Exhibit 2.1
EXECUTION COPY
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UNIT PURCHASE AGREEMENT
BY AND AMONG
VESTAR/AGRILINK HOLDINGS LLC,
a Delaware limited liability company,
AGRILINK FOODS, INC.,
a New York corporation,
and
PRO-FAC COOPERATIVE, INC.,
a New York corporation
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June 20, 2002
TABLE OF CONTENTS
Article I Reorganization; Unit Purchase; Closing; Deliveries.................................................2
1.1 Reorganization Transactions................................................................2
1.2 Unit Purchase; Issuance of Warrants........................................................2
1.3 The Closing................................................................................2
1.4 Other Purchasers...........................................................................3
Article II Representations and Warranties of the Company and Pro-Fac.........................................4
2.1 Organization and Company Power.............................................................4
2.2 Capitalization.............................................................................4
2.3 Subsidiaries; Investments..................................................................5
2.4 Authorization; No Breach...................................................................6
2.5 Governmental Authorization.................................................................6
2.6 Financial Statements.......................................................................7
2.7 SEC Filings................................................................................7
2.8 Absence of Undisclosed Liabilities.........................................................7
2.9 Accounts Receivable; Inventory.............................................................8
2.10 Absence of Certain Developments............................................................8
2.11 Assets....................................................................................11
2.12 Tax Matters...............................................................................11
2.13 Contracts and Commitments.................................................................13
2.14 Intellectual Property Rights..............................................................16
2.15 Litigation................................................................................17
2.16 Brokerage.................................................................................18
2.17 Insurance.................................................................................18
2.18 Labor Matters.............................................................................19
2.19 ERISA.....................................................................................19
2.20 Compliance with Laws; Permits.............................................................21
2.21 Specific Compliance with FDA, USDA and Other Food Regulations.............................22
2.22 Environmental and Safety Matters..........................................................23
2.23 Affiliate Transactions....................................................................24
2.24 Suppliers and Customers...................................................................25
2.25 Real Property.............................................................................25
2.26 Personal Property.........................................................................26
2.27 Product Recalls...........................................................................26
2.28 Intercompany Payments.....................................................................26
2.29 Prohibited Payments.......................................................................27
2.30 Closing Date..............................................................................27
2.31 Disclosure................................................................................27
Article III Representations and Warranties of Pro-Fac.......................................................27
3.1 Power and Authority.......................................................................27
3.2 Authorization; No Breach..................................................................27
3.3 Brokerage.................................................................................28
3.4 Litigation, etc...........................................................................28
3.5 Closing Date..............................................................................28
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Article IV Representations and Warranties of Buyer..........................................................28
4.1 Organization, Company Power and Authority.................................................28
4.2 Authorization; No Breach..................................................................29
4.3 Investment Representations................................................................29
4.4 No Public Market..........................................................................30
4.5 Brokerage.................................................................................30
4.6 Litigation................................................................................30
4.7 Commitment Letter.........................................................................31
4.8 Closing Date..............................................................................31
Article V Covenants Relating to Conduct of Business.........................................................31
5.1 Ordinary Course...........................................................................31
5.2 Dividends; Changes in Share Capital.......................................................31
5.3 Issuance of Securities....................................................................31
5.4 Other Specified Actions...................................................................32
5.5 Insurance.................................................................................33
5.6 Benefit Plans.............................................................................33
Article VI Additional Covenants.............................................................................34
6.1 Advice of Changes.........................................................................34
6.2 Government Filings........................................................................34
6.3 Bondholder Consent Solicitation...........................................................35
6.4 Solicitation Materials....................................................................35
6.5 Pro-Fac Shareholders/Members Meeting; Preparation of Information Statement................35
6.6 Access to Information.....................................................................36
6.7 Confidentiality...........................................................................36
6.8 Approvals and Consents; Cooperation.......................................................37
6.9 Non-Solicitation..........................................................................38
6.10 Public Announcements......................................................................39
6.11 Further Assurances........................................................................40
6.12 Disposition of Litigation.................................................................40
6.13 Financing.................................................................................40
6.14 Real Estate Matters.......................................................................41
6.15 Cessation of Use of "Agrilink" Name and of Company Intellectual Property Rights...........42
6.16 Reorganization Transactions...............................................................42
6.17 Holdings LLC Agreement....................................................................42
6.18 Issuance of Units.........................................................................42
6.19 Amended Bylaws............................................................................42
6.20 Amended Certificate.......................................................................42
6.21 Preparation of certain Organizational Documents...........................................42
6.22 Management Services Agreement.............................................................43
6.23 Securityholders Agreement.................................................................43
6.24 Amended and Restated Marketing and Facilitation Agreement and Termination Agreement.......43
6.25 Transition Services Agreement.............................................................43
6.26 Equity Value Plan.........................................................................43
6.27 AgriFrozen Litigation Expenses............................................................43
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6.28 Directors and Officers Liability Insurance................................................44
6.29 Environmental Expenses, Expenditures and Liabilities......................................44
6.30 Knouse Agreement..........................................................................44
6.31 Pro-Fac Loan Facility.....................................................................45
6.32 Non-Solicitation of Employees.............................................................45
6.33 Evaluating LLC Structure..................................................................45
Article VII Closing Conditions..............................................................................46
7.1 Conditions to Buyer's Obligations.........................................................46
7.2 Conditions to the Company's and Pro-Fac's Obligations.....................................49
Article VIII Termination....................................................................................51
8.1 Termination...............................................................................51
8.2 Procedure and Effect of Termination.......................................................52
Article IX Tax Matters......................................................................................53
9.1 Tax Indemnification.......................................................................53
9.2 Straddle Period...........................................................................53
9.3 Responsibility for Filing Tax Returns for Periods through Closing Date....................54
9.4 Cooperation on Tax Matters................................................................54
9.5 Tax Sharing Agreements....................................................................55
9.6 Certain Taxes and Fees....................................................................55
9.7 Audits....................................................................................55
9.8 Carrybacks................................................................................55
9.9 Retention of Carryovers...................................................................55
9.10 Survival..................................................................................56
Article X Indemnification...................................................................................56
10.1 Indemnification...........................................................................56
10.2 Further Limitations.......................................................................59
10.3 Funding Mechanism.........................................................................60
10.4 Exclusive Remedy..........................................................................60
10.5 Effect of Indemnification Payments........................................................60
Article XI Definitions......................................................................................61
Article XII Miscellaneous...................................................................................72
12.1 Fees and Expenses.........................................................................72
12.2 Remedies..................................................................................73
12.3 Release and Waiver........................................................................73
12.4 Consent to Amendments; Waivers............................................................73
12.5 Successors and Assigns....................................................................74
12.6 Severability..............................................................................74
12.7 Counterparts..............................................................................74
12.8 Descriptive Headings; Interpretation......................................................74
12.9 Entire Agreement..........................................................................74
12.10 No Third-Party Beneficiaries..............................................................75
12.11 Schedules and Exhibits....................................................................75
12.12 Certain Matters and Payments..............................................................75
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12.13 Governing Law.............................................................................76
12.14 Waiver of Jury Trial......................................................................76
12.15 Jurisdiction..............................................................................76
12.16 Notices ..................................................................................76
12.17 No Strict Construction....................................................................78
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EXHIBITS AND SCHEDULES
Exhibits
Exhibit A - Terms of Agrilink Holdings LLC Limited Liability Company Agreement
Exhibit B - Terms of Management Equity Participation
Exhibit C - Financing Commitment Letter
Exhibit D - Equity Commitment Letter
Exhibit E - Financeable Leaseholds
Exhibit F - Management Services Agreement
Exhibit G - Securityholders Agreement
Exhibit H - Amendment and Restated Marketing and Facilitation Agreement
Exhibit I - Termination Agreement
Exhibit J - Transition Services Agreement
Exhibit K - Terms of Pro-Fac Loan Facility
Exhibit L - Evaluating LLC Structure
Exhibit M - Seneca Sideletter Agreement
Exhibit N - Dean Sideletter Agreement
Exhibit O - Terms of Harris Beach LLP Legal Opinion
Schedules
Schedule 2.1(a) - Organization and Corporate Power
Schedule 2.2(a) - Capitalization
Schedule 2.3 - Subsidiaries and Investments
Schedule 2.4 - Company Consents et al.
Schedule 2.6 - Financial Statements
Schedule 2.8(a) - Liabilities
Schedule 2.8(b) - Pro-Fac Liabilities
Schedule 2.9 - Inventory
Schedule 2.10 - Developments
Schedule 2.11 - Assets
Schedule 2.12 - Tax Matters
Schedule 2.13(a) - Material Contracts
Schedule 2.13(e) - Third Party Beneficiaries
Schedule 2.14(a) - Intellectual Property Rights
Schedule 2.14(b) - Ownership of Intellectual Property Rights
Schedule 2.14(c) - Claims with respect to Intellectual Property Rights
Schedule 2.15(a) - Company Litigation
Schedule 2.15(b) - Settlements
Schedule 2.15(c) - AgriFrozen/AgriPac related Claims
Schedule 2.16 - Brokerage
Schedule 2.17 - Insurance
Schedule 2.18 - Labor Matters
Schedule 2.19(a) - Employee Benefit Plans
Schedule 2.19(b) - ERISA Liabilities
Schedule 2.19(f) - Medical, Life and Welfare Benefits
Schedule 2.19(i) - Change of Control Agreements
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Schedule 2.20(a) - Compliance with Laws
Schedule 2.20(b) - Permits, Licenses, Certificates, Accreditations et al.
Schedule 2.21 - Compliance with Food Regulations
Schedule 2.22 - Environmental and Safety Matters
Schedule 2.23 - Affiliate Transactions
Schedule 2.24 - Suppliers and Customers
Schedule 2.25(a) - Owner Property
Schedule 2.25(b) - Leases
Schedule 2.27 - Product Recalls
Schedule 2.28 - Intercompany Payments
Schedule 3.2 - Pro-Fac Consents et al.
Schedule 3.3 - Brokerage
Schedule 3.4 - Pro-Fac Litigation
Schedule 5.4(ii) - Loans or Advances to Pro-Fac
Schedule 5.4(iii) - Other Payments to Pro-Fac
Schedule 6.32 - Non-Solicitation Exceptions
Schedule 9.4 - Order of Events
Schedule 11.1 - List of Executives
Schedule 11.2 - Known Environmental Liabilities
Schedule 11.3 - Retained Equity Value Plan Liabilities
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UNIT PURCHASE AGREEMENT
THIS UNIT PURCHASE AGREEMENT (this "Agreement"), dated as of June 20, 2002,
is by and among Vestar/Agrilink Holdings LLC, a Delaware limited liability
company ("Buyer"), Agrilink Foods, Inc., a New York corporation (the "Company"),
and Pro-Fac Cooperative, Inc., a New York cooperative corporation ("Pro-Fac").
Capitalized terms used herein and not otherwise defined herein have the meanings
given to such terms in Article XI below.
WHEREAS, Pro-Fac owns 10,000 shares of the Company's common stock, par
value $.01 per share (the "Company Common Stock").
WHEREAS, the parties hereto desire to form and capitalize a new limited
liability company under the laws of the State of Delaware, to be named Agrilink
Holdings LLC ("Holdings LLC") pursuant to the Agrilink Holdings LLC Limited
Liability Company Agreement on the terms attached hereto as Exhibit A and other
customary provisions (the "Holdings LLC Agreement").
WHEREAS, subject to the terms and conditions of this Agreement, Buyer, or
its assigns, will purchase from Holdings LLC (i) newly issued Class A Common
Units of Holdings LLC having the rights and preferences and terms and conditions
set forth on Exhibit A attached hereto (the "Common Purchase Units"),
representing 49% of Holdings LLC's fully diluted common equity ownership (prior
to dilution by Executives' equity ownership) in consideration for $37,500,000
(the "Common Unit Purchase Price"), and (ii) newly issued Preferred Units of
Holdings LLC having the rights and preferences and terms and conditions set
forth on Exhibit A attached hereto (the "Preferred Purchase Units", and together
with the Common Purchase Units, the "Purchase Units") in consideration for
$137,500,000 (the "Preferred Unit Purchase Price", and together with the Common
Unit Purchase Price, the "Purchase Price"), (such purchases, the "Unit
Purchase").
WHEREAS, Holdings LLC will issue to Buyer warrants exercisable into Class A
Common Units, representing 9% of Holdings LLC's fully diluted common equity
ownership (prior to dilution by Executives' equity ownership) (the "Warrants").
WHEREAS, subject to the terms and conditions of this Agreement, Pro-Fac
will contribute to the capital of Holdings LLC all of the issued and outstanding
shares of Company Common Stock, representing 100% of the issued and outstanding
capital stock of the Company, in exchange for newly issued Class B Common Units
of Holdings LLC having the rights and preferences and terms and conditions set
forth on Exhibit A attached hereto (the "Pro-Fac Common Units"), representing
42% of Holdings LLC's fully diluted common equity ownership (prior to dilution
by Executives' equity ownership).
WHEREAS, the parties and the Executives intend to effect arrangements on
the terms set forth on Exhibit B attached hereto which would enable the
Executives to participate in the equity of Holdings LLC following the Closing.
WHEREAS, Buyer has proposed, and the Company and Pro-Fac have agreed, that
the Company shall arrange through a lender or lenders to be selected by Buyer
(the "Lender") to
enter into a new credit facility or other form or forms of debt financing the
proceeds of which, together with the Purchase Price, will be used to repay the
Company's existing senior credit facility (the "Existing Financing") with Harris
Trust and Savings Bank, as administrative agent, and Bank of Montreal, Chicago
Bank, as syndication agent (collectively with the other lenders under the
Existing Financing, the "Existing Banks"), to provide for the working capital
needs of the Company and to provide funds necessary to consummate the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
understandings herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Article I
Reorganization; Unit Purchase; Closing; Deliveries
1.1 Reorganization Transactions.
(a) Formation of Holdings LLC. Pro-Fac shall form Holdings LLC
pursuant to the laws of the State of Delaware and to the Holdings LLC Agreement.
(b) Formation of Holdings Inc. Pro-Fac shall cause Holdings LLC to,
and Holdings LLC shall, form a new corporation under the laws of the State of
Delaware to be named Agrilink Holdings Inc. ("Holdings Inc.") having (i) a
certificate of incorporation, and (ii) bylaws in forms provided
by Buyer that are consistent with the transactions contemplated hereby.
(c) Contribution of Company Common Stock to Holdings LLC. Subject to
the terms and conditions of this Agreement, Pro-Fac shall contribute to the
capital of Holdings LLC all of the issued and outstanding shares of Company
Common Stock in exchange for the Pro-Fac Common Units.
(d) Contribution of Company Common Stock to Holdings Inc. Subject to
the terms and conditions of this Agreement, Pro-Fac shall cause Holdings LLC,
and Holdings LLC shall, contribute to the capital of Holdings Inc. all of the
issued and outstanding shares of Company Common Stock.
1.2 Unit Purchase; Issuance of Warrants. Subject to the terms and
conditions of this Agreement, including Section 1.4 below, at the Closing,
Holdings LLC shall issue to Buyer (i) the Purchase Units in exchange for the
Purchase Price, and (ii) the Warrants.
1.3 The Closing.
(a) Time and Place of Closing. The consummation of the Unit Purchase
and the issuance of the Warrants and the transactions relating thereto
(collectively, the "Closing") will take place at the offices of Kirkland &
Ellis, 153 East 53rd Street, New York, New York, commencing at 10:00 a.m. local
time two business days following the date on which the conditions to Closing set
forth in Article VII below (other than the conditions which are, by their terms,
to be satisfied at Closing) have been satisfied or waived in writing by the
party entitled to
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the benefit thereof or such other date and time as agreed by the parties. The
date and time of the Closing is referred to as the "Closing Date".
(b) Deliveries and Proceedings at the Closing. At the Closing, subject
to the satisfaction or waiver of each of the conditions specified in Article VII
below:
(i) Deliveries by Pro-Fac. Pro-Fac shall deliver to Buyer
evidence of (i) the consummation of the transactions contemplated by
Section 1.1, and (ii) Buyer's ownership of the Purchase Units and the
Warrants.
(ii) Deliveries by Buyer. Buyer (or its assigns) shall pay to
Holdings LLC the Purchase Price by wire transfer of immediately available
funds to one or more accounts as designated by Holdings LLC, such account
or accounts to be designated by written notice to Buyer not less than two
business days prior to the Closing.
(iii) Other Deliveries. The closing certificates, opinion of
counsel and other documents and agreements required to be delivered
pursuant to this Agreement with respect to the Closing will be exchanged.
1.4 Other Purchasers. Pro-Fac, the Company and Buyer acknowledge that
subsequent to the date hereof, Holdings LLC may offer to certain member growers
of Pro-Fac (the "Other Accredited Investors") an opportunity to purchase through
an investment vehicle, formed as a limited liability company under the Laws of
Delaware, with Pro-Fac as the managing member ("Investment LLC") on the same
economic terms and conditions and in the same relative proportions as
contemplated by this Agreement for Buyer, up to $25,000,000 of Class B Common
Units, Preferred Units and warrants exercisable into Class B Common Units (the
"Offered Securities"). Pro-Fac will be responsible for obtaining subscriptions
from the Other Accredited Investors for the Offered Securities, which
subscriptions shall be received on or prior to the date that is the later of (x)
30 days following the date hereof, and (y) the day following the day on which
the last of the special meetings of Pro-Fac's shareholders/members contemplated
by Section 6.5 is held, together with any payment or a valid, irrevocable right
of set off for the benefit of the Company against amounts owed by the Company to
Pro-Fac that Pro-Fac owes to such Persons which are payable to such Persons on
or prior to Closing for the full subscription price. In the event that Other
Accredited Investors timely execute and deliver subscriptions together with
payment or a valid, irrevocable right of set off as contemplated above, Pro-Fac
will form the Investment LLC, the units of which will be issued to the Other
Accredited Investors that will represent an interest in the underlying Offered
Securities. The aggregate proceeds to be received by Holdings LLC from the Other
Accredited Investors will reduce Buyer's obligation to purchase the Purchase
Units and the Warrants on a dollar-by-dollar basis and shall ratably reduce the
number of Purchase Units and Warrants sold to Buyer and the proceeds thereof
shall be contributed to the Company and the Company will receive the benefit of
any such set off. The purchase of the Offered Securities, if any, shall close
simultaneously with the Unit Purchase.
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Article II
Representations and Warranties of the Company and Pro-Fac
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and Pro-Fac, on a
joint and several basis, hereby represent and warrant to Buyer as follows:
Except as set forth in the Company Disclosure Schedules delivered by the
Company to Buyer at or prior to the execution and delivery of this Agreement
(the "Company Disclosure Schedules"):
2.1 Organization and Company Power.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of New York and is licensed or
qualified to conduct its business and is in good standing in every jurisdiction
where it is required to be so licensed or qualified except where the failure to
be so qualified is not, and will not be, individually or in the aggregate
materially adverse to the Company's or any of its Subsidiaries' business, which
such jurisdictions are set forth on Schedule 2.1(a) attached hereto. The Company
possesses all requisite corporate power and authority necessary to own and
operate its properties, to carry on its businesses as now conducted, to execute
and deliver this Agreement and to carry out the transactions contemplated by
this Agreement. The copies of the Company's charter documents and bylaws which
have been furnished to Buyer reflect all amendments made thereto at any time
prior to the date of this Agreement and are true, complete and correct. The
minute books (containing the records of meetings of the stockholders, the board
of directors and any committees of the board of directors) of the Company are
true, complete and correct. The stock certificate ledger and the stock record
books of the Company are true, complete and correct.
(b) Holdings LLC shall be a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
and a wholly owned Subsidiary of Pro-Fac. Holdings LLC will not conduct any
business prior to the Closing Date, except as contemplated in Article I.
(c) Holdings Inc. shall be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and a
wholly owned Subsidiary of Holdings LLC. Holdings Inc. will not conduct any
business prior to the Closing Date, except as contemplated in Article I.
2.2 Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consisted solely of 10,000 shares of Company Common Stock, 10,000 shares of
which are issued and outstanding and are held beneficially and of record by
Pro-Fac and, except as set forth on Schedule 2.2(a), free and clear of any
Liens. Immediately prior to and following the Closing, the authorized capital
stock of the Company shall consist of 10,000 shares of Company Common Stock.
Except as set forth on Schedule 2.2(a) attached hereto, the Company does not
have and will not have immediately following the Closing any outstanding (i)
stock or securities convertible, exchangeable or exercisable for any shares of
its capital stock or containing any
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profit participation features, nor any rights or options to subscribe for or to
purchase its capital stock (ii) any stock appreciation rights or phantom stock
or similar plans or rights or (iii) bonds, debentures, notes or other
Indebtedness of the Company having, or convertible into other securities having,
the right to vote on any matters on which shareholders may vote. There are no
(i) outstanding obligations of the Company (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock or (ii) voting
trusts, proxies or other agreements among the Company's stockholders with
respect to the voting or transfer of the Company's capital stock. Schedule
2.2(a) attached hereto contains a true, complete and correct list of all
beneficiaries of the Equity Value Plan setting forth the number of units
granted, the time such units were granted, the beginning value of such units and
the vesting schedule for such units.
(b) As of immediately after the Closing, the Pro-Fac Units, the
Purchase Units, the equity to be issued to the Executives as contemplated by
Exhibit B attached hereto, the Warrants and the Units and warrants issued to the
Investment LLC shall constitute all of the issued and outstanding equity and
equity equivalents of Holdings LLC. Immediately after the Closing, the Pro-Fac
Units, the Purchase Units, the equity to be issued to the Executives as
contemplated by Exhibit B attached hereto, the Warrants and the Units and
warrants issued to the Investment LLC will be duly authorized, validly issued
and fully paid and free and clear of any Liens and will have been issued free
and clear of any preemptive or similar rights or any other claim of any third
party. Except for the Warrants and the warrants issued to the Investment LLC,
Holdings LLC will not have immediately following the Closing any outstanding (i)
equity or securities convertible, exchangeable or exercisable for any units of
its equity or containing any profit participation features, nor any rights or
options to subscribe for or to purchase its equity, (ii) any equity appreciation
rights or phantom units or similar plans or rights or (iii) bonds, debentures,
notes or other Indebtedness of Holdings LLC having, or convertible into other
securities having, the right to vote on any matters on which members may vote.
There are no (i) outstanding obligations of Holdings LLC (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its equity
or any warrants, options or other rights to acquire its equity or (ii) voting
trusts, proxies or other agreements among Holding LLC's members with respect to
the voting or transfer of Holdings LLC's equity, other than the Securityholders
Agreement.
2.3 Subsidiaries; Investments.
(a) Schedule 2.3 attached hereto lists each Subsidiary of the Company
and such Subsidiary's jurisdiction of organization. The Company owns, directly
or indirectly, all of the outstanding capital stock (or other ownership
interests) of each of its Subsidiaries which, with respect to each such
Subsidiary, has been duly authorized and validly issued and is fully paid and,
if applicable, non assessable and were not issued in violation of any preemptive
right or other contractual obligations. The Company is the beneficial owner of
all of the outstanding shares of capital stock of each of its Subsidiaries, free
and clear of any and all Liens and there are no outstanding options, warrants,
convertible securities, calls, rights, commitments, preemptive rights or
agreements or instruments or understandings of any character, obligating any
Subsidiary of the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, contingently or otherwise, additional shares of such
Subsidiary or any securities or obligations convertible or exchangeable for such
shares or to grant, extend or enter into any such option,
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warrants, convertible security, call, right, commitment, preemptive right or
agreement. No Subsidiary of the Company owns any capital stock of the Company.
Except as disclosed on Schedule 2.3 attached hereto, the Company and its
Subsidiaries have no investments (whether through acquisition of an equity
interest or otherwise) in any other person, joint venture, business,
corporation, partnership, trust or other entity. There are no stockholder
agreements, voting trusts, proxies or other agreements or understanding with
respect to or concerning the purchase, sale or voting of the capital stock or
Stock Rights of any of the Subsidiaries of the Company. No Subsidiary of the
Company is in default under or in violation of any provision of its
Organizational Documents.
(b) The Company has the ability (A) to effect any action requiring the
approval of the shareholders of any of its Subsidiaries and (B) to designate all
of the members of the board of directors of each of its Subsidiaries.
2.4 Authorization; No Breach. The Company's execution, delivery and
performance of this Agreement, the Amended and Restated Marketing and
Facilitation Agreement and all other agreements and instruments contemplated
hereby to which it is a party have been duly approved and authorized by the
Company and by Pro-Fac in its capacity as the Company's sole shareholder. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, and all other agreements and instruments
contemplated hereby to which the Company is a party, when executed and delivered
by the Company in accordance with the terms hereof, shall each constitute a
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors rights generally or by general principles of equity.
Except as set forth on Schedule 2.4 attached hereto, the execution and delivery
by the Company of this Agreement and all other agreements and instruments
contemplated hereby to which it is a party, and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company does not
and shall not (i) conflict with or result in a breach of the terms, conditions
or provisions of, (ii) constitute a default under (whether with or without the
passage of time, the giving of notice or both), (iii) result in the loss of a
benefit under or in the creation of any Lien upon the Company's capital stock or
assets pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any third party or any Government Entity
pursuant to, (A) the Organizational Documents of the Company or any of its
Subsidiaries, (B) any Law to which the Company is subject, or any order,
judgment or decree or (C) any material agreement or instrument to which the
Company is subject, except in the case of subclause (B) and (C) above, for any
conflict, breach, default, loss, creation, modification, termination,
acceleration, violation or requirement that would not be material in any
respect.
2.5 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no consent, waiver, agreement,
approval, permit or authorization of, or declaration, filing, notice or
registration to or with, any governmental body, agency, official or authority
other than (a) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act");
(b) compliance with any applicable requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange
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Act") and the rules and regulations promulgated thereunder; (c) state securities
or "blue sky" laws; and (d) such other actions, filings, approvals and consents,
the failure to make or obtain is not, and will not be, individually or in the
aggregate, materially adverse to the Company's or any of its Subsidiaries'
business.
2.6 Financial Statements. Attached as Schedule 2.6 hereto are (a)
audited balance sheet and statements of income and cash flow for each of (i)
Pro-Fac and its Subsidiaries on a consolidated basis, and (ii) the Company and
its Subsidiaries on a consolidated basis, in each case, for each of the fiscal
years ended June 26, 1999, June 24, 2000 and June 30, 2001 and (b) unaudited
balance sheet and statements of income and cash flow for each of (i) Pro-Fac and
its Subsidiaries on a consolidated basis, and (ii) the Company and its
Subsidiaries on a consolidated basis, in each case, for the fiscal quarter ended
as of March 30, 2002 (collectively, the "Financial Statements"). Except as set
forth on the Schedule 2.6 attached hereto, each of the Financial Statements
(including in all cases the notes thereto, if any) has been prepared from, and
are in accordance with, the books and records of (i) Pro-Fac and its
Subsidiaries, and (ii) the Company and its Subsidiaries, as applicable, are
true, complete and correct in all material respects, fairly and accurately
present the financial condition of Pro-Fac or the Company, as applicable, as of
the dates thereof, operating results and cash flows for the periods of (i)
Pro-Fac and its Subsidiaries on a consolidated basis, and (ii) the Company and
its Subsidiaries on a consolidated basis then ended, as applicable, and have
been prepared in accordance with GAAP consistently applied throughout such
Financial Statements and the periods covered thereby in accordance with past
custom and practice of Pro-Fac or the Company, as applicable; provided, that the
unaudited Financial Statements are subject to normal year end adjustments (that
are not expected to be material) and the absence of footnote disclosure required
by GAAP.
2.7 SEC Filings.
(a) Since June 27, 1998, each of Pro-Fac and the Company has timely
filed all forms reports, statements, schedules and other documents (the "Company
Filings") with the Securities and Exchange Commission (the "SEC") required to be
filed by Pro-Fac and the Company, respectively, pursuant to the federal
securities laws. As of their respective dates, the Company Filings (i) complied
in all material respects with all applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act, as applicable,
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of Pro-Fac and the Company has heretofore made available to
Buyer a true, complete and correct copy of any amendments or modifications,
which have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by Pro-Fac or the Company,
respectively, with the SEC pursuant to the Exchange Act.
2.8 Absence of Undisclosed Liabilities.
(a) Except as set forth on Schedule 2.8(a) attached hereto and
identified as it relates to each such entity, none of Pro-Fac, the Company or
any of their respective Subsidiaries has any Liability or obligation (whether
accrued, absolute, contingent, unliquidated or otherwise,
-7-
whether known or unknown, whether due or to become due and regardless of when
asserted) involving more than $100,000 individually, or $1,000,000 in the
aggregate, other than (i) liabilities and obligations to the extent disclosed,
accrued, reserved for or otherwise specifically reflected on the face of the
Most Recent Balance Sheet and/or that are specifically identified and quantified
in the notes related thereto, (ii) liabilities and obligations incurred in the
ordinary course of Pro-Fac's, the Company's or any of their respective
Subsidiaries' business and consistent with past practice since the date of the
Most Recent Balance Sheet (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, claim, lawsuit, violation of law or environmental
liability or clean-up obligation), (iii) contractual liabilities and obligations
with respect to executory contracts of Pro-Fac, the Company or any of their
respective Subsidiaries not required to be disclosed in financial statements
prepared in accordance with GAAP which contracts are listed or not required to
be listed on Schedule 2.13 attached hereto, or (iv) obligations of Pro-Fac, the
Company or any of their respective Subsidiaries pursuant to leases for real or
personal property used in the ordinary course of business.
(b) Except as set forth on Schedule 2.8(b) attached hereto, neither
the Company nor any of its Subsidiaries has any Liability or obligation (whether
accrued, absolute, contingent, unliquidated or otherwise, whether known or
unknown, whether due or to become due and regardless of when asserted) directly
to, or derivatively by virtue of its relationship with Pro-Fac, Pro-Fac member
growers, or former Pro-Fac member growers.
2.9 Accounts Receivable; Inventory. All notes and accounts receivable
of the Company and each of its Subsidiaries as reflected in the Financial
Statements are valid notes and account receivables subject to no setoffs or
counterclaims, have been prepared from, and are in accordance with the books and
records of the Company, have been prepared in accordance with GAAP consistently
applied, and arose solely out of bona fide sales and delivery of goods and
performance of services. Except as set forth on Schedule 2.9, the inventory
shown in the Financial Statements consists and shall consist of a quantity and
quality usable and saleable in the ordinary course of business at normal selling
prices. All excess, obsolete and other unsaleable inventory to be sold at less
than normal selling prices has been identified as of March 30, 2002, is set
forth on Schedule 2.9 and does not exceed $15.8 million in inventory value at
standard cost. For all inventory on Schedule 2.9 sold or otherwise disposed of
at less than standard cost, the aggregate amount by which standard costs exceed
net proceeds will not exceed $4.0 million. Total adjustments from physical
inventory counts and reconciliations of such counts to the accounting records
(including reconciliation of in-transit accounts), for the period beginning
December 31, 2001 and ending June 29, 2002 will not result in any write-down to
gross inventory values, other than any write-down up to $1.5 million related to
in-transit inventory accounts and other than any write-down related to physical
inventory counts and reconciliations of such accounts of up to $900,000, in each
case, whether or not set forth on Schedule 2.9.
2.10 Absence of Certain Developments. Since June 30, 2001, there has
been no fact, event, circumstance, change, development, effect or occurrence
which has had or would reasonably be expected to have a Material Adverse Effect.
-8-
Except as expressly contemplated by this Agreement, or as set forth on
Schedule 2.10 attached hereto, since June 30, 2001, the Company has conducted
its business only in the ordinary course of business consistent with past custom
and practice, and neither the Company nor any of its Subsidiaries has:
(a) authorized for issuance, issued, sold, delivered, granted any
options, warrants, calls, subscriptions or other rights for, or entered into any
other agreement or commitment to issue, sell, deliver or grant, any shares of
any class of capital stock of the Company or its Subsidiaries or any securities
convertible or exchangeable or exercisable into shares of any class of capital
stock of the Company or its Subsidiaries;
(b) incurred any Indebtedness not disclosed in the Financial
Statements (in each case, determined in accordance with GAAP), assumed,
guaranteed, endorsed or otherwise accommodated any obligations of any other
individual, firm or corporation, made any loans or advances to any other
individual, firm or corporation, or otherwise committed to any similar financial
transaction involving more than $100,000 individually, or $1,000,000 in the
aggregate;
(c) discharged or satisfied any material Lien or paid any material
obligation or liability, other than current liabilities paid in the ordinary
course of business consistent with past custom and practice;
(d) declared, set aside or made any payment or distribution of cash or
other property with respect to its capital stock or other equity securities or
otherwise made any distribution of cash or other property to Pro-Fac of any kind
or purchased, redeemed or otherwise acquired any shares of its capital stock or
other equity securities (including any warrants, options or other rights to
acquire its capital stock or other equity securities);
(e) mortgaged, pledged or encumbered any of its properties or assets
or subjected them to any Lien, except Permitted Liens;
(f) sold, assigned, transferred, leased, licensed or abandoned any of
its assets, tangible or intangible (including, without limitation, the Company
Intellectual Property Rights) involving more than $100,000 individually, or
$1,000,000 in the aggregate, except in the ordinary course of business
consistent with past custom and practice, has not consented to enter into any
agreement granting a right to sell, lease or otherwise dispose of any such
asset, or made any commitment, or entered into any transaction, contract or
agreement relating to the Company's or any of its Subsidiaries' respective
assets or businesses (including the acquisition or disposition of any assets) or
relinquished any material contract or other material right of the Company or any
of its Subsidiaries, other than, in each case, in the ordinary course of
business in accordance with their respective past custom and practice;
(g) made or granted any bonus or any wage or salary increase or
committed, orally or in writing, to any such increase to any employee or group
of employees (other than bonuses and wage increases in the ordinary course of
business consistent with past custom and practice) or made or granted any
material increase or committed, orally or in writing, to any such increase in
any employee benefit plan or arrangement, or amended or terminated in any
material respect any existing employee benefit plan or arrangement or adopted
any new employee benefit
-9-
plan or arrangement, or entered into, terminated or modified in any material
respect any collective bargaining agreement or relationship;
(h) made capital expenditures or commitments therefor in excess of
$100,000 individually, or $1,000,000 in the aggregate;
(i) made any loans or advances to, guarantees for the benefit of, or
any Investments in, any Persons (other than advances to employees in the
ordinary course of business consistent with past custom and practice) or formed
any Subsidiary;
(j) suffered any damage, destruction or casualty loss exceeding
$1,000,000 in the aggregate, whether or not covered by insurance, or experienced
any material changes in the amount and scope of insurance coverage;
(k) made any change in its cash management practices or in any method
of accounting or accounting policies, made any write-down in the value of its
inventory that is material or out of the ordinary course of business consistent
with past custom and practice or made any write-off of any accounts receivables
that is material or out of the ordinary course of business consistent with past
custom and practice;
(l) other than compensation paid in the ordinary course of business,
consistent with past practice, directly or indirectly engaged in any transaction
or entered into, amended or terminated, any arrangement with any officer,
director, shareholder or other Affiliate of the Company with a value,
individually or in the aggregate, in excess of $100,000;
(m) amended its charter, bylaws or other Organizational Documents;
(n) waived any material benefits of, or agreed to modify in any
material respect, any confidentiality, standstill, non-solicitation or similar
agreement to which the Company or any of its Subsidiaries is a party;
(o) been involved in any labor dispute, other than routine
non-material grievances, or experienced any activity, union organizing or
decertification, or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to such employees;
(p) implemented any employee layoffs that could implicate the WARN
Act;
(q) entered into any new line of business;
(r) disposed of (by sale, license, forfeiture or otherwise), or failed
to keep in effect any material right in, to or for the use of or any
registration or application for, any Intellectual Property Right that is either
individually or in the aggregate material to the business of the Company as
currently conducted or proposed to be conducted;
(s) entered into any acquisition or agreement to acquire by merger,
consolidation or otherwise, or agreement to acquire a substantial portion of the
assets of, or in any other manner, any business of any other Person;
-10-
(t) entered into any material settlement, conciliation or similar
agreement;
(u) cancelled or waived (i) any right material to the operation of the
business of the Company, or (ii) any debts or claims against any Affiliate of
the Company; or
(v) agreed, whether orally or in writing, to do any of the foregoing
or agreed to take any action, that if taken prior to the date of this Agreement
would have made any representation or warranty in this Article II untrue or
incorrect.
2.11 Assets. Except as set forth on Schedule 2.11 attached hereto, the
Company has good and valid title to, or a valid leasehold interest in, the
material properties and assets, tangible or intangible, shown on the Most Recent
Balance Sheet or acquired thereafter, free and clear of all Liens, except for
(a) properties and assets disposed of in the ordinary course of business since
the date of the Most Recent Balance Sheet and (b) Permitted Liens. The Company
owns, has a valid leasehold interest in, or has a valid license to use, all the
material assets, properties and rights, whether tangible or intangible,
necessary for the conduct of its business as presently conducted and as
presently proposed to be conducted.
2.12 Tax Matters.
(a) Except as set forth on Schedule 2.12 attached hereto:
(i) the Company and its Subsidiaries have filed all Tax Returns
which it is required to file under applicable laws and regulations, and all
such Tax Returns are true, complete and correct in all material respects
and have been prepared in compliance with all applicable laws and
regulations;
(ii) the Company and its Subsidiaries have paid all Taxes due and
owing by them (whether or not such Taxes are shown or required to be shown
on a Tax Return) and have withheld and paid over to the appropriate Taxing
Authority all Taxes which they are required to withhold from amounts paid
or owing to any employee, shareholder, creditor or other third party;
(iii) neither the Company nor any of its Subsidiaries has waived
any statute of limitations with respect to any Taxes or agreed to any
extension of time for filing any Tax Return which has not been filed; and
neither the Company nor any of its Subsidiaries has consented to extend to
a date later than the date hereof the period in which any Tax may be
assessed or collected by any Taxing Authority;
(iv) the unpaid Taxes of the Company and its Subsidiaries (A) did
not, as of the date of the Most Recent Balance Sheet, exceed the reserve
for Tax Liability (excluding any (i) provision for deferred Taxes
established to reflect timing differences between book and Tax income, and
(ii) general reserves) set forth in the Most Recent Balance Sheet (other
than in any notes thereto) and (B) do not exceed that reserve as adjusted
for effects on Tax Liabilities for income earned, losses incurred and Taxes
paid in the ordinary course of business from the date of such balance sheet
through the Closing Date, which accruals shall be adjusted in accordance
with the past custom and practice of the Company and its Subsidiaries in
filing their Tax Returns, for income
-11-
earned, losses incurred and Taxes paid in the ordinary course of business
during such period;
(v) no foreign, federal, state or local tax audits or assessments
or administrative or judicial proceedings are pending or being conducted or
are expected to occur with respect to the Company or any of its
Subsidiaries;
(vi) there are no unresolved questions or claims concerning the
Company's or any of its Subsidiaries' Tax Liability; there are no Liens on
any of the assets of the Company that arose in connection with any failure
(or alleged failure) to pay any Tax;
(vii) no claim has ever been made by a Taxing Authority in a
jurisdiction where the Company or any of its Subsidiaries do not file Tax
Returns that the Company or any of its Subsidiaries are or may be subject
to Taxes assessed by such jurisdiction;
(viii) neither the Company nor any of its Subsidiaries has been a
member of an Affiliated Group or filed or been included in a combined,
consolidated or unitary income Tax Return;
(ix) neither the Company nor any of its Subsidiaries is a party
to or bound by or has any obligation under any Tax allocation or Tax
sharing agreement or similar contract or arrangement, or an agreement that
obligates the Company or any of its Subsidiaries to make any payment
computed by reference to Taxes, taxable income or taxable losses of any
other Person (other than agreements entered into with employees,
consultants or independent contractors or in connection with purchase or
sale agreements or sale leasebacks); and
(x) neither the Company nor any of its Subsidiaries shall be
required to (i) as a result of a change in method of accounting for a
taxable period ending on or prior to the Closing Date, include any
adjustment in taxable income for any taxable period (or portion thereof)
ending after the Closing Date, (ii) as a result of any "closing agreement,"
as described in Section 7121 of the Code (or any corresponding provision of
state, local or foreign income Tax law), include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing Date, (iii) as a result of
any sale reported on the installment method where such sale occurred on or
prior to the Closing Date, include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date, or (iv) as a result of any prepaid
amount received on or prior to the Closing Date (other than amounts prepaid
in the ordinary course of business consistent with past custom and
practice), include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending
after the Closing Date.
(b) Neither the Company nor any of its Subsidiaries:
-12-
(i) has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code;
(ii) has made an election under Section 341(f) of the Code;
(iii) is liable for the Taxes of another Person (A) under
Treasury Regulation Section 1.1502-6 (or comparable provisions of state,
local or foreign law), (B) as a transferee or successor, (C) by contract or
indemnity or (D) otherwise;
(iv) is a party to any agreement, arrangement, contract or plan
that has resulted or will result, individually or in the aggregate in the
payment of any "excess parachute payments" within the meaning of Section
280G of the Code; or
(v) has consented to extend the time, or is the beneficiary of
any extension of time, in which any Tax may be assessed or collected by any
Taxing Authority.
(c) The Company and its Subsidiaries have disclosed on their federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
2.13 Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement or as set forth
on Schedule 2.13(a) attached hereto, and except for any Exempt Contract (unless
a smaller dollar value is specifically provided below), the Company is not a
party to or bound by any written or oral:
(i) agreement, arrangement or contract with Pro-Fac, including,
without limitation, relating to services or functions that the Company
provides to, conducts for, is required to provide to or conduct for Pro-Fac
or for Pro-Fac's benefit;
(ii) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan, arrangement
or practice, whether formal or informal;
(iii) collective bargaining agreement or any other contract with
any labor union, or severance agreement, program, policy or arrangement;
(iv) settlement, conciliation or similar agreement;
(v) management agreement or contract for the employment of any
officer, individual employee or other Person on a full-time, part-time,
consulting or other basis (i) providing annual cash or other compensation
in excess of $100,000, (ii) providing for the payment of any cash or other
compensation or benefits upon the consummation of the transactions
contemplated hereby, (iii) providing any severance benefits or making any
severance arrangements, or (iv) restricting its ability to terminate
-13-
the employment of any employee at any time for any lawful reason or for no
reason without penalty or liability;
(vi) contract or agreement involving any Governmental Entity;
(vii) agreement or indenture relating to borrowed money or other
Indebtedness or the mortgaging, pledging or otherwise placing a Lien on any
material asset or material group of assets of the Company or any letter of
credit arrangements, or any guarantee therefor;
(viii) agreement under which it has advanced or loaned any amount
to any of its directors, officers and employees other than the advance or
reimbursement of reasonable business expenses incurred or to be incurred in
the ordinary course of business;
(ix) lease or agreement under which the Company is (i) lessee of
or holds or operates any personal property, owned by any other party,
except for any lease of personal property under which the aggregate annual
rental payments do not exceed $100,000 or (ii) lessor of or permits any
third party to hold or operate any property, real or personal, owned or
controlled by the Company, except for any lease of personal property under
which the aggregate annual rental payments do not exceed $100,000;
(x) contract or group of related contracts with the same party or
group of affiliated parties continuing over a period of more than six
months from the date or dates thereof, not terminable by the Company upon
60 or fewer days' notice without penalty or involving more than $500,000;
(xi) agreements relating to the ownership of, Investments in or
loans and advances to any Person (other than as contemplated by subclause
(viii) above), including Investments in joint ventures and minority equity
investments;
(xii) agreement, contract or commitment or series of related
agreements, contracts or commitments for the purchase of assets by the
Company or any of its Subsidiaries involving consideration in excess of
$250,000, except with respect to purchase of items of inventory in the
ordinary course of business consistent with past custom and practice;
(xiii) agreement, contract or commitment or series of related
agreements, contracts or commitments for the sale of any asset by the
Company or any of its Subsidiaries involving consideration in excess of
$250,000, except with respect to sales of items of inventory in the
ordinary course of business consistent with past custom and practice and
not involving delivery of such inventory more than six months after the
date of such commitment;
(xiv) agreement, contract or commitment involving consideration
in excess of $100,000 with respect to advertising, marketing or promotion
(including slotting agreements) of the products of the Company and its
Subsidiaries;
-14-
(xv) warehouse agreement;
(xvi) license, royalty, indemnification or other agreement with
respect to any material intangible property (including any Intellectual
Property Rights);
(xvii) agent, sales representative, sales or distribution
agreement;
(xviii) supply agreement and any agreement, contract or
commitment or series of related agreements, contracts or commitments with
the same party or group of affiliated parties for the purchase of a minimum
volume of products or services involving more than $500,000, and Schedule
2.13(a) shall specify the minimum amount to be purchased or rendered
thereunder on an annual basis;
(xix) co-pack agreement;
(xx) power of attorney or other similar agreement or grant of
agency;
(xxi) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world, including, without
limitation, any nondisclosure or confidentiality agreements, any
non-competition or similar agreements that restrict the geographic or
operational scope of the Company's or any of its Subsidiaries' business or
the ability of the Company or any of its Subsidiaries to enter into any new
line of business, any right of first offer or first refusal with respect to
the sale of any asset, any division or any business of the Company or any
of its Subsidiaries, or any contract or agreement prohibiting the Company
or any of its Subsidiaries from granting any rights or conducting any
business; or
(xxii) other agreement which is material to its operations and
business prospects or involves a consideration in excess of $1,000,000
annually, whether or not in the ordinary course of business.
(b) All of the contracts, agreements and instruments set forth or
required to be set forth on Schedule 2.13(a) attached hereto (the "Material
Contracts") are valid, binding and enforceable in all material respects in
accordance with their respective terms. Subject to obtaining the consents listed
on Schedule 2.4 attached hereto, each of the Material Contracts shall be in full
force and effect without penalty in accordance with their terms upon
consummation of the transactions contemplated hereby. The Company is neither in
default under, nor in breach of, nor in receipt of any claim of default or
breach under any Material Contract; no event has occurred which with the passage
of time or the giving of notice or both would result in a default, breach or
event of noncompliance by the Company under any Material Contract; and neither
the Company nor Pro-Fac has any Knowledge of any existing or threatened breach
or cancellation or anticipated breach or cancellation by the other party or
parties to any Material Contract to which the Company is a party.
(c) The Company has made available to Buyer a true, complete and
correct copy of each written Material Contract, together with all amendments,
waivers or other changes thereto (all of which amendments, waivers or other
changes thereto have been made available to Buyer), and has provided to Buyer a
written description of any oral material contract.
-15-
(d) "Exempt Contract" means any sale or purchase order or any contract
or other agreement entered into by the Company or any of its Subsidiaries in the
ordinary course of business consistent with past custom and practice that
involves consideration not in excess of $500,000.
(e) Except as set forth on Schedule 2.13(e) attached hereto, Pro-Fac
and Pro-Fac member growers are not third party beneficiaries of any Material
Contract.
2.14 Intellectual Property Rights.
(a) Schedule 2.14(a) attached hereto contains a true, complete and
correct list of all (i) patented and registered Intellectual Property Rights
owned or used by the Company, (ii) pending patent applications and applications
for registration of other Intellectual Property Rights filed by or on behalf of
the Company, (iii) computer software owned or used by the Company other than
mass-marketed software purchased or licensed for less than a total cost of
$10,000, (iv) trade or corporate names used by the Company, (v) material
unregistered trademarks, servicemarks, and copyrights owned or used by the
Company, and (vi) all licenses or similar agreements or arrangements for
Intellectual Property Rights to which the Company is a party, either as licensee
or licensor.
(b) Except as set forth on Schedule 2.14(b) attached hereto and except
as set forth in Section 2.14(f) below, the Company owns all right, title and
interest to, or has the right to use pursuant to a valid, enforceable and
effective license, free and clear of all Liens, all material Company
Intellectual Property Rights. The Company Intellectual Property Rights comprise
all of the Intellectual Property Rights necessary for the operation of the
business of the Company as currently conducted or as proposed to be conducted.
No loss, other than (i) by expiration of patents at the end of their respective
statutory terms (and not as a result of any failure by the Company to pay
maintenance fees) or (ii) through non-use (and not as a result of any failure by
the Company to pay renewal fees where such fees are permitted to be paid during
periods of non-use), of any of the material Company Intellectual Property Rights
is threatened or pending. The Company has taken all commercially reasonable
action to maintain and protect the material Company Intellectual Property
Rights.
(c) Except as set forth on Schedule 2.14(c) attached hereto, (i) there
are no claims against the Company that were either made within the past six (6)
years or are presently pending asserting the invalidity, misuse or
unenforceability of any of the Company Intellectual Property Rights and to the
Knowledge of the Company, there is no basis for any such claim, (ii) the Company
has not infringed, misappropriated or otherwise conflicted with, and the
operation of the business of the Company as currently conducted will not
infringe, misappropriate or conflict with, any Intellectual Property Rights of
other Persons in any material respect and the Company has not received any
written notices regarding any of the foregoing (including, without limitation,
any offers to license any Intellectual Property Rights from any other Person),
and (iii) to the Knowledge of the Company, no third party has infringed,
misappropriated or otherwise conflicted with any of the Company Intellectual
Property Rights. The transactions contemplated by this Agreement shall not
impair in any material respect, the right, title or interest of the Company in
and to the material Company Intellectual Property Rights and all of the material
Company Intellectual Property Rights shall be owned or available
-16-
for use by the Company immediately after the Closing on terms and conditions
substantially similar to those under which the Company owned or used the
material Company Intellectual Property Rights immediately prior to the Closing.
(d) The computer software, computer firmware, computer hardware
(whether general or special purpose), and other similar or related items of
automated, computerized, and/or software system(s) (collectively, the "Computer
Systems") that are used or relied on by the Company in the conduct of its
business are sufficient in any material respect for the current and anticipated
future needs of such business, including, without limitation as to capacity and
ability to process peak volumes in a timely manner. In the past twelve months,
there have been no bugs in, or failures, breakdowns, or continued substandard
performance of any such Computer Systems which has caused any substantial
disruption or interruption in or to the use of such Computer Systems by the
Company.
(e) The Company owns all right, title and interest in and to the Birds
Eye Mark in the Birds Eye Territory. Neither the Company nor any of its
predecessors-in-interest to the Birds Eye Mark have received any notice that its
use of the Birds Eye Mark in the Birds Eye Territory conflicts with any
Intellectual Property Rights of any other Person, including without limitation
Unilever plc, and there is no basis for any such claim. No other Person uses any
trademark or owns any registration or application for any trademark likely to be
confused with the Birds Eye Mark in the Birds Eye Territory. Except as set forth
on Schedule 2.14(b), the Company has not entered into any license agreements
with any other Person for the Birds Eye Mark or otherwise permitted any other
person to use the Birds Eye Mark. There are not now and there have never been
any claims against the Company or any of its predecessors-in-interest asserting
the invalidity, misuse or unenforceability of the Birds Eye Mark, and there is
no basis for any such claim.
(f) The Company owns all right, title and interest in and to the
registrations of the Birds Eye Mark in the Non-Use Birds Eye Territory. With
respect to each country in the Non-Use Birds Eye Territory, the Company has not
used the Birds Eye Mark in such country since June 26, 1999. Neither the Company
nor any of its predecessors-in-interest to the Birds Eye Mark have received any
notice that any of such registrations of the Birds Eye Mark in the Non-Use Birds
Eye Territory conflicts with any Intellectual Property Rights of any other
Person. No other Person uses any trademark or owns any registration or
application for any trademark likely to be confused with the Birds Eye Mark in
the Non-Use Birds Eye Territory. Except as set forth on Schedule 2.14(b), the
Company has not entered into any license agreements with any other Person for
the Birds Eye Mark in the Non-Use Birds Eye Territory or otherwise permitted any
other person to use the Birds Eye Mark in the Non-Use Birds Eye Territory. There
are not now and there have never been any claims against the Company or any of
its predecessors-in-interest asserting the invalidity, misuse or
unenforceability of the Birds Eye Mark in the Non-Use Birds Eye Territory or
petitioning to cancel any of the registrations of the Birds Eye Mark in the
Non-Use Birds Eye Territory.
2.15 Litigation.
(a) Except as set forth on Schedule 2.15(a) attached hereto, there are
no actions, suits, charges, complaints, proceedings (including any grievance or
arbitration
-17-
proceedings), orders, investigations or claims ("Claims") pending or, to the
Knowledge of the Company or Pro-Fac, threatened against the Company or Pro-Fac
involving more than $500,000 individually, or $1,000,000 in the aggregate, or
pending or threatened by the Company against any third party, at law or in
equity, or before or by any Government Entity (including any actions, suits,
charges, complaints, proceedings or investigations with respect to the
transactions contemplated by this Agreement) involving more than $500,000
individually, or $1,000,000 in the aggregate, nor is there, to the Knowledge of
Pro-Fac or the Company, any Basis for any such Claim; neither Pro-Fac nor the
Company is subject to any grievance or arbitration proceedings under collective
bargaining agreements or otherwise or any governmental investigations or
inquiries. All matters identified on Schedule 2.15(a) attached hereto are fully
insured against, have been truly, completely and correctly disclosed to
Pro-Fac's and the Company's applicable insurance carriers, and neither Pro-Fac
nor the Company has been denied insurance coverage with respect to such matters.
The Company is not subject to any judgment, order or decree of any Government
Entity involving more than $100,000 individually, or $1,000,000 in the
aggregate. None of Pro-Fac, the Company or any of their respective Subsidiaries
is subject to any outstanding order, writ, injunction, settlement or similar
agreement, or decree which would (i) reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect or (ii) prevent or delay the
transactions contemplated hereby.
(b) Except as set forth on Schedule 2.15(b) attached hereto, since
March 27, 1999, neither Pro-Fac, nor the Company, nor any of their respective
Subsidiaries has entered into any settlement agreement with respect to any
Claim, in any such case, involving a payment in excess of $250,000, whether or
not covered by insurance or otherwise subject to indemnification.
(c) Except as set forth on Schedule 2.15(c) attached hereto, no claim
has been made in writing against Pro-Fac, the Company, any of their respective
Subsidiaries or any of their respective officers or directors regarding the
AgriPac Acquisition, the AgriFrozen Business or the assets and transactions
relating thereto.
2.16 Brokerage. Except for J.P. Morgan Securities Inc. (the "Financial
Adviser"), whose fees will be paid by the Company and the amount of which is set
forth on Schedule 2.16 attached hereto, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Company or any of its Subsidiaries who might be entitled to any
fee or commission from Pro-Fac, the Company, any Subsidiary of the Company,
Buyer or any of their Affiliates as a result of consummation of the transactions
contemplated by this Agreement. The Company has furnished to Buyer a complete
and correct copy of all agreements between the Company and the Financial Adviser
pursuant to which such adviser would be entitled to any payment relating to the
transaction contemplated hereby, and there has been no amendment to such
agreements.
2.17 Insurance. Schedule 2.17 attached hereto contains a description
of each material insurance policy maintained by the Company or Pro-Fac with
respect to or providing coverage for the Company's properties, assets and
business, and each such policy shall be in full force and effect as of the
Closing or a substituted policy shall have been obtained therefor. The Company
is not in default with respect to its obligations under any material insurance
policy maintained by it, the Company has never been denied insurance coverage,
and there has never been a gap in insurance coverage with respect to the matters
insured under the material insurance
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policies. Except as set forth on Schedule 2.17 attached hereto, the Company has
no self-insurance or co-insurance programs. None of the limits of any material
insurance policy has been exhausted or has been materially reduced, and to the
Knowledge of Pro-Fac and the Company, the claims comprising AgriFrozen
Litigation are the only claims that potentially could significantly reduce or
exhaust the existing limits of the material insurance policies. To the Knowledge
of Pro-Fac and the Company, Pro-Fac's and the Company's insurance carriers have
sufficient assets and sufficient liquidity to perform their respective
obligations under the material insurance policies.
2.18 Labor Matters. Schedule 2.18 attached hereto contains a true,
complete and correct list as of March 30, 2002 of (i) the employees employed by
the Company or any of its Subsidiaries having an annual compensation in calendar
year 2001 of $100,000 or more, (ii) the rate of all current compensation payable
by the Company to each such employee, including, without limitation, any bonus,
contingent or deferred compensation, and (iii) the directors of the Company and
each of its Subsidiaries. Except as set forth on Schedule 2.18 attached hereto,
no executive, officer or key employee of the Company or any of its Subsidiaries
and no group of employees of the Company or its Subsidiaries has terminated, or
to the Knowledge of the Company, has any plans to terminate employment with the
Company or any of its Subsidiaries. The Company has (a) to the Knowledge of each
of the Company and Pro-Fac, no material labor relations problems (including any
threatened or actual strikes or work stoppages or material grievances), (b) not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act, (c) during the past five years, not suffered any labor strike,
lockout, work stoppage or other material labor dispute and, (d) to the Knowledge
of each of the Company and Pro-Fac, no union organization campaign or
decertification in progress with respect to any of the employees. The Company
has not engaged in any plant closing or employee layoff activities within the
last two (2) years that would violate or in any way implicate the WARN Act. Any
notice of the transactions contemplated hereby that is required by any law or
collective bargaining agreement has been given, and all bargaining obligations
have been, or prior to Closing will be, satisfied.
2.19 ERISA.
(a) Schedule 2.19(a) attached hereto sets forth a true, complete and
correct list of each "employee benefit plan" (as such term is defined in Section
3(3) of ERISA) and each other employee benefit plan, program or arrangement
maintained, sponsored, or contributed to by the Company or any of its
Subsidiaries within the past six years. Each such item listed on Schedule
2.19(a) attached hereto together with any such plan, program or arrangement
maintained, sponsored, or contributed to by the Company or any of its
Subsidiaries at any time or with respect to which the Company or any of its
Subsidiaries has any Liability or potential Liability is referred to herein as
an "Employee Benefit Plan" and collectively as the "Employee Benefit Plans".
(b) Except as set forth on Schedule 2.19(b) attached hereto: (A) none
of the Company or its Subsidiaries maintains, contributes to, or has any
Liability or potential Liability under (or with respect to) any "defined benefit
plan" (as defined in Section 3(35) of ERISA), or any "multiemployer plan" (as
defined in Section 3(37) of ERISA; (B) no asset of the Company or any of its
Subsidiaries is subject to any Lien under ERISA or the Code; (C) there has been
no
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application for or waiver of the minimum funding standards imposed by Section
302 of ERISA and Section 412 of the Code with respect to any Employee Benefit
Plan that is an "employee pension benefit plan" as defined in Section 3(2) of
ERISA (hereinafter a "Pension Plan"); (D) no Pension Plan has an "accumulated
funding deficiency" within the meaning of Section 412 of the Code; (E) none of
the Company or any of its Subsidiaries has incurred any liability on account of
a "partial withdrawal" or a "complete withdrawal" (within the meaning of
Sections 4205 and 4203, respectively, of ERISA) from any Employee Benefit Plan
subject to Title IV of ERISA which is a "multiemployer plan" (as such term is
defined in Section 3(37) of ERISA), no such liability has been asserted, and
there are no events or circumstances which could result in any such partial or
complete withdrawal; (F) there has been no "reportable event" (within the
meaning of Section 4043 of ERISA) with regard to any Pension Plan; and (G) none
of the Company or any of its Subsidiaries has any liability or potential
liability under Title IV of ERISA (other than for contributions not yet due) or
to the Pension Benefit Guaranty Corporation (other than for payment of premiums
not yet due). There are no pending or threatened actions, suits, investigations
or claims with respect to any Employee Benefit Plan (other than routine claims
for benefits) which could result in material liability to the Company or any of
its Subsidiaries.
(c) Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination from the Internal
Revenue Service that such Employee Benefit Plan is so qualified, and nothing has
occurred since the date of such determination that could adversely affect the
qualified status of such Employee Benefit Plan. Each such Employee Benefit Plan
is in compliance with the requirements of Sections 401(a)(4) and 410(b) of the
Code for each plan year of such Employee Benefit Plan commencing on or before
the Closing Date, and has been timely submitted to the Internal Revenue Service
for a determination that such Employee Benefit Plan remains qualified under
Section 401(a) of the Code for purposes of the legislation commonly referred to
as "GUST".
(d) Each of the Employee Benefit Plans and all related trusts,
insurance contracts and funds have been maintained, funded and administered in
material compliance with their terms and the terms of any applicable collective
bargaining agreement and in material compliance with the applicable provisions
of ERISA, the Code, and any other applicable laws. With respect to each Employee
Benefit Plan, all required payments, premiums, contributions, distributions, or
reimbursements for all periods ending prior to or as of the Closing Date have
been made or properly accrued. Claims incurred prior to the Closing Date but not
reported as of the Closing Date under each Employee Benefit Plan which is a
self-insured "welfare plan" (as such term is defined in Section 3(1) of ERISA)
do not exceed the amount accrued on the Financial Statements with respect to
such claims.
(e) None of the Company, its Subsidiaries, or any other "disqualified
person" (within the meaning of Section 4975 of the Code) or any "party in
interest" (within the meaning of Section 3(14) of ERISA) has engaged in any
"prohibited transaction" (within the meaning of Section 4975 of the Code or
Section 406 of ERISA) with respect to any of the Employee Benefit Plans which
could subject any of the Employee Benefit Plans, the Company or any of its
Subsidiaries, or any officer, director or employee of any of the foregoing to a
penalty or tax under Section 502(i) of ERISA or Section 4975 of the Code.
-20-
(f) Each Employee Benefit Plan which is subject to the health care
continuation requirements of Part 6 of Subtitle B of Title I of ERISA or Section
4980B of the Code ("COBRA") has been administered in material compliance with
such requirements. Except as set forth on Schedule 2.19(f) attached hereto, no
Employee Benefit Plan provides medical or life or other welfare benefits to any
current or future retired or terminated employee (or any dependent thereof) of
the Company or any of its Subsidiaries other than as required pursuant to COBRA.
(g) With respect to each Employee Benefit Plan, the Company has
provided Buyer with true, complete and correct copies of (to the extent
applicable): (A) all documents pursuant to which the Employee Benefit Plan is
maintained, funded and administered (including the plan and trust documents, any
amendments thereto, the summary plan descriptions, and any insurance contracts
or service provider agreements); (B) the three most recent annual reports (Form
5500 series) filed with the Internal Revenue Service (with applicable
attachments); and (C) the most recent determination letter received from the
Internal Revenue Service.
(h) The Company has no liability with respect to any "employee benefit
plan" (as defined in Section 3(3) of ERISA) solely by reason of being treated as
a single employer under Section 414 of the Code with any trade, business or
entity other than the Company and its Subsidiaries.
(i) Except as set forth on Schedule 2.19(i) attached hereto, none of
the Employee Benefit Plans obligates the Company or any of its Subsidiaries to
pay any separation, severance, termination or similar benefit solely as a result
of any transaction contemplated by this Agreement or solely as a result of a
change in control or ownership within the meaning of Section 280G of the Code.
2.20 Compliance with Laws; Permits.
(a) Except with respect to Environmental and Safety Requirements,
which are addressed in Section 2.22 below, and except as set forth on Schedule
2.20(a) attached hereto, the Company has complied with all applicable Laws
relating to the operation of its business in all material respects. No notices
have been received by and no claims have been filed against the Company alleging
any material violation of any such Laws.
(b) Except with respect to permits relating to Environmental and
Safety Requirements which are addressed in Section 2.22 below, the Company holds
all material permits, licenses, certificates, accreditation and other
authorizations of all Government Entities required for the conduct of its
business and the ownership of its properties and except as set forth on Schedule
2.20(b) all such permits, licenses, certificates, accreditation and other
authorizations will remain in effect following the Closing and the validity
thereof will not be affected by the transactions contemplated by this Agreement.
No notices have been received by the Company alleging the failure to hold any
material permit, license, certificate, accreditation or other authorization of
any Government Entity. The Company is in compliance in all material respects
with all terms and conditions of all material permits, licenses, accreditations
and authorizations which it holds. Except as disclosed on Schedule 2.20(b)
attached hereto all of such permits,
-21-
licenses, accreditations and authorizations will be available for use by the
Company immediately after the Closing.
2.21 Specific Compliance with FDA, USDA and Other Food Regulations.
Without limiting in any way the generality of Sections 2.4 and 2.20, or the
other provisions of this Agreement, except as identified on Schedule 2.21
attached hereto:
(a) The Company is, with respect to every product currently made,
sold, marketed or under development (each a "Product"), in compliance in all
material respects with the applicable provisions of the Federal Food, Drug, and
Cosmetic Act, as amended (the "FFDCA"), the applicable regulations and
requirements adopted by the U.S. Food and Drug Administration (the "FDA"), the
applicable provisions of the Federal Meat Inspection Act (the "FMIA") and the
Poultry Products Inspection Act (the "PPIA"), the applicable regulations and
requirements adopted by the U.S. Department of Agriculture (the "USDA"), the
applicable provisions of the Federal Trade Commission Act and any applicable
implementing regulations or requirements established by the Federal Trade
Commission (the "FTC") and any applicable requirements established by state or
local authorities responsible for regulating food products and establishments
(collectively, the "State Food Authorities"), as well as with all material terms
and conditions imposed in any consent agreements, licenses, permits, approvals
or other authorizations granted to or imposed on the Company by the FDA, the
USDA, the FTC, or any State Food Authority, including but not limited to any
applicable good manufacturing practices or sanitation requirements, requirements
relating to food or color additives, food standards, product or nutrition
labeling requirements, inspection requirements, product composition
requirements, testing requirements or protocols, recordkeeping or reporting
requirements, monitoring requirements, packaging (including co-packing and
repackaging) requirements, laboratory controls, storage and warehousing
procedures, shipping requirements, and shelf-life requirements.
(b) None of the Company, the Products, or the facilities in which the
Products are made or handled is now subject (and none has been subject during
the previous three years) to any adverse inspection, finding, recall,
investigation, penalty assessment, audit or other compliance or enforcement
action by the FDA, the USDA, the FTC, any State Food Authority, or any other
authority having responsibility for the regulation of food products, and, to the
Knowledge of the Company, none of the co-manufacturers, assemblers, or
foodservice distributors which produce, receive, assemble or distribute the
Products is subject (or has been subject during the previous three years) to any
such adverse action with regard to a Product.
(c) The Company has obtained all necessary approvals and
authorizations from, and have made all necessary and appropriate applications
and other submissions to, the FDA, the USDA, any State Food Authority and any
other authority having responsibility for the regulation of food products, for
their current and past business activities relating to the Products in all
material respects, including without limitation, any approvals required for the
marketing or sale of those Products, making or distributing the Products, any
food or color additives or other ingredients appearing in or otherwise used in
making the Products, the labeling or packaging of the Products, and the claims
made regarding the content, benefits or quality of the Products.
-22-
(d) Neither the Company nor, to the Knowledge of the Company, any
third party retained by the Company has made on behalf of the Company any
material false statements or material omissions in applications or other
submissions to the FDA, the USDA, any State Food Authority or any other
authority having responsibility for the regulation of food products, and neither
the Company nor, to the Knowledge of the Company, any third party retained by
the Company has made or offered on behalf of the Company any payments,
gratuities, or other things of value that are prohibited by any law or
regulation to personnel of the FDA, the USDA, any State Food Authority, or other
authority having responsibility for the regulation of food products.
(e) The Company has not received any information or report from the
FDA, FDA personnel, the USDA, USDA personnel, any State Food Authority, or any
other authority having responsibility for the regulation of food products,
indicating that any of the Products is unsafe or unsuitable for its intended
use, and to the Knowledge of each of the Company and Pro-Fac, there are no facts
that would indicate that the FDA, the USDA, the FTC, any State Food Authority,
or other authority having responsibility for the regulation of food products,
has or will prohibit or materially restrict the marketing, sale, distribution or
use in the United States of any Product currently made, sold, marketed, or under
development by the Company, or the operation or use of any facility currently
used by the Company in connection with the Products. In addition, to the
Knowledge of each of the Company and Pro-Fac, neither the FDA nor the USDA has
prohibited any product or process from being marketed or used in the United
States which is substantially similar to any Product or to a process used for
making, handling or distributing any Product.
(f) Each ingredient and finished Product included in the inventory of
the Company and each of its Subsidiaries, as well as all Products in the
possession or control of third parties retained by the Company, (i) comply in
all material respects with (x) the FFDCA, FMIA, or PPIA, as applicable, and all
acts amending or supplementing the same (including, without limitation, the Food
Additive Amendments of 1958), and (y) the pure food and drug laws of each and
all states of the United States into which any such product would normally be
shipped by the Company and its Subsidiaries, (ii) are not adulterated or
misbranded within the meaning of the FFDCA, FMIA, PPIA or such state laws, (iii)
are not prohibited from being introduced into interstate commerce under any
provision of the FFDCA, FMIA, or PPIA, including Sections 404 or 505 of the
FFDCA, and (iv) do not contain a hazardous substance or a banned substance.
2.22 Environmental and Safety Matters. Except as set forth on Schedule
2.22 attached hereto:
(a) The Company has complied in all material respects with and is
currently in compliance in all material respects with all applicable
Environmental and Safety Requirements. The Company has not received any oral or
written notice, report or information regarding any material violations of or
any Liabilities or corrective, investigatory or remedial obligations arising
under Environmental and Safety Requirements which relate to the Company or any
of its properties or facilities that has not been resolved.
(b) Without limiting the generality of the foregoing, the Company has
obtained and complied with, and is currently in compliance in all material
respects with, all
-23-
permits, licenses and other authorizations that may be required pursuant to any
Environmental and Safety Requirements for the occupancy of its past or current
properties or facilities or the operation of its business.
(c) None of the following exists at any property or facility currently
owned, occupied or operated by the Company:
(i) underground storage tanks;
(ii) asbestos-containing materials in any form or condition;
(iii) materials or equipment containing polychlorinated
biphenyls; or
(iv) landfills, surface impoundments or other disposal areas.
(d) The Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any substance
(including any hazardous substance) or owned, occupied or operated any facility
or property (and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to any material
Liabilities, including any material Liability for response costs, corrective
action costs, personal injury, natural resource damages, property damage or
attorneys fees or any investigatory, corrective or remedial obligations,
pursuant to CERCLA or any other Environmental and Safety Requirements.
(e) The Company has not, either expressly or by operation of law,
assumed or undertaken any Liability or investigatory, corrective or remedial
obligation of any other Person relating to any Environmental and Safety
Requirements.
(f) Without limitation upon the foregoing, no facts, events or
conditions relating to the past or current facilities, properties or operations
of the Company or any of its Subsidiaries, or any other person or entity whose
liability the Company or any of its Subsidiaries has or may have assumed either
contractually or by operation of law, will prevent, hinder or limit continued
compliance in all material respects with, or give rise to any material Liability
or investigatory, corrective or remedial obligations under, Environmental and
Safety Requirements.
(g) The Company has made available to Buyer all environmental audits,
reports and other material environmental documents relating to the Company or
its predecessors or Affiliates or their respective past or current facilities,
properties or operations which are in its possession or under its reasonable
control.
2.23 Affiliate Transactions. Except as set forth on Schedule 2.10,
Schedule 2.13, and Schedule 2.23 attached hereto, no officer, director,
shareholder (including Pro-Fac) or Affiliate of the Company, or to the Knowledge
of the Company any individual related by blood, marriage or adoption to any such
individual or any entity in which any such Person or individual owns any
beneficial interest, is a party to any agreement, contract, commitment or
transaction with the Company or has any material interest in any material
property used by the Company.
-24-
2.24 Suppliers and Customers. Schedule 2.24 attached hereto sets forth
a list of the top ten customers and each of the top ten suppliers for (i) raw
products, and (ii) other supplies of the Company by dollar volume of sales and
purchases, respectively, for the twelve month period ended December 31, 2001.
Since December 31, 2001, the Company has not received any written notice from
any supplier to the effect that, and each of Pro-Fac and the Company has no
reason to believe that, any supplier will stop, materially decrease the rate of,
or materially change the terms (whether related to payment, price or otherwise)
with respect to, supplying materials, products or services to the Company
(whether as a result of the consummation of the transactions contemplated hereby
or otherwise). The Company has not received any written notice from any customer
of the Company to the effect that, and each of Pro-Fac and the Company does not
have any reason to believe that, any customer will stop, or materially decrease
the rate of, buying products of the Company (whether as a result of the
consummation of the transactions contemplated hereby or otherwise).
2.25 Real Property.
(a) Schedule 2.25(a) attached hereto is a list with the address of
each parcel of real property owned by the Company or its Subsidiaries (the
"Owned Property"). The Company or its applicable Subsidiary has good and
marketable fee simple title in and to all of the Owned Property, subject to no
liens, encroachments, encumbrances, claims, leases, rights of possession or
other defects in title (collectively, "Liens"), other than Permitted Liens.
(b) Schedule 2.25(b) attached hereto is a list of each lease, sublease
and other occupancy agreement, including each amendment, extension and other
modifications thereto (collectively, the "Leases") for (i) all manufacturing and
storage facilities, and (ii) all other real property that involves annual lease
payments in excess of $25,000 (the properties subject to Leases identified in
clauses (i) and (ii), the "Leased Property") and, together with the Owned
Property, the "Real Property") to which the Company is the "tenant," "subtenant"
or other lessee party. The Company has a good and valid leasehold interest in
and to all of the Leased Property, subject to no Liens except for Permitted
Liens. Each Lease is in full force and effect and is enforceable in accordance
with its terms. There exists no default or condition which, with the giving of
notice, the passage of time or both, could become a default under any Lease. The
Company has previously delivered to Buyer true, complete and correct copies of
all the Leases. Except as described on Schedule 2.25(b) attached hereto, no
consent, waiver, approval or authorization is required from the landlord under
any Lease as a result of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
(c) The Real Property constitutes all of the real property owned,
leased, occupied or otherwise utilized in connection with the business of the
Company. Other than the Company and the landlords under the Leases, there are no
parties in possession or parties having any current or future right to occupy
any of the Real Property. The Real Property is in good condition and repair
(normal wear and tear excepted) and is sufficient for the conduct of the
business of the Company. The Real Property and all plants, buildings and
improvements located thereon conform in all material respects to all applicable
building, zoning and other laws, ordinances, rules and regulations. All permits,
licenses and other approvals necessary to the current occupancy and use of the
Real Property have been obtained, are in full force and effect and have not been
violated in any material effect. To the Knowledge of each of the Company
-25-
and Pro-Fac, no portion of the Real Property is subject to "permitted
non-conforming use" or "permitted non-conforming structure" classifications. To
the Knowledge of each of the Company and Pro-Fac, there exists no violation of
any covenant, condition, restriction, easement, agreement or order affecting any
portion of the Real Property. To the Knowledge of each of the Company and
Pro-Fac, all improvements located on the Real Property have direct access to a
public road adjoining such Real Property. To the Knowledge of each of the
Company and Pro-Fac, no such improvements or accessways encroach on land not
included in the Real Property and no such improvement is dependent for its
access, operation or utility on any land, building or other improvement not
included in the Real Property. There is no pending or, to the Knowledge of each
of the Company and Pro-Fac, any threatened condemnation proceeding, lawsuit or
administrative action affecting any portion of the Real Property. To the
Knowledge of each of the Company and Pro-Fac, there are no other matters
affecting adversely the current use, occupancy or value of the Real Property.
2.26 Personal Property.
(a) The Company has good title to all material personalty of any kind
or nature which are currently being used by the Company or any of its
Subsidiaries, free and clear of all Liens, except for (i) Liens disclosed on
Schedule 2.10 attached hereto, (ii) Liens for non-delinquent taxes and
non-delinquent statutory Liens arising other than by reason of default, (iii)
statutory Liens of landlords, Liens of carriers, warehousemen, mechanics and
materialmen incurred in the past customary practice for sums not yet due; (iv)
Liens incurred or deposits made in the past customary practice in connection
with worker's compensation, unemployment insurance and other types of social
security, (v) purchase money liens, and (vi) Liens which do not materially
detract from the value or use of said personalty. The Company, as lessee, has
the right under valid and subsisting leases to use, possess and control all
personalty leased by the Company as now used, possessed and controlled by the
Company.
(b) All machinery, equipment and other tangible assets currently being
used by the Company or any of its Subsidiaries or which are owned or leased by
the Company are in good operating condition, maintenance and repair, ordinary
wear and tear excepted, are usable in the ordinary course of business and are
reasonably adequate and suitable for the uses to which they are being put.
2.27 Product Recalls. Except as forth on Schedule 2.27 attached
hereto, since June 29, 1996 no products manufactured, marketed, sold, or
delivered by the Company or any of its Subsidiaries have been subject to a
re-call by the Company or any of its Subsidiaries nor, to the Knowledge of the
Company, has any of such products been subject to a re-call by any third party
retained by the Company or any distributor or wholesaler of such products.
2.28 Intercompany Payments. Set forth on Schedule 2.28 attached hereto
and identified as it relates to each group of payments and credits on a monthly
basis, are all payments and credits made (including, without limitation, by
set-off) since June 26, 1999 (i) from Pro-Fac to the Company, and (ii) from the
Company to Pro-Fac, in each case separately accounting for such payments that
relate to the sale or purchase of products.
-26-
2.29 Prohibited Payments. The Company has not, directly or indirectly,
(a) made or agreed to make any contribution, payment or gift to any government
official, employee or agent where either the contribution, payment or gift or
the purpose thereof was illegal under the laws of any federal, state, local or
foreign jurisdiction, (b) established or maintained any unrecorded fund or asset
for any purpose or made any false entries on the books and records of the
Company for any reason, (c) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any other person, to any
candidate for federal, state, local or foreign public office or (d) paid or
delivered any fee, commission or any other sum of money or item of property,
however characterized, to any finder, agent, government official or other party,
in the United States or any other country, which in any manner relates to the
assets, business or operations of the Company, which the Company known or has
reason to believe to have been illegal under any federal, state or local laws
(or any rules or regulations thereunder) of the United States or any other
country having jurisdiction.
2.30 Closing Date. The representations and warranties of the Company
and Pro-Fac contained in this Article II and elsewhere in this Agreement and all
information contained in any Exhibit, Schedule or attachment hereto or in any
certificate or other writing delivered by, or on behalf of, the Company or
Pro-Fac to Buyer shall be true, complete and correct on the Closing Date as
though then made and as though the Closing Date was substituted for the date of
this Agreement throughout such representations and warranties.
2.31 Disclosure. The representations and warranties contained in this
Article II do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article II not misleading.
Article III
Representations and Warranties of Pro-Fac
As a material inducement to Buyer to enter into this Agreement and to
consummate the transactions on its part to be performed contemplated hereby,
Pro-Fac hereby represents and warrants to Buyer as follows:
3.1 Power and Authority. Subject to the approval of its members,
Pro-Fac possesses all requisite power and authority necessary to carry out the
transactions contemplated by this Agreement.
3.2 Authorization; No Breach. Pro-Fac's execution, delivery and
performance of this Agreement, the Amended and Restated Marketing and
Facilitation Agreement and all other agreements and instruments contemplated
hereby to which it is a party and the consummation of the Reorganization
Transactions have been duly approved and authorized (i) subject to the approval
of its members, by Pro-Fac, and (ii) by the Pro-Fac Board. This Agreement, the
Amended and Restated Marketing and Facilitation Agreement and all other
agreements or instruments contemplated hereby to which Pro-Fac is a party or by
which Pro-Fac is bound, when executed and delivered by Pro-Fac in accordance
with the terms hereof or thereof, shall each constitute a valid and binding
obligation of Pro-Fac, enforceable in accordance with its respective terms,
except as may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors rights generally or by general principles of equity.
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Except as set forth on Schedule 3.2 attached hereto, the execution, delivery and
performance by Pro-Fac of this Agreement and all other agreements contemplated
hereby to which it is a party, the fulfillment of and compliance with the
respective terms hereof and thereof by Pro-Fac, and the consummation of the
Reorganization Transactions do not and shall not (i) conflict with or result in
a breach of the terms, conditions or provisions of, (ii) constitute a default
under (whether with or without the passage of time, the giving of notice or
both), (iii) result in the creation of any Lien upon the Purchase Units, the
Warrants or the Pro-Fac Common Units pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or (vi) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any third party or
Government Entity pursuant to, (A) the certificate of incorporation or bylaws of
Pro-Fac or any of its Subsidiaries, (B) any Law to which Pro-Fac is subject, or
any order, judgment or decree, or (C) any material agreement or instrument to
which Pro-Fac is subject, except in the case of subclause (B) and (C) above, for
any conflict, breach, default, creation, modification, termination,
acceleration, violation or requirement that would not be material in any
respect.
3.3 Brokerage. Except as set forth on Schedule 3.3 attached hereto,
there are no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement to which Pro-Fac is a party or to which
Pro-Fac is subject other than the Financial Advisor.
3.4 Litigation, etc. Except as set forth on Schedule 3.4 attached
hereto, there are no Claims pending or, to the Knowledge of Pro-Fac, threatened
against or affecting Pro-Fac in which it is sought to restrain or prohibit or to
obtain damages or other relief in connection with the transactions contemplated
hereby or that could reasonably be expected to have an adverse effect on the
Company, nor is there any Basis for any such Claim.
3.5 Closing Date. The representations and warranties of Pro-Fac
contained in this Article III and elsewhere in this Agreement and all
information contained in any Exhibit, Schedule or attachment hereto or in any
certificate or other writing delivered by, or on behalf of, Pro-Fac to Buyer
shall be true, complete and correct on the Closing Date as though then made and
as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties.
Article IV
Representations and Warranties of Buyer
As a material inducement to the Company and Pro-Fac to enter into this
Agreement and consummate the transactions contemplated hereby, Buyer hereby
represents and warrants to the Company and Pro-Fac as follows:
4.1 Organization, Company Power and Authority. Buyer is a limited
liability company duly organized, validly existing and in good standing under
the Laws of the State of Delaware. Buyer possesses all requisite company power
and authority necessary to carry out the transactions contemplated by this
Agreement.
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4.2 Authorization; No Breach. The execution, delivery and performance
of this Agreement, the Holdings LLC Agreement and all other agreements or
instruments contemplated hereby to which Buyer is a party or by which Buyer is
bound have been duly authorized by Buyer. This Agreement, the Holdings LLC
Agreement and all other agreements contemplated hereby to which Buyer is a
party, when executed and delivered by Buyer in accordance with the terms hereof,
shall each constitute a valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors rights generally or by general
principles of equity. The execution, delivery and performance by Buyer of this
Agreement, the Holdings LLC Agreement and all other agreements contemplated
hereby to which Buyer is a party, and the fulfillment of and compliance with the
respective terms hereof and thereof by Buyer, do not and shall not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under (whether with or without the passage of time, the
giving of notice or both), (iii) give any third party the right to modify,
terminate or accelerate any obligation under, (iv) result in a violation of, or
(v) require any authorization, consent, approval, exemption or other action by
or notice or declaration to, or filing with, any Government Entity pursuant to,
(A) the Organizational Documents of Buyer, (B) any Law to which Buyer is
subject, or (C) any material agreement, instrument, order, judgment or decree to
which Buyer is subject, except in the case of subclause (B) and (C) above, for
any conflict, breach, default, creation, modification, termination,
acceleration, violation or requirement that would not be material in any
respect.
4.3 Investment Representations.
(a) This Agreement is made with Buyer in reliance upon Buyer's
representation to Pro-Fac, Holdings LLC and the Company, which by its acceptance
hereof Buyer hereby confirms, that the Purchase Units and the Warrants to be
received by it will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and that it has no present intention of selling, granting participation
in, or otherwise distributing the same. By executing this Agreement, Buyer
further represents that it does not have any contract, undertaking, agreement,
or arrangement with any person to sell, transfer or grant participations to such
person, or to any third person, with respect to any of the Purchase Units and
the Warrants.
(b) Buyer understands that the Purchase Units and Warrants have not
been registered under the Securities Act on the grounds that the sale provided
for in this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act, and that the Company's reliance on such
exemption is predicated in part on Buyer's representations set forth herein.
(c) Buyer represents that it is an accredited investor, as defined
under Regulation D of the Securities Act, experienced in evaluating companies
such as the Company, is able to independently evaluate the transactions
contemplated by this Agreement, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment, and has the ability to bear the economic risks of its investment.
(d) Buyer understands that the Purchase Units and Warrants may not be
sold, transferred or otherwise disposed of without registration under the
Securities Act and any
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applicable state securities laws or an exemption therefrom, and that in the
absence of an effective registration statement covering the Purchase Units and
Warrants or an available exemption from such registration, the Purchase Units
and Warrants must be held indefinitely. In particular, Buyer is aware that the
Purchase Units and Warrants may not be sold pursuant to Rule 144 promulgated
under the Securities Act unless all of the conditions of that Rule are met.
Buyer represents that, in the absence of an effective registration statement
covering the Purchase Units and Warrants, it will sell, transfer, or otherwise
dispose of the Purchase Units and Warrants only in a manner consistent with its
representations set forth herein.
(e) Buyer understands that in the event that Holdings LLC issues any
certificates representing any of the Units, each certificate representing Units,
will be endorsed with a legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS. COPIES OF THE UNIT PURCHASE
AGREEMENT AND THE SECURITYHOLDERS AGREEMENT, PROVIDING FOR
RESTRICTIONS ON TRANSFER OF THESE SECURITIES MAY BE OBTAINED UPON
WRITTEN REQUEST BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
COMPANY."
4.4 No Public Market. Buyer understands that no public market now
exists for any of the Purchase Units and Warrants and that there is no assurance
that a public market will ever exist for the Purchase Units and Warrants.
4.5 Brokerage. Except for the Vestar Capital Fee and a transaction fee
payable to UBS Warburg LLC, there are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement to which
Buyer is a party or to which Buyer is subject.
4.6 Litigation. There are no Claims pending or, to the Knowledge of
Buyer, threatened against or affecting Buyer in which it is sought to restrain
or prohibit or to obtain damages or other relief in connection with the
transactions contemplated hereby or that could reasonably be expected to have an
adverse effect on Buyer, nor is there any Basis for any such Claim.
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4.7 Commitment Letter. Attached hereto as Exhibit C is an executed
commitment letter from JPMorgan Chase Bank and J.P. Morgan Securities Inc.
(collectively, the "Bank"), dated as of June 17, 2002 and executed by Buyer as
of the date hereof (the "Bank Commitment Letter"). Pursuant to the Bank
Commitment Letter and subject to the terms and conditions contained therein, the
Bank has committed to provide senior debt financing to the Company in the amount
of $470 million, consisting of a $270 million term loan and a $200 million
revolving credit facility. Attached hereto as Exhibit D is an executed
commitment letter from Vestar Capital Partners IV, L.P. to Buyer, dated as of
the date hereof (the "Equity Commitment Letter"). Pursuant to the Equity
Commitment Letter and subject to the terms and conditions contained therein,
Vestar Capital Partners IV, L.P. has committed to purchase equity securities of
Buyer for an aggregate purchase price of $175 million subject to reduction to
the extent Buyer's investment is reduced as contemplated by Section 1.4 hereof.
4.8 Closing Date. The representations and warranties of Buyer
contained in this Article IV and elsewhere in this Agreement shall be true,
complete and correct on the Closing Date as though then made and as though the
Closing Date was substituted for the date of this Agreement throughout such
representations and warranties.
Article V
Covenants Relating to Conduct of Business
During the period from the execution of this Agreement and continuing
until the Closing (except as expressly contemplated or permitted by this
Agreement or to the extent that Buyer shall otherwise consent in writing):
5.1 Ordinary Course. The Company and its Subsidiaries shall carry on
their respective businesses in the ordinary course of business consistent with
past custom and practice and shall use commercially reasonable efforts to
preserve intact their present business organizations and their relationships
with employees, customers, suppliers and others having business relationships
and dealings with them.
5.2 Dividends; Changes in Share Capital. Except as set forth on
Schedules 5.4(ii) and 5.4(iii) and subject to Section 12.12, the Company shall
not, and shall not permit any of its Subsidiaries to, and shall not propose to,
(i) declare or pay any dividends on or make other distributions in respect of
any of its capital stock, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock or
(iii) repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock.
5.3 Issuance of Securities. The Company shall not, and shall cause its
Subsidiaries not to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class, any
Company Voting Debt or any securities convertible into or exercisable for, or
any rights, warrants or options to acquire, any such shares or Company Voting
Debt, any phantom stock or similar interest or right (including units granted
under the Equity Value Plan) or enter into any agreement with respect to any of
the foregoing.
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5.4 Other Specified Actions. The Company shall not, and shall not
permit any of its Subsidiaries to:
(i) other than incurrence of indebtedness under existing working
capital facilities in the ordinary course of business consistent with past
custom and practice, incur any Indebtedness or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or its
Subsidiaries or of other Persons, other than Indebtedness of the Company or
its Subsidiaries to the Company or its Subsidiaries; provided, that in the
event that the Closing has not occurred on or prior to September 30, 2002
and the administrative agent under the Company's existing senior credit
facility has not waived the Company's obligation to pay the contingent fee
in accordance with and pursuant to the seventh amendment to the Company's
existing senior credit agreement (the Company will use its commercially
reasonable efforts to obtain such waiver), then the Company may incur on
October 1, 2002 an amount under its existing working capital facilities or
make a cash payment to its lenders in an amount equal to the amount of such
contingent fee,
(ii) except as set forth on Schedule 5.4(ii) attached hereto,
make any loans or advances other than by the Company or its Subsidiaries to
the Company or its Subsidiaries,
(iii) make any payment or distribution of patronage earnings to
Pro-Fac, pay or distribute any other amounts to Pro-Fac, or forgive any
Indebtedness or other obligation of Pro-Fac, in each case, except as set
forth on Schedule 5.4(iii) attached hereto,
(iv) make any capital contributions to, or investments in, any
other Person, other than by the Company or its domestic Subsidiaries to or
in the Company or its domestic Subsidiaries,
(v) other than the payment, discharge or satisfaction of claims,
liabilities and obligations in the ordinary course of business consistent
with past practices not in excess of amounts duly accrued therefor, pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise); provided, that,
the foregoing shall not preclude the Company from paying any charges, fees
or expenses incurred in the course of analyzing, negotiating and performing
actions and tasks related to or in connection with the transactions
contemplated hereby,
(vi) make capital expenditures in excess of $250,000 or that are
inconsistent with the Eight plus Four Plan prior to the Closing Date or
enter into binding contracts to make capital expenditures in excess of
$250,000,
(vii) issue, deliver, sell, lease, sell and leaseback, pledge,
dispose of or encumber material properties or material assets of the
Company or any of its Subsidiaries other than the sale of inventory in the
ordinary course of business consistent with past custom and practice, and
except Permitted Liens,
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(viii) (A) make or change any Tax election or method of
accounting with respect to Taxes, (B) file any amended Tax Return or (C)
settle or compromise any examination or proceeding with respect to any
material Tax Liability,
(ix) change any accounting principles or practices, except as
required by any change in applicable accounting standards,
(x) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement), other than settlements involving
amounts payable by the Company and its Subsidiaries that are not in excess
of $100,000 in the aggregate over amounts fully recoverable from insurers
of the Company and its Subsidiaries,
(xi) enter into any new or amended contract or agreement with any
labor unions representing employees of the Company or any Subsidiary,
(xii) enter into or amend, modify, renew or terminate any
agreement or transaction, including, without limitation, any transaction
involving any merger, consolidation, joint venture, license agreement,
partial or complete liquidation or dissolution, reorganization,
recapitalization, restructuring, or a purchase, sale, lease or other
acquisition or disposition of any assets or capital stock that if entered
into prior to the date hereof would be required to be set forth on Schedule
2.13,
(xiii) knowingly undertake any action or fail to take any action
that will result in a breach of the representations and warranties set
forth in Article II as if made on and as of the Closing Date,
(xiv) alter, close or otherwise change the designation of any of
its plants or facilities as they are in existence as of the date hereof, or
(xv) agree, or commit to agree, to take any action not permitted
to be taken pursuant to this Section 5.4.
5.5 Insurance. Pro-Fac and the Company shall continue to maintain all
current material insurance policies, including, without limitation, paying any
premium as it becomes due. Neither Pro-Fac nor the Company shall take any action
nor omit to take any action that would, or could reasonably be expected to,
compromise the coverage under any material insurance policy.
5.6 Benefit Plans. The Company shall not, and shall not permit any of
its Subsidiaries to, (i) establish, adopt, enter into, or amend any Employee
Benefit Plan, or any plan, agreement, program, policy, trust, fund or other
arrangement that would be a Employee Benefit Plan if it were in existence as of
the date of this Agreement, except as required by law, (ii) increase the
compensation payable or to become payable to (A) any of its directors or
officers, except to the extent required under agreements existing as of the date
of this Agreement and disclosed on Schedule 2.13 or consistent with the Eight
plus Four Plan previously provided to Buyer, or (B) except in the ordinary
course of business consistent with past custom and practice and consistent with
the Eight plus Four Plan, other employees or (iii) take any action with respect
to the grant, modification or amendment of any severance or termination pay, or
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stay, bonus or other incentive arrangement (other than the payment of amounts to
Persons entitled thereto pursuant to benefit plans and policies in effect on the
date of this Agreement).
Article VI
Additional Covenants
6.1 Advice of Changes. Each of the Company and Buyer shall (a) confer
on a regular and frequent basis with the other, (b) report (to the extent
permitted by law, regulation and any applicable confidentiality agreement) to
the other on operational matters and (c) promptly advise the other orally and in
writing of (i) any representation or warranty made by it contained in this
Agreement becoming untrue or inaccurate in any respect such that the conditions
set forth in Section 7.1(a) or Section 7.2(a) would not be satisfied, (ii) the
failure by it (A) to comply with or satisfy in any respect any covenant,
condition or agreement required to be complied with or satisfied by it under
this Agreement that is qualified as to materiality or (B) to comply with or
satisfy in any material respect any covenant, condition or agreement required to
be complied with or satisfied by it under this Agreement that is not so
qualified as to materiality, (iii) any change, event or circumstance that has
had, has or could reasonably be expected to have a Material Adverse Effect on
such party or adversely affects its ability to consummate the Unit Purchase and
the agreements and transactions contemplated hereby in a timely manner, (iv) any
written notice or other written communication from any Person alleging that the
consent of such Person is or may be required in connection with the Unit
Purchase or the agreements and transactions contemplated hereby, (v) any written
notice or other written communication from any Governmental Entity in connection
with the Unit Purchase or the agreements and transactions contemplated hereby,
or (vi) any action, suit, contract claim or dispute, investigation, audit or
proceeding commenced or, to the Knowledge of the Company, threatened against,
relating to or involving or otherwise affecting the Company which, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Article II or which relates to the consummation of the Unit Purchase
or the agreements and transactions contemplated hereby; provided, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
6.2 Government Filings. Pro-Fac, the Company and Buyer shall file all
reports required to be filed by each of them with the SEC (and all other
Governmental Entities) between the date of this Agreement and the Closing Date,
shall (to the extent permitted by law or regulation or any applicable
confidentiality agreement) deliver to the other party copies of all such reports
promptly after the same are filed and such filings shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Subject to
applicable laws relating to the exchange of information, each of the Company and
Buyer shall have the right to review in advance, and to the extent practicable
each will consult with the other, with respect to all the information relating
to the other party and each of their respective Subsidiaries, which appears in
any filings, announcements or publications made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each of the Company and Buyer agrees that, to the extent
practicable, it
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will consult with the other party with respect to obtaining all Permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each further agrees to keep the other apprized of the status
of matters relating to completion of the transactions contemplated hereby.
6.3 Bondholder Consent Solicitation. The parties acknowledge that it
will be necessary to obtain the consent of the Bondholders with respect to
certain matters in order to effectuate the transactions contemplated hereby (the
"Bondholders Consent"). As soon as practicable following the execution of this
Agreement, the Buyer and the Company shall prepare the Solicitation Materials
with respect to the Bondholders Consent, which shall be satisfactory in form and
substance to Buyer in its sole and absolute discretion. Buyer will promptly
supply to the Company in writing, for inclusion in the Solicitation Materials,
all information concerning Buyer required by law, rule or regulation to be
included in the Solicitation Materials. The Company shall mail the Solicitation
Materials to the Bondholders as promptly as practicable following the date
hereof and the Company shall use commercially reasonable efforts to obtain the
Bondholders Consent at the earliest practicable time. Pro-Fac shall, and shall
cause each of Holdings LLC and Holdings Inc. to, take all such actions as are
reasonably requested by Buyer in connection with obtaining the Bondholder
Consent; provided, that this Section 6.3 shall not require Pro-Fac, the Company,
or any of their respective Subsidiaries to make any material payment unless such
payment is to be made by the Company conditioned upon and contemporaneously with
or following the Closing.
6.4 Solicitation Materials.
(a) Each document prepared in connection with and for the purpose of
the solicitation of the Bondholders Consent (the "Solicitation Materials") and
any amendments or supplements thereto, will comply as to form in all material
respects with the applicable requirements of the Exchange Act and the rules and
regulations thereunder.
(b) At the time the Solicitation Materials or any amendment or
supplement thereto are first mailed to the Bondholders and, at the time the
Bondholders provide their consent as contemplated by the Solicitation Materials,
the Solicitation Materials, as supplemented or amended, if applicable, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in paragraphs (a) and (b) of this Section 6.4 will not
apply to statements or omissions included in the Solicitation Materials, if any,
based upon information furnished to the Company in writing by Buyer specifically
for use therein.
6.5 Pro-Fac Shareholders/Members Meeting; Preparation of Information
Statement.
(a) Pro-Fac shall, acting through Pro-Fac's board of directors (the
"Pro-Fac Board"), as soon as practicable following execution of this Agreement
and in accordance with this Agreement, duly call, give notice of, convene and
hold the special meetings of its shareholders/members (collectively, the
"Pro-Fac Shareholders Meeting") for the purpose of
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considering and taking action upon the approval of the Unit Purchase and the
adoption of this Agreement, the Amended and Restated Marketing and Facilitation
Agreement, the Reorganization Transactions and the transactions and agreements
contemplated hereby, and Pro-Fac shall, through the Pro-Fac Board, recommend to
its shareholders/members that they approve and adopt this Agreement, the Amended
and Restated Marketing and Facilitation Agreement, the Reorganization
Transactions and any other actions, including, without limitation, amending or
modifying its Organizational Documents or any other agreement or contract, in
order to effectuate the transactions and agreements contemplated hereby in their
capacity as shareholders and members of Pro-Fac (the "Pro-Fac Shareholder/Member
Consent"); provided, that the Pro-Fac Board may withdraw, modify or change such
recommendation in accordance with the terms of Section 6.9(c) of this Agreement.
(b) As soon as practicable following the execution of this Agreement,
Pro-Fac shall prepare the Information Statement with respect to the Pro-Fac
Shareholders Meeting, which shall be satisfactory in form and substance to Buyer
in its reasonable discretion, and have the Information Statement mailed to
Pro-Fac's shareholders/members. Pro-Fac and Buyer shall cooperate with each
other in the preparation of the Information Statement. The Information Statement
(i) shall contain (A) subject to the terms of Section 6.9(c), statements of the
Pro-Fac Board that it has (x) determined that this Agreement and the
transactions contemplated hereby, are fair to and in the best interests of the
shareholders of Pro-Fac, (y) declared this Agreement to be advisable and (z)
recommended unanimously that the shareholders/members of Pro-Fac vote in favor
of the approval of the Unit Purchase and the adoption of this Agreement and (B)
the written opinion of J.P. Morgan Securities Inc. regarding the fairness, from
a financial point of view, of the consideration to be received by Pro-Fac in
connection with the transactions contemplated hereby and (ii) shall comply as to
form and content in all material respects with the applicable provisions of the
federal securities and other laws. Buyer will promptly supply to Pro-Fac in
writing, for inclusion in the Information Statement, all information concerning
Buyer required by law, rule or regulation to be included in the Information
Statement. Pro-Fac shall use its commercially reasonable efforts to obtain the
Pro-Fac Shareholder/Member Consent at the earliest practicable time.
6.6 Access to Information. Upon reasonable notice, each of the Company
and Buyer shall (and shall cause their respective Subsidiaries, to) afford to
the officers, employees, accountants, counsel, financial advisors and other
representatives of the other party reasonable access during normal business
hours, during the period prior to the Closing Date, to all its properties,
books, contracts, commitments and records and its officers, employees and
representatives and, during such period, each of the Company and Buyer shall
(and shall cause its Subsidiaries to) furnish promptly to the other party (a) a
copy of each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of federal or state securities laws, as applicable (other than
reports or documents which such party is not permitted to disclose under
applicable law) and (b) consistent with its legal obligations, all other
information concerning its business, properties and personnel as the other party
may reasonably request.
6.7 Confidentiality. Following the Closing, Pro-Fac shall, and shall
cause its Subsidiaries, officers, directors, advisors, agents, representatives
or other intermediaries to, keep all proprietary information relating to the
Company confidential, and shall not, and shall cause its
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Subsidiaries, officers, directors, advisors, agents, representatives or other
intermediaries not to, use any of such confidential information to the detriment
of the Company, except to the extent that (i) it is necessary or appropriate to
disclose such information to a Governmental Entity having jurisdiction over
Pro-Fac or its Subsidiaries, officers, directors, advisors, agents,
representatives or other intermediaries from whom disclosure is sought, (ii) any
requirement of law or governmental rule or regulation requires otherwise, or
(iii) such duty as to confidentiality is waived in writing by the Company;
provided, with respect to subclauses (i) and (ii), that if Pro-Fac is requested
or required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any confidential information, that Pro-Fac will
notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6.7. If, in the absence of a protective order or the receipt of a waiver
hereunder, Pro-Fac is, on the advice of its outside counsel, compelled to
disclose any confidential information to any tribunal or else stand liable for
contempt, Pro-Fac may disclose the confidential information to the tribunal;
provided, Pro-Fac shall use its commercially reasonable efforts to obtain, at
the request of Buyer, an order or other assurance that confidential trearent
will be accorded to such portion of the confidential information required to be
disclosed as Buyer shall designate.
6.8 Approvals and Consents; Cooperation. Each of Pro-Fac, the Company
and Buyer shall cooperate with each other and use (and shall cause their
respective Subsidiaries to use) its commercially reasonable efforts to take or
cause to be taken all actions, and do or cause to be done all things, necessary,
proper or advisable on their part under this Agreement and applicable laws to
consummate and make effective the Unit Purchase and the other transactions
contemplated by this Agreement as soon as practicable, including without
limitation (i) preparing and filing as promptly as practicable all documentation
to effect all necessary applications, notices, petitions, filings, Tax ruling
requests and other documents and to obtain as promptly as practicable all
consents, waivers, licenses, orders, registrations, approvals, Permits, Tax
rulings and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Unit Purchase or
any of the other transactions contemplated by this Agreement (including, but not
limited to, those approvals, consents, orders, registrations, declarations and
filings required under Section 2.4, Section 3.2 or the Bank Waiver)
(collectively, the "Required Approvals"), (ii) taking all reasonable steps as
may be necessary to obtain all such Required Approvals and (iii) using its
commercially reasonable efforts to take all necessary or desirable steps and do
all things necessary or desirable to enable the conditions in Article VII to be
satisfied. Without limiting the generality of the foregoing, each of Pro-Fac,
the Company and Buyer agree to make all necessary filings in connection with the
Required Approvals as promptly as practicable after the date of this Agreement,
and to use its commercially reasonable efforts to furnish or cause to be
furnished, as promptly as practicable, all information and documents requested
with respect to such Required Approvals, and shall otherwise cooperate with any
applicable Governmental Entity and to use its commercially reasonable efforts in
order to obtain any Required Approvals in as expeditious a manner as possible;
provided, that neither the Company nor Pro-Fac shall be required pursuant to
this Section 6.8 to dispose of or hold separate any material portion of their
respective business or assets, to expend any material amount (other than the
payment of filing fees and other similar payments), commence any litigation or
grant any material accommodation (financial or otherwise) to any third party.
Each of Pro-Fac, the Company and Buyer shall use its
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commercially reasonable efforts to resolve such objections, if any, as any
Governmental Entity may assert with respect to this Agreement and the
transactions contemplated hereby in connection with the Required Approvals.
In the event that a suit is instituted by a Person or Governmental Entity
challenging this Agreement and the transactions contemplated hereby as violative
of applicable antitrust or competition laws, each of Pro-Fac, the Company and
Buyer shall use its commercially reasonable efforts to resist or resolve
such suit. Pro-Fac, the Company and Buyer each shall, upon request by any of
the others, furnish the other with all information concerning itself, its
Subsidiaries, affiliates, directors, officers and shareholders and such other
matters as may reasonably be necessary or advisable in connection with any
statement, filing, Tax ruling request, notice or application made by or on
behalf of Pro-Fac, the Company, Buyer or any of their respective Subsidiaries
to any third party and/or any Governmental Entity in connection with the Unit
Purchase or the other transactions contemplated by this Agreement.
6.9 Non-Solicitation.
(a) Neither Pro-Fac, nor the Company nor any of their respective
Subsidiaries shall (whether directly or indirectly through their respective
officers, directors, advisors, agents, representatives or other intermediaries),
nor shall Pro-Fac, the Company or any of their respective Subsidiaries authorize
or permit any of their respective officers, directors, advisors, agents,
representatives or other intermediaries (the "Company Representatives") to (a)
solicit, initiate, encourage (including by way of furnishing non-public
information) or take any action to facilitate the submission of any inquiries,
proposals or offers (whether or not in writing) from any Person (other than
Buyer and its Affiliates), other than the transactions contemplated by this
Agreement, that constitute, or are reasonably expected to lead to, an
Acquisition Proposal, (b) enter into or participate in any discussions or
negotiations regarding an Acquisition Proposal or (c) afford access to the
properties, books or records of Pro-Fac, the Company or any of their respective
Subsidiaries to any Person that may be considering making, or has made, an
Acquisition Proposal.
(b) The Company shall immediately notify Buyer orally and shall
promptly (and in no event later than 24 hours) notify Buyer in writing after
having received any Acquisition Proposal, or request for nonpublic information
relating to Pro-Fac, the Company or any of their respective Subsidiaries or for
access to the properties, books or records of Pro-Fac, the Company or any of
their respective Subsidiaries regarding an Acquisition Proposal (such oral and
written notices shall identify the Person making such proposal or request and,
if a proposal is made, setting forth the material terms thereof). The Company
will keep Buyer fully informed, on a current basis, of the status and details of
any such Acquisition Proposal or request.
(c) Neither Pro-Fac, nor the Company, nor the Pro-Fac Board, nor any
committee thereof shall withdraw or modify, or propose to withdraw or modify, in
any manner adverse to Buyer, the approval or recommendation of this Agreement or
the agreements and transactions contemplated hereby, or propose publicly to
approve or recommend an Acquisition Proposal, unless (i) the withdrawal or
modification of the approval or recommendation of this Agreement and the
agreements and transactions contemplated hereby or the approval or
recommendation of another proposal is, in the opinion of Pro-Fac's outside
counsel, required, in response to an unsolicited bona fide written Superior
Proposal, in order for the Pro-Fac Board to comply with its fiduciary duties to
its stockholders under applicable law, and (ii) Pro-Fac and the
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Company have fully and completely complied with this Section 6.9. Nothing in
this Section 6.9(c) shall prohibit Pro-Fac, the Company or Pro-Fac's Board from
taking and disclosing to Pro-Fac's stockholders a position with respect to an
Acquisition Proposal by a third party to the extent required under the Exchange
Act or from making such disclosure to Pro-Fac's stockholders which, in the
judgment of Pro-Fac's outside counsel, is required under applicable law;
provided, that nothing in this sentence shall affect the obligations of Pro-Fac,
the Company and Pro-Fac's Board under any other provision of this Agreement.
(d) Pro-Fac and the Company shall immediately cease and cause their
respective Subsidiaries, officers, directors, advisors, agents, representatives
and other intermediaries to cease immediately and cause to be terminated any and
all existing activities, discussions or negotiations with any Person conducted
heretofore with respect to any Acquisition Proposal, and following the Closing,
each of Pro-Fac and the Company, as applicable, shall use its commercially
reasonable efforts to cause any such parties in possession of confidential
information about Pro-Fac or the Company that was furnished by or on behalf of
Pro-Fac or the Company to return or destroy all such information in the
possession of any such party or in the possession of any agent or advisor of any
such party. Pro-Fac and the Company agrees not to release any third party from
or waive any provisions of confidentiality in any confidentiality agreement to
which the Company is a party.
(e) "Acquisition Proposal" means any inquiry, proposal or offer for
(i) an acquisition or purchase of any of the assets of Pro-Fac, the Company and
their respective Subsidiaries outside the ordinary course of business or of
equity or debt securities of any class of Pro-Fac, the Company or any of their
respective Subsidiaries, or (ii) any merger, consolidation, business
combination, purchase, lease or acquisition or assumption of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving Pro-Fac, the Company or any of their respective Subsidiaries.
(f) "Superior Proposal" means any bona fide written inquiry, proposal
or offer for an acquisition or purchase of 60 percent or more of the
consolidated assets of Pro-Fac, the Company and their respective Subsidiaries or
of 60 percent or more of the equity securities of Pro-Fac, the Company or any of
their respective Subsidiaries, whether accomplished by merger, consolidation,
business combination, purchase, lease or acquisition or assumption of assets,
recapitalization, liquidation, dissolution or similar transaction involving
Pro-Fac, the Company or any of their respective Subsidiaries, that, in each
case, the Pro-Fac Board concludes in good faith, taking into account the advice
of a financial advisor of nationally recognized reputation and its outside legal
counsel, (x) is reasonably likely to be completed, taking into account all
legal, financial, regulatory and other aspects of the Acquisition Proposal,
including the status of the financing therefor and the Person making the
proposal and (y) would, if consummated, result in a transaction more favorable
and provide greater value to Pro-Fac and the Company from a financial point of
view than the transactions contemplated by this Agreement, in each case, taking
into consideration all the terms and conditions of the Acquisition Proposal,
including any break-up fee, expense reimbursement provision and condition to
consummation.
6.10 Public Announcements. None of the parties hereto shall make any
press release or public announcement with respect to this Agreement, the Unit
Purchase or the transactions contemplated hereby without the prior written
consent of the other party hereto
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(which consent shall not be unreasonably withheld); provided, however, that each
party hereto may make any disclosure or announcement which such party, after
consultation with its outside legal counsel, determines that it is obligated to
make pursuant to applicable law or regulation of any national securities
exchange or in order to discharge its fiduciary duties, in which case, the party
desiring to make the disclosure shall consult with the other party hereto prior
to making such disclosure or announcement and shall consider in good faith such
other party's comments.
6.11 Further Assurances. In case at any time after the Closing Date
any further action is reasonably necessary to carry out the purposes of this
Agreement or the transactions contemplated by this Agreement, the proper
officers of Pro-Fac, the Company, Holdings Inc., Holdings LLC and Buyer shall
take any such reasonably necessary action.
6.12 Disposition of Litigation. In connection with any litigation
which may be brought against Pro-Fac, the Company or their respective directors
relating to the transactions contemplated hereby, Pro-Fac and the Company shall
keep Buyer, and any counsel which Buyer may retain at its own expense, informed
of the status of such litigation and will provide Buyer's counsel the right to
participate in the defense of such litigation to the extent Buyer is not
otherwise a party thereto, and neither Pro-Fac nor the Company shall enter into
any settlement or compromise of any such litigation without Buyer's prior
written consent, which consent shall not be unreasonably withheld or delayed.
6.13 Financing.
(a) Buyer shall be primarily responsible for any negotiations with
respect to any definitive agreements regarding the Financing (the "Definitive
Financing Agreements"); provided, that (i) the Company shall have received prior
notice of, and shall be kept reasonably informed of the ongoing status of, any
such negotiations, (ii) the Company and its counsel shall be given an
opportunity to review and comment upon drafts of the Definitive Financing
Agreements when they become available to Buyer, and Buyer shall consider such
comments in good faith, (iii) Pro-Fac shall, and shall cause each of Holdings
LLC and Holdings Inc. to, take all such actions as are reasonably requested by
Buyer in connection with any such negotiations and (iv) the Company shall take
all such actions as are reasonably requested by Buyer in connection with any
such negotiations. Buyer and the Company shall, and Pro-Fac shall cause each of
Holdings LLC and Holdings Inc. to, use their respective commercially reasonable
efforts to satisfy on or before the Closing Date all requirements of the
Definitive Financing Agreements which are conditions to closing the transactions
constituting the Financing and to drawing the cash proceeds thereunder. In no
event shall Pro-Fac be required under this Section 6.13(a) to (i) guarantee any
additional financing, (ii) grant any security interest in its assets, (iii)
expend any material amount, (iv) commence any litigation, or (v) grant any
material accommodation (financial or otherwise).
(b) The Company shall use commercially reasonable efforts so that upon
payment of all amounts then owed to the Existing Banks under the Existing
Financing at the Closing, (i) all outstanding Indebtedness under the Existing
Financing and any other amounts owed thereunder by each of the Company and its
Subsidiaries shall have been paid in full, defeased in a manner that will not
result in any Liability or obligation being imposed on the Company, or its
Subsidiaries, and (ii) all Liens on the capital stock or other equity interests
of the
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Company or its Subsidiaries and on all other assets of the Company and its
Subsidiaries securing such Indebtedness shall have been released, and, if
required by Lender, all public records shall have been cleared of any such
Liens. At the Closing, the Company shall provide, or arrange to be provided to
Buyer, all releases and other documents in form and substance reasonably
satisfactory to Buyer either providing for, or if required by Lender,
demonstrating the release (actual and of record) of such Liens.
(c) The Company agrees to provide, and will cause its Subsidiaries and
its and their respective officers, employees and advisors to provide, and
Pro-Fac agrees to provide, and shall cause each of Holdings LLC and Holdings
Inc. and its and their respective officers, employees and advisors to provide,
all cooperation reasonably necessary in connection with the arrangement of any
financing to be consummated contemporaneously with or at or after the expiration
of the Closing Date in respect of the transactions contemplated by this
Agreement, including participation in meetings, due diligence sessions, road
shows, the preparation of offering memoranda, private placement memoranda,
prospectuses and similar documents, the execution and delivery of any commitment
letters, underwriting or placement agreements, pledge and security documents,
other definitive financing documents, or other requested certificates or
documents, including a certificate of the chief financial officer of the
Company, Holdings Inc., and Holdings LLC with respect to solvency matters,
comfort letters of accountants and legal opinions as may be reasonably requested
by Buyer and taking such other actions as are reasonably required to be taken by
the Company; provided, that Buyer shall use commercially reasonable efforts not
to materially interfere with the duties of such officers, employees and advisors
such that the Company's or Pro-Fac's business and results of operations would be
materially adversely affected thereby. The Company further agrees to, and
Pro-Fac agrees to, and agrees to cause each of Holdings LLC and Holdings Inc.
to, approve and to enter into any contract or agreement with the Lender relating
to the Financing as Buyer in its sole and absolute discretion may request;
provided, that no such contract or agreement shall be irrevocably made until
contemporaneously with or after the Closing Date. In addition, in conjunction
with the transactions contemplated hereby, the Company agrees, at the reasonable
request of Buyer, to call for or offer prepayment, repayment, exchange or
redemption, or take such actions as necessary to prepay, repay, redeem, exchange
and/or renegotiate, as the case may be, or obtain consents from any holder of,
any then existing Indebtedness of the Company and its Subsidiaries; provided,
that no call for redemption, repayment or prepayment shall be irrevocably made
until contemporaneously with or after the Closing Date. In no event shall
Pro-Fac be required under this Section 6.13(c) to (i) guarantee any additional
financing, (ii) grant any security interest in its assets, (iii) expend any
material amount other than filing fees and other similar payments, (iv) commence
any litigation, or (v) grant any material accommodation (financial or
otherwise).
6.14 Real Estate Matters.
(a) Title Insurance. Each of the Company and Buyer shall cooperate
with each other to obtain (within 15 days following the date hereof) from
Chicago Title Insurance Company (the "Title Company") a commitment for a title
insurance policy for each parcel of Owned Property and each parcel of Leased
Property identified by Buyer on Exhibit E attached hereto. Pro-Fac shall provide
all such affidavits and indemnities as the Title Company reasonably shall
require in order for the Title Company to provide Buyer and Lender with title
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policies at Closing insuring the Company's ownership of all Owned Property in
fee simple or the Company's valid leasehold interest in all Leased Property
identified on Exhibit E attached hereto, subject to no Liens except for
Permitted Liens. The Company shall pay all the costs of obtaining such title
insurance policy.
(b) Surveys. The Company shall grant surveyors retained by Buyer
reasonable and appropriate access to the Real Property so that the surveyors may
prepare a survey of each such Real Property, in each case conforming to the
Minimum Standard Detail Requirements jointly established and approved in 1992 by
ALTA and ACSM, certified to the Company, Buyer, and the Title Company, and
showing no Liens other than Permitted Liens. Pro-Fac shall provide all such
affidavits (including same-as survey affidavits) and indemnities as the
surveyors or the Title Company may reasonably require in order to rely on any
existing surveys of the Real Property. The Company shall pay all the costs of
obtaining any new surveys of the Real Property.
6.15 Cessation of Use of "Agrilink" Name and of Company Intellectual
Property Rights. Pro-Fac shall immediately following the Closing Date cease and
cause its Subsidiaries (other than Holdings LLC, Holdings Inc. and the Company)
to immediately following the Closing Date cease to use the "Agrilink" name and
the Company Intellectual Property Rights, except, with respect to the use of the
Company Intellectual Property Rights, as provided in the Transition Services
Agreement and/or the license contemplated thereby. Pro-Fac shall (i) immediately
following the Closing Date issue a press release announcing that it will no
longer conduct business under the name of "Agrilink", (ii) promptly file such
press release on Form 8-K with the SEC, and (iii) take such other actions as are
reasonably requested by Buyer to notify Persons who have in the past or may in
the future have dealings with Pro-Fac and/or the Company of the fact that
Pro-Fac is no longer conducting business under the name "Agrilink".
6.16 Reorganization Transactions. Pro-Fac shall, and shall cause each
of Holdings LLC and Holdings Inc. to, consummate the Reorganization
Transactions.
6.17 Holdings LLC Agreement. At or prior to the Closing, each of
Pro-Fac and Buyer shall execute and deliver the Holdings LLC Agreement.
6.18 Issuance of Units. At or prior to the Closing and subject to the
terms and the conditions of this Agreement, Pro-Fac shall cause Holdings LLC to
issue the Pro-Fac Units to Pro-Fac and the Purchase Units and the Warrants to
Buyer.
6.19 Amended Bylaws. At or prior to the Closing, the Company shall
amend and restate its bylaws in a form provided by Buyer (the "Amended Bylaws").
6.20 Amended Certificate. At or prior to the Closing, the Company
shall amend and restate its certificate of incorporation in a form provided by
Buyer (the "Amended Certificate").
6.21 Preparation of certain Organizational Documents. Buyer shall
prepare (i) the Holdings LLC Agreement consistent with the terms set forth on
Exhibit A attached hereto and such other customary provisions reasonably
acceptable to Pro-Fac, and (ii) the Amended Bylaws, the Amended Certificate, and
the Organizational Documents for Holdings Inc.
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6.22 Management Services Agreement. At or prior to Closing, the
Company shall execute and deliver the Management Services Agreement in the form
attached hereto as Exhibit F (the "Management Services Agreement") with such
modifications as Buyer, Pro-Fac and the Company mutually agree.
6.23 Securityholders Agreement. At or prior to the Closing, Buyer,
Holdings LLC and Pro-Fac shall execute and deliver the Securityholders Agreement
in the form attached hereto as Exhibit G (the "Securityholders Agreement") with
such modifications as Buyer and Pro-Fac mutually agree.
6.24 Amended and Restated Marketing and Facilitation Agreement and
Termination Agreement. At or prior to the Closing, Pro-Fac shall, following the
Pro-Fac Shareholder/Member Consent, execute and deliver the Amended and Restated
Marketing and Facilitation Agreement in the form attached hereto as Exhibit H
with such modifications as Buyer and Pro-Fac mutually agree (the "Amended and
Restated Marketing and Facilitation Agreement") and the Termination Agreement in
the form attached hereto as Exhibit I with such modifications as Buyer and
Pro-Fac mutually agree (the "Termination Agreement"). Immediately following the
Closing, the Company shall executive and deliver the Amended and Restated
Marketing and Facilitation Agreement and the Termination Agreement.
6.25 Transition Services Agreement. At or prior to the Closing,
Pro-Fac and the Company shall execute and deliver a Transition Services
Agreement in the form attached hereto as Exhibit J (the "Transition Services
Agreement") with such modifications as Buyer and Pro-Fac mutually agree.
6.26 Equity Value Plan. The Company shall use its commercially
reasonable efforts to obtain, at or prior to the Closing, all necessary consents
to terminate its Equity Value Plan and the rights granted thereunder in a manner
that will eliminate the Company's existing Liabilities under such plan and the
units granted thereunder and will not result in any Liability or obligation
being imposed on the Company, any of the Company's Subsidiaries, or any
successor or assign of the Company.
6.27 AgriFrozen Litigation Expenses.
(i) Notwithstanding Section 10.1(a)(iv), the Company shall pay,
on an annual basis, the first $300,000 incurred by the Company and Pro-Fac
in any year with respect to their out-of-pocket expenses in connection with
the AgriFrozen Litigation (other than the Kenyon Matter and the GE Matter,
which are not subject to this Section 6.27), and fifty percent of the
amount that the Company's and Pro-Fac's out-of-pocket expenses in
connection with the AgriFrozen Litigation (other than the Kenyon Matter and
the GE Matter, which are not subject to this Section 6.27) exceeds $300,000
in any such year (the "Excess Payment") (collectively, the "Covered
AgriFrozen Litigation Expenses"); provided, that the maximum amount of
Excess Payment that the Company will pay hereunder together with any share
of judgments and settlement amounts paid by the Company and/or Pro-Fac
pursuant to Section 6.27(ii) is $3,000,000.
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(ii) The Company shall pay 50% of any judgment against the
Company and/or Pro-Fac or settlement agreement to obtain release of the
Company and/or Pro-Fac relating to the AgriFrozen Litigation (other than
the Kenyon Matter and the GE Matter, which are not subject to this Section
6.27) to which the Company consents, such consent not to be unreasonably
withheld; provided, that the aggregate amount that the Company will pay for
Excess Payment pursuant to Section 6.27(i) and all judgments and
settlements pursuant to this Section 6.27(ii) is $3,000,000.
(iii) For the avoidance of doubt, this Section 6.27 shall in no
event be construed to (i) create any obligation of the Company, as between
Pro-Fac and the Company, other than as specifically set forth above, (A) to
bear any of Pro-Fac's out-of-pocket expenses in connection with the
AgriFrozen Litigation, or (B) to pay any portion of any judgment or
settlement agreement relating to the AgriFrozen Litigation, or (ii) other
than as specifically set forth above, affect Pro-Fac's indemnification
obligation under Section 10.1(a)(iv).
6.28 Directors and Officers Liability Insurance. Pro-Fac shall
maintain in effect for not less than six years from the Closing Date the current
policies of the directors and officers liability insurance maintained by Pro-Fac
as of the date hereof with such changes as may be necessary to provide coverage
during such period, among others, for the officers and directors of the Company
with respect to any matter that arises directly or indirectly out of, or relates
directly or indirectly to, any circumstance, agreement, activity, action,
omission, event or matter occurring on or prior to, the Closing Date, including
in connection with the transactions contemplated hereby; provided, that Pro-Fac
may substitute therefor policies providing coverage in amounts and containing
terms and conditions which are not less favorable to such officers and directors
so long as no lapse in coverage occurs as a result of such substitution. Pro-Fac
shall take such steps as reasonably requested by the Company to assure that the
Company may verify compliance with this covenant from time to time, including
without limitation, permitting representatives of the Company to speak directly
to the insurance company providing such coverage about payment of premiums and
other matters concerning the coverage required by this covenant.
6.29 Environmental Expenses, Expenditures and Liabilities.
Notwithstanding the provisions of Section 10.1(a)(i) or Section 10.1(a)(iii),
the Company agrees that during the three year period following the Closing Date,
it will be responsible for and will pay any capital expenditure incurred by the
Company to address noncompliance arising from the presence of metals in the
wastewater effluent of the fruit canning facility in Lawton, Michigan up to an
aggregate amount of $2.5 million; provided, that the Company shall bear no
responsibility for, and Pro-Fac shall bear responsibility pursuant to Section
10.1(a) for, any Damages (including any investigatory, remedial, or corrective
obligations) related to off-site environmental impacts from contamination
originating at the Lawton, Michigan site. For the avoidance of doubt, this
Section 6.29 shall in no event be construed to, other than as specifically set
forth above, affect Pro-Fac's indemnification obligation under Section 10.1(a).
6.30 Knouse Agreement. Pro-Fac shall terminate or modify, in a manner
reasonably acceptable to Buyer, the Marketing Agreement between Knouse Foods
Cooperative, Inc. and Pro-Fac, dated as of 1998 in a manner that (i) will assure
that the Company will not
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violate any applicable Law as a result of performing such agreement, and (ii)
will not result in any Liability or obligation being imposed on the Company, any
of its respective Subsidiaries, or any successor or assign of the Company.
6.31 Pro-Fac Loan Facility.
At or prior to the Closing, Pro-Fac and the Company shall execute and
deliver the Pro-Fac Loan Facility containing the terms set forth on Exhibit K
attached hereto and other customary provisions (the "Pro-Fac Loan Facility") as
Buyer and Pro-Fac mutually agree.
6.32 Non-Solicitation of Employees.
(a) Pro-Fac agrees that during the period beginning on the date hereof
and ending on the fifth anniversary of the date hereof (the "Non-Solicitation
Period"), neither Pro-Fac nor any of Pro-Fac's Affiliates shall directly or
indirectly (i) induce or attempt to induce any employee of the Company or any of
its Subsidiaries (an "Employee") to leave the employ of the Company or such
Subsidiary, (ii) hire any person who was an employee of the Company or any of
its Subsidiaries at any time during the Non-Solicitation Period, except such
person who's employment with the Company was terminated by the Company, or (iii)
in any other way interfere with the relationship between the Company or any of
its Subsidiaries and any Employee; provided, that the persons listed on Schedule
6.32 attached hereto shall not be subject to the restrictions set forth in this
Section 6.32 to the extent and in the manner set forth on such schedule.
(b) Pro-Fac agrees that (i) the covenants set forth in Section 6.32(a)
are reasonable in temporal scope and in all other respects, and (ii) the
covenants contained herein have been made in order to induce the Company and
Buyer to enter into this Agreement.
(c) If, at the time of enforcement of Section 6.32(a), a court shall
hold that the duration or scope stated herein are unreasonable under
circumstances then existing, the parties agree that the maximum duration or
scope under such circumstances shall be substituted for the stated duration or
scope and that the court shall be allowed to revise the restrictions contained
herein to cover the maximum period and scope permitted by law.
(d) Pro-Fac recognizes and affirms that in the event of its breach of
any provision of Section 6.32(a), money damages would be inadequate and neither
the Company, nor the Buyer would have adequate remedy at law. Accordingly,
Pro-Fac agrees that in the event of a breach or a threatened breach by Pro-Fac
of any of the provisions of Section 6.32(a), the Company and Buyer, in addition
and supplementary to other rights and remedies existing in its favor, may apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security). In
addition, in the event of a breach or violation by Pro-Fac of Section 6.32(a),
the Non-Solicitation Period shall be tolled until such breach or violation has
been duly cured.
6.33 Evaluating LLC Structure. The parties hereby agree to take the
actions with respect to converting the Company to a limited liability company as
contemplated by Exhibit L.
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Article VII
Closing Conditions
7.1 Conditions to Buyer's Obligations. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the satisfaction
as of the Closing of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Pro-Fac and the Company set forth in this Agreement (other than those
representations and warranties that address matters as of particular dates)
shall be true and correct as of the Closing Date and any representation and
warranty of Pro-Fac and the Company set forth in this Agreement that addresses
matters as of a particular date shall be true and correct as of the date
referred to therein; it being understood that (i) any inaccuracies in such
representations and warranties shall be disregarded if the circumstances giving
rise to such inaccuracies (considered collectively) do not constitute a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole and (ii) for
purposes of determining whether such representations and warranties are true,
complete and correct, all "Material Adverse Effect" qualifications and any other
materiality qualifications (whether qualitative or quantitative, other than
those qualifications specifically referring to a certain dollar amount) in such
representations and warranties shall be disregarded.
(b) Performance. Each of Pro-Fac and the Company shall have performed
all obligations and complied in all material respects with all agreements or
covenants to be performed or complied with by it under this Agreement.
(c) Litigation. No suit, action or other proceeding, or injunction,
order, decree or judgment relating thereto, shall be threatened or pending
against the Company, Pro-Fac or Buyer in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with the
transactions contemplated hereby and no injunction, judgment, order, decree or
ruling with respect thereto shall be in effect.
(d) Reorganization Transactions.
(i) Formation of Holdings LLC. Pro-Fac shall have formed and
capitalized Holdings LLC pursuant to the Holdings LLC Agreement.
(ii) Formation of Holdings Inc. Holdings LLC shall have formed
and capitalized Holdings Inc.
(iii) Contribution of Company Common Stock to Holdings LLC.
Pro-Fac shall have contributed to the capital of Holdings LLC all of the
issued and outstanding shares of Company Common Stock in exchange for the
Pro-Fac Common Units.
(iv) Contribution of Company Common Stock to Holdings Inc.
Holdings LLC shall have contributed to the capital of Holdings Inc. all of
the issued and outstanding shares of Company Common Stock.
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(e) Holdings LLC Agreement. Pro-Fac shall have executed and delivered
the Holdings LLC Agreement, and the Holdings LLC Agreement shall be a legal,
valid and binding obligation of Pro-Fac.
(f) Amended Bylaws. The Amended Bylaws shall be in full force and
effect.
(g) Amended Certificate. The Amended Certificate shall be in full
force and effect.
(h) Management Services Agreement. The Company shall have executed and
delivered the Management Services Agreement, and such Management Services
Agreement shall be in full force and effect.
(i) Securityholders Agreement. Pro-Fac, the Executives and, to the
extent applicable, the Investment LLC shall have executed and delivered the
Securityholders Agreement, and such Securityholders Agreement shall be in full
force and effect.
(j) Subscription Agreements. Each Executive shall have executed and
delivered a subscription agreement in respect of the equity investment of such
Executive in the form provided by Buyer that is consistent with the terms set
forth on Exhibit B attached hereto and that is otherwise reasonably acceptable
to Buyer and the Company, and such subscription agreement shall be in full force
and effect.
(k) Amended and Restated Marketing and Facilitation Agreement and
Termination Agreement. Pro-Fac shall have executed and delivered the Amended and
Restated Marketing and Facilitation Agreement and the Termination Agreement.
(l) Seneca Sideletter Agreement. Pro-Fac shall have executed and
delivered a sideletter agreement with respect to Seneca Foods Corporation in the
form attached hereto as Exhibit M with such modifications as Buyer and Pro-Fac
mutually agree.
(m) Dean Sideletter Agreement. Pro-Fac shall have executed and
delivered a sideletter agreement with respect to Dean Pickle and Specialty
Products Company in the form attached hereto as Exhibit N with such
modifications as Buyer and Pro-Fac mutually agree.
(n) Transition Services Agreement. Pro-Fac shall have executed and
delivered the Transition Services Agreement, and such Transition Services
Agreement shall be in full force and effect.
(o) Force Majeure. Following the date hereof, (a) there shall have not
occurred (i) any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange, the American Stock Exchange, or in
Nasdaq National Market System, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or not
mandatory), (iii) any limitation by any United States Governmental Entity that
has a material adverse effect generally on the extension of credit by banks or
other financial institutions, or (iv) any disaster, act of God, act of war or
act of hostilities involving the United States, or act of terrorism against the
United States, and (b) in the
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case of any of the situations described in clauses (i) through (iv) above that
are existing on the date hereof, there shall not have occurred a material
acceleration or worsening thereof.
(p) Opinions of the Company's and Pro-Fac's Counsel. Buyer shall have
received from Harris Beach LLP, counsel for the Company and Pro-Fac, opinions
with respect to the matters set forth on Exhibit O attached hereto, which shall
be addressed to Buyer, dated as of the Closing Date, and permit reliance thereon
by the Lender.
(q) Directors. The Company shall have received the resignations from
all of the current directors of the Company other than Dennis M. Mullen and two
current directors of the Company to the extent that Pro-Fac designates any
current director of the Company to serve as Pro-Fac designated director pursuant
to the Securityholders Agreement, effective as of the Closing Date and Buyer's
designees shall have been elected to the Board effective as of the Closing, as
contemplated by the Securityholders Agreement.
(r) Employment Arrangements. The Company shall have obtained a waiver
of the change of control provision with respect to the Unit Purchase and the
agreements and transactions contemplated hereby from Dennis M. Mullen under his
Supplemental Executive Retirement Agreement with the Company dated July 1, 2000.
The Company's Equity Value Plan shall have been terminated.
(s) Material Adverse Effect. Since June 30, 2001, there shall have not
been any fact, event, circumstance, change, development, effect or occurrence
which has had, has or would reasonably be expected to have a Material Adverse
Effect.
(t) Consents and Approvals.
(i) The Company shall have made all filings and shall have
obtained all permits, authorizations, consents and approvals required to be
obtained by the Company to consummate the transactions contemplated by this
Agreement, including, without limitation, the consents set forth on
Schedule 2.4 and Schedule 3.2.
(ii) The Company shall have obtained the Bondholders Consent on
terms and conditions satisfactory to Buyer in its sole and absolute
discretion.
(iii) Pro-Fac shall have obtained the Pro-Fac Shareholder/Member
Consent.
(iv) The waiting period under the HSR Act (including any
extension thereof) applicable to the Unit Purchase and the other agreements
and transactions contemplated hereby shall have been terminated or shall
have expired.
(v) Pro-Fac shall have obtained the Bank Waiver on or before July
8, 2002.
(u) Minimum EBITDA. The Minimum EBITDA shall have been achieved.
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(v) Financing; Availability of Funds. The Financing shall have been
obtained, the Lender shall have made available at the Closing the funding and
the facilities contemplated by the Financing and the Company shall have complied
in all respects with paragraphs (b) and (c) of Section 6.13.
(w) Closing Documents. At the Closing, the Company and Pro-Fac shall
have delivered to Buyer all of the following documents:
(i) a certificate of an officer of Pro-Fac and an officer of the
Company, dated the Closing Date stating that the conditions specified in
Section 7.1(a), Section 7.1(b), Section 7.1(d) and Section 7.1(s) through
Section 7.1(u) have been fully satisfied;
(ii) good standing certificates of the Company and each of its
Subsidiaries from the state of its formation and each state where it is
qualified to conduct business, dated within fifteen (15) days prior to the
Closing Date;
(iii) a copy of the Company's Organizational Documents certified
by the Secretary of the state of its formation; and
(iv) such other documents relating to the transactions
contemplated by this Agreement as Buyer may reasonably request.
(x) Real Property.
(i) All Real Property shall be in substantially the same
condition and repair as it is on the date of this Agreement, reasonable
wear and tear excepted.
(ii) Buyer shall have received (A) from each landlord under a
Lease an estoppel, and (B) from each landlord under a Lease described on
Schedule 2.25(b) a consent to the transactions contemplated by this
Agreement.
(iii) The Company shall have timely paid any and all real
property transfer, transfer gains, stamp and other similar taxes, if any,
assessed in connection with the transactions contemplated by this
Agreement, including all transactions that occurred prior to the date
hereof, and shall have delivered evidence satisfactory to Buyer and the
Title Company of the payment of such taxes.
(y) Other than amounts owing for the purchase of crops under the
Existing MFA and as contemplated in Section 12.12, all intercompany amounts
owing from the Company or any of the Company's Subsidiaries to Pro-Fac and from
Pro-Fac to the Company or any of the Company's Subsidiaries shall be cancelled
with no adverse tax or other consequences to the Company or any of its
Subsidiaries.
7.2 Conditions to the Company's and Pro-Fac's Obligations. The
obligation of the Company and Pro-Fac to consummate the transactions
contemplated hereby is subject to the satisfaction as of the Closing of the
following conditions:
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(a) Representations and Warranties. The representations and warranties
of Buyer set forth in this Agreement (other than those representations and
warranties that address matters as of particular dates) shall be true and
correct as of the Closing Date and any representation and warranty of Buyer set
forth in this Agreement that addresses matters as of a particular date shall be
true and correct as of the date referred to therein; it being understood that
(i) any inaccuracies in such representations and warranties shall be disregarded
if the circumstances giving rise to such inaccuracies (considered collectively)
do not constitute a Material Adverse Effect on Buyer and (ii) for purposes of
determining whether such representations and warranties are true, complete and
correct, all "Material Adverse Effect" qualifications and any other materiality
qualifications (whether qualitative or quantitative) in such representations and
warranties shall be disregarded.
(b) Performance. Buyer shall have performed all obligations and
complied in all material respects with all agreements or covenants to be
performed or complied with by it under this Agreement.
(c) Holdings LLC Agreement. Buyer shall have executed and delivered
the Holdings LLC Agreement, and the Holdings LLC Agreement shall be a legal,
valid and binding obligation of Buyer.
(d) Contribution Agreement. Holdings LLC shall have executed and
delivered the Contribution Agreement, and the Contribution Agreement shall be a
legal, valid and binding obligation of Holdings LLC.
(e) Securityholders Agreement. Buyer shall have executed and delivered
the Securityholders Agreement, and the Securityholders Agreement shall be in
full force and effect.
(f) Transition Services Agreement. The Company shall have executed and
delivered the Transition Services Agreement, and such Transition Services
Agreement shall be in full force and effect.
(g) Pro-Fac Loan Facility. The Company shall have executed and
delivered the Pro-Fac Loan Facility, and such Pro-Fac Loan Facility shall be in
full force and effect.
(h) Pro-Fac Shareholder/Member Consent. Pro-Fac shall have obtained
the Pro-Fac Shareholder/Member Consent.
(i) HSR Act. The waiting period under the HSR Act (including any
extension thereof) applicable to the Unit Purchase and the other agreements and
transactions contemplated hereby shall have been terminated or shall have
expired.
(j) Closing Documents. At the Closing, Buyer shall have delivered to
Pro-Fac and the Company a certificate of an officer of Buyer, dated the Closing
Date, stating that the conditions specified in Section 7.2(a) and Section 7.2(b)
have been fully satisfied.
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Article VIII
Termination
8.1 Termination. This Agreement may be terminated and abandoned at any
time prior to the Closing:
(a) by the mutual agreement of the Company and Buyer.
(b) by either the Company or Buyer:
(i) if the Closing shall not have occurred on or before October
31, 2002; provided, that the right to terminate this Agreement under this
Section 8.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such date.
(ii) if any United States federal or state Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable; provided, that
the party seeking to terminate this Agreement shall have used its
commercially reasonable efforts to remove or lift such order, decree,
ruling or other action.
(iii) if, at the Pro-Fac Shareholders Meeting or any adjournment
thereof at which this Agreement, the Amended and Restated Marketing and
Facilitation Agreement and the agreements and transactions contemplated
hereby are voted upon, the requisite shareholder and member adoption and
approval shall not have been obtained; provided, that the right to
terminate this Agreement under this Section 8.1(b)(iii) shall not be
available to the Company if its or Pro-Fac's failure to fulfill any
obligations under Section 6.4, Section 6.5, Section 6.8 or Section 6.9 has
been the cause or resulted in the failure to obtain such shareholder and
member approval.
(c) by the Company, if, prior to the Closing Date, the representations
and warranties of Buyer set forth in this Agreement which are not qualified by
"materiality" or "Material Adverse Effect" shall not be true, complete and
correct in any material respect, and the representations and warranties that are
qualified by "materiality" or "Material Adverse Effect" shall not be true,
complete and correct in any respect, at any time, after the date hereof (except
for those representations and warranties that address matters only as of a
particular date or only with respect to a specific period of time which need
only be true, complete and correct as of such date or with respect to such
period), or Buyer shall have breached or failed to perform or comply in any
material respect with any obligation, agreement or covenant required by this
Agreement to be performed or complied with by it, and, with respect to any such
breach or failure to perform that is reasonably capable of being remedied, the
breach or failure to perform is not remedied within 30 days after the Company
has furnished Buyer with written notice of such breach or failure to perform.
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(d) by Buyer:
(i) if Pro-Fac, the Company or any of their respective
Subsidiaries shall have breached any of their obligations under Section
6.9.
(ii) if Pro-Fac or the Pro-Fac Board shall have (1) not
recommended, or after such recommendation has been made, withdrawn or
modified in any manner adverse to Buyer its approval or recommendation of
this Agreement, the Unit Purchase, the Amended and Restated Marketing and
Facilitation Agreement and the agreements and transactions contemplated
hereby, (2) approved, recommended or endorsed any Acquisition Proposal from
a Person other than Buyer or any of its Affiliates, or (3) resolved to do
any of the foregoing or publicly announced its intention to do any of the
foregoing.
(iii) if, prior to the Closing Date, the representations and
warranties of Pro-Fac and the Company set forth in this Agreement which are
not qualified by "materiality" or "Material Adverse Effect" shall not be
true, complete and correct in any material respect, and the representations
and warranties that are qualified by "materiality" or "Material Adverse
Effect" shall not be true, complete and correct in any respect, at any
time, after the date hereof (except for those representations and
warranties that address matters only an of a particular date or only with
respect to a specific period of time which need only be true, complete and
correct as of such date or with respect to such period), or Pro-Fac, the
Company or any of their respective Subsidiaries shall have breached or
failed to perform or comply in any material respect with any obligation,
agreement or covenant required by this Agreement to be performed or
complied with by it, and, with respect to any such breach or failure to
perform that is reasonably capable of being remedied, the breach or failure
to perform is not remedied within 30 days after Buyer has furnished the
Company with written notice of such breach or failure to perform.
(iv) if, the Bondholder Consent shall not have been obtained (A)
on terms and conditions satisfactory to Buyer in its sole and absolute
discretion, and/or (B) within 45 days following the mailing of the
Solicitation Materials; provided, that the right to terminate this
Agreement under this Section 8.1(d)(iv) shall not be available to Buyer if
its failure to fulfill its obligations under Section 6.3 has been the cause
or resulted in the failure to obtain the Bondholders Consent.
8.2 Procedure and Effect of Termination. In the event of the
termination and abandonment of this Agreement by the Company and/or Buyer
pursuant to Section 8.1 hereof, written notice thereof shall forthwith be given
to the other parties. The parties hereto acknowledge that to the extent that
either party shall have the right to terminate this Agreement under more than
one provision of Section 8.1, that party may elect in its sole and absolute
discretion which of such provisions it will rely on. In the event of termination
of this Agreement as provided above, this Agreement shall forthwith become void
and of no further force and effect, except that the covenants and agreements set
forth in Section 6.7, Section 6.10, Section 12.1 and Section 12.13 through
Section 12.17 shall survive such termination indefinitely, and except that
nothing in this Section 8.2 shall be deemed to release any party from any
liability for any breach by such party of the representations, warranties,
covenants and other provisions of
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this Agreement or to impair the right of any party to compel specific
performance by another party of its obligations under this Agreement.
Article IX
Tax Matters
The following provisions shall govern the allocation of responsibility as
between Buyer and Pro-Fac for certain tax matters following the Closing Date.
9.1 Tax Indemnification. Pro-Fac shall indemnify the Company, its
Subsidiaries, Buyer, and each Buyer Affiliate and hold them harmless from and
against without duplication, any loss, claim, liability, expense, or other
damage attributable to (i) all Income Taxes (or the non-payment thereof) of the
Company and its Subsidiaries for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any taxable
period that includes (but does not end on) the Closing Date ("Pre-Closing Tax
Period"), (ii) all Income Taxes of any member of an affiliated, consolidated,
combined or unitary group of which the Company or any of its Subsidiaries (or
any predecessor of any of the foregoing) is or was a member on or prior to the
Closing Date, including pursuant to Treasury Regulation Section 1.1502-6 or any
analogous or similar state, local, or foreign law or regulation, and (iii) any
and all Income Taxes of any Person (other than the Company and its Subsidiaries)
imposed on the Company or any of its Subsidiaries as a transferee or successor,
by contract or pursuant to any law, rule, or regulation, which Income Taxes
relate to an event or transaction occurring before the Closing; provided, that
Pro-Fac shall be liable under clauses (i) through (iii) above only to the extent
that such losses, claims, liabilities, expenses and other damages exceed the
Income Tax Reserve. Pro-Fac shall reimburse Buyer for any Income Taxes of the
Company or its Subsidiaries which are the responsibility of Pro-Fac pursuant to
this Section 9.1 within fifteen (15) business days after payment of such Income
Taxes by Buyer, the Company, or its Subsidiaries or any Affiliate of Buyer. The
indemnities contained in this Article IX shall not be subject to the limitations
contained in Article X other than the monetary limitations contained in Section
10.1(d); provided, that such monetary limitations shall not apply to any damages
attributable to the nondeductibility of net patronage income of Pro-Fac and the
Company for their respective fiscal year ending June 29, 2002 utilized to
calculate the Permitted Patronage Amount.
9.2 Straddle Period. In the case of any Taxable period that includes
(but does not end on) the Closing Date (a "Straddle Period"), the amount of any
Income Taxes of the Company and its Subsidiaries for the Pre-Closing Tax Period
shall be determined based on an interim closing of the books as of the close of
business on the Closing Date (and for such purpose, the Taxable period of any
partnership or other pass-through entity in which the Company or any of its
Subsidiaries holds a beneficial interest shall be deemed to terminate at such
time) and the amount of other Taxes of the Company and its Subsidiaries for a
Straddle Period which relate to the Pre-Closing Tax Period shall be deemed to be
the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in such Straddle
Period.
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9.3 Responsibility for Filing Tax Returns for Periods through Closing
Date. Pro-Fac shall include the income of the Company and its Subsidiaries
(including any deferred items triggered into income by Reg. Section 1.1502-13
and any excess loss account taken into income under Reg. Section 1.1502-19) on
Pro-Fac's consolidated federal income Tax Returns for all periods through the
Closing Date and pay any federal income Taxes attributable to such income;
provided, that the Company shall be responsible for the payment of Income Taxes
payable with respect to the Pre-Closing Tax Period, up to the amount of and not
to exceed the Income Tax Reserve, with respect to the net income of the Company
and its Subsidiaries that is included in Pro-Fac's consolidated federal and
state Income Tax Returns for such periods through the Closing Date. Pro-Fac
shall deliver to the Company notice of any amount payable by the Company as
contemplated by the prior sentence not less than 60 days prior to the due date
for payment thereof, and the Company shall have the right to review the Tax
Returns in question and to recalculate any amount determined by Pro-Fac to be
payable. The Company shall pay to Pro-Fac the amount due (subject to any such
recalculation). The Company shall indemnify Pro-Fac and hold it harmless from
any Liabilities of Pro-Fac resulting from any reduction of amounts payable to
Tax Authorities based on the Company's recalculation of amounts determined to be
due by Pro-Fac. For all taxable periods ending on or before the Closing Date,
Pro-Fac shall cause the Company and its Subsidiaries to join in Pro-Fac's
consolidated federal income tax return and, in jurisdictions requiring separate
reporting from Pro-Fac, to file separate company foreign, state and local income
tax returns. All such Tax Returns shall be prepared and filed in a manner
consistent with prior practice, except as required by a change in applicable
law. Buyer shall have the right to review and comment on any such Tax Returns
prepared by Pro-Fac. The Company and its Subsidiaries shall furnish information
to Pro-Fac as reasonably requested by Pro-Fac to allow Pro-Fac to satisfy its
obligations under this section in accordance with past custom and practice. The
Company and its Subsidiaries and Buyer shall consult and cooperate with Pro-Fac
as to any elections to be made on returns of the Company and its Subsidiaries
for periods ending on or before the Closing Date.
9.4 Cooperation on Tax Matters.
(a) Buyer, the Company and its Subsidiaries, and Pro-Fac shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Article IX and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and its Subsidiaries and Pro-Fac agree
(A) to retain all books and records with respect to Tax matters pertinent to the
Company and its Subsidiaries relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Pro-Fac, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any Taxing Authority, and (B) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, in any such event if the other party so requests, the Company and
its Subsidiaries or Pro-Fac, as the case may be, shall allow the other party to
take possession of such books and records.
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(b) Buyer and Pro-Fac agree further, upon request, to use their
commercially reasonable efforts to obtain any certificate or other document from
any governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(c) Buyer and Pro-Fac agree, upon request, to provide the other party
with all information that either party may be required to report pursuant to
Code Section 6043 and all Treasury Regulations promulgated thereunder.
(d) Buyer, the Company and Pro-Fac agree that the consummation of the
Closing of the transactions contemplated hereby, shall take place in the order
set forth on Schedule 9.4 attached hereto and that for all purposes each party
shall respect such order.
9.5 Tax Sharing Agreements. All Tax sharing agreements or similar
agreements between Pro-Fac and the Company or Pro-Fac and one or more of the
Company's Subsidiaries with respect to or involving the Company and its
Subsidiaries shall be terminated as of the Closing Date and, after the Closing
Date, the Company and its Subsidiaries shall not be bound thereby or have any
liability thereunder.
9.6 Certain Taxes and Fees. All transfer, documentary, sales, use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with consummation of the transactions contemplated by
this Agreement shall be paid by the Company when due, and the Company will, at
its own expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees and charges, and, if required by applicable law,
and each of Pro-Fac and Buyer will, and will each cause their respective
Affiliates to, join in the execution of any such Tax Returns and other
documentation.
9.7 Audits. Pro-Fac shall allow the Company and its counsel to
participate in any audit of Pro-Fac's consolidated federal income Tax Returns to
the extent that such returns relate to the Company and its Subsidiaries. Pro-Fac
shall not settle any such audit in a manner which would adversely affect the
Company and its Subsidiaries after the Closing Date without the prior written
consent of Buyer, which consent shall not unreasonably be withheld.
9.8 Carrybacks. Pro-Fac shall immediately pay to Buyer any Tax refund
(or reduction in Tax Liability) resulting from a carryback of a post-acquisition
Tax attribute of any of the Company and its Subsidiaries into the Pro-Fac
consolidated Tax Return, when such refund (or reduction) is realized by
Pro-Fac's group. At Buyer's request, Pro-Fac will cooperate with the Company and
its Subsidiaries in obtaining such refund (or reduction), including through the
filing of amended Tax Returns or refund claims. Buyer agrees to repay to Pro-Fac
the amount previously paid by Pro-Fac to Buyer pursuant to the first sentence of
this Section 9.8 in the event of the disallowance of such post-acquisition Tax
attribute on audit or otherwise.
9.9 Retention of Carryovers. Pro-Fac shall not elect to retain any net
operating loss carryovers or capital loss carryovers of the Company and its
Subsidiaries under Reg. Section 1.1502-20(g). At Pro-Fac's request, Buyer will
cause any of the Company and its Subsidiaries to join with Pro-Fac in filing any
necessary elections under Reg. Section 1.1502-20(g).
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9.10 Survival. All rights and obligations under this Article IX shall
survive the Closing until the expiration of the statute of limitations
(including any extension thereof) applicable to the subject thereof.
Article X
Indemnification
10.1 Indemnification. Claims, obligations, liabilities, covenants and
representations with respect to Income Taxes shall be governed solely by Article
IX (and not this Section 10.1). Claims, obligations, liabilities, covenants and
representations with respect to non-Income Taxes shall generally be governed by
this Section 10.1; provided, that the procedural provisions set forth in Section
9.2, Section 9.3 and Section 9.4 shall apply in lieu of Section 10.1(e).
(a) Indemnification by Pro-Fac. Subject to the limits set forth in
this Section 10.1, Section 6.27 and Section 6.29, Pro-Fac agrees effective as of
the Closing to indemnify, defend and hold Buyer and its officers, directors,
agents and Affiliates (including Holdings LLC, Holdings Inc. and the Company)
(collectively, the "Buyer Indemnitees"), harmless from and in respect of any and
all losses (including diminution in value of the Purchase Units or the
Warrants), damages, expenses, costs, Taxes, fines, penalties and fees of the
Buyer Indemnitees, amounts paid in settlement and reasonable expenses
(including, without limitation, reasonable expenses of investigation, attorney's
fees, enforcement of this Agreement, defense fees, witness fees, court costs and
disbursements of counsel and other professionals) (collectively, "Damages") that
any of them may incur arising out of or due to any of the following: (i) the
inaccuracy of any representation or the breach of any warranty made by Pro-Fac
or the Company in this Agreement or any certificate delivered pursuant to this
Agreement, (ii) the breach of any covenant, undertaking or agreement of Pro-Fac
or the Company (with respect to the Company only prior to the Closing) contained
in this Agreement (other than breaches of the representations and warranties
contained in Article II), (iii) any Known Environmental Liability, and (iv) any
Pro-Fac Excluded Liability.
Buyer's knowledge prior to the Closing of any inaccuracy or breach of any
representation, warranty or covenant made or to be performed by Pro-Fac, the
Company, or any of their respective Subsidiaries under this Agreement shall not
in any way limit or affect Buyer Indemnitees' rights to indemnification under
this Section 10.1(a) if the Closing occurs.
(b) Indemnification by Buyer. Subject to the limits set forth in this
Section 10.1, Buyer agrees effective as of the Closing to indemnify, defend and
hold Pro-Fac, its officers, directors, agents and Affiliates (other than
Holdings LLC, Holdings Inc. and the Company) (collectively, the "Pro-Fac
Indemnitees"), harmless from and in respect of any and all losses, damages,
expenses, costs, fines, penalties, fees, amounts paid in settlement and
reasonable expenses (including, without limitation, reasonable expenses of
investigation, attorney's fees, enforcement of this Agreement, defense fees,
witness fees, court costs and disbursements of counsel and other professionals)
that they may incur arising out of or due to (i) any inaccuracy of any
representation or the breach of any warranty made by Buyer in this Agreement or
in any certificate delivered pursuant to this Agreement, or (ii) the breach of
any covenant, undertaking or other agreement of Buyer contained in this
Agreement.
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Pro-Fac's knowledge prior to the Closing of any inaccuracy or breach of any
representation, warranty or covenant made or to be performed by Buyer under this
Agreement shall not in any way limit or affect the Company's right to
indemnification under this Section 10.1(b) if the Closing occurs.
(c) Survival of Representations and Warranties. Subject to Section
9.10, the several representations and warranties of the parties contained in
this Agreement or in any certificate delivered pursuant hereto will survive the
Closing Date and will remain in full force and effect thereafter until the date
that is eighteen months following the Closing Date; provided, however, that (i)
the representations and warranties contained in Section 2.2, Section 2.3,
Section 2.4, Section 2.14 (as they relate to the Birds Eye Mark), Section 2.16,
Section 3.2, Section 3.3, Section 4.2 and Section 4.5 shall survive
indefinitely, and (ii) the representations and warranties contained in Section
2.14 (other than as they relate to the Birds Eye Mark), Section 2.19 and Section
2.22 shall survive for five years; and, provided further, that all such
representations or warranties that survive the Closing Date shall survive beyond
the date that they would otherwise terminate with respect to any claim based on
any inaccuracy therein or breach thereof, if notice of such claim is duly given
within such applicable period in accordance with Section 10.1(e) hereof.
(d) Limitations on Indemnification. Anything to the contrary contained
herein notwithstanding (A) Buyer Indemnitees shall not be entitled to recover
from Pro-Fac pursuant to (1) Section 10.1(a)(i), Section 10.1(a)(iii) or Section
9.1 (except as otherwise provided in Section 9.1) of this Agreement any claim
for Damages pursuant to Section 10.1(a)(i), Section 10.1(a)(iii) and Section 9.1
resulting from a single inaccuracy or breach that Buyer would otherwise be
entitled to be indemnified by Pro-Fac for hereunder (but for the limitations
contained in this sentence) that is not equal to or in excess of $200,000 (the
"Minimum Claim Amount") (provided, that for purposes of this clause (1) all
claims for Damages arising out of the same facts or events or related to the
same period (in the case of Section 9.1) resulting in such inaccuracy or breach
shall be treated as a single claim) and (2) Section 10.1(a)(i), Section
10.1(a)(iii) and Section 9.1 unless and until the total of all claims for
Damages pursuant to Section 10.1(a)(i), Section 10.1(a)(iii) and Section 9.1
that satisfy the Minimum Claim Amount exceeds $10,000,000 (the "Basket")
(provided, that any Excess Payment and any amount paid by the Company pursuant
to Section 6.27(ii) shall reduce the unused Basket, on a dollar-for-dollar
basis; provided further, that in the event that the remaining unused Basket is
less than the amount by which the Basket would be reduced at any time by this
proviso, the Buyer Indemnitees shall be entitled to recover from Pro-Fac such
excess of the reduction amount over the unused Basket) and then, once the Basket
has been exceeded, Buyer Indemnitees shall be entitled to recover from Pro-Fac
all amounts claimed pursuant to such Section 10.1(a)(i), Section 10.1(a)(iii)
and Section 9.1 that exceed the Basket and (B) the aggregate liability of
Pro-Fac for indemnification payable pursuant to Section 10.1(a)(i), Section
10.1(a)(iii) and Section 9.1 shall not exceed $50,000,000 (the "Indemnity Cap");
provided, that the preceding limitations shall not apply to claims for Damages
with respect to the willful breach of any representation or warranty contained
in this Agreement or any inaccuracy or breach of any representations and
warranties set forth in Section 2.1, Section 2.2, Section 2.4, Section 2.16,
Section 3.1, Section 3.2 or Section 3.3 of this Agreement or claims for Damages
under clauses (ii) or (iv) of Section 10.1(a), regardless of whether such
indemnity obligations relate to matters covered by representations and
warranties that are subject to the limitations expressed in
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this sentence. For purposes of Section 10.1(a)(i), any requirement in any
representation or warranty that an event or fact be material (whether
quantitatively or qualitatively) in order for such event or fact to constitute a
misrepresentation or breach of such representation or warranty shall be ignored.
The Minimum Claim Amount, the Basket and the Indemnity Cap shall also apply with
respect to the Pro-Fac Indemnitees' claims for indemnification pursuant to
Section 10.1(b) in the same manner as described above; provided, that such
limitations shall not apply to claims for losses, damages, expenses, costs,
Taxes, fines, penalties and fees of Pro-Fac, amounts paid in settlement and
reasonable expenses (including, without limitation, reasonable expenses of
investigation, attorney's fees, enforcement of this Agreement, defense fees,
witness fees, court costs and disbursements of counsel and other professionals)
with respect to any inaccuracy or breach of any representations and warranties
set forth in Section 4.1, Section 4.2, or Section 4.5 of this Agreement.
(e) Notice and Opportunity to Defend.
(i) If there occurs an event which a party asserts is an
indemnifiable event pursuant to Section 10.1(a) or Section 10.1(b), the
party seeking indemnification shall notify the other party or parties
obligated to provide indemnification (the "Indemnifying Party") promptly
upon its determination to seek indemnification; provided, however, that no
delay on the part of the party seeking indemnification in notifying the
Indemnifying Party shall relieve the Indemnifying Party from any liability
or obligation hereunder unless (and then solely to the extent that) the
Indemnifying Party was damaged by such delay.
(ii) If such event involves any claim or the commencement of any
action or proceeding by a third person (a "Proceeding"), the party seeking
indemnification will give such Indemnifying Party prompt written notice of
such claim or the commencement of such Proceeding; provided, however, that
the failure to provide prompt notice as provided herein will not relieve
the Indemnifying Party of its obligations hereunder unless, and then only
to the extent that, the Indemnifying Party was damaged by such delay. In
case any such action shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to
participate therein and may elect, within fifteen (15) days of receiving
such notice, to assume the defense thereof, with counsel reasonably
satisfactory to such party seeking indemnification (provided, that the
Indemnifying Party shall only be entitled to assume the defense of such
action (A) to the extent that the action seeks only money damages from, and
not injunctive or other equitable relief against, such party seeking
indemnification, (B) if the Indemnifying Party first acknowledges in
writing to the party seeking indemnification that the party seeking
indemnification is entitled to indemnification under this Section 10.1 with
respect to such matter, and (C) upon giving effect to the provisions of
this Section 10.1, the Indemnifying Party would be responsible for a
majority of the damages or liability in respect of such action) and, after
notice from the Indemnifying Party to such party seeking indemnification of
such election so to assume the defense thereof, subject to the following
sentence, the Indemnifying Party shall not be liable to the party seeking
indemnification hereunder for any legal expenses of other counsel or any
other expenses subsequently incurred by such party in connection with the
defense thereof. The party
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seeking indemnification shall have the right to participate at its own
expense in the defense of such asserted liability including being
represented by its own counsel, which cost shall be for its account (except
that the Indemnifying Party will be responsible for the reasonable fees and
expenses of the separate counsel (a) to the extent the Indemnified Party
concludes reasonably based upon written advice of counsel that a conflict
of interest exists between the Indemnified Party and Indemnifying Party or
(b) if the named parties to any such action (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party and
such Indemnified Party shall have been advised in writing by counsel that
there may be one or more material legal defenses available to the
Indemnified Party which are not available to the Indemnifying Party, or
available to the Indemnifying Party, but the assertion of which would be
materially adverse to the interest of the Indemnified Party). The party
seeking indemnification agrees to cooperate in a commercially reasonable
manner with the Indemnifying Party and its counsel in the defense against
any such asserted liability. No settlement shall be effected by the
Indemnifying Party without the consent of the party seeking indemnification
(which consent shall not be unreasonably withheld) unless, in connection
with such settlement, the party seeking indemnification is fully and
unconditionally released from such asserted liability (without any
liability for payment) and the settlement does not contain other terms or
conditions that are adverse to the interests of the party seeking
indemnification. No settlement shall be effected by a party seeking
indemnification without the consent of the Indemnifying Party, such consent
not to be unreasonably withheld, unless the party seeking indemnification
would be liable for at least fifty percent of any payments due pursuant to
the terms of such settlement.
10.2 Further Limitations.
(a) The amount which the Indemnifying Party is required to pay to,
for, or on behalf of the party seeking indemnification pursuant to this Article
X and/or Article IX, shall be reduced by any federal, state, local or non-United
States Income Tax benefit actually received by the party seeking indemnification
applicable to the indemnifiable losses, damages, expenses, costs, Taxes, fines,
penalties and fees of the party seeking indemnification, amounts paid in
settlement and reasonable expenses (including, without limitation, reasonable
expenses of investigation, attorney's fees, enforcement of this Agreement,
defense fees, witness fees, court costs and disbursements of counsel and other
professionals).
(b) The Indemnifying Party shall make any indemnification payments
determined to be payable to the Indemnified Party hereunder without regard to
any expectation that the Indemnified Party will recover insurance proceeds as a
result of the matter giving rise to the claim for which indemnification payments
are to be made. The Indemnified Party shall use its commercially reasonable
efforts to seek to recover or make a claim for insurance proceeds as a result of
any matter giving rise to an indemnification claim of the Indemnified Party
against the Indemnifying Party. If the Indemnified Party receives any insurance
proceeds as a result of the matter giving rise to any indemnification claim of
the Indemnified Party prior to the date upon which the Indemnifying Party is
given notice of such claim, the Indemnifying Party's indemnification obligation
with respect to such claim shall be reduced by the amount of any such insurance
proceeds actually received by the Indemnified Party. If the Indemnified Party
receives any insurance proceeds as a result of the matter giving rise to any
indemnification claim of the
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Indemnified Party against the Indemnifying Party after the Indemnifying Party
has paid such indemnification claim to the Indemnified Party, then the
Indemnified Party shall promptly turn over any such insurance proceeds received
to the Indemnifying Party to the extent of the payments made by the Indemnifying
Party to the Indemnified Party on the claim. For the purposes of this Section
10.2, the amount of any "insurance proceeds" received by the Indemnified Party
shall be equal to the difference between (A) the actual amount of such proceeds
and (B) the amount of incremental premium costs which are (i) incurred by the
Indemnified Party during the five year period following the loss or event which
gives rise to the payment of the insurance proceeds and (ii) related to such
loss and event.
10.3 Funding Mechanism. Any payment to be made to the Buyer
Indemnitees or the Pro-Fac Indemnitees pursuant to this Article X shall be
effected by wire transfer of immediately available funds from Pro-Fac or Buyer,
as the case may be, to an account designated in writing by Buyer or Pro-Fac, as
the case may be, within 30 days after the determination of the amount due;
provided, that Pro-Fac may in lieu of such payment in immediately available
funds elect, within 30 days after the determination of the amount due, in a
written notice to Buyer and the Company, to either (i) instruct the Company to
set off any such amount due from Pro-Fac against future payments due to Pro-Fac
from the Company either (A) under the Termination Agreement, or (B) under
accounts payable existing in Pro-Fac's favor at that time for crops purchased by
the Company pursuant to the Amended and Restated Marketing and Facilitation
Agreement, in each case, in the order that such payments become due, or (ii)
surrender to the Company that number of Pro-Fac Common Units (the "Surrendered
Units") which when multiplied by a fraction, the numerator of which is the
Common Unit Purchase Price and the denominator of which is the number of
newly-issued Common Purchase Units is equal to the amount due (provided, that
this option to surrender Pro-Fac Common Units shall not be available to Pro-Fac,
unless at the time that any amount due is payable hereunder for which Pro-Fac
intends to surrender Pro-Fac Common Units, the Company has realized EBITDA of at
least $135,000,000 for the last twelve month period, ending on the last day of
the month that precedes the month in which the determination of the amount due
has been made). If Pro-Fac elects to satisfy any amount due to the Buyer
Indemnitees with Surrendered Units, the notice required in the proviso above
shall have attached to it Pro-Fac's original unit certificate, if any, and a
unit transfer power executed in blank, if certificated units have been issued.
Holdings LLC shall, in the event that Pro-Fac surrenders a unit certificate for
shares of Pro-Fac Common Units in excess of the Surrendered Units, execute and
deliver a new certificate of like kind for that number of excess Pro-Fac Common
Units. Any indemnification payments shall be made together with interest
accruing thereon from the date written notice of the indemnification claim is
made to the date of payment at a fluctuating Borrowing Rate.
10.4 Exclusive Remedy. The sole recourse and exclusive remedy of
Buyer, Pro-Fac and the Company arising under claims for breaches of
representations or warranties or under Article IX, Section 10.1(a)(i) or Section
10.1(b)(i) of this Agreement shall be to assert a claim for indemnification
under the indemnification provisions of this Article X and/or Article IX, and
Buyer and the Company each covenant that it or they will not seek to obtain any
remedy except as provided in this Article X and/or Article IX.
10.5 Effect of Indemnification Payments. All indemnification payments
under Article IX and Article X of this Agreement shall be deemed adjustments to
the Purchase Price.
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Article XI
Definitions
For the purposes hereof, the following terms have the meanings set
forth below:
"Acquisition Proposal" has the meaning set forth in Section 6.9(e).
"ACSM" means the American Congress on Surveying and Mapping.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Affiliated Group" means any affiliated group as defined in Code
Section 1504 that has filed a consolidated return for federal income tax
purposes (or any consolidated, combined or unitary group under state, local or
foreign law) for a period during which the Company was a member.
"Agreement" has the meaning set forth in the preamble.
"AgriFrozen Business" means the frozen food business that has been
conducted by PF Acquisition II, Inc. under the name of AgriFrozen Foods.
"AgriFrozen Litigation" means any action, suit, charge, complaint,
proceeding, order, investigation or claim (whether now existing or hereinafter
brought) with respect to (i) the purchase of the assets of AgriPac, Inc., an
Oregon cooperative, by PF Acquisition II, Inc., a formerly wholly owned
Subsidiary of Pro-Fac that conducted its business under the name of AgriFrozen
Foods, (ii) the subsequent bankruptcy of PF Acquisition II, Inc., in each case,
including, without limitation, Stan Seifer et al. vs. AgriFrozen Foods et al.
(also known as the grower lien litigation), Blue Line Farms, Inc. vs. Pro-Fac
Cooperative, Inc. et al., Pro-Fac Cooperative, Inc. et al. vs. Alpha Nursery,
Inc. et al., the threatened suit John T. Brice et al. vs. PF Acquisition II,
Inc. et al., the Kenyon Matter and the GE Matter and (iii) any other claim set
forth on Schedule 2.15(c) attached hereto.
"AgriPac Acquisition" means the acquisition of certain assets by PF
Acquisition II, Inc. pursuant to that certain Asset Purchase Agreement by and
among PF Acquisition II, Inc., Pro-Fac, and AgriPac, Inc., an Oregon cooperative
corporation, as debtor and debtor-in-possession, dated February 19, 1999.
"ALTA" means the American Land Title Association.
"Alternative Transaction" has the meaning set forth in Section
12.1(b).
"Amended and Restated Marketing and Facilitation Agreement" has the
meaning set forth in Section 6.24.
"Amended Bylaws" has the meaning set forth in Section 6.19.
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"Amended Certificate" has the meaning set forth in Section 6.20.
"Bank" has the meaning set forth in Section 4.7.
"Bank Commitment Letter" has the meaning set forth in Section 4.7.
"Bank Waiver" means a waiver, forbearance, consent or other agreement
among Pro-Fac, the Company and the required number of the Existing Banks under
the Existing Financing that is acceptable in form and substance to Buyer that
waives or forestalls the Existing Banks from exercising remedies with respect
to, any default or event of default under the Existing Financing that is caused
by or arises from or is related to the Non-Cash Goodwill Impairment Charge
and, if not a waiver, provides for the Company to have access to the facilities
contemplated by the Existing Financing through the Closing Date on terms not
less favorable than those applicable immediately prior to the execution of
this Agreement.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that, as of the date of determination,
could form the basis of any Claim.
"Basket" has the meaning set forth in Section 10.1(d).
"Birds Eye Mark" means the trademark "BIRDS EYE" and any derivations
thereof, including without limitation design marks incorporating the words
"BIRDS EYE".
"Birds Eye Territory" means Canada, Costa Rica, El Salvador, Jamaica,
Mexico, the Netherlands, Nicaragua, Panama, Uruguay, Suriname, Venezuela, the
United States, and any other country or geographic region in which the Company
uses the Birds Eye Mark, whether or not the Birds Eye Mark is registered in such
countries.
"Board" means the Company's board of directors.
"Bondholders" means the holders of the Bonds.
"Bondholders Consent" has the meaning set forth in Section 6.3.
"Bonds" means the Company's 11-7/8% Senior Subordinated Notes due
2008.
"Borrowing Rate" means the rate of interest that the Company's senior
lenders then charge (or would charge) the Company for adjusted base rate
advances under its revolving credit facility.
"Buyer" has the meaning set forth in the preamble.
"Buyer Indemnitees" has the meaning set forth in Section 10.1(a).
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended.
"Claims" has the meaning set forth in Section 2.15(a).
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"Class A Common Units" means the Class A Units on the terms set forth
on Exhibit A attached hereto.
"Class B Common Units" means the Class B Units on the terms set forth
on Exhibit A attached hereto.
"Class C Common Units" means the Class C Units on the terms set forth
on Exhibit A attached hereto.
"Class D Common Units" means the Class D Units on the terms set forth
on Exhibit A attached hereto.
"Closing Date" has the meaning set forth in Section 1.3(a).
"Closing" has the meaning set forth in Section 1.3(a).
"COBRA" has the meaning set forth in Section 2.19(f).
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Purchase Units" has the meaning set forth in the preamble.
"Common Unit Purchase Price" has the meaning set forth in the
preamble.
"Common Units" means the Class A Common Units, Class B Common Units,
Class C Common Units and Class D Common Units of Holdings LLC.
"Company" has the meaning set forth in the preamble.
"Company Common Stock" has the meaning set forth in the preamble.
"Company Disclosure Schedules" has the meaning set forth in Article
II.
"Company Filings" has the meaning set forth in Section 2.7.
"Company Intellectual Property Rights" means all of the Intellectual
Property Rights owned or used by the Company (along with all income, royalties,
damages and payments due or payable at the Closing or thereafter (including
without limitation, damages and payments for past or future infringements or
misappropriations thereof)), the right to sue and recover for past infringements
or misappropriations thereof, any and all corresponding rights that, now or
hereafter, may be secured throughout the world and all copies and tangible
embodiments of any such Intellectual Property Rights.
"Company Representative" has the meaning set forth in Section 6.9(a).
"Company Voting Debt" means any bond, debenture, note or other
Indebtedness of the Company having, or convertible into other securities having,
the right to vote on any matters on which shareholders of the Company may vote.
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"Computer Systems" has the meaning set forth in Section 2.14(d).
"Confidentiality Agreement" means the certain Confidentiality
Agreement between the Company and Vestar Capital Partners IV, L.P., dated
October 15, 2001.
"Covered AgriFrozen Litigation Expenses" has the meaning set forth in
Section 6.27.
"Damages" has the meaning set forth in Section 10.1(a).
"Deferred Payments" has the meaning set forth in Section 12.12.
"Definitive Financing Agreements" has the meaning set forth in Section
6.13(a).
"EBITDA" means for any period, for the Company and its Subsidiaries on
a consolidated basis, net income for such period plus an amount that, in the
determination of net income for such period, has been deducted for (i) Pro-Fac
share of income, (ii) interest expense, (iii) income taxes, (iv) depreciation
expense and (v) amortization expense, and less an amount that, in the
determination of net income for such period, has been included for (i) Pro-Fac
share of losses, (ii) interest income and (iii) income tax benefit as reported
by the Company in accordance with GAAP consistently applied, and adjusted to
exclude (A) any non-recurring income, extraordinary income items and/or out of
period income adjustments that are not specifically contemplated by and
reflected in the Eight Plus Four Plan, including any gain from Equity Value Plan
unit cancellations (other than reversal of amounts that have been accrued during
the Company's fiscal year ending June 29, 2002) or termination of the Equity
Value Plan, and (B) up to $1,500,000 of non-recurring expenses, extraordinary
expenses and/or out of period adjustments for expenses that are not specifically
contemplated by and reflected in the Eight Plus Four Plan.
"Eight plus Four Plan" means the Company's eight month actual and four
month projected financial statements for the period ending June 29, 2002 that
has been supplied to Buyer.
"Employee Benefit Plan" has the meaning set forth in Section 2.19(a).
"Environmental and Safety Requirements" shall mean all federal, state,
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation).
"Environmental Liability" means any Liability (including, without
limitation, for response costs, personal injury, property damage or natural
resource damage) or investigatory,
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corrective or remedial obligation which arises under or relates to any
Environmental and Safety Requirements, including, without limitation, those
relating to (a) violations of, or noncompliance with, Environmental and Safety
Requirements, or (b) the handling, treatment, storage, disposal, arrangement for
disposal, release or threatened release of hazardous materials, substances or
wastes.
"Equity Commitment Letter" has the meaning set forth in Section 4.7
"Equity Value Plan" means the Company's Equity Value Plan as amended
and restated effective August 23, 2000.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Payment" has the meaning set forth in Section 6.27(i).
"Exchange Act" has the meaning set forth in Section 2.5.
"Executives" means the individuals set forth on Schedule 11.1 attached
hereto.
"Exempt Contract" has the meaning set forth in Section 2.13(d).
"Existing Banks" has the meaning set forth in the preamble.
"Existing Financing" has the meaning set forth in the preamble.
"Existing MFA" means the Marketing and Facilitation Agreement between
Pro-Fac and the Company, dated as of November 3, 1994.
"Expenses" means all out-of-pocket expenses (including all fees and
expenses of counsel, accountants, investment bankers, financing sources and
their counsel, experts and consultants to a party hereto and its Affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the agreements and transactions contemplated hereby, including due
diligence, the preparation, printing, and mailing of the Solicitation Materials,
the solicitation of shareholder approvals and all other matters related to the
transactions contemplated hereby.
"FDA" has the meaning set forth in Section 2.21(a).
"FFDCA" has the meaning set forth in Section 2.21(a).
"Financial Adviser" has the meaning set forth in Section 2.16.
"Financial Statements" has the meaning set forth in Section 2.6.
"Financing" means the credit facility or other debt financing(s) to be
entered into by the Company as contemplated by the Bank Commitment Letter (or
alternative financing arranged by the Buyer) and by paragraphs (a) through (c)
of Section 6.13 and consummated at the Closing on terms and conditions
satisfactory to Buyer in its sole and absolute discretion.
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"FMIA" has the meaning set forth in Section 2.21(a).
"FTC" has the meaning set forth in Section 2.21(a).
"GAAP" means United States generally accepted accounting principles
consistently applied, as in effect from time to time.
"GE Matter" means the matters underlying the proceeding General
Electric Capital Corporation vs. Pro-Fac Cooperative, Inc. et al.
"Government Entity" means individually, and "Government Entities"
means collectively, the United States of America or any other nation, any state
or other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government,
including any court, in each case having jurisdiction over the Company.
"Holdings Inc." has the meaning set forth in Section 1.1(b).
"Holdings LLC" has the meaning set forth in the preamble.
"Holdings LLC Agreement" has the meaning set forth in the preamble.
"HSR Act" has the meaning set forth in Section 2.5.
"Income Tax" means all Taxes imposed on or measured by income, net
income, receipts, earnings or profits, including any minimum tax or alternative
minimum tax and franchise tax based on income, and any interest, penalties or
additions attributable to any such Tax.
"Income Tax Reserve" means the reserve or reserves for Income Tax
Liabilities (excluding any (i) provision for deferred Income Taxes established
to reflect timing differences between book and Tax Income and (ii) general
reserves) set forth in the March 29, 2002 balance sheet (other than in any notes
thereto) as adjusted for any amount properly accrued for effects on Income Tax
Liabilities for income earned, losses incurred and Taxes paid in the ordinary
course of business from March 29, 2002 through the Closing Date, which accrual
shall be adjusted in accordance with the past custom and practice of the Company
and its Subsidiaries in filing their Tax Returns for income earned, losses
incurred and Taxes paid in the ordinary course of business during such period.
Such reserves and any adjustment thereto for the fiscal year ending June 29,
2002 shall not include any reserve for liability based directly or indirectly on
any impact of the Non-Cash Goodwill Impairment Charge.
"Indebtedness" means at a particular time, without duplication, (i)
any obligations under any indebtedness for borrowed money (including, without
limitation, all obligations for principal, interest premiums, penalties, fees,
expenses, breakage costs and bank overdrafts thereunder), (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
commitment by which a Person assures a creditor against loss (including
contingent reimbursement obligations with respect to letters of credit), (iv)
any indebtedness pursuant to a guarantee, (v) any obligations under capitalized
leases or with respect to which a Person is liable,
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contingently or otherwise, as obligor, guarantor or otherwise, or with respect
to which obligations a Person assures a creditor against loss, and (vi) any
indebtedness secured by a Lien on a Person's assets.
"Indemnifying Party" has the meaning set forth in Section 10.1(e)(i).
"Indemnity Cap" has the meaning set forth in Section 10.1(d).
"Information Statement" means the information statement related to the
Pro-Fac Shareholders Meeting to be held in connection with the approval of this
Agreement and the other transactions contemplated by this Agreement.
"Intellectual Property Rights" means all (i) patents, patent
applications, patent disclosures and inventions as well as any reissues,
continuations, continuations-in-part, divisions, revisions, extensions or
reexaminations thereof, (ii) trademarks, service marks, trade dress, trade
names, slogans, logos, internet domain names, and corporate names and
registrations and applications for registration thereof, together with all of
the goodwill associated therewith, (iii) copyrights and copyrightable works and
registrations and applications for registration thereof, (iv) mask works and
registrations and applications for registration thereof, (v) computer software,
data, data bases and documentation thereof, (vi) trade secrets and other
confidential information (including, ideas, formulas, recipes, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial and marketing plans and customer and
supplier lists and information), and (vii) all other intellectual property
rights.
"Investment" as applied to any Person means (i) any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Investment LLC" has the meaning set forth in Section 1.4.
"Kenyon Matter" means the matters underlying the proceeding Kenyon
Zero Storage, Inc. vs. PF Acquisition II, Inc., et al.
"Knowledge" means, with respect to any Person, actual knowledge of
such Person (including, without limitation, such Person's and its Subsidiaries'
officers) after reasonable inquiry and investigation.
"Known Environmental Liability" means the Liabilities set forth on
Schedule 2.22 and Schedule 11.2.
"Laws" means all statutes, laws, codes, ordinances, regulations,
rules, orders, judgments, writs, injunctions, acts or decrees of any Government
Entity.
"Leased Property" has the meaning set forth in Section 2.25(b).
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"Leases" has the meaning set forth in Section 2.25(b).
"Lender" has the meaning set forth in the preamble.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lien" or "Liens" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute (other than to reflect ownership by a third party of property leased to
the Company under a lease which is not in the nature of a conditional sale or
title retention agreement), any subordination arrangement in favor of another
Person, any encroachment, encumbrances or any other defect in title.
"Management Services Agreement" has the meaning set forth in Section
6.22.
"Material Adverse Effect" means with respect to any Person, any
change, event, condition, development or effect that individually or in the
aggregate with all other changes, events, conditions, developments and effects,
is or is reasonably likely to be materially adverse to (i) the business,
operations, assets, liabilities, results of operations, prospects or condition
(financial or otherwise) of such Person and its Subsidiaries, taken as a whole,
or (ii) the ability of such Person to perform its obligations under this
Agreement.
"Material Contracts" has the meaning set forth in Section 2.13(b).
"Minimum Claim Amount" has the meaning set forth in Section 10.1(d).
"Minimum EBITDA" means EBITDA of $130,000,000 for the twelve month
period since June 30, 2001.
"Most Recent Balance Sheet" means Pro-Fac's or the Company's, as
applicable, audited consolidated balance sheet as of June 30, 2001.
"Non-Cash Goodwill Impairment Charge" means a non-cash reduction for
book accounting purposes, taken in the Company's 2002 fiscal year, of the stated
value of the Company's goodwill which will reduce the Company's equity account,
which charge is expected to be approximately $105 million.
"Non-Use Birds Eye Territory" means Argentina, Aruba, the Bahamas,
Bolivia, Brazil, Chile, China, Colombia, the Dominican Republic, Ecuador,
Guatemala, Honduras, Hong Kong, India, Japan, Nicaragua, Papua New Guinea,
Paraguay, Peru, Puerto Rico, and any other country in which the Company has
registrations for use of the Birds Eye Mark but is not using the Birds Eye Mark
in such country as of the date of this Agreement.
"Offered Securities" has the meaning set forth in Section 1.4.
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"Organizational Documents" means, with respect to any entity, the
certificate of incorporation, bylaws and/or other similar governing documents of
such entity.
"Other Accredited Investors" has the meaning set forth in Section 1.4.
"Owned Property" has the meaning set forth in Section 2.25(a).
"Pension Plan" has the meaning set forth in Section 2.19(b).
"Permits" means all permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all Governmental
Entities.
"Permitted Liens" means (i) Liens for Taxes or assessments and similar
charges, or those otherwise arising by operation of law which either are (a) not
delinquent or (b) being contested in good faith and by appropriate proceedings,
and adequate reserves (as determined in accordance with GAAP, consistently
applied) have been established on the Company's books with respect thereto, and
(ii) with respect to Real Property only, (a) taxes which are a lien and not yet
due and payable, (b) zoning, building and other land use regulations imposed by
governmental agencies having jurisdiction over the Real Property which are not
violated by the current use and operation of the Real Property and (c)
covenants, conditions, restrictions, easements and other similar matters of
record affecting title to the Real Property which do not materially impair (x)
the value or marketability of the parcel of Real Property to which they pertain
or (y) the occupancy or use of the Real Property by the Company for the purposes
for which it is currently used in connection with the Company's business.
"Permitted Patronage Amount" means an amount equal to the lesser of
(i) 25% of the net patronage income of Pro-Fac for the fiscal year ending June
29, 2002 calculated in accordance with past custom and practice under the
Existing MFA without regard to the impact of the Non-Cash Goodwill Impairment
Charge and (ii) $2.5 million.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PPIA" has the meaning set forth in Section 2.21.
"Pre-Closing Tax Period" has the meaning set forth in Section 9.1.
"Preferred Purchase Units" has the meaning set forth in the preamble.
"Preferred Unit Purchase Price" has the meaning set forth in the
preamble.
"Preferred Units" means the Class P Units on the terms set forth on
Exhibit A attached hereto.
"Proceeding" has the meaning set forth in Section 10.1(e)(ii).
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"Product" has the meaning set forth in Section 2.21(a).
"Pro-Fac" has the meaning set forth in the preamble.
"Pro-Fac Common Units" has the meaning set forth in the preamble.
"Pro-Fac Excluded Liability" means any Liability of the Buyer
Indemnitees resulting from (i) actions by Pro-Fac with respect to any third
party, including, without limitation, Pro-Fac's shareholders, Pro-Fac's grower
members, or any of Pro-Fac's Subsidiaries (other than Holdings LLC, Holdings
Inc. and the Company), (ii) directly or indirectly, or relating directly or
indirectly to, any agreement, activity or action taken or omitted to be taken in
the process of approving the transactions contemplated hereby and obtaining any
third party consent (including the Bondholder Consent and the Pro-Fac
Shareholder/Member Consent), by the Company's directors and officers as of the
date hereof, on or prior to, the Closing Date, but excluding, in the case of
this clause (ii) and clause (i) above, any such Liability to the extent and only
to the extent that such Liability is a direct result of any action taken or
omitted to be taken at the direction of Buyer, (iii) the AgriFrozen Litigation,
other than the Covered AgriFrozen Litigation Expenses, (iv) any Liability of the
Company in excess of $100,000 arising from the Company's Equity Value Plan
and/or any unit granted thereunder, other than those Liabilities described on
Schedule 11.3 attached hereto, and (v) any Liability or obligation of the
Company resulting solely from its affiliation (whether as a parent, combined,
consolidated or unitary group member or otherwise) on or before the Closing Date
with any other Person (other than its Subsidiaries).
"Pro-Fac Indemnitees" has the meaning set forth in Section 10.1(b).
"Pro-Fac Loan Facility" has the meaning set forth in Section 6.31.
"Pro-Fac Shareholders Meeting" has the meaning set for in Section
6.5(a).
"Pro-Fac Shareholder/Member Consent" has the meaning set for in
Section 6.5(a).
"Purchase Price" has the meaning set forth in the preamble.
"Purchase Units" has the meaning set forth in the preamble.
"Real Property" has the meaning set forth in Section 2.25(b).
"Reorganization Transactions" means the transactions contemplated by
Section 1.1.
"Required Approvals" has the meaning set forth in Section 6.8.
"SEC" has the meaning set forth in Section 2.7(a).
"Securities Act" has the meaning set forth in Section 2.7(a)
"Securityholders Agreement" has the meaning set forth in Section 6.23.
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"Solicitation Materials" has the meaning set forth in Section 6.4(a).
"State Food Authorities" has the meaning set forth in Section 2.21(a).
"Straddle Period" has the meaning set forth in Section 9.2.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof.
"Superior Proposal" has the meaning set forth in Section 6.9(f).
"Surrendered Units" has the meaning set forth in Section 6.13.
"Tax" or "Taxes" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, escheat, capital stock, license, payroll, wage or other withholding,
employment, unemployment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules (including Schedule K-1) attached
thereto and including any amendment thereof.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any non-United States jurisdiction, having or purporting to
exercise jurisdiction with respect to any Tax.
"Termination Agreement" has the meaning set forth in Section 6.24.
"Termination Fee" has the meaning set forth in Section 12.1(c).
"Title Company" has the meaning set forth in Section 6.14(a).
"Transition Services Agreement" has the meaning set forth in Section
6.25.
"Treasury Regulation" means the United States Treasury Regulations
promulgated under the Code, and any reference to any particular Treasury
Regulation section shall be interpreted to include any final or temporary
revision of or successor to that section regardless of how numbered or
classified.
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"Unit Purchase" has the meaning set forth in the preamble.
"Units" means the Common Units, the Preferred Units and the Common
Units to be issued upon exercise of the Warrants and the warrants issued to the
Investment LLC, and "Unit" means each one of them.
"USDA" has the meaning set forth in Section 2.21(a).
"Vestar Capital Fee" means the transaction fee for services rendered
in connection with the transactions contemplated hereby equal to $8,000,000
payable to Vestar Capital Partners upon the Closing.
"Warrants" has the meaning set forth in the preamble.
"WARN Act" means the Worker Adjustment Retraining and Notification Act
of 1988, as amended, or any similar foreign, state or local law, rule,
regulation or ordinance.
Article XII
Miscellaneous
12.1 Fees and Expenses.
(a) In the event that this Agreement is terminated by Buyer pursuant
to Section 8.1(d)(iii) the Company shall, within five business days of such
event, pay Buyer by wire transfer of immediately available funds to an account
specified by Buyer, the amount of the Expenses incurred by or on behalf of Buyer
and its Affiliates; provided, that the foregoing shall not limit the Buyer's
right to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by Laws to the extent that
the Buyer Indemnitees' Damages exceed such Expenses.
(b) In the event that this Agreement is terminated pursuant to Section
8.1(b)(iii), the Company shall, within five business days of such event, pay
Buyer by wire transfer of immediately available funds to an account specified by
Buyer (i) the amount of Expenses incurred by or on behalf of Buyer and its
Affiliates up to an amount of $3,000,000 and (ii) an amount equal to $3,000,000;
provided, that if, within 12 months of the date of such termination, the Company
enters into a definitive agreement with respect to, or consummates, any proposal
with respect to (i) an acquisition or purchase of 50 percent or more of the
consolidated assets of Pro-Fac, the Company and their respective Subsidiaries or
of 50 percent or more of any class of equity securities of Pro-Fac, the Company
or any of their respective Subsidiaries, or (ii) any merger, consolidation,
business combination, purchase, lease or acquisition or assumption of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction or the issuance or incurrence of any significant Indebtedness by or
involving Pro-Fac, the Company or any of their respective Subsidiaries (an
"Alternative Transaction"), then, the Company shall, concurrently with the
earlier of (x) the execution of such definitive agreement, or (y) the
consummation of such Alternative Transaction, pay Buyer by wire transfer of
immediately available funds to an account specified by Buyer an additional
amount equal to $5,000,000.
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(c) In the event that this Agreement is terminated pursuant to any of
Section 8.1(d)(i) or Section 8.1(d)(ii), the Company shall, within five business
days of such event, pay Buyer by wire transfer of immediately available funds to
an account specified by Buyer (i) the amount of Expenses incurred by or on
behalf of Buyer and its Affiliates up to an amount of $3,000,000 and (ii) an
amount equal to $8,000,000 (the "Termination Fee").
(d) Except as provided in this Section 12.1, all Expenses incurred in
connection with this Agreement and the agreements and transactions contemplated
hereby shall be paid by the party incurring such Expenses; provided, that if the
Unit Purchase is consummated, the Company shall pay, or cause to be paid, (i)
all Expenses incurred by or on behalf of Buyer and its Affiliates and Pro-Fac in
connection with the agreements and transactions contemplated hereby, and (ii)
the Vestar Capital Fee; provided further, that the Company shall bear all
expenses related to printing and mailing the Information Statement and the
Solicitation Materials.
12.2 Remedies. Except as expressly provided in this Agreement, any
Person having any rights under any provision of this Agreement shall be entitled
to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights granted by Laws. Except as otherwise provided
in this Agreement, all such rights and remedies shall be cumulative and
non-exclusive, and may be exercised singularly or concurrently. One or more
successive actions may be brought, either in the same action or in separate
actions, as often as is deemed advisable, until all of the obligations to such
Person are paid and performed in full.
12.3 Release and Waiver. Pro-Fac, for itself and for each of its
Affiliates, hereby generally, irrevocably, unconditionally and completely
releases and forever discharges effective as of the Closing each of the Company,
the Company's directors and the Company's officers from, and hereby irrevocably,
unconditionally and completely waives and relinquishes, any claim that Pro-Fac
may now or hereafter have against any of the Company, the Company's directors or
the Company's officers that arises directly or indirectly out of, or relates
directly or indirectly to, any circumstance, agreement, activity, action,
omission, event or matter, other than those based on gross negligence or willful
misconduct by any of the Company's directors or the Company's officers,
occurring on or prior to the Closing Date, whether or not in connection with the
transactions contemplated hereby. Pro-Fac hereby waives the benefits of, and any
rights it might have under, any statute or common law principle in any
jurisdiction providing that a general release does not extend to claims which a
creditor does not know or suspects to exist in its favor at the time of
execution of such release, which if known by such creditor must have materially
affected such creditor's settlement with the debtor. For the avoidance of doubt,
nothing herein shall limit any of the rights of Pro-Fac with respect to the
Company's performance of its obligations under this Agreement or any other
agreement or document contemplated hereby, or which the Company and Pro-Fac may
enter into following the date hereof, at any time following the Closing.
12.4 Consent to Amendments; Waivers. This Agreement may be amended, or
any provision of this Agreement may be waived upon the approval, in a writing,
executed by Buyer, the Company and Pro-Fac. No course of dealing between or
among the parties hereto
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shall be deemed effective to modify, amend or discharge any part of this
Agreement or any rights or obligations of any such party or such holder under or
by reason of this Agreement.
12.5 Successors and Assigns. This Agreement and all covenants and
agreements contained herein and rights, interests or obligations hereunder, by
or on behalf of any of the parties hereto, shall bind and inure to the benefit
of the respective successors and permitted assigns of the parties hereto whether
so expressed or not, except that neither this Agreement nor any of the covenants
and agreements herein or rights, interests or obligations hereunder may be
assigned or delegated by Pro-Fac, or assigned or delegated by the Company prior
to the Closing, without the prior written consent of Buyer, and neither this
Agreement nor any of the covenants and agreements herein or rights, interests or
obligations hereunder may be assigned or delegated by Buyer without the prior
written consent of Pro-Fac; provided, that Buyer may assign this Agreement and
its rights and obligations hereunder, in whole or in part, without such prior
written consent to any of its Affiliates or to co-investors (provided, that
Buyer shall remain liable for the obligations hereunder and any such assignment
will not result in a breach of Section 4.3(a) hereof), any Person which provides
financing to the Company, Buyer or any of their respective Affiliates, and any
subsequent purchaser of Buyer, the Company or any of their respective Affiliates
(whether by merger, consolidation, sale of stock, sale of assets or otherwise).
12.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held to be prohibited by,
illegal or unenforceable under applicable law or rule in any respect by a court
of competent jurisdiction, such provision shall be ineffective only to the
extent of such prohibition, illegality or unenforceability, without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
12.7 Counterparts. This Agreement may be executed in counterparts
(including by means of telecopied signature pages), any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together shall constitute one and the same agreement.
12.8 Descriptive Headings; Interpretation. The headings and captions
used in this Agreement and the table of contents to this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized terms used in any Schedule or
Exhibit attached hereto and not otherwise defined therein shall have the
meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation."
12.9 Entire Agreement. This Agreement, the Confidentiality Agreement
and the agreements and documents referred to herein contain the entire agreement
and understanding among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written or
oral, relating to such subject matter in any way, including, without limitation,
the memorandum of understanding dated February 4, 2002 between the Company and
Buyer.
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12.10 No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted successors and assigns and
nothing herein expressed or implied shall give or be construed to give any
Person, other than the parties hereto and such permitted successors and assigns,
any legal or equitable rights hereunder.
12.11 Schedules and Exhibits. All Schedules and Exhibits attached
hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
12.12 Certain Matters and Payments.
(a) The parties acknowledge that the Company may determine to defer
certain payments to Pro-Fac until the Closing. Specifically, the Company and
Pro-Fac have informed Buyer that the Company may defer the following payments
(collectively, the "Deferred Payments") (i) the final payment of Commercial
Market Value (as defined in the Existing MFA) for crops delivered by Pro-Fac to
the Company during the Company's fiscal year ending June 29, 2002 under the
Existing MFA in the amount of $14.4 million (subject to adjustment based on
final determination of Commercial Market Value for tar cherries), (ii) the
annual payment pursuant to Section 14 of the Existing MFA representing the
sharing of certain of the Company's profits for the Company's 2002 fiscal year
up to $2.5 million; provided, that the Company is able to reduce its taxable
income by the amount of income allocated to Pro-Fac that gives rise to such
payment; provided further, that if the Company is not able to reduce its taxable
income by the amount of income so allocated, then the Company will reverse such
allocation, (iii) amounts needed to satisfy Pro-Fac's preferred stock dividends
and Pro-Fac's common stock dividends, in the amount of $1,978,869 and $509,638,
respectively, that would otherwise be paid in July 2002, and (iv) amounts needed
to satisfy Pro-Fac's preferred stock dividends in the amount of $1,934,099 that
would otherwise be paid in October 2002. Buyer, the Company and Pro-Fac hereby
agree that the Deferred Payments will be made at Closing and that the payments
contemplated by clauses (i) and (ii) above will not be affected by the Non-Cash
Goodwill Impairment Charge. To the extent that any consent or waiver is
necessary in order to permit any of the Deferred Payments to be made, the
parties will use commercially reasonable efforts to obtain such consent or
waiver prior to Closing. Notwithstanding anything else to the contrary in this
Agreement and the Schedules attached hereto, irrespective of whether the
payments under clause (ii) above are deferred, any amount paid under clause (ii)
above or the proceeds of related loans from the Company, in excess of the
Permitted Patronage Amount either shall be immediately reinvested by Pro-Fac as
a capital contribution to the Company, or applied towards the repayment of the
gross amount of any outstanding intercompany debt owed by Pro-Fac to the
Company. To the extent that any payment is made by the Company to Pro-Fac with
respect to the dividends described in clauses (iii) or (iv) above or as
contemplated by Schedule 5.4(ii), then the amounts payable pursuant to the
Termination Agreement will be subject to reduction in the manner contemplated
therein.
(b) The parties hereby agree that for purposes of this Agreement the
mere recording of the Non-Cash Goodwill Impairment Charge shall not result in a
breach of any representation or warranty or covenant contained herein, nor will
the Non-Cash Goodwill Impairment Charge be taken into consideration for purposes
of determining whether the conditions to Closing in Sections 7.1(a), 7.1(s) or
7.1(u) have been satisfied; provided, that the
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foregoing shall in no way affect Buyer's rights or protections including,
without limitation, under Section 7.1(a) or Section 7.1(s), provided in this
Agreement with respect to, arising from or related to any consequences from or
collateral effects of the Company taking the Non-Cash Goodwill Impairment Charge
including, without limitation, any restatement of prior financial statements, if
any.
12.13 Governing Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
Schedules and Exhibits hereto shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. In furtherance of the foregoing,
the internal law of the State of New York shall control the interpretation and
construction of this Agreement (and all Schedules and Exhibits hereto), even
though under that jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
12.14 Waiver of Jury Trial. Each of the parties hereto waives any
right it may have to trial by jury in respect of any litigation based on,
arising out of, under or in connection with this Agreement or any course of
conduct, course of dealing, verbal or written statement or action of any party
hereto.
12.15 Jurisdiction. Each of parties hereto submits to the jurisdiction
of any state or federal court sitting in New York, New York to the extent such
matter arises before Closing, or Rochester, New York, to the extent such matter
arises following the Closing, in any action or proceeding arising out or
relating to this Agreement and agrees that all claims in respect of the action
or proceeding may be heard and determined in any such court, as applicable.
12.16 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient or when sent by facsimile followed by delivery by reputable
overnight courier service, or one day after being sent to the recipient by
reputable overnight courier service (charges prepaid). Such notices, demands and
other communications shall be sent to Buyer, Pro-Fac and the Company at the
addresses indicated below or to such other address or to the attention of such
other Person as the recipient party has specified by prior written notice to the
sending party. All notices, demands and other communications hereunder may be
given by any other means (including telecopy or electronic mail), but shall not
be deemed to have been duly given unless and until it is actually received by
the intended recipient.
The Company (prior to Closing):
Agrilink Foods, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: Dennis M. Mullen
Facsimile No.: (585) 383-1606
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with a copy to (which shall not constitute notice to the
Company):
Harris Beach LLP
99 Garnsey Road
Pittsford, NY 14534
Attn: Thomas E. Willett, Esq.
Facsimile No.: (585) 419-8818
The Company (following the Closing):
Agrilink Foods, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: Dennis M. Mullen
Facsimile No.: (585) 383-1606
with a copy to (which shall not constitute notice to the
Company):
Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, NY 10167
Attn: David M. Hooper and General Counsel
Facsimile No.: (212) 808-4922
with a copy to (which shall not constitute notice to the
Company):
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attn: Michael Movsovich, Esq.
Facsimile No.: (212) 446-4900
Pro-Fac:
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: Bruce Fox, Chairman
Facsimile: (231) 861-4884
with a copy to (which shall not constitute notice to Pro-Fac):
Harris Beach LLP
99 Garnsey Road
Pittsford, NY 14534
Attn: Thomas E. Willett, Esq.
Facsimile No.: (585) 419-8818
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Buyer:
Vestar/Agrilink Holdings LLC
c/o Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, NY 10167
Attn: David M. Hooper and General Counsel
Facsimile No.: (212) 808-4922
with a copy to (which shall not constitute notice to Buyer):
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attn: Michael Movsovich, Esq.
Facsimile No.: (212) 446-4900
12.17 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party hereto by virtue
of the authorship of any of the provisions of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have duly executed this Unit
Purchase Agreement as of the date first written above.
VESTAR/AGRILINK HOLDINGS LLC
By: /s/ David Hooper
--------------------------------------
Name: David Hooper
Title: President
AGRILINK FOODS, INC.
By: /s/ Dennis M. Mullen
--------------------------------------
Name: Dennis M. Mullen
Title: President and Chief
Executive Officer
PRO-FAC COOPERATIVE, INC.
By: /s/ Stephen R. Wright
--------------------------------------
Name: Stephen R. Wright
Title: General Manager
Company Disclosure Schedules
The Company Disclosure Schedules are arranged by sections corresponding to the
lettered and numbered sections contained in Article II of the Unit Purchase
Agreement and the disclosure in any Company Disclosure Schedule shall qualify
only the corresponding paragraph of Article II of the Unit Purchase Agreement
unless a specific cross-reference is made to another Company Disclosure
Schedule. All capitalized terms used but not defined herein shall have the
meaning ascribed to such term in the Unit Purchase Agreement.
Exhibit H
EXECUTION COPY
AMENDED AND RESTATED
MARKETING AND FACILITATION AGREEMENT
TABLE OF CONTENTS
DEFINITIONS.....................................................................................2
MARKETING.......................................................................................2
2. Supply of Product Under the 2002 Raw Product Plan......................................2
3. Supply of Product; Pro-Fac Preferred Provider Status...................................3
4. Raw Product Plan.......................................................................4
5. Agricultural Management Function......................................................10
PAYMENT FOR CROPS..............................................................................12
6. Payment for Crops.....................................................................12
7. Preseason Activities; Determination of Commercial Market Value........................15
GENERAL........................................................................................21
8. Quality...............................................................................21
9. Force Majeure; Other Failure or Potential Failure to Deliver..........................21
10. Bypassed Crops........................................................................22
11. Failure to Deliver....................................................................22
12. Adulteration or Misbranding...........................................................23
13. Title and Risk of Loss................................................................23
14. Compliance with Fair Labor Standards Act..............................................24
15. Compliance with FIFRA and Food Quality Protection Act.................................24
16. Term and Termination..................................................................25
17. Assignment............................................................................26
18. Audit.................................................................................27
19. Disagreements.........................................................................27
20. Indemnification.......................................................................30
21. Confidentiality.......................................................................30
22. Merchant Status; Pro-Fac to Become a Licensed Farm Product Dealer.....................31
23. Notices...............................................................................32
24. Entire Agreement......................................................................33
25. No Third-Party Beneficiaries..........................................................34
26. Agreement Jointly Drafted.............................................................34
27. Section Headings......................................................................34
28. Severability..........................................................................34
29. Counterpart Execution.................................................................34
30. Time of Essence.......................................................................34
31. Governing Law; Waiver of Jury Trial...................................................35
EXHIBITS AND SCHEDULES
EXHIBIT 2...................................................................2002 Raw Product Plan
SCHEDULE 3..........................................................................Covered Crops
SCHEDULE 4(d)...............................................................Shortfall Adjustments
(i)
AMENDED AND RESTATED
MARKETING AND FACILITATION AGREEMENT
This Amended and Restated Marketing and Facilitation Agreement (this
"Agreement") is dated as of [_____], 2002 between Pro-Fac Cooperative, Inc.
("Pro-Fac") and Agrilink Foods, Inc. ("Agrilink").
The members and patrons of Pro-Fac are active growers who have joined
together in their cooperative to market their crops at a fair price and to try
to achieve as much stability and continuity as is possible in agriculture.
Agrilink and its predecessors have long been engaged in the processing,
distribution and sale of processed foods, now on a diversified geographical
basis.
Pro-Fac and Agrilink came together in 1961 because of Pro-Fac's need to
find a stable market for crops grown by its members and patrons and because of
Agrilink's need for a reliable supply of such crops.
Since 1994, Agrilink has been a wholly-owned subsidiary of Pro-Fac.
Following the closing of the transactions (the "Transactions") contemplated by
the Unit Purchase Agreement dated as of June 20, 2002, by and among Pro-Fac,
Agrilink and Vestar/Agrilink Holdings LLC (the "Unit Purchase Agreement"),
Agrilink will no longer be a wholly-owned subsidiary of Pro-Fac.
Agrilink and Pro-Fac desire to continue their long standing supply
relationship with Pro-Fac serving as Agrilink's preferred supplier of crops
hereunder, so that Pro-Fac will have the ability to continue to market its
members' crops through Agrilink without being subject to the economic
risk-sharing arrangements that were previously part of their relationship.
It is therefore agreed as follows:
DEFINITIONS
1. When used in this Agreement, the following terms shall have the meanings
indicated below:
"Commercial Market Value" of crops sold by Pro-Fac to Agrilink shall mean
the weighted average of the prices paid by other commercial processors for
similar crops used for similar or related purposes purchased under pre-season
contracts and in the open market in the same or similar marketing areas.
Commercial Market Value shall be determined as provided in Paragraph 7 hereof.
"Raw Products" shall mean the Covered Crops (defined below) required by
Agrilink as contemplated by any Raw Product Plan (defined below).
MARKETING
2. Supply of Product Under the 2002 Raw Product Plan. Pro-Fac and Agrilink
have approved a Raw Product Plan (defined below) for the 2002 growing season
(the "2002 Raw Product Plan"). Based upon the 2002 Raw Product Plan, Pro-Fac has
entered into annual crop agreements with its members and Agrilink has made
certain business arrangements and production plans and commitments in reliance
thereon. Therefore, Pro-Fac agrees that it will supply to Agrilink all crops
contemplated to be delivered by it under the 2002 Raw Product Plan, which is
attached hereto as Exhibit 2, and Agrilink agrees to accept and to pay for such
crops as contemplated by the 2002 Raw Product Plan, in each case, in accordance
with the terms and conditions of this Agreement.
2
3. Supply of Product; Pro-Fac Preferred Provider Status. Subject to the
terms and conditions of this Agreement, Pro-Fac shall be Agrilink's preferred
supplier of Covered Crops (defined below). On an annual basis, Agrilink shall be
required to purchase from Pro-Fac Raw Products as determined in accordance with
Paragraph 4 below and pursuant to the terms and conditions of this Agreement.
Agrilink shall use all commercially reasonable efforts in connection with the
development of the applicable annual Raw Product Plan and the implementation
thereof to source as much of its Raw Products supply for each Agrilink
processing facility from Pro-Fac as is practicable subject to relevant
commercial considerations including, without limitation, the production
capabilities of Pro-Fac's members in the relevant geographic area, Agrilink's
Raw Products needs (including timing and delivery requirements) and the overall
cost of obtaining the applicable Raw Products. The fruit and vegetable crops
that Pro-Fac currently supplies to Agrilink are listed on Schedule 3 attached
hereto (the "Covered Crops").
Pro-Fac agrees, in consideration of the foregoing, to use all commercially
reasonable efforts to maintain its ability to supply crops and to give Agrilink
priority and to use all commercially reasonable efforts to cause its members to
give priority to Agrilink in the supply of crops (whether pursuant to Pro-Fac
commitments or by means of an upward proration). Where a Pro-Fac member is
subject to commitments to supply crops to any person or entity in addition to
Pro-Fac, and the member's yield for a particular growing season is insufficient
to meet all such commitments, Pro-Fac shall use all commercially reasonable
efforts to ensure that such Pro-Fac member allocates at least a pro-rata portion
(based on such member's relative commitments to all persons and entities) of the
crops that are available to satisfy such member's commitment to Pro-Fac under
the annual crop agreement(s) in effect between such member and Pro-Fac. Subject
3
only to its inability to do so because of the vagaries of weather or other
causes validly preventing the delivery or growing of such crops as set forth in
this Agreement and in the agreements between Pro-Fac and its members, Pro-Fac
agrees to sell to Agrilink all crops of the quality, type and in the amounts set
forth by acreage or tonnage in the Raw Product Plan to be obtained from members
of Pro-Fac (provided that such commitment to sell shall not apply to raw
products contracted for directly between Agrilink as a contracting party and a
grower who is a member of Pro-Fac). Pro-Fac agrees that it shall, in a manner
consistent with past custom and practice, exercise any and all rights that it
has pursuant to the terms of the corporate governance documentation of Pro-Fac
and any agreement between Pro-Fac and any of its members to manage (or, to the
extent that and for so long as the agricultural management function has been
delegated to Agrilink under this Agreement, to assist Agrilink to manage) the
supply of crops from its members in a manner that facilitates and accommodates
implementation of the annual Raw Product Plans, including, without limitation,
allocating crop production among its members (whether above or below their
respective committed amounts). In addition, Pro-Fac agrees that unless required
by law, it shall not without Agrilink's consent amend the corporate governance
documents of Pro-Fac or modify any existing agreements between Pro-Fac and its
members, if such amendment or modification adversely affects Pro-Fac's ability
to carry out the terms of this Agreement.
4. Raw Product Plan.
(a) The quality, quantity and variety of Raw Products required by
Agrilink, the specific facilities for which they are required and the timing of
their delivery shall be as established in an annual Raw Product Plan (the "Raw
Product Plan"). The Raw Product Plan shall be based on the condition and needs
of Agrilink's business, as determined by Agrilink in its
4
sole discretion. The 2002 Raw Product Plan is indicative of the matters
addressed in, and format and detail of, future Raw Product Plans. The Raw
Product Plan will be prepared by Agrilink, in a manner that is substantially
consistent with the past custom and practice of Agrilink and Pro-Fac and this
Agreement, with such modifications as Agrilink shall deem appropriate in the
future in order to accommodate its business. Pro-Fac agrees that, as requested
by Agrilink, it will provide to Agrilink, in a commercially timely manner, to
the extent available to Pro-Fac on a non-confidential basis, any and all
information regarding Pro-Fac and the Pro-Fac members that Agrilink requests in
connection with the preparation of the Raw Product Plan and to which Agrilink
does not otherwise have direct access in connection with its performance of the
provisions of this Agreement (including, without limitation, the crop
commitments of each member, each member's capability to produce its commitment
(or amounts less than or exceeding its commitment), each member's past
production performance and information regarding its member's financial and
business condition, including any liens, judgments or defaults under any
financial instruments or any other material condition that reasonably could be
considered relevant to such member's ability to deliver crops pursuant to this
Agreement and related agreements). Pro-Fac agrees that it will cooperate and
consult with Agrilink and use good faith efforts to assist Agrilink in the
preparation of each Raw Product Plan so that Agrilink can complete the Raw
Product Plans in a timely fashion.
(b) Following its preparation of the Raw Product Plan for a particular
growing season, Agrilink shall deliver to Pro-Fac its proposed Raw Product Plan
no later than January 31 of the year for which the Raw Product Plan will be
effective. The Raw Product Plan shall set forth, among other things, the types
of crops, the amount of each crop by acreage or tonnage, the specific Pro-Fac
members from whom such crops will be acquired, and the specific facilities to
5
which such crops shall be delivered. The Raw Product Plan will also identify, by
notation, the reasons for any significant reduction in Agrilink's needs for a
particular crop. Pro-Fac shall have an opportunity to examine the Raw Product
Plan, and shall provide Agrilink with its comments within thirty (30) days of
delivery of the Raw Product Plan to Pro-Fac. If Pro-Fac has not provided any
comments on the Raw Product Plan during the period stated above, Pro-Fac shall
be deemed for all purposes under this Agreement to have accepted the Raw Product
Plan as delivered by Agrilink. If comments are timely provided by Pro-Fac,
Agrilink will consider in good faith such comments and in light thereof, and
after giving due consideration to the rights and obligations of the parties
under this Agreement, will modify the Raw Product Plan as it deems appropriate.
Agrilink shall prepare the Raw Product Plan to be implemented for a particular
growing season no later than March 31 of the year for which the Raw Product Plan
will be effective, in a manner consistent with the past custom and practice of
the parties, so as to provide Pro-Fac with reasonably adequate time to implement
its portion of the plan with its members, provided that the parties acknowledge
and agree that the implemented Raw Product Plan will be subject to further
modifications following initial implementation by the parties (in a manner
consistent with the past custom and practice of the parties, including any
pre-finalization implementation activity, as contemplated by Paragraph 4(c)
below), to adjust aspects of the plan that Agrilink determines should be
adjusted, and that can be adjusted, in a commercially reasonable manner. Each
party agrees to use all commercially reasonable efforts and to act in good faith
to implement the Raw Product Plan as so modified (such modified plan, the "Final
Raw Product Plan").
(c) The annual crop agreement and harvest agreement used by Pro-Fac
for the 2002 growing season for each of the Covered Crops have been delivered by
Pro-Fac to Agrilink
6
(the "2002 Agreements"). The annual crop agreements and harvest agreements to be
used by Pro-Fac with its members for the particular crops to be supplied under
this Agreement shall be substantially in the form of the 2002 Agreements for
each such crop, with such modifications, additions, deletions or amendments as
Agrilink may require (Agrilink will notify Pro-Fac of such changes prior to the
time of delivery of the applicable proposed Raw Product Plan pursuant to
Paragraph 4(b) above), including, without limitation, the quality standards to
be applied to each such crop, provided that Agrilink may request changes only to
the extent such changes are related to implementing any annual Raw Product Plan
in the manner determined by Agrilink and, provided further that, to the extent
any such change has an impact on the determination of Commercial Market Value,
such change will be considered under the provisions of Paragraph 7 below. In
addition, Pro-Fac agrees that as requested by Agrilink, through the delegation
to be made pursuant to Paragraph 5(a), it will enter into annual crop agreements
with its members to commence the implementation of any particular Raw Product
Plan prior to the finalization thereof, provided that if the applicable Final
Raw Product Plan is inconsistent with any such contract entered into or other
action taken prior to the finalization of such year's Raw Product Plan, Agrilink
shall bear the costs, if any, arising from the cancellation or modification of
any such agreement.
(d) If the aggregate amount to be purchased from Pro-Fac under any
Final Raw Product Plan for any Covered Crop (the "Annual Pro-Fac Planned
Purchases") both (i) constitutes by volume less than the aggregate volume
specified for such Covered Crop in Schedule 4(d) attached hereto (the "Target
Volume") and (ii) constitutes a percentage of Agrilink's total planned purchases
from all sources of such Covered Crop ("Annual Total Planned Purchases") for the
applicable year that is less than the percentage for such Covered
7
Crop for such growing season specified on Schedule 4(d) attached hereto (the
"Target Percentage"), then Agrilink shall pay to Pro-Fac an amount (the
"Shortfall Adjustment") calculated for such Covered Crop in accordance with the
formulas and other provisions set forth in Schedule 4(d) attached hereto. In
determining whether a Shortfall Adjustment is required and the amount thereof,
the Annual Pro-Fac Planned Purchases will be deemed to include the amount of (i)
crops designated in the Final Raw Product Plan to be purchased from Pro-Fac and
(ii) crops which are not designated to be purchased from Pro-Fac because (a)
Pro-Fac breaches this Agreement or (b) Pro-Fac is unable to produce (through its
members) the crops specified in such Final Raw Product Plan (ignoring, for this
purpose, any specification relating to the geographic location of crop
production or delivery). In order to determine the "Percentage of Target" as set
forth on Schedule 4(d), the Annual Pro-Fac Planned Purchases reflected or deemed
reflected in the applicable Final Raw Product Plan will be divided by the amount
that is the lesser of (i) the Target Volume and (ii) the Target Percentage
multiplied by the Annual Total Planned Purchases for such year. Agrilink shall
determine, and notify Pro-Fac within fifteen (15) business days following
finalization of any Final Raw Product Plan, whether there are any Shortfall
Adjustments payable pursuant to this Agreement. Any Shortfall Adjustment amount
payable under this Agreement shall be paid to Pro-Fac as part of the final
Commercial Market Value payment made pursuant to this Agreement for the fiscal
year subject to the applicable Raw Product Plan with respect to the applicable
crop. In the event that payment of the amounts under this Paragraph 4(d) is
prohibited because of the existence of a default that is not waived or cured
under the terms of any Institutional Indebtedness of Agrilink and/or any
subsidiary of Agrilink having a principal amount in excess of $20,000,000, the
payments due hereunder will be deferred until permitted by the applicable
instruments evidencing such indebtedness and will
8
then be made to the fullest extent permitted. "Institutional Indebtedness"
means, for purposes of this Agreement (i) indebtedness under any credit facility
provided by a bank or other financial institution, (ii) indebtedness for
borrowed money under any bond or note indenture and notes issued pursuant
thereto, (iii) indebtedness under any financing facility, note or other evidence
of indebtedness (as determined in accordance with generally accepted accounting
principles) provided by or issued to a financial institution in connection with
a borrowing or other financing transaction, and (iv) any refinancing of the
foregoing. During the period of any such deferral, the portion of the Shortfall
Adjustment amount so deferred shall bear interest at the rate of 10% per annum
compounded annually. Shortfall Adjustments determined pursuant to this Paragraph
4(d) shall be the sole and exclusive remedy available to Pro-Fac with respect to
Agrilink's failure to commit to the purchase of the Target Volume or Target
Percentage of any Covered Crop during the term of this Agreement, and any such
failure by Agrilink shall not constitute a breach of the terms of this Agreement
provided that the Shortfall Adjustments required to be paid are duly paid in
accordance with this Paragraph 4(d).
(e) If Pro-Fac disputes the calculation of any Shortfall Adjustment,
then Pro-Fac shall notify Agrilink of its disagreement and provide in reasonable
detail the reasons therefor within fifteen (15) business days following
Agrilink's delivery to Pro-Fac of notice of the amount of such Shortfall
Adjustment. If Pro-Fac has not notified Agrilink of any disagreement within the
time period contemplated above, Pro-Fac shall be deemed to have agreed to the
Shortfall Adjustment as calculated by Agrilink for all purposes of this
Agreement. If Pro-Fac has notified Agrilink of a disagreement within such time
period, Agrilink shall be deemed to have agreed to Pro-Fac's disagreement if
Agrilink has not notified Pro-Fac of any objection to such disagreement within
15 business days.
9
5. Agricultural Management Function.
(a) Pro-Fac hereby delegates to Agrilink and any of its affiliates, as
Agrilink may designate, all rights, power and authority that is necessary or
desirable to control any or all aspects of planning, consulting, sourcing and
harvesting crops from Pro-Fac members in a manner consistent with past custom
and practice of the parties (including, without limitation, those functions that
have heretofore been delegated to Agrilink pursuant to the Pro-Fac Bylaws, the
general marketing agreements between Pro-Fac and Pro-Fac members (each, a
"General Marketing Agreement"), the annual crop agreements and the harvest
agreements), including, without limitation, consulting with Pro-Fac members
regarding the implementation of the Raw Product Plan, determining whether or not
to supply seed, selecting the seed, setting a planting schedule and reaching
decisions regarding farming techniques, harvest, harvest scheduling and crop
bypass. Such delegation of power and authority shall include the authority to
perform any such function under any applicable agreement, document, or
instrument between Pro-Fac and any member or otherwise governing their
relationship as suppliers of Raw Product (but not their relationship as members
of Pro-Fac), and Pro-Fac shall assist and cooperate with Agrilink in carrying
out the agricultural management functions contemplated by this Paragraph 5.
Agrilink hereby accepts the delegation of rights, power and authority under this
Paragraph 5(a) and agrees to perform or to cause one or more of its subsidiaries
or affiliates to perform the functions described above for which such rights,
power and authority are delegated. The parties agree that to the extent that
Pro-Fac would otherwise be required to perform any obligation under this
Agreement that is delegated to Agrilink pursuant to this Paragraph 5, so long as
and to the extent that such delegation remains in effect, Agrilink's failure to
perform any such obligation or Agrilink's failure to perform such obligation to
the standard of conduct contemplated by this
10
Agreement shall not be imputed to Pro-Fac to give rise to any liability of
Pro-Fac hereunder. With respect to transactions between Agrilink and Pro-Fac
members undertaken by Agrilink pursuant to the agricultural management functions
delegated to Agrilink pursuant to this Paragraph 5, Agrilink will indemnify
Pro-Fac from any liability arising from any actual or alleged breach of this
Agreement by Agrilink, any breach by Pro-Fac of any agreement entered into on
Pro-Fac's behalf by Agrilink due to Agrilink's performance or non-performance of
any such delegated function, or any other conduct of Agrilink which any member
of Pro-Fac or any third party imputes or attempts to impute to Pro-Fac, to the
extent that the actions of Agrilink or any of its representatives (other than as
specifically directed by Pro-Fac) give rise to any such liability during the
course of such transactions.
(b) Agrilink hereby agrees that until the fifth anniversary of the
date of this Agreement (or, if earlier, the date of termination of this
Agreement in accordance with Paragraph 16), it will use commercially reasonable
efforts to make available members of its agricultural management staff to
provide to Pro-Fac such services as are to be mutually agreed by Agrilink and
Pro-Fac that reasonably relate to the expansion of the market for the
agricultural products of the Pro-Fac members. Such services may include
allocating a portion of the agricultural staff's personnel resources, during
such period, to the provision of agricultural management services on an
out-sourced basis to persons who enter into supply relationships with Pro-Fac
providing for the delivery of agricultural products by Pro-Fac members. Pro-Fac
shall pay to Agrilink Agrilink's fully loaded incremental costs for providing
such services (including salaries, benefits and reasonably allocated overhead),
provided that upon Pro-Fac's request, Agrilink shall provide good-faith
estimates of the costs expected to be incurred and paid by Pro-Fac in connection
with any such services requested. The terms for the provision of and the payment
for any such
11
services shall be reasonably determined by the parties at the time that Agrilink
and Pro-Fac reach agreement with respect to the provision of any such services
and shall be set forth in independent agreements. Notwithstanding the foregoing,
Agrilink shall not be required to provide any service or services pursuant to
this Paragraph 5 to the extent that doing so would have a greater than de
minimis effect on Agrilink's ability to conduct its own business and affairs. To
the extent that Agrilink provides to Pro-Fac or any third party any services of
the type contemplated by this Paragraph 5(b), the agreement or agreements for
such services will provide for indemnification of Agrilink and for Agrilink to
be held harmless from any and all damages, losses and other liabilities that any
of Agrilink, its officers, directors, employees, agents, stockholders or
affiliates may suffer or incur arising from, as the result of or in any way
related to the provision of such services, except for any damages, losses and
other liabilities to the extent that they arise from Agrilink's willful breach,
willful misconduct or gross negligence.
PAYMENT FOR CROPS
6. Payment for Crops.
(a) Agrilink shall pay Pro-Fac an amount equal to the aggregate
Commercial Market Value for the crops delivered to Agrilink by Pro-Fac members
pursuant to annual crop agreements entered into between Pro-Fac and its members
as contemplated by the Final Raw Product Plan for each growing season during the
term of this Agreement. Agrilink shall pay Pro-Fac the Commercial Market Value
to be paid under this Agreement in installments corresponding to the payment by
Pro-Fac to its members of Commercial Market Value for the crops delivered.
Pro-Fac shall make payment of Commercial Market Value to its members pursuant to
the applicable annual crop agreements in accordance with Section 1(d) of the
General Marketing Agreement between Pro-Fac and each such member. A copy of
Pro-Fac's standard General Marketing Agreement is attached hereto as Exhibit
6(a). Pro-Fac represents to Agrilink
12
that each General Marketing Agreement that is currently in force with its
members contains the same payment terms as are set forth in Section 1(d) and
otherwise conforms in all material respects to Exhibit 6(a). Pro-Fac hereby
agrees that during the term of this Agreement it shall not amend the payment
provisions of any existing annual crop agreements or General Marketing Agreement
and that each General Marketing Agreement that it enters into in the future
shall contain the Commercial Market Value payment provisions set forth in
Exhibit 6(a), unless otherwise agreed to in writing by Agrilink.
(b) Prior to the final determination of Commercial Market Value in
accordance with Paragraph 7, Agrilink shall make payments to Pro-Fac based upon
an estimated Commercial Market Value (the "Estimated CMV") for the applicable
year. The Estimated CMV shall be determined for purposes of this Agreement by
Agrilink in a manner consistent with past custom and practice taking into
account such factors as Agrilink determines in good faith to be appropriate. The
final payment, to be made following the end of Agrilink's fiscal year, shall be
made following the determination of the actual Commercial Market Value for the
applicable year in accordance with Paragraph 7. At such time and to the extent
that the prior payments made in reliance on the Estimated CMV are found to have
underestimated or overestimated the actual Commercial Market Value as later
determined, the next required payment shall be adjusted upward to remedy any
underpayment or downward to remedy any overpayment, as applicable. If payments
made in reliance on the Estimated CMV are found to have overestimated the actual
Commercial Market Value by a margin greater than the amount remaining due to
Pro-Fac for any Covered Crop, whether with respect to all remaining payments due
for a particular growing season or the last payment due for that growing season,
Pro-Fac shall reimburse Agrilink promptly for the aggregate amount of any such
overpayments. The payment of Estimated CMV
13
shall take into account the payment of harvest advances in accordance with the
annual crop agreements.
(c) To the extent that the amount payable to any Pro-Fac member would
be reduced, or Pro-Fac is entitled to an offset against, or deduction from, the
amount payable to any member for any service provided, or other cost incurred,
by Pro-Fac, Agrilink or any third party as provided in the applicable annual
crop agreement or otherwise, then to the extent that Agrilink provides any such
service or incurs any such expense (including by hiring and paying any third
party), the deduction for any such services or expenses shall reduce, in a
manner consistent with the past custom and practice of the parties (without
double counting), the amount payable to Pro-Fac pursuant to this Agreement
("Agrilink Reimbursable Expenses"). Agrilink shall deliver periodically to
Pro-Fac a schedule setting forth the Agrilink Reimbursable Expenses to which
Agrilink believes it is entitled.
(d) Pursuant to Section 5, during the term of this Agreement Agrilink
will, on Pro-Fac's behalf, determine amounts payable to Pro-Fac's members as
contemplated by this Section 6. Agrilink will coordinate with Pro-Fac to arrange
for the amounts determined by Agrilink to be paid to Pro-Fac members from bank
accounts maintained by Pro-Fac. Within ten (10) business days following any
payment of an installment of Estimated CMV or Commercial Market Value to
Pro-Fac's members (or, during the harvest advance period, within ten (10)
business days following the last payment made for any weekly period), Agrilink
will provide to Pro-Fac a schedule setting forth the aggregate amount of such
payment and the breakdown of the amounts paid to each Pro-Fac member, taking
into account Agrilink's calculation of the Agrilink Reimbursable Expenses
applicable to each such member payment. If Pro-Fac disagrees with the amount of
any such payment, Pro-Fac will notify Agrilink of its disagreement in writing
within
14
ten (10) business days following delivery of such schedule to Pro-Fac and
provide in reasonable detail the basis of such disagreement, including Pro-Fac's
proposed adjustment to any payment. If Pro-Fac has not notified Agrilink of any
disagreement within the time period contemplated above, Pro-Fac shall be deemed
to have agreed to the payments reflected in the applicable schedule. If Pro-Fac
has notified Agrilink of its disagreement within the time period contemplated
above and Agrilink fails to notify Pro-Fac of any objection to Pro-Fac's
disagreement within ten (10) business days following Agrilink's receipt of
Pro-Fac's disagreement, then Agrilink shall be deemed to have agreed to
Pro-Fac's proposed adjustments to such payments. If Agrilink does object to any
disagreement by Pro-Fac within the time period contemplated above, such
objection will be treated as a disagreement subject to the provisions of
Paragraph 19.
7. Preseason Activities; Determination of Commercial Market Value.
(a) On or prior to the forty-fifth (45th) day prior to the date that
Agrilink expects to commence entering into annual crop agreements for a
particular crop, Agrilink will prepare and deliver in writing to the applicable
commodity committee(s) of Pro-Fac, which committees shall be formed and
maintained by Pro-Fac in accordance with past custom and practice, the Estimated
CMV for such crop as contemplated by Paragraph 6(b) above and the Commercial
Market Value guidelines for each crop to be purchased from Pro-Fac in the
upcoming growing season (collectively, the "Preseason Materials"). Such
Preseason Materials shall include any change in the methodology for determining
Commercial Market Value for any commodity in any growing region, including any
changes arising from changes in the form of an annual crop agreement as
contemplated by Paragraph 4(c) above to the extent such changes affect
Commercial Market Value. The parties acknowledge that some aspects of the
information
15
that will be incorporated in the Preseason Materials will become known to, be
decided by or become available to Agrilink at different times. Agrilink will
have the right to deliver Preseason Materials to Pro-Fac in whole or in part at
any time prior to such 45th day referenced above (and it is possible that
certain Preseason Material will be delivered to Pro-Fac one (1) year or more in
advance of such date). The preparation and implementation of the Preseason
Materials will be subject to the following process which, to the extent not
specifically addressed otherwise in this Paragraph 7, shall be consistent with
past custom and practice of Agrilink and Pro-Fac. The applicable commodity
committee(s) will either approve of any Preseason Materials with respect to a
particular crop or crops or will disapprove of such Preseason Materials (or any
aspect thereof) based on their inconsistency with the terms of this Agreement
within thirty (30) calendar days following Agrilink's delivery of such Preseason
Materials to it. Pro-Fac may extend such 30-day period for up to an additional
thirty (30) days if the Preseason Materials at issue were delivered by Agrilink
to Pro-Fac more than sixty (60) days prior to such 45th day referenced in the
first sentence of this Subparagraph 7(a). To the extent the applicable commodity
committee notifies Agrilink within the time period contemplated above that it
disapproves of any aspect of the Preseason Materials, it shall be treated as a
Disputed Item under Paragraph 7(d). If the applicable commodity committee
approves the applicable Preseason Materials or fails to notify Agrilink that it
disapproves of any aspect of the applicable Preseason Materials within the time
period contemplated above, such Preseason Materials, to the extent not objected
to, will be presented to the CMV Committee for ratification. The "CMV Committee"
shall be a standing committee appointed under this Agreement, and shall be
comprised of three (3) persons designated by Agrilink and three (3) persons
designated by Pro-Fac. Within three (3) calendar days following the presentation
to it by the applicable commodity committee of the Preseason
16
Materials, the CMV Committee shall either ratify such Preseason Materials or, in
the event of any disagreement preventing ratification, shall notify Agrilink of
such disagreement. Any disagreement by the CMV Committee that constitutes the
grounds for withholding ratification of the Preseason Materials shall be treated
as a Disputed Item under Paragraph 7(d).
(b) Commercial Market Value shall be determined for purposes of this
Agreement by Agrilink in a manner consistent with the past custom and practice
of the parties, and in accordance with the terms of this Agreement, with the
objective to determine the weighted average of the prices paid by other
commercial processors, for similar crops, used for similar or related purposes,
sold under pre-season contracts and in the open market in the same or similar
marketing areas. Such weighted average shall be calculated pursuant to a process
that obtains and checks input data, weights such markets' and other processors'
prices, adjusts the stated purchase price for varying contractual terms and
otherwise includes procedures (including the periodic modification of such
procedures) that are consistent with the established past custom and practice of
Agrilink and Pro-Fac. Commercial Market Value, for purposes of this Agreement,
will not be adjusted for any profits realized or losses incurred by Agrilink.
The parties have reviewed and acknowledge that the materials reflecting
Agrilink's calculation of Commercial Market Value for the 2001 growing season
(the "2001 CMV Materials"), including, without limitation (i) the sample
contracts used by Agrilink to assess relevant prices and purchase terms among
comparable parties in the marketplace and (ii) tables reflecting Agrilink's
weighting system for such contracts and the analyses of, and adjustments to,
such prices and terms made in reaching its determination of Commercial Market
Value were consistent with the past custom and practices of the parties.
Agrilink shall continue to use substantially the same comparable parties,
weighting system for contracts used by such comparable parties, and
17
adjustment processes reflected in the 2001 CMV Materials, subject to any changes
that result from the approval or other determination of changes as contemplated
by Paragraph 7(a) above and the other provisions of this Paragraph 7.
(c) At the appropriate times Agrilink will gather the data necessary
for analyzing comparable annual crop agreements, determine adjustments to the
prices reflected in such comparable agreements, and otherwise take such action
and make such determinations as are necessary to calculate the Commercial Market
Value for each crop. The determination of Commercial Market Value for each crop
shall be prepared by Agrilink and presented to the applicable commodity
committee(s) of Pro-Fac. The applicable commodity committee(s) will either
approve of the proposed Commercial Market Value for a particular crop or
disapprove of such Commercial Market Value based on its inconsistency with the
terms of this Agreement within thirty (30) calendar days following Agrilink's
delivery of the proposed Commercial Market Value to it. If the applicable
commodity committee(s) approves the proposed Commercial Market Value or fails to
notify Agrilink that it disapproves of the proposed Commercial Market Value
within the time period contemplated above, the proposed Commercial Market Value
will be presented to the CMV Committee for ratification which ratification shall
be made within three (3) calendar days following submission thereof to the CMV
Committee. To the extent a determination of Commercial Market Value is not
approved by the applicable commodity committee or not ratified by the CMV
Committee, it shall be treated as a Disputed Item under Paragraph 7(d).
(d) Any disagreement regarding any of the Preseason Materials or the
determination of Commercial Market Value pursuant to this Paragraph 7 (each item
subject to
18
such disagreement, a "Disputed Item") shall be addressed in one of the following
four (4) manners:
(i) If Agrilink determines that a Disputed Item should be
addressed through further work by the staff of Agrilink, the Disputed Item may
be referred back to the appropriate representatives of Agrilink for such further
work. Upon the completion of such further work, any aspect of the applicable
Preseason Materials or the determination of Commercial Market Value, as the case
may be, revised as necessary to take into account such further work, shall again
be presented by Agrilink to the applicable commodity committee(s) in accordance
with Paragraph 7(a) or Paragraph 7(b), as the case may be, provided that for the
purposes of this Paragraph 7(d)(i), the applicable commodity committee shall
have three (3) days following such presentation to approve or disapprove of such
revisions.
(ii) If Agrilink determines that a Disputed Item should be
addressed by discussion between the Chief Executive Officer of Agrilink and the
General Manager of Pro-Fac, or their designees (the "Executives"), then the
Disputed Item shall be referred to such Executives for further discussion. The
Executives will meet as promptly as reasonably possible and in any event within
ten (10) days to consider such matter. The Executives will endeavor to resolve
such Disputed Item within three (3) days following their initial meeting
thereon. If the Executives reach a resolution of the Disputed Item, their
proposed resolution of the Disputed Item shall be referred or resubmitted, as
the case may be, to the CMV Committee for ratification. Subject to the other
provisions of this Paragraph 7(d), in the event that any Disputed Item referred
to the Executives under this clause (ii) is not resolved by the Executives
within such three-day period following their initial meeting thereon, unless
each Executive agrees to extend such time period, the Disputed Item shall be
referred to the CMV Committee in accordance with clause (iii) below.
19
(iii) If Agrilink determines that a Disputed Item should be
resolved directly by the CMV Committee, the Disputed Item shall be referred to
the CMV Committee. The CMV Committee will meet within ten (10) days to consider
such matter. The CMV Committee will endeavor to resolve such Disputed Item
within three (3) days following its initial meeting thereon. If the CMV
Committee reaches a resolution of the Disputed Item, the CMV Committee's
resolution shall be dispositive of the matter. In the event that any Disputed
Item referred to the CMV Committee is not resolved by the CMV Committee within
such 3 day period following the initial meeting thereon, unless an extension of
such period is agreed by all members of the CMV Committee, then either Agrilink
or Pro-Fac may refer the matter to arbitration by complying with the provisions
of Paragraph 19(b) of this Agreement.
(iv) If Agrilink determines that a Disputed Item should be
addressed through arbitration, then Agrilink shall have the right to submit such
matter directly to arbitration in accordance with the provisions of Paragraph
19(b) of this Agreement regarding referring matters to arbitration.
Notwithstanding the foregoing, in the event a Disputed Item exists, then
either Agrilink or Pro-Fac may at any time choose to initiate arbitration in
accordance with Paragraph 19(b) of this Agreement rather than follow or continue
to follow any of the alternative dispute resolution procedures set out in
subparagraphs (i) through (iii) of this Paragraph 7(d). It is the intent of this
provision that either party may choose arbitration in order to expedite a
resolution of a Disputed Item if, in the party's judgment, resolving the
Disputed Item through arbitration is in the best interests of that party.
20
The parties agree to use commercially reasonable efforts, to the extent
practicable and not detrimental to the commercial activities of the parties
(including the timing thereof), to consolidate the resolution of any Disputed
Items hereunder.
Any person who is required to attend any meeting referred to in this
Paragraph 7 shall have the right to attend by means of conference call or other
telecommunication device or means that permits each individual participating
therein to hear and speak to each other participant therein.
GENERAL
8. Quality. The annual crop agreements shall prescribe the standards of
quality for the Raw Products supplied pursuant to the Raw Product Plan in a
reasonable manner, taking into consideration established USDA standards,
requirements for Agrilink's processed products, prevailing standards in the
industry and Agrilink's historical quality standards. Changes to the applicable
quality standards shall be made in accordance with Paragraph 7. Agrilink may
accept or reject Raw Products based upon the annual crop agreements, and any
disputes concerning acceptance or rejection shall be subject to arbitration
pursuant to Paragraph 19(b).
9. Force Majeure; Other Failure or Potential Failure to Deliver.
(a) In the event the performance of any part of this Agreement by
either party is prevented or delayed by act of God, war, terrorism, civil
insurrection, fire, flood, storm, strike, lockout or by law, regulation or order
of federal, state or local authority or by any other cause beyond the control of
either party, then such performance, to the extent that it is so prevented or
delayed, shall be excused.
(b) If Pro-Fac invokes the provisions of force majeure pursuant to
this Paragraph 9, Pro-Fac may reduce the quantity of the affected categories of
Raw Products
21
supplied to Agrilink pursuant to the Raw Product Plan for the applicable year.
In the event that Pro-Fac fails to deliver the amount of any Raw Products
specified in the Raw Product Plan or if in any particular case Agrilink
reasonably concludes, due to anticipated crop yields, growing conditions, any
anticipatory breach of any annual crop agreement or other factors indicating
that any Pro-Fac member is likely to fail to deliver the amount of Raw Products
specified in the Raw Product Plan, Agrilink shall have the right, at its option,
to purchase additional quantities of such Raw Products from alternative sources
without regard to Paragraphs 3 and 4.
10. Bypassed Crops. Raw Products fit for harvesting and suitable for
processing under the provisions of the Raw Product Plan which are not harvested
at the direction of Agrilink shall be referred to as "Bypassed Crops." Sharing
of the economic impact of Bypassed Crops among Agrilink, Pro-Fac members and
contract growers of the applicable Covered Crop shall be governed by the
applicable provisions of the annual crop agreement for purchase of the affected
Covered Crop. All determinations made with respect to Bypassed Crops, including,
without limitation, expected yields, costs not incurred for harvest and
allocation among affected Pro-Fac members, shall be made by Agrilink in good
faith in a manner consistent with the past custom and practice of the parties.
11. Failure to Deliver. Pro-Fac acknowledges that, in order to process
properly the maximum quantities of Raw Products for inclusion in its processed
food products, it is essential that Agrilink not only be supplied with the Raw
Products hereunder, but that Agrilink receive such Raw Products, to the extent
not affected by circumstances owing to force majeure, in a timely manner
consistent with the applicable Raw Product Plan. Pro-Fac further acknowledges
that Agrilink will suffer damages if Pro-Fac or its members fail to deliver the
quantity of Raw Products in a timely manner as specified in the applicable Raw
Product Plan. Accordingly, Pro-
22
Fac hereby assigns to Agrilink, as a third party beneficiary, all rights and
powers that Pro-Fac may have under any General Marketing Agreement or Annual
Crop Agreement and any other right to seek redress in the event that any Pro-Fac
member fails to perform its obligations to deliver crops to Agrilink as
contemplated hereby. To the extent that Agrilink may not directly take any
action described above to redress any such breach, Pro-Fac hereby agrees to take
such action in its own right as requested and directed by Agrilink to seek
redress for any such breach for the benefit of Agrilink. To the extent that such
redress involves an offset against or reduction of the amount payable by Pro-Fac
to any member, then such amount will be treated as an Agrilink Reimbursable
Expense hereunder. Pro-Fac hereby grants to Agrilink its power of attorney to
take such action and to do all things necessary or desirable in Pro-Fac's name,
place and stead for any purpose in connection with the matters contemplated by
this Paragraph 11.
12. Adulteration or Misbranding. Pro-Fac guarantees that no articles of
food delivered by it to Agrilink during the period in which this contract is
effective will be adulterated or misbranded within the meaning of the Federal
Food, Drug and Cosmetic Act of June 25, 1938, as amended, or within the meaning
of any state food and drug law, the adulteration and misbranding provisions of
which are identical with or substantially the same as those found in the federal
Act, and goods will not be produced or shipped in violation of Section 404 or
301(d) (21 USCS sections 331(d), 344) of the federal Act. Pro-Fac, however, does
not guarantee against goods becoming adulterated or misbranded within the
meaning of the Act or Acts after delivery to Agrilink by reason of causes beyond
the control of Pro-Fac.
13. Title and Risk of Loss. In the cases where Agrilink arranges the
harvest and hauling of Raw Products pursuant to Paragraph 5 above, title and
risk of loss to the Raw Products shall pass from Pro-Fac to Agrilink upon the
harvest of such Raw Products. In cases
23
where such harvest and/or hauling are not arranged by Agrilink, title and risk
of loss to the Raw Products shall pass from Pro-Fac to Agrilink when the Raw
Products are delivered to and accepted by Agrilink. All products delivered to
Agrilink pursuant to the terms of this Agreement shall be delivered free and
clear of all liens and adverse claims, other than Permitted Liens. "Permitted
Liens" shall mean (i) liens arising due to the operation of law with respect to
Raw Products delivered hereunder for amounts that are not yet due and payable
and (ii) liens on Raw Products in favor of creditors to individual Pro-Fac
members, provided that notice of all such liens, as well as any specific
requirements of the lienholder with respect to control of proceeds, is provided
to Agrilink before harvest. In addition, Pro-Fac agrees that upon receipt of
payment from Agrilink with respect to any crops subject to any statutory lien,
Pro-Fac shall promptly make payment to the applicable Pro-Fac member from whom
such crops were received consistent with the payment terms applicable to such
crops.
14. Compliance with Fair Labor Standards Act. Pro-Fac agrees that all of
the crops delivered pursuant to this Agreement will be produced and delivered in
compliance with all applicable standards of the Fair Labor Standards Act, as
amended.
15. Compliance with FIFRA and Food Quality Protection Act. Pro-Fac agrees
that its members have not used and will not use any pesticide or other product
in violation of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA),
as amended, or the Food Quality Protection Act, as amended, in connection with
planting, growing, harvesting or delivering any Raw Products.
24
16. Term and Termination.
(a) This Agreement shall become effective as of the date hereof and,
unless terminated earlier as provided herein, shall continue for a period of ten
(10) years.
(b) Without prejudice to any other rights either party may have under
this Agreement, applicable law or rule of equity, either party shall have the
option to terminate this Agreement in the event:
(i) the other party commits a material breach of any term,
covenant or condition of this Agreement and such breach is not remedied within
sixty (60) days after the aggrieved party has delivered notice of such breach to
the other party; or
(ii) the other party becomes insolvent within the meaning of any
bankruptcy or insolvency law, or makes an assignment for the benefit of its
creditors.
(c) Agrilink may terminate this Agreement, with respect to any
particular Raw Products to be delivered to Agrilink hereunder, if an attachment,
execution or foreclosure of any lien is levied against such Raw Products and
such attachment, execution or lien foreclosure is not remedied within ten (10)
days after Agrilink has sent written notice of such event to Pro-Fac or such
action otherwise impairs, in any material respect, Agrilink's ability to either
take title, free and clear of all liens, other than Permitted Liens, to any such
Raw Products or use such Raw Products.
(d) Agrilink may terminate this Agreement in connection with a Change
of Control. "Change of Control" shall mean any transaction or series of
transactions, including any sale, transfer or issuance by securities sale,
merger, consolidation, recapitalization or otherwise, that results, directly or
indirectly, in (i) a transfer of all or substantially all of the assets of
Agrilink, or (ii) Vestar Capital Partners IV, L.P. and its affiliates ceasing to
possess, directly or
25
indirectly, the power to elect a majority of Agrilink Holdings, Inc.'s board of
directors. If this Agreement is terminated pursuant to this Paragraph 16(d)
within three (3) years following the date hereof, then Agrilink shall pay to
Pro-Fac a fee (a "Termination Fee") equal to $20,000,000 minus the aggregate
amount of any Shortfall Adjustments previously paid. If this Agreement is
terminated pursuant to this Paragraph 16(d) at a time later than three (3) years
following the date hereof, then no Termination Fee shall be payable.
(e) In the event that this Agreement is terminated as provided in
Paragraph 16(b) or Paragraph 16(d) above, such termination shall not affect any
obligation with respect to the delivery of crops pursuant to a then-effective
Raw Product Plan or payment for such crops hereunder.
17. Assignment. Agrilink shall have the right to assign this Agreement in
whole or in part in connection with the sale of all or any part of its business,
and upon such assignment shall be released from all obligations relating to the
portion of this Agreement that has been assigned, provided that the assignee of
this Agreement or the relevant portion thereof is (i) the person who acquires
Agrilink's business or the relevant portion of Agrilink's business or (ii) any
other person if such person's financial ability to perform the assigned
obligations is reasonably acceptable to Pro-Fac. In the event of a sale of all
or any part of its business following the third anniversary of this Agreement,
Agrilink will use commercially reasonable efforts to assign its rights and
obligations under this Agreement, in whole or in relevant part, to a transferee,
purchaser or other successor to all or any material part of its business, so
long as such assignment does not disadvantage Agrilink or any of its
equityholders as determined in Agrilink's sole discretion. This Agreement may
not be assigned by Pro-Fac without the prior written consent of Agrilink, and
any attempted assignment without such consent shall be void.
26
18. Audit. During the term of this Agreement and for a period of three (3)
years thereafter, both parties to this Agreement shall, upon reasonable notice
and during normal business hours, be given access to the pertinent books and
records, management personnel and outside accountants of the other party in
order to verify the accuracy of costs, fees or expenses reported by such other
party in connection with the performance of the obligations under this
Agreement, crop deliveries, offsets, adjustments and similar matters and for
other purposes reasonably related to the performance of the parties under this
Agreement. In exercising its right under this Section 18, each party shall
endeavor to minimize the disruption to the business and activities of the other.
19. Disagreements.
(a) In the event that Pro-Fac and Agrilink have an unresolved
disagreement relating to the application or interpretation of this Agreement or
regarding whether any determination made by a party was made in a manner that
complies with the process and procedures set forth in this Agreement, then
either party shall have the right to invoke the disagreement resolution
procedures set forth in this Paragraph 19. Other than with respect to matters
addressed in Paragraph 7(d) hereof, promptly upon notice of such invocation,
Pro-Fac and Agrilink shall each designate a senior executive who shall be
charged with full authority to resolve the disagreement in cooperation with the
other. Such executives shall meet as promptly as possible (and in any event
within ten (10) days) to discuss, consider and otherwise attempt to resolve the
disagreement. If the designated executives resolve such disagreement, their
resolution shall be set forth in a writing executed by each executive and such
resolution shall be binding on the parties. Should the designated executives
fail to resolve the disagreement within five (5) days following their initial
meeting, then the dispute shall be submitted directly to final
27
and binding arbitration upon written demand therefore delivered by either party
to the other pursuant to Paragraph 19(b) below.
(b) Each arbitration shall be conducted before one arbitrator, who
shall be selected as follows: one representative shall be selected by each of
Pro-Fac and Agrilink within two (2) days in the case of a Crop Sensitive Dispute
(defined below) and five (5) days in all other cases following either party
invoking the provisions of this Paragraph 19(b), and such representatives shall,
within a period of two (2) days in the case of a Crop Sensitive Dispute and five
(5) days in all other cases, agree mutually upon an arbitrator, provided that if
either party fails to select a representative within such two-day period, then
the representative timely selected by the other party shall serve as the
arbitrator. Neither of the representatives selected by the parties, nor the
arbitrator selected by such representatives, shall have any previous affiliation
with either party. With respect to any arbitration regarding a disagreement
arising under any of Paragraphs 3, 4, 5, 6, 7 or 10 of this Agreement ("Crop
Sensitive Disputes"), the arbitrator shall be a person who has substantial
experience and expertise in the agricultural industry, including with respect to
matters related to planning and managing farming, harvesting and processing of
crops. For disagreements arising under any other paragraph of this Agreement,
the arbitrator shall have the requisite experience and expertise concerning the
subject matter of the dispute, as well as the requisite legal knowledge
pertaining thereto, to conduct and conclude the arbitration in accordance with
the terms hereof. Within three (3) days in the case of Crop Sensitive Disputes
(other than those arising under Paragraph 6(d)) and within ten (10) days for all
other disputes following the selection of an arbitrator, and subject to the
terms hereof, such arbitrator shall establish the rules and procedures for the
proceeding and commence the arbitration, provided that such rules and procedures
will be consistent with the terms and objectives of this
28
Agreement and an expeditious resolution of the matter. Any arbitration commenced
hereunder shall be conducted in Rochester, New York. No discovery shall be
permitted. The arbitrator shall hear evidence (whether oral or written)
presented by each party and resolve each of the issues identified by the
parties. The arbitrator shall render a formal, binding, non-appealable
resolution and award on each issue as expeditiously as possible, and in any
event within three (3) days in the case of Crop Sensitive Disputes (other than
those arising under Paragraph 6(d)) and within fifteen (15) days for all other
disputes after the hearing. The arbitrator shall resolve each issue in dispute
by selecting either the solution proposed by Pro-Fac or the solution proposed by
Agrilink, provided that if the disagreement was submitted directly to
arbitration under this Paragraph 19(b) without any prior attempt at resolution
pursuant to either clause (ii) or (iii) of Paragraph 7(d) or Paragraph 19(a)
hereof, the arbitrator shall have the discretion to determine a resolution that
is within the range of outcomes proposed by the parties as opposed to selecting
between the alternative solutions proposed by the parties. Each party shall bear
its own costs and expenses incurred in connection with any arbitration hereunder
and shall share equally the fees and expenses of the arbitrator (and those of
the representatives charged with selecting the arbitrator, if any), provided
that if the arbitrator determines that either party has acted in bad faith or in
a grossly commercially unreasonable manner then the arbitrator shall be free to
allocate between the parties the fees and expenses of the arbitrator and of the
parties as they shall determine. The parties agree to use commercially
reasonable efforts to minimize the costs of any arbitration hereunder and, to
the extent practicable and not detrimental to the commercial activities of the
parties (including the timing thereof), to consolidate disagreements arising
hereunder to avoid multiple arbitration proceedings. In addition, the parties
agree that once an arbitrator has been selected pursuant to this Paragraph
19(b), the same arbitrator shall preside
29
over any other arbitrations arising within thirty (30) days following such
selection, consistent with such arbitrator's expertise and experience, and that
such arbitrator's term may be extended upon mutual agreement of the Parties.
20. Indemnification. Each party hereto agrees to fully indemnify, defend
and hold the other party harmless against all claims, complaints, losses, costs,
expenses, damages or fees (including all attorneys' fees) arising from or
associated with any failure of such party to comply with the terms, undertakings
or commitments set forth in this Agreement and the other agreements relating
hereto. Each party waives any claim, or right to seek indemnification, for
consequential damages. If the indemnifying party shall so request, the
indemnified party agrees to cooperate with the indemnifying party and its
counsel in contesting any claim which the indemnifying party elects to contest
or, if appropriate, in making any counterclaim against the person asserting the
claim, or any cross-complaint against any person. The indemnifying party shall
reimburse the indemnified party for any expenses incurred by it in so
cooperating. The indemnifying party shall not settle any claim, other than a
claim solely for money damages, without the consent of the indemnified party,
such consent not to be unreasonably withheld or delayed.
21. Confidentiality.
(a) During the term of this Agreement, and for five (5) years
thereafter, Pro-Fac and Agrilink and each of their respective affiliates and
each of their employees, consultants and directors will maintain the
confidentiality of any Confidential Information received from the other under
this Agreement in the same manner as such party maintains the confidentiality of
its own confidential information. As defined herein, "Confidential Information"
shall mean the information, observations and data concerning the business or
30
affairs of Pro-Fac and Agrilink and their respective subsidiaries obtained by
the other party as a result of the interactions and communications contemplated
in this Agreement (including the audit rights under Paragraph 18), the Marketing
and Facilitation Agreement between the parties hereto dated as of November 3,
1994 (the "Prior Agreement") and related agreements. The following information
shall not be considered Confidential Information hereunder:
(i) information in the public domain at the time of disclosure;
(ii) information that was known or otherwise available to the
receiving party prior to its disclosure by the disclosing party; and
(iii) information that has been independently developed without
the benefit of any reference to any disclosure hereunder by any party.
(b) Notwithstanding any of the foregoing, a party may disclose
Confidential Information of the other party if required by applicable law, rule,
regulation, government requirement and/or court order, provided that the
disclosing party promptly notifies the other party of its notice of any such
requirement and provides the other party a reasonable opportunity to seek a
protective order or other appropriate remedy and/or to waive compliance with the
provisions of this Agreement.
22. Merchant Status; Pro-Fac to Become a Licensed Farm Product Dealer.
Pro-Fac hereby represents and warrants (i) that it is a merchant with respect to
the Raw Products sold and delivered to Agrilink, and (ii) that the Pro-Fac
members are merchants with respect to the Raw Products delivered to Agrilink
pursuant to this Agreement. The parties hereby agree that under this Agreement
(i) notwithstanding the method of transportation or delivery, Pro-Fac, not
Pro-Fac's members, will sell and deliver Raw Products to Agrilink; and (ii)
Agrilink will buy and receive Raw Products from Pro-Fac, not Pro-Fac's members.
Pro-Fac hereby represents that
31
it will make all commercially reasonable efforts to become, and to continue to
be during the term of this Agreement, a licensed farm product dealer with the
New York State Department of Agriculture and Markets.
23. Notices. All notices, requests, demands or other communications
required or permitted under this Agreement shall be given in writing and shall
be deemed to have been given upon delivery if delivered personally, upon receipt
by the sender of a confirmation of receipt by the receiving party if sent by
facsimile, one day following dispatch if sent by overnight courier, fees
prepaid, or five days following mailing, postage prepaid, as follows:
(a) Any delivery of commercial communications in connection with the
Raw Product Plan, the Commercial Market Value determination or objections
thereto shall be directed to the following:
If to Pro-Fac:
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: General Manager
Facsimile: (585) 383-1281
If to Agrilink:
Agrilink Foods, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: President
Facsimile: (585) 383-1606
(b) Any notices of breach, of arbitration or dispute or communications
regarding amendment or modification of this Agreement shall be directed to the
following:
32
If to Pro-Fac:
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: General Manager
Facsimile: (585) 383-1281
with a copy to:
Harris Beach LLP
99 Garnsey Road
Pittsford, NY 14534
Attn: Thomas Willett
Facsimile: (585) 419-8801
If to Agrilink:
Agrilink Foods, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: Dennis Mullen and David Mehalick
Facsimile: (585) 385-1606
With copies to:
Vestar Capital Partners IV, L.P.
245 Park Avenue, 41st Floor
New York, NY 10167-4098
Attn: David Hooper
Facsimile: (212) 808-4922
and
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attn: Michael Movsovich
Facsimile: (212) 446-4900
24. Entire Agreement. This Agreement, including the Exhibits and Schedules
attached hereto, constitutes the entire agreement between, and supercedes all
prior agreements and understandings of, the parties with respect to its subject
matter including, without limitation,
33
the Prior Agreement. This Agreement may only be modified by a writing signed by
duly authorized representatives of both parties.
25. No Third-Party Beneficiaries. This Agreement is for the sole benefit of
the parties hereto and their permitted successors and assigns and nothing herein
expressed or implied shall give or be construed to give any Person, other than
the parties hereto and such permitted successors and assigns, any legal or
equitable rights hereunder.
26. Agreement Jointly Drafted. Both parties acknowledge that they have
jointly drafted and negotiated all provisions of this Agreement, and this
Agreement was not drafted solely by either party. This agreement shall not be
interpreted strictly for or against either party.
27. Section Headings. Section, Paragraph and other headings contained in
this Agreement are for reference purposes only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
28. Severability. Each provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever in a particular jurisdiction, such illegality or invalidity shall not
affect the validity of such term or provision in any other jurisdiction or the
validity of the remainder of this Agreement in any jurisdiction.
29. Counterpart Execution. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties hereto had signed the same document. All
counterparts so executed shall be deemed to be an original, shall be construed
together and shall constitute one Agreement.
30. Time of Essence. Time is expressly declared to be the essence of this
agreement.
34
31. Governing Law; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICTS OR CHOICE
OF LAWS PRINCIPLES OF THE STATE OF NEW YORK OR OF ANY OTHER JURISDICTION THAT
WOULD RESULT IN THE APPLICATION OF ANY LAWS OTHER THAN THOSE OF THE STATE OF NEW
YORK. VENUE FOR ALL PROCEEDINGS UNDER THIS AGREEMENT SHALL BE ROCHESTER, NEW
YORK. EACH PARTY, TO THE FULLEST EXTENT PERMITTED BY LAW, HEREBY WAIVES TRIAL BY
JURY OF ANY MATTER RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
* * * * *
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
AGRILINK FOODS, INC.
By:
--------------------------
Name:
Title:
PRO-FAC COOPERATIVE, INC.
By:
--------------------------
Name:
Title:
36
Schedule 4(d) Page 1
Target Percentage and Target Volume for Each Covered Crop1
- ----------------------------------------------------------------------
Covered Crop Target Volume (tons) Target Percentage
- ----------------------------------------------------------------------
Asparagus 2,400 100%
- ----------------------------------------------------------------------
Snap Beans 37,496 57%
- ----------------------------------------------------------------------
Beets 1,383 100%
- ----------------------------------------------------------------------
Cabbage 42,000 100%
- ----------------------------------------------------------------------
Red Cabbage 1,100 100%
- ----------------------------------------------------------------------
Carrots 18,000 25%
- ----------------------------------------------------------------------
Corn 93,967 35%
- ----------------------------------------------------------------------
Peas 27,401 43%
- ----------------------------------------------------------------------
Butternut 2,500 100%
- ----------------------------------------------------------------------
Greens 7,570 85%
- ----------------------------------------------------------------------
Limas 3,850 37%
- ----------------------------------------------------------------------
Roots 0 0%
- ----------------------------------------------------------------------
Popcorn 17,288 100%
- ----------------------------------------------------------------------
Dry Beans 5,328 67%
- ----------------------------------------------------------------------
Potatoes (for Potato Chips) 34,947 81%
- ----------------------------------------------------------------------
Cucumbers 0 0%
- ----------------------------------------------------------------------
Apples 26,407 100%
- ----------------------------------------------------------------------
Blueberries 2,997 100%
- ----------------------------------------------------------------------
Cherries 16,597 100%
- ----------------------------------------------------------------------
Peaches 1,824 65%
- ----------------------------------------------------------------------
- ----------
1 The Target Volumes and Target Percentages set forth in this table are
subject to adjustment and the calculations contemplated by Paragraph 4(d)
of this Agreement and by this Schedule 4(d) are both subject to the terms
of pages 4 and 5 of this Schedule 4(d).
Schedule 4(d) Page 1
Schedule 4(d) Page 2
Table A: Determination of Shortfall Payment Percentage
Once the Percentage of Target is determined pursuant to Paragraph 4(d), the
Shortfall Payment Percentage in the right column below corresponding to the
Percentage of Target so determined shall be applied to the applicable amount in
Table B below to determine the applicable Shortfall Adjustment, subject to the
limitations described therein.
- ---------------------------------------------------
Percentage of Target Shortfall Payment Percentage
- ---------------------------------------------------
0%-50% 50%
- ---------------------------------------------------
50%-55% 45%
- ---------------------------------------------------
55%-60% 40%
- ---------------------------------------------------
60%-65% 35%
- ---------------------------------------------------
65%-70% 30%
- ---------------------------------------------------
70%-75% 25%
- ---------------------------------------------------
75%-80% 20%
- ---------------------------------------------------
80%-85% 15%
- ---------------------------------------------------
85%-90% 10%
- ---------------------------------------------------
90%-95% 5%
- ---------------------------------------------------
95%-100% 0%
- ---------------------------------------------------
Schedule 4(d) Page 2
Schedule 4(d) Page 3
Table B: Determination of Shortfall Adjustment
- --------------------------------------------------------------------------------
For purposes of this Agreement, a Shortfall Adjustment shall be determined by
multiplying the Commodity Amount shown below for the applicable Covered Crop in
the applicable year by the Shortfall Payment Percentage determined pursuant to
Table A above, provided that all Shortfall Adjustments will be subject to the
following limitations: (i) any Shortfall Adjustments will be limited to the
extent that such payment, together with all prior Shortfall Adjustments paid
with respect to that Covered Crop, would exceed the Commodity Amount in effect
for such Covered Crop in the year for which the Shortfall Adjustment is being
calculated and (ii) any Shortfall Adjustment will be limited to the extent that
such payment, together with all prior Shortfall Adjustments paid with respect to
all Covered Crops, would exceed the aggregate of all Commodity Amounts for all
Covered Crops in effect in the year for which the Shortfall Adjustment is being
calculated .
- --------------------------------------------------------------------
Commodity Amount Commodity Amount
Covered Crop Years 1 through 3 Years 4 through 10
- --------------------------------------------------------------------
Asparagus $ 430,000 $ 215,000
- --------------------------------------------------------------------
Snap Beans $ 1,420,000 $ 710,000
- --------------------------------------------------------------------
Beets $ 30,000 $ 15,000
- --------------------------------------------------------------------
Cabbage $ 680,000 $ 340,000
- --------------------------------------------------------------------
Red Cabbage $ 20,000 $ 10,000
- --------------------------------------------------------------------
Carrots $ 610,000 $ 305,000
- --------------------------------------------------------------------
Corn $ 1,820,000 $ 910,000
- --------------------------------------------------------------------
Peas $ 3,370,000 $ 1,685,000
- --------------------------------------------------------------------
Butternut $ 110,000 $ 55,000
- --------------------------------------------------------------------
Greens $ 390,000 $ 195,000
- --------------------------------------------------------------------
Limas $ 590,000 $ 295,000
- --------------------------------------------------------------------
Roots $ 0 $ 0
- --------------------------------------------------------------------
Popcorn $ 1,270,000 $ 635,000
- --------------------------------------------------------------------
Dry Beans $ 1,470,000 $ 735,000
- --------------------------------------------------------------------
Potatoes (for Potato Chips) $ 2,250,000 $ 1,125,000
- --------------------------------------------------------------------
Cucumbers $ 0 $ 0
- --------------------------------------------------------------------
Apples $ 1,230,000 $ 615,000
- --------------------------------------------------------------------
Blueberries $ 1,370,000 $ 685,000
- --------------------------------------------------------------------
Cherries $ 2,630,000 $ 1,315,000
- --------------------------------------------------------------------
Peaches $ 310,000 $ 155,000
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Total: $20,000,000 $10,000,000
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Schedule 4(d) Page 3
Schedule 4(d) Page 4
Adjustments Related To Business Sales and Acquisitions
- --------------------------------------------------------------------------------
I. ADJUSTMENTS
1. Adjustments to Schedule Generally. In the event of a Sale of a Business,
the Target Volumes and Target Percentages set forth above shall be adjusted
following such sale to reflect the volumes and percentages that would have been
set forth above had the applicable Disposed Business not been owned by Agrilink
on the date of this Agreement. If Agrilink acquires any business after the date
of this Agreement, the Target Percentages on this Schedule 4(d) will be adjusted
down, but not up, to reflect the volume of the relevant crops purchased by such
business during the most recently ended twelve month period prior to the date of
such acquisition. Target Volumes will not be adjusted in connection with an
acquisition of a business.
2. Sale of a Business Prior to Third Anniversary. If there is a Sale of a
Business (other than Agrilink's popcorn business and applesauce business) during
the three year period commencing on the date hereof and there has not been an
Effective Assignment, then the Annual Total Planned Purchases provided for in
each Final Raw Product Plan prepared by Agrilink during such three year period
shall be deemed to include the Disposed Business Included Volume and the Pro-Fac
Offset Volume shall be included in the Annual Pro-Fac Planned Purchases during
such period.
Notwithstanding Paragraph 1 above, if the provisions of this Paragraph 2
are applicable to a Disposed Business, the adjustment that would otherwise be
made to the Target Volumes and Target Percentages set forth above shall not be
made until the third anniversary of this Agreement.
II. DEFINITIONS
"Disposed Business" means the business unit, line of business or operation,
or part thereof that is the subject of a Sale of a Business.
"Disposed Business Included Volume" means the volume of each affected crop
relating to a Disposed Business that was specified in the Final Raw Product Plan
most recently prepared by Agrilink prior to the date on which such business
became a Disposed Business.
"Effective Assignment" means (i) an assignment of all or any portion of
Agrilink's rights and obligations under this Agreement to a person or persons in
connection with a Sale of a Business, provided that Agrilink has determined that
the assignee is financially capable of performing the assigned obligations and
Pro-Fac has not successfully challenged such determination, or (ii) the
purchaser of any Disposed Business entering into another supply agreement or
relationship with Pro-Fac and/or one or more of its members with respect to the
Disposed Business
Schedule 4(d) Page 4
Schedule 4(d) Page 5
Adjustments Related To Business Sales and Acquisitions (continued)
"Pro-Fac Offset Volume" means, on an annual basis, the volume of any
applicable crop purchased from Pro-Fac or any Pro-Fac member by the purchaser of
a Disposed Business that exceeds the volume of the applicable crop purchased by
such purchaser from Pro-Fac and any Pro-Fac member during the year prior to
acquiring the Disposed Business.
"Sale of a Business" means a sale by Agrilink of all or part of a business
unit, line of business or operation subsequent to the date of this Agreement.
Schedule 4(d) Page 5
Exhibit I
EXECUTION COPY
AGRILINK FOODS, INC.
90 Linden Oaks
Rochester, NY 14625
______ , 2002
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, NY 14625
Ladies and Gentlemen:
This letter agreement (this "Agreement") is entered into in connection
with the termination of the Marketing and Facilitation Agreement dated as of
November 3, 1994, (the "MFA"), by and between Pro-Fac Cooperative, Inc.
("Pro-Fac") and Curtice-Burns Foods, Inc., predecessor in interest to Agrilink
Foods, Inc. ("Agrilink"). The MFA is the latest in the series of substantially
similar agreements dating back to 1961 which evidence the symbiotic relationship
between Pro-Fac and Agrilink. The members and patrons of Pro-Fac are active
growers who have joined together in their cooperative to market their crops at a
fair price and to try to achieve as much stability and continuity as is possible
in agriculture. While Pro-Fac and its members and patrons have considerable
expertise in the growing of crops, they do not have such expertise in the
processing and sale of the crops in the form of commercially viable processed
food products. Agrilink has long been engaged in the processing, distribution
and sale of processed foods on a diversified geographical basis, but it lacks
expertise in the farming and growing of the crops on which it depends for a
reliable and long term source of supply for its products. Pro-Fac and Agrilink
came together because of the need of Pro-Fac to find a stable market for crops
grown by its members and patrons and because of the need of Agrilink for a
reliable supply of such crops. While Agrilink has always believed that it has
available to it adequate funds to finance its non-Pro-Fac related operations, in
order to process and market Pro-Fac products Agrilink has required significant
additional sources of financing in the form of working capital and facilities
necessary to give it the capacity to provide a reliable and stable market for
Pro-Fac crops. Consequently, the willingness of Agrilink to enter into its
relationship with Pro-Fac has always depended upon the commitment of Pro-Fac to
provide financial support and other accommodations to Agrilink from a variety of
sources not directly available to Agrilink. Pro-Fac has always provided such
accommodations in order to achieve its primary objective of a guaranteed and
stable market for crops grown by its members and patrons. As most recently
reflected in the MFA, those accommodations have included the guarantee by
Pro-Fac of all indebtedness for borrowed funds of Agrilink, the making available
by Pro-Fac to Agrilink of access to the Federal Farm Credit System for borrowing
of funds, the long term commitment of Pro-Fac to provide Agrilink with a stable
and reliable source of high quality crops that provide the essential basis for
the operation and utilization of facilities of Agrilink in which Pro-Fac
products are processed, favorable extended payment terms for crops of Pro-Fac's
members, the acceptance by Pro-Fac of the risk of losses by Agrilink on the sale
of Pro-Fac products, and the commitment of Pro-Fac to provide loans to Agrilink
for use as working capital of funds of Pro-Fac not needed by Pro-Fac for its own
business purposes. In exchange, Agrilink has paid Pro-Fac the commercial market
value of its crops plus an additional payment based on Agrilink's earnings from
the marketing of Pro-Fac products. The parties hereto acknowledge
that all income, gains, and losses earned by Pro-Fac under the MFA have been
reported as patronage sourced income pursuant to Subchapter T of the Internal
Revenue Code, and that characterization has been supported by longstanding
rulings from the Internal Revenue Service. Since the termination fee provided
for in Paragraph 1 below is being paid to Pro-Fac in full and arms length
consideration for the cessation of its rights to earn patronage income under the
MFA, it is by necessity Pro-Fac's intent to treat such termination fee as
patronage income and include it in its patronage dividends to its
member/growers.
1. Termination Fee. Subject to the terms of Paragraph 4 below, as
consideration to Pro-Fac for terminating its rights under the MFA, Agrilink
will pay to Pro-Fac an amount equal to $10,000,000 per year for the five
(5) consecutive years following the date of this Agreement (the
"Termination Date"). Such amount shall be paid in quarterly installments as
follows: $4,000,000 on each July 1st, and $2,000,000 on each October 1st,
January 1st and April 1st, wired to an account designated by Pro-Fac not
less than 30 days prior to the due date for each such payment, until an
aggregate amount of $50,000,000 has been paid or until a Prepayment is made
pursuant to Paragraph 2 below. It is the parties intention that the first
payment hereunder be made as of the Termination Date in the amount of
$4,000,000 (subject to the provisions of Paragraph 4 below), with the next
payment to be made on October 1, 2002 and quarterly thereafter until all
payments required hereunder have been made. In the event that payment of
the amounts under this Paragraph 1 are prohibited because of the existence
of a default, that is neither waived nor cured, under the terms of any
Third Party Indebtedness of Agrilink and/or any of its subsidiaries having
a principal amount in excess of $20,000,000, the payments due hereunder
will be deferred until permitted by the applicable instruments evidencing
such indebtedness and will then be made to the fullest extent permitted.
During the period of any such deferral, the portion of the payments so
deferred shall bear interest at the rate of 10% per annum compounded
annually. Notwithstanding the preceding provisions of this Paragraph 1,
Agrilink's obligation to make any payment due during a fiscal year shall be
conditioned upon Pro-Fac, as of the time such payment is due, having
maintained grower membership such that it would be capable (based on the
commitments of its growers) of delivering to Agrilink in the twelve months
following the due date for such payment at least 75% of the aggregate
volume of crops that it delivered to Agrilink pursuant to the MFA during
the corresponding twelve month period most recently ended prior to the date
of this Agreement; provided, that Pro-Fac shall be deemed to have satisfied
such condition if Pro-Fac's inability to achieve the foregoing delivery
capacity in any given year is due primarily to Agrilink's reduced
requirements for crops in that or a previous year that has caused a
reduction in Pro-Fac membership; provided, that, notwithstanding the
foregoing proviso, to the extent that Agrilink's requirements increase
subsequent to a reduction, Pro-Fac shall not be deemed to have satisfied
such condition unless it will have used its commercially reasonable efforts
to restore membership. "Third Party Indebtedness" means, for purposes of
this Paragraph 1, (i) indebtedness under any credit facility provided by a
bank or other financial institution, (ii) indebtedness for borrowed money
under any bond or note indenture and notes issued pursuant thereto, (iii)
indebtedness under any financing facility, note or other evidence of
indebtedness (as determined in accordance with generally accepted
accounting principles) provided by or issued to a financial institution in
connection with a borrowing or other financing transaction, and (iv) any
refinancing of the foregoing.
2. Defeasance Prepayment and Mandatory Prepayment.
-2-
(a) At any time while amounts remain outstanding under this Agreement,
Agrilink may satisfy all or any portion of its obligation hereunder by
making a lump-sum payment (a "Defeasance Prepayment") by means of
deposit to an escrow account maintained by an escrow agent selected by
Agrilink and reasonably acceptable to Pro-Fac. The escrow agent shall
hold such lump-sum payment in escrow, subject to the provisions of
Paragraph 1 above, until any portion thereof would have been paid
pursuant to the terms and conditions of this Agreement, at which time
the escrow agent shall pay such amounts to Pro-Fac; provided, that all
amounts remaining in escrow, if any, after all payments due to Pro-Fac
hereunder have been paid, shall be paid to Agrilink. In the event of a
Defeasance Prepayment, the amount required to satisfy the portion of
Agrilink's obligation hereunder being prepaid shall be sufficient to
enable the escrow agent to pay the portion of the obligations being
prepaid, without any discount, when due, assuming all such quarterly
payments that are being prepaid will in fact become payable according
to the terms hereof. Any amount paid pursuant to this Paragraph 2(a)
shall reduce future payments under Paragraph 1, in the order that such
payments would otherwise be made.
(b) In the event of a Change of Control at any time when any amount
remains to be paid pursuant to Paragraph 1 above, Agrilink must
satisfy all of its obligation hereunder by making a lump-sum payment
(a "Mandatory Prepayment", and collectively with a Defeasance
Prepayment referred to herein as a "Prepayment") to Pro-Fac equal to
an amount calculated by applying a discount factor of 10% per annum,
on a quarterly basis, to the amount required to satisfy all remaining
payments to be made pursuant to Paragraph 1 above, assuming all such
quarterly payments that are being prepaid will in fact become payable
according to the terms hereof. Agrilink shall have no further
obligation to Pro-Fac hereunder after the Mandatory Prepayment has
been made. "Change of Control" means, for purposes of this Paragraph
2(b), any transaction or series of transactions, including any sale,
transfer or issuance by securities sale, merger, consolidation,
recapitalization or otherwise, that results, directly or indirectly,
in (i) a transfer of all or substantially all of the assets of
Agrilink, or (ii) Vestar Capital Partners IV, L.P. and its affiliates
ceasing to possess, directly or indirectly, the power to elect a
majority of Agrilink Holdings, Inc.'s board of directors.
3. Prohibited Payments. Until the entire amount due hereunder is paid in
accordance with Paragraph 1 or 2 above, Agrilink shall not make payments to
Agrilink Holdings, LLC ("Holdings LLC"), Agrilink Holdings, Inc. nor to
Vestar/Agrilink Holdings LLC ("Vestar") if such funds will be used directly
or indirectly to redeem, acquire or make distributions or payments with
respect to any Vestar Securities. "Vestar Securities" means equity
securities of Holdings LLC originally issued to Vestar or any of its
affiliates pursuant to the Unit Purchase Agreement ("the UPA"), dated as of
June 20, 2002, among Vestar, Pro-Fac and Agrilink.1
- ----------
1 In the event that the LLC structure is implemented, this provision will not
prohibit tax distributions to any member of any constituent entity.
-3-
4. Payment Adjustments. Notwithstanding the provisions of Paragraph 1 above,
the payments to be made to Pro-Fac pursuant to Paragraph 1 (or Paragraph 2,
if applicable) will be reduced, in the order in which such payments are
otherwise scheduled to be made, to the extent that either (i) following
February 28, 2002 and prior to the Closing, Agrilink has made or makes
payments to Pro-Fac that are not contemplated by the Eight Plus Four Plan
(as defined in the UPA), other than for crops purchased by Agrilink in the
ordinary course of business pursuant to and in accordance with the MFA,
other than payments under Section 14 thereof ("Crop Purchase Payments"), or
(ii) following June 29, 2002 and on or prior to the Termination Date,
Agrilink makes any payment to Pro-Fac other than (a) Crop Purchase Payments
or (b) to fund a patronage dividend payment by Pro-Fac to its members in an
amount not to exceed the Permitted Patronage Amount (as defined in the
UPA).
5. Miscellaneous.
(a) Assignment. Agrilink shall have the right to assign this Agreement in
whole or in part in connection with the sale or other disposition of
all or any part of its business. This Agreement may not be assigned by
Pro-Fac without the prior written consent of Agrilink, and any
attempted assignment without such consent shall be void.
(b) Counterpart Execution. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties hereto had signed the same
document. All counterparts so executed shall be deemed to be an
original, shall be construed together and shall constitute one
Agreement.
(c) No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this letter agreement. In the event
an ambiguity interpretation arises, this letter agreement shall be
construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any
party hereto by virtue of the authorship of any of the provisions of
this letter agreement.
(d) Governing Law; Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CONFLICTS
OR CHOICE OF LAWS PRINCIPLES OF THE STATE OF NEW YORK OR OF ANY OTHER
JURISDICTION THAT WOULD RESULT IN THE APPLICATION OF ANY LAWS OTHER
THAN THOSE OF THE STATE OF NEW YORK. VENUE FOR ALL PROCEEDINGS UNDER
THIS AGREEMENT SHALL BE ROCHESTER, NEW YORK. EACH PARTY, TO THE
FULLEST EXTENT PERMITTED BY LAW, HEREBY WAIVES TRIAL BY JURY OF ANY
MATTER RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(e) Notices. All notices, requests, demands or other communications
required or permitted under this Agreement shall be given in writing
and shall be deemed to have been given upon delivery if delivered
personally, upon receipt by the sender
-4-
of a confirmation of receipt by the receiving party if sent by
facsimile, one day following dispatch if sent by overnight courier,
fees prepaid, or five days following mailing, postage prepaid, as
follows:
If to Pro-Fac:
Pro-Fac Cooperative, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: Bruce Fox, Chairman
Facsimile:(231) 861-4884
with a copy (which shall not constitute notice to Pro-Fac) to:
Harris Beach LLP
99 Garnsey Road
Pittsford, NY 14534
Attn: Thomas E. Willett, Esq.
Facsimile: (585) 419-8818
If to Agrilink:
Agrilink Foods, Inc.
90 Linden Oaks
Rochester, NY 14625
Attn: Dennis M. Mullen
Facsimile: (585) 383-1606
With copies (which shall not constitute notice to Agrilink) to:
Vestar Capital Partners IV, L.P.
245 Park Avenue, 41st Floor
New York, NY 10167-4098
Attn: David Hooper and General Counsel
Facsimile: (212) 808-4922
and
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attn: Michael Movsovich
Facsimile: (212) 446-4900
* * * *
-5-
Please sign the enclosed copy of this Agreement in the place provided
below acknowledging receipt of this Agreement and confirming that this Agreement
reflects your understanding.
Very Truly Yours,
AGRILINK FOODS, INC.
By:
-------------------------
Name:
Title:
Accepted and agreed to as of
this ___ day of _____________, 2002
PRO-FAC COOPERATIVE, INC.
By:
--------------------------------------------
Name:
Title:
Exhibit L
Evaluating LLC Structure
The parties agree that the Company will be converted to a limited liability
company immediately prior to Closing; provided, that such conversion shall not
occur if Pro-Fac is not reasonably satisfied that, under the terms of the
proposed conversion to a limited liability company presented by the Buyer (the
"Proposed Terms"), Pro Fac's shareholders/members will be at least as well off
on an after-tax cash flow basis, and that the Proposed Terms do not impair any
material rights, that are not contemplated in this Exhibit L to be modified, of
Pro-Fac and its members as contemplated by the transactions and agreements
contemplated hereby (assuming no conversion to the limited liability structure)
using any reasonable set of assumptions about the performance of the Company and
the timing and value of the Company in connection with a sale of the Company,
compared to the results if there is no such conversion using the same set of
assumptions. Assuming such conversion, Pro-Fac and Buyer will take or cause to
be taken all actions, and do or cause to be done all things, necessary, proper
or advisable on their part to implement and make effective, no later than
immediately preceding the Closing, the limited liability company structure,
including without limitation (i) creating a new limited liability company or
reforming an existing entity to serve as the successor to the Company, and (ii)
preparing, filing and obtaining, as promptly as practicable, all documentation
to effect the change of status (by merger or otherwise) and all necessary
applications, notices, petitions, approvals, Permits, filings, Tax ruling
requests, authorizations and other documents in order to implement the limited
liability company structure. The Proposed Terms, including the types of
membership units and their respective rights to allocations and distributions,
in the case of a conversion to the limited liability company structure shall be
drafted so that (1) the after-tax dollar return realized by the holders of the
Preferred Purchase Units in respect of the ownership of such units, whether held
directly or through a corporation, shall be equal to what they would be in a
comparable case using a corporate structure, (2) after the provisions of clause
(1) have been satisfied, after-tax dollar benefits of using the limited
liability company structure will be allocated among the members of Holdings LLC
in proportion to their capital contributions to Holdings LLC at the Closing (for
this purpose, Pro-Fac shall be deemed to have contributed $32.1 million to the
capital of Holdings LLC), and (3) the $10 million priority distribution shall be
a guaranteed payment subject only to the same limitations on payment with
respect to defaults under Third Party Indebtedness as are reflected in the
Termination Agreement and shall not be considered an after tax benefit to
Pro-Fac for purposes of clause (2) above. With respect to a Sale of the Company
(as defined in the Securityholders Agreement) no portion of the proceeds of such
sale will be considered after tax dollar benefits under clause (2) above except
to the extent that the Buyer can demonstrate to Pro-Fac's reasonable
satisfaction that such portion of such proceeds arises from, is due to or has
been obtained because of the limited liability company structure. Holdings LLC
and the new limited liability operating company will make tax distributions to
their members; provided, that there shall be no separate tax distribution for
the $10 million priority distribution (to Pro-Fac) or for income realized in
connection with a Sale of the Company (as defined under the Securityholders
Agreement). With respect to the tax distributions, the Buyer will have the right
to specify the percentage of allocated income that will be paid to each member
by Holdings LLC as tax distributions, provided that, either (i) each member will
receive tax distributions based on the same percentage of allocated income or
(ii) if there are disparate percentages for different members in respect of
their common units, the first
distributions to the members with respect to their common units will be used to
adjust for the disparate tax distribution rates. In no event shall the tax rate
utilized to determine tax distributions (i) to Pro-Fac be less than 30%, or (ii)
with respect to the preferred units be more than the highest marginal federal,
state and local tax rate applicable to individuals. The Buyer may amend the
Proposed Terms in its discretion in order to satisfy the criteria of the first
sentence of this Exhibit L, but the amended Proposed Terms shall in no event be
less favorable to Pro-Fac and its shareholders/members with respect to the terms
outlined above than the original Proposed Terms. The limited liability company
structure will not be implemented in the event that it would preclude the
parties from satisfying any of the conditions to closing set forth in Article
VII. Nothing herein shall obligate the Buyer to undertake the conversion to the
limited liability company structure.
2