STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 3, 1995
BY AND BETWEEN
LEVMARK CAPITAL CORPORATION
AND
SHONEY'S, INC.
TABLE OF CONTENTS
1. DEFINITIONS..............................................-1-
2. PURCHASE AND SALE OF SHARES..............................-5-
A. Sale of Shares...........................................-5-
B. Assets Not Being Purchased and Sold......................-5-
C. Transfer of Shares.......................................-5-
3. PURCHASE PRICE...........................................-5-
A. Purchase Price for the Shares............................-5-
B. Means of Payment.........................................-6-
4. NO ASSUMPTION OF OBLIGATIONS.............................-6-
5. AUDITED BALANCE SHEET AND ADJUSTMENTS TO
PURCHASE PRICE...........................................-6-
A. Proposed Balance Sheet...........................-6-
B. Right of Review..................................-6-
C. Audited Balance Sheet............................-7-
D. Adjustments......................................-7-
E. Post-Closing.....................................-7-
6. HSR NOTIFICATION.........................................-8-
7. SELLER'S REPRESENTATIONS AND WARRANTIES..................-8-
A. General..................................................-8-
B. Good Standing of Seller..................................-8-
C. Good Standing and Foreign Qualification of Company.......-8-
D. Board and Shareholder Authorization......................-9-
E. Consents.................................................-9-
F. Legality and Enforceability..............................-9-
G. Business of Company..............................-9-
H. Capital Structure of Company.....................-9-
I. Ownership of Shares..............................-10-
J. Litigation...............................................-10-
K. Financial Information....................................-11-
L. Accounts Receivable; Inventory...........................-12-
M. No Other Liabilities.............................-13-
N. Taxes............................................-13-
O. No Changes.......................................-14-
P. Material Contracts...............................-16-
Q. Insurance........................................-17-
R. No Conflicts.....................................-18-
S. No Restrictions..................................-18-
T. No Misstatements, etc....................................-18-
U. Mortgages................................................-18-
V. Property.................................................-19-
W. Trademark Matters........................................-20-
X. Conformance to Law.......................................-21-
(i)
Y. Employee Benefit and Labor Matters...............-21-
Z. Licenses and Permits.............................-24-
AA. Brokers..........................................-24-
AB. Hazardous Materials..............................-24-
AC. Asbestos.........................................-25-
AD. Charter..........................................-25-
AE. Bylaws...........................................-25-
AF. Stock Records....................................-25-
AG. Salaried Employees...............................-26-
AH. Bank Accounts....................................-26-
AI. OSHA and Other Filings...........................-26-
AJ. Major Suppliers and Customers....................-26-
AK. Copies of Documents..............................-26-
8. BUYER'S REPRESENTATIONS AND WARRANTIES...................-27-
A. General..................................................-27-
B. Good Standing of Buyer...................................-27-
C. Board Authorization......................................-27-
D. Consents.................................................-27-
E. Legality and Enforceability..............................-28-
F. Litigation...............................................-28-
G. No Default.......................................-28-
H. Securities Matters.......................................-28-
I. No Restrictions..........................................-30-
J. No Misstatements, etc....................................-30-
K. No Broker................................................-31-
9. COVENANTS OF SELLER......................................-31-
A. Operate in Regular Manner................................-31-
B. Maintenance of Property..................................-31-
C. Books and Records........................................-31-
D. Taxes and Assessments....................................-31-
E. Inspection...............................................-31-
F. No Tax Settlements.......................................-32-
G. Notice of Certain Events.................................-32-
H. Capital Changes..................................-32-
I. Dividends........................................-32-
J. Certain Actions..................................-32-
K. Removal of Certain Encumbrances..................-33-
L. Hazardous Materials..............................-33-
M. Trademark........................................-34-
N. Remedial Actions.................................-34-
10. TITLE AND ENVIRONMENTAL MATTERS..........................-34-
A. Title Matters............................................-34-
B. Environmental Matters....................................-35-
11. CONDITIONS OF CLOSING....................................-35-
A. Conditions for the Benefit of Buyer......................-35-
B. Conditions for the Benefit of Seller.....................-38-
C. Best Efforts and Right to Perform........................-41-
D. Failure of Conditions....................................-41-
E. Waiver of Conditions.....................................-41-
12. DELIVERIES AT THE CLOSING................................-41-
A. Seller's Deliveries to Buyer.............................-41-
B. Buyer's Deliveries to Seller.............................-42-
C. Other Deliveries.........................................-43-
13. TERMINATION..............................................-43-
A. By Agreement or Failure of Conditions....................-43-
B. Lapse of Time............................................-44-
C. Notice; Remedies.........................................-44-
14. INDEMNIFICATION..........................................-44-
A. Indemnification by Seller................................-44-
B. Indemnification by Buyer.................................-45-
C. Participation in Third Party Claims......................-45-
D. Litigation.......................................-46-
15. TAX MATTERS..............................................-47-
A. Tax Indemnities..................................-47-
B. Refunds and Tax Benefits.........................-48-
C. Contests.........................................-49-
D. Preparation of Tax Returns.......................-50-
E. Section 338(h)(10) Election......................-50-
F. Cooperation and Exchange of Information..........-52-
G. Miscellaneous....................................-52-
16. SURVIVAL OF TERMS........................................-53-
17. WAIVER AND AMENDMENT.....................................-53-
18. CONFIDENTIAL INFORMATION AND RETENTION OF DOCUMENTS......-54-
A. Confidential Information.................................-54-
B. Retention of Documents...................................-54-
C. Inspection of Documents..........................-54-
19. FEES AND EXPENSES........................................-55-
20. PUBLICITY................................................-55-
21. CERTAIN OPERATING SYSTEMS................................-55-
22. TRANSFER TAXES, ETC......................................-56-
23. NOTICES..................................................-56-
24. CONSTRUCTION.............................................-57-
25. SUCCESSORS AND ASSIGNS...................................-57-
26. SEVERABILITY.............................................-57-
27. COUNTERPARTS.............................................-58-
28. ENTIRE AGREEMENT.........................................-58-
29. FURTHER ASSURANCES.......................................-58-
30. NO THIRD PARTY BENEFICIARIES.............................-58-
(iv)
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made on this
3rd day of August, 1995, by and between LEVMARK CAPITAL CORPORATION, a New
York corporation having its principal executive offices at 000 Xxxxxxxx
Xxxxxxx, Xxx Xxxxxxxx, Xxx Xxxx 00000 ("Buyer"), and SHONEY'S, INC., a
Tennessee corporation having its principal executive offices at 0000 Xxx
Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx 00000 ("Seller").
WITNESSETH:
WHEREAS, Seller owns all of the issued and outstanding capital
stock of Xxxx Xxxx Foods, Inc., a Tennessee corporation ("Company"); and
WHEREAS, Buyer desires to acquire from Seller, and Seller desires
to transfer to Buyer, all of the issued and outstanding shares of capital
stock of Company in exchange for payment to Seller of the Purchase Price
(as defined herein) to be delivered on the Closing Date (as defined
herein), all upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises and of
the mutual agreements, provisions, covenants and grants contained herein,
the parties hereto hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, in addition to the terms defined
elsewhere herein, unless the context otherwise requires, the following
terms shall have the meanings indicated:
"ACCOUNTS RECEIVABLE" means all of the accounts and notes
receivable owed to the Company.
"ACCOUNTS PAYABLE" means all of the accounts and notes payable
owed by the Company.
"AFFILIATE" means, when used with respect to a specific Person,
another Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control
with the Person specified.
"ASBESTOS" shall have the meaning set forth in SECTION 0.XX.
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"BUYER" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"BUYER'S COUNSEL" means King & Spalding of Atlanta, Georgia.
"CHATTEL MORTGAGES" shall have the meaning set forth in SECTION
7.U.
"CLOSING" means the consummation of the purchase and sale of all
of the issued and outstanding shares of capital stock of Company as
provided in this Agreement.
"CLOSING DATE" means September 30, 1995, or any other Friday as
may be mutually agreed upon by the parties hereto.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and any regulations or published rulings promulgated or
issued thereunder.
"COMPANY" shall have the meaning set forth in the first recital
of this Agreement.
"CONTROLS" (including, with its correlative meanings, "CONTROLLED
BY" and "UNDER COMMON CONTROL WITH") means possession, directly or
indirectly, of power to direct or cause direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).
"DUE INQUIRY" means an inquiry by Seller of a group of employees
of the Company on July 31, 1995 in the presence of Buyer's representatives
with respect to particular matters in this Agreement.
"ENVIRONMENTAL LAWS" shall have the meaning set forth in SECTION
7.AB.
"ENVIRONMENTAL CONDITION" means any condition (other than
Scheduled Environmental Conditions) at the Site which: (1) is in violation
of applicable Environmental Laws; (2) involves the disposal or emission
of Hazardous Materials prior to the Closing Date that results in any
damages or injury to or claim by any third party; or (3) results in a
claim by any governmental or regulatory authority under applicable
Environmental Laws.
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"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any regulations or published rulings
promulgated or issued thereunder.
"ERISA AFFILIATE" means any trade or business (whether
incorporated or unincorporated) which is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code, of which Company is also a
member.
"HAZARDOUS MATERIALS" means and shall include, without limitation,
hazardous substances as defined in CERCLA, 42 U.S.C. Section 9601(14),
hazardous wastes and hazardous constituents as defined in RCRA, 42 U.S.C.
Section 6901, et seq., toxic substances as defined in TSCA, 15 U.S.C. Section
2601 et seq., gasoline, petroleum products, explosives, radioactive materials,
polychlorinated biphenyls or related or similar materials, or any other
substance or material defined as of the date hereof as hazardous or toxic
by any federal, state or local law, ordinance, rule or regulation, but
excluding Asbestos.
"HSR ACT" shall have the meaning set forth in SECTION 6.
"INVENTORIES" means, collectively, Company's inventories of raw
materials, work in process and finished goods, whether stored on or away
from the Site.
"1933 ACT" means the Securities Act of 1933, as amended.
"PERMITTED ENCUMBRANCE" shall have the meaning set forth in
SECTION 10.A.(1).
"NONCOMPETITION AGREEMENT" means an agreement to be entered into
between Seller and Company on the Closing Date, which agreement shall be
in the form attached hereto as EXHIBIT 1.
"PERSON" means an individual, partnership, corporation, trust or
other entity, or a government or agency or instrumentality thereof.
"PURCHASE PRICE" shall have the meaning set forth in SECTION 3.A.
"REAL ESTATE MORTGAGES" shall have the meaning set forth in
SECTION 7.U.
"SCHEDULED ENVIRONMENTAL CONDITION" means those matters identified
on SCHEDULE 1.A.
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"SELLER" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"SELLER'S COUNSEL" means Tuke Xxxx & Xxxxxxx of Nashville,
Tennessee.
"SHARES" means the three hundred (300) issued and outstanding
shares of the fifty dollar ($50.00) par value common stock of Company.
"SITE" means Company's place of business at 000 Xxxxxx Xxxx,
Xxxxxxxxx, Xxxxxxxx Xxxxxx, Xxxxxxxxx.
"SUPPLY AGREEMENT" means an agreement to be entered into between
Seller and Company on the Closing Date, which agreement shall be in the
form attached hereto as EXHIBIT 2.
"TAXES" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Sec. 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto, whether
disputed or not.
"TAX RETURN" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"TERMINATION DATE" means October 15, 1995.
"TITLE COMPANY" shall have the meaning set forth in
SECTION 10.A.(1).
"TRADEMARK" means the trademark listed on SCHEDULE 1.B.
"TRADEMARK ASSIGNMENT" means an assignment between Seller and
Company pursuant to which the Trademark is assigned to Company, in form
and substance reasonably acceptable to the parties.
"WORKING CAPITAL" means the excess of: (i) cash plus trade
Accounts Receivable plus Inventories over (ii) Accounts Payable.
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All references herein to "Sections," "Schedules" and "Exhibits"
shall, unless otherwise indicated, refer to the sections, schedules and
exhibits which (through attachment or incorporation by reference) are a
part of this Agreement.
2. PURCHASE AND SALE OF SHARES
A. SALE OF SHARES. Seller agrees to sell, transfer and
convey to Buyer on the Closing Date, subject to the terms and conditions
set forth in this Agreement, free and clear of all liens, encumbrances,
claims, pledges or security interests or charges or interests of any kind
whether voluntarily incurred or arising by operation of law or otherwise,
the Shares. Buyer agrees to accept the transfer from Seller of the Shares
subject to the terms and conditions of this Agreement and in reliance upon
the representations, warranties and agreements of Seller set forth herein
and in the other agreements entered into pursuant to this Agreement.
B. ASSETS NOT BEING PURCHASED AND SOLD. No asset, property
or item other than the Shares is being conveyed to Buyer hereunder.
C. TRANSFER OF SHARES. Subject to the satisfaction or
waiver of the conditions set forth in SECTION 11, on the Closing Date,
Seller shall transfer the Shares by delivery of a stock certificate or
stock certificates representing all of the Shares, duly endorsed in blank
or with executed stock powers or assignments attached, in proper form for
transfer. With the exception of the monies required to be paid pursuant
to SECTION 3 (which monies shall be wire transferred to Seller's account
in Nashville, Tennessee pursuant to instructions to be provided by
Seller), the transfers and deliveries contemplated by this Agreement shall
be completed at the offices of Seller's Counsel, Suite 1700, Third
National Bank Building, Nashville, Tennessee 37219 (or at such other place
as may be agreed upon by the parties hereto) at 9:00 a.m. (Central Time)
on the Closing Date.
3. PURCHASE PRICE
A. PURCHASE PRICE FOR THE SHARES. The purchase price for the
Shares, which Buyer agrees to pay at Closing, shall be Fifty-four Million
Eight Hundred Fifty Thousand Dollars ($54,850,000.00) (the "Purchase
Price").
-5-
B. MEANS OF PAYMENT. Buyer shall pay the Purchase Price to
Seller on the Closing Date by wire transfer of immediately available funds
in Nashville, Tennessee, as directed by Seller.
4. NO ASSUMPTION OF OBLIGATIONS Buyer does not and shall not assume
hereunder or be responsible or liable in any way or amount for or in
respect of any obligations, commitments, indebtedness or liabilities of
Seller of any kind or character whatsoever.
5. AUDITED BALANCE SHEET AND ADJUSTMENT TO PURCHASE PRICE
A. PROPOSED BALANCE SHEET. As promptly as practicable after the
Closing Date, Coopers & Xxxxxxx, certified public accountants (the
"Auditors"), shall, at Buyer's expense, conduct and complete an audit in
accordance with generally accepted auditing standards of the balance sheet
of Company as of the Closing Date (the "Proposed Balance Sheet"). The
Proposed Balance Sheet shall be prepared in accordance with generally
accepted accounting principles applied consistently with past practices
and in accordance with the principles used in preparing the Balance Sheet
(as defined in SECTION 7.K.(1)). Seller shall use its best efforts to
assist and to cause Ernst & Young LLP, certified public accountants
("E&Y"), to assist the Auditors in completing the audit and the
preparation of the Proposed Balance Sheet.
B. RIGHT OF REVIEW. E&Y shall have the right to review the
Proposed Balance Sheet and all work papers and audit procedures relating
thereto. E&Y shall complete its review of the Proposed Balance Sheet
within thirty (30) days after the Proposed Balance Sheet has been made
available to E&Y. If E&Y is of the view that any adjustment should be
made to the Proposed Balance Sheet in order for the Proposed Balance Sheet
to be prepared in accordance with the requirements of SECTION 5.A., E&Y
shall give the Auditors and Buyer written notice of such adjustments. If
no such notice is given within thirty (30) days after the Proposed Balance
Sheet has been made available to E&Y, Seller and E&Y shall be deemed to
have accepted the Proposed Balance Sheet without adjustment. If the
Auditors agree with any of the adjustments proposed by E&Y, such
adjustments shall be made to the Proposed Balance Sheet. If there are any
proposed adjustments that are disputed by the Auditors, then the Auditors,
E&Y, Buyer and Seller shall negotiate in good faith to resolve all
disputed adjustments. If, after a period of thirty (30) days following
the date on which E&Y gives the Auditors written notice of any proposed
adjustments, any such adjustments still remain disputed, then the Auditors
and E&Y shall jointly
-6-
select a nationally recognized accounting firm (the "Joint Firm") to
resolve any remaining disputed adjustments, and the decision of the Joint
Firm shall be final and binding on the parties hereto. The parties hereto
shall use their best efforts to cause the Joint Firm to resolve any such
remaining disputed adjustments as promptly as possible.
C. AUDITED BALANCE SHEET. After the Proposed Balance Sheet has
been prepared and any related adjustments thereto have been calculated and
agreed to pursuant to SECTION 5.A. and SECTION 5.B., all adjustments, if
any, so agreed to with respect to the Proposed Balance Sheet shall be
made. The Proposed Balance Sheet, as so revised by all such adjustments,
if any, is referred to hereinafter as the "Audited Balance Sheet."
D. ADJUSTMENTS. The parties hereto acknowledge that the Purchase
Price has been calculated based on certain assumptions with respect to the
financial condition of Company that will be disclosed on the Audited
Balance Sheet. Accordingly, the parties hereto agree that if Working
Capital of Company as reflected on the Audited Balance Sheet ("Audited
Working Capital") is less than Six Million Nine Hundred Ninety-Three
Thousand, Six Hundred Sixty Three Dollars ($6,993,663.00) (the "Benchmark
Amount"), Seller shall pay to Buyer on the "Post-Closing Date" (as
hereinafter defined) an amount (hereinafter referred to as the "Deficiency
Payment") equal to the amount by which the Audited Working Capital is less
than the Benchmark Amount. Seller shall also pay, in addition to any
Deficiency Payment, interest on such payment, at an annual interest rate
equal to the prime rate as announced by Trust Company Bank, N.A., Atlanta,
Georgia as of the Closing Date, for the period commencing on the Closing
Date and ending on the Post-Closing Date. The parties further agree that
if Audited Working Capital exceeds the Benchmark Amount, Buyer shall pay
to Seller on the Post-Closing Date an amount (hereinafter referred to as
the "Surplus Payment") equal to the amount by which the Audited Working
Capital exceeds the Benchmark Amount; provided, however, that
notwithstanding the amount by which Audited Working Capital exceeds the
Benchmark Amount, the Surplus Payment shall not exceed Two Hundred Fifty
Thousand Dollars ($250,000).
E. POST-CLOSING. Any payment that is required to be made
pursuant to SECTION 5.D. shall be made directly to Buyer or Seller, as the
case may be, at that party's address set forth in SECTION 23 within thirty
(30) days after the Audited Balance Sheet has been completed in accordance
with this SECTION 5 (including resolutions of disputed adjustments), or
on such other date or at such other time or place as Buyer and Seller
shall agree to in writing (the
-7-
date of such post-closing hereunder being referred to herein as the "Post-
Closing Date"). All payments required to be made pursuant to SECTION 5.D.
shall be made by certified or bank check or by wire transfer of
immediately available funds.
6. HSR NOTIFICATION Promptly following execution hereof,
Buyer and Seller shall prepare and file the premerger notifications
required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx
"XXX Xxx"). Buyer shall pay any fees associated with such filing. Seller
shall cooperate with Buyer in preparing and filing such notification.
Seller shall reimburse Buyer for all of any filing fees (but not related
legal and other costs of preparation) associated with such filing within
thirty (30) days after the Termination Date if the Closing does not occur,
if the failure of the Closing to occur resulted solely from the failure
of Seller to satisfy its obligations hereunder or to satisfy the
conditions set forth in SECTION 11.A..
7. SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as follows:
A. GENERAL. The statements contained in SECTIONS 7.B.
through 7.AK. are true and correct and will, except where specific
reference is made to the date of this Agreement or to another date, be
true and correct as of the Closing Date.
B. GOOD STANDING OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Tennessee. Seller has all requisite corporate power and
authority to own, operate and lease its property and to carry on its
business as now being conducted and to enter into and perform its
obligations under this Agreement and under all other agreements
contemplated by this Agreement.
C. GOOD STANDING AND FOREIGN QUALIFICATION OF COMPANY.
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee. Company has all
requisite corporate power and authority to own, operate and lease its
property and to carry on its business as now being conducted. Company is
duly qualified and in good standing as a foreign corporation in the states
of Louisiana and South Carolina, constituting each jurisdiction in which
such qualification is required.
-8-
D. BOARD AND SHAREHOLDER AUTHORIZATION. Seller has
received, or will have received as of the Closing Date, the approval of
this Agreement and all other agreements contemplated by this Agreement
from its board of directors. The individuals executing this Agreement on
behalf of and in the name of Seller are duly authorized and empowered to
so act. There is no requirement that the execution or performance of this
Agreement be authorized or approved by Seller's shareholders.
E. CONSENTS. Seller has received, or will have received as
of the Closing Date, all necessary consents to the transactions
contemplated by this Agreement, and to the execution and performance of
this Agreement and all other agreements contemplated by this Agreement by
Seller and the consummation of the transactions contemplated hereby will
not require the consent, approval or authorization of any other Person not
so received.
F. LEGALITY AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by Seller and is the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its
terms, subject to applicable bankruptcy laws and judicial limitations on
the availability of equitable remedies. The other agreements to be entered
into pursuant to this Agreement, when entered into, will be duly executed
and delivered by Seller and will be legal, valid and binding obligations
of Seller enforceable against Seller in accordance with their respective
terms, subject to applicable bankruptcy laws and judicial limitations on
the availability of equitable remedies.
G. BUSINESS OF COMPANY. Company does not have any
subsidiaries and does not own or control, directly or indirectly, any of
the capital stock of any corporation. Company does not own any interest
in any partnership or other entity. There are no outstanding contractual
obligations of Company to acquire any shares of capital stock or other
ownership interest of any corporation, partnership or other entity.
Company does not have any investment (either debt or equity), or
commitments to make such an investment, in any corporation, joint venture,
general or limited partnership, business enterprise or other person or
entity.
H. CAPITAL STRUCTURE OF COMPANY. Company has authorized
capital consisting of three hundred (300) shares of capital stock, of
fifty dollars ($50.00) par value each, of which three hundred (300) shares
are issued and outstanding. Company has no other issued or authorized
equity securities. There are no shares of capital stock held in the
treasury of Company. The issued and outstanding shares of Company are
validly issued, fully paid and
-9-
nonassessable. There are no existing subscriptions, options, warrants,
calls, commitments, agreements or rights of any kind obligating Company
to issue any shares of stock or options or rights with respect thereto,
and there are no existing or outstanding securities of any kind
convertible into or exchangeable for shares of stock of Company. No
former shareholder of Company or any corporation heretofore merged with
or into Company has any claim or cause of action whatsoever against
Company arising or in any way connected with any occurrence or state of
facts in existence prior to the date hereof, and no such former
shareholder shall come to have any claim or cause of action whatsoever
against Company, Seller or Buyer, or any officer, director or shareholder
of any such corporations, by virtue of, or in any way connected with, the
transactions contemplated by this Agreement. All of the outstanding
capital stock of Company has been issued and sold in compliance with all
federal and state securities laws. There are no preemptive rights in
respect of Company's capital stock.
I. OWNERSHIP OF SHARES. Except as disclosed on SCHEDULE
7.I, Seller owns of record and beneficially all of the issued and
outstanding capital stock of Company and has the right and power to
transfer and assign the Shares in Company free and clear of all liens,
encumbrances, restrictions, claims, pledges or security interests or
charges or interests of any kind, whether voluntarily incurred or arising
by operation of law or otherwise. Except as disclosed on SCHEDULE 7.I,
Seller has the exclusive right, power and authority to vote the Shares.
Seller is the sole shareholder of Company, and will remain and continue
to be the sole shareholder through the Closing Date and will not sell,
pledge or otherwise transfer or assign any of its stock in Company prior
to the Closing Date. Upon the transfer of the Shares to Buyer, Buyer will
have good, valid and marketable title to all of the issued and
outstanding capital stock of Company, free and clear of all liens,
encumbrances, restrictions, claims, pledges, security interests, charges
or interests of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, with the exception of liens or encumbrances
that may have been created or granted by Buyer.
J. LITIGATION.
(1)(a) There is no pending, or, after Due Inquiry, to
Seller's knowledge, threatened litigation relating to the Shares;
(b) there is no litigation, claim, suit, action, administrative
or arbitration proceeding or controversy pending or, after Due
Inquiry, to Seller's knowledge, threatened against Seller, nor is
Seller in receipt of any
-10-
inquiry, notice, citation, investigation or complaint from any
governmental agency or department, which would adversely affect
Seller's ability to perform its obligations under this Agreement
nor does Seller, after Due Inquiry, have knowledge of any
occurrence or condition that might properly constitute a basis
for such litigation or proceeding or such inquiry, notice,
citation, investigation or complaint; and (c) Seller is not
subject to any judgment, order, writ, injunction or decree of any
court or administrative agency which would adversely affect
Seller's ability to perform its obligations hereunder.
(2) Except as set forth on SCHEDULE 7.J.(2): (a) there
is no litigation, claim, suit, action, administrative or
arbitration proceeding or controversy pending or, after Due
Inquiry, to Seller's knowledge, threatened against Company, nor
is Company in receipt of any inquiry, notice, citation,
investigation or complaint from any governmental agency or
department, which might adversely affect its business or
properties, nor does Seller know or have reasonable grounds to
know of any occurrence or condition that might properly
constitute a basis for such litigation, proceeding or controversy
or such inquiry, notice, citation, investigation or complaint;
(b) Company is not subject to any judgment, order, writ,
injunction or decree of any court or administrative agency; and
(c) after Due Inquiry, to Seller's knowledge, there is no event
which has occurred or condition which is in existence of any kind
or character pertaining to the business or assets of Company that
may materially and adversely affect such business or assets.
K. FINANCIAL INFORMATION. Seller has delivered to Buyer
copies of Company's unaudited balance sheet dated July 9, 1995 (the
"Balance Sheet Date"), a copy of which is attached hereto as EXHIBIT
7.K.(1) (the "Balance Sheet") and incorporated herein by reference.
Except as stated below, the Balance Sheet was prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
with past practices utilized in preparing the audited consolidated
financial statements of Seller (however, materiality is determined as to
Company on a stand-alone basis) and presents fairly as of its date the
proforma financial condition of Company assuming the sale of the Shares
pursuant to this Agreement. Attached as EXHIBIT 7.K.(2) is an unaudited
statement of operations for the thirty-six weeks ended July 9, 1995 (the
"Income Statement"). Except as stated below, the Income Statement was
prepared in accordance with GAAP consistently applied with past practices
utilized in preparing the audited consolidated
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financial statements of Seller (however, materiality is determined as to
Company on a stand-alone basis) and presents fairly the revenues and
expenses of Company for the period indicated. The exceptions to the
Balance Sheet and Income Statement being prepared in accordance with GAAP
are as follows: (1) footnotes and other financial statement disclosures
required by GAAP have been omitted; (2) intercompany allocations reflected
therein are based upon Company's historical methods of allocation and may
not be representative of the actual costs attributable to the goods or
services in question; and (3) liabilities of Company assumed or
indemnified by Seller have been omitted.
L. ACCOUNTS RECEIVABLE; INVENTORY.
(1) The Accounts Receivable which are reflected on the
Balance Sheet or which have arisen since the Balance Sheet Date
(i) are, with the exception of a reasonable allowance for bad
debts that is reflected on the Balance Sheet, valid, existing and
fully collectible, (ii) represent monies due for goods sold or
services rendered in the ordinary course of business, (iii) are
not subject to any defenses, rights of set-off, assignment,
restrictions, security interests or other encumbrances except for
those set forth on SCHEDULE 7.U.(2), and (iv) as of the Closing
Date, shall include all Accounts Receivable generated from sales
of products from Company to Seller and its Affiliates during the
28-day period prior to the Closing Date (which amount of Accounts
Receivable owed by Seller and its Affiliates during such 28-day
period shall not in any case be less than One Million Seven
Hundred Fifty Thousand Dollars ($1,750,000.00) and all of which
Accounts Receivable are payable on 30-day terms from the date of
delivery). SCHEDULE 7.L. sets forth an aging schedule of all
Accounts Receivable as of the date set forth on SCHEDULE 7.L.,
and Company is not aware of any dispute regarding the
collectibility of any Accounts Receivable.
(2) All of the Inventories of Company included on the
Balance Sheet or subsequently acquired and to be properly
included on the Audited Balance Sheet are merchantable, with the
exception of a reasonable allowance for spoilage and/or
obsolescence that is reflected on the Balance Sheet, in the
ordinary and usual course of business of Company and are of a
quality and quantity usable and saleable in the ordinary and
usual course of the business of Company, and the quantities of
each type of inventory (whether raw materials, work-in-process or
finished goods) are not excessive, but are reasonable, adequate
and appropriate for the present operation of Company.
-12-
The Inventories of Company included on the Balance Sheet are
valued for the purposes thereof at the lower of cost or market.
No food ingredient, finished article of food, food packaging or
food labelling included in the Inventories of Company is
adulterated or misbranded within the meaning of the Federal Food,
Drug and Cosmetic Act or prohibited under the Food, Drug and
Cosmetic Act from being introduced into interstate commerce. In
addition, all such items comply in all material respects with all
other applicable laws, rules and regulations.
M. NO OTHER LIABILITIES. As of the Closing Date, there will
be no liabilities or obligations of any nature of Company (whether
accrued, absolute, contingent or otherwise and whether due or to become
due), including, without limitation, liability for Taxes or employee
bonuses for periods ending on or before the Closing Date, except (a) to
the extent fully reflected or adequately reserved against in the Balance
Sheet; or (b) for liabilities which have arisen in the ordinary course of
business consistent with past practices since the Balance Sheet Date.
N. TAXES.
(1) Company has filed or obtained timely extensions to
file all Tax Returns which are required to be filed prior to the
date of this Agreement, and such filed returns were true,
complete and correct in all material respects. Company has paid
all Taxes and other charges due or claimed to be due (whether or
not requiring the filing of a return) to the extent that such
Taxes are due prior to the date of this Agreement. The Tax
Returns filed reflected all Taxes due and payable by Company with
respect to the periods covered thereby and Company has no
liabilities for Taxes with respect to such periods.
(2) Company is a member of the affiliated group (as
defined in Section 1504 of the Code) of which Seller is the
common parent. Seller has included or will include Company in
its consolidated federal income Tax Return for the taxable year
ended October 30, 1994 and for the taxable year of Seller that
includes the Closing Date, and Seller has included Company in its
consolidated, combined or unitary Tax Returns relating to state
Taxes as set forth in SCHEDULE 7.N. Except as set forth in
SCHEDULE 7.N., Company has not obtained an extension of time
within which to file any Tax Return which has not yet been filed.
Neither Seller nor, to Seller's knowledge after Due Inquiry,
Company has received written
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notice from any governmental agency in a jurisdiction in which
Company does not file a Tax Return stating that it is subject to
taxation by that jurisdiction. Company is not required to file
any Tax Return in any jurisdiction outside the United States and
is not the tax matters partner of any partnership.
(3) The amounts accrued as liabilities for Taxes on the
books of Company and reflected on the Balance Sheet are adequate
to satisfy all unpaid liabilities for Taxes of Company through
the Balance Sheet Date. Except as set forth on SCHEDULE 7.N.,
there is no agreement, waiver or other document extending, or
having the effect of extending, the period for assessment or
collection of any Taxes of Company, which extension or waiver is
still in effect. Seller has delivered to Buyer correct and
complete copies of all examination reports, statements or
deficiencies and similar documents prepared by any Tax authority
that relate to the income, operations or business of Company with
respect to any period ending on or after October 27, 1991. All
final adjustments made by the Internal Revenue Service with
respect to any federal Tax Return of Company (or which includes
Company) have been reported to the relevant state Tax authorities
as required by law. Company is not a party to any Tax sharing or
allocation agreement with any entity. Company (i) has not been
a member of affiliated group filing a consolidated federal Tax
Return other than the affiliated group of which Seller is the
common parent and (ii) has no liability for Taxes of any person
other than Seller under Treasury Regulation Section 1.1502-6 or any
similar provision of state law, or as a transferee or successor,
by contract or otherwise.
O. NO CHANGES. From March 19, 1995, to the Closing Date,
there has not been, except as disclosed on SCHEDULE 7.O.:
(a) any declaration or payment of dividends on any
capital stock of Company or any distribution with respect to, or
in redemption of, any of its Shares;
(b) any sale or transfer of any assets or properties of
Company except in the ordinary course of business consistent with
past practice;
(c) any damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting the
properties, assets, business or prospects of Company;
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(d) any change in the condition (financial or otherwise)
of properties, assets, liabilities, business or prospects of
Company, except for changes in the ordinary course of business
consistent with past practice, none of which has been materially
adverse;
(e) any transaction other than in the ordinary course of
business of Company consistent with past practice;
(f) any lease of personal or real property to or from any
person, firm or entity with respect to which Company is a party;
(g) any amendment of the charter or bylaws of Company;
(h) the granting or filing of any lien, encumbrance or
security interest against any of Company's properties or assets,
real, personal or mixed, tangible or intangible;
(i) any payment, loan or advance of any amount to, or
sale, transfer or lease of any properties or assets (real,
personal or mixed, tangible or intangible) to, or execution of
any agreement with, officers or directors of Company or Seller;
(j) any personal injury on the premises of Company or in
connection with its business that may give rise to a claim in
excess of Company's applicable insurance coverage;
(k) any increase in the compensation payable to or to
become payable by Company to any officer, employee or agent of
Company, except for normal compensation adjustments to salaries
or wages made in the ordinary course of business consistent with
past practice;
(l) any payment, other than in the ordinary course of
business of Company consistent with past practice, under any
insurance, pension or other benefit plan, program or arrangement
made to, for or with any officer, employee or agent of Company;
(m) any material change in the method of accounting or
accounting practice by Company, except as required by GAAP; or
(n) any agreement, whether in writing or otherwise, to
take any action described in this SECTION 7.O..
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P. MATERIAL CONTRACTS. Except as set forth in SCHEDULE
7.P., Company is not a party to any:
(a) contract or agreement involving amounts payable to
or by Company during any 12-month period that will aggregate
$100,000.00 or more;
(b) management, consultant or employment contract;
(c) contract obligating Company to make severance or
similar payments to any employee or officer of Company upon
termination of employment or to make payments to any officer or
employee of Company in excess of the officer's or employee's
regular salary and reimbursement of ordinary business expenses;
(d) contract or agreement with any distributor, dealer
or sales representative that is not cancelable without liability
to Company on a maximum of thirty (30) days notice;
(e) contract or agreement of any nature whatsoever with
Seller or any Affiliate of Seller, with any director or officer
of Company, Seller or any Affiliate of Seller, or with any person
related to any director or officer of Company, Seller or any
Affiliate of Seller;
(f) contract or agreement relating to any loan,
factoring or credit line;
(g) lease of real property;
(h) lease of personal or mixed property under which
Company is a lessor or lessee involving payments by or to Company
in excess of $75,000.00 in any 12-month period;
(i) joint venture, partnership or other agreement
involving sharing of profits;
(j) contract preventing Company from carrying on its
business anywhere in the world;
(k) outstanding power of attorney empowering any Person
to act on behalf of Company;
(l) outstanding offer or bid that, if accepted, would
result in (i) a contract required to be disclosed pursuant to
-16-
this SECTION 7.P., or (ii) any other material contract or
commitment;
(m) purchase commitment for an amount that is in excess
of the normal, ordinary requirements of its business, or purchase
contract or commitment providing for prices substantially in
excess of the current market prices for comparable goods and
services, or any requirements or similar contracts;
(n) outstanding guaranty, subordination or other similar
type of agreement, whether or not entered into in the ordinary
course of business; or
(o) contract, commitment, or obligation otherwise
material to Company's business or not made in the ordinary course
of business.
SCHEDULE 7.P. describes the material terms of all oral contracts disclosed
in SCHEDULE 7.P. Company has duly complied in all material respects with
all provisions of every contract listed on SCHEDULE 7.P. (whether written
or oral) to which Company is a party and is not in default in any material
respect as to any such contract. No condition or state of facts exists
that, with notice or the passage of time, or both, would constitute a
default under any such contract. All contracts and other agreements to
which Company is a party are in full force and effect and are enforceable
by Company in accordance with their terms against all other parties
thereto, subject as to enforceability to bankruptcy, insolvency and
similar laws affecting creditors's rights generally. No loan payable by
Company provides for any prepayment penalty or premium.
Q. INSURANCE. Seller has in full force and effect policies
of insurance, which policies are described on SCHEDULE 7.Q. attached
hereto, to cover Company's business, assets and properties from loss by
fire, windstorm and extended coverage as well as insurance for general
liability, automobile and workers' compensation. SCHEDULE 7.Q. also
contains a list of all claims (including but not necessarily limited to
workers' compensation, automobile and general liability) filed by or on
behalf of Company for insured losses which are pending and have not been
disposed of as of the Closing Date. Neither Seller nor, after Due
Inquiry, to Seller's knowledge, Company, has been notified as to a default
under or a threatened cancellation of any of such policies of insurance.
There are no pending claims against such insurance by Company as to which
any insurer is defending under reservation of rights or has denied
liability and, after Due Inquiry, to Seller's
-17-
knowledge, there exists no claim under such insurance that has not been
properly filed by Seller or Company.
R. NO CONFLICTS. Neither the execution, delivery or
performance of this Agreement in accordance with its terms, does or will,
after the giving of notice, the lapse of time or otherwise:
(a) conflict with, result in a breach of, or constitute
a default under, the charter or bylaws of Company or Seller, as
applicable, or any contract, agreement or instrument to which
either Company or Seller, as applicable, is a party or by which
either Company or Seller, as applicable, is bound, or any federal
or state law, statute, ordinance, rule or regulation or any court
or administrative order or process;
(b) result in the creation of any lien, encumbrance,
claim or security interest of any nature whatsoever upon or in
any of the assets of Company; or
(c) terminate, amend or modify, or give any party the
right to terminate, amend, modify, abandon or refuse to perform,
any contract, agreement, arrangement, commitment or plan to which
Company is a party.
S. NO RESTRICTIONS. Neither Seller nor Company is a party
to, subject to or bound by any agreement, judgment, order, writ,
injunction or decree of any court or governmental body which could prevent
the consummation of the transactions contemplated herein. Further, no
applicable federal, state or local law or ordinance prevents or prohibits
the consummation of the transactions contemplated herein or necessitates
any filing or the taking of any action by Company or Seller or any
Affiliate thereof that has not been or that will be taken prior to the
Closing Date.
T. NO MISSTATEMENTS, ETC. This Agreement and the Schedules
and Exhibits hereto are accurate as of the date hereof and will be
accurate as of the Closing Date. Neither this Agreement nor the Schedules
attached hereto, when read together, contains any misstatement of a
material fact or omits to state a material fact necessary to make the
statements contained herein not misleading.
U. MORTGAGES. Except for the real estate mortgages listed on
SCHEDULE 7.U.1. (the "Real Estate Mortgages") and the equipment financing
or chattel mortgages listed on SCHEDULE 7.U.2. (the "Chattel Mortgages"),
there are no mortgages, security interests or other liens or encumbrances
affecting Company's assets. Neither Seller nor Company has received any
notice of default, nor are
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there any defaults, or events which, but for the passage of time or the
giving of notice, would constitute defaults, under the Real Estate
Mortgages or the Chattel Mortgages. All payments of principal, interest
and other payments as are required to be made as of the date hereof
relating to such Real Estate Mortgages and Chattel Mortgages have been
made and shall be made as of the Closing Date.
V. PROPERTY.
(1) SCHEDULE 7.V.(1) sets forth a complete and accurate
list and description of all the real and personal property that
Company owns, has agreed (or has an option) to purchase, sell or
lease, or may be obligated to purchase, sell or lease, in each
case the value of which (on an individual item-by-item basis)
exceeds $10,000.00.
(2) Company (i) has fee simple title to all of its real
property and has good, valid and marketable title to all the
personal and mixed, tangible and intangible properties and assets
which it purports to own, including all the real and personal
properties and assets reflected, but not shown as leased or
encumbered, on the Balance Sheet (except for Inventories and
assets sold in the ordinary course of business consistent with
past practice and supplies consumed in the ordinary course of
business), and (ii) except for Permitted Liens, owns such real
and personal property free and clear of all title defects or
objections, liens, restrictions, claims, charges, security
interests, easements or other encumbrances of any nature
whatsoever, including any mortgages, leases, chattel mortgages,
conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements. "Permitted
Liens" shall mean (i) the security interests, easements and other
encumbrances described in SCHEDULE 7.V.(2); and (ii) liens for
Taxes not yet due and payable. All properties and assets of
Company are in the possession or control of Company. With the
exception of certain Inventories that are stored in offsite
public storage, Company has no personal property or leasehold
improvements which are not located at the Site.
(3) Except for Permitted Liens, no real property owned
or leased by Company is subject to (i) any governmental decree or
order (or threatened or proposed order known to Company) to be
sold or taken by public authority or (ii) any rights of way,
building use restrictions, exceptions, variances,
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reservations or limitations of any nature whatsoever, which are
not of record.
(4) The rights, properties and other assets presently
owned, leased or licensed by Company include all rights,
properties and other assets necessary to permit Company to
conduct its business in the same manner as its business has been
conducted during the past twenty-four (24) months or is currently
planned by Company to be conducted, without any need for
replacement, refurbishment or extraordinary repair, except in the
ordinary course of business and as disclosed on SCHEDULE 7.V.(4).
(5) At the Closing, each material item of Company's
equipment will, except as disclosed on SCHEDULE 7.V.(5), be in
good operating condition, normal wear and tear excepted.
(6) After Due Inquiry, Seller has no knowledge of any
structural deficiencies relating to the buildings or structures
located at the Site.
W. TRADEMARK MATTERS.
(1) Seller has good and valid title to, and is the
sole owner of, the Trademark in the United States for the goods
with which the Trademark is used and the registration thereof is
valid and subsisting and in full force and effect.
(2) Through the Closing Date, Seller shall cause
Company to continue to use the Trademark on each and every
trademark class of goods applicable to its operations in order to
maintain the Trademark in full force and effect free from any
claim of abandonment for nonuse and shall cause Company not to do
any act or knowingly omit to do any act whereby the Trademark may
become invalidated.
(3) Through the Closing Date, Seller shall take all
necessary steps in any proceeding before the United States Patent
and Trademark Office to maintain registration of the Trademark,
including, without limitation, filing of renewals, extensions,
affidavits of use and incontestability, and opposition,
interference and cancellation proceedings. Through the Closing
Date, Seller shall notify Buyer promptly in writing if the
registration relating to the Trademark may become abandoned or
dedicated or subject to an adverse final determination in any
proceeding in the United States Patent and Trademark Office or
any court regarding Company's
-20-
ownership of the Trademark, its right to register same, or to
keep or maintain the validity of same.
(4) Except as specifically set forth in SCHEDULE
7.W., the Trademark is free of any liens, claims or encumbrances;
is not subject to any license (royalty bearing or royalty free)
and is not subject to any other arrangement requiring any payment
to any person or the obligation to grant rights to any person in
exchange. Except as specifically set forth in SCHEDULE 7.W., the
validity of the Trademark and title thereto: (i) have not been
questioned in any pending litigation; and (ii) are not the
subject(s) of any threatened or proposed litigation. Except as
specifically set forth in SCHEDULE 7.W., after Due Inquiry, to
Seller's knowledge the business of Company, as now conducted or
currently proposed to be conducted, does not conflict with and
has not been alleged to conflict with any patents, trademarks,
trade names, service marks or copyrights of others. The
consummation of the transactions contemplated hereby will not
result in the loss or impairment of the Trademark. Except as
specifically set forth in SCHEDULE 7.W., Seller does not know of
any use by others of the Trademark.
X. CONFORMANCE TO LAW. Except as set forth in SCHEDULE
7.X., neither Seller nor, after Due Inquiry, to Seller's knowledge,
Company has received any notice or claim from any governmental authority
to the effect that Seller or Company is in violation of any applicable
law, ordinance, regulation, order, codes or requirement which would
materially interfere with the business operations presently conducted by
Company.
Y. EMPLOYEE BENEFIT AND LABOR MATTERS.
(1) EMPLOYEE BENEFITS. (a) Neither Seller nor
Company provides, nor has an obligation to provide, or makes, nor
has had an obligation to make, contributions to provide
compensation or benefits of any kind or description whatsoever
(whether current or deferred and whether paid in cash or in kind)
to, or on behalf of, one, or more than one, current or former
employee or director of Company or any of their dependents, other
than any plans, programs or other arrangements which only provide
for the payment of cash compensation currently from the general
assets of Company on a payday by payday basis as base salary or
hourly wages for current services (individually a "Benefit Plan"
and collectively the "Benefit Plans"). Each of the Benefit Plans
and each other plan pursuant to which any current or former
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employee or director of Company is entitled to any compensation
or benefits is listed on SCHEDULE 7.Y.
(b) Except as specifically described on SCHEDULE
7.Y.:
(i) No ERISA Affiliate (other than Company)
provides, or has an obligation to provide, or makes, or
has had an obligation to make, contributions to provide,
compensation or benefits of under any plan, program or
arrangement which is subject to Title IV of ERISA ("ERISA
Affiliate Title IV Plan").
(ii) Company has furnished to Buyer a true,
complete and current copy of each written Benefit Plan
and any amendments thereto, a complete description of
each other Benefit Plan, and all Internal Revenue
Service, Department of Labor or Pension Benefit Guaranty
Corporation rulings or determinations, annual reports,
summary plan descriptions, actuarial and other financial
reports and such other documentation with respect to any
Benefit Plan as is reasonably requested by Buyer.
(iii) No assets have been set aside in a trust
or other separate account to pay directly or indirectly
any benefits under any Benefit Plan or to the extent
assets have been set aside, all assets are shown on the
books and records of such trust or separate account at
their current fair market value.
(iv) Each Benefit Plan and each ERISA Affiliate
Title IV Plan has been established, maintained and
administered in compliance with all applicable laws.
Company has no duty or obligation to indemnify or hold
any other person or entity harmless for any liability
attributable to any acts or omissions by such person or
entity with respect to any Benefit Plan or ERISA
Affiliate Title IV Plan.
(v) Company has not incurred and no facts exist
which are reasonably likely to result in any liability to
Company for any tax or penalty with respect to any
Benefit Plan, ERISA Affiliate Title IV Plan or any group
health plan (as described in section 5000 of the Code) of
an ERISA Affiliate including, without limitation, any tax
or penalty under ERISA or under the Code and any
deductions claimed by Company with respect to
contributions made to any Benefit Plan have been
-22-
deductible in full on the income tax returns on which
Company has claimed such deduction.
(vi) Company has not (within the last six
years) terminated or withdrawn from or sought a funding
waiver with respect to, and no facts exist which could
reasonably be expected to result in termination or
withdrawal from or seeking a funding waiver with respect
to, any Benefit Plan which is subject to Title IV of
ERISA. Company has not incurred, and no facts exist
which could reasonably be expected to result in,
liability to Company as a result of a termination,
withdrawal or funding waiver with respect to an ERISA
Affiliate Title IV Plan.
(vii) There are no claims which have been made
or threatened under a Benefit Plan or ERISA Affiliate
Title IV Plan which could reasonably be expected to
result in liability to Company (other than routine and
reasonable claims made in the ordinary course of plan or
contract operations) or with respect to the employment or
termination of employment or treatment of any employee or
former employee, and neither Seller nor to Seller's
knowledge, after Due Inquiry, Company has any notice or
knowledge of any proposed or actual audit or
investigation by any governmental or other law
enforcement agency with respect to any Benefit Plan or
ERISA Affiliate Title IV Plan.
(viii) Company has the right under the terms of
each Benefit Plan and under applicable law to terminate
such plan at any time exclusively by action of Company,
and no additional contributions would be required in
order to properly effect the termination of such plan in
accordance with the terms of such plan and applicable
law.
(ix) Company neither makes nor has made, nor
has or has had an obligation to make, nor reimburses nor
has reimbursed, nor has or has had an obligation to
reimburse, another employer, directly or indirectly, for
making, contributions to a multiemployer plan as
described in Title IV of ERISA.
(x) Section 280G of the Code shall not apply to
any payments made by Company as a result of the
transactions contemplated by this Agreement, and there
are no
-23-
additional payments to or increase in vesting for any
current or former employee or director or their
dependents which will be triggered as a result of the
change in the control of Company contemplated by this
Agreement.
(2) REPRESENTATION. Company is not subject to or
bound by any labor union, collective bargaining, guild or similar
agreement; since January 1, 1992, there has been no strike,
request for union representation or any other material labor
dispute, grievance or controversy pending, or, to the knowledge
of Seller, after Due Inquiry, threatened against Company.
Z. LICENSES AND PERMITS. Except as disclosed on SCHEDULE
7.Z.: (a) Company has all material permits, licenses, orders and approvals
(including, without limitation, all environmental permits licenses and
approvals) of all federal, state and local governmental or regulatory
bodies required for Company to carry on its business as presently
conducted; (b) all such permits, licenses, orders and approvals are in
full force and effect and no suspension or cancellation of any of them is
threatened; (c) Company has complied, in respect of its operations, real
property, equipment, all other property, practices and all other aspects
of its business, in all material respects, with all applicable laws
(whether statutory or otherwise), rules, regulations, orders, ordinances,
judgments and decrees of all governmental authorities (federal, state,
local or otherwise); (d) neither Seller nor Company has received any
notification of any asserted present or past failure to so comply; and (e)
Company has made all filings required by federal, state and local
statutes, regulations and ordinances including, without limitation, EPCRA,
42 U.S.C. Section 11001 et seq.
AA. BROKERS. With the exception of the assistance of Salomon
Brothers Inc., all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on directly by Seller
with Buyer without the intervention of any broker or other Person so as
to afford a basis for any claim for brokerage or other commissions or fees
relative to this Agreement or the transactions contemplated hereby.
Seller agrees to bear sole responsibility for any claims for brokerage or
other commissions or fees made by any brokers engaged by Seller including,
without limitation any amounts owed to Salomon Brothers Inc.
AB. HAZARDOUS MATERIALS. Except as set forth on SCHEDULE
7.AB., at all times during Company's use and occupancy of the Site
-24-
through and including the date of this Agreement: (a) to the knowledge of
Seller, after Due Inquiry, Company has not used, stored or disposed of any
Hazardous Materials, except in compliance with all applicable federal,
state and local laws, ordinances, rules and regulations (the
"Environmental Laws") and, to the knowledge of Seller, after Due Inquiry,
no former user of the Site has used, stored or disposed of any Hazardous
Materials on or at the Site, except in compliance with all applicable
Environmental Laws; (b) to the knowledge of Seller, after Due Inquiry,
Company has complied with all applicable Environmental Laws in connection
with Company's use and occupancy of the Site; (c) neither Seller nor, to
the knowledge of Seller, after Due Inquiry, Company has received any
notice or advice from any governmental agency or any source whatsoever
with respect to Hazardous Materials on, from or affecting the Site; (d) to
the knowledge of Seller, after Due Inquiry, there are no underground
storage tanks on the Site, either active, out-of-service or abandoned;
(e) to the knowledge of Seller, after Due Inquiry, there has been no
"release" as that term is defined in CERCLA, 42 U.S.C. Section 9601(22), of any
Hazardous Material at, on or adjoining the Site; and (f) neither Seller
nor, to the knowledge of Seller after Due Inquiry, Company has received
any notice or advice of any claim or potential claim arising out of
Company's transportation, use or disposal of Hazardous Materials at the
Site or at any other location.
AC. ASBESTOS. Seller represents and warrants to Buyer that,
to Seller's knowledge, after Due Inquiry, there is no asbestos or material
containing asbestos ("Asbestos") in the buildings located on the Site, and
neither Seller nor to Seller's knowledge, after Due Inquiry, Company, has
received any notice or advice from any governmental agency or any source
whatsoever with respect to Asbestos on, affecting or installed in the
buildings located on the Site. Seller has provided Buyer with copies of
any and all investigations, test results, or audits intended to discover
the presence of Asbestos at the Site.
AD. CHARTER. True and correct copies of Company's charter
and all amendments thereto have been furnished to Buyer.
AE. BYLAWS. True and correct copies of Company's bylaws and
all amendments thereto have been furnished to Buyer.
AF. STOCK RECORDS. True and correct copies of all stock
records and corporate minutes of Company have been furnished to Buyer.
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AG. SALARIED EMPLOYEES. SCHEDULE 0.XX sets forth the names and
current annual salary of all salaried employees of Company who currently
are paid a salary more than $50,000.00 per year together with the date and
amount of the last salary increase for each such person.
AH. BANK ACCOUNTS. The Company has no bank accounts or safe
deposit boxes.
AI. OSHA AND OTHER FILINGS. Company has previously delivered to
Buyer all reports and filings made or filed by Company pursuant to the
Occupational Safety and Health Act, Resource Conservation and Recovery Act
and Executive Order 11246 and similar state and local laws, regulations
and orders since January 1, 1990.
AJ. MAJOR SUPPLIERS AND CUSTOMERS. SCHEDULE 7.AJ. sets forth a
list of each supplier of goods or services to, and each customer of,
Company to whom Company paid or billed in the aggregate more than
$250,000.00 during the fiscal year ended October 30, 1994 and to whom
Company paid or billed in the aggregate more than $170,000.00 during the
thirty-six (36) weeks ended July 9, 1995, together with in each case the
amount paid or billed during such period. Company is not engaged in any
dispute with any of such suppliers or customers. Neither Seller nor
Company believes that the consummation of the transactions contemplated
hereunder will have any adverse effect on the business relationship of
Company with any such supplier or customer. Seller agrees to promptly
notify Buyer in the event that Seller or Company receives any written or
oral notice that the consummation of the transactions contemplated
hereunder will have an adverse effect on the business relationship of
Company with any such supplier or customer.
AK. COPIES OF DOCUMENTS. If requested, Seller has delivered or
made available to Buyer true, correct and complete copies of the following
items:
(1) With respect to each parcel of real property listed
or described in SCHEDULE 7.V.(1), the deed evidencing Company's
ownership of such property, each mortgage or other encumbrance
thereon reflected in a written instrument, each instrument (if
any) evidencing a grant by or to Company of an option to purchase
or lease such property, each lease and leasehold mortgage (if
any) with respect to such property, and any title policies or
commitments and surveys with respect to such property;
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(2) Each of the contracts, lease agreements, plans,
instruments, reports or documents that are in writing and are
listed in the Schedules attached hereto;
(3) The certificate evidencing the Trademark and any
item listed in SCHEDULE 7.W.;
(4) The pleadings and briefs filed in each pending suit
or proceeding listed in SCHEDULES 7.J.(1) and (2) and the
judgments, orders, injunctions, decrees, stipulations and awards
listed in said Schedules; and
(5) All Tax Returns filed by Company within the past
four (4) years.
8. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as follows:
A. GENERAL. The statements contained in SECTIONS 8.B.
through 8.K. are true and correct and will, except where specific
reference is made to the date of this Agreement or to another date, be
true and correct as of the Closing Date.
B. GOOD STANDING OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York and is not qualified to do business in any other state.
Buyer has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as now being conducted
and to enter into and perform its obligations under this Agreement and
under all other agreements contemplated by this Agreement.
C. BOARD AUTHORIZATION. The execution, delivery and
performance of this Agreement and all other agreements contemplated by
this Agreement have been duly authorized by the board of directors of
Buyer. There is no requirement that this Agreement be approved by the
shareholders of Buyer. The individuals executing this Agreement on behalf
of and in the name of Buyer are duly authorized and empowered to so act.
D. CONSENTS. Buyer has, or will have as of the Closing Date,
all consents of Persons required for the execution and performance by
Buyer of this Agreement, and all other agreements contemplated by this
Agreement, and the consummation of the transactions
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contemplated hereby will not require the consent, approval or
authorization of any other Person or public authority.
E. LEGALITY AND ENFORCEABILITY. This Agreement has been duly
executed and delivered by Buyer and is the legal, valid and binding
obligation of Buyer enforceable against Buyer in accordance with its
terms, subject to applicable bankruptcy laws and judicial limitations on
the availability of equitable remedies.
F. LITIGATION. Buyer is not a party to any litigation,
proceeding or controversy pending before any court or administrative
agency or threatened against Buyer, nor is Buyer in receipt of any
inquiry, notice, citation, investigation or complaint from any
governmental agency or department, which might adversely affect Buyer's
ability to perform its obligations under this Agreement, nor does Buyer
know or have reasonable grounds to know of any occurrence or condition
that might properly constitute a basis for such litigation, proceeding or
controversy or such inquiry, notice, citation, investigation or complaint.
G. NO DEFAULT. Neither the execution, delivery nor
performance of this Agreement or the other agreements contemplated herein
in accordance with their respective terms, does or will, after the giving
of notice, the lapse of time or otherwise, conflict with, result in a
breach of, or constitute a default under the charter or bylaws of Buyer
or any contract or any agreement to which Buyer is a party (except those
for which consent has been or will be obtained) or by which Buyer is
bound, or any federal or state law, statute, ordinance, rule or
regulation, or any court or administrative order or process.
H. SECURITIES MATTERS.
(1) Buyer and Affiliates of Buyer have received, read
and are familiar with all information concerning the Shares and
the business and operations of Company for the purpose of making
an informed investment decision.
(2) Buyer and Affiliates of Buyer recognize the
highly speculative nature of an investment in the Shares.
(3) Buyer is an "accredited investor" as that term
is defined in Rule 506 of Regulation D promulgated under the 1933
Act. Buyer further represents that Buyer's overall commitment to
investments that are not readily marketable is not
disproportionate to its net worth and Buyer's purchase of the
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Shares will not cause such overall commitment to become
excessive.
(4) Buyer and Affiliates of Buyer who are assisting
Buyer have sufficient knowledge and experience in financial and
business matters that Buyer is capable of evaluating the merits
and risks of an investment in the Shares. Buyer and such
Affiliates have made other investments and, by reason of their
respective business and financial experience (and the collective
experience of their agents and employees), have acquired the
capacity to protect Buyer's interests in investments of this
nature. In reaching the conclusion that Buyer wishes to acquire
the Shares, Buyer and such Affiliates have carefully evaluated
Buyer's financial resources and investment position and the risks
associated with this investment in the Shares and believe that
Buyer will be able to bear the economic risks of this investment
in the Shares and will have no need for liquidity from this
investment in the Shares.
(5) Buyer and Affiliates of Buyer have had, if
requested, an opportunity to verify the accuracy of all
information furnished to Buyer or such Affiliates by Seller, and,
if requested, all documents, records and books pertaining to the
proposed investment in the Shares by Buyer have been made
available to Buyer and such Affiliates. In addition, Buyer and
such Affiliates have had an opportunity to ask questions of and
receive satisfactory answers from Seller, or a person or persons
acting on behalf of Seller, concerning the terms and conditions
of this investment in the Shares, and all such questions have
been answered to the full satisfaction of Buyer and such
Affiliates.
(6) Buyer will acquire the Shares for Buyer's own
account for investment and not with a view to, or for resale in
connection with, any distribution of the Shares within the
meaning of the 1933 Act, and Buyer does not now have any reason
to anticipate any change in Buyer's circumstances or other
particular occasion or event that would cause Buyer to sell the
Shares or any portion thereof.
(7) Buyer and Buyer's Affiliates recognize that this
investment in the Shares involves certain risks, and Buyer and
Buyer's Affiliates have taken full cognizance of and understand
such risks.
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(8) All information that Buyer has provided to
Seller or Company concerning Buyer and Buyer's Affiliates, the
financial position of Buyer and Buyer's Affiliates and the
knowledge of financial and business matters by Buyer and Buyer's
Affiliates as represented by Buyer to Seller is correct and
complete in all material respects.
(9) In connection with Buyer's purchase of the
Shares: (a) Buyer has been fully informed as to the circumstances
under which Buyer is required to take and hold the Shares
pursuant to the requirements of the 1933 Act and any applicable
state securities or "Blue Sky" laws; and (b) Buyer has been
informed by Seller that the Shares are not registered under the
1933 Act and may not be transferred, assigned or otherwise
disposed of unless the Shares are subsequently registered under
the 1933 Act or an exemption from such registration is available.
(10) Buyer understands that the Shares may not be
sold, assigned or transferred unless: (a) such sale, assignment
or transfer is exempt from registration under the 1933 Act and
any applicable state securities or "Blue Sky" laws; or (b) a
registration statement covering the Shares is effective under the
1933 Act.
(11) Seller and Buyer acknowledge and agree that the
representations, warranties, covenants and agreements of Seller
contained in this Agreement shall not be affected or diminished
in any way by any investigation by Buyer or by virtue of any
representation or warranty of Buyer contained in this Section
8.H.
I. NO RESTRICTIONS. Buyer is not a party to, subject to or
bound by any agreement, judgment, order, writ, injunction or decree of any
court or governmental body which could prevent the consummation of the
transactions contemplated herein. No applicable federal, state or local
law or ordinance prevents or prohibits the consummation of the
transactions contemplated herein or necessitates any filing or the taking
of any action by Buyer other than actions that have been or that will be
taken prior to the Closing Date, as contemplated herein.
J. NO MISSTATEMENTS, ETC. Neither this Agreement, the
Exhibits or Schedules attached hereto, nor any other statement or document
furnished to Seller by or on behalf of Buyer and relating to this
Agreement, when read together, contains any misstatement of
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a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
K. NO BROKER. With the exception of the assistance of
SunTrust Corporate Finance, all negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on directly by
Buyer with Seller without the intervention of any broker or other person
so as to afford a basis for any claim for brokerage or other commissions
or fees relative to this Agreement or the transactions contemplated
hereby. Buyer agrees to bear sole responsibility for any claims for
brokerage or other commissions or fees made by brokers engaged by Buyer
including, without limitation, any amounts owed to SunTrust Corporate
Finance.
9. COVENANTS OF SELLER
Seller covenants and agrees that, during the period from the date
hereof to the Closing Date, Seller will cause:
A. OPERATE IN REGULAR MANNER. Company to be operated only in
the usual, regular and ordinary manner and use reasonable efforts (without
entering into any written employment agreements) to preserve intact its
present business organization.
B. MAINTENANCE OF PROPERTY. Company's properties to be
maintained in their current condition of repair, ordinary wear and tear
excepted, with certain costs thereof to be reimbursed by Buyer to Seller
as provided on SCHEDULE 7.V.(5).
C. BOOKS AND RECORDS. The books of account and records
relating to the operations of Company to be maintained in the usual,
regular and ordinary manner on a basis consistent with past practices.
D. TAXES AND ASSESSMENTS. All Taxes and assessments
relating to the operation of Company during taxable periods ending on or
before such Closing Date to be paid when due and payable and all Tax
Returns relating to such Taxes and assessments to be filed whether such
returns are required to be filed before or after the Closing Date.
E. INSPECTION. Representatives of Buyer, including lenders,
accountants, attorneys, engineers, architects and construction personnel,
to be permitted to inspect any property or business records of Company
upon reasonable notice and at any and all
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reasonable times during ordinary business hours of Company so long as the
same does not disrupt the operation of Company.
F. NO TAX SETTLEMENTS. Company not to withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real
estate or personal property Taxes assessed against any assets of Company
for any fiscal period in which the Closing Date is to occur or any
subsequent fiscal period, without the prior written consent of Buyer.
G. NOTICE OF CERTAIN EVENTS. Notify Buyer in writing as soon
as possible upon Seller's receipt of any notices from any Persons or
governmental authorities pertaining to Hazardous Materials on, from or
affecting the Site or to alleged illegal activities or conditions at any
of Company's properties or operations.
H. CAPITAL CHANGES. Company not to issue or sell or otherwise
make commitments with respect to the issuance or sale of any equity
interest in Company or otherwise make changes to its capital structure.
I. DIVIDENDS. Company not to declare or pay any dividends or
other distribution of any kind in respect of any equity interest, except
as described in SCHEDULE 7.O.
J. CERTAIN ACTIONS. Company not to take any of the following
actions:
(1) Dispose of any assets other than in the ordinary
course of business;
(2) Mortgage, pledge or subject to liens or other
encumbrances any assets or properties of Company;
(3) Purchase or commit to purchase any capital asset for
a price exceeding $100,000.00;
(4) Except for planned or normal increases in the
ordinary course of business with respect to non-officer
employees, increase (or announce any increase of) any salaries,
wages or employee benefits or hire, commit to hire or terminate
any employee;
(5) Amend its charter or bylaws;
(6) Issue, sell or repurchase any of its capital stock or
make any change in its issued and outstanding capital stock or
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issue any warrant, option or other right to purchase shares of
its capital stock or any security convertible into its capital
stock, or redeem, purchase or otherwise acquire any shares of its
capital stock, or declare any dividends or make any other
distribution with respect to its stock;
(7) Incur, assume or guarantee any obligation or
liability for borrowed money, or exchange, refund or renew any
outstanding indebtedness in such a manner as to reduce the
principal amount of such indebtedness and increase the interest
rate or balance outstanding;
(8) Cancel any debts owed to Company;
(9) Amend or terminate any material agreement, including
any employee benefit plan or any insurance policy, in force on
the date hereof;
(10) Solicit or entertain any offer for, or sell or agree
to sell, or participate in any business combination with respect
to, any assets of Company (except Inventories sold in the
ordinary course of business consistent with past practices) or
any of the Shares;
(11) Make any changes in its accounting methods,
principles or practices, except as may be required by GAAP;
(12) Enter into any contract or agreement of the type
described in SECTION 7.P.; or
(13) Do any act, omit to do any act or permit any act
within Seller's or Company's control which will cause a breach of
any representation, warranty, covenant or agreement contained in
this Agreement or any obligations contained in any contract.
K. REMOVAL OF CERTAIN ENCUMBRANCES.The liens and
encumbrances listed on SCHEDULES 7.I., 7.U.(1), 7.U.(2) and 7.W. to be
terminated and removed as of the Closing Date at Seller's sole cost and
expense, except as noted on such SCHEDULES.
L. HAZARDOUS MATERIALS. Company: (1) not to use,
transport, store, dispose of or in any manner deal with Hazardous
Materials, except in compliance in all material respects with all
applicable Environmental Laws; (2) to comply in all material respects with
all applicable Environmental Laws, and to keep the Site free and clear of
any liens imposed pursuant to such
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Environmental Laws; and (3) not to install, or permit to be installed,
Asbestos on the Site.
M. TRADEMARK. All of Seller's right, title and interest
in and to the Trademark to be conveyed to Company on or before the Closing
pursuant to the Trademark Assignment.
N. REMEDIAL ACTIONS. Seller agrees to implement and/or complete,
at its expense prior to Closing, each of the recommended actions specified
in Section 5.0 of the report identified in Item 2 of SCHEDULE 7.AB. Such
actions by Seller shall include the complete performance and payment by
Seller of all of Company's obligations under that Agreement dated June 20,
1995, between Company and Xxxxxx Xxxxxxxxx Contractors, Inc. If any of
such actions are not sufficient to cause each of the conditions to be
remediated by such action to comply with all applicable Environmental
Laws, Seller shall take such additional actions, at its expense, as are
reasonably requested by Company to bring such conditions into compliance.
10. TITLE AND ENVIRONMENTAL MATTERS
A. TITLE MATTERS.
(1) TITLE POLICY. The obligations of Buyer to consummate the
transactions contemplated by this Agreement shall be subject to Company's
ability to obtain an owner's title insurance policy issued by Chicago
Title Insurance Company (the "Title Company") with respect to Company's
fee simple interest in the Site on a regular and customary form of title
insurance policy then being issued by Title Company, insuring that Company
is the valid owner, as of the Closing Date, of the fee simple estate in
the Site. The cost of such title policy shall be the obligation of Buyer.
The policy (or the final commitment if a policy is not obtained) shall
contain no exceptions to coverage other than the following (each, a
"Permitted Encumbrance"): (i) the liens of real estate taxes not due and
payable as of the Closing Date; (ii) licenses and easements for public
utilities; (iii) easements and restrictions of record; (iv) all applicable
zoning ordinances for the governing municipality and other governmental
regulations, laws and ordinances; (v) such matters as are set forth on the
preliminary title commitment of Title Company received by Seller and
attached hereto as EXHIBIT 10.A.(1) (the "Commitment"); and (vi) any other
encumbrances which, either individually or in the aggregate, do not
materially interfere with or restrict the use of or materially and
adversely affect the value of the Site.
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(2) PRELIMINARY COMMITMENT. Within fifteen (15) days after
the date hereof, Buyer shall specify to Seller and to Title Company any
exception set forth in the Commitment which Buyer contends is not a
Permitted Encumbrance. Any exception not so specified shall be deemed
approved by Buyer.
(3) SURVEY. Seller has furnished to Buyer a survey of the
Site, which survey shall indicate the as-built location of buildings and
structures on the Site. Any updates to such surveys shall be at Buyer's
expense.
B. ENVIRONMENTAL MATTERS. Seller has furnished to Buyer a
Phase I environmental survey and a Report of Limited Sampling and Analysis
relating to the Site. Buyer shall have a study period of forty-five (45)
days after the date hereof within which to make, at its expense, such
tests as it deems advisable to determine if there is an Environmental
Condition on the Site and an additional fifteen (15) days within which to
receive and review the results of such tests. Seller shall pay and/or
reimburse Buyer for one-half of the out of pocket costs for any such
testing; provided, however, that Seller's obligation to pay for the costs
of such testing shall not exceed $12,500.00. If the testing indicates
that there is an Environmental Condition at the Site, Buyer shall have the
option to extend the study period an additional fifteen (15) days at its
sole discretion. If Buyer discovers an Environmental Condition at the
Site during the study period, Buyer may elect not to purchase the Shares
unless Seller agrees to remediate such Environmental Condition, in which
case Buyer shall have no right to refuse to purchase the Shares because
of the presence of any Environmental Condition existing at the Site.
11. CONDITIONS OF CLOSING
A. CONDITIONS FOR THE BENEFIT OF BUYER. The obligations of
Buyer to consummate the transactions provided for herein shall be subject
to the satisfaction, on or before the Closing Date, or such earlier date
as may be specified herein, of the following conditions, in addition to
such other conditions as may be provided for in this Agreement:
(1) Seller has made all of the deliveries required
by SECTION 12.A.
(2) The representations and warranties of Seller
contained herein shall have been true and correct in all material
respects as of the date hereof and shall be true and
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correct in all material respects as of and at the Closing Date
with the same effect as if made at and as of such dates, except
as provided or permitted hereunder, and Seller shall have
performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement
to be performed and complied with by them, at or prior to the
Closing Date.
(3) All consents and/or approvals (including those
of Buyer's board of directors and of its lenders) necessary for
the consummation of the transactions contemplated by this
Agreement shall have been obtained.
(4) No suit, action or other proceeding (including
action under federal antitrust laws) to prohibit, delay or
otherwise materially and adversely affect the consummation of
this Agreement or to subject Buyer or Company to any liability
resulting directly or indirectly from the transactions
contemplated hereby shall have been instituted or threatened.
(5) Buyer shall have received the opinion, dated as
of the Closing Date, of Seller's Counsel, in form and substance
reasonably satisfactory to Buyer's Counsel, to the effect that:
(a) Seller is a corporation
duly organized, validly existing and in
good standing under the laws of the
State of Tennessee.
(b) Company is a corporation
duly organized, validly existing and in
good standing under the laws of the
State of Tennessee and is duly
qualified to transact business in the
States of Louisiana and South Carolina.
(c) Each of Seller and Company
has the requisite corporate power to
carry on its business as it is now
being conducted.
(d) The Shares are validly
authorized, issued, fully paid and
nonassessable.
(e) The instruments of
transfer to be delivered by Seller to
Buyer on the Closing Date are
sufficient to transfer to Buyer all
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right, title and interest in and to the
Shares.
(f) Neither the execution and
delivery of this Agreement or the other
agreements contemplated herein nor
Seller's performance in accordance with
their respective terms are restricted
by or violate the terms of any existing
constitution, law or administrative
rule or regulation applicable to Seller
or Company, the charter or bylaws of
Seller or Company, or any lease,
option, agreement, mortgage, loan
agreement or any contractual or other
obligation of Seller or Company listed
on any Schedule to this Agreement.
(g) To the best of counsel's
current knowledge and belief, no legal
action or proceeding against Seller or
Company is pending or threatened at the
Closing Date which, if successful,
would prohibit consummation or require
substantial rescission of the
transactions contemplated by this
Agreement.
(h) Seller has full power to
execute, deliver and perform this
Agreement, and the other agreements and
instruments executed on even date
herewith pursuant to this Agreement.
(i) This Agreement, and the
other agreements and instruments
executed on even date herewith pursuant
to this Agreement have been duly and
validly executed and delivered by
Seller and they constitute legal, valid
and binding obligations of Seller,
enforceable in accordance with their
respective terms (subject to applicable
bankruptcy, insolvency and other laws
affecting the enforceability of
creditor's rights generally and subject
to general principles of equity and
subject to public policy considerations
as expressed in the 1933 Act which may
render certain indemnification
provisions unenforceable and subject to
the provisions of applicable securities
laws).
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(6) The required waiting periods under the HSR Act
have either expired or been terminated by the Federal Trade
Commission and the Antitrust Division of the United States
Department of Justice.
(7) The Trademark Assignment has been duly executed
and delivered by Seller.
(8) The Supply Agreement has been duly executed and
delivered by Seller.
(9) The Noncompetition Agreement has been duly
executed and delivered by Seller.
(10) Seller shall have delivered to Buyer a
certificate, dated as of the Closing Date, certifying to the
fulfillment of the foregoing conditions. Seller may, conditioned
upon prior receipt of the written approval of Buyer, amend the
Schedules attached hereto for the purpose of making immaterial
corrections and clarifications thereon applicable to Seller and
consistent with the terms and agreements contained herein, which
amendments shall be attached to the certificate delivered
pursuant to this SECTION 11.A.(10). Unless otherwise agreed to in
writing by the parties hereto, if the Closing occurs, Buyer shall
be deemed to waive any rights for breach of representation or
warranty by Seller to the extent that such amendment corrects
such representation or warranty. Nothing in this SECTION
11.A.(10) shall impose any obligation on Buyer either to accept
any material amendment to the Schedules provided for herein or to
close the transaction notwithstanding such amendment, unless
Buyer elects to do so in its sole and absolute discretion.
(11) Buyer shall have obtained financing for at least
Forty-five Million Dollars ($45,000,000.00) on the terms set
forth in the commitments for financing described in SECTION
13.A.(4) to allow it to complete the purchase of the Shares, it
being acknowledged and agreed that Buyer and its Affiliates (and
other entities, if any, investing through Buyer) shall fund at
least Twelve Million Dollars ($12,000,000.00) toward the Purchase
Price and expected transaction expenses.
B. CONDITIONS FOR THE BENEFIT OF SELLER. The obligations of
Seller to consummate the transactions provided for herein shall be subject
to the satisfaction, on or before the Closing Date, of the following
conditions, in addition to such other conditions as may be provided for
in this Agreement:
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(1) Buyer has made all of the deliveries required by
SECTION 12.B.
(2) The representations and warranties of Buyer
contained herein shall have been true and correct in all material
respects as of the date hereof and shall be true and correct at
and as of the Closing Date with the same effect as if made on and
as of such dates, except as otherwise provided or permitted
hereunder, and Buyer shall have performed and complied in all
material respects with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by
it, at or prior to the Closing Date.
(3) All consents and/or approvals (including those
of Seller's board of directors and lenders) necessary for the
consummation of the transactions contemplated by this Agreement
shall have been obtained.
(4) No suit, action or other proceeding (including
action under federal antitrust laws) to prohibit, delay or
otherwise materially and adversely affect the consummation of
this Agreement or to subject Seller to any liability resulting
directly or indirectly from the transactions contemplated hereby
shall have been instituted or threatened.
(5) Seller shall have received an opinion, dated as
of the Closing Date, from Buyer's Counsel, in form and substance
reasonably satisfactory to Seller's Counsel to the effect that:
(a) Buyer is a corporation
duly organized, validly existing and in
good standing under the laws of the
State of New York.
(b) Buyer has the requisite
corporate power to carry on its
business as it is now being conducted.
(c) Neither the execution and
delivery of this Agreement or the other
agreements contemplated herein nor
Buyer's performance in accordance with
their respective terms are restricted
by or violate the terms of any existing
constitution, law or administrative
rule or regulation applicable to Buyer,
the
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charter or bylaws of Buyer or, to the
best of counsel's current knowledge and
belief, any lease, option, agreement,
mortgage, loan agreement or any
contractual or other obligation of
Buyer.
(d) To the best of counsel's
current knowledge and belief, no legal
action or proceeding against Buyer is
pending or threatened at the Closing
Date which, if successful, would
prohibit consummation or require
substantial rescission of the
transactions contemplated by this
Agreement.
(e) Buyer has full power to
execute, deliver and perform this
Agreement, and the other agreements and
instruments executed on even date
herewith pursuant to this Agreement.
(f) This Agreement, and the
other agreements and instruments
executed on even date herewith pursuant
to this Agreement, each have been duly
and validly executed and delivered by
Buyer and they constitute legal, valid
and binding obligations of Buyer,
enforceable in accordance with their
respective terms (subject to applicable
bankruptcy, insolvency and other laws
affecting the enforceability of
creditor's rights generally and subject
to general principles of equity and
subject to public policy considerations
as expressed in the 1933 Act which may
render certain indemnification
provisions unenforceable).
(6) The required waiting periods under the HSR Act
have either expired or been terminated by the Federal Trade
Commission and the Antitrust Division of the United States
Department of Justice.
(7) The Supply Agreement has been duly executed and
delivered by Company.
(8) Buyer shall have delivered to Seller a
certificate, dated as of the Closing Date, certifying to the
fulfillment of the foregoing conditions. Buyer may, conditioned
upon prior receipt of the written approval of Seller, amend the
Schedules
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attached hereto for the purpose of making immaterial corrections
and clarifications thereon applicable to Buyer and consistent
with the terms and agreements contained herein, which amendments
shall be attached to the certificate delivered pursuant to this
SECTION 11.B.(8). Unless otherwise agreed to in writing by the
parties hereto, if the Closing occurs, Seller shall be deemed to
waive any rights for breach of representation or warranty by
Buyer to the extent that such amendment corrects such
representation or warranty. Nothing in this SECTION 11.B.(8)
shall impose any obligation on Seller either to accept any
material amendment to the Schedules provided for herein or to
close the transaction notwithstanding such amendment, unless
Seller elects to do so in its sole and absolute discretion.
C. BEST EFFORTS AND RIGHT TO PERFORM. Seller and Buyer shall
use their best efforts to fulfill all of their respective pre-Closing
obligations under this Agreement; provided, however, that, unless
otherwise required by this Agreement, no party shall be required to make
any material out-of-pocket payments (other than customary fees and charges
and salary and travel expenses) or incur any additional material
obligations to satisfy such obligations or conditions. Seller and Buyer
shall have the right, but not the obligation (unless otherwise required
by this Agreement), to assist the other in performing any pre-Closing
obligations or conditions precedent of the other party.
D. FAILURE OF CONDITIONS. If any of the foregoing conditions
precedent to Seller's obligations fail, Seller, subject to SECTION 13, may
elect, in its sole discretion, not to sell the Shares. If any of the
foregoing conditions precedent to Buyer's obligations fail, Buyer, subject
to SECTION 13, may elect, in its sole discretion, not to purchase the
Shares.
E. WAIVER OF CONDITIONS. Seller or Buyer, as the case may
be, may waive any condition precedent to its obligations under this
Agreement; provided, however, that such waiver can be granted only on the
waiving party's behalf and only to the extent that it does not affect any
other party's rights hereunder.
12. DELIVERIES AT THE CLOSING
A. SELLER'S DELIVERIES TO BUYER. At the Closing, Seller
shall deliver to Buyer, in addition to any and all other instruments
required hereunder to be so delivered to Buyer by Seller, the following:
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(1) A stock certificate or stock certificates
representing the Shares, registered in the name of Seller and
duly endorsed in blank or with executed stock powers or
assignments attached, in proper form for transfer;
(2) Written resignations of all officers and
directors of Company effective as of the Closing Date;
(3) Copies of the charter and bylaws of Seller and
of Company and of resolutions adopted by the board of directors
of Seller authorizing and approving the execution and performance
of this Agreement and the other agreements contemplated by this
Agreement and the sale and transfer of the Shares, all as
certified by an appropriate officer of Seller as of the Closing
Date;
(4) A certificate as to the incumbency of each person
executing this Agreement and the other agreements contemplated by
this Agreement on behalf of Seller;
(5) A Certificate of Existence with respect to Seller
dated not more than seven (7) days prior to the Closing Date
issued by the Tennessee Secretary of State;
(6) A Certificate of Existence with respect to
Company dated not more than seven (7) days prior to the Closing
Date issued by the Tennessee Secretary of State and certificates
of corporate good standing (or equivalent) with respect to
Company dated not more than seven (7) days prior to the Closing
Date issued by the appropriate officers of the States of
Louisiana and South Carolina;
(7) The Supply Agreement, duly executed by Seller;
(8) The Noncompetition Agreement, duly executed by
Seller;
(9) The opinion of Seller's Counsel referred to in
SECTION 11.A.(5); and
(10) The certificate of Seller required by SECTION
11.A.(10).
B. BUYER'S DELIVERIES TO SELLER. At the Closing, Buyer shall
deliver to Seller, in addition to any and all other instruments required
hereunder to be so delivered to Seller by Buyer, the following:
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(1) The Purchase Price;
(2) Copies of the charter and bylaws of Buyer and of
resolutions adopted by the board of directors of Buyer
authorizing Buyer's execution and performance of this Agreement
and the other agreements contemplated by this Agreement and the
purchase of the Shares, all as certified by an appropriate
officer of Buyer as of the Closing Date;
(3) A certificate as to the incumbency of each person
executing this Agreement and the other agreements contemplated by
this Agreement on behalf of Buyer;
(4) Certificates of corporate good standing (or
equivalent) with respect to Buyer dated not more than seven (7)
days prior to the Closing Date issued by the secretary of state
or other appropriate officer of the state of New York;
(5) The Supply Agreement, duly executed by Company;
(6) The opinion of Buyer's Counsel referred to in
SECTION 11.B.(5); and
(7) The certificate of Buyer required by SECTION
11.B.(8).
C. OTHER DELIVERIES. At the Closing, all other consents,
permits, licenses and administrative approvals required to be obtained as
conditions precedent to the consummation of the transactions provided for
herein shall be delivered.
13. TERMINATION
A. BY AGREEMENT OR FAILURE OF CONDITIONS. This Agreement may
be terminated:
(1) By mutual consent of all parties hereto;
(2) By Buyer if any of the conditions to Buyer's
obligations to consummate the transactions contemplated in this
Agreement shall not have been satisfied, or waived by Buyer, on
or prior to the Closing Date; or
(3) By Seller if any of the conditions to Seller's
obligations to consummate the transactions contemplated in
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this Agreement shall not have been satisfied, or waived by
Seller, on or prior to the Closing Date; or
(4) By Seller if, on or before August 31, 1995, Buyer
fails to obtain and furnish to Seller one or more commitments for
financing for at least Forty-five Million Dollars
($45,000,000.00) (it being acknowledged and agreed that Buyer and
its Affiliates (and other entities, if any, investing through
Buyer) shall fund at least Twelve Million Dollars
($12,000,000.00) toward the Purchase Price and expected
transaction expenses) to allow Buyer to purchase the Shares on a
basis that Buyer indicates to Seller is satisfactory and which
commitment contains terms and conditions that are reasonably
satisfactory to Seller.
B. LAPSE OF TIME. Any provision of this Agreement to the
contrary notwithstanding, if the Closing has not been held for any reason
whatsoever on or before the Termination Date, either party may terminate
this Agreement by written notice to the other party.
C. NOTICE; REMEDIES. The rights of termination hereof as
provided herein shall be exercised by written notice of termination given
by the terminating party to the other party in the manner hereinafter
provided. Any such right of termination shall not preclude any legal or
equitable remedies which may be available to any nondefaulting party
hereto arising out of any default hereunder by the other party hereto. In
the event of a default by any party, the nondefaulting party shall have
such remedies against the defaulting party as may be available to the
nondefaulting party either pursuant to this Agreement and/or at law or in
equity, including the right to recover all costs, expenses or damages
resulting from such default and the right to specifically enforce this
Agreement.
14. INDEMNIFICATION
A. INDEMNIFICATION BY SELLER. Seller will indemnify, defend
and hold Buyer and Company (collectively, the "Buyer Parties") harmless
after the Closing Date from and against any claims or costs (including,
without limitation, reasonable attorneys' fees and court costs and costs
of investigation), losses, damages, liabilities or expenses (collectively
"Costs") incurred by the Buyer Parties (whether as a result of a third-
party claim, or otherwise) as a result of:
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(1) The breach of any of Seller's representations and
warranties made under or pursuant to this Agreement or any of the
other agreements contemplated by this Agreement;
(2) The nonfulfillment of any covenant, agreement or
obligation to be performed by Seller under or pursuant to this
Agreement or any of the other agreements contemplated by this
Agreement;
(3) Any claim for brokerage, finders' fees or other
commissions relative to this Agreement or any of the other
agreements contemplated by this Agreement asserted by or on
behalf of any broker or finder claiming to have been retained by
Seller or to have rendered services on Seller's behalf;
(4) The litigation described on SCHEDULE 7.J.(2) (the
"Litigation") (subject to the further conditions described in
SECTION 14.D.);
(5) Any Scheduled Environmental Condition; or
(6) Any Environmental Condition existing on the
Closing Date that was caused by Seller or is known to Seller.
B. INDEMNIFICATION BY BUYER. Buyer will indemnify, defend
and hold Seller harmless on and after the Closing Date from and against
all Costs incurred by Seller (whether as a result of a third-party claim,
or otherwise) as a result of:
(1) The breach of any of Buyer's representations and
warranties made under or pursuant to this Agreement or any of the
other agreements contemplated by this Agreement;
(2) The nonfulfillment of any covenant, agreement or
obligation to be performed by Buyer under or pursuant to this
Agreement or any of the other agreements contemplated by this
Agreement; or
(3) Any claim for brokerage, finders' fees or other
commissions relative to this Agreement or any of the other
agreements contemplated by this Agreement asserted by or on
behalf of any broker or finder claiming to have been retained by
Buyer or to have rendered services on Buyer's behalf.
C. PARTICIPATION IN THIRD PARTY CLAIMS. Should any claim be
made by a person not a party to this Agreement with respect to any matter
to which the foregoing indemnity relates, the indemnified
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party shall promptly notify the indemnifying party thereof. If the
indemnified party fails to promptly notify the indemnifying party, the
obligation of the indemnifying party shall be reduced by the amount of
damages actually suffered as a result of such late notice. The
indemnified party may make settlement of a claim and such settlement shall
be binding on both parties hereto for the purposes of this SECTION 14 if,
not less than thirty (30) days prior to such settlement, the indemnified
party delivers to the indemnifying party written notice of its intent to
settle such claim, which notice shall set forth the terms of the proposed
settlement; provided, however, that if within such thirty (30) day period
the indemnifying party shall have requested the indemnified party to
contest any such claim at the expense of the indemnifying party, the
indemnified party shall promptly comply, and the indemnifying party shall
have the right to direct the defense of such claim or any litigation based
thereon at its own expense through counsel reasonably acceptable to the
indemnified party. The indemnified party shall also have the right to
participate in the settlement of any such claim or in any such litigation
so long as its participation is at its own expense and with the
understanding that the indemnifying party may settle in its own
discretion. Any payment or settlement made by the indemnifying party in
such contest, together with the total expense thereof, shall be binding
on the indemnified party and the indemnifying party for the purposes only
of this SECTION 14. Notwithstanding anything herein to the contrary, an
indemnifying party shall not, without the prior written consent of the
indemnified party, settle any claim in any manner which adversely affects
the indemnified party or Company. In addition to the foregoing, the
indemnifying party shall assume the defense of any claim, action or
proceeding within the scope of the foregoing indemnities upon the written
request of the indemnified party.
D. LITIGATION. Seller will assume the defense of and will
control the Litigation and the settlement of such matters; provided,
however, that Seller (i) will use its best efforts to avoid any judgment
which would involve equitable relief (for example, reinstatement) of any
kind against any of the Buyer Parties, and (ii) will not enter into any
settlement involving such relief without Buyer's prior written consent.
It is understood and agreed that Seller shall have no obligation to
indemnify the Buyer Parties for any equitable relief that may be awarded
in the Litigation.
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15. TAX MATTERS
A. TAX INDEMNITIES.
(1) From and after the Closing Date, Seller agrees
to indemnify Buyer and Company against all Taxes (i) imposed on
Seller or any member of an affiliated group with which Seller
files a consolidated or combined income tax return with respect
to any taxable period that ends on or before the Closing Date,
including any Taxes resulting from or attributable to Seller's
sale of the Shares and the Section 338(h)(10) Election (as
defined herein), or (ii) imposed on Company with respect to any
taxable period that ends on or before the Closing Date, including
any Taxes resulting from or attributable to the Section
338(h)(10) Election (as defined herein), provided, however, that
no indemnity shall be provided under this Agreement for any Taxes
resulting from any transaction of Company occurring after the
Closing Date. Any indemnity payment made by Seller pursuant to
this SECTION 15.A. shall, in accordance with SECTION 15.G.(1), be
treated for tax purposes as an adjustment to the Purchase Price
and shall not include or require any gross-up for Taxes on such
indemnity payment.
(2) From and after the Closing Date, Buyer shall
indemnify Seller against all Taxes imposed on or with respect to
Company that are not subject to indemnification pursuant to
SECTION 15.A.(1). Any indemnity payment made by Buyer pursuant
to this SECTION 15.B. shall, in accordance with SECTION 15.G.(1),
be treated for tax purposes as an adjustment to the Purchase
Price and shall not include or require any gross-up for Taxes on
such indemnity payment.
(3) Any indemnity payment required under this SECTION
15.A. shall be made within ten (10) business days following
notice by the party to be indemnified that payment of the amount
for which indemnity is sought is then due to the appropriate Tax
authority; provided, however that no indemnity payment shall be
required to be made more than two (2) business days before it is
due to the appropriate Tax authority. In the case of a Tax that
is contested pursuant to SECTION 15.C., payment of the Tax to the
appropriate Tax authority will not be considered to be due until
a final non-appealable determination to such effect is made by
the appropriate Tax authority or a court.
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(4) For purposes of this Agreement, in the case of
any Tax that is imposed on a periodic basis and is payable for a
period that begins before the Closing Date and ends after the
Closing Date, the portion of such Tax payable for the period
ending on the Closing Date shall be (i) in the case of any Tax
other than a Tax based upon or measured by income, the amount of
such Tax for the entire period multiplied by a fraction, the
numerator of which is the number of days in the period ending on
the Closing Date and the denominator of which is the number of
days in the entire period and (ii) in the case of any Tax based
upon or measured by income, the amount which would be payable if
the taxable year ended on the Closing Date. Any credit or
prepayment shall be prorated based upon the fraction employed in
clause (i) of the next preceding sentence. In the case of any
Tax based upon or measured by capital (including net worth or
long-term debt) or intangibles, any amount thereof required to be
allocated under this SECTION 15.A.(4) shall be computed by
reference to the level of such items on the Closing Date.
B. REFUNDS AND TAX BENEFITS
(1) Buyer shall promptly pay or cause Company to pay
to Seller any refund or credit (including any interest paid or
credited with respect thereto) received by Buyer or Company of
Taxes (i) relating to taxable periods ending on or before the
Closing Date or (ii) attributable to an amount paid by Seller
under SECTION 15.A., but, in each case, only to the extent that
the right to such refund or credit was not included as an asset
of Company on the Balance Sheet. Buyer shall, if Seller so
requests and at Seller's expense, file for or cause Company to
file for and obtain any refund to which Seller (or Seller,
indirectly through Company) is entitled under this SECTION 15.B.
Buyer shall permit or cause Company to permit Seller to control
(at Seller's expense) the prosecution of any such refund claim,
and shall cause the relevant entity to authorize by appropriate
power of attorney such persons as Seller shall designate to
represent such entity with respect to such refund claim.
(2) If Seller pays an amount pursuant to SECTION
15.A., and the underlying adjustment resulting in the obligation
of Seller results in a Tax benefit to Buyer, any subsidiary or
any Affiliate of Buyer or Company or any entity with which
Company files a consolidated, combined or unitary tax return for
a period or portion thereof beginning after the Closing Date and
ending on or before the date of the Tax payment
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giving rise to the indemnity obligation, then, upon Seller's
request and at Seller's expense and provided that the period of
limitations for obtaining a refund such Taxes has not expired,
Buyer shall file or cause Company to file a claim for refund and
diligently pursue the same. Buyer shall permit or cause Company
to permit Seller to control (at Seller's expense) the prosecution
of any such refund claim, and shall cause the relevant entity to
authorize by appropriate power of attorney such persons as Seller
shall designate to represent such entity with respect to such
refund claim. Buyer shall pay or cause Company to pay to Seller,
upon receipt of any such refund, the amount of such refund
attributable to the Tax benefit, including allocable interest to
the extent actually received.
C. CONTESTS.
(1) After the Closing Date, Buyer shall notify Seller
in writing of the commencement of any Tax audit or administrative
or judicial proceeding or of any demand or claim on Buyer or
Company which, if determined adversely to the taxpayer or after
the lapse of time, would be grounds for indemnification under
SECTION 15.A. within fifteen (15) days after such commencement or
the receipt of such demand or claim. Such notice to Seller shall
contain factual information (to the extent known to Buyer or
Company) describing the asserted Tax liability in reasonable
detail and shall include copies of any notice or other document
received from any Tax authority in respect of any such asserted
Tax liability. If Buyer fails to give Seller notice of an
asserted Tax liability as required by this SECTION 15.C., then,
if Seller is precluded by the failure to give such notice from
contesting the asserted Tax liability in formal proceedings
before either the administrative or judicial forum, then Seller
shall not have any obligation to indemnify Buyer or Company for
any loss arising out of such asserted Tax liability.
(2) Seller may elect to direct, through counsel of
its own choosing and at its own expense, any audit, claim for
refund and administrative or judicial proceeding involving any
asserted liability with respect to which indemnity may be sought
under SECTION 15.A. (any such audit, claim for refund or
proceeding relating to an asserted Tax liability is referred to
herein as a "Contest"); provided, however, that Buyer and Company
and their duly appointed representatives shall have the right to
participate in any such Contest, at their own expense, to the
extent that such Contest relates to
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matters for periods after the Closing Date; and provided,
further, that Seller shall obtain the consent of Buyer and
Company prior to the resolution or settlement of any such dispute
to the extent it relates to matters after the Closing Date, which
consent shall not be unreasonably withheld or delayed. If Seller
elects to direct a Contest, within thirty (30) days after receipt
of the notice of asserted Tax liability, Seller shall notify
Buyer of its intent to do so, and Buyer shall cooperate and shall
cause Company or its respective successor or successors to
cooperate, at Seller's expense, in each phase of such Contest.
If Seller chooses to direct the Contest, Buyer promptly shall
empower and cause Company or its successor to empower (by power
of attorney and such other documentation as may be necessary and
appropriate) such representatives of Seller as it may designate
to represent Buyer or Company or their respective successors in
the Contest insofar as the Contest involves an asserted Tax for
which Seller may be required to indemnify Buyer or Company under
SECTION 15.A. If Seller elects not to direct the Contest, fails
to notify Buyer of its election as herein provided or contests
its obligation to indemnify under SECTION 15.A., Buyer or Company
may pay, compromise or contest, at their own expense, such
asserted Tax liability without prejudice to any right of Buyer or
Company to indemnification if otherwise entitled thereto
hereunder.
D. PREPARATION OF TAX RETURNS. Seller shall cause to be
prepared and filed any Tax Return relating to Company for any taxable
period ending on or before the Closing Date. Any such Tax Return shall
be prepared an a basis consistent with those prepared for prior Tax years
unless a different treatment of any item is required by an intervening
change in law. Buyer shall prepare or cause Company to prepare any Tax
Return relating to Company for any taxable period ending after the Closing
Date.
E. SECTION 338(h)(10) ELECTION.
(1) The parties shall cause an election to be made
under Sections 338(g) and 338(h)(10) of the Code (and any
corresponding elections under state, local or foreign tax law)
(collectively a "Section 338(h)(10) Election") in connection with
the sale of the Shares contemplated hereby and with respect to
Company and shall comply with the rules and regulations
applicable to such Section 338(h)(10) Election. Buyer shall pay
all expenses associated with the Section 338(h)(10) Election
including, without limitation, the costs of any necessary
appraisals.
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(2) On or prior to the Closing Date, Buyer and Seller
(and/or other entities as necessary) jointly shall execute two
copies (one for Buyer and one for Seller) of Internal Revenue
Service Form 8023-A (or any successor form) and all attachments
required to be filed therewith pursuant to applicable
regulations. The forms relating to the Section 338(h)(10)
Election for federal, state and local Tax purposes hereinafter
shall be referred to as the "SECTION 338 FORMS". Buyer and
Seller agree that the Section 338 Forms shall be filed with the
appropriate Tax authorities not earlier than sixty (60) days
before the latest date for the filing thereof. In no event shall
the Section 338 Forms be filed later than fifteen (15) days
before they are due. At least one hundred twenty (120) days
prior to the latest date for the filing of each Section 338 Form,
Buyer shall prepare and submit to Seller any necessary
corrections, amendments or supplements to such Section 338 Form
and the attachments thereto, as previously executed by Buyer and
Seller (and/or other entities as necessary). Buyer shall not
file any Section 338 Form or the attachments thereto, as
corrected, amended or supplemented, unless Buyer obtains Seller's
consent, which consent shall not be unreasonably withheld or
delayed. On or prior to the 30th day after Seller's receipt of
such corrections, amendments or supplements from Buyer, Seller
shall deliver to Buyer either (i) its consent to such filing or
(ii) a written notice specifying in reasonable detail all
disputed items and the basis therefor. If, within thirty (30)
days after Buyer's receipt of the written notice described in
clause (ii) above, Buyer and Seller have been unable to resolve
their differences, any remaining disputed issues shall be
submitted to a nationally recognized independent public
accounting firm in the United States (other than a firm which
then serves, has been selected to serve in the future or has
served within the past three years as the independent auditor for
Buyer) selected by Seller, and reasonably acceptable to Buyer, to
resolve the issues in a final and binding manner after hearing
the views of both parties. In that event, Buyer and Seller shall
execute and consent to the filing of the corrected, amended or
supplemented Section 338 Forms in the manner determined by such
accounting firm. The fees and expenses of the accounting firm
shall be paid by the non-prevailing party.
(3) For purposes of making the Section 338(h)(10)
Election, Buyer and Seller shall agree upon an allocation of
Buyer's "adjusted grossed-up basis" in the Shares (within the
meaning of the regulations under Section 338 of the Code) to
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the tangible and intangible assets of Company as of the Closing
Date (the "Allocation"). The Allocation shall be binding upon
Buyer and Seller for purposes of allocating the "deemed selling
price" (within the meaning of the regulations under Section 338
of the Code) among the assets of Company. Neither party shall
file any Tax Return, or take a position with a Tax authority,
that is inconsistent with the Allocation. If Buyer and Seller
shall not be able to agree to the Allocation, they shall submit
any dispute to a nationally recognized independent public
accounting firm in the United States which is mutually agreeable
to Buyer and Seller to resolve all disputed matters related to
the Allocation, and such resolution shall be binding on both
parties. The fees and expenses of the accounting firm shall be
shared equally by Buyer and Seller.
F. COOPERATION AND EXCHANGE OF INFORMATION. Seller and
Buyer will provide each other with such cooperation and information as
either of them reasonably may request of the other in filing any Tax
Return, amended return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or participating in or conducting
any audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of relevant Tax Returns or
portions thereof, together with accompanying schedules and related work
papers and documents relating to rulings or other determinations by Tax
authorities. Each party shall make its employees available on a mutually
convenient basis to provide explanations of any documents or information
provided hereunder. Each party will retain all returns, schedules and
work papers and all material records or other documents relating to Tax
matters of Company for the taxable period first ending after the Closing
Date and for all prior taxable periods until the later of (i) the
expiration of the statute of limitations of the taxable periods to which
such returns and other documents relate, without regard to extensions
except to the extent notified by the other party in writing of such
extensions for the respective Tax periods, or (ii) eight years following
the due date (without extension) for such returns. Any information
obtained under this SECTION 15.F. shall be kept confidential, except as
may be otherwise necessary in connection with the filing of returns or
claims for refund or in conducting an audit or other proceeding.
G. MISCELLANEOUS.
(1) The parties agree to treat all payments made
under this SECTION 15, under any other indemnity provision
contained
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in this Agreement, and for any misrepresentations or breach of
warranties or covenants as adjustments to the Purchase Price for
Tax purposes.
(2) For the purposes of this SECTION 15, all references
to Buyer, Seller and Company include successors.
(3) The covenants and agreements of the parties
hereto contained in this SECTION 15 shall survive the Closing and
shall remain in full force and effect with respect to: (a)
Seller's obligations until the expiration of all statutes of
limitations with respect to any Taxes that would be indemnifiable
by Seller under SECTION 15.A.(l); and (b) Buyer's obligations
until the expiration of all statutes of limitations with respect
to any Taxes that would be indemnifiable by Buyer under SECTION
15.A.(2) or SECTION 15.B. of this Agreement.
16. SURVIVAL OF TERMS
All of the representations and warranties of the respective
parties hereto, as contained herein, shall survive the Closing Date and
shall continue thereafter in full force and effect for a period of two (2)
years following the Closing Date notwithstanding any investigations
heretofore or hereafter made by or on behalf of any of the parties hereto,
provided, however, that the terms and provisions of SECTION 15 hereof
shall remain in full force and effect as set forth therein, the
representations and warranties set forth in SECTION 7.N. shall remain in
full force and effect for a period of ninety (90) days following the
expiration of all statute(s) of limitations applicable to the Taxes in
question, the representations and warranties set forth in SECTION 7.AB.
and SECTION 0.XX. shall remain in full force and effect for a period of
five (5) years following the Closing Date, and the representations and
warranties set forth in SECTION 7.H., SECTION 7.I., SECTION 7.V.(2) and
SECTION 7.Y.(1) shall be actionable by Buyer at any time there is a breach
thereof following the Closing Date. The limitations on survival set forth
in this SECTION 16 shall not affect or terminate any claim made by Buyer
against Seller prior to the expiration of the applicable survival period
with respect to any breach of a representation or warranty, which claim
shall remain effective until finally settled as between the parties.
17. WAIVER AND AMENDMENT
Any of the provisions of this Agreement may be waived in writing
at any time, by the party or parties which is or are
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entitled to the benefit of such provision. Any of the provisions of this
Agreement may be amended at any time by written agreement of all parties.
18. CONFIDENTIAL INFORMATION AND RETENTION OF DOCUMENTS
A. CONFIDENTIAL INFORMATION. All information given by any
party hereto to any other party shall be used only for the purposes of
this Agreement and the transactions contemplated in this Agreement and
shall be treated as confidential and not disclosed to others except the
parties' attorneys, accountants and agents and except insofar as such data
or information is published or is a matter of public knowledge or is
required to be disclosed by applicable law or legal process. In the event
that Buyer does not consummate the acquisition provided for herein for any
reason whatsoever, Buyer shall return to Seller all copies of data
supplied by Seller to Buyer or its representatives.
B. RETENTION OF DOCUMENTS. Seller agrees that, after the
Closing Date, all of Seller's documents relating to the ownership and
operation of Company during the period prior to the Closing Date shall be
open for inspection by representatives of Buyer at any time during regular
business hours of Seller for any proper purpose until such time as such
documents are destroyed or possession thereof is given to Buyer as
provided for in the following sentences, and that Buyer at its expense may
during such period make such copies thereof as it may reasonably request.
Without limiting the generality of the foregoing, for a period commencing
on the Closing Date and ending on the sixth anniversary of the Closing
Date, Seller shall not destroy or give up possession of any document
referred to in the preceding sentence without first offering to Buyer the
opportunity, at Buyer's expense (but without any other payment), to obtain
the same. Thereafter, Seller shall be free to dispose of such documents
as it deems fit.
C. INSPECTION OF DOCUMENTS. Buyer agrees that, subject to
Section 6.3 of the Supply Agreement, after the Closing Date, documents
relating to the ownership and operation of Company prior to the Closing
Date shall be open for inspection by representatives of Seller if needed
in the course of any audit, claim or litigation involving such operations
at any time during regular business hours of Seller for any proper purpose
until such time as such documents are destroyed or possession thereof is
given to Seller as provided for in the following sentences, and that
Seller at its expense may during such period make such copies thereof as
it may reasonably request. Without limiting the generality of the
foregoing, for a
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period commencing on the Closing Date and ending on the sixth anniversary
of the Closing Date, Buyer shall not and shall not allow Company to
destroy or give up possession of any document referred to in the preceding
sentence without first offering to Seller the opportunity, at Seller's
expense (but without any other payment), to obtain the same. Any
documents shall be held in confidence pursuant to SECTION 18.A.
Thereafter, Seller shall be free to dispose of such documents as it deems
fit.
19. FEES AND EXPENSES
Except as otherwise provided herein, Seller and Buyer,
respectively, shall each bear its own costs and expenses incurred in
connection herewith and with the transactions contemplated hereby, whether
or not the sale of the Shares hereunder shall be consummated or this
Agreement subsequently shall be terminated. Any recording costs shall be
paid by the party desiring recordation.
20. PUBLICITY
The parties agree that except, as required by law, neither of them
will make any public announcement regarding this Agreement without the
approval of the other party, such approval not to be unreasonably withheld
or delayed.
21. CERTAIN OPERATING SYSTEMS
Buyer and Seller recognize that Company requires additional
computer hardware and software systems to permit Company to perform
certain accounting and other functions such that Company can operate on
a stand-alone basis. Promptly following the date hereof, Seller, at its
expense, shall engage a consultant to advise Buyer and Seller as to the
most effective method for installing such systems at Company. Following
the receipt of the consultant's report, Seller and Buyer shall consult in
good faith and shall agree upon an appropriate system and the preferred
vendor therefor. Seller shall use its best efforts to cause such system
to be fully installed and operational (including reasonable and customary
employee training) prior to the Closing Date. If such system is not fully
operational prior to the Closing Date, Seller shall make available to
Company following the Closing access to Seller's network and MIS personnel
as may be necessary to permit Company to remain fully operational
consistent with past practice pending the
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final installation and operability of the new system at Company. In such
event, Buyer shall pay and/or reimburse Seller (in an amount not to exceed
$2,500.00 per month) for Seller's out-of-pocket costs incurred in allowing
such access, including any expenses incurred in connection with ensuring
security of Seller's computer system. At the Closing, Buyer shall
reimburse Seller for the amount of all out-of-pocket costs paid or payable
by Seller to the selected vendor for hardware and software and
installation thereof. In addition, prior to Closing, Seller shall, at its
expense, cause the telephone system of Company to be operational on a
stand-alone basis.
22. TRANSFER TAXES, ETC.
Notwithstanding SECTION 15, Buyer shall be responsible for and
shall pay any transfer taxes, sales and/or use taxes, documentary stamps
or similar taxes, fees or charges imposed by federal, state or local
governments as the result of the sale of any Shares to Buyer.
23. NOTICES
Any notice which any party hereto may desire or may be required
hereunder to give to the other parties hereto shall be in writing and
shall be deemed to be duly given when received (or when first refused, if
that be the case) by personal delivery, by overnight delivery service
which provides return receipts, or by express, registered or certified
U.S. mail, postage prepaid, return receipt requested, addressed to such
other party as follows:
BUYER: c/o Levmark Capital Corporation
000 Xxxxxxxx Xxxxxxx
Xxx Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
copy to: King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxx III
SELLER: Shoney's, Inc.
0000 Xxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Secretary
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copy to: Tuke Xxxx & Xxxxxxx
17th Floor
Third National Bank Building
000 Xxxxxx Xxxxxx, Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxx
or to such other address as a party hereto hereafter may designate to the
other party in writing.
24. CONSTRUCTION
As herein used, the singular number shall include the plural, the
plural the singular, and the use of any gender shall be applicable to all
genders, unless the context would clearly not admit such construction.
This instrument shall be construed and interpreted in accordance with the
laws of the State of Tennessee. Section or paragraph headings are
employed herein solely for convenience of reference, and such headings
shall not be used in construing any term or provisions of this instrument.
25. SUCCESSORS AND ASSIGNS
This Agreement and all of the provisions hereof shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective heirs, successors and assigns, provided, however, that neither
this Agreement nor any of the rights or obligations of any party hereto
may be assigned without the prior written consent of the other party
hereto; and provided further that Buyer may assign its rights hereunder
to any entity that is a direct or indirect wholly-owned subsidiary of
Levmark Corporation.
26. SEVERABILITY
Whenever possible, each provision and term of this Agreement shall
be interpreted in such manner as to be valid and enforceable; provided,
however, that in the event any provision or term of this Agreement should
be determined to be invalid or unenforceable, all other provisions and
terms of this Agreement and the application thereof to all persons and
circumstances subject thereto shall remain unaffected to the extent
permitted by law. If any application of any provision or term of this
Agreement to any person or circumstances should be determined to be
invalid or unenforceable, the application of such provision or term to
other
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persons and circumstances shall remain unaffected to the extent permitted
by law.
27. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original hereto and all of which together
shall constitute but one Agreement.
28. ENTIRE AGREEMENT
This Agreement and the agreements and documents to be executed and
delivered pursuant to this Agreement constitute the entire agreement among
the parties hereto and supersede all prior and contemporaneous agreements
and undertakings of the parties pertaining to the subject matter hereof
and there are no representations or warranties, express or implied, other
than those contained in this Agreement.
29. FURTHER ASSURANCES
After the Closing Date, Seller shall take all such actions and
deliver all such documents as shall be reasonably necessary or appropriate
to confirm and vest title to the Shares in Buyer.
30. NO THIRD PARTY BENEFICIARIES
With the exception of the parties to this Agreement, there shall
exist no right of any person to claim a beneficial interest in this
Agreement or any rights accruing by virtue of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed the day and year first above written.
SELLER:
SHONEY'S, INC.
By: /s/ W. Xxxxx Xxxxxx
______________________________
Title: EVP & CFO
BUYER:
LEVMARK CAPITAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
____________________________
Title: Vice President
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EXHIBITS AND SCHEDULES
OMITTED FOR
FILING PURPOSES
