STOCK PURCHASE AGREEMENT
BY AND AMONG
SENECA FOODS CORPORATION,
▇▇▇▇ ▇▇▇▇▇ STRATEGIC INVESTMENTS, L.P.,
▇▇▇▇ ▇▇▇▇▇ STRATEGIC INVESTMENTS II, L.P.
AND URANUS FUND, LTD.
Dated as of June 22, 1998
TABLE OF CONTENTS
Page
1. DEFINITIONS..........................................................3
2. CLOSING.............................................................13
2.1 Time and Place of the Closing............................13
2.2 Transactions at the Closing..............................14
3. CONDITIONS TO THE CLOSING...........................................15
3.1 Conditions Precedent to the Obligations of the
Purchaser...............................................15
3.1.1 Compliance by the Company.........................15
3.1.2 Shareholder Approval..............................16
3.1.3 Rights Offering...................................16
3.1.4 Amendment to Certificate of Incorporation.........16
3.1.5 Board of Directors................................16
3.1.6 Consents..........................................17
3.1.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇.................................18
3.1.8 Absence of Material Adverse Effect................18
3.1.9 Nasdaq Listing....................................18
3.1.10 Stock Price.......................................18
3.1.11 Legal Opinions....................................18
3.1.12 Exemption from Special Voting Requirements........18
3.1.13 Officer's Certificate.............................19
3.1.14 Secretary's Certificate...........................19
3.1.15 No Injunction.....................................19
3.1.16 Change of Control.................................20
3.2 Conditions Precedent to Obligations of the Company.......20
3.2.1 Compliance by the Purchaser.......................20
3.2.2 Shareholder Approval..............................20
3.2.3 Consents..........................................20
3.2.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇.................................21
3.2.5 Nasdaq Listing....................................21
3.2.6 No Injunction.....................................21
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................21
4.1 Corporate Existence and Power............................21
4.2 Power and Authority......................................22
4.3 Affiliate Transactions...................................23
4.4 No Contravention, Conflict, Breach, Etc..................24
4.5 Consents.................................................24
4.6 Capitalization of the Company............................25
4.7 No Rights Plan...........................................27
4.8 Registration Rights......................................27
4.9 Subsidiaries.............................................27
4.10 SEC Documents............................................29
4.11 Financial Statements.....................................31
4.12 No Existing Violation, Default, Etc......................32
4.13 Licenses and Permits.....................................34
4.14 Title to Properties......................................35
4.15 Intellectual Property....................................35
4.16 Environmental Matters....................................38
4.17 Taxes....................................................39
4.18 Litigation...............................................42
4.19 Labor Matters............................................42
4.20 Employee Benefits........................................43
4.21 Contracts................................................45
4.22 Contingent Liabilities...................................46
4.23 No Material Adverse Effect...............................46
4.24 Finder's Fees............................................48
4.25 Investment Company.......................................48
4.26 Exemption from Registration; Restrictions on Offer
and Sale of Same or Similar Securities.................48
4.27 Use of Proceeds..........................................49
4.28 Full Disclosure..........................................49
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.....................49
5.1 Partnership Existence and Power..........................49
5.2 Power and Authority......................................50
5.3 No Contravention, Conflict, Breach, Etc..................50
5.4 Consents.................................................51
5.5 Acquisition for Own Account..............................51
5.6 Third Party Agreements...................................52
5.7 Finder's Fee.............................................52
5.8 Ownership of Common Stock................................53
5.9 Full Disclosure..........................................53
6. COVENANTS OF THE PARTIES............................................53
6.1 Shareholder Meeting; Proxy Material; Certificate
of Amendment...........................................53
6.2 Rights Offering..........................................54
6.3 Rights Offering Registration Statement...................55
6.4 Pre-Closing Activities...................................58
6.5 Option Shares............................................62
6.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇........................................63
6.7 Access to Information....................................63
6.8 Publicity................................................64
6.9 Certificates for Shares To Bear Legends..................64
6.10 Reservation of Shares....................................65
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS...........................................................65
8. INDEMNIFICATION.................................... ................66
8.1 Indemnification by the Company...........................66
8.2 Notification.............................................67
8.3 Registration Rights Agreement............................69
9. TERMINATION.........................................................70
9.1 Termination..............................................70
9.2 Expenses.................................................71
9.3 Effect of Termination....................................71
10. MISCELLANEOUS.......................................................72
10.1 Performance; Waiver......................................72
10.2 Extension or Modification of Rights Offering.............72
10.3 Successors and Assigns...................................73
10.4 Notices..................................................73
10.5 Governing Law............................................74
10.6 Severability.............................................74
10.7 Headings; Interpretation.................................75
10.8 Entire Agreement.........................................75
10.9 No Third Party Rights....................................75
10.10 Counterparts.............................................75
EXHIBITS
A Pillsbury Letter Agreement
B Certificate of Amendment
C Registration Rights Agreement
D Rights Offering Registration Statement
E Shareholders Agreement
F ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & Mugel, LLP Opinion
G ▇▇▇▇▇▇▇▇▇▇▇, D'▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ Opinion
SCHEDULES
I Shares Purchased
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("AGREEMENT"), dated as of June 22,
1998, by and among Seneca Foods Corporation, a New York corporation (the
"Company"), ▇▇▇▇ ▇▇▇▇▇ Strategic Investments, L.P., a Delaware limited
partnership ("CMSI"), ▇▇▇▇ ▇▇▇▇▇ Strategic Investments II, L.P., a Delaware
limited partnership ("CMSI II"), Uranus Fund, Ltd., a Cayman Islands corporation
("Uranus" and, together with CMSI and CMSI II, the "Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and
the Purchasers desire to purchase, an aggregate of 1,166,667 shares of
Convertible Participating Preferred Stock, par value $.025 per share, of the
Company (the "Preferred Stock"), at a purchase price equal to $12.00 per Share
(the "Purchase Price Per Share") (or $14,000,004 in the aggregate) upon the
terms and subject to the conditions set forth herein;
WHEREAS, each share of Preferred Stock may be converted at any
time by the holder thereof into one share of Class A Common Stock, par value
$.25 per share, of the Company (the "Class A Common Stock");
WHEREAS, the Company proposes, as soon as practicable after
the Rights Offering Registration Statement (as defined herein) becomes
effective, to distribute to holders of its Class A Common Stock and Class B
common stock, par value $.25 per share, of the Company (the "Class B Common
Stock" and, together with the Class A Common Stock, the "Common Stock")
transferable rights (the "Rights") to subscribe for and purchase up to an
aggregate of 3,000,000 shares of the Preferred Stock at a subscription price
equal to the Purchase Price Per Share;
WHEREAS, pursuant to the Rights Offering (as defined herein),
stockholders of record will receive one-half of a Right for each share of Common
Stock held by them as of the applicable record date, and each whole Right will
entitle the holder to purchase one share of Preferred Stock at the Purchase
Price Per Share;
WHEREAS, the Company desires to assure the sale of at least
2,500,000 of the shares of Preferred Stock as a result of the Rights Offering in
order to realize proceeds of not less than $30,000,000 (the "Minimum Proceeds");
WHEREAS, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Individually and as Trustee),
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (as Trustee), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Individually and as Trustee for
Alexius ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇), ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(Individually and as Trustee for certain ▇▇▇▇▇▇ family trusts), ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (as Trustee of certain ▇▇▇▇▇▇
family trusts), ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Individually and as Trustee for ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇), ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(Individually and as Trustee for ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇), ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Individually and
as Trustee for ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇), ▇▇▇▇▇ ▇▇▇▇▇▇ and The Pillsbury Company ("Pillsbury") (collectively, the
"Existing Shareholders"), the owners of approximately 30.4% of the outstanding
Class A Common Stock and approximately 23.8% of the outstanding Class B Common
Stock, have advised the
Company that, pursuant to the terms of the Shareholders Agreement (as defined
herein) and a letter agreement, dated as of June 9, 1998, between Pillsbury and
the Company and attached as Exhibit A hereto, respectively, they will not
exercise any of their Rights;
WHEREAS, in lieu thereof, and to assist the Company in its
efforts to assure realization of the Minimum Proceeds, the Purchasers have
offered to purchase from the Company, and the Company is willing to sell to the
Purchasers at the Purchase Price Per Share, up to 2,500,000 shares of Preferred
Stock that otherwise would have been available for purchase by the shareholders
of the Company pursuant to the Rights Offering; and
WHEREAS, if less than 2,500,000 shares of Preferred Stock
become available for purchase by the Purchasers following the Rights Offering,
the Purchasers may require the Company to issue and sell to them additional
shares of Preferred Stock so as to permit them to acquire up to 2,500,000 shares
of Preferred Stock (subject to certain limitations).
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, agreements and conditions
contained herein, the Company and the Purchasers agree as follows:
4
1. DEFINITIONS.
The terms defined in this Section 1 shall have the following
meanings for all purposes of this Agreement:
"Act" means the Securities Act of 1933, as amended, or any
superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect from time to time. References to
a particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such superseding Federal
statute.
An "Affiliate" of, or a person "affiliated" with, a specified
Person, means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified. The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract, or otherwise.
"Alliance Agreement" has the meaning set forth in Section 4.12.
"Annual Report" means the Company's Annual Report on Form 10-K
for the year ended March 31, 1997, as filed with the SEC (including all exhibits
and schedules thereto and documents incorporated by reference therein).
"Benefit Plans" has the meaning set forth in Section 4.20.
5
"Blank Check Preferred Stock" means preferred stock, Class A,
par value $0.025 per share, of the Company.
"Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
"Business Day" shall mean any day that is not a Saturday,
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"By-Laws" means the By-laws of the Company, as amended through
the date hereof.
"Certificate of Amendment" means the Certificate of Amendment
of the Certificate of Incorporation to be filed for recording by the Company
with the Department of State of the State of New York on or prior to the date
and time of the Closing, in the form attached as Exhibit B hereto.
"Certificate of Incorporation" means the Restated Certificate
of Incorporation of the Company, as filed for recording with the Department of
State of the State of New York, as amended through the date hereof.
"Change of Control" means the acquisition by any Person or 13D
Group (other than the parties to the Shareholders Agreement and their
Affiliates) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of the outstanding Voting Securities representing 25% or more of
the voting power of the Company.
6
"Class A Common Stock" has the meaning set forth in the preamble to
this Agreement.
"Class B Common Stock" has the meaning set forth in the preamble to
this Agreement.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"CMSI" has the meaning set forth in the preamble to this Agreement.
"CMSI II" has the meaning set forth in the preamble to this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in the preamble to this
Agreement.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Conversion Shares" means the shares of Class A Common Stock
issuable upon conversion of the Preferred Stock pursuant to the terms of the
Certificate of Amendment.
"Credit Agreement" has the meaning set forth in Section 4.12.
"Disclosure Letter" has the meaning set forth in Article 4.
"Draft Form 10-K" means the draft of the Company's Annual Report
7
on Form 10-K for the year ended March 31, 1998, dated June 12, 1998 (excluding
all exhibits and schedules thereto and documents incorporated by reference
therein), and the draft of the Company's annual report for the year ended March
31, 1998, dated June 16, 1998, each in the form previously delivered to the
Purchasers.
"Encumbrance" means any mortgage, pledge, lien, security
interest, restriction upon voting or transfer, claim or other encumbrance of any
kind.
"Environmental Laws" means all federal, state, local and
foreign laws, principles of common law, regulations, codes and ordinances, as
well as orders, decrees, judgments or injunctions issued, promulgated, approved
or entered thereunder relating to pollution, protection of the environment, or
health and safety, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601 et
--
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq.,
--- ------
the Toxic Substances Control Act, 15 U.S.C. Sec. 2601 et seq., the Federal Water
------
Pollution Control Act, 33 U.S.C. Sec. 1251 et seq., the Clean Air Act, 42 U.S.C.
------
Sec. 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7
------
U.S.C. Sec. 121 et seq., the Occupational Safety and Health Act, 29 U.S.C. Sec.
------
651 et seq., the Asbestos Hazard Emergency Response Act, 15 U.S.C. Sec. 2601 et
------ --
seq., the Safe Drinking Water Act, 42 U.S.C. Sec. 300f et seq., the Oil
---- ------
Pollution Act of 1990, 33 U.S.C. Sec. 2701 et seq., and analogous state acts.
------
8
"ERISA" has the meaning set forth in Section 4.20.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any superseding Federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934, as
amended, shall include a reference to the comparable section, if any, of such
superseding Federal statute.
"Existing Shareholders" has the meaning set forth in the preamble to
this Agreement.
"Governmental Authority" means the government of any nation or
state, or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Intellectual Property" has the meaning set forth in Section 4.15(A).
"Investment Proposal" has the meaning set forth in Section 6.1.
"IP Licenses" has the meaning set forth in Section 4.15(B).
"Knowledge of the Company" means the actual knowledge of (i) the
executive officers of the Company named in the Annual Report and (ii) each of
the Presidents of the Company's processed food groups, in each case, after
reasonable inquiry.
9
"Law" means any law, treaty, rule or regulation of a
Governmental Authority or judgment, order, writ, injunction or determination of
an arbitrator or a court or other Governmental Authority.
"Liabilities" has the meaning set forth in Section 8.1.
"Licenses" means any certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
Governmental Authorities.
"Material Adverse Effect" means a material adverse effect on
(i) the assets, results of operations, business, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole,
and (ii) the ability of the Company to consummate the transactions contemplated
by this Agreement, the Registration Rights Agreement and the Shareholders
Agreement, or to perform its obligations under such agreements.
"Minimum Proceeds" has the meaning set forth in the preamble to this
Agreement.
"Most Recent Balance Sheet" means the balance sheet contained
within the unaudited consolidated and consolidating balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of and
for the months ended December 27, 1997.
"Most Recent Fiscal Month End" means December 27, 1997.
10
"Nasdaq" means the Nasdaq National Market.
"1997 Note Agreement" has the meaning set forth in Section 4.12.
"No Par Preferred Stock" has the meaning set forth in Section 4.6.
"Option Closing Date" has the meaning set forth in Section 6.3.
"Option Shares" has the meaning set forth in Section 6.3.
"Person" means any individual, firm, corporation, partnership, limited
liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Pillsbury" has the meaning set forth in the preamble to this
Agreement.
"Preferred Stock" has the meaning set forth in the preamble to this
Agreement.
"Proxy Statement" means the proxy statement of the Company on
Schedule 14A to be filed with the SEC in connection with the Stockholder
Meeting, as amended or supplemented (including all exhibits and schedules
thereto and documents incorporated by reference therein).
"Purchase Price Per Share" has the meaning set forth in the
first recital of this Agreement.
11
"Purchasers" has the meaning set forth in the preamble to this
Agreement.
"Purchaser Designees" has the meaning set forth in Section 3.1.4.
"Quarterly Reports" means the Company's Quarterly Report on
Form 10-Q for the quarter ended June 28, 1997, the Company's Quarterly Report on
Form 10-Q for the quarter ended September 27, 1997 and the Company's Quarterly
Report on Form 10-Q for the quarter ended December 27, 1997, each as filed with
the SEC.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, between the Company and the Purchasers,
substantially in the form attached as Exhibit C hereto, as amended, supplemented
and modified from time to time in accordance with the terms thereof.
"Representatives" shall mean the employees, counsel,
accountants and other authorized representatives of the Purchasers.
"Rights" has the meaning set forth in the preamble to this Agreement.
"Rights Offering" means the offering of Rights, shares of Preferred
Stock and Class A Common Stock pursuant to the Rights Offering Registration
Statement, with the material terms described in Exhibit D hereto.
"Rights Offering Expiration Date" shall mean the date on which
the subscription period (as the same may be extended for up to 30 days by the
Company
12
at the request or with the prior consent of the Purchasers) under the Rights
Offering expires.
"Rights Offering Prospectus" shall mean the final prospectus
included in the Rights Offering Registration Statement for use in connection
with the issuance of the Rights (including, without limitation, any prospectus
filed pursuant to Rule 424(b) under the Act).
"Rights Offering Registration Statement" shall mean the
Company's Registration Statement on Form S-1 under the Act or such other
appropriate form under the Act, pursuant to which the Rights, the underlying
shares of Preferred Stock and shares of Class A Common Stock will be registered
pursuant to the Act, with the material terms described in Exhibit D.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means the Annual Reports and all documents
(including any Annual Reports) filed by the Company with the SEC (including all
exhibits and schedules thereto and documents incorporated by reference therein)
since January 1, 1997, but shall not include any portion of any document which
is not deemed to be filed under applicable SEC rules and regulations.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) purchase money liens
13
and liens securing rental payments under capital lease arrangements, and (d)
other liens arising in the ordinary course of business (consistent with past
custom and practice) and not incurred in connection with the borrowing of money.
"Series A Preferred Stock" has the meaning set forth in Section 4.6.
"Series B Preferred Stock" has the meaning set forth in Section 4.6.
"6% Preferred Stock" has the meaning set forth in Section 4.6.
"Shareholders Agreement" means the Shareholders Agreement, dated as
of the date hereof, by and among the Company, the persons listed therein and the
Purchasers, substantially in the form attached as Exhibit E hereto, as amended,
supplemented and modified from time to time in accordance with the terms
thereof.
"Shares" means the shares of Preferred Stock to be purchased by the
Purchasers pursuant to Section 2.2.
"Standby Commitment Amount" has the meaning set forth in
Section 2.2(B).
"Stockholder Meeting" has the meaning set forth in Section 6.1.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, joint venture, association, limited liability
company or partnership, joint stock company, trust, unincorporated organization,
or other entity analogous to any of the foregoing of which 50% or more of the
equity ownership (whether voting stock or comparable interest) is, at the time,
owned, directly or
14
indirectly by such Person.
"Tax" or "Taxes" means all requisite federal, state, county,
local, foreign and other taxes (including income, profits, premium, estimated,
excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance,
capital levy, production transfer, withholding, employment, unemployment
compensation, payroll related and property taxes, import duties and other
governmental charges and assessments), whether or not measured in whole or in
part by net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with contesting any proposed adjustment related to any of the foregoing.
"13D Group" means any partnership, limited partnership,
syndicate or other "group" (as such term is used in Section 13(d)(3) of the
Exchange Act).
"Time of Mailing" means the commencement of the mailing of
certificates representing the Rights to the shareholders of the Common Stock.
"Uranus" has the meaning set forth in the preamble to this Agreement.
"Voting Securities" means any securities of the Company entitled to
vote generally in the election of directors, or securities convertible into or
exercisable or exchangeable for such securities.
"Year 2000 Data" has the meaning set forth in 4.15(I).
15
2. CLOSING.
2.1 Time and Place of the Closing. Subject to the terms and
conditions of this Agreement, the closing of the sale and purchase of the shares
of Preferred Stock (including shares purchased upon the expiration of Rights)
contemplated hereby (the "Closing") shall take place at the offices of ▇▇▇▇,
Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, at 10:00 A.M., New York time, three Business Days after the
Rights Offering Expiration Date, or at such other date as may be agreed to by
the parties hereto, assuming that all of the conditions to Closing in Section 3
shall have been satisfied or waived. The "Closing Date" shall be the date the
Closing occurs.
2.2 Transactions at the Closing. At the Closing, subject to
the terms and conditions of this Agreement:
(A) The Company shall issue and sell to each Purchaser,
and each Purchaser shall purchase, such number of shares of Preferred Stock as
are set forth opposite such Purchaser's name on Schedule I at the Purchase Price
Per Share.
(B) The Company shall issue and sell to the
Purchasers and the Purchasers shall purchase from the Company, at the Purchase
Price Per Share, a number of shares of Preferred Stock equal to the Standby
Commitment Amount. The "Standby Commitment Amount" is an amount equal to the
number of shares of Preferred Stock that are not purchased by shareholders
pursuant to the exercise of
16
Rights in the Rights Offering plus the difference between (i) 3,000,000 and (ii)
the number of shares of Preferred Stock purchased pursuant to the exercise of
Rights in the Rights Offering (up to a maximum amount of 2,500,000 shares of
Preferred Stock). Notwithstanding the foregoing, under no circumstance shall the
Company be required to issue shares pursuant to this Section 2.2, Sections 6.2
and 6.5 of this Agreement with an aggregate purchase price of more than
$50,000,004. It is understood and agreed that, if and to the extent that the
Purchasers are required to purchase shares of Preferred Stock pursuant to this
Section 2.2(B), such shares shall be so purchased by each of the Purchasers,
severally and not jointly, equal to the product of (i) the aggregate number of
shares of Preferred Stock to be purchased pursuant to this Section 2.2(B) and
(ii) the percentage set forth opposite such Purchaser's name on Schedule I (to
be adjusted by the Purchasers to eliminate fractional shares).
(C) The Company shall deliver to each Purchaser a
certificate representing such number of shares of Preferred Stock as determined
pursuant to Sections 2.2(A) and (B), each registered in the name of such
Purchaser or its nominees, against payment of the Purchase Price Per Share, with
respect thereto by wire transfer of immediately available funds to an account or
accounts previously designated by the Company.
17
3. CONDITIONS TO THE CLOSING.
3.1 Conditions Precedent to the Obligations of the Purchaser.
The obligations of the Purchasers to be discharged under this Agreement on or
prior to the Closing are subject to satisfaction of the following conditions at
or prior to the Closing (unless expressly waived in writing by each of the
Purchasers at or prior to the Closing):
3.1.1 Compliance by the Company. All of the terms,
covenants and conditions of this Agreement and the Shareholders Agreement to be
complied with and performed by the Company and the Existing Shareholders at or
prior to the Closing shall have been complied with and performed by such parties
in all material respects, and the representations and warranties made by the
Company in this Agreement shall be true and correct at and as of the Closing,
with the same force and effect as though such representations and warranties had
been made at and as of the Closing, except for representations and warranties
that are made as of a specific time, which shall be true and correct only as of
such time.
3.1.2 Shareholder Approval. The sale of the Shares (and the
Conversion Shares) to the Purchasers pursuant to this Agreement shall have been
duly approved by the holders of the Common Stock and other Voting Securities of
the Company entitled to vote thereon at the Stockholder Meeting.
3.1.3 Rights Offering. The Rights Offering Registration
Statement shall have become effective; no stop order suspending the
effectiveness of
18
the Rights Offering Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending, or
shall be contemplated by the SEC, and any request on the part of the SEC for
additional information shall have been complied with. The Rights Offering
Expiration Date shall have occurred.
3.1.4 Amendment to Certificate of Incorporation. At the
Stockholder Meeting, the holders of the Common Stock and other Voting Securities
of the Company entitled to vote thereon shall have duly approved the amendments
in the Certificate of Amendment, such amendment shall have been filed with the
Department of State of the State of New York and such amendment shall be in full
force and effect.
3.1.5 Board of Directors. The Board of Directors shall
increase the size of the Board of Directors from seven members to nine members
and shall elect two new members who shall take office effective upon the Closing
and be designated by the Purchasers (the "Purchaser Designees"). The other seven
directors of the Company upon the Closing shall be the existing Board of
Directors. At the next annual meeting of shareholders of the Company, the Board
of Directors shall nominate the two Purchaser Designees (or any other Person or
Persons) in accordance with the Shareholders Agreement for election as directors
with terms expiring in 2000 and 2001. Effective upon the Closing, the Board of
Directors shall include a number
19
of Purchaser Designees on any committee of that Board of Directors equal to the
product of 22% and the total number of directors on such committee (rounded up
to the next whole number). Within 20 days of the date of this Agreement, the
Purchasers shall deliver a written notice to the Company designating the two
Purchaser Designees and shall cause such Purchase Designees to provide to the
Company all information required to be disclosed in the Proxy Statement with
respect to such designees.
3.1.6 Consents. All consents, approvals, authorizations,
orders, registrations, filings and qualifications of or with any (A)
Governmental Authority, (B) Nasdaq or any stock exchange on which the securities
of the Company are traded and (C) other Persons (whether acting in an
individual, fiduciary or other capacity) necessary or required to be made or
obtained by the Company, any of its Subsidiaries or the Existing Shareholders
for the consummation of the transactions contemplated by this Agreement, the
Certificate of Amendment, the Shareholders Agreement, the Rights Offering
Registration Statement or the Registration Rights Agreement, shall have been
made or obtained, as the case may be, and shall be in full force and effect, and
the Purchasers shall have been furnished with appropriate evidence thereof.
3.1.7 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The waiting period under the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 shall have expired or been
20
terminated, to the extent applicable.
3.1.8 Absence of Material Adverse Effect. No event or
events shall have occurred after March 31, 1997 that individually or in the
aggregate has had or would reasonably be expected to have a Material Adverse
Effect (other than any event specifically disclosed in a Quarterly Report or the
Draft Form 10-K).
3.1.9 Nasdaq Listing. The Conversion Shares shall have been
approved for quotation on the Nasdaq by the Nasdaq Stock Market, Inc.
3.1.10 Stock Price. For any five consecutive trading day period
after the date hereof, the five consecutive trading day average of the closing
price of the Class A Common Stock (as reported in the Wall Street Journal) shall
not be $12.00 per share or lower.
3.1.11 Legal Opinions. The Company shall have furnished to
the Purchasers on the Closing Date the opinions of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & Mugel,
LLP, special counsel for the Company, and ▇▇▇▇▇▇▇▇▇▇▇, D'▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇, counsel to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, as Trustee, each dated the Closing
Date, and each substantially in the forms attached hereto of Exhibits F and G,
respectively.
3.1.12 Exemption from Special Voting Requirements. The
Board of Directors shall have irrevocably taken all action necessary under
Section 912 of the New York Business Corporation Law to exempt the transactions
contemplated
21
by this Agreement, the Registration Rights Agreement and the Shareholders
Agreement and any future transactions between the Company and its Subsidiaries,
on the one hand, and the Purchasers and their "affiliates" and "associates"
(each as defined in such Section 912), on the other hand, from the provisions of
such Section 912 and the Purchasers shall have received evidence reasonably
satisfactory to it that such action shall have been taken.
3.1.13 Officer's Certificate. The Purchasers shall have
received a certificate, dated the Closing Date and signed by the Chairman of the
Board of Directors or the President of the Company, certifying that the
conditions set forth in this Section 3.1 have been satisfied on and as of such
date.
3.1.14 Secretary's Certificate. The Purchasers shall have
received a certificate, dated the Closing Date and signed by the secretary or an
assistant secretary of the Company, certifying the truth and correctness of
attached copies of the Certificate of Incorporation (including amendments
thereto), the By-Laws (including amendments thereto), and resolutions of the
Board of Directors and the holders of the Common Stock approving the sale of the
Shares to the Purchasers, the Rights Offering and the other transactions
contemplated hereby (including the execution and delivery of the Shareholders
Agreement and the Registration Rights Agreement).
3.1.15 No Injunction. There shall be no judgment, injunction,
22
order or decree enjoining the Company or the Purchaser from consummating the
transactions contemplated by this Agreement, the Shareholders Agreement, the
Rights Offering Registration Statement or the Registration Rights Agreement to
be consummated at or before the Closing.
3.1.16 Change of Control. No Change of Control shall have
occurred on or after the date of this Agreement and on or prior to the Closing.
3.2 Conditions Precedent to Obligations of the Company. The
obligations of the Company to be discharged under this Agreement on or prior to
the Closing are subject to satisfaction of the following conditions at or prior
to the Closing (unless expressly waived in writing by the Company at or prior to
the Closing):
3.2.1 Compliance by the Purchaser. All of the terms,
covenants and conditions of this Agreement to be complied with and performed by
the Purchasers in all material respects at or prior to the Closing, shall have
been complied with and performed by the Purchasers and the representations and
warranties made by the Purchasers in this Agreement, shall be true and correct
at and as of the Closing, with the same force and effect as though such
representations and warranties had been made at and as of the Closing, except
for changes contemplated by this Agreement.
3.2.2 Shareholder Approval. The sale of the Shares to the
Purchasers pursuant to this Agreement and the Certificate of Amendment shall
have
23
been duly approved by the holders of the Common Stock and other Voting
Securities of the Company entitled to vote thereon at the Stockholder Meeting.
3.2.3 Consents. All consents, approvals, authorizations,
orders, registrations, filings and qualifications of or with any (A)
Governmental Authority and (B) other Persons (whether acting in an individual,
fiduciary or other capacity) necessary or required to be made or obtained by the
Purchasers for the consummation of the transactions contemplated by this
Agreement, the Rights Offering Registration Statement or the Registration Rights
Agreement, shall have been made or obtained, as the case may be, and shall be in
full force and effect, and the Company shall have been furnished with
appropriate evidence thereof.
3.2.4 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The waiting period under the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 shall have expired or been
terminated, to the extent applicable.
3.2.5 Nasdaq Listing. The Conversion Shares shall have been
approved for quotation on the Nasdaq by the Nasdaq Stock Market, Inc.
3.2.6 No Injunction. There shall be no judgment, injunction,
order or decree enjoining the Company or the Purchasers from consummating the
transactions contemplated by this Agreement to be consummated at or before the
Closing.
24
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchasers
that, except as disclosed in writing by the Company to the Purchasers in a
letter specifically with respect to this Article 4 (the "Disclosure Letter")
delivered to the Purchasers on or prior to the date hereof:
4.1 Corporate Existence and Power. (A) The Company is a
corporation duly organized, validly existing and subsisting under the laws of
the State of New York. The Company has the corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
SEC Documents and the Draft Form 10-K, and as currently conducted. The Company
is duly qualified to transact business as a foreign corporation and is in good
standing (if applicable) in each jurisdiction in which the conduct of its
business or its ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or in good standing as
would not singly or in the aggregate with all such other failures reasonably be
expected to have a Material Adverse Effect.
(B) True and complete copies of the Certificate of
Incorporation and the By-Laws as in effect on the date hereof have been provided
by the Company to the Purchasers. The minute books of the Company contain in all
material respects true and complete records of all meetings and consents in lieu
of meetings of the Board of Directors (and any committees thereof) and of the
shareholders of the Company.
25
4.2 Power and Authority. The Company has the full corporate
power and authority to execute and deliver this Agreement, the Certificate of
Amendment, the Shareholders Agreement, the Rights and the Registration Rights
Agreement and to perform its obligations under this Agreement, the Certificate
of Amendment, the Shareholders Agreement, the Rights and the Registration Rights
Agreement. The execution, delivery and performance by the Company of this
Agreement, the Certificate of Amendment, the Shareholders Agreement, the Rights
and the Registration Rights Agreement and the consummation by the Company of the
transactions contemplated hereby and thereby (including the Rights Offering)
have been duly authorized and approved by the Board of Directors and no further
corporate action on the part of the Company or the holders of its securities
(other than the actions described in Sections 3.1.2 and 3.1.4, the filing of the
Certificate of Amendment under the New York Business Corporation Law and the
effectiveness of the Rights Offering Registration Statement pursuant to the Act)
is necessary to authorize the execution, delivery and performance by the Company
of such agreements or the consummation by the Company of the transactions
contemplated hereby and thereby (including the Rights Offering). Subject to
shareholder approval, the Board of Directors has duly adopted the Certificate of
Amendment. The foregoing authorization and approval by the Board of Directors
constitutes prior approval by the Board of Directors of the transaction which
resulted in the Purchasers
26
becoming "interested shareholders" within the meaning of Section 912 of the New
York Business Corporation Law. As of the Closing Date, future transactions
between the Company and its Subsidiaries, on the one hand, and the Purchasers
and their "affiliates" and "associates" (each as defined in such Section 912),
on the other hand, shall be exempted from the provisions of such Section 912.
Each of this Agreement, the Shareholders Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Company and is a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
4.3 Affiliate Transactions. Except as disclosed in any SEC
Document filed prior to the date hereof, in the Draft Form 10-K or in the
Disclosure Letter, the Company and its Subsidiaries have not entered into any
transaction or series of transactions with any shareholder, director, officer,
employee or Affiliate of the Company other than any transaction (or series of
related transactions) not involving amounts in excess of $60,000 and conducted
on an arms'-length basis in the ordinary course of business of the Company.
4.4 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of each of this Agreement, the Certificate of
Amendment, the Shareholders Agreement, the Rights and the Registration Rights
Agreement by the Company and the Existing Shareholders, the issuance of the
Rights and the shares of Preferred Stock upon the exercise thereof by the
Company and the consummation of
27
the transactions contemplated hereby and thereby (including the Rights Offering)
will not conflict with, contravene or result in a breach or violation of any of
the terms and provisions of, or constitute a default under (or permit any party
to terminate all or any provisions of), or result in the creation or imposition
of any Encumbrance upon any assets or properties of the Company or of any of its
Subsidiaries or cause the Company or any of its Subsidiaries to be required to
redeem, repurchase or offer to repurchase any of their respective indebtedness
under (A) the certificate of incorporation, the by-laws or other organizational
documents of the Company or any of its Subsidiaries, (B) any Law of any
Governmental Authority having jurisdiction over the Company, any of its
Subsidiaries or any of their respective assets, properties or operations or (C)
any indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any lease, permit, license or other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound or to which any of the assets, properties or
operations of the Company or any of its Subsidiaries is subject.
4.5 Consents. No consent, approval, authorization, order,
registration, filing or qualification of or with any (A) Governmental Authority,
(B) Nasdaq or any stock exchange on which the securities of the Company are
traded or (C) other Person (whether acting in an individual, fiduciary or other
capacity) is
28
required to be made or obtained by the Company or any of its Subsidiaries for
the execution, delivery and performance by the Company and the Existing
Shareholders of this Agreement, the Certificate of Amendment, the Shareholders
Agreement, the Rights and the Registration Rights Agreement and the consummation
of the transactions contemplated hereby, except the actions described in
Sections 3.1.2, 3.1.4 and 3.1.7 and such approvals as may be required under the
Act and state securities laws in connection with the performance by the Company
of its obligations under the Registration Rights Agreement.
4.6 Capitalization of the Company. As of the date hereof, the
authorized capital stock of the Company consists of: (A) 10,000,000 shares of
Class A Common Stock, par value $0.25 per share, of which 3,143,125 shares are
outstanding; (B) 10,000,000 shares of Class B Common Stock, par value $0.25 per
share, of which 2,796,555 shares are outstanding; (C) 200,000 shares of six
percent (6%) Voting Cumulative Preferred Stock, par value $0.25 per share ("6%
Preferred Stock"), of which 200,000 shares are outstanding; (D) 30,000 shares of
Preferred Stock, no par value ("No Par Preferred Stock"), of which no shares are
outstanding; (E) 1,000,000 shares of 10% Cumulative Convertible Voting Preferred
Stock-Series A, par value $0.025 per share ("Series A Preferred Stock"), of
which 407,240 shares are outstanding; (F) 400,000 shares of 10% Cumulative
Convertible Voting Preferred Stock - Series B, par value $0.025 per share
("Series B Preferred Stock"),
29
of which 400,000 shares are outstanding; and (G) 2,600,000 shares of Blank Check
Preferred Stock, of which no shares are outstanding. At the Closing (after
giving effect to the Certificate of Amendment), the authorized capital stock of
the Company will consist of 20,000,000 shares of Class A Common Stock, those
securities described in clauses (B) through (F) of the preceding sentence,
2,633,333 shares of Blank Check Preferred Stock, of which no shares will be
outstanding, and 4,166,667 shares of Preferred Stock, of which 4,166,667 shares
will be outstanding (assuming the exercise of all Rights). No other class of
capital stock of the Company is, or at the Closing will be, authorized or
issued. From the date hereof until the Closing, except for the conversion of
outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Class B Common Stock in accordance with their terms, the Company will not issue
any shares of its capital stock. All outstanding shares of capital stock of the
Company have been duly authorized, are validly issued, fully paid and
nonassessable and have been issued in compliance with applicable federal and
state securities laws. At the Closing, all of the Shares will be duly authorized
and, when issued in accordance with this Agreement, will be validly issued,
fully paid and nonassessable. The Rights and the shares of Preferred Stock
issuable upon exercise of the Rights have been duly authorized and, when issued
and paid for, will be validly issued, fully paid and nonassessable. The
Conversion Shares are duly authorized and reserved for issuance upon conversion
of the Shares and, when issued in accordance
30
with the Certificate of Amendment, will be validly issued, fully paid and
nonassessable. The shareholders of the Company have no preemptive or similar
rights with respect to the securities of the Company or which will enable them
to subscribe for the Shares. Except as set forth in the Disclosure Letter, there
are no outstanding (i) securities or obligations of the Company convertible into
or exchangeable for any capital stock of the Company, (ii) warrants, rights or
options to subscribe for or purchase from the Company any such capital stock or
any such convertible or exchangeable securities or obligations or (iii)
obligations of the Company to issue such shares, any such convertible or
exchangeable securities or obligations, or any such warrants, rights or options.
4.7 No Rights Plan. Except for the rights set forth in Article
4(a)(C)(ii) of the Certificate of Incorporation, the Company has not adopted a
shareholders rights plan, poison pill or similar arrangement.
4.8 Registration Rights. Except as set forth in the Disclosure
Letter, neither the Company nor any of its Subsidiaries has previously entered
into any agreement granting any registration rights to any Person, whether
consistent or inconsistent with the rights to be granted to the Purchasers in
the Registration Rights Agreement.
4.9 Subsidiaries. The Disclosure Letter sets forth a complete and
accurate list of all of the Subsidiaries of the Company together with their
respective
31
jurisdictions of incorporation or organization. Except for its Subsidiaries and
except as disclosed in any SEC Document filed prior to the date hereof or in the
Draft Form 10-K, the Company holds no equity, partnership, joint venture or
other interest in any Person. True and complete copies of the certificate of
incorporation, by-laws and other organizational documents of the Subsidiaries of
the Company as in effect on the date hereof have been provided by the Company to
the Purchasers. Each Subsidiary of the Company has been duly incorporated or
organized and is validly existing as a corporation or other legal entity in good
standing under the laws of the jurisdiction of its incorporation or
organization, has the corporate or other power and authority to own, lease and
operate its properties and to conduct its business as currently conducted and is
duly qualified to transact business as a foreign corporation or other legal
entity and is in good standing (if applicable) in each jurisdiction in which the
conduct of its business or its ownership, leasing or operation of property
requires such qualification, other than any failure to be so qualified or in
good standing as would not singly or in the aggregate with all such other
failures reasonably be expected to have a Material Adverse Effect. All of the
outstanding capital stock of each Subsidiary of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and is owned by
the Company, directly or through other Subsidiaries of the Company, free and
clear of any Encumbrance (other than such transfer restrictions as may exist
under federal and state securities laws or any
32
Encumbrances between or among the Company and/or any Subsidiary of the Company),
and there are no rights granted to or in favor of any third party (whether
acting in an individual, fiduciary or other capacity), other than the Company or
any Subsidiary of the Company, to acquire any such capital stock, any additional
capital stock or any other securities of any such Subsidiary. There exists no
restriction, other than those pursuant to applicable law or regulation, on the
payment of cash dividends by any Subsidiary.
4.10 SEC Documents.
(A) The Company has delivered true and complete copies of
all SEC Documents to the Purchasers except for schedules and exhibits thereto
and documents incorporated by reference therein.
(B) As of its filing date, each SEC Document filed,
and
each SEC Document that will be filed by the Company prior to the Closing Date,
as amended or supplemented prior to the Closing Date, if applicable, pursuant to
the Exchange Act (i) complied or will comply in all material respects with the
applicable requirements of the Exchange Act (except as set forth in the
Disclosure Letter) and (ii) did not or will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading.
(C) Each final registration statement filed with the
SEC, and
33
each final registration statement that will be filed with the SEC by the Company
prior to the Closing Date, as amended or supplemented prior to the Closing Date,
if applicable, pursuant to the Act, as of the date such statement or amendment
became or will become effective (i) complied or will comply in all material
respects with the applicable requirements of the Act and (ii) did not or will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading (in the case of any prospectus, in light of the
circumstances under which they were made).
(D) At the time the Proxy Statement is first mailed
to the shareholders of the Company, and at the time such shareholders vote on
approval of the transactions contemplated hereby, the Proxy Statement, as then
amended or supplemented, will comply in all material respects with the Exchange
Act and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of circumstances under which they were made, not misleading; provided that
the Company makes no representation or warranty with respect to (i) any
statement or omissions included in the Proxy Statement based upon information
furnished in writing to the Company by the Purchasers specifically for use
therein or (ii) any portion thereof which is not deemed to be filed under
applicable SEC rules and regulations.
34
(E) At the time the Rights Offering Registration Statement
becomes effective, the Rights Offering Registration Statement, as then amended,
will comply in all material respects with the requirements of the Act and will
not contain an untrue statement of a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Rights Offering
Prospectus, at the time the Rights Offering Registration Statement becomes
effective and at the Closing Date, will not include an untrue statement or a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the representations and
warranties in this Section 4.10(E) shall not apply to statements in or omissions
from the Rights Offering Registration Statement or the Rights Offering
Prospectus made in reliance upon or in conformity with the information furnished
to the Company in writing by the Purchasers specifically for use in the Rights
Offering Registration Statement or in the Rights Offering Prospectus.
4.11 Financial Statements. The audited consolidated financial
statements and related schedules and notes included in the SEC Documents and the
Draft Form 10-K (including, without limitation, the Rights Offering Registration
Statement) comply in all material respects with the requirements of the Exchange
Act and the Act and the rules and regulations of the SEC thereunder, were
prepared in accordance with generally accepted accounting principles
consistently applied
35
throughout the period involved and fairly present in all material respects the
financial condition, results of operations, cash flows and changes in
stockholders' equity of the Company and its Subsidiaries (and in the case of the
financial statements of net assets to be acquired of the ▇▇▇▇▇▇▇ ▇▇▇▇▇ Vegetable
Processing Plant and Food Storage Warehouse and Aunt Nellie's Farm Kitchens, the
financial condition, results of operation and cash flows of such assets) at the
dates and for the periods presented. The unaudited quarterly consolidated
financial statements and the related notes included in the SEC Documents and in
the Draft Form 10-K (including, without limitation, the Rights Offering
Registration Statement) fairly present in all material respects the financial
condition, results of operations and cash flows of the Company and its
Subsidiaries (and in the case of the financial statements of net assets to be
acquired of the ▇▇▇▇▇▇▇ ▇▇▇▇▇ Vegetable Processing Plant and Food Storage
Warehouse and Aunt Nellie's Farm Kitchens, the financial condition, results of
operation and cash flows of such assets) at the dates and for the periods to
which they relate, subject to year-end adjustments (consisting only of normal
recurring accruals), and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis except as otherwise
stated therein and have been prepared on a basis consistent with that of the
audited financial statements referred to above except as otherwise stated
therein.
4.12 No Existing Violation, Default, Etc. Neither the Company nor
36
any of its Subsidiaries is (A) in violation of any provision of its certificate
of incorporation, by-laws or other organizational documents or (B) in violation
of any applicable Law, stock exchange rule or regulation, which violation has or
would reasonably be expected to have a Material Adverse Effect. Except as set
forth in the Disclosure Letter, no breach, event of default, event that, but for
the giving of notice or the lapse of time or both, would constitute an event of
default or breach that would result in the loss of a benefit under or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of the Company or any of its Subsidiaries exists under any indenture, mortgage,
loan agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
permit, license or other agreement to which the Company or any of its
Subsidiaries is a party or by which the Company or any such Subsidiary is bound
or to which any of the properties, assets or operations of the Company or any
such Subsidiary is subject, which breach, event of default, or event that has or
would reasonably be expected to have a Material Adverse Effect. Except as set
forth in the Disclosure Letter, (i) no event of default, (ii) no event that, but
for the giving of notice or the lapse of time or both, would constitute an event
of default, and (iii) no event that would require the Company to prepay, redeem,
repurchase or offer to repurchase any of its indebtedness exists and (iv) no
breach that would result
37
in the loss of a benefit under or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of the Company or any of its
Subsidiaries exists under (a) the Amended and Restated Credit Agreement, dated
as of September 24, 1997, among the Company, the Banks signatory thereto and The
Chase Manhattan Bank, as Agent (the "Credit Agreement"), (b) the Note Agreement,
dated as of February 23, 1995, among the Company and The Prudential Insurance
Company of America and ▇▇▇▇ ▇▇▇▇▇▇▇ Mutual Life Insurance Company, as
Purchasers, relating to a $75 million 10.78% Series A Senior Note and a $50
million 10.81% Series B Senior Note, (c) the Note Agreement, dated as of
September 26, 1997, among the Company, Signature 1A (Cayman), Ltd., by ▇▇▇▇
▇▇▇▇▇▇▇ Mutual Life Insurance Company, Portfolio Advisor, Mellon Bank, N.A. as
Trustee for the Long-Term Investment Trust, Mellon Bank, N.A. as Trustee for
NYNEX Master Pension Trust, and CoBank, ACB, as Purchasers, relating to $15
million 9.17% Senior Notes (the "1997 Note Agreement"), (d) the 8% Secured
Nonrecourse Subordinated Promissory Note, dated as of February 1, 1995, issued
by the Company to Pillsbury, as Payee, and (e) the Master Reimbursement
Agreement, dated as of September 15, 1997, between the Company, as borrower, and
General Electric Capital Corporation, as lender. No event of default, no event
that, but for the giving of notice or the lapse of time or both, would
constitute an event of default and no breach that would result in the loss
38
of a benefit under or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any of its Subsidiaries
exists under the First Amended and Restated Alliance Agreement by and among the
Company, Pillsbury and Grand Metropolitan Incorporated, dated December 8, 1994,
as amended February 10, 1995 (the "Alliance Agreement"), or the First Amended
and Restated Asset Purchase Agreement by and between the Company and Pillsbury,
dated December 8, 1994, as amended February 10, 1995.
4.13 Licenses and Permits. The Company and its Subsidiaries
have such Licenses as are necessary to own, lease or operate their properties
and to conduct their businesses in the manner described in the SEC Documents and
the Draft Form 10-K, and as currently owned or leased and conducted, and all
such Licenses are valid and in full force and effect except such Licenses that
the failure to have or to be in full force and effect individually or in the
aggregate has not had, and would not reasonably be expected to have, a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has received any
written notice that any violations are being or have been alleged in respect of
any such License and no proceeding is pending or, to the Knowledge of the
Company, threatened, to suspend, revoke or limit any such License the effect of
which would reasonably be expected to have a Material Adverse Effect. The
Company and its Subsidiaries are in compliance with
39
their respective obligations under such Licenses, with such exceptions as
individually or in the aggregate have not had, and would not reasonably be
expected to have, a Material Adverse Effect, and no event has occurred that
allows, or after notice or lapse of time would allow, revocation, suspension,
limitation or termination of such Licenses, except such events as have not had,
or would not reasonably be expected to have, a Material Adverse Effect.
4.14 Title to Properties. Except as set forth in the
Disclosure Letter, the Company and its Subsidiaries have sufficient title to all
material properties (real and personal) owned by the Company and any such
Subsidiary that are necessary for the conduct of the business of the Company and
any such Subsidiary as described in the SEC Documents and the Draft Form 10-K
and as currently conducted, free and clear of any Encumbrance that may
reasonably be expected to materially interfere with the conduct of its business
taken as a whole, and all material properties held under lease by the Company
and the Subsidiaries are held under valid, subsisting and enforceable leases
except for such leases the loss of which would not reasonably be expected to
have a Material Adverse Effect.
4.15 Intellectual Property. (A) The Company and each of its
Subsidiaries own or are licensed to use all (i) patents, trademarks, trade
names, service marks, copyrights and any applications therefor and (ii) trade
secrets, know-how, computer software programs and proprietary information, in
each case, that are
40
material to the conduct of the business of the Company and the Subsidiaries as
described in the SEC Documents and the Draft Form 10-K and as currently
conducted (collectively, the "Intellectual Property") free and clear of any
material Encumbrance, except for any Encumbrances set forth in the Disclosure
Letter.
(B) The Disclosure Letter lists (i) all Intellectual Property
described in Section 4.15(A)(i) owned by the Company and any of its Subsidiaries
and that has been registered or for which an application for registration has
been filed with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, or any similar office in any other
country, specifying as to each item, as applicable: (a) the category of
Intellectual Property, (b) the jurisdictions in which the item is recognized or
registered, or in which any application for registration has been filed,
including the registration or application number; and (c) with respect to any
trademarks or service marks, the type of goods or services on which such ▇▇▇▇ is
or is intended to be used; and (ii) all material licenses, sublicenses and other
agreements ("IP Licenses") under which the Company or any of its Subsidiaries is
either a licensor or licensee of any Intellectual Property. A true and complete
list of all material documents evidencing Intellectual Property as in effect on
the date hereof has been delivered by the Company to the Purchasers.
(C) None of the Company, any of its Subsidiaries or, to the
Knowledge of the Company, any other party is in breach of or default under
any IP
41
License. Each IP License is now, and immediately following the consummation of
the transactions herein contemplated will be, valid and in full force and
effect.
(D) No litigation is pending or, to the Knowledge of the
Company, threatened, that challenges the validity, enforceability or ownership
of, or right to use or license, any Intellectual Property.
(E) No item of Intellectual Property is subject to any
outstanding order, ruling, judgment, decree or written agreement restricting the
use thereof by the Company or its Subsidiaries except for agreements made in the
ordinary course of business of the Company or its Subsidiaries. None of the
Company or any Subsidiary has agreed to indemnify any person against any charge
of infringement or other violation with respect to any Intellectual Property
owned or used by the Company or any Subsidiary except in the ordinary course of
business.
(F) To the Knowledge of the Company, none of the
Company or its Subsidiaries has infringed upon or otherwise violated the
intellectual property rights of third parties which would reasonably be expected
to have a Material Adverse Effect. Neither the Company nor its Subsidiaries has
received any complaint or notice alleging any such infringement or other
violation.
(G) To the Knowledge of the Company, no third party is
infringing upon or otherwise violating the Intellectual Property rights of the
Company or any Subsidiary.
42
(H) All material patents and registered trademarks and
registered copyrights held by the Company or any Subsidiary are valid and
subsisting. The Company and its Subsidiaries have taken all necessary action to
maintain and protect the Intellectual Property that they own or use other than
such actions taken in the ordinary course of business of the Company and its
Subsidiaries that would not reasonably be expected to have a material adverse
effect on the Intellectual Property.
(I) The Company has (i) issued purchase orders to upgrade
certain material computer software programs and systems (accounts payable,
general ledger and payroll) and (ii) initiated the reprogramming of certain
other material computer software programs (order processing systems) (items (i)
and (ii) being collectively referred to as "Programs and Systems"), all of which
are used by the Company and any Subsidiary so that such Programs and Systems
will operate during and after calendar year 2000 A.D. to accurately process date
data (including, but not limited to, calculating, comparing and sequencing)
from, into and between the twentieth and twenty-first centuries, including
leap-year calculations (the "Year 2000 Data"). The Company expects to have the
Programs and Systems installed, fully tested and operational at March 31, 1999.
To the Knowledge of the Company, the computer programs and systems of its major
customer, Pillsbury, will be capable of accurately processing the Year 2000
Data. The Company has not finished inquiring of its major customers, suppliers
and vendors as to whether such persons' computer
43
systems and programs will be capable of accurately processing the Year 2000
Data. Except for Pillsbury, the Company does not believe that any failure by any
single customer, supplier or vendor to accurately process the Year 2000 Data
will have a Material Adverse Effect on the Company.
4.16 Environmental Matters. Subject to such disclosures as are
contained in the SEC Documents and the Draft Form 10-K:
(A) The Company and its Subsidiaries and their respective
operations and properties, are and have been in compliance with all applicable
Environmental Laws except for such failures which, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect.
(B) There is no civil, criminal or administrative judgment,
action, suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter pending or, to their knowledge, threatened
against the Company or any of its Subsidiaries pursuant to Environmental Laws
which could reasonably be expected to result in a fine, penalty or other
obligation, cost or expense, except such obligations, costs or expenses which,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect.
44
(C) There are no past or present events, conditions,
circumstances, activities, practices, incidents, agreements, actions or plans
which may prevent compliance by the Company or its Subsidiaries with, or which
have given rise to, or will give rise to, material liability to the Company or
any of its Subsidiaries under Environmental Laws, except any such events,
conditions, circumstances, activities, practices, incidents, agreements, actions
or plans which, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect.
4.17 Taxes.
(A) Each of the Company and its Subsidiaries has
filed all returns, reports and other forms related to Taxes with
respect to the business, activities or assets of the Company or its
Subsidiaries (collectively, "Tax Returns") required to be filed. All
such Tax Returns were correct and complete in all material respects.
All Taxes owed by any of the Company and its Subsidiaries (whether or
not shown on any Tax Return) have been paid. None of the Company and
its Subsidiaries currently is the beneficiary of any extension of time
within which to file any Tax Return. Except as set forth in the
Disclosure Letter, no claim has ever been made by an authority in a
jurisdiction where any of the Company and its Subsidiaries does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
any of the Company and its
45
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(B) Each of the Company and its Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder, or other third party.
(C) The Disclosure Letter sets forth all federal,
state, county, local and foreign Tax elections under the Code
and other applicable provisions of law that are in effect with
respect to the Company and its Subsidiaries for the fiscal year ended
March 31, 1998, and the fiscal year beginning April 1, 1998.
(D) The Disclosure Letter sets forth the status of
state, county, local and foreign Tax audits of the Tax Returns of the
Company and its Subsidiaries for each fiscal year for which the statute
of limitations has not expired, including the amounts of any
deficiencies or additions to Tax, interest and penalties that have been
made or proposed, and the amounts of any payments made by the Company
or any of its Subsidiaries with respect thereto. Each state, county,
local and foreign Tax Return filed by or with respect to the Company or
any of its Subsidiaries for which the state, county, local or foreign
Tax audit has not been completed accurately reflects the
46
amount of its liability for Taxes thereunder and makes all disclosures
required by applicable provisions of law.
(E) None of the Company and its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(F) None of the Company and its Subsidiaries has
filed a consent under Code Section 341(f) concerning collapsible
corporations. None of the Company and its Subsidiaries has been a
United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii). None of the Company and its Subsidiaries is a
party to any Tax allocation or sharing agreement. None of the Company
and its Subsidiaries (A) has been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the
common parent of which was the Company) or (B) has any liability for
the Taxes of any Person (other than any of the Company and its
Subsidiaries) under Reg. Sec. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(G) The Disclosure Letter sets forth, as of the most
recent practicable date, the amount of any net operating loss, net
capital loss, unused investment or other credit, unused foreign tax, or
excess charitable
47
contribution allocable to the Company or Subsidiary.
(H) Based upon preliminary estimates which are
subject to adjustment or verification, the unpaid Taxes of the Company
and its Subsidiaries (A) did not, as of the Most Recent Fiscal Month
End, exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not exceed that reserve
as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns. Such adjustments may be
material to the reserve for Tax liability but would not have a Material
Adverse Effect on the Company's operating results.
4.18 Litigation. Except as set forth in the Disclosure Letter
in SEC Documents filed with the SEC prior to the date of this Agreement or in
the Draft Form 10-K, there are no pending actions, suits, proceedings,
arbitrations or investigations against or affecting the Company, any of its
Subsidiaries or any of their respective properties, assets or operations, or
with respect to which the Company or any such Subsidiary is responsible by way
of indemnity or otherwise, that are required under the Exchange Act to be
described in such SEC Documents or the Draft Form 10-K (as if it were filed
under applicable SEC rules and regulations), that
48
questions the validity of this Agreement, the Shareholders Agreement, the Rights
or the Registration Rights Agreement, or that could singly, or in the aggregate,
with all such other actions, suits, investigations or proceedings, reasonably be
expected to have a Material Adverse Effect and, to the Knowledge of the Company,
no such actions, suits, proceedings or investigations are threatened.
4.19 Labor Matters. Except as set forth in the Disclosure
Letter, no labor disturbance by the employees of the Company or any of its
Subsidiaries that has had or that could reasonably be expected to have a
Material Adverse Effect exists or, to the Knowledge of the Company, is
threatened.
4.20 Employee Benefits. (A) Except for the plans set forth in
the Disclosure Letter (the "Benefit Plans"), there are no employee benefit plans
or arrangements of any type (including, without limitation, plans described in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
and the regulations thereunder ("ERISA")), under which the Company or any of its
Subsidiaries has or in the future could have directly, or indirectly through a
Commonly Controlled Entity (within the meaning of Code Sections 414(b), (c), (m)
and (o)), any material liability with respect to any current or former employee
of the Company, any of its Subsidiaries or any Commonly Controlled Entity.
Except as set forth in the Disclosure Letter, no such Benefit Plan is a
"multiemployer plan" (within the meaning of ERISA Section 4001(a)(3)).
49
(B) With respect to each Benefit Plan that is not a
multiemployer plan, the Company has delivered or made available to the
Purchasers complete and accurate copies of (i) all plan texts and agreements (as
amended or modified to date), (ii) all summary plan descriptions and similar
material employee communications, (iii) the most recent annual report (Form 5500
including, if applicable, Schedule B thereto), (iv) the most recent annual and
periodic accounting of plan assets, (v) the most recent determination letter
received from the Internal Revenue Service and (vi) the most recent actuarial
valuation.
(C) With respect to each Benefit Plan that is not a
multiemployer plan: (i) such Benefit Plan has been maintained and administered
at all times in material compliance with its terms and applicable law and
regulation; (ii) to the Knowledge of the Company, no event has occurred and
there exists no circumstance under which the Company or any of its Subsidiaries
could directly, or indirectly through a Commonly Controlled Entity, incur any
material liability under ERISA, the Code or otherwise (other than routine claims
for benefits and other liabilities arising in the ordinary course pursuant to
the normal operation of such Benefit Plan); (iii) there are no actions, suits or
claims (other than routine claims for benefits) pending or, to the Knowledge of
the Company, threatened, with respect to any Benefit Plan or against the assets
of any Benefit Plan with respect to which suits the Company or any of its
Subsidiaries could incur any material liability; (iv) all
50
contributions and premiums due and owing to any Benefit Plan have been made or
paid on a timely basis and no "accumulated funding deficiency", as defined in
Code Section 412, has been incurred, whether or not waived; (v) all
contributions made under any Benefit Plan have met the requirements for
deductibility under the Code, and all contributions that have not been made have
been properly recorded on the books of the Company, or a Commonly Controlled
Entity thereof in accordance with generally accepted accounting principles; (vi)
if such Benefit Plan is intended to be qualified under Code Section 401(a), such
Benefit Plan has been determined to be so qualified and each trust created under
such Benefit Plan has been determined to be exempt from tax under Code Section
501(a) and no event has occurred since the date of such determinations,
including effective changes in laws or regulations or modifications to the
Benefit Plans, that would adversely affect such qualification or tax exempt
status; and (vii) as of the most recent valuation date, the value of assets
under any Benefit Plan subject to Title IV of ERISA exceeded the liabilities of
such plan on a projected benefit obligation basis determined using the
assumptions used to fund such Plan.
(D) The Accumulated Postretirement Benefit Obligation (as defined in
Statement of Financial Accounting Standards No. 106) in respect of post-
retirement health and medical benefits for current and former employees of the
Company and its Subsidiaries, calculated as of March 31, 1997 on the basis of
51
reasonable actuarial assumptions in accordance with generally accepted
accounting principles, does not exceed $1,000,000. No condition exists that
would prevent the Company or any of its Subsidiaries from amending or
terminating any plan providing health or medical benefits in respect of current
or former employees of the Company or its Subsidiaries.
(E) There is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of the Company or its
Subsidiaries that, individually or collectively, could give rise to the payment
by the Company or its Subsidiaries of any amount that would not be deductible
pursuant to the terms of Code Section 280G.
(F) No employee or former employee of the Company or its
Subsidiaries will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including acceleration of
vesting or exercise of an incentive award) as a result of the transactions
contemplated hereby.
4.21 Contracts. All of the material contracts of the Company
or any of its Subsidiaries that are required to be described in the SEC
Documents and the Draft Form 10-K (as if it were filed under applicable SEC
rules or regulations) (including, without limitation, the Rights Offering
Registration Statement) or to be filed as exhibits thereto are (or will be, as
applicable) described in the SEC Documents or the Draft Form 10-K or filed as
exhibits thereto and are (or will be, as
52
applicable) in full force and effect. True and complete copies of all such
material contracts have been delivered by the Company to the Purchasers. Neither
the Company nor any of its Subsidiaries nor, to the Knowledge of the Company,
any other party is in breach of or in default under any such contract except for
such breaches and defaults as in the aggregate have not had, and would not
reasonably be expected to, have a Material Adverse Effect.
4.22 Contingent Liabilities. Except as fully reflected or
reserved against in the audited financial statements included in the Annual
Report or the financial statements included in the Draft Form 10-K, or disclosed
in the footnotes contained in such financial statements, the Company and its
Subsidiaries had no liabilities (including tax liabilities) at the date of such
financial statements, absolute or contingent, that were material either
individually or in the aggregate to the Company and its Subsidiaries taken as a
whole.
4.23 No Material Adverse Effect. Since March 31, 1997: (A) the
Company and its Subsidiaries have not incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would reasonably be expected to result in a Material Adverse
Effect; (B) the Company and its Subsidiaries have not sustained any loss or
interference with its business or properties from fire, flood, windstorm,
accident or other calamity (whether or not
53
covered by insurance) that has had or that would reasonably be expected to have
a Material Adverse Effect; (C) except for seasonal changes in outstanding
indebtedness under the Credit Agreement and the requirement to reduce all
indebtedness under the Credit Agreement to an aggregate amount not in excess of
$30 million for a period of 30 consecutive days, there has been no material
change in the indebtedness of the Company and its Subsidiaries except for the
$15 million increase in long-term indebtedness pursuant to the 1997 Note
Agreement, and no change in the capital stock of the Company except for the
conversion of outstanding shares of Series A Preferred Stock, Series B Preferred
Stock and Class B Common Stock in accordance with their terms; (D) except for
(i) the aggregate payment of semiannual dividends in the amount of $11,590.50 on
its outstanding shares of 6% Preferred Stock, Series A Preferred Stock and
Series B Preferred Stock, and (ii) the aggregate payment of accumulated
dividends in the amount of $34,771.50 on such 6% Preferred Stock, Series A
Preferred Stock and Series B Preferred Stock that initially accrued on January 1
and July 1, 1996, and January 1, 1997, there has been no dividend or
distribution of any kind declared, paid or made by the Company or any of its
Subsidiaries on any class of its capital stock; (E) neither the Company nor any
of its Subsidiaries has made (nor does it propose to make) (i) any material
change in its accounting methods or practices or (ii) any material change in the
depreciation or amortization policies or rates adopted by it, in either case,
except as may be required
54
by law or applicable accounting standards; and (F) there has been no event
causing a Material Adverse Effect, nor any development that would, singly or in
the aggregate, reasonably be expected to result in a Material Adverse Effect
(other than an event or development specifically disclosed in any Quarterly
Report or the Draft Form 10-K).
4.24 Finder's Fees. No broker, finder or other party is
entitled to receive from the Company or any of its Subsidiaries any brokerage or
finder's fee for the transactions contemplated by this Agreement as a result of
the actions of the Company, any of its Subsidiaries, or any of its Affiliates.
4.25 Investment Company. Neither the Company nor any of its
Subsidiaries is or, after giving effect to the Closing, will be an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
4.26 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of the Purchasers set forth in Section 5.5 hereof are true and correct in all
material respects, the offer and sale of the Shares and the Conversion Shares
made pursuant to this Agreement will be exempt from the registration
requirements of the Act. Neither the Company nor any Person acting on its behalf
has, in connection with the offering of the Shares, engaged in (A) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 502(c) under the Act), (B) any action involving a public
offering within the meaning of Section 4(2) of the Act, or (C) any
55
action that would require the registration under the Act of the offering and
sale of the Shares and the Conversion Shares pursuant to this Agreement or that
would violate applicable state securities or "blue sky" laws. The Company has
not made and will not prior to the Closing make, directly or indirectly, any
offer or sale of Shares or Conversion Shares or of securities of the same or a
similar class as the Shares or Conversion Shares if as a result the offer and
sale of the Shares and Conversion Shares contemplated hereby could fail to be
entitled to exemption from the registration requirements of the Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(3)
of the Act.
4.27 Use of Proceeds. The net proceeds of the sale of the
Shares will be used by the Company and its Subsidiaries to reduce currently
outstanding indebtedness under the Credit Agreement.
4.28 Full Disclosure. To the Knowledge of the Company, no
statement by the Company contained in this Agreement, the Disclosure Letter, the
SEC Documents, the Draft Form 10-K (including, without limitation, the Rights
Offering Registration Statement) or any other documents listed in the Disclosure
Letter or on any certificates, notices or consents delivered to the Purchasers
in connection with the purchase and sale of the Shares at or prior to the
Closing, taken as a whole, in light of the circumstances in which made, contains
(or will contain) an untrue statement of a material fact or omits (or will omit)
to state a material fact
56
required to be stated therein or necessary to make the statements made, in light
of the circumstances in which made, not materially false or misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchasers hereby represent and warrant to the Company that:
5.1 Partnership Existence and Power. Each Purchaser (other
than Uranus) is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware. Uranus is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Cayman Islands. Each Purchaser has all requisite power and authority to own,
lease and operate its properties and to conduct its business as currently
conducted.
5.2 Power and Authority. Each Purchaser has the full
corporate or partnership power and authority to execute and deliver this
Agreement, the Shareholders Agreement and the Registration Rights Agreement and
to perform its obligations under this Agreement, the Shareholders Agreement and
the Registration Rights Agreement. The execution, delivery and performance by
each Purchaser of this Agreement, the Shareholders Agreement and the
Registration Rights Agreement and the consummation by each Purchaser of the
transactions contemplated hereby have been duly authorized. Each of this
Agreement, the Shareholders Agreement and the Registration Rights Agreement has
been duly executed and delivered by each Purchaser and is a valid and binding
agreement of each Purchaser, enforceable against
57
such Purchaser in accordance with their respective terms.
5.3 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of each of this Agreement, the Shareholders Agreement
and the Registration Rights Agreement by the Purchasers and the consummation of
the transactions contemplated hereby will not conflict with, contravene or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, (A) the certificate of incorporation, by-laws,
partnership agreement or other organizational documents of the Purchasers, (B)
any Law of any Governmental Authority having jurisdiction over any Purchaser or
(iii) any agreement to which any Purchasers is a party.
5.4 Consents. No consent, approval, authorization, order,
registration, filing, or qualification of or with any (A) Governmental Authority
or (B) other Person (whether acting in an individual, fiduciary or other
capacity) is required to be made or obtained by the Purchasers for the
consummation of the transactions contemplated hereby except for compliance with
any applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976.
5.5 Acquisition for Own Account. The Shares and the Conversion
Shares to be acquired by the Purchasers pursuant to this Agreement are being
acquired by them for their own account for investment purposes and with no
intention of distributing or reselling the Shares and the Conversion Shares in
any transaction
58
that would be in violation of the Act or the securities laws of any state,
without prejudice, however, to the rights of the Purchasers at all times to sell
or otherwise dispose of all or any part of the Shares or the Conversion Shares
under an effective registration statement under the Act, under an exemption from
such registration available under the Act, and subject, nevertheless, to the
disposition of the Purchasers' property being at all times within their control,
except as otherwise provided by this Agreement. Each of the Purchasers is an
"accredited investor" within the definition of Rule 501(a) of Regulation D under
the Act. Each Purchaser (A) has such knowledge, sophistication and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Shares, (B) fully understands the nature, scope
and duration of the limitations on transfer contained in this Agreement and (C)
can bear the economic risk of an investment in the Shares and the Conversion
Shares and can afford a complete loss of such investment. Each Purchaser
acknowledges receipt of the SEC Documents, the Draft Form 10-K, the Disclosure
Letter and all documents delivered in accordance therewith and that it has been
afforded the opportunity to ask such questions as it deemed necessary, and to
receive answers from, representatives of the Company concerning the merits and
risks of investing in the Shares and to obtain such additional information that
the Company possesses or can acquire that is necessary to verify the accuracy
and completeness of the information contained in the SEC
59
Documents and the Draft Form 10-K. Notwithstanding the foregoing, nothing
contained in this Section 5.5 shall affect or be deemed to modify any
representation or warranty made by the Company.
5.6 Third Party Agreements. None of the Purchasers has any
contract, arrangement, understanding or agreement with any other Person with
respect to any securities of the Company, including but not limited to the
transfer or voting of securities or the giving of proxies, and has no current
plans or proposals or any contract, arrangement, understanding or agreement with
any Person which relate to or would result in a major corporate transaction,
including but not limited to the types of transactions described in Item 4 of
Schedule 13D of the Exchange Act, except as provided for in this Agreement, the
Registration Rights Agreement and the Shareholders Agreement and except as
disclosed in writing to the Company prior to the execution of this Agreement.
5.7 Finder's Fee. No broker, finder or other party is entitled
to receive from the Company or any of its Subsidiaries any brokerage or finder's
fee for the transactions contemplated by this Agreement as a result of the
actions of the Purchaser.
5.8 Ownership of Common Stock. Except as otherwise disclosed in
writing to the Company prior to the execution of this Agreement, the Purchasers
do not own beneficially (within the meaning of Rule 13d-3 of the Exchange Act)
any
60
shares of Common Stock or other Voting Securities of the Company.
5.9 Full Disclosure. To the knowledge of the Purchasers, none
of the written information provided to the Company by the Purchasers or their
Representatives expressly for use in connection with the Proxy Statement and the
Rights Offering Registration Statement, taken as a whole, in light of the
circumstances in which made, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which made,
not materially false or misleading.
6. COVENANTS OF THE PARTIES.
6.1 Shareholder Meeting; Proxy Material; Certificate of
Amendment. The Company shall cause a meeting of its shareholders to be duly
called and held as soon as practicable, subject to the Company's right to
adjourn such meeting at any time or from time to time if in the Board of
Directors' good faith judgment such action is desirable to effectuate the
transactions contemplated hereunder, for the purpose of voting on (A) the
approval of the purchase of the Shares by the Purchasers pursuant to the terms
of this Agreement (the "Investment Proposal"), (B) the approval of each of the
amendments of the Certificate of Amendment and (C) transacting such other
business as may properly come before the meeting or any adjournment thereof (the
"Stockholder Meeting"). The Board of
61
Directors shall recommend approval and adoption of the Investment Proposal and
the Certificate of Amendment. In connection with the Stockholder Meeting, the
Company: (A) shall promptly prepare and file with the SEC in accordance with the
Exchange Act the Proxy Statement, shall use its best efforts to have the Proxy
Statement and/or any amendment or supplement thereto cleared by the SEC and
shall thereafter mail to its shareholders as promptly as practicable the Proxy
Statement; (B) shall use all best efforts to obtain the necessary approvals by
its shareholders of the Investment Proposal and the Certificate of Amendment;
and (C) shall otherwise comply with all legal requirements applicable to such
meeting. The Company shall make available to the Purchasers prior to the filing
thereof with the SEC copies of the preliminary Proxy Statement and any
amendments or supplements thereto, shall make any changes therein reasonably
requested by the Purchasers insofar as such changes relate to any matters
relating to the Purchasers or the description of the transactions contemplated
by this Agreement, the Rights Offering, the Certificate of Amendment, the
Shareholders Agreement and the Registration Rights Agreement and shall not file
any such Proxy Statement or amendments or supplements thereto as to which the
Purchaser shall reasonably object.
6.2 Rights Offering. Under the terms of the Rights Offering,
the Company shall offer to holders of its Common Stock of record at the Record
Date the right to purchase shares of Preferred Stock at the Purchase Price Per
Share on the
62
basis of one right to purchase one-half share of Preferred Stock for every share
of Class A Common Stock or Class B Common Stock held. The Company shall, or
shall cause its transfer agent to, mail certificates representing the Rights to
such holders of Common Stock as promptly as practicable after the Rights
Offering Registration Statement becomes effective, and in any event will
complete such mailing not later than midnight on the day next succeeding the
effective date of the Rights Offering Registration Statement, unless the
Purchasers shall consent to a later time in writing. At the Time of Mailing, the
Company shall notify each of the Purchasers of such mailing, and the Company
shall advise each of the Purchasers daily during the period of such offer of the
subscriptions received and of sales. Not later than 10:00 a.m., New York City
time, on the first full Business Day following the Rights Offering Expiration
Date, the Company will notify each Purchaser by telephone of the total number of
shares of Preferred Stock subscribed for by holders of certificates representing
the Rights and the resulting amount of unsubscribed shares of Preferred Stock
and will continue to confirm such notice as to the amount of unsubscribed shares
of Preferred Stock to be purchased by them in accordance with Section 2.2(B)
hereto.
6.3 Rights Offering Registration Statement.
(A) The Company shall promptly prepare and file the Rights
Offering Registration Statement. Notwithstanding the foregoing, the Company
shall
63
not at any time, whether before or after the Rights Offering Registration
Statement shall have become effective, file or make any amendment or supplement
to the Rights Offering Registration Statement or Rights Offering Prospectus of
which the Purchasers have not previously been advised and furnished a copy, or
to which the Purchasers shall reasonably object in writing.
(B) The Company will use its best efforts to cause the
Rights Offering Registration Statement to become effective and will advise the
Purchasers immediately, and confirm the advice in writing (i) when the Rights
Offering Registration Statement, or any post-effective amendment to the Rights
Offering Registration Statement, shall have become effective, or any supplement
to the Rights Offering Prospectus or any amended Rights Offering Prospectus
shall have been filed, (ii) of the necessity of amending or supplementing the
Rights Offering Prospectus or any amended Rights Offering Prospectus in order to
then meet the requirements of the Act, (iii) of any request of the SEC for
amendment or supplementation of the Rights Offering Registration Statement or
Rights Offering Prospectus or the additional information and (iv) of the
issuance by the SEC of any stop order suspending the effectiveness of the Rights
Offering Registration Statement or of any order preventing or suspending the use
of any preliminary or amended preliminary prospectus, or of the suspension or
the qualification of the Rights, the Preferred Stock and the Class A Common
Stock for offering for sale in any
64
jurisdiction, or of the institution of any proceeding for any of such purposes.
The Company will use its best efforts to prevent the issuance of any such stop
order or of any order preventing or suspending such use and to obtain the
lifting thereof as soon as possible, if issued.
(C) The Company will deliver to the Purchasers, without
charge from time to time until the effective date of the Rights Offering
Registration Statement and thereafter from time to time as requested, as many
copies of each preliminary or amended preliminary prospectus and the Rights
Offering Prospectus (as supplemented or amended, if the Company shall have made
any supplements or amendments to the Rights Offering Prospectus) as the
Purchasers may reasonably request. The Company has furnished or will furnish to
the Purchasers two copies of the Rights Offering Registration Statement as
originally filed and of all amendments thereto, whether filed before or after
the Rights Offering Registration Statement becomes effective, and two copies of
all exhibits filed therewith or incorporated therein by reference.
(D) The Company will use its best efforts to comply with
the Act and the Exchange Act and the rules and regulations thereunder so as to
permit the continuance of sales of, and dealings in, the Rights, the Preferred
Stock and the Class A Common Stock in the Rights Offering under the Act and the
Exchange Act. Subject to the provisions of subsection (A) of this Section 6.3,
if at any time when a
65
Rights Offering Prospectus is required to be delivered under the Act (i) an
event shall have occurred as a result of which it is necessary to amend or
supplement the Rights Offering Prospectus in order to make the statements
therein not untrue or misleading or to make the Rights Offering Prospectus
comply with the Act or (ii) the proposed offering of the Shares makes it
necessary to amend or supplement the Rights Offering Prospectus, the Company
promptly will amend or supplement the Rights Offering Prospectus (and if a
post-effective amendment to the Rights Offering Registration Statement is
necessary in connection therewith, will promptly prepare and file the same) and
will use its best efforts to cause the same to become effective as necessary to
permit the lawful use of the Rights Offering Prospectus in connection with the
distribution of the Preferred Stock.
(E) The Company will take the necessary action to qualify
the Rights, the Preferred Stock and the Class A Common Stock in connection with
the offer and sale thereof by the Company in the Rights Offering, under the laws
of such jurisdictions as may be deemed advisable by the Company in respect of
the offer to the holders of its Common Stock. The Company, however, shall not be
obligated to qualify as a foreign corporation or file any general consent to
service of process under the laws of any such jurisdiction or subject itself to
taxation as doing business in any such jurisdiction. The Company will use its
best efforts to comply with state securities and blue sky laws so as to permit
the continuance of sales of and dealings in
66
the Rights, the Preferred Stock and the Class A Common Stock in the Rights
Offering.
6.4 Pre-Closing Activities. From and after the date of this
Agreement until the Closing, each of the Company and the Purchasers shall act
with good faith towards, and shall use its best efforts to consummate, the
transactions contemplated by this Agreement, and neither the Company nor the
Purchasers will take any action that would prohibit or impair its ability to
consummate the transactions contemplated by this Agreement. From the date hereof
until the Closing, the Company shall conduct the business of it and its
Subsidiaries in the ordinary course and shall use its best efforts to preserve
intact its business organizations and relationships with third parties and to
keep available the services of the present directors, officers and key
employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing, except as contemplated by this Agreement, without the
Purchasers' prior written consent:
(A) the Company shall not adopt or propose (or agree to
commit to) any change in the Certificate of Incorporation or its By-Laws (except
for the Certificate of Amendment) or any shareholders rights plan, poison pill
or similar arrangement;
(B) the Company shall not, and shall cause each of its
Subsidiaries not to, (i) enter into any loan agreement or other financing
agreement
67
(other than any such agreement among the Company and its wholly owned
Subsidiaries or among the Company's wholly owned Subsidiaries), (ii) amend or
terminate any such existing agreement (except as set forth in the Disclosure
Letter), (iii) incur any indebtedness other than (a) seasonal borrowings under
the Credit Agreement, (b) other indebtedness incurred in the ordinary course of
business consistent with past practice in an aggregate amount not to exceed
$1,000,000 and (c) such indebtedness as is set forth in the Disclosure Letter,
(iv) amend or terminate the Alliance Agreement or any agreement entered into or
related to such alliance with Pillsbury (except in the manner contemplated in
the Disclosure Letter), (v) issue stock or any other shares of capital
securities except pursuant to the operation of the Seneca Foods Corporation
Employees' Savings Plan, as in effect on the date hereof, or (vi) initiate,
solicit or encourage any inquiries or proposals or offers to purchase any of its
securities by any third party;
(C) the Company shall not, and shall cause each of
its Subsidiaries not to, enter into any other material agreements, commitments
or contracts other than in the ordinary course of business consistent with past
practice, or otherwise make any material change in any existing agreement,
commitment or arrangement other than in the ordinary course of business
consistent with past practice;
(D) the Company shall not, and shall cause each of
its
68
Subsidiaries not to, merge, consolidate or otherwise combine with any Person or
sell or otherwise transfer any of the assets of the Company or such Subsidiaries
(or the securities of entities holding the same) in one transaction or a series
of related transactions other than immaterial asset sales in the ordinary course
of business of the Company consistent with past practice;
(E) the Company shall not, and shall cause each of
its Subsidiaries not to, acquire any assets of any other Person or Persons
(other than in the ordinary course of business of the Company consistent with
past practice) or acquire any equity, partnership or other interests in any
other Person or Persons, in one transaction or series of related transactions
other than any transactions or series of related transactions in an aggregate
amount not to exceed $500,000;
(F) except for repayments of seasonal borrowings
under the Credit Agreement and scheduled payments of indebtedness, the Company
shall not, and shall cause each of its Subsidiaries not to, repay, redeem or
repurchase any indebtedness of the Company or any of the Subsidiaries or any
shares of capital stock of the Company or to declare or pay any dividends on any
shares of capital stock except for aggregate semiannual dividends of $11,590.50
on the outstanding shares of the 6% Preferred Stock, Series A Preferred Stock
and Series B Preferred Stock;
(G) except as set forth in the Disclosure Letter,
the Company shall not, and shall cause each of its Subsidiaries not to, enter
into any
69
transaction with any director, executive officer or Affiliate (other than any
transaction among the Company and its wholly-owned Subsidiaries or among any
wholly-owned Subsidiaries of the Company) of the Company other than any
transaction (or series of related transactions) not involving amounts in excess
of $60,000 and conducted on an arm's-length basis in the ordinary course of
business of the Company;
(H) the Company shall not, and shall cause each of
its Subsidiaries not to, (i) grant to any employee, officer or director, any
option, warrant or other subscription or purchase right with respect to shares
of capital stock other than pursuant to the Seneca Foods Corporation Employees'
Savings Plan in effect on the date hereof; (ii) grant to any employee any
increase in salary or other remuneration not consistent with past practices,
grant to any officer or director any increase in salary, bonus incentive
compensation, service award or other remuneration or grant to any employee,
officer or director any increase in severance or termination pay; (iii) enter
into any employment contract or severance arrangement with any officer or
director; or (iv) adopt or amend in any respect any of its employee benefit
plans except as required by law;
(I) the Company shall, and shall cause each of its
Subsidiaries to, not take or agree to commit to take any action that would make
any representation or warranty of the Company hereunder required to be true at
and as of the Closing as a condition to the Purchasers' obligations to
consummate the
70
transactions contemplated hereby, inaccurate at the Closing;
(J) except as permitted by the Credit Agreement and
consistent with the Company's operating budget existing on the date hereof, the
Company shall not, and shall cause its Subsidiaries not to, agree to expend,
commit or otherwise obligate itself to make any capital expenditures; and
(K) the Company shall not, and shall cause each of its
Subsidiaries not to, (i) agree or commit to do any of the foregoing or (ii)
solicit or encourage any proposals from third parties, or enter into any
negotiations with any third party or parties, to do any of the foregoing actions
described in clauses (B)(iv), (B)(v), (D), (E) and (F).
6.5 Option Shares. The Company hereby grants to each Purchaser
the right to purchase prior to the Closing at its election the number of shares
of Preferred Stock (the "Option Shares") set forth opposite its name on Schedule
I at the Purchase Price Per Share. Any such election to purchase the Option
Shares may be exercised by the Purchasers by written notice to the Company
setting forth the aggregate number of Option Shares to be purchased and the date
of purchase of such shares (which must be prior to the Closing and no earlier
than 15 business days after the date of such notice (the "Option Closing
Date")). On the Option Closing Date, the Company shall issue and sell to the
Purchasers exercising such option, and such Purchasers shall purchase, the
number of Option Shares for which such option has
71
been exercised. The Company shall take all actions necessary to effect such sale
(including, without limitation, filing a certificate of designation for the
Option Shares that is reasonably acceptable to the Purchasers). At such closing,
the Company shall deliver to each of the Purchasers exercising such option
certificates representing the number of Option Shares for which such Purchaser
has exercised its option, each registered in the name of such Purchaser or its
nominees, against payment of the Purchase Price Per Share with respect thereto
by wire transfer of immediately available funds to an account or accounts
previously designated by the Company. Upon the purchase of such Option Shares,
the number of Shares to be purchased by each Purchaser hereunder shall be
reduced automatically by an amount equal to the Option Shares purchased by such
Purchaser under this Section 6.5. The option granted under this Section 6.5
shall expire immediately prior to the Closing.
6.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. To the extent applicable, whether made
prior to or after the Closing, the Company and the Purchasers shall make all
filings and furnish all information required with respect to the transactions
contemplated by this Agreement by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 and shall use their best efforts to obtain the early termination of
the waiting period thereunder.
6.7 Access to Information. Upon reasonable notice prior
to the Closing, the Company shall (and shall cause each of its Subsidiaries to)
afford the
72
Purchasers and their Representatives reasonable access during normal business
hours to its properties, books, contracts and records and personnel and advisors
(who will be instructed by the Company to cooperate), and the Company shall (and
shall cause each of the Subsidiaries to) furnish promptly to the Purchasers all
information concerning its business, properties and personnel as the Purchasers
or their Representatives may reasonably request, provided that any review will
be conducted in a way that will not interfere unreasonably with the conduct of
the Company's business, and provided, further, that no review pursuant to this
Section 6.7 shall affect or be deemed to modify any representation or warranty
made by the Company.
6.8 Publicity. Except as required by law, regulation or stock
exchange requirements, neither (A) the Company nor any of its Affiliates nor (B)
the Purchasers or any of their respective Affiliates shall, without the consent
of the other, make any public announcement or issue any press release with
respect to the transactions contemplated by this Agreement. In the event that
either (i) the Company or any of its Affiliates or (ii) the Purchasers or any of
their respective Affiliates are required by law, regulation or stock exchange
requirements to make any public announcement or issue any press release, such
party or parties agree to consult with the other party or parties, to the extent
feasible, as to the content of such public announcement or press release.
6.9 Certificates for Shares To Bear Legends.
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(A) So long as the Shares or Conversion Shares are not sold
pursuant to an effective registration statement under the Act or pursuant to
Rule 144 under the Act, the Shares or the Conversion Shares shall bear the
following legend by which each holder thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR
(ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER."
(B) If (i) any of the Shares or Conversion Shares are sold
pursuant to an effective Registration Statement or Rule 144 promulgated under
the Act, or (ii) the Shares or Conversion Shares may be sold pursuant to Rule
144(k) promulgated under the Act, the Company shall, upon the written request of
the holders of the Shares or Conversion Shares and receipt by the Company of
evidence reasonably satisfactory to it that such requirement has terminated
(including a written opinion of outside counsel with respect to clause (ii)
above), issue certificates for such Shares or Conversion Shares that do not bear
all or part of the legend described in Section 6.9(A).
6.10 Reservation of Shares. The Company shall at all
times reserve and keep available, out of its authorized and unissued stock,
solely for the purpose of
74
effecting the conversion of the Preferred Stock, such number of shares of Class
A Common Stock as shall from time to time be sufficient to effect the conversion
of all shares of Preferred Stock from time to time.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.
Notwithstanding any investigation by the Purchasers, the
representations, warranties, covenants and agreements contained herein shall
survive the execution and delivery of this Agreement and the Closing hereunder;
provided that, the representations and warranties of the parties in Section 4
and Section 5 (other than the representations and warranties set forth in
Sections 4.1, 4.2, 4.6, 4.16, 4.17 and 4.20) shall survive only for a period of
three years after the Closing Date.
8. INDEMNIFICATION.
8.1 Indemnification by the Company. In addition to all other
sums due hereunder or provided for in this Agreement, the Company agrees to
indemnify and hold harmless the Purchasers, their partners or stockholders and
their respective Affiliates and the respective officers, directors, agents,
employees, subsidiaries, partners, advisors, representatives and controlling
Persons of each of the foregoing (each, an "indemnified party") to the fullest
extent permitted by law from and against any and all losses, claims, damages,
expenses (including reasonable fees, disbursements and other charges of counsel)
or other liabilities ("Liabilities") resulting
75
from any legal, administrative or other actions brought by any Person or entity
(including actions brought by the Company or any equity or debtholders of the
Company or derivative actions brought by any Person claiming through the Company
or in the Company's name), proceedings or investigations (whether formal or
informal), or written threats thereof, based upon, relating to or arising out of
this Agreement, the transactions contemplated hereby, or any indemnified party's
role therein or in the transactions contemplated hereby (including Liabilities
to which an indemnified party may become subject under the Act, the Exchange Act
or other federal or state statutory law or regulation, at common law, or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based on any untrue statement or alleged untrue statement of a material
fact contained in the Proxy Statement, any preliminary prospectus, the Rights
Offering Registration Statement or the Rights Offering Prospectus or any
amendment or supplement thereto, or the omission or alleged omission to state in
such document a material fact required to be stated in it or necessary to make
the statements in it not misleading, provided, however, that the Company will
not be liable to the extent that such Liability is based on an untrue statement
or omission or alleged untrue statement or omission made in reliance on and in
conformity with information furnished in writing to the Company by or on behalf
of the Purchasers expressly for use in such document); provided, however, that
the Company shall not be liable under this Section 8.1 to an
76
indemnified party to the extent (i) that it is finally judicially determined
that such Liabilities resulted primarily from the willful malfeasance of such
indemnified party or (ii) any Liability arising out of the failure of the
parties to make any filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976 prior to the Closing; and provided, further, that if and to the
extent that such indemnification is unenforceable for any reason other than the
immediately preceding proviso, the Company shall make the maximum contribution
to the payment and satisfaction of such indemnified Liabilities that shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for Liabilities as set forth above, the Company further
agrees to reimburse each indemnified party for all such expenses (including
reasonable fees, disbursements and other charges of counsel) as they are
incurred by such indemnified party.
8.2 Notification. Each indemnified party under this Section 8
will, promptly after the receipt of notice of the commencement of any action or
other proceeding against such indemnified party in respect of which indemnity
may be sought from the Company under Section 8, notify the Company in writing of
the commencement thereof. The omission of any indemnified party so to notify the
Company of any such action shall not relieve the Company from any liability that
it may have to such indemnified party unless the Company is materially
prejudiced thereby. In case any such action or other proceeding shall be brought
against any
77
indemnified party and it shall notify the Company of the commencement thereof,
the Company shall be entitled to participate therein and, to the extent that it
may wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that any indemnified party may, at
its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action or proceeding in which both the
Company and an indemnified party is, or is reasonably likely to become, a party,
such indemnified party shall have the right to employ separate counsel at the
Company's expense and to control its own defense of such action or proceeding
if, in the opinion of counsel to such indemnified party, (i) there are or may be
legal defenses available to such indemnified party or to other indemnified
parties that are different from or additional to those available to the Company
or (ii) any conflict or potential conflict exists between the Company and such
indemnified party that would make such separate representation advisable;
provided, however, that in no event shall the Company be required to pay fees
and expenses under this Article 8 for more than one firm of attorneys
representing the indemnified parties (together, if appropriate, with one firm of
local counsel per jurisdiction) in any one legal action or group of related
legal actions. The Company shall not be liable for any settlement of such action
or proceeding effected without its prior written consent, not to be unreasonably
withheld. Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested the
78
Company to reimburse the indemnified party for fees and expenses of counsel as
contemplated by this Section 8, the Company agrees that it shall be liable for
any settlement of any proceeding effected without the Company's written consent
if (i) such settlement is entered into more than 30 days after receipt by the
Company of the aforesaid request, and (ii) the Company shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement. The Company agrees that the Company will not, without the prior
written consent of the Purchaser, not to be unreasonably withheld, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to any matter subject to indemnification
hereunder unless such settlement, compromise or consent includes an
unconditional release of the Purchasers and each other indemnified party from
all liability arising or that may arise out of such claim, action or proceeding
and the Purchasers and each other indemnified party are not obligated to take or
forego taking any action, including the payment of money, thereunder. The rights
accorded to indemnified parties hereunder shall be in addition to any rights
that any indemnified party may have at common law, under federal and state
securities laws, by separate agreement or otherwise.
8.3 Registration Rights Agreement. Notwithstanding anything to the
contrary in this Section 8, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
79
registration statements filed pursuant thereto or sales made thereunder.
9. TERMINATION.
9.1 Termination. Subject to Section 9.2, this Agreement may be
terminated at any time prior to the Closing:
(A) by the Purchasers if (i) the Board of Directors
determines not to give, withdraws, modifies or changes its approval or
recommendation of the sale of the Shares to the Purchasers or any of the other
matters contemplated by Sections 3.1.2 and 3.1.4, (ii) a Change of Control
occurs or (iii) the Stockholder Meeting is held to consider the transactions
contemplated hereby and the shareholders fail to approve the sale of the Shares
to the Purchasers or any of the other matters contemplated by Sections 3.1.2 and
3.1.4;
(B) by the Purchasers if there has been a material breach of
any representation, warranty, covenant or agreement of the Company contained in
this Agreement, which breach is incurable or has not been cured by the Company
within 30 days after written notice from the Purchasers;
(C) by the Company if there has been a material breach of
any representation, warranty, covenant or agreement of the Purchasers contained
in this Agreement, which breach is incurable or has not been cured by the
Purchasers within 30 days after written notice from the Company;
(D) by the Purchasers if any one or more of the conditions
to the obligation of the Purchasers to close has not been fulfilled as of the
scheduled Closing Date;
80
(E) by the Company if any one or more of the conditions to
the obligation of the Company to close has not been fulfilled as of the
scheduled Closing Date;
(F) by the Company or the Purchasers, if the Closing shall
not have occurred on or before October 30, 1998; provided, however, that the
right to terminate this Agreement under this Section 9.1(F) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date;
(G) by the Company or the Purchasers, if any judgment,
injunction, order or decree enjoining the Company or the Purchasers from
consummating the transactions contemplated by this Agreement is entered and such
judgment, injunction, order or decree becomes final and nonappealable; provided,
however, that the party seeking to terminate this Agreement must use all
reasonable efforts to remove such judgment, injunction, order or decree; and
(H) by mutual written consent of the Company and the
Purchasers.
9.2 Expenses. Except as otherwise provided in the Registration
Rights Agreement, each party hereto shall bear its own expenses arising out of
the drafting, negotiation and execution of this Agreement, the Shareholders
Agreement, the Rights Offering Registration Statement and the Registration
Rights Agreement and the transactions contemplated herein and therein.
9.3 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on
81
the part of any party hereto, except (A) to the extent such termination results
from the breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement and (B) that the
representation contained in Section 4.24 and the covenants and agreements
contained in Sections 6.8, 8.1, 8.2, 9.2, 9.3 and 10 (except Section 10.2) shall
survive the termination hereof.
10. MISCELLANEOUS.
10.1 Performance; Waiver. The provisions of this Agreement may
be modified or amended, and waivers and consents to the performance and
observance of the terms hereof may be given by written instrument executed and
delivered by the Company and the Purchasers. The failure at any time to require
performance of any provision hereof shall in no way affect the full right to
require such performance at any time thereafter (unless performance thereof has
been waived in accordance with the terms hereof for all purposes and at all
times by the parties to whom the benefit of such performance is to be rendered).
The waiver by any party to this Agreement of a breach of any provision hereof
shall not be taken or held to be a waiver of any succeeding breach of such
provision of any other provision or as a waiver of the provision itself.
10.2 Extension or Modification of Rights Offering. Without the
prior written consent of the Purchasers, the Company will not permit the Rights
Offering Expiration Date to be extended or any of the other terms or conditions
of the Rights, the Preferred Stock or the offering of the Preferred Stock for
subscription as described in the Rights Offering Prospectus to be amended,
modified or terminated in
82
any material respect, except that, without such consent, the Company may waive
irregularities in the manner of exercise of the Rights to the extent that such
waiver does not materially adversely affect the interests of the Purchasers. At
the request of the Purchasers, the Company will extend the Rights Offering
Expiration Date, but in no event shall any such extension (i) be made other than
with the consent or at the request of the Purchasers or (ii) postpone the Rights
Offering Expiration Date to a date more than 30 days later than the date set
forth in the Rights Offering Prospectus.
10.3 Successors and Assigns. All covenants and agreements
contained in this Agreement by or on behalf of the parties hereto shall bind,
and inure the benefit of, the respective successors and assigns of the parties
hereto; provided, however, that the rights and obligations of either party
hereto may not be assigned without the prior written consent of the other
parties, except that prior to the Closing, the Purchasers may assign, with the
prior written consent of the Company, not to be unreasonably withheld, all or a
portion of their rights and obligations hereunder to an Affiliate of any of the
Purchasers or to any Person for whom ▇▇▇▇ ▇▇▇▇▇ Management Company, L.P. acts as
investment advisor, in which event the Purchasers will be relieved of their
obligations hereunder to the extent so assumed by such Affiliate or Affiliates
and such Affiliate or Affiliates shall be considered to be included within the
term "Purchaser" for all purposes of this Agreement.
10.4 Notices. All notices or other communications given or
made hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt
83
requested, postage prepaid, or sent by a reputable overnight courier to, the
following addresses (and shall be deemed effective at the time of receipt
thereof).
If to the Company:
Seneca Foods Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and
Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & Mugel, LLP
Fleet Bank Building
Twelve ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
If to the Purchasers:
▇▇▇▇ ▇▇▇▇▇ Strategic Investments, L.P.
▇▇▇▇ ▇▇▇▇▇ Strategic Investments II, L.P.
Uranus Fund, Ltd.
c/o ▇▇▇▇ ▇▇▇▇▇ Management Company, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
84
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
10.5 Governing Law. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED IN THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
10.6 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each of the Company and the Purchasers direct
that such court interpret and apply the remainder of this Agreement in the
manner that it determines most closely effectuates their intent in entering into
this Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
10.7 Headings; Interpretation. The index and section headings
herein are for convenience only and shall not affect the construction hereof.
References to sections means sections of this Agreement unless the context
otherwise requires. References to herein or hereof mean this Agreement.
10.8 Entire Agreement. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof and
supersedes any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and the Purchasers, or
between or among any agents,
85
representatives, parents, Subsidiaries, Affiliates, predecessors in interest or
successors in interest, with respect to the subject matter hereof.
10.9 No Third Party Rights. Except for the indemnified
parties, directors and officers described in Article 8 and the rights of such
Persons expressly created under Article 8, this Agreement is intended solely for
the benefit of the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor of, any Person (including, without
limitation, any shareholder or debtholder of the Company) other than the parties
hereto.
10.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.
86
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement.
SENECA FOODS CORPORATION
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Executive Officer
▇▇▇▇ ▇▇▇▇▇ STRATEGIC INVESTMENTS, L.P.
By: ▇▇▇▇ ▇▇▇▇▇ Management Company, L.P.,
its general partner
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: General Partner
▇▇▇▇ ▇▇▇▇▇ STRATEGIC INVESTMENTS II, L.P.
By: ▇▇▇▇ ▇▇▇▇▇ Management Company, L.P.,
its general partner
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: General Partner
87
URANUS FUND, LTD.
By: ▇▇▇▇ ▇▇▇▇▇ Offshore Management, Inc.,
its Investment Manager
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
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