1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
INTRODUCTION
This STOCK PURCHASE AGREEMENT is dated as of March 17, 1996. The
parties are Xxxxxx Xxxxxxxx, Xx. (the "SHAREHOLDER"), being the sole owner of
all of the issued and outstanding shares of capital stock of Health Valley
Foods, Inc. and Health Valley Manufacturing Company (severally the "COMPANY"
and jointly the "COMPANIES"), and Health Valley Company (the "BUYER"). The
Companies are California corporations and the Buyer is a Delaware corporation.
BACKGROUND
The Shareholder owns all of the issued and outstanding shares of capital
stock of the Companies (the "STOCKS"). The Buyer desires to purchase from the
Shareholder, and the Shareholder desires to sell to the Buyer, all of the
Stocks in exchange for the consideration set forth herein in accordance with
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
TERMS AND CONDITIONS
1. Definitions. For convenience and brevity, in addition to terms
elsewhere defined herein, certain terms used in various parts of this Agreement
are listed in alphabetical order and defined or referred to below (such terms
to be equally applicable to both singular and plural forms of the terms
defined).
"ACQUISITION" means the acquisition of all of the Stocks by the Buyer
and all related transactions provided for in or contemplated by this
Agreement, the Ancillary Documents or any Exhibit hereto.
"AGREEMENT" means this Stock Purchase Agreement.
"ANCILLARY DOCUMENTS" means the Escrow Agreement, the Option Agreement,
the License Agreement, the State Tax Escrow Agreement, the Shareholder
Noncompetition Agreement and the Roof Repair Escrow Agreement.
"ASSETS" means all of either of the Companies' assets, properties,
business, goodwill and rights of every kind and description, real,
personal and mixed, tangible and intangible, wherever situated and
whether or not reflected on the Latest Year-End Balance Sheet including,
without limitation, rights to existing books and refunds of federal and
state
1
2
taxes of the Companies shown on the Latest Year-End Balance Sheet as a
negative liability - federal and state income taxes payable (the "KNOWN
REFUND").
"AUDITED FINANCIAL STATEMENTS" means the audited consolidated balance
sheet of the Companies as of December 31, 1995, and the related audited
consolidated statements of income, retained earnings and cash flow for
the year then ended, and the notes thereto, accompanied by an opinion of
Coopers & Xxxxxxx that, in its opinion, such balance sheet and
statements of income, retained earnings and cash flow reflect the
consolidated financial condition of the Companies in accordance with
GAAP, as of such date, and the results of operations and cash flow for
the period then ended in accordance with GAAP, which opinion shall be
unqualified except possibly as to the impairment of certain assets
classified as construction-in-process on the Latest Year-End Balance
Sheet and the going concern of the Companies.
"BUSINESS" means the existing and prospective business, operations,
facilities and other Assets, financial condition, results of operations,
finances, markets, products, competitive position, raw materials and
other supplies, customers and customer relations and personnel and
personnel relations of either of the Companies.
"BUSINESS DAY" means any calendar day which is not a Saturday, Sunday or
public holiday on which banks are closed under the laws of California.
"BUYER" means Health Valley Company, a Delaware corporation.
"BUYER'S SPECIAL DAMAGES" means Buyer's Damages resulting from, relating
to or arising out of:
(a) any breach of, or inaccuracy in, the Tax Representation,
the Capitalization Representation or the Environmental
Representations;
(b) any claim with respect to any of the matters set forth in
Section 8.1(B)(1), (3), (4), (5), (6) or (7);
(c) any intentional or knowing breach or violation by the
Shareholder of any covenant or agreement contained in
Section 6 of this Agreement;
(d) any breach of Section 3.2 hereof; and
(e) any claim arising out of the fraudulent actions or
fraudulent misconduct of the Shareholder, personally, or
by the Companies, but only to the extent personally
directed by the Shareholder.
"BUYER'S REGULAR DAMAGES" means any Buyer's Damages, other than Buyer's
Special Damages.
2
3
"CLAIM NOTICE" is defined in Section 8.2(A).
"CLOSING" and "CLOSING DATE" are defined in Section 3.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" means Health Valley Foods, Inc. and Health Valley
Manufacturing Company, each of which is a California corporation.
"CONTRACT" means any written or oral contract, agreement, lease, plan,
instrument or other document, commitment, arrangement, undertaking,
practice or authorization that is or may be binding on any person or its
property under applicable law.
"COPYRIGHTS" means registered copyrights, copyright applications and
unregistered copyrights.
"COURT ORDER" means any judgment, decree, injunction, order, ruling or
similar action of any federal, state or local court or governmental or
regulatory body or authority that is binding on any person or its
property under applicable law.
"DEFAULT" means (i) a breach of or default under any Contract, (ii) the
occurrence of an event that with the passage of time or the giving of
notice or both would constitute a breach of or default under any
Contract, or (iii) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a
right of termination, renegotiation or acceleration under any Contract.
"EMPLOYEE BENEFIT PLANS" means "employee benefit plans" as defined in
section 3(3) of ERISA and any other plan, policy, program, practice or
arrangement providing compensation or other benefits to any current or
former officer or employee of either of the Companies, or any dependent
or beneficiary thereof, which are now or have been maintained by either
of the Companies, or any affiliate or under which either of the
Companies or any affiliate has any obligation or liability, whether
actual or contingent, including, without limitation, all incentive,
bonus, deferred compensation, vacation, holiday, medical disability,
share purchase or other similar plans, policies, programs, practices or
arrangements.
"ENVIRONMENTAL LAWS" means all Regulations relating to environmental
safety, or health matters, including but not limited to, those relating
to the release or threatened release of Hazardous Substances and the
generation, use, storage, transportation, or disposal of Hazardous
Substances in any manner applicable to either of the Companies or the
Assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
3
4
"ESCROW AGENT" means a bank or financial institution, mutually selected
by the Buyer and the Shareholder, to serve as the escrow agent under the
Escrow Agreement and the State Escrow Agreement.
"ESCROW AGREEMENT" means an escrow agreement among the Shareholder, the
Buyer and the Escrow Agent substantially in the form of EXHIBIT A.
"ESCROW AMOUNT" means an amount equal to 10% of the difference between
(a) $32,000,000 and (b) the sum of (i) the Funded Indebtedness as of the
Closing Date, less $664,964, and (ii) the Transaction Costs through the
Closing.
"ESCROW FUND" means the Escrow Amount in cash which is deposited with,
and held and disbursed by, the Escrow Agent in accordance with this
Agreement and the Escrow Agreement together with the investment income
thereon.
"FUNDED INDEBTEDNESS" means all liabilities and obligations of the
Companies, or either of them, outstanding as of December 31, 1995 or
arising at any time thereafter but prior to the Closing Date, under
those certain agreements relating to (i) indebtedness for borrowed
money, (ii) capitalized leases and (iii) the "Capital lease equivalents"
listed on EXHIBIT B hereto (the "FUNDED INDEBTEDNESS EXHIBIT") and all
liabilities and obligations of the Companies, or either of them, for
other indebtedness for borrowed money.
"GAAP" means generally accepted accounting principles consistently
applied.
"HAZARDOUS SUBSTANCES" means (a) any chemical, material or substance
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "medical waste," "toxic pollutants,"
"contaminants," "pollutants," "toxic substances," or words of similar
import under any applicable Environmental Law, (b) any oil, petroleum,
petroleum product or petroleum derived substance, any flammable
substances or explosives, or any radioactive materials, (c) asbestos and
asbestos-containing materials in any form which is or could become
friable, (d) radon gas, urea, formaldehyde, foam insulation, dielectric
fluid, and polychlorinated bipbenyls, and (e) any other chemical,
material or substance which is prohibited, limited, or regulated by any
governmental authority.
"INTELLECTUAL PROPERTY" means Copyrights, Patents, Trademarks,
technology rights and licenses, computer software (including, without
limitation, any source or object codes therefor or documentation
relating thereto), trade secrets, franchises, know-how, inventions and
other intellectual property rights.
"IRS" means the Internal Revenue Service.
"LATEST YEAR-END BALANCE SHEET" and "LATEST YEAR-END BALANCE SHEET DATE"
are defined in Section 4.7.
4
5
"LATEST YEAR-END FINANCIAL STATEMENTS" has the meaning ascribed to it in
Section 4.7 hereof.
"LIABILITY" means any direct or indirect liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of or by
any person (other than endorsements of notes, bills and checks presented
to banks for collection or deposit in the ordinary course of business)
of any type whether accrued, absolute, contingent, matured, unmatured or
other.
"LICENSES" means licenses, franchises, permits, easements, rights and
other authorizations.
"LIEN" means any mortgage, lien, security interest, pledge, encumbrance,
restriction on transferability, defect of title, charge or claim of any
nature whatsoever on any property or property interest.
"LIENHOLDER" means the bolder of or other person entitled to any
benefits arising under any Lien.
"LITIGATION" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or
inquiry involving or affecting the Companies, the Business, the Assets
or any Contracts to which either of the Companies is party or by which
either of them or any of the Assets or the Business may be bound or
affected.
"NOTICE PERIOD" is defined in Section 8.2(A).
"OPTION AGREEMENT" means that certain Option Agreement between the
Buyer and the Shareholder in the form attached hereto as EXHIBIT C.
"OPTIONS" means the options to purchase common stock of the Buyer to be
granted to the Shareholder pursuant to the Option Agreement.
"OVERDRAFT DEBT AMOUNT" means the aggregate amount of the portion of the
Identified Checks which constitute or represent a payment of principal
of indebtedness for borrowed money, capitalized leases or Capital lease
equivalents. The Identified Checks shall be determined in the following
manner:
1. The Companies and the Buyer shall prepare a list of all
checks issued by either of the Companies that did not
clear the respective bank accounts on which such checks
were drawn as of December 31, 1995 (the "LISTED CHECKS").
5
6
2. The Companies and the Buyer shall list the Listed Checks
in reverse order by check number, until the aggregate
amount of the Listed Checks equals $709,657 (the
"OVERDRAFT CHECKS").
3. The Companies and the Buyer shall identify the Overdraft
Checks which constitute or represent a payment of
principal of indebtedness for borrowed money, capitalized
leases or Capital lease equivalents (the "IDENTIFIED
CHECKS").
"PATENTS" means all patents and patent applications.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLANS" means "employee pension benefit plans" as defined in
section 3(2) of ERISA.
"PERMITTED LIENS" means liens for real estate taxes not yet due and
payable.
"PURCHASE PRICE" shall mean the Options and aggregate amount of Thirty-
two Million Dollars ($32,000,000).
"REGULATION" means any statute, law, ordinance, regulation, order, rule
or rule of common law and of any federal, state, local or other
governmental agency or body or of any other type of regulatory body,
including, without limitation, those covering environmental, energy,
safety, health, transportation, bribery, recordkeeping, zoning,
antidiscrimination, antitrust wage and hour, and price and wage control
matters.
"ROOF REPAIR AGREEMENT" means an escrow agreement between the Buyer, the
Shareholder and the Escrow Agent in substantially the form of the Escrow
Agreement and otherwise reasonably acceptable to the Buyer and the
Shareholder, pursuant to which an amount equal to the aggregate estimate
of the contractors or contractors hired in connection therewith of the
costs for the repair, reconstruction or replacement of the roofs on the
existing facilities of the Companies (and reasonably agreed to by and
among the Companies, the Shareholder and the lessor of such facilities)
pursuant to Section 8.1(B)(7) hereof (the "ROOF REPAIR ESCROW AMOUNT")
shall be deposited into escrow in order to secure the Shareholder's
liability to indemnify the Buyer pursuant to Section B.1(B)(7) hereof.
"SHAREHOLDER" means Xxxxxx Xxxxxxxx, Xx., who is the owner of all of the
Stocks.
"SHAREHOLDER NONCOMPETITION AGREEMENT" means the Noncompetition
Agreement between the Buyer and the Shareholder in the form attached
hereto as EXHIBIT D.
6
7
"STATE TAXES" means all Taxes, but only with respect to those states
listed on EXHIBIT E hereto, relating to periods ending on or prior to
the Closing Date.
"STATE TAX ESCROW AGREEMENT" means an escrow agreement among the Buyer,
the Shareholder and the Escrow Agent, in substantially the form of the
Escrow Agreement and otherwise reasonably acceptable to the Buyer and
the Shareholder, pursuant to which $350,000 of the Purchase Price (the
"STATE TAX ESCROW AMOUNT") shall be deposited into escrow in order to
secure the Shareholder's obligation to indemnify the Buyer for State
Taxes and the reasonable fees and expenses of a "Big-Six" certified
public accounting firm and, if such accounting firm determines
necessary, legal counsel specializing in state tax matters reasonably
acceptable to the Shareholder and the Buyer relating to the preparation
and filing of any tax returns for such State Taxes, and the prosecution
or settlement of such State Taxes.
"STOCKS" means 5,500 shares of the Common Stock of Health Valley Foods,
Inc., which constitutes all of the issued and outstanding capital stock
of Health Valley Foods, Inc., and 30,000 shares of the Common Stock of
Health Valley Manufacturing Company, which constitutes all of the issued
and outstanding capital stock of Health Valley Manufacturing Company.
"TAXES" shall mean and include, collectively, all foreign, federal state
and local taxes imposed by any taxing authority, including, without
limitation, income, gross receipts, net proceeds, alternative, add-on,
minimum, ad valorem, value added, turnover, sales, use, property,
personal property (tangible and intangible), stamp, leasing, excise,
duty, franchise, transfer, license, withholding, payroll, employment,
fuel, excess profits, environmental, occupational, interest equations
windfall profits and severance taxes, and all other like governmental
charges, together with any interest additions to tax and penalties
thereon.
"TAX REFUNDS" shall mean and include all refunds and credits received or
utilized by or on behalf of either Company for California State Taxes
paid by either Company with respect to periods ending on or prior to the
Closing Date, arising solely as a result of the payment of State Taxes
(other than State Taxes paid by the Companies prior to the Closing
Date).
"TRADEMARKS" means registered trademarks, registered service marks,
trademark and service xxxx applications and unregistered trademarks,
tradenames and service marks.
"TRANSACTION COSTS" means (i) all legal fees and expenses of counsel
incurred by the Shareholder or the Companies for services rendered from
and after February 1, 1996 in connection with the preparation,
negotiation and execution of that certain memorandum of agreed to
business principles, dated February 16, 1996, and this Agreement and the
consummations of the transactions contemplated hereby, (ii) the fees,
expenses and other commissions of Xxxxxxxxxxx Xxxxxxx & Co., (iii) any
amounts owed by either of the
7
8
Companies to Ray L'Heureux due to a change in the control of either of
the Companies, and (iv) all legal fees and expenses of counsel incurred
by the Shareholder or the Companies for services rendered from January
1, 1996 through January 31, 1996, in connection with the preparation,
negotiation and execution of that certain memorandum of agreed to
business principles, dated February 16, 1996, and this Agreement and the
consummations of the transactions contemplated hereby, to the extent
such fees and expenses exceed $15,500.
2. Sale and Purchase of the Stocks.
2.1 Sale and Purchase of the Stocks. Subject to the terms and
conditions hereinafter set forth and on the basis of and in reliance
upon the representations, warranties, obligations and agreements set
forth herein, at the Closing the Shareholder shall sell to the Buyer and
the Buyer shall purchase from the Shareholder all of the Stocks, free
and clear of all Liens, for a purchase price equal to the Purchase
Price.
2.2 Default by the Shareholder at the Closing. The
Shareholder acknowledges that the Stocks are unique and otherwise not
available and agree that in addition to any other remedies, the Buyer
may invoke any equitable remedies to enforce delivery of the Stocks
hereunder, including, without limitation, an action or suit for specific
performance.
3. Closing.
3.1 Closing Date. The Closing (the "CLOSING") of the sale and
purchase of the Stocks shall take place at the offices of Weinstock,
Manion, Xxxxxxx, Shore & Xxxxxxx, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx at 10:00 a.m. local time, on April 10, 1996, or at
such other time or place or on such other date as the Buyer and the
Shareholder may agree to in writing. The date of the Closing is
hereinafter sometimes referred to as the CLOSING DATE.
3.2 Deliveries.
(A) At the Closing, subject to the provisions of this
Agreement the Shareholder shall deliver to the Buyer, free and
clear of all Liens, the certificates for the Stocks in negotiable
form, duly endorsed in blank, or with separate notarized stock
transfer powers attached thereto and signed in blank, in exchange
for (i) the delivery by the Buyer to the Shareholder, or in the
event any Funded Indebtedness or Transaction Costs remain
outstanding as of the Closing, to the person or entity to which
either of the Companies or the Shareholder are obligated with
respect to such Funded Indebtedness or Transaction Costs to the
extent thereof (but only out of the funds referred to in the
following clause (b)),
8
9
of (a) an Option Agreement, duly executed by the Buyer, and (b)
the wire transfer into an account to be designated by the
Shareholder of an amount equal to the difference between (I) 90%
of the difference between (1) $32,000,000 and (2) the sum of the
Funded Indebtedness as of the Closing Date, less $664,964, and
the Transaction Costs through the Closing and (II) the sum of the
State Tax Escrow Amount and the Roof Repair Escrow Amount, and
(ii) the wire transfer or other delivery by the Buyer to the
Escrow Agent of (X) the Escrow Amount which, amount shall be held
and eventually disbursed by the Escrow Agent in accordance with
this Agreement and the Escrow Agreement, (Y) the State Tax Escrow
Amount which amount shall be held and eventually disbursed by the
Escrow Agent in accordance with the State Tax Escrow Agreement
and (Z) the Roof Repair Escrow Amount, which amount shall be held
and eventually disbursed by the Escrow Agent in accordance with
the Roof Repair Escrow Agreement.
(B) At the Closing, the Shareholder will deliver to the Buyer
the written resignations of all the directors and officers of
either of the Companies, and all plan fiduciaries of all Employee
Benefit Plans, effective as of the Closing except for such
directors, officers and plan fiduciaries as the Buyer shall
designate in writing.
(C) At the Closing, the Shareholder shall also deliver to the
Buyer, and the Buyer shall deliver to the Shareholder, the
certificates, opinions and other instruments and documents
referred to in Sections 9 and 10, respectively.
(D) At the Closing, the Shareholder shall pay or cause to be
paid, out of the amount to be paid pursuant to item (A)(i)(b)
above, all Funded Indebtedness (other than capitalized leases and
Capital lease equivalents listed on the Funded Indebtedness
Exhibit) and Transaction Costs and shall obtain from each holder
of Funded Indebtedness (other than holders of capitalized leases
and capital lease equivalents listed on the Funded Indebtedness
Exhibit) and each person or entity to which either of the
Companies or the Shareholder is obligated with respect to
Transaction Costs a release of the Companies with respect to such
Funded Indebtedness or Transaction Costs.
(E) In the event that any Funded Indebtedness (other than
interest on such Funded Indebtedness paid in the ordinary course
of business) or Transaction Costs have been paid after December
31, 1995 and on or prior to the date hereof, or are paid after
the date hereof and prior to the Closing Date, by either of the
Companies, the Shareholder shall reimburse the Companies, at the
Closing, for all such Funded Indebtedness or Transaction Costs.
9
10
(F) At the Closing, the Shareholder shall repay to the
Companies all loans made by either of the Companies to the
Shareholder that are outstanding on the Closing Date.
(G) Without duplicating any obligation set forth in (D) above,
at the Closing, the Shareholder shall pay to the Buyer, out of
the amount to be paid to the Shareholder pursuant to item
(A)(i)(b) above, an amount equal to the difference between (1)
the then aggregate outstanding balance or principal with respect
to all capitalized leases and "Capital lease equivalents" listed
on the Funded Indebtedness Exhibit and (2) $664,964.
(H) At the Closing, the Shareholder shall pay to the Buyer,
out of the amount to be paid to the Shareholder pursuant to item
(A)(i)(b) above, an amount equal to the aggregate amount paid by
the Companies for Roof Repairs prior to the Closing.
(I) At the Closing, the Shareholder shall pay to the Buyer,
out of the amount to be paid to the Shareholder pursuant to item
(A)(i)(b) above, an amount equal to the Overdraft Debt Amount.
3.3 Termination. In the event that the Closing shall not have taken
place on or before April 15, 1996, or such later date as shall be
mutually agreed to in writing by the Buyer and the Shareholder, all of
the rights and obligations of the parties under this Agreement shall
terminate without liability, except for liability with respect to a
party in the event the Closing does not occur and this Agreement
terminates by reason of a default or breach by such party.
4. Representations and Warranties of the Shareholder. The Shareholder
hereby represents and warrants to the Buyer that, as of the date hereof, except
as set forth on a Disclosure Schedule attached hereto, each of which exceptions
shall specifically identify the relevant subsection hereof to which it relates
and shall be deemed to be representations and warranties as if made hereunder:
4.1 Organization and Standing. The Companies are corporations duly
organized, validly existing and in good standing under the laws of
California, having full power and authority to carry on the Business as
it has been and is now being conducted and to own, lease and operate the
Assets. Each of the Companies is duly qualified to do business and in
good standing in every jurisdiction in which the Business or the
character of the Assets requires such qualification, all of which
jurisdictions are disclosed in the Disclosure Schedule. Neither of the
Companies has any subsidiaries or any stock or other equity or ownership
interest (whether controlling or not) in any corporation, association,
partnership, joint venture or other entity.
10
11
4.2 Capitalization and Stock Ownership. The Companies' authorized
capital stock consists of 1,000,000 shares of Common Stock as to Health
Valley Foods, Inc. and 1,000,000 shares of Common Stock as to Health
Valley Manufacturing Company. There are 5,500 shares of Common Stock
presently outstanding as to Health Valley Foods, Inc. and 30,000 shares
of Common Stock presently outstanding as to Health Valley Manufacturing
Company (previously defined as the "STOCKS"), which Stocks are owned of
record and beneficially by the Shareholder, free and clear of any Liens.
The Shareholder has good title to the Stocks, free and clear of all
Liens. All of the Stocks have been duly authorized and validly issued,
are fully paid and nonassessable, were not issued in violation of the
terms of any Contract binding upon either of the Companies, and were
issued in compliance with all applicable charter documents of the
Companies and all applicable federal and state securities or "blue sky"
laws and regulations. No equity securities of either of the Companies,
other than the Stocks, are issued or outstanding. There are, and have
been, no preemptive rights with respect to the issuance of the Stocks.
There are: (i) no existing Contracts, subscriptions, options, warrants,
calls, commitments or rights of any character to purchase or otherwise
acquire any capital stock or other securities of either of the
Companies, whether or not presently issued or outstanding, from the
Shareholder, either of the Companies or otherwise, at any time, or upon
the happening of any stated event; (ii) no outstanding securities that
are convertible into or exchangeable for capital stock or other
securities of either of the Companies; (iii) no Contracts,
subscriptions, options, warrants, calls, commitments or rights to
purchase or otherwise acquire from the Shareholder, either of the
Companies or otherwise any such convertible or exchangeable securities;
and (iv) no capital appreciation or profit participation rights, or
commitments to issue such rights, with respect to either of the
Companies.
4.3 Authority and Binding Effect. The Shareholder has the full power
and authority to execute, deliver and perform this Agreement and the
Escrow Agreement and consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Escrow
Agreement and the consummation of the transactions herein and therein
contemplated will not contravene or violate the Articles of
Incorporation or bylaws of the Companies. Each of this Agreement and
the Escrow Agreement constitutes the legal, valid and binding obligation
of the Shareholder, enforceable against the Shareholder in accordance
with its terms.
4.4 Validity of Contemplated Transactions. Neither the execution and
delivery of this Agreement and the Escrow Agreement by the Shareholder,
nor the consummation of the transactions contemplated hereby and thereby
nor the use of the proceeds from the Acquisition by the Shareholder will
contravene or violate any Regulation or Court Order which is applicable
to any of the Companies, the Shareholder, the Business or the Assets, or
will result in a Default under, or require the consent or approval of
any party to, any Contract relating to the Business or the Assets or to
or by which any of the Companies or the Shareholder is a party or
otherwise bound or affected, or any License, or require any of the
Companies or the Shareholder to notify or obtain any License from any
11
12
federal, state, local or other court or governmental agency or body or
from any other regulatory authority.
4.5 Restrictions. Neither of the Companies nor the Shareholder is a
party to any Contract, holds any License or is subject to any
restriction or any Court Order or Regulation which adversely affects the
Companies, the Assets or the Business, affects or restricts the ability
of the Companies or the Shareholder to consummate the Acquisition or
will restrict the Companies, the Business or the Assets after the
Acquisition in a manner that the Companies, the Business or the Assets
were not restricted prior to the Acquisition.
4.6 Third-Party Options. There are no existing Contracts, options,
commitments or rights with, to or in any third party to acquire the
Companies, or either of them, any of the Assets or any interest therein
or in the Business.
4.7 Financial Statements. The Companies and the Shareholder have
delivered to the Buyer (i) each of the Companies' consolidated year-end
balance sheets at December 31, 1995, (ii) their related consolidated
statements of income, retained earnings and cash flow for the fiscal
year then ended, and (iii) all related notes and schedules. All
Liabilities of either of the Companies at December 31, 1995 required to
be reflected or reserved for by GAAP are fully reflected or reserved for
in the Companies' consolidated balance sheet at December 31, 1995 (the
"LATEST YEAR-END BALANCE SHEET", and, together with the related
consolidated statements of income and retained earnings, the "LATEST
YEAR-END FINANCIAL SHEET"). December 31, 1995 is referred to as the
"LATEST YEAR-END BALANCE SHEET DATE" in other parts of this Agreement.
All of the financial statements referred to in this Section 4.7 were
prepared in accordance with GAAP and, subject to any qualifications set
forth in the applicable notes and schedules, fairly present the
financial position, results of operations and cash flow of the Companies
at the date and for the period covered and include all adjustments that
are necessary for a fair presentation of the information shown.
4.8 Books of Account; Returns and Reports; Taxes. The books of
account of each of the Companies fairly reflect, in accordance with
GAAP, (i) all transactions relating to the Companies, or either of them,
and (ii) all items of income and expense, assets and liabilities and
accruals relating to either of the Companies. Neither of the Companies
has engaged in any transaction, maintained any bank account or used any
corporate funds except for transactions, bank accounts and funds which
have been and are reflected in the normally maintained books and records
of the Companies. Each of the Companies has duly filed all foreign,
federal, state and local tax reports and returns required to be filed by
it pursuant to any Regulation, which reports and returns were correct
and complete. Each of the Companies has duly made all deposits required
by law to be made with respect to employees' withholding taxes and has
withheld all amounts required to be withheld by it. Each of the
Companies has duly paid or accrued on its books of account all taxes,
duties and charges (including penalties and interest thereon) payable
12
13
by it, and the amounts established as provisions for taxes on the Latest
Year-End Balance Sheet are sufficient for the payment of all taxes
(including penalties and interest thereon) due as a result of activities
which occurred during the period covered by the Latest Year-End Balance
Sheet. Neither of the Companies has received any notice of assessment
or deficiency or proposed assessment from or by the IRS or any other
taxing authority in connection with its tax returns or reports, and to
the Shareholder's knowledge, there is no pending or threatened tax
examination of or tax claim asserted against the Companies, or either of
them, or any of the Assets. There is no tax lien on any of the Assets
except for liens for real estate taxes not yet due and payable. The
federal income tax returns filed by Health Valley Natural Foods, Inc.
have been audited and settled through December 31, 1992, the federal
income tax returns for Health Valley Manufacturing Company have never
been audited and, with respect to either of the Companies, no agreement
for the extension of time or waiver of the statute of limitations for
the assessment of any deficiency or adjustment for any year is in
effect. True and correct copies of all federal and state income tax
returns filed by any of the Companies since December 31, 1994, have been
delivered to Buyer. The Companies will receive at least $500,000 with
respect to the Known Refund.
4.9 Undisclosed Liabilities. Neither of the Companies has
liabilities except for:
(A) those Liabilities adequately and specifically set forth or
reserved for on the Latest Year-End Balance Sheet and not
heretofore paid or discharged;
(B) those Liabilities arising in the ordinary course of its
business consistent with past practice under any Contract
specifically disclosed on the DISCLOSURE SCHEDULE (or not
required to be disclosed because of the term or amount involved);
and
(C) those Liabilities incurred, consistent with past business
practice, in the Ordinary course of its business since the Latest
Year-End Balance Sheet Date and not heretofore paid or
discharged.
4.10 Accounts Receivable. All accounts receivable as set forth on the
Latest Year-End Balance Sheet Date or arising since the Latest Year-End
Balance Sheet (i) have arisen only in the ordinary course of business
consistent with past practice for goods sold and delivered or services
performed and (ii) are collectible in full at the recorded amounts
thereof (free of any, and subject to no defenses, setoffs or
counterclaims) in the ordinary course of business (without resort to
Litigation or assignment to a collection agency), but in no event later
than 90 days after the Closing Date, net of any allowance for doubtful
accounts reflected in the Latest Year-End Balance Sheet.
4.11 Inventory. The inventory, as set forth on the Latest Year-End
Balance Sheet or arising since the Latest Year-End Balance Sheet Date,
was acquired and has been maintained in accordance with the regular
business practices of the Companies, consists
13
14
of new and unused items of a quality and quantity usable or salable in
the ordinary course of business of the Companies consistent with past
practice, and are valued at the lower of cost or market value on an
average cost basis. None of such inventory is obsolete, unusable,
damaged or unsalable in the ordinary course of the Companies, business
consistent with past practice.
4.12 Title to Assets. The Companies own outright and have good and
marketable title to all of the Assets, including, without limitation,
the assets and properties set forth on the Latest Year-End Balance Sheet
(except for such as may have been disposed of in the ordinary course of
business since the Latest Year-End Balance Sheet Date), free and clear
of all Liens, except Permitted Liens. The Assets constitute all of the
assets reasonably required to conduct the Business as presently
conducted by the Companies.
4.13 All Tangible Assets. The DISCLOSURE SCHEDULE sets forth accurate
lists and summary descriptions of all tangible Assets where the value of
an individual item exceeds $50,000 or where an aggregate of similar
items exceeds $75,000, and of all leases, Licenses and other Contracts
to which any of the Companies is a party or otherwise bound which relate
in whole or in part to such Assets. In the DISCLOSURE SCHEDULE, the
Assets listed have been grouped by type and assigned location. The
Assets listed in the DISCLOSURE SCHEDULE constitute substantially all of
the tangible assets used in or necessary to the conduct of the Business.
4.14 Condition of Assets. All tangible assets and properties which
are part of the Assets are in good operating condition and repair and
are usable in the ordinary course of the Business consistent with past
practice and conform in all material respects to all applicable
Regulations relating to their ownership, construction, use and
operation. There are no conditions or developments materially affecting
any such Asset which might curtail the present or future use thereof for
the purpose for which it was acquired. Except pursuant to leases
described on the DISCLOSURE SCHEDULE, no person other than the Companies
owns any vehicles, equipment or other tangible Assets situated on the
facilities used by either of the Companies in the Business (other than
immaterial items of personal property owned by the Companies, employees)
or necessary to the operation of the Business.
4.15 Real Property.
(A) Title. All real property (including, without limitation,
all interests in and rights to real property) and improvements
located thereon which are owned or leased by either of the
Companies are listed on the DISCLOSURE SCHEDULE (the "REAL
PROPERTY"), which constitutes an of the real property used in or
reasonably necessary to conduct the Business as presently
conducted by the Companies.
(B) Zoning. To the Shareholder's actual knowledge, the Real
Property is zoned M-2.
14
15
(C) Utility Services. To the Shareholder's actual knowledge,
the water, electric, gas, sewer and other utility services and
the septic tank and storm drainage facilities currently available
to the Real Property are adequate for the present use of the Real
Property by the Companies in conducting the Business, and there
is no condition which could result in the discontinuance of such
services, or result in the impairment or termination of the
present access from the Real Property to such utility services
and other facilities.
(D) Access. Each of the Companies has obtained all Licenses
and rights-of-way, including proof-of-dedication over the Real
Property, or from private parties, necessary to ensure vehicular
and pedestrian ingress and egress to and from the Real Property
from adjoining public streets. To the Shareholder's actual
knowledge, there are no restrictions on entrance to or exit from
the Real Property to adjacent public streets and no conditions
which could result in the impairment or termination of the
present access from the Real Property to existing highways and
roads.
(E) Assessments or Hazards. To the Shareholder's actual
knowledge, neither of the Companies has received any notices,
oral or written from any governmental body, and neither of the
Companies is aware, that the assessed value of the Real Property
has been determined to be greater than that upon which county,
township or school tax was paid for the most recent tax year
applicable to each such tax or any pending general or special
assessments with respect to the Real Property, or from any
insurance carrier of the Companies of fire hazards or other
defects or inadequacies with respect to the Real Property.
(F) Eminent Domain. To the Shareholder's actual knowledge,
neither of the Companies has received any notices, oral or
written, and has any reason to believe, that any governmental
body having jurisdiction over the Real Property intends to
exercise the power of eminent domain or a similar power with
respect to all or any part of the Real Property.
(G) No Violations. The Real Property or any improvements
erected or situate thereon, or the uses conducted thereon or
therein, do not violate, and, while either of the Companies have
occupied the Real Property, have not violated, any Regulations of
any governmental body having jurisdiction over the Real Property.
(H) Improvements. The improvements located on the Real
Property are in good condition and are structurally sound, and
all mechanical and other systems located therein are in good
operating condition, subject to normal wear, and no condition
exists requiring material repairs, alterations or corrections.
None of the Real Property, nor any of the improvements located
thereon, is included in a flood hazard area, or encroaches upon
adjoining property, easements or building or set-back lines.
15
16
(I) Environmental Matters. Hazardous Substances have not been
disposed of or otherwise come to be located upon or beneath the
Real Property by the Companies or any real property owned or
leased by either of the Companies at any time prior to the date
hereof. While either of the Companies has occupied the Real
Property, the Real Property has not been investigated by any
governmental environmental agency, Board of Health or the public
media for, and neither of the Companies has received any inquiry
from any governmental environmental agency, Board of Health or
the public media with respect to, storage, generating, treating
or disposal of any Hazardous Substances. No underground storage
tanks are or have been located on the Real Property.
4.16 Contracts.
(A) The DISCLOSURE SCHEDULE sets forth complete and accurate
lists or descriptions of:
(1) all Employee Benefit Plans; and
(2) all consents or approvals required under any
Contracts or Licenses that are necessary for the
Shareholder to complete the Acquisition or to avoid a
Default under such Contracts or Licenses.
(B) None of the Assets is leased by either of the Companies
from any third party, whether affiliated or unaffiliated with the
Companies.
(C) Neither of the Companies is a party to or bound by any:
(1) Contract with any present or former employee or
consultant;
(2) Contract for the future purchase of, or payment
for, supplies, raw materials, equipment, products or
services, including, but not limited to, all take-or-pay
Contracts;
(3) Contract to sell or supply products or to perform
services;
(4) representative or sales agency or advertising
Contract;
(5) Contract limiting or restraining it from engaging
or competing in any lines of business with any person,
firm, corporation or other entity;
(6) license, franchise, distributorship or other
agreement, including those which relate in whole or in
part to any ideas, technical assistance or other know-how
of or used by either of the Companies;
16
17
(7) Contract for the lease of any assets, whether as
lessor or lessee, including but not limited to,
capitalized leases and Capital lease equivalents (as set
forth in the Funded Indebtedness Exhibit);
(8) loan agreement, guarantee, letter of credit,
indemnification agreement or other similar or related
agreements;
(9) mortgage, pledge, security agreement, factoring
agreement or other similar agreements;
(10) contracts for the purchase of organic supplies (the
DISCLOSURE SCHEDULE contains the outstanding obligation of
the Companies under such Contracts as of February 29,
1996);
(11) Contract involving the payment of consideration in
excess of $50,000 annually; or
(12) material Contract not otherwise disclosed herein.
(D) All of the Contracts to which either Company is a party or
by which it or any of the Assets is bound or affected are valid,
binding and enforceable in accordance with their terms. Each of
the Companies has fulfilled, or taken all action necessary to
enable it to fulfill, when due, au of its obligations under each
of such Contracts. All parties to such Contracts have complied
in all material respects with the provisions thereof; no party is
in Default thereunder and no notice of any claim of Default has
been given to or by either of the Companies. There are no
provisions of, or developments materially affecting, any such
Contract which might prevent either of the Companies from
realizing the benefits thereof whether before or after the
completion of the Acquisition. With respect to any of such
Contracts that are leases, neither of the Companies has received
any notice of cancellation or termination under any option or
right reserved to the lessor, or any notice of Default,
thereunder. Each of the Companies enjoys peaceful and
undisturbed possession of the Assets under such leases.
4.17 Employees. The DISCLOSURE SCHEDULE sets forth the names and
current annual salary rates or current hourly wages of all present
employees of either of the Companies, together with the average number
of hours worked per week, the date of the last salary increase, the date
of commencement of employment of each employee with such Company and a
summary of salary, bonuses and other compensation, if any, paid or
payable to each of such persons for or in respect of the Latest Year-End
Balance Sheet Date and any commitments to increase any such compensation
after the Latest Year-End Balance Sheet Date. The DISCLOSURE SCHEDULE
also sets forth the earnings for each of such employees as reflected on
Form W-2 for the 1995 calendar year.
17
18
4.18 Licenses. The DISCLOSURE SCHEDULE sets forth a complete list of
all Licenses used in the operation of the Business or otherwise held by
either of the Companies, each of which is valid and in full force and
effect. The Companies own, possess or lawfully use in the operation of
their Business all Licenses which are necessary to conduct the Business
as now or previously conducted or to the ownership or use of the Assets,
free and clear of all Liens. Neither of the Companies is or has been in
Default, nor have they received any notice of any claim of Default, with
respect to any such License. All such Licenses are renewable by their
terms or in the ordinary course of business without the need to comply
with any special qualification procedures or to pay any amounts other
than routine filing fees and will not be adversely affected by the
completion of the Acquisition. No present or former Shareholder,
director, officer or employee of either of the Companies, any member of
their immediate families or other affiliates of any of them, or any
other person, firm, corporation or other entity owns or has any
proprietary, financial or other interest (direct or indirect) in any
License which either of the Companies owns, possesses or uses.
4.19 Intellectual Property.
(A) No employee of either of the Companies has been, is or is
now expected to be, in default under any term of any employment
contract, agreement or arrangement relating to any Intellectual
Property or noncompetition arrangement, or any other Contract or
any restrictive covenant relating to the right of any such
officer or employee to be employed by either of the Companies
because of the nature of the business conducted or to be
conducted by the Companies or relating to the use of any
Intellectual Property of others, and the continued employment of
such officers and employees does not subject either of the
Companies to any Liability resulting from such a violation. The
Intellectual Property of the Companies was developed entirely by
its employees during the time they were employees only of the
Companies and such Intellectual Property does not include any
inventions of the employees made prior to the time such employees
became employees of the Companies nor any Intellectual Property
of any previous employer of such employee. All books written by
the Shareholder prior to the date hereof are owned by the
Companies (subject to publishing agreements) and neither the
Shareholder nor any other employee of either of the Companies has
any right, title or interest therein.
(B) The Companies own or have a valid right to use the
Intellectual Property being used to conduct the business of the
Companies; and the conduct of its business as now operated and as
now proposed to be operated does not and will not conflict with,
or infringe upon, valid Intellectual Property rights of others.
No person or entity is infringing upon, or has within the last
five (5) years infringed upon, the Companies' Intellectual
Property Rights. The Companies own or have a valid right to use
all Intellectual Properties necessary to conduct the Business as
now conducted. The Companies have not violated any Intellectual
18
19
Property rights of others, and have not received any
communication alleging that either of the Companies has violated
or, by conducting their businesses as currently being conducted
by the Companies, would violate any of the Intellectual Property
rights of any other person or entity. Neither of the Companies
has any obligation to compensate any Person for the use of any
such Intellectual Property rights nor has either of the Companies
granted to any person any licenses, option or other rights to use
in any manner any of the Intellectual Property of the Companies,
whether requiring the payment of royalties or not.
(C) All Patents, Copyrights, Trademarks and computer software
used in the Business or owned by either of the Companies is
listed in the DISCLOSURE SCHEDULE, and the DISCLOSURE SCHEDULE
indicates whether such item is used or owned by the Companies.
All registrations with respect to such Patents, Copyrights and
Trademarks are currently valid and effective.
(D) Except as listed in the DISCLOSURE SCHEDULE, the computer
software of the Companies included in the Intellectual Property
functions as intended, is in machine-readable form, contains all
current revisions of such software, and is the only software used
by either of the Companies in the conduct of their business.
4.20 Compliance with Regulations and Court Orders. Neither of the
Companies has violated within the last ten (10) years, nor is in
violation of any Court Order or Regulation, and the Business and the
Assets are not, and have not been used or operated by either of the
Companies or any other person or entity within the last ten (10) years,
in violation of any Regulation or Court Order and neither of the
Companies has received within the last ten (10) years any notice
alleging any such violations. All Court Orders to which either of the
Companies is a party or subject are listed in the DISCLOSURE SCHEDULE.
Each of the Companies has made all filings or notifications required to
be made by it within the last ten (10) years under any Regulations
applicable to such Company, the Business or the Assets. Within the last
ten (10) years, neither of the Companies, nor any officer, employee or
agent of, nor any consultant to, either of the Companies has unlawfully
offered, paid, or agreed to pay, directly or indirectly, any money or
anything of value to, or for the benefit of, any individual who is or
was a candidate for public office, or an official or employee of any
governmental or regulatory body or authority or an officer or employee
of any client, customer or supplier of either of the Companies. Without
affecting in any way the generality of the foregoing, neither of the
Companies has violated within the last ten (10) years, nor is in
violation of, the applicable provisions of the federal Food, Drug and
Cosmetics Act, as amended, the regulations and requirements adopted by
the United States Food and Drug Administration (the "FDA") pursuant to
such Act, the regulations and requirements adopted by the United States
Department of Agriculture (the "USDA"), and the requirements established
by state and local authorities responsible for regulating food products
and establishments (collectively "state food authorities"), as well as
with the terms and conditions imposed in any Licenses granted to the
Companies by the FDA, USDA or state food authorities.
19
20
In addition, neither of the Companies is aware of any facts that would
indicate that the FDA, USDA, or any state food authorities has or will
prohibit or materially restrict the marketing, sale, license or use in
the United States of any product currently produced, marketed, or under
development, by the Companies ("Product"), or the operation or use of
any Product, and neither of the Companies is aware of any product or
process which the FDA or the USDA has prohibited from being marketed or
used in the United States which in function and composition is
substantially similar to any Product. Except as set forth in the
DISCLOSURE SCHEDULE, the Products qualify as "HEALTHY" under the FDA
guidelines.
4.21 Claims. There is no Litigation pending or threatened against the
Shareholder, either of the Companies, the Business or the Assets. No
claim has been asserted and no event has occurred that might result in
Litigation against the Shareholder, either of the Companies, the
Business or the Assets. To the best of the Companies' and the
Shareholder's knowledge, there is no reasonable basis for any such
claim. All pending or threatened Litigation is fully covered by
insurance.
4.22 Insurance. The DISCLOSURE SCHEDULE contains a true and complete
description of the insurance coverage applicable to either of the
Companies, the Business and the Assets for the past three years,
including amounts (including limits and deductibles) and lines of
coverage, loss experience history by line of coverage for the past five
years, and a description of all claims in excess of $10,000 for the past
five years. All insurance coverage applicable to either of the
Companies, the Business and the Assets is in full force and effect, is
valid, binding and enforceable in accordance with its terms against the
respective insurers, insures each of the Companies in reasonably
sufficient amounts against all risks usually insured against by persons
operating similar businesses or properties in the localities where such
businesses or properties are located and has been issued by insurers of
recognized responsibility. There is no Default under any such coverage
nor has there been any failure to give notice or present any claim under
any such coverage in a due and timely fashion. There are no premiums
past due and no notice of cancellation or renewal of any such coverage
has been received. There are no provisions in such insurance policies
for retroactive or retrospective premium adjustments. Neither of the
Companies nor the Shareholder knows or has reason to know of the
occurrence of any event which reasonably might form the basis of any
claim against either of the Companies, the Business or the Assets or
which might materially increase the insurance premiums payable for any
such coverage. All products liability and general liability insurance
policies maintained by either of the Companies since January 1, 1993,
have been occurrence policies and not claims-made policies. There are
no outstanding performance bonds covering or issued for the benefit of
either of the Companies.
4.23 Labor Matters. Neither of the Companies has any collective
bargaining or other agreements with any labor union or other
representative of employees. No strike, slowdown, picketing, work
stoppage or organizing activity by any union or other group
20
21
of employees against either of the Companies, or the Assets wherever
located, and no secondary boycott with respect to their products,
lockout by them of any of their employees or any other labor trouble or
other occurrence, event or condition of a similar character, has
occurred or been threatened. To the best of the Companies' and the
Shareholder's knowledge, no officer or key employer of either of the
Companies or group of employees intends to terminate his or their
employment with the Companies. The Companies have delivered to the Buyer
a true and complete copy of all employee handbooks used by the Companies
as of the date hereof or at any time during the past year. Such
employee handbooks contained all material employee policies and
practices of the Companies in effect at such time.
4.24 Pension Plans; Employee Benefit Plans.
(A) Disclosure. Except as disclosed in the DISCLOSURE
SCHEDULE, there are no Employee Benefit Plans, currently or
within the past five years, maintained, sponsored or contributed
to by either of the Companies. No Employee Benefit Plan
disclosed is a Pension Plan.
(B) Disclosed Plans. With respect to any such Employee
Benefit Plans disclosed, each of the Companies has made all
contributions thereto which they have accrued on their financial
statements and other books and records as a liability or which
any of them is obligated to make prior to the date hereof, and
the Companies have delivered to the Buyer copies of (i) all
documents governing such Plans, and all amendments thereto, (ii)
all reports filed by the Companies or Plan officials with respect
to such Plans with the United States Department of Labor, the IRS
and any other federal or state regulatory agency, (iii) all
summary plan descriptions, notices and other reporting and
disclosure material furnished to participants in any of such
Plans, (iv) all actuarial, accounting and financial reports
prepared with respect to any of such Plans, and (v) all currently
effective IRS ruling or determination letters on any of such
Plans.
(C) Compliance with Law. The provisions of each Employee
Benefit Plan and the administration of each Employee Benefit Plan
are and have been in all material respects in compliance with all
applicable Regulations, and neither of the Companies nor the
Shareholder has received or is aware of any claim or notice
alleging to the contrary with respect to any Employee Benefit
Plan.
(D) Tax or Civil Liability. Neither of the Companies nor the
Shareholder has participated in any conduct, and neither of the
Companies nor the Shareholder will participate in any conduct
prior to the Closing Date or thereafter, that could result in the
imposition upon either of the Companies, the Shareholder or the
Buyer of either excise tax under section 4975 (relating to
prohibited transactions) of the Code, or civil liability under
section 502(i) of ERISA (also relating to prohibited
transactions).
21
22
(E) Claims Liability. There is no action, claim or demand of
any kind (other than routine claims for benefits) which has been
brought or, to the knowledge of the Companies or the Shareholder,
threatened, against any Employee Benefit Plan or the assets
thereof or against any fiduciary of any such Plan.
(F) Fiduciary Appointments and Conduct. There has not
occurred any circumstances by reason of which either of the
Companies, the Shareholder or the Buyer may be liable for:
(1) Appointment by the Companies of any person or
entity as a fiduciary with respect to any Employee Benefit
Plan where such person or entity was legally disqualified
from serving in such capacity;
(2) Failure by the Companies to monitor the performance
of their appointees as fiduciaries with respect to any
Employee Benefit Plan or failure of the Companies timely
to replace any such fiduciary whose performance failed to
meet the standards imposed by ERISA with respect to
fiduciary duties;
(3) Action taken by a fiduciary With respect to any
Employee Benefit Plan upon the direction of, or with the
acquiescence of, the Companies; or
(4) Breach of any fiduciary of his or its fiduciary
duties, to any Employee Benefit Plan or its beneficiaries.
(G) Multiemployer Plans, Neither of the Companies maintains or
participates in, or has ever maintained or participated in, any
"multiemployer plans" as defined in Section 3(37) of ERISA.
(H) Controlled Groups. Neither of the Companies is presently
or potentially liable with respect to any employee benefit plan
sponsored by or previously sponsored by any entity which,
together with the Companies, is or has ever been a member of a
controlled group of corporations within the meaning of Section
414(b) of the Code, a group of trades or businesses under common
control within the meaning of Section 414(c) of the Code, or an
affiliated service group within the meaning of section 414(m) of
the Code, whether such plan is a single employer plan, a multiple
employer plan or a multiemployer plan. Liability to which
reference is made herein includes, but is not limited to,
liability for the underfunding of such plan, whether or not such
plan is terminated; liability for unamortized funding
deficiencies (whether or not waived); liability to or on account
of any multiemployer plan under any circumstances; penalties,
late payment fees or taxes with respect to any plan or the
administration of any plan; or liability with respect to
fiduciary conduct in connection with any such plan.
22
23
(I) Reporting and Disclosure. Each of the Companies has filed
or caused to be filed on a timely basis each and every return,
report, statement, notice, declaration and other documents
required by any governmental agency with respect to each Employee
Benefit Plan.
(J) Participant and Beneficiary Notifications. Each of the
Companies has delivered or caused to be delivered to every
participant, beneficiary and other party entitled to such
material, all plan descriptions, returns, reports, schedules,
notices, statements and other materials required to be delivered.
4.25 Transactions with Affiliates. No Shareholder or director or
officer of either of the Companies, any member of his or her immediate
family or any other of its, his or her affiliates, owns or has an
ownership interest in any corporation or other entity that is or was
during the last three years a party to, or in any property which is or
was during the last three years the subject of, Contracts, business
arrangements, transactions or relationships of any kind with either of
the Companies ("AFFILIATED TRANSACTIONS"). All disclosed Affiliated
Transactions have been on an arm's-length basis and on substantially the
same terms an conditions as the Companies could have obtained from non-
affiliated parties and are properly recorded on the books and records of
the Companies.
4.26 Delivery of Documents. The Companies and the Shareholder have
delivered to the Buyer true, correct and complete copies of each of the
Companies, charter documents and bylaws and all written Contracts and
other documents and summaries of any material oral Contracts (including
all amendments, supplements, modifications or waivers currently in
effect) described in this Agreement or in the DISCLOSURE SCHEDULE.
4.27 No Material Adverse Developments. Since the Latest Year-End
Balance Sheet Date, there has been no actual or threatened change in the
Business or, to the best of the Companies' and the Shareholder's
knowledge, any event, condition or state of facts, in either case that
is or might be material and adverse to any of the Companies, the
Business or the Assets.
4.28 Material Transactions. Since the Latest Year-End Balance Sheet
Date, the Business has been operated, and the Shareholder and the
Companies have acted, in the manner that would have been required by
Section 6 had that section been effective since the Latest Year-End
Balance Sheet Date and neither of the Companies or the Shareholder has
taken any action that would have been prohibited by Section 6 had that
Section been effective since the Latest Year-End Balance Sheet Date.
4.29 Hazardous Waste. Neither of the Companies does now, nor has it
ever, generated, transported, stored, disposed of or treated solid
wastes, hazardous wastes or hazardous substances within the meaning of
any applicable Regulation. The Companies have provided to the Buyer true
and complete copies of all permits, filings and related correspondence
with, to or from any environmental or safety agency, together with true
23
24
and complete copies of all correspondence, investigations, audits
(whether or not internally generated) and reports relating in any way to
the environment health and safety condition of the Assets or the past or
present operation of the Business with respect to environmental health
or safety matters.
4.30 Additional Information. The DISCLOSURE SCHEDULE contains
accurate lists and summary descriptions of the following:
(A) all accounts receivable of either of the Companies
reflected on the Latest Year-End Balance Sheet, specifying in
each case the account debtor, the face amount of each receivable,
and reconciling the aggregate value of all accounts receivable as
of the Latest Year-End Balance Sheet Date to the amount of such
category set forth on the Latest Year-End Balance Sheet;
(B) all accounts payable and accrued expenses of either of the
Companies reflected on the Latest Year-End Balance Sheet,
specifying in each case the payee, the face amount of each
payable, the age of each payable regardless of classification on
the balance sheet account, any defenses, setoffs or counterclaims
that may exist with respect thereto, and reconciling the
aggregate value of all accounts payable as of the Latest Year-End
Balance Sheet Date to the amount of such category set forth on
the Latest Year-End Balance Sheet;
(C) the names of all present officers and directors of each
of the Companies and all plan fiduciaries of each Employee
Benefit Plan of the Companies;
(D) the names and addresses of every bank, investment bank,
securities broker and other financial institution in which either
of the Companies maintains an account (whether checking, savings
or otherwise), lock box or safe deposit box, and the account
numbers and names of persons having signing authority or other
access thereto;
(E) the names of all persons authorized to borrow money or
incur or guarantee indebtedness on behalf of either of the
Companies;
(F) the names of all persons holding powers of attorney from
either of the Companies and a summary statement of the terms
thereof; and
(G) all names under which either of the Companies have
conducted any business or which they have otherwise used during
the last five years.
4.31 Corporate Records. The minute books of each of the Companies are
current and contain correct and complete copies of all charter documents
of each of the Companies, including all amendments thereto and
restatements thereof, and of all minutes of meetings, resolutions and
other actions and proceedings of its shareholders and board of
24
25
directors and all committees thereof, duly signed by the Secretary or an
Assistant Secretary, and the stock record book of each of the Companies
is also current, correct and complete and reflects the issuance of all
of the Stocks to the Shareholder.
4.32 Fees and Commissions. Except for Xxxxxxxxxxx Xxxxxxx & Co.,
neither the Shareholder nor either of the Companies has retained any
finder, broker, agent, financial advisor or other intermediary in
connection with the transactions contemplated by Agreement.
4.33 Full Disclosure. There are and will be no materially misleading
misstatements in any of the representations and warranties made by the
Shareholder in this Agreement or in any of the certificates and
instruments delivered or to be delivered by the Companies, or the
Shareholder pursuant to this Agreement, including, without limitation,
in the DISCLOSURE SCHEDULE, and the Shareholder has not omitted to state
any fact necessary to make such representations and warranties not
materially misleading.
5. Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to the Companies and the Shareholder as follows:
5.1 Organization and Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware having all requisite corporate power and authority to perform
its obligations under this Agreement.
5.2 Capitalization. The Buyer's authorized capital stock consists of
1,000 shares of common stock, par value $.01 per share (the "COMMON
STOCK"), and there is no other class of capital stock of any sort,
mature or description authorized as of the date hereof. It is the
Buyer's present intention (subject to obtaining all of its contemplated
financing for the transactions contemplated hereby) to issue shares of
its Common Stock to Intrepid Food Holdings, Inc. ("INTREPID"). The
Buyer represents that (i) it has received assurances from Intrepid that,
subject to the Buyer obtaining other financing necessary to consummate
the transactions contemplated by this Agreement and the satisfaction of
the terms and conditions specified in this Agreement, Intrepid will
invest between $20.0 and $25.0 million in the Common Stock of the Buyer
(the "INTREPID INVESTMENT") and (ii) Intrepid has received assurances
from Frontenac VI Limited Partnership ("FRONTENAC VI") that, subject to
the Buyer obtaining other financing necessary to consummate the
transactions contemplated by this Agreement and the satisfaction of the
terms and conditions specified in this Agreement, Frontenac VI is ready,
willing and able to invest between $10.0 and $15.0 million in the Common
Stock of Intrepid. As of immediately after the consummation of the
equity financing obtained by the Buyer to consummate the transactions
contemplated by this Agreement (including the Intrepid Investment), the
aggregate number of shares of Common Stock of the Buyer subject to the
exercise of the Options granted to the Shareholder under the Option
Agreement will equal ten percent
25
26
(10%) of the then outstanding issued and outstanding Common Stock of the
Buyer, on a fully diluted basis.
5.3 Capital Stock. As of the date hereof, the Buyer has only one
class of authorized equity securities and that class is the Common Stock
referred to in Section 5.2 above. Other than as set forth in the Option
Agreement, there are no preemptive rights with respect to the issuance
of Common Stock. As of the date hereof, there are no existing
subscriptions, options, warrants, calls, commitments or rights of any
character to purchase or otherwise acquire any capital stock or other
securities of the Buyer, nor are there any outstanding securities that
are convertible into, or exchangeable for, capital stock or other
securities of the Buyer, and no subscriptions, options, warrants, calls,
commitments or rights to purchase or otherwise acquire from the Buyer
any such convertible or exchangeable securities and no capital
appreciation or profit participation rights, or commitments to issue
such rights, with respect to the Buyer.
5.4 Authority and Binding Effect. The Buyer has the corporate power
and authority to execute, deliver and perform this Agreement. The
execution, delivery and performance of this Agreement by the Buyer has
been duly authorized by all necessary corporate action. This Agreement
constitutes the legal, valid and binding obligation of the Buyer,
enforceable against it in accordance with its terms.
5.5 Compliance With Laws. All of the Common Stock issued to the
shareholders of the Buyer prior to the Closing Date will have been duly
authorized and validly issued, fully paid and nonassessable, and not
issued in violation of the terms of any Contract binding upon the Buyer,
and will have been issued in compliance with all applicable charter
documents of the Buyer and all applicable federal and state securities
or "blue sky" laws and regulations.
5.6 Validity of Contemplated Transactions. Neither the execution and
delivery of this Agreement by the Buyer nor the consummation of the
transactions contemplated hereby by the Buyer will contravene or violate
any Regulation or Court Order which is applicable to the Buyer, or the
Certificate of Incorporation or by-laws of the Buyer, or will result in
a Default under any Contract to which the Buyer is a party or by which
it is otherwise bound.
5.7 Buyer's Due Diligence, Subject to the Confidentiality Agreement
among the Shareholder, the Companies and the Buyer's representative, the
Buyer does hereby confirm that it has completed, and is satisfied with,
its review of the business, management, finances and accounts receivable
of the Companies. Subject to Article 9 hereof, the Buyer has, prior to
the execution and delivery of this Agreement, informed (and does hereby
confirm to) the Shareholder and the Companies that the Buyer's due
diligence investigation is satisfactory to the Buyer. Nothing contained
in this section is intended to be, or shall be deemed to be, a waiver of
any condition or covenant contained in this Agreement.
26
27
6. Conduct of Business Pending Closing.
6.1 Conduct of Business. From the date hereof until the Closing
Date, except as may be approved by the Buyer in writing or as otherwise
expressly provided in this Agreement, the Shareholder shall (i) use his
best efforts to complete the Acquisition and satisfy the conditions
specified in Section 9 and not sell or otherwise transfer the Stocks or
any interest therein or subject the Stock to any lien and (ii) cause the
Companies, and each of them, to:
(A) not sell any Assets except for sales of inventory in the
ordinary course of business;
(B) operate the Business only in the ordinary course and in
substantially the same manner as it has been operated in the past
and not issue, sell, repurchase or redeem or Commit to issue,
sell, repurchase or redeem, shares of its capital stock, any
options or other rights to acquire such stock or any securities
convertible into or exchangeable for such stock;
(C) not declare or pay any dividend on, or make any other
distribution with respect to, the Stocks;
(D) not (i) incur any amount of long or short-term debt for
money borrowed other than Funded Indebtedness, (ii) guarantee or
agree to guarantee the obligations of others, (iii) indemnify or
agree to indemnify others, or (iv) incur any other Liabilities
other than those incurred in the ordinary course of business
consistent with past practice (as in existence as of December 31,
1995);
(E) keep in full force and effect insurance covering either of
the Companies, the Assets and the Business comparable in amount
and scope of coverage to that now maintained;
(F) maintain the tangible Assets in good condition and working
order, ordinary wear and tear excepted, and preserve intact each
of the Companies' business organization, intangible assets and
other rights and trade secrets;
(G) use their best efforts to retain each of the Companies,
employees and maintain the Business so that such employees will
remain available to the Companies on and after the Closing Date
and to maintain existing relationships with suppliers, customers
and others having business dealings with either of the Companies
and otherwise to preserve the goodwill of the Business so that
such relationships and goodwill will be preserved on and after
the Closing Date;
(H) not amend their Articles of Incorporation or bylaws;
27
28
(I) not merge or consolidate with or into any other
corporation or sell, assign, transfer, pledge or encumber any
part of the Assets or agree to do any of the foregoing;
(J) not enter into any Contract that is material, nor permit
any amendment or termination of any material Contract;
(K) not waive any rights of value or rights that would
otherwise accrue to either of the Companies after the Closing
Date;
(L) not increase the salaries of, or make any bonus or similar
payments to or establish or modify any Employee Benefit Plans
for, any of the Companies' directors, officers or employees or
enter into or modify any employment, consulting or similar
Contracts with any such persons or agree to do any of the
foregoing;
(M) continue to maintain all Employee Benefit Plans in
accordance with applicable Regulations, and ensure that no
Employee Benefit Plan, nor any trust related thereto, shall be
amended or terminated prior to the Closing Date, except for any
such amendment as may be required to comply with applicable
Regulations;
(N) collect their accounts receivable in the ordinary course
of business consistent with past practice (as in existence on
December 31, 1995, other than practices changed prior to February
29, 1996 in order to finance the Companies' losses);
(O) pay their accounts payable in the ordinary course of
business consistent with past practice (as in existence on
December 31, 1995, other than practices changed prior to February
29, 1996 in order to finance the Companies' losses) and not fail
to pay or discharge when due any liabilities, except as provided
in this Section;
(P) use their best efforts to help the Shareholder complete
the Acquisition and obtain the satisfaction of the conditions
specified in Section 9;
(Q) promptly notify the Buyer of any Default, the threat or
commencement of any litigation, or any development that occurs
before the Closing that could in any way materially affect the
Companies, the Assets or the Business;
(R) use their best efforts to obtain any consents or approvals
required under any Contracts or License or otherwise that are
necessary to complete the Acquisition or to avoid a Default under
any such Contracts or License;
28
29
(S) comply with all Regulations applicable to them and the
Assets and to the conduct of their business and comply with all
Contracts by which they are bound and all Licenses held by them;
(T) provide the Buyer with such financial and other reports of
the Business as may be reasonably requested;
(U) not make, or agree to make, any capital expenditures in
excess of $25,000 in the aggregate;
(V) not grant any person or entity a license or other right to
use the name "Health Valley Foods" or any derivation thereof;
(W) not (i) pay any Funded Indebtedness (other than scheduled
principal and interest on such Funded Indebtedness in the
ordinary course of business) or Transaction Costs or (E) pay any
amounts to obtain the consents or approvals required by item (R)
above;
(X) not pay (i) any Taxes except in the ordinary course of
business and with respect to Taxes for periods ending on or prior
to December 31, 1995 to the extent reflected as an accrual on the
Latest Year-End Balance Sheet, or (ii) any amounts described in
Section 8.1(B)(6) hereof;
(Y) (i) give to the Buyer's officers, employees, counsel
accountants, potential financing sources and other
representatives free and full access to and the right to inspect
and investigate, during normal business hours, all of the Assets,
records, Contracts and other documents relating to the Business
or either of the Companies, (ii) permit them to consult with the
officers, employees, accountants, counsel agents, customers and
suppliers of either of the Companies for the purpose of making
such investigation of either of the Companies, the Business and
the Assets as the Buyer shall desire to make, provided that such
investigation shall not unreasonably interfere with the
Companies' business operations, and (iii) furnish to the Buyer
all such documents and copies of documents and records and
information with respect to either of the Companies' affairs and
copies of any working papers relating thereto as the Buyer shall
from time to time reasonably request;
(Z) promptly disclose to the Buyer in writing any information
set forth in the DISCLOSURE SCHEDULE hereto which no longer is
correct and any information of the nature of that set forth in
the DISCLOSURE SCHEDULE which arises after the date hereof and
which would have been required to be included in the DISCLOSURE
SCHEDULE if such information had been obtained on the date
hereof;
29
30
(AA) not increase any accrual or reserve for Taxes on the books
and records of either Company or on any financial statement of
either Company other than in the ordinary course consistent with
their past practices;
(BB) maintain their working capital in the ordinary course of
business consistent with their past practices (as in existence on
December 31, 1995, other than practices changed prior to February
29, 1996 in order to finance the Companies' losses);
(CC) maintain their inventory, including, without limitation, the
levels thereof, in the ordinary course of business and in
accordance with their past practices (as in existence as of
February 29, 1996); and
(DD) not dispose of Excess Inventory (other than the disposition
of organic supplies as a result of their use in the production of
the Companies' products).
6.2 Exclusivity. Until the earlier of the Closing Date and April 15,
1996, neither the Shareholder, the Companies nor any of their agents or
representatives shall, directly or indirectly, entertain, solicit,
initiate, encourage or consider any inquiries or proposals from, provide
confidential information to, participate in any discussion or
negotiations with or enter into any agreement or understanding, whether
written or oral with any person or entity (other than the Buyer)
concerning the sale of all or a substantial portion of the assets or
capital stock of the Companies in any manner or by any means.
7. Survival of Representations and Warranties.
7.1 Survival. All of the representations, warranties, covenants and
agreements made by each party in this Agreement the Disclosure Schedule
or in any certificate delivered by any such party pursuant hereto or in
connection with the Acquisition, shall survive the Closing and each
party hereto shall be entitled to rely upon the representations and
warranties of the other party set forth in this Agreement.
7.2 Expiration of Certain Representations and Warranties.
Notwithstanding the foregoing, however, except with respect to those
representations and warranties pertaining directly to Buyer's Special
Damages (including but not limited to, the Tax Representation, the
Capitalization Representation and the Environmental Representations),
the representations and warranties made by the Shareholder in this
Agreement, the DISCLOSURE SCHEDULE or in any certificate delivered by or
on behalf of the Shareholder to or on behalf of the Buyer pursuant
hereto or thereto in connection with the Acquisition shall terminate,
expire and be of no further force or effect upon the complete
distribution of the Escrow Amount by the Escrow Agent to or for the
benefit of the Shareholder, the Buyer or otherwise in accordance with
the terms and conditions of the Escrow Agreement.
30
31
8. Indemnification. Subject to the limitations set forth in Sections 7.2
and 8.3(B) hereof with respect to Buyer's Regular Damages:
8.1 Indemnification Obligations.
(A)(I) The Shareholder shall indemnify and hold harmless the
Buyer from, against and in respect of any and all damages,
losses, deficiencies, liabilities, claims, costs and expenses
(collectively "BUYER'S DAMAGES") resulting from, relating to or
arising out of any (i) breach of, or inaccuracy in, the
representations and warranties of the Shareholder contained in
this Agreement or in any certificate or other document delivered
pursuant hereto or (ii) nonfulfillment or breach of any agreement
or covenant on the part of the Shareholder hereunder.
(A)(11) The Buyer shall indemnify and bold harmless the
Shareholder from, against and in respect of any and all damages,
losses, deficiencies, liabilities, claims, costs and expenses
resulting from, relating to or arising out of any (i) breach of,
or inaccuracy in, the representations and warranties of the Buyer
contained in this Agreement or in any certificate or other
document delivered pursuant hereto, (ii) nonfulfillment or breach
of any agreement or covenant on the part of the Buyer hereunder
or (iii) failure to satisfy and perform in full all of the terms
and conditions of all capitalized leases and Capital lease
equivalents listed on the Funded Indebtedness Exhibit.
(B) The Shareholder shall also indemnify and bold harmless the
Buyer and each person who controls the Buyer within the meaning
of the Securities Act of 1933, as amended, and each officer and
director of the Buyer and any such controlling person, at all
times after the date hereof from, against and in respect of any
and all damages, losses, deficiencies, liabilities, claims, costs
and expenses resulting from, relating to or arising out of:
(1) (i) the breach or inaccuracy of the representations or
warranties of the Shareholder set forth in Section 4.2
hereof (the "CAPITALIZATION REPRESENTATION") or (ii) any
claim, proceeding or action by any former shareholder, or
holder of securities or rights to acquire securities, of
either of the Companies involving the transactions
contemplated hereby or any prior transaction involving any
shares of capital stock or securities, or rights to
acquire securities, of either of the Companies, or any
predecessor corporation;
(2) without limiting the generality of anything
contained in this Section 8.1, any and all damages,
losses, deficiencies, liabilities, costs and expenses of,
or claims against, the Buyer, resulting from, relating to
or arising out of the Business, operations or Assets of
the Companies prior to the Closing Date or the actions or
omissions of the Companies'
31
32
officers, directors, shareholders, employees or agents
prior to the Closing Date, including, without limitation,
any liability relating to, and any claim which arises out
of or is based upon, negligence, strict liability, or any
express or implied representation, warranty, agreement or
guarantee made by or on behalf of the Companies or alleged
to have been made by or on behalf of the Companies or
which is imposed or asserted to be imposed on the
Companies by operation of law, in connection with any
product designed, used, tented, sold, manufactured,
shipped or installed by or on behalf of the Companies or
for any service performed by or on behalf of the
Companies, in any case prior to the Closing Date and
irrespective of the date that any claim, suit or other
cause of action related to any of the foregoing is filed
or otherwise instituted against the Companies; provided,
however, that the foregoing shall not apply to the
Liabilities of the Companies disclosed on the DISCLOSURE
SCHEDULE or referred to in Sections 4.9(A) through (C));
(3) any liabilities or obligations of the Companies
relating to any Transaction Costs;
(4) (i) the breach or inaccuracy of the representations
and warranties of the Shareholder set forth in Section 4.8
hereof (other than as set forth in the first two (2)
sentences thereof) (the "TAX REPRESENTATION") or (ii) any
liabilities or obligations of any of the Companies, or any
affiliated group of which one or more of the Companies is
a member, for any foreign, federal state or local tax,
including, but not limited to, income taxes, personal
property taxes, franchise taxes, gross receipts taxes,
sales taxes, use taxes, occupational taxes, wage and
payroll taxes, real property taxes and ad valorem taxes,
or any interest, additions to tax or penalties thereon
accrued for, applicable to or arising from any period
ending on or prior to the Closing Date;
(5) any liabilities or obligations of the Companies
with respect to Funded Indebtedness;
(6)(i) the breach or inaccuracy of the representations and
warranties of the Shareholder contained in Sections
4.15(I) and 4.29 hereof (the "ENVIRONMENTAL
REPRESENTATIONS"), (ii) the presence, disposal, spillage,
discharge, transportation, emission, leakage, release or
threatened release ("PRESENCE OR RELEASE"), on or prior to
the Closing Date, of any Hazardous Substances which is at
in, on, under, about from or affecting any property owned
or leased by the Companies on the Closing Date or at any
time prior thereto or in which the Companies has or had an
interest, regardless of when the Presence or Release is
discovered, (iii) any personal injury (including wrongful
death) or property damage (real
32
33
or personal) arising out of or related to any such
Presence or Release, (iv) any lawsuit brought or
threatened settlement reached, or order or directive of or
by any governmental authority relating to such Presence or
Release, or (v) any violation or alleged violation of any
Environmental Law by the Companies at any time on or prior
to the Closing Date;
(7) the repair, replacement or reconstruction of the
roofs on the Companies' existing facilities and other work
incidental thereto ("ROOF REPAIRS"), which Roof Repairs,
and the contractor or contractors hired to perform such
Roof Repairs, shall be reasonably acceptable to the
Companies, the Shareholder and the landlords of such
facilities; and
(8) any and all costs, judgments, claims, actions at
law or in equity, interest charges and reasonable
attorneys' fees with respect to any cause of action or
proceeding, by any participant or dependent or beneficiary
of any participant, arising out of or by reason of the
sponsorship by the Companies of any Employee Benefit Plan
or Pension Plan prior to the Closing Date.
(9) the owning, holding, storing, transporting or
disposing of Excess Inventory from and after the thirtieth
day after the Closing, including, but not limited to, (u)
the cost of insuring and warehousing such Excess
Inventory, (v) any losses realized on the Disposition of
Excess Inventory, (w) the cost of any such Excess
Inventory which spoils or deteriorates prior to the use or
disposition of such Excess Inventory, (x) the amounts paid
to terminate or modify any Contracts for such Excess
Inventory, and (y) the interest deemed incurred by the
Companies on the funds used by the Companies to acquire
such Excess Inventory (the Companies shall be deemed to
have incurred interest on such funds at a rate equal to
the prime rate of Sanwa Bank in effect from time to time),
offset by any gains realized on the Disposition of Excess
Inventory. For the purposes hereof, "Excess Inventory"
means the organic supplies acquired or to be acquired
pursuant to the Contracts listed on EXHIBIT F (other than
organic supplies used in production of the Companies'
products in the ordinary course of business prior to the
Closing or within thirty (30) days thereafter), unless the
Buyer notifies the Shareholder in writing that such
organic supplies acquired or to be acquired pursuant to
any such Contract are not included in Excess Inventory.
After the thirtieth day after the Closing, the Shareholder
and the Buyer agree to cooperate with each other in order
to (i) dispose of any or all of such Excess Inventory in
any reasonable manner (each such transaction, a
"DISPOSITION"), and (ii) contact any or all of the vendors
of such Excess Inventory for the purpose of attempting to
reduce the levels thereof in a manner acceptable to the
Shareholder, the Companies and the Buyer.
33
34
(C) Each indemnifying party or parties hereto will
indemnify and hold harmless the indemnified party or
parties hereto from, against and in respect of any and all
actions, suits, proceedings, demands, assessments,
judgments, costs (including attorneys' fees) and legal and
other expenses incident to any of the foregoing or to the
enforcement of this Section 8.
(D) Notwithstanding anything herein to the contrary but
subject to the provisions of Section 8.3(B) hereof with
respect to Buyer's Regular Damages: the Buyer shall not be
entitled to indemnification from the Shareholder, whether
directly, indirectly or through the Escrow Fund, pursuant
to the provisions of Section 8.1.(A)(I)(i) of this
Agreement until the aggregate cumulative amount of Buyer's
Damages for claims pursuant to Section 8.1(A)(I)(i)
exceeds $175,000, in which event the Buyer may assert a
claim against the Shareholder only for those Buyer's
Damages in excess of $175,000.
(E) Except with respect to, and only to the extent of
matters for which the Shareholder is obligated (or would
be obligated but for any limitation on recovery contained
herein) to indemnify the Buyer pursuant to the terms of
this Agreement, the Buyer and the Companies (collectively,
the "BUYER PARTIES") jointly and severally shall indemnify
and hold harmless the Shareholder from and against any and
all damages, losses, liabilities, costs and expenses of
the Shareholder resulting from, relating to or arising out
of, claims by a third party against the Shareholder
relating to (i) the business, operations or assets of any
Buyer Party from and after the Closing Date and (ii) the
actions or omissions of any Buyer Party from and after the
Closing Date.
8.2 Method of Asserting Claims, Etc. All claims for indemnification
under this Section 8 shall be asserted and resolved as follows:
(A) In the event that any claim or demand for which the
Shareholder would be liable to the Buyer hereunder is asserted
against or sought to be collected by a third party, the Buyer
shall promptly notify the Shareholder of such claim or demand,
specifying the nature of such claim or demand and the amount or
the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such
claim or demand) (the "CLAIM NOTICE"); provided, however, the
failure to give the Shareholder prompt notice of such claim or
demand shall not relieve the Shareholder of, or limit in any way,
the Shareholder's indemnification obligations under this
Agreement, unless the Shareholder is materially prejudiced by the
Buyer's failure to give prompt notice of such claim or demand.
If the Shareholder desires to participate in, but not control any
such defense or settlement it may do so at its sole cost and
expense. The Buyer shall have the right to control the defense or
settlement of any such
34
35
claim or demand, and its reasonable costs and expenses thereof
shall be included as part of the indemnification obligations of
the Buyer hereunder.
(B) In the event that the Buyer should have a claim against
the Shareholder hereunder which does not involve a claim or
demand being asserted against or sought to be collected from it
by a third party, the Buyer shall promptly send a Claim Notice
with respect to such claim to the Shareholder; provided, however,
the failure to give the Shareholder prompt delivery of a Claim
Notice shall not relieve the Shareholder of, or limit in any way,
the Shareholder's indemnification obligations under this
Agreement, unless the Shareholder is materially prejudiced by the
Buyer's failure promptly to give such Claim Notice. If the
Shareholder does not notify the Buyer within thirty (30) days of
the giving of such Claim Notice that he disputes such claim, the
amount of such claim shall be conclusively deemed a liability of
the Shareholder hereunder.
(C) All claims for indemnification made by the Shareholder
under this Agreement shall be asserted and resolved under the
procedures set forth above in this Section 8.2 by substituting,
as appropriate, "the Buyer" for "Shareholder" and "Shareholder",
as appropriate, for "the Buyer".
(D) Nothing herein shall be deemed to prevent any indemnified
party from making a claim hereunder for potential or contingent
claims or demands provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or
demand and the estimated amount thereof to the extent then
feasible and the indemnified party has reasonable grounds to
believe that such a claim or demand will be made.
8.3 Payment.
(A) Subject to the provisions of on 8.3.(B) with respect to
Buyer's Regular Damages, in the event that any party is required
to make any payment under this Section 8, such party shall
promptly pay the indemnified party such amount. If there should
be a dispute as to the amount or manner of determination of any
indemnity obligation owed under this Section 8, the party from
which indemnification is due shall nevertheless pay when due such
portion, if any, of the obligation as shall not be subject to
dispute. The difference, if any, between the amount of the
obligation ultimately determined as properly payable under this
Section 8 and the portion, if any, theretofore paid shall bear
interest as provided in Section 8.3(C). Upon the payment in full
of any claim, either by setoff or otherwise, the party or entity
making payment shall be subrogated to the rights of the
indemnified party against any person, firm, corporation or other
entity with respect to the subject matter of such claim.
35
36
(B) Notwithstanding the provisions of Section 11.7:
(1) Any indemnification claim for Buyer's Regular
Damages for which the Buyer is entitled to payment under
this Section 8 shall be paid to the Buyer exclusively from
the Escrow Fund held by the Escrow Agent, to the extent of
funds held under the Escrow Agreement. With respect to
any claim by the Buyer for indemnification for Buyer's
Special Damages, the Buyer may, but shall not be obligated
to, proceed against the Escrow Fund or directly against
the Shareholder.
(2) Anything in this Agreement elsewhere to the
contrary notwithstanding, if the funds held under the
Escrow Agreement are insufficient to pay any
indemnification claim for Buyer's Regular Damages in full,
such claim shall be paid from the Escrow Fund to the
extent that funds are then held by the Escrow Agent under
the Escrow Agreement and, to the extent the funds then
held by the Escrow Agent under the Escrow Agreement are
not sufficient to satisfy such claim in full, such excess
shall not be the obligation of the Shareholder and the
Shareholder shall not be obligated to make full and prompt
payment of such excess to the Buyer.
(3) Except for indemnification claims for Buyer's
Special Damages, which shall not be limited as hereinafter
provided, (a) the sole obligation of the Shareholder with
respect to (i) any claim for Buyer's Regular Damages, (ii)
any other payment to which Buyer may be entitled under
this Section 8, (iii) any other obligation of the
Shareholder to Buyer under any other provisions of this
Agreement and/or (iv) any claims of Buyer against Seller
under or pursuant to the Securities Exchange Act of 1934,
as amended, or any other statutes of similar import unless
such claim constitutes a claim for Buyer's Special
Damages, shall be discharged, if at all, solely and
exclusively from the Escrow Fund and not by the
Shareholder and (b) if the Escrow Fund is exhausted, then,
in such event, Buyer shall have no further claim against
the Shareholder.
(C) Subject to the provisions of Section 8.3.(B) with respect
to Buyer's Regular Damages, if all or part of any indemnification
obligation under this Agreement is not paid when due, then the
indemnifying party or parties shall pay the indemnified party or
parties interest on the unpaid amount of the obligation for each
clay from the date the amount was claimed to be due until payment
in full, payable on demand, at the fluctuating rate per annum
which at all times shall be the lowest rate of interest generally
charged from time to time by Sanwa Bank and publicly announced by
such bank as its so-called "prime rate."
36
37
(D) Notwithstanding anything contained in this Agreement to
the contrary, the Buyer's claims for indemnification for Buyer's
Special Damages shall not be (a) limited to, and the Buyer shall
not be obligated to proceed against, the Escrow Fund or in any
other manner as to the time for bringing such claim or the amount
of such claim or (b) subject to the deductible contained in
Section 8.1(D) hereof, and nothing contained herein shall be
interpreted as, or deemed to be, a waiver of the Buyer's
indemnification rights for Buyer's Special Damages.
8.4 Service of Process, Consent to Jurisdiction, Etc.
(A) The Shareholder irrevocably consents to the service of any
process, pleading, notices or other papers by the mailing of
copies thereof by registered, certified or first class mail,
postage prepaid, to the Shareholder at his address set forth
herein, or by any other method provided or permitted under
California law.
(B) The Shareholder irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding arising out of
this Agreement may be brought in the United States District Court
for the Central District of California or, if such court does not
have jurisdiction or will not accept jurisdiction, in any court
of general jurisdiction in the county of Los Angeles, California;
(ii) consents to the jurisdiction of any such court in any such
suit, action or proceeding; and (iii) waives any objection which
the Shareholder may have to the laying of venue of any such suit,
action or proceeding in any such court.
9. Conditions Precedent to Obligations of the Buyer. Subject to waiver as
set forth in Section 11.4, the obligations of the Buyer under this Agreement
are subject to the fulfillment, to the Buyer's reasonable satisfaction (other
than with respect to Section 9.16, the fulfillment of which the Buyer shall be
satisfied in its absolute discretion), prior to or at the Closing of each of
the following conditions:
9.1 Representations True at Closing. The representations and
warranties of the Shareholder set forth in Section 4 shall be true and
correct as of the date hereof and true and correct on and as of the
Closing Date with the same effect as if made on such date.
9.2 Performance by the Shareholder. The Shareholder shall have
performed and satisfied all agreements and conditions which he is
required by this Agreement to perform or satisfy prior to or on the
Closing Date.
9.3 Certificates. The Buyer shall have received certificates from the
Shareholder dated the Closing Date certifying in such detail as the
Buyer may reasonably request that each of the conditions described in
Sections 9.1 and 9.2 has been fulfilled.
37
38
9.4 Form and Content of Documents. The form and content of all
documents, certificates and other instruments to be delivered by the
Shareholder shall be reasonably satisfactory to the Buyer.
9.5 Opinion of Counsel. The Buyer shall have received the written
opinion dated the Closing Date of Xxxx X. Xxxxxx, A Professional
Corporation, counsel for the Shareholder, in form and substance
reasonably satisfactory to the Buyer.
9.6 Litigation Affecting Closing. No Court Order shall have been
issued or entered which would be violated by the completion of the
Acquisition or which would impose material conditions or restrictions on
the Companies, the Business or the Assets that did not exist prior to
the Acquisition. No person who or which is not a party to this
Agreement shall have commenced or threatened to commence any Litigation
seeking to restrain or prohibit, or to obtain substantial damages in
connection with, this Agreement or the transactions contemplated by this
Agreement, or impose material conditions or restrictions on the
Companies, the Business or the Assets after the Acquisition as a
consequence of the Acquisition and no Litigation shall be pending
against the Companies.
9.7 Material Adverse Changes. From the date hereof to the Closing
Date, neither the Companies, the Business nor the Assets shall have been
materially adversely affected or changed (except personnel layoffs and
other changes disclosed to Buyer prior to the signing of this Agreement)
in any way, including, without limitation, by fire, casualty, act of God
or otherwise. There shall be no conditions existing or threatened with
respect to the Companies, the Business or the Assets that might be
expected to have a material adverse effect on any of them.
9.8 Regulatory Compliance and Approvals. All approvals required
under any Regulations to carry out the Acquisition shad have been
obtained and that the parties shall have complied with all Regulations
applicable to the Acquisition.
9.9 Consents. The Shareholder or the Companies shall have delivered
to the Buyer a waiver of existing defaults, and all consents required to
be obtained in connection with the Acquisition in order to avoid a
Default as a result of the Acquisition, under any Contract to or by
which the Companies are a party or by which they or their assets may be
bound or under any License which they hold. Each of the foregoing must
be free from material burdensome restrictions and conditions not
applicable to the Companies prior to the date of this Agreement.
9.10 Escrow Agreement. The Buyer, the Shareholder, and the Escrow
Agent shall have entered into the Escrow Agreement.
9.11 Consents and Approvals. The Shareholder and the Companies shall
have obtained all consents and approvals necessary to complete the
Acquisition and related transactions.
38
39
9.12 Ancillary Documents. Each entity other than the Buyer which is a
party to any of the Ancillary Documents shall have executed and
delivered such of the Ancillary Documents as it is a party thereto.
9.13 Spousal Waiver. At the Closing, the Shareholder shall have
delivered to the Buyer a written waiver, in form and substance
reasonably acceptable to the Buyer from the Shareholder's spouse waiving
all of her rights in the Stocks.
9.14 FIRPTA Certificate. At the Closing, the Shareholder shall have
delivered to the Buyer a written certification in accordance with
Section 1445 of the Code certifying that the Shareholder is not a person
subject to withholding under Section 1445 of the Code and containing the
Shareholder's address.
9.15 Shareholder Noncompetition Agreement. As of the Closing, the
Shareholder Noncompetition Agreement shall have been duly executed and
delivered by the Shareholder and shall be in full force and effect.
9.16 Financing. At or prior to the Closing, the Buyer shall have
obtained all debt and equity financing necessary to consummate the
Acquisition, on terms and in amounts satisfactory to the Buyer.
9.17 State Securities Matters. Prior to the Closing Date, the
Companies shall have delivered to the Buyer evidence satisfactory to the
Buyer that the Stocks can be transferred to the Buyer in compliance with
all applicable state securities laws.
9.18 Proceedings and Documents. As of the Closing, all corporate and
other proceedings in connection with the transactions contemplated
hereby and all documents and instruments incident to such transactions,
shall be reasonably satisfactory in form and substance to the Buyer, and
its counsel, and the Buyer shall have received at or prior to the
Closing all such documents as it shall have reasonably requested.
9.19 License Agreement. The Buyer, the Companies and the Shareholder
shall have entered into a license agreement, in form the attached hereto
as EXHIBIT G (the "LICENSE AGREEMENT").
9.20 State Tax Escrow Agreement. The Buyer, the Shareholder and the
Escrow Agent shall have entered into the State Tax Escrow Agreement.
9.21 Roof Repair Escrow Agreement. The Buyer, the Shareholder and the
Escrow Agent shall have entered into the Roof Repair Escrow Agreement.
9.22 Audited 1995 Financial Statements. At, and simultaneously with,
the Closing, the Companies shall have delivered to the Buyer the Audited
Financial Statements, which Audited Financial Statements shall not be,
in any material respect, different than, or
39
40
reflect material differences from, the Latest Year-End Financial
Statements, except for possible differences arising from the write-down
of certain assets classified as construction-in-progress on the Latest
Year-End Balance Sheet and the possible accrual of additional State
Taxes in an amount not to exceed $500,000.
10. Conditions Precedent to Obligations of the Shareholder. Subject to
waiver as set forth in Section 11.4, the obligations of the Shareholder under
this Agreement are subject to the fulfillment to the Shareholder's reasonable
satisfaction prior to or at the Closing of each of the following conditions:
10.1 Buyer Representations True at Closing. The representations and
warranties of the Buyer set forth in Section 5 shall be true and correct
on and as of the Closing Date with the same effect as if made at that
time.
10.2 Performance by the Buyer. The Buyer shall have performed and
satisfied all agreements and conditions which it is required by this
Agreement to perform or satisfy prior to or on the Closing Date.
10.3 Officer's Certificate. The Shareholder shall have received a
certificate from the Buyer dated the Closing Date certifying in such
detail as the Shareholder may reasonably request that each of the
conditions described in Sections 10.1 and 10.2 has been fulfilled.
10.4 Incumbency Certificate. The Shareholder shall have received a
certificate of the Secretary or an Assistant Secretary of the Buyer
dated the Closing Date certifying to the incumbency of the officers of
the Buyer signing for it and as to the authenticity of their signatures.
10.5 Capitalization of the Buyer as of the Closing Date. The
Shareholder shall have received a certificate executed by the President
of the Buyer dated the Closing Date setting forth the name, address and
number of shares of Common Stock owned and the price per share paid by
each of the shareholders of the Buyer as of the Closing Date and further
demonstrating that the aggregate number of shares of Common Stock of the
Buyer subject to the exercise of the Options granted to the Shareholder
under the Option Agreement equals ten percent (10%) of the then
outstanding issued and outstanding Common Stock of the Buyer, on a fully
diluted basis.
10.6 Form and Content of Documents. The form and content of all
documents, certificates and other instruments to be delivered by the
Buyer shall be reasonably satisfactory to the Shareholder.
10.7 Opinion of Counsel. The Shareholder shall have received the
written opinion dated the Closing Date of Xxxxxxx and Xxxxxx, counsel
for the Buyer, in form and substance reasonably satisfactory to the
Shareholder.
40
41
10.8 Litigation Affecting Closing. No Court Order shall have been
issued or entered which would be violated by the completion of the
Acquisition. No person who or which is not a party to this Agreement
shall have commenced or threatened to commence any Litigation seeking to
restrain or prohibit, or to obtain substantial damages in connection
with, this Agreement or the transactions contemplated by this Agreement.
10.9 Regulatory Compliance and Approval. All approvals required under
any Regulations to carry out the Acquisition shall have been obtained
and that the parties have complied with all Regulations applicable to
the Acquisition.
10.10 Ancillary Documents. The Buyer shall have executed and delivered
each of the Ancillary Documents to which it is a party.
10.11 Release of Guarantees. The Buyer shall deliver to the Shareholder
releases (which may be subject to the Closing) of all personal liability
the Shareholder may have pursuant to the guarantees relating to
indebtedness for borrowed money set forth on the Funded Indebtedness
Exhibit.
10.12 Option Agreement. At the Closing, the Buyer shall have executed
and delivered to the Shareholder the Option Agreement.
11. Miscellaneous.
11.1 Termination by Mutual Consent. This Agreement may be terminated
at any time on or prior to the Closing Date by mutual consent of the
Shareholder and the Buyer.
11.2 Termination for Breach. The Buyer may terminate its obligations
under this Agreement at any time prior to the Closing Date if the
Shareholder or the Companies shall have breached any of their
representations, warranties or other obligations under this Agreement in
any material respect. The Shareholder and the Companies may likewise
terminate their obligations under this Agreement at any time prior to
the Closing Date if the Buyer shall have breached any of its
representations, warranties or other obligations under this Agreement in
any material respect. Such termination may be effected by written
notice from either the Buyer or the Shareholder or the Companies, as
appropriate, citing the reasons for termination and shall not subject
the terminating party to any liability for any valid termination.
11.3 Assignment and Binding Effect. This Agreement may not be
assigned prior to the Closing by any party hereto without the prior
written consent of the other parties. Subject to the foregoing, all of
the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the heirs, executors,
legal representatives, successors and assigns of the Shareholder and by
the successors and assigns of the Buyer.
41
42
11.4 Waiver. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written
instrument executed by such party.
11.5 Notices. Any notice, request demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be
in writing and shall be deemed given only if delivered personally to the
address set forth below (to the attention of the person identified
below), sent by telegram or by registered or certified mail, postage
prepaid, or sent by overnight courier service as follows:
If to Buyer, to:
Health Valley Company
c/o Intrepid Food Holdings, Inc.
000 X. XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxx
If to the Shareholder, to:
Xxxxxx Xxxxxxxx, Xx.
c/o Xxxx X. Xxxxxx, Esq.
Suite 1920
00000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
With a required copy to:
Xxxx X. Xxxxxx, Esq.
Suite 1920
00000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
or to such other address as the addressee may have specified in a notice
duly given to the sender and to counsel as provided herein. Such
notice, request, demand, waiver, consent, approval or other
communication will be deemed to have been given as of the date so
delivered or telegraphed or, if mailed, three business days after the
date so mailed or if sent by overnight courier service one business day
after delivery to such overnight courier.
11.6 California Law to Govern. This Agreement and the rights and
obligations of the parties hereto shall be governed by and interpreted
and enforced in accordance with the substantive laws of California. Any
suit brought hereon, whether in contract, tort, equity or otherwise,
shall be brought in the state or federal courts sitting in Los Angeles,
42
43
California, if such courts have jurisdiction over the subject matter of
such suit, the parties hereto hereby waiving any claim or defense that
such forum is not convenient or proper. Each party hereby agrees that
any such court shall have in personam jurisdiction over it, consents to
service of process in any manner authorized by California law, and
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner specified by law.
11.7 Remedies Not Exclusive. Nothing in this Agreement shall be
deemed to limit or restrict in any manner other rights or remedies that
any party may have against any other party at law, in equity or
otherwise.
11.8 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of
the parties hereto and the Companies and their heirs, executors, legal
representatives, successors and assigns, and they shall not be construed
as conferring and are not intended to confer any rights on any other
persons.
11.9 Contents of Agreement. This Agreement, together with any
documents referred to herein, sets forth the entire agreement of the
parties hereto with respect to the transactions contemplated hereby.
This Agreement may not be amended except by an instrument in writing
signed by the parties hereto, and no claimed amendment, modification,
termination or waiver shall be binding unless in writing and signed by
the party against whom or which such claimed amendment, modification,
termination or waiver is sought to be enforced.
11.10 Section Headings and Gender. All section headings and the use of
a particular gender are for convenience only and shall in no way modify
or restrict any of the terms or provisions hereof. Any reference in
this Agreement to a Section, Exhibit or the Disclosure Schedule shall be
deemed to be a reference to a Section, Exhibit or the Disclosure
Schedule of this Agreement unless the context otherwise expressly
requires.
11.11 Disclosure Schedule and Exhibits. All attachments, Exhibits and
the Disclosure Schedule referred to herein are intended to be and hereby
are specifically made a part of this Agreement. An item disclosed in
the DISCLOSURE SCHEDULE in response to one Section of this Agreement
shall not be deemed disclosed in response to any other Section unless
otherwise specifically provided in this Agreement.
11.12 Fees and Expenses. Each party will bear all of its own expenses
in connection with the preparation, execution and negotiation of this
Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, any such expenses incurred by the Companies, including, but
not limited to, the fees, expenses and other commissions of Xxxxxxxxxxx
Xxxxxxx & Co., shall be deemed to be expenses of the Shareholder and
shall be paid by the Shareholder.
43
44
11.13 Use of Proceeds. The Shareholder will use the proceeds from the
sale of the Stocks pursuant to this Agreement to satisfy any obligations
that he is obligated, by law or contract to satisfy with such proceeds,
which the parties hereto expressly acknowledge and agree do not include
those Shareholder guarantees not being released pursuant to Section
10.11 hereof.
11.14 Release of Guarantees. Subject to Section 10.11 hereof, the
Buyer shall request that the Shareholder be released from all guarantees
of obligations of either Company described in items (A), (B) and (C) of
Section 4.9 hereof and the Companies and Buyer shall jointly and
severally indemnify the Shareholder from any liability relating thereto;
provided, however, that the Buyer shall not be obligated to satisfy any
obligation, provide collateral or give its own guarantee in connection
with obtaining such releases.
11.15 Severability. Any provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.16 Counterparts. This Agreement may be executed in two or more
counterparts, each of which is an original and all of which together
shall be deemed to be one and the same instrument. This Agreement shall
become binding when one or more counterparts taken together shall have
been executed and delivered by all of the parties. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
11.17 Tax Refunds. As additional consideration for the sale by the
Shareholder to the Buyer of the Stocks pursuant to this Agreement, the
Buyer hereby agrees to cause the Companies to pay to the Shareholder all
Tax Refunds promptly upon receipt thereof, or, if any such Tax Refund
offsets or otherwise reduces in any way a Tax liability of either
Company applicable to or arising out of any period ending after the
Closing Date, promptly upon the utilization thereof.
11.18 Post-Closing Cooperation. From and after the Closing Date, each
of the parties shall execute and deliver any and all additional papers,
documents and other assurances and shall do any and all acts and things
reasonable or necessary in connection with the performances of their
respective obligations hereunder.
11.19 Access to Books and Records; Cooperation. The Buyer shall cause
the Companies to provide the Shareholder and the Shareholder's
representatives with such reasonable cooperation as the Shareholder
shall reasonably request in connection with the Shareholders defense of
any action brought by any party other than the Buyer and concerning
which the Shareholder reasonably believes (a) the Companies have any
books, records or other documents, instruments or papers or other
information, or (b) the
44
45
Companies or any of their officers, directors, employees or agents have
any knowledge, provided the Shareholder executes a confidentiality
agreement reasonably acceptable to the Buyer, which agreement, however,
shall permit the Shareholder to use all disclosed information to the
extent necessary for such defense. In connection with such defense, the
Buyer shall cause the Companies to provide reasonable access to all of
the Companies' books, records, Contracts and other documents,
instruments and papers (delivered by the Shareholder to the Buyer at the
Closing pursuant to Section 3.2 hereof) to the Shareholder and the
Shareholder's representatives following no less than two (2) business
days' prior written notice from the Shareholder to the Buyer.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
THE SHAREHOLDER
/S/ Xxxxxx Xxxxxxxx, Xx.
------------------------------
Xxxxxx Xxxxxxxx, Xx.
HEALTH VALLEY COMPANY, a
Delaware corporation
By: /S/ Xxxxxxx X. Xxxx
---------------------------
Title: President
------------------------
45
