Exhibit 2.1
MERGER AGREEMENT
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
AND PLAN OF REORGANIZATION
by and among
HORMEL FOODS CORPORATION,
BADGER ACQUISITION CORPORATION,
XXXXXX FOODS, INC.
and
XXXXXX X. XXXXXX
dated
JANUARY 22, 2001
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER...........................................................3
1.01 The Merger............................................................3
1.02 Effect of the Merger..................................................3
1.03 Effective Time........................................................4
1.04 Directors and Officers................................................4
1.05 Articles of Incorporation; Bylaws.....................................4
1.06 Taking of Necessary Action; Further Action............................4
1.07 The Closing...........................................................5
ARTICLE II CONVERSION OF SECURITIES............................................5
2.01 Conversion of Securities..............................................5
2.02 Dissenting Shares.....................................................6
2.03 Payment of Merger Consideration for Company Common Stock..............7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................9
3.01 Incorporation and Corporate Power.....................................9
3.02 Execution, Delivery; Valid and Binding Agreement.....................10
3.03 Approval of the Articles of Merger; Meeting of Company Shareholders..10
3.04 No Breach............................................................10
3.05 Governmental Authorities; Consents...................................11
3.06 Capital Stock........................................................11
3.07 Subsidiaries.........................................................11
3.08 Financial Statements.................................................13
3.09 Absence of Undisclosed Liabilities...................................14
3.10 No Material Adverse Change...........................................15
3.11 Absence of Certain Developments......................................15
3.12 Title to Properties..................................................18
3.13 Accounts Receivable..................................................19
3.14 Product Quality and Labeling Standards; No Disease, Etc..............19
3.15 Inventory............................................................20
3.16 Tax Matters..........................................................20
3.17 Contracts and Commitments............................................23
3.18 Intellectual Property Rights.........................................25
3.19 Litigation...........................................................26
3.20 Warranties...........................................................26
3.21 Employees............................................................26
3.22 Employee Benefits....................................................28
3.23 Insurance............................................................31
3.24 Affiliate Transactions...............................................31
3.25 Customers and Suppliers..............................................32
3.26 Compliance with Laws; Permits........................................32
3.27 Environmental Matters................................................33
3.28 Brokerage............................................................36
3.29 Disclosure...........................................................36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB.............36
4.01 Incorporation and Corporate Power....................................37
4.02 Execution, Delivery; Valid and Binding Agreement.....................37
4.03 No Breach............................................................37
4.04 Merger Subsidiary....................................................37
4.05 Governmental Authorities; Consents...................................38
4.06 Adoption of Key Employee Compensation Plan...........................38
ARTICLE V COVENANTS OF THE COMPANY............................................38
5.01 Conduct of the Business..............................................38
5.02 Access to Books and Records..........................................41
5.03 Approval of Company Shareholders.....................................42
5.04 Regulatory Filings...................................................42
5.05 Conditions...........................................................43
5.06 No Negotiations, etc.................................................43
5.07 Required Consents....................................................43
5.08 Closing Certificates.................................................43
5.09 Benefit Plans........................................................43
5.10 Accounting Policies and Procedures...................................44
5.11 Disposition..........................................................44
5.12 Tax Covenants........................................................44
5.13 Payoff of Debt; Xxxxxxx..............................................45
5.14 Environmental Matters................................................46
5.15 Excluded Land........................................................51
5.16 Farm Permits and Consents............................................51
ARTICLE VI COVENANTS OF BUYER AND MERGER SUB..................................54
6.01 Regulatory Filings...................................................54
6.02 Conditions...........................................................54
6.03 Approvals and Consents...............................................54
6.04 Closing Certificates.................................................55
6.05 Confidentiality......................................................55
6.06 WARN Act.............................................................55
6.07 Employee Benefits....................................................55
6.08 Cooperation in Obtaining Shareholder Approval........................55
ARTICLE VII CONDITIONS TO CLOSING.............................................56
7.01 Conditions to Buyer's and Merger Sub's Obligations...................56
7.02 Conditions to the Company's Obligations..............................60
ARTICLE VIII TERMINATION......................................................61
8.01 Termination..........................................................61
8.02 Effect of Termination................................................62
ARTICLE IX POST-CLOSING ADJUSTMENT............................................62
9.01 Preparation of Closing Date Balance Sheet............................62
9.02 Determination of Closing Date Working Capital........................63
9.03 Adjustment of Merger Consideration...................................63
9.04 Definition of Working Capital; Estimate..............................64
ARTICLE X ADDITIONAL AGREEMENTS...............................................65
10.01 Merger Expenses......................................................65
10.02 Broker's or Finder's Fees............................................65
ARTICLE XI SURVIVAL; INDEMNIFICATION..........................................65
11.01 Survival of Representations and Warranties and Third Party Claims....65
11.02 Indemnification......................................................67
11.03 Method of Asserting Claims...........................................69
11.04 Limitations on Indemnity.............................................71
11.05 Escrow Amount........................................................74
11.06 Exclusivity..........................................................75
11.07 Merger Consideration Adjustment......................................75
11.08 Insurance............................................................75
ARTICLE XII THE SHAREHOLDER REPRESENTATIVE AND ESOP TRUSTEE...................76
12.01 Appointment..........................................................76
12.02 Election and Replacement.............................................76
12.03 Authority............................................................76
12.04 No Liability of Buyer................................................77
ARTICLE XIII CERTAIN TAX MATTERS..............................................77
13.01 Tax Periods Ending On or Before or Including the Effective Date......77
13.02 Refunds and Tax Benefits.............................................77
13.03 Certain Buyer Covenants..............................................77
13.04 Cooperation on Tax Matters...........................................77
13.05 Allocation of Taxes..................................................79
ARTICLE XIV MISCELLANEOUS.....................................................79
14.01 Press Releases and Announcements.....................................79
14.02 Further Assurances...................................................80
14.03 Amendment and Waiver.................................................80
14.04 Notices..............................................................80
14.05 Assignment...........................................................81
14.06 Severability.........................................................81
14.07 Complete Agreement...................................................82
14.08 Counterparts.........................................................82
14.09 Governing Law........................................................82
EXHIBITS
EXHIBIT A-1 AUTO DEALERSHIP LAND
EXHIBIT A-2 LEASE FOR AUTO DEALERSHIP LAND
EXHIBIT B COMPANY SHAREHOLDERS
EXHIBIT C ARTICLES OF MERGER
EXHIBIT D DIRECTORS AND OFFICERS
EXHIBIT E ESCROW AGREEMENT
EXHIBIT F INDIVIDUALS WITH KNOWLEDGE
EXHIBIT G KEY EMPLOYEE COMPENSATION PLAN
EXHIBIT H [INTENTIONALLY OMITTED]
EXHIBIT I-1 ASSESSED REAL PROPERTY
EXHIBIT I-2 REMEDIATION SCOPES OF WORK
EXHIBIT J-1 UNWANTED REAL PROPERTY
EXHIBIT J-2 UNWANTED REAL PROPERTY SUBJECT TO RESTRICTIVE COVENANT, OPTION
TO PURCHASE AND RIGHT OF FIRST REFUSAL
EXHIBIT J-3 FORM OF RESTRICTIVE COVENANT
EXHIBIT J-4 FORM OF OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL
EXHIBIT J-5 UNWANTED REAL PROPERTY SUBJECT TO LEASE
EXHIBIT J-6 FORM OF LEASE OF UNWANTED REAL PROPERTY
EXHIBIT K EMPLOYMENT AGREEMENT
EXHIBIT L INDEMNIFICATION AGREEMENT
EXHIBIT M OPINION OF COUNSEL TO THE COMPANY
EXHIBIT N OPINION OF COUNSEL TO BUYER
EXHIBIT O GUARANTY
DEFINED TERMS
Term Section
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AGREEMENT Recitals
ALLOCATED GOODWILL Section 5.16(b)(i)
ANNUAL FINANCIAL STATEMENTS Section 3.08(b)
ARTICLES OF MERGER Section 1.01
ASSESSED REAL PROPERTY Section 5.14(a)
AUTO DEALERSHIP LAND Recitals
BALANCE SHEET DATE Section 3.08(a)
XXXXXX TREATMENT PLANT Section 11.02(a)
BASKET AMOUNT Section 11.04(a)
BENEFIT PLANS Section 3.22(a)
BUSINESS Recitals
BUYER Recitals
BUYER INDEMNIFIED PARTIES Section 11.02(a)
BUYER RELATED DOCUMENTS Section 11.02(b)
BUYER'S REPRESENTATIVES Section 5.02
CERTIFICATE Section 2.03(a)
CAP AMOUNT Section 11.04(a)
CLOSING Section 1.07
CLOSING DATE Section 1.07
CLOSING BALANCE SHEET Section 9.01
CLOSING DATE WORKING CAPITAL Section 9.04
CLOSURE DETERMINATION Section 5.14(g)
CODE Section 3.16(a)
COMPANY Recitals
COMPANY COMMON STOCK Recitals
COMPANY ANNUAL FINANCIAL STATEMENTS Section 3.08(a)
COMPANY FINANCIAL STATEMENTS Section 3.08(a)
COMPANY INTERIM FINANCIAL STATEMENTS Section 3.08(a)
COMPANY LATEST BALANCE SHEET Section 3.08(a)
COMPANY SHAREHOLDERS Recitals
CONFIDENTIALITY AGREEMENT Section 6.05
CONSTITUENT CORPORATIONS Recitals
CONTEST Section 5.16(b)(i)
CONVEYANCE COSTS Section 5.16(b)(i)
DEBT Section 5.13(a)
DEBT PAYOFF INSTRUMENTS Section 5.13(a)
DISCLOSURE SCHEDULE Article III
DISPOSITION Recitals
DISSENTING SHARES Section 2.02
EFFECTIVE DATE Section 1.03
EFFECTIVE TIME Section 1.03
ENVIRONMENTAL CONDITION Section 5.14(f)
ENVIRONMENTAL CONSULTANT Section 5.14(c)
ENVIRONMENTAL LAWS Section 3.27(a)(ii)
ENVIRONMENTAL PERMITS Section 3.27(c)
ERISA Section 3.22(a)
ESCROW AGENT Section 2.01(b)
ESCROW AGREEMENT Section 2.01(b)
ESCROW AMOUNT Section 2.01(b)
ESCROW FUND Section 2.01(b)
ESOP Recitals
ESOP SHAREHOLDERS PERCENTAGE Section 9.03(a)
EXCLUDED REAL PROPERTY Section 3.12(a)
EXPERT Section 9.02
FARIBAULT BONDS Section 5.13(a)
FARIBAULT WELL Section 11.02(a)
FARM CONSENTS Section 5.16(a)
FINANCIAL STATEMENTS Section 3.08(b)
FOOD ACTS Section 3.14
FOOD AND DRUG ACT Section 3.14
GAAP Section 3.08(c)
HSR ACT Recitals
HAZARDOUS MATERIALS Section 3.27(a)(i)
INCLUDED LAND Section 5.15
INCLUDED SUBSIDIARY OR INCLUDED SUBSIDIARIES Section 3.07(b)
INDEMNIFICATION ESCROW AMOUNT Section 2.01(b)
INDEMNIFICATION ESCROW PERIOD Section 11.05(c)
INDEMNIFIED PARTY Section 11.03
INDEMNIFYING PARTY Section 11.03
INITIAL CAP PERIOD Section 11.04(a)(i)
INSIDERS Section 3.24
INTERIM PERIOD Section 3.08(a)
INSURANCE SUBSIDIARY Recitals
INSURANCE SUBSIDIARY EQUITY INTERESTS Recitals
INSTRUMENT Section 12.03
INTERIM FINANCIAL STATEMENTS Section 3.08(b)
XXXXXXX RELEASE 5.13(b)
XXXXXXX AUTO Recitals
XXXXXXX AUTO SHARES Recitals
KEY EMPLOYEE COMPENSATION PLAN Section 4.06
KNOWLEDGE Article III
LONG RANGE PLAN Section 3.27(f)
LOSS PAYMENT Section 11.02(c)
LOSSES Section 11.02(a)
MAJORITY Section 12.02
MEAT INSPECTION ACT Section 3.14
MERGER Recitals
MERGER CONSIDERATION Section 2.01(a)
MERGER EXPENSES Section 10.01
MERGER SUB Recitals
MEXICAN SUBSIDIARY Recitals
MEXICAN SUBSIDIARY EQUITY INTERESTS Recitals
NEWCO Recitals
NON-ESOP SHAREHOLDERS PERCENTAGE Section 9.03(a)
OTHER BENEFITS ARRANGEMENTS Section 3.22(a)
OTHER BUSINESS Recitals
PERMITTED LIENS Section 3.11(b)
PERMITS Section 3.26(b)
PLAN OF MERGER Section 1.03
POLISH JOINT VENTURE COMPANIES Recitals
POLISH JOINT VENTURE EQUITY INTERESTS Recitals
POST-CLOSING ADJUSTMENT ESCROW AMOUNT Section 2.01(b)
POULTRY INSPECTION ACT Section 3.14
PRE-CLOSING COMPENSATION PLAN TERMINATION Section 5.09(b)
PRO FORMA ANNUAL FINANCIAL STATEMENTS Section 3.08(b)
PRO FORMA FINANCIAL STATEMENTS Section 3.08(b)
PRO FORMA INTERIM FINANCIAL STATEMENTS Section 3.08(b)
PRO FORMA LATEST BALANCE SHEET Section 3.08(b)
REAL PROPERTY Section 3.12
REAL PROPERTY LEASES Section 3.12
RELATED AGREEMENTS Section 7.01(f)
RELEASE Section 3.27(a)(iii)
REMEDIABLE CONDITION Section 5.14(d)
REMEDIATE Section 5.14(f)
REMEDIATION SCOPE OF WORK Section 5.14(c)
REQUIRED CONSENT Section 5.07
RETAINED CASH Section 11.05(d)
RETURNED CASH Section 11.05(d)
RETURNS Section 3.16
SCHEDULED FARM Section 5.16(a)
SCHEDULED FARMS Section 5.16(a)
SECOND CAP PERIOD Section 11.04(a)(ii)
SELLER RELATED DOCUMENTS Section 11.02(a)
SHAREHOLDER INDEMNIFIED PARTIES Section 11.02(b)
SHAREHOLDER REPRESENTATIVE Recitals
SHARES Recitals
SUBSIDIARY OR SUBSIDIARIES Section 3.07(a)
SURVIVAL PERIOD OR SURVIVAL PERIODS Section 11.01(a)
SURVIVING CORPORATION Section 1.01
SURVIVING CORPORATION COMMON STOCK Section 2.01(c)
TARGET WORKING CAPITAL Section 9.03
TAX AFFILIATE OR TAX AFFILIATES Section 3.16
TAXES Section 3.16
TERMINATED COMPENSATION PLANS Section 5.09(b)
THIRD PARTY CLAIM Section 11.03(a)
THIRD PARTY CLAIM NOTICE Section 11.03(a)
TRANSFERRED FACILITY Section 5.16(b)(i)
TRANSMITTAL MATERIALS Section 2.03(a)
UNWANTED REAL PROPERTY Section 5.15
WELFARE PLAN Section 3.22(b)(xiii)
WISCONSIN STATUTES Recitals
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER AND PLAN OF REORGANIZATION (this
"AGREEMENT"), dated as of January 22, 2001, is made and entered into by and
among HORMEL FOODS CORPORATION, a Delaware corporation ("BUYER"), BADGER
ACQUISITION CORPORATION, a Wisconsin corporation and wholly owned subsidiary of
Buyer ("MERGER SUB"), XXXXXX FOODS, INC., a Wisconsin corporation doing business
as The Turkey Store Company (the "COMPANY"), and XXXXXX X. XXXXXX (the
"SHAREHOLDER REPRESENTATIVE"), acting solely in his capacity as representative
of the shareholders of the Company, other than the Xxxxxx Foods Employees' Stock
Ownership Plan (the "ESOP"). Merger Sub and the Company are hereinafter
sometimes collectively referred to as the "CONSTITUENT CORPORATIONS."
WHEREAS, the Company is engaged primarily in the business of producing,
processing, marketing, distributing and selling fresh, frozen and processed
turkey products (the "BUSINESS");
WHEREAS, the Company is also engaged in certain other businesses
unrelated to the Business (collectively, the "OTHER BUSINESS"), which Other
Business includes (i) the marketing and sale of automobiles through the Xxxxxx
Sales and Service division of the Company, including the land related thereto to
the extent included in Unwanted Real Property under Section 5.15 hereof, and
through Xxxxxxx Bros. Auto Inc., a Wisconsin corporation ("XXXXXXX AUTO"), of
which the Company owns seventy-five (75) shares of the issued and outstanding
common stock, without par value (the "XXXXXXX AUTO SHARES"), constituting
sixty-five and twenty-two hundredths percent (65.22%) of all of the issued and
outstanding shares of common stock and other capital stock or equity or
ownership interests of Xxxxxxx Auto; PROVIDED, HOWEVER, that the land described
in EXHIBIT A-1 (the "AUTO DEALERSHIP LAND") shall be deemed to be part of the
Business and not part of the Other Business, PROVIDED, further, that such Auto
Dealership Land shall, after the Closing (defined herein) be leased by the
Company to Xxxxxxx Auto pursuant to the Lease Agreement attached hereto as
EXHIBIT A-2, (ii) the provision of insurance through Riverton Insurance Co. Ltd,
a company organized under the laws of Barbados ("INSURANCE SUBSIDIARY"), of
which the Company owns all of the issued and outstanding capital stock or other
equity or ownership interests (the "INSURANCE SUBSIDIARY EQUITY INTERESTS"),
(iii) the processing, marketing, distributing and selling of turkey products in
Poland through Indykpol S.A., Lubdrob S.A. and Frednowy Sp z.o.o., each of which
is a company organized under the laws of Poland (the "POLISH JOINT VENTURE
COMPANIES"), of which the Company owns 1,191,183, 346,451 and 142 shares,
respectively, of the issued and outstanding shares of such Polish Joint Venture
Companies constituting 40.63%, 15.61% and 19.9%, respectively, of the issued and
outstanding shares of common stock and other capital stock or equity or
ownership interests of such Polish Joint Venture Entities (the "POLISH JOINT
VENTURE EQUITY INTERESTS"); (iv) the processing, marketing, distributing and
selling of turkey products in Mexico through Xxxxxx Mezoro S.A. de C.V., which
is a company organized under the laws of Mexico (the "MEXICAN SUBSIDIARY"), of
which the Company owns 98 of 100 of the issued and outstanding "Series A" shares
and 158,117, constituting all, of the issued and outstanding "Series B" shares
of such Mexican Subsidiary ("Series A" shares and "Series B" shares constitute
all of authorized and
outstanding shares of capital stock or equity or ownership interests of such
Mexican Subsidiary) (the "MEXICAN SUBSIDIARY EQUITY INTERESTS"); (v) the
Unwanted Real Property, as described in Section 5.15 hereof; (vi) the
Company's interest in a $135,000 receivable owed by Xxxxx Xxxxxx; (vii) the
Company's interest in certain Split Dollar Life Insurance Policies for
payments made on behalf of Xxxxxx family shareholders; (viii) the Company's
interest in the cash surrender value of certain insurance policies and the
Company's obligation to repay certain amounts borrowed against such cash
surrender value; (ix) the Company's interest in certain life insurance
policies on the life of Xxxxxxx Xxxxxx; and (x) the Company's interest in
certain publicly traded stocks held in a brokerage account at Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated;
WHEREAS, the Company intends to separate the Other Business from the
Business by (i) disposing of all the assets, liabilities and business of the
Other Business, including the Xxxxxxx Auto Shares, the Insurance Subsidiary
Equity Interests, the Polish Joint Venture Equity Interests, the Mexican
Subsidiary Equity Interests, the Unwanted Real Property, the Company's interest
in the receivable from Xxxxx Xxxxxx, the Company's interest in certain Split
Dollar Life Insurance Policies for payments made on behalf of Xxxxxx family
shareholders, the Company's interest in the cash surrender value of certain
insurance policies and the Company's obligation to repay certain amounts
borrowed against such cash surrender value, the Company's interest in certain
life insurance policies on the life of Xxxxxxx Xxxxxx, the Company's interest in
certain publicly traded stocks held in a brokerage account at Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated and the deferred compensation liability for
Xxxxxxx X. Xxxxxx through the contribution prior to the Merger of such assets,
liabilities and business of the Other Business to Our Family, LLP and Our Family
MN, LLP, each a newly formed Wisconsin limited liability partnership of which
the Company owns approximately 97.82% of the partnership interests of Our Family
MN, LLP and Xxxxxx X. Xxxxxx owns approximately 2.18% of the partnership
interests and the Company owns approximately 99.55% of the partnership interests
of Our Family, LLP and Xxxxxx X. Xxxxxx owns approximately 0.45% of the
partnership interests, and Our Family I, LLC, a newly formed Wisconsin limited
liability company which is wholly owned by Our Family, LLP (each, a "NEWCO") and
the exchange of all of the partnership interests or membership interests, as
applicable, of each Newco held by the Company in redemption of a number of
Shares (as defined below) of the Company Common Stock (as defined below) to be
determined by the Company and the Company Shareholders exchanging such Shares
(the "DISPOSITION"), and (ii) retaining all of the assets and business of, and
liabilities incurred in the ordinary course of business related to, the Business
in the Company, including the Auto Dealership Land which shall be retained by
the Company and not be subject to the Disposition;
WHEREAS, the respective Boards of Directors of Buyer, Merger Sub and
the Company have determined that it is advisable and in the best interests of
the respective corporations and their shareholders that, after consummation
of the Disposition, Merger Sub be merged with and into the Company in
accordance with the Wisconsin Statutes (the "WISCONSIN STATUTES") and the
terms of this Agreement, pursuant to which the Company will be the surviving
corporation and will become a wholly owned subsidiary of Buyer (the "MERGER");
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WHEREAS, the shareholders of the Company set forth on EXHIBIT B hereto
(the "COMPANY SHAREHOLDERS") collectively own 1,304,806 shares (the "SHARES") of
common stock of the Company, par value $.10 per share (the "COMPANY COMMON
STOCK"), such Shares constituting all of the issued and outstanding shares of
Common Stock or other capital stock or equity or ownership interests of the
Company;
WHEREAS, certain Company Shareholders, other than the ESOP, have
entered in to a Shareholder Voting Agreement with Buyer of even date herewith
pursuant to which such shareholders have agreed to vote their Shares in favor of
this Agreement and the Merger;
WHEREAS, each of Buyer and the Company has filed a notification and
report form with respect to the Merger under the applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR ACT"), and has received
notification that the waiting periods with respect thereto have expired; and
WHEREAS, Buyer, Merger Sub and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement and in the Articles of
Merger (as defined in Section 1.01 hereof), the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
1.01 THE MERGER.
At the Effective Time (as defined in Section 1.03 hereof), Merger Sub
shall be merged with and into the Company upon the terms and conditions
set forth herein and in the Articles of Merger, a copy of which is
attached hereto as EXHIBIT C (the "ARTICLES OF MERGER"), as permitted
by and in accordance with Section 180.1105 of the Wisconsin Statutes.
Thereupon, the separate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation under the corporate
name it possesses immediately prior to the Effective Time. The Company,
in its capacity as the corporation surviving the Merger, is sometimes
referred to herein as the "SURVIVING CORPORATION."
1.02 EFFECT OF THE MERGER.
At the Effective Time, the separate existence of Merger Sub will cease,
and the Surviving Corporation shall succeed to all the rights and
property, and be subject to all the liabilities of, the Constituent
Corporations, all without further act or deed and with the effects set
forth in Section 180.1106 of the Wisconsin Statutes.
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1.03 EFFECTIVE TIME.
The consummation of the Merger shall be effected as promptly as
practicable after the satisfaction or waiver of the conditions set
forth in Article VII hereof, PROVIDED THAT this Agreement has not been
terminated pursuant to Article VIII hereof, and the parties hereto will
cause a copy of the Articles of Merger, together with a Plan of Merger
attached to the Articles of Merger (the "PLAN OF MERGER"), to be
executed, delivered and filed with the Department of Financial
Institutions of the State of Wisconsin as provided in Section 180.1105
of the Wisconsin Statutes. The Merger shall become effective
immediately upon the receipt of the Articles of Merger and Plan of
Merger by the Department of Financial Institutions of the State of
Wisconsin and the subsequent acceptance of the Articles of Merger and
Plan of Merger as "filed" by the Department of Financial Institutions
of the State of Wisconsin. The date on which the Merger shall become
effective is referred to herein as the "EFFECTIVE DATE," and the time
on the Effective Date at which the Merger shall become effective is
referred to herein as the "EFFECTIVE TIME."
1.04 DIRECTORS AND OFFICERS.
From and after the Effective Time, the directors and the officers of
the Surviving Corporation shall be the persons listed on EXHIBIT D
hereto. Such directors and officers of the Surviving Corporation shall
hold office for the term specified in, and subject to the provisions
contained in, the Bylaws of the Surviving Corporation and applicable
law. If, at or after the Effective Time, a vacancy shall exist on the
Board of Directors or in any of the offices of the Surviving
Corporation, such vacancy shall be filled in the manner provided in the
Bylaws of the Surviving Corporation.
1.05 ARTICLES OF INCORPORATION; BYLAWS.
From and after the Effective Time and until further amended in
accordance with applicable law, the Articles of Incorporation of Merger
Sub as in effect immediately prior to the Effective Time shall become
the Articles of Incorporation of the Surviving Corporation, EXCEPT that
Article I thereof shall be amended to change the name of the Surviving
Corporation to "The Turkey Store Company." From and after the Effective
Time and until further amended in accordance with applicable law, the
Bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation.
1.06 TAKING OF NECESSARY ACTION; FURTHER ACTION.
Buyer, Merger Sub and the Company, respectively, shall each use its
commercially reasonable best efforts to take all such action as may be
necessary or appropriate to effectuate the Merger under the Wisconsin
Statutes at the time specified in Section 1.03 hereof. If, at any time
after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
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Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of either of the
Constituent Corporations, the officers of the Surviving Corporation are
fully authorized in the name of each Constituent Corporation or
otherwise to take, and shall take, all such lawful and necessary
action.
1.07 THE CLOSING.
(a) The closing of the transactions contemplated by this Agreement
(the "CLOSING") will take place at the offices of Xxxxxx &
Whitney LLP at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx,
or such other location as the parties may mutually agree. The
Closing will be effective as of the Effective Time and the
date on which the Effective Time occurs is sometimes referred
to herein as the "CLOSING DATE".
(b) The parties shall deliver to each other the documents required
to be delivered pursuant to Article VII hereof at the Closing.
ARTICLE II
CONVERSION OF SECURITIES
2.01 CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any action
on the part of Buyer, Merger Sub, the Company, the Surviving
Corporation or the holder of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than (i)
shares of Company Common Stock owned or held in treasury by
the Company or any direct or indirect subsidiary of the
Company and (ii) any Dissenting Shares (as defined in
Section 2.02 hereof)) shall be canceled and extinguished and
be converted into and become a right to receive an amount in
cash, without interest, equal to (x) $334.4 million minus
the amount of Debt of the Company and each Included
Subsidiary at the Effective Time that has not been paid in
full prior to Effective Time in accordance with Section 5.13
hereof divided by (y) the total number of shares of Company
Common Stock outstanding immediately prior to the Effective
Time and any other shares of capital stock of the Company
and any other securities of the Company convertible into or
exchangeable for shares of capital stock of the Company
outstanding immediately prior to such time (the "MERGER
CONSIDERATION").
(b) An amount of the Merger Consideration (the "ESCROW AMOUNT")
equal to the sum of (i) $5.0 million (the "POST-CLOSING
ADJUSTMENT ESCROW AMOUNT"), (ii)(A) the aggregate retention
amount for all insurance obtained by or for the
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benefit of the Company Shareholders with respect to their
obligations under Article XI hereof plus (B) $2.5 million (the
"INDEMNIFICATION ESCROW AMOUNT") and (iii) $2.0 million (the
"ENVIRONMENTAL REMEDIATION ESCROW AMOUNT"), shall be
deposited by Buyer with U.S. Bank, National Association (the
"ESCROW AGENT") to be held in escrow (the "ESCROW FUND")
pursuant to the terms of the Escrow Agreement, in the form
attached hereto as EXHIBIT E (the "ESCROW AGREEMENT"), among
Buyer, the Shareholder Representative and the Escrow Agent
in accordance with the terms of this Agreement. The Escrow
Amount shall be deducted, pro rata, from the Merger
Consideration that would, but for the establishment of the
Escrow Fund, otherwise be issued to the Company Shareholders
at the Effective Time. The Company Shareholders shall be
entitled to the rights and remedies with respect to the
Escrow Amount described in Sections 9.03 and 11.05 hereof.
For all purposes, including without limitation financial
reporting and income taxation, the Escrow Amount, together
with any investment income thereon, shall constitute Merger
Consideration under this Agreement which is contingent upon
disbursement to the Company Shareholders from the Escrow
Fund on the terms and conditions contained in this Agreement
and the Escrow Agreement.
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned or held in
treasury by the Company or any direct or indirect subsidiary
of the Company shall be canceled and extinguished, and no
payment shall be made with respect thereto.
(d) Each share of common stock, $.01 par value, of Merger Sub
issued and outstanding immediately prior to the Effective Time
shall be converted into one fully paid and nonassessable
(subject to Section 180.0622(2)(b) of the Wisconsin Statutes)
share of common stock, $.10 par value, of the Surviving
Corporation ("SURVIVING CORPORATION COMMON STOCK").
2.02 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, if
Section 180.1302 of the Wisconsin Statutes shall be
applicable to the Merger, shares of Company Common Stock
that are issued and outstanding immediately prior to the
Effective Time and which are held by Company Shareholders
who have not consented to the Merger or, in the event a
meeting of Shareholders is held to approve the Merger, have
not voted such shares in favor of the Merger, who shall have
delivered a written demand for the fair value of such shares
in the manner provided in Section 180.1323 of the Wisconsin
Statutes, who shall have submitted such shares for
endorsement, and who, as of the Effective Time, shall not
have effectively withdrawn or lost such right to dissenters'
rights ("DISSENTING SHARES") shall not be converted into or
represent a right to receive the Merger Consideration
pursuant to Section 2.01 hereof, but the holders thereof
shall be entitled only to such rights as are granted by
Section 180.1325 of the Wisconsin Statutes. Each holder of
6
Dissenting Shares who becomes entitled to payment for such
shares pursuant to Section 180.1325 of the Wisconsin
Statutes shall receive payment therefor from the Surviving
Corporation in accordance with the Wisconsin Statutes;
PROVIDED, HOWEVER, that if any such holder of Dissenting
Shares shall have effectively withdrawn such holder's demand
for appraisal of such shares (with the consent of the
Company) or lost such holder's right to appraisal and
payment of such shares, such holder or holders (as the case
may be) shall forfeit the right to appraisal of such shares
and each such share shall thereupon be deemed to have been
canceled, extinguished and converted, as of the Effective
Time, into and represent the right to receive payment from
the Surviving Corporation of the Merger Consideration, as
provided in Section 2.01 hereof.
(b) The Company shall give Buyer (i) prompt notice of any written
demand for fair value, any withdrawal of a demand for fair
value and any other instrument served pursuant to Section
180.1323 of the Wisconsin Statutes received by the Company and
(ii) the opportunity to direct all negotiations and
proceedings with respect to demands for fair value under
Section 180.1325 of the Wisconsin Statutes. The Company shall
not, except with the prior written consent of Buyer,
voluntarily make any payment with respect to any demand for
fair value or offer to settle or settle any such demand.
2.03 PAYMENT OF MERGER CONSIDERATION FOR COMPANY COMMON STOCK.
(a) After the Effective Time, each holder of a certificate or
certificates representing shares of Company Common Stock
canceled and extinguished at the Effective Time pursuant to
Section 2.01(a) hereof (each, a "CERTIFICATE") may surrender
such Certificate or Certificates to Buyer, as agent for the
holders of shares of Company Common Stock, to effect the
exchange of such Certificate or Certificates on such holder's
behalf. Buyer shall, promptly, but in no event more than five
(5) business days, after approval of the Merger by the Company
Shareholders, cause to be distributed to such shareholders
appropriate materials to facilitate such surrender and will
process such materials promptly after receipt thereof
("TRANSMITTAL MATERIALS"). After surrender to Buyer of any
Certificate after the Effective Time, together with the
completed Transmittal Materials, subject to the provisions of
Section 2.02(a) hereof, Buyer shall distribute to the person
in whose name such Certificate shall have been registered, an
amount in cash, either by check or wire transfer of
immediately available funds, at the election of such person,
to an account or accounts designated by such person,
representing the amount in cash into which the shares of
Company Common Stock represented thereby shall have been
converted at the Effective Time pursuant to Section 2.01(a)
hereof, less the amount of cash deposited by Buyer with the
Escrow Agent pursuant to Section 2.01(b) hereof. In the case
of Certificates surrendered on the Closing, so long as Buyer
has received, at least three business days prior to the
Effective Time, written notice from a Company Shareholder that
such shareholder will
7
surrender its Certificates to Buyer on the Closing (which
notice shall include completed Transmittal Materials and
contain wire transfer and account instructions or in the case
of check, delivery instructions), Buyer shall distribute on
the Closing Date to the person in whose name such Certificate
shall have been registered, an amount in cash, either by check
or wire transfer of immediately available funds, at the
election of such person to an account or accounts designated
by such person, representing the amount in cash into which the
shares of Company Common Stock represented thereby shall have
been converted at the Effective Time pursuant to Section
2.01(a) hereof, less the amount of cash deposited by Buyer
with the Escrow Agent pursuant to Section 2.01(b) hereof.
Until so surrendered and exchanged, each outstanding
Certificate shall be deemed to represent and evidence only
the right to receive the Merger Consideration to be paid
therefor as set forth in Section 2.01 and, until such
surrender and exchange, no amount of Merger Consideration
shall be paid to the holder of such outstanding Certificate in
respect thereof.
(b) If payment of any portion of the Merger Consideration is to be
made to a person other than the person in whose name the
certificate surrendered in exchange therefor is registered, it
shall be a condition to such payment that the Certificate so
surrendered shall be properly endorsed and otherwise in proper
form for transfer, and that the person requesting such payment
shall pay to Buyer any transfer and other taxes required by
reason of such payment in any name other than that of the
registered holder of the Certificate surrendered or shall have
established to the satisfaction of Buyer that such tax either
has been paid or is not payable.
(c) No interest shall accrue or be payable with respect to any
amounts which any holder of shares of Company Common Stock
shall be so entitled to receive. Buyer shall be authorized to
pay the cash attributable to any Certificate theretofore
issued which has been lost or destroyed, upon receipt of
satisfactory evidence of ownership of the shares of Company
Common Stock represented thereby and of appropriate
indemnification.
(d) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the
shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are
presented to the Surviving Corporation, they shall be canceled
and exchanged for the Merger Consideration as provided in this
Section 2.03, subject to applicable law in the case of
Dissenting Shares.
(e) If a holder of any shares of Company Common Stock shall become
entitled to receive payment for such shares pursuant to
Section 180.1325 of the Wisconsin Statutes and Section 2.02
hereof, such payment shall be made by the Surviving
Corporation in accordance with Section 2.02 hereof.
8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and
warranties to Buyer as of the date hereof and the Effective Time, except as
otherwise set forth in the Disclosure Schedule delivered by the Company to
Buyer on the date hereof and as may be supplemented after the date hereof in
accordance with Section 5.01(f) hereof (the "DISCLOSURE SCHEDULE") (which
Disclosure Schedule sets forth the exceptions to the representations and
warranties contained in this Article III under Schedules referencing the
Sections to which such exceptions apply). Each item disclosed in the
Disclosure Schedule shall be deemed to be disclosed with respect to each
section of the Disclosure Schedule to which it relates, without the necessity
of repetitive disclosure or cross-reference, so long as such item is fairly
described with reasonable particularity and detail and such description
provides a reasonable indication that the item applies to another Schedule
contained in the Disclosure Schedule; PROVIDED, THAT, no such deemed
disclosure shall apply with respect to any such Schedule of the Disclosure
Schedule (or portion thereof) that contains a disclosure of "none". Unless
otherwise specifically referenced herein or in the Disclosure Schedule, none
of the representations or warranties shall be deemed to apply to the assets
or entities subject to the Disposition except to the extent such assets or
entities are related to the Business. For purposes of this Agreement, the
term "KNOWLEDGE" when used with respect to the Company or any Included
Subsidiary shall mean the actual knowledge after reasonable inquiry of the
individuals listed on EXHIBIT F hereto, each of which individuals has
received a copy of the representations and warranties contained in this
Article III and has reviewed and understands such representations and
warranties.
3.01 INCORPORATION AND CORPORATE POWER.
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Wisconsin and, subject to
the approval of the Articles of Merger by the Company Shareholders, has
the requisite corporate power and authority to execute and deliver this
Agreement and the Articles of Merger and to perform its obligations
hereunder and thereunder. The Company has the corporate power and
authority and all authorizations, licenses, permits and certifications
necessary to own and operate its properties and to carry on its
business as now conducted. The copies of the Company's Articles of
Incorporation and Bylaws that have been furnished by the Company to
Buyer and Merger Sub prior to the date hereof reflect all amendments
made thereto and are correct and complete as of the date hereof. The
Company is qualified to do business as a foreign corporation in every
jurisdiction in which the nature of its business or its ownership of
property requires it to be so qualified, except for those jurisdictions
in which the failure to be so qualified would not, individually or in
the aggregate, have a material adverse effect on the Company's business
or results of operations. A list of the jurisdictions in which the
Company is so qualified is set forth in SCHEDULE 3.01 of the Disclosure
Schedule.
9
3.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT.
The execution, delivery and performance of this Agreement and the
Articles of Merger by the Company and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action, and no other corporate
proceedings on its part are necessary to authorize the execution,
delivery and performance of this Agreement and the Articles of Merger,
other than the approval of the Articles of Merger by the Company
Shareholders. This Agreement has been duly executed and delivered by
the Company and constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally or by
application of equitable principles and the Articles of Merger, when
executed and delivered by the Company, will constitute the valid and
binding obligation of the Company, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally or by application of equitable principles.
3.03 APPROVAL OF THE ARTICLES OF MERGER; MEETING OF COMPANY SHAREHOLDERS.
The Company's Board of Directors has, by resolutions duly adopted at a
meeting held on January 19, 2001, approved this Agreement and the
transactions contemplated hereby, including the Merger, and resolved to
recommend the approval of the Merger, this Agreement, the Articles of
Merger and the Key Employee Compensation Plan by the Company
Shareholders. The written consent or the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock
is the only consent or vote of the holders of any class of capital
stock of the Company necessary to approve the Merger, this Agreement,
the Articles of Merger and the Key Employee Compensation Plan. None of
the resolutions described in this Section 3.03 has been amended or
otherwise modified in any respect since the date of adoption thereof,
and all such resolutions remain in full force and effect.
3.04 NO BREACH.
Except as set forth in SCHEDULE 3.04 of the Disclosure Schedule, the
execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of,
result in the creation of a right of termination or acceleration or any
lien, security interest, charge or encumbrance upon any assets of the
Company or any Included Subsidiary under the provisions of the Articles
of Incorporation or Bylaws of the Company or any Included Subsidiary or
any indenture, mortgage, lease, loan agreement or other agreement or
instrument by which the Company is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which the
Company or any Included Subsidiary is subject.
10
3.05 GOVERNMENTAL AUTHORITIES; CONSENTS.
Except for the applicable requirements of the HSR Act, and except for
the filing of the Articles of Merger with the Department of Financial
Institutions of the State of Wisconsin, and except for the applicable
requirements of the United States Department of Agriculture, Food
Safety Inspection Service, neither the Company nor any Subsidiary is
required to submit any notice, report or other filing with any
governmental authority in connection with the execution or delivery by
it of this Agreement or the consummation of the transactions
contemplated hereby. Except as set forth in SCHEDULE 3.05 and SCHEDULE
3.27(c) of the Disclosure Schedule, no consent, approval, exemption or
authorization of either (i) any governmental or regulatory authority or
court or (ii) any other party or person (except the approval of the
Articles of Merger by the Company Shareholders) is required to be
obtained by the Company or any Subsidiary in connection with the
Company's execution, delivery and performance of this Agreement or the
transactions contemplated hereby, including without limitation, in each
case, any consent, approval, exemption or authorization under any
indenture, mortgage, lease, loan agreement or other agreement or
instrument by which the Company or any Subsidiary is bound or affected
or any law, statute, rule or regulation or order, judgment or decree to
which the Company or any Subsidiary is subject.
3.06 CAPITAL STOCK.
The authorized capital stock of the Company consists of 2,100,000
shares of Common Stock, par value $.10 per share, of which, as of the
date hereof, 1,304,806 shares are issued and outstanding and held of
record by the Company Shareholders, as forth in EXHIBIT B hereto. All
of such outstanding shares of Company Common Stock have been duly
authorized and are validly issued, fully paid and nonassessable
(subject to Section 180.0622(2)(b) of the Wisconsin Statutes) and are
owned by the Company Shareholders. Except as set forth on SCHEDULE 3.06
of the Disclosure Schedule, the Company has no other equity securities
or securities containing any equity features authorized, issued or
outstanding. There are no agreements or other rights or arrangements
existing which provide for the sale or issuance of capital stock by the
Company and there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to purchase or
otherwise acquire from the Company any shares of capital stock or other
securities of the Company of any kind. There are no agreements or other
obligations (contingent or otherwise) that may require the Company to
repurchase or otherwise acquire any shares of its capital stock.
3.07 SUBSIDIARIES.
(a) Except for the subsidiaries listed SCHEDULE 3.07(a) of the
Disclosure Schedule (each, a "SUBSIDIARY" and, collectively,
the "SUBSIDIARIES"), the Company does not own any stock,
partnership interest, joint venture interest or any other
security or ownership interest issued by any other
corporation, organization or entity.
11
(b) SCHEDULE 3.07(b) of the Disclosure Schedule lists, after
giving effect to the Disposition, each Subsidiary that owns
assets related to, or performs operations in connection with,
the Business (each such Subsidiary, an "INCLUDED SUBSIDIARY"
and, collectively, the "INCLUDED SUBSIDIARIES"). Except for
Xxxxxxx Auto and the Xxxxxx Sales and Service Division, no
Subsidiary currently conducts any business in the United
States, except the Included Subsidiaries. The Company and the
Included Subsidiaries are the only entities that conduct the
Business in the United States. After giving effect to the
Disposition, (i) no Subsidiary, other than the Included
Subsidiaries, will own any assets or perform and operations
related to the Business and (ii) the Included Subsidiaries
will not include any assets or liabilities related to, or
perform any operations in connection with, the Other Business
or any other business other than the Business.
(c) SCHEDULE 3.07(c) of the Disclosure Schedule sets forth, for
each Included Subsidiary, the jurisdiction of incorporation or
organization, the number of authorized and issued and
outstanding shares of capital stock or other ownership
interests of such Included Subsidiary and the names and titles
of the directors and officers of such Included Subsidiary.
Each Included Subsidiary is a corporation (or other entity as
described in SCHEDULE 3.07(c) of the Disclosure Schedule) duly
incorporated or organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation or organization and has the corporate or other
power and authority and all authorizations, licenses, permits
and certifications necessary to own and operate its properties
and to carry on its business as now conducted. The copies of
each Included Subsidiary's Articles of Incorporation and
Bylaws or other organizational documents which have been
furnished by the Company to Buyer prior to the date hereof
reflect all amendments made thereto and are correct and
complete as of the date hereof. Each Included Subsidiary is
qualified to do business as a corporation or other entity in
every jurisdiction in which the nature of its business or its
ownership of property requires it to be so qualified, except
for those jurisdictions in which the failure to be so
qualified would not, individually or in the aggregate, have a
material adverse effect on the Included Subsidiary's or the
Company's business or results of operations. A list of the
jurisdictions in which each Included Subsidiary is so
qualified is set forth in SCHEDULE 3.07(c) of the Disclosure
Schedule. Except as set forth on SCHEDULE 3.07(c) of the
Disclosure Schedule, no Included Subsidiary has any other
equity securities or securities containing any equity features
authorized, issued or outstanding. There are no agreements or
other rights or arrangements existing which provide for the
sale or issuance of capital stock by any Included Subsidiary
and there are no rights, subscriptions, warrants, options,
conversion rights or agreements of any kind outstanding to
purchase or otherwise acquire from the Company or any Included
Subsidiary any shares of capital stock or other securities of
any Included Subsidiary of any kind. There are no agreements
or other obligations (contingent or otherwise) that may
require the
12
Company or any Included Subsidiary to repurchase or otherwise
acquire any shares of its capital stock or other ownership
interests. All of the issued and outstanding shares of capital
stock or other ownership interests of each Included Subsidiary
(i) have been duly and validly authorized and issued, and are
fully paid and nonassessable (subject to
Section 180.0622(2)(b) of the Wisconsin Statutes) and (ii) are
owned by the Company free and clear of all liens, security
interests, charges or any other encumbrances of any kind.
3.08 FINANCIAL STATEMENTS.
(a) The Company has delivered to Buyer copies of (i) the audited
consolidated balance sheet, as of February 28, 1998, and the
audited consolidated and consolidating balance sheets, as of
February 27, 1999 and February 26, 2000, of the Company and
the audited consolidated statements of operations,
stockholders' investment and cash flows of the Company for the
year ended February 28, 1998, and the audited consolidated and
consolidating statements of operations and the audited
consolidated statements of stockholders' investment and cash
flows of the Company for each of the years ended February 27,
1999 and February 26, 2000 (collectively, the "COMPANY ANNUAL
FINANCIAL STATEMENTS") and (ii) the unaudited consolidated and
unconsolidated balance sheet, as of December 30, 2000, of the
Company and the unaudited consolidated and unconsolidated
statements of operations and the unaudited consolidated
statement of cash flows of the Company for the period
commencing February 27, 2000 and ending December 30, 2000, and
related agreed upon procedures report of Xxxxxx Xxxxxxxx LLP
(the "INTERIM PERIOD") (collectively, the "COMPANY INTERIM
FINANCIAL STATEMENTS", and together with the Company Annual
Financial Statements, the "COMPANY FINANCIAL STATEMENTS"). The
audited consolidated and consolidating balance sheet as of
February 26, 2000 is referred to herein as the "COMPANY LATEST
BALANCE SHEET", and February 26, 2000 is referred to herein as
the "BALANCE SHEET DATE." The Company Financial Statements are
attached to SCHEDULE 3.08 of the Disclosure Schedule.
(b) The Company has delivered to Buyer copies of (i) the unaudited
pro forma balance sheets, as of February 28, 1998, February
27, 1999 and February 26, 2000, of the Business consolidated
for all the assets and liabilities of the Company and the
Included Subsidiaries (as if the Disposition had occurred
prior to such dates) and the unaudited pro forma statements of
operations, stockholders' investment and depreciation and
amortization of the Business consolidated for all the
operations of the Company and the Included Subsidiaries for
each of the years ended February 28, 1998, February 27, 1999
and February 26, 2000 (as if the Disposition had occurred
prior to such periods) (collectively, the "PRO FORMA ANNUAL
FINANCIAL STATEMENTS" and, together with the Company Annual
Financial Statements, the "ANNUAL FINANCIAL STATEMENTS") and
(ii) the unaudited pro forma balance sheet, as of December 30,
2000, of the Business consolidated for all the assets and
13
liabilities of the Company and the Included Subsidiaries (as
if the Disposition had occurred prior to such date) and the
unaudited pro forma statements of operations, stockholders'
investment and depreciation and amortization of the Business
consolidated for all the operations of the Company and the
Included Subsidiaries for the Interim Period (as if the
Disposition has occurred prior to such period) (collectively,
the "PRO FORMA INTERIM FINANCIAL STATEMENTS" and (i) together
with the Company Interim Financial Statements, the "INTERIM
FINANCIAL STATEMENTS" and (ii) together with the Pro Forma
Annual Financial Statements, the "PRO FORMA FINANCIAL
STATEMENTS"). The Pro Forma Financial Statements include (x)
an agreed upon procedures report from the Company's
independent auditors stating that such Pro Forma Financial
Statements were compiled in a manner consistent with the
methods, procedures and accounting principles used in
preparing the Company Financial Statements and (y) a schedule
which accurately reconciles such Pro Forma Financial
Statements to the corresponding Company Financial Statements
for each of the periods and as of each of the dates of such
Pro Forma Financial Statements. The unaudited pro forma
balance sheet of the Business as of February 26, 2000 is
referred to herein as the "PRO FORMA LATEST BALANCE SHEET".
The Pro Forma Financial Statements are attached to SCHEDULE
3.08 of the Disclosure Schedule. The Pro Forma Financial
Statements and the Company Financial Statements are referred
to herein, collectively, as the "FINANCIAL STATEMENTS."
(c) The Financial Statements are based upon the information
contained in the books and records of the Company and the
Subsidiaries and fairly present the financial condition of the
Company and the Subsidiaries and of the Business, as
applicable, as of the dates thereof and results of operations
for the periods referred to therein. The Annual Financial
Statements have been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP"),
consistently applied throughout the periods indicated. The
Interim Financial Statements have been prepared in accordance
with GAAP applicable to unaudited interim financial statements
(and thus will not contain all notes or prior period
comparative data which are required to be prepared in
accordance with GAAP) on a basis consistent with the Annual
Financial Statements and reflect all adjustments necessary to
present a fair statement of the results for the interim period
presented.
3.09 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Neither the Company nor any Included Subsidiary nor, to the
Knowledge of the Company, any Subsidiary that is not an
Included Subsidiary, has any liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due
or to become due, whether known or unknown, and regardless of
when asserted) except (i) as reflected in the Company Latest
Balance Sheet, (ii) liabilities which have arisen after the
Balance Sheet Date in the ordinary course of business (none of
which is a material uninsured liability for breach of
14
contract, breach of warranty, tort, infringement, claim or
lawsuit) and (iii) liabilities disclosed in SCHEDULE 3.09(a)
of the Disclosure Schedule.
(b) Neither the Company nor any Included Subsidiary, after giving
effect to the Disposition, shall have any liability (whether
accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and
regardless of when asserted), except (i) as reflected in the
Pro Forma Latest Balance Sheet, (ii) liabilities which have
arisen after the Balance Sheet Date in the ordinary course of
the Business (none of which is a material uninsured liability
for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and (iii) liabilities
disclosed in SCHEDULE 3.09(b) of the Disclosure Schedule.
3.10 NO MATERIAL ADVERSE CHANGE.
Since the Balance Sheet Date, there has been no material adverse change
in the assets, financial condition, operating results, customer,
employee or supplier relations or business condition of the Company or
any Included Subsidiary, except for changes that are specifically
referred to in the Disclosure Schedule.
3.11 ABSENCE OF CERTAIN DEVELOPMENTS.
Except as set forth in SCHEDULE 3.11 of the Disclosure Schedule,
neither the Company nor any Included Subsidiary has, since the dates
indicated below, taken any of the following actions except in
connection with the Disposition:
(a) since December 30, 2000, borrowed any amount or incurred or
become subject to any liability in excess of $200,000, except
(i) current liabilities incurred in the ordinary course of
business, (ii) liabilities under contracts entered into in the
ordinary course of business which liabilities under this
clause (ii) do not exceed, in the aggregate, $500,000 and
(iii) borrowed money under the Company's Revolving Credit
Agreement with Xxxxxx Trust and Savings Bank or Business Loan
Agreement with Bank of America National Trust and Savings
Association;
(b) since February 26, 2000, mortgaged, pledged or subjected to
any lien, security interest, charge or any other encumbrance,
any of its assets with a fair market value in excess of
$100,000, except (i) liens for taxes, assessments, or
governmental charges, carriers', warehousemen's, repairmen's,
mechanics', materialmen's and other similar liens created by
law, which are either not delinquent or are being contested in
good faith by appropriate proceedings which will prevent
foreclosure of such liens, and against which adequate cash
reserves have been provided; (ii) easements, restrictions and
minor title irregularities that do not materially interfere
with the ownership and use of the affected property; (iii)
liens or deposits in connection with worker's compensation,
unemployment insurance, social security or other insurance or
to secure customs duties, public or
15
statutory obligations in lieu of surety, stay or appeal bonds,
or deposits required by law as a condition to the transaction
of business; (iv) liens to secure repayment of loans or other
extensions of credit which shall be released on or before the
Closing Date in accordance with the terms of the applicable
loan or other extension of credit; (v) liens created by
sellers of goods sold to the Company or an Included Subsidiary
on open account, which liens attach solely to the goods sold
and secure solely the purchase price of said goods during the
period during which said goods are in the possession of the
Company or the Included Subsidiary on a trial or "approval"
basis and before which the purchase price for said goods
becomes due and payable; (vi) liens on grain purchased in the
ordinary course of business and (vii) liens created by
purchase money indebtedness for equipment purchased by the
Company or an Included Subsidiary for use in the Business
(the liens referred to in clauses (i) through (vii) hereof
being referred to as, the "PERMITTED LIENS");
(c) since December 30, 2000, sold, assigned or transferred
(including, without limitation, transfers to any employees,
affiliates or shareholders) any tangible assets with a fair
market value in excess of $100,000 (other than pursuant to the
Disposition), or canceled any debts or claims, in each case,
except in the ordinary course of business;
(d) since February 26, 2000, sold, assigned or transferred
(including, without limitation, transfers to any employees,
affiliates or shareholders) any patents, trademarks, trade
names, copyrights, trade secrets or other intangible assets
used in connection with the Business;
(e) since March 15, 2000, disclosed, to any person other than the
Company's or the Company Shareholders' attorneys, accountants
and financial advisors, Buyer or Merger Sub and authorized
representatives of Buyer or Merger Sub, any proprietary
confidential information, other than pursuant to a
confidentiality agreement prohibiting the use or further
disclosure of such information, which agreement is identified
in SCHEDULE 3.11 of the Disclosure Schedule and is in full
force and effect on the date hereof;
(f) since February 26, 2000, waived any rights of material value
or suffered any extraordinary losses or adverse changes in
collection loss experience, whether or not in the ordinary
course of business or consistent with past practice;
(g) since February 26, 2000, declared or paid any dividends or
other distributions with respect to any shares of the
Company's capital stock or redeemed or purchased, directly or
indirectly, any shares of the Company's capital stock or any
options (other than pursuant to the Disposition) and pursuant
to the Company's obligations under the ESOP;
(h) since February 26, 2000, issued, sold or transferred any of
its or any Included Subsidiary's equity securities, securities
convertible into or exchangeable for
16
its equity securities or warrants, options or other rights to
acquire its equity securities, or any bonds or debt
securities;
(i) since February 26, 2000, taken any other action or entered
into any other transaction other than in the ordinary course
of business and in accordance with past custom and practice,
or entered into any transaction with any "insider" (as defined
in Section 3.24 hereof), other than employment arrangements
otherwise disclosed in this Agreement and the Disclosure
Schedule or the transactions contemplated by this Agreement;
(j) since December 30, 2000, suffered any material theft, damage,
destruction or loss of or to any property or properties owned
or used by it, whether or not covered by insurance;
(k) since May 15, 2000, made or granted any bonus or any wage,
salary or compensation increase to any director, officer,
employee who earns more than $100,000 per year, or consultant
or made or granted any increase in any employee benefit plan
or arrangement, or amended or terminated any existing employee
benefit plan or arrangement, or adopted any new employee
benefit plan or arrangement or made any commitment or incurred
any liability to any labor organization; the Company
represents and warrants that all bonuses granted or paid
between the period from February 26, 2000 and May 15, 2000
have been accrued in the Company Annual Financial Statements
for the year ended February 26, 2000;
(l) since February 26, 2000, except as specifically provided for
in the capital budget of the Company for its fiscal year
ending February 24, 2001 (a copy of which has been delivered
to Buyer), made (i) any single capital expenditure (defined in
accordance with GAAP consistently applied) or commitment
therefor in excess of $25,000 or (ii) aggregate capital
expenditures (defined in accordance with GAAP consistently
applied) or commitments in excess of $100,000;
(m) since December 30, 2000, made any loans or advances to, or
guarantees for the benefit of, any individuals except advances
against accrued salaries or for business travel, lodging or
other expenses in the ordinary course of business to
employees;
(n) since December 30, 2000, made charitable contributions or
pledges which in the aggregate exceed $10,000 and which will
be paid after the Effective Date; or
(o) since February 26, 2000, made any change in accounting
principles or practices from those utilized in the preparation
of the Annual Financial Statements.
17
3.12 TITLE TO PROPERTIES.
(a) The real property owned by the Company or the Subsidiaries or
demised by the leases (the "REAL PROPERTY LEASES"), in each
case described in SCHEDULE 3.12 of the Disclosure Schedule,
constitutes all of the real property owned, leased, used or
occupied by the Company and the Subsidiaries in the United
States (the "REAL PROPERTY"). The Real Property consisting of
the Unwanted Real Property, as described in Section 5.15
hereof, any Real Property owned outside of the United States
by the Polish Joint Venture Companies or the Mexican
Subsidiary and the Real Property specifically indicated on
SCHEDULE 3.12 as being excluded from the Real Property is
referred to herein as the "EXCLUDED REAL PROPERTY". The Real
Property, other than the Excluded Real Property, has access,
sufficient for the conduct of the Business as now conducted,
to public roads and to all utilities, including electricity,
sanitary and storm sewer, potable water, natural gas and other
utilities, used in the operation of the Business at that
location.
(b) The Real Property Leases are in full force and effect, and the
Company or an Included Subsidiary holds a valid and existing
leasehold interest under each of the Real Property Leases for
the term set forth in SCHEDULE 3.12 of the Disclosure
Schedule. The Company has delivered to Buyer and Merger Sub
complete and accurate copies of each of the Real Property
Leases, and none of the Real Property Leases has been modified
in any respect, except to the extent that such modifications
are disclosed by the copies delivered to Buyer and Merger Sub.
Neither the Company nor any Included Subsidiary is in default,
and no circumstances exist which, if unremedied, would, either
with or without notice or the passage of time or both, result
in such default under any of the Real Property Leases, nor, to
the Knowledge of the Company or any Included Subsidiary, is
any other party to any of the Real Property Leases in default.
(c) The Company owns good and marketable title to each parcel of
Real Property (other than the Excluded Real Property)
identified in SCHEDULE 3.12 of the Disclosure Schedule as
being owned by the Company and to each of the tangible
properties and tangible assets reflected on the Pro Forma
Latest Balance Sheet or acquired since the date thereof, free
and clear of all liens, security interests, charges and
encumbrances, except for (i) Permitted Liens, (ii) the
properties subject to the Real Property Leases and (iii)
assets disposed of since the date of the Pro Forma Latest
Balance Sheet in the ordinary course of business, all of which
Permitted Liens aggregate less than $100,000.
(d) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Business are in
adequate condition and repair, ordinary wear and tear excepted
for the operation of the Business as now conducted, and are
usable in the ordinary course of business. There are no
defects in such assets or other conditions relating thereto
which, in the aggregate, materially adversely affect the
operation or value of such assets. The Company and the
18
Included Subsidiaries own, or lease under valid leases, all
real property, buildings, machinery, equipment and other
tangible assets necessary for the conduct of the Business as
currently conducted.
(e) Neither the Company nor any Included Subsidiary is in
violation, in any material respect, of any applicable zoning
ordinance or other law, regulation or requirement relating to
the operation of any properties used in the operation of the
Business. During the three (3) year period prior to the date
hereof, neither the Company nor any Included Subsidiary has
received any notice of any such violation, or the existence of
any condemnation proceeding with respect to any of the Real
Property, except, in each case, violations the consequences of
which do not or will not have a material adverse effect on the
Business.
(f) Neither the Company nor any Included Subsidiary has any
Knowledge of improvements made or contemplated to be made by
any public or private authority, the costs of which are to be
assessed as special taxes or charges against any of the Real
Property, and there are no such present special taxes or
charges except as disclosed in SCHEDULE 3.12.
3.13 ACCOUNTS RECEIVABLE.
The accounts receivable reflected on the balance sheet included in the
Pro Forma Interim Financial Statements are valid receivables, are
reflected net of any valid counterclaims or setoffs, and are
collectible in accordance with their terms, except to the extent of the
bad debt reserve reflected on such balance sheet.
3.14 PRODUCT QUALITY AND LABELING STANDARDS; NO DISEASE, ETC.
(a) The Company and each Included Subsidiary has prepared,
manufactured and sold all of its products (including product
in process and in inventory on the Effective Date) in full
compliance with the applicable provisions of the United States
Food, Drug and Cosmetic Act, as amended (the "FOOD AND DRUG
ACT"), the United States Meat Inspection Act, as amended (the
"MEAT INSPECTION ACT") and the United States Poultry Products
Inspection Act, as amended (the "POULTRY INSPECTION ACT" and,
together with the Food and Drug Act and the Meat Inspection
Act, the "FOOD ACTS"), and all rules and regulations
promulgated thereunder and all applicable state and municipal
laws and regulations governing the purity of food sold for
human consumption. All of the products of the Company and the
Included Subsidiaries satisfy all federal and state
nutritional labeling requirements, including all regulations
under the Food Acts and all other such laws and regulations.
All ingredients used in such products conform to the
requirements of the Food Acts and all other such laws and
regulations. All products of the Company and the Included
Subsidiaries (i) in process or in inventory on the Effective
Date are not and (ii) all products manufactured or packaged by
the Company and the Included Subsidiaries at the time of
delivery thereof to the customers of the Company or
19
the Included Subsidiaries were not, "adulterated" or
"contaminated" within the meaning of said regulations, nor did
any such products constitute an article prohibited from
introduction into interstate commerce under the Food Acts at
the time of such delivery.
(b) Except as disclosed in SCHEDULE 3.14 of the Disclosure
Schedule, to the Knowledge of the Company and any Included
Subsidiary, all of the live poultry owned by or contracted to
the Company or any Included Subsidiary as of the Effective
Date, including all breeder and commercial flocks, is
currently free from any disease or harmful virus. All of such
poultry, including all breeder and commercial flocks, was
grown and maintained in compliance with the National Poultry
Improvement Plan, as adopted in Minnesota and Wisconsin, as
applicable.
3.15 INVENTORY.
The Company's and each Included Subsidiary's inventory of raw
materials, ingredients, work in process and finished products consists
of items of a quality and quantity usable and, with respect to finished
products only, salable at the Company's normal historical profit
levels, in each case, in the ordinary course of the Business. The
Company's and each Included Subsidiary's inventory of finished products
is not slow-moving as determined in accordance with the Company's past
practices, obsolete or damaged and is merchantable and fit for its
particular use, including, in the case of food products, human
consumption, and the reserve specifically established by the Company
for such inventory on the balance sheet included in the Pro Forma
Interim Financial Statements is set forth in SCHEDULE 3.15 of the
Disclosure Schedule. The Company has on hand or has ordered and expects
timely delivery of such quantities of raw materials and ingredients and
has on hand such quantities of work in process and finished products as
are reasonably required timely to fill current orders on hand which
require delivery within 60 days and to maintain the manufacture and
shipment of products at its normal level of operations. As of the date
of the balance sheet included in the Pro Forma Interim Financial
Statements, the values at which such inventory is carried on such
balance sheet are in accordance with GAAP.
3.16 TAX MATTERS.
(a) Each of the Company and any Subsidiary, any affiliated,
combined or unitary group of which the Company or any
Subsidiary is or was a member, any Benefit Plans (as defined
in Section 3.22 hereof), as the case may be (each, a "TAX
AFFILIATE" and, collectively, the "TAX AFFILIATES"), has: (i)
timely filed (or has had timely filed on its behalf) all
returns, declarations, reports, estimates, information returns
and statements ("RETURNS") required to be filed or sent by it
in respect of any Taxes (as defined in subsection (m) below)
or required to be filed or sent by it by any taxing authority
having jurisdiction, and all such Returns are true and
complete in all material respects; (ii) timely and properly
paid (or has had paid on its behalf) all Taxes shown to be due
and payable on
20
such Returns; (iii) timely and properly paid all Taxes due
for all Tax periods or portions thereof ending on, prior to
or including the date of the Pro Forma Latest Balance Sheet
and payable as of such date or otherwise established on the
Pro Forma Latest Balance Sheet reserves that are adequate for
the payment of any Taxes for all Tax periods or portions
thereof ending on, prior to or including the date thereof, the
amount of which reserves as of the date of the Pro Forma
Latest Balance Sheet, is set forth in SCHEDULE 3.16 of the
Disclosure Schedule; and (iv) complied in all material
respects with all applicable laws, rules and regulations
relating to the withholding of Taxes and the payment thereof
(including, without limitation, withholding of
Taxes under Sections 1441 and 1442 of the United States
Internal Revenue Code of 1986, as amended (the "CODE"), or
similar provisions under any foreign laws), and timely and
properly withheld from individual employee wages and paid over
to the proper governmental authorities all amounts required to
be so withheld and paid over under all applicable laws.
(b) There are no liens for Taxes upon any assets of the Company
any Subsidiary or of any Tax Affiliate, except liens for Taxes
not yet due and payable.
(c) No deficiency for any Taxes has been proposed, asserted or
assessed against the Company, any Subsidiary or the Tax
Affiliates that has not been resolved and paid in full. No
waiver, extension or comparable consent given by the Company,
any Subsidiary or the Tax Affiliates regarding the application
of the statute of limitations with respect to any Taxes or
Returns is outstanding, nor is any request for any such waiver
or consent pending. Within the five (5) years prior to the
date of this Agreement, there has been no Tax audit or other
administrative proceeding or court proceeding with regard to
any Taxes or Returns, nor is any such Tax audit or other
proceeding pending, nor has there been any written notice to
the Company or any Subsidiary by any Taxing authority
regarding any such Tax, audit or other proceeding, or, to the
Knowledge of the Company or any Subsidiary, is any such Tax
audit or other proceeding threatened with regard to any Taxes
or Returns. To the Knowledge of the Company and any
Subsidiary, neither the Company nor any Included Subsidiary
expects the assessment of any additional Taxes of the Company,
any Subsidiary or the Tax Affiliates and neither the Company
nor any Included Subsidiary has any Knowledge of any
unresolved questions, claims or disputes concerning the
liability for Taxes of the Company, any Subsidiary or the Tax
Affiliates which would exceed the estimated reserves
established on the Pro Forma Latest Balance Sheet.
(d) Neither the Company, any Subsidiary nor any Tax Affiliate is a
party to any agreement, contract or arrangement executed or
established prior to the date of this Agreement that would
result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G
of the Code, and the consummation of the transactions
contemplated by this Agreement, excluding the adoption of and
payments
21
under the Key Employee Compensation Plan, will not be
a factor causing payments to be made on or prior to the
Closing Date by the Company, any Subsidiary or any Tax
Affiliate pursuant to any such agreement, contract or
arrangement executed or established prior to the date of this
Agreement that are not deductible (in whole or in part) under
Section 280G of the Code.
(e) Neither the Company, any Subsidiary nor any Tax Affiliate has
requested any extension of time within which to file any
Return, which Return has not since been filed.
(f) No property of the Company, any Subsidiary or any Tax
Affiliate is "tax-exempt use property" within the meaning of
Section 168 of the Code.
(g) Neither the Company, any Subsidiary nor any Tax Affiliate is
required to include in income any adjustment under Section
481(a) of the Code by reason of a voluntary change in
accounting method initiated by the Company, any Subsidiary or
any Tax Affiliate as a result of the Tax Reform Act of 1986
and, to the Knowledge of the Company and any Included
Subsidiary, the Internal Revenue Service has not proposed any
such adjustment or change in accounting method.
(h) No consent under Section 341(f) of the Code has been filed
with respect to the Company or any Subsidiary.
(i) The Company has complied in all material respects with
Sections 921-927 of the Code in operating Xxxxxx Foods FSC,
Inc.
(j) Neither the Company nor any Subsidiary owes any amount
pursuant to any Tax sharing agreement or arrangement, and
neither the Company nor any Subsidiary will have any liability
after the date hereof in respect of any Tax sharing agreement
or arrangement, whether any such agreement or arrangement is
written or unwritten.
(k) For purposes of this Agreement, the term "TAXES" means all
taxes, charges, fees, levies, or other assessments, including,
without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, social
security, unemployment, excise, estimated, severance, stamp,
occupation, property, or other taxes, customs duties, fees,
assessments, or charges of any kind whatsoever, including,
without limitation, all interest and penalties thereon, and
additions to tax or additional amounts imposed by any taxing
authority, domestic or foreign, upon the Company, any
Subsidiary or any Tax Affiliate.
22
3.17 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 3.17 of the Disclosure Schedule lists the following
contracts, commitments or binding understandings or
arrangements, whether oral or written, to which the Company or
any Included Subsidiary is a party, which are currently in
effect, which relate to the operation of the Business and
which will be retained by the Company or an Included
Subsidiary after giving effect to the Disposition:
(i) (A) all leases of real property (to the extent not
otherwise disclosed in SCHEDULE 3.12 of the
Disclosure Schedule) and (B) all leases of personal
property under which annual lease payments exceed
$20,000;
(ii) all distributor, dealer, wholesaler, broker,
manufacturer's representative, sales agency or
advertising agency contracts, in each case to the
extent not terminable by the Company or the Included
Subsidiary on 90 days' or less notice without
penalty;
(iii) all contracts or group of related contracts with the
same party for the purchase of products or services,
including, without limitation, contracts with growers
or suppliers of feed, in each case to the extent
annual payments exceed $20,000;
(iv) all contracts or group of related contracts with the
same party for the sale of products or services,
including, without limitation, contracts with
wholesalers or retailers, in each case to the extent
annual payments exceed $20,000;
(v) all contracts or group of related contracts with the
same party (other than any contract or group of
related contracts for the purchase or sale of
products or services) continuing over a period of
more than six months from the date or dates thereof,
not terminable by it on 90 days' or less notice
without penalty and involving more than $100,000;
(vi) all employment or consulting agreements, any Benefit
Plan or a union or collective bargaining agreement,
other than oral employment agreements for "at will"
employees of the Company or any Included Subsidiary;
(vii) all bonus, pension, profit sharing, retirement or
other form of deferred compensation plan, other than
as described SCHEDULE 3.22 of the Disclosure
Schedule;
(viii) all stock purchase, stock option plans or other
similar plans providing for the acquisition of the
Company's or any Included Subsidiary's equity
securities;
23
(ix) all material contracts terminable by the other party
thereto upon a change of control of the Company of
any Included Subsidiary or upon the failure of the
Company or any Included Subsidiary to satisfy
financial or performance criteria specified in such
contract as provided therein;
(x) all contracts between or among the Company or any
Included Subsidiary, Xxxxxx X. Xxxxxx, Xxxxxxx
Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxx and Xxxxx Xxxx
or any member of such individual's immediate family
(as defined in Section 3.24 hereof) or any entity
affiliated with any such individual relating in any
way to the Company or any Included Subsidiary (to the
extent not otherwise disclosed in SCHEDULE 3.24 of
the Disclosure Schedule);
(xi) all contracts, agreements or understandings among any
Company Shareholders or between any Company
Shareholder and the Company or any Included
Subsidiary, including all contracts, agreements or
understandings relating to the voting of Company
Common Stock or the election of directors of the
Company or any Included Subsidiary and;
(xii) all contracts relating to the performance and payment
of any surety bond or letter of credit required to be
maintained by the Company or any Included Subsidiary;
or
(xiii) all confidentiality or non-disclosure agreements;
(xiv) all agreements or indentures relating to the
borrowing of money or to mortgaging, pledging or
otherwise placing a lien (other than Permitted Liens)
on any of the assets of the Company or any Included
Subsidiary, which involve amounts in excess of
$200,000;
(xv) guaranty of any obligation for borrowed money or
otherwise;
(xvi) all contracts which prohibit the Company or any
Included Subsidiary from freely engaging in business
anywhere in the world;
(xvii) all license agreements or agreements providing for
the payment or receipt of royalties or other
compensation by the Company or any Included
Subsidiary in connection with the intellectual
property rights listed SCHEDULE 3.18 of the
Disclosure Schedule;
(xviii) all contracts or commitments for capital expenditures
with respect to which the remaining unpaid balance
exceeds $100,000;
24
(xix) all agreements for the sale of any capital asset; and
(xx) any other agreement that is material to the business,
financial condition or results of operation of the
Company or any Included Subsidiary or was not entered
into in the ordinary course of business.
(b) The Company or the applicable Included Subsidiary has
performed all obligations required to be performed by it in
connection with the contracts or commitments required to be
disclosed in SCHEDULE 3.17 of the Disclosure Schedule and is
not in receipt of any claim of default under any contract or
commitment required to be disclosed in such schedule. Neither
the Company nor any Included Subsidiary has any Knowledge of
any breach by any other party to any contract or commitment
required to be disclosed in such schedule.
(c) Prior to the date of this Agreement, Buyer and Merger Sub have
been supplied with or provided access to a true and correct
copy of each written contract or commitment, and a written
description of the material terms of each oral contract or
commitment, referred to SCHEDULE 3.17 of the Disclosure
Schedule, together with all amendments, waivers or other
changes thereto.
3.18 INTELLECTUAL PROPERTY RIGHTS.
(a) SCHEDULE 3.18 of the Disclosure Schedule lists all rights in
patents, patent applications, trademarks, service marks, trade
names, corporate names, registered copyrights or other
intellectual property rights owned by, licensed to or
otherwise controlled by the Company or any Included Subsidiary
or used in, developed for use in or necessary to the conduct
of the Business as now conducted or for the development or
production of products that are currently in development and
proposed to be produced during the two-year period after the
date hereof. The Company and the Included Subsidiaries own and
possess all right, title and interest, or hold a valid
license, in and to the rights set forth in such Schedule and
all trade secrets and know how owned by, licensed to or
otherwise controlled by the Company and the Included
Subsidiaries or used in, developed for use in or necessary to
the conduct of the Business as now conducted or presently
proposed to be conducted. SCHEDULE 3.18 of the Disclosure
Schedule lists all intellectual property rights that have been
licensed to third parties and those intellectual property
rights which are licensed from third parties.
(b) The Company and each Included Subsidiary has taken all
necessary action to protect the intellectual property rights
set forth in such SCHEDULE 3.18 and all know how and trade
secrets owned by, licensed to or otherwise controlled by the
Company or any Included Subsidiary or used in, developed for
use in or necessary to the conduct of the Business as now
conducted or presently proposed to be conducted. Neither the
Company nor any Included Subsidiary has received any notice
of, nor are there any facts of which the Company or
25
any Included Subsidiary has Knowledge which indicate a
likelihood of, any infringement or misappropriation by, or
conflict from, any third party with respect to the
intellectual property rights owned by, licensed to or
otherwise controlled by the Company of any Included Subsidiary
or used in, developed for use in or necessary to the conduct
of the Business as now conducted or presently proposed to be
conducted. No claim by any third party contesting the validity
of any intellectual property rights listed in SCHEDULE 3.18 of
the Disclosure Schedule has been made, is currently
outstanding or, to the Knowledge of the Company or any
Included Subsidiary, is threatened. Neither the Company nor
any Included Subsidiary has received any notice of any
infringement, misappropriation or violation by the Company of
any intellectual property rights of any third parties, and
neither the Company nor any Included Subsidiary has infringed,
misappropriated or otherwise violated any such intellectual
property rights. No infringement, illicit copying,
misappropriation or violation has occurred or will occur with
respect to products currently being sold by the Company or any
Included Subsidiary or with respect to the products currently
under development (in their present state of development) or
with respect to the conduct of the Business as now conducted.
3.19 LITIGATION.
Except as set forth in SCHEDULE 3.19 of the Disclosure Schedule, there
are no actions, suits, proceedings, orders or investigations involving
amounts greater that $25,000 pending or, to the Knowledge of the
Company and each Included Subsidiary, threatened against the Company or
any Included Subsidiary, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
3.20 WARRANTIES.
SCHEDULE 3.20 of the Disclosure Schedule lists all claims outstanding,
pending or, to the Knowledge of the Company and each Included
Subsidiary, threatened for breach of any warranty relating to any
products sold by the Company or any Included Subsidiary prior to the
date hereof, including all product recalls. The description of the
Company's and each Included Subsidiary's product warranties set forth
under SCHEDULE 3.20 of the Disclosure Schedule is correct and complete.
3.21 EMPLOYEES.
(a) The Company has received no notice that any employee of the
Company or any Included Subsidiary who is identified on
EXHIBIT F hereto or any group of the Company's or any Included
Subsidiary's employees has any plans to terminate his or its
employment. The Company and each Included Subsidiary has
complied, in all material respects, with all laws and
regulations relating to the employment of labor, including
provisions thereof relating to wages, hours, equal
opportunity, collective bargaining, wages and hours,
nondiscrimination,
26
unfair labor practices and the payment of social security
and other Taxes, and the Company and each Included
Subsidiary has not been, during the past three (3) years,
and is not currently subject to or involved in any action,
claim or proceeding and during such period has not been and,
to the Knowledge of the Company and any Included Subsidiary,
is not currently being threatened with any action, claim or
proceeding relating to any such laws or regulations. The
Company and each Included Subsidiary has no labor relations
problem pending and its labor relations are satisfactory.
There is, and during the past three (3) years there has been,
no labor strike, material dispute or work stoppage actually
pending or, to the Knowledge of the Company and any Included
Subsidiary, threatened involving the business of the Company
or any Included Subsidiary. None of the employees of the
Company or any Included Subsidiary is covered by any
collective bargaining agreement, no collective bargaining
agreement is currently being negotiated and no attempt is
currently being made or during the past three (3) years has
been made to organize any of its employees to form or enter
into any labor union or similar organization. There are no
workers' compensation claims made by an employee who has
received medical treatment or lost a day of work pending
against the Company or any Included Subsidiary, nor does the
Company or any Included Subsidiary have Knowledge of any
facts that would give rise to such a claim, for which the
amount involved is greater than $25,000. No employee of the
Company or any Included Subsidiary is subject to any secrecy
or noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the
ability of such employee to carry out fully all activities of
such employee in furtherance of the Business. No employee or
former employee of the Company or any Included Subsidiary has
any claim with respect to any intellectual property rights
set forth in SCHEDULE 3.18 hereto.
(b) SCHEDULE 3.21 of the Disclosure Schedule lists each employee
of the Company and each Included Subsidiary and the position,
title, remuneration (including any scheduled salary or
remuneration increases, other than increases given to
non-exempt employees in the ordinary course of business) and
date of employment of each such employee. With respect to
exempt employees of the Company and the Included Subsidiaries,
neither the Company nor any Included Subsidiary accrues
amounts for vacation for such employees, permits such
employees to carryover any vacation that was not used in a
calendar year to the next calendar year or compensates such
employees for any such vacation that was not used in a
calendar year. With respect to non-exempt employees of the
Company and the Included Subsidiaries, such employees are
permitted to exchange vacation days for cash in accordance
with the policies from "The Turkey Store Company Supervisor's
Guide" and as set forth in the "Weekly Salaried Team Member
Handbook" and "Hourly Team Member Handbook", as appropriate,
which policies are attached to SCHEDULE 3.21 of the Disclosure
Schedule. With respect to exempt and non-exempt employees,
such employees earn vacation in the year in which it is
required to be taken.
27
SCHEDULE 3.21 sets forth the accrued vacation expense provided
in the Company Interim Financial Statements.
(c) All employment of any terminated former employee of the
Company and each Included Subsidiary during the three-year
period prior to the date hereof and, to the Knowledge of the
Company and the Included Subsidiaries, prior to such
three-year period, has been terminated in accordance with any
applicable contractual terms and applicable law, and neither
the Company nor any Included Subsidiary has any liability
under any contract or applicable law toward any such
terminated employee. The consummation of the transactions
contemplated hereby will not cause the Company or any Included
Subsidiary to incur or suffer any liability relating to, or
obligation to pay, severance, termination or other payments to
any person except as contemplated by Section 5.01(c) hereof.
(d) Neither the Company nor any Included Subsidiary has made any
loans (except advances against accrued salaries or for
business travel, lodging or other expenses in the ordinary
course of business) to any employee of the Company or any
Included Subsidiary.
3.22 EMPLOYEE BENEFITS.
(a) SCHEDULE 3.22 of the Disclosure Schedule sets forth (i) all
employee benefit plans (the "BENEFIT PLANS") (as defined in
Section 3(3) of Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and (ii) all benefit programs or
practices providing for bonuses, incentive compensation,
vacation pay, severance pay, insurance, restricted stock,
stock options, employee discounts or passes, company cars,
tuition reimbursement or any other prerequisite or benefit
(including, without limitation, any fringe benefit under
Section 132 of the Code) to present or former employees,
officers or independent contractors of the Company, that is
not a Plan ("OTHER BENEFITS ARRANGEMENTS"), in each case,
maintained or contributed to by the Company and any Subsidiary
and applicable to employees of the Company or any Subsidiary.
The Company has delivered to Buyer true and complete copies of
all material plan documents and summary plan descriptions
relating to the Benefit Plans and Other Benefit Arrangements,
and there have been no amendments, modifications or
supplements to any such Benefit Plans and Other Benefit
Arrangements from the copies delivered to Buyer. The terms
"BENEFIT PLAN" and "OTHER BENEFITS ARRANGEMENTS" as used in
this Section 3.22 shall include every such plan, fund,
contract, program and arrangement: (i) which the Company or
any Subsidiary has committed to implement, establish, adopt or
contribute to in the future, (ii) for which the Company or any
Subsidiary is or may be financially liable as a result of a
direct sponsor's affiliation to the Company or any Subsidiary
for the benefit of its owners (whether or not such affiliation
exists at the date of this Agreement and notwithstanding that
the Benefit Plan is not maintained by the Company or any
28
Subsidiary for the benefit of its employees or former
employees), (iii) which is in the process of termination (but
such term does not include any arrangement that has been
terminated and completely wound up prior to the date of this
Agreement such that the Company or any Subsidiary has no
present or potential liability with respect to such
arrangement) or (iv) for or with respect to which the Company
or any Subsidiary is or may become liable under any common law
successor doctrine, express successor liability provisions of
law, provisions of a collective bargaining agreement, labor or
employment law or agreement with a predecessor employer.
(b) All Benefit Plans and Other Benefits Arrangements have been
maintained and administered, both as to form and in operation,
in compliance in all material respects with the provisions of
ERISA, to the extent applicable, and of the Code and other
applicable laws. Without limiting the foregoing, with respect
to each Benefit Plan and Other Benefit Arrangement:
(i) All payments due from the Company or any Subsidiary
to date have been made and all amounts properly
accrued to date as liabilities of the Company or such
Subsidiary that have not been paid have been properly
recorded on the books of the Company and each
Subsidiary.
(ii) All reports and information relating to each Benefit
Plan and Other Benefit Arrangement required to be
filed with any governmental authority have been
timely filed.
(iii) All reports and information relating to each Benefit
Plan and Other Benefit Arrangement required to be
disclosed or provided to participants or their
beneficiaries have been timely disclosed or provided.
(iv) There are no actions, suits or claims pending (other
than routine claims for benefits in accordance with
the Benefit Plans or Other Benefit Arrangements), or,
to the Knowledge of the Company or any Subsidiary,
threatened, with respect to any such Benefit Plan or
Other Benefit Arrangement or against the assets of
any such Benefit Plan or Other Benefit Arrangement.
(v) No Benefit Plan that is an employee pension benefit
plan within the meaning of Section 3(2) of ERISA has
been terminated so as to subject, directly or
indirectly, any assets of the Company or any
Subsidiary to any liability, contingent or otherwise,
under Title IV of ERISA, and if any such plan were to
be terminated as of the Effective Date, no assets of
the Company or any Subsidiary would be subject,
directly or indirectly to any liability, contingent
or otherwise.
29
(vi) Each such Benefit Plan that is intended to be a
qualified plan under Section 401 of the Code has
received, or has been filed and is expected to
receive, a favorable determination letter from the
United States Internal Revenue Service with respect
to its qualification under Section 401 of the Code,
and nothing has occurred since the date of such
letter that has adversely affected such qualification
or exemption other than Benefit Plan changes required
in the Code for which the remedial amendment period
has not expired.
(vii) The Company and each Subsidiary has complied in all
respects with all of the provisions of, and is not in
breach of any obligation under, any Benefit Plan or
Other Benefit Arrangement.
(viii) There have been no "prohibited transactions" for
which a statutory, class, or administrative exemption
does not exist within the meaning of Sections 406 or
407 of ERISA or Section 4975 of the Code with respect
to any Benefit Plan, and no event or omission has
occurred in connection with which the Company or any
Subsidiary or any of their respective assets, or any
Benefit Plan or Other Benefit Arrangement, directly
or indirectly, could be subject to any liability
applicable to any Benefit Plan or Other Benefit
Arrangement under ERISA, the Code or any other law,
regulation or governmental order, including, without
limitation, Sections 406, 407, 409, 502, 510, 511 or
601 of ERISA, or Sections 4971, 4972, 4975, 4976,
4977, 4979 or 4980B of the Code other than routine
claims for benefits in accordance with the Benefit
Plans or Other Benefit Arrangements, or under any
agreement, instrument, statute, rule of law or
regulation pursuant to or under which the Company or
any Subsidiary has agreed to indemnify or is required
to indemnify any person against liability incurred
under, or for a violation or failure to satisfy the
requirements of, any statute, regulation or order.
(ix) There are no "leased employees" within the meaning of
Section 414(n) of the Code who perform services for
the Company or any Subsidiary, nor are there any
persons who are anticipated to become leased
employees with the passage of time.
(x) No Benefit Plan is a "multiemployer plan" as such
term is defined in Section 3(37) of ERISA.
(xi) Except as set forth in SCHEDULE 3.22 of the
Disclosure Schedule, no Benefit Plan is an "employee
stock ownership plan" as such term is defined in
Section 407(d)(6) of ERISA or Section 4975(a)(7) of
the Code.
30
(xii) No Benefit Plan or Other Benefit Arrangement,
individually or collectively, provides for any
payment by the Company or any Subsidiary to any
employee or independent contractor that is not
deductible under Section 162(a)(1) or Section 404 of
the Code.
(xiii) No Benefit Plan or Other Benefit Arrangement is a
funded "employee welfare benefit plan" as such term
is defined in Section 3(1) of ERISA (a "WELFARE
PLAN") that provide benefits to current or former
employees of the Company or any Subsidiary or their
beneficiaries.
(xiv) No Benefit Plan or Other Benefit Arrangement promises
or provides, now or in the future, post-retirement
medical, life insurance or other benefits to current,
former or retired employees of the Company or any
Subsidiary, except for COBRA continuation coverage
under any of the Benefit Plans.
(xv) All Welfare Plans and the related trusts that are
subject to Section 4980B(f) of the Code and Sections
601 through 607 of ERISA comply with and have been
administered in compliance in all material respects
with the health care continuation-coverage
requirements for tax-favored status under Section
4980B(f) of the Code, Sections 601 through 607 of
ERISA, and all proposed or final Treasury regulations
under Section 162 of the Code explaining those
requirements.
3.23 INSURANCE.
SCHEDULE 3.23 of the Disclosure Schedule lists all insurance policies
currently maintained by the Company and each Subsidiary, and
identifies, for each policy, the type of coverage, the insurance
carrier, the term of such policy, the annualized premium, the policy
limits and deductibles. Such insurance: (i) is in full force and
effect; (ii) is sufficient for compliance in all material respects with
all requirements of applicable law and of any contract or agreement to
which the Company is subject; and (iii) is valid, outstanding, and
enforceable. Neither the Company nor any Included Subsidiary has,
during the past three (3) years, received any notice of termination,
cancellation or nonrenewal of any insurance policy maintained by the
Company or any Included Subsidiary.
3.24 AFFILIATE TRANSACTIONS.
Except as disclosed in SCHEDULE 3.24 of the Disclosure Schedule, no
officer or director of the Company or any Included Subsidiary or any
member of the immediate family of any such officer or director, or any
entity in which any of such persons owns any beneficial interest (other
than any publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than one
percent of the stock of which is beneficially owned by any of such
persons) (collectively "INSIDERS"), has any agreement with the Company
or any Included
31
Subsidiary or any interest in any property, real, personal or mixed,
tangible or intangible, used in or pertaining to the business of the
Company or any Included Subsidiary (other than ownership of capital
stock of the Company). None of the insiders has any direct or
indirect interest in any competitor, supplier or customer (other
than any publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and
less than one percent of the stock of which is beneficially owned by
any of such persons) of the Company or any Included Subsidiary or in
any person, firm or entity (other than any publicly held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than one percent of the stock of
which is beneficially owned by any of such persons) from whom or to
whom the Company or any Included Subsidiary leases any property, or
in any other person, firm or entity with whom the Company or any
Included Subsidiary transacts business of any nature. For purposes of
this Section 3.24, the members of the immediate family of an officer
or director shall consist of the spouse, parents, children, siblings,
mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of such officer, director or employee.
3.25 CUSTOMERS AND SUPPLIERS.
SCHEDULE 3.25 of the Disclosure Schedule lists the 10 largest customers
and the 10 largest suppliers of the Company and each Included
Subsidiary, taken as a whole, for the year ended February 26, 2000 and
for the period from February 26, 2000 to November 4, 2000 and sets
forth opposite the name of each such customer or supplier, the volume
of business (expressed in units and dollar amounts) attributable to
such customer or supplier for each such period and the approximate
percentage of the aggregate volume and net sales or purchases by the
Company and each Included Subsidiary represented by such customer or
supplier for each such period. Since the Balance Sheet Date, no
customer or supplier listed on SCHEDULE 3.25 has indicated that it will
stop or materially decrease the volume of business done with the
Company or any Included Subsidiary for any reason, including without
limitation, in response the Company's price increase put into effect on
August 14, 2000.
3.26 COMPLIANCE WITH LAWS; PERMITS.
(a) The Company and each Included Subsidiary and, when acting or
purporting to act on behalf of the Company or any Included
Subsidiary, the officers, directors, agents and employees of
the Company and each Included Subsidiary, have complied in all
material respects with all applicable laws, regulations and
other requirements, including, but not limited to, federal,
state and local laws, ordinances, rules, regulations and other
requirements pertaining to product labeling, consumer products
safety, equal employment opportunity, employee retirement,
affirmative action and other hiring practices, occupational
safety and health, workers' compensation, unemployment and
building and zoning codes, which affect the Business or the
Real Property (other than the Excluded Real Property) and to
which the Company or any Included Subsidiary may be
32
subject,and no claims are currently pending or during the
three (3) year period prior to the date hereof have been filed
against the Company or any Included Subsidiary alleging a
violation of any such laws, regulations or other requirements.
Neither the Company nor any Included Subsidiary has Knowledge
of any action, pending or threatened, to change the zoning or
building ordinances or any other laws, rules, regulations or
ordinances affecting the Real Property. Neither the Company
nor any Included Subsidiary is relying on any exemption from
or deferral of any such applicable law, regulation or other
requirement that would not be available to the Surviving
Corporation.
(b) The Company or the Business, the Company and each Included
Subsidiary has, in full force and effect, all licenses,
permits and certificates, from federal, state and local
authorities (including, without limitation, federal and state
agencies regulating occupational health and safety) necessary
to conduct the Business and own and operate its properties
(other than Environmental Permits, as such term is defined in
Section 3.27(c) hereof) (collectively, the "PERMITS"). A list
of all the Permits is set forth in SCHEDULE 3.26 of the
Disclosure Schedule. The Company and each Included Subsidiary
has conducted its business in compliance in all material
respects with all terms and conditions of the Permits.
(c) Neither the Company nor any Included Subsidiary has made or
agreed to make gifts of money, other property or similar
benefits (other than incidental gifts of articles of nominal
value) to any actual or potential customer, supplier,
governmental employee or any other person in a position to
assist or hinder the Company or any Included Subsidiary in
connection with any actual or proposed transaction.
(d) In particular, but without limiting the generality of the
foregoing, neither the Company nor any Included Subsidiary has
violated and or has any liability, and has not during the last
three (3) years received a notice or charge asserting any
violation of or liability under, the federal Occupational
Safety and Health Act of 1970 or any other federal or state
acts (including rules and regulations thereunder) regulating
or otherwise affecting employee health and safety.
3.27 ENVIRONMENTAL MATTERS.
(a) As used in this Section 3.27, the following terms shall have
the following meanings:
(i) "HAZARDOUS MATERIALS" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste,
material or substance as defined in or governed by
any applicable federal, state or local law, statute,
code, ordinance, regulation, rule or official
requirement relating to such substance or to the
environment or human health or safety,
33
including without limitation any waste, material,
substance, pollutant or contaminant that causes any
injury to human health or safety or to the
environment or subjects the Company or any Included
Subsidiary to any imposition of costs or liability
under any Environmental Law.
(ii) "ENVIRONMENTAL LAWS" means all applicable federal,
state, and local laws, rules, regulations, codes,
ordinances, orders, decrees, directives, permits,
licenses and judgments relating to pollution,
contamination or protection of the environment or
human health or safety (including, without
limitation, all applicable federal, state, and local
laws, rules, regulations, codes, ordinances, orders,
decrees, directives, permits, licenses and judgments
relating to Hazardous Materials in effect as of the
date of this Agreement).
(iii) "RELEASE" shall mean the spilling, leaking,
disposing, discharging, emitting, depositing,
ejecting, leaching, escaping or any other release or
threatened release, whether intentional or
unintentional, of any Hazardous Material; provided
that the term "Release" as used herein shall not
include any threatened release to the extent that the
only statutory basis for requiring a feedlot-type
permit for any of the Real Property is the existence
of such a threatened release.
(b) The Company, each Included Subsidiary and the Real Property
(other than the Excluded Real Property) are in compliance, in
all material respects, with all applicable Environmental Laws.
(c) The Company and each Included Subsidiary has obtained, and
maintained in full force and effect, all environmental
permits, licenses, certificates of compliance, approvals and
other authorizations currently necessary to conduct its
business and own or operate the Real Property (other than the
Excluded Real Property) (collectively, the "ENVIRONMENTAL
PERMITS") and such Environmental Permits are listed in
SCHEDULE 3.27 of the Disclosure Schedule. A true and complete
copy of each such Environmental Permit has been provided by
the Company to Buyer prior to the date hereof. The Company and
each Included Subsidiary has conducted its business in
compliance in all material respects with all terms and
conditions of the Environmental Permits. The Company and each
Included Subsidiary has filed all reports and notifications
required to be filed under and pursuant to all applicable
Environmental Laws. Neither the Company nor any Included
Subsidiary has any Knowledge that any Environmental Permit
will not be renewed or extended at upon the expiration of such
Environmental Permit subject to those matters addressed in
Section 5.16 hereof.
(d) (i) No Hazardous Materials have been generated, manufactured,
contained, stored or used by the Company or any Included
Subsidiary in the last five (5) years except in material
compliance with applicable Environmental Laws; (ii)
34
no Hazardous Materials have been, (A) deposited, buried,
incinerated, Released or disposed of at any time on, at, under
or to the Real Property, whether by the Company, any Included
Subsidiary or any other person or entity, or (B) deposited,
buried, incinerated, Released or disposed of at any location
other than the Real Property by the Company or any Included
Subsidiary during the twenty-year period immediately preceding
the Closing Date; (iii) the Real Property (other than the
Excluded Real Property), and any improvements thereon, contain
no asbestos, urea formaldehyde, polychlorinated biphenyls
(PCBs) or pesticides requiring any remediation, abatement or
other corrective action under applicable Environmental Laws;
and (iv) no aboveground or underground storage tanks are
located on or under the Real Property (other than the Excluded
Real Property) or have been located on or under the Real
Property (other than the Excluded Real Property) and then
subsequently removed or filled. If any such storage tanks
exist on or under the Real Property (other than the Excluded
Real Property), such storage tanks have been duly registered
with all appropriate governmental entities and are otherwise
in compliance with all applicable Environmental Laws.
(e) Neither the Company nor any Included Subsidiary has received
any notice during the ten-year period immediately preceding
the Closing Date alleging in any manner that the Company is,
or might potentially be, responsible for any Release of
Hazardous Materials, or any costs arising under or as a result
of an alleged or actual violation of Environmental Laws.
(f) Except for those ongoing compliance costs incurred in the
ordinary course of business consistent with past practice and
except as expressly provided for in the Company's capital
budget included in the Company's long-term plan dated Spring,
2000 and entitled "The Turkey Store Long Range Plan", a copy
of which is attached to SCHEDULE 3.27 of the Disclosure
Schedule (the "LONG RANGE PLAN"), no expenditure will be
required for Buyer, Merger Sub or the Surviving Corporation to
comply with any Environmental Laws in effect at the time of
the Closing in connection with the continued operation of the
business of the Company or the Real Property (other than the
Excluded Real Property) in a manner consistent with the
current operation thereof by the Company and the Included
Subsidiaries.
(g) The Company, each Included Subsidiary and the Real Property
(other than the Excluded Real Property) are not and have not
been listed on the United States Environmental Protection
Agency National Priorities List of Hazardous Waste Sites, or
any other list, schedule, law, inventory or record of
hazardous or solid waste sites maintained by any federal,
state or local agency.
(h) The Company has disclosed and delivered to Buyer and Merger
Sub all non-routine environmental reports and investigations
which the Company or any Included Subsidiary has obtained or
ordered with respect to the business of the
35
Company and the Real Property (other than the Excluded Real
Property) during the ten-year period immediately preceding the
Closing Date.
(i) No part of the Business or the Real Property (other than the
Excluded Real Property) has been used as a landfill, dump or
other disposal, storage, transfer, handling or treatment area
for Hazardous Materials, except in compliance in all material
respects with applicable Environmental Laws, or as a gasoline
service station or a facility for selling, dispensing,
storing, transferring, disposing or handling petroleum and/or
petroleum products, except in compliance in all material
respects with applicable Environmental Laws.
(j) No lien has been attached or filed against the Company, and
Included Subsidiary or the Real Property (other than the
Excluded Real Property) in favor of any governmental or
private entity for (i) any liability or imposition of costs
under or violation of any applicable Environmental Law; or
(ii) any Release of Hazardous Materials.
3.28 BROKERAGE.
No third party (other than Houlihan, Lokey, Xxxxxx & Xxxxx Capital)
shall be entitled to receive any brokerage commissions, finder's fees,
fees for financial advisory services or similar compensation in
connection with the transactions contemplated by this Agreement based
on any arrangement or agreement made by or on behalf of the Company.
3.29 DISCLOSURE.
Neither this Agreement nor any of the Exhibits hereto nor any of the
documents delivered by or on behalf of the Company pursuant to Article
VII hereof nor the Disclosure Schedule nor the Annual Financial
Statements, taken as a whole, contains any untrue statement of a
material fact regarding the Company, any Included Subsidiary, the
Business or any of the other matters dealt with in this Article III
relating to the Company and the Included Subsidiaries or the
transactions contemplated by this Agreement, or omits any material fact
necessary to make the statements contained herein or therein, in light
of the circumstances in which they were made, not misleading. There is
no fact which has not been disclosed to Buyer or Merger Sub of which
any officer or director of the Company or any Included Subsidiary is
aware which would have a material adverse effect or could reasonably be
anticipated to have a material adverse effect on the business,
including operating results, assets, customer relations and employee
relations, of the Company and the Included Subsidiaries, taken as a
whole.
36
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
Buyer and Merger Sub, jointly and severally, hereby represent and
warrant to the Company that:
4.01 INCORPORATION AND CORPORATE POWER.
Each of Buyer and Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of
its incorporation, with the requisite corporate power and authority to
enter into this Agreement and perform its obligations hereunder.
4.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT.
The execution, delivery and performance of this Agreement by each of
Buyer and Merger Sub and the Articles of Merger by Merger Sub and the
consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all requisite corporate action, and
no other corporate proceedings on its part are necessary to authorize
the execution, delivery or performance of this Agreement or the
Articles of Merger. This Agreement has been duly executed and delivered
by Buyer and Merger Sub and constitutes the valid and binding
obligation of Buyer and Merger Sub, enforceable in accordance with its
terms, and the Articles of Merger, when executed and delivered by
Merger Sub, will constitute the valid and binding obligation of Merger
Sub, enforceable in accordance with its terms.
4.03 NO BREACH.
The execution, delivery and performance of this Agreement by Buyer and
Merger Sub, and of the Articles of Merger by Merger Sub, and the
consummation by Buyer and Merger Sub of the transactions contemplated
hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of,
result in the creation of a right of termination or acceleration or any
lien, security interest, charge or encumbrance upon any assets of Buyer
or Merger Sub, or require any authorization, consent, approval,
exemption or other action by or notice to any court or other
governmental body, under the provisions of the Articles of
Incorporation or Bylaws of either Buyer or Merger Sub or any indenture,
mortgage, lease, loan agreement or other agreement or instrument by
which either Buyer or Merger Sub is bound or affected, or any law,
statute, rule or regulation or order, judgment or decree to which
either Buyer or Merger Sub is subject.
4.04 MERGER SUBSIDIARY.
All of the outstanding capital stock of Merger Sub is owned by Buyer
free and clear of any lien, claim or encumbrance or any agreement with
respect thereto. Since the date
37
of its incorporation, Merger Sub has not engaged in any activity of any
nature except in connection with or as contemplated by this Agreement.
4.05 GOVERNMENTAL AUTHORITIES; CONSENTS.
Except for the applicable requirements of the HSR Act and the filing of
the Articles of Merger with the Department of Financial Institutions of
the State of Wisconsin, neither Buyer or Merger Sub is required to
submit any notice, report or other filing with any governmental
authority in connection with the execution or delivery by it of this
Agreement or the consummation of the transactions contemplated hereby.
Except for the requirements of the HSR Act, no consent, approval,
exemption or authorization of either (i) any governmental or regulatory
authority or court or (ii) or any other party or person is required to
be obtained by either Buyer or Merger Sub in connection with its
execution, delivery and performance of this Agreement or the
transactions contemplated hereby, including without limitation, in each
case, any consent, approval, exemption or authorization under any
indenture, mortgage, lease, loan agreement or other agreement or
instrument by which Buyer or Merger Sub is bound or affected or any
law, statute, rule or regulation or order, judgment or decree to which
Buyer or Merger Sub is subject.
4.06 ADOPTION OF KEY EMPLOYEE COMPENSATION PLAN.
The Board of Directors of Buyer has approved and adopted the
Xxxxxx-O--The Turkey Store Key Employee Compensation Plan (the "KEY
EMPLOYEE COMPENSATION PLAN"), in the form attached hereto as EXHIBIT G,
which Key Employee Compensation Plan shall become effective only upon
Closing and only upon approval by the Company Shareholders in
accordance with Section 5.03 hereof.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 CONDUCT OF THE BUSINESS.
The Company shall, and shall cause each Included Subsidiary to, observe
each term set forth in this Section 5.01 and agrees that, from the date
hereof until the Effective Time, unless otherwise consented to by Buyer
in writing (and except for actions necessary to effect only the
Disposition, all of which actions shall be done in consultation with
Buyer):
(a) The Business shall be conducted only in, and the Company and
each Included Subsidiary shall not take any action except in,
the ordinary course of the business of the Company and each
Included Subsidiary, on an arm's-length basis and in
accordance in all material respects with all applicable laws,
rules and regulations and the Company's and each Included
Subsidiary's past custom and practice;
38
(b) The Company and each Included Subsidiary shall not, directly
or indirectly, do or permit to occur any of the following: (i)
issue or sell any additional shares of, or any options,
warrants, conversion privileges or rights of any kind to
acquire any shares of, any of its capital stock, (ii) sell,
pledge, dispose of or encumber any of its assets, except in
the ordinary course of business; (iii) amend or propose to
amend its Articles of Incorporation or Bylaws; (iv) split,
combine or reclassify any outstanding shares of its capital
stock, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise
with respect to shares of its capital stock; (v) redeem,
purchase or acquire or offer to acquire any shares of its
capital stock or other securities, except in the ordinary
course of business pursuant to the Company's obligations under
the ESOP; (vi) acquire (by merger, exchange, consolidation,
acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or
division or material assets thereof; (vii) incur any
indebtedness for borrowed money or issue any debt securities
except the borrowing of working capital in the ordinary course
of business and consistent with past practice; (viii) permit
any accounts payable owed to trade creditors to remain
outstanding more than 60 days, except for accounts payable
that are subject to dispute or are not otherwise due in
accordance with their terms; (ix) accelerate, beyond the
normal collection cycle, collection of accounts receivable; or
(x) enter into or propose to enter into, or modify or propose
to modify, any agreement, arrangement or understanding with
respect to any of the matters set forth in this Section
5.01(b);
(c) Except as set forth in SCHEDULE 5.01(c) of the Disclosure
Schedule, neither the Company nor any Included Subsidiary
shall, directly or indirectly, (i) enter into or modify any
employment, severance or similar agreements or arrangements
with, or grant any bonuses, salary increases, severance or
termination pay to, any officers or directors or consultants
or (ii) in the case of employees, officers or consultants who
earn in excess of $50,000 per year, take any action with
respect to the grant of any bonuses, salary increases,
severance or termination pay or with respect to any increase
of benefits payable in effect on the date hereof;
(d) Except as set forth in SCHEDULE 5.01(c) of the Disclosure
Schedule, neither the Company nor any Included Subsidiary
shall adopt or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or
group arrangement for the benefit or welfare of any employees
or any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director;
39
(e) Neither the Company nor any Included Subsidiary shall cancel
or terminate its current insurance policies or cause any of
the coverage thereunder to lapse, unless simultaneously with
such termination, cancellation or lapse, replacement policies
providing coverage equal to or greater than the coverage under
the canceled, terminated or lapsed policies for substantially
similar premiums are in full force and effect;
(f) The Company and each Included Subsidiary shall: (i) use its
commercially reasonable efforts to preserve intact the
business organization and goodwill of the Company and each
Included Subsidiary, keep available the services of the
Company's and each Included Subsidiary's officers and
employees as a group and maintain satisfactory relationships
with suppliers, distributors, customers and others having
business relationships with the Company or any Included
Subsidiary; (ii) confer on a regular and frequent basis with
representatives of Buyer or Merger Sub to report operational
matters and the general status of ongoing operations; (iii)
not intentionally take any action which would render, or which
reasonably may be expected to render, any representation or
warranty made by it in this Agreement untrue at the Closing;
(iv) notify Buyer and Merger Sub of any emergency or other
change in the normal course of the Company's or any Included
Subsidiary's business or in the operation of the Company's or
any Included Subsidiary's properties and of any governmental
or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated)
if such emergency, change, complaint, investigation or hearing
would be material, individually or in the aggregate, to the
Business, operations or financial condition of the Company or
any Included Subsidiary or to the Company's, Buyer's or Merger
Sub's ability to consummate the transactions contemplated by
this Agreement and the Articles of Merger; and (v) promptly
notify Buyer and Merger Sub in writing if the Company or any
Included Subsidiary shall discover that any representation or
warranty made by it in this Agreement was when made, or has
subsequently become, untrue in any respect; PROVIDED, HOWEVER,
that any such notification shall in no event amend or be
deemed to amend the Disclosure Schedule, and, PROVIDED,
FURTHER, that the Company shall only be permitted to amend the
Disclosure Schedule with the prior written consent of Buyer
and in all events only for events or occurrences arising after
the date hereof;
(g) The Company and each Included Subsidiary (for purposes of this
Section 5.01(g), all references to the Company and any
Included Subsidiary shall include the Tax Affiliates of the
Company and each Included Subsidiary) shall file (or cause to
be filed) at its own expense, on or prior to the due date, all
Tax returns, including all returns and reports relating to the
Benefit Plans or the Other Benefit Arrangements, for all Tax
periods ending on or before the Effective Date where the due
date for such returns or reports (taking into account valid
extensions of the respective due dates) falls on or before the
Effective Date (all Tax returns described in this Section
5.01(g) and any schedules to be included therewith shall be
prepared on a basis consistent with
40
those of the Company prepared for prior Tax periods);
PROVIDED, HOWEVER, that neither the Company nor any Included
Subsidiary shall file any such Tax returns, or other returns,
elections, claims for refund or information statements with
respect to any liabilities for Taxes (other than federal,
state or local sales, use, withholding or employment tax
returns or statements) for any Tax period, or consent to any
adjustment or otherwise compromise or settle any matters with
respect to Taxes, without prior consultation with Buyer. The
Company shall provide Buyer with a copy of appropriate
workpapers, schedules, drafts and final copies of each federal
and state income Tax return or election of the Company or any
Included Subsidiary at least ten days before filing such
return or election and shall reasonably cooperate with any
request by Buyer in connection therewith;
(h) Neither the Company nor any Included Subsidiary shall, without
the consent of Buyer (which consent shall not be unreasonably
withheld) (i) make or rescind any express or deemed election
or take any other discretionary position relating to Taxes,
(ii) settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or (iii) change any of its methods of
reporting income or deductions for federal income Tax purposes
from those employed in the preparation of the federal income
Tax returns for the taxable year ended February 26, 2000; and
(i) Neither the Company nor any Included Subsidiary shall perform
any act referenced by (or omit to perform any act which
omission is referenced by) the terms of Section 3.11 hereof.
5.02 ACCESS TO BOOKS AND RECORDS.
Between the date hereof and the Effective Date, the Company shall
afford to Buyer and Merger Sub and their authorized representatives
("BUYER'S REPRESENTATIVES") full access at all reasonable times and
upon reasonable notice to the offices, properties, facilities, books,
records, officers, employees and other items of the Company and each
Included Subsidiary, and the work papers of Xxxxxx Xxxxxxxx LLP, the
Company's independent public accountants, relating to work done by
Xxxxxx Xxxxxxxx LLP with respect to the Company for each of the fiscal
years ended February 28, 1998, February 27, 1999 and February 26, 2000,
and with respect to the Pro Forma Financial Statements, and otherwise
provide such assistance, financial information (including, without
limitation, financial statements and management reports for all periods
after December 30, 2000, as and when available) and other materials and
information relating to the Business as is reasonably requested by
Buyer and Merger Sub in order that Buyer and Merger Sub may have a full
opportunity to make such investigation and evaluation as they shall
reasonably desire to make of the business and affairs of the Company
and each Included Subsidiary, and the Company shall instruct its
officers, employees, agents and representatives to cooperate with
Buyer's Representatives in carrying out such investigation. In
addition, the Company and its officers and directors shall cooperate
fully (including providing introductions, where necessary) with Buyer
to enable Buyer to contact and visit such third parties, including
41
customers, prospective customers, specified agencies, vendors, or
suppliers of the Company and each Subsidiary as Buyer deems reasonably
necessary to complete its due diligence; PROVIDED THAT, Buyer agrees
not to initiate such contacts without the prior approval of the
Company, which approval will not be unreasonably withheld, limited or
delayed.
5.03 APPROVAL OF COMPANY SHAREHOLDERS.
The Board of Directors of the Company shall, promptly after the date of
this Agreement and in no event later than February 15, 2001, take all
action necessary in accordance with the Wisconsin Statutes and its
Articles of Incorporation and Bylaws to solicit consents (or in the
event consents cannot be solicited or obtained, to convene a meeting)
of the Company Shareholders for the purpose of approving this
Agreement, the Articles of Merger and the Key Employee Compensation
Plan, and the Company shall consult with Buyer in connection therewith.
In addition, the Company shall cooperate with Buyer in determining the
appropriate manner of obtaining approval of the Key Employee
Compensation Plan through written consents (or, in the case of a
meeting, in a vote) intended to comply with the provisions of Sections
280G(b)(5)(A)(ii) and 280G(b)(5)(B) of the Code, including determining
the disclosures required to obtain such approvals and the proper
Company Shareholders eligible to approve the Key Employee Compensation
Plan. Notwithstanding the foregoing, neither Buyer nor the Surviving
Corporation shall have any claim against the Company Shareholders for
any failure of the consents so obtained to comply with such provisions
of the Code. The Board of Directors of the Company will (i) in the
event consents cannot be solicited or obtained, cause proper notice of
a meeting to be given to its shareholders in compliance with the
Wisconsin Statutes and other applicable law and regulation, (ii)
recommend by the affirmative vote of the Board of Directors a written
consent for approval of (or, in the case of a meeting, a vote in favor
of) this Agreement, the Articles of Merger and the Key Employee
Compensation Plan, (iii) if appropriate, use its commercially
reasonable best efforts to solicit from its shareholders proxies in
favor thereof, and (iv) if applicable, notify each shareholder who did
not consent to the approval of this Agreement and the Articles of
Merger of the authorization of such action and send them the
dissenters' notice described in Section 180.1322 of the Wisconsin
Statutes.
5.04 REGULATORY FILINGS.
The Company shall, as promptly as practicable after the execution of
this Agreement, make or cause to be made all filings and submissions
under any laws or regulations applicable to the Company and each
Subsidiary for the consummation of the transactions contemplated
herein. The Company will coordinate and cooperate with Buyer and Merger
Sub in exchanging such information, will not make any such filing
without providing to Buyer and Merger Sub a final copy thereof for
their review and consent at least two full business days in advance of
the proposed filing, which consent shall not be unreasonably withheld,
and will provide such reasonable
42
assistance as Buyer and Merger Sub may request in connection with all
of the foregoing.
5.05 CONDITIONS.
The Company shall take all commercially reasonable actions necessary or
desirable to cause the conditions set forth in Section 7.01 hereof to
be satisfied and to consummate the transactions contemplated herein as
soon as reasonably possible after the satisfaction thereof (but in any
event within three business days of such date).
5.06 NO NEGOTIATIONS, ETC.
Until the earliest to occur of the Effective Time or the termination of
this Agreement pursuant to Article VIII hereof, neither the Company nor
any of its officers, directors, agents or representatives, shall
directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage submission of any proposal or
offer from any person or entity (including any of the officers or
employees of the Company) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of
all or a material portion of the assets of, or any equity interest in,
the Company or any Included Subsidiary or other similar transaction or
business combination involving the Company or any Included Subsidiary
or participate in any discussions or negotiations regarding, or furnish
to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person or entity to do or
seek any of the foregoing. The Company shall promptly notify Buyer if
any such proposal or offer, or any inquiry from or contact with any
person with respect thereto, is made and shall promptly provide Buyer
with such information regarding such proposal, offer, inquiry or
contact as Buyer may request.
5.07 REQUIRED CONSENTS.
The parties have indicated on SCHEDULE 5.07 of the Disclosure Schedule
the consents, approvals, exemptions or authorizations that will be
required to be obtained by the Company prior to the Closing (each, as
so indicated, a "REQUIRED CONSENT"). With respect to the Required
Consents issued by governmental authorities, the Company shall notify,
promptly after the date hereof, such governmental authorities of the
execution of this Agreement and the transactions contemplated hereby.
The Company shall obtain all Required Consents prior to the Closing and
will cooperate with Buyer to obtain all such approvals and consents
required of Buyer.
5.08 CLOSING CERTIFICATES.
The Company will use its commercially reasonable efforts to deliver to
the Closing all opinions, certificates and other documents required to
be delivered by it at the Closing.
43
5.09 BENEFIT PLANS.
(a) Upon the request of Buyer, the Company will take all action
necessary or required (i) to terminate or amend, if requested
by Buyer, all qualified retirement and welfare benefit plans
and all non-qualified benefit plans and compensation
arrangements as of a time immediately prior to the Effective
Time and (ii) to submit application to the Internal Revenue
Service for a favorable determination letter for each of the
Benefit Plans that is subject to the qualification
requirements of Section 401(a) of the Code prior to the
Effective Date of the Merger.
(b) On or prior to the Closing Date, the Company shall terminate
the Company's Phantom Stock Plan, Target Supplemental
Executive Retirement Plan and Wrap-Around Savings Plan (the
"TERMINATED COMPENSATION PLANS") and make in full all payments
required to be made by the Company to all participants and
beneficiaries of such Terminated Compensation Plans and
satisfy in full all obligations of the Company under such
Terminated Compensation Plans, such that, after the Closing,
neither Buyer, the Surviving Corporation nor any of their
affiliates shall have any obligation or liability, payment or
otherwise, with respect to such Terminated Compensation Plans
or any employees or other beneficiaries participating in such
Terminated Compensation Plans. The termination of the
Terminated Compensation Plans is referred to as the
"PRE-CLOSING COMPENSATION PLAN TERMINATION." Any indebtedness
incurred by the Company or any Included Subsidiary in
connection with the Pre-Closing Compensation Plan Termination
shall be paid off in full prior to the Closing Date in
accordance with Section 5.13 hereof.
5.10 ACCOUNTING POLICIES AND PROCEDURES.
The Company shall not take any action, other than as required by law or
GAAP, to modify any of its accounting policies, procedures and
practices from those in effect in the Audited Financial Statements.
5.11 DISPOSITION.
The Company shall effect the Disposition in a manner that will result
in the Company, after giving effect to the Disposition, owning all of
the assets and business of the Business, subject only to the
liabilities (i) identified in the Pro Forma Latest Balance Sheet or
(ii) incurred in the ordinary course of the Business since February 26,
2000, in each case, to the extent not paid as of the Effective Date.
5.12 TAX COVENANTS.
(a) The Company and each Subsidiary and any Tax Affiliate shall
timely and properly pay all Taxes due for all Tax periods or
portions thereof ending on,
44
prior to or including the Effective Date and payable as of
the Effective Date (including any and all Taxes of the
Company relating to the Disposition and all related
transactions) or otherwise establish on its books and records
(in accordance with GAAP and consistent with past practice),
reserves that are adequate for the payment of any Taxes for
all Tax periods or portions thereof ending on, or prior to
the Effective Date or if including the Effective Date,
allocable to the portion of the period ending on the Effective
Date as determined in accordance with Section 13.05 hereof,
and such reserves shall be taken into account in the
determination of Closing Date Working Capital pursuant to
Section 9.02 hereof.
(b) Neither the Company nor any Subsidiary shall make payments
prior to the Effective Time that separately or in the
aggregate could or would result in the payment of any "excess
parachute payments" within the meaning of Section 280G of the
Code, unless and until such payments are approved by the
stockholders in accordance with the provisions of Sections
280G(b)(5)(A)(ii) and 280G(b)(5)(B) of the Code. The Company
shall, prior to the Effective Time and in accordance with
Section 5.03 hereof, seek the approval of its shareholders of
payments made pursuant to the Key Employee Compensation Plan
in a manner intended to comply with such sections of the Code.
5.13 PAYOFF OF DEBT; XXXXXXX.
(a) At or before the Closing, the Company (a) shall, and shall
cause each Included Subsidiary either to (i) pay in full to
the persons entitled thereto all debt of the Company and each
such Included Subsidiary for money borrowed ("DEBT") such that
on the Effective Time the Company and each Included Subsidiary
shall have no Debt or (ii) cause to be delivered to Buyer,
prior to the Closing Date, instruments in a form satisfactory
to Buyer, executed by each of the lenders of such Debt and the
Company pursuant to which each such lender agrees to the
amount required to pay in full all Debt owed by the Company or
any Included Subsidiary to such Lender on the Closing Date and
pursuant to which such Lender agrees to accept such amount
from Buyer on the Closing Date in full satisfaction of all
such Debt and to release the Company and each Included
Subsidiary, as applicable, from any and all obligations
related to such Debt, and (b) deliver to Buyer any other
instruments, releases, terminations (including without
limitation, terminations of all liens, mortgages, security
interests and the filings by such lenders of UCC termination
statements of financing statements) or other documents as
Buyer may request, in order to evidence the payments made
under subsection (a) above and the release of the Company and
the Included Subsidiaries with respect to all Debt
(collectively, the "DEBT PAYOFF INSTRUMENTS"). Notwithstanding
the foregoing, the Company shall be deemed to have paid the
amounts owed pursuant to the $5,000,000 City of Faribault,
Minnesota Variable Rate Demand Industrial Development Revenue
Bonds (Xxxxxx Foods, Inc. Project) by defeasing such bonds in
accordance with their terms (the "FARIBAULT BONDS").
45
(b) On or prior to the Closing Date, the Company shall terminate
and pay in full or otherwise satisfy all obligations to Xxxxx
Xxxxxxx under that certain Agreement, dated August 26, 2000,
and obtain a release from Xxxxx Xxxxxxx or such other
documents that Buyer may request, in a form satisfactory to
Buyer, pursuant to which he releases the Company from any and
all such obligations (the "XXXXXXX RELEASE").
5.14 ENVIRONMENTAL MATTERS.
To the extent not completed prior to the date hereof:
(a) The Company has provided Buyer a Phase I environmental site
assessment report concerning each parcel of Real Property
identified in EXHIBIT I-1 attached hereto (the "ASSESSED REAL
PROPERTY"), which Phase I assessments shall be conducted in
accordance with the ASTM standard E 1527-97 or 1527-2000 and
shall be subject to Buyer's review pursuant to Section 5.14(c)
below. The Company and each Included Subsidiary shall
cooperate with Buyer's and Buyer's Representatives' efforts to
conduct such additional environmental assessment of the
Assessed Real Property and/or an environmental audit of the
Business that Buyer may, in its discretion, consider
necessary. To the extent Buyer or Buyer's Representatives
conduct additional environmental assessment of the Assessed
Real Property and/or an environmental audit of the Business,
then Buyer shall indemnify the Company and each Company
Shareholder for all costs, damages, fees and assessments
incurred by the Company caused by the negligent activities or
willful misconduct of Buyer or Buyer's Representatives, if
any, in performing such additional assessment or audit;
PROVIDED, HOWEVER, that such indemnification obligation shall
arise only in the event that Closing of the transactions
contemplated by this Agreement does not occur. The Company and
each Company Shareholder shall be a third-party beneficiary of
any insurance proceeds covering or applicable to the conduct
of Buyer, Buyer's Representatives or its agents, consultants,
representatives and contractors in the performance of such
additional environmental assessment or audit. Buyer shall
provide the Company a full and complete copy of all written,
non-privileged data, reports, findings, conclusions and
assessments generated by Buyer or Buyer's Representatives in
the course of any such additional environmental assessment or
audit by Buyer or Buyer's Representatives. The Company and
each Included Subsidiary shall allow Buyer and Buyer's
Representatives access to the Assessed Real Property, at all
reasonable times prior to Closing and without charge, for the
purpose of conducting such inspections, reviews, inventories,
observations, tests, analyses, examinations and investigations
as Buyer may desire (including, without limitation, any Phase
II environmental assessments); PROVIDED, HOWEVER, that such
inspections, reviews, inventories, observations, tests,
analyses, examinations and investigations shall be conducted
in a manner so as not to interfere unreasonably with the
Company's operation of the Business. Buyer shall provide to
the Company prior to conducting such
46
inspections reviews, inventories, observations, tests,
analyses, examinations and investigations a detailed
proposal for such assessments and investigations, and
such inspections and assessments shall be conducted in
substantial conformity with such proposal unless the
Company agrees to a modified proposal, which agreement
shall not be unreasonably withheld or delayed. Buyer shall
not be provided access to perform any such inspections or
investigations unless and until the Company consents to
such proposed assessment, which consent shall not be
unreasonably withheld or delayed. Buyer's inspections,
reviews, inventories, observations, tests, analyses,
examinations, and investigations shall not interfere
unreasonably with the Company's operations, and all of
Buyer's efforts shall be subject to the Company's approval
of schedule, which approval shall not be unreasonably
withheld or delayed. The Company and each Included
Subsidiary shall allow Buyer and Buyer's Representatives
access to all plans and specifications for improvements on
the Assessed Real Property, if any, and all current and
historical maintenance records, licenses, permits,
reports, certificates, correspondence with governmental
authorities or other items relating to the construction,
operation or environmental assessment of the Assessed Real
Property and/or the environmental audit of the Company or
any Included Subsidiary for the purposes of reviewing and
making photocopies (or other reproductions) of the same.
Buyer and Buyer's Representative shall maintain such
documentation as confidential unless the Company agrees
that such documentation may be disclosed publicly or such
disclosure is required by applicable laws and regulations
or by a governmental authority or court. The Company and
each Included Subsidiary shall furthermore make available,
for the purpose of interviews with Buyer and Buyer's
Representatives for the purpose of environmental due
diligence, such employees and representatives of the Company
and each Included Subsidiary as may be requested by Buyer or
Buyer's Representatives. The Company and each Included
Subsidiary agree not to object to, or interfere with,
interviews by Buyer and Buyer's Representatives with past
and present occupants of the Real Property, past owners of
the Assessed Real Property, past employees of the Company
and the Included Subsidiaries and past and present owners
and occupants in the vicinity of the Assessed Real Property,
subject only to Buyer or Buyer's Representative's agreement
to provide the Company with advance notice of and an
opportunity to attend such interviews. Buyer and Buyer's
Representatives shall cooperate with Seller to schedule any
such interviews at times and locations mutually convenient
to the parties hereto.
(b) If the Closing of the transactions contemplated by this
Agreement occurs, Buyer shall pay the expense of the Phase I
environmental site assessments of the Assessed Real Property
performed by the Company pursuant to Section 5.14(a) above and
the expense of any environmental audit of the Business, if one
is so ordered by Buyer, and the expense of the Phase II
assessments and the preparation of any written reports in
connection therewith, identified in SCHEDULE 5.14(b) of the
Disclosure Schedule. If the Closing of the transactions
47
contemplated by this Agreement does not occur, the Company
shall bear the cost of all such Phase I and II assessments and
audits. Regardless of whether the Closing occurs, the Company
Shareholders shall be responsible for paying for any Phase II
site assessments other than those identified in SCHEDULE
5.14(b) of the Disclosure Schedule and any other environmental
investigation, and any written reports prepared in connection
therewith, performed in connection with any Remediation
performed pursuant to this Agreement.
(c) The environmental site assessments of the Assessed Real
Property, including the Phase I environmental site assessments
prepared by the Company, and if applicable, any Phase II
environmental assessments, shall be subject to the review and
approval of Buyer, which approval shall not be unreasonably
withheld or delayed. Buyer shall complete its review of the
Phase I, and if applicable, Phase II environmental
assessments, as promptly as practicable. Buyer and the Company
shall agree on (i) the requirements, if any, to Remediate (as
defined in Section 5.14(f)(i) below) each Environmental
Condition (as defined in Section 5.14(f)(ii) below) and (ii) a
scope of work setting forth such agreed upon approach to
Remediate each such Environmental Condition (the "REMEDIATION
SCOPE OF WORK"). The Remediation Scope of Work shall include,
without limitation, identification of the actions necessary to
complete the Remediation, such that a Closure Determination
under Section 5.14(g) hereof is issued, and a proposed
schedule for the performance of the Remediation. The Company
and Buyer agree to utilize and accept the services of URS (or
such other service provider upon which the parties mutually
agree) as the environmental consultant (the "ENVIRONMENTAL
CONSULTANT") that will oversee, perform or coordinate and
direct the performance of the Remediation. In the event that
it is necessary after the date hereof to modify or amend the
Remediation Scope of Work agreed upon pursuant to this Section
5.14(c), or any portion thereof, in order to complete any
Remediation required under this Agreement or to obtain a
Closure Determination pursuant to Section 5.14(g) hereof, any
such modification or amendment shall be in writing and shall
be mutually agreed by Buyer and the Company Shareholders
(which agreement shall not be unreasonably withheld by either
Buyer or the Company Shareholders).
(d) Subject to the terms of this Section 5.14(d), the Company
Shareholders, at their sole cost and expense, shall Remediate,
in a manner mutually acceptable to Buyer and the Company
Shareholders (which agreement shall not be unreasonably
withheld by either Buyer or the Company Shareholders), all
known Environmental Conditions associated with each parcel of
the Assessed Real Property (including, without limitation, the
land and any improvements located thereon) that have been
identified as conditions to be Remediated in accordance with
the Remediation Scope of Work set forth in EXHIBIT I-2 (each,
a "REMEDIABLE CONDITION"); PROVIDED that, the maximum
aggregate liability of the Company Shareholders for such
Remediation shall be $2.0 million, as provided by the
Environmental Remediation Escrow Amount. The Company
48
Shareholders shall complete, or cause to be completed, the
Remediation of all Remediable Conditions in accordance with
the Remediation Scope of Work. The parties acknowledge and
agree that the Company Shareholders shall contract with the
Environmental Consultant to supervise and implement the
Remediation of the Remediable Conditions required by the
Remediation Scope of Work, and that the Environmental
Consultant shall consult regularly with Buyer's designated
representative to keep such representative apprised of the
status of such Remediation and to permit such representative
to address any issues or recommendations with respect to such
Remediation. As of the date hereof, Buyer and the Company
Shareholders have mutually agreed upon the Remediation Scope
of Work set forth in EXHIBIT I-2, which Remediation Scope of
Work may only be modified, if necessary, in accordance with
the terms of Section 5.14(c) hereof. The Company Shareholders
shall cause the Remediation of the Remediable Conditions
required hereunder to be commenced promptly after, but not
prior to, the Effective Time, and shall cause such Remediation
to be completed as soon as is practicable thereafter; PROVIDED
that, the Company Shareholders and Buyer shall mutually agree
in advance on the schedule for the work activities comprising
such Remediation at each parcel of the Assessed Real Property.
The Company Shareholders' obligation to Remediate each
Remediable Condition shall terminate upon the earlier of (i)
the aggregate expenditure of $2.0 million for such
Remediation, such that the Environmental Remediation Escrow
Amount has been exhausted, or (ii) the issuance of a Closure
Determination with respect to each Remediable Condition at the
Assessed Real Property; PROVIDED that, if the Company
Shareholders' obligation to Remediate the Remediable
Conditions were to be terminated under clause (i) of this
sentence, the Company Shareholders shall remain obligated to
cooperate with the Company and the Buyer to obtain a Closure
Determination with respect to each Remediable Condition for
which Remediation has been completed prior to exhaustion of
the Environmental Remediation Escrow Amount, provided that
such cooperation shall be at the expense of the Buyer.
(e) The Company Shareholders shall undertake and complete the
Remediation of the Remediable Conditions required hereunder so
as not to interfere unreasonably with any operations at the
Assessed Real Property or to damage the Assessed Real Property
or any improvements thereon, except for collateral damage
resulting from such Remediation, which collateral damage shall
be repaired by or at the direction of the Company
Shareholders. Buyer shall allow the Company Shareholders and
the Environmental Consultant access to the Assessed Real
Property, at all reasonable times and without charge, for the
purpose of performing the Remediation of the Remediable
Conditions hereunder; PROVIDED that Buyer shall be provided
reasonable advance notice of the proposed entry of the Company
Shareholders or the Environmental Consultant onto the Assessed
Real Property for such Remediation. The Company Shareholders
shall provide Buyer with copies of all non-privileged
correspondence, reports and other communications prepared or
received by
49
them or the Environmental Consultant in connection with the
Remediation of the Remediable Conditions.
(f) For purposes of this Agreement:
(i) "REMEDIATE" shall mean the removal, abatement,
encapsulation, investigation, cleanup, remediation or
correction of, or other response to (including,
without limitation, testing, monitoring, sampling or
investigation of any kind) any Environmental
Conditions (as defined in Section 5.14(f)(ii) below)
solely to the extent required by, and in accordance
with, the applicable Environmental Laws, including,
all applicable orders, directives, policies and
requirements of courts or of relevant governmental
agencies or other authorities. Completion of any
Remediation required hereunder shall be evidenced by
issuance of a Closure Determination pursuant to
Section 5.14(g) hereof. For purposes of this Section
5.14, the term "Remediate" may include reliance on
institutional or engineering controls or deed
instruments required by governmental authorities
exercising jurisdiction under applicable
Environmental Laws if such controls or instruments do
not prevent or materially interfere with or restrict
the use of the properties for purposes consistent
with their uses as of the Closing Date.
(ii) "ENVIRONMENTAL CONDITION" shall mean any recognized
environmental condition (as defined by reference to
ASTM standard E 1527-97 or E 1527-2000), violation of
law or regulation, or other matter with respect to
which action or response is recommended or required
by the Environmental Consultant, as identified or
addressed in the approved Phase I and Phase II
environmental site assessments under Section 5.14(c)
above, or any other matter with respect to which the
parties hereto agree that Remediation shall be
conducted and shall include the full extent of such
environmental conditions, violations or other matters
whether the same are fully known, described or
characterized in said Phase I and Phase II
environmental assessments.
(g) For purposes of this Section 5.14, any Remediation required
hereunder with respect to any Environmental Condition shall be
completed when the Shareholder Representative provides to
Buyer either (i) a written no-action or no-further-action
letter or other form of closure determination in the form and
scope customarily available from the primary governmental
authority exercising jurisdiction over such Environmental
Condition certifying that said Remediation is complete and no
further Remediation is required, or (ii) if such a
determination from such governmental authorities cannot
practicably be obtained, a written certification from the
Environmental Consultant that, in its professional opinion,
such Remediation was undertaken and completed in accordance
with applicable laws and regulations and the Remediation Scope
of Work, and that, in its professional opinion, the property
involved is free from
50
all previously identified Environmental Conditions. Such a
written determination or certification issued pursuant to
clause (i) or (ii) of this Section 5.14(g) shall be referred
to as a "CLOSURE DETERMINATION" for purposes of this
Agreement.
5.15 EXCLUDED LAND.
Buyer agrees that, prior to the Closing Date, the Company will have
transferred the land described on EXHIBIT J-1 to Our Family, LLP, Our
Family MN, LLP, or Gobblers Inc. (the "UNWANTED REAL PROPERTY"). All
land not transferred and, as a result, not subject to the Disposition
is referred to herein as the "INCLUDED LAND". Included Land shall be
deemed to be Real Property under this Agreement and shall be subject to
the applicable representations and warranties and the environmental
procedures and indemnifications contained in this Agreement, including
without limitation the representations and warranties in Sections 3.12
and 3.27 hereof and the environmental procedures and indemnifications
in Section 5.14 hereof. The land described on EXHIBIT J-2 shall be
subject to a restrictive covenant substantially in the form set forth
in EXHIBIT J-3 and an option to purchase and right of first refusal
substantially in the form set forth in EXHIBIT J-4. The land described
on EXHIBIT J-5 shall be leased by Our Family, LLP, Our Family MN, LLP,
or Gobblers Inc., as applicable, to the Company pursuant to a lease
substantially in the form set forth in EXHIBIT J-6.
5.16 FARM PERMITS AND CONSENTS.
(a) The Company and Buyer shall jointly notify, promptly after the
date hereof, the applicable governmental authorities that
issued the consents, licenses, permits, authorizations or
approvals identified in SCHEDULE 5.16(a) attached hereto (the
"SCHEDULED FARM CONSENTS") applicable to those turkey
production farms set forth in SCHEDULE 5.16(b) attached hereto
(the "SCHEDULED FARMS" and each, a "SCHEDULED FARM") of the
execution of this Agreement and the transactions contemplated
hereby. If any of such governmental authorities does not issue
any such Scheduled Farm Consents, or asserts that other or
different consents, approvals, permits or licenses are
required or must be issued or renewed with respect to the
Scheduled Farms (together with the Scheduled Farm Consents,
the "FARM CONSENTS") due to any of the circumstances set forth
in the next sentence of this Section 5.16(a), then the Company
Shareholders shall (i) in the first instance and at their sole
cost and expense, with the assistance, cooperation and best
efforts of Buyer (so long as such efforts are at the Company
Shareholders' expense), take such actions as are necessary to
cause the Farm Consents to be issued prior to the Effective
Time and (ii) if Section 5.16(b) hereof is applicable and is
elected by the Company Shareholders after their compliance
with the preceding clause (i), replace the turkey production
of the affected Scheduled Farms in effect as of the Effective
Time in accordance with the terms of Section 5.16(b) hereof.
The obligations of the Company Shareholders under the previous
sentence of this Section 5.16(a) shall be applicable only in
the event of (x) any failure of the Company
51
or Company Shareholders to undertake, complete or properly
perform any action legally required to be taken prior to the
Effective Time; PROVIDED HOWEVER, that the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby, in and of themselves, shall
not be deemed to be a failure of the Company or Company
Shareholders to undertake, complete or properly perform any
action legally required to be taken it or them, (y) the
Company's violation of a statute, rule, regulation or other
legal requirement prior to the Effective Time; PROVIDED
HOWEVER, that the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby,
in and of themselves, shall not be deemed to be a violation of
a statute, rule, regulation or other legal requirement, or (z)
any other action or inaction of the Company or Company
Shareholders prior to the Effective Time not related to
execution and delivery of this Agreement.
(b) If the Company Shareholders' obligation to obtain Farm
Consents applicable to a Scheduled Farm applies pursuant to
Section 5.16(a) hereof, and any such Farm Consents are not
obtained prior to the Effective Time, then the Company
Shareholders may replace the turkey production generated at
such Scheduled Farm as of the Effective Time in accordance
with the terms set forth below in this Section 5.16(b).
(i) Each Scheduled Farm subject to a Farm Consent that
has not been obtained as of the Closing Date (each, a
"TRANSFERRED FACILITY") shall be conveyed by the
Company prior to the Effective Time to Our Family,
LLP or Our Family MN, LLP, as designated in writing
by the Shareholders Representative, at a cost equal
to the appraised value of such Transferred Facility
plus the "Allocated Goodwill" (as defined below) for
such Transferred Facility; PROVIDED that, the Company
Shareholders shall pay all costs and expenses
associated with such conveyance, including, without
limitation, costs of appraisal, transfer taxes, real
estate fees, recording, title evidence and insurance,
if any (collectively, the "CONVEYANCE COSTS"). For
purposes of this Agreement, "ALLOCATED GOODWILL"
shall mean the product of (A) the aggregate goodwill
to be recognized by Buyer on its books and records
resulting from the Merger multiplied by (B) the
quotient resulting from dividing (X) the book value
of a Transferred Facility, as set forth in the
financial books and records of the Company as of the
Closing Date, by (Y) the book value of all of the
Company's assets (after giving effect to the
Disposition) as set forth in such records as of the
Closing Date;
(ii) Our Family, LLP or Our Family MN, LLP, as applicable,
shall thereafter (A) cause the Transferred Facility
to be subject to a turkey production contract or
lease, at Buyer's option, for a period of at least
five (5) years, or (B) replace the turkey
production represented by the Transferred Facility
with alternative turkey production reasonably
acceptable to Buyer for a period of at least five (5)
years; PROVIDED that, in all instances, the
replacement turkey production to be provided under
52
either clause (A) or (B) of this Section 5.16(b)(ii)
shall be equivalent, both in quantity and quality, to
the turkey production of the Transferred Facility,
and such replacement turkey production shall be made
available to Buyer at the cost of production incurred
by Our Family, LLP or Our Family MN, LLP, as
applicable, without any profit margin, xxxx-up or
other addition by Our Family, LLP or Our Family MN,
LLP, as applicable. For purposes of this Section
5.16(b)(ii), the cost of such turkey production shall
be deemed to be equal to the costs projected in the
Long-Range Plan, EXCEPT that the cost of feed and
fuel used by Our Family, LLP or Our Family MN, LLP,
as applicable, in the production of turkeys for
replacement purposes, shall be equal to the actual
costs thereof to such producers in effect from time
to time during the term of such replacement
production (which costs shall be documented by such
producers and available for audit by Buyer from time
to time). The terms and conditions of such
replacement production shall be those set forth in
the standard form of independent grower contract
utilized by Xxxxxx-O Foods, Inc. from time to time.
If Buyer chooses to lease a Transferred Facility from
Our Family, LLP or Our Family MN, LLP, such lease
terms shall be negotiated in good faith by the
parties, but the total rent payable by Buyer
thereunder shall be equal to no more than, in each
case with respect to the Transferred Facility, the
actual real property taxes payable by the owner
thereof, insurance, utilities, assessments, scheduled
depreciation for assets owned by the lessor,
financing costs of leasehold improvements paid for by
the lessor and the costs of any improvements
requested by Buyer. If, during the term of a
production contract or lease, the applicable Farm
Consent or Consents were to be issued with respect to
a Transferred Facility, then such Transferred
Facility shall be conveyed back to the Company (or
its successors or assigns) at the same price
provided for in Section 5.16(b)(i) above under the
same terms and conditions of this Agreement as if
such property had been included as an asset of the
Company on the Effective Date; PROVIDED that, the
Company Shareholders shall pay all associated
Conveyance Costs, except the costs of any premiums
under any title insurance, which shall be paid by
Buyer. If, upon expiration of the term of a
production contract or lease, the applicable Farm
Consent or Farm Consents were not issued, then, at
Buyer's option, (x) the parties may renew the
production contract or lease on the same terms and
conditions and for another term equal in length to
the initial term or (y) the Company (or its
successors or assigns) shall be entitled to a thirty
(30) day option to purchase the Transferred Facility
without having the applicable Farm Consents in hand,
at a price equal to the then-appraised market value
of such Transferred Facility plus the Allocated
Goodwill applicable to such Transferred Facility or
(z) the production represented by the Transferred
Facility may be replaced with alternative turkey
production
53
on terms and conditions (including quality and
quantity of production) reasonably acceptable to
Buyer.
(c) If a Farm Consent were not to be issued due to any reason
other than that set forth in the last sentence of Section
5.16(a) hereof, then the Company Shareholders shall have no
further obligation to obtain such Scheduled Farm Consent;
EXCEPT that, if Buyer were to choose, in its sole discretion,
to pursue either obtaining such Scheduled Farm Consent or
contesting the applicable governmental authority's failure or
refusal to issue such Scheduled Farm Consent (collectively, a
"CONTEST"), then the Company Shareholders, on the one hand,
and Buyer, on the other, shall share equally in the legal
costs, including attorneys' fees, costs and expert witnesses
or consultant fees, incurred in such Contest. If such Contest
were to involve the action or inaction of any governmental
authority in Wisconsin, the parties agree to retain Xxxxxxx
Xxxx & Xxxxxxxxx LLP for such contest; if such Contest were to
involve the action or inaction of any governmental authority
in Minnesota or the federal government, the parties agree to
retain Xxxxxx & Whitney LLP for such Contest. If the parties
were to prevail in any such legal contest, then the Scheduled
Farm that is the subject of such Contest would then be
transferred to Buyer at the price set forth in Section
5.16(b)(i) hereof (assuming that such Scheduled Farm had
become a Transferred Facility prior to the conclusion of such
legal contest); and, if the parties were not to prevail in any
such Contest, such that the Farm Consent involved were still
held to be required by the applicable governmental
authorities, then the parties agree that terms and conditions
of Section 5.16(b) hereof shall apply.
(d) This Section 5.16 applies only to Farm Consents that are
applicable to the Scheduled Farms.
ARTICLE VI
COVENANTS OF BUYER AND MERGER SUB
Buyer and Merger Sub covenant and agree with the Company as follows:
6.01 REGULATORY FILINGS.
Buyer or Merger Sub shall, as promptly as practicable after the
execution of the Agreement, make or cause to be made all filings and
submissions under any laws or regulations applicable to Buyer and
Merger Sub for the consummation of the transactions contemplated
herein. Buyer and Merger Sub will coordinate and cooperate with the
Company in exchanging such information, will not make any such filing
without providing to the Company a final copy thereof for its review
and consent at least two full business days in advance of the proposed
filing, which consent shall not be unreasonably withheld, and will
provide such reasonable assistance as the Company may request in
connection with all of the foregoing.
54
6.02 CONDITIONS.
Buyer or Merger Sub shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section
7.02 hereof to be satisfied and to consummate the transactions
contemplated herein as soon as reasonably possible after the
satisfaction thereof (but in any event within three business days of
such date).
6.03 APPROVALS AND CONSENTS.
Buyer shall take all necessary corporate and other action and file all
documents required to obtain and will use its commercially reasonable
efforts to obtain all approvals of regulatory authorities, consents and
approvals required of it to carry out the transactions contemplated by
this Agreement and will cooperate with the Company to obtain all such
approvals and consents required by the Company, including any consents
or approvals necessary or appropriate to effect the Disposition.
6.04 CLOSING CERTIFICATES.
Buyer will use its best efforts to deliver at the Closing all opinions,
certificates and other documents required to be delivered by it at the
Closing.
6.05 CONFIDENTIALITY.
Buyer acknowledges that all information provided to any of it and its
affiliates, agents and representatives by the Company and its
affiliates, agents and representatives is subject to the terms of a
confidentiality agreement dated March 17, 2000 between the Company and
Buyer (the "CONFIDENTIALITY AGREEMENT"), the terms of which are hereby
incorporated herein by reference. Buyer acknowledges that any and all
information provided or made available to it and its affiliates, agents
and representatives by or on behalf of the Company concerning the
Company and its affiliates (other than information that relates to the
Business) shall remain subject to the terms and conditions of the
Confidentiality Agreement after the Closing Date.
6.06 WARN ACT.
Buyer shall be responsible for any notification under the Worker
Adjustment and Retraining and Notification Act of 1988 and any similar
state laws or regulations with respect to employees of the Company or
any Included Subsidiary after the Effective Time.
6.07 EMPLOYEE BENEFITS.
Buyer or Merger Sub will, for the period of one (1) year after the
Effective Date, maintain a level of benefits for employees of the
Company which in the aggregate are substantially equivalent to the
lesser of: (i) the level of benefits such employees received prior to
the date of this Agreement or (ii) the level of benefits received by
55
other, substantially equivalent, employees of Xxxxxx-O Foods, Inc., a
Minnesota corporation and wholly owned subsidiary of Buyer. For
purposes of eligibility and vesting, but not for purposes of benefit
accrual, in Buyer's benefit plans, service shall include all service
with the Company or any Included Subsidiary.
6.08 COOPERATION IN OBTAINING SHAREHOLDER APPROVAL.
Buyer shall cooperate with the Company in determining the appropriate
manner of obtaining approval of the Key Employee Compensation Plan
through written consents (or, in the case of a meeting, in a vote)
intended to comply with the provisions of Sections 280G(b)(5)(A)(ii)
and 280G(b)(5)(B) of the Code, including determining the disclosures
required to obtain such approvals and the proper Company Shareholders
eligible to approve the Key Employee Compensation Plan. Neither Buyer
nor the Surviving Corporation shall have any claim against the Company
Shareholders for any failure of any approval so obtained to comply with
such provisions of the Code.
ARTICLE VII
CONDITIONS TO CLOSING
7.01 CONDITIONS TO BUYER'S AND MERGER SUB'S OBLIGATIONS.
The obligation of Buyer and Merger Sub to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the
following conditions at or before the Effective Time:
(a) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties set forth in Article III hereof
shall be true and correct in all material respects at and as
of the Effective Time (except that any such representation or
warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such
date and except for those representations and warranties made
in Section 3.14(b) hereof which need only be correct as of the
date hereof) as though then made and as though the Effective
Time had been substituted for the date of this Agreement
throughout such representations and warranties (without taking
into account any disclosures by the Company or any Company
Shareholder of discoveries, events or occurrences arising on
or after the date hereof).
(b) COVENANTS PERFORMED. The Company and each Company Shareholder
shall have performed in all material respects all of the
covenants and agreements required to be performed and complied
with by it under this Agreement prior to the Effective Time.
(c) CONSENTS OBTAINED. The Company shall have obtained, or caused
to be obtained, each Required Consent.
56
(d) SHAREHOLDER APPROVAL. The Merger, this Agreement, the Articles
of Merger and the Key Employee Compensation Plan shall have
been duly and validly approved by the Company Shareholders
under the Wisconsin Statutes, and the Company shall have
delivered to Buyer evidence, in form satisfactory to Buyer's
counsel, of such approval, and the Articles of Merger shall
have been duly executed by the Company.
(e) GOVERNMENT APPROVALS. All material governmental filings,
authorizations and approvals that are required for the
consummation of the transactions contemplated by this
Agreement or the Articles of Merger will have been duly made
and obtained.
(f) NO PROHIBITIONS. There shall not be threatened, instituted or
pending any action or proceeding, before any court or
governmental authority or agency, domestic or foreign, (i)
challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the
consummation of the transactions contemplated hereby or
seeking to obtain material damages in connection with such
transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Buyer or Merger Sub of all or a
material portion of the business or assets of the Company and
the Included Subsidiaries, or to require Buyer or Merger Sub
or any of their subsidiaries or the Company to dispose of or
to hold separately all or a material portion of the business
or assets of Buyer or Merger Sub and their subsidiaries or of
the Company or any Included Subsidiary, as a result of the
transactions contemplated hereby, (iii) seeking to require
direct or indirect transfer or sale by Buyer or Merger Sub of
any of the shares of Company Common Stock or capital stock of
any Included Subsidiary, (iv) seeking to invalidate or render
unenforceable any material provision of this Agreement, the
Articles of Merger or any other agreements attached as
exhibits hereto (collectively, the "RELATED AGREEMENTS") or
(v) otherwise relating to and materially adversely affecting
the transactions contemplated hereby.
(g) NO GOVERNMENTAL ACTIONS TAKEN. There shall not be any action
taken, or any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, issued or
deemed applicable to the transactions contemplated hereby by
any federal, state or foreign court, government or
governmental authority or agency, which would reasonably be
expected to result, directly or indirectly, in any of the
consequences referred to in Section 7.01(f) hereof.
(h) NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Effective Time, there shall not have occurred any
change in the business, assets, properties, condition
(financial or otherwise), results of operations or prospects
of the Company or any Subsidiary which is (or may reasonably
be expected to result in a change which is), individually or
in the aggregate with other such facts and circumstances,
materially adverse to the Company and the
57
Included Subsidiaries, taken as a whole, or to the value of
the shares of Company Common Stock, whether or not arising
from transactions in the ordinary course of business.
(i) NO DAMAGE TO PROPERTIES. There shall have been no damage,
destruction or loss of or to any property or properties owned
or used by the Company or any Included Subsidiary, whether or
not covered by insurance which, in the aggregate, has, or
would be reasonably likely to have, a material adverse effect
on the Company and the Included Subsidiaries, taken as a
whole.
(j) DISSENTING SHARES. Not more than five percent (5%) of the
outstanding shares of Company Common Stock shall be qualified
to be Dissenting Shares as of the Effective Time.
(k) DISPOSITION. The Disposition shall have been completed in a
manner reasonably satisfactory to Buyer prior to the Closing.
(l) EMPLOYMENT AGREEMENT. Xxxxxx X. Xxxxxx shall have entered into
the Employment Agreement, in the form attached hereto as
EXHIBIT K, with Buyer.
(m) DELIVERY OF CERTAIN DOCUMENTS. Prior to the Effective Time,
the Company shall have delivered to Buyer all of the
following:
(i) certificates of the Chief Executive Officer and Chief
Financial Officer of the Company, dated as of the
date of the Effective Time, stating that the
conditions precedent set forth in subsections (a),
(b) and (j) above have been satisfied;
(ii) copies of the Required Consents and governmental
consents and approvals and of the authorizations
referred to in subsections (c), (d) and (e) above;
(iii) the Company's and each Included Subsidiary's minute
books, stock transfer records, corporate seal and
other materials related to corporate administration;
(iv) resignations (effective as of the Effective Time)
from all of the directors and from such of the
Company's and each Included Subsidiary's officers as
Buyer shall have requested prior to the Effective
Time;
(v) a copy of the Articles of Incorporation of the
Company and the organizational documents of each
Included Subsidiary, certified by the Department of
Financial Institutions of the State of Wisconsin or
the Secretary of State or other appropriate authority
of the jurisdiction of its incorporation, and
certificates of good standing (or document of similar
58
import) from such authority evidencing the good
standing of the Company and each Included Subsidiary
in each such jurisdiction;
(vi) a copy of each of (A) the texts of the resolutions
adopted by the Board of Directors of the Company and
the Company Shareholders, respectively, authorizing
the execution, delivery and performance of this
Agreement and the Articles of Merger and the
consummation of all of the transactions contemplated
by this Agreement and the Articles of Merger and
approving the Key Employee Compensation Plan and (B)
the Bylaws of the Company, together with certificates
executed on behalf of the Company by its corporate
secretary certifying to Buyer that such copies are
true and complete copies of such resolutions and
Bylaws, respectively, and that such resolutions and
Bylaws were duly adopted and have not been amended or
rescinded;
(vii) a copy of the Indemnification Agreement, executed by
all Company Shareholders other than the ESOP, in the
form attached hereto as EXHIBIT L;
(viii) a copy of the Escrow Agreement, executed by all
Company Shareholders, in the form attached hereto as
EXHIBIT E;
(ix) a written opinion of Xxxxxxx Xxxx & Xxxxxxxxx LLP,
counsel to the Company, dated as of the Effective
Date, addressed to Buyer and satisfactory to Buyer's
counsel, in form and substance substantially as set
forth on EXHIBIT M;
(x) executed copies of all Debt Payoff Instruments and
evidence, in a form reasonably satisfactory to Buyer,
of the defeasance of the Faribault Bonds;
(xi) executed copies of the Xxxxxxx Release;
(xii) a guaranty, in the form attached hereto as EXHIBIT O,
from Xxxxxx X. Xxxxxx to the Company pursuant to
which Xxxxxx X. Xxxxxx guarantees the obligations of
Xxxxx Xxxxxxxxxxx and Xxxxxxx Xxxxxxxxxxx under that
certain Contract for Deed, dated December 17, 1996,
from Xxxxx Xxxxxxxxxxx and Xxxxxxx Xxxxxxxxxxx to the
Company;
(xiii) copies of a Restrictive Covenant in substantially the
form set forth on EXHIBIT J-3 for each parcel of real
property as indicated on EXHIBIT J-2, executed by the
owner of such property;
(xiv) copies of an Option to Purchase and Right of First
Refusal in substantially the form set forth on
EXHIBIT J-4 for each parcel of real
59
property as indicated on EXHIBIT J-2, executed by the
owner of such property;
(xv) copies of leases in the forms set forth on EXHIBIT
J-6 for each parcel of Unwanted Real Property set
forth on EXHIBIT J-5, executed by the owner of such
property;
(xvi) copies of the insurance policies, in the form
previously agreed by Buyer and the Company
Shareholders, supporting the Company Shareholders'
indemnification obligations with respect to the
representations and warranties contained in Article
III of this Agreement, together with a certificate or
certificates of insurance certifying that such
insurance is in full force and effect; and
(xvii) such other certificates, documents and instruments as
Buyer reasonably requests related to the transactions
contemplated hereby.
7.02 CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligations of the Company to consummate the transactions
contemplated by this Agreement are subject to the satisfaction of the
following conditions at or before the Effective Time:
(a) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties set forth in Article IV hereof
shall be true and correct in all material respects at and as
of the Effective Time (except that any such representation or
warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such
date) as though then made and as though the Effective Time had
been substituted for the date of this Agreement throughout
such representations and warranties (without taking into
account any disclosures by Buyer of discoveries, events or
occurrences arising on or after the date hereof).
(b) COVENANTS PERFORMED. Buyer and Merger Sub shall have performed
in all material respects all the covenants and agreements
required to be performed by them under this Agreement and the
Articles of Merger prior to the Effective Time, and Merger Sub
shall have executed the Articles of Merger.
(c) CONSENTS OBTAINED. All material governmental filings,
authorizations and approvals that are required for the
consummation of the transactions contemplated hereby will have
been duly made and obtained.
(d) SHAREHOLDER APPROVAL. The Merger, this Agreement, the Articles
of Merger and the Key Employee Compensation Plan shall have
been duly and validly approved by the Company Shareholders.
60
(e) NO PROHIBITIONS. There shall not be threatened, instituted or
pending any action or proceeding, before any court or
governmental authority or agency, domestic or foreign, (i)
challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly restrain or prohibit, the
consummation of the transactions contemplated by this
Agreement or the Articles of Merger or seeking to obtain
material damages in connection with such transactions, (ii)
seeking to invalidate or render unenforceable any material
provision of this Agreement, the Articles of Merger or any of
the Related Agreements, or (iii) otherwise relating to and
materially adversely affecting the transactions contemplated
hereby or thereby.
(f) NO GOVERNMENT ACTIONS TAKEN. There shall not be any action
taken, or any statute, rule, regulation, judgment, order or
injunction, enacted, entered, enforced, promulgated, issued or
deemed applicable to the transactions contemplated by this
Agreement or the Articles of Merger by any federal, state or
foreign court, government or governmental authority or agency,
which would reasonably be expected to result, directly or
indirectly, in any of the consequences referred to in Section
7.02(e) hereof.
(g) EMPLOYMENT AGREEMENT. Buyer shall have entered into the
Employment Agreement, in the form attached hereto as EXHIBIT
K, with Xxxxxx X. Xxxxxx.
(h) DELIVERY OF CERTAIN DOCUMENTS. At or prior to the Effective
Time, Buyer will have delivered to the Company:
(i) a certificate of a Senior Vice President of Buyer and
the President of Merger Sub, dated as of the date of
the Effective Time, stating that the conditions
precedent set forth in subsections (a) and (b) above
have been satisfied;
(ii) an executed copy of the Indemnification Agreement in
the form attached hereto as EXHIBIT L;
(iii) a copy of the Escrow Agreement, executed by Buyer, in
the form attached hereto as EXHIBIT E;
(iv) a written opinion of Xxxxxx & Xxxxxxx LLP, counsel to
Buyer, dated as of the Effective Date, addressed to
the Company and the Company Shareholders and
satisfactory to the Company's counsel, in form and
substance substantially as set forth on EXHIBIT N;
and
(v) a written opinion of the General Counsel of Buyer,
dated as of the Effective Date, addressed to Xxxxxx
X. Xxxxxx and satisfactory to the Company's counsel,
as to the authorization, execution, delivery and
enforceability of the Employment Agreement.
61
ARTICLE VIII
TERMINATION
8.01 TERMINATION.
This Agreement may be terminated at any time prior to the Effective
Time:
(a) by the mutual written consent of Buyer and the Company;
(b) by either Buyer or the Company, if there has been a material
misrepresentation, breach of warranty or breach of covenant on
the part of the other party in the representations, warranties
and covenants set forth in this Agreement; PROVIDED that, in
the event of a breach of a covenant that is capable of being
cured, notice of the breach of such covenant has been
delivered by the non-breaching party and the breaching party
does not cure such breach by the earlier to occur of tenth
business day or the date provided in Section 8.01(c) hereof;
(c) by either Buyer or the Company, if the transactions
contemplated hereby have not been consummated by March 1,
2001; PROVIDED THAT, neither party will be entitled to
terminate this Agreement pursuant to this Section 8.01(c)
hereof if such party's breach of this Agreement has prevented
the consummation of the transactions contemplated by this
Agreement; or
(d) by Buyer, after the date hereof, if there shall have been a
material adverse change in the assets, financial condition,
operating results, customer, employee or supplier relations,
business condition or prospects of the Company and the
Included Subsidiaries, taken as a whole, which material
adverse change cannot be remedied by March 1, 2001, or if an
event shall have occurred which, so far as reasonably can be
foreseen, would result in any such change.
8.02 EFFECT OF TERMINATION.
In the event of termination of this Agreement by either Buyer or the
Company as provided in Section 8.01 hereof, all provisions of this
Agreement shall terminate, and there shall be no liability on the part
of any of Buyer, Merger Sub, or the Company or their respective
shareholders, officers, or directors, except that: (i) Sections 5.09
(confidentiality), 14.01 (press releases), 14.02 (expenses) and 14.10
(governing law) hereof shall survive indefinitely and (ii) the parties
shall remain liable for their willful breaches of this Agreement prior
to the time of such termination.
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ARTICLE IX
POST-CLOSING ADJUSTMENT
9.01 PREPARATION OF CLOSING DATE BALANCE SHEET.
The Company shall close its books as of the close of business on the
Closing Date. As soon as practicable after the Closing Date (but in any
event within 60 days of such date), Buyer shall prepare, or cause to be
prepared, the balance sheet of the Business as of the Closing Date (the
"CLOSING BALANCE SHEET"). The Closing Balance Sheet shall be prepared
in a manner consistent with past accounting practices of the Company,
except that, in the event of any conflict or difference between
consistency of application of such practices and GAAP, GAAP shall
prevail. Buyer shall deliver the Closing Balance Sheet to the
Shareholder Representative (as defined in Section 12.01 hereof) within
five (5) business days of the preparation thereof.
9.02 DETERMINATION OF CLOSING DATE WORKING CAPITAL.
The Closing Balance Sheet shall include a determination of the Closing
Date Working Capital (as such term is defined in Section 9.04 hereof)
of the Surviving Corporation. In the event the Shareholder
Representative disagrees with such determination of the Closing Date
Working Capital, the Shareholder Representative shall notify Buyer of
such disagreement within twenty (20) business days of receipt of the
Closing Balance Sheet, and during such twenty (20) business day period,
Buyer shall afford the Shareholder Representative and his advisors with
reasonable access to the books of account and records of the Company.
Within ten (10) business days following the end of such twenty (20)
business day period, the Shareholder Representative shall further
notify Buyer of the amount the Shareholder Representative has
determined as the Closing Date Working Capital. If such notice is not
given, the determination of Closing Date Working Capital included in
the Closing Balance Sheet will be final and binding. If the Shareholder
Representative delivers the notice setting forth its disagreement with
such determination, and Buyer and the Shareholder Representative are
unable to resolve the disagreement within ten (10) business days, the
Chief Financial Officer of Buyer and the Shareholder Representative
shall agree to retain the Minneapolis office of the accounting firm of
KPMG Peat Marwick (the "EXPERT") to arbitrate the dispute and render a
decision regarding the Closing Date Working Capital within thirty (30)
days of such retention, which decision shall be final and binding;
PROVIDED, HOWEVER, that the Expert, promptly upon its engagement, shall
disclose any business relationship it currently has, or has in the past
three (3) years had, with Buyer or Seller or any of their respective
affiliates and the party with whom the Expert does not have a
relationship shall be entitled to propose a different, independent
nationally recognized accounting firm to act as Expert, which firm
shall be subject to the review and approval, not to be unreasonably
withheld, of the other party. Such proposed Expert shall disclose any
business relationship it currently has, or has in the past three (3)
years had, with Buyer or Seller and shall be subject to replacement in
accordance with the proviso of the preceding sentence. The Expert shall
conduct such arbitration by reviewing the Closing Balance Sheet with
the understanding that such Closing
63
Balance Sheet was to be prepared in a manner consistent with the
accounting principles identified in Section 9.01 hereof. The party
whose determination of Closing Date Working Capital is furthest from
the amount determined by the Expert shall bear its own costs and
expenses, the fees and expenses of the Expert and the out-of-pocket
costs and expenses (including legal fees and costs) of the other party
thereto.
9.03 ADJUSTMENT OF MERGER CONSIDERATION.
Subject to Section 9.04 hereof,
(a) In the event that the Closing Date Working Capital is less
than $26,379,000 (the "TARGET WORKING CAPITAL"), the Escrow
Agent shall deliver to Buyer the amount of such shortfall from
the Post-Closing Adjustment Escrow Amount, and if such
shortfall exceeds the Post-Closing Adjustment Escrow Amount,
the Shareholder Representative shall cause the Company
Shareholders (other than the ESOP) to deliver to Buyer, within
five (5) business days after the later of the delivery of the
Closing Balance Sheet or final resolution of any dispute
regarding the Closing Date Working Capital as provided in
Section 9.02 hereof, cash in an amount equal to the amount by
which such shortfall exceeds the Post-Closing Adjustment
Escrow Amount. If such shortfall is less than the Post-Closing
Adjustment Escrow Amount, the Escrow Agent shall deliver to
the Shareholder Representative, on behalf of the Company
Shareholders other than the ESOP, and to the ESOP, the amount
of the Post-Closing Adjustment Escrow Amount remaining after
it has delivered to Buyer the amount of such shortfall from
the Post-Closing Adjustment Escrow Amount. Such remaining
amount of the Post-Closing Adjustment Escrow Amount shall be
apportioned between the Shareholder Representative and the
ESOP as follows: (i) to the Shareholder Representative, a
percentage of such amount equal to the percentage of Company
capital stock held by all Company Shareholders other than the
ESOP at the Effective Time (the "NON-ESOP SHAREHOLDERS
PERCENTAGE") and (ii) to the ESOP, a percentage of such amount
equal to 100% minus the Non-ESOP Shareholders Percentage (the
"ESOP SHAREHOLDERS PERCENTAGE").
(b) In the event that the Closing Date Working Capital is greater
than the Target Working Capital, Buyer shall deliver to the
Company Shareholders, within five (5) business days after the
later of the delivery of the Closing Balance Sheet or final
resolution of any dispute regarding the Closing Date Working
Capital as provided in Section 9.02 hereof, cash in an amount
equal to the amount by which the Closing Date Working Capital
exceeds the Target Working Capital and the Escrow Agent shall
deliver to the Shareholder Representative, on behalf of the
Company Shareholders, other than the ESOP the Non-ESOP
Shareholders Percentage and to the ESOP, the ESOP Shareholders
Percentage of the Post-Closing Adjustment Escrow Amount.
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9.04 DEFINITION OF WORKING CAPITAL; ESTIMATE.
For the purposes of this Agreement, "CLOSING DATE WORKING CAPITAL"
shall mean, with respect to the Business as of the close of business on
the Closing Date (after giving effect to the Disposition and to all
transactions required by this Agreement to be effected prior to the
Effective Time, including the Pre-Closing Plan Termination contemplated
by Section 5.09 hereof and the payment of all Debt in accordance with
Section 5.13 hereof) the excess of current assets (excluding cash) over
current liabilities (excluding short-term debt and the current portion
of long-term debt), all determined in accordance with GAAP applied on a
basis consistent with the preparation of the Pro Forma Latest Balance
Sheet; PROVIDED, HOWEVER, that, with respect to the calculation of
Closing Date Working Capital (i) any liability related to deferred
compensation shall be treated as a long-term liability in such
calculation and in a manner consistent with the February 26, 2000
balance sheet included in the Company Financial Statements and (ii)
such calculation shall exclude the effect of any reclassification of
any deferred compensation as a current liability on the books and
records of the Company. Buyer and the Company estimate, as of the date
hereof, that the Closing Date Working Capital will exceed the Target
Working Capital by approximately $20.0 million. Accordingly, (i) Buyer
has agreed that, on the Closing Date, it will pay such amount to the
Company Shareholders in accordance with Sections 2.01 and 2.03 hereof
as though such amount were Merger Consideration and (ii) Buyer and the
Company agree that such amount shall be subtracted from the computation
of Closing Date Working Capital for purposes of determining the final
adjustment of the Merger Consideration in this Article IX.
ARTICLE X
ADDITIONAL AGREEMENTS
10.01 MERGER EXPENSES.
Each party to this Agreement shall bear all of its Merger Expenses,
regardless of whether the Merger is consummated. In addition, the
Company Shareholders, and not the Company, shall pay, and shall, in
accordance with and subject to the provisions of Article XI hereof,
indemnify Buyer, for any and all Merger Expenses of the Company
incurred prior to the Effective Time, to the extent not taken into
account in the Closing Balance Sheet pursuant to Article IX hereof. The
term "MERGER EXPENSES" shall mean, with respect to any party hereto,
all fees and expenses relating to the Merger, including the negotiation
of this Agreement, the performance of any obligations under this
Agreement and all ancillary agreements hereto, and the consummation of
the transactions contemplated hereby and thereby (including, without
limitation, the fees and expenses of any attorneys, accountants,
financial advisors (including Houlihan, Lokey, Xxxxxx & Xxxxx Capital,
the financial advisors to the ESOP or Xxxxxxx, Sachs & Co.) or brokers
and finders hired or otherwise engaged by the Company, the ESOP or
Buyer, as applicable).
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10.02 BROKER'S OR FINDER'S FEES.
Each of Buyer and the Company shall indemnify, defend and hold harmless
the other party against the claims or any brokers or finders claiming
by, through or under the indemnifying party.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND THIRD PARTY CLAIMS.
(a) Notwithstanding any investigation made by or on behalf of any
of the parties hereto or the results of any such investigation
and notwithstanding the participation of such party in the
Closing, the representations and warranties contained in
Articles III and IV hereof shall survive the Effective Time
for the following periods (each a "SURVIVAL PERIOD" and,
collectively, the "SURVIVAL PERIODS"): (i) two years from the
Effective Date with respect to the specific representations
and warranties contained in Articles III and IV of this
Agreement, except as otherwise specifically provided herein
and giving effect to supplements to the Disclosure Schedule as
to which Buyer has provided its written consent in accordance
with Section 5.01(f) hereof for events or occurrences arising
after the date hereof, (ii) until six months following the
expiration of the applicable state and federal statutes of
limitations (including any extension periods) applicable to
the representations and warranties set forth in Sections 3.16
(relating to Tax matters) and 3.22 (relating to employee
benefits matters) hereof, (iii) ten years from the Effective
Date with respect to the representations and warranties set
forth in Section 3.27 hereof (relating to environmental
matters) and (iv) indefinitely with respect to the
representations and warranties set forth in Section 3.06
hereof (relating to capital stock); PROVIDED, HOWEVER, in all
instances that, with respect to any specific representation or
warranty under which an Indemnified Party (as defined in
Section 11.03 hereof) shall have delivered a notice of a claim
under Section 11.02(a) or (b) hereof prior to the respective
termination date for the Survival Period of such
representation or warranty as set forth in this Section
11.01(a) and as to which such claim has not been completely
and finally resolved prior to such termination date, such
representation or warranty shall survive for purposes of such
claim for the period of time beyond such termination date
sufficient to resolve, completely and finally, the claim
relating to such representation or warranty.
(b) The indemnification obligations of the Company Shareholders
and Buyer and Merger Sub with respect to Third Party Claims
(other than Third Party Claims relating to capital stock)
shall terminate (i) two years from the Effective Date with
respect to all Third Party Claims, except as otherwise
specifically provided herein, (ii) on the date that is six
months following the expiration of
66
the last remaining state and federal statutes of limitations
(including any extension periods) with respect to Third Party
Claims relating to Tax matters or employee benefits matters
and (iii) on the date that is ten years from the Effective
Date with respect to Third Party Claims relating to
environmental matters; PROVIDED, HOWEVER, in all instances
that, with respect to any Third Party Claim for which an
Indemnified Party shall have delivered a Third Party Claim
Notice (as defined in Section 11.03(a) hereof) to an
Indemnifying Party (as defined in Section 11.03 hereof)
prior to the respective termination date for such Third Party
Claim as set forth in this Section 11.01(b) and as to which
such Third Party Claim has not been completely and finally
resolved prior to such termination date, the related
indemnification obligation for such Third Party Claim shall
survive for the period of time beyond such termination date
sufficient to resolve, completely and finally, the Third Party
Claim.
11.02 INDEMNIFICATION.
(a) Subject to the limitations of Sections 11.01, 11.04(a) and
11.04(b) hereof, the Company Shareholders, jointly and
severally, agree to indemnify in full Buyer and the Surviving
Corporation and their respective officers, directors,
employees, agents and stockholders (collectively, the "BUYER
INDEMNIFIED PARTIES") and hold them harmless against any loss,
liability, penalty, fines, settlement, deficiency, damage,
expense or cost (including reasonable legal expenses)
(collectively, "LOSSES"), which Buyer Indemnified Parties may
suffer, sustain or become subject to, whether or not incurred
or paid prior to the termination date of the applicable
Survival Period, if any, as a result of (i) any
misrepresentation in any of the representations and warranties
of the Company contained in this Agreement or in any exhibits,
schedules or certificates delivered or to be delivered by or
on behalf of the Company pursuant to the terms of this
Agreement or in any other documents described in Article VII
hereof that are to be so delivered (collectively, the "SELLER
RELATED DOCUMENTS") (except for misrepresentations of the
representations and warranties contained in Section 3.05
hereof to the extent such representations and warranties
relate solely to matters covered by Section 5.16 hereof, as to
which no indemnification shall be available hereunder), (ii)
any breach of, or failure to perform, any agreement of the
Company or the Company Shareholders contained in this
Agreement or any of the Seller Related Documents, (iii) any
Third Party Claims (as defined in Section 11.03(a) hereof) or
threatened Third Party Claims against Buyer or the Surviving
Corporation arising out of the actions or inactions of the
Company or the Company Shareholders with respect to the
Company's or any Subsidiary's business (including the Other
Business) or the Real Property prior to the Effective Time,
including without limitation, Third Party Claims for product
liability or product recalls related to the Company's products
sold prior to the Effective Time or the Company's products in
process or in inventory at the Effective Time and acquired by
Buyer as a consequence of the Merger, (iv) any claim or
liability (including any liability for Taxes) arising out of,
67
based upon events or circumstances occurring in connection
with or resulting from (A) the Disposition or (B) the
operation or ownership of the Other Business after the
Effective Time, (v) any Merger Expenses (except to the extent
included in the Closing Date Balance Sheet and taken into
account in the determination of any adjustment to the Merger
Consideration in accordance with Article IX hereof), and any
claim by LaSalle Bank National Association with respect to its
role as trustee and advisor to the ESOP in connection with the
transactions contemplated by this Agreement, including any
claim, including any claim for indemnification, under the
Trustee Agreement between LaSalle Bank National Association
and the Company, (vi) any Pre-Closing Compensation Plan
Termination, (vii) any contact prior to the Effective Time
between (A) water from the production well (designated as
Unique Xxxx Xx, 000000 (OPDCCSTL) located at the Company's
Faribault, Minnesota facilities (the "FARIBAULT WELL") that
has been contaminated, adulterated or otherwise impacted by
any Hazardous Material and (B) any food or food grade
materials or products produced, processed or handled at the
Company's Faribault, Minnesota facilities or any food-contact
surfaces at such facilities, (viii) the operation or use of
the wastewater treatment plant in Xxxxxx, Wisconsin having
WPDES permit no. WI-00704408-7 (the "XXXXXX TREATMENT PLANT")
by any person or entity other than the Company prior to the
Effective Time for any purpose other than a wastewater
treatment facility solely dedicated to treatment of the
Company's turkey processing facility in Barron, Wisconsin and
(ix) any notice delivered by, or determination of, any
governmental agency identified in SCHEDULE 11.02(a)(ix) that
any consent, approval, exemption or authorization with respect
to the permits, licenses, registrations or approvals
identified in such Schedule was required in connection with
the execution of this Agreement or the transactions
contemplated hereby, which notice or determination is made
within two (2) years after the Effective Date. Buyer
Indemnified Parties shall be entitled to recover any Losses
for which the Company Shareholders are obligated to indemnify
under this Article XI, (x) first, from the Escrow Agent, an
amount equal to any Losses any Buyer Indemnified Party may
suffer hereunder pursuant to Section 11.05 hereof and (y)
second, if and to the extent that the Escrow Amount is not
sufficient to cover such Losses, from the Company Shareholders
(other than the ESOP) pursuant to the terms of the
Indemnification Agreement. Notwithstanding anything in this
Agreement or in any Seller Related Document to the contrary,
the Company Shareholders shall have no liability or obligation
to indemnify any Buyer Indemnified Party, under this Article
XI or otherwise, and no Buyer Indemnified Party shall have any
claim against the Company Shareholders, for any Losses
relating to any of the following: (1) the operation by the
Company, the adequacy of existing or future capacity and the
planned facility upgrade of the Xxxxxx Treatment Plant,
specifically including, but not limited to, costs of
construction, design and operation of the Xxxxxx Treatment
Plant, sludge handling or treatment, if required, costs of
lagoon and seepage cell abandonment and groundwater impacts,
monitoring or cleanup, if required; PROVIDED, HOWEVER, that
the Company Shareholders shall be responsible for any
68
Losses relating to the operation of the Xxxxxx Treatment Plant
by any person or entity other than the Company prior to the
Effective Time for any purpose other than a wastewater
treatment facility solely dedicated to treatment of the
Company's turkey processing facility in Barron, Wisconsin,
specifically including, but not limited to, costs of sludge
handling or treatment, lagoon and seepage cell abandonment
and groundwater impacts, monitoring or cleanup to the extent
they relate to the operation of the Xxxxxx Treatment Plant by
any person or entity other than the Company prior to the
Effective Time for any purpose other than a wastewater
treatment facility solely dedicated to treatment of the
Company's turkey processing facility in Barron, Wisconsin; (2)
the operation by the Company, the adequacy of existing or
future capacity, the facility upgrade, if required, and the
industrial wastewater discharge contract and charges
concerning the Company's Faribault, Minnesota wastewater
treatment system PROVIDED, HOWEVER, that the Company
Shareholders shall be responsible for any Losses relating to
the operation of the Company's Faribault, Minnesota wastewater
treatment system by any person or entity other than the
Company prior to the Effective Time; and (3) except as
otherwise provided in Section 11.02(d)(vii) above, the past,
present or future use of the Faribault Well for any and all
purposes.
(b) Subject to the limitations of Sections 11.01 and 11.04(c)
hereof, Buyer and Merger Sub agree to indemnify in full the
Company Shareholders (collectively the "SHAREHOLDER
INDEMNIFIED PARTIES") and hold them harmless against any
Losses which the Shareholder Indemnified Parties may suffer,
sustain or become subject to, prior to the second anniversary
of the Effective Date, as a result of (i) any
misrepresentation of any of the representations and warranties
of Buyer or Merger Sub contained in this Agreement or in any
exhibits, schedules or certificates delivered or to be
delivered by or on behalf of Buyer or Merger Sub pursuant to
the terms of this Agreement or in any other documents
described in Article VII hereof that are to be so delivered
(collectively, the "BUYER RELATED DOCUMENTS") or (ii) any
breach of, or failure to perform, any agreement of Buyer or
Merger Sub contained in this Agreement or any of the Buyer
Related Documents.
(c) Each of the Company Shareholders and the Shareholder
Representative hereby agrees that if, following the Closing,
any payment is made by such Company Shareholder in respect of
any Losses (a "LOSS PAYMENT"), such Company Shareholder shall
have no rights against the Surviving Corporation, or any
director, officer or employee thereof (in their capacity as
such), whether by reason of contribution, indemnification,
subrogation or otherwise, in respect of any such Loss Payment,
and shall not take any action against the Surviving
Corporation or any such person with respect thereto. Any
rights with respect to Loss Payments which any of the Company
Shareholders or the Shareholder Representative may, by
operation or law or otherwise, have against the Surviving
Corporation or any such person shall, effective at the time of
the Closing, be deemed to be hereby expressly and knowingly
waived.
69
11.03 METHOD OF ASSERTING CLAIMS.
As used herein, "INDEMNIFIED PARTY" shall refer either to a Buyer
Indemnified Party or a Shareholder Indemnified Party, as applicable,
and "INDEMNIFYING PARTY" shall refer to the party obligated hereunder
to indemnify such Indemnified Party.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for liability,
costs or expenses of which are Losses (any such third party
action or proceeding being referred to as a "THIRD PARTY
CLAIM"), the Indemnified Party shall give the Indemnifying
Party prompt notice thereof (a "THIRD PARTY CLAIM NOTICE"),
including, in reasonable detail, the identity of the third
party and the nature and amount of the Third Party Claim,
which notice shall be delivered promptly to the Indemnifying
Party. The failure to give such notice shall not affect any
Indemnified Party's ability to seek reimbursement unless such
failure has materially and adversely affected the Indemnifying
Party's ability to defend successfully a Third Party Claim.
The Indemnifying Party shall be entitled to contest and defend
such Third Party Claim; PROVIDED, that the Indemnifying Party
diligently contests and defends such Third Party Claim. Notice
of the intention so to contest and defend shall be given by
the Indemnifying Party to the Indemnified Party within 20
business days after the Indemnified Party's Third Party Claim
Notice (but, in all events, at least five business days prior
to the date that an answer to such Third Party Claim is due to
be filed). Such contest and defense shall be conducted by
reputable attorneys employed by the Indemnifying Party. The
Indemnified Party shall be entitled at any time, at its own
cost and expense (which expense shall not constitute a Loss
unless the Indemnified Party reasonably determines that the
Indemnifying Party is not adequately representing or, because
of a conflict of interest, may not adequately represent, any
interests of the Indemnified Parties, and only to the extent
that such expenses are reasonable), to participate in such
contest and defense and to be represented by attorneys of its
or their own choosing. If the Indemnified Party elects to
participate in such defense, the Indemnified Party will
cooperate with the Indemnifying Party in the conduct of such
defense. Neither the Indemnified Party nor the Indemnifying
Party may concede, settle or compromise any Third Party Claim
without the consent of the other party, which consent will not
be unreasonably withheld; provided that, if a Third Party
Claim seeks monetary damages as its sole relief, the
Indemnifying Party will be responsible for payment of 100% of
the final damage amount, and the concession, settlement or
compromise includes a complete release of the Indemnified
Parties with respect to the manners underlying such Third
Party Claim, then the Indemnifying Party may concede, settle
or compromise such Third Party Claim without the consent of
the Indemnified Party. Notwithstanding the foregoing, (i) if a
Third Party Claim seeks equitable relief or (ii) if the
subject matter of a Third Party Claim relates to the ongoing
business of any of the Indemnified Parties, which Third Party
70
Claim, if decided against any of the Indemnified Parties,
would materially adversely affect the ongoing business or
reputation of any of the Indemnified Parties, then, in each
such case, the Indemnified Parties alone shall be entitled to
contest, defend and settle such Third Party Claim in the first
instance and, if the Indemnified Parties do not contest,
defend or settle such Third Party Claim, the Indemnifying
Party shall then have the right to contest and defend (but not
settle) such Third Party Claim.
(b) In the event any Indemnified Party should have a claim against
the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a notice of such
claim with reasonable promptness to the Indemnifying Party,
which notice shall set forth in reasonable detail the
identity, nature and amount of Losses related to such claim.
If the Indemnifying Party notifies the Indemnified Party that
the Indemnifying Party does not dispute the claim described in
such notice or fails to notify the Indemnified Party within 20
days after delivery of such notice by the Indemnified Party
whether the Indemnifying Party disputes the claim described in
such notice, the Loss in the amount specified in the notice
will be conclusively deemed a liability of the Indemnifying
Party and the Indemnifying Party shall pay the amount of such
Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability with respect to such
claim, the Shareholder Representative, the trustee of the ESOP
(to the extent such liability is capable of being satisfied
from the Escrow Amount) and the Chief Financial Officer of
Buyer will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through such negotiations
within 60 days after the delivery of the Indemnifying Party's
notice, such dispute shall be resolved fully and finally in
Minneapolis, Minnesota by an arbitrator selected pursuant to,
and an arbitration governed by, the Commercial Arbitration
Rules of the American Arbitration Association. The arbitrator
shall resolve the dispute within 30 days after selection and
judgment upon the award rendered by such arbitrator may be
entered in any court of competent jurisdiction. The party
whose position in the dispute (at the time the dispute was
submitted to arbitration) is furthest from the resolution of
the dispute rendered by the arbitrator shall pay all costs and
expenses of the other party in connection with the arbitration
and the costs and the costs and expenses of the arbitrator.
(c) The Surviving Corporation shall not be deemed to have notice
of any claim or of any breach by the Company of any
representation, warranty, covenant or agreement under this
Agreement by virtue of knowledge acquired on or prior to the
date of the Closing by an employee of the Company or any
Subsidiary.
(d) Any notice required to be delivered to the Company
Shareholders pursuant to this Article XI shall be deemed to
have been duly delivered to the Company Shareholders if
delivered to the Shareholder Representative and (to the extent
71
such liability is capable of being satisfied from the Escrow
Amount) the trustee for the ESOP.
(e) Notwithstanding anything in this Agreement to the contrary
(except as otherwise provided in Section 11.06 hereof), the
ESOP shall not be obligated to pay any amounts pursuant to
this Article XI in excess of the amounts held in the Escrow
Account (as defined in the Escrow Agreement).
11.04 LIMITATIONS ON INDEMNITY.
(a) The Company Shareholders shall be liable for claims under
Sections 11.02(a)(i) and 11.02(a)(iii) hereof only if the
aggregate amount of all Losses for claims under Sections
11.02(a)(i) and 11.02(a)(iii) hereof exceeds $750,000 (the
"BASKET AMOUNT"). The Basket Amount shall not apply to claims
other than claims under Sections 11.02(a)(i) and 11.02(a)(iii)
hereof. In the event that Losses for claims under Sections
11.02(a)(i) and 11.02(a)(iii) hereof exceed the Basket Amount
or in the event of Losses for claims other than claims under
Sections 11.02(a)(i) and 11.02(a)(iii) hereof, the Company
Shareholders shall be obligated, jointly and severally, with
each other to indemnify Buyer Indemnified Parties for the
entire amount of all such Losses without deduction up to the
total of the Cap Amount in effect at the time that a notice of
a claim for Losses is made; PROVIDED, HOWEVER, that the joint
and several obligation of the ESOP with the other Company
Shareholders shall be limited to the Escrow Amount (except as
otherwise provided in Section 11.06 hereof). The "CAP AMOUNT"
shall be equal to:
(i) for the period from the Effective Date through the
date that is six (6) months after the Effective Date
(the "INITIAL CAP PERIOD"), $100 million,
(ii) for the six-month period commencing upon expiration
of the Initial Cap Period and ending on the date that
is six (6) months after such expiration (the "SECOND
CAP PERIOD"), an amount equal to $66 million less (x)
the aggregate amount of Losses in excess of $34
million for which the Company Shareholders were
obligated to indemnify the Buyer Indemnified Parties
for claims subject to the Cap Amount made during the
Initial Cap Period plus (y) the aggregate amount of
(I) all claims subject to the Cap Amount for Losses
up to $34 million pending upon expiration of the
Initial Cap Period less (II) the aggregate amount of
Losses for which the Company Shareholders were
obligated to indemnify the Buyer Indemnified Parties
for claims subject to the Cap Amount made during the
Initial Cap Period, and
(iii) after expiration of the Second Cap Period, an amount
equal to $33.75 million less (x) the aggregate amount
of Losses in excess of $66.25 million for which the
Company Shareholders were obligated to
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indemnify the Buyer Indemnified Parties for claims
subject to the Cap Amount made during the Initial
Cap Period and the Second Cap Period plus (y) the
aggregate amount of (I) all claims subject to the Cap
Amount for Losses up to $66.25 million pending upon
expiration of the Second Cap Period less (II) the
aggregate amount of Losses for which the Company
Shareholders were obligated to indemnify the Buyer
Indemnified Parties for claims subject to the Cap
Amount made during the Initial Cap Period or the
Second Cap Period.
Except as otherwise set forth in the next two sentences, the
Cap Amount shall be the maximum aggregate liability of the
Company Shareholders to the Buyer Indemnified Parties under
Section 11.02(a) hereof; PROVIDED, HOWEVER, that,
notwithstanding anything to the contrary provided in this
Agreement, the maximum aggregate liability of the ESOP to the
Buyer Indemnified Parties under this Agreement shall not
exceed the Escrow Amount and such liability shall be satisfied
only from funds held in the Escrow Account (as defined in the
Escrow Agreement (and neither the Shareholder Representative
nor the Company Shareholders shall in any event have any right
to contribution or otherwise against the ESOP). The
limitations on the indemnity obligations of the Company
Shareholders set forth in this Section 11.04(a) shall not
apply to (i) claims for indemnification under Section
11.02(a)(i) hereof for breaches of the representations set
forth in Sections 3.01 (Incorporation and Corporate Power),
3.02 (Execution, Delivery, Valid and Binding Agreement), 3.03
(Approval of the Merger Agreement, Meeting of Shareholders),
3.06 (Capital Stock) and 3.16 (Tax Matters) hereof, (ii)
claims for indemnification under Sections 11.02(a)(iv),
11.02(a)(v), 11.02(a)(vi), 11.02(a)(vii), 11.02(a)(viii) or
11.02(a)(ix) hereof or (iii) claims for indemnification based
upon allegations of fraud or other intentional breach of an
obligation of or with respect to the other parties in
connection with this Agreement. The maximum aggregate
liability of the Company Shareholders to Buyer in connection
with complying with the covenants contained in Section 5.14(d)
hereof, except for the Company Shareholders' obligations in
respect of collateral damage thereunder, shall not exceed $2.0
million, not including the costs of conducting Phase I or
Phase II assessments which shall be an expense of Buyer.
(b) The Company Shareholders shall be entitled to offset against
their indemnification obligations under Section 11.02 hereof
for any Loss the amount of any reserve that was established in
the Closing Balance Sheet specifically for claims giving rise
to such Loss. This right of offset may be exercised by the
Company Shareholders in their sole discretion by delivering a
notice to Buyer thereof and following Buyer's and the
Shareholder Representative's (i) acknowledgment that such a
reserve applies to such Loss and (ii) agreement upon the
amount of such reserve available for such purpose.
(c) Buyer and Merger Sub shall be liable for claims under Section
11.02(b)(i) hereof only if the aggregate amount of all Losses
for claims under Section
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11.02(b)(i) hereof exceeds the Basket Amount. The Basket
Amount shall not apply to claims against Buyer or Merger Sub
other than claims under Section 11.02(b)(i) hereof. In the
event that Losses for claims under Section 11.02(b)(i) hereof
exceed the Basket Amount or in the event of Losses for claims
other than claims under Section 11.02(b)(i) hereof, Buyer and
Merger Sub shall be obligated, jointly and severally, to
indemnify the Shareholder Indemnified Parties for the entire
amount of all such Losses without deduction up to a total of
the Cap Amount in effect at the time the Claim for Losses is
made. Except as otherwise set forth in the next sentence, the
Cap Amount shall be the maximum aggregate liability of Buyer
and Merger Sub to the Shareholder Indemnified Parties under
Section 11.02(b) hereof. The limitations on the indemnity
obligations of Buyer and Merger Sub set forth in this
Section 11.04(c) shall not apply to (i) claims for
indemnification under Section 11.02(b)(i) hereof for breaches
of the representations set forth in Sections 4.01
(Incorporation and Corporate Power) and 4.02 (Execution,
Delivery, Valid and Binding Agreement) hereof or (ii) claims
for indemnification based upon allegations of fraud or other
intentional breach of an obligation of or with respect to the
other parties in connection with this Agreement.
(d) In computing the amount of indemnifiable Losses, there shall
be deducted therefrom an amount equal to the amount of
insurance proceeds, if any, which an Indemnified Party or any
of its affiliates actually receives as a consequence of any
loss, claim, damage, liability, cost, expense or deficiency
giving rise to such Losses.
(e) In computing the amount of indemnifiable Losses, there shall
be (i) deducted therefrom an amount equal to the amount of any
Tax benefit actually realized by the Indemnified Party
attributable to the loss, claim, damage, liability, cost,
expense or deficiency giving rise to such Losses and (ii)
added thereto an amount equal to any increased tax liability
of the Indemnified Party as a result of inclusion in income of
any part of payments made in respect of such Losses. If and to
the extent an Indemnified Party has not actually realized such
Tax benefit at the time the Indemnifying Party makes an
indemnity payment, the Indemnified Party shall make a payment
(or, as appropriate, payments) at such time as it actually
realizes such Tax benefits. For purposes of determining the
amount of any Tax benefit or detriment pursuant to this
Section 11.04(e) hereof, the marginal combined federal and
state income tax rate of the Indemnified Party shall be deemed
to be forty percent (40%).
11.05 ESCROW AMOUNT.
(a) The Post-Closing Adjustment Escrow Amount shall be held by the
Escrow Agent in the Escrow Account pursuant to the terms of
the Escrow Agreement from the Effective Date until the final
resolution of any adjustment to the Merger Consideration is
determined under Section 9.03 hereof and shall be
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released by the Escrow Agent in accordance with Section 9.03
hereof and the terms of the Escrow Agreement.
(b) The Environmental Remediation Escrow Amount shall be held by
the Escrow Agent in the Escrow Account pursuant to the terms
of the Escrow Agreement from the Effective Date until the
expiration of the Environmental Remediation Escrow Period (as
defined in the Escrow Agreement) and shall be released by the
Escrow Agent in accordance with the terms of the Escrow
Agreement.
(c) The Indemnification Escrow Amount shall be held by the Escrow
Agent in the Escrow Account pursuant to the terms of the
Escrow Agreement from the Effective Date until two years after
the Effective Date (the "INDEMNIFICATION ESCROW PERIOD").
During the Indemnification Escrow Period, if any Buyer
Indemnified Party suffers Losses subject to indemnification
pursuant to Section 11.02(a) hereof, it shall be entitled to
recover from the Indemnification Escrow Amount an amount equal
to the amount of the Loss pursuant to the terms of the Escrow
Agreement.
(d) At the end of the Indemnification Escrow Period, the Escrow
Agent shall promptly deliver to the Shareholder Representative
and the ESOP cash (the "RETURNED CASH") in amount equal to the
then current balance of Indemnification Escrow Amount (subject
to the prior reduction of the Indemnification Escrow Amount
through the release of funds in the Escrow Fund in
satisfaction of any Loss for which Buyer Indemnified Parties
were entitled to indemnification pursuant to Section 11.02(a)
hereof) less the aggregate value of all pending claims for
indemnification under this Article XI made by Buyer, if any,
for which notice has been timely filed by any Buyer
Indemnified Party, and the Shareholder Representative shall in
turn promptly deliver such cash to the Company Shareholders
(other than the ESOP) pursuant to the terms of this Agreement.
The Returned Cash shall be apportioned between the Shareholder
Representative and the ESOP as follows: (i) to the Shareholder
Representative, a percentage of such Returned Cash equal to
the Non-ESOP Shareholders Percentage and (ii) to the ESOP, a
percentage of such Returned Cash equal to the ESOP
Shareholders Percentage. At the time that the Escrow Agent
delivers the Returned Cash to the Shareholder Representative
and the ESOP, the Escrow Agent shall deliver a notice to
Buyer, the Shareholder Representative and the ESOP setting
forth the amount of Returned Cash, the aggregate value of all
pending claims for indemnification under this Article XI, if
any, for which notice has been timely filed by any Buyer
Indemnified Party, and the amount of the Indemnification
Escrow Amount that will remain in escrow pursuant to the
Escrow Agreement pending resolution of any such claims (the
"RETAINED CASH").
(e) Within ten (10) business days after the date on which a claim
for indemnification of a Loss against Retained Cash has been
completely and finally resolved in accordance with this
Agreement, the Escrow Agent shall
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deliver to the Shareholder Representative and the ESOP the
Retained Cash less an amount of cash equal to the aggregate
amount recovered by Buyer in connection with the final
resolution of its claims against the Retained Cash.
(f) Prior to release from the Escrow Account, all income
earned on the Escrow Amount shall be taxable to Buyer as the
owner thereof and shall be credited to the Escrow Account. On
a quarterly basis, in accordance with the Escrow Agreement,
the Escrow Agent shall disburse forty percent (40%) of the
accumulated income in the Escrow Account, including investment
income thereon, to Buyer and the remainder of any accumulated
income shall remain in the Escrow Account until released in
accordance with this Agreement and the Escrow Agreement.
11.06 EXCLUSIVITY.
After the Closing, the rights set forth in this Article XI shall be
each party's sole and exclusive remedies against the other parties
hereto for misrepresentations or breaches of covenants contained in
this Agreement and the Related Documents. Notwithstanding the
foregoing, nothing herein shall prevent any of the parties hereto from
bringing an action based upon allegations of fraud or other intentional
breach of an obligation of or with respect to the other parties in
connection with this Agreement and the Related Documents. In the event
such action is brought, the prevailing party's attorneys' fees and
costs shall be paid by the nonprevailing party.
11.07 MERGER CONSIDERATION ADJUSTMENT.
Any indemnification payable under this Article XI shall be, to the
extent permitted by law, an adjustment to the Merger Consideration.
Buyer shall not be entitled to recover Losses with respect to any
matter (including any breach of this Agreement by the Company
Shareholders) relating to the Closing Date Working Capital to the
extent such matter was expressly included in the Closing Date Balance
Sheet and the calculation of Closing Date Working Capital and factored
into the determination of any adjustment to the Merger Consideration
pursuant to Article IX hereof.
11.08 INSURANCE.
The Company Shareholders shall maintain in full force and effect during
the Indemnification Escrow Period, the insurance policies supporting
the Company Shareholders' indemnification obligations with respect to
the representations and warranties contained in Article III of this
Agreement in the form delivered to Buyer on the Closing Date.
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ARTICLE XII
THE SHAREHOLDER REPRESENTATIVE AND ESOP TRUSTEE
12.01 APPOINTMENT.
As used in this Agreement, the "SHAREHOLDER REPRESENTATIVE" shall mean
Xxxxxx X. Xxxxxx, or any person appointed as a successor Shareholders'
Representative pursuant to Section 12.02 hereof.
12.02 ELECTION AND REPLACEMENT.
During the period ending upon the date when all obligations under this
Agreement have been discharged (including all indemnification
obligations under Article XI and the Indemnification Agreement), the
Company Shareholders, other than the ESOP, who, immediately prior to
the Effective Time, held Company Common Stock representing an aggregate
number of shares of Company Common Stock which exceeded 50% of the
amount of such Company Common Stock outstanding immediately prior to
the Effective Time (a "MAJORITY"), may, from time to time upon written
notice to the Shareholder Representative and Buyer, remove the
Shareholder Representative or appoint a new Shareholder Representative
to fill any vacancy created by the death, incapacitation, resignation
or removal of the Shareholder Representative. Furthermore, if the
Shareholder Representative dies, becomes incapacitated, resigns or is
removed by a Majority, the Majority shall appoint a successor
Shareholder Representative to fill the vacancy so created. If the
Majority is required to but has not appointed a successor Shareholder
Representative within 15 business days from a request by Buyer to
appoint a successor Shareholder Representative, Buyer shall have the
right to appoint a Shareholder Representative to fill any vacancy so
created, and shall advise all those who were holders of Company Common
Stock, other than the ESOP, immediately prior to the Effective Time of
such appointment by written notice. A copy of any appointment by the
Majority of any successor Shareholder Representative shall be provided
to Buyer promptly after it shall have been effected.
12.03 AUTHORITY.
The Shareholder Representative shall be authorized to take any action
and to make and deliver any certificate, notice, consent or instrument
required or permitted to be made or delivered under this Agreement or
under the documents referred to in this Agreement (an "INSTRUMENT")
which the Shareholder Representative determines in his discretion to be
necessary, appropriate or desirable, and, in connection therewith, to
hire or retain, at the sole expense of the Company Shareholders, other
than the ESOP, such counsel, investment bankers, accountants,
representatives and other professional advisors as he determines in his
sole and absolute discretion to be necessary, advisable or appropriate
in order to carry out and perform his rights and obligations hereunder.
Any party receiving an Instrument from the Shareholder Representative
shall have the
77
right to rely in good faith upon such certification, and
to act in accordance with the Instrument without independent
investigation.
12.04 NO LIABILITY OF BUYER.
(a) Buyer (and the Surviving Corporation) shall have no liability
to any Company Shareholder, other than the ESOP, or otherwise
arising out of the acts or omissions of the Shareholder
Representative or any disputes among the Company Shareholders
or with the Shareholder Representative. Buyer shall have no
direct liability to the Company Shareholders, other than the
ESOP, under this Agreement or the other agreements referred to
herein and may rely entirely on its dealings with, and notices
to and from, the Shareholder Representative to satisfy any
obligations it might have under this Agreement, any agreement
referred to herein or otherwise to the Company Shareholders,
other than the ESOP.
(b) Buyer (and the Surviving Corporation) shall have no liability
to any beneficiary of the ESOP, or otherwise arising out of
the acts or omissions of the trustee of the ESOP or any
disputes among such beneficiaries or with the trustee of the
ESOP. Buyer shall have no direct liability to any beneficiary
of the ESOP, under this Agreement or the other agreements
referred to herein and may rely entirely on its dealings with,
and notices to and from, the trustee of the ESOP to satisfy
any obligations it might have under this Agreement, any
agreement referred to herein or otherwise to the ESOP.
ARTICLE XIII
CERTAIN TAX MATTERS
The following provisions shall govern the allocation of responsibility
as between Buyer and the Company Shareholders for certain Tax matters.
13.01 TAX PERIODS ENDING ON OR BEFORE OR INCLUDING THE EFFECTIVE DATE.
Buyer shall prepare and file (or cause to be prepared and filed) at its
own expense, on or prior to the due date, all Tax Returns for the
Company and the Included Subsidiaries for all Tax periods ending on or
prior to or including the Effective Date where the due date for such
Tax Returns falls after the Effective Date (all Tax Returns described
in this Section 13.01 and any schedules to be included therewith shall
be prepared on a basis consistent with those of the Company prepared
for prior Tax periods); PROVIDED, HOWEVER, that neither Buyer nor the
Company shall file any such Tax Returns, or other returns, elections,
claims for refund or information statements with respect to any
liabilities for Taxes for any Tax period, or consent to any adjustment
or otherwise compromise or settle any matters with respect to Taxes,
without the prior approval of the Shareholder Representative, which
approval shall not be unreasonably withheld and, in addition to any
applicable requirements set forth in
78
Section 11.03 hereof or herein, Buyer shall provide the Shareholder
Representative with prompt notice of any inquiry, audit, or proceeding
with respect to any Tax period or portion thereof ending on, prior to,
or including the Closing Date and provide the Shareholder
Representative with the right to participate with respect thereto.
Buyer shall provide (or cause to be provided) the Shareholder
Representative with a copy of appropriate workpapers, schedules,
drafts and final copies of each such Tax Return of the Company or
Included Subsidiary at least ten days before filing such return and
shall reasonably cooperate with any request by the Shareholder
Representative in connection therewith.
13.02 REFUNDS AND TAX BENEFITS.
Any Tax refunds that are received by Buyer or the Company and the
Included Subsidiaries, and any amounts credited against Tax to which
Buyer or the Company and the Included Subsidiaries become entitled,
that relate to Tax periods or portions thereof ending on or before or
including the Effective Date shall be for the account of the Company
Shareholders, and Buyer shall pay to the Shareholder Representative any
such refund or the amount of any such credit with fifteen (15) days
after receipt or entitlement thereto.
13.03 CERTAIN BUYER COVENANTS.
Without the prior written consent of the Shareholder Representative
(which consent shall not be unreasonably withheld), neither Buyer, the
Company, the Included Subsidiaries nor any affiliate of Buyer shall (i)
make any election or (ii) file any amended Tax Return with any Tax
authority with respect to any Tax period ending on, before or including
the Effective Date that would have the effect of creating or increasing
any indemnification obligations of the Company Shareholders under
Section 11.02(a) hereof or under the Indemnification Agreement. Buyer
shall not make an election under Section 338 of the Code with respect
to the Company.
13.04 COOPERATION ON TAX MATTERS.
Buyer, the Company and the Subsidiaries and the Shareholder
Representative shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Article XIII and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on
a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Company and the
Subsidiaries agree (i) to retain all books and records with respect to
Tax matters pertinent to the Company and the Subsidiaries relating to
any Tax period beginning before the Effective Date until the expiration
of the applicable statute of limitations (and, to the extent notified
by Buyer or the Shareholder Representative, any extensions thereof) of
the respective Tax periods, and to abide by all record
79
retention agreements entered into with any Taxing authority, and
(ii) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and,
if the other party so requests, the Company and the Subsidiaries or
the Shareholder Representative, as the case may be, shall allow the
other party to take possession of such books and records.
13.05 ALLOCATION OF TAXES.
For purposes of this Agreement, in determining, in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax
period that includes (but does not end on) the Effective Date, the
portion of such Tax which relates to the portion of such Tax period
ending on the Effective Date shall (a) in the case of any Taxes other
than Taxes based upon or related to income or receipts, be deemed to be
the amount of such Tax for the entire Tax period multiplied by a
fraction the numerator of which is the number of days in the Tax period
ending on the Effective Date and the denominator of which is the number
of days in the entire Tax period and (b) in the case of any Tax based
upon or related to income or receipts be deemed equal to the amount
which would be payable if the relevant Tax period ended on the
Effective Date. Any credits relating to a Tax period that begins before
and ends after the Effective Date shall be taken into account as though
the relevant Tax period ended on the Effective Date. All determinations
necessary to give effect to the foregoing allocations shall be made in
a manner consistent with prior practice of the Company and the Included
Subsidiaries.
ARTICLE XIV
MISCELLANEOUS
14.01 PRESS RELEASES AND ANNOUNCEMENTS.
Prior to the Effective Time, no party hereto shall issue any press
release (or make any other public announcement) related to this
Agreement or the transactions contemplated hereby or make any
announcement to the employees, customers or suppliers of the Company or
any Subsidiary without prior written approval of the other party hereto
(such approval not to be unreasonably withheld or delayed), except that
Buyer may issue any such release (or other announcement) as it
determines, in its sole discretion, may be required to comply with the
requirements of this Agreement, applicable law or by obligations
pursuant to any listing agreement with any national securities
exchange. If Buyer determines that any such press release or public
announcement is so required, Buyer shall use reasonable efforts to
provide notice to, and to consult in good faith with, the Company (but
shall not be required to obtain the consent of the Company) prior to
issuing such press release or making such announcement.
80
14.02 FURTHER ASSURANCES.
The Company Shareholders agree that, on and after the Effective Date,
they will take all appropriate action and execute any documents,
instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions hereof.
14.03 AMENDMENT AND WAIVER.
This Agreement may not be amended or waived except in a writing
executed by the party against which such amendment or waiver is sought
to be enforced; PROVIDED, HOWEVER, that after the approval of the
Articles of Merger by the Company Shareholders, no amendment may be
made which reduces the Merger Consideration or which effects any
changes which would materially adversely affect the Company
Shareholders without the further approval of the Company Shareholders.
No course of dealing between or among any persons having any interest
in this Agreement will be deemed effective to modify or amend any part
of this Agreement or any rights or obligations of any person under or
by reason of this Agreement.
14.04 NOTICES.
All notices, demands and other communications to be given or delivered
under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered
or three days after being mailed, if mailed by first class mail, return
receipt requested, or when receipt is acknowledged, if sent by
facsimile, telecopy or other electronic transmission device. Notices,
demands and communications to Buyer, Merger Sub or the Company will,
unless another address is specified in writing, be sent to the address
indicated below:
NOTICES TO BUYER OR MERGER SUB:
Hormel Foods Corporation
Xxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Chief Financial Officer and General Counsel
Facsimile No.: (000) 000-0000
WITH A COPY TO:
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
81
NOTICES TO THE SHAREHOLDER REPRESENTATIVE:
Xxxxxx X. Xxxxxx
1396 00 0/0 Xxxxxx
Xxxxxx, XX 00000
WITH A COPY TO:
Xxxxxxx Xxxx & Xxxxxxxxx LLP
Xxx Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
NOTICES TO THE ESOP:
LaSalle Bank N.A.
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: E. Xxxxxx Xxxxx
Facsimile No.: (000) 000-0000
WITH A COPY TO:
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xx.
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
14.05 ASSIGNMENT.
This Agreement and all of the provisions hereof will be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be
assigned by any party hereto without the prior written consent of the
other parties hereto.
14.06 SEVERABILITY.
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but
if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only
to the extent of such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining provisions of this
Agreement.
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14.07 COMPLETE AGREEMENT.
This Agreement, the Articles of Merger, the Disclosure Schedule and the
exhibits and the other documents referred to herein contain the
complete agreement among the parties and supersede, except for the
Confidentiality Agreement (as set forth in Section 5.09 hereof), any
prior understandings, agreements or representations by or between the
parties, written or oral, which may have related to the subject matter
hereof in any way.
14.08 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, any one of
which need not contain the signatures of more than one party, but all
such counterparts taken together will constitute one and the same
instrument.
14.09 GOVERNING LAW.
Except to the extent that the Wisconsin Statutes applied to the terms
and conditions of the Merger, the internal law, without regard for
conflicts of laws principles, of the State of Minnesota will govern all
questions concerning the construction, validity and interpretation of
this Agreement and the performance of the obligations imposed by this
Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.
SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
HORMEL FOODS CORPORATION
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chairman of the Board,
Chief Executive Officer and President
BADGER ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. XxXxx
------------------------------------------
Name: Xxxxxxx X. XxXxx
Title: President
XXXXXX FOODS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman and CEO
SHAREHOLDER REPRESENTATIVE
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxx
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