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EXHIBIT 2.2
STRICTLY CONFIDENTIAL
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AmeriServe Food Distribution, Inc.
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ASSET PURCHASE AGREEMENT
between
PepsiCo, Inc. and
Nebco Evans Holding Company
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May 23, 1997
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
as of the 23rd day of May, 1997, between PepsiCo, Inc., a North Carolina
corporation (the "Seller"), and Nebco Evans Holding Company, a Delaware
corporation (the "Buyer").
PRELIMINARY STATEMENTS
A. The Seller, through its unincorporated division called PFS ("PFS"),
owns and operates a distribution business which sells food, supplies, equipment,
smallwares, uniforms, beverages, promotional items and point of purchase
materials to (i) all of the Pizza Hut, Taco Bell and KFC restaurants currently
owned by the Seller and its subsidiaries within the contiguous 48 States of the
United States (the "Continental United States"), except for 53 KFC restaurants,
and (ii) a portion of the Pizza Hut, Taco Bell and KFC restaurants which have
been franchised to independent franchisees within the Continental United States,
and (iii) a limited number of Pizza Hut, Taco Bell and KFC restaurants outside
the Continental United States by exporting such food, supplies, equipment,
smallwares, uniforms, beverages, promotional items and point of purchase
materials from PFS distribution centers in the United States (as currently
conducted, the "PFS Business").
B. The Buyer desires to acquire, and the Seller desires to sell, the
assets and properties of the Seller used or held for use in the PFS Business,
and, subject to the terms and subject to the conditions set forth in this
Agreement, the Buyer desires to assume certain liabilities and obligations of
the PFS Business as hereinafter specified.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
ARTICLE 1
AGREEMENT TO PURCHASE AND SELL
SECTION 1.01. Sale of Assets arid Assumption of Liabilities.
(a) Subject to and upon the terms and conditions set forth in this
Agreement: (i) the Seller agrees to sell, transfer, assign, convey, set over and
deliver to the Buyer, and the Buyer agrees to purchase, acquire and receive from
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the Seller, all of the PFS Assets (as defined below), and (ii) the Buyer agrees
to assume all of the PFS Liabilities (as defined below), in each case at a
closing (the "Closing") to be held at the offices of Wachtell, Lipton, Rosen &
Katz, 51 West 52nd Street, New York, New York, 10019, or at such other location
as the parties hereto may agree, on the later of (i) the third business day
after satisfaction or waiver of the conditions set forth in Article 9 (subject
to Article 11) and (ii) June 25, 1997, or on such other date as shall be
mutually agreed in writing by the parties hereto (the "Closing Date"). All
transactions consummated at the Closing shall be deemed to have been made
simultaneously and shall all be effective at and as of the close of business on
the Closing Date.
(b) On or prior to the Escrow Date (as defined in Article 10), Pepsi-Cola
Canada, Ltd. ("PCL"), a Canadian corporation and wholly owned subsidiary of the
Seller, the Seller and the Buyer shall enter into a Canadian Asset Purchase
Agreement substantially similar to this Agreement but with such reasonable and
customary provisions as may be necessary or desirable under Canadian law (the
"Canadian Sale Agreement") pursuant to which PCL will agree to sell to the Buyer
and the Buyer will agree to purchase from PCL the PFS Canadian Business
comprised of the PFS Canadian Assets and the PFS Canadian Liabilities (as such
terms will be defined in the Canadian Sale Agreement).
SECTION 1.02. PFS Assets. The term "PFS Assets" shall mean all of the
Seller's (and each of the Seller's subsidiaries' other than PCL) right, title
and interest in and to all of the following assets, properties and rights:
(a) Owned Real Property. The parcel of real property in Manassas, Virginia
more specifically described in Exhibit A attached hereto, and operating as a
distribution center, together with all easements, rights of way, privileges,
licenses, appurtenances and other rights and benefits running with such parcel
of real property (the "Owned Real Property");
(b) Leased Real Property. All of the Seller's rights and leasehold
interests in the real property leased or subleased to the Seller pursuant to the
real estate lease agreements (or sublease agreements) described in Exhibit B
attached hereto (collectively, the "Leased Real Property"; the Owned Real
Property and the Leased Real Property are together referred to herein as the
"Real Property"). The Leased Real Property includes all 21 leased distribution
centers of the PFS Business within the Continental United States;
(c) Owned Tangible Personal Property. All fixtures, machinery, leasehold
improvements, equipment and all other tangible personal property (other than the
Vehicles and the Inventory, as such terms are defined below) owned by the Seller
and located at or forming part of the Real Property on the Closing Date,
including, without limitation, all furniture, office equipment (including all
computer
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hardware, copiers, fax machines and other business machines), refrigeration
equipment, material handling equipment, supplies and miscellaneous items
(collectively, the "Owned Tangible Personal Property"). Attached as Exhibit C is
a list of the refrigeration equipment owned by the Seller on the date hereof
which have been installed in the distribution centers of the PFS Business and a
separate list of substantially all of the material handling equipment of the PFS
Business owned by the Seller on the date hereof;
(d) Leased Tangible Personal Property. All of the Seller's rights and
interests in the equipment and other tangible personal property which are leased
to the Seller as of the Closing Date and are used or held for use primarily in
the PFS Business pursuant to equipment or vehicle lease agreements
(collectively, the "Leased Tangible Personal Property"; the Owned Tangible
Personal Property and the Leased Tangible Personal Property are together
referred to herein as the "Tangible Personal Property"). Exhibit D attached
hereto lists all material lease agreements existing on the date hereof relating
to the Leased Tangible Personal Property;
(e) Tractors, Trailers and Other Motor Vehicles. All of the route
tractors, yard tractors, route trailers and yard trailers and other motor
vehicles owned by the Seller as of the Closing Date and used or held for use
primarily in the PFS Business (collectively, the "Vehicles"), together with any
titles and licenses of the Seller relating to the Vehicles. Attached hereto as
Exhibit E is a list of all such Vehicles existing as of the date hereof;
(f) Intangible Property. All rights, title and interests of the Seller in
and to the following intangible property (collectively, the "Intangible
Property"):
(i) The Sourcelink automated order entry computer software system
owned by the Seller and more fully described in Exhibit F attached hereto;
(ii) the exclusive rights of the Seller to market, sell and install
in Taco Bell franchised restaurants the Home Office 360 computer software
system licensed by the Seller from Peavine Creek Software, Inc. pursuant
to the License and Marketing Agreement dated July 1, 1994 between Peavine
Creek Software, Inc. and the Seller, which Home Office 360 computer
software system is more fully described in Exhibit F attached hereto;
(iii) all computer applications, programs and other software, data
and databases (including all embodiments or fixations thereof and related
documentation, registrations and franchises, and all additions,
improvements, enhancements, updates and accessions thereto), all technical
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manuals and documentation made in connection with the foregoing, and all
licenses and rights with respect to the foregoing or of like nature,
including operating software, network software, firmware, middleware,
design software, design tools, systems documentation and instructions, in
each case to the extent owned by the Seller and used or held for use
exclusively in the PFS Business as of the Closing Date including, without
limitation, the Seller's rights in the Manugistics inbound transportation
software, the ASI inventory forecasting software, SAILS replenishment
program, and J.D. Edwards software package;
(iv) all service and parts records, warranty records, maintenance
and repair records and similar records of the Seller and all warranties
issued to the Seller as of the Closing Date relating to the PFS Assets;
and
(v) all material licenses and permits (collectively, the "Permits")
issued to the Seller as of the Closing Date by any governmental or
quasi-governmental agency or authority or any private party relating to or
affecting the ownership, use or enjoyment of the PFS Assets or required to
carry on the PFS Business, to the extent the Permits are transferable.
(g) Contracts. All of the rights, title and interest of the Seller in, to
and under the agreements, arrangements, contracts and commitments of the PFS
Business, including those agreements, arrangements, contracts and commitments
which are listed in Exhibits B, D, G, L and R attached hereto and purchase
orders for Goods in Transit (as defined herein) being transferred to the Buyer
pursuant to this Agreement, subject to the assumption by the Buyer of the
Seller's obligations thereunder as described in Section 1.03 below;
(h) Inventory. All of the inventory of finished goods, work in progress,
goods, commodities, supplies and raw materials owned by the Seller and located
on, or in transit to or from, the Real Property or used or sold in the operation
of the PFS Business and existing on the Closing Date (collectively, the
"Inventory");
(i) Goods in Transit. Anything falling under the description Owned
Tangible Personal Property or Inventory above ordered by the Seller from third
party vendors in the ordinary course of business for use in the PFS Business but
not yet received by the Seller prior to the Closing Date (the "Goods in
Transit");
(j) Prepaid Expenses. All prepaid expenses of Seller relating to the PFS
Business and included in the calculation of the Final Working Capital (defined
in Section 1.06 below);
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(k) Accounts Receivable. All of the accounts receivable of the Seller
arising out of the operations of the PFS Business and included in the
calculation of the Final Working Capital;
(l) Cash and Cash Equivalents. All cash equivalents and all cash included
in the calculation of the Final Working Capital or in bank accounts used
exclusively for the operation of the PFS Business and existing on the Closing
Date;
(m) Records. All records of the PFS Business in the Seller's possession on
the Closing Date, including sales and credit records, studies and reports,
advertising and sales material, customer lists, vendor lists, costs and supply
data, purchasing records, distribution and transportation records, inventory
records, historical product velocity reports, historical Department of
Transportation logs, financial records, copies of property and sales tax
records, personnel and payroll records for PFS employees, computer data and
records and other materials and information used in the PFS Business; provided,
however, that if the records or other information described in this clause (m)
is included within information relating to the businesses of the Seller and its
subsidiaries other than the PFS Business, then only the data relating to PFS
shall be provided by the Seller;
(n) Claims. All claims, rights of action and similar rights of the Seller
against third parties arising out of the Seller's ownership of the PFS Assets;
(o) Intellectual Property. All rights, title and interests of Seller as of
the Closing Date in and to the following intellectual property (collectively,
the "Intellectual Property") to the extent used or held for use primarily in the
PFS Business: any and all United States (i) patents (including design patents,
industrial designs and utility models) and patent applications (including
docketed patent disclosures awaiting filing, reissues, divisions, continuations
in part and extensions), patent disclosures awaiting filing determination,
inventions and improvements thereto; (ii) trademark, tradename, service mark and
brand name rights of the Seller to the PFS name, the PFS Globe design and the
Sourcelink name pursuant to the trademark registrations and applications listed
in Exhibit F attached hereto in the respective countries listed therein; (iii)
copyrights (including software) and registrations thereof; (iv) inventions,
processes, designs, formulae, trade secrets, know-how, industrial models,
confidential and technical information, manufacturing, engineering and technical
drawings, product specifications and confidential business information; (v) mask
work and other semiconductor chip rights and registrations thereof; and (vi)
copies and tangible embodiments thereof (in whatever form or medium, including
electronic media), including, but not limited to, rights to sue for and remedies
against past, present and future infringements thereof; and rights of priority
and protection of interests therein under the laws of any jurisdiction worldwide
and all tangible embodiments thereof; and
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(p) The PFS Business as an ongoing concern and the goodwill thereof.
SECTION 1.03. PFS Liabilities. The term "PFS Liabilities" shall mean:
(a) All obligations and liabilities of the Seller under any and all of the
leases, contracts, licenses and commitments of the PFS Business which are
described in Section 1.02 as part of the PFS Assets;
(b) Those liabilities and obligations in respect of the employees of the
PFS Business on the Closing Date to be assumed in accordance with Article 6
below;
(c) All liabilities of the PFS Business with respect to any litigation
disclosed pursuant to Section 2.10 below; provided, however, that the total
amount of liabilities assumed by the Buyer pursuant to this clause (c) shall not
exceed $2,000,000;
(d) All liabilities (including, without limitation, accounts payable)
arising out of the operation of the PFS Business or the ownership of the PFS
Assets existing on the Closing Date and included in the calculation of the Final
Working Capital described in Section 1.06 hereof;
(e) Up to $3,000,000 of sales, transfer and similar taxes on the transfer
of the PFS Assets to the Buyer pursuant to this Agreement plus any additional
such taxes occasioned by the failure of the Buyer to file appropriate and timely
resale certificates or take similar action to avoid such taxes; and
(f) No liability, obligation, claim or other matter shall in any event be
a PFS Liability except as expressly set forth in this Section 1.03.
SECTION 1.04. Purchase Price. The purchase price (the "Purchase Price")
for the PFS Assets and the PFS Canadian Assets is US$830,000,000, as adjusted
pursuant to Sections 1.06 and 1.07 below. The Purchase Price is in addition to
the assumption of the PFS Liabilities and the PFS Canadian Liabilities by the
Buyer, as described herein and in the Canadian Sale Agreement. The Purchase
Price for the PFS Assets and the PFS Canadian Assets shall be paid at the
Closing by wire transfer of immediately available funds to a bank account
designated by the Seller prior to the Closing.
SECTION 1.05. Allocation of Purchase Price. The Seller and the Buyer shall
use their reasonable best efforts to agree, within sixty (60) days after the
Closing Date, to an allocation of the Purchase Price (together with liabilities
assumed hereunder and other relevant items) among the PFS Assets and the PFS
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Canadian Assets. Such allocation will comply with the requirements of Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and will be
determined through arm's length negotiations. The Seller and the Buyer each
agrees that, to the extent permitted by applicable law, it will adopt and
utilize the amounts so allocated to each asset or class of assets for purposes
of all federal, state and other tax returns or reports of any nature filed by it
and that, except as may be required by applicable law or regulation, it will not
take any position inconsistent therewith upon examination of any such tax
returns or reports, in any claim for refund, in any litigation or otherwise with
respect to such tax returns or reports.
SECTION 1.06. Closing Balance Sheet.
(a) As promptly as practicable, but no later than 90 days after the
Closing Date, the Buyer (through the management of the PFS Business) will cause
to be prepared and delivered to the Seller a balance sheet (the "Closing Balance
Sheet"), and a certificate based on such Closing Balance Sheet setting forth in
detail the Buyer's calculation of the Closing Working Capital (as such term is
hereinafter defined). The Closing Balance Sheet shall fairly present the
consolidated financial position of the PFS Business and the PFS Canadian
Business as of the close of business on the Closing Date on a basis consistent
with those principles used in preparation of the Financial Statements referred
to in Section 2.07 below but including only those assets that are PFS Assets,
only those liabilities that are PFS Liabilities and reflecting all valuation and
other reserves with respect to PFS Assets recorded in any of the books and
records of the Seller or any division or affiliate of the Seller. For purposes
of this Agreement, the "Closing Working Capital" shall mean an amount equal to
(A) the sum of all current assets of the PFS Business and the PFS Canadian
Business, as defined by United States generally accepted accounting principles
("GAAP") and applied in a manner consistent with the Financial Statements
referred to in Section 2.07 below, less (B) the sum of all current liabilities
(but excluding all accounts payable cash management account liabilities
determined in accordance with the historical accounting practices and statements
of the PFS Business) of the PFS Business and the PFS Canadian Business, as
defined by GAAP and applied in a manner consistent with the Financial Statements
referred to in Section 2.07 below, but in each case excluding any items excluded
from the calculation of the Statement of Net Assets To Be Sold (as hereinafter
defined).
(b) After delivery of its calculation of the Closing Working Capital, the
Buyer shall make available to the Seller all books, records, work papers,
personnel and other materials and sources used by the Buyer to prepare the
calculation of the Closing Working Capital delivered pursuant to subsection
1.06(a). If the Seller disagrees with the Buyer's calculation of the Closing
Working Capital delivered pursuant to subsection 1.06(a), the Seller may within
60 days after receipt of the
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Buyer's calculation of the Closing Working Capital, send a notice to the Buyer
disagreeing with such calculation and setting forth the Seller's calculation of
such amount. Any such notice of disagreement shall specify those items or
amounts as to which the Seller disagrees.
(c) If a notice of disagreement is given by the Seller pursuant to
subsection 1.06(b), the Buyer and the Seller shall, during the 15 business days
following receipt of such notice, use their best efforts to reach agreement on
the disputed items or amounts in order to determine the Closing Working Capital.
If, during such period, the Buyer and the Seller are unable to reach such
agreement, they shall promptly thereafter cause a nationally recognized firm of
independent accountants chosen and mutually accepted by the Buyer and the Seller
(the "Accounting Referee") to review this Agreement and the disputed items or
amounts for the purpose of calculating the Closing Working Capital. In making
such calculation, the Accounting Referee shall consider only those items or
amounts in the Buyer's calculation of the Closing Working Capital as to which
the Seller has disagreed. The Accounting Referee shall deliver to the Buyer and
the Seller, as promptly as practicable, a report setting forth such calculation.
Such report shall be final and binding upon the Buyer and the Seller and shall
constitute an arbitral award upon which a judgment may be entered in any court
having jurisdiction thereof. The cost of such review and report by the
Accounting Referee shall be borne (i) by the Buyer if (A) the difference between
the Final Working Capital (as such term is hereinafter defined) and the Buyer's
calculation of the Closing Working Capital delivered pursuant to subsection
1.06(a) is greater than (B) the difference between the Seller's calculation of
the Closing Working Capital delivered pursuant to subsection 1.06(b) and the
Final Working Capital, and (ii) by the Seller if the amount referred to in
clause (A) above is less than the amount referred to in clause (B) above. For
purposes of this Agreement, the "Final Working Capital" shall mean the Closing
Working Capital, (x) as shown in the Buyer's calculation delivered pursuant to
subsection 1.06(a) if no notice of disagreement with respect thereto is
delivered by the Seller pursuant to subsection 1.06(b), or (y) if such a notice
of disagreement is delivered by the Seller, as agreed by the parties pursuant to
this subsection 1.06(c) or, in the absence of such agreement, as shown in the
Accounting Referee's calculation delivered pursuant to this subsection 1.06(c).
(d) The Buyer and the Seller agree that they will cooperate and assist in
the preparation of the Closing Balance Sheet and the calculation of the Closing
Working Capital and in the conduct of the audits and reviews referred to in this
Section 1.06, including, without limitation, making available to the extent
necessary books, records, work papers and personnel.
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SECTION 1.07. Adjustment of Purchase Price.
(a) If the Final Working Capital is less than US$232,342,000 (the amount
of Closing Working Capital estimated by the Seller immediately prior to the date
hereof), the Seller shall pay to the Buyer, as an adjustment to the Purchase
Price, in the manner provided in subsection 1.07(b), the amount of such
difference. If the Final Working Capital is greater than US$232,342,000, the
Buyer shall pay to the Seller, in the manner provided in subsection 1.07(b),
the amount of such difference.
(b) Any payment due pursuant to subsection 1.07(a) shall be made by wire
transfer of immediately available funds within 10 days after the Final Working
Capital has been determined pursuant to Section 1.06(c), to such bank account of
the other party as may be designated by such other party. If the payment due
pursuant to subsection 1.07(a) is not made within such 10 day period, interest
shall be due on such late payment at a rate equal to the lesser of: (i) 18% per
annum (calculated on the basis of the number of days elapsed and a 365 day year)
or (ii) the maximum rate permitted to be charged under applicable state law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER
In order to induce the Buyer to enter into this Agreement, the Seller
hereby represents and warrants as follows:
SECTION 2.01. Organization and Standing of the Seller. The Seller (i) is a
duly organized and validly existing corporation, in good standing under the laws
of the State of North Carolina, (ii) has all requisite corporate power and
authority to own, lease, use and operate the PFS Assets and to transact the PFS
Business where and as now conducted, and (iii) is duly qualified and in good
standing in each jurisdiction in which the conduct of the PFS Business, as now
conducted, makes such qualification necessary.
SECTION 2.02. Corporate Power and Authority. The Seller has full corporate
power and authority to carry out its obligations hereunder. The execution and
delivery of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Seller. No other
corporate acts or proceedings on the part of the Seller or its stockholders are
necessary to authorize the exclusion and delivery of this Agreement or the
consummation of the transactions contemplated hereby. When duly executed and
delivered by the parties hereto, this Agreement will constitute a valid and
legally
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binding obligation of, and will be enforceable against, the Seller in accordance
with its terms.
SECTION 2.03. Conflicts, Consents and Approvals.
(a) Except as described in subsection 2.03(b) below, neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by the Seller with any of the provisions
hereof, will: (i) result in the creation of any lien, security interest, charge,
or encumbrance upon any of the PFS Assets; (ii) violate any order, writ,
injunction, decree, or any statute, rule or regulation applicable to the Seller
or any of the PFS Assets; (iii) violate the certificate of incorporation or
bylaws or other organizational documents of the Seller; or (iv) require the
consent or approval of any third party, court, or governmental body or agency,
instrumentality, or authority, other than as required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
(b) Exhibits B, D, G and R attached hereto identify all of the leases and
other agreements listed in such Exhibits which require the consents of certain
of the other parties thereto to assign to the Buyer such leases and agreements.
As described in Section 4.05 below certain of the Permits (including local,
state and federal vehicle, dairy and food licenses) are not transferable.
SECTION 2.04. Title to Properties; Absence of Liens and Encumbrances.
(a) Exhibits A and B hereto list and describe all of the Real Property of
the PFS Business. Exhibit C hereto lists and describes all of the refrigeration
equipment installed in the distribution centers of the PFS Business and a
separate list of substantially all of the material handling equipment of the PFS
Business owned by the Seller on the date hereof. Exhibit D hereto lists all
Leased Tangible Personal Property of the PFS Business. Exhibit E hereto lists
all Vehicles of the PFS Business.
(b)(i) Exhibit A sets forth a complete and accurate list and
description of all Owned Real Property. Exhibit B also sets forth a
complete and accurate list and description of all Leased Real Property,
such description including, for each Leased Real Property, an
identification of the lease or sublease agreement therefor, the names of
the lessor and lessee (or sublessor and sublessee) thereunder, the title
and date thereof, the address and approximate size of the premises leased
thereunder, the rental and term thereunder, including any extension
options, and the use of such premises.
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(ii) Seller holds good and marketable fee or leasehold title (as the
case may be) to the Owned Real Property and the Leased Real Property, free
and clear of any liens, mortgages, easements, rights-of-way, licenses, use
restrictions, claims, charges, options, title defects or encumbrances of
any nature whatsoever, except for the Permitted Encumbrances (as defined
below). The Permitted Encumbrances do not impair or adversely affect the
value of any Real Property in any material respect, the current use,
occupancy or operation thereof, or the business, operations or financial
condition of the PFS Business. As used herein, the term "Permitted
Encumbrances" means (A) liens for taxes not yet due and payable or which
are being contested by Seller in good faith and by appropriate
proceedings; (B) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like liens arising in the ordinary course of business
which are less than $50,000 in amount and which are being contested in
good faith and by appropriate proceedings; or (C) easements,
rights-of-way, encroachments, restrictions, conditions and other similar
encumbrances incurred or suffered in the ordinary course of business and
which, individually or in the aggregate, (1) are not substantial in
character, amount or extent in relation to the applicable Real Property
and (2) do not materially detract from the use, utility or value of the
applicable Real Property or otherwise materially impair Seller's present
business operations at such location.
(iii) No condemnation or eminent domain proceeding against any
material part of the Real Property is pending or (to Seller's knowledge)
threatened, and no material damage or destruction has occurred with
respect to any of the Real Property.
(iv) Seller has granted no outstanding options and has entered into
no outstanding contracts with others for the sale, mortgage, pledge,
hypothecation, assignment, sublease, lease or other transfer of all or any
part of the Real Property. No person or entity has any right or option to
acquire, or right of first refusal with respect to, Seller's interest in
the Real Property or any part thereof.
(v) All of the leases or subleases of the Leased Property (the "Real
Property Leases") are valid, binding and in full force and effect. No Real
Property Lease is subject to any pledge, lien, sublease, assignment,
license or other agreement pursuant to which the Seller granted to any
third party any interest in such Real Property Lease or any right to the
use or occupancy of any Leased Real Property. True and complete copies of
the Real Property Leases have previously been delivered to Buyer,
including, without limitation all amendments or modifications thereof and
all side letters or other instruments affecting in any material way the
obligations of
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any party thereunder. The lessee under each Real Property Lease is now in
possession of the applicable Leased Real Property. There is no pending or,
to the knowledge of the Seller, threatened proceeding against the Seller
which might interfere with the quiet enjoyment of each tenant. There are
no outstanding defaults or circumstances which, upon the giving of notice
or passage of time or both, would constitute a default or breach by the
Seller under any Real Property Lease. As used herein, the term "lease"
shall also include subleases, the term "lessor" shall also include any
sublessor, and the term "lessee" shall also include any sublessee.
(c) The Seller owns and has good and marketable title to (or, in the case
of leased property, has a valid leasehold interest in) the PFS Assets (other
than the Real Property, which is addressed in subparagraph 2.04(b) above), free
and clear of any liens, claims, charges, pledges, mortgages, security interests
or encumbrances (collectively "Encumbrances"), except for immaterial
Encumbrances which do not materially adversely affect the full use or enjoyment
of the PFS Assets and liens for taxes or assessments not yet due and payable.
SECTION 2.05. Condition of PFS Assets. All of the PFS Assets (i) are in
good operating condition, ordinary, wear and tear excepted and (ii) are fit for
the purposes for which they are intended and for which they are presently being
used in the operation of the PFS Business.
SECTION 2.06. Agreements and Commitments. Exhibits B, D, G, L and R list
all material contracts or agreements (including lease agreements and employment
agreements) of the PFS Business to which the Seller or any Affiliate of the
Seller is a party (collectively, the "Material Contracts"). Contracts and
agreements involving a total commitment of more than $50,000 (other than
purchase orders made in the ordinary course of business) shall be deemed to be
material for purposes of this Section 2.06. Each Material Contract is a valid
and binding agreement of the Seller and, to the Seller's knowledge, of the other
parties thereto. The Seller is not in default in any material respect under the
terms of such material contracts or agreements of the PFS Business and, to the
knowledge of the Seller, there is no existing default by the other party to such
material contracts or agreements.
SECTION 2.07. Financial Statements. Attached hereto as Exhibit H are true
and complete copies of:
(i) The audited consolidated balance sheets of PFS Business and the
PFS Canadian Business as at December 25, 1996 (the "Balance Sheet Date")
and December 27, 1995;
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(ii) The audited consolidated income statements and statements of
cash flows and divisional equity of the PFS Business and the PFS Canadian
Business for each of the three years ended December 25, 1996, December 27,
1995 and December 28, 1994;
(iii) The unaudited consolidated balance sheet of the PFS Business
and the PFS Canadian Business as of March 19, 1997 (the "Quarterly Balance
Sheet Date");
(iv) The unaudited consolidated income statements and statements of
cash flow and divisional equity of the PFS Business and the PFS Canadian
Business for the 12 week periods ended March 19, 1997 and March 23, 1996;
and
(v) The unaudited statement of the net PFS Assets and PFS
Liabilities (and the PFS Canadian Assets and PFS Canadian Liabilities) to
be sold as at the Balance Sheet Date (such statement, the "Statement of
Net Assets To Be Sold").
The balance sheets, income statements and statements of cash flows and
divisional equity referred to in paragraphs (i), (ii), (iii) and (iv) above have
been prepared in accordance with GAAP applied on a consistent basis and present
fairly the consolidated financial position of the PFS Business and the PFS
Canadian Business as of the dates indicated and the consolidated results of
operations and cash flows of the PFS Business and the PFS Canadian Business for
the years and periods indicated.
Except as reflected in the adjustments reflected in the statements
referred to in paragraph (v) above, the balance sheet referred to in paragraph
(i) above does not include any material assets that do not constitute a part of
the PFS Business and the PFS Canadian Business.
Except as set forth in Exhibit H, and without prejudice to the
classification of any claim, liability or obligation as a PFS Liability, to the
Seller's knowledge, there is no outstanding claim, liability or obligation of
any nature, whether absolute, accrued, known or unknown, contingent or
otherwise, affecting the PFS Assets or the PFS Business, other than (i)
liabilities and obligations that are fully reflected, accrued or reserved
against on the Financial Statements, (ii) liabilities and obligations that are
not required under GAAP to be reflected, accrued or reserved on the Financial
Statements, or (iii) other liabilities and obligations incurred since the
Quarterly Balance Sheet Date in the ordinary course of business consistent with
the prior practices of the PFS Business and the PFS Canadian Business, none of
which, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the assets, liabilities, results of
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operations, business or financial condition of the PFS Business (a "Material
Adverse Effect").
SECTION 2.08. Insurance. The Seller carries insurance sufficient in type
and amount to protect the PFS Assets and the PFS Business. The Seller has
provided to the Buyer a description of the insurance policies carried by it for
the PFS Business. The premiums for such insurance policies are fully paid and
there are no loans outstanding against any of such policies. All such insurance
will be maintained through the Closing Date but not thereafter.
SECTION 2.09. Taxes. Except as set forth in Exhibit I attached hereto, (i)
all tax returns and reports relating to the PFS Business which were required by
law to be filed for all periods prior to or including the Closing Date have been
timely filed or will be prepared and timely filed and are true and correct in
all material respects, (ii) all Taxes (as defined below) upon the PFS Business,
or upon any of its properties, assets or income, which are due and payable for
Pre-Closing Tax Periods (as defined below) have been paid or adequately
reserved, other than those presently payable without penalty or interest and
other than in connection with any sales or use tax arising as a result of the
transaction contemplated by this Agreement and (iii) the Seller has received no
written notice from any governmental authority, and has no actual knowledge,
that any deficiency or claim for additional taxes or any special tax or
assessment is to be levied against any PFS Asset. For purposes of this
Agreement, (i) "Tax" or "Taxes" shall mean any income, capital stock, sales,
use, ad valorem, payroll, occupation, property, excise taxes or governmental
charges (including interest and penalties), and (ii) "Pre-Closing Tax Periods"
shall mean all Tax periods ending on or before the Closing Date, and, with
respect to any Tax period that includes but does not end on the Closing Date,
the portion of such period that ends on and includes the Closing Date.
SECTION 2.10. No Litigation. Except as set forth in Exhibit J attached
hereto, there is no claim, arbitration, litigation or other legal proceeding or
governmental investigation pending or, to the knowledge of the Seller,
threatened against or affecting the PFS Business or the PFS Assets. For purposes
of this Agreement, the "knowledge of the Seller" shall mean the knowledge of the
officers, directors and management of the Seller and its subsidiaries and
divisions, including without limitation, the officers and management of the PFS
Business. The Seller is not in default with respect to any judgment, order,
injunction or decree of any court or other governmental authority affecting the
PFS Business.
SECTION 2.11. Compliance with Laws. The PFS Business is in compliance in
all respects, other than noncompliance which is individually or in the aggregate
immaterial with respect to the operations of the PFS Business, with all federal,
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state and local laws (statutory, judicial or otherwise), ordinances and
regulations, including, but not limited to "Environmental Laws" (hereinafter
defined).
Except as to matters that would not reasonably be expected to have a
Material Adverse Effect:
(a) the Seller has obtained or caused to be obtained all environmental
permits necessary for the operation of the PFS Business by the Seller to comply
with all Environmental Laws; all such permits are in good standing; the Seller
is in compliance with all terms and conditions of such permits, and the PFS
Business is in compliance with all other applicable Environmental Laws;
(b) during the two year period prior to the date hereof; no written
notice, request for information, order, complaint or penalty has been received
by Seller relating to, and Seller has not filed any notice pursuant to the
requirements of, any Environmental Law relating to the PFS Business;
(c) there are no judicial, administrative or other actions, suits or
proceedings pending or, to the Seller's knowledge, threatened which allege a
violation of any Environmental Law by Seller in connection with its operation of
the PFS Business; and
(d) there has been no written audit conducted by Seller of any properties
currently used in connection with the PFS Business which has not been delivered
to Buyer prior to the date hereof.
For purposes of this section, the term "Environmental Law" shall mean all
federal, state and local laws, ordinances and regulations of any governmental
entity now in effect and all judicial or administrative rulings, consent
decrees, orders, judgments or binding opinions, relating to the regulation and
protection of the environment or natural resources, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, the Clean Air Act, the Federal Water Pollution Control Act,
the Emergency Planning Community Right to Know Act, the Toxic Substances Control
Act, the Federal Insecticide, Fungicide, and Rodenticide Act and the Hazardous
Materials Transportation Act and applicable state laws.
SECTION 2.12. Permits. The Seller has all material Permits required for
the conduct of the PFS Business or to utilize the PFS Assets, which Permits are
listed in Exhibit K attached hereto. All such Permits are in full force and
effect, valid and outstanding, and the Seller has duly complied with all of the
terms and
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conditions under which each is held. Substantially all of the permits listed
in Exhibit K are not transferable.
SECTION 2.13. Employee Matters. The Seller has in relation to the
employees of the PFS Business, including, without limitation, those on lay-off,
short or long term disability, family leave or other leave of absence (the "PFS
Employees"), complied in all material respects with all federal, state and local
laws, ordinances and regulations. The Seller is not a party to any union
contract or collective bargaining agreements with the PFS Employees. Exhibit L
lists all employment agreements between the Seller and the PFS Employees. There
are no labor strikes or work stoppages pending or, to the knowledge of the
Seller, threatened against the PFS Business, nor have there been any such labor
strikes or work stoppages at any time within two years prior to the date of this
Agreement.
SECTION 2.14. Conduct of Business. Except as expressly contemplated
pursuant to the terms of this Agreement or disclosed in any Exhibit hereto,
since the Balance Sheet Date the Seller has not:
(a) sold, assigned, transferred or otherwise disposed of, mortgaged,
pledged or subjected to lien, charge, security interest or any other
encumbrance, any material PFS Asset, or any of the Seller's interest in any
material PFS Asset, except inventory and other items of personal property
disposed of in the ordinary course of the PFS Business;
(b) suffered any material damage, destruction or loss to the PFS Assets,
which damage or loss is not fully covered by insurance, or suffered any other
significant change, event or condition which a reasonable person could expect to
have a material adverse effect on the PFS Business (taken as a whole);
(c) taken any action, or failed to take any action, or permitted any act
or omission which would have a material adverse effect on the PFS Business
(taken as a whole);
(d) cancelled any material claim of or debt for borrowed money owed to the
PFS Business outside the ordinary course of business;
(e) subjected to or suffered the imposition of any lien on any material
PFS Asset, except for Permitted Encumbrances;
(f) made any material amendment or modification to or terminated any
Material Contract except in the ordinary course of business;
(g) except as disclosed to the Buyer prior to the date hereof,
increased, or committed to increase, the compensation for services payable or
to become
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payable to any officer, director or employee of the PFS Business, or any bonus
payment or similar arrangement for services made to or with any of such
officers, directors or employees, other than routine increases made in the
ordinary course of business not exceeding ten percent (10%) per annum for any of
them individually, in each case which will be an obligation or liability of the
Buyer (other than those obligations or liabilities assumed by the Buyer pursuant
hereto);
(h) incurred, assumed, or taken any property subject to, any indebtedness
that would be a PFS Liability (excluding trade payable and other liabilities
incurred in the ordinary course of business and consistent with past practices);
(i) except as disclosed to the Buyer prior to the date hereof, adopted any
material plan or agreement or made any material amendment to any plan or
agreement providing any new or additional "fringe benefits" for the employees of
the PFS Business, in each case which will be an obligation or liability of the
Buyer (other than those obligations or liabilities assumed by the Buyer pursuant
hereto);
(j) made any material alteration in the manner of keeping the books,
accounts or records of the Seller as to the PFS Business, or in the accounting
practices therein reflected; or
(k) agreed, orally or in writing, or granted any other person or entity an
option, to do any of the things specified in paragraphs (a) through (j) above.
SECTION 2.15. Brokerage and Finder's Fees. Neither the Seller nor any of
its officers or employees has incurred or will incur any brokerage, finder's or
similar fee in connection with the transaction contemplated by this Agreement,
except that Merrill Lynch & Company ("ML") has acted as financial advisor to
the Seller. All fees of ML will be borne by the Seller.
SECTION 2.16. Intellectual Property. The Seller owns the Intangible
Property and the Intellectual Property including, but not limited to, the
trademarks, tradenames, service marks and brand names set forth in Exhibit F
attached hereto, and, except as disclosed in that Exhibit, has not granted any
options, licenses or rights therein. Except as disclosed in Exhibit F, the
Seller, as of the date hereof, possesses the right to use in perpetuity (without
royalty or payment except as disclosed in Exhibit F) all of the property rights
disclosed on Exhibit F. To the Seller's knowledge, it is not infringing on the
intangible property rights of any person or entity in the operation of the PFS
Business, and the Seller does not know of any third party who has asserted any
claim concerning such an infringement.
SECTION 2.17. All Distribution Businesses. Except through PFS and PCL, the
Seller does not own and operate any distribution businesses which sell
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food (excluding snacks and beverages), supplies, equipment, smallwares,
uniforms, promotional items or point of purchase materials to Pizza Hut, Taco
Bell or KFC restaurants within the United States or Canada.
SECTION 2.18. All Assets. The PFS Assets include all of the assets and
properties of the Seller (i) used or held for use primarily in the PFS Business,
except for (x) the administrative services currently provided by the Seller or
its Subsidiaries to the PFS Business and (y) services and rights provided to the
PFS Business as expressly contemplated by this Agreement or (ii) included in
"Property and Equipment, Net" in the Statement of Net Assets to be Sold (subject
to change in the ordinary course of business since the date of the Statement of
Net Assets to be Sold). The PFS Assets include all of the assets and properties
of the Seller required for the continued conduct by the Buyer of the PFS
Business as now being conducted, except for (x) the administrative services
currently provided by the Seller or its Subsidiaries to the PFS Business and (y)
services and rights provided to the PFS Business as expressly contemplated by
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
In order to induce the Seller to enter into this Agreement, the Buyer
hereby represents and warrants as follows:
SECTION 3.01. Organization and Standing. (a) The Buyer is a duly organized
and validly existing corporation, in good standing under the laws of the State
of Delaware.
(b) Holberg Industries, Inc. (the "Guarantor") is a duly organized and
validly existing corporation, in good standing under the laws of the State of
Delaware.
SECTION 3.02. Corporate Power and Authority. The Buyer and the Guarantor
each have full corporate power and authority to carry out their respective
obligations hereunder. The execution and delivery of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Buyer and the execution and delivery of the Guaranty
has been duly and validly authorized by the Board of Directors of the Guarantor.
No other corporate acts or proceedings on the part of the Buyer are necessary to
authorize this Agreement or the consummation of the transactions contemplated
hereby and no other corporate acts or proceedings on the part of the Guarantor
are necessary to authorize the Guarantee. When duly executed and delivered by
the parties hereto, this Agreement will constitute a valid and legally
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binding obligation of, and will be enforceable against, the Buyer in accordance
with its terms. When duly executed and delivered by the Guarantor, the Guarantee
will constitute a valid and legally binding obligation of, and will be
enforceable against, the Guarantor in accordance with its terms.
SECTION 3.03. Conflicts, Consents and Approvals. Neither the execution and
delivery of this Agreement nor the creation and delivery of the Guarantee, nor
the consummation of the transactions contemplated hereby, nor compliance by the
Buyer with any provision hereof, nor compliance by the Guarantor with any
provisions of the Guarantee will: (i) violate any order, writ, injunction,
decree or any statute, rule or regulation applicable to the Buyer or the
Guarantor; or (ii) require the consent or approval of any third party, court, or
governmental body or agency, instrumentality, or authority, other than as
required by the HSR Act.
SECTION 3.04. Financial Information. True and complete copies of the most
recent financial statements concerning the Guarantor have previously been
delivered to the Seller. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis and present fairly the
financial position of the Guarantor as of the dates indicated.
SECTION 3.05. Brokerage and Finder's Fees. Neither the Buyer nor any of
its officers or employees has incurred or will incur any brokerage, finder's or
similar fee in connection with the transaction contemplated by this Agreement,
except that Donaldson, Lufkin and Jenrette Securities Corporation ("DLJ") has
acted as financial advisor to the Buyer. All fees of DLJ will be borne by the
Buyer.
ARTICLE 4
INTERIM COVENANTS OF THE SELLER
The Seller agrees that subsequent to the date hereof and prior to the
Closing Date:
SECTION 4.01. Access. The Seller will afford to the officers, employees
and authorized representatives of the Buyer full access during normal business
hours to the PFS Assets (including all contracts, commitments, books and records
of the PFS Business) and to the management, employees, accountants and other
agents and representatives of the PFS Business to discuss matters relating to
the PFS Business. Any information relating to the PFS Assets and the PFS
Business provided to the Buyer or its authorized representatives pursuant to
this Agreement shall be held by the Buyer and its representatives prior to the
Closing in accordance with the Confidentiality Agreement, dated March 13, 1997,
by and between Holberg Industries, Inc. and the Seller, except paragraphs 3 and
5 thereof.
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No investigations made by the Buyer shall affect the representations, warranties
and agreements made by the Seller pursuant to this Agreement, and each such
representation, warranty and agreement shall survive any such investigation.
SECTION 4.02. Management of the PFS Business. The Seller shall cause the
PFS Business to be maintained in a manner consistent with the present operation
of the PFS Business and the Seller shall not sell, transfer, convey or encumber
the PFS Assets, or any part thereof or interest therein without the Buyer's
prior written consent (which consent shall not be unreasonably withheld), other
than sales in the ordinary course of business. The Seller shall use reasonable
and good faith efforts to retain the services of the key employees of the PFS
Business, to maintain all of the PFS Assets in their current condition (normal
wear and tear excepted) and to preserve the present goodwill and advantageous
relationships of the Seller with respect to the PFS Business. The Seller shall
not, without the prior written consent of the Buyer:
(a) take any action described in Section 2.14;
(b) enter into any agreements or contracts that would require payments by
the Seller or the Buyer of more than $1,000,000 over any period of twelve (12)
months or more or impose material restrictions that would affect the continued
operation of the PFS Business by the Buyer in whole or in part; or
(c) take any action, or omit to take any actions, that would cause any of
the representations and warranties set forth in Article 2 (Representations and
Warranties of the Seller) to become untrue in any material respect as of or
prior to the Closing Date.
SECTION 4.03. Governmental Consents and Approvals. The Seller shall make
all required filings and obtain all consents or other approvals required to be
obtained by the Seller from any appropriate governmental agency or authority in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, any filing required to be made by the
Seller under the HSR Act.
SECTION 4.04. Third Party Consents.
(a) To the extent that any of the agreements, leases, licenses or any
other contract included in the PFS Assets and listed in the Exhibits hereto to
be transferred to the Buyer under this Agreement are not transferable without
the consent of a third party as described in the Exhibits hereto (the
"Nontransferable Agreements"), the Seller and the Buyer agree to use their
respective best efforts prior or subsequent to the Closing Date to identify and
secure the required third party consent to the transfer of each Nontransferable
Agreement to the Buyer, and
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shall afford the Buyer the opportunity in cooperation with the Seller to
negotiate directly with each third party in the event that such consent shall
initially be denied. For purposes of this Section 4.04, the term "best efforts"
by the Seller or the Buyer, as the case may be, shall not require the Seller or
the Buyer, as the case may be, to execute any guaranty, incur any other
obligation, or pay any money to the third party under any Nontransferable
Agreement or commence any legal, administrative or other proceeding.
Notwithstanding the foregoing, (i) in no event shall Seller require that, in
connection with the assignment or transfer to the Buyer of any Real Property
Lease or other contract or agreement, the landlord or other party to such
contract or agreement release Seller, in whole or in part, from any liability
under such Real Property Lease or other contract or agreement following the
Closing, and (ii) Seller shall, if required by a landlord or other third party
as a condition to obtaining a required consent from such landlord or other third
party, confirm in writing Seller's continuing liability under such Real Property
Lease or other contract or agreement; provided, however, that the Buyer shall
agree to fully indemnify the Seller for such continuing liability.
(b) The Seller and the Buyer agree that, so long as the required consent
for the transfer of a Nontransferable Agreement has not been obtained, the
Seller and the Buyer shall enter into satisfactory arrangements on the Closing
Date (i) to afford to the Buyer the material economic and practical benefits of
each such Nontransferable Agreement and (ii) to eliminate any liability of the
Seller with respect to the Nontransferable Agreement after the Closing.
SECTION 4.05. Permits. Certain of the Permits of the PFS Business
(including certain local, state and federal vehicle, dairy and food licenses)
are not transferable and as a result the Buyer will need its own permits to
distribute certain products. To the extent the Buyer does not already have such
Permits, the Seller will assist the Buyer in its efforts to identify, apply and
receive such Permits prior to the Closing Date.
SECTION 4.06. Communications. The Seller will promptly advise the Buyer of
all material communications which it receives from any governmental agencies or
authorities or any person or entity alleging that the consent of such person or
entity is required in connection with the transactions contemplated by this
Agreement; and any claim, action, lawsuit or proceeding commenced or, to the
Seller's knowledge, threatened, relating to the consummation of the transactions
contemplated by this Agreement or any person or entity alleging that the consent
of such person or entity is required in connection with the transactions
contemplated by this Agreement; and any claim, action, lawsuit or proceeding
commenced or, to the Seller's knowledge, threatened, relating to the
consummation of the transactions contemplated by this Agreement.
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SECTION 4.07. Announcements. Neither party will, without the prior consent
of the other party, make any announcement to the public concerning the
transactions contemplated by this Agreement, except as may be required by law.
SECTION 4.08. No Waiver. Nothing in this Article 4 shall in any way waive
or modify the conditions to Closing provided for herein.
ARTICLE 5
INTERIM COVENANTS OF THE BUYER
The Buyer agrees that subsequent to the date hereof and prior to the
Closing Date:
SECTION 5.01. Government Consents and Approvals. The Buyer shall make
all required filings and obtain all licenses, consents or other approvals
required to be obtained by the Buyer from any appropriate governmental agency or
authority or other person in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, any
required filing to be obtained by the Buyer under the HSR Act.
SECTION 5.02. Communications. The Buyer will promptly advise the Seller of
all material communications which it receives from any governmental agencies or
authorities or any person or entity alleging that the consent of such person or
entity is required in connection with the transactions contemplated by this
Agreement; and any claim, action, lawsuit or proceeding commenced or, to the
Buyer's knowledge, threatened, relating to the consummation of the transactions
contemplated by this Agreement.
SECTION 5.03. Announcements. The Buyer will not, without the prior consent
of the Seller, make any announcement to the public concerning the transactions
contemplated by this Agreement, except as may be required by law.
ARTICLE 6
EMPLOYEE MATTERS
SECTION 6.01. Employment and Compensation of PFS Employees. (a) The Buyer
agrees that immediately after the Closing Date, the Buyer shall employ all of
the employees of the PFS Business on the Closing Date who are listed in Exhibit
M hereto, except as otherwise agreed by the Buyer and the Seller in writing;
including without limitation, those employees on lay-off, short-term
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disability, family leave or any other leave of absence as of the Closing Date
(collectively "Transferred Employees"). Employees on long-term disability as of
the closing date are not to be considered Transferred Employees unless, later,
on recovery the Buyer accepts them into employment.
(b) Buyer agrees to provide Transferred Employees with cash bonuses equal
to the full 1997 cash bonuses due under the Seller's Middle Management
Incentive Program and Executive Incentive Program, such bonuses to be paid
during the first quarter of 1998 in accordance with the terms and conditions set
forth in Exhibit M-1, including without limitation the condition that no
Transferred Employee shall be entitled to any such bonus if the employment of
such Transferred Employee is terminated for cause or voluntarily by such
Transferred Employee before January 1, 1998.
(c) Employee Payroll Information. Seller shall transfer to Buyer any
records relating to withholding and payment of income and unemployment taxes
(federal, state and local) and FICA and FUTA taxes and any and all state
unemployment payment reserves and/or charge history with respect to wages paid
to Transferred Employees for the calendar year in which the Closing occurs
(including, without limitation, Forms W-4 and Employees' Withholding Allowance
Certificate). Buyer shall provide Transferred Employees with Forms W-2, Wage and
Tax Statement, for the calendar year in which the Closing occurs setting forth
the wages paid and taxes withheld with respect to the Transferred Employees for
such calendar year by Seller and Buyer as predecessor and successor employers,
respectively, as provided in Revenue Procedure 96-60.
SECTION 6.02. Employee Matters.
(a) Exhibit N attached hereto identifies certain Employee Benefit Plans,
(as defined in Section 3(3) of the Employee Retirement Income Security Act, as
amended ("ERISA")) and certain Employee Arrangements, including employment and
consulting contracts, bonus and other incentive compensation, deferred
compensation, disability, severance, vacation, stock awards, stock options,
worker's compensation agreements, plans, programs, policies and arrangements
with respect to the employment and termination of employment of the Transferred
Employees maintained by the Seller as of the date hereof.
(b) The Seller hereby represents to the Buyer as follows: (1) the Seller
has provided or made available to the Buyer true, correct and complete copies of
the following with respect to each such Employee Benefit Plans: (i) all plan
documents, benefit schedules, and insurance contracts, as applicable; (ii) the
most recent summary plan descriptions, if any; and (iii) the most recent annual
financial reports, if any; (2) no liability currently exists, and under no
circumstances could the Seller or any of its ERISA Affiliates incur a liability
under plans sponsored by
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the Seller on or before the Closing Date, pursuant to the provisions of Title I,
II or IV of ERISA or Section 412, 4971 or 4980B of the Code that could become a
liability of Buyer after the consummation of the transactions contemplated by
this Agreement; and (3) neither this Agreement nor the consummation of the
transactions contemplated by this Agreement will entitle any employee, including
but not limited to, Transferred Employees, to any severance benefits other than
those described in Section 6.05(d) below nor will it (either alone or in
conjunction with a termination of employment) accelerate compensation due any
such Transferred Employee as of the Closing Date.
(c) Effective as of the Closing Date, Transferred Employees shall cease
participation in all Employee Benefit Plans and Employee Arrangements maintained
by the Seller, except as otherwise provided herein. The Buyer agrees that for a
period of twelve months commencing on the Closing Date, the Buyer shall maintain
such Employee Benefit Plans and Employee Arrangements necessary to provide each
Transferred Employee with (i) Welfare Plan benefits including post-retirement
welfare benefits (as defined in Section 3(1) of ERISA) and compensation that are
in the aggregate equal in value to the compensation and Welfare Plan benefits
which such Transferred Employees received from Seller under the Employee Benefit
Plans and Employee Arrangements identified in Exhibit N, but disregarding for
this purpose any compensation paid in the form of stock, options to acquire
stock or any other equity-based compensation, (ii) benefits under "Pension
Plans" (as defined in Section 3(2) of ERISA) of Buyer and/or its affiliates on
the same basis as other similarly situated employees of Buyer and its
affiliates, and (iii) benefits as set forth below.
SECTION 6.03. Pension Plans. (a) As of the Closing Date, (i) the Seller
shall cease benefit accruals for all Transferred Employees who are then
Participants in the PepsiCo Salaried Employees Retirement Plan and the PepsiCo
Retirement Plan for Transportation Employees (the "Qualified Pension Plans") and
the PepsiCo Pension Equalization Plan (the "Non-qualified Pension Plan"), and
(ii) Transferred Employees who have not yet satisfied participation requirements
under such Plans shall thereafter not become eligible to participate thereunder.
Notwithstanding the foregoing, all Transferred Employees who are participants in
the Qualified Pension Plans and the Non-qualified Pension Plan as of the Closing
Date shall continue to accrue Service (as such term is defined in the Qualified
Pension Plans and the Non-qualified Pension Plan) for purposes of satisfying the
vesting and early retirement requirements under such Plans during the time such
Transferred Employees continue employment with the Buyer or, with Seller's prior
approval, any successor or affiliate of the Buyer.
(b) In connection with the Pension benefits provided under subsection (a)
above, the Buyer shall pay to the Seller by wire transfer of immediately
available funds to a bank account designated by the Seller prior to the Closing
(i)
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US$4,000,000.00 within ninety (90) days after the Closing and (ii)
US$4,000,000.00 within two hundred seventy (270) days after the Closing.
SECTION 6.04. Savings Plans. As of the Closing Date, the Buyer shall have
established one or more defined contribution plans that are qualified under
Section 401(a) of the Code and that allow for participant loans ("Defined
Contribution Plans") and shall have established related trusts for such plans
that are exempt under Section 501(a) of the Code. As soon as practicable after
the Closing Date, the Buyer shall provide the Seller with an opinion of counsel
acceptable to the Seller that the Buyer has established the Defined Contribution
Plans and the Seller shall provide the Buyer with an opinion of counsel
acceptable to the Buyer that the PepsiCo Long Term Savings Program (the "Savings
Plan") is in form and operation qualified under Section 401(a) of the Code and
that the related trust is exempt under Section 501(a) of the Code. After both
such opinions have been delivered, the Seller shall cause the trustee of the
PepsiCo Long Term Savings Program (the "Savings Plan") to transfer, in cash and
to the extent a participant has any outstanding loans, all promissory notes
issued in connection therewith, to the Defined Contribution Plans, the Savings
Plan account balances and related assets, including promissory notes covering
outstanding employee loan balances, allocated to Transferred Employees. Such
account balances and assets shall be valued as of the business day immediately
preceding the transfer date to the Defined Contribution Plans.
As of the effective date of the transfer, but subject to audit, all
obligations and liabilities with respect to the Savings Plan account balances,
including outstanding loans, of Transferred Employees shall be assumed by the
Buyer. Following such date, the Seller shall have no further liability with
respect to the Savings Plan account balances of the Transferred Employees, and
the Buyer shall indemnify and hold the Seller harmless from any claims and
losses with respect thereto. Notwithstanding the foregoing, the Seller shall
indemnity and hold the Buyer harmless from any liabilities, claims and losses
arising as a result of a failure of the Savings Plan to be qualified under
Section 401(a) of the Code and/or a failure of the related trust to be exempt
under Section 501(a) of the Code.
SECTION 6.05. Welfare Plans and Vacation Pay.
(a) Neither the Seller nor any of its subsidiaries and affiliates nor any
of the Welfare Plans maintained by the Seller, shall have any obligation to
provide coverage to any Transferred Employee under any Employee Benefit Plans or
Employee Arrangements, including any health care, short-term disability,
long-term disability, accident, educational assistance or life insurance or any
other Welfare Plan after the Closing Date. The Seller shall be responsible for
payment of all claims incurred by Transferred Employees and their eligible
beneficiaries and dependents prior to the Closing Date under any Employee
Benefit Plans or
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Employee Arrangements maintained by the Seller. All claims incurred with respect
to Transferred Employees and their eligible spouses and dependents after the
Closing Date for any Employee Benefit Plans or Employee Arrangements maintained
by the Buyer shall be the responsibility of the Buyer.
(b) The Buyer agrees to provide continuation coverage to "qualified
beneficiaries" (as such term is defined in Section 602 of ERISA and Section
4980B of the Code) of the PFS Business as of the Closing Date and to provide
"continuation coverage" to Transferred Employees, their spouses and their
dependents who become "qualified beneficiaries" subsequent to the Closing Date.
(c) For the remainder of the calendar year including the Closing Date, the
Buyer agrees to continue to maintain any and all health care plans maintained by
the Seller as of the Closing Date.
(d) As of the Closing Date, the Buyer agrees to waive all pre-existing
condition exclusions under any health care plan it maintains with respect to
Transferred Employees and for the remainder of the fiscal year which includes
the Closing Date, Buyer agrees to take into account any deductibles and out-of
pocket expenses incurred by Transferred Employees or their beneficiaries prior
to the Closing in determining satisfaction of deductibles and out-of-pocket
limits under health care plans maintained by the Buyer for the benefit of
Transferred Employees.
(e) Severance Plans. Transferred Employees shall not be entitled to any
severance benefits from the Seller, its divisions or subsidiaries.
Notwithstanding the provisions of the immediately preceding sentence, or the
provisions of any severance plan of the Buyer, if the Buyer terminates any
Transferred Employee within twelve months following the Closing Date, other than
for good cause, the Buyer shall pay a severance benefit to such Transferred
Employee in an amount computed as set forth on Exhibit 0 attached hereto based
upon (i) the Transferred Employee's number of years of service with the Seller,
and its subsidiaries, affiliates and predecessors through the date of his or her
termination and (ii) the Transferred Employee's job classification with the PFS
Business as of the Closing Date.
(f) Vacation Policy. The Buyer agrees to continue for Transferred
Employees the Seller's vacation pay policy for the remainder of the calendar
year in which the Closing occurs.
SECTION 6.06. Past Service Granted. The Buyer shall grant full past
service credit (including credit for eligibility, benefit accrual and for
vesting) to the Transferred Employees for service with the Seller and its
affiliates and
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predecessors under any and all of the Buyer's Employee Benefit Plans, severance
plans, service award plans, vacation pay plans and employee arrangements.
SECTION 6.07. Rights. Except as provided in Section 6.05(c) and 6.02(c),
no provision of this Article 6 shall be construed (a) to limit the right of the
Buyer or any of its affiliates to amend any employee benefit plan or terminate
any employee benefit plan, or (b) to create any right or entitlement whatsoever
in any Transferred Employee or any beneficiary or dependent thereof, including
without limitation a right to continued employment or to any benefit under a
plan or any other compensation.
SECTION 6.08. Employee Communications. The Seller and the Buyer shall use
their reasonable best efforts to cooperate with one another in making any
required communications with Transferred Employees regarding any Employee
Benefit Plans or Employee Arrangements.
ARTICLE 7
TAX MATTERS
SECTION 7.01. Overlap Taxes. Any real and personal property Taxes (and any
other Taxes not measured or measurable, in whole or in part, by net or gross
income or receipts), with respect to the PFS Assets that relate to a tax period
beginning before the Closing Date and ending after the Closing Date (an "Overlap
Period") shall be apportioned between the Seller and the Buyer on a per diem
basis; provided, however, that this Article shall not apply to (i) any sales,
transfer and similar taxes on the transfer of the PFS Assets to the Buyer
pursuant to this Agreement or (ii) any taxes which have been accrued on the
Closing Balance Sheet as a prepaid tax asset and reflected in the Closing
Working Capital described in Section 1.06 hereof. Overlap Period returns shall
be prepared and timely filed by the entity responsible for filing such returns
under local law, regulation or custom, and the Seller or the Buyer, as the case
may be, shall cause such entity to timely file such returns and timely pay any
Tax due with respect to such returns when due or assessed. Such returns shall be
prepared in a manner consistent with past practice of the Seller and in a manner
that does not distort the taxable income or loss of tax liability of the Seller
or the Buyer, except as required by law or regulation or otherwise agreed to by
the Seller and the Buyer. To the extent an Overlap Period Tax is paid in full by
the Seller after the Closing, the Buyer shall pay to the Seller, within fifteen
days of receipt of written notice from the Seller (which notice shall set forth
in reasonable detail the calculations regarding the Buyer's share of the Overlap
Taxes), the amount of any such Taxes apportioned to the Buyer under the first
sentence of this paragraph, except to the extent the Buyer has made such payment
to the Seller pursuant to the purchase price adjustment in
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Section 1.07. In the case where the Buyer is responsible for filing the
applicable Overlap Tax Return or paying the applicable Overlap Period Tax, the
Seller shall pay to the Buyer, within fifteen days of receipt of written notice
from the Buyer (which notice shall set forth in reasonable detail the
calculations regarding the Seller's share of the Overlap Taxes), the amount of
any such Taxes apportioned to the Seller under the first sentence of this
paragraph, in each case except to the extent the Seller has paid such Tax or
accrued or otherwise reflected such Tax as a liability on the Closing Balance
Sheet.
ARTICLE 8
DISTRIBUTION AGREEMENT
SECTION 8.01 Distribution Agreement with Company Owned Pizza Hut, Taco
Bell and KFC Restaurants. The Buyer understands that the Seller, through its
subsidiaries, Pizza Hut, Inc., Taco Bell Corp., Kentucky Fried Chicken
Corporation and Kentucky Fried Chicken of California, Inc., and their respective
subsidiaries (the "Restaurant Companies"), currently own approximately 9,000
Pizza Hut, Taco Bell and KFC restaurants (such restaurants, except for 53 KFC
restaurants currently operated by a subsidiary of the Restaurant Companies
called WMCR Corporation which are not customers of the PFS Business, are
hereinafter referred to as the "Company Owned Restaurants") within the United
States. At the Closing the Seller will assign its rights to the Buyer and the
Buyer shall assume the Seller's obligations under the Sales and Distribution
Agreement dated as of May 6, 1997 among the Seller and the Restaurant Companies
(the "Exclusive Distribution Agreement") in the form attached hereto as Exhibit
P pursuant to which the Buyer shall become the exclusive distributor after the
Closing Date of certain food, restaurant supplies and smallwares for the Company
Owned Restaurants which are owned by Restaurant Companies on the Closing Date.
Attached hereto as Exhibit Q is a list of the Company Owned Restaurants on the
date hereof. The Buyer understands that the number of such Company Owned
Restaurants on the Closing Date, and covered by the Exclusive Distribution
Agreement, may be less than the number of Company Owned Restaurants on the date
hereof as a result of the ongoing refranchising process by the Restaurant
Companies. As provided in the Exclusive Distribution Agreement, if the
Restaurant Companies sell any Pizza Hut or Taco Bell Company Owned Restaurants
after the Closing Date and during the term of the Exclusive Distribution
Agreement, the new franchisees of such restaurants will be required as part of
the refranchise terms to assume the Distribution Agreement with respect to such
Pizza Hut or Taco Bell restaurants for the remaining term of the Distribution
Agreement.
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SECTION 8.02. Franchised Pizza Hut, Taco Bell and KFC Restaurants. The
Buyer understands that the Restaurant Companies have also entered into franchise
agreements to franchise Pizza Hut, Taco Bell and KFC Restaurants (the
"Franchised Restaurants") within the United States. The Buyer further
understands that while PFS is currently the distributor of food, restaurant
supplies and restaurant equipment for many of the Franchised Restaurants within
the United States, PFS has not been appointed by any Franchised Restaurants as
the exclusive distributor of any products purchased by Franchised Restaurants,
except for the exclusive appointments by certain Taco Bell franchised
restaurants which are described in Exhibit R attached hereto. As a result,
except as described in Exhibit R, the Buyer will have no legal commitment from
any Franchised Restaurants currently serviced by PFS that the Buyer will
continue to be the distributor for such Franchised Restaurants after the Closing
Date.
ARTICLE 9
CONDITIONS PRECEDENT
SECTION 9.01. Mutual Conditions Precedent. The obligations of the Seller
and the Buyer to consummate the transactions contemplated herein shall be
subject, in each instance, to the fulfillment or written waiver of each of the
following conditions at or prior to the Closing:
(a) Pre-merger Notification. The parties hereto shall have made all
filings required by the HSR Act with respect to the transaction contemplated
hereby, and all waiting periods under the HSR Act shall have expired or been
terminated without the institution of a proceeding challenging the transactions
contemplated hereby by the United States Federal Trade Commission or Department
of Justice, and all comparable requirements under Canadian Law applicable to the
transactions contemplated by the Canadian Asset Purchase Agreement shall also
have been satisfied.
(b) Exclusive Distribution Agreement. The Seller shall have duly assigned
the Exclusive Distribution Agreement to the Buyer, and the amendment thereto
attached hereto as Exhibit P-1 shall have been duly executed and delivered by
the Buyer and the Restaurant Companies at the Closing.
SECTION 9.02. Conditions Precedent to the Buyer's Obligations. The
obligations of the Buyer hereunder to consummate the transactions contemplated
herein shall be subject, in each instance, to the fulfillment, or written waiver
by the Buyer, of each of the following conditions at or prior to the Closing:
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(a) Correctness of Warranties. All of the representations and warranties
of the Seller contained in this Agreement shall be true, complete and correct in
all material respects, except for such representations and warranties which are
qualified as to materiality, which shall be true, complete and correct in all
respects, at and as of the Closing Date as though such representations and
warranties were then made in exactly the same language as contained herein, and
the Seller shall have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date.
(b) Legal Action. No temporary restraining order, preliminary injunction
or permanent injunction or other order preventing the consummation of the
transactions contemplated hereby or materially adversely affecting the right of
the Buyer to own the PFS Assets or to operate the PFS Business shall have been
issued by any federal or state court or other governmental authority and remain
in effect and no action, suit or proceeding shall have been brought by any
governmental authority seeking any of the foregoing.
(c) Adverse Change. There shall have been no material adverse change in
the assets, liabilities, results of operations, business or financial condition
of the PFS Business from the date hereof to the Closing Date.
(d) Documents and Instruments to be Delivered at the Closing. The Seller
shall deliver or cause to be executed and delivered to the Buyer at the Closing
the following documents, each dated the Closing Date unless otherwise specified
below:
(i) A limited warranty deed in respect of each parcel of Owned Real
Property, duly executed and acknowledged and in recordable form, conveying
to the Buyer fee simple title to the Real Property;
(ii) Such other deeds, assignments, bills of sale and other
instruments of transfer duly executed by and on behalf of the Seller,
reasonably satisfactory in form and substance to counsel to the Buyer, as
are necessary or desirable to effect the conveyance, sale, assignment,
transfer and delivery of all rights, interests and properties constituting
the PFS Assets, including, without limitation, all contracts, leases,
licenses and Intangible Property to be assigned to the Buyer as part of
the PFS Assets;
(iii) A certificate of the Seller's good standing as a domestic
corporation in the State of North Carolina, certified by the Secretary of
State of the State of North Carolina as of a date no more than 15 days
prior to the Closing Date;
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(iv) A certificate duly executed by a Vice President of the Seller
certifying: (i) that the representations and warranties made by the Seller
in this Agreement are true and correct as of the Closing Date with the
same effect as if made at and as of such date, and (ii) that the Seller is
not in material breach of any covenants made pursuant to this Agreement;
(v) Copies of the resolutions, certified by the Secretary or an
Assistant Secretary of the Seller as being in full force and effect on
the Closing Date, duly adopted by the Board of Directors of the Seller
evidencing the approval and authorization of the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby;
(vi) A certificate of the Secretary or an Assistant Secretary of the
Seller as to the incumbency and specimen signatures of each officer of the
Seller who executes this Agreement or any other documents or instrument
contemplated hereby; and
(vii) Such affidavits, certifications, evidence of corporate
authority, indemnities and other instruments as Buyer's title insurance
company shall require in order to issue any title insurance policy to be
obtained by Buyer at Closing with respect to the Owned Real Property.
(e) Services Agreement. Buyer and Seller shall have executed the services
agreement pursuant to Section 11.03 hereof
SECTION 9.03. Conditions Precedent to the Seller's Obligations. The
obligations of the Seller hereunder to consummate the transactions contemplated
herein shall be subject, in each instance, to the fulfillment, or written waiver
by the Seller, of each of the following conditions at or prior to the Closing:
(a) Correctness of Warranties. All of the representations and warranties
of the Buyer contained in this Agreement shall be true, complete and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were then made in exactly the same language as
contained herein, and the Buyer shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it at or prior to the Closing Date.
(b) Legal Action. No temporary restraining order, preliminary injunction
or permanent injunction or permanent injunction or other order preventing the
consummation of the transactions contemplated hereby shall have been issued by
any federal or state court or other governmental body and remain in effect and
no
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action, suit or proceeding shall have been brought by any governmental authority
seeking any of the foregoing.
(c) Documents and Instruments to be Delivered at the Closing. The Buyer
shall deliver or cause to be executed and delivered to the Seller at the Closing
the following documents, each dated the Closing Date unless otherwise specified
below:
(i) One or more assumption agreements, in a form reasonably
satisfactory in form and substance to counsel to the Seller, pursuant to
which the Buyer assumes and agrees to perform or pay the PFS Liabilities;
(ii) A certificate of the Buyer's good standing as a domestic
corporation in the State of Delaware, certified by the Secretary of State
of the State of Delaware as of a date no more than 15 days prior to the
Closing Date;
(iii) A certificate duly executed by a Vice President of the Buyer
certifying: (i) that the representations and warranties made by the Buyer
in this Agreement are true and correct as of the Closing Date with the
same effect as if made at and as of such date and (ii) that the Buyer is
not in material breach of any covenant made pursuant to this Agreement;
(iv) Copies of the resolutions, certified by the Secretary or an
Assistant Secretary of the Buyer as being in full force and effect on the
Closing Date, duly adopted by the Board of Directors of the Buyer
evidencing the approval and authorization of the execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby; and
(v) A certificate of the Secretary or an Assistant Secretary of the
Buyer as to the incumbency and specimen signatures of each officer of the
Buyer who executes this Agreement or any other document or instrument
contemplated hereby.
ARTICLE 10
ESCROW AND GUARANTEED NOTE
The parties shall use their reasonable best efforts to satisfy all of the
conditions set forth in Article 9 hereof on or before June 5, 1997 (the "Escrow
Date").
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(a) If on the Escrow Date, all of the conditions to Closing set forth in
Article 9 hereof (except for Section 9.0l(a), which need not be satisfied as of
such date) shall have been satisfied or waived, but even if the conditions set
forth in Section 9.01(a) shall have been satisfied as of such date, the
following shall occur:
(i) Each of the Buyer and the Seller shall execute and deliver to
Chase Manhattan Bank, N.A. (or such other escrow agent as is mutually
acceptable to both Buyer and Seller) all of the documents to be delivered
by such party at the Closing pursuant to Article 9, all in such form so
that upon release from escrow in accordance with the terms hereof and of
the escrow agreement the matters and transactions contemplated to be
effected at the Closing will be effected or will be capable of being
effected by the other party by use of such documents without any further
act or instrument of such party. The escrow agreement shall provide for
the release of such documents held in escrow to the Buyer and the Seller
at the Closing. Following the Escrow Date, the Closing shall take place on
the later of (x) June 25, 1997 and (y) the third business day after
satisfaction of the condition set forth in Section 9.01(a). Following the
Escrow Date, there shall be no conditions to Closing other than the
condition set forth in Section 9.01(a), and all other conditions to
Closing set forth in Article IX shall be irrevocably deemed to have been
satisfied.
(ii) The Buyer shall execute and deliver to Seller a promissory note
in the form attached hereto as Exhibit S (the "Note") and Holberg
Industries, Inc. shall execute an unconditional guarantee (the
"Guarantee") in the form attached hereto as Exhibit T. The Note shall be
in the principal amount equal to the Purchase Price. The Note shall become
immediately due and payable by the Buyer on the Closing Date,
simultaneously with the release of the documents from the escrow and the
consummation of the Closing.
(iii) At the Closing, the Buyer will pay the Note in full by wire
transfer of immediately available funds, together with interest thereon
from the Escrow Date to the Closing Date, against delivery of all the
documents held in escrow, which payment shall satisfy in full its
obligation to pay the Purchase Price. In addition, at the Closing, by wire
transfer or immediately available funds, the Seller shall deliver to the
Buyer an amount of cash equal to the Net Cash (as defined below). The term
"Net Cash" means the net amount of cash generated by the PFS Business for
the period from the Escrow Date through the Closing Date, as determined
from the change in the intercompany accounts between the Escrow Date and
the Closing Date between the PFS Business and the Seller, including cash
payments made to or from the PFS Business and payments made by the Seller
on behalf of the PFS Business and adjusted for the amount of the
outstanding checks on the
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Escrow Date compared to the amount of the outstanding checks on the
Closing Date. Such Net Cash shall be computed and determined as if the PFS
Business had been operated on a stand-alone basis during the period from
the Escrow Date to the Closing Date. The Seller will provide to the Buyer
a statement of the Net Cash, and, if requested by the Buyer, KPMG will,
within 10 days of the Closing, provide a report of their findings on the
Seller's statement of Net Cash, based upon agreed procedures. In the
unlikely event that the Net Cash is actually negative, the Buyer shall
deliver the Seller the amount of such negative Net Cash. Any dispute as to
the amount of Net Cash will be determined in a manner comparable to the
procedure as to Closing Working Capital and Final Working Capital.
(iv) Notwithstanding any provision contained herein to the contrary,
(x) for the purposes of Section 1.06, the Closing Working Capital and the
Final Working Capital shall be determined by reference to the current
assets and current liabilities of the PFS Business measured as such assets
and liabilities existed on the Escrow Date (not the Closing Date) and (y)
for purposes of the asset transfer and liability assumption provisions of
Section 1.02, all PFS Assets and PFS Liabilities determined by reference
to Final Working Capital shall instead be determined by reference to such
Final Working Capital (computed as if the Escrow Date were the Closing
Date) as the same may have changed in the ordinary course of business from
the Escrow Date to the Closing Date.
If on the Escrow Date, all of the conditions to Closing set forth in
Article 9 (other than Section 9.01(a)) have not been satisfied, the parties
shall use their reasonable best efforts to cause such conditions to be satisfied
as promptly as possible so that the transactions contemplated by clause (a)
above can be completed.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Hart-Scott-Rodino Act. As soon as practicable after the
date hereof the Buyer and the Seller shall, in cooperation with each other, file
any reports or notifications that may be required to be filed by them under the
HSR Act in connection with the transactions contemplated by this Agreement, and
shall use their respective best efforts to obtain early termination of all
waiting periods under the HSR Act. All fees due from any party to the Department
of Justice or the Federal Trade Commission in connection with the filing of
those reports or notifications shall be borne by the Buyer.
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SECTION 11.02. Aberdeen Building Sublease. Prior to the Closing the Buyer
and the Seller shall agree upon the terms of a sublease agreement pursuant to
which the Seller shall sublease to the Buyer the space currently occupied by PFS
in the Aberdeen Building at 14841 Dallas Parkway, Dallas, Texas. The initial
term of the sublease shall be for one year after the Closing Date during which
period the aggregate annual rent payable by the Buyer to the Seller shall be
$500,000. The sublease shall further provide that the Buyer shall have the
right, upon written notice given to Seller not later than 90 days prior to the
end of the initial term, to extend the term of the sublease for one additional
year (at Buyer's option), which extension term may apply (at Buyer's option) to
all or any portion of the subleased premises. The rent during any such extension
term shall be based on all the costs of the Aberdeen Building, including,
without limitation, the rental and other payments to the landlord of the
Aberdeen Building, and will be allocated to the sublet space based on the
percentage of the total space occupied by all Seller-affiliated tenants of the
Aberdeen Building (Pizza Hut, PepsiCo Restaurants International and PFS) which
is sublet to the Buyer. The Seller has made available to the Buyer a copy of the
Seller's lease of the Aberdeen Building. The Buyer understands that the Seller
may assign and transfer all of its rights and obligations under the lease of the
Aberdeen Building to Pizza Hut, Inc. or one of its other restaurant subsidiaries
as part of the planned spin off of the Seller's restaurant operations. If the
Seller transfers its leasehold interest in the Aberdeen Building to Pizza Hut,
Inc. or one of its other restaurant subsidiaries, the sublease to the Buyer will
be assigned by the Seller to Pizza Hut, Inc. or such other restaurant
subsidiary, as the case may be, which will thereafter be responsible for all of
the Seller's obligations under said sublease.
SECTION 11.03. PepsiCo Data Center. The Buyer understands that a data
center (the "Data Center") owned and operated by the Seller at Hillcrest Oaks,
6600 & 6606 LBJ Freeway, Dallas, Texas currently provides the mainframe computer
services required by the PFS Business. Prior to the Closing the Buyer and the
Seller will agree upon a services agreement where the Data Center will provide
such mainframe computer services to the Buyer after the Closing. The term of
such services agreement shall be one year and Buyer shall pay a total service
fee to Seller of $l,000,000 paid in equal monthly installments. The specific
services to be provided will be agreed upon by the Buyer and the Seller prior to
the Closing. The Buyer understands that the Seller may transfer the Data Center
to Pizza Hut, Inc. or one of its other restaurant subsidiaries as part of the
planned spin off of the Seller's restaurant operations. If the Seller transfers
the Data Center to a restaurant subsidiary, the Buyer agrees that the services
agreement between the Data Center and the Buyer shall be assigned by the Seller
to such restaurant subsidiary which shall thereafter be responsible for
performing the computer services under the services agreement.
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SECTION 11.04. Survival of Representations and Warranties and Agreements.
The representations and warranties and agreements made by the parties pursuant
to this Agreement shall survive the Closing and continue for a period of two
years from and after the Closing Date except that (i) the representations and
warranties contained in Section 2.09 regarding tax matters shall survive until
the expiration of the applicable statute of limitations, and (ii) the
representations and warranties contained in Section 2.11 as to environmental
matters shall survive for a period of four years from and after the Closing Date
and thereafter in each case no claims (for indemnification or otherwise) may be
brought with respect to such representations and warranties and agreements,
except to the extent that the party making such claim shall have notified the
other party of any such breach or failure to perform prior to the end of such
two year period or such expiration of the statute of limitations, respectively.
This Section 11.04 shall not limit any agreement of the parties herein which by
its terms contemplates performance after two years from the Closing.
SECTION 11.05. Indemnification.
(a) The Seller agrees to indemnify, defend and hold the Buyer and its
officers, directors, employees and subsidiaries and other affiliates entirely
harmless, on an after-tax basis and net of any insurance proceeds, against and
from any claim, demand, cause of action, judgment, loss, liability, cost or
other expense whatsoever, including, without limitation, reasonable attorneys'
fees (each such claim, demand, cause of action, judgment, loss, liability, cost
or other expense is referred to herein individually as a "Loss" and collectively
as "Losses"), which any of them may suffer, sustain, incur or otherwise become
subject to (i) as a result of any breach of any representation, warranty or
agreement made either (x) by the Seller pursuant to this Agreement or (y) by PCL
pursuant to the Canadian Sale Agreement; provided, however, that Buyer shall not
be entitled to indemnification for Losses pursuant to this Section 11.05(a)
arising out of any breach of any representation or warranty contained in Article
2 or 6 hereof or Article 2 of the Canadian Sales Agreement unless and until the
aggregate of all such Losses exceeds $3,000,000, whereupon the Buyer shall be
entitled to indemnification pursuant to this Section 11.05(a) arising out of any
breach of any representation or warranty contained in Articles 2 and 6 of this
Agreement and Article 2 of the Canadian Sale Agreement only to the extent such
Losses exceed $3,000,000 or (ii) resulting from or arising out of any liability
or obligation not expressly assumed by Buyer pursuant to this Agreement or the
Canadian Sale Agreement. Notwithstanding the foregoing, the provision of the
preceding sentence setting forth the $3,000,000 amount before indemnification
claims may be made shall not apply to the obligations of either party to make a
payment after the Closing to the other as an adjustment to the Purchase Price as
described in Section 1.07 hereof.
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(b) The Buyer agrees to indemnify, defend and hold the Seller and its
officers, directors, employees and subsidiaries and other affiliates (including,
without limitation, PCL) entirely harmless, on an after-tax basis and net of any
insurance proceeds, against and from any claim, demand, cause of action,
judgment, loss, liability, cost or other expense, including, without limitation,
reasonable attorneys' fees, which any of them may suffer, sustain, incur or
otherwise become subject to as a result of (i) any breach of any representation,
warranty or agreement made by the Buyer pursuant to this Agreement or the
Canadian Sale Agreement, or (ii) the operation of the PFS Business or the PFS
Canadian Business by the Buyer after the Closing Date.
(c) With respect to any claims or demands by third parties, whenever the
party to be indemnified (the "Indemnified Party") shall have notice that such a
claim or demand has been asserted or threatened which, if true, would constitute
a basis for indemnification hereunder, the Indemnified Party shall notify the
indemnifying party (the "Indemnifying Party") of such claim or demand and of the
facts within the knowledge of the Indemnified Party which relate thereto. The
Indemnifying Party shall then have the right to contest, negotiate or settle any
such claim or demand through counsel of its own selection, reasonably
satisfactory to the Indemnified Party, and solely at the cost, risk and expense
of the Indemnifying Party; provided, however, that the Indemnifying Party shall
not, without the prior written consent of the Indemnified Party (which consent
shall not be unreasonably withheld), settle, compromise or offer to settle or
compromise any such claim or demand on a basis which would or could reasonably
be expected to result in the imposition of a consent order, injunction or decree
which would or could reasonably be expected to restrict the future activity or
conduct of the Indemnified Party. The Indemnified Party may, if it so elects and
entirely within its discretion, defend any such claim or demand in the event the
Indemnifying Party fails to give notice of its intention to contest or settle
any such claim or demand, in which event the Indemnifying Party shall be
required to indemnify the Indemnified Party for any and all Losses related to
such claim or demand to the extent the Indemnified Party is entitled to be
indemnified pursuant to this Section 11.05.
(d) The Indemnified Party shall make demand to the Indemnifying Party in
writing for payment of any claim by the Indemnified Party (whether such claim is
based upon payment of a third party claim or a claim of the Indemnified Party
arising under this Agreement) under the provisions of this Section 11.05.
(e) Any payments made pursuant to the provisions of this Section 11.05
shall be treated as an adjustment to the Purchase Price.
SECTION 11.06. Bulk Sales. The Buyer hereby waives compliance by the
Seller with any bulk-sales notice requirements of applicable law, and the Seller
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shall indemnify and hold the Buyer harmless from any tax or other liability
which shall be incurred by the Buyer for the failure to comply with such
requirements.
SECTION 11.07. Expenses. Unless otherwise expressly provided herein, each
of the parties hereto shall bear the expenses incurred by that party incident to
this Agreement and the transactions contemplated hereby, including, without
limitation, all fees and disbursements of counsel and accountants retained by
such party, whether or not the transactions contemplated hereby shall be
consummated.
SECTION 11.08. Further Assurances. The Seller and the Buyer each agree
that subsequent to the Closing, at the request of the other party, it will
execute and deliver to the other party such further instruments, documents,
conveyances or assurances and take such other action as may be necessary or
otherwise reasonably requested by Buyer to carry out the transactions
contemplated by this Agreement.
SECTION 11.09. Entire Agreement. This Agreement, together with the
Canadian Sale Agreement and the Exhibits attached hereto, contains the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby and may be amended, modified, supplemented or altered only
by a writing duly executed by all of the parties hereto, and any prior
agreements or understandings, whether oral or written, are entirely superseded
hereby. All Exhibits attached hereto are hereby incorporated by reference herein
and made a part hereof as if fully set forth herein.
SECTION 11.10. Assignment; Binding Effect. This Agreement shall be binding
upon all of the parties hereto and upon all of their respective successors and
permitted assigns. This Agreement shall not, however, be assignable or
transferable, in whole or in part, by either the Buyer or the Seller except upon
the express prior written consent of the other party provided that the Buyer may
assign this Agreement to any Subsidiary, of the Buyer, provided, further, that
no such assignment shall relieve the Buyer from any of its obligations under
this Agreement. Any attempt to assign or otherwise transfer this Agreement or
any rights or obligations hereunder in violation of the foregoing shall be void.
Nothing contained in this Agreement is intended to confer upon any person, other
than the parties hereto and their respective successors and permitted assigns,
any rights, remedies or obligations under, or by reason of, this Agreement.
SECTION 11.11. Modification, Waiver and Extensions. The Buyer and the
Seller may, by written instrument, extend the time for the performance of any of
the obligations or other acts of the other, waive any inaccuracies of the other
in the representations and warranties contained herein or in any document
delivered pursuant to this Agreement, waive compliance with any of the covenants
of the other contained in this Agreement, and waive the other's performance of
any of the obligations set out in this Agreement. No modification, waiver or
extension of
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any of the provisions of this Agreement and no consent by the Buyer or the
Seller to any departure therefrom by the other shall be effective unless such
modification, waiver or extension shall be in writing and signed by the party or
parties to be bound, and the same shall then be effective only for the period
and on the conditions and for the specific instances and purposes specified in
such writing.
SECTION 11.12. Notices. All notices, demands, consents or other
communications required or permitted hereunder shall be in writing and shall be
personally delivered or sent by overnight air courier, addressed as follows: if
to the Seller to: PepsiCo, Inc., 700 Anderson Hill Road, Purchase, New York
10577 Attn: Chief Financial Officer, with a copy to the General Counsel; and if
to the Buyer to: Nebco Evans Holding Company, c/o Holberg Industries, Inc., 545
Steamboat Road, Greenwich, Connecticut 06830, Attn: A. Petter Ostberg, with a
copy to Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York
10019, Attn: Adam O. Emmerich; or to such other addresses as may hereafter be
furnished in writing to the other party in the manner described above. Any
notice, demand, consent or communication given hereunder in the manner described
above shall be deemed to have been effected and received as of the date hand
delivered or as of the date received if sent by overnight air courier.
SECTION 11.13. Choice of Law.
THIS AGREEMENT, AND ALL INSTRUMENTS DELIVERED PURSUANT HERETO OR
INCORPORATED HEREIN, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, SHALL IN ALL
RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.
SECTION 11.14. Captions. The captions of the various articles and sections
of this Agreement have been inserted for the purpose of convenience of reference
only, and such captions are not a part of this Agreement and shall not be deemed
in any manner to modify, explain, enlarge or restrict any of the provisions of
this Agreement.
SECTION 11.15. Counterparts. This Agreement may be executed by the parties
in one or more counterparts, each of which shall be an original and all of which
shall together constitute one and the same agreement.
SECTION 11.16. Severability. If any provision or provisions of this
Agreement, or any portion of any provision hereof, shall be deemed invalid or
unenforceable pursuant to a final determination of any court of competent
jurisdiction, such determination or action shall be construed so as not to
affect the validity or enforceability of any other provisions of this Agreement.
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SECTION 11.17. Non-Solicitation. Without the prior written consent of the
Buyer, the Seller agrees that, for a period of 12 months from the date of this
Agreement, neither the Seller nor its Representatives (as defined in the
Confidentiality Agreement referred to in Section 4.01) will actively and
directly solicit any officer, manager or key employee of the Buyer to become
employed by the Seller or any of its affiliates, except that the Seller shall
not be precluded from hiring any such officer, manager or key employee who (i)
initiates discussions regarding such employment without any solicitation by the
Seller, (ii) responds to any advertisement placed by the Seller, or (iii) has
been terminated by the Buyer.
SECTION 11.18. Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties to this Agreement and, except for the agreements set
forth in Article 6, nothing in this Agreement should be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, claim of action or
other right.
SECTION 11.19. Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
(a) Mutual Consent. By mutual consent of the parties hereto;
(b) Failure of Conditions. By the Buyer, on the one hand, or the Seller,
on the other hand, if the transactions contemplated hereby are not consummated
on or before July 14, 1997, and by the Seller at any time after June 5, 1997 if
the matters contemplated by Article 10(a)(i) and (ii) have not occurred by the
Escrow Date; provided that in each case each party shall have the right to
terminate under this clause only if the failure to consummate such transactions
on or before such date did not result from the breach of any representation,
warranty or agreement herein of the party seeking such termination (including
without limitation the failure of such party to satisfy any condition to the
other party's obligation to close hereunder).
Termination shall be effected by the giving of written notice to that effect by
one party to the other. If this Agreement is validly terminated and the
transactions contemplated hereby are not consummated, this Agreement shall
become null and void and of no further force and effect and no party shall be
obligated to the other hereunder except as provided in the next sentence.
Notwithstanding the foregoing or anything to the contrary in this Agreement,
termination shall not effect the rights and remedies available to one or more of
the parties as a result of the breach or default by another party or parties
hereunder.
SECTION 11.20. Accounts Receivable. After the Closing, the Buyer shall
have the right to collect, for the account of the Buyer, all receivables, claims
and
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other assets to be transferred to the Buyer as provided herein and to endorse in
the name of the Seller any checks received on the account thereof. The Seller
will promptly transfer and deliver to the Buyer, as received from time to time
after the Closing, any cash or other property that the Seller may receive in
respect of such receivables, claims or other assets which are the property of
the Buyer.
SECTION 11.21. Sales Tax. The Seller agrees that it shall not seek after
the Closing to recover from the Buyer or any customer of the PFS Business any
sales, use, syrup or similar tax, levy, impost or similar charge due, but not
previously charged to and collected from customers of the PFS Business whether
arising as a results of audits or assessments from any governmental or
quasi-governmental taxing authority or otherwise.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
PepsiCo, Inc.
By: /s/
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Nebco Evans Holding Company
By: /s/
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