would reasonably be
expected to have a Material Adverse Effect, or which challenge the legality of
this Agreement or any action to be taken in connection herewith. The Company is
not in default under any judgment, order or decree of any court binding on the
Company.
10
2.12. Insurance. Schedule 2.12 contains (a) a list of all policies of
insurance held by, or maintained on behalf of, the Company in effect for policy
periods beginning on or after January 1, 1999, indicating for each policy the
carrier, the insured, the type of insurance, the amounts of coverage, the
expiration date and a description of any claims currently pending under such
policy and (b) a description of any claims currently pending under all policies
of insurance held by, or maintained on behalf of, the Company in effect for
policy periods prior to January 1, 1999. Except as set forth on Schedule 2.12,
the Company has not received any written notice of cancellation, material
amendment or material dispute as to coverage with respect to any policies
identified on Schedule 2.12. Since January 1, 1997, the Company has not received
any written notice (including, without limitation, in electronic form) regarding
any actual or possible refusal of coverage under, or any actual or possible
rejection of any claim under, any of the policies identified on Schedule 2.12.
2.13. Employee and Labor Matters.
(a) Schedule 2.13 sets forth, with respect to each Employee (as
defined below):
(i) the name and hire date of such Employee, including whether
the Employee is employed by Seller or the Company;
(ii) such Employee's title;
(iii) the aggregate dollar amount of base salary and bonuses
received by such Employee from Seller or the Company with respect to services
performed in 1999; and
(iv) such Employee's aggregate annualized base salary and
targeted bonus for 2000.
(b) Schedule 2.13 accurately sets forth (i) a list of the employment
agencies used by Seller to provide temporary employees to the Company and (ii)
the number of leased or temporary employees employed by the Company during 2000.
None of the Employees set forth on Schedule 2.13 under the heading "Employees"
is a temporary or leased employee.
(c) The Company does not have any current or pending severance
obligations to any former employee of the Company or Seller.
(d) Except as set forth in Schedule 2.13, the Company is not a party
to or bound by, or has ever been a party to or bound by, any written employment
agreement, or any union contract or collective bargaining agreement.
(e) Except as set forth in Schedule 2.13, the employment of each of
the Employees is terminable by Seller or the Company, as applicable, at will
without the payment of any severance or similar benefits. To the knowledge of
the Company, the Company is not currently engaged in any material unfair labor
practices, and, except as set forth in Schedule 2.13, no material unfair labor
practice charges have been filed against the Company during the last two years.
11
(f) The term "Employee" shall mean all individuals with whom Seller
maintains an employer-employee relationship as of the Closing Date who are
primarily engaged in providing services to the Company, and all individuals
employed by the Company as of the Closing Date, including those on an authorized
leave of absence for any reason, including but not limited to, employees on a
leave of absence under the Family and Medical Leave Act of 1993, as amended, or
employees on a leave of absence as a result of a short term disability, and who
are identified on Schedule 2.13.
2.14. Benefit Plans. (a) The Company does not sponsor any "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")). Schedule 2.14 sets forth all "employee
benefit plans" (as defined in Section 3(3) of ERISA), bonus, incentive, deferred
compensation, severance, stock or stock option plans, and other material
employee fringe benefit plans or arrangements, (the foregoing being herein
called the "Benefit Plans") maintained, or contributed to, by Seller or the
Company for the benefit of any Employees. Seller has made available to Buyer (if
applicable) copies of (i) each of the Benefit Plans and any amendments thereto
(or, in the case of any unwritten Benefit Plans, written descriptions thereof),
(ii) the most recent annual report on Form 5500 filed with the Internal Revenue
Service with respect to any of the Benefit Plans, and (iii) each trust agreement
and group annuity contract and most recent IRS determination letters relating to
any of the Benefit Plans.
(b) The Benefit Plans are, and at all times in the past have been,
operated in compliance with the applicable provisions of ERISA, the Code, or any
other law, and the regulations and published interpretations thereunder, except
where noncompliance would not have a Material Adverse Effect. Each contribution
or other payment that is required to have been made under or with respect to any
Benefit Plan has been made on a timely basis except where a failure to make such
contribution or payment would not have a Material Adverse Effect.
(c) Seller and the Company have performed in all material respects all
of their obligations under all such Benefit Plans required to be performed as of
the date of this Agreement. No event has occurred that could reasonably be
expected to subject any such Benefit Plan to any material tax under Section 511
of the Code, and no "prohibited transaction" (within the meaning of Section 4975
of the Code or Sections 406 or 408 of ERISA) has occurred with respect to such
Benefit Plans that could reasonably be expected to give rise to any material tax
or penalty. There are no actions (other than routine claims for benefits)
pending or, to the knowledge of Seller, threatened against such Benefit Plans or
their assets, or arising out of such Benefit Plans, and, to the knowledge of
Seller, no facts exist which could reasonably be expected to give rise to any
such actions that would have a Material Adverse Effect on the Company.
(d) Except as set forth on Schedule 2.14, no Benefit Plan:
(i) provides or provided any benefit guaranteed by the Pension
Benefit Guaranty Corporation;
(ii) is or was a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA; or
12
(iii) is or was subject to the minimum funding standards of Section
412 of the Code or Section 302 of ERISA.
(e) Except as set forth on Schedule 2.14, there is no person or entity
other than Seller and the Company that (by reason of common control or
otherwise) is treated together with Seller and the Company as a single employer
within the meaning of Section 414 of the Code.
(f) Except as set forth in Schedule 2.14, no Benefit Plan provides
death, medical or health and welfare benefits with respect to any current or
former Employee after any such Employee's termination of service (other than (i)
benefit coverage mandated by applicable law, including coverage provided
pursuant to Section 4980B of the Code, (ii) deferred compensation benefits
accrued as liabilities, and (iii) benefits the full cost of which are borne by
current or former Employees and the Employees' beneficiaries).
(g) With respect to each of the Benefit Plans constituting a group
health plan within the meaning of Section 4980B (g)(2) of the Code, the
provisions of Section 4980B of the Code, "COBRA", have been materially complied
with in all material respects.
(h) Except as set forth in Schedule 2.14, none of the Benefit Plans of
the Company or Seller (i) provide for the payment of separation, severance,
termination or similar type of benefits to any person; or (ii) obligate the
Company to make any payment or provide any benefit that is subject to a tax
under Section 4999 of the Code.
(i) Except as set forth in Schedule 2.14, neither the execution,
delivery or performance of this Agreement, nor the consummation of the other
transactions contemplated by this Agreement, will result in any payment
(including any bonus or parachute payment under Section 280G of the Code) to any
current or former Employee, service provider or director of the Company, or
materially increase the benefits payable under any Benefit Plan, or result in
any acceleration of the time of payment or retiring of such benefits.
(j) Each of the Benefit Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service, and Seller is not aware of any reasonable basis for
the revocation of such letter.
2.15. Absence of Changes or Events. Except as set forth in Schedule 2.15 or
in any other disclosure schedule to this Agreement and except for this Agreement
and the transactions contemplated by this Agreement, since September 30, 2000:
(a) there has not been a Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to, or
material interruption in the use of, any of the material assets of the Company
(whether or not covered by insurance);
(c) the Company has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock or other equity interests of
13
the Company or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock, other equity interests or other securities of the Company;
(d) the Company has not sold or otherwise issued any shares of capital
stock, other equity interests or any other securities of the Company;
(e) the Company has not amended its certificate of incorporation or
bylaws or other constitutive documents or effected or been a party to any
acquisition transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(f) the Company has not purchased or otherwise acquired any asset from
any other person or entity, except for assets acquired in the ordinary course of
business consistent with past practice;
(g) the Company has not entered into any lease or licensing agreement
for any asset from any other person or entity, except for any lease or licensing
agreements entered into in the ordinary course of business consistent with past
practice and the annual payment under each of which does not exceed $25,000;
(h) the Company has not made any capital expenditure, except for
capital expenditures that were made in the ordinary course of business
consistent with past practice;
(i) the Company has not sold or otherwise transferred, or has leased
or licensed, any asset to any other person or entity, except for products sold
from inventory in the ordinary course of business consistent with past practice;
(j) the Company has not pledged or hypothecated any of its assets or
otherwise permitted any of its assets to become subject to any Lien, other than
Permitted Liens;
(k) the Company has not made any loan or advance to any other person
or entity other than in the ordinary course of business consistent with past
practice and each of which does not exceed $10,000;
(l) the Company has not (i) established or adopted any "employee
benefit plan" (as defined under Section 3(3) of ERISA) or (ii) paid or agreed to
pay any bonus or made or agreed to make any profit-sharing or similar payment
to, or increased or agreed to increase the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors or officers, or Employees, other than increases in wages,
salaries, commissions, fringe benefits or other compensation to Employees in the
ordinary course of business consistent with past practice;
(m) no Material Contract has been materially amended or terminated;
(n) the Company has not (i) discharged any Lien, or (ii) discharged or
paid any indebtedness except, in each case, in the ordinary course of business
consistent with past practice;
14
(o) the Company has not forgiven any indebtedness or otherwise
released or waived any material right or claim;
(p) the Company has not changed any of its methods of accounting or
accounting practices in any respect, other than to comply with generally
accepted accounting principles;
(q) the Company has not entered into any transaction or taken any
other action outside the ordinary course of business;
(r) the Company has not failed to pay any account payable for a period
that is longer than the Company's historical payment period for accounts payable
that are similar in amount and nature as such account payable; and
(s) the Company has not agreed or committed to take any of the actions
referred to in causes (c) through (q)) above.
2.16. Compliance with Applicable Laws. Except as set forth in Schedule
2.16, the Company and its properties and assets are in compliance with all
applicable statutes, laws, ordinances, rules and regulations of any Governmental
Authority (other than Environmental Laws, which are dealt with separately in
Section 2.18) applicable to the Company or its properties, assets, operations
and business, except where noncompliance would not have a Material Adverse
Effect. Since January 1, 1997, the Company has not received any notice
(including, without limitation, in electronic form) from any Governmental
Authority or any other person or entity regarding any actual, alleged, possible
or potential violation of, or failure to comply with, any such statutes, laws,
ordinances, rules or regulations, except for any such violation or failure which
would not, individually or in the aggregate, have a Material Adverse Effect.
2.17. Licenses and Permits. Schedule 2.17 identifies all material licenses,
permits and authorizations from Governmental Authorities held by the Company
(other than those relating to environmental matters, which are dealt with
separately in Section 2.18). All such licenses, permits or authorizations of the
Company (other than those relating to environmental matters, which are dealt
with separately in Section 2.18) are validly held by the Company, and the
Company is in compliance in all material respects with such licenses, permits or
authorizations. The Company has all of the governmental licenses, permits or
authorizations (other than those referred to above) which are required to carry
on the business of the Company as such business is now conducted, except where
the failure to have any such license, permit or authorization would not have a
Material Adverse Effect. Except as set forth in Schedule 2.17, the execution,
delivery and performance by Seller and the Company of this Agreement will not
(a) constitute or result in a violation of any term or requirement of any
licenses, permits or authorizations identified in Schedule 2.17, or (b) result
in the revocation, withdrawal, suspension, cancellation, termination or
modification of any licenses, permits or authorizations identified in Schedule
2.17, except, in each case, for any such violation, revocation, withdrawal,
suspension, cancellation, termination or modification which would not,
individually or in the aggregate, have a Material Adverse Effect. Since January
1, 1997, the Company has not received any notice (including, without limitation,
in electronic form) from any Governmental Authority or any other
15
person or entity regarding (x) any actual, alleged, possible or potential
violation of or failure to comply with any term or requirement of any licenses,
permits or authorizations identified in Schedule 2.17, or (y) any actual,
proposed, possible or potential revocation, withdrawal, suspension,
cancellation, termination or modification of any licenses, permits or
authorizations identified in Schedule 2.17, except, in each case, for any such
violation, failure, revocation, withdrawal, suspension, cancellation,
termination or modification which would not, individually or in the aggregate,
have a Material Adverse Effect.
2.18. Environmental Matters. Except as set forth on Schedule 2.18:
(a) The Company has all of the governmental licenses, permits or
authorizations which are required under applicable Environmental Laws to carry
on the business of the Company as such business is now conducted, except where
the failure to have any such license, permit or authorization would not have a
Material Adverse Effect. The Company is in compliance with all terms and
conditions of such authorizations, and with all applicable Environmental Laws,
except for any noncompliance which would not have a Material Adverse Effect.
(b) The Company has not received written notice of any citation,
summons, order, complaint, penalty, investigation, or review by any governmental
or other entity with respect to any violation by the Company of any
Environmental Law, except for such violations which have been resolved.
(c) The Company has not received any written request for information,
notice of claim, demand, or notification that it is, or may be, potentially
responsible with respect to any actual, alleged or potential material liability
arising from or relating to the presence, generation, manufacture, production,
transportation, importation, use, treatment, refinement, processing, handling,
storage, or Release (as defined by CERCLA) any Hazardous Substance, except for
such requests, notices, demands, or notifications which, individually or in the
aggregate, have been resolved or may, individually or in the aggregate, not have
a Material Adverse Effect.
(d) Except as set forth in Schedule 2.18, to the knowledge of Seller,
the Company has never generated, manufactured, produced, transported, imported,
used, treated, refined, processed, handled, stored, discharged, released or
disposed of any Hazardous Substance (whether lawfully or unlawfully) at or from
the Company's current properties that may result in a liability to the Company
under applicable Environmental Laws which, individually or in the aggregate,
would have a Material Adverse Effect. Except as set forth in Schedule 2.18, the
Company has never knowingly permitted any Hazardous Substance to be generated,
manufactured, produced, used, treated, refined, processed, handled, stored, or
Released at or from any property currently owned or leased by the Company in a
manner that is reasonably likely to result in a liability of the Company which
may have a Material Adverse Effect.
(e) Except as set forth in Schedule 2.18, to the knowledge of Seller,
there have been no Releases by the Company of Hazardous Substance at any
property currently owned by or leased to the Company which requires remediation
under current Environmental Laws the impact of which would reasonably be likely
to have a Material Adverse Effect.
16
(f) As used herein, "Environmental Laws" means federal, state and
local laws, rules, regulations, codes and ordinances, and any orders, decrees,
judgments or injunctions issued, promulgated, approved or entered thereunder,
relating to the environment and each as in effect on the date hereof, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act ("CERCLA"); the Resource Conservation and Recovery Act of
1976, as amended ("RCRA"); the Federal Water Pollution Control Act, as amended;
the Federal Clear Air Act, as amended; the Toxic Substances Control Act, as
amended; the Safe Drinking Water Act, as amended; the Pollution Control Act of
1990, as amended; and comparable state and local laws in effect on the date
hereof. As used herein, "Hazardous Substances" has the meaning set forth in
Section 101(14) of CERCLA, 42 U.S.C. Section 9601(14) and petroleum products and
"Hazardous Waste" as defined in RCRA.
(g) The representations and warranties in this Section 2.18 are the
sole representations and warranties regarding environmental matters.
2.19. Inventory. Schedule 2.19 provides a list of all inventory of the
Company as of December 31, 2000 ("Inventory"). Such Inventory (i) is of such
quality and quantity as to be usable and saleable by the Company in the ordinary
course of business, and does not have a useful life of less than 90 days, (ii)
has been priced at the lower of cost or market value using the "first-in,
first-out" method and (iii) is of such quality as to be compliant in all
material respects with the Company's current quality control standards. None of
the ingredients or finished goods inventory of the Company (i) is adulterated,
contaminated or misbranded in any material respect within the meaning of the
Federal Food, Drug and Cosmetic Act, as amended (the "FDC Act"), or any state
pure food and drug laws or (ii) constitutes articles prohibited from
introduction into interstate commerce under the provisions of Section 302(d),
404, 405 or 505 of the FDC Act.
2.20. Equipment. Schedule 2.20 identifies all material equipment,
furniture, fixtures, improvements and other tangible assets (other than
inventory) owned by the Company. Each asset identified in Schedule 2.20 is in
reasonably good condition and repair (ordinary wear and tear excepted) and free
of material defects. The assets identified in Schedule 2.20 are adequate for the
uses for which they are put in the manner in which the business is currently
being conducted.
2.21. Brokers. Except for Goldsmith, Agio, Helms & Lynner, Ltd. ("GAHL")
and Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS"), Seller is not subject to
any valid claim of any broker, investment banker, finder or other intermediary
in connection with the transactions contemplated by this Agreement. Seller is
solely responsible for any payment, fee or commission that may be due to GAHL
and BRS in connection with the transactions contemplated hereby.
2.22. No Liabilities. As of, and after giving effect to, the Closing, the
Company will have no liabilities of a type that would be required to be set
forth on a balance sheet of the Company prepared in accordance with GAAP, other
than (i) liabilities under Material Contracts and the Leases, (ii) liabilities
disclosed in this Agreement (including the disclosure schedules hereto), (iii)
liabilities under open purchase orders, (iv) liabilities under Trade Discounts
(as defined in Section 4.6) in effect prior to the Closing and (v) liabilities
created or imposed by
17
actions of Buyer or, following the Closing, the Company (including, without
limitation, in connection with any financing of Buyer obtained in connection
herewith).
2.23. Major Customers. Schedule 2.23 identifies, and provides a breakdown
of the revenues received from, (i) each customer or other person or entity that
accounted for more than One Hundred Fifty Thousand Dollars ($150,000) of the
gross revenues of the Company during the nine (9) months ended September 30,
2000 and (ii) each customer or other person or entity that accounted for more
than Two Hundred Thousand Dollars ($200,000) of the gross revenues of the
Company during the fiscal year ended January 1, 2000. The Company has not
received any written notice or other written communication (including, without
limitation, in electronic form) from any customer or other person or entity that
accounted for more than Two Hundred Thousand Dollars ($200,000) of the gross
revenues of the Company during the ten (10) months ended October 31, 2000,
stating that such customer, person or entity will (i) cease doing business with
the Company or (ii) reduce the volume of its business with the Company by the
lesser of (x) $200,000 of gross revenues and (y) fifty percent (50%) or more of
the gross revenues accounted for by such customer during such ten (10) month
period, in either case, within ninety (90) days of such notice, which cessation
or reduction of business related in no way to the execution, delivery or
performance of this Agreement, the potential transactions contemplated by this
Agreement or the identity of Buyer or its affiliates. To the knowledge of
Seller, the Company has not received any oral notice from any customer or other
person or entity that accounted for more than Two Hundred Forty Thousand Dollars
($240,000) of the gross revenues of the Company during the ten (10) months ended
October 31, 2000, stating that such customer, person or entity will (i) cease
doing business with the Company or (ii) reduce the volume of its business with
the Company by fifty percent (50%) or more of the gross revenues accounted for
by such customer during such ten (10) month period, in either case, within
ninety (90) days of such notice, which cessation or reduction of business
related in no way to the execution, delivery or performance of this Agreement,
the potential transactions contemplated by this Agreement or the identity of
Buyer or its affiliates.
2.24. Related Party Transactions. Except as set forth on Schedule 2.24:
(a) no Related Party (as defined below) is, or has been at any time
since January 1, 1997, involved in any material business arrangement or
relationship with the Company;
(b) no Related Party has, or has had at any time since January 1,
1997, any direct interest in any Material Contract or any property or asset
owned by the Company;
(c) no Related Party is, or has been at any time since January 1,
1997, indebted to the Company; and
(d) neither Seller nor any of its subsidiaries (other than the
Company) is competing, directly or indirectly, with the Company in the business
currently conducted by the Company.
18
For purposes of this Section 2.24, "Related Party" means any of Seller, its
affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended)
or the Company's officers, directors or employees.
2.25. Sale of Products; Promotions.
(a) Each product that has been manufactured, sold or put into trade
inventory (but in each case as of a date and time no later than the time of
shipment of such product from the Company's premises) by the Company since
January 1, 1997 (i) conformed and complied in all material respects with the
terms and requirements of any applicable warranty made by the Company to the
Consumers (as defined below) of such product, other than any non-conformity or
non-compliance with any such warranty that were consistent with prior
non-conformities or non-compliances under such warranty and (ii) was of such
quality as to be compliant in all material respects with the Company's then
existing quality control standards. Except as set forth in Schedule 2.25, since
January 1, 1997, no Consumer has asserted any material consumer claim against
the Company under or based upon any applicable warranty made by the Company to
the Consumers of the Company's products, other than any claims against the
Company under or based upon any such warranty that were consistent with prior
claims under such warranty. As used in this Section 2.25(a), "Consumers" shall
mean those persons who purchase products for personal consumption and not for
resale or use in the production of other products for resale, and shall exclude
brokers, wholesalers, distributors, retailers and other similar persons or
entities.
(b) No material amount of products manufactured and sold by the
Company since January 1, 1997 has been the subject of any recall or other
similar action.
(c) Schedule 2.25 sets forth the Company's current published national
promotional schedule which is consistent with the Company's ordinary course of
operations and past practice.
2.26. Certain Payments. Neither the Company nor any officer, employee,
agent or other person or entity acting for or on behalf of the Company, since
January 1, 1997, has made, directly or indirectly, any material payment to any
person or entity, or provided anything of material value (whether in the form of
property or services or in any other form) to any person or entity, for the
purpose of obtaining favorable treatment in securing business, or has agreed or
committed to take any of the foregoing actions; except in any case for (x) any
slotting, shipping, dating allowance or similar programs of the Company or
defensive programs to secure or defend business, (y) Trade Discounts and (z) any
such payment or provision which would not, individually or in the aggregate,
have a Material Adverse Effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants, as of the date of this Agreement, to Seller
and the Company as follows:
3.1. Organization. Buyer is a corporation duly incorporated and registered
under the laws of the State of Florida. Buyer has the requisite corporate power
and authority to carry on its
19
business as presently conducted and to own and operate the properties and assets
now owned and operated by it.
3.2. Authorization and Enforceability. Buyer has the requisite corporate
power and authority to enter into this Agreement and the Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. All corporate acts and other proceedings required to be taken by Buyer
and its shareholders to authorize the execution, delivery and performance of
this Agreement and the Ancillary Agreements by Buyer, and the consummation of
the transactions contemplated hereby and thereby by Buyer have been duly taken.
This Agreement and the Ancillary Agreements have been duly executed and
delivered by Buyer and, when duly executed and delivered by the other parties
hereto and thereto, will constitute the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency or other
laws affecting creditor's rights generally and except for equitable remedies.
3.3. No Violations of Laws or Agreements. The execution, delivery and
performance by Buyer of this Agreement will not (a) violate any provision of
federal, state, local or foreign law, rule or regulation or any listing rule of
any stock exchange to which Buyer is subject or by which any of its properties
are bound or affected (it being understood that the necessity for filings and
consents is dealt with separately in the following paragraph), (b) conflict with
or violate any order, judgment, injunction, award or decree binding upon Buyer,
(c) conflict with or violate the certificate of incorporation, bylaws or other
similar governing documents of Buyer, (d) constitute a default in any material
respect, or give rise to a right of termination, cancellation or acceleration of
any right or obligation of Buyer under any provision of any agreement, contract
or other instrument binding upon Buyer or any license, franchise, permit or
other similar authorization held by Buyer, (e) result in the creation or
imposition of any Lien upon any of the assets of Buyer, or (f) give any
Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate
or modify, any licenses, permits or authorizations from such Governmental
Authority that is held by Buyer or that otherwise relates to the business of
Buyer or to any of the assets owned or used by Buyer, except, in the case of any
of the foregoing clauses (a), (d), (e) or (f), for any such conflict, violation,
default, right, Lien revocation, withdrawal, suspension, cancellation,
termination or modification which would not, individually or in the aggregate,
have a Material Adverse Effect or have a material adverse effect on the ability
of Buyer to consummate the transactions contemplated hereby.
The execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby do not require any
consent from, or filing with, any governmental or regulatory authority, except
for (a) the filing of a report under the HSR Act, and the expiration of the
applicable waiting period thereunder, (b) any action, consent or filing that
Seller or the Company is required to obtain or make, and (c) consents and
filings which, if not obtained or made, will not, individually or in the
aggregate, have a Material Adverse Effect or have a material adverse effect on
the ability of Buyer to consummate the transactions contemplated hereby.
3.4. Purchase for Investment. Buyer is acquiring the Shares to be acquired
by it hereunder for investment and for its own account, and not with a view to,
or for offer or sale in
20
connection with, any distribution thereof that would violate the Securities Act
of 1933, as amended (the "Securities Act"), or any applicable state securities
law. Buyer is (i) knowledgeable, sophisticated and experienced in business and
financial matters and fully understands the limitations on transfer described
above and (ii) an "accredited investor" as such term is defined in Rule 501(a)
of Regulation D under the Securities Act.
3.5. Brokers. Except for SPC Management II, LLC and Silver Brands Partners
L.P., Buyer is not subject to any valid claim of any broker, investment banker,
finder or other intermediary in connection with the transactions contemplated by
this Agreement. Buyer is solely responsible for any payment, fee or commission
that may be due to SPC Management II, LLC and Silver Brands Partners L.P. in
connection with the transactions contemplated hereby.
ARTICLE IV
COVENANTS
4.1. Confidentiality. Buyer, on behalf of itself and its affiliates,
acknowledges that all information being provided to it by Seller and the
Company, or their representatives, is subject to the terms of a Confidentiality
Agreement dated September 24, 2000, between Buyer and Seller (the
"Confidentiality Agreement"), the terms of which are incorporated herein by
reference.
4.2 Financial Information. Buyer will use its best efforts to (a) hold all
of the material books and records of the Company existing on the Closing Date
and not destroy or dispose of any thereof for a period of three (3) years from
the Closing Date or such longer time as may be required by law or by Material
Contract, and thereafter, but prior to the seventh (7th) anniversary of the
Closing Date, if it desires to destroy or dispose of such books and records,
will offer first in writing at least sixty (60) days prior to such destruction
or disposition to surrender them to Seller and (b) provide to Seller such
financial and other information with respect to the Company for the portion of
the current fiscal year during which the Shares were owned by Seller in
accordance with past practice to allow Seller to comply with financial, tax
reporting, legal and accounting requirements.
4.3. Solicitations of Employees. Without the prior written consent of
Seller, Buyer agrees that for a period of three (3) years following the Closing
Date, neither Buyer nor any affiliate of Buyer (other than Swander Pace Capital
and Silver Brand Partners L.P. and their respective officers, directors, members
or partners and their respective portfolio companies) shall employ or solicit
for employment, directly or indirectly, any employee of Seller (it being
expressly understood that the foregoing shall not prohibit Buyer or any of its
affiliates (i) from engaging in general solicitations not targeted at employees
of Seller, (ii) from employing or soliciting for employment any employee of
Seller who has been terminated without cause or (iii) from employing or
soliciting for employment, after six (6) months of the date of termination, any
employee of Seller who voluntarily has terminated his employment). Without the
prior written consent of Seller, Buyer agrees that for a period of three (3)
years following the Closing Date, none of the portfolio companies of Swander
Pace Capital or Silver Brand Partners L.P. shall solicit for employment,
directly or indirectly, any employee of Seller (it being expressly understood
that the foregoing shall not prohibit such companies (i) from engaging in
general solicitations not targeted at employees of Seller, (ii) from soliciting
for employment any employee of Seller who has been terminated without cause or
(iii) from soliciting for
21
employment, after six (6) months of the date of termination, any employee of
Seller who voluntarily has terminated his employment).
4.4. Employees.
(a) Employment. Effective as of the Closing Date, Seller shall cause
the employment of each Employee, other than those listed on Schedule 4.4, to be
terminated. Buyer shall extend offers of employment to all the Employees
terminated in accordance with the preceding sentence, such offers to be
effective as of the Closing Date. All Employees who are offered and who accept
such offers of employment are hereinafter referred to as the "Transferred
Employees". Service performed by such Transferred Employees for Seller, the
Company or its affiliates prior to Closing need not be credited under any
employee benefit plans of Buyer for purposes of eligibility to participate,
vesting or any other purpose as if it had been performed for Buyer. Buyer is not
required to provide the Transferred Employees with benefits under its employee
benefit plans that are substantially similar to the benefits under the Benefits
Plans, and Buyer shall not credit all Transferred Employees for any deductibles
and co-payments made for the current year under Seller's Welfare Plans (as
defined below). With respect to any Benefit Plan with a cash or deferred
election under Section 401(k) of the Code, Buyer shall not be obligated to
provide a matching contribution as provided by the Company or Seller to its
Employee. The Seller's defined benefit pension plan shall remain with the Seller
and will not be assumed or transferred to the Buyer in any way. Buyer shall be
under no obligation to sponsor or maintain a defined benefit pension plan for
the Employees, or to provide other retirement benefits for the purpose of making
up benefits lost by the Employee as a result of not having a defined benefit
plan. Effective as of the Closing Date, Seller shall be solely responsible for
all of the Company's or Seller's vacation pay liability owed to the Employees
that is earned but not taken as of the Closing Date. Transferred Employees
active participation in the Benefits Plans that are "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA) sponsored by Seller or the Company
(the "Seller's Welfare Plans") shall cease as of the Closing Date or as
otherwise provided under the terms of such Benefit Plan, unless Buyer and
Seller, in conjunction with any provider, agree to extend coverage thereafter.
Notwithstanding the preceding sentence, Seller's Welfare Plans shall retain
liability for all claims incurred by the Transferred Employees and their
dependents prior to the Closing Date including claims which are not submitted
until after the Closing Date. Buyer's Welfare Plans (as defined below) shall be
responsible for all claims incurred by the Transferred Employees and their
dependants on or after the Closing Date. A claim shall be deemed incurred (i) on
the date of occurrence of death or dismemberment in the case of claims under
life insurance and accidental death and dismemberment plans and (ii) on the date
service or treatment is provided in the case of claims under medical, hospital,
dental and similar plans. Effective as of the Closing Date, Buyer shall
establish or designate a pre-existing group health plan or plans (the "Buyer's
Welfare Plans") that will provide medical, dental and life insurance benefits
for the Transferred Employees and their dependents. Buyer's Welfare Plans shall
comply with any pre-existing condition exclusions under applicable law for any
Transferred Employees or their dependents. Buyer assumes any and all liability
to provide continuation coverage under Section 4980B of the Code with respect to
any Transferred Employee and any dependant or spouse of such Transferred
Employee.
(b) WARN Act. None of Seller or any post-Closing affiliate of Seller
shall have any liability under the Worker Adjustment and Retraining Notification
Act, or any similar
22
state or local law, with respect to any Employee on account of the termination
of that Employee's employment by Buyer on or after the Closing Date (and Buyer
will hold such parties harmless from such liabilities).
(c) Severance Pay. Neither Seller nor any post-Closing affiliate of
Seller shall have any liability attributable to any severance benefits or
termination pay that become payable to any Transferred Employee on account of
the termination of any Transferred Employee's employment by Buyer on or after
the Closing Date (and Buyer will hold such parties harmless from such
liabilities).
(d) Pension Plan. Seller shall be responsible for any notices, filings
or other obligations under Title IV of ERISA and any liability for benefits
related to the transactions contemplated by this Agreement with respect to
Seller's "defined benefit plan" described under Section 3(35) of ERISA.
4.5. Taxes. (a) Seller shall timely prepare and file (or cause to be
prepared and filed) all income Tax Returns of the Company for taxable periods
that end on or before the Closing Date (the "Seller's Returns"). Such Seller's
Returns shall be true and complete in all material respects. Seller shall timely
pay (or cause to be paid) all Taxes shown as due and payable on the Seller's
Returns and all Taxes attributable to the operations of the Company prior to the
Closing Date.
(b) Buyer shall timely prepare and file (or cause to be prepared and
filed) all Tax Returns of the Company required by law that are not required to
be prepared and filed by Seller pursuant to Section 2.7(a) (the "Buyer's
Returns"). Buyer shall timely pay or cause to be paid all Taxes relating to
Buyer's Returns.
(c) Buyer and Seller shall reasonably cooperate with each other in
connection with the preparation of all Tax Returns with respect to the Company
and with any tax investigation, audit or other preceding related to the Company.
Buyer and Seller shall preserve all information, returns, books, record and
documents relating to any liabilities for Taxes with respect to a taxable period
until the later of the expiration of all applicable statutes of limitation and
extensions thereof, or the conclusion of all litigation with respect to Taxes
for such period. Buyer shall provide to Seller all documentation necessary for
Seller to prepare all Tax Returns of the Company for taxable periods that end on
or before the Closing Date. Seller shall have the right to control any audit or
examination by any taxing authority, contest, resolve and defend against any
assessment, notice of deficiency or other adjustment or proposed adjustment
relating to or with respect to Taxes (a "Tax Proceeding") for which it has
responsibility under Sections 2.7(a) or 4.5(a).
4.6. Trade Discounts. Following the Closing, (i) Seller shall pay or
discharge all obligations under Trade Discounts (as defined below) on sales
effected prior to Closing by the Company or Seller and (ii) Buyer shall pay or
discharge, and indemnify and hold Seller harmless from, all obligations under
Trade Discounts on sales effected by Buyer or the Company following the Closing.
"Trade Discounts" shall mean trade discounts, invoice deductions or similar
concessions to wholesalers or retailers of finished products of the Company. Any
undisputed amounts to be paid by Seller or Buyer, as the case may be, under this
Section 4.6
23
shall be paid within ten (10) days of receipt by Seller or Buyer, as the case
may be, of an invoice from Buyer or Seller, as the case may be, for such
amounts, together with such other documentation as the paying party reasonably
may request.
4.7. Returns. Following the Closing, Seller shall pay or discharge all
liabilities for returns, disposals and reclamations (of which return, disposal
or reclamation Seller shall have received notice) of finished products of the
Company from wholesalers or retailers ("Returns"), provided, however, that (i)
(A) such Returns occur within six (6) months from the Closing Date and the
liabilities for each such Return amount to $5,000 or more or (B) such Returns
occur within thirty (30) days from the Closing Date and the liabilities for all
such Returns in the aggregate amount to $15,000 or more, and (ii) with respect
to Returns described by the foregoing clause (i)(A), such finished products were
sold and shipped by (x) the Company prior to the Closing or (y) by Seller in
connection with its sale of Slow-Moving Closing Inventory acquired from the
Company pursuant to Section 1.2(d) above, and Buyer provides to Seller
reasonably satisfactory evidence to such effect. Any amounts to be paid by
Seller under this Section 4.7 shall be paid within ten (10) days of receipt by
Seller of an invoice from Buyer in accordance with this Section 4.7 for such
amounts, together with such other documentation as Seller reasonably may
request.
4.8. Accounts Payable. Following the Closing, Seller shall pay any account
payable of the Company for goods delivered or services performed prior to the
Closing Date within a period no longer than the Company's historic payment
period for accounts payable that are similar in amount and nature to such
account payable.
4.9. Prepaid Expenses. At Closing, Buyer and Seller shall agree on the
amount of rent and real estate taxes for the Company that shall have been
prepaid by Seller or the Company prior to Closing and relate to the period from
and after the Closing Date (the "Prepaid Expense Amount"), such amount not to
exceed $60,000 in the aggregate. Seller shall provide Buyer with such
documentation as Buyer may reasonably request to evidence the amount of the
Prepaid Expense Amount.
4.10. USPTO Filings. Promptly following the Closing, Seller will file with
the U.S. Patent and Trademark Office the unrecorded terminations and releases
relating to the trademarks covered by the Liens described on Schedule 2.8.
4.11. Further Assurances. From time to time, as and when requested by
either party hereto, the other party shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
4.12. Press Releases. Buyer and the Company, on the one hand, and Seller,
on the other, agree that neither it nor its affiliates will make any statement
to the press, press release or other public announcement regarding this
Agreement or the transactions contemplated hereby after the Closing unless the
text and time of the release of any such statement has been approved by the
other party, except where such disclosure is required pursuant to applicable law
or applicable listing requirements of any national exchange or interdealer
quotation system (in
24
which case such party will consult with the other party regarding any such
public statements prior to disclosure); provided, however, that the foregoing
shall not prevent Swander Pace Capital and its affiliates from issuing standard
"tombstone" announcements concerning the transactions contemplated hereby.
ARTICLE V
INDEMNIFICATION
5.1. Indemnification by Seller. Subject to the terms and conditions of
Section 5.3, from and after the Closing, Seller shall indemnify Buyer and its
affiliates and their respective officers, directors, members, partners and
employees (the "Buyer Indemnified Parties") against, and hold them harmless
from, any loss, liability, claim, damage or expense, including reasonable legal
fees and expenses, but excluding punitive damages, lost profits (including
damages for loss of business reputation) and other unforeseen or consequential
damages ("Losses"), suffered or incurred by any such Buyer Indemnified Party as
a direct consequence of (a) any breach of any representation or warranty of
Seller contained in this Agreement which by the terms of Section 5.3(f) survives
the Closing, (b) any breach of any covenant of Seller contained in this
Agreement which by its terms requires performance after the Closing, (c) any
environmental liabilities relating to any property formerly owned or leased by
the Company (and not owned or leased as of the Closing Date) or (d) the items
set forth on each of Schedule 2.11 and Schedule 2.12 hereof.
5.2. Indemnification by Buyer. Subject to the terms and conditions of
Section 5.3, each of Buyer and, after the Closing, the Company, on a joint and
several basis, shall indemnify Seller and its affiliates and their respective
officers, directors, members, partners and employees (the "Seller Indemnified
Parties") against, and hold them harmless from, any Losses suffered or incurred
by any such Seller Indemnified Party as a direct consequence of (a) any breach
of any representation or warranty of Buyer contained in this Agreement which by
the terms of Section 5.3(f) survives the Closing, (b) any breach of any covenant
of Buyer contained in this Agreement or (c) the operation of the business of the
Company after the Closing.
5.3. Indemnification Limitations and Procedures.
(a) Notwithstanding anything to the contrary in this Agreement, no
Buyer Indemnified Party shall be entitled to indemnification pursuant to Section
5.1 unless the aggregate amount of all Losses for which the Buyer Indemnified
Parties would, but for this sentence, be entitled to receive indemnification
pursuant to Section 5.1 exceeds an amount equal to $200,000 and then only to the
extent of any such aggregate excess; provided, however, that in no event will
the Buyer Indemnified Parties be entitled to receive in the aggregate an amount
in excess of $4,000,000 pursuant to Section 5.1, except that no deductible or
limit shall apply (i) to the extent that such liability for indemnification
resulted, directly or indirectly, from fraud or intentional misrepresentation on
the part of Seller or from breaches of representations and warranties contained
in Sections 2.2 and 2.4, (ii) to any amounts payable by Seller under Sections
4.6 and 4.7 hereof or (iii) to Seller's indemnification obligations under
paragraphs (c) and (d) of Section 5.1.
25
(b) Notwithstanding anything to the contrary in this Agreement, no
Seller Indemnified Party shall be entitled to indemnification pursuant to
Section 5.2 unless the aggregate amount of all Losses for which the Seller
Indemnified Parties would, but for this sentence, be entitled to receive
indemnification pursuant to Section 5.2 exceeds an amount equal to $200,000 and
then only to the extent of any such aggregate excess; provided, however, that in
no event will the Seller Indemnified Parties be entitled to receive in the
aggregate an amount in excess of $4,000,000 pursuant to Section 5.2, except that
no deductible or limit shall apply (i) to the extent that such liability for
indemnification resulted, directly or indirectly, from fraud or intentional
misrepresentation on the part of Buyer or from breaches of the representations
and warranties contained in Section 3.2 or (ii) to any amounts payable by Buyer
under Section 4.6 hereof.
(c) Buyer acknowledges and agrees that, from and after the date
hereof, its sole and exclusive remedy with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article V. In furtherance of the
foregoing, as a material inducement for the execution and delivery of this
Agreement by Seller and the Company, Buyer, on behalf of itself and its
affiliates, hereby waives, from and after the date hereof, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
it may have against Seller or the Company (or their affiliates or
representatives) relating to the subject matter of this Agreement, the Company
(or its operations) or otherwise, whether known or unknown, including claims
arising under or based upon any federal, state or local statute, law, ordinance,
rule or regulation, including Environmental Laws, except claims brought under
and subject to the terms of this Agreement.
(d) Buyer acknowledges and agrees that, other than the representations
and warranties of Seller expressly set forth in this Agreement, there are no
representations or warranties of Seller expressed or implied relating to the
subject matter of this Agreement, Seller or the Company (or its operations) and
that there shall be no claim against Seller or the Company or their affiliates
or representatives or right to indemnification with respect to any information
(whether written or oral), documents or materials furnished by such parties (or
any of their affiliates or representatives) to Buyer or any of its affiliates or
representatives, including any "business plan," "executive summary," offering
memorandum or other marketing materials, or any information contained therein,
or any projections, estimates or budgets heretofore delivered to or made
available to Buyer of future revenues, expenses or expenditures, future results
of operations (or any component thereof), future cash flows or future financial
condition (or any component thereof) of the Company. Except as expressly
provided in this Agreement, Buyer is accepting the Company and its properties on
an "AS IS, WHERE IS, with all faults" basis.
(e) Amounts paid in respect of indemnification obligations of the
parties pursuant to this Article V shall be treated as an adjustment to the
purchase price paid by Buyer for the Shares. In determining the amount of Losses
to which an indemnified party is entitled under this Article V, full allowance
shall be made for any proceeds available pursuant to the indemnified party's
insurance policies or from any third party and for any tax benefit resulting
from the indemnified party's loss, claim or damages. In the event that any such
proceeds or recovery are received by an indemnified party after payment of an
indemnity claim by an indemnifying party hereunder, the indemnified party shall
promptly pay the amount of such proceeds or other recovery to the indemnifying
party to the extent it is duplicative with the
26
indemnifying party's prior payment. For purposes of determining the amount of
Losses payable in respect of Section 5.1 or 5.2 for a breach of a representation
or warranty, references to any materiality qualification therein shall be
disregarded.
(f) The representations and warranties in this Agreement shall survive
the Closing solely for purposes of Sections 5.1 and 5.2 of this Agreement and
shall terminate at the close of business eighteen (18) months following the
Closing; provided, however, that (i) the representations and warranties set
forth in Section 2.18 shall terminate on the date which is four (4) years from
the Closing Date, (ii) the representations and warranties set forth in Section
2.7 shall terminate on the date on which the applicable statute of limitations
shall have expired and (iii) the representations and warranties set forth in
Sections 2.2 and 2.4 shall survive indefinitely. The obligations to indemnify
and hold harmless a Buyer Indemnified Party or a Seller Indemnified Party, as
the case may be, (x) pursuant to Sections 5.1(a) and 5.2(a), shall terminate
when the applicable representation or warranty terminates, and (y) pursuant to
the other clauses of Sections 5.1 and 5.2, shall not terminate; provided,
however, that such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to be indemnified
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice stating in reasonable detail the basis of such
claim to the party providing the indemnification.
(g) Seller shall not have obligation under this Agreement to indemnify
any Buyer Indemnified Party with respect to any matter that was addressed
through the working capital adjustment procedure pursuant to Section 1.2.
(h) No Contribution. Seller waives, and acknowledges and agrees that
Seller shall not have and shall not exercise or assert or attempt to exercise or
assert, any right of contribution or right of indemnity or any other right or
remedy against the Company in connection with any indemnification claim against
Seller under Section 5.1 of this Agreement.
5.4. Procedures Relating to Indemnification. (a) A party seeking
indemnification pursuant to Sections 5.1 or 5.2 (an "Indemnified Party") shall
give prompt notice to the other party from whom such indemnification is sought
(the "Indemnifying Party") of the assertion of any claim or assessment (but in
no event shall such notice be given later than 30 days after a senior officer of
such Indemnified Party has actual knowledge of such claim or assessment), and
shall notify the Indemnifying Party of the commencement of any action, suit,
audit or proceeding by a third party in respect of which indemnity may be sought
hereunder (a "Third Party Claim") within 30 days of such commencement. Any such
notice shall specify in reasonable detail the claim, assessment, action, suit,
audit or proceeding. The Indemnified Party will give the Indemnifying Party such
information with respect thereto as the Indemnifying Party may reasonably
request. Thereafter, the Indemnified Party shall deliver to the Indemnifying
Party, within five business days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim. If the Third Party Claim
involves (and continues to involve) solely monetary damages, the Indemnifying
Party shall have the right, exercisable by written notice (the "Notice") to the
Indemnified Party at any time following receipt of notice from the Indemnified
Party of the commencement of or assertion of any Third Party Claim, to assume
the defense of such Third Party Claim, using counsel selected by the
Indemnifying Party. Should the Indemnifying Party
27
so elect to assume the defense of a Third Party Claim, the Indemnifying Party
will not be liable to the Indemnified Party for legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof.
Regardless of whether the Indemnifying Party elects to assume the defense of any
such Third Party Claim, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent. The Indemnifying Party or the
Indemnified Party, as the case may be, shall in any event have the right to
participate, at its own expense, in the defense of any Third Party Claim which
the other is defending; provided, however, that if the parties in any action
shall include both an Indemnifying Party and an Indemnified Party, and the
Indemnified Party shall have received written advice of counsel that counsel
selected by the Indemnifying Party has a conflict of interest under applicable
standards of professional responsibility because of the availability of
different or additional defenses to the Indemnified Party, the Indemnified Party
shall have the right to select one separate counsel to participate in the
defense of such action on its behalf, at the expense of the Indemnifying Party.
(c) The Indemnifying Party, if it shall have assumed the defense of
any Third Party Claim and if such Third Party Claim involves solely monetary
damages, shall have the right to consent to the entry of judgment with respect
to, or otherwise settle such Third Party Claim, provided that as between the
Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be
obligated to satisfy and discharge such judgment or settlement. Otherwise, such
settlement only may be made with the written consent of the Indemnified Party,
which consent shall not be unreasonably withheld.
(d) Whether or not the Indemnifying Party chooses to defend or
prosecute any claim involving a third party, all the parties hereto shall
cooperate reasonably in the defense or prosecution thereof and shall furnish
such records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include access during normal
business hours afforded to the Indemnifying Party to, and reasonable retention
by the Indemnified Party of, records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder, and the Indemnifying Party shall reimburse the
Indemnified Party for all its reasonable out-of-pocket expenses in connection
therewith.
(e) For any indemnity claim which involves environmental remediation,
monitoring, investigation or post clean-up monitoring ("Remediation"), the level
of clean-up shall be the least stringent level allowed by Environmental Laws and
in compliance with all Environmental Laws and acceptable to Governmental
Authorities and landlords, and the Indemnifying Party may use the most
cost-effective approach to Remediation, as long as such approach reasonably
promptly achieves the required goal.
ARTICLE VI
MISCELLANEOUS
6.1. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses,
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except as may otherwise be expressly provided in this Agreement and except for
the fees associated with the filings under the HSR Act, which shall be borne
equally by Buyer and Seller.
6.2. Construction of this Agreement. All of the parties to this Agreement
have participated jointly in the negotiation and drafting of this Agreement. In
the event any ambiguity or question of interpretation arises, this Agreement and
the other documents and instruments executed in connection with this Agreement
shall be construed as if drafted jointly, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement or such other documents and instruments. Any item
disclosed on a disclosure schedule to this Agreement shall be deemed disclosed
for all other disclosure schedules to which such item is applicable, provided
such reference is clear. The term "including" in this Agreement shall mean
"including without limitation." References in this Agreement to dollar amount
thresholds shall not, for purposes of this Agreement, be deemed to be evidence
of materiality or a Material Adverse Effect. All references to immediately
available funds or dollar amounts contained in this Agreement shall mean United
States dollars. All references to GAAP contained in this Agreement shall mean
United States generally accepted accounting principles. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. References to "schedules"
or "sections" herein shall be deemed to refer to the applicable disclosure
schedule or section of this Agreement.
6.3. Assignment. This Agreement and the rights and obligations of the
parties hereunder shall not be assigned, delegated or otherwise transferred by
Buyer, Seller or the Company without the prior written consent of Buyer (where
Seller seeks to assign or delegate rights or obligations) or Seller (where Buyer
or the Company seek to assign or delegate rights or obligations), except that
Buyer may assign its rights under this Agreement as collateral security to any
entity providing financing to Buyer. This Agreement shall inure to the benefit
of, and be binding upon and enforceable against, the successors and permitted
assigns of the respective parties hereto.
6.4. No Third-Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted assigns, and nothing herein expressed
or implied shall give or be construed to give to any person, other than the
parties hereto and such assigns, any legal or equitable rights hereunder
(except, in the case of Article V hereof, the persons referred to in Sections
5.1 and 5.2).
6.5. Amendments. No amendment to or modification of this Agreement shall be
effective unless it shall be in writing and signed by each of the parties to
this Agreement.
6.6. Notices. All notices and other communications given under this
Agreement shall be in writing and shall be deemed duly given (a) on the date of
delivery, if delivered personally, (b) on the date of transmission, if sent via
facsimile transmission to the facsimile number given below, and telephonic or
written confirmation of receipt is obtained promptly after completion of
transmission, (c) the business day after the date of delivery to a reputable and
recognized next-day express courier service, or (d) three business days after
(or, in the case of a notice or communication sent overseas, ten business days
after) being mailed by registered or certified
29
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to Buyer, to:
Nonni's Food Company, Inc.
601 South Boulder
Tulsa, OK 74119
Attention: Its President
Facsimile: (918) 560-4108
with a required copy to:
Cooley Godward LLP
One Freedom Square, Reston Town Center
11951 Freedom Drive
Reston, VA 20190-5601
Attention: Christian E. Plaza, Esq.
Facsimile: (703) 456-8100
If to Seller or the Company, to:
B&G Foods, Inc.
Four Gatehill Drive
Suite 110
Parsippany, NJ 07054
Attention: Mr. David L. Wenner
Facsimile: (973) 630-6550
with a required copy to:
Dechert
30 Rockefeller Plaza
New York, New York 10112
Attention: Glyndwr P. Lobo, Esq.
Facsimile: (212) 698-3599
Such addresses may be changed, from time to time by means of a notice given in
the manner provided in this Section (provided that no such notice shall be
effective until it is received by the other parties hereto).
6.7. Consent to Jurisdiction. Each of Buyer, Seller and the Company
irrevocably submits to the exclusive jurisdiction of (a) the Court of Chancery
for the State of Delaware, and (b) the United States District Court for the
District of Delaware, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Buyer,
Seller and the Company each irrevocably consent to service of process out of
such courts
30
in any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, or by recognized overnight courier or delivery
service, to Buyer or Seller at their respective addresses set forth herein. Each
of Buyer, Seller and the Company irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to above and hereby further irrevocably waives and agrees, to
the full extent permitted by applicable law, not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in any inconvenient forum.
6.8. Severability. If any provision of this Agreement or the application of
any such provision to any person or circumstance shall be held invalid, illegal
or unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
6.9. Waiver. Waiver of any term or condition of this Agreement by any party
shall be effective if in a writing signed by the party against whom such waiver
is asserted. Any such waiver shall not be construed as a waiver of any
subsequent breach or failure of the same term or condition, or a waiver of any
other term of this Agreement. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
6.10. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties to this Agreement and delivered to the other parties, it
being understood that all parties need not sign the same counterpart.
6.11. Entire Agreement. This Agreement, including the disclosure schedules
hereto and the other documents delivered pursuant to this Agreement, contains
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof (except for the Confidentiality Agreement) and
supersede all prior and contemporaneous agreements, negotiations,
correspondence, undertakings and understandings, oral or written, relating to
such subject matter (except for the Confidentiality Agreement).
6.12. Governing Law. This Agreement shall be governed by an construed in
accordance with the internal laws of the State of Delaware applicable to
agreements made and to be performed entirely within the State of Delaware,
without regard to the conflicts of law principles of such state.
6.13. Certain Defined Terms. (a) As used herein, "Material Adverse Effect"
means (a) with respect to the Company, a material adverse effect on the
business, liabilities, assets, financial condition or results of operations of
the Company, other than with respect to any adverse effects which, directly or
indirectly, relate to or result from (i) public or industry knowledge regarding
the transactions contemplated by this Agreement or (ii) past, existing or
prospective economic, regulatory or other conditions generally affecting the
industries in which the Company competes, and (b) with respect to Buyer, a
material adverse effect on the
31
consolidated business, liabilities, assets, financial condition or results of
operations of Buyer, other than with respect to any adverse effects which,
directly or indirectly, relate to or result from (i) public or industry
knowledge regarding the transactions contemplated by this Agreement or (ii)
past, existing or prospective economic, regulatory or other conditions generally
affecting the industries in which Buyer competes.
It is understood that Seller may include in the disclosure schedules to
this Agreement or elsewhere items which would not have a Material Adverse Effect
within the meaning of the previous paragraph to avoid any misunderstanding or
for any other reason, and such inclusion shall not be deemed to be an
acknowledgement by Seller that such items would have a Material Adverse Effect
or further define or bear on the meaning of such term for the purposes of this
Agreement. When applied to any party to this Agreement, the term "knowledge" and
any derivatives thereof shall refer only to the knowledge of, with respect to
Seller, the members of Seller's executive management listed on Schedule 6.13,
and, with respect to Buyer, the executive officers of Buyer, in each case after
reasonable investigation of the books and records and reasonable inquiries of
the management-level employees of that party, in each case, with respect to the
representation and warranty given by such party.
6.14. Time is of the Essence. Time is of the essence in the performance of
this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
NONNI'S FOOD COMPANY, INC.
By /s/ Timothy G. Bruer
----------------------------------------
Name: Timothy G. Bruer
Title: Chief Executive Officer
B&G FOODS, INC.
By /s/ Robert C. Cantwell
----------------------------------------
Name: Robert C. Cantwell
Title: Executive Vice President
BURNS & RICKER, INC.
By /s/ Robert C. Cantwell
----------------------------------------
Name: Robert C. Cantwell
Title: Executive Vice President
33