EXHIBIT 10.(l)
CONSENT AND FOURTH AMENDMENT TO CREDIT AGREEMENT
------------------------------------------------
CONSENT AND FOURTH AMENDMENT, dated as of July 30, 2002 (this
"Consent"), to the Credit Agreement referred to below among AGWAY, INC., a
-------
Delaware corporation, FEED COMMODITIES INTERNATIONAL LLC, a Delaware limited
liability company, XXXXXXXX AGRONOMIC CONSULTING SERVICE LLC, a Delaware limited
liability company, AGWAY GENERAL AGENCY, INC., a New York corporation, COUNTRY
BEST XXXXX, LLC, a Delaware limited liability company, COUNTRY BEST-XXXXXXX LLC,
a Delaware limited liability company, AGWAY ENERGY PRODUCTS LLC, a Delaware
limited liability company, AGWAY ENERGY SERVICES-PA, INC., a Delaware
corporation, and AGWAY ENERGY SERVICES, INC., a Delaware corporation, as
Borrowers (the "Borrowers"), THE OTHER CREDIT PARTIES SIGNATORY THERETO (the
---------
"Credit Parties"), THE LENDERS SIGNATORY THERETO FROM TIME TO TIME (the
---------------
"Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent ("Agent") and as
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a Lender.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Borrowers, the Credit Parties, the Lenders and Agent
are parties to that certain Credit Agreement, dated as of March 28, 2001
(including all annexes, exhibits and schedules thereto, and as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
----------------
WHEREAS, Agway, Inc. has entered into a Stock Purchase Agreement
with United Farm Family Mutual Insurance Company dated as of June 14, 2002 in
the form annexed hereto as Exhibit A (the "Stock Purchase Agreement")
------------------------------
whereby Agway, Inc. is, among other things, selling shares of capital stock
of Agway Insurance Company;
WHEREAS, the Agent and Lenders have agreed to consent to the
sale of certain Collateral and the amendment of the Credit Agreement, in the
manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein
-----------
shall have the meanings ascribed to them in the Credit Agreement or Annex A
--------
thereto.
2. Consent. As of the Consent Effective Date (as hereinafter
------
defined), Agent and Lenders hereby consent to (i) the sale by Agway, Inc. of
the "Purchased Shares", as such term is defined in Section 1.1 of the Stock
Purchase Agreement and (ii) the sale by Agway, Inc. or Related Persons (as
defined in the Stock Purchase Agreement) of Agway, Inc. of the "Agway, Inc.
Assets," as such term is defined in Section 1.1 of the Stock Purchase Agreement,
provided that (i) the "Agway, Inc. Assets" shall not be transferred or
--------
conveyed to Agway Insurance Company until Closing (as defined in the Stock
Purchase Agreement); and (ii) the aggregate net proceeds from the sale shall be
applied to prepay the Loans pursuant to Section 1.3(b)(ii) of the Credit
------------------
Agreement.
3. Amendments.
----------
(a) Annex A of the Credit Agreement is hereby amended as of
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the Consent Effective Date by:
(i) deleting the definition of "Commitments" and inserting in
lieu thereof:
"`Commitments'" means (a) as to any Lender, the aggregate of
------------
such Lender's Revolving Loan Commitment (including without
duplication the Swing Line Lender's Swing Line Commitment as a
subset of its Revolving Loan Commitment) as set forth on Annex J
-------
to the Agreement or in the most recent Assignment Agreement
executed by such Lender and (b) as to all Lenders, the aggregate
of all Lenders' Revolving Loan Commitments (including without
duplication the Swing Line Lender's Swing Line Commitment as a
subset of its Revolving Loan Commitment), which aggregate
commitment shall be One Hundred Twenty-Five Million Dollars
($125,000,000) on the Consent Effective Date (as defined in the
Consent and Fourth Amendment to Credit Agreement dated as of July
30, 2002), as to each of clauses (a) and (b), as such Commitments
may be reduced, amortized or adjusted from time to time in
accordance with the Agreement."
(ii) deleting the definition of "Revolving Loan Commitment"
and inserting in lieu thereof:
"'Revolving Loan Commitment' means (a) as to any Lender, the
---------------------------
aggregate commitment of such Lender to make Revolving Credit
Advances or incur Letter of Credit Obligations as set forth on
Annex J to the Agreement or in the most recent Assignment
--------
Agreement executed by such Lender and (b) as to all Lenders, the
aggregate commitment of all Lenders to make Revolving Credit
Advances or incur Letter of Credit Obligations, which aggregate
commitment shall be One Hundred Twenty- Five Million Dollars
($125,000,000) on the Consent Effective Date (as defined in the
Consent and Fourth Amendment to Credit Agreement dated as of July
30, 2002), as such amount may be adjusted, if at all, from time
to time in accordance with the Agreement."
(b) Annex J of the Credit Agreement is hereby amended as of
-------
the Consent Effective Date by deleting such Annex in its entirety and replacing
it with a new Annex J attached hereto as Exhibit B.
------- ---------
(c) Section 1.1(a)(iii) of the Credit Agreement is hereby
-------------------
ammended as of the Consent Effective Date by deleting the last sentence of such
section in its entirety and inserting in lieu thereof the following:
"Except as otherwise provided in Section 1.11(b), the authority
---------------
of Agent to make Overadvances is limited to an aggregate amount
not to exceed One Million Dollars ($1,000,000) at any time,
shall not cause the aggregate Revolving Loan to exceed the
Maximum Amount, and may be revoked prospectively by a written
notice to Agent signed by Revolving Lenders holding more than 50%
of the Revolving Loan Commitments."
(d) Annex G of the Credit Agreement is hereby amended as of
-------
the Consent Effective Date by deleting section (h) thereunder in its entirety
and inserting in lieu thereof the following new section (h) to read as follows:
"(h) Minimum Excess Availability. Borrowers and their
----------------------------
Subsidiaries (excluding all Telmark Entities, Agway Insurance
Company and all of their respective Subsidiaries) at all times
shall have Borrowing Availability, after giving effect to
Eligible Accounts, Eligible Deferred Accounts and Eligible
Inventory of Borrowers supporting Revolving Credit Advances and
all Letter of Credit Obligations (on a pro forma basis, with
trade payables being paid in the ordinary course, and expenses
and liabilities being paid in the ordinary course of business and
without acceleration of sales) of at least Ten Million Dollars
($10,000,000), provided however, upon closing and consummation of
-------- -------
the Stock Purchase Agreement between Agway, Inc. and United Farm
Family Mutual Insurance Company, dated June 14, 2002 and if a
Default or Event of Default has occurred and is continuing, such
Borrowing Availability shall be at least Fifteen Million Dollars
($15,000,000)."
4. Representations and Warranties. To induce Agent and Lenders
------------------------------
to enter into this Consent, Borrowers hereby represent and warrent that:
(a) The execution, delivery and performance by Borrowers of
this Consent (i) are within Borrowers' respective corporate powers, (ii) has
been duly authorized by all necessary corporate and shareholder action, and
(iii) is not in contravention of any provision of any Borrower's charter or
bylaws or equivalent organizational documents.
(b) This Consent has been duly executed and delivered by or on
behalf of Borrowers.
(c) The Consent constitutes a legal, valid and binding
obligation of Borrowers, enforceable against each of them in accordance with its
terms.
(d) Except for those expressly waived pursuant to the First
Amendment and Waiver to Credit Agreement dated as of September 14, 2001, the
Second Amendment and Waiver to Credit Agreement dated as of January 31, 2002,
the Third Amendment and Waiver to Credit Agreement dated as of April 3, 2002,
and the Waiver under Credit Agreement dated as of May 13, 2002, no Default or
Event of Default has occurred and is continuing after giving effect to this
Consent.
(e) No action, claim or proceeding is now pending or, to the
knowledge of Borrowers, threatened against Borrowers, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal, state, or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators, which challenges Borrowers'
right, power, or competence to enter into this Consent or, to the extent
applicable, perform any of their obligations under this Consent, the Credit
Agreement or any other Loan Document, or the validity or enforceability of this
Consent, the Credit Agreement or any other Loan Document or an action taken
under this Consent, the Credit Agreement or any other Loan Document or except
for items on Disclosure Schedule (3.13) or notifications sent to Agent since the
--------------------------
Closing Date, which if determined adversely, is reasonably likely to have or
result in a Material Adverse Effect after giving effect to this Consent. Except
for items on Disclosure Schedule (3.13) or notifications sent to Agent since the
--------------------------
Closing Date, to the knowledge of Borrowers, there does not exist a state of
facts which is reasonably likely to give rise to such proceedings.
(f) The representations and warranties of the Borrowers
contained in the Credit Agreement and each other Loan Document shall be true and
correct on and as of the Consent Effective Date (as hereinafter defined) with
the same effect as if such representations and warranties had been made on and
as of such date, except that any such representation or warranty which is
expressly made only as of a specified dated need be true only as of such date.
5. No Other Consents/Waivers. Except as expressly provided
-------------------------
herein, (i) the Credit Agreement shall be unmodified and shall continue to be in
full force and effect in accordance with its terms and (ii) this Consent shall
not be deemed a waiver of any term or condition of any Loan Document and shall
not be deemed to prejudice any right or rights which the Agent or any Lender may
now have or may have in the future under or in connection with any Loan Document
or any of the instruments or agreements referred to therein, as the same may be
amended from time to time. Except as otherwise provided for herein, nothing set
forth herein shall be deemed to be a consent by Agent or Lenders with respect to
any sale or other disposition by Borrowers of any assets.
6. Outstanding Indebtedness; Waiver of Claims. Each of Borrowers
------------------------------------------
and other Credit Parties hereby acknowledges and agrees that as of July 30,
2002 the aggregate outstanding principal amount of the Revolving Loan is
$47,276,378.81 and that such principal amount is payable pursuant to the Credit
Agreement without defense, offset, withholding, counterclaim or deduction of
any kind. Borrowers and each other Credit Party hereby waives, releases,
remises and forever discharges Agent, Lenders and each other Indemnified Person
from any and all claims, suits, actions, investigations, proceedings or demands
arising out of or in connection with the Credit Agreement (collectively,
"Claims"), whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law of any kind or character,
known or unknown, which any Borrower or any other Credit Party ever had, now has
or might hereafter have against Agent or Lenders which relates, directly or
indirectly, to any acts or omissions of Agent, Lenders or any other Indemnified
Person on or prior to the Consent Effective Date (as hereinafter defined),
provided, that no Borrower nor any other Credit Party waives any Claim solely to
--------
the extent such Claim relates to the Agent's or any Lender's gross negligence or
willful misconduct.
7. Expenses. Borrowers hereby reconfirm their obligations
--------
pursuant to Sections 1.9 and 11.3 of the Credit Agreement to pay and reimburse
------------- ----
Agent and the Lenders for all reasonable costs and expenses (including, without
limitation, reasonable fees of counsel) incurred in connection with the
negotiation, preparation, execution and delivery of this Consent and all other
documents and instruments delivered in connection herewith.
8. Effectiveness. This Consent shall become effective as of
-------------
July 30, 2002 (the "Consent Effective Date") only upon satisfaction in full in
the judgment of Agent of each of the following conditions:
(a) Consent. Agent shall have received six (6) original copies
-------
of this Consent duly executed and delivered by Agent, the Requisite Lenders and
Borrowers.
(b) Payment of Expenses. Borrowers shall have paid to Agent
-------------------
all costs, fees and expenses owing in connection with this Consent and the other
Loan Documents and due to Agent (including, without limitation, reasonable legal
fees and expenses).
(c) Stock Purchase Agreement. The Agent shall have received a
------------------------
true and complete copy of the StockPurchase Agreement, substantially in the form
of Exhibit A hereto, duly authorized and executed together with all schedules,
exhibits, amendments, supplements, modifications, assignments and all other
documents delivered pursuant thereto or in connection therewith.
(d) Representations and Warranties. The representations and
------------------------------
warranties of or on behalf of the Borrowers in this Consent shall be true and
correct on and as of the Consent Effective Date.
9. GOVERNING LAW. THIS CONSENT SHALL BE GOVERNED BY, AND
-------------
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10. Counterparts. This Consent may be executed by the parties
------------
hereto on any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
(SIGNATURE PAGE FOLLOWS)
IN WITNESS WHEREOF, the parties hereto have caused this
Consent to be duly executed and delivered as of the day and year first above
written.
BORROWERS
AGWAY, INC.
FEED COMMODITIES INTERNATIONAL LLC
XXXXXXXX AGRONOMIC CONSULTING SERVICE LLC
COUNTRY BEST-XXXXXXX LLC
AGWAY ENERGY PRODUCTS LLC
AGWAY ENERGY SERVICES-PA, INC.
AGWAY ENERGY SERVICES, INC.
COUNTRY BEST XXXXX, LLC
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxx
--------------------------------------------
Title: Treasurer
--------------------------------------------
AGWAY GENERAL AGENCY, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxxxx
--------------------------------------------
Title: Asst. Treasurer
--------------------------------------------
LENDERS
COBANK, ACB
By: /s/ K. E. Hide
--------------------------------------------
Name: K. E. Hide
--------------------------------------------
Title: Vice President
--------------------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEEN BANK B.A.,
"Rabobank Nederland" New York Branch
By: /s/ Xxxxx Xxxxx /s/ Xxxxxx X. Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxx Xxxxxx X. Xxxxxx
--------------------------------------------
Title: Vice-President Managing Director
--------------------------------------------
GMAC BUSINESS CREDIT, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
--------------------------------------------
Title: SVP
--------------------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ Xxxxxx X. Xxxx
--------------------------------------------
Name: Xxxxxx X. Xxxx
--------------------------------------------
Title: Its Duty Authorized Signatory
EXHIBIT A
TO
CONSENT
See attached Stock Purchase Agreement dated June 14, 2002.
EXHIBIT B
---------
ANNEX J (from Annex A - Commitments definition)
--------------------------------
to
CREDIT AGREEMENT
----------------
Lender(s)
---------
Revolving Loan Commitment
(including a Swing Line Commitment
of $10,000,000)
$53,571,428.57 General Electric Capital Corporation
Revolving Loan Commitment
$37,142,857.14 CoBank, ACB
Revolving Loan Commitment
$16,428,571.43 Cooperatieve Centrale Raiffeisen-
Boerenleenbank
B.A., "Rabobank Nederland", New York
Branch
Revolving Loan Commitment
$17,857,142.86 GMAC Business Credit, LLC
EXHIBIT 10.(m)
CONSENT AND FIFTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------------------
CONSENT AND FIFTH AMENDMENT, dated as of September 13, 2002
(this "Consent and Amendment"), to the Credit Agreement referred to below among
---------------------
AGWAY, INC., a Delaware corporation, FEED COMMODITIES INTERNATIONAL LLC, a
Delaware limited liability company, XXXXXXXX AGRONOMIC CONSULTING SERVICE LLC, a
Delaware limited liability company, AGWAY GENERAL AGENCY, INC., a New York
corporation, COUNTRY BEST XXXXX, LLC, a Delaware limited liability company,
COUNTRY BEST-XXXXXXX LLC, a Delaware limited liability company, AGWAY ENERGY
PRODUCTS LLC, a Delaware limited liability company, AGWAY ENERGY SERVICES-PA,
INC., a Delaware corporation, and AGWAY ENERGY SERVICES, INC., a Delaware
corporation, as Borrowers (the "Borrowers"), THE OTHER CREDIT PARTIES SIGNATORY
---------
THERETO (the "Credit Parties"), THE LENDERS SIGNATORY THERETO FROM TIME TO TIME
--------------
(the "Lenders"), and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent ("Agent")
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and as a Lender.
W I T N E S S E T H
-------------------
WHEREAS, Borrowers, the Credit Parties, the Lenders and Agent
are parties to that certain Credit Agreement, dated as of March 28, 2001
(including all annexes, exhibits and schedules thereto, and as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
and ------------------
WHEREAS, the Agent and Lenders have agreed to consent to the
sale of certain Collateral and the amendment of the Credit Agreement, in the
manner, and on the terms and conditions, provided for herein;
NOW THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
-----------
have the meanings ascribed to them in the Credit Agreement or Annex A thereto.
-------
2. Consent. As of the Consent Effective Date (as hereinafter defined),
-------
Agent and Lenders hereby consent to the sale by Agway, Inc. of the "Acquired
Assets," as such term is defined in Section 1.1 of that certain Asset Purchase
Agreement, dated as of September 10, 2002 by and between Agway, Inc., as seller
and Cenex Harvest States Cooperatives, as buyer, a copy of which is attached
hereto as Exhibit A (the "Asset Purchase Agreement"), provided that the
aggregate net proceeds from such sale shall be applied to prepay the Loans
pursuant to Section 1.3(b)(ii) of the Credit Agreement. Agent agrees to release
its Lien on the Acquired Assets in order to permit Agway, Inc. to effect the
sale and shall execute and deliver to Borrowers, at Borrowers' expense,
appropriate UCC-3 release statements and other releases as reasonably requested
by Borrowers.
3. Amendment. Annex G of the Credit Agreement is hereby amended as
--------- -------
of the Consent Effective Date by deleting section (h) thereunder in its entirety
and inserting in lieu thereof the following new section (h) to read as follows:
"(h) Minimum Excess Availability. Borrowers and their
-------------------------------
Subsidiaries (excluding all Telmark Entities, Agway Insurance
Company and all of their respective Subsidiaries) at all times
shall have Borrowing Availability, after giving effect to
Eligible Accounts, Eligible Deferred Accounts and Eligible
Inventory of Borrowers supporting Revolving Credit Advances
and all Letter of Credit Obligations (on a pro forma basis,
with trade payables being paid in the ordinary course, and
expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) of at least Ten
Million Dollars ($10,000,000), provided however, upon closing
and consummation of the Asset Purchase Agreement between
Agway, Inc. and Cenex Harvest States Cooperatives dated
September 10, 2002, such Borrowing Availability shall be at
least Twenty Five Million Dollars ($25,000,000)."
4. Representations and Warranties. To induce Agent and Lenders to
------------------------------
enter into this Consent and Amendment, Borrowers hereby represent and warrant
that:
(a) The execution, delivery and performance by Borrowers of
this Consent and Amendment (i) are within Borrowers' respective corporate
powers, (ii) has been duly authorized by all necessary corporate and shareholder
action, and (iii) is not in contravention of any provision of any Borrower's
charter or bylaws or equivalent organizational documents.
(b) This Consent and Amendment has been duly executed and
delivered by or on behalf of Borrowers.
(c) The Consent and Amendment constitutes a legal, valid and
binding obligation of Borrowers.
(d) Except for those expressly waived pursuant to the First
Amendment and Waiver to Credit Agreement dated as of September 14, 2001, the
Second Amendment and Waiver to Credit Agreement dated as of January 31, 2002,
the Third Amendment and Waiver to Credit Agreement dated as of April 3, 2002,
and the Waiver under Credit Agreement dated as of May 13, 2002, no Default or
Event of Default has occurred and is continuing after giving effect to this
2
Consent and Amendment.
(e) No action, claim or proceeding is now pending or, to
the knowledge of Borrowers, threatened against Borrowers, at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal, state, or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators, which challenges Borrowers'
right, power, or competence to enter into this Consent and Amendment or, to the
extent applicable, perform any of their obligations under this Consent and
Amendment, the Credit Agreement or any other Loan Document, or the validity or
enforceability of this Consent and Amendment, the Credit Agreement or any other
Loan Document or an action taken under this Consent and Amendment, the Credit
Agreement or any other Loan Document or except for items on Disclosure Schedule
(3.13) or notifications sent to Agent since the Closing Date, which if
determined adversely, is reasonably likely to have or result in a Material
Adverse Effect after giving effect to this Consent and Amendment. Except for
items on Disclosure Schedule (3.13) or notifications sent to Agent since the
Closing Date, to the knowledge of Borrowers, there does not exist a state of
facts which is reasonably likely to give rise to such proceedings.
(f) The representations and warranties of the Borrowers
contained in the Credit Agreement and each other Loan Document shall be true and
correct on and as of the Consent Effective Date (as hereinafter defined) with
the same effect as if such representations and warranties had been made on and
as of such date, except that any such representation or warranty which is
expressly made only as of a specified dated need be true only as of such date.
5. No Other Consents/Waivers. Except as expressly provided herein,
--------------------------
(i) the Credit Agreement shall be unmodified and shall continue to be in full
force and effect in accordance with its terms and (ii) this Consent and
Amendment shall not be deemed a waiver of any term or condition of any Loan
Document and shall not be deemed to prejudice any right or rights which the
Agent or any Lender may now have or may have in the future under or in
connection with any Loan Document or any of the instruments or agreements
referred to therein, as the same may be amended from time to time. Except as
otherwise provided for herein, nothing set forth herein shall be deemed to be a
consent by Agent or Lenders with respect to any sale or other disposition by
Borrowers of any assets.
6. Outstanding Indebtedness; Waiver of Claims. Each of Borrowers
----------------------------------------------
and other Credit Parties hereby acknowledges and agrees that as of September 13,
2002, the aggregate outstanding principal amount of the Revolving Loan is
$24,549,025.68 and that such principal amount is payable pursuant to the Credit
Agreement without defense, offset, withholding, counterclaim or deduction of any
kind. Borrowers and each other Credit Party hereby waives, releases, remises and
forever discharges Agent, Lenders and each other Indemnified Person from any and
3
all claims, suits, actions, investigations, proceedings or demands arising out
of or in connection with the Credit Agreement (collectively, "Claims"), whether
based in contract, tort, implied or express warranty, strict liability, criminal
or civil statute or common law of any kind or character, known or unknown, which
any Borrower or any other Credit Party ever had, now has or might hereafter have
against Agent or Lenders which relates, directly or indirectly, to any acts or
omissions of Agent, Lenders or any other Indemnified Person on or prior to the
Consent Effective Date (as hereinafter defined), provided, that no Borrower nor
any other Credit Party waives any Claim solely to the extent such Claim relates
to the Agent's or any Lender's gross negligence or willful misconduct.
7. Expenses. Borrowers hereby reconfirm their obligations pursuant
--------
to Sections 1.9 and 11.3 of the Credit Agreement to pay and reimburse Agent and
the Lenders for all reasonable costs and expenses (including, without
limitation, reasonable fees of counsel) incurred in connection with the
negotiation, preparation, execution and delivery of this Consent and Amendment
and all other documents and instruments delivered in connection herewith.
8 Effectiveness. This Consent and Amendment shall become effective
-------------
as of September 13, 2002 (the "Consent Effective Date") only upon satisfaction
in full in the judgment of Agent of each of the following conditions:
(a) Consent and Amendment. Agent shall have received six (6)
-----------------------
original copies of this Consent and Amendment duly executed and delivered by
Agent, each Lender and Borrowers.
(b) Payment of Expenses. Borrowers shall have paid to Agent all
-------------------
costs, fees and expenses owing in connection with this Consent and Amendment and
the other Loan Documents and due to Agent (including, without limitation,
reasonable legal fees and expenses).
(c) Asset Purchase Agreement. The Agent shall have received a
------------------------
true and complete copy of the Asset Purchase Agreement, substantially in the
form of Exhibit A hereto, duly authorized and executed together with all
schedules, exhibits, amendments, supplements, modifications, assignments and all
other documents delivered pursuant thereto or in connection therewith.
(d) Representations and Warranties. The representations and
------------------------------
warranties of or on behalf of the Borrowers in this Consent and Amendment shall
be true and correct on and as of the Consent Effective Date.
9. GOVERNING LAW. THIS CONSENT AND AMENDMENT SHALL BE GOVERNED BY, AND
-------------
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
4
10. Counterparts. This Consent and Amendment may be executed by the
------------
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(SIGNATURE PAGE FOLLOWS)
IN WITNESS WHEREOF, the parties hereto have caused this
Consent and Amendment to be duly executed and delivered as of the day and year
first above written.
BORROWERS
AGWAY, INC.
FEED COMMODITIES INTERNATIONAL LLC
XXXXXXXX AGRONOMIC CONSULTING SERVICE LLC
COUNTRY BEST-XXXXXXX LLC
AGWAY ENERGY PRODUCTS LLC
AGWAY ENERGY SERVICES-PA, INC.
AGWAY ENERGY SERVICES, INC.
COUNTRY BEST XXXXX, LLC
AGWAY GENERAL AGENCY, INC.
By: /s/ XXXXX X. XXXXXXX
--------------------------------------------
Name: Xxxxx X. Xxxxxxx
--------------------------------------------
Title: Treasurer
--------------------------------------------
LENDERS
COBANK, ACB
By: /s/ XXXXXXX X. HIDE
--------------------------------------------
Name: Xxxxxxx X. Hide
--------------------------------------------
Title: Vice President
--------------------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEEN BANK B.A.,
"Rabobank Nederland" New York Branch
By: /s/ W. XXXXXXX XXXXXXX
--------------------------------------------
Name: W. Xxxxxxx Xxxxxxx
--------------------------------------------
Title: Senior Credit Officer
--------------------------------------------
GMAC BUSINESS CREDIT, LLC
By: /s/ XXXXXXXX XXXXXXXX
--------------------------------------------
Name: Xxxxxxxx Xxxxxxxx
--------------------------------------------
Title: First Vice President
--------------------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/ XXXXX XXXXXXXX
--------------------------------------------
Name: Xxxxx XxXxxxxx
--------------------------------------------
Title: Its Duly Authorized Signatory
EXHIBIT A
TO
CONSENT AND AMENDMENT
See attached Asset Purchase Agreement dated September 10, 2002.
EXHIBIT 10.(n)
[For 14 Directors]
DIRECTOR DEFERRED PAYMENT AGREEMENT
AGREEMENT made this day of , 2001, between AGWAY
----- ---------------
INC., a Delaware corporation, with its principal office in DeWitt, New York
(hereinafter called "AGWAY"), and residing at
----------------
--------------------------------------------------------------------------------
(hereinafter called "Director").
RECITALS:
A. AGWAY has established a deferred payment program for Directors.
B. Director desires to participate in the program upon the following terms and
conditions.
WITNESSETH:
For good and valuable consideration, the parties, intending to be
legally bound, hereby agree as follows:
1. Director hereby designates (check one)
% of retainer (or $ of retainer) only
--- --- -------
% of per diem and all other payments other than expense
--- ---
reimbursements (or $ of per diem and all other payments
--------
other than expense reimbursements) only
% of both retainer and per diem and all other payments
--- ---
other than expense reimbursements (or $ of both retainer
---------
and per diem)
-1-
for the period beginning January 1, 2002 and ending December 31, 2002 be
credited to Director's Reserve Account.
2. AGWAY shall maintain in its accounting records a separate account
(herein called "Director's Reserve Account") for each Director electing deferral
of any amount under this Agreement and shall credit to the Director's Reserve
Account the item or items designated by Director in Section 1 above. The
Director's Reserve Account shall also be credited at the close of each calendar
quarter with an amount computed by applying the average cost-of-debt percentage
as hereinafter defined to the total average accumulated credit of the Director's
Reserve Account. "Average cost-of-debt" as used in this Agreement shall mean the
average cost to AGWAY of the debt employed by AGWAY during each calendar quarter
in the conduct of AGWAY's business, and this average cost-of- debt shall be
determined by the Treasurer of AGWAY.
3. AGWAY and Director hereby agree that payment from the Director's
Reserve Account shall begin on the first January 1 or July 1 that follows the 15
month anniversary of the Director's attainment of age fifty-five (55) or the
date on which Director's service as Director of AGWAY terminates, whichever is
earlier.
This Agreement by the Director shall be irrevocable; provided, however, that at
least twelve (12) months prior to January 1 or July 1 described above, the
Director may request, by notice in writing to Agway, that the commencement of
payments be deferred to a specified January 1 or July 1 date later than that on
which commencement was previously scheduled. Whether to approve such a request
shall be within the discretion of the Chief Financial Officer of AGWAY, or
his/her designee. Approval of such a request shall be in writing. After
approval, Director shall have no right to payment at any date earlier than that
specified in the written approval. In any event, payments shall commence not
later than the January following the calendar year when Director reaches age
seventy (70).
-0-
XXXXX may impose a thirty (30) day waiting period before the first payment is
made.
4. Payment will be either (a) a lump sum payment of the entire balance
in the Director's Reserve Account; or (b) in an amount determined by multiplying
the balance in the Director's Reserve Account at the beginning of each calendar
year during which a payment is to be made by a fraction, the numerator of which
is one (1) and the denominator of which will be the number of years remaining
during which the Director's Reserve Account will be paid to Director. The
payment election must be made at least twelve (12) months prior to the
commencement of payment in writing to the chief financial officer of AGWAY, or
his/her designee, to have the payments made:
(A) over 3 years;
(B) over 5 years;
(C) over 10 years;
(D) over 15 years; or
(E) over 20 years.
If a timely election is not made, the entire balance in Director's Reserve
Account will be paid in a single lump sum.
If the initial annual payment computed for the applicable payment period
described above would be less than ten thousand dollars ($10,000), then,
notwithstanding the prior provisions of this Section, AGWAY may make payment (at
the sole discretion of AGWAY) either in one (1) lump sum or in annual
installments over the longest period resulting in an initial annual payment of
at least ten thousand dollars ($10,000).
5. Upon furnishing AGWAY with proper evidence of financial hardship,
Director may request a withdrawal of all or part of the balance in the
-3-
Director's Reserve Account. Whether to approve such a request shall be within
the discretion of the Chief Financial Officer of AGWAY, or his/her designee.
Approval of such a request shall be in writing.
6. In the event of Director's death, either before or after the
payments to Director have begun, the amount payable, as provided in Section 4
above, shall be paid to the beneficiary or beneficiaries designated by Director
in the most recent notice in writing to AGWAY in installments computed in the
same manner as if Director was still living. If no beneficiary has been
designated, the amount payable, as provided in Section 4 above, shall be paid in
installments computed in the same manner as if Director was still living to
Director's estate or, at the sole discretion of AGWAY, the remaining balance in
the Director's Reserve Account may be paid in a lump sum to Director's estate.
In the event that after payments have commenced to the beneficiary or to the
beneficiaries designated by Director the sole beneficiary dies or all
beneficiaries die, then, any remaining balance in the Director's Reserve Account
will be paid in a lump sum to the sole beneficiary's estate or to the
beneficiaries' estates. In the absence of clear written instructions to the
contrary, a designation of multiple beneficiaries will be deemed to provide for
payment to the designated beneficiaries in equal shares, and for the payment to
Director's estate of the share of any beneficiary who predeceases Director. In
the event of Director's death before the payments to Director have begun, the
payments will commence on the January 1 or July 1, next following the date of
Director's death.
7. Director agrees that AGWAY's liability to make any payment as
provided in this Agreement shall be contingent upon Director's:
(a) being available to AGWAY for consultation and advice after
termination of service as a director of AGWAY, unless Director is disabled or
deceased; and
-4-
(b) retaining unencumbered any interest or benefit under this
Agreement.
If Director fails to fulfill any one or more of these
contingencies, AGWAY's obligation under this Agreement may be terminated by
AGWAY as to Director.
8. Director also agrees that AGWAY's obligations to make deferred
payments under this Agreement are merely contractual; and that AGWAY is the
outright beneficial owner of, and does not hold for Director as trustee or
otherwise, the amounts credited to Director's Reserve Account; and that such
amounts are subject to the rights of AGWAY's creditors in the same manner and to
the same extent as all assets owned by AGWAY.
9. Neither Director nor Director's beneficiary/ies shall have the right
to encumber, commute, borrow against, dispose of or assign the right to receive
payments under this Agreement.
IN WITNESS WHEREOF, AGWAY and Director have duly executed this
Agreement the day and year first above written.
AGWAY INC.
By:
-------------------------------------------
Secretary
-------------------------------------------
(Director)
-5-
* * * * * * * *
DESIGNATION OF BENEFICIARY/IES
Pursuant to the provisions of this Deferred Payment Agreement, I hereby
designate as my beneficiary/ies hereunder:
--------------------------------------------------------------------------------
(Name of beneficiary/ies)
This designation is also effective with respect to any and all amounts of
deferred compensation accrued for my benefit under any and all Deferred Payment
Agreements executed by me in previous years.
---------------------------------------
(Director)
Date: , 2001
---------------
-6-
EXHIBIT 10.(o)
[For 2 Board officers]
DIRECTOR DEFERRED PAYMENT AGREEMENT
AGREEMENT made this day of , 2001, between AGWAY INC.,
---- ------------
a Delaware corporation, with its principal office in DeWitt, New York
(hereinafter called "AGWAY"), and residing at
-------------------------
(hereinafter called
-----------------------------------------------------------
"Director").
RECITALS:
A. AGWAY has established a deferred payment program for Directors.
B. Director desires to participate in the program upon the following
terms and conditions.
WITNESSETH:
For good and valuable consideration, the parties, intending to be
legally bound, hereby agree as follows:
1. Director hereby designates % (or $ ) of annual retainer
---- ---------
for the period beginning January 1, 2002 and ending December 31, 2002 be
credited to Director's Reserve Account.
2. AGWAY shall maintain in its accounting records a separate account
(herein called "Director's Reserve Account") for each Director electing deferral
of any amount under this Agreement and shall credit to the Director's Reserve
Account the amount designated by Director in Section 1 above. The Director's
Reserve Account shall also be credited at the close of each calendar quarter
with an amount computed by applying the average cost-of-debt percentage as
hereinafter defined to the total average accumulated credit of the Director's
Reserve Account. "Average cost-of-debt" as used in this Agreement shall mean
- 1 -
the average cost to AGWAY of the debt employed by AGWAY during each calendar
quarter in the conduct of AGWAY's business, and this average cost-of- debt shall
be determined by the Treasurer of AGWAY.
3. AGWAY and Director hereby agree that payment from the Director's
Reserve Account shall begin on the first January 1 or July 1 that follows the 15
month anniversary of the Director's attainment of age fifty-five (55) or the
date on which Director's service as Director of AGWAY terminates, whichever is
earlier.
This Agreement by the Director shall be irrevocable; provided, however, that at
least twelve (12) months prior to January 1 or July 1 described above, the
Director may request, by notice in writing to Agway, that the commencement of
payments be deferred to a specified January 1 or July 1 date later than that on
which commencement was previously scheduled. Whether to approve such a request
shall be within the discretion of the Chief Financial Officer of AGWAY, or
his/her designee. Approval of such a request shall be in writing. After
approval, Director shall have no right to payment at any date earlier than that
specified in the written approval. In any event, payments shall commence not
later than the January following the calendar year when Director reaches age
seventy (70). AGWAY may impose a thirty (30) day waiting period before the first
payment is made.
4. Payment will be either (a) a lump sum payment of the entire balance
in the Director's Reserve Account; or (b) in an amount determined by multiplying
the balance in the Director's Reserve Account at the beginning of each calendar
year during which a payment is to be made by a fraction, the numerator of which
is one (1) and the denominator of which will be the number of years remaining
during which the Director's Reserve Account will be paid to Director. The
payment election must be made at least twelve (12) months prior to the
commencement of payment in writing to the chief financial officer of AGWAY, or
his/her designee, to have the payments made:
- 2 -
(A) over 3 years;
(B) over 5 years;
(C) over 10 years;
(D) over 15 years; or
(E) over 20 years.
If a timely election is not made, the entire balance in Director's Reserve
Account will be paid in a single lump sum.
If the initial annual payment computed for the applicable payment period
described above would be less than ten thousand dollars ($10,000), then,
notwithstanding the prior provisions of this Section, AGWAY may make payment (at
the sole discretion of AGWAY) either in one (1) lump sum or in annual
installments over the longest period resulting in an initial annual payment of
at least ten thousand dollars ($10,000).
5. Upon furnishing AGWAY with proper evidence of financial hardship,
Director may request a withdrawal of all or part of the balance in the
Director's Reserve Account. Whether to approve such a request shall be within
the discretion of the Chief Financial Officer of AGWAY, or his/her designee.
Approval of such a request shall be in writing.
6. In the event of Director's death, either before or after the
payments to Director have begun, the amount payable, as provided in Section 4
above, shall be paid to the beneficiary or beneficiaries designated by Director
in the most recent notice in writing to AGWAY in installments computed in the
same manner as if Director was still living. If no beneficiary has been
designated, the amount payable, as provided in Section 4 above, shall be paid in
installments computed in the same manner as if Director was still living to
Director's estate or, at the sole discretion of AGWAY, the remaining balance in
the Director's Reserve Account may be paid in a lump sum to Director's estate.
In the event that after payments
- 3 -
have commenced to the beneficiary or to the beneficiaries designated by Director
the sole beneficiary dies or all beneficiaries die, then, any remaining balance
in the Director's Reserve Account will be paid in a lump sum to the sole
beneficiary's estate or to the beneficiaries' estates. In the absence of clear
written instructions to the contrary, a designation of multiple beneficiaries
will be deemed to provide for payment to the designated beneficiaries in equal
shares, and for the payment to Director's estate of the share of any beneficiary
who predeceases Director. In the event of Director's death before the payments
to Director have begun, the payments will commence on the January 1 or July 1,
next following the date of Director's death.
7. Director agrees that AGWAY's liability to make any payment as
provided in this Agreement shall be contingent upon Director's:
(a) being available to AGWAY for consultation and advice
after termination of service as a director of AGWAY, unless Director is disabled
or deceased; and
(b) retaining unencumbered any interest or benefit under
this Agreement.
If Director fails to fulfill any one or more of these
contingencies, AGWAY's obligation under this Agreement may be terminated by
AGWAY as to Director.
8. Director also agrees that AGWAY's obligations to make deferred
payments under this Agreement are merely contractual; and that AGWAY is the
outright beneficial owner of, and does not hold for Director as trustee or
otherwise, the amounts credited to Director's Reserve Account; and that such
amounts are subject to the rights of AGWAY's creditors in the same manner and to
the same extent as all assets owned by AGWAY.
- 4 -
9. Neither Director nor Director's beneficiary/ies shall have the right
to encumber, commute, borrow against, dispose of or assign the right to receive
payments under this Agreement.
IN WITNESS WHEREOF, AGWAY and Director have duly executed this
Agreement the day and year first above written.
AGWAY INC.
By:
---------------------------------------
Secretary
---------------------------------------
(Director)
- 5 -
* * * * * * * *
DESIGNATION OF BENEFICIARY/IES
Pursuant to the provisions of this Deferred Payment Agreement, I hereby
designate as my beneficiary/ies hereunder:
--------------------------------------------------------------------------------
(Name of beneficiary/ies)
This designation is also effective with respect to any and all amounts of
deferred compensation accrued for my benefit under any and all Deferred Payment
Agreements executed by me in previous years.
-----------------------------------
(Director)
Date: , 2001
-----------------
- 6 -
EXHIBIT 10.(p)
Name: Xxx Xxxxxxxxxx Position: President & CEO, Agway Inc.
--------------- ----------------------------
Incentive Plans For Period Beginning July 1, 2001
-------------------------------------------------
1. Annual Incentive Plan for Fiscal 2002, Ending June 30, 2002
EBITDA = $32.428M 15% Base Salary*
Improve Agway Ops Leverage to 3.4 to 1 25% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 50% Base Salary*
EBITDA = $34.428M 30% Base Salary*
Improve Agway Ops Leverage to 3.3 to 1 45% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 75% Base Salary*
EBITDA = $36.428M 40% Base Salary*
Improve Agway Ops Leverage to 3.2 to 1 60% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 100% Base Salary*
(*Base Salary As Of June 30, 2002)
Definitions:
*EBITDA Target = $34.428M
*EBITDA Budget = $32.428M
*Agway Ops Leverage Target - Debt/Equity = 3.3 To 1
*Agway Ops Leverage Budget - Debt/Equity = 3.52 To 1
(*Based On Agway Operations Level)
2. Two Year Incentive Plan for Period Ending 6/30/03
Improve Agway Ops Leverage To 3.1 to 1 75% Base Salary*
Improve Agway Ops Leverage To 2.9 to 1 100% Base salary*
Improve Agway Ops Leverage To 2.7 to 1 150% Base Salary*
(Agway Operations Leverage Budget - Debt/Equity - 6/30/03 = 3.56 to 1)
(*Base Salary As Of June 30, 2003)
3. Consideration of up to 100% of the Base Salary may be given as an additional
incentive payment, after the end of the current fiscal year, as a result of the
evaluation of the CEO's performance during fiscal 2002.
1
4. Payout Provisions
(a) If EBITDA and Leverage Targets are met at different levels for the
purpose of annual incentive calculation, the payout is the sum of the
two individual payouts. Example: If annual results for EBITDA equals
Target at $34.428M (30% Payout) and annual leverage result equals
maximum payout level of 3.2 to 1 (60% Payout), the total payout will
be 90% of Base Salary.
(b) All payouts will be in cash and shall be made in a lump sum within
90 days after the end of the term of the respective incentive plan.
(c) EBITDA will be calculated after the accrual of the expense for the
incentive.
(d) EBITDA financial covenants under Agway Inc.'s principal credit
agreements in effect at the time of each reporting period must be
exceeded in order for a payout to be made under the EBITDA incentive
calculation contained in this agreement.
5. Conditions
(a) If the employee voluntarily terminates employment for good reason
(as hereinafter defined) or if Agway terminates his employment without
cause (as hereinafter defined) during the plan period, he will be
eligible for a payout under both plans. The payout will be calculated
on a pro-rated basis (using completed weeks of service during the
incentive period) representative of the employee's period of active
full time employment during the term of each such plan.
(b) If the employee dies, retires (as hereinafter defined), or becomes
permanently disabled to such a degree that he is prevented from
performing the usual duties of his position, he (or his estate) will
be eligible for a payout under both plans. The payout will be
calculated on a pro-rated basis (using completed weeks of service
during the incentive period) representative of the employee's period
of active full time employment during the term of each such plan.
(c) If there is a change of control (as defined in the Indemnification
Agreement between Agway Inc. and the employee) during the plan period,
the employee will be deemed fully vested in both the annual and
long-term incentive plans. Fully vested means the payout will be fully
earned without a reduction.
2
(d) The payout for three events, 5(a), (b), and (c) above, will be
calculated based upon target performance. Upon the occurrence of one
of these three events (a), (b) or (c) the employee (or his estate)
will also receive a payout equal to 200% of his base salary. Payout
for these three events, 5(a), (b), and (c) above and payment of base
salary shall be made in a lump sum within 90 days after the occurrence
of the event.
(e) If the employee voluntarily quits without good reason or if Agway
terminates his employment for cause during an unexpired plan period,
he will not be eligible for any part of any payout, payments or other
compensation identified in this document for the applicable plan
period.
(f) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time payments
are made.
(g) Under any of the events described in 5(a), (b) or (c) above, (i)
the employee will be deemed on leave status in order to receive full
employee benefits at active employee contribution rates for one year,
and (ii) the employee will receive for one year following his
termination executive level career transition assistance services by a
firm selected by the employee and paid for by Agway.
In these incentive plans, "you" and "your" refer to and mean the employee.
For purposes of these incentive plans, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities, including
but not limited to misappropriating any funds or property of Agway, committing
any act involving fraud, failing to perform in all material respects any duties
reasonably required in the course of your employment (other than such failure
resulting from your incapacity due to illness) after Agway has notified you and
you have failed to correct such failure within 10 days of such notice, violating
in any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated use
of alcohol or drugs, or your untreated alcoholism or drug abuse, in each case
impairing your ability to perform your executive responsibilities.
3
For purposes of these incentive plans, "good reason" means termination of
employment by you acting in good faith due to any of the following occurring
without your prior consent (i) any adverse change in your title or any change in
your reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in similar
businesses, (iii) any diminution in your compensation or benefits other than (a)
a diminution in your compensation that is implemented in connection with an
across the board reduction of executive salaries of the Company or (b) a
modification or elimination of any benefit plan that affects other employees of
Agway or other senior executives of Agway generally, (iv) the requirement that
you relocate outside of the Syracuse, NY area, or (v) the requirement that you
sign or be bound by a written noncompetition agreement.
For purposes of these incentive plans, "retire" means attaining the age of 59
1/2 and having at least 3 years of continuous active full-time employment with
Agway immediately prior to the date of retirement.
For purposes of these incentive plans, "Base Salary" means the employee's annual
salary at the time of the event or indicated determination date before bonuses
or other incentives.
6. Miscellaneous
(a) The incentive plans are not a contract for continued employment and do
not limit the right of Agway to terminate your employment. You are,
and shall remain, an employee at will.
(b) Annual incentive plans targeted at 75% of Base Salary and multi-year
incentive plans targeted at 100% of Base Salary with substantially the
same parameters for payment as set forth in Section 1 above will be
initiated in each ensuing fiscal year.
(c) All payments under the incentive plans are subject to income tax and
employment tax withholding
4
EXHIBIT 10.(q)
Name: Xxx Xxxxxxxxxx Position: President & CEO, Agway Inc.
--------------- ----------------------------
Incentive Plans For Period Beginning July 1, 2002
-------------------------------------------------
1. Annual Incentive Plan for Fiscal 2003, Ending June 30, 2003
Part A:
EBITDA = $21.44 25% of Base Salary*
EBITDA = $26.8M 50% of Base Salary*
EBITDA = $32.16 100% of Base Salary*
(*Base Salary As Of June 30, 2003)
Note: EBITDA Consolidated Budget for Continuing Operations = $26.8M
Part B:
Consideration of up to 100% of the Base Salary may be given as an
additional incentive payment, after the end of the current fiscal year,
as a result of the evaluation of the CEO's performance during fiscal
2003.
2. Two Year Incentive Plan for Period Ending 6/30/03
Improve Agway Ops Leverage To 3.1 to 1 50% Base Salary*
Improve Agway Ops Leverage To 2.9 to 1 75% Base Salary*
Improve Agway Ops Leverage To 2.7 to 1 100% Base Salary*
(Agway Operations Leverage Budget - Debt/Equity - 6/30/03 = 3.56 to 1)
(*Base Salary As Of June 30, 2003)
3. Two Year Incentive Plan for Period Ending 6/30/04
The payout will be the average of the payout received for the two
annual incentive plans ending June 30, 2003 and June 30, 2004.
4. Consideration will be given for additional incentives as a result of
one-time events that financially benefit Agway and occur during the term of
the plans.
5. Due to the impact of the changes in the businesses that will occur during
the term of the plan, discretion will be allowed when calculating the
payout for items 1, 2, 3 and 4 above.
1
6. Payout Provisions
(a) Partial payouts for the annual incentive component may be made at
the discretion of the Board of Directors at semi-annual periods or at
the accomplishment of a specific strategy approved by the Board of
Directors.
(b) All other payouts will be in cash and shall be made in a lump sum
within 90 days after the end of the term of the respective incentive
plan.
7. Conditions
(a) If the employee voluntarily terminates employment for good reason
(as hereinafter defined) or if Agway terminates his employment without
cause (as hereinafter defined) during the plan period, he will be
eligible for a payout under each plan. The payout will be calculated
on a pro-rated basis (using completed weeks of service during the
incentive period) representative of the employee's period of active
full time employment during the term of each such plan.
(b) If the employee dies, retires (as hereinafter defined), or becomes
permanently disabled to such a degree that he is prevented from
performing the usual duties of his position, he (or his estate) will
be eligible for a payout under each plan. The payout will be
calculated on a pro-rated basis (using completed weeks of service
during the incentive period) representative of the employee's period
of active full time employment during the term of each such plan.
(c) If there is a change in control (as hereinafter defined) during the
plan period, the employee will be deemed fully vested in each annual
and multi-year incentive plan. Fully vested means the payout will be
fully earned without a reduction.
(d) The payout for three events, 5(a), (b), and (c) above, will be
calculated based upon target performance. Upon the occurrence of one of
these three events (a), (b) or (c) the employee (or his estate) will
also receive a payout equal to 200% of his base salary. Payout for
these three events, 5(a), (b), and (c) above and payment of base salary
shall be made in a lump sum within 90 days after the occurrence of the
event.
2
(e) If the employee voluntarily quits without good reason or if Agway
terminates his employment for cause during an unexpired plan period, he
will not be eligible for any part of any payout, payments or other
compensation identified in this document for the applicable plan
period.
(f) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time payments
are made.
(g) Under any of the events described in 5(a), (b) or (c) above, (i)
the employee will be deemed on leave status in order to receive full
employee benefits at active employee contribution rates for one year,
and (ii) the employee will receive for one year following his
termination executive level career transition assistance services by a
firm selected by the employee and paid for by Agway.
In these incentive plans, "you" and "your" refer to and mean the employee.
For purposes of these incentive plans, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities, including
but not limited to misappropriating any funds or property of Agway, committing
any act involving fraud, failing to perform in all material respects any duties
reasonably required in the course of your employment (other than such failure
resulting from your incapacity due to illness) after Agway has notified you and
you have failed to correct such failure within 10 days of such notice, violating
in any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated use
of alcohol or drugs, or your untreated alcoholism or drug abuse, in each case
impairing your ability to perform your executive responsibilities.
For purposes of these incentive plans, "good reason" means termination of
employment by you acting in good faith due to any of the following occurring
without your prior consent (i) any adverse change in your title or any change in
your reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in similar
businesses, (iii) any diminution in your compensation or benefits other than (a)
a diminution in your compensation that is implemented in connection with an
3
across the board reduction of executive salaries of the Company or (b) a
modification or elimination of any benefit plan that affects other employees of
Agway or other senior executives of Agway generally, (iv) the requirement that
you relocate outside of the Syracuse, NY area, or (v) the requirement that you
sign or be bound by a written noncompetition agreement.
For purposes of these incentive plans, "change in control" means any of the
following: (i) a person or entity or group of persons or entities independent of
Agway, Inc., acting in concert, shall become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 of the Exchange Act) of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the issued and outstanding common stock of the Company; or (ii)
the majority of the Company's Board of Directors is no longer comprised of the
incumbent directors who constitute the Board of Directors on the effective date
of this incentive plan and any other individual(s) who becomes a director
subsequent to the date of this incentive plan whose initial election or
nomination for election as a director, as the case may be, was approved by at
least a majority of the directors who comprised the incumbent directors as of
the date of such election or nomination; or (iii) a sale of all or substantially
all of the assets of the Company; or (iv) the Board shall approve any merger,
consolidation, or like business combination or reorganization of the Company,
the consummation of which would result in the occurrence of any event described
in clause (ii) above, and such transaction shall have been consummated.
For purposes of these incentive plans, "retire" means attaining the age of 59
1/2 and having at least 3 years of continuous active full-time employment with
Agway immediately prior to the date of retirement.
For purposes of these incentive plans, "Base Salary" means the employee's annual
salary at the time of the event or indicated determination date before bonuses
or other incentives.
8. Miscellaneous
(a) The incentive plans are not a contract for continued employment and
do not limit the right of Agway to terminate your employment. You
are, and shall remain, an employee at will.
(b) Annual incentive plans and multi-year incentive plans with
substantially the same parameters for payment as set forth in
this document will be initiated in each ensuing fiscal year.
4
(c) All payments under the incentive plans are subject to income tax
and employment tax withholding.
5
EXHIBIT 10.(r)
Name: Xxxx Xxxxxxxxx
--------------------
Position: Executive Vice President, Agriculture and Energy
-----------------------------------------------------------
Incentive Plans For Period Beginning July 1, 2001
1. Annual Incentive Plan for Fiscal 2002, Ending June 30, 2002
Part (1) AEP Results
-------------------------------------------------------------------------------------------------------------------
Additional
for Achieving Total
EBITDA Working Capital Both Incentive
-------------------------------------------------------------------------------------------------------------------
29.48 100.0% 10.0% 58.22 100.0% 10.0% 5.0% 25.0%
30.48 103.4% 13.4% 56.55 97.1% 13.4% 5.0% 31.8%
31.48 106.8% 16.8% 54.88 94.3% 16.8% 5.0% 38.6%
32.48 110.2% 20.0% 53.22 91.4% 20.0% 10.0% 50.0%
33.48 113.6% 23.6% 51.55 88.6% 23.6% 10.0% 57.2%
34.48 117.0% 27.0% 49.89 85.7% 27.0% 10.0% 64.0%
35.48 120.4% 30.0% 48.22 82.8% 30.0% 15.0% 75.0%
Definitions:
EBITDA Target = $32.480M
EBITDA Budget = $29.480M
*Average Working Capital Target (Net) = $53.217M
*Average Working Capital Budget (Net) = $58.217M
(*12 Month Average Agway Energy Working Capital)
Part (2)
Successful completion of necessary components of the Agriculture Plan
for submission to lender's at the end of the 3rd quarter of fiscal 2002 will
result in a payment of $150,000.
Part (3)
The implementation of the beginning phases of the Agriculture plan will
result in a payment of $150,000 at the end of the 4th quarter of fiscal 2002.
2. Three Year Incentive Plan for Period Ending 6/30/04 - AEP Results
Accumulative EBITDA = $95M 50% Base Salary*
Accumulative EBITDA = $100M 75% Base Salary*
Accumulative EBITDA = $105M 100% Base Salary*
(*Base Salary As Of June 30, 2004)
1
Definition:
Accumulative EBITDA Target = $100M
Accumulative EBITDA Budget = $91.420M
3. Consideration will be given for additional incentives as a result of one-time
events that financially benefit Agway and occur during the term of the plans.
4. Payout Provisions
(a) All payouts will be in cash and paid from Energy earnings. Payouts
shall be made in a lump sum within 90 days after the end of the
term of the respective incentive plan.
(b) EBITDA will be calculated after the accrual of the expense for the
incentive.
(c) EBITDA financial covenants for Agway Energy under Agway Inc.'s
principal credit agreements in effect at the time of each
reporting period, both quarterly and annually, must be exceeded in
order for a payout to be made under the annua incentive
calculations contained in this agreement.
5. Conditions
(a) If the employee voluntarily terminates employment for good reason
(as hereinafter defined) or if Agway terminates his employment without
cause (as hereinafter defined) during the plan period, he will be
eligible for a payout under both plans. The payout will be calculated
on a pro-rated basis (using completed weeks of service during the
incentive period) representative of the employee's period of active
full time employment during the term of each such plan.
(b) If the employee dies, retires (as hereinafter defined), or becomes
permanently disabled to such a degree that he is prevented from
performing the usual duties of his position, he (or his estate) will
be eligible for a payout under both plans. The payout will be
calculated on a pro-rated basis (using completed weeks of service
during the incentive period) representative of the employee's period
of active full time employment during the term of each such plan.
2
(c) If there is a change of control (as defined in the Indemnification
Agreement between Agway Inc. and the employee) during the plan period,
the employee will be deemed fully vested in both the annual and
long-term incentive plans. Fully vested means the payout will be fully
earned without a reduction.
(d) The payout for three events, 5(a), (b), and (c) above, will be
calculated based upon target performance. Upon the occurrence of one
of these three events (a), (b) or (c) the employee (or his estate)
will also receive a payout equal to 100% of his base salary. Payout
for these three events, 5(a), (b), and (c) above and payment of base
salary shall be made in a lump sum within 90 days after the occurrence
of the event.
(e) If the employee voluntarily quits without good reason or if Agway
terminates his employment for cause during an unexpired plan period,
he will not be eligible for any part of any payout, payments or other
compensation identified in this document for the applicable plan
period.
(f) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time payments
are made.
(g) Under any of the events described in 5(a), (b) or (c) above, (i)
the employee will be deemed on leave status in order to receive full
employee benefits at active employee contribution rates for one year,
and (ii) the employee will receive for one year following his
termination executive level career transition assistance services by a
firm selected by the employee and paid for by Agway.
In these incentive plans, "you" and "your" refer to and mean the employee.
For purposes of these incentive plans, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities, including
but not limited to misappropriating any funds or property of Agway, committing
any act involving fraud, failing to perform in all material respects any duties
reasonably required in the course of your employment (other than such failure
resulting from your incapacity due to illness) after Agway has notified you and
you have failed to correct such failure within 10 days of such notice, violating
3
in any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated use
of alcohol or drugs, or your untreated alcoholism or drug abuse, in each case
impairing your ability to perform your executive responsibilities.
For purposes of these incentive plans, "good reason" means termination of
employment by you acting in good faith due to any of the following occurring
without your prior consent (i) any adverse change in your title or any change in
your reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in similar
businesses, (iii) any diminution in your compensation or benefits other than (a)
a diminution in your compensation that is implemented in connection with an
across the board reduction of executive salaries of the Company or (b) a
modification or elimination of any benefit plan that affects other employees of
Agway or other senior executives of Agway generally, (iv) the requirement that
you relocate outside of the Syracuse, NY area, or (v) the requirement that you
sign or be bound by a written noncompetition agreement.
For purposes of these incentive plans, "retire" means attaining the age of 59
1/2 and having at least 3 years of continuous active full-time employment with
Agway immediately prior to the date of retirement.
For purposes of these incentive plans, "Base Salary" means the employee's annual
salary at the time of the event or indicated determination date before bonuses
or other incentives.
6. Miscellaneous
(a) The incentive plans are not a contract for continued employment and
do not limit the right of Agway to terminate your employment. You
are, and shall remain, an employee at will.
(b) The combination of base salary and incentive payments for fiscal
2003 for Energy performance, Feed performance, and Agronomy
performance/value attained, will provide a total compensation target
of $1M for fiscal 2003.
(c) All payments under the incentive plans are subject to income tax and
employment tax withholding.
4
EXHIBIT 10.(s)
Name: Xxxx Xxxxxxxxx
--------------------
Position: Executive Vice President, Agriculture and Energy
-----------------------------------------------------------
Incentive Plans For Period Beginning July 1, 2002
-------------------------------------------------
1. Annual Incentive Plan for Fiscal 2003, Ending June 30, 2003
Part A = Agway EBITDA:
EBITDA = $21.44M 12.5% of Base Salary*
EBITDA = $26.8M 25% of Base Salary*
EBITDA = $32.16M 50% of Base Salary*
Part B = Agriculture EBITDA
EBITDA = $5.0M 12.5% of Base Salary*
EBITDA = $6.34M 25% of Base Salary*
EBITDA = $7.75 50% of Base Salary*
Part C = Energy EBITDA
EBITDA = $26.0M 12.5% of Base Salary*
EBITDA = $30.1M 25% of Base Salary*
EBITDA = $34.0M 50% of Base Salary*
(*Base Salary As Of June 30, 2003)
Agway EBITDA Budget = $26.8M
Agriculture EBITDA Budget = $6.34M
Energy EBITDA Budget = $30.1M
2. Three Year Incentive Plan for Period Ending 6/30/04 - AEP Results
Accumulative EBITDA = $95M 50% Base Salary** Accumulative EBITDA =
$100M 75% Base Salary** Accumulative EBITDA = $105M 100% Base Salary**
(**Base Salary As Of June 30, 2004)
Definition:
Accumulative EBITDA Target = $100M
Accumulative EBITDA Budget = $91.420M
3. Three Year Incentive Plan for Period Ending 6/30/05
The payout will be the average of the payout received for the three
annual incentive plans ending June 30, 2003, June 30, 2004, and June
30, 2005.
1
4. Consideration will be given for additional incentives as a result of
one-time events that financially benefit Agway and occur during the term of
the plans.
5. Due to the impact of the changes in the businesses that will occur during
the term of the plan, discretion will be allowed when calculating the
payout for items 1, 2, 3 and 4 above.
6. Payout Provisions
All payouts will be in cash and shall be made in a lump sum within
90 days after the end of the term of the respective incentive plan.
7. Conditions
(a) If the employee voluntarily terminates employment for good reason
(as hereinafter defined) or if Agway terminates his employment without
cause (as hereinafter defined) during the plan period, he will be
eligible for a payout under each plan. The payout will be calculated
on a pro-rated basis (using completed weeks of service during the
incentive period) representative of the employee's period of active
full time employment during the term of each such plan.
(b) If the employee dies, retires (as hereinafter defined), or becomes
permanently disabled to such a degree that he is prevented from
performing the usual duties of his position, he (or his estate) will
be eligible for a payout under each plan. The payout will be
calculated on a pro-rated basis (using completed weeks of service
during the incentive period) representative of the employee's period
of active full time employment during the term of each such plan.
(c) If there is a change in control (as hereinafter defined) during
the plan period, the employee will be deemed fully vested in each
annual and multi-year incentive plan. Fully vested means the payout
will be fully earned without a reduction.
(d) The payout for three events, 5(a), (b), and (c) above, will be
calculated based upon target performance. Upon the occurrence of one
of these three events (a), (b) or (c) the employee (or his estate)
will also receive a payout equal to 100% of his base salary. Payout
for these three events, 5(a), (b), and (c) above and payment of base
salary shall be made in a lump sum within 90 days after the occurrence
of the event.
2
(e) If the employee voluntarily quits without good reason or if Agway
terminates his employment for cause during an unexpired plan period,
he will not be eligible for any part of any payout, payments or other
compensation identified in this document for the applicable plan
period.
(f) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time payments
are made.
(g) Under any of the events described in 5(a), (b) or (c) above, (i)
the employee will be deemed on leave status in order to receive full
employee benefits at active employee contribution rates for one year,
and (ii) the employee will receive for one year following his
termination executive level career transition assistance services by a
firm selected by the employee and paid for by Agway.
In these incentive plans, "you" and "your" refer to and mean the employee.
For purposes of these incentive plans, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities, including
but not limited to misappropriating any funds or property of Agway, committing
any act involving fraud, failing to perform in all material respects any duties
reasonably required in the course of your employment (other than such failure
resulting from your incapacity due to illness) after Agway has notified you and
you have failed to correct such failure within 10 days of such notice, violating
in any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated use
of alcohol or drugs, or your untreated alcoholism or drug abuse, in each case
impairing your ability to perform your executive responsibilities.
For purposes of these incentive plans, "good reason" means termination of
employment by you acting in good faith due to any of the following occurring
without your prior consent (i) any adverse change in your title or any change in
your reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in similar
businesses, (iii) any diminution in your compensation or benefits other than (a)
3
a diminution in your compensation that is implemented in connection with an
across the board reduction of executive salaries of the Company or (b) a
modification or elimination of any benefit plan that affects other employees of
Agway or other senior executives of Agway generally, (iv) the requirement that
you relocate outside of the Syracuse, NY area, or (v) the requirement that you
sign or be bound by a written noncompetition agreement.
For purposes of these incentive plans, "change in control" means any of the
following: (i) a person or entity or group of persons or entities independent of
Agway, Inc., acting in concert, shall become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 of the Exchange Act) of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the issued and outstanding common stock of the Company; or (ii)
the majority of the Company's Board of Directors is no longer comprised of the
incumbent directors who constitute the Board of Directors on the effective date
of this incentive plan and any other individual(s) who becomes a director
subsequent to the date of this incentive plan whose initial election or
nomination for election as a director, as the case may be, was approved by at
least a majority of the directors who comprised the incumbent directors as of
the date of such election or nomination; or (iii) a sale of all or substantially
all of the assets of the Company; or (iv) the Board shall approve any merger,
consolidation, or like business combination or reorganization of the Company,
the consummation of which would result in the occurrence of any event described
in clause (ii) above, and such transaction shall have been consummated.
For purposes of these incentive plans, "retire" means attaining the age of 59
1/2 and having at least 3 years of continuous active full-time employment with
Agway immediately prior to the date of retirement.
For purposes of these incentive plans, "Base Salary" means the employee's annual
salary at the time of the event or indicated determination date before bonuses
or other incentives.
8. Miscellaneous
(a) The incentive plans are not a contract for continued employment and do
not limit the right of Agway to terminate your employment. You are,
and shall remain, an employee at will.
4
(b) Annual incentive plans and multi-year incentive plans with
substantially the same parameters for payment as set forth in this
document will be initiated in each ensuing fiscal year.
(c) All payments under the incentive plans are subject to income tax and
employment tax withholding.
5
EXHIBIT 10.(t)
(logo)
AGWAY INC. XX XXX 0000, XXXXXXXX, XXX XXXX 00000-0000
000-000-0000
XXXXXX X. XXXXXXXXXX
PRESIDENT
AND CHIEF EXECUTIVE OFFICER
PERSONAL & CONFIDENTIAL
October 26, 2001
Dear Xxxx,
This letter confirms our understanding of your newest responsibilities and
compensation.
Effective today, your responsibilities will include all areas of operations for
our Agriculture and Energy businesses. Your title is Executive Vice President,
Agriculture & Energy and you will retain the title of President, Agway Energy
Products LLC. Your base compensation is $400,000 per year.
Your fiscal 2002 incentive arrangement related to Agway Energy Products'
performance for both short-term incentive and long-term incentive payments will
remain in place. In addition, for fiscal 2002 there will be two payments of
$150,000 each. The first will be for successfully completing the necessary
components of the Agriculture Plan that need to be submitted to our banks in our
3rd Quarter. The second payment will be made at year-end, with 4th Quarter plan
execution underway.
We discussed the component of your arrangement related to potential termination
and agreed that we need to confirm that the language in your current agreement
transfers to your new position satisfactorily. I have asked Xxxxx Xxxxxx to
review this.
Finally, we agreed that in developing your goals for fiscal 2003 for Energy
performance, Feed performance, Agronomy performance/value attained, we will
target your total compensation at $1 million for that year.
Xxxx, please see me if you have any questions. You know how pleased I am that
you are advancing these important business initiatives on behalf of Agway. My
hope and belief is that I will continue to see you succeed and prosper.
Sincerely,
/s/ Xxxxxx X. Xxxxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxxxx
/pf
/s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Xxxxxxx X. Xxxxxxxxx
Agway Inc.
bcc: X. X. Xxxxxx
EXHIBIT 10.(u)
April 20, 2001 (VIA FEDERAL EXPRESS)
Xxx Xxxxxxxx
0000 Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Dear Xxx:
It gives me pleasure to confirm our discussion today in which we committed to
the following:
1. You will assume the position of President of the Country Products Group and
be a Vice President of Agway Inc. You will be given authority and
responsibility to provide executive leadership of the businesses that
comprise that group, including full accountability for results and full
authority for decision making. You will be expected to meet oversight
responsibilities of the Corporate Center, including financial reporting,
leadership development, legal matters and communications.
2. You will report directly to me.
3. Your initial annual base salary will be $350,000, and will be subject to an
annual review and adjustment beginning in August 2002. Your base salary
amount in effect from time to time during your employment shall hereinafter
be referred to as your "base salary." Your base salary shall be payable in
accordance with Agway's usual payroll payment practices. Your base salary
is not subject to a decrease.
4. You will be eligible for an annual bonus payment based upon meeting
performance objectives which will be established prior to the beginning of
each fiscal year of Agway. Your performance objectives will be driven by
financial goals such as earnings, cash flow and growth. You will receive a
cash payout of 50% of your base salary upon completion of a strategic plan
for Produce and Sunflower. You will be eligible for an additional 50% if
earnings targets, which we will establish prior to the beginning of fiscal
year 2002, are met. These targets will be developed on a sliding scale
basis. Upon the payout of the additional 50%, we will provide an additional
pro-rated payout for the months of May and June 2001.
For fiscal year 2003 and thereafter, your annual bonus will be targeted at
50% of your base salary; additional or lesser amounts above or below the
50% may be paid depending on results.
Your annual bonus will be payable in a single lump sum cash payment at the
same time as other executives' annual bonuses are paid, except as otherwise
provided in this letter agreement.
5. A long term incentive plan driven by earnings and/or value creation will be
in place at the beginning of Fiscal Year 2002, for a single lump sum cash
payout at the end of Fiscal Year 2004. Your target will be 75% of your base
salary. Additional or lesser amounts above or below the 75% may be paid
depending on results. The benefits under this long term incentive plan will
accrue annually, at a rate of one third per year. A new three (3) Fiscal
Xxx Xxxxxxxx
April 20, 2001
Page 2
Year long term incentive plan with substantially the same parameters for
payout will be initiated in each ensuing Fiscal Year.
6. You will receive vacation for four weeks for each of the first three years
and five weeks for each year thereafter.
7. You will receive reimbursement of reasonable relocation expenses which you
incur which include:
a. Real estate broker fees on your house in Lake Forest;
b. Seller's closing costs on your house in Lake Forest;
c. Normal closing costs, other than real estate broker fees, on a residence in
the Syracuse area, excluding any mortgage points;
d. Trip expenses between Syracuse and Lake Forest as required until you and
your family have relocated to the Syracuse area;
e. Travel, room and meal expenses for you and your family while house hunting;
f. Temporary housing expenses until you complete the construction of and begin
occupying a new new home, or purchase and begin occupying an existing home
in Central New York, as long as you are also paying a mortgage, or
apartment rental expense or other housing expense in Illinois; and after
you cease paying a mortgage, apartment rental or other housing expense in
Illinois, temporary housing expenses shall continue for up to four months
or until you occupy a new or existing home in Central New York, whichever
occurs first;
g. Cost of a commercial moving company to transfer your household goods,
personal items and automobiles to Central New York and temporary automobile
rental expenses until the delivery of your automobiles to Central New York;
h. Cost of storage of your household effects until you move into your
permanent residence in the Syracuse area;
i. We will gross up your income to cover any tax liability you incur as a
result of your relocation expenses.
Please provide us with estimated costs of the above expenses that you
anticipate incurring.
You will also receive an allowance of $50,000 to cover other incidental
relocation related expenses.
8. You will be eligible to participate in all compensation and employee
benefit plans or programs and receive all benefits and perquisites for
which any senior executive of Agway is eligible, including, but not limited
to, an annual executive physical and executive level long term disability
insurance. The effective date for benefits coverage, including medical
coverage for yourself
Xxx Xxxxxxxx
April 20, 2001
Page 3
and your family, will be May 1, 2001. There are no pre-existing condition
restrictions under our medical plan.
9. Your start date will be April 30, 2001.
10. Agway will reimburse you for all business related expenses that you incur
in connection with the performance of your responsibilities to Agway
provided that you document such expenses in accordance with Agway's
business expense reimbursement guidelines.
11. Agway will indemnify you according to the terms of an Indemnity Agreement,
a copy of which is attached to this letter.
12. You will be an employee at will. However, it is agreed and understood that
in the event at any time Agway (or its successor) terminates your
employment without cause, you terminate your employment for good reason, or
if you die or become permanently disabled to such a degree that you are
prevented from performing the usual duties of your position, Agway (or its
successor) will pay or provide you with the following separation pay and
benefits which shall be in lieu of any and all benefits under Agway's
Severance Pay Plan. At solely Agway's option, Agway shall have the right to
purchase life insurance and/or disability insurance on you in order to
provide the separation pay and benefits payable to you (or your estate)
under this letter as a result of your death or disability as described in
this letter.
a. 150% of your base salary;
b. annual bonus at target pro-rated to your date of termination;
c. accrued long term incentive at target, pro-rated to your date of
termination, however, in case of a change in control (as defined in the
Indemnity Agreement) the long term incentive plan shall be deemed fully
vested;
d. you will be deemed on leave status in order to receive full employee
employee benefits at active employee contribution rates for one year;
e. executive level career transition assistance services by a firm
selected by you and paid for by Agway;
f. if the foregoing separation pay and benefits become payable to you
within twenty-four months of your start date, Agway will also provide
full executive level relocation expenses to the Chicagoland area on a
grossed up basis.
For purposes of this letter agreement, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities under
this letter agreement including but not limited to misappropriating any
funds or property of Agway, committing any act involving fraud, failing to
perform in all material respects any duties reasonably required in the
course of your employment (other than such failure resulting from your
incapacity due to illness) after we have notified you and you have
Xxx Xxxxxxxx
April 20, 2001
Page 4
failed to correct such failure within 10 days of such notice, violating in
any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated
use of alcohol or drugs, or your untreated alcoholism or drug abuse, in
each case impairing your ability to perform your executive responsibilities
under this letter agreement.
For purposes of this letter agreement, "good reason" means termination of
employment by you acting in good faith due to any of the following
occurring without your prior written consent (i) any change in your title
or reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in
similar businesses, (iii) any diminution in your compensation or benefits
other than (a) a diminution in your compensation that is implemented in
connection with an across the board reduction of executive salaries of the
Company or (b) a modification or elimination of any benefit plan that
affects other employees of Agway or other senior executives of Agway
generally, (iv) the requirement that you relocate outside of the Syracuse,
NY area, or (v) the requirement that you sign or be bound by a
noncompetition agreement.
13. All ongoing costs of your employment, including base salary, annual bonus
payments, long term incentive payouts, and other benefits, including but
not limited to insurance premiums or other costs required to fund
separation pay and benefits available to you or your estate, shall be
accounted for as costs of the Country Products Group.
Sincerely,
/s/ Xxxxxx X. Xxxxxxxxxx
------------------------
Xxxxxx X. Xxxxxxxxxx
President & CEO
ACCEPTED AND AGREED:
/s/ Xxx Xxxxxxxx
----------------------
Xxx Xxxxxxxx
April 21, 2001
----------------------
Date
EXHIBIT 10.(v)
INDEMNITY AGREEMENT
-------------------
This Indemnity Agreement ("Agreement") is made as of April 30, 2001 by and
between AGWAY, INC., a Delaware corporation (the "Company"), and Xxx Xxxxxxxx,
0000 Xxxxxxxxxxx Xxxxx, Xxxx Xxxxxx, XX 00000 ("Indemnitee").
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation.
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself. The By-laws of
the Company require indemnification of the officers and directors of the
Company. Indemnitee may also be entitled to indemnification pursuant to the
Delaware General Corporation Law ("DGCL"). The By-laws and the DGCL expressly
provide that the indemnification provisions set forth therein are not exclusive,
and thereby contemplate that contracts may be entered into between the Company
and members of the board of directors, officers and other persons with respect
to indemnification.
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons.
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future.
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified.
-1-
WHEREAS, this Agreement is a supplement to and in furtherance of the
By-laws of the Company and any resolutions adopted pursuant thereto, and shall
not be deemed a substitute therefor, nor to diminish or abrogate any rights of
Indemnitee thereunder.
WHEREAS, Indemnitee does not regard the protection available under the
Company's By-laws and insurance as adequate in the present circumstances, and
may not be willing to serve as an officer or director without adequate
protection, and the Company desires Indemnitee to serve in such capacity.
Indemnitee is willing to serve, continue to serve and to take on additional
service for or on behalf of the Company on the condition that he be so
indemnified.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. SERVICES TO THE COMPANY. Indemnitee will serve or continue to serve,
at the will of the Company, as an officer, director or key employee of the
Company for so long as Indemnitee is duly elected or appointed or until
Indemnitee tenders his or her resignation.
2. DEFINITIONS. As used in this Agreement:
(a) A "Change in Control" shall be deemed to occur upon the
earliest to occur after the date of this Agreement of any of the following
events:
(i) Acquisition of Stock by Third Party. Any Person (as defined
below) is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Company representing fifteen percent (15%) or
more of the combined voting power of the Company's then outstanding Voting
Securities;
(ii) Change in Board of Directors. During any period of two (2)
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the
Board, and any new director whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a least a majority of
the members of the Board;
(iii) Corporate Transactions. The effective date of a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 51% of the total voting power of
the voting securities of the surviving entity outstanding immediately after such
merger or consolidation and with the power to elect at least a majority of the
board of directors or other governing body of such surviving entity;
-2-
(iv) Liquidation. The approval by the stockholders of the Company
of a complete liquidation of the Company or an agreement or series of agreements
for the sale or disposition by the Company of all or substantially all of the
Company's assets; or
(v) Other Events. There occurs any other event of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or
form) promulgated under the Exchange Act (as defined below), whether or not the
Company is then subject to such reporting requirement.
(b) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(ii) "Person" shall have the meaning as set forth in Sections 13(d)
and 14(d) of the Exchange Act; provided, however, that Person shall exclude (i)
the Company, (ii) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, and (iii) any corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
(iii) "Beneficial Owner" shall have the meaning given to such term
in Rule 13d-3 under the Exchange Act.
(iv) "Corporate Status" describes the status of a person who is or
was a director, officer, trustee, general partner, managing member, fiduciary,
employee or agent of the Company or of any other Enterprise (as defined below)
which such person is or was serving at the request of the Company.
(v) "Disinterested Director" means a director of the Company who
is not and was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
(vi) "Enterprise" shall mean the Company and any other corporation,
limited liability company, partnership, joint venture, trust, employee benefit
plan or other enterprise of which Indemnitee is or was serving at the request of
the Company as a director, officer, trustee, general partner, managing member,
fiduciary, employee or agent.
(vii) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses in
connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, or otherwise participating
in, a Proceeding. Expenses also shall include Expenses incurred in connection
with any appeal resulting from any Proceeding, including without limitation the
premium, security for, and other costs relating to any cost bond, supersedeas
-3-
bond, or other appeal bond or its equivalent. Expenses, however, shall not
include amounts paid in settlement by Indemnitee or the amount of judgments or
fines against Indemnitee.
(viii) References to "other enterprise" shall include employee
benefit plans; references to "fines" shall include any excise tax assessed with
respect to any employee benefit plan; references to "serving at the request of
the Company" shall include any service as a director, officer, employee or agent
of the Company which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
(ix) The term "Proceeding" shall include any threatened,
pending or completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, inquiry, administrative hearing or any other actual,
threatened or completed proceeding, whether brought in the right of the
Company or otherwise and whether of a civil, criminal, administrative or
investigative nature, in which Indemnitee was, is or will be involved as a party
or otherwise by reason of the fact that Indemnitee is or was a director or
officer of the Company, by reason of any action taken by him or of any inaction
on his part while acting as director or officer of the Company, or by reason of
the fact that he is or was serving at the request of the Company as a director,
officer, trustee, general partner, managing member, fiduciary, employee or agent
of any other Enterprise, in each case whether or not serving in such capacity at
the time any liability or expense is incurred for which indemnification,
reimbursement, or advancement of expenses can be provided under this Agreement.
(x) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party (other than with
respect to matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees and expenses of the
Independent Counsel referred to above.
(xi) "Voting Securities" means any securities of the Company which
vote generally in the election of directors.
(xii) A "Potential Change in Control" shall be deemed to have
occurred if (i) the Company enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in Control;
(ii) any Person (including the Company) publicly announces an intention to take
or consider taking actions which if consummated would constitute a Change in
Control; (iii) any Person, who is or becomes the Beneficial Owner, directly or
indirectly, of securities
-4-
of the Company representing 5% or more of the combined voting power of the
Company's then outstanding Voting Securities increases his beneficial ownership
of such securities by 5% or more over the percentage so owned by such person on
the date hereof; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change of Control has occurred.
3. INDEMNITY IN THIRD-PARTY PROCEEDINGS. The Company shall indemnify,
defend and hold harmless Indemnitee in accordance with the provisions of this
Section 3 if Indemnitee was, is, or is threatened to be made, a party to or a
participant (as a witness or otherwise) in any Proceeding, other than a
Proceeding by or in the right of the Company to procure a judgment in its favor.
Pursuant to this Section 3, Indemnitee shall be indemnified against all
Expenses, judgments, fines, penalties and amounts paid in settlement (including
all interest, assessments and other charges paid or payable in connection with
or in respect of such Expenses, judgments, fines, penalties and amounts paid in
settlement) actually and reasonably incurred by Indemnitee or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, if
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and, in the case of a
criminal Proceeding had no reasonable cause to believe that his conduct was
unlawful.
4. INDEMNITY IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The
Company shall indemnify, defend and hold harmless Indemnitee in accordance with
the provisions of this Section 4 if Indemnitee was, is, or is threatened to be
made, a party to or a participant (as a witness or otherwise) in any Proceeding
by or in the right of the Company to procure a judgment in its favor. Pursuant
to this Section 4, Indemnitee shall be indemnified against all Expenses actually
and reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company. No indemnification for Expenses shall be made under
this Section 4 in respect of any claim, issue or matter as to which Indemnitee
shall have been finally adjudged by a court to be liable to the Company , unless
and only to the extent that any court in which the Proceeding was brought or the
Delaware Court of Chancery shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnification.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provisions of this Agreement, to the
extent that Indemnitee is a party to (or a participant in) and is successful, on
the merits or otherwise, in any Proceeding or in defense of any claim, issue or
matter therein, in whole or in part, the Company shall indemnify and hold
harmless Indemnitee against all Expenses actually and reasonably incurred by him
in connection therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Company shall
indemnify, defend and hold harmless Indemnitee against all Expenses actually and
reasonably incurred by him or on his behalf in connection with each successfully
resolved claim, issue or matter. If the Indemnitee is not wholly successful in
such Proceeding, the Company also shall indemnify, defend and hold harmless
Indemnitee against all Expenses reasonably incurred in connection with a claim,
issue or matter related to any claim, issue, or matter on which the Indemnitee
-5-
was successful. For purposes of this Section and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified, defended and held harmless against all
Expenses actually and reasonably incurred by him or on his behalf in connection
therewith.
7. ADDITIONAL INDEMNIFICATION.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the
Company shall indemnify, defend and hold harmless Indemnitee if Indemnitee is a
party to or threatened to be made a party to any Proceeding (including a
Proceeding by or in the right of the Company to procure a judgment in its favor)
against all Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties and
amounts paid in settlement) actually and reasonably incurred by Indemnitee in
connection with the Proceeding. No indemnity shall be made under this Section
7(a) on account of Indemnitee's conduct which constitutes a breach of
Indemnitee's duty of loyalty to the Company or its stockholders or is an act or
omission not in good faith or which involves intentional misconduct or a knowing
violation of the law.
(b) Notwithstanding any limitation in Sections 3, 4, 5 or 7(a), the
Company shall indemnify, defend and hold harmless Indemnitee if Indemnitee is a
party to or threatened to be made a party to any Proceeding (including a
Proceeding by or in the right of the Company to procure a judgment in its favor)
against all Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties and
amounts paid in settlement) actually and reasonably incurred by Indemnitee in
connection with the Proceeding.
8. CONTRIBUTION IN THE EVENT OF JOINT LIABILITY.
(a) Whether or not any of the indemnification, defense and hold
harmless rights provided in Sections 3, 4, 5, 7(a) and 7(b) hereof are available
in respect of any Proceeding in which the Company is jointly liable with
Indemnitee (or would be if joined in such Proceeding), the Company shall pay, in
the first instance, the entire amount of any judgment or settlement of such
Proceeding without requiring Indemnitee to contribute to such payment, and the
Company hereby waives and relinquishes any right of contribution it may have
against Indemnitee. The Company shall not enter into any settlement of any
Proceeding in which the Company is jointly liable with Indemnitee (or would be
if joined in such Proceeding) unless such settlement provides for a full and
final release of all claims asserted against Indemnitee.
(b) Without diminishing or impairing the obligations of the Company
set forth in the preceding subparagraph, if, for any reason, Indemnitee shall
elect or be required to pay all or any portion of any judgment or settlement in
-6-
any Proceeding in which the Company is jointly liable with Indemnitee (or would
be if joined in such Proceeding), the Company shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually incurred and paid or payable by Indemnitee in proportion to
the relative benefits received by the Company and all officers, directors or
employees of the Company other than Indemnitee who are jointly liable with
Indemnitee (or would be if joined in such Proceeding), on the one hand, and
Indemnitee, on the other hand, from the transaction from which such Proceeding
arose; provided, however, that the proportion determined on the basis of
relative benefit may, to the extent necessary to conform to law, be further
adjusted by reference to the relative fault of the Company and all officers,
directors or employees of the Company other than Indemnitee who are jointly
liable with Indemnitee (or would be if joined in such Proceeding), on the one
hand, and Indemnitee, on the other hand, in connection with the events that
resulted in such expenses, judgments, fines or amounts paid in settlement, as
well as any other equitable considerations. The relative fault of the Company
and all officers, directors or employees of the Company other than Indemnitee
who are jointly liable with Indemnitee (or would be if joined in such
Proceeding), on the one hand, and Indemnitee, on the other hand, shall be
determined by reference to, among other things, the degree to which their
actions were motivated by intent to gain personal profit or advantage, the
degree to which their liability is primary or secondary, and the degree to which
their conduct is active or passive.
(c) The Company hereby agrees to fully indemnify, defend and hold
harmless Indemnitee from any claims for contribution which may be brought by
officers, directors or employees of the Company other than Indemnitee who may be
jointly liable with Indemnitee.
9. EXCLUSIONS. Notwithstanding any provision in this Agreement, the
Company shall not be obligated under this Agreement to make any indemnity in
connection with any claim made against Indemnitee:
(a) for which payment has actually been received by or on behalf of
Indemnitee under any insurance policy or other indemnity provision, except with
respect to any excess beyond the amount actually received under any insurance
policy or other indemnity provision; or
(b) for an accounting of profits made from the purchase and sale (or
sale and purchase) by Indemnitee of securities of the Company within the meaning
of Section 16(b) of the Exchange Act or similar provisions of state statutory
law or common law; or
(c) except as otherwise provided in Sections 14(d)-(f) hereof, prior
to a Change in Control, in connection with any Proceeding (or any part of any
Proceeding) initiated by Indemnitee, including any Proceeding (or any part of
any Proceeding) initiated by Indemnitee against the Company or its directors,
officers, employees or other indemnitees, unless (i) the Board of Directors of
the Company authorized the Proceeding (or any part of any Proceeding) prior to
its initiation or (ii) the Company provides the indemnification, in its sole
discretion, pursuant to the powers vested in the Company under applicable law.
-7-
10. ADVANCES OF EXPENSES; DEFENSE OF CLAIM.
(a) Notwithstanding any provision of this Agreement to the contrary,
the Company shall advance the expenses incurred by Indemnitee in connection with
any Proceeding within ten (10) days after the receipt by the Company of a
statement or statements requesting such advances from time to time, whether
prior to or after final disposition of any Proceeding. Advances shall be
unsecured and interest free. Advances shall be made without regard to
Indemnitee's ability to repay the expenses and without regard to Indemnitee's
ultimate entitlement to indemnification under the other provisions of this
Agreement. Advances shall include any and all reasonable Expenses incurred
pursuing an action to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed. The Indemnitee shall qualify for advances solely upon the
execution and delivery to the Company of an undertaking providing that the
Indemnitee undertakes to repay the advance to the extent that it is ultimately
determined that Indemnitee is not entitled to be indemnified by the Company.
This Section 10(a) shall not apply to any claim made by Indemnitee for which
indemnity is excluded pursuant to Section 9.
(b) The Company will be entitled to participate in the Proceeding at
its own expense.
(c) The Company shall not settle any action, claim or Proceeding (in
whole or in part) which would impose any Expense, judgment, fine, penalty or
limitation on the Indemnitee without the Indemnitee's prior written consent.
11. PROCEDURE FOR NOTIFICATION AND APPLICATION FOR INDEMNIFICATION.
(a) Within sixty (60) days after the actual receipt by Indemnitee of
notice that he or she is a party to or a participant (as a witness or otherwise)
in any Proceeding, Indemnitee shall submit to the Company a written notice
identifying the Proceeding. The omission by the Indemnitee to notify the Company
will not relieve the Company from any liability which it may have to Indemnitee
(i) otherwise than under this Agreement, and (ii) under this Agreement only to
the extent the Company can establish that such omission to notify resulted in
actual prejudice to the Company.
(b) Indemnitee shall thereafter deliver to the Company a written
application to indemnify, defend and hold harmless Indemnitee in accordance with
this Agreement. Such application(s) may be delivered from time to time and at
such time(s) as Indemnitee deems appropriate in his or her sole discretion.
Following such a written application for indemnification by Indemnitee, the
Indemnitee's entitlement to indemnification shall be determined according to
Section 12(a) of this Agreement.
12. PROCEDURE UPON APPLICATION FOR INDEMNIFICATION.
(a) Upon written request by Indemnitee for indemnification pursuant to
Section 11(b), a determination, if required by applicable law, with respect to
Indemnitee's entitlement thereto shall be made in the specific case by one of
the following methods, which shall be at the election of Indemnitee: (i) by a
majority vote of the Disinterested Directors, even though less than a quorum of
the Board; or (ii) by Independent Counsel in a written opinion to the Board , a
copy of which shall be delivered to Indemnitee. If it is so determined that
Indemnitee is entitled to indemnification,
-8-
payment to Indemnitee shall be made within ten (10) days after such
determination. Indemnitee shall reasonably cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 12(a) hereof, the
Independent Counsel shall be selected as provided in this Section 12(b). The
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall
request that such selection be made by the Board of Directors), and Indemnitee
shall give written notice to the Company advising it of the identity of the
Independent Counsel so selected. If the Independent Counsel is selected by the
Board of Directors, the Company shall give written notice to Indemnitee advising
him of the identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 10 days after such
written notice of selection shall have been received, deliver to the Company or
to Indemnitee, as the case may be, a written objection to such selection;
provided, however, that such objection may be asserted only on the ground that
the Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 2 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. Absent a proper and timely objection, the person so selected shall
act as Independent Counsel. If such written objection is so made and
substantiated, the Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or a court of competent
jurisdiction has determined that such objection is without merit. If, within 20
days after submission by Indemnitee of a written request for indemnification
pursuant to Section 11(a) hereof, no Independent Counsel shall have been
selected and not objected to, either the Company or Indemnitee may petition a
court of competent jurisdiction for resolution of any objection which shall have
been made by the Company or Indemnitee to the other's selection of Independent
Counsel and/or for the appointment as Independent Counsel of a person selected
by the Court or by such other person as the Court shall designate, and the
person with respect to whom all objections are so resolved or the person so
appointed shall act as Independent Counsel under Section 12(a) hereof. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
14(a) of this Agreement, Independent Counsel shall be discharged and relieved of
any further responsibility in such capacity (subject to the applicable standards
of professional conduct then prevailing).
(c) The Company agrees to pay the reasonable fees and expenses of
Independent Counsel.
-9-
13. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification under
this Agreement if Indemnitee has submitted a request for indemnification in
accordance with Section 11(b) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including by its directors or independent
legal counsel) to have made a determination prior to the commencement of any
action pursuant to this Agreement that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard of conduct, nor
an actual determination by the Company (including by its directors or
independent legal counsel) that Indemnitee has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under
Section 12 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within thirty (30) days
after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 30-day period
may be extended for a reasonable time, not to exceed an additional fifteen (15)
days, if the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto.
(c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) Reliance as Safe Harbor. For purposes of any determination of good
faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee's
action is based on the records or books of account of the Enterprise, including
financial statements, or on information supplied to Indemnitee by the officers
of the Enterprise in the course of their duties, or on the advice of legal
counsel for the Enterprise or on information or records given or reports made to
the Enterprise by an independent certified public accountant or by an appraiser
or other expert selected by the Enterprise. The provisions of this Section 13(d)
shall not be deemed to be exclusive or to limit in any way the other
circumstances in which the Indemnitee may be deemed or found to have met the
applicable standard of conduct set forth in this Agreement.
-10-
(e) Actions of Others. The knowledge and/or actions, or failure to act,
of any other director, officer, trustee, partner, managing member, fiduciary,
agent or employee of the Enterprise shall not be imputed to Indemnitee for
purposes of determining the right to indemnification under this Agreement.
14. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section
12 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 10 of this Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 12(a) of this Agreement
within 45 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to Section 5 , 6, 7, 8 or
the last sentence of Section 12(a) of this Agreement within ten (10) days after
receipt by the Company of a written request therefor, or (v) payment of
indemnification pursuant to Section 3 or 4 of this Agreement is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification, Indemnitee shall be entitled to an adjudication by the Delaware
Court (as defined below) to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association. The Company shall not oppose Indemnitee's
right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 12(a) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 14 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any judicial proceeding or arbitration commenced
pursuant to this Section 14 the Company shall have the burden of proving
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be, and the Company may not refer to or introduce into evidence any
determination pursuant to Section 12(a) of this Agreement adverse to Indemnitee
for any purpose. If Indemnitee commences a judicial proceeding or arbitration
pursuant to this Section 14, Indemnitee shall not be required to reimburse the
Company for any advances pursuant to Section 10 until a final determination is
made with respect to Indemnitee's entitlement to indemnification (as to which
all rights of appeal have been exhausted or lapsed).
(c) If a determination shall have been made pursuant to Section 12(a)
of this Agreement that Indemnitee is entitled to indemnification, the Company
shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d) In the event that Indemnitee, pursuant to this Section 14, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be
-11-
indemnified by the Company against, any and all Expenses actually and reasonably
incurred by him in such judicial adjudication or arbitration. If it shall be
determined in said judicial adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
Expenses sought, the Indemnitee shall be entitled to recover from the Company,
and shall be indemnified by the Company against, any and all Expenses reasonably
incurred by Indemnitee in connection with such judicial adjudication or
arbitration .
(e) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 14 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(f) The Company shall indemnify, defend and hold harmless Indemnitee to
the fullest extent permitted by law against all Expenses and, if requested by
Indemnitee, shall (within ten (10) days after the Company's receipt of such
written request) advance such Expenses to Indemnitee, which are incurred by
Indemnitee in connection with any judicial proceeding or arbitration brought by
Indemnitee for (i) indemnification or advances of Expenses by the Company under
the Agreement or any other agreement or provision of the Company's Certificate
of Incorporation or By-laws now or hereafter in effect or (ii) recovery or
advances under any insurance policy maintained by any person for the benefit of
Indemnitee, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance or insurance recovery, as the case may
be.
15. ESTABLISHMENT OF TRUST. In the event of a Potential Change in Control,
the Company shall, upon written request by Indemnitee, create a "Trust" for the
benefit of Indemnitee and from time to time upon written request of Indemnitee
shall fund such Trust in an amount sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be incurred in
connection with investigating, preparing for, participating in or defending any
Proceedings, and any and all judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines penalties and
amounts paid in settlement) in connection with any and all Proceedings from time
to time actually paid or claimed, reasonably anticipated or proposed to be paid.
The trustee of the Trust (the "Trustee") shall be a bank or trust company or
other individual or entity chosen by the Indemnitee and approved by the Company.
Nothing in this Section 15 shall relieve the Company of any of its obligations
under this Agreement. The amount or amounts to be deposited in the Trust
pursuant to the foregoing funding obligation shall be determined by the
Disinterested Directors. The terms of the Trust shall provide that upon a Change
in Control (i) the Trust shall not be revoked or the principal thereof invaded,
without the written consent of the Indemnitee, (ii) the Trustee shall advance,
within two business days of a request by the Indemnitee and upon the execution
and delivery to the Company of an undertaking providing that the Indemnitee
undertakes to repay the advance to the extent that it is ultimately determined
that Indemnitee is not entitled to be indemnified by the Company, any and all
Expenses to the Indemnitee, (iii) the Trust shall continue to be funded by the
Company in accordance with the funding obligations set forth above, (iv) the
Trustee shall promptly pay to the Indemnitee all amounts for which the
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in such Trust shall revert to the
-12-
Company upon a final determination by the Disinterested Directors, Independent
Counsel or a court of competent jurisdiction, as the case may be, that the
Indemnitee has been fully indemnified under the terms of this Agreement.
16. SECURITY. Notwithstanding anything herein to the contrary, to the
extent requested by the Indemnitee and approved by the Board of Directors of the
Company, the Company may at any time and from time to time provide security to
the Indemnitee for the Company's obligations hereunder through an irrevocable
bank line of credit, funded trust or other collateral. Any such security, once
provided to the Indemnitee, may not be revoked or released without the prior
written consent of the Indemnitee.
17. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Certificate of Incorporation, the Company's By- laws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or of any provision hereof
shall limit or restrict any right of Indemnitee under this Agreement in respect
of any action taken or omitted by such Indemnitee in his Corporate Status prior
to such amendment, alteration or repeal. To the extent that a change in Delaware
law, whether by statute or judicial decision, permits greater indemnification or
advancement of Expenses than would be afforded currently under the Company's By-
laws and this Agreement, it is the intent of the parties hereto that Indemnitee
shall enjoy by this Agreement the greater benefits so afforded by such change.
No right or remedy herein conferred is intended to be exclusive of any other
right or remedy, and every other right and remedy shall be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, trustees,
partners, managing members, fiduciaries, employees, or agents of the Company or
of any other Enterprise which such person serves at the request of the Company,
Indemnitee shall be covered by such policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any such
director, officer, trustee, partner, managing member, fiduciary, employee or
agent under such policy or policies. If, at the time the Company receives notice
from any source of a Proceeding as to which Indemnitee is a party or a
participant (as a witness or otherwise), the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of such
Proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such Proceeding in accordance with the terms of
such policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
-13-
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable (or for which advancement is provided
hereunder) hereunder if and to the extent that Indemnitee has otherwise actually
received such payment under any insurance policy, contract, agreement or
otherwise.
(e) The Company's obligation to indemnify or advance Expenses here
under to Indemnitee who is or was serving at the request of the Company as a
director, officer, trustee, partner, managing member, fiduciary, employee or
agent of any other Enterprise shall be reduced by any amount Indemnitee has
actually received as indemnification or advancement of expenses from such
Enterprise.
18. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director or officer of the Company or as a
director, officer, trustee, partner, managing member, fiduciary, employee or
agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the request of the
Company; or (b) one (1) year after the final termination of any Proceeding
(including any rights of appeal thereto) then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of Expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 14
of this Agreement relating thereto (including any rights of appeal of any
Section 14 Proceeding).
19. SEVERABILITY. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section, paragraph
or sentence of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby and shall remain
enforceable to the fullest extent permitted by law; (b) such provision or
provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties
hereto; and (c) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section, paragraph or
sentence of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested thereby.
20. ENFORCEMENT AND BINDING EFFECT.
(a) The Company expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on it hereby in order to
induce Indemnitee to serve as a director or officer of the Company, and the
Company acknowledges that Indemnitee is relying upon this Agreement in serving
as a director or officer of the Company.
(b) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral, written and implied, between the parties
hereto with respect to the subject matter hereof.
-14-
(c) The indemnification and advancement of expenses provided by, or
granted pursuant to this Agreement shall be binding upon and be enforceable by
the parties hereto and their respective successors, shall continue as to a
person who has ceased to be a director, officer, employee or agent of the
Company or of any other Enterprise at the Company's request, and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(d) The Company shall require and cause any successor (whether direct
or indirect by purchase, merger, consolidation or otherwise) to
all,substantially all or a substantial part, of the business and/or assets of
the Company, by written agreement in form and substance satisfactory to the
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place.
(e) The parties hereto agree that Indemnitee may enforce this Agreement
by seeking specific performance hereof, without any necessity of showing
irreparable harm or posting a bond, which requirements are hereby waived, and
that by seeking specific performance, Indemnitee shall not be precluded from
seeking or obtaining any other relief to which he may be entitled.
21 . MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement nor shall
any waiver constitute a continuing waiver.
22. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the Company
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder. The failure of Indemnitee to so notify the Company shall not relieve
the Company of any obligation which it may have to the Indemnitee under this
Agreement or otherwise.
23. NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) if delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (b) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee , at the address indicated on the signature page
of this Agreement, or such other address as Indemnitee shall provide in writing
to the Company.
(b) If to the Company to:
Agway, Inc.
000 Xxxxxxxxx Xxxxx
XxXxxx, XX 00000
Attention: General Counsel
-15-
or to any other address as may have been furnished to Indemnitee in writing by
the Company.
24. CONTRIBUTION. To the fullest extent permissible under applicable law,
if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all of the circumstances of such Proceeding in order
to reflect (i) the relative benefits received by the Company and Indemnitee as a
result of the event(s) and/or transaction(s) giving cause to such Proceeding;
and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).
25. APPLICABLE LAW AND CONSENT TO JURISDICTION. This Agreement and the
legal relations among the parties shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to its conflict of laws rules. Except with respect to any arbitration commenced
by Indemnitee pursuant to Section 13(a) of this Agreement, the Company and
Indemnitee hereby irrevocably and unconditionally (i) agree that any action or
proceeding arising out of or in connection with this Agreement shall be brought
only in the Chancery Court of the State of Delaware (the "Delaware Court"), and
not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction
of the Delaware Court for purposes of any action or proceeding arising out of or
in connection with this Agreement, (iii) appoint, to the extent such party is
not a resident of the State of Delaware, irrevocably RL&F Service Corp., One
Xxxxxx Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801 as
its agent in the State of Delaware as such party's agent for acceptance of legal
process in connection with any such action or proceeding against such party with
the same legal force and validity as if served upon such party personally within
the State of Delaware, (iv) waive any objection to the laying of venue of any
such action or proceeding in the Delaware Court, and (v) waive, and agree not to
plead or to make, any claim that any such action or proceeding brought in the
Delaware Court has been brought in an improper or inconvenient forum.
26. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
-16-
27. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate. The headings of the
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the day and year first above written.
AGWAY, INC. INDEMNITEE
By: /s/ Xxxxxx X. Xxxxxxxxxx /s/ Xxx Xxxxxxxx
----------------------------- -------------------------------------
XXXXXX X. XXXXXXXXXX XXX XXXXXXXX
Chief Executive Officer 0000 Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
-17-
EXHIBIT 10.(w)
Name: Xxx Xxxxxxxx Position: President, CPG
-------------------------------------------------------------------------
Incentive Plans For Period Beginning July 1, 2001
I. Annual Incentive Plan (AIP) for Fiscal Year 2002, ending June 30, 2002
Part (1)
o Target payout is 50% of base salary as of June 30, 2002
o Performance metrics as per *FY02 Annual Incentive Plan Scale:
--------------------------------
o EBITDA and ROI (EBIT/Average Total Investment)
o Weighted 50/50
o Scale: see attached scale ranging from 0 to 150% of target payout
o To earn the EBITDA portion of the AIP, the Credit Covenant threshold
must be achieved (75% of Budget) for the covenant periods as follows:
o 12/23/00 to 9/30/01 $(6.3MM)
o 12/23/00 to 12/31/01 $(5.3MM)
o 4/1/01 to 3/31/02 $(3.7MM)
o 7/1/01 to 6/30/02 $ 2.9MM
o
o EBITDA will be calculated after the accrual of the expense for the
incentive
o Cash payment made in lump sum by September 30, 2002
Part (2)
o Earn 50% of June 30, 2001 base salary upon completion of strategic
plan for the Produce and Sunflower businesses ($175,000)
o Cash payment made in lump sum within 90 days of completion of plan
Part (3)
o Pro-rated payout at target (50% of June 30, 2001 base salary) for
months of May and June, 2001 ($29,167)
o Cash payment made in lump sum at same time as Part (1), by
September 30, 2002
1
*FY02 Annual Incentive Plan Scale
---------------------------------
EBITDA: Budget = $3.916 million
Target = $4.416 million
EBITDA Earned % of Target Bonus Payout
------------- ------------------------
Less than $3.916MM 0
$3.916MM 50
$4.416MM 100
$5.000MM 150
ROI %: Target = Budget = .6% = EBIT/Average Total Investment = $278M/$45,233M
ROI % of Target Bonus Payout
--- ------------------------
Less than .3% 0
.3% 50
.6% 100
1.6% 150
Sample Calculation (weighting of EBITDA and ROI is 50/50)
Example:
o EBITDA is $4.6MM and ROI is 1.7%
o Target incentive is $175,000 (50% of base salary on June 30, 2002)
o Calculation:
o .5(1.0 * 175,000) + .5(1.5 * 175,000) = $218,750
o If an EBITDA covenant threshold was not met, then the payout would
just be the ROI part of the bonus or $131,250 in this example.
2
II. Three Year Incentive Plan for Period Ending 6/30/04
Accumulative EBITDA = $21.261M 50% Base Salary*
Accumulative EBITDA = $24M 75% Base Salary*
Accumulative EBITDA = $26M 100% Base Salary*
(*Base Salary As Of June 30, 2004)
Definition:
Accumulative EBITDA Target = $24M
Accumulative EBITDA Budget = $21.261M
III. Consideration will be given for additional incentives as a result of one-
time events that financially benefit Agway and occur during the term of the
plans.
Payout Provisions
(a) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time
payments are made.
(b) Payouts shall be made in a lump sum within 90 days after the end
of the term of the respective incentive plan.
(c) EBITDA will be calculated after the accrual of the expense for
the incentive.
(d) For purposes of these incentive plans, "base salary" means the
employees annual salary before bonuses or other incentives.
V. Conditions
This plan is subject to the terms of the employment letter from Xxx
Xxxxxxxxxx dated April 20, 2001. This plan shall not be interpreted to
provide any duplication of payments required under the employment
letter.
3
EXHIBIT 10.(x)
Name: Xxx Xxxxxxxx Position: President, CPG
-------------------------------------------------------------------------
Incentive Plans For Period Beginning July 1, 2002
1. Annual Incentive Plan for Fiscal 2003, Ending June 30, 2003
Part A = Agway EBITDA:
EBITDA = $21.44 12.5% of Base Salary*
EBITDA = $26.8M 25% of Base Salary*
EBITDA = $32.16 50% of Base Salary*
Part B = CPG EBITDA:
EBITDA = Break Even 12.5% of Base Salary*
EBITDA = $.5M 25% of Base Salary*
EBITDA = $1.0M 50% of Base Salary*
(*Base Salary As Of June 30, 2003)
Note:
Agway EBITDA Budget = $26.8M
CPG EBITDA Budget = ($.61M)
2. Three Year Incentive Plan for Period Ending 6/30/04
Accumulative EBITDA = $21.261M 50% Base Salary**
Accumulative EBITDA = $24M 75% Base Salary**
Accumulative EBITDA = $26M 100% Base Salary**
(**Base Salary As Of June 30, 2004)
Definition:
Accumulative EBITDA Target = $24M
Accumulative EBITDA Budget = $21.261M
3. Three Year Incentive Plan for Period Ending 6/30/05
The payout will be the average of the payout received for the three
annual incentive plans ending June 30, 2002, June 30, 2003, and June
30. 2004
4. Consideration will be given for additional incentives as a result of
one-time events that financially benefit Agway and occur during the term of
the plans.
5. Due to the impact of the changes in the businesses that will occur during
the term of the plan, discretion will be allowed when calculating the
payout for items 1, 2, 3 and 4 above.
1
6. Payout Provisions
(a) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time
payments are made.
(b) Payouts shall be made in a lump sum within 90 days after the end
of the term of the respective incentive plan.
(c) EBITDA will be calculated after the accrual of the expense for the
incentive.
(d) For purposes of these incentive plans, "base salary" means the
employees annual salary before bonuses or other incentives.
V. Conditions
This plan is subject to the terms of the employment letter from Xxx
Xxxxxxxxxx dated April 20, 2001. This plan shall not be interpreted to
provide any duplication of payments required under the employment
letter.
2
EXHIBIT 10.(y)
Name: Xxx Xxxxxxx Position: President, Telmark
--------------------------------------------------------------------
Incentive Plans For Period Beginning July 1, 2001
-------------------------------------------------
1. Annual Incentive Plan for Fiscal 2002, Ending June 30, 2002
EBT = $21.5M 10% Base Salary*
Currency 96.5% 10% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 25% Base Salary*
EBT = $22.0M 20% Base Salary*
Currency 97.0% 20% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 50% Base Salary
EBT = $22.5M 30% Base Salary*
Currency 97.5% 30% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 75% Base Salary*
(*Base Salary As of June 30, 2002)
Definitions:
EBT Target = $22.0M
EBT Budget = $21.5M
*Total Portfolio Currency Target = 97.0%
*Total Portfolio Currency Budget = 97.0%
(*Currency As Calculated in the Fiscal 2002 Telmark Budget)
2. Three Year Incentive Plan for Period Ending 6/30/04
Accumulative 3 Year EBT = $68.25M 50% Base Salary*
Accumulative 3 Year EBT = $70.25M 75% Base Salary*
Accumulative 3 year EBT = $72.25M 100% Base Salary*
(*Base salary As of June 30, 2004)
Definitions
Accumulative EBT Target = $70.25M
Accumulative EBT Budget = $68.25M
3. Consideration will be given for additional incentives as a result of one-time
events that financially benefit Agway and occur during the term of the plans.
1
4. Payout Provisions
(a) If EBT and currency targets are met at different levels, the
payout is the sum of the two individual payouts. Example: If annual
plan results for EBT equals Target at $22.0M (20% Payout) and currency
96.5% (10% Payout), the total payout will be 30% of Base Salary.
(b) All payouts will be in cash and paid from Telmark earnings.
Payouts shall be made in a lump sum within 90 days after the end of
the term of the respective incentive plan.
(c) EBT will be calculated after the accrual of the expense for the
incentive.
5. Conditions
(a) If the employee voluntarily terminates employment for good reason
(as hereinafter defined) or if Agway terminates his employment without
cause (as hereinafter defined) during the plan period, he will be
eligible for a payout under both plans. The payout will be calculated
on a pro-rated basis (using completed weeks of service during the
incentive period) representative of the employee's period of active
full time employment during the term of each such plan.
(b) If the employee dies, retires (as hereinafter defined), or becomes
permanently disabled to such a degree that he is prevented from
performing the usual duties of his position, he (or his estate) will
be eligible for a payout under both plans. The payout will be
calculated on a pro-rated basis (using completed weeks of service
during the incentive period) representative of the employee's period
of active full time employment during the term of each such plan.
(c) If there is a change of control (as defined in the Indemnification
Agreement between Agway Inc. and the employee) during the plan period,
the employee will be deemed fully vested in both the annual and
long-term incentive plans. Fully vested means the payout will be fully
earned without a reduction.
(d) The payout for three events, 5(a), (b), and (c) above, will be
calculated based upon target performance. Upon the occurrence of one
2
of these three events (a), (b) or (c) the employee (or his estate)
will also receive a payout equal to 100% of his base salary. Payout
for these three events, 5(a), (b), and (c) above and payment of base
salary shall be made in a lump sum within 90 days after the occurrence
of the event.
(e) If the employee voluntarily quits without good reason or if Agway
terminates his employment for cause during an unexpired plan period,
he will not be eligible for any part of any payout, payments or other
compensation identified in this document for the applicable plan
period.
(f) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time payments
are made.
(g) Under any of the events described in 5(a), (b) or (c) above, (i)
the employee will be deemed on leave status in order to receive full
employee benefits at active employee contribution rates for one year,
and (ii) the employee will receive for one year following his
termination executive level career transition assistance services by a
firm selected by the employee and paid for by Agway.
In these incentive plans, "you" and "your" refer to and mean the employee.
For purposes of these incentive plans, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities, including
but not limited to misappropriating any funds or property of Agway, committing
any act involving fraud, failing to perform in all material respects any duties
reasonably required in the course of your employment (other than such failure
resulting from your incapacity due to illness) after Agway has notified you and
you have failed to correct such failure within 10 days of such notice, violating
in any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated use
of alcohol or drugs, or your untreated alcoholism or drug abuse, in each case
impairing your ability to perform your executive responsibilities.
For purposes of these incentive plans, "good reason" means termination of
employment by you acting in good faith due to any of the following occurring
3
without your prior consent (i) any adverse change in your title or any change in
your reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in similar
businesses, (iii) any diminution in your compensation or benefits other than (a)
a diminution in your compensation that is implemented in connection with an
across the board reduction of executive salaries of the Company or (b) a
modification or elimination of any benefit plan that affects other employees of
Agway or other senior executives of Agway generally, (iv) the requirement that
you relocate outside of the Syracuse, NY area, or (v) the requirement that you
sign or be bound by a written noncompetition agreement.
For purposes of these incentive plans, "retire" means attaining the age of 59
1/2 and having at least 3 years of continuous active full-time employment with
Agway immediately prior to the date of retirement.
For purposes of these incentive plans, "Base Salary" means the employee's annual
salary at the time of the event or indicated determination date before bonuses
or other incentives.
6. Miscellaneous
(a) The incentive plans are not a contract for continued employment and do
not limit the right of Agway to terminate your employment. You are,
and shall remain, an employee at will.
(b) Annual incentive plans targeted at 50% of Base Salary and multi-year
incentive plans targeted at 75% of Base Salary with substantially the
same parameters for payment as set forth in Section 1 above will be
initiated in each ensuing fiscal year.
(c) All payments under the incentive plans are subject to income tax and
employment tax withholding.
4
EXHIBIT 10.(z)
Name: Xxx Xxxxxxx Position: President, Telmark
--------------------------------------------------------------------
Incentive Plans For Period Beginning July 1, 2002
-------------------------------------------------
1. Annual Incentive Plan for Fiscal 2003, Ending June 30, 2003
EBT = $24.0M 10% Base Salary*
Currency 96.5% 10% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 25% Base Salary*
EBT = $24.5M 20% Base Salary*
Currency 97.0% 20% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 50% Base Salary
EBT = $25.0M 30% Base Salary*
Currency 97.5% 30% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 75% Base Salary*
(*Base Salary As of June 30, 2003)
Definitions:
EBT Target = $24.5M
EBT Budget = $24.0M
*Total Portfolio Currency Target = 97.0%
*Total Portfolio Currency Budget = 97.0%
(*Currency As Calculated in the Fiscal 2002 Telmark Budget)
2. Three Year Incentive Plan for Period Ending 6/30/04
Accumulative 3 Year EBT = $68.25M 50% Base Salary*
Accumulative 3 Year EBT = $70.25M 75% Base Salary*
Accumulative 3 year EBT = $72.25M 100% Base Salary*
(*Base salary As of June 30, 2004)
Definitions
Accumulative EBT Target = $70.25M
Accumulative EBT Budget = $68.25M
3. Three Year Incentive Plan for Period Ending 6/30/05
The payout will be the average of the payout received for the three
annual incentive plans ending June 30, 2003, June 30, 2004, and June
30, 2005.
1
4. Consideration will be given for additional incentives as a result of one-
time events that financially benefit Agway and occur during the term of the
plans.
5. Payout Provisions
(a) If EBT and currency targets are met at different levels, the
payout is the sum of the two individual payouts. Example: If annual
plan results for EBT equals Target at $24.5M (20% Payout) and currency
96.5% (10% Payout), the total payout will be 30% of Base Salary.
(b) All payouts will be in cash and paid from Telmark earnings.
Payouts shall be made in a lump sum within 90 days after the end of
the term of the respective incentive plan.
(c) EBT will be calculated after the accrual of the expense for the
incentive.
6. Conditions
(a) If the employee voluntarily terminates employment for good reason
(as hereinafter defined) or if Agway terminates his employment without
cause (as hereinafter defined) during the plan period, he will be
eligible for a payout under each plan. The payout will be calculated
on a pro-rated basis (using completed weeks of service during the
incentive period) representative of the employee's period of active
full time employment during the term of each such plan.
(b) If the employee dies, retires (as hereinafter defined), or becomes
permanently disabled to such a degree that he is prevented from
performing the usual duties of his position, he (or his estate) will
be eligible for a payout under each plan. The payout will be
calculated on a pro-rated basis (using completed weeks of service
during the incentive period) representative of the employee's period
of active full time employment during the term of each such plan.
(c) If there is a change in control (as hereinafter defined) during
the plan period, the employee will be deemed fully vested in each
annual and multi-year incentive plan. Fully vested means the payout
will be fully earned without a reduction.
2
(d) The payout for three events, 5(a), (b), and (c) above, will be
calculated based upon target performance. Upon the occurrence of one
of these three events (a), (b) or (c) the employee (or his estate)
will also receive a payout equal to 100% of his base salary. Payout
for these three events, 5(a), (b), and (c) above and payment of base
salary shall be made in a lump sum within 90 days after the occurrence
of the event.
(e) If the employee voluntarily quits without good reason or if Agway
terminates his employment for cause during an unexpired plan period,
he will not be eligible for any part of any payout, payments or other
compensation identified in this document for the applicable plan
period.
(f) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time payments
are made.
(g) Under any of the events described in 5(a), (b) or (c) above, (i)
the employee will be deemed on leave status in order to receive full
employee benefits at active employee contribution rates for one year,
and (ii) the employee will receive for one year following his
termination executive level career transition assistance services by a
firm selected by the employee and paid for by Agway.
In these incentive plans, "you" and "your" refer to and mean the employee.
For purposes of these incentive plans, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities, including
but not limited to misappropriating any funds or property of Agway, committing
any act involving fraud, failing to perform in all material respects any duties
reasonably required in the course of your employment (other than such failure
resulting from your incapacity due to illness) after Agway has notified you and
you have failed to correct such failure within 10 days of such notice, violating
in any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated use
of alcohol or drugs, or your untreated alcoholism or drug abuse, in each case
impairing your ability to perform your executive responsibilities.
3
For purposes of these incentive plans, "good reason" means termination of
employment by you acting in good faith due to any of the following occurring
without your prior consent (i) any adverse change in your title or any change in
your reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in similar
businesses, (iii) any diminution in your compensation or benefits other than (a)
a diminution in your compensation that is implemented in connection with an
across the board reduction of executive salaries of the Company or (b) a
modification or elimination of any benefit plan that affects other employees of
Agway or other senior executives of Agway generally, (iv) the requirement that
you relocate outside of the Syracuse, NY area, or (v) the requirement that you
sign or be bound by a written noncompetition agreement.
For purposes of these incentive plans, "change in control" means any of the
following: (i) a person or entity or group of persons or entities independent of
Agway, Inc., acting in concert, shall become the direct or indirect beneficial
owner (within the meaning of Rule 13d-3 of the Exchange Act) of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the issued and outstanding common stock of the Company; or (ii)
the majority of the Company's Board of Directors is no longer comprised of the
incumbent directors who constitute the Board of Directors on the effective date
of this incentive plan and any other individual(s) who becomes a director
subsequent to the date of this incentive plan whose initial election or
nomination for election as a director, as the case may be, was approved by at
least a majority of the directors who comprised the incumbent directors as of
the date of such election or nomination; or (iii) a sale of all or substantially
all of the assets of the Company; or (iv) the Board shall approve any merger,
consolidation, or like business combination or reorganization of the Company,
the consummation of which would result in the occurrence of any event described
in clause (ii) above, and such transaction shall have been consummated.
For purposes of these incentive plans, "retire" means attaining the age of 59
1/2 and having at least 3 years of continuous active full-time employment with
Agway immediately prior to the date of retirement.
For purposes of these incentive plans, "Base Salary" means the employee's annual
salary at the time of the event or indicated determination date before bonuses
or other incentives.
4
7. Miscellaneous
(a) The incentive plans are not a contract for continued employment and do
not limit the right of Agway to terminate your employment. You are, and
shall remain, an employee at will.
(b) Annual incentive plans and multi-year incentive plans with substantially
the same parameters for payment as set forth in this document will be
initiated in each ensuing fiscal year.
(c) All payments under the incentive plans are subject to income tax and
employment tax withholding.
(d) The amounts payable under this plan are obligations of Telmark LLC.
EXHIBIT 10.(aa)
CONFIDENTIAL
September 26, 2002 ------------
To: X. X. Xxxxxxx
From: X. X. Xxxxxxxxxx
Re: INCENTIVE
---------
Xxx, please refer to the following regarding the components of your incentive
compensation that may be payable in the event of Agway's "sale of Telmark"
during Agway's fiscal year ending June 30, 2003. This letter supercedes and
replaces the November 30, 2001 memo from Xxxxx Xxxxxx to you and the July 19,
2002 memo from me to you.
1. If you voluntarily leave Agway at the end of the closing of any sale
of Telmark during the fiscal year ending June 30, 2003, whether or not
to join the acquirer, under your Executive Incentive Plan for Period
Beginning July 1, 2002, you will be considered to have terminated
employment for "good reason." Therefore, you will be eligible for a
payout of one times your base salary and a payout of both your annual
and multi-year incentives at target, each, pro-rated for time in plan.
In addition, Telmark will also provide a retention incentive ("stay
pay") for you to stay as President of Telmark during the period ending
September 30, 2003 (or earlier date if employment is terminated for
"good reason") of $230,022. You will receive 50% of the stay pay as of
March 31, 2003 and the remaining 50% as of September 30, 2003. In the
event of a sale of Telmark before September 30, 2003, you will receive
100% of the stay pay, less any stay pay payments previously received.
2. In addition to any payments that may be made to you pursuant to your
Executive Incentive Plan and for stay pay, Telmark will also provide
an incentive for any sale of Telmark through September 30, 2003. This
incentive is provided in recognition of the added responsibilities you
have assumed and will assume to prepare for and complete a sale of
Telmark.
This component will provide you with an incentive/bonus payment equal
to the difference between (a) $985,000, and (b) the amount payable to
you pursuant to paragraph 1. In other words, if the closing of a sale
of Telmark occurs on or before September 30, 2003, and if you remain
as President of Telmark through the closing date, you will receive a
combined amount equal to $985,000, a portion of which will be paid
pursuant to your Executive Incentive Plan, a portion for stay pay, and
the balance of which will be paid as an incentive/bonus for a sale of
Telmark. This payment would be made regardless of the actual sale
price.
- 2 -
3. Your right to the incentive/bonus payment described above, however, is
subject to the following added conditions:
a. No amount will be payable pursuant to paragraph 2 if the closing
date of the sale of Telmark does not occur on or before September
30, 2003.
b. No amount will be payable pursuant to paragraph 2 if you
voluntarily terminate your employment prior to the closing of a
sale of Telmark or if you continue your employment with Agway
after the closing of a sale of Telmark.
c. The amount payable pursuant to paragraphs 1 and 2 is an
obligation of Telmark LLC.
d. This letter is not intended as a duplication of amounts that
would otherwise be payable to you under your Executive Incentive
Plan. The provisions of your Executive Incentive Plan shall
remain in force and effect.
e. In order to avoid the application of Internal Revenue Code
Sections 280G and 4999 to any payments that may be made to you,
in no event will you be entitled to payments pursuant to this
memo, your Executive Incentive Plan, or otherwise that would
result in the application of the non-deduction and excise tax
consequences imposed by Internal Revenue Code Sections 280G and
4999. Payments to you pursuant to this memo will be limited to
the extent necessary to avoid any such application.
4. "Sale of Telmark" means a sale of Agway's ownership interest in
Telmark, a sale of substantially all of the assets of Telmark or a
transfer of substantially all of the employees of Telmark to another
party, such other party to be administering substantially all of the
assets of Telmark.
Xxx, as evidence of receipt and acceptance of the contents of this letter,
please sign and return one copy of this letter. Thank you.
/s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxxxx
President and CEO
Agway Inc.
/s/ Xxxxxx X. Xxxxxxx
-------------------------------- Date: September 26 , 2002
Xxxxxx X. Xxxxxxx ----------------------
President
Telmark LLC
/pf
cc: X. X. Xxxxxx
EXHIBIT 10.(ab)
Name's:
-------
Xxxxx Xxxxxx
------------
Positions:
----------
Chief Financial Officer, & Chief Administration Officer
---------------------------------------------------------
Incentive Plans For Period Beginning July 1, 2001
-------------------------------------------------
1. Annual Incentive Plan for Fiscal 2002, Ending June 30, 2002
EBITDA = $32.428M 10% Base Salary*
Improve Agway Ops Leverage to 3.4 to 1 20% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 35% Base Salary*
EBITDA = $34.428M 15% Base Salary*
Improve Agway Ops Leverage to 3.3 to 1 25% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 50% Base Salary*
EBITDA = $36.428M 30% Base Salary*
Improve Agway Ops Leverage to 3.2 to 1 45% Base Salary*
---------------------------------------------------------------------
Incentive for Meeting Both = 75% Base Salary*
(*Base Salary As Of June 30, 2002)
Definitions:
*EBITDA Target = $34.428M
*EBITDA Budget = $32.428M
*Agway Ops Leverage Target - Debt/Equity = 3.3 To 1
*Agway Ops Leverage Budget - Debt/Equity = 3.52 To 1
(*Based On Agway Operations Level)
2. Two Year Incentive Plan for Period Ending 6/30/03
Improve Agway Ops Leverage To 3.1 to 1 50% Base Salary*
Improve Agway Ops Leverage To 2.9 to 1 75% Base Salary*
Improve Agway Ops Leverage To 2.7 to 1 100% Base Salary*
(Agway Operations Leverage Budget - Debt/Equity - 6/30/03 = 3.56 to 1)
(*Base Salary As Of June 30, 2003)
3. Consideration will be given for additional incentives as a result of one-time
events that financially benefit Agway and occur during the term of the plans.
1
4. Payout Provisions
(a) If EBITDA and Leverage Targets are met at different levels for the
purposeof annual incentive calculation, the payout is the sum of the
two individual payouts. Example: If annual results for EBITDA equals
Target at $34.428M (15% Payout) and annual leverage result equals
maximum payout level of 3.2 to 1 (45% Payout), the total payout will
be 60% of Base Salary.
(b) All payouts will be in cash and shall be made in a lump sum within 90
days after the end of the term of the respective incentive plan.
(c) EBITDA will be calculated after the accrual of the expense for the
incentive.
(d) EBITDA financial covenants under Agway Inc.'s principal credit
agreements in effect at the time of each reporting period, both
quarterly and annually, must be exceeded in order for a payout to be
made under the EBITDA incentive calculations contained in this
agreement.
5. Conditions
(a) If the employee voluntarily terminates employment for good reason
(as hereinafter defined) or if Agway terminates his employment without
cause (as hereinafter defined) during the plan period, he will be
eligible for a payout under both plans. The payout will be calculated
on a pro-rated basis (using completed weeks of service during the
incentive period) representative of the employee's period of active
full time employment during the term of each such plan.
(b) If the employee dies, retires (as hereinafter defined), or becomes
permanently disabled to such a degree that he is prevented from
performing the usual duties of his position, he (or his estate) will
be eligible for a payout under both plans. The payout will be
calculated on a pro-rated basis (using completed weeks of service
during the incentive period) representative of the employee's period
of active full time employment during the term of each such plan.
(c) If there is a change of control (as defined in the Indemnification
Agreement between Agway Inc. and the employee) during the plan period,
the employee will be deemed fully vested in both the annual and
long-term incentive plans. Fully vested means the payout will be fully
earned without a reduction.
2
(d) The payout for three events, 5(a), (b), and (c) above, will be
calculated based upon target performance. Upon the occurrence of one of
these three events (a), (b) or (c) the employee (or his estate) will
also receive a payout equal to 100% of his base salary. Payout for
these three events, 5(a), (b), and (c) above and payment of base salary
shall be made in a lump sum within 90 days after the occurrence of the
event.
(e) If the employee voluntarily quits without good reason or if Agway
terminates his employment for cause during an unexpired plan period, he
will not be eligible for any part of any payout, payments or other
compensation identified in this document for the applicable plan
period.
(f) Incentives earned under this plan are taken into account for
purposes of Agway's employee benefit plan programs to the extent
provided by the terms of those programs in effect at the time payments
are made.
(g) Under any of the events described in 5(a), (b) or (c) above, (i)
the employee will be deemed on leave status in order to receive full
employee benefits at active employee contribution rates for one year,
and (ii) the employee will receive for one year following his
termination executive level career transition assistance services by a
firm selected by the employee and paid for by Agway.
In these incentive plans, "you" and "your" refer to and mean the employee.
For purposes of these incentive plans, "cause" means termination of your
employment by Agway acting in good faith due to your (i) willful gross
misconduct or gross negligence with respect to your responsibilities, including
but not limited to misappropriating any funds or property of Agway, committing
any act involving fraud, failing to perform in all material respects any duties
reasonably required in the course of your employment (other than such failure
resulting from your incapacity due to illness) after Agway has notified you and
you have failed to correct such failure within 10 days of such notice, violating
in any material respect any written policy of Agway or of your duty of loyalty
owed to Agway, or acting in any way that is materially detrimental to the
business reputation of Agway, (ii) conviction of, or a plea of guilty or no
contest to, a felony or crime of moral turpitude, or (iii) willful repeated use
of alcohol or drugs, or your untreated alcoholism or drug abuse, in each case
impairing your ability to perform your executive responsibilities.
3
For purposes of these incentive plans, "good reason" means termination of
employment by you acting in good faith due to any of the following occurring
without your prior consent (i) any adverse change in your title or any change in
your reporting relationship, (ii) any diminution in your responsibility or
authority or the assignment to you of duties which are inconsistent with
responsibilities normally performed by an executive at your level in similar
businesses, (iii) any diminution in your compensation or benefits other than (a)
a diminution in your compensation that is implemented in connection with an
across the board reduction of executive salaries of the Company or (b) a
modification or elimination of any benefit plan that affects other employees of
Agway or other senior executives of Agway generally, (iv) the requirement that
you relocate outside of the Syracuse, NY area, or (v) the requirement that you
sign or be bound by a written noncompetition agreement.
For purposes of these incentive plans, "retire" means attaining the age of 59
1/2 and having at least 3 years of continuous active full-time employment with
Agway immediately prior to the date of retirement.
For purposes of these incentive plans, "Base Salary" means the employee's annual
salary at the time of the event or indicated determination date before bonuses
or other incentives.
6. Miscellaneous
(a) The incentive plans are not a contract for continued employment and
do not limit the right of Agway to terminate your employment. You
are, and shall remain, an employee at will.
(b) Annual incentive plans targeted at 50% of Base Salary and multi-
year incentive plans targeted at 75% of Base Salary with
substantially the same parameters for payment as set forth in
Section 1 above will be initiated in each ensuing fiscal year.
(c) All payments under the incentive plans are subject to income tax
and employment tax withholding.
4
EXHIBIT 10.(ac)
(logo)
AGWAY INC. XX XXX 0000, XXXXXXXX, XXX XXXX 00000-0000
000-000-0000
Xxxxxx X. Xxxxxxxxxx
President
and Chief Executive Officer
January 14, 2002
To: X. X. Xxxxxx
Re: Incentive
Xxxxx, please refer to the following regarding the components of your incentive
compensation that will be payable in the event of Agway's sale of Agway
Insurance Company:
1. If you voluntarily leave Agway at the time of the closing of any sale of
Agway Insurance Company, whether or not to join the acquirer, under your
Executive Incentive Plans for Period Beginning July 1, 2001, you will be
considered to have terminated employment for "good reason." Therefore, you
will be eligible for a payout of one times your base salary and a payout of
both your annual and multi-year incentives at target, each pro-rated for
time in plan. An example of your payout if closing were to occur on May 31,
02, follows:
Closing for an Agway Insurance Company Sale Occurs 5/31/02
Base Salary $338,000
Annual incentive pro-rated at target for period 5/31/02-6/30/02
(50% salary target x 11 months/12 months) 154,917
Multi-year incentive pro-rated at target for period 5/31/02-6/30/03
(75% salary target x 11 months/24 months) 116,188
-------
Total $609,105
The foregoing is only an example of the cash payment that may be made to
you pursuant to your Executive Incentive Plans for Period Beginning July 1,
2001. (This is not intended as a duplication of amounts that would
otherwise be payable to you under that plan.) The provisions of your
Executive Incentive Plan shall remain in full force and effect.
2. In addition to any payments that may be made to you pursuant to your
Executive Incentive Plan, Agway will also provide an additional
incentive/bonus for you to stay as President of Agway Insurance Company
through any sale of Agway Insurance Company. This section is in recognition
of the added responsibilities you have assumed and will assume to prepare
for and complete a sale of Agway Insurance Company.
Specifically this component will provide you with an incentive/bonus
payment equal to 2% of the gross sale price that Agway receives from such a
sales transaction or one times your current base salary of $338,000,
whichever is greater. This payment would be made within 30 days of closing.
- 2 -
3. Your right to the incentive/bonus payment described above, however, is
subject to the following added conditions:
a. No amount will be payable pursuant to paragraph 2, if the closing
of the sale of Agway Insurance Company does not occur on or before
December 31, 2002; however, if a definitive agreement has been
executed by all parties by December 31, 2002, and such agreement
sets forth a required closing date of no later than March 31,
2003, then you will still be entitled to the incentive/bonus
payment under paragraph 2 of this letter;
b. No amount will be payable pursuant to paragraph 2, if you
voluntarily terminate your employment prior to the closing of a
sale of Agway Insurance Company, or if you continue your
employment with Agway after the closing of a sale of Agway
Insurance Company; and
c. In order to avoid the application of Internal Revenue Code
Sections 280G and 4999 to any payments that may be made to you, in
no event will you be entitled to payments pursuant to this memo,
your Executive Incentive Plan, or otherwise that would result in
the application of the non- deduction and excise tax consequences
imposed by Internal Revenue Code Sections 280G and 4999. Payments
to you pursuant to this memo will be limited to the extent
necessary to avoid any such application.
Xxxxx, we appreciate the many contributions you have made to Agway over the past
32 years. I sincerely hope the above meets with your approval and wish you
continued success in the future.
/s/ Xxxxxx X. Xxxxxxxxxx
-------------------------
XXXXXX X. XXXXXXXXXX
/pf
EXHIBIT 10.(ad)
================================================================================
STOCK PURCHASE AGREEMENT
Between
AGWAY, INC.
and
UNITED FARM FAMILY MUTUAL
INSURANCE COMPANY
DATED: June 14, 2002
================================================================================
TABLE OF CONTENTS
-----------------
Page
----
BACKGROUND...................................................................... 1
TERMS........................................................................... 1
ARTICLE 1 - DEFINITIONS; GENERAL PROVISIONS..................................... 1
1.1 Definitions................................................... 1
1.2 General Provisions............................................ 8
ARTICLE 2 - PURCHASE AND SALE OF SHARES......................................... 8
2.1 Purchase and Sale of Shares................................... 8
2.2 Purchase Price................................................ 8
2.3 Payment of Purchase Price..................................... 9
2.4 Escrow Deposit................................................ 9
2.5 Eligible Claims Adjustment.................................... 9
ARTICLE 3 - RELATED TRANSACTIONS................................................ 9
3.1 Transfers By Seller........................................... 9
3.2 Transfer and Payment.......................................... 9
3.3 Transfers by Company.......................................... 9
3.4 Endorsement Agreement......................................... 10
3.5 Transition Service Agreement.................................. 10
3.6 Employment Agreement and Non-Competition and
Confidentiality Agreement..................................... 10
3.7 Covenant Not To Compete....................................... 10
3.8 Change of Name................................................ 10
3.9 Employees..................................................... 10
ARTICLE 4 - CLOSING............................................................. 11
4.1 Closing....................................................... 11
4.2 Closing Deliveries............................................ 11
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF SELLER............................ 13
5.1 Organization; Good Standing, Licenses......................... 13
5.2 Capitalization................................................ 13
5.3 Authority; No Conflict........................................ 14
5.4 Financial Statements.......................................... 15
5.5 No Material Adverse Change.................................... 15
5.6 Title To Assets; Encumbrances................................. 15
5.7 Taxes......................................................... 16
5.8 Employee Benefits............................................. 17
5.9 Legal and Regulatory Compliance............................... 17
5.10 Legal Proceedings and Contingent Liabilities; Orders.......... 18
5.11 Absence of Certain Changes and Events......................... 18
5.12 Contracts..................................................... 19
5.13 Insurance; Reinsurance........................................ 20
5.14 Employees and Agents.......................................... 21
5.15 Labor Matters................................................. 22
5.16 Intellectual Property......................................... 23
5.17 Relationships With Related Persons............................ 23
5.18 Powers of Attorney and Suretyships............................ 23
5.19 Warranties.................................................... 23
5.20 Brokers or Finders............................................ 23
5.21 Exclusivity of Representations................................ 23
5.22 Disclosure.................................................... 24
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF PURCHASER......................... 24
6.1 Organization and Good Standing................................ 24
6.2 Authority; No Conflict........................................ 24
6.3 Certain Proceedings........................................... 24
6.4 Brokers or Finders............................................ 24
6.5 Investment Representations.................................... 25
6.6 Financial and Regulatory Matters.............................. 25
6.7 Purchaser's Business Decision................................. 25
ARTICLE 7 - DUE DILIGENCE; UPDATES TO SCHEDULES................................. 25
7.1 Completion; Verification...................................... 25
7.2 Notice of Breach.............................................. 25
7.3 Updates to Schedules.......................................... 26
ARTICLE 8 - COVENANTS OF SELLER................................................. 26
8.1 Operation of the Business of Company.......................... 26
8.2 No Negotiation................................................ 27
8.3 Consents...................................................... 27
8.4 Cooperation................................................... 27
ARTICLE 9 - COVENANTS OF PURCHASER.............................................. 28
9.1 Consents...................................................... 28
9.2 Cooperation................................................... 28
ARTICLE 10 - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE............ 28
10.1 Accuracy of Representations................................... 28
10.2 Performance................................................... 28
10.3 Consents...................................................... 29
10.4 No Proceedings; No Material Adverse Change.................... 29
10.5 Agreements with Xx. Xxxxxx.................................... 29
ARTICLE 11 - CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE............... 29
11.1 Accuracy of Representations................................... 29
11.2 Purchaser's Performance....................................... 29
11.3 Consents...................................................... 30
11.4 No Proceedings................................................ 30
ARTICLE 12 - TERMINATION........................................................ 30
12.1 Termination Events; Opportunity to Cure....................... 30
12.2 Effect of Termination......................................... 31
ARTICLE 13 - INDEMNIFICATION; REMEDIES.......................................... 32
13.1 Survival...................................................... 32
13.2 Indemnification By Seller..................................... 32
13.3 Indemnification By Purchaser.................................. 32
13.4 Time Limitations.............................................. 33
13.5 Limitations on Amount of Liability............................ 33
13.6 Procedure for Indemnification - Third Party Claims............ 33
13.7 Exclusive Remedies............................................ 34
13.8 Certain Exclusions............................................ 34
ARTICLE 14 - TAX MATTERS........................................................ 34
14.1 Tax Returns................................................... 34
14.2 Cooperation - Tax Matters..................................... 35
14.3 Records....................................................... 36
14.4 Audits........................................................ 36
14.5 Indemnity..................................................... 37
14.6 Purchase Price Allocation..................................... 37
14.7 Section 338(h)(10) Election................................... 37
14.8 Transfer and Similar Taxes.................................... 39
14.9 Refunds....................................................... 39
14.10 Tax Sharing Arrangement....................................... 39
14.11 Conflicts..................................................... 39
ARTICLE 15 - GENERAL PROVISIONS................................................. 39
15.1 Expenses...................................................... 39
15.2 Public Announcements.......................................... 39
15.3 Confidentiality............................................... 39
15.4 Notices....................................................... 40
15.5 Jurisdiction; Service of Process.............................. 41
15.6 Further Assurances............................................ 41
15.7 Books and Records............................................. 41
15.8 Waiver........................................................ 42
15.9 Entire Agreement and Modification............................. 42
15.10 Assignments, Successors, and No Third-Party Rights............ 42
15.11 Severability.................................................. 42
15.12 Section Headings, Construction................................ 42
15.13 Time of Essence............................................... 43
15.14 Governing Law................................................. 43
15.15 Counterparts.................................................. 43
EXHIBITS
--------
Exhibit A - Covenant Not To Compete
Exhibit B - Escrow Agreement
Exhibit C - Endorsement Agreement
Exhibit D - Transition Services Agreement
Exhibit E-1 - Closing Certificate of Seller
Exhibit E-2 - Closing Certificate of Purchaser
Exhibit F - Opinion of Counsel to Seller
Exhibit G-1 - Opinion of Counsel to Purchaser
Exhibit G-2 - Opinion of Local Counsel to Purchaser
Exhibit H - Financial Statements
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered as
of June , 2002 by and between AGWAY, INC., an agricultural cooperative
---
incorporated under the laws of the State of Delaware ("Seller") and UNITED FARM
FAMILY MUTUAL INSURANCE COMPANY, an Indiana mutual property and casualty
insurance company (d/b/a Indiana Farm Bureau Insurance "Purchaser").
BACKGROUND
----------
A. Seller owns all of the issued and outstanding capital stock of AGWAY
INSURANCE COMPANY, a New York property and casualty insurance company (the
"Company").
B. Company is a licensed insurance company under the laws of the State
of New York and sixteen other jurisdictions. In connection with the foregoing,
Company conducts the business of a licensed property and casualty insurance
company including, underwriting, marketing and administering property and
casualty insurance policies (the "Business").
C. Purchaser desires to purchase Company and its Business and,
accordingly, the Purchaser is willing to purchase from the Seller, and the
Seller is willing to sell to the Purchaser, all of the issued and outstanding
shares of capital stock of Company on the terms and conditions set forth in this
Agreement.
TERMS
-----
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements, representations, and warranties set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties, each intending to be
legally bound, hereby agree as follows:
ARTICLE 1
---------
DEFINITIONS; GENERAL PROVISIONS
-------------------------------
1.1 Definitions. For purposes of this Agreement and the
-----------
attached Exhibits and the Schedules, the following terms shall have the meanings
specified or referred to in this Section, unless the context otherwise requires:
"ADSP" - is defined in Section 14.7(b).
"Agway, Inc. Assets" - certain assets used by Company
in its Business that are owned by Seller or Seller's Related Persons (other than
Company) and that are to be transferred to Purchaser at Closing as provided in
Section 3.1.
"Allocation Agreement" - the agreement described in
Section 14.7(b).
1
"Balance Sheet" - the statutory balance sheets of
Company as of December 31, 2001, copies of which will be included in the
Financial Statements.
"Balance Sheet Date" - December 31, 2001.
"Breach" - a "Breach" of a representation, warranty,
covenant, obligation or other provision of this Agreement will be deemed to have
occurred if there is or has been any material inaccuracy in, or breach of, or
any material failure to perform or comply with, the representation, warranty,
covenant, obligation or other provision.
"Business" - the business as defined in the
Background to this Agreement.
"Closing" - the consummation of the purchase of the
Purchased Shares, payment of the Purchase Price and execution and delivery of
documents as set forth in Article 4 of this Agreement. Except as otherwise
expressly provided in this Agreement or in any document contemplated in this
Agreement, all matters at the Closing shall be considered to take place
simultaneously and no delivery of any documents shall be deemed complete until
all transactions and deliveries of documents are completed.
"Closing Date" - the date and time as of which the
Closing actually takes place.
"Code" - the Internal Revenue Code of 1986, as
amended, or any successor law.
"Company" - Agway Insurance Company, a New York
property and casualty insurance company.
"Company Common Stock" - the authorized capital
stock of Company consisting of two hundred sixty-five thousand (265,000) shares
of $20 par, capital stock.
"Company Employee" - at any specified time, each
person directly employed by Company.
"Computation" - the computation described in Section
14.7(b).
"Consent" - any approval, consent, ratification,
waiver, or other authorization or release, including, but not limited to,
shareholder approval, board of director approval, third party consent and any
Governmental Authorization.
"Contemplated Transactions" - the sale and purchase
of the Purchased Shares and the consummation of the Related Transactions under
this Agreement.
"Contract" - any agreement or contract (whether
written or oral) that is legally binding.
2
"Covenant Not To Compete" - An agreement among Seller,
the Company and Purchaser in the form of Exhibit A to be entered into at
Closing. ---------
"Damages" - collectively, all claims, Liabilities,
obligations, losses, damages, deficiencies, assessments, judgments, costs,
expenses (including, without limitation, reasonable attorneys' fees and costs
and expenses incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, or other Proceeding or
demand), with respect to which the Seller or the Purchaser is entitled to
receive indemnification pursuant to the provisions of Sections 13.2 and 13.3,
respectively; provided, however, that (i) in no event shall "Damages" include
punitive damages or lost profits or other incidental or consequential damages
and (ii) in the event that the loss, claim or other Liability that gave rise to
the right to receive indemnification (A) is covered by insurance maintained by
or for the benefit of the party entitled to receive indemnification or that was
heretofore or is hereafter maintained by Company, or (B) results in a Tax
Benefit to the party entitled to receive indemnification, the amount of any
"Damages" that such party would otherwise be entitled to receive will be reduced
by the amount of any such insurance proceeds or Tax Benefit.
"Disclosure Schedules" - Schedules referenced in
Articles 3 and 5 to be delivered to Purchaser by Seller, and Schedule 6.2(c) to
be delivered to Seller by Purchaser, simultaneously with, and pursuant to, this
Agreement.
"Eligible Claims" - claims with respect to assumed
reinsurance written by the Company prior to 1980 that were unreserved, or
inadequately reserved, as of December 31, 2001.
"Employee Benefit Plans" - collectively, all "plans"
(as defined in ERISA Section 3(3)) (i) of which Company is or was a "Plan
Sponsor" (as defined in ERISA Section 3(16)(B)) or (ii) to which Company
otherwise contributes or has contributed or (iii) in which Company employees
otherwise participate or have participated.
"Employment Agreement" - an employment agreement to
be entered into among Purchaser, Company and Xxxxxx X. Xxxxxx.
"Encumbrance" - any mortgage, easement, right of way,
charge, claim, community property interest, condition, equitable interest, lien,
option, pledge, security interest, right of first refusal or restriction or
adverse claim of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership, or any other
encumbrance or exception to title of any kind.
"Endorsement Agreement" - An agreement between Seller
and Company in the form of Exhibit C to be entered into at Closing.
"Environmental, Health and Safety Liabilities" -
collectively, any Liabilities arising from or under any Environmental Law or
Occupational Safety and Health
Law.
3
"ERISA" - the Employee Retirement Income Security
Act of 1974, as amended, or any successor law, and regulations and rules issued
pursuant to that act or to any successor law.
"ERISA Affiliate" - means (a) any corporation
included with Company or Seller in a controlled group of corporations within the
meaning of Section 414(b) of the Code; (b) any trade or business (whether or not
incorporated) which is under common control with Company or Seller within the
meaning of Section 414(c) of the Code; (c) any member of any affiliated service
group of which Company or Seller is a member within the meaning of Section
414(m) of the Code; or (d) any other person or entity treated as an affiliate of
any of Company or Seller under Section 414(o) of the Code.
"Escrow Agent" - JPMorgan Chase
"Escrow Agreement" - an agreement among the parties
and the Escrow Agent in the form of Exhibit B to be entered at Closing.
---------
"Escrow Deposit" - the amount to be deposited by
Purchaser with the Escrow Agent as provided in Section 2.4.
"Financial Statements" - collectively, (i) Company's
audited statutory statements of admitted assets, liabilities and surplus as of
December 31, 1999, 2000 and 2001, and the related statutory statements of
income, changes in surplus, and cash flows for the years then ended, including
the notes thereto, prepared by PricewaterhouseCoopers, LLP, and (ii) Company's
internally prepared balance sheets and related interim statutory statements of
income, changes in surplus and cash flows for the period from December 31, 2001
to May 31, 2002. Copies of the audited Financial Statements are attached as
Exhibit H.
"GAAP" - at any particular time, generally accepted
accounting principles as in effect in the United States at such time; provided,
however, that, if it is or was permissible to use more than one principle at
such time in respect of a particular accounting matter, "GAAP" shall refer to
the principle which is or was then employed by Company.
"Governmental Authorization" - any Consent, license
or permit issued, granted or given by or under the authority of any Governmental
Body or pursuant to any Legal Requirement.
"Governmental Body" - any federal, state, local,
municipal, foreign or other governmental or quasi-governmental entity, including
an arbitrator, or authority of any nature.
"Income Tax" - any Tax measured in whole or part
by gross income, adjusted gross income, or net income, as such terms are
understood for federal Tax purposes.
"Indiana Commissioner" - Commissioner of the Indiana
Department.
"Indiana Department" - the Indiana Department of
Insurance.
4
"Independent Firm" - is defined in Section 14.1(a).
"Intellectual Property" - all software, trade
secrets, patents, trademarks, copyrights, and any applications therefor in or
to which Company has any right or claim.
"IRS" - the Internal Revenue Service or a successor
agency performing similar functions.
"Knowledge" - an individual will be deemed to have
"Knowledge" of a particular fact or matter if the individual is actually aware
of the fact or matter, or a reasonable individual in a similar capacity would
have knowledge of the fact or matter. A Person other than an individual shall be
deemed to have "Knowledge" of a particular fact or matter if any individual
serving as an officer or director (or in any similar capacity) of such Person
has Knowledge of the fact or matter, or a reasonable Person in a similar
capacity would have knowledge of the fact or matter.
"Leases" - collectively, leases for Personal Property
to which Company is a party.
"Legal Requirement" - any United States federal,
state or local law, ordinance, principle of common law, regulation or statute
as in effect on the date hereof.
"Liabilities" - Any debts, obligations, duties or
liabilities of any nature which would be required to be disclosed on a balance
sheet prepared in accordance with SAP or GAAP.
"Material Adverse Effect" or "Material Adverse
Change" - any change or effect with respect to Company, other than losses and
claims from insurance policies, which is materially adverse to its licenses,
permits, certificates of authority or, taken as a whole, to its Business,
operations, assets, or financial condition.
"New York Superintendent" - the Superintendent of the
New York Department.
"New York Department" - the New York State Insurance
Department.
"Occupational Safety and Health Law" - any Legal
Requirement or governmental program designed to provide safe and healthful
working conditions, and to reduce occupational safety and health hazards.
"Order" - any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body.
"Owned Tangible Personal Property" - is defined in
Section 5.6(b).
5
"Person" - any individual, corporation, general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, or other entity or Governmental Body.
"Personal Property" - is defined in Section 5.6(c).
"Plans" - any plan defined in Section 5.8(b).
"Proceeding" - any action, claim, dispute, demand,
arbitration, audit, hearing, investigation, litigation, or suit (whether civil,
criminal, administrative, investigative or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body.
"Purchase Price" - the consideration for the Purchased
Shares payable by Purchaser pursuant to Section 2.2.
"Purchased Shares" - collectively, 265,000 issued and
outstanding shares of Company Common Stock.
"Related Person" - (1) with respect to a Person that
is an individual shall mean: (i) each other member of the individual's immediate
family; (ii) any Person that is directly or indirectly controlled by any one
or more members of the individual's immediate family; or (iii) any Person with
respect to which one or more members of the individual's immediate family serves
as a director, officer, partner, or trustee (or in a similar capacity); or (2)
with respect to a specified Person other than an individual shall mean: (i) any
Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with the
specified Person; and (ii) each Person that serves as a director, officer,
partner, or trustee of the specified Person (or in a similar capacity).
As used in this definition, "control," or any
derivation thereof, shall mean possession, directly or indirectly, of the power
to direct or cause the direction of management or policies (whether through the
ownership of securities or of partnership or other ownership interests, by
contract or otherwise), provided, that, in any event, any Person that owns or
holds, directly or indirectly, ten percent (10%) or more of the voting
securities or ten percent (10%) or more of the partnership or other equity
interests of any other Person (other than as a limited partner of such Person)
will be deemed to control that corporation or other Person.
"Related Transactions" - the transactions required
under Article 3.
"Representative" - with respect to a particular
Person shall include any director, officer, employee, agent, consultant,
advisor, or other representative of such Person, including legal counsel,
accountants and financial advisors.
"SAP" - statutory accounting practices prescribed
or permitted by the Insurance Department of the State of New York, as described
in Note 1 to the Audited Financial Statements.
6
"Schedules" - means all of the Disclosure Schedules
delivered by Seller to Purchaser, and Schedule 6.2(c) to be delivered to Seller
--------------
by Purchaser, contemporaneously with the execution of this Agreement.
"Section 338(h)(10) Election" - is defined in Section
14.7
"Section 338 Forms" - is defined in Section 14.7(a).
"Share Purchase Price" - is defined in Section 14.6.
"Tax" - any tax of any kind, levy, assessment, tariff,
duty, impost, charge or fee, including, without limitation, income, gross
receipts, franchise, ad valorem, value added, excise, real or personal property,
asset, sales, use, license, payroll, transaction, capital, net worth,
withholding, estimated, social security, utility, workers' compensation,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes or other taxes or similar governmental charge
or assessment of any kind imposed, assessed or collected by or under the
authority of any Governmental Body, together with any interest, additions, or
penalties with respect thereto and any interest in respect of such additions or
penalties.
"Tax Audit" - is defined in Section 14.4.
"Tax Benefit" - with respect to Damages, the amount
of actual Tax savings realized by the party entitled to receive indemnification
for such Damages in the taxable year in which such Damages are incurred.
"Tax Return" - any return, report, statement,
declaration, estimate, form or other document (including any related or
supporting information) filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection, reporting, or payment of any Tax.
"Tax Sharing Arrangement" - any written or unwritten
agreement or arrangement to which the Company is a party for the allocation or
payment of Tax Liabilities or payment for any increase or decrease of Tax
Liabilities or payment with respect to a combined, consolidated or unitary Tax
Return that includes Company.
"Threatened" - a Proceeding, claim, dispute or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing or any notice has been given in writing.
"Transfer Taxes" - all sales, transfer, recording, ad
valorem, privilege, documentary, registration, conveyance, excise, license,
gains, stamps, duties or similar Taxes.
"Transferred Books and Records" - is defined in
Section 15.7.
7
"Transition Services Agreement" - an Agreement between
Seller and Company in the form of Exhibit D to be entered into at Closing.
---------
"Updated Schedules" - is defined in Section 7.3.
1.2 General Provisions.
------------------
(a) Unless expressly provided otherwise in this
Agreement, or unless the context requires otherwise:
(i) all accounting terms used in this
Agreement shall have the meanings or interpretation given to them in
accordance with SAP or GAAP, as the context may require;
(ii) the singular shall mean the plural,
the plural shall mean the singular, and the use of any gender shall
include all genders; and all references to any particular party defined
herein shall be deemed to refer to each and every Person defined
herein as such party individually, and to all of them, collectively,
jointly and severally, as though each were named wherever the
applicable defined term is used;
(iii) all references to "Sections" shall
be deemed to refer to the provisions of this Agreement, all references
to "Exhibits" shall be deemed to refer to Exhibits to this Agreement;
(iv) all references to time herein shall
mean Eastern Standard Time or Eastern Daylight Time, as then in effect
in Syracuse, New York; and
(vi) all references to sections,
subsections, paragraphs or other provisions of any Legal Requirement
that consists of a law, ordinance, regulation, statute or treaty, shall
be deemed to include successor, amended, renumbered and replacement
provisions thereof.
ARTICLE 2
---------
PURCHASE AND SALE OF SHARES
---------------------------
2.1 Purchase and Sale of Shares. On the terms and conditions
---------------------------
set forth in this Agreement, at the Closing Purchaser will purchase from the
Seller, and the Seller will sell, assign, transfer and deliver to Purchaser
(free and clear of all Encumbrances), all of the Purchased Shares.
2.2 Purchase Price. Subject to possible adjustment as provided
---------------
in Section 2.5, the consideration to be paid by the Purchaser to the Seller for
all Purchased Shares shall be an amount equal to Twenty-One Million Dollars
($21,000,000.00), which amount shall include the Five Hundred Fifty Thousand
Dollar ($550,000) Escrow Deposit described in Section 2.4.
8
2.3 Payment of Purchase Price. The Purchase Price, less the
-------------------------
Escrow Deposit, shall be paid by Purchaser at the Closing by wire transfer of
immediately available funds to an account to be designated at least two days
before the Closing Date by Seller.
2.4 Escrow Deposit. Subject to possible adjustment as provided
--------------
in Section 2.5, at or prior to Closing Purchaser shall deliver to the Escrow
Agent Five Hundred Fifty Thousand Dollars ($550,000) (the "Escrow Deposit") to
be held in escrow and disbursed as provided in the Escrow Agreement.
2.5 Eligible Claims Adjustment. The Purchase Price and the
----------------------------
amount of the Escrow Deposit shall be reduced by the amount, if any, of Eligible
Claims paid by Company prior to the Closing, provided that the total amount of
any such reduction shall not exceed $550,000. Eligible Claims paid after Closing
shall be paid from the Escrow Deposit without further adjustment.
ARTICLE 3
---------
RELATED TRANSACTIONS
--------------------
3.1 Transfers By Seller. Certain assets used by
---------------------
Company in its business are owned by Seller or Related Persons of Seller (other
than Company). At or prior to the Closing, Seller will cause the following
assets to be transferred and conveyed to the Company:
(a) Fixed Assets. The fixed assets listed on
-------------
Schedule 3.1(a) of the Disclosure Schedules.
(b) Trademarks. The registered service marks listed
----------
on Schedule 3.1(b) to the Disclosure Schedules.
(c) Information Technology. The computer hardware
----------------------
and software listed on Schedule 3.1(c) of the Disclosure Schedules.
------
Hereafter, the assets described in Sections 3.1(a),
(b) and (c) are referred to collectively as the "Agway, Inc. Assets."
3.2 Transfer and Payment . Seller shall transfer, or cause
--------------------
to be transferred, good and marketable title to the Agway, Inc. Assets, to
Company, free and clear of all Encumbrances, but subject to the software
licenses listed in Schedule 3.1(c) of the Disclosure Schedules. All Agway, Inc.
Assets shall be transferred to the Company "as is" except that Agway shall
assign to the Company its rights under any third party warranties relating to
the Agway, Inc. Assets.
3.3 Transfers by Company. Prior to the Closing, Company will
--------------------
assign and transfer to Seller all rights (including the right to use) in the
name "Agway," including all trade names and marks, registered or unregistered,
that include the name "Agway," provided, however, that Company shall be entitled
to use the name "Agway" in identifying itself as "successor to Agway Insurance
Company" or "formerly known as Agway Insurance Company" and similar identifying
9
phrases for a period of one year, under the terms and subject to the conditions
set forth in the Endorsement Agreement.
3.4 Endorsement Agreement. - At the Closing, Seller and
----------------------
Company shall enter into an Endorsement Agreement in the form of Exhibit C.
3.5 Transition Service Agreement. - At Closing, Seller
------------------------------
and Company shall enter into a Transition Service Agreement in the form of
Exhibit D.
3.6 Employment Agreement and Non-Competition and
-------------------------------------------------------
Confidentiality Agreement. - At the Closing, Purchaser, Company and Company's
--------------------------
current President, Xxxxxx X. Xxxxxx, will enter into an Employment Agreement and
a Non-Competition and Confidentiality Agreement on terms to be agreed upon for
the continuation of Xx. Xxxxxx'x employment by Company following Closing.
3.7 Covenant Not To Compete. At Closing, Seller and Company
-----------------------
shall enter into a Covenant Not To Compete in the form of Exhibit A.
3.8 Change of Name. - Effective as of the Closing, Company's
--------------
charter shall be amended pursuant to Section 1206 of the New York Insurance Law
to change its corporate name to a new name to be selected by Purchaser which
will not contain the word "Agway."
3.9 Employees.
---------
(a) Effective as of the Closing Date, Seller shall
cause the Company to terminate the employment of such Company Employees as
Purchaser shall specify in a notice delivered to Seller within 60 days of
signing this Agreement (the "Terminated Company Employees"). Subject to Article
13, Purchaser shall indemnify, defend and hold Seller harmless from any claims
or Proceedings by the Terminated Company Employees asserting that the
termination of their employment pursuant to this Section 3.9(a) constituted a
wrongful termination in violation of applicable law, provided, however, that the
foregoing covenant shall not extend to claims or Proceedings seeking benefits,
rights or remedies (including, without limitation, severance and other fringe
benefits) under any of the Plans. Any suit or Proceeding as to which Purchaser
is obligated to indemnify Seller pursuant to this Section 3.9(a) shall not
constitute a Material Adverse Change for purposes of this Agreement.
(b) Seller shall coordinate the termination of each
Terminated Company Employee with Purchaser and shall allow Purchaser to
participate in such termination process to the extent Purchaser desires to do
so. Seller shall be solely responsible for and shall provide all severance
benefits and other fringe benefits Company Employees are eligible for under the
Plans, including without limitation vacation pay earned or accrued but not used
by all Company Employees on or prior to the Closing Date. In addition, Seller
shall be solely responsible for and shall provide all accrued benefits and/or
contributions under the Plans.
10
(c) Except as set forth on Schedule 3.9 of the
Disclosure Schedules, effective as of the Closing Date, Seller shall, and to the
extent necessary or appropriate shall cause the Company to, terminate the active
participation of all Company Employees in the Plans such that Company Employees
shall not accrue additional benefits under the Plans after the Closing Date.
(d) Effective as of the Closing Date, Seller shall
and, to the extent necessary or appropriate shall cause the Company to,
terminate the Company's participation in all Plans.
ARTICLE 4
---------
CLOSING
-------
4.1 Closing. Unless otherwise agreed, the Closing will take
-------
place at the offices of Bond, Xxxxxxxxx & Xxxx, LLP in Syracuse, New York at
10:00 a.m. on the date that is ten (10) business days following the satisfaction
(or waiver) of all conditions to Closing.
4.2 Closing Deliveries. At the Closing:
------------------
(a) The Seller will deliver, or cause to be
delivered, to Purchaser:
(i) the original stock certificates
representing all of the Purchased Shares accompanied by duly executed
stock transfer powers endorsed in blank;
(ii) the minute book, stock records, and
corporate seal of Company;
(iii) certified copies of resolutions duly
adopted by the board of directors of Seller approving the execution
and delivery of this Agreement and the consummation of the Contemplated
Transactions;
(iv) certificates contemplated by Section 10.1,
10.2, 10.3 and 10.4;
(v) a certificate of compliance issued by the
New York Department and the insurance regulatory authority for each
other jurisdiction in which Company is conducting Business;
(vi) copies of the certificate of authority
of Company for each state or other jurisdiction in which Company is
conducting Business;
(vii) the Covenant Not To Compete executed
by Seller;
(viii) the Escrow Agreement executed by Seller;
(ix) the Endorsement Agreement executed by
Seller;
11
(x) the Transition Services Agreement executed
by Seller;
(xi) a closing certificate executed by the
Seller in substantially the form attached as Exhibit E-1;
-----------
(xii) resignations, effective as of the
Closing Date, of all of the directors and officers of Company with
the exception of Xxxxxx X. Xxxxxx and any Vice President(s), designated
by Purchaser, who will continue employment with Company after the
Closing Date;
(xiii) documents reasonably satisfactory to
Purchaser evidencing the transfer and conveyance of the Agway, Inc.
Assets to the Company by Seller;
(xiv) an opinion letter of Bond, Xxxxxxxxx
& King, LLP, counsel to the Seller and Company, in the form attached
as Exhibit F;
---------
(xv) all other certificates, instruments and
documents to be delivered by the Seller and/or Company pursuant to this
Agreement.
(b) Purchaser will deliver, or cause to be delivered,
to the Seller:
(i) the Purchase Price payable in the manner
described in Section 2.3;
(ii) certified copies of resolutions duly
adopted or consented to by the board of directors of Purchaser
approving the execution and delivery by Purchaser of this Agreement and
the consummation of the Contemplated Transactions;
(iii) certificates contemplated by Sections 11.1,
11.2., 11.3 and 11.4;
(iv) the Covenant Not To Compete executed by
Company;
(v) the Escrow Agreement executed by Purchaser;
(vi) the Endorsement Agreement executed by
Company;
(vii) the Transition Services Agreement executed
by Company; and
(viii) a closing certificate executed by
Purchaser in substantially the form attached as Exhibit E-2;
-----------
(ix) opinion letters of counsel to Purchaser,
Xxxxxx & Xxxxxxx, P.C. and Xxxxxx Xxxxxx P.C., in substantially the
form attached as Exhibit G-1 and Exhibit G-2; and
----------- -----------
12
(x) all other certificates, instruments and
documents to be delivered by Purchaser pursuant to this Agreement.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Purchaser as follows:
5.1 Organization; Good Standing, Licenses.
-------------------------------------
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and with
all requisite power to enter into and perform its obligations under this
Agreement.
(b) Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York,
with full corporate power and authority to (i) conduct its Business as it is now
being conducted, (ii) own its properties and assets, and (iii) perform its
obligations under all material Contracts to which it is a party. Company is duly
qualified to do Business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction and where the nature of its
business or the property owned or leased by it makes qualification necessary,
which states and jurisdictions are set forth on Schedule 5.1(b) of the
Disclosure Schedules.
(c) Company is duly licensed to sell property and
casualty insurance in the states and jurisdictions listed on the attached
Schedule 5.1(c) of the Disclosure Schedules, which Schedule also lists the
product lines Company is licensed to sell in the listed states and
jurisdictions.
(d) Company keeps and maintains books, accounts
and records that accurately account in all material respects for and reflect the
assets, properties, liabilities, obligations, affairs and results of the conduct
and operation of its Business. The minute books of Company contain an accurate
and complete record in all material respects of all meetings and consents of its
shareholder(s) and board of directors, and of the issuance of the issued and
outstanding Company Common Stock. Those books and records, and all records,
deeds, agreements and other documents relating to the affairs of Company are in
the control of Company and in the possession of the Company or Iron Mountain
Records Management, Syracuse, New York.
(e) Company has no subsidiaries and has no
ownership interest in any joint venture, partnership, limited liability company
or similar business organization.
5.2 Capitalization.
--------------
(a) Company's authorized capitalization consists
of two hundred sixty-five thousand (265,000) shares of $20 par, common stock,
all of which are issued and outstanding.
13
(b) Seller is the beneficial and record owner of
the Purchased Shares, which are free and clear of all Encumbrances.
(c) Subject to the receipt of any required Consents
set forth on Schedule 5.3(c) and Schedule 6.2(c) of the Disclosure Schedules,
----------------
Seller has complete and unrestricted power to sell, assign, and deliver good and
marketable title to the Purchased Shares to Purchaser.
(d) The Purchased Shares are duly authorized,
validly issued, fully paid, and nonassessable and constitute all of the issued
and outstanding shares of capital stock of Company. There are no outstanding
options, warrants or other rights or agreements, including conversion or
preemption rights or rights of first refusal, for the issuance of additional
shares of stock by Company.
5.3 Authority; No Conflict.
----------------------
(a) This Agreement has been duly approved by the
Board of Directors of Seller. This Agreement constitutes the legal, valid, and
binding obligation of Seller, and is enforceable against Seller in accordance
with its terms.
(b) The consummation of the Contemplated
Transactions will not, directly or indirectly:
(i) conflict with, or result in a violation
of, any provision of the certificate of incorporation, by laws or other
organizational documents of Seller or Company;
(ii) subject to the receipt of the Consents
set forth on Schedule 5.3(c) and Schedule 6.2(c) of the Disclosure
Schedules, contravene, conflict with, or result in a material violation
of any existing license or other Governmental Authorization held by Seller
or Company, or give any Governmental Body or other Person the right to
challenge the Contemplated Transactions or to exercise any remedy or
obtain any relief under any Legal Requirement or any Order to which
Seller or Company are subject, or give any Governmental Body the right
to revoke, withdraw, suspend or terminate any Governmental
Authorization held by Seller or Company.
(iii) subject to the receipt of the Consents
set forth on Schedule 5.3(c) and Schedule 6.2(c) of the Disclosure
Schedules, contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel or terminate, any material Contract to which Company is a
party; or
(iv) result in the imposition or creation
of any Encumbrance upon or with respect to any of the property or assets
of Company or the Purchased Shares.
(c) Except as set forth in Schedule 5.3(c) of the
Disclosure Schedules, to the Knowledge of Seller, neither Seller nor Company is,
or will be, required to give any notice to or obtain any
14
Consent from any Person or Governmental Body in connection with the
Contemplated Transactions.
5.4 Financial Statements.
--------------------
(a) The audited Financial Statements (i) present
fairly, in all material respects, the admitted assets, liabilities and surplus
of Company as of their respective dates, of and for the years referred to in the
Financial Statements, in accordance with SAP, and the related statutory
statements of income, changes in surplus and cash flows, and (ii) reflect the
consistent application of SAP throughout the periods involved, except as
disclosed in the audited Financial Statements. The unaudited monthly and
quarterly Financial Statements (i) present fairly, in all material respects, the
admitted assets, liabilities, and surplus of Company and the related statutory
statements of income (monthly statements) and, in the case of quarterly
statements, changes in surplus and cash flows, as of their respective dates,
subject to normal recurring year-end adjustments the effect of which will not,
individually or in the aggregate, be materially adverse, and, in the case of
quarterly statements, (ii) reflect the consistent application of SAP throughout
the periods involved.
5.5 No Material Adverse Change. Except as disclosed in
----------------------------
Schedules, since the Balance Sheet Date there has not been any Material Adverse
Change.
5.6 Title To Assets; Encumbrances.
-----------------------------
(a) The Company does not own or lease any real
property and as of the Closing, will not lease any Personal Property.
(b) The Company has good and marketable title
to all machines, furniture, equipment and other tangible personal property
used exclusively by Company in its Business and located on the third floor of
Seller's headquarters building, 000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxx 00000 as
of Closing. Hereafter, these assets are referred to as "Owned Tangible Personal
Property." All of the Owned Tangible Personal Property are owned by Company free
and clear of all Liabilities or Encumbrances.
(c) Except as disclosed in Schedule 5.6 of the
------------
Disclosure Schedules, Company has good and marketable title to, or right to use
by valid enforceable Lease or Contract, all other properties and assets (whether
real, personal, tangible, intangible or otherwise) Company purports to own or
which Company has exclusive use of in its Business. All of such properties or
assets and such Owned Tangible Personal Property are referred to collectively as
"Personal Property."
(d) Seller and its Related Persons have good and
marketable title to the Agway, Inc. Assets to be transferred to Purchaser
pursuant to Article 3 of this Agreement (subject to the software licenses listed
on Schedule 3.1(c)) (of the Disclosure Schedules), free and clear of all
Liabilities or Encumbrances except as listed in Schedule 3.1(c) of the
Disclosure Schedules, which Liabilities or Encumbrances shall be satisfied or
released prior to the Closing.
15
(e) With respect to each Lease of the Personal
Property (i) Company has a valid leasehold interest in such Personal Property,
(ii) such Lease is in full force and effect in accordance with its terms, (iii)
all rents and other monetary amounts that have become due and payable thereunder
have been paid in full, (iv) no waiver, indulgence, extension or postponement of
any obligations thereunder has been granted by any party thereto, (v) there
exists no default or breach (or an event that, with notice or lapse of time or
both, would constitute a default or breach) under such Lease, and (vi) the
transactions contemplated by this Agreement will not constitute a default or
breach, or cause the termination or any modification, of such Lease.
5.7 Taxes.
-----
(a) Except as set forth in Schedule 5.7(a) of the
----------------
Disclosure Schedules, all material Tax Returns that were required to be filed by
or on behalf of Company have been prepared and filed in accordance with
applicable Legal Requirements (taking into account any valid extensions of time
for filing). All such Tax Returns were true and correct in all material aspects
and there is no unresolved audit, claim, adjustment, or deficiency proposed or
assessed concerning any Tax Liability relating to Company. All Tax Liabilities
that have become due pursuant to any such Tax Returns and any tax assessment
relating to Company have been paid, or provision has been made for the payment
thereof, except those Tax Liabilities, if any, listed in such Schedule 5.7(a) of
the Disclosure Schedules that are being contested in good faith and for which
adequate reserves (determined in accordance with SAP) have been provided in the
Financial Statements. Any positions taken on such Tax Returns that could give
rise to a substantial understatement of federal income Tax to Seller or Company
within the meaning of Section 6662(d) of the Code either were based on
"substantial authority" or were "adequately disclosed" and had a "reasonable
basis," in each case within the meaning of Section 6662(d)(2)(B) of the Code. No
claim has ever been made by any jurisdiction where no Tax Return has been filed
by or on behalf of Company that Company is or may be subject to Tax by such
jurisdiction.
(b) There are no agreements, waivers or other
arrangements providing for the extension of time with respect to the filing of
any Tax Return, the payment of any Tax Liability, or the assessment of any Tax
Liability with respect to Company. Except as set forth in Schedule 5.7(b) of the
Disclosure Schedules, there are no Tax Sharing Arrangements. Company has not
made, is not obligated to make, and is not a party to any agreement or
arrangement under which it might become obligated to make any "excess parachute
payments" within the meaning of Section 280G of the Code. No consent has been
given to the application of Section 341(f) of the Code (or any predecessor
provision) to Company. No closing agreement pursuant to Section 7121 of the Code
(or any predecessor provision) or any similar provision of state or local law
has been entered into by or with respect to Company. No adjustment pursuant to
Section 481 of the Code (or any predecessor provision) or any similar provision
of state or local law has been agreed to by or on behalf of Company, nor is any
such adjustment required to be made, by reason of any change in any accounting
method by Company, nor has any application for any such change been made to any
Tax Governmental Body. Neither the IRS nor any other Tax Governmental Body has
proposed any such change or adjustment of accounting method. All ceding
commissions and expenses, if any, paid or accrued by Company in connection with
any reinsurance arrangement or contract or transaction have been capitalized and
amortized over the life or lives of such reinsurance arrangement or contract in
16
accordance with applicable Tax law. Company has never been either a
"distributing corporation" or a "controlled corporation" in a transaction
described in Section 355 of the Code. Except for the affiliated group of
corporations of which Seller is the parent and Company is a member. Company has
never been a member of any affiliated, consolidated, combined or unitary group
or participated in any other arrangement whereby any income, revenues, receipts,
gain or loss of Company was determined or taken into account for Tax purposes
with reference to or in conjunction with any other Person, nor does Company have
any Liability for Taxes for any other Person, except for the affiliated group of
corporations of which Seller is the parent and Company is a member, under
Treasury Regulation Section 1.1502-6(a) (or any similar provision of any other
provision of state, local, or foreign law). Company is not and has never been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code.
5.8 Employee Benefits.
-----------------
(a) Except as set forth on Schedule 5.8(b) of the
----------------
Disclosure Schedules, neither Company nor any ERISA Affiliate maintains, or has
ever maintained or contributed to, or been required to contribute to any
Employee Benefit Plan covered by Title IV of ERISA or any Multiemployer Plan (as
defined in ERISA Section 3(37)(A)).
(b) Company Employees participate in various plans
sponsored by Seller, including those listed on Schedule 5.8(b) of the Disclosure
Schedules, which is a true and complete list of each Employee Benefit Plan and
each pension, retirement, profit sharing, deferred compensation, or other
similar plan, arrangement or agreement; each medical, dental or other health
insurance plan; each life or disability insurance plan; each severance plan; and
each sick-time, paid-time-off, vacation pay and other personnel policy or
payroll practice, which provides benefits to Company Employees ("Current
Plans"). Seller may also have sponsored Employee Benefit Plans, pension,
retirement, profit sharing, deferred compensation and other similar plans;
medical, dental or other health insurance plans; life or disability insurance
plans; severance plans; and sick-time, paid-time-off, vacation pay and other
personnel policy or payroll practices for former Company Employees, such plans
and the Current Plans hereinafter referred to collectively as "Plans".
(c) All Plans have been administered and are in
compliance with their individual terms and with applicable law, so that neither
Company nor Purchaser shall be subject to any Damages or Liability attributable
to any period prior to the Closing Date that could reasonably be expected to
have a Material Adverse Effect.
(d) Seller has made, or will make on or after
the Closing Date, all Plan contributions required and attributable to service
performed by participants in the Plans on or before the Closing Date.
(e) Seller shall be responsible for the payment of
claims by Company Employees for welfare and severance benefits under the Plans
to the extent the claims arise from losses that occur, or from covered expenses
that are incurred, on or before the Closing Date.
5.9 Legal and Regulatory Compliance. To the Knowledge of
-------------------------------
Seller, Company operates the Business in substantial compliance with all
applicable federal and state statutes and all Legal Requirements and
17
Governmental Authorizations. Within the past five years from the date of this
Agreement, neither Seller nor Company has received any written notice of
noncompliance by the Company with any applicable Legal Requirements or
Governmental Authorizations where failure to be in compliance could reasonably
be expected to have a Material Adverse Effect.
5.10 Legal Proceedings and Contingent Liabilities; Orders.
----------------------------------------------------
(a) Except as set forth in Schedule 5.10 of the
-------------
Disclosure Schedules, and for (i) claim files or Proceedings relating to claims
for policy benefits under insurance policies issued by Company and (ii) for
Eligible Claims as defined in the Escrow Agreement:
(1) there is no pending Proceeding that has
been commenced by or against Company;
(2) no Proceeding is pending or, to the
Knowledge of Seller Threatened, that challenges, or that would have
the effect of preventing or rendering illegal the Contemplated
Transactions;
(3) to the Knowledge of Seller, no
Proceeding of the type described in Section 5.10(a)(1) has been
Threatened; and
(4) to the Knowledge of Seller, Company
has no material contingent liabilities.
(b) There is no material Order to which the Company
or any of its property or assets, or the Agway, Inc. Assets, is subject.
5.11 Absence of Certain Changes and Events. Since the
-----------------------------------------
Balance Sheet Date, Company has conducted its Business in the ordinary course
and except as set forth in Schedule 5.11 of the Disclosure Schedules, the
Company has not:
(a) suffered any damage, destruction or loss,
whether or not covered by insurance, which has a Material Adverse Effect;
(b) suffered or experienced any Material Adverse
Change;
(c) issued or agreed to issue any additional
securities;
(d) declared, set aside or paid any dividend or
other distribution in respect of its capital stock, made or agreed to any
redemption, purchase or other acquisition of any shares of its capital stock
or subdivided, consolidated or otherwise recapitalized, its capital stock or
authorized any of the foregoing;
(e) transferred, sold, conveyed or disposed of any
of its assets other than in the ordinary course of business and consistent with
past practices; or
18
(f) encumbered any of its assets or incurred any
indebtedness or other liabilities (contingent or absolute), other than unsecured
debts and liabilities incurred in the ordinary course of business and consistent
with past practices;
(g) suffered any change in the status of any
certificate of authority;
(h) other than in the ordinary course of business,
changed any products, policy provisions, licenses, permits, reinsurance,
operations, properties, pricing, underwriting, investment or accounting
practices or methods of Company;
(i) been involved in any Proceeding with respect
to the merger, consolidation, supervision, rehabilitation, conservation,
liquidation or reorganization of Company;
(j) implemented any change in a Plan (as defined in
Section 5.8(b)), ;
(k) experienced any change in any terms or
provisions of any license or other Contract related to Intellectual Property
listed on Schedule 5.12 of the Disclosure Schedules in response to Section
5.12(a)(iv), other than in the ordinary course of business, or experienced any
change in any terms or provisions of any other Contracts listed on Schedule 5.12
and/or Schedule 5.13(a) of the Disclosure Schedules; or
(l) other than in the ordinary course of business,
implemented any change in compensation, fees, commissions or other benefits paid
or payable by Company to any employees, officers, directors, agents, managing
general agents, brokers, or third-party administrators.
5.12 Contracts. (a) Except for Contracts of insurance and
---------
reinsurance, Schedule 5.12 of the Disclosure Schedules sets forth a complete and
accurate list of, and Seller has made available to Purchaser for its review true
and complete copies, including all amendments, of:
(i) all loan or credit agreements, lines of credit,
letters of credit, promissory notes, land or conditional sales
contracts, other title retention agreements, security agreements,
mortgages, deeds of trusts, indentures, bonds, guaranties of the debts
or obligations of a third party, or other contracts, agreements or
instruments pursuant to which Company is indebted or liable to any
person for borrowed money or for the deferred purchase price of any
property, capitalized leases pursuant to which Company leases
Personal Property, and pledge agreements to which Company is a party;
(ii) each Contract that involves performance of
services or delivery of goods or materials by or to Company of an amount
or value in excess of Fifty Thousand Dollars ($50,000) per year;
(iii) each Contract that was not entered into in the
ordinary course of business and that involves expenditures or receipts
of Company in excess of Fifty Thousand Dollars ($50,000) per year;
19
(iv) each licensing agreement or other Contract with
respect to any of the Intellectual Property;
(v) each employment Contract or consulting agreement
between Company and any employee, group of employees, or other Person;
(vi) each Contract containing covenants that purport
to restrict, in any material respect, Company's business activity or
limit, in any material respect, the freedom of Company to engage in any
line of business or to compete with any Person;
(vii) each Contract for capital expenditures in excess
of Fifty Thousand Dollars ($50,000) to which Company is a party;
(viii) each material Contract entered into by Company
for, or regarding, the sale or distribution of insurance products, by
any broker, agent or other Representative of Company, and each agent
incentive plan, which will be outstanding or otherwise in effect at
the Closing Date, together with the name and address of each broker,
agent or other Representative of Company that is engaged in the sale or
distribution of insurance products sold by Company; and
(ix) each Lease.
With respect to contracts referenced in Section 5.12(a)(viii), it is agreed that
Schedule 5.12 of the Disclosure Schedules may list Company's standard contract
forms together with a list of brokers, agents, and other Representatives as of
May 7, 2002, rather than a list of each individual Contract. For purposes of
Closing, this list shall be updated to the end of the quarter immediately
preceding the Closing.
(b) To the Knowledge of Seller, but without
investigation or review of individual agency contracts, except as set forth in
Schedule 5.12 of the Disclosure Schedules, each Contract or Lease identified
in Schedule 5.12 of the Disclosure Schedules is in full force and effect and is
valid and enforceable in accordance with its terms.
5.13 Insurance; Reinsurance.
----------------------
(a) Schedule 5.13(a) of the Disclosure Schedules sets
forth an accurate and complete list of all insurance policies of any nature
whatsoever maintained by Company, or on its behalf, as an insured at any time
during the three year prior to the date of this Agreement and the annual or
other premiums payable from time to time for each such policy. There are no
outstanding requirements or recommendations of any insurance company that issued
any such policy or of any Governmental Body that requires or recommends any
changes in the conduct of the Business of, or any repairs or other work to be
done on or with respect to any of the properties or assets of, Company.
(b) Schedule 5.13(b) of the Disclosure Schedules
----------------
contains an accurate and complete list of all forms of insurance policies,
contracts and endorsements currently issued. Company has provided Purchaser
20
with an accurate and complete copy of each such form. Each such form has been
filed or approved by all appropriate Governmental Bodies and complies with
all applicable laws, rules and regulations.
(c) Since January 1, 1997 Company has not been the
ceding company in an assumption reinsurance transaction or any other transaction
pursuant to which another person or entity assumed, or purported to assume,
direct or primary liability for any insurance policies and/or contracts issued
or assumed by Company.
(d) Except as disclosed in Schedule 5.13(d) of the
-----------------
Disclosure Schedules, Company is not a party to any joint venture, partnership
or similar arrangement with respect to the sale, distribution or marketing of
any insurance products.
5.14 Employees and Agents.
--------------------
(a) Schedule 5.14(a) of the Disclosure Schedules
is a true, accurate and complete list containing the name and current position,
of each person who is a Company Employee on the date of this Agreement. A
separate schedule listing the compensation, including incentive plans, for each
Company Employee has been provided to Purchaser.
(b) All Company Employees are employees-at-will.
(c) Schedule 5.14(c) of the Disclosure Schedules
----------------
contains an accurate and complete list of all managing general agents, agents
and brokers which, are currently engaged by Company to offer, sell, or solicit
the offer or sale of, any insurance policies or contracts, or other insurance
products, together with the premium volume realized by Company from each of such
managing general agents, agents and brokers during each of the years 1999, 2000
and 2001, and the three months ended March 31, 2002. There have previously been
delivered to the Purchaser sample copies of contracts, agreements and other
arrangements between Company and such managing general agents, agents or brokers
which are currently in effect or under which Company has any remaining
obligations or liabilities, including sample commission schedules thereto. No
such contract, agreement or arrangement includes any covenant regarding
exclusivity for the benefit of any managing general agent, agent or broker.
(d) Except as set forth in Schedule 5.14(d) of
-----------------
the Disclosure Schedules, since December 31, 1999, no engagement by Company of
any managing general agent, agent or broker to offer, sell, or solicit the offer
or sale of, any insurance policies or contracts, or other insurance products,
has been terminated or cancelled nor is the engagement of any such managing
general agent, agent or broker in the process of being terminated pursuant to
the applicable agency contract or agreement. Except as disclosed on Schedule
5.14(d) of the Disclosure Schedules, there are no disputes between Company and
any managing general agents, agents or brokers.
(e) To the Knowledge of Company, each managing
general agent, agent and broker of Company (i) is and has been duly and
properly licensed by all applicable Governmental Bodies, (ii) has engaged in no
conduct which could subject Company to any sanctions by any Governmental Body or
to any Liability (other than express liabilities under insurance contracts and
21
policies), and (iii) has engaged in no conduct which could subject such managing
general agent, agent or broker to sanctions by any Governmental Body.
(f) Except as set forth in Schedule 5.14(f), the
----------------
Company does not provide, is not obligated to provide, and has made no
commitment to provide, any compensation, fringe benefits, retirement benefits or
other benefits which are not expressly provided for in the contracts, agreements
and other arrangements referred to in Section 5.14(c) or 5.8(b).
(g) The Company has not contracted with any
third party to provide claims management services relating to claims arising
under insurance contracts issued or assumed by the Company.
5.15 Labor Matters.
-------------
(a) The Company is not a party to any labor
Contract, and no strike, slowdown, picketing, work stoppage, labor arbitration
or Proceeding in respect of the grievance of any Company Employee is pending or
Threatened, and no labor organizational activity or other labor dispute against
or affecting the Company, is pending or, to the Knowledge of Seller, Threatened;
(b) all salaries, wages and other compensation
(including bonuses, commissions and overtime), sick leave, severance pay and
vacation benefits for all Company Employees for all periods through the date
of this Agreement have been paid in the ordinary course of business or the cost
thereof has been accrued in the Financial Statements;
(c) Company has maintained and continues to
maintain, true, accurate and complete payroll, personnel and time records for
purposes of compliance with all federal and state minimum wage and overtime laws
and right to work laws, including, without limitation, adequate documentation of
the applicability of exemptions under such laws;
(d) to the Knowledge of Seller, Company is in
substantial compliance with all Legal Requirements relating to (i) employment
and Company Employees, (ii) terms and conditions of employment, (iii) wages and
hours and (iv) Occupational Safety and Health; and
(e) except as set forth in Schedule 5.15(e) of the
----------------
Disclosure Schedules, there are no pending or Threatened, and during the last
five years have not been any, formal employment-related Proceedings against
Company, including, but not limited to, violations of the Age Discrimination in
Employment Act of 1967, the Americans With Disabilities Act of 1990, the
Rehabilitation Act of 1973, the Family and Medical Leave Act of 1993, the Civil
Rights Act of 1866 and 1964, the Employee Retirement Income Security Act, the
Occupational Safety and Health Act, and any other employment-related Legal
Requirements.
22
5.16 Intellectual Property.
---------------------
Schedule 5.16 of the Disclosure Schedules sets
--------------
forth a complete and accurate list of all Intellectual Property owned by
Company, and all Contracts to which Company is a party or by which Company is
bound that relate to Intellectual Property or similar proprietary rights of
other Persons that are licensed by Company. Except for the Intellectual Property
set forth on Schedule 5.16 of the Disclosure Schedules, Company does not use any
Intellectual Property in the conduct of the Business. Except as set forth in
Schedule 5.16(a) of the Disclosure Schedules, (a) there are no outstanding and,
to the Knowledge of Seller, no Threatened disputes or disagreements with respect
to any Intellectual Property and (b) Company has not and does not infringe on
the intellectual property rights of any Person.
5.17 Relationships With Related Persons. Except as set
-------------------------------------
forth in Schedule 5.17 of the Disclosure Schedules:
(a) no Related Person of Company has any
interest in the assets of Company reflected in the Financial Statements; and
(b) no Related Person of Company is a party to any
material Contract with, or has any material claim or right against, Company.
5.18 Powers of Attorney and Suretyships. Except as set
forth in Schedule 5.18 of the Disclosure Schedules, Company has no general
or special powers of attorney outstanding (whether as grantor or grantee
thereof) and has no obligation or liability (whether actual, accrued, contingent
or otherwise) as guarantor, surety, co-xxxxxx, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks endorsed or made in the ordinary course of business.
5.19 Warranties. Company does not provide any warranties
----------
(written, oral or otherwise) with respect to any services or products that it
provides.
5.20 Brokers or Finders. Except for compensation owed to
------------------
Capital Formation Group of Rochester, L.P. which shall be the sole
responsibility of Seller, neither the Seller nor Company has incurred any
obligation or Liability for brokerage or finders' fees or agents' commissions or
other similar payments in connection with this Agreement or the Contemplated
Transactions.
5.21 Exclusivity of Representations. The representations
--------------------------------
and warranties made by Seller in this Article 5 are in lieu of, and are
exclusive of, all other representations and warranties by Seller including,
without limitation, any implied warranties. Seller hereby disclaims any
representations or warranties, express or implied, not set forth in this Article
or in any document to be delivered by Seller at Closing.
23
5.22 Disclosure. No representations or warranty by Seller
----------
to Purchaser contained in this Agreement, and no statement contained in the
Disclosure Schedules or any certificate furnished by Seller to Purchaser
pursuant to the provisions hereof, contains or will contain any untrue statement
of material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein not misleading.
ARTICLE 6
---------
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to Seller as follows:
6.1 Organization and Good Standing. Purchaser is a
------------------------------
corporation duly organized, and validly existing under the laws of the State of
Indiana, and with all requisite power to enter into and perform its obligations
under this Agreement.
6.2 Authority; No Conflict.
----------------------
(a) This Agreement has been duly approved by the
Board of Directors of Purchaser. This Agreement constitutes the legal, valid,
and binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms.
(b) Neither Purchaser's execution and delivery
of this Agreement nor the performance by Purchaser of its obligations under this
Agreement will directly or indirectly:
(i) conflict with, or result in a violation
of, any provision of the certificate of incorporation, bylaws or other
organizational documents of Purchaser;
(ii) subject to the receipt of any required
consents, result in a violation of any Legal Requirement or Order to
which Purchaser may be subject; or
(iii) subject to the receipt of any required
consents, result in a violation of any Contract to which Purchaser
is a party or by which Purchaser may be bound.
(c) Except as set forth in Schedule 6.2(c) of the
Disclosure Schedules, Purchaser is not required to give any notice to or obtain
any Consent from any Person or Governmental Body in connection with the
Contemplated Transactions.
6.3 Certain Proceedings. There is no pending Proceeding
--------------------
that has been commenced against Purchaser and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
the Contemplated Transactions. To the Knowledge of Purchaser, no such Proceeding
has been Threatened.
6.4 Brokers or Finders. Purchaser has not incurred any
-------------------
obligation or Liability for brokerage or finders' fees or agents' commissions or
other similar payments in connection with this Agreement and the Contemplated
24
Transactions for which the Seller will directly or indirectly have any
Liability.
6.5 Investment Representations. Purchaser is acquiring
----------------------------
the Purchased Shares as an investment, and not with a view to, or for, sale or
transfer in connection with any distribution thereof, or for any sale or
transfer thereof.
6.6 Financial and Regulatory Matters. Purchaser has the
---------------------------------
financial capacity to perform all of its obligations relating to the
Contemplated Transactions, and Purchaser has no knowledge of any reason why it
will be unable to obtain any required Governmental Authorization.
6.7 Forward-Looking Statements. Purchaser acknowledges that
it has made its decision as to the future prospects and profitability of the
Company after Closing based on, among other things, the representations and
warranties of Seller set forth in this Agreement and Purchaser's own business
review and judgment, but not in reliance on any projections, predictions or
similar forward-looking statements by the Seller or anyone acting on its behalf.
ARTICLE 7
---------
DUE DILIGENCE; UPDATES TO SCHEDULES
-----------------------------------
7.1 Completion; Verification. Prior to entering into this
-------------------------
Agreement, Purchaser was provided the opportunity to perform its due diligence
investigation concerning Company, including the opportunity to review such
books, records and documents of Company, and to interview Company management and
personnel of Seller and Company, as Purchaser deemed necessary. Purchaser
confirms that it has completed its due diligence. Hereafter, Purchaser's further
due diligence shall be limited to verifying and confirming the continued
accuracy of the representations and warranties of the Seller, and the compliance
of Seller with its covenants, as set forth in this Agreement. Purchaser shall
coordinate any further due diligence through Xxxxxx X. Xxxxxx. During any
examination by Purchaser pursuant to the provisions of this Section 7.1,
Purchaser shall not disrupt or adversely affect any aspect of the operations of
Company or the morale of Company's employees.
7.2 Notice of Breach. Purchaser acknowledges that one of the
----------------
purposes of due diligence is to permit Purchaser to conduct examinations of the
Business, property and assets of the Company so as to enable Purchaser to
independently verify whether the representations and warranties made by the
Seller pursuant to Article 5 are accurate and correct in all material respects.
Accordingly, if during the course of Purchaser's due diligence an officer,
manager, accountant or attorney acting for or on behalf of Purchaser, discovers
a fact or circumstance which causes or would cause a reasonable person to
believe that a Breach of any of the representations and warranties of Seller set
forth in Article 5 exists or will result, Purchaser shall provide written notice
thereof to Seller (i) describing, in detail, the extent and nature of the Breach
and (ii) stating, if such is the case, its intention to terminate this Agreement
in the event that Seller is unable to remedy Breach within a commercially
25
reasonable time. The failure to give this notice by Purchaser shall be deemed a
waiver by Purchaser of the Breach. If, following any such notice, Seller fails
to remedy the Breach, or to otherwise hold Purchaser harmless from the
consequences of the Breach, within a commercially reasonable time, Purchaser
shall have the option to either waive the Breach and close without further claim
against Seller, or to terminate this Agreement in accordance with Article 12.
7.3 Updates to Schedules. Promptly following the receipt of
---------------------
all Consents, Seller shall update any and all of the Disclosure Schedules
provided pursuant to Articles 3 or 5 hereof to reflect each and every change to
each Schedule occurring or arising after the date of this Agreement and prior to
the Closing Date that would make any Schedule incomplete or inaccurate or which,
if in existence or having occurred as of or prior to the date of this Agreement,
would have been required to be set forth or described in any Disclosure Schedule
to this Agreement (collectively, the "Updated Schedules"). If any Updated
Schedule discloses a fact or circumstance relating to the Company that
constitutes a Materially Adverse Change that is unacceptable to Purchaser,
Purchaser shall notify Seller of its intention to terminate this Agreement by
reason of the Materially Adverse Change unless an appropriate adjustment is made
as hereafter provided. In that event, Seller and Purchaser shall negotiate in
good faith regarding an appropriate adjustment of the Purchase Price or other
modification of this Agreement in light of the Materially Adverse Change. If
Seller and Purchaser are unable to agree on such modification or adjustment
within thirty (30) days following Purchaser's notice, Purchaser may either elect
to Close notwithstanding the Materially Adverse Change or Purchaser may
terminate this Agreement by written notice to Seller.
ARTICLE 8
---------
COVENANTS OF SELLER
-------------------
8.1 Operation of the Business of Company.
------------------------------------
(a) Between the date of this Agreement and the Closing
Date, unless otherwise agreed in writing by Purchaser, Seller will cause Company
to:
(i) except as otherwise allowed or required
pursuant to the terms of this Agreement, conduct business only in the
ordinary course and consistent with past practices;
(ii) use commercially reasonable efforts to
preserve intact the current business organization of Company, keep
available the services of the current officers, employees, and agents
of Company, and maintain the relations and good will with all material
customers, employees, agents, and others having material business
relationships with Company; it being recognized, however, that the
announcement of the proposed sale of Company may in and of itself have
some adverse affects on Company's personnel and business organization;
(iii) maintain liability, property and casualty
insurance coverage comparable to coverage provided for other
subsidiaries of Seller;
(iv) continue to prepare Financial Statements in
accordance with SAP and in the ordinary course, and to furnish
Purchaser with copies of these Financial Statements promptly after
they are completed;
26
(v) continue to file all required Tax Returns
when due (including any extensions for filing) and to pay all Taxes
when due except to the extent that such Taxes are being contested in
good faith;
(vi) refrain from incurring any long-term
indebtedness for borrowed money;
(vii) consummate the Related Transactions with
Seller under Article 3 of this Agreement;
(viii) except as otherwise provided in Section 3.3,
refrain from selling or transferring any properties or assets unless
(A) properties or assets are disposed of in the ordinary course of
business, or (B) properties or assets are replaced by properties or
assets substantially similar in value; and
(ix) use commercially reasonable efforts not to
do, or allow to be done, anything which would cause a breach of a
representation, warranty or covenant by Seller.
(b) From the date of this Agreement through the Closing
Date, Seller shall not cause or permit Company to pay any dividends or redeem
any Company Common Stock.
8.2 No Negotiation. Until such time, if any, as this
---------------
Agreement is terminated pursuant to Article 11, Seller will not, nor will it
cause or permit Company or any of their respective Representatives to, directly
or indirectly negotiate with any Person other than Purchaser concerning any
transaction involving the sale of Company or all or substantially all of the
property or assets of Company, or of any Company common stock, or any merger,
consolidation, business combination, or similar transaction involving Company.
8.3 Consents.
--------
(a) As promptly as practicable after the date of this
Agreement, Seller will cause Company and any of Seller's Related Parties to make
all filings which are required to be made by Company in accordance with Legal
Requirements in order to consummate the Contemplated Transactions. Any filing
fees incurred in connection with any filings required under Legal Requirements
shall be shared equally by Seller and Purchaser.
(b) If any material Contract to which Company is a party
requires the Consent of any Person that is a party thereto to the Contemplated
Transactions, the Seller will cause Company to use its commercially reasonable
best efforts, with Purchaser's cooperation, to obtain the written Consent prior
to Closing.
8.4 Cooperation. Between the date of this Agreement and the
-----------
Closing Date, Seller will, and will cause Company and each other Related Party
of Seller to, cooperate with Purchaser and its Related Parties with respect to
27
all filings that any of them are required by Legal Requirements to make in
connection with the Contemplated Transactions.
ARTICLE 9
---------
COVENANTS OF PURCHASER
----------------------
9.1 Consents.
--------
(a) As promptly as practicable after the date of this
Agreement, Purchaser will, and will cause each of its Related Persons to, make
all filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions including all filings to obtain required Governmental
Authorizations. Any filing fees incurred in connection with any filings required
under Legal Requirements shall be shared equally by Seller and Purchaser.
(b) If any material Contract to which Purchaser is a party
requires the Consent of any Person that is a party thereto to the Contemplated
Transactions, the Purchaser will use its commercially reasonable best efforts to
obtain the written Consent prior to Closing.
9.2 Cooperation. Between the date of this Agreement and the
-----------
Closing Date, Purchaser will, and will cause each Related Person of Purchaser
to, (a) cooperate with Company and the Seller with respect to all filings that
Seller and/or Company are required by Legal Requirements to make in connection
with the Contemplated Transactions, and (b) cooperate with Company in obtaining
all of the necessary Consents.
ARTICLE 10
----------
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
-------------------------------------------------------
The obligation of Purchaser to pay the Purchase Price and to
take the other actions required to be taken by Purchaser at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Purchaser, in whole or in
part):
10.1 Accuracy of Representations. All of the representations
-----------------------------
and warranties of the Seller set forth in this Agreement shall have been
accurate in all material respects as of the date of this Agreement, and shall be
accurate as of the Closing Date as if made on the Closing Date, except to the
extent that the representations and warranties are untrue or inaccurate as of
the Closing Date because of (a) changes caused by actions or transactions
approved in writing by Purchaser, or (b) events or changes occurring between the
date of this Agreement and Closing Date that do not, in the aggregate, have a
Material Adverse Effect on the Business and assets of the Company, taken as a
whole.
10.2 Performance. The following shall be true, and Purchaser
-----------
shall receive a certificate of an officer of Seller to the effect that:
28
(a) all of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing shall have been duly performed and complied with in all material
respects;
(b) Seller shall have delivered, or caused the delivery
of, each of the documents required to be delivered pursuant to Section 4.2(a);
and
(c) all Encumbrances on the Agway, Inc. Assets, Personal
Property and other assets of Company shall have been released and discharged.
10.3 Consents. Each of the Consents and Governmental
--------
Authorizations identified or referred to in Schedules 5.3(c) and 6.2(c) of the
Disclosure Schedules, including, without limitation, any Consents required under
agreements with Seller's and/or Company's lenders, shall have been obtained and
be in full force and effect and Purchaser shall receive a certificate of officer
to that effect.
10.4 No Proceedings; No Material Adverse Change. No Proceeding
--------------
(a) involving any challenge to, or seeking Damages or other relief in connection
with, the Contemplated Transactions, or (b) that would have the effect of
preventing, materially delaying, making illegal, or otherwise materially
interfering with the Contemplated Transactions, shall be pending or threatened.
There shall have been no Material Adverse Change with respect to Company since
December 31, 2001 and Purchaser shall receive a certificate of officer to that
effect.
10.5 Agreements with Xx. Xxxxxx. Xx. Xxxxxx shall have executed
--------------------------
and delivered an Employment Agreement and a Non-Competition and Confidentiality
Agreement in form and substance acceptable to Purchaser.
ARTICLE 11
----------
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
----------------------------------------------------
The obligation of Seller to take the actions required to be
taken by the Seller at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by Seller, in whole or in part):
11.1 Accuracy of Representations. All of the representations
------------------------------
and warranties of Purchaser in this Agreement shall have been accurate in all
material respects as of the date of this Agreement and shall be accurate as of
the Closing Date as if made on the Closing Date and Seller shall receive a
certificate of officer to that effect.
11.2 Purchaser's Performance. The following shall be true, and
------------------------
Seller shall receive a certificate of officer to the effect that:
(a) Purchaser shall have paid the Purchase Price and made
the Escrow Deposit as provided in Sections 2.3 and 2.4 and shall have performed
29
and complied in all material respects with all other covenants and obligations
that Purchaser is required to perform or to comply with pursuant to this
Agreement at or prior to Closing; and
(b) Purchaser shall have delivered, or caused the
delivery of, each of the documents or other items required to be delivered by
Purchaser pursuant to Section 4.2(b) including, without limitation, the delivery
of the Purchase Price.
11.3 Consents. Each of the Consents and Governmental
--------
Authorizations identified or referred to in Schedule 5.3(c) and 6.2(c) of the
Disclosure Schedules must have been obtained and must be in full force and
effect and Seller shall receive a certificate of officer to that effect.
11.4 No Proceedings. No Proceeding (a) involving any challenge
--------------
to, or seeking Damages or other relief in connection with, the Contemplated
Transactions, or (b) that would have the effect of preventing, materially
delaying, making illegal, or otherwise materially interfering with the
Contemplated Transactions, shall be pending or threatened and Seller shall
receive a certificate of officer to that effect.
ARTICLE 12
----------
TERMINATION
-----------
12.1 Termination Events; Opportunity to Cure.
---------------------------------------
(a) Subject to Section 12.1(b), this Agreement may be
terminated on written notice:
(i) by either party, in the event of a Breach by the
other party of its obligations under this Agreement which remains
uncured after notice; or
(ii) by Purchaser, if any of the conditions in
Article 10 have not been satisfied in all material respects as of the
Closing Date, or if satisfaction of a condition is or becomes
impossible (other than through the failure of Purchaser to comply with
its obligations under this Agreement) and Purchaser has not waived the
condition on or before the Closing Date; or
(iii) by Seller, if any of the conditions in Article
11 have not been satisfied in all material respects as of the Closing
Date, or if satisfaction of a condition is or becomes impossible
(other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such
condition on or before the Closing Date; or
(iv) by mutual consent of Purchaser and Seller; or
(v) by Seller or Purchaser, if the Closing does not
occur by December 31, 2002, provided, however, that the December 31,
2002 termination date will be automatically extended for up to 90
30
days if on December 31, 2002 any of the required Governmental
Authorizations have not been obtained, but are being pursued diligently
and all other conditions to the Closing are satisfied; or
(vi) by either party, if any Governmental Body
issues a final, nonappealable order prohibiting the Contemplated
Transactions; or
(vii) By Purchaser, if an Updated Schedule confirms
that a Material Adverse Change has occurred by reason other than
a Breach by Seller, and Purchaser and Seller, having followed the
procedures set forth in Section 7.3, have failed to reach agreement
in an appropriate adjustment or modification as therein provided.
(b) The foregoing not withstanding, this Agreement shall
not be terminated under Section 12.1(a)(i), (ii) or (iii) if the noncompliance,
nonperformance or breach can be cured or eliminated in which event the party
wishing to terminate shall not terminate unless and until (i) it has given the
other party written notice that noncompliance, nonperformance or a breach has
occurred, specifying the nature thereof and the action required to cure and (ii)
such noncompliance, nonperformance or breach shall not have been cured or
eliminated, or the party giving the notice shall not have otherwise been held
harmless from the consequences of the noncompliance, nonperformance or breach,
within thirty (30) days of the receipt of such notice.
12.2 Effect of Termination.
---------------------
(a) Subject to the limitations of Article 13, in the event
of a termination of this Agreement by the Seller pursuant to Section 12.1(a)(i)
or (iii), if termination resulted from a breach of a representation, warranty,
or covenant by Purchaser, Purchaser shall be liable to Seller for all Damages
incurred or suffered by Seller as a result thereof.
(b) Subject to the limitations contained in Article
13, in the event of termination of this Agreement by Purchaser pursuant to
Section 12.1(a)(i) or (ii), if the termination resulted from a Breach of a
representation, warranty or covenant by Seller, Seller shall be liable to
Purchaser for all Damages incurred or suffered by Purchaser as a result thereof.
(c) Except as otherwise provided in Sections 12.2(a)
or (b), in the event of termination of this Agreement as provided for in Section
12.1, this Agreement shall forthwith become null and void and there shall be no
liability or obligation on the part of any party hereto, or their respective
officers or directors except to the extent provided in Section 12.2(a) and (b).
Further, Purchaser shall return to Seller all copies of all information and
documents furnished to Purchaser by Seller or Company and shall destroy all
memoranda, notes, extracts and reproductions relating thereto.
31
ARTICLE 13
----------
INDEMNIFICATION; REMEDIES
-------------------------
13.1 Survival. All (i) covenants and obligations of the parties
--------
under this Agreement and (ii) all representations and warranties of Purchaser
under Sections 6.1, 6.2 and 6.3, and of Seller under Sections 5.1(a), (b), (c)
and (e), 5.2, 5.3 and 5.10(a)(2), of this Agreement shall survive the Closing
indefinitely. The representations and warranties of Seller under Section 5.7 and
5.8 shall survive the Closing for a period of time equal to the applicable
statute of limitations for each applicable Tax Return or claim under ERISA, as
the case may be, including any extension or waiver of such statute of
limitations. All other representations and warranties of Seller and Purchaser
under this Agreement will survive the Closing for a period of eighteen (18)
months.
13.2 Indemnification By Seller. Seller will, subject to the
---------------------------
limitations set forth in Sections 13.4 and 13.5, indemnify, defend and hold
Purchaser harmless from and against any Damages arising directly or indirectly
from any of the following, regardless of whether the claim arises under
contract, breach of warranty, tort or other legal theory:
(i) any Breach of any representation or warranty
made by Seller in this Agreement, the Schedules, or any supplements to
the Schedules;
(ii) any Breach by Seller of any of its covenants
or obligations under this Agreement; or
(iii) any claim by any Person for brokerage or
finder's fees or commissions or similar payments that remain unpaid
after the Closing and which are based upon any agreement or
understanding alleged to have been made by any Person with Seller (or
any Person acting on its behalf) in connection with the Contemplated
Transactions.
13.3 Indemnification By Purchaser. Purchaser will, subject
to the limitations set forth in Sections 13.4 and 13.5, indemnify, defend and
hold Seller harmless from and against any Damages arising directly or indirectly
from any of the following, regardless of whether the claim arises under
contract, breach of warranty, tort or other legal theory:
(i) any Breach of any representation or warranty
made by Purchaser in this Agreement or in any Schedule delivered
by Purchaser pursuant to or in connection with this Agreement;
(ii) any Breach by Purchaser of any of its covenants
or obligations under this Agreement; or
(iii) any claim by any Person for brokerage or
finder's fees or commissions or similar payments that remain unpaid
after the Closing and which are based upon any agreement or
understanding alleged to have been made by such Person with Purchaser
(or any Person acting on its behalf) in connection with the Contemplated
Transactions.
32
13.4 Time Limitations. Neither Seller nor Purchaser shall
-----------------
have any Liability under or in connection with, this Agreement pursuant to this
Article 13 or otherwise, unless the party seeking indemnification gives written
notice of its indemnity claim, specifying the factual basis of that claim in
reasonable detail, prior to the expiration of the applicable survival period
specified in Section 13.1.
13.5 Limitations on Amount of Liability. Notwithstanding
-------------------------------------
anything to the contrary contained in this Agreement, no claim for indemnity may
be asserted by Purchaser unless and until the aggregate amount of all claims
which would be indemnifiable but for the application of this Section 13.5
exceeds Two Hundred Thousand Dollars ($200,000) (the "Basket") and then only to
the extent of the excess; provided, however, the Basket shall not apply to
claims based on a breach of any representation or warranty under Sections
5.1(a), (b), (c) and (e), 5.2, 5.3, 5.7, 5.8, 5.10(a)(2) and/or any Breach of
Article 14 or Sections 3.9(b), (c) or (d). The maximum amount of Damages that
Seller shall, in the aggregate, be required to pay to Purchaser for any Breach
of a representation or warranty by Seller under Sections 5.1(a), (b), (c) and
(e), 5.2, 5.3, 5.7, 5.8, 5.10(a)(2) and/or any Breach of Article 14 or Sections
3.9(b), (c) or (d) of this Agreement shall be Twenty-One Million Dollars, but
the maximum amount of Damages that Seller shall, in the aggregate, be required
to pay to Purchaser pursuant to any other provision of this Agreement shall be
Three Million Dollars. The maximum amount of Damages that Purchaser shall, in
the aggregate, be required to pay to Seller pursuant to any provision of this
Agreement shall be Three Million Dollars.
13.6 Procedure for Indemnification - Third Party Claims.
--------------------------------------------------
(a) Promptly after receipt by a party entitled to
indemnification under Sections 13.2 or 13.3 of notice of the commencement of any
Proceeding against it, the indemnified party shall, if a claim is to be made
against an indemnifying party, give notice to the indemnifying party of the
commencement of the claim.
(b) If any Proceeding referred to in Section 13.6
(a) is brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of the Proceeding, the indemnifying party
shall, upon written notice given within thirty (30) days after the indemnified
party's notice is given, be entitled to assume the defense of the Proceeding. If
the indemnifying party elects to assume the defense of a Proceeding, the
indemnified party shall turn the Proceeding over to the indemnifying party who
shall, at its own expense, assume the contest and the indemnified party shall
have the right (but not the obligation) to participate, at its own expense, in
the defense thereof by counsel of its own choice, and shall cooperate with and
assist the indemnifying party as reasonably requested by the indemnifying party
in connection with the defense or contest, but the indemnifying party shall
retain control thereof and have final authority to determine all matters in
connection therewith. Notwithstanding the foregoing, the indemnifying party
shall have the right to control the defense, litigation and settlement of the
action only if the indemnifying party has agreed in writing to be responsible
for all costs, expenses, judgments and liabilities connected with the claim and
provided the indemnified party with a bond, letter of credit or other evidence
satisfactory to the indemnified party, in its sole discretion, of the
indemnifying party's ability to satisfy these obligations.
33
13.7 Exclusive Remedies. Subject to Section 13.8, the sole
-------------------
and exclusive remedy of Seller and Purchaser for any and all claims or Damages
relating to or arising out of or in connection with this Agreement shall be an
action for indemnity pursuant to this Section 13 which shall be governed and
limited by this Section 13.7, whether any such claim is made in contract, breach
of warranty, tort or otherwise, provided, however, that any provision in this
Agreement to the contrary notwithstanding, Purchaser's sole and exclusive remedy
for Damages or losses relating to assumed reinsurance obligations of the Company
shall be pursuant to the Escrow Agreement.
13.8 Certain Exclusions. Article 13 does not apply to the
-------------------
Covenant Not To Compete, the Endorsement Agreement, the Transition Services
Agreement, the Employment Agreement and the Non-Competition and Confidentiality
Agreement.
ARTICLE 14
----------
TAX MATTERS
-----------
14.1 Tax Returns.
-----------
(a) Seller shall prepare or cause to be prepared
(at its own cost and expense and in a manner consistent with past practice) all
Income Tax Returns required to be filed by or on behalf of Company for taxable
years or periods ending on or before the Closing Date. Seller shall, on a timely
basis, file such Tax Returns and pay the amounts shown as due thereon to the
appropriate Governmental Body. Subject to the foregoing, the income of Company
for the taxable year of Seller that includes the Closing shall be determined for
the period up to and including the Closing Date by closing the books of Company
as of the end of the Closing Date or by any other reasonable method agreed to by
Seller and Purchaser, except that (i) exemptions, allowances, or deductions that
are calculated on an annual basis (such as deductions for depreciation or
amortization) shall be apportioned on a time basis and (ii) such determination
shall be consistent with the principles of Treasury Regulation Section
1.1502-76. Company will furnish Tax information to Seller for inclusion in
Seller's federal consolidated Income Tax Return in accordance with the parties'
past custom and practice, and Purchaser will provide (or cause to be provided)
to Seller no later than 120 days prior to the due date (with extensions) of
Seller's Tax Return for the taxable year including the Closing all information
and calculations relating to the proper determination of the income of Company
for such period. If, within 60 days of Seller's receipt of such information and
calculations, Seller does not object to Purchaser's determination, the
determination shall be final and shall be used by Seller, Purchaser, and
Company. If Seller objects in writing to such determination within such 60 days,
Purchaser and Seller shall negotiate in good faith to resolve any dispute. If
Seller and Purchaser shall not have agreed to the proper determination within 10
days after Seller's objection, any disputed aspects of the determination shall
be resolved by a mutually agreeable "big four" public accounting firm that does
not serve either Seller or Purchaser (the "Independent Firm") as soon as
practicable, but in no event later than 20 days prior to the due date (with
extensions) of Seller's Tax Return. The decision of the Independent Firm shall
be final, and the costs, expenses, and fees of the Independent Firm shall be
borne equally by Seller and Purchaser. Neither Seller nor Purchaser (or their
respective affiliates) shall file any Income Tax Return prior to, or
34
inconsistent with, the determination of the proper income of Company for the
pre-Closing period pursuant to this Section 14.1(a).
(b) Seller additionally shall prepare or cause to
be prepared (at its own cost and expense and in a manner consistent with past
practice) all Tax Returns of, including or relating to Company required to be
filed on or before the Closing Date. Seller shall, on a timely basis, file such
Tax Returns (or cause such Tax Returns to be filed) and pay the amounts shown as
due thereon (or cause such amounts to be paid) to the appropriate Governmental
Body.
(c) Purchaser shall prepare or cause to be prepared
(at its own cost and expense) all other Tax Returns of Company for all other
taxable periods and, subject to Section 14.5(b), pay the amounts shown as due
thereon to the appropriate Governmental Body. For any taxable period beginning
before and ending on or after the Closing Date, the Taxes of Company for the
period ending on the Closing Date shall be determined by closing the books of
Company as of the end of the Closing Date or by any other reasonable method
agreed to by Seller and Purchaser, except that (i) exemptions, allowances, or
deductions that are calculated on an annual basis shall be apportioned on a time
basis, (ii) all property Taxes, guaranty fund assessments, or other Taxes (other
than Income, premium, franchise, or similar Taxes) as to which the lien or
assessment date occurs on or before the Closing Date shall be attributed to the
pre-Closing period and shall be the liability of Seller, and (iii) all property
Taxes, guaranty fund assessments, or other Taxes (other than Income, premium,
franchise, or similar Taxes) as to which the lien or assessment date occurs
after the Closing Date shall not be attributed to the pre-Closing period and
shall not be the liability of Seller. The determination of such Taxes shall be
made by following procedures consistent (to the extent possible) with those in
Section 14.1(a). Any dispute between Seller and Purchaser regarding the
computation or determination of Taxes under this Section 14.1(c) shall be
resolved by the Independent Firm in a manner consistent with Section 14.1(a).
(d) Except as required by law, no position shall
be taken on any Tax Return (including any amended Tax Return) filed by Seller or
Company on or after the date hereof by or on behalf of Company for any period
ending on or before the Closing Date that would adversely affect Purchaser or
Company after the Closing unless Seller shall indemnify and hold harmless
Purchaser from such adverse effect, provided that Seller and Company may take
positions consistent with their historic positions and past practices on Tax
matters. Except as required by law, no position shall be taken on any Tax Return
(including any amended Tax Return) filed by Purchaser or Company after the
Closing Date by or on behalf of Company for any period beginning on or before
the Closing Date and ending after the Closing Date that would adversely affect
Seller unless Purchaser shall indemnify and hold harmless Seller from such
adverse effect, provided that Purchaser and Company may take positions
consistent with Seller's and Company's historic positions and past practices on
Tax matters.
14.2 Cooperation - Tax Matters.
-------------------------
(a) As soon as practicable from and after the
Closing Date, but in any event within 30 days after any request, and subject to
Section 14.1, Seller or Purchaser shall provide each other with such cooperation
and shall deliver such information and data concerning the pre-Closing
operations of Company and make available such knowledgeable employees as Seller
or Purchaser may reasonably request, including providing the information and
35
data required by Seller's or Purchaser's customary Tax and accounting
questionnaires, in order to enable Seller or Purchaser to complete and file all
Tax Returns which they may be required to file with respect to the operations
and business of Company through the Closing Date or to respond to audits by any
taxing authorities with respect to such operations and otherwise to enable
Seller or Purchaser to satisfy their internal accounting, Tax, and other
legitimate requirements. Such cooperation and information shall include without
limitation provisions of powers of attorney for the purpose of signing Tax
Returns and defending audits and promptly forwarding copies of appropriate
notices and forms of other communications received from or sent to any taxing
authority which relate to Company, and providing copies of all relevant
documents relating to rulings or other determinations by any taxing authority
and records concerning the ownership and Tax basis of property, which Seller,
Purchaser or Company, may possess, but shall not require Seller or any of its
affiliates to disclose or provide copies of Tax Returns or accompanying
schedules and related workpapers (or portions thereof) except to the extent they
relate to Company. Seller and Purchaser shall make their respective employees
and facilities available on a mutually convenient basis during normal business
hours to provide explanation of any documents or information provided hereunder.
(b) Subject to Section 14.1, Purchaser and Seller
shall cooperate in the preparation of all Tax Returns relating in whole or in
part to Tax periods ending on or before or including the Closing Date that are
required to be filed after such date. Such cooperation shall include, but not be
limited to, furnishing such information within such party's possession requested
by the party filing such Tax Returns as is relevant to their preparation. In the
case of any state, local or foreign joint, consolidated, combined, unitary or
similar Tax Returns, such cooperation shall also relate to any other Tax periods
in which one party could reasonably require the assistance of the other party in
obtaining any necessary information, but shall not require Seller or its
affiliates to disclose or provide copies of Tax Returns or accompanying
schedules and related workpapers (or portions thereof) except to the extent they
relate to Company.
14.3 Records. For a period of ten (10) years or, if longer,
-------
the applicable statute of limitations period (including any extensions or
waivers thereof) after the Closing Date, Purchaser shall, and shall cause
Company to, retain all Tax Returns, and other books and records (including
computer files) of, or with respect to the activities of, Company for all Tax
periods or portions thereof ending on or prior to the Closing Date. Thereafter,
Purchaser shall not dispose of any such Tax Returns, books, or records except
after providing Seller with reasonable notice and, if Seller so requests, the
opportunity to take possession of such Tax Returns, books, or records solely at
Seller's cost and expense. Furthermore, Purchaser agrees to abide by all record
retention agreements entered into with any taxing authority with respect to
Company with respect to books and records applicable to periods prior to the
Closing Date.
14.4 Audits. Seller shall have the right, at its own
------
expense, to control any audit or examination by any taxing authority ("Tax
Audit"), to initiate any claim for refund, and to contest, resolve, and defend
against any assessment, notice of deficiency, or other adjustment or proposed
adjustment relating to any and all Income Taxes for any Tax period or portion
thereof ending on or before the Closing Date. Seller shall have the right, at
its own expense, to control any Tax Audits, to initiate any claim for refund,
and to contest, resolve, and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment relating to any and all
36
other Taxes payable with respect to Tax Returns filed or required to be filed
(taking into account extensions) prior to the Closing Date with respect to
Company. Seller shall have the right, at its own expense, to participate in any
other Tax Audit or contest or defense of any assessment, notice of deficiency,
or other adjustment or proposed adjustment relating to Company to the extent
that Seller would have any obligation to indemnify Company or Purchaser for
additional Taxes of Company or Purchaser pursuant to this Agreement.
14.5 Indemnity. If Purchaser fails to provide any
---------
information reasonably requested by Seller, or if Seller fails to provide any
information reasonably requested by Purchaser, pursuant to Sections 14.2 and
14.3, or if either Purchaser or Seller breaches any covenant in this Article 14,
then Purchaser or Seller, as the case may be, shall be obligated,
notwithstanding any other provision of this Agreement, to indemnify the other
party and shall so indemnify the other party and its respective affiliates and
hold the other party and its respective affiliates harmless from and against any
and all costs, claims or damages, including, without limitation, all Taxes or
deficiencies thereof, payable as a result of such failure or breach. Seller
shall indemnify and hold Purchaser and Company harmless from:
(a) any Tax Liability imposed on Company as a member
of the affiliated group of corporations of which Seller is the parent and of
which Company is a member arising under Treasury Regulation 1.1502-6(a) (or any
similar provision of any other provision of state, local, or foreign law); and
(b) any Tax Liability of or with respect to Company
for any taxable year or period that ends on or before the Closing Date and, for
any taxable year or period beginning on or before the Closing Date and ending
after the Closing Date, for the portion of such Tax Liability that is allocable
under Section 14.1 to the portion of such year or period ending on the Closing
Date.
Notwithstanding anything to the contrary in this Article 14,
Seller shall have no liability to Purchaser or Company for any Taxes to the
extent of any reserves or accruals for such Taxes on the Balance Sheet.
14.6 Purchase Price Allocation. Notwithstanding Article 2
---------------------------
hereof, for Tax purposes $300,000 of the Purchase Price will be allocated to the
Covenant Not to Compete and the remainder of the Purchase Price will be
allocated to the Purchased Shares following the transfers described in Section
3.1 (the "Share Purchase Price").
14.7 Section 338(h)(10) Election. Seller and Purchaser shall
---------------------------
join in making an election under Section 338(h)(10) of the Code (and any
corresponding election under state, local or foreign tax law) with respect to
the purchase and sale of the stock of Company hereunder (a "Section 338(h)(10)
Election").
37
(a) With respect to Company, Seller, Purchaser, and
Company shall execute any documents, statements, and other forms that are
required to be submitted to any taxing authority in connection with a Section
338 Election (the "Section 338 Forms") no later than 15 days prior to the date
such Section 338 Forms are required to be filed. Seller, Purchaser, and Company
shall cause the Section 338 Forms to be duly executed by an authorized person
for Seller, Purchaser, or Company, as the case may be, and shall duly and timely
file the Section 338 Forms in accordance with applicable Tax laws and the terms
of this Agreement. Seller and Purchaser shall report the purchase of the shares
of stock of Company consistent with the Section 338 Election and shall take no
position contrary thereto unless and to the extent required to do so pursuant to
applicable law.
(b) Seller and Purchaser agree, as soon as
practicable after the Closing Date, but no later than 60 days after the Closing
Date, to enter into an agreement (the "Allocation Agreement") to allocate the
Share Purchase Price and the liabilities of Company to the assets of Company
pursuant to the Section 338 Election for all applicable Tax purposes, including
the computation of the Aggregate Deemed Sale Price (as defined under applicable
Treasury Regulations under the Code and similar state or local tax provisions)
("ADSP") for the assets of Company. (The amount of the liabilities taken into
account for this purpose shall, in the case of any insurance liabilities, be
equal to Company's corresponding Tax reserves, and, in the case of any other
liabilities, be equal to the amount of Company's liabilities that would properly
be taken into account in tax basis under general principles of tax law that
would apply upon an acquisition of the assets of Company (other than
insurance-in-force) for consideration that included discharge of such
liabilities.) The determination and allocation of ADSP (and the treatment of any
deemed reinsurance transaction stemming from the Section 338 Election) shall be
made in accordance with Section 338(b) of the Code and any applicable Treasury
Regulations and, except to the extent required by applicable law, in a manner
consistent with Proposed Treasury Regulations Section 1.338-11 and all related
Proposed Treasury Regulations. Purchaser initially shall prepare a statement
setting forth a proposed computation and allocation of ADSP (the "Computation")
and shall submit the Computation to Seller, along with copies of applicable
supporting documents used to prepare the Computation, no later than 30 days
after the Closing Date. If, within 30 days of Seller's receipt of the
Computation, Seller shall not have objected in writing to the Computation, the
Computation shall become the Allocation Agreement. If Seller objects in writing
to the Computation within such 30 days, Purchaser and Seller shall negotiate in
good faith to resolve the Computation, and if so resolved, such Computation
shall become the Allocation Agreement. If Purchaser and Seller shall not have
agreed to the Computation and adopted an Allocation Agreement within 30 days
after Seller's objection, Seller and Purchaser shall appoint the Independent
Firm to resolve any disputed aspects of the Allocation Agreement or Computation
within 35 days of Seller's objection. The Independent Firm shall resolve any
disputed aspects of the Allocation Agreement or Computation as soon as
practicable but in no event later than 30 days prior to the earlier of (i) the
last date on which the Section 338 Forms must be filed or (ii) the last date on
which either Purchaser or Seller (whichever is earlier) must file a Tax Return
relating to the transactions contemplated herein. The decision of the
Independent Firm shall be final, and the costs, expenses, and fees of the
Independent Firm shall be borne equally by Purchaser and Seller. Seller and
Purchaser (i) shall be bound by such allocation for purposes of determining any
Taxes, (ii) shall prepare and file all Tax Returns to be filed with any taxing
authority in a manner consistent with such allocation, and (iii) shall not take
a position before any taxing authority or otherwise (including in any Tax
Return) inconsistent with the Allocation Agreement unless and to the extent
required to do so pursuant to applicable law. In the event any taxing authority
disputes the Allocation Agreement, the party receiving notice of such dispute
shall promptly notify the other party of such dispute, and Seller and Purchaser
shall cooperate in good faith in responding to such challenge in order to
preserve the effectiveness of such allocation.
38
14.8 Transfer and Similar Taxes. All Transfer Taxes arising
--------------------------
out of, in connection with or attributable to the transactions effected pursuant
to this Agreement shall be borne and paid by Purchaser. Purchaser shall prepare
and timely file all relevant Tax Returns required to be filed in respect of such
Transfer Taxes and timely pay the Transfer Taxes shown on such Tax Returns. For
the avoidance of doubt, Seller shall be responsible for and shall pay all Income
Taxes relating to the sale of the Purchased Shares.
14.9 Refunds. Any refund of Taxes received by Seller or any
-------
amounts credited against Taxes that relate to any taxable period of Company
ending after the Closing Date shall be for the account of Purchaser and Seller
shall pay over the amount of such refund or credit within 30 days after receipt
or entitlement thereto. Notwithstanding the foregoing, with respect to a refund
or credit pertaining to a taxable year or period beginning on or before and
ending after the Closing, such refund or credit shall be apportioned between
Seller and Purchaser based on the Tax allocation provided in Section 14.1.
14.10 Tax Sharing Arrangement. Any Tax Sharing Arrangement
------------------------
shall be terminated effective as of the Closing Date.
14.11 Conflicts. In the event of a conflict between this
---------
Article 14 and Article 13 (including any claim for indemnification relating to
Taxes that could be made under both this Article 14 and Article 13), this
Article 14 shall govern and control.
ARTICLE 15
----------
GENERAL PROVISIONS
------------------
15.1 Expenses. Except as otherwise expressly provided in
--------
this Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, negotiation, execution, and
performance of this Agreement and the Contemplated Transactions, including all
fees and expenses of agents, Representatives, counsel, and accountants.
15.2 Public Announcements. Any public announcement or
--------------------
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, at such time and in such manner as Purchaser and
Seller shall mutually determine, provided that following execution of this
Agreement and consultation with Purchaser, Seller and Company may make
appropriate announcements to their employees, agents, and customers, and each
party may make announcements and filings required by law or otherwise
contemplated by this Agreement.
15.3 Confidentiality. Between the date of this Agreement
---------------
and the Closing Date, Purchaser and Seller will maintain in confidence, and will
cause their Related Persons and Representatives to maintain in confidence, any
confidential or proprietary written, oral, or other information obtained from
the other party or its Related Persons or Representatives in connection with
this Agreement or the Contemplated Transactions, unless (a) the information is
already known to the party or to others not bound by a duty of confidentiality
or the information becomes publicly available through no fault of the party, (b)
the use of the information is necessary or appropriate in making any filing or
obtaining any Consent or approval required for the consummation of the
39
Contemplated Transactions, or (c) the furnishing or use of the information is
required by or necessary or appropriate in connection with a Legal Requirement
or Proceeding. If the Contemplated Transactions is not consummated, each party
will return or destroy as much of the written information as the other party may
reasonably request, and the confidentiality provisions set forth in the first
sentence of this Section 15.3 shall remain in effect.
15.4 Notices. All notices, consents, waivers, and other
-------
communications under this Agreement must be in writing and will be deemed to
have been duly given (a) when delivered by hand (with written confirmation of
receipt), (b) when deposited in the mails, if sent via certified mail, with
return receipt requested, (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), or (d)
upon receipt of confirmation of a successful transmission, if sent via facsimile
or other similar transmission, in each case to the appropriate addresses set
forth below (or to such other addresses as a party may designate by notice to
the other party):
If to Seller: By mail or facsimile:
Agway, Inc.
X.X. Xxx 0000
Xxxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. X'Xxxxx
Senior Vice President
Facsimile: (000) 000-0000
By delivery service:
000 Xxxxxxxxx Xxxxx
XxXxxx, Xxx Xxxx 00000
with a copy to: By mail or facsimile:
Xxxx X. Xxxxxxxx, Esq.
Deputy General Counsel
Agway, Inc.
X.X. Xxx 0000
Xxxxxxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
By delivery service:
000 Xxxxxxxxx Xxxxx
XxXxxx, Xxx Xxxx 00000
and to: Xxxxxxx X. XxXxxxxx, Esq.
Bond, Xxxxxxxxx & King, LLP
Xxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile:(000) 000-0000
40
If to Purchaser: Xxxx X. Xxxxxxxx, Esq.
Farm Bureau Insurance Companies
000 X. Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: 000-000-0000
with a copy to: Xxxx X. Xxxxxxx, Esq.
Xxxxxx & Xxxxxxx, PC
4000 Bank One Tower
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
15.5 Jurisdiction; Service of Process. Any suit, action or
------------
other Proceeding seeking to enforce any provision of, or based upon any right
arising out of, in connection with, or in any way relating to, this Agreement
shall be brought only in the Supreme Court sitting in Onondaga County, New York
or the United States District Court for the Northern District of New York. Each
party hereby irrevocably consents and submits to the jurisdiction and venue of
these courts and irrevocably waives any objection which it may now or hereafter
have to the laying of the venue of any suit, action or Proceeding brought in
these courts and any claim that the suit, action or Proceeding has been brought
in an inconvenient forum.
15.6 Further Assurances. Each of the parties hereto will use
------------------
commercially reasonable, good faith efforts (a) to furnish upon request to each
other such further information, (b) to execute and deliver to each other such
other documents, and (c) to do, or cause to be done, all things necessary,
proper or advisable under applicable Legal Requirements to consummate and make
effective the sale of the Purchased Shares and the Related Transactions pursuant
to this Agreement, including without limitation using commercially reasonable
efforts to ensure satisfaction of the conditions precedent to each party's
obligations hereunder. Neither of the parties hereto will, without prior written
consent of the other party, take any action which would reasonably be expected
to prevent or materially impede, interfere with or delay the transactions
contemplated by this Agreement. From time to time on or after the Closing Date,
Seller will, at its own expense, execute and deliver such documents to Purchaser
as Purchaser may reasonably request in order to more effectively vest in
Purchaser, Seller's title to the Purchased Shares and the Agway, Inc. Assets.
15.7 Books and Records.
-----------------
(a) Unless otherwise agreed to by the parties
hereto, at the Closing all books and records of the Company shall be located
in the Company's offices or, with respect to books and records located in off-
site storage facilities, shall, within ninety (90) days following Closing, be
transferred at Purchaser's sole expense to an account established in the name of
Purchaser and/or the Company, whether at the same location or such other
location as may be identified by Purchaser (all such books and records,
regardless of location, referred to collectively as the "Transferred Books and
Records"). To the extent that any Transferred Books and Records relating to the
operation of the businesses of the Company prior to Closing are expected in good
faith to be reasonably required by Seller following Closing for purposes of the
preparation or examination of Tax Returns, regulatory filings, financial
41
statements, the conduct of any litigation or regulatory dispute resolution or
relating to obligations arising under this Agreement, Seller may, at its own
expense, make and retain copies of any such Transferred Books and Records.
(b) Following the Closing Date, and for a period
of 10 years from the Closing Date, Purchaser shall, and shall cause the Company
to, (i) allow Seller, upon reasonable prior notice and during regular business
hours, through its employees and representatives, the right, at Seller's
expense, to examine and make copies of the Transferred Books and Records for any
reasonable business purpose, and (ii) maintain the Transferred Books and Records
for Seller's examination and copying. Access to the Transferred Books and
Records shall be at Seller's expense and may not unreasonably interfere with
Purchaser's or the Company's or any successor company's business operations.
15.8 Waiver. The rights and remedies of the parties to this
------
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege.
15.9 Entire Agreement and Modification. This Agreement
------------------------------------
supersedes all prior negotiations, understandings, representations and
agreements between the parties with respect to its subject matter, and
constitutes a complete and exclusive statement of the terms of the agreement
between the parties. This Agreement may not be amended except by a written
agreement executed by the party to be charged with the amendment.
15.10 Assignments, Successors, and No Third-Party Rights.
-----------------------------------------------------
Neither party may assign any of its rights under this Agreement without the
prior consent of the other party except that Purchaser may assign its rights and
obligations under this Agreement to any wholly-owned subsidiary of Purchaser so
long as Purchaser remains liable for the performance of all obligations of
Purchaser under this Agreement. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
15.11 Severability. If any provision of this Agreement is
------------
held invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
15.12 Section Headings, Construction. The headings of
--------------------------------
Articles and Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation. Unless otherwise expressly
42
provided, the word "including" does not limit the preceding words or terms.
15.13 Time of Essence. With regard to all dates and time
----------------
periods set forth or referred to in this Agreement, time is of the essence.
15.14 Governing Law. This Agreement will be governed by and
-------------
construed under the laws of the State of New York without regard to its
principles pertaining to conflict of laws.
15.15 Counterparts. This Agreement may be executed in one
------------
or more counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
"PURCHASER"
UNITED FARM FAMILY MUTUAL
INSURANCE COMPANY
By /s/ XXXXXX X. XXXXXXXX
---------------------------
Xxxxxx X. Xxxxxxxx
President and CEO
"SELLER"
AGWAY, INC.
By: /s/ XXXXX X. X'XXXXX
---------------------------
Xxxxx X. X'Xxxxx
Senior Vice President
STOCK PURCHASE AGREEMENT
BETWEEN AGWAY INC. AND
UNITED FARM FAMILY MUTUAL
INSURANCE COMPANY DATED JUNE 14, 2002
--------------------------------------------------------------------------------
Displayed below is a summary of Exhibits and Disclosure Schedules that have not
been filed. We will furnish supplementally a copy of any omitted Exhibit and/or
Disclosure Schedule to the Commission upon request.
Exhibit A - Covenant Not To Compete
Exhibit B - Escrow Agreement
Exhibit C - Endorsement Agreement
Exhibit D - Transition Services Agreement
Exhibit E-1 - Closing Certificate of Seller
Exhibit E-2 - Closing Certificate of Purchaser
Exhibit F - Opinion of Counsel to Seller
Exhibit G-1 - Opinion of Counsel to Purchaser
Exhibit G-2 - Opinion of Local Counsel to Purchaser
Exhibit H - Financial Statements
EXHIBIT 10.(ae)
--------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AGWAY, INC.
AND
Cenex Harvest States Cooperatives
DATED AS OF SEPTEMBER 10, 2002
--------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT, dated as of the 10th day of September
2002, by and between CENEX HARVEST STATES COOPERATIVES, a Minnesota corporation
("the Purchaser"), and AGWAY, INC., a Delaware corporation (the "Seller"). Terms
used herein and not otherwise defined shall have the meanings set forth in
Section 12.3 hereof.
This Asset Purchase Agreement is entered into pursuant to which the
Purchaser will acquire substantially all of the assets primarily used by or in
connection with the Seller's sunflower seed processing business, and its related
soybean roasting, hulled millet and other grain businesses conducted at the
Seller's Grandin, North Dakota facility (the "Business").
NOW, THEREFORE, in consideration of the representations and warranties,
covenants and agreements, and subject to the conditions, contained herein, the
Seller and the Purchaser hereby agree as follows:
ARTICLE I
PURCHASE OF ASSETS
------------------
1.1 Purchase and Sale of Acquired Assets. Subject to the terms
------------------------------------
and conditions of this Agreement, the Seller agrees to sell, assign,
convey and transfer to the Purchaser, and the Purchaser agrees to
purchase, at the Closing, the goodwill of the Business and all of the
following assets used by or in connection with the Business (the
"Acquired Assets"):
(a) the real property (land and buildings) listed in
Section 1.1(a) of the Disclosure Schedule (the "Real
------------------------------------------ ----
Property") and the real estate leases listed in
--------
Section 1.1(b) of the Disclosure Schedule (the "Real
------------------------------------------ ----
Estate Leases");
-------------
(b) all inventory exclusively relating to the Business;
(c) all Assigned Receivables;
(d) all Assigned Contracts;
(e) all prepaid expenses to the extent relating to the
Business;
(f) the machinery, equipment and vehicles listed in
Section 1.1(f) of the Disclosure Schedule;
------------------------------------------
(g) all customer lists and business records primarily
relating to the Business;
(h) the trademarks and registrations therefor listed in
Section 1.1(h) of the Disclosure Schedule and all
---------------------------------------------
Proprietary Rights owned by the Seller (other than trademarks, service
marks, domain names, corporate names, trade names or other indications
2
of origin) that exclusively relate to the Business, including, without
limitation, all sunflower seed genetic material, hybrid, inbred parent
lines and experimental genetic material owned by the Seller and used in
the Business; and
(i) all Proprietary Rights owned by the Seller that
exclusively relate to the website found at XXX.XXXXXXXXXXXXXX.XXX;
-----------------------
provided, however, that (i) the Purchaser shall delete all references
-------- -------
contained on such website to the Seller's ownership of the Business
within thirty (30) days after closing; (ii) the Purchaser shall add a
link from XXX.XXXXXXXXXXXXXX.XXX to XXX.XXXXX.XXX in a manner that
---------------------- -------------
clearly indicates to consumers that the two companies and two websites
are owned by different entities; (iii) the Purchaser shall clearly
indicate on the first page of its website that it is using the
XXX.XXXXXXXXXXXXXX.XXX domain name under license from Agway; and (iv)
----------------------
the Purchaser shall bear all costs associated with the transfer of such
website to the Purchaser's server (or any other server designated by
Purchaser), which transfer shall be accomplished within five (5) days
after Closing.
1.1.1 Notwithstanding anything contained in this Agreement to the
contrary, the parties expressly acknowledge and agree that the Seller shall
retain, and the Acquired Assets shall not include, any of the following assets
(the "Excluded Assets"):
(a) all of the Seller's cash or cash equivalents;
(b) all Excluded Receivables;
(c) all Contracts not constituting Assigned Contracts;
(d) all rights of the Seller under this Agreement and all
agreements, instruments and certificates executed in connection with
this Agreement;
(e) all records prepared in connection with the sale of
the Business, including analyses relating to the Business;
(f) all rights of the Seller under insurance policies;
(g) all rights, Claims and causes of action relating to
any of the Excluded Liabilities or the Excluded Assets, including
rights, Claims and causes of action under Contracts included in the
Excluded Assets and insurance policies relating thereto;
(h) all rights, Claims and causes of action, asserted or
unasserted, of any kind or nature arising prior to the Closing Date,
including, without limitation, all rights, Claims and causes of action
arising prior to the Closing Date under Contracts included in the
Acquired Assets, excluding accounts receivable described in Section
1.1(c);
(i) all right, title or interest in or to the name and
xxxx relating to AGWAY, FEATHERED FRIEND (as used and registered
in the United States) and the other trademarks, domain names and other
indications of origin listed on Annexes A and B to the License
3
Agreement (in logo type design or any other style or design and any
name, xxxx or indication of origin derived therefrom including any
abbreviations thereof), except to the limited extent the Purchaser
acquires an express license to use such names, trademarks or other
indications of origin pursuant to the License Agreement;
(j) all rights to, or claims available to or being pursued
by the Seller for, refunds of or credits against Taxes (including all
investment tax credits, research credits and credits for prepayments of
Income Taxes) attributable to the Business or the Acquired Assets;
(k) any Tax Return relating to the Business or the
Acquired Assets, and records and work papers used in preparation
thereof;
(l) all prepaid expenses or deposits associated with any
of the Excluded Assets or Excluded Liabilities;
(m) the corporate charter, article of organization, bylaws,
qualifications to conduct business as a foreign corporation,
arrangements with registered agents relating to foreign qualifications,
taxpayer and other identification numbers, seals, minute books, stock
transfer books, blank stock certificates, and other documents relating
to the organization, maintenance, and existence of the Seller; and
(n) all records and reports maintained by the Seller
pertaining exclusively to other Excluded Assets or Excluded
Liabilities.
1.1.2 (a) Nothing contained in this Agreement shall be construed
as an attempt to agree to assign any Assigned Contract which is non-assignable
without the consent of any other party thereto, unless such consent shall have
been given. The Seller and the Purchaser shall use their commercially reasonable
efforts to obtain all consents necessary to effect such assignment, effective as
of the Closing, prior to the Closing, it being understood that the failure to
obtain such consents shall not reduce the Purchase Price or relieve any party
from its obligation to consummate at the Closing the transactions contemplated
by this Agreement. To the extent they are unsuccessful in obtaining such
consents by Closing, the Seller and the Purchaser shall continue their efforts
to obtain such consent(s) after the Closing, and pending the ultimate obtaining
of such approvals, or if such approvals are impossible to obtain, the Seller
shall take all such commercially reasonable action as may be necessary or proper
in order to enable the Seller and the Purchaser to arrange for performance by
the Purchaser in accordance with Section 1.1.2(b). Notwithstanding anything to
the contrary in this Agreement, nothing in this Section 1.1.2 shall require the
Seller or the Purchaser to expend any material sum, make a material financial
commitment or grant or agree to any material concession to any third Person to
obtain any such consent.
(b) To the extent that any such consents and waivers are
not obtained, or until the impediments to such assignment are resolved, the
Seller shall use all reasonable efforts (without the expenditure, in the
aggregate, of any material sum) to the extent permitted by Law to (i) provide to
the Purchaser, at the request of the Purchaser, the benefits of any such
4
Assigned Contracts, (ii) cooperate in any lawful arrangement designed to provide
such benefits to the Purchaser and (iii) enforce, at the request of and for the
account of the Purchaser, any rights of the Seller arising from any such
Assigned Contracts against any third Person including the right to elect to
terminate in accordance with the terms thereof upon the advice of the Purchaser.
To the extent that the Purchaser is provided the benefits (including payment
rights) of any Assigned Contracts referred to herein (whether from the Seller or
otherwise), (i) the Purchaser shall perform for the benefit of any third Person
the obligations of the Seller thereunder or in connection therewith, and (ii)
the Purchaser agrees to pay, perform and discharge, and, pursuant to Section
11.3, indemnify the Seller against and hold the Seller harmless from, all
obligations and liabilities of the Seller relating to such performance or
failure to perform, and in the event of a failure of such indemnity, the Seller
shall cease to be obligated under this Agreement in respect of the Assigned
Contracts which are the subject of such failure.
1.1.3 Promptly after the execution of this Agreement and continuing
until the Closing Date, representatives of the Seller and the Purchaser shall
jointly review, applying a reasonable analysis of applicable credit factors, the
accounts receivable that relate exclusively to the Business but that are not
described in clauses (i) and (ii) of the definition of "Assigned Receivables."
Each such account receivable as to which the parties agree, based on such
review, that such account receivable does not entail a substantial risk of
uncollectibility shall constitute an Assigned Receivable and shall be identified
as such on a schedule signed at the Closing Date by such representatives. Each
such account receivable as to which the parties disagree, based on such review,
whether such account receivable entails a substantial risk of uncollectibility
shall constitute an Assigned Receivable but shall also constitute a Puttable
Receivable and shall be identified as such on a separate schedule signed at the
Closing Date by such representatives.
1.2. Assumed Liabilities. At the Closing, except as described in
-------------------
this Section 1.2, the Purchaser shall assume and agree to pay, satisfy, perform
and discharge as the same shall become due (i) all accounts payable to the
extent they relate to the Business and are listed on a schedule prepared by the
Seller and delivered to the Purchaser prior to the Closing Date, and (ii) all
liabilities resulting from or arising out of the operation of the Business by
the Purchaser, or the Purchaser's ownership, operation or use of the Acquired
Assets, or the actions or omissions of the Purchaser, its Affiliates, agents,
contractors or subcontractors in connection therewith, following the Closing,
including but not limited to liabilities under Assigned Contracts and the Real
Estate Leases, in each case arising after the Closing Date (the "Assumed
Liabilities"), pursuant to an Assumption Agreement substantially in the form of
Exhibit 1.2 hereto.
Notwithstanding anything contained in this Agreement to the contrary,
the Purchaser shall not assume or otherwise be responsible at any time for any
liability, obligation, debt or commitment of the Seller, including, but not
limited to, any liabilities, obligations, debts or commitments of the Seller
incident to, arising out of or incurred with respect to this Agreement and the
transactions contemplated hereby, other than the Assumed Liabilities. Without
limiting the foregoing, the following liabilities shall be retained by the
Seller (the "Excluded Liabilities"):
(a) any liability of the Seller for Income Taxes attributable to the
Business or the Acquired Assets for Pre-Closing Tax Periods, including
(A) any liability for Income Taxes of the Seller pursuant to Treasury
Regulation ss.1.1502-6(a) or any comparable provision of state, local
5
or foreign law and (B) Income Taxes resulting from the sale and
transfer from the Seller to the Purchaser of the Acquired Assets; and
(b) all liabilities in respect of any claim, lawsuit, action or
proceeding to the extent such claim, lawsuit, action or proceeding
directly pertains to any Excluded Asset or Excluded Liability.
1.3. Method of Conveyance. The sale, transfer, conveyance and
----------------------
assignment by the Seller of the Acquired Assets to the Purchaser in accordance
with Section 1.1 hereof shall be effected on the Closing Date at the Closing by
the Seller's execution and delivery to the Purchaser of instruments of transfer
including: (a) special warranty deeds to the Real Property in the form of the
special warranty deed attached hereto as Exhibit 1.3(a), (b) a xxxx of sale in
the form attached hereto as Exhibit 1.3(b) (the "Xxxx of Sale"), (c) an
assignment of the Seller's leases included in the Acquired Assets in the form of
Exhibit 1.3(c) attached hereto (the "Assignment of Lease"), (d) transfer
documents for the certificates of title for all of the Seller's vehicles
included in the Acquired Assets, and (e) assignments of trademarks for the
trademarks included in the Acquired Assets. At the Closing, all of the Acquired
Assets shall be transferred by the Seller to the Purchaser free and clear of any
and all Liens, other than Permitted Liens.
1.4 Purchase Price. In consideration for the conveyance of the
--------------
Acquired Assets and in reliance on the representations and warranties, covenants
and agreements of the Seller contained herein and the documents contemplated
hereby, the Purchaser agrees to assume the Assumed Liabilities and shall pay to
the Seller at Closing an amount equal to the sum of $8,500,000 plus the Closing
Date Net Current Asset Value, or if the Closing Date Net Current Asset Value is
negative, minus the absolute value of the Closing Date Net Current Asset Value
(such amount, plus or minus any adjustments pursuant to Section 1.6, the
"Purchase Price").
1.5 Current Asset Valuation. (a) During the two days prior to the
-----------------------
Closing Date, representatives of the Seller and the Purchaser shall conduct a
physical count of the inventory included in the Acquired Assets for purposes of
determining the quantities and types thereof, and shall use their commercially
reasonable efforts to complete and agree upon such determination and the
calculation of the Closing Date Inventory Value prior to the Closing Date.
Unless they are unable to reach such agreement, such representatives shall
jointly sign a certificate setting forth such agreed valuation, which shall be
final and binding on, and shall be nonappealable by, the parties and shall be
the Closing Date Inventory Value for all purposes of this Agreement. If they are
unable to reach such agreement prior to the Closing Date, the Closing Date
Inventory Value shall be deemed to be the amount equal to (i) 90% of the book
value of all inventory of the Business as set forth on the balance sheet of the
Business, prepared in accordance with GAAP as of the most recent month-end prior
to the Closing Date minus (ii) $118,000, solely for purposes of determining the
amount of Purchase Price to be paid at Closing, and the provisions of Section
1.6(a) through (c) shall apply for purposes of determining the final Closing
Date Inventory Value.
(b) During the two days prior to the Closing Date,
representatives of the Seller and the Purchaser shall review the accounts
receivable included in the Acquired Assets and the accounts payable included in
the Assumed Liabilities, and shall use their commercially reasonable efforts to
complete and agree upon the Closing Date Receivables Value and the Closing Date
6
Payables Value. Unless they are unable to reach such agreement, such
representatives shall jointly sign a certificate setting forth such agreed
valuation, which shall be final and binding on, and shall be nonappealable by,
the parties and shall be the Closing Date Receivables Value and the Closing Date
Payables Value, respectively, subject to the provisions of Section 1.6(d). If
such representatives are unable to reach such agreement as to the Closing Date
Receivables Value prior to the Closing Date, the Closing Date Receivables Value
shall be deemed to be the book value of the accounts receivable of the Business
described in Section 1.1(c) as set forth on the balance sheet of the Business,
prepared in accordance with GAAP as of the most recent month-end prior to the
Closing Date, solely for purposes of determining the amount of Purchase Price to
be paid at Closing, and the provisions of Section 1.6(a) through (c) shall apply
for purposes of determining the final Closing Date Receivables Value. If such
representatives are unable to reach such agreement as to the Closing Date
Payables Value prior to the Closing Date, the Closing Date Payables Value shall
be deemed to be the book value of the accounts payable of the Business as set
forth on the balance sheet of the Business, prepared in accordance with GAAP as
of the most recent month-end prior to the Closing Date, solely for purposes of
determining the amount of Purchase Price to be paid at Closing, and the
provisions of Section 1.6(a) through (c) shall apply for purposes of determining
the final Closing Date Payables Value.
1.6 Purchase Price Adjustments.
--------------------------
(a) Post-Closing Purchase Price Adjustment. If the
representatives of the parties are unable to agree on the Closing Date Inventory
Value, the Closing Date Receivables Value or the Closing Date Payables Value in
accordance with Section 1.5, then, as soon as practicable but no later than
fifteen (15) business days after the Closing Date, the Purchaser shall prepare
and deliver to the Seller a balance sheet which shall be prepared in accordance
with GAAP applied consistently with the preparation of the Financial Statements
(the "Closing Date Balance Sheet") and a calculation of the Closing Date
Inventory Value, the Closing Date Receivables Value or the Closing Date Payables
Value (whichever items are in dispute) and a calculation of the Closing Date Net
Current Asset Value, in each case, as of the opening of business on the Closing
Date. The Seller shall have the right to dispute the calculation of any such
disputed item and make any proposed adjustments thereto as provided in Section
1.6(b).
(i) If it is determined there is a Current Asset
Value Shortfall, the difference shall be paid to the Purchaser
on the Settlement Date; or
(ii) If it is determined there is a Current Asset
Value Surplus, the difference shall be paid to the Seller on
the Settlement Date.
(iii) In the event a Current Asset Value Shortfall is
not paid to the Purchaser on the Settlement Date (unless due
to the fault of the Purchaser), the Seller shall also pay to
the Purchaser interest on the amount of the Current Asset
Value Shortfall at a rate of nine percent (9%) per annum,
which shall accrue from the Settlement Date to the date of
actual payment. In the event a Current Asset Value Surplus is
not paid to the Seller on the Settlement Date (unless due to
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the fault of the Seller), the Purchaser shall also pay to the
Seller interest on the amount of the Current Asset Value
Surplus at a rate of nine percent (9%) per annum, which shall
accrue from the Settlement Date to the date of actual payment.
(b) Dispute Resolution Procedures. The Seller shall have
until fifteen (15) business days after the delivery of the Closing Date Balance
Sheet and accompanying calculations to review such calculations and propose any
adjustments thereto. All adjustments proposed by the Seller shall be set out in
detail in a written statement delivered to the Purchaser (the "Adjustment
Statement") and shall be incorporated into the Closing Date Net Current Asset
Value calculation, unless the Purchaser shall object in writing to such proposed
adjustments (the proposed adjustment or adjustments to which the Purchaser
objects are referred to herein as the "Contested Adjustments" and the
Purchaser's objection notice is referred to herein as the "Contested Adjustment
Notice") within fifteen (15) business days of delivery by the Seller to the
Purchaser of the Adjustment Statement. If the Purchaser delivers a Contested
Adjustment Notice to the Seller, the Purchaser and the Seller shall use
reasonable efforts to resolve their dispute regarding the Contested Adjustments,
but if a final resolution thereof is not obtained within ten (10) days after the
Purchaser delivers to the Seller said Contested Adjustment Notice, the Purchaser
and the Seller shall promptly retain a nationally recognized independent
accounting firm acceptable to both the Seller and the Purchaser (the
"Independent Accountant") to resolve any remaining disputes concerning the
Contested Adjustments. Either the Seller or the Purchaser may retain the
Independent Accountant upon the expiration of such ten-day period.
If the Independent Accountant is retained, then (i) the Seller
and the Purchaser shall each submit to the Independent Accountant in writing not
later than fifteen (15) days after the Independent Accountant is retained their
respective positions with respect to the Contested Adjustments, together with
such supporting documentation as they deem necessary or as the Independent
Accountant requests, and (ii) the Independent Accountant shall, within thirty
(30) days after receiving the positions of both the Seller and the Purchaser and
all supplementary supporting documentation requested by the Independent
Accountant, render its decision as to the Contested Adjustments, which decision
shall be final and binding on, and nonappealable by, the Seller and the
Purchaser. The fees and expenses of the Independent Accountant shall be shared
equally by the Seller and the Purchaser. The decision of the Independent
Accountant shall also include a certificate of the Independent Accountant
setting forth the final calculation of the Closing Date Net Current Asset Value
(the "Settlement Amount Certificate"), which shall include all adjustments
proposed by the Seller not disputed by the Purchaser and those adjustments
accepted or made by the decision of the Independent Accountant in resolving the
Contested Adjustments.
(c) There shall be a "Settlement Date" after the
calculation of the Closing Date Net Current Asset Value which shall mean the
following, as applicable:
(i) If the Seller has not timely delivered an
Adjustment Statement to the Purchaser, twenty (20) days after
the date the Seller receives the Closing Date Net Current
Asset Value calculation;
8
(ii) If the Seller has timely delivered an
Adjustment Statement and the Purchaser has not timely
delivered a Contested Adjustment Notice, twenty (20)days after
the date the Purchaser receives the Adjustment Statement;
(iii) If the Seller and the Purchaser have any
disputes regarding Contested Adjustments and they resolve
those disputes, five business days after such resolution;
(iv) Five business days after the Independent
Accountant delivers the Settlement Amount Certificate, if
applicable; or
(v) Such other date as shall be agreed between the
Seller and the Purchaser.
(d) Real and personal property Taxes relating to the
Acquired Assets, utility charges, rentals and similar charges relating to the
Business that are unpaid as of the Closing Date and that cover or are
attributable to periods that straddle the Closing Date, including but not
limited to any such charges that are reflected on invoices received after
the Closing Date and that were not taken into account in the calculation of the
Closing Date Payables Value pursuant to Section 1.5, shall be pro rated between
the parties on a per diem basis as of the Closing Date, and the parties shall
make such payments to one another as shall be appropriate to reflect such
proration or, to the extent such amounts are determined prior to the Closing,
shall be adjustments reflected on the closing statement. Any dispute under this
provision shall be resolved by the Independent Accountant within thirty (30)
days of the submission of such dispute.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
--------------------------------------------
The Seller hereby makes, as of the date hereof and as of the Closing
Date, the following representations and warranties to the Purchaser, except as
otherwise set forth in a written disclosure schedule (the "Disclosure Schedule")
delivered by the Seller to the Purchaser prior to the date hereof and attached
hereto, and which contains schedules numbered to correspond to various sections
of this Article II and which sets forth certain exceptions to the
representations and warranties contained in this Article II and certain other
information called for by this Agreement. Unless otherwise specified, each
reference in this Agreement to any numbered schedule is a reference to that
numbered schedule that is included in the Disclosure Schedule.
2.1 Corporate Organization, Etc. The Seller is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets.
2.2 Authorization, Etc. The Seller has full power and authority to
-------------
enter into this Agreement and the agreements contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and all other agreements and
9
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Seller and no other corporate proceedings on its part are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement and all other agreements contemplated hereby to be entered into
by the Seller each constitutes a legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms.
2.3 No Violation. The execution, delivery and performance by the
------------
Seller of this Agreement, and all other agreements contemplated hereby,
and the fulfillment of and compliance with the respective terms hereof and
thereof by the Seller, do not and will not (a) conflict with or result in a
breach of the terms, conditions or provisions of, (b) constitute a default or
event of default under (with due notice, lapse of time or both), (c) result in
the creation of any Lien upon the Acquired Assets pursuant to, (d) give any
third party the right to accelerate any obligation under, (e) result in a
violation of, or (f) require any authorization, consent, approval, exemption or
other action by, notice to, or filing with any Authority pursuant to, the
charter or bylaws of the Seller or any applicable Law (including, without
limitation, approvals pursuant to the Xxxx-Xxxxx-Xxxxxx Act), Order or any
Contract to which the Seller or its properties or the Acquired Assets are
subject. The Seller has complied with all applicable Laws and Orders in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
2.4 Financial Statements. Set forth as Section 2.4 of the Disclosure
--------------------
Schedule are the historical unaudited financial statements (the "Financial
Statements") of the Business for fiscal years 1998, 1999, 2000, 2001 and 2002.
All such financial statements were prepared in accordance with GAAP and fairly
represent in all material respects the consolidated financial condition and
operating profit of the Business as of the respective dates thereof and for the
respective periods covered thereby through and including the period ended June
30, 2002 (the "Balance Sheet Date").
2.5 Employees. Section 2.5 of the Disclosure Schedule sets forth a
---------
list of all key Business Employees (meaning those earning more than $40,000
annually) of the Seller. The Seller is in compliance with all Laws or Orders
affecting employment and employment practices applicable to the Seller and the
Business Employees, including terms and conditions of employment and wages and
hours. The Seller has no collective bargaining agreements and, since January 1,
2000, there have been no strikes, work stoppages nor any demands for collective
bargaining by any union or labor organization, in each case with respect to the
Business Employees. There is no dispute or controversy with any union or other
organization of the Business Employees and no arbitration proceedings pending or
to the Knowledge of the Seller threatened involving a dispute or controversy
affecting the Business Employees.
2.6 Absence of Certain Changes. Since the Balance Sheet Date, there
----------------------------
has not been any (a) Material Adverse Change in the Business; (b) damage,
destruction or loss, whether covered by insurance or not, having a Material
Adverse Effect on the Business; (c) increase in the compensation payable to or
to become payable by the Seller to any Business Employee or any adoption of or
increase in any bonus, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any Business Employee in each case
other than in the ordinary course of business or as may be required under
existing agreements; (d) entry into any material Contract not in the ordinary
10
course of business; (e) change by the Seller in accounting methods or principles
with respect to the Business; (f) failure to promptly pay and discharge current
liabilities of the Business; or (g) Lien placed on any of the Acquired Assets
other than Permitted Liens.
2.7 Contracts.
---------
(a) With respect to the Business, the Seller is not a party to
any written or oral: (i) Contract relating to the mortgaging, pledging or
otherwise placing a Lien on any of the Acquired Assets other than a Permitted
Lien and the Senior Lender Liens; (ii) Guarantee or Contract for the borrowing
of money that will be an Assumed Liability; (iii) Contract pursuant to which the
Seller is (and the Purchaser will become) the lessor of, or any third party is
permitted to hold or operate, any property, real or personal, owned or
controlled by the Seller with respect to the Business; (iv) Contract or
non-competition provision in any Contract prohibiting or restricting it from
freely engaging in the Business except for the restrictions and prohibitions
specified in the License Agreement; (v) Contract for the purchase, acquisition
or supply of inventory and other property and assets primarily relating to the
Business, whether for resale or otherwise, in excess of $20,000; (vi) Contracts
with independent agents, brokers, dealers or distributors which provide for
annual payments in excess of $20,000; (vii) employment or consulting; (viii) any
other Contract which involves a consideration in excess of $20,000 annually that
is an Assumed Liability, excluding any purchase orders in the ordinary course of
business (the foregoing be referred to collectively as the "Material
Contracts").
(b) With respect to the Business, the Seller has performed
in all material respects all obligations required to be performed by it under,
and is not in default in any respect under or in breach of nor in receipt of any
Claim of default or breach under, any Material Contract; no event has occurred
which with the passage of time or the giving of notice or both would result in a
default, breach or event of non-compliance by the Seller under any Material
Contract; and the Seller does not have any Knowledge of any breach or
anticipated breach by the other parties to any Material Contract.
(c) The Seller has delivered to the Purchaser true and
complete copies of all the Contracts and documents listed in the schedules to
this Agreement.
2.8 Title and Related Matters.
-------------------------
(a) The Seller has good and marketable title to all
Acquired Assets, free and clear of all Liens, except (i) Permitted Liens and
(ii) the Senior Lender Liens. Section 2.8(b) of the Disclosure Schedule hereto
sets forth a complete and accurate list of all leased assets that have annual
rental payments in excess of $20,000. At the Closing, the Seller shall deliver
good and marketable title to all of the Acquired Assets, free and clear of all
Liens except for the Permitted Liens.
(b) All the leases that are part of the Acquired Assets are
in full force and effect. The Seller has not received any notice of any, and
there exists no event of default or event which constitutes or would constitute
(with notice or lapse of time or both) a default by the Seller or any, to the
Seller's Knowledge, other Person under any lease. All rent and other amounts due
11
and payable with respect to the leases that are part of the Acquired Assets have
been paid through the date of this Agreement and all rent and other amounts due
and payable with respect to the leases that are part of the Acquired Assets that
are due and payable on or prior to the Closing Date will have been paid prior to
the Closing Date.
(c) The buildings, structures and improvements or real
property included within the Acquired Assets (collectively, the "Improvements")
comply in all material respects with all applicable restrictions, building
ordinances and zoning ordinances and all Laws. The Improvements are in good
operating condition and repair, ordinary wear and tear excepted, and are
adequate and suitable for the purposes for which they are presently being used.
The real property included in the Acquired Assets and its continued use,
occupancy and operation as currently used, occupied and operated does not
constitute a nonconforming use under any Law or Order affecting the real
property (other than possible set back violations, none of which will have a
Material Adverse Effect or the continued use, occupancy and operation of the
real property included in the Acquired Assets as currently used, occupied and
operated), and the continued existence, use, occupancy and operation of each
Improvement, and the right and ability to repair and/or rebuild such
Improvements in the event of casualty, is not dependent on any special Permit,
exception, approval or variance.
(d) There has not been since the Balance Sheet Date and will
not be prior to the Closing Date, any sale, lease, or any other disposition or
distribution by the Seller of any of the Acquired Assets, now or hereafter owned
by it, except for (i) sales of inventory in the ordinary course of business,
(ii) sales or retirement of equipment no longer useful in the Business and (iii)
transactions consented to by the Purchaser. After the Closing, the Purchaser
will own, or have the unrestricted right to use, all properties and assets that
are primarily used in connection with the Business subject to restrictions set
forth in the License Agreement.
2.9 Litigation. There is no Claim pending or, to the best Knowledge
----------
of the Seller, threatened against the Seller which, if adversely determined,
would have a Material Adverse Effect on the Business, nor is there any Order
outstanding against the Seller having, or which, insofar as can be reasonably
foreseen, in the future may have, a Material Adverse Effect on the Business.
2.10 Tax Matters. The Seller has filed on a timely basis all material
-----------
Tax Returns that were required to be filed with respect to the Business or the
Acquired Assets pursuant to applicable law, and all such Tax Returns were true,
correct and complete in all material respects. The Seller has paid, or made
provision for the payment of, all material Taxes that have become due pursuant
to those Tax Returns and that are attributable to the Seller, the Business or
the Acquired Assets.
2.11 Compliance with Law and Applicable Government Laws. The Business
--------------------------------------------------
has not been, and is not being, operated in material violation of all applicable
Laws and applicable Orders, including, but not limited to, all Laws relating to
the safe conduct of business, quality and labeling, antitrust, consumer
protection, equal opportunity, discrimination, health, sanitation, fire, zoning,
building and occupational safety. There are no Claims pending, or to the
Knowledge of the Seller threatened, nor has the Seller received any written
notice, regarding any violations of any Laws or Orders enforced by any Authority
12
claiming jurisdiction over the Seller including any requirement of OSHA. This
Section shall not apply to Tax matters, employee benefit matters or
environmental matters, which are instead the subject of Sections 2.10, 2.12 and
2.14, respectively.
2.12 ERISA and Related Matters.
-------------------------
(a) Section 2.12(a) of the Disclosure Schedule contains a complete
and accurate list of all the Seller Plans and other benefit obligations with
respect to the Business.
(b) The Seller has made available to the Purchaser:
(i) all documents that set forth the terms of each Seller Plan
or other benefit obligation and of any related trust, including (A) plan
descriptions and summary plan descriptions of Plans for which the Seller is
required to prepare and distribute plan descriptions and summary plan
descriptions, and (B) summaries and descriptions furnished to participants and
beneficiaries regarding plans or other benefit obligations for which a plan
description or summary plan description is not required;
(ii) the most recent actuarial report with respect to any
Seller Title IV Plan;
(iii) the Form 5500 filed for the most recent Plan year with
respect to each Seller Plan, including all schedules thereto and the opinions of
independent accountants; and
(iv) with respect to Pension Plans, the most recent
determination letter for each Plan of the Seller.
(c) (i) Each Seller Plan intended to be qualified under Code
Section 401(a) has or has applied for a current favorable determination letter
from the Internal Revenue Service indicating that the Plan is so qualified, none
of such Plans has been subject to any assertion by any governmental Authority
that it is not qualified, and nothing has occurred with respect to the operation
of any such Plan which is reasonably likely to cause the imposition of any
material liability against the Business or the Purchaser under ERISA or other
applicable laws other than the Code. With respect to all other Seller Plans and
other benefits obligations with respect to the Business, nothing has occurred
which is reasonably likely to cause the imposition of any material liability
against the Business or the Purchaser under ERISA, the Code, or other applicable
laws. Without limiting the foregoing:
(A) No transaction prohibited by ERISA Section 406
and no "prohibited transaction" under Code Section 4975(c) have
occurred with respect to any Seller Plan that is reasonably
likely to result in a material liability to the Business or
the Purchaser.
(B) All contributions required with respect to any
Seller Plan have been paid to the applicable Seller Plan or
trust when due, and the Seller has no liability to the Pension
Benefit Guaranty Corporation with respect to any Plan.
13
(C) All contributions and payments made or accrued
with respect to all Seller Plans and other benefit obligations
are deductible under Code Section 162 or Section 404. No
amount, or any asset of any Seller Plan, is subject to tax as
unrelated business taxable income.
(ii) Other than routine claims for benefits submitted by
participants or beneficiaries, no Claim against, or legal proceeding involving
any Seller Plan or other benefit obligation that would have any Material Adverse
Effect to the Business or the Purchaser is pending or, to the Seller's
Knowledge, is threatened.
(iii) Neither the Seller nor any ERISA Affiliate contributes
to or otherwise participates in any Multi-Employer Plan and neither the Seller
nor any ERISA Affiliate has been notified of withdrawal liability by any
Multi-Employer Plan.
(iv) The Seller has complied in all material respects with
the provisions of ERISA Section 601 et seq. and Code Section 4980B.
(v) No payment that is owed or may become due to any
Business Employee or any director, officer, employee, or agent of the Seller as
a result of the consummation of transactions contemplated hereby will be non-
deductible to the Purchaser or subject to Tax under Code Section 280G or Section
4999; nor will the Purchaser be required to "gross up" or otherwise compensate
any such person because of the imposition of any excise tax on a payment to such
person.
(vi) The consummation of transactions contemplated hereby and
hereunder will not result in the payment, vesting, or acceleration of any
benefit.
2.13 Intellectual Property.
---------------------
(a) The Seller owns or has a license or has the right to use
the Proprietary Rights listed on Section 2.13(a) of the Disclosure Schedule;
each such item of Proprietary Rights listed on Section 2.13(a) of the Disclosure
Schedule has been duly registered with, filed in, or issued by the appropriate
Authority, to the extent required; and each such registration, filing and
issuance remains in full force and effect. To the Knowledge of the Seller, no
Claim adverse to the interests of the Seller in the Proprietary Rights or
Contracts listed in Section 2.13(a) of the Disclosure Schedule has been made in
litigation.
(b) To the Knowledge of the Seller, (i) no other Person has
any rights to any of the Proprietary Rights owned or used by the Seller that are
listed on Section 2.13(a) of the Disclosure Schedule except pursuant to
agreements or licenses specified in Section 2.13(b) of the Disclosure Schedule,
(ii) no other Person is infringing, violating or misappropriating any such
Proprietary Right, and (iii) no such Proprietary Right is subject to any
outstanding Order or Claim.
14
2.14 Environmental Matters.
---------------------
(a) Neither the Business nor the operation thereof has
violated any material applicable Environmental Law and no condition exists or
Occurrence has occurred which, with notice or the passage of time or both, would
constitute a violation of any material Environmental Law;
(b) the Seller is in possession of all material Environmental
Permits required under any applicable Environmental Law for the conduct or
operation of the Business (or any part thereof), and the Seller is in full
compliance with all of the requirements and limitations included in such
Environmental Permits;
(c) the Seller has not received any written notice from any
Authority or any private Person that the Business or the operation of any of its
facilities is in violation of any material Environmental Law or any material
Environmental Permit; and
(d) the Seller is not the subject of any material Federal,
state, local, or private Claim involving a demand for damages or other potential
liability with respect to a violation of Environmental Laws relating to
operations or the condition of any facilities or property (including underlying
groundwater) owned, leased, or operated by the Seller in the Business.
2.15 Dealings with Affiliates. Section 2.15 of the Disclosure
------------------------
Schedule hereto sets forth a complete and accurate list, including the parties,
of all oral or written Contracts included in the Acquired Assets or Assumed
Liabilities to which any one or more Affiliates of the Seller is also a party.
2.16 Insurance. The Seller currently has, and through the Closing
---------
Date will have, Policies in full force and effect that provide for coverages
that are usual and customary as to amount and scope in the Business.
2.17 Accounts Receivable; Inventories. With respect to the Business,
-------------------
the accounts receivable of the Seller reflected in the Financial Statements and
such additional accounts receivable as are included in the Acquired Assets
(except to the extent reserved against in the Financial Statements) are or will
be valid, genuine and subsisting, and arise or will arise out of bona fide sales
and deliveries of goods, performance of services or other business transactions.
The inventories reflected on the Financial Statements and included in the
Acquired Assets do not include any items which are not usable or saleable in the
ordinary course of business of the Seller.
2.18 Brokerage. There are no claims for brokerage commissions,
---------
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Seller that would be an Assumed Liability.
2.19 Customers and Suppliers. With respect to the Business, no
-------------------------
material supplier of the Business has advised the Seller in writing within the
past year that it will stop, or decrease the rate of, supplying materials,
products, or services to the Seller (other than by reason of changes in crop
yields) and no material customer of the Business has advised the Seller in
writing within the past year that it will stop, or decrease the rate of, buying
materials, products or services from the Seller. With respect to the Business,
Section 2.19 of the Disclosure Schedule hereto sets forth a complete and
15
accurate list of (a) each customer that accounted for more than 5% of the
revenues of the Business during the last full fiscal year and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product or component to
the Business.
2.20 Permits. The Permits listed on Section 2.20 of the Disclosure
-------
Schedule hereto are the only material Permits that are required for the Seller
to conduct the Business as presently conducted. Each such Permit is in full
force and effect and, to the best of the Knowledge of the Seller, no suspension
or cancellation of any such Permit is threatened and there is no basis for
believing that such Permit will not be renewable upon expiration.
2.21 Utilities. The Improvements primarily used in the Business has
---------
sufficient power, fuel oil, natural gas and water supplies and adequate sewerage
and waste disposal systems for the operation of the Business as presently
conducted, and, to the Seller's Knowledge, all such supplies and systems will be
available after the Closing to the Purchaser. All such systems are in compliance
with all federal, state and local environmental and other Laws in all material
respects.
2.22 Sufficiency of Assets. The Acquired Assets are all of the
---------------------
material assets used by the Seller to conduct the Business and are sufficient
for the continued conduct of the Business after the Closing in substantially
the same manner as conducted prior to Closing.
2.23 Mycogen Agreement. The Business is currently not processing
------------------
any seed and the business plan of the Business does not contemplate future
processing of seed under that certain License and Supply Agreement, dated as of
May 10, 1995, including all addenda thereto, by and between the Seller and
Mycogen Plant Sciences, a Delaware corporation.
2.24 No Other Representations or Warranties.
--------------------------------------
Except for representations and warranties contained in this Article II, neither
the Seller nor any other Person makes any representation or warranty whatsoever,
express or implied, on behalf of the Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
The Purchaser represents and warrants to the Seller as follows as of
the date hereof and as of the Closing Date:
3.1 Corporate Organization, Etc. The Purchaser is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets.
3.2 Authorization, Etc. The Purchaser has full corporate power and
------------------
authority to enter into this Agreement and to carry out the transactions
contemplated hereby and thereby. The Board of Directors of the Purchaser has
duly authorized the execution, delivery and performance of this Agreement and to
consummate the transactions contemplated hereby, and no other corporate
16
proceedings on their part are necessary to authorize this Agreement and the
transactions contemplated hereby and thereby. This Agreement constitutes the
legal, valid and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms.
3.3 No Violation. The execution, delivery and performance by the
-------------
Purchaser of this Agreement, and all other agreements contemplated hereby, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and will not (a) conflict with or result in a breach of
the terms, conditions or provisions of, (b) result in a violation of, or (c)
require any authorization, consent, approval, exemption or other action by, or
notice to, or filing with any court or Authority pursuant to, the charter or
bylaws of the Purchaser or, to the best knowledge of the Purchaser, any
applicable Law, Order or any contract to which the Purchaser, or its properties
are subject. The Purchaser will comply in all material respects with all
applicable Laws and Orders in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
3.4 Certain Proceedings. There is no pending proceeding that has been
-------------------
commenced against the Purchaser that challenges, or may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
transactions contemplated by this Agreement. To the Purchaser's knowledge, no
such proceeding has been commenced or threatened.
3.5 Financing. The Purchaser has (through cash on hand, existing
---------
credit arrangements or otherwise) as of the date hereof, and will have at the
Closing, sufficient funds to pay the Purchase Price, any expenses to be incurred
by the Purchaser in connection with this Agreement and all other amounts payable
by the Purchaser at the Closing and to perform its obligations hereunder
following the Closing and to provide adequate working capital to the Business.
3.6 Brokers or Finders. The Purchaser and its officers and agents
------------------
have incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with this Agreement.
ARTICLE IV
COVENANTS OF THE SELLER
-----------------------
Until the Closing Date, except as otherwise consented to or approved by
the Purchaser in writing, the Seller agrees that, with respect to the Business,
it shall act, or refrain from acting where required hereinafter, to comply with
the following:
4.1 Regular Course of Business. The Seller shall operate the Business
--------------------------
diligently and in good faith, consistent with past management practices, use its
commercially reasonable efforts to maintain all of its properties of the
Business in customary repair, order and condition, reasonable wear and tear
excepted; maintain (except for expiration due to lapse of time) all leases and
Contracts in effect without change except as expressly provided herein; comply
in all material respects with the provisions of all Laws and Orders applicable
17
to the Seller and the conduct of the Business; and maintain insurance coverage
up to the Closing Date consistent with the terms set forth in Section 2.16.
4.2 Certain Prohibited Transactions. Until the Closing Date, without
--------------------------------
obtaining the prior written consent of the Purchaser, the Seller shall not and
shall not commit or agree to, other than in the ordinary course of business and
consistent with past practices, (i) increase the salary or benefits of any
Business Employee or commit to pay any bonuses or other cash or property to any
Business Employee, (ii) cancel, release, waive or compromise any debt, Claim or
right in its favor having a value in excess of $5,000 other than in connection
with returns for credit or replacement in the ordinary course of business, (iii)
incur or assume any Indebtedness, (iv) make any loans or advances to any Person
that would be an Assumed Liability, or (v) sell or otherwise transfer or grant
any Liens (other than Permitted Liens and Senior Lender Liens) on or right to
acquire any of the assets or other property primarily owned or used in the
Business.
4.3 Access and Disclosure.
---------------------
(a) The Seller shall afford to the Purchaser and its counsel,
accountants, agents and other authorized representatives reasonable access
during business hours to the Business's plants, properties, books and records in
order that the Purchaser may have full opportunity to make such reasonable
investigations as it shall desire to make of the affairs of the Business; and
the Seller shall cause its officers, employees and auditors to furnish such
additional financial and operating data and other information relating to the
Business as the Purchaser shall from time to time reasonably request.
(b) From time to time prior to the Closing Date, the Seller
shall promptly supplement or amend information previously delivered to the
Purchaser with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or disclosed in the Disclosure Schedule.
4.4 Fulfillment of Conditions Precedent. The Seller shall use
--------------------------------------
commercially reasonable efforts to obtain by September 16, 2002 (or, if such
date is not practicable, as soon thereafter as is practicable) and at its
expense all such waivers, Permits, consents, approvals or other authorizations
from third parties and Authorities required on its part in connection with, and
to do all things as may be necessary or desirable to fulfill the conditions to,
the consummation of the transactions contemplated by this Agreement.
4.5 License Agreement. The Seller shall enter into and deliver at
-----------------
Closing the License Agreement in substantially the form of Exhibit 7.7 hereto.
-----------
4.6 Employees; Employee Benefit Matters. The Seller shall cooperate
-----------------------------------
with the Purchaser in connection with the Purchaser satisfying its obligations
under Section 5.4 below. The Seller shall retain the liability for payment of
the completion of business transaction and performance incentives under the
terms of the individual retention incentive agreements listed in Section
2.12(c)(vi) of the Disclosure Schedule.
18
4.7 Non-Competition. For a period of three (3) years from the
---------------
Closing, the Seller shall not, and shall cause each of its Subsidiaries not to,
directly or indirectly, engage in any business that is in competition with the
Business. Notwithstanding anything to the contrary contained in this Section
4.7, the Purchaser hereby agrees that the foregoing covenant shall not be deemed
breached as a result of (i) the ownership by the Seller or any Affiliate of the
Seller of less than an aggregate of 5% of any class of capital stock of a person
engaged, directly or indirectly, in a business that is in competition with the
Business or less than 10% in value of any instrument of indebtedness of a Person
engaged, directly or indirectly, in a business that is in competition with the
Business, (ii) the retention and conduct by the Seller of seed businesses, other
than sunflower seed businesses, and animal food businesses other than bird food
businesses, (iii) any action taken by the Seller or any of its Affiliates
pursuant to this Agreement or the License Agreement, or (iv) any action taken by
the Seller of any of its Affiliates or by any third party at the direction of
the Seller in connection with discharging its obligations under any Contracts
guarantees (including guarantees of performance under contacts or Agreements),
assumption of obligations, letters of credit or other similar arrangements,
including surety and performance bonds, in effect at the Closing Date and not
included in the Assumed Liabilities. Notwithstanding the foregoing, the Seller
may enter into a merger, acquisition, joint venture or other business
combination with another entity so long as (a) the objective of the transaction
is not to serve the sunflower seed market and (b) serving the sunflower seed
market is not a primary element of the other entity's business or, if that
service is such an element, the Seller and its personnel will have no
involvement with that element of the combined business.
4.8 Telmark Lease. At Closing, the Seller will prepay any amounts
-------------
owing under the Telmark Lease.
ARTICLE V
COVENANTS OF THE PURCHASER
--------------------------
The Purchaser hereby covenants and agrees with the Seller that:
5.1 Fulfillment of Conditions Precedent. The Purchaser shall use
-------------------------------------
commercially reasonable efforts to obtain by September 16, 2002 (or if such date
is not practicable, as soon thereafter as is practicable) and at its expense all
such waivers, Permits, consents, approvals or other authorizations from third
parties and Authorities required on its part in connection with, and to do all
things as may be necessary or desirable to fulfill the conditions to, the
consummation of the transactions contemplated by this Agreement
5.2 Confidentiality. The Purchaser confirms and agrees that, with
---------------
respect to any information directly or indirectly furnished by or on behalf of
the Seller, whether before, on or after the date of hereof, the Purchaser shall
continue to be bound by the terms of that certain Confidentiality Agreement,
dated as of May 9, 2002, by and between the Purchaser and the Seller until the
Closing.
19
5.3 License Agreement. The Purchaser shall enter into and deliver
-----------------
at Closing the License Agreement in substantially the form of Exhibit 7.7
hereto.
-----------
5.4 Employees; Employee Benefit Matters.
------------------------------------
(a) With respect to each Business Employee who is employed in
connection with the Business immediately before the Closing Date, including any
employee who is absent from work by reason of vacation, the Purchaser agrees
that as of and immediately after the Closing Date, the Purchaser shall employ
such Business Employee in a position that is reasonably comparable to that held
with the Seller as disclosed to the Purchaser in the Data Book Information dated
July 2002 and that does not result in a significant change in compensation
(excluding any retention or other bonus plan payments) or work location. With
respect to each Business Employee who is absent from work on the Closing Date by
reason of approved leave of absence, short-term disability, or workers'
compensation, the Purchaser agrees that when each such Business Employee is
available to return to work, fit for duty, within one (1) year after the Closing
Date the Purchaser shall offer to employ such Business Employee in a position
that is reasonably comparable to that held with the Seller as disclosed to the
Purchaser in the Data Book Information dated July 2002 and that does not result
in a significant change in compensation (excluding any retention or other bonus
plan payments) or work location. The Purchaser shall indemnify and hold harmless
the Seller and be responsible for any Claims made by any Business Employees for
severance or other benefits based on separation, for any Claims based on breach
of contract, and for any other Claims arising out of or in connection with the
employment, or the suspension or termination of employment of, any employees,
other than any claims related to the Seller's actions before the Closing Date or
based solely on the transactions contemplated by this Agreement.
(b) On and after the Closing Date, the Purchaser shall credit
to each Business Employee the service of such employee with the Seller through
the Closing Date to the same extent as if such service had been performed for
the Purchaser (i) for all purposes in connection with determining such
employee's eligibility for and vesting in all Plans, programs, and arrangements
for which such employee is otherwise eligible, including but not limited to, as
applicable, the Purchaser's Pension Plan, 401(k) Plan, severance, and sick days,
and (ii) for purposes of determining the amount of such employee's benefit under
the Purchaser's severance plan. For purposes of the Purchaser's vacation policy,
the Purchaser shall credit each Business Employee with no less than the number
of years of service necessary to ensure that (i) each Business Employee has the
same number of annual vacation days for 2002 (taking into account days used by
each Business Employee while employed by the Seller) under the Purchaser's
vacation policy as under the Seller's vacation policy, and (ii) each Business
Employee does not require a greater number of years of service to reach the next
higher increment of vacation days under the Purchaser's vacation policy than
would have been required under the Seller's vacation policy. Vacation earned by
Business Employees in 2001 to be taken in 2002, and which is unused as of the
Closing Date, shall be assumed by the Purchaser provided that: (i) the Seller
shall pay the Purchaser an amount equal to the value of such unused vacation on
the Closing Date, and (ii) the Purchaser shall pay any Business Employee who
terminates employment with Purchaser in 2002 for any reason an amount equal to
the value of such Business Employee's unused vacation for 2002. The Purchaser
20
shall have no obligation to pay to any Business Employees any of the value of
any vacation accrued in 2002 that is not available for use in that year.
Furthermore, the Purchaser shall waive or cause to be waived, except to the
extent such waiver is prohibited by applicable Law, any waiting period,
probationary period, pre-existing condition exclusion, evidence of insurability
requirement, or similar condition with respect to initial participation under
any Plan, program, or arrangement of the Purchaser to provide health coverage,
life insurance, disability benefits, or other similar welfare benefits with
respect to each Business Employee who has satisfied the comparable requirements
under the Seller's comparable Plans before the Closing Date.
Notwithstanding the foregoing, the Business Employees employed by the Purchaser
shall not be eligible for medical benefits with the Purchaser until October 1,
2002. On and after the Closing Date and until September 30, 2002, the Seller
shall continue to provide medical coverage under the Agway Inc. Medical/Dental
Plan to Business Employees who were participating in such plan as of the Closing
Date.
(c) Except as otherwise specifically provided in this Section
5.4, the Seller shall retain liability for all salary and other compensation and
benefits of any kind due to any Business Employee arising out of employment by
the Seller before the Closing Date, and the Purchaser shall assume liability for
all salary and other compensation and benefits of any kind earned on or after
the Closing Date by any Business Employee arising out of employment by the
Purchaser.
5.5 Signage. Upon expiration of its right to use any name or
-------
trademark pursuant to the License Agreement, the Purchaser shall discontinue the
use of such name or trademark on any stationery, purchase order forms, packaging
or other similar paper goods or supplies, or advertising and promotional
materials, product, training and service literature and materials, or computer
programs or like materials and shall remove all signage containing such name or
trademark.
ARTICLE VI
OTHER AGREEMENTS
----------------
The parties further agree as follows:
6.1 Agreement to Defend. In the event any action, suit, proceeding or
-------------------
investigation of the nature specified in Section 7.5 or Section 8.3 hereof is
commenced, whether before or after the Closing Date, the parties hereto agree to
cooperate and use their commercially reasonable efforts to defend against and
respond thereto.
6.2 Cooperation. Subject to the terms and conditions of this
-----------
Agreement, the parties hereto shall use commercially reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws and Orders to consummate
and make effective, by September 16, 2002, (or, if such date is not practicable,
as soon thereafter as is practicable) the transactions contemplated by this
Agreement, and to cooperate with each other in connection with the foregoing,
including without limitation using all reasonable efforts (a) to obtain all
21
necessary waivers, consents, and approvals from other parties to loan
agreements, leases, mortgages and other Contracts, (b) to obtain all necessary
Permits, consents, approvals and authorizations as are required to be obtained
under any Law, (c) to lift or rescind any injunction or restraining order or
other Order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (d) to effect all necessary registrations and
filings and submissions of information requested by Authorities, and (e) to
fulfill all conditions to the obligations of the parties under this Agreement.
Each of the Purchaser and the Seller further covenants and agrees that it shall
use its commercially reasonable efforts to prevent, with respect to a threatened
or pending preliminary or permanent injunction or other Law or Order, the entry,
enactment or promulgation thereof, as the case may be.
6.3 Deliveries After Closing. From time to time after the Closing,
------------------------
at the Purchaser's request and without further consideration from the Purchaser,
the Seller shall execute and deliver such other instruments of conveyance and
transfer and take such other action as the Purchaser reasonably may require to
convey, transfer to and vest in the Purchaser and to put the Purchaser in
possession of the Acquired Assets.
6.4 Public Announcements. Neither the Seller nor the Purchaser, nor
--------------------
any Affiliate, representative or shareholder of either of such persons, shall
disclose any of the terms of this Agreement to any third party without the other
party's prior written consent. The form, content and timing of all press
releases, public announcements or publicity statements with respect to this
Agreement and transactions contemplated hereby shall be subject to the prior
approval of both the Seller and the Purchaser, which approval shall not be
unreasonably withheld. No press releases, public announcements or publicity
statements shall be released by either party without such prior mutual
agreement. The provisions of this Section 6.4 shall be subject to any contrary
requirement of any Law or Order, including, without limitation, the federal
securities laws of the United States.
6.5. Allocation; Tax Matters.
-----------------------
(a) The Seller and the Purchaser agree to use commercially
reasonable efforts to enter into an agreement (the "Allocation Agreement")
as soon as practicable (but in any event no later than 150 days after the
Closing Date) to allocate the Purchase Price, the Assumed Liabilities, and all
other capitalizable costs among the Acquired Assets and the Seller's agreement
under Section 4.7 for all applicable Tax purposes, including Code Section 1060.
The Purchaser shall initially prepare a statement setting forth a proposed
computation and allocation of the aggregate purchase price (the "Computation"),
and submit it to the Seller no later than 60 days after the Closing Date. If,
within 30 days of the Seller's receipt of the Computation, the Seller shall not
have objected in writing to such Computation, the Computation shall become the
Allocation Agreement. If such objection shall be made within such period, and
within 60 days after the Seller's receipt of the Computation the Seller and the
Purchaser have not adopted an Allocation Agreement, any disputed aspects of the
Allocation Agreement shall be resolved within 90 days of the Seller's receipt of
the Computation by the Independent Accountant, which shall resolve such dispute
pursuant to, first, the terms of this Agreement and, second, the application of
applicable Tax laws to the relevant facts.
22
(b) After the Closing, from time to time, the Purchaser and the Seller
shall agree upon revisions to the Allocation Agreement to reflect any
adjustments to the consideration. The Purchaser and the Seller shall file and
cause to be filed all Tax Returns and execute such other documents as may be
required by any Taxing Authority, in a manner consistent with the Allocation
Agreement, as it may be revised from time to time. The Seller shall prepare
Internal Revenue Service Form 8594 (or any successor form) pursuant to Code
Section 1060 relating to the transactions contemplated by this Agreement based
on the Allocation Agreement, as it may be revised from time to time, and deliver
such form to the Purchaser. The Purchaser and the Seller shall file, or cause
the filing of, such form and each comparable form with each relevant Taxing
Authority. Any dispute under this provision shall be resolved by the Independent
Accountant within 30 days of the submission of such dispute.
(c) Irrespective of Article XI or any other provision hereof, the
Purchaser shall bear and be liable for, and shall indemnify the Seller against,
all title insurance premiums, and sales and use Taxes incurred in connection
with the transactions contemplated hereby. Irrespective of Article XI or any
other provision hereof, the Seller shall bear and be liable for, and shall
indemnify the Purchaser against abstracting and title insurance commitment
costs, all transfer, documentary, registration, stamp, value-added and other
similar Taxes (including all applicable real estate transfer Taxes and real
property gains Taxes), incurred in connection with the transactions contemplated
hereby. The Seller and the Purchaser shall cooperate in timely making and filing
all Tax Returns as may be required to comply with the provisions of any Tax laws
applicable to the transfer of the Acquired Assets, and each of the Seller and
the Purchaser shall timely pay any Taxes for which it is responsible under this
Section 6.5(c) or, in the case of any such Taxes paid by the other party hereto,
timely indemnify such other party against such Taxes. Any dispute under this
provision shall be resolved by the Independent Accountant within 30 days of the
submission of such dispute.
(d) At the Closing, the Seller shall deliver to the Purchaser duly
executed certificates certifying that the transactions contemplated hereby are
exempt from withholding under Section 1445 of the Code.
(e) The Seller shall timely file or cause to be filed (i) the United
States consolidated federal income Tax Returns of the Seller and (ii) all other
Tax Returns with respect to the Acquired Assets or the income or operations of
the Business required to be filed (including any extensions) on or prior to the
Closing Date or with respect to any Pre-Closing Tax Period. The Seller shall pay
or cause to be paid all Taxes due on or with respect to such Tax Returns or the
taxable periods or events covered thereby. The Purchaser shall prepare all Tax
Returns with respect to the Acquired Assets or the income and operations of the
Business due after the Closing Date except for Tax Returns due with respect to a
Pre-Closing Tax Period; provided that if such Tax Returns cover a Straddle
Period and the Seller is liable for any Taxes shown as due on such Tax Returns
pursuant to the terms of this Section 6.5(e), the Purchaser shall submit such
Tax Returns to the Seller for review and comment no later than thirty (30) days
prior to the date such Tax Returns are required to be filed (including
extensions). Notwithstanding anything to the contrary in Section 1.2, the
Purchaser shall timely pay all Taxes shown as due on such Tax Returns. Except to
the extent paid or adjusted on the closing statement pursuant to Section 1.6(d),
the Seller shall remit to the Purchaser at least two (2) days prior to the due
23
date of any Tax Returns relating to any Straddle Period relating to the Acquired
Assets its pro rata share (calculated on a per diem basis as of the Closing
Date) of any Taxes shown as due on such Tax Returns. Any dispute under this
provision shall be resolved by the Independent Accountant within 30 days of the
submission of such dispute.
(f) The Seller and the Purchaser shall each provide the other with
such assistance as may be reasonably requested (including making employees
reasonably available to provide information or testimony) in connection with the
preparation of any Tax Return or the determination of liability for Taxes with
respect to the Acquired Assets or the income or operations of the Business, in
each case as contemplated by this Agreement.
(g) Any decision of the Independent Accountant under this Section 6.5
shall be final, and the costs, expenses and fees of the Independent Accountant
shall be borne equally by the Seller and the Purchaser.
(h) The obligations of the parties pursuant to this Section 6.5 shall
survive indefinitely.
6.6. Certain Information. After the Closing, upon reasonable written
-------------------
notice, the Purchaser and the Seller shall furnish or cause to be furnished to
each other and their respective accountants, counsel and other representatives
access, during normal business hours, to such information (including records
pertinent to the Business), personnel and assistance relating to the Business as
is reasonably necessary for financial reporting and accounting matters, the
preparation and filing of any returns, reports or forms or the defense of,
prosecution of, or response required under, or pursuant to, any lawsuit, action
or proceeding (including any proceeding involving the Seller, the Purchaser, any
Excluded Assets, any Excluded Liabilities, or any environmental matters related
to the Acquired Assets) or in order to enable the parties to comply or monitor
compliance (including with respect to Purchaser's obligations in respect of the
Assumed Liabilities) with their respective obligations under this Agreement. The
Purchaser and the Seller shall also furnish or cause to be furnished to each
other and their respective accountants, counsel and other representatives
access, during normal business hours, to such information for any other
reasonable business purpose.
6.7 Collection of Excluded Accounts Receivable; Reassignment of
----------------------------------------------------------------
Puttable Receivables.
--------------------
(a) For a period of 180 days after the Closing Date, the
Purchaser shall assist the Seller, without charge, in the collection of all
Excluded Receivables, and shall use commercially reasonable efforts to collect
all Puttable Receivables, provided that in either case the Purchaser shall not
be required to initiate any legal proceedings or incur any expenses for outside
attorneys or collection agencies in connection with such collection.
(b) The Purchaser shall apply all collections on Assigned
Receivables and Excluded Receivables from a given customer to the oldest
outstanding invoice to that customer, unless (i) the customer specifically
directs application to a different invoice or (ii) the customer is disputing
such oldest invoice and application of the payment to the oldest invoice would
be inconsistent with the position of the customer in such dispute. The Purchaser
will hold for the Seller all collections received by it in respect of Excluded
24
Receivables pursuant to this Section 6.7, and shall pay such collections over to
the Purchaser within three (3) business days after receipt, whether or not such
collections are received during the 180-day period after the Closing Date.
(c) On the date that is 180 days after the Closing Date, the
Purchaser may, by notice to the Seller, require the Seller to repurchase the
uncollected portion of all Puttable Receivables at a purchase price equal the
uncollected balance thereof plus interest at 9 percent per annum from the
Closing Date to the date of purchase. The Seller shall effect such repurchase
within ten (10) days of receipt of such notice.
6.8 Transitional Home Office. The Seller shall provide to the
-------------------------
Purchaser, for the benefit of Xxxxxx Xxxxxxx, her current office furniture (or
comparable) and desktop computer. In addition, the Seller shall keep her
existing telephone line and number active for a period of up to sixty (60) days
from the Closing.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
----------------------------------------------
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Purchaser:
7.1 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Seller set forth in this Agreement (determined without
regard to any materiality qualification or exception in any representation or
warranty) shall be true and correct in all respects as of the date of this
Agreement and, except for those made as of a particular date, as of the Closing
as though made at and as of the Closing, except in each case for such failures
or representations and warranties to be true and correct (i) as the result of
changes permitted or contemplated by this Agreement or (ii) that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Purchaser shall have received a certificate signed by an
authorized officer of the Seller to such effect certifying to the foregoing.
7.2 Consent of Senior Lenders. The Seller shall have obtained the
-------------------------
consent of the Senior Lenders to the sale of the Business to the Purchaser
pursuant to this Agreement and the release of the Senior Lender Liens.
7.3 Opinion of the Seller's Counsel. The Purchaser shall have
-----------------------------------
received an opinion of the Seller's counsel, dated the Closing Date, in the
form of Exhibit 7.3 hereto.
7.4 No Material Adverse Change. There shall have been no Material
--------------------------
Adverse Change since the date of this Agreement.
7.5 No Proceeding or Litigation. No preliminary or permanent
------------------------------
injunction or other Order issued by a court of competent jurisdiction or by any
Authority, or any Law or Order promulgated or enacted by any Authority shall be
25
in effect, which would prevent the consummation of the transactions contemplated
hereby.
7.6 Secretary's Certificate. The Purchaser shall have received a
-----------------------
certificate, by the secretary of the Seller, as to the charter and bylaws of the
Seller, the resolutions adopted by the directors of the Seller in connection
with this Agreement and the incumbency of certain officers of the Seller.
7.7 License Agreement. The Seller shall have executed the License
-----------------
Agreement in substantially the form of Exhibit 7.7 hereto.
-----------
7.8 Other Documents. The Seller shall have furnished the Purchaser
----------------
with such other and further documents and certificates, including certificates
of the Seller's officers and others, as the Purchaser shall reasonably request
to evidence compliance with the conditions set forth in this Agreement.
7.9 Title Policies. The Purchaser shall have received from Chicago
--------------
Title Insurance Company (the "Title Company"), at the Seller's sole cost and
expense, a commitment for an owner's title insurance policy (ALTA Owner's Form
1992) to be issued to the Purchaser with respect to each parcel of Real
Property, together with endorsements reasonably requested by the Purchaser
(including, without limitation, access, zoning, comprehensive, and contiguity
endorsements to the extent available in the State), in an amount determined by
the Purchaser and approved by Title Company, insuring the Purchaser and issued
as of the Closing Date by the Title Company, showing the Purchaser to have
marketable title to each such parcel of Real Property, in each case free and
clear of all Liens except for the Permitted Liens. The Seller shall be solely
liable for payment of all title insurance charges and fees excluding premiums,
inclusive of any additional premiums attributable to requested and/or required
endorsements. The Purchaser shall be solely responsible for all title insurance
premiums. The Seller shall have delivered to the Title Company an Owner's
Affidavit for each parcel of Real Property in form and substance satisfactory to
the Seller and the Title Company.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
-------------------------------------------
Each and every obligation of the Seller under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Seller:
8.1 Representations and Warranties; Performance. The representations
-------------------------------------------
and warranties of the Purchaser set forth in this Agreement (determined without
regard to any materiality qualification or exception in any representation or
warranty) shall be true and correct in all material respects as of the date of
this Agreement and, except for those made as of a particular date, as of the
Closing as though made at and as of the Closing, except in each case for such
failures or representations and warranties to be true and correct as the result
of changes permitted or contemplated by this Agreement. The Seller shall have
26
received a certificate signed by an authorized officer of the Seller to such
effect certifying to the foregoing.
8.2 Consent of Senior Lenders. The Seller shall have obtained the
-------------------------
consent of the Senior Lenders to the sale of the Business to the Purchaser
pursuant to this Agreement and the release of the Senior Lender Liens.
8.3 No Proceeding or Litigation. No preliminary or permanent
-------------------------------
injunction or other Order issued by a court of competent jurisdiction or by any
Authority, or any Law or executive order promulgated or enacted by any Authority
shall be in effect, which would prevent the consummation of the transactions
contemplated hereby.
8.4 Secretary's Certificate. The Seller shall have received a
-------------------------
certificate by the assistant secretary of the Purchaser, as to the charter and
bylaws of the Purchaser, the resolutions adopted by the directors of the
Purchaser in connection with this Agreement, and the incumbency of certain
officers of the Purchaser.
8.5 License Agreement. The Purchaser shall have executed the License
-----------------
Agreement in substantially the form of Exhibit 7.7 hereto.
8.6 Opinion of the Purchaser's Counsel. The Seller shall have
--------------------------------------
received an opinion of the Purchaser's counsel dated the Closing Date, in the
form of Exhibit 8.6 hereto.
8.7 Other Documents. The Purchaser shall have furnished the Seller
----------------
with such other and further documents and certificates, including certificates
of the Purchaser's officers and others, as the Seller shall reasonably request
to evidence compliance with the conditions set forth in the Agreement.
ARTICLE IX
CLOSING
-------
9.1 Closing. Unless this Agreement shall have been terminated or
-------
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on
September 16, 2002, or, if later, the date that is three (3) business days after
the satisfaction or waiver of the conditions precedent set forth in Articles VII
and VIII, or on such other date as the parties may agree. The Closing shall take
place in the offices of Xxxxxxxxxx Xxxxxx & Xxxxxxx, LLP, 0000 Xxxxxxxxxxxx
Xxxxxx, X.X., Xxxxxxxxxx, XX 00000.
27
ARTICLE X
TERMINATION AND ABANDONMENT
---------------------------
10.1 Methods of Termination. This Agreement may be terminated and
----------------------
the transactions here in contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser and the Seller; or
(b) by the Purchaser or the Seller if this Agreement is not
consummated on or before September 30, 2002; provided that if such
non-consummation of this Agreement results from a breach or default by a party
with respect to its respective obligations under this Agreement on or before
such date, such party may not terminate this Agreement pursuant to this Section
10.1(b), and the other party to this Agreement may at its option enforce its
rights against such breaching or defaulting party and seek any remedies against
such party, in either case as provided hereunder and by applicable Law.
10.2 Procedure Upon and Effects of Termination.
-----------------------------------------
(a) In the event of termination and abandonment pursuant to
Section 10.1 hereof, and subject to the proviso contained in Section 10.1(b),
this Agreement shall terminate and shall be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as provided herein,
each party shall redeliver all documents and other material of any other party
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same.
(b) In the event of a termination of this Agreement pursuant
to Section 10.1, this Agreement shall become null and void and of no further
force or effect, and no Person shall have any liability in respect hereof or of
the transactions contemplated hereby, except (i) with respect to any willful and
material breach of any covenant contained in this Agreement by such Person prior
to such termination and (ii) that the provisions of the Confidentiality
Agreement and the provisions of Section 12.14 and ARTICLE X shall survive such
termination and shall remain in full force and effect.
ARTICLE XI
INDEMNIFICATION; REMEDIES
-------------------------
11.1. Survival. Subject to Section 11.5 below, all representations,
--------
warranties, covenants, and obligations in this Agreement will survive the
Closing.
11.2. Indemnification and Payment of Damages by the Seller. The Seller
----------------------------------------------------
will indemnify and hold harmless the Purchaser and its officers, directors,
stockholders, controlling persons, and Affiliates (collectively, the "Purchaser
Indemnified Persons") for, and will pay to the Purchaser Indemnified Persons the
amount of, any loss, liability, claim, damage or expense (including reasonable
costs of investigation and defense and reasonable attorneys' fees), whether or
28
not involving a third-party claim (collectively, "Damages"), arising from: (a)
any breach of any representation or warranty made by the Seller in this
Agreement or in any certificate delivered by the Seller pursuant to this
Agreement, (b) any breach by the Seller of any covenant or obligation of the
Seller in this Agreement, (c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with the Seller (or
any Person acting on their behalf) in connection with any of the transactions
contemplated by this Agreement, or (d) any Excluded Liabilities.
11.3. Indemnification and Payment of Damages By the Purchaser. The
----------------------------------------------------------
Purchaser will indemnify and hold harmless the Seller and its officers,
directors, stockholders, controlling persons, and affiliates (collectively, the
"Seller Indemnified Persons" and, together with the Purchaser Indemnified
Persons, "Indemnified Persons"), and will pay to the Seller Indemnified Persons
the amount of any Damages arising from: (a) any breach of any representation or
warranty made by the Purchaser in this Agreement or in any certificate delivered
by the Purchaser pursuant to this Agreement, (b) any breach by the Purchaser of
any covenant or obligation of the Purchaser in this Agreement, (c) any claim by
any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with the Purchaser (or any Person acting on its behalf) in connection
with any of the transactions contemplated by this Agreement, (d) any Assumed
Liabilities, or (e) the operation of the Business or the Acquired Assets, or any
actions or omissions of the Purchaser, its Affiliates, agents, contractors or
subcontractors in connection therewith, after the Closing.
11.4. Exclusive Remedy. If the Closing occurs, the remedies provided
----------------
in Sections 11.2 and 11.3 will be the exclusive remedies available to the
Purchaser, the Seller, and all other Indemnified Persons. Notwithstanding any
provision of this Article XI or any other provision of this Agreement, any issue
or matter relating to indemnification for Taxes or Damages relating thereto
shall be governed solely by Section 6.5.
11.5. Time Limitations. If the Closing occurs, neither the Seller nor
----------------
the Purchaser will have any liability (for indemnification or otherwise) with
respect to any representation or warranty, or any covenant or obligation to be
performed and complied with on or prior to the Closing Date, unless on or before
the date that is two (2) years from the Closing Date, except for indemnity for a
breach of the representations and warranties contained in sections 2.8(a), 2.11
and 2.14 in which case such period shall be seven (7) years from the Closing
Date, the Purchaser or the Seller, as the case may be, notifies the other of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by the person providing such notice.
11.6. Limitations on Amount - the Seller. The Seller will have no
------------------------------------
liability (for indemnification or otherwise) with respect to the matters
described in clause (a) of Section 11.2 or, to the extent relating to any
failure to perform or comply prior to the Closing Date (determined without
regard to any materiality qualification or exception in any representation or
warranty), clause (b) of Section 11.2 until the total of all Damages with
respect to such matters exceeds $100,000 and then only for the amount by which
such Damages exceed $100,000; provided, however, this Section 11.6 will not
apply to any intentional breach by the Seller of any covenant or obligation, and
the Seller will be liable for all Damages with respect to such breaches; and
29
provided further, that in no event shall the Seller's obligations under this
Article XI exceed $8,500,000.
11.7. Limitation on Amount- the Purchaser. The Purchaser will have no
-----------------------------------
liability (for indemnification or otherwise) with respect to the matters
described in clause (a) of Section 11.3 or, to the extent relating to any
failure to perform or comply prior to the Closing Date, clause (b) of Section
11.3 until the total of all Damages with respect to such matters exceeds
$100,000, and then only for the amount by which such Damages exceeds $100,000;
provided, however, that this Section 11.7 will not apply to any intentional
breach by the Purchaser of any covenant or obligation, and the Purchaser will be
liable for all Damages with respect to such breaches; and provided further, that
in no event shall the Purchaser's obligations under this Article XI exceed
$8,500,000.
11.8. Procedure for Indemnification - Third Party Claims.
--------------------------------------------------
(a) Promptly after receipt by an Indemnified Person under
Section 11.2 or Section 11.3 of notice of the commencement of any Proceeding
against it, such Indemnified Person will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
Indemnified Person, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the Indemnified
Person's failure to give such notice.
(b) If any Proceeding referred to in Section 11.8(a) is
brought against an Indemnified Person and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and (unless the indemnifying party is also a party to such Proceeding and the
Indemnified Person determines in good faith that joint representation would be
inappropriate), to assume the defense of such Proceeding. After notice from the
indemnifying party to the Indemnified Person of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the Indemnified Person under this
Article XI for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the Indemnified Person's consent
unless (A) there is no finding or admission of any violation of any Law or Order
or any violation of the rights of any Person and no effect on any other claims
that may be made against the Indemnified Person, and (B) the sole relief
provided is monetary damages that are paid in full by the indemnifying party;
and (iii) the Indemnified Person will have no liability with respect to any
compromise or settlement of such claims effected without its consent. If notice
is given to an indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the Indemnified Person's
notice is given, give notice to the Indemnified Person of its election to assume
the defense of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding; provided, however, that the Indemnified
30
Person may not, without the written consent of the indemnifying party, consent
to any compromise or settlement of the Proceeding.
11.9. Procedure for Indemnification - Other Claims. A claim for
---------------------------------------------
indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
ARTICLE XII
MISCELLANEOUS PROVISIONS
--------------------------
12.1 Amendment and Modification. Subject to applicable Law, this
--------------------------
Agreement may be amended, modified and supplemented only by written agreement of
the parties hereto.
12.2 Waiver of Compliance; Consents. Any failure of any party hereto
------------------------------
to comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
12.3 Certain Definitions.
-------------------
"Adjustment Statement" shall have the meaning set forth in
---------------------
Section 1.5(b).
"Affiliate" means, with regard to any Person, (a) any Person,
---------
directly or indirectly, controlled by, under common control of, or controlling
such Person, (b) any Person, directly or indirectly, in which such Person holds,
of record or beneficially, five percent or more of the equity or voting
securities, (c) any Person that holds, of record or beneficially, five percent
or more of the equity or voting securities of such Person, (d) any Person that,
through Contract, relationship or otherwise, exerts a substantial influence on
the management of such Person's affairs, (e) any Person that, through Contract,
relationship or otherwise, is influenced substantially in the management of
their affairs by such Person, or (f) any director, officer, partner or
individual holding a similar position in respect of such Person.
"Allocation Agreement" shall have the meaning set forth in
---------------------
Section 6.5(a).
"Assigned Contract" means (i) all Contracts in effect on the
------------------
Closing Date relating to the purchase or sale of inventory, (ii) all Contracts
listed on Schedule 1.1(d) of the Disclosure Schedule, and (iii) all Contracts in
effect on the Closing Date and entered into in the ordinary course of business
consistent with past practice and providing for payments by the Seller of not
more than $25,000 per annum, provided that the Contracts included in Assigned
Contracts pursuant to this clause (iii) may not provide for payments by the
Seller in excess of $100,000 in the aggregate; provided that notwithstanding the
foregoing, "Assigned Contract" shall not include the Contracts listed on
Schedule 1.1(d)(i) of the Disclosure Schedule.
31
"Assigned Receivables" means (i) all grower accounts
-----------------------
receivable exclusively relating to the Business and secured by Liens, (ii) all
other accounts receivable exclusively relating to the Business that are as of
the Closing Date not past due as determined in accordance with the contract
terms giving rise to such account receivable and (iii) all accounts receivable
exclusively relating to the Business that are not described in the preceding
clause (i) or (ii) but that are designated as Assigned Receivables pursuant to
Section 1.1.3.
"Authority" means any federal, state, local or foreign
---------
governmental, regulatory or administrative body, agency, commission, board,
arbitrator or authority, any court or judicial authority, and any public,
private or industry regulatory authority, whether international, national,
federal, state or local.
"Balance Sheet Date" shall have the meaning as set forth in
--------------------
Section 2.4.
"Business" shall have the meaning as set forth in the
--------
Recitals.
"Business Employee" means each employee who performs service
-------------------
primarily in the Business as an employee of the Seller, including any employee
who is absent from work by reason of vacation, approved leave of absence,
short-term disability, or workers' compensation.
"Claim" means any action, claim, lawsuit, demand, suit,
-----
inquiry, hearing, investigation, notice of a violation, litigation, proceeding,
arbitration, appeals or other dispute, whether civil, criminal, administrative
or otherwise.
"Closing" shall have the meaning set forth in Section 9.1.
-------
"Closing Date" means the date the Closing occurs.
------------
"Closing Date Balance Sheet" shall have the meaning set forth
---------------------------
in Section 1.5(a).
"Closing Date Inventory Value" means the book value as of the
-----------------------------
opening of business on the Closing Date of the inventory included in the
Acquired Assets, determined in accordance with GAAP applied consistently with
the preparation of the Financial Statements, minus $118,000.
"Closing Date Net Current Asset Value" means the sum of the
---------------------------------------
Closing Date Inventory Value and the Closing Date Receivables Value less the
Closing Date Payables Value.
"Closing Date Payables Value" means the book value as of the
-----------------------------
opening of business on the Closing Date of the accounts payable included in the
Assumed Liabilities, determined in accordance with GAAP applied consistently
with the preparation of the Financial Statements.
"Closing Date Receivables Value" means the book value as of
---------------------------------
the opening of business on the Closing Date of the accounts receivable included
in the Acquired Assets, determined in accordance with GAAP applied consistently
with the preparation of the Financial Statements.
32
"Code" means the Internal Revenue Code of 1986, as amended,
----
and the Laws thereunder.
"Computation" shall have the meaning set forth in Section
-----------
6.5(a).
"Contested Adjustments" shall have the meaning set forth in
----------------------
Section 1.5(b).
"Contested Adjustment Notice" shall have the meaning set forth
---------------------------
in Section 1.5(b).
"Contract" means any agreement, contract, commitment, instrument
--------
or other binding arrangement or understanding, whether written or oral, which
primarily relates to the Business.
"Current Asset Value Shortfall" means the amount, if any, by
------------------------------
which the final Closing Date Net Current Asset Value determined in accordance
with Section 1.6 (if applicable) is less than the amount of the Closing Date Net
Current Asset Value utilized in the determination of the amount of Purchase
Price payable at Closing in accordance with Section 1.5.
"Current Asset Value Surplus" means the amount, if any, by
-----------------------------
which the Closing Date Net Current Asset Value determined in accordance with
Section 1.6 (if applicaple) exceeds the amount of the Closing Date Net Current
Asset Value utilized in the determination of the amount of Purchase Price
payable at Closing in accordance with Section 1.5.
"Damages" shall have the meaning set forth in Section 11.2.
-------
"Disclosure Schedule" shall have the meaning provided in the
--------------------
lead-in to Article II.
"Environmental Claims" means any and all administrative,
----------------------
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law or any permit issued under any such
Environmental Law (for purposes of this definition, "Claims") including, without
limitation (i) any and all of the foregoing by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all of the foregoing, by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Law" means any Law, Order, settlement agreement
-----------------
or Authority requirement, which relates to or otherwise imposes liability or
standards of conduct concerning mining or reclamation of mined land, discharges,
emissions, releases or threatened releases of noises, odors or any pollutants,
contaminants or hazardous or toxic wastes, substances or materials, whether as
matter or energy, into ambient air, water, or land, or otherwise relating to the
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants, or
hazardous wastes, substances or materials, including (but not limited to and as
may be amended) the Comprehensive Environmental Response, Compensation and
33
Liability Act, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Material Transportation Act, the Resource Conservation
and Recovery Act of 1976, as amended, the Toxic Substances Control Act, as
amended, the Federal Water Pollution Control Act, the Clean Water Act, the Clean
Air Act, the Occupational Safety and Health Act, any so-called "Superlien" law,
all as now or hereafter amended or supplemented, and the Laws promulgated
thereunder, and any other similar Federal, state or local statutes.
"Environmental Permit" means Permits, certificates, approvals,
---------------------
licenses and other authorizations relating to or required by Environmental Law
and necessary or desirable for the Business.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974 or any successor law, and regulations and rules issued pursuant to the Act
or any successor law.
"ERISA Affiliate" means any trade or business, whether or not
---------------
incorporated, that together with the Seller would be deemed a "single employer"
within the meaning of Section 4001(b)(i) of ERISA.
"Excluded Receivables" means all accounts receivable relating
---------------------
exclusively to the Business that are not Assigned Receivables.
"Financial Statements" shall have the meaning as set forth in
---------------------
Section 2.4.
"GAAP" means generally accepted accounting principles,
----
consistently applied, as in existence at the date hereof.
"Guarantee" means any guarantee or other contingent liability
---------
(other than any endorsement for collection or deposit in the ordinary course of
business), direct or indirect with respect to any obligations of another Person,
through an agreement or otherwise, including, without limitation, (a) any
endorsement or discount with recourse or undertaking substantially equivalent to
or having economic effect similar to a guarantee in respect of any such
obligations and (b) any Contract (i) to purchase, or to advance or supply funds
for the payment or purchase of, any such obligations, (ii) to purchase, sell or
lease property, products, materials or supplies, or transportation or services,
in respect of enabling such other Person to pay any such obligation or to assure
the owner thereof against loss regardless of the delivery or nondelivery of the
property, products, materials or supplies or transportation or services or (iii)
to make any loan, advance or capital contribution to or other investment in, or
to otherwise provide funds to or for, such other Person in respect of enabling
such Person to satisfy an obligation (including any liability for a dividend,
stock liquidation payment or expense) or to assure a minimum equity, working
capital or other balance sheet condition in respect of any such obligation.
"Hazardous Materials" means (i) any petroleum or petroleum
--------------------
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; (ii) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import, under any
applicable Environmental Law; and (iii) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
34
"Improvements" shall have the meaning set forth in Section
------------
2.14(c).
"Income Tax" means any Tax on or determined by reference to
-----------
gross or net income and all interest, fines and penalties imposed with respect
to any such Tax.
"Indebtedness" with respect to any Person means any obligation
------------
of such Person for borrowed money, but in any event shall include (a) any
obligation or liabilities incurred for all or any part of the purchase price of
property or other assets or for the cost of property or other assets constructed
or of improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary course
of business, (whether or not such Person has assumed or become liable for the
payment of such obligation) (whether accrued, absolute, contingent, unliquidated
or otherwise, known or unknown, whether due or to become due), (b) the face
amount of all letters of credit issued for the account of such Person and all
drafts drawn thereunder, (c) capitalized lease obligations, and (d) all
Guarantees of such Person.
"Indemnified Persons" shall have the meaning set forth in
--------------------
Section 11.3.
"Independent Accountant" shall have the meaning set forth in
-----------------------
Section 1.6(b).
"Knowledge" means, with respect to a particular fact or other
---------
matter, actual awareness of such fact or other matter on the part of one of the
individuals named in Section 12.2(a) of the Disclosure Schedule.
"Law" means, as to any Person, any foreign or United States
---
federal, state or local law, statute, code, ordinance, regulation, order, writ,
injunction, decision, directive, judgment or decree (or judicial or
administrative interpretations thereof having the force of law which are not
subject to appeal or challenge) applicable to such Person and to the businesses
and assets thereof.
"Liability Policies" means insurance Contracts or policies
-------------------
applicable to the Seller and the Subsidiaries including workers' compensation,
general liability, property or other insurance policy that relate to liability
or excess liability insurance including the name of the insurer, the types,
dates and amounts of coverages, and any material coverage exclusions.
"License Agreement" means that certain license agreement
--------------------
entered into by the Seller and the Purchaser pursuant to Sections 4.5 and 5.3
hereof, by which the Seller grants the Purchaser certain trademark rights.
"Lien" means any security interest, lien, mortgage, pledge,
------
hypothecation, encumbrance, Claim, easement, charge, restriction on transfer or
otherwise, or interest of another Person of any kind or nature.
35
"Material Adverse Change" means any developments or changes
-----------------------
which would have a Material Adverse Effect.
"Material Adverse Effect" means any circumstances, state of
------------------------
facts or matters which might reasonably be expected to have a material adverse
effect in respect of the Business' operations, properties, assets, condition
(financial or otherwise) or results.
"Material Contract" shall have the meaning set forth in
-------------------
Section 2.7.
"Multi-Employer Plan" shall have the meaning set forth in
--------------------
Section 3(37)(A) of ERISA.
"Occurrence" means any accident, happening or event which
-----------
occurs or has occurred at any time prior to the Closing Date that is caused or
allegedly caused by any hazard, defect, action or inaction including, without
limitation, any failure or alleged failure to warn or any breach or alleged
breach of express or implied warranties or representations with respect to a
product manufactured, shipped, sold or delivered by or on behalf of the Seller
which results or is alleged to have resulted in injury or death to any person or
damage to or destruction of property (including damage to or destruction of the
product itself) or other consequential damages, at any time.
"Order" means any decree, order, judgment, injunction, rule,
-----
ruling, voting right or consent of or by an Authority.
"Pension Plan" shall have the meaning set forth in Section
-------------
3(2)(A) of ERISA.
"Permits" means all permits, licenses, registrations,
-------
certificates, Orders or approvals from any Authority or other Person (including
without limitation those relating to the occupancy or use of owned or leased
real property) issued to or held by the Seller primarily relating to the
Business.
"Permitted Liens" means (i) Liens for Taxes not yet due and
----------------
payable, (ii) such imperfections or irregularities of title or Liens as do not
materially detract from or interfere with the present use of the properties or
assets subject thereto or affected thereby, otherwise impair present business
operations at such properties, or do not detract from the value of such
properties and assets, (iii) the rights of customers of the Business with
respect to inventory or work in progress under orders or Contracts entered into
by the Seller in the ordinary course of business, and (iv) Liens disclosed in
Section 12.2(b) of the Disclosure Schedule.
"Person" means any corporation, limited liability company,
-------
partnership, joint venture, organization, entity, Authority or natural person.
"Plan" shall have the meaning set forth in Section 3(3) of
----
ERISA.
"Policies" means all insurance policies that insure (i) the
--------
properties, plant and equipment of the Business for loss or damage, and (ii) the
Seller or its officers, directors, employees or agents against any liabilities,
36
losses or damages (or lost profits) with respect to the Business for any reason
or purpose.
"Pre-Closing Tax Period" means any taxable period ending on or
----------------------
before the Closing Date.
"Proceeding" means any action, arbitration, audit, hearing,
----------
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any governmental Authority or arbitrator.
"Property" means any real property and improvements owned
--------
(directly, indirectly, or beneficially), leased, used, operated or occupied by
the Seller and/or its Subsidiaries.
"Proprietary Rights" means all (i) patents, patent
--------------------
applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, reexamination, utility, model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations, (ii) trademarks, service marks, trade dress,
logos, trade names and corporate names and registrations and applications for
registration thereof, (iii) copyrights and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data and documentation, (vi) trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (vii) other proprietary rights relating to any of the foregoing and
(viii) copies and tangible embodiments thereof.
"Purchase Price" shall have the meaning set forth in Section
----------------
1.4.
"Purchaser Indemnified Person" shall have the meaning set
-------------------------------
forth in Section 11.2.
"Puttable Receivables" means accounts receivable identified as
-------------------
such in accordance with Section 1.1.3.
"Real Property" shall have the meaning set forth in Section
--------------
1.1(a).
"Seller Indemnified Person" shall have the meaning set forth
---------------------------
in Section 11.3.
"Senior Lenders" means the lenders which are parties to that
---------------
certain Credit Agreement, dated as of March 28, 2001, by and among the Seller,
such lenders and the other parties listed therein.
"Senior Lender Liens" means the liens granted in favor of the
--------------------
lenders pursuant to that certain Credit Agreement, dated as of March 28, 2001,
by and among the Seller, such lenders and the other parties listed therein.
37
"Settlement Amount Certificate" shall have the meaning set
-------------------------------
forth in Section 1.5(b).
"Settlement Date" shall have the meaning set forth in Section
----------------
1.5(c).
"Straddle Period" means any taxable period beginning on or
-----------------
before the Closing Date and ending after the Closing Date.
"Subsidiary" means any Person in which the Seller has (i) an
----------
ownership interest, (ii) advanced funds or provided financial accommodations to
which, in each case, is secured by an ownership interest in or has an option to
acquire an ownership interest in such Person.
"Tax Returns" means federal, state, foreign and local Tax
------------
reports, returns, information returns and other documents.
"Taxes" means any and all taxes, including without limitation
-----
income, gross receipts, net proceeds, alternative or add-on minimum, ad valorem,
value added, turnover, sales, use, property, personal property (tangible and
intangible), stamp, leasing, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, foreign, fuel, excess profits,
occupational and interest equalization, windfall profits, severance, and other
taxes and governmental charges of any kind whatsoever (including interest and
penalties thereon).
"Taxing Authorities" means the United States Internal Revenue
-------------------
Service and any other federal, state, or local authority that has the right to
administer, collect, impose or assess Taxes.
"Telmark Lease" refers to the transfer of all rights of Fleet
--------------
Capital Corporation as lessor to Telmark LLC pursuant to that certain Master
Lease Agreement (and any amendments thereto) entered into on June 25, 1997 by
and between the Seller and Fleet Capital Corporation.
"Title IV Plans" means all Pension Plans that are subject to
---------------
Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer
Plans.
"Title Company" shall have the meaning set forth in Section
---------------
7.11.
12.4 Notices. All notices, requests, demands and other
--------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand or mailed, first class
certified mail with postage paid or by overnight receipted courier service or by
facsimile (with proof of receipt):
(a) If to the Seller, to:
Agway Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxx, Esq.
----
General Counsel
Facsimile: (000) 000-0000
---------
38
or to such other Person or address as the Seller shall furnish by
notice to the Purchaser in writing.
(b) If to the Purchaser, to:
Cenex Harvest States Cooperatives
0000 Xxxxx Xxxxx
Xxxxx Xxxxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Legal Department
Facsimile: (000) 000-0000
---------
or to such other Person or address as the Purchaser shall furnish by
notice to the Seller in writing.
12.5 Assignment. This Agreement and all of the provisions hereof shall
----------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
12.6 Governing Law. The Agreement shall be governed by the internal
-------------
laws of the State of New York as to all matters, including but not limited to
matters of validity, construction, effect and performance.
12.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.8 Headings. The article and section headings contained in this
--------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.9 Entire Agreement; No Third Party Beneficiaries. This Agreement,
----------------
including the schedules and exhibits hereto and the documents, certificates and
instruments referred to herein, embodies the entire agreement and understanding
of the parties hereto in respect of the transactions contemplated by this
Agreement and supersedes all prior agreements, representations, warranties,
promises, covenants, arrangements, communications and understandings, oral or
written, express or implied, between the parties with respect to such
transactions. There are no agreements, representations, warranties, promises,
covenants, arrangements or understandings between the parties with respect to
such transactions, other than those expressly set forth or referred to herein.
Except as provided in Article XI, this Agreement is not intended to confer upon
any Person other than the parties hereto and their successors and permitted
assigns any rights or remedies hereunder.
39
12.10 Binding Effect. This Agreement shall not be construed so as to
---------------
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.11 Injunctive Relief. The parties hereto agree that in the event
-----------------
of a breach of any provision of this Agreement prior to the consummation of the
Closing, the aggrieved party or parties may be without an adequate remedy at
law. The parties therefore agree that in the event of a breach of any provision
of this Agreement prior to the consummation of the Closing, the aggrieved party
or parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
12.12 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any party hereto, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party hereto of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
12.13 Severability. Unless otherwise provided herein, if any
------------
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
12.14 Expenses. The Purchaser shall bear its own legal fees with
--------
respect to this Agreement and the transactions contemplated hereby. The Seller
shall bear its own legal fees with respect to this Agreement and the
transactions contemplated hereby.
The covenants contained in this Section 12.14 shall survive the
termination of this Agreement.
12.15 Waiver of Jury Trial. EACH OF THE PARTIES HERETO KNOWINGLY,
--------------------
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY EXHIBIT HERETO, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING OR STATEMENTS (WHETHER VERBAL OR WRITTEN) RELATING TO THE
FOREGOING. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES HERETO TO
ENTER INTO THIS AGREEMENT.
* * *
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Asset Purchase Agreement the date first hereinabove set forth.
AGWAY, INC.
By: /s/ Xxx Xxxxxxxx
-----------------------------------------
Vice President, Agway Inc.
Title: --------------------------------------
CENEX HARVEST STATES COOPERATIVES
By: /s/ Xxxxx Xxxxxxx
------------------------------------------
Title: Senior Vice President
---------------------------------------
Schedule 1.1(h)
---------------
---------------------------------------------------------------------------------------------------------------------
Application/
Registration Product
Trademarks, Trade and Domain Names Number
------------------------------------------------------- ------------------- --------------------------------
------------------------------------------------------- ------------------- --------------------------------
Backyard Banquet For Birds(R)- US 1,690,408 Bird Food
Birdsnack(R)- Canada 396,081 Bird Food
Birdsnack(R)- Ireland B152561 Bird Food
Chirp(R)- US 829,193 Wild Bird Food & Sunflower Seed
Feathered Friend(R)- Canada 381,569 Bird Food
Feathered Friend(R)- United Kingdom B1 506 709 Bird Food
Feathered Friend(R)& Design - Canada 381,153 Bird Food & Bird Feeders
Xxxxx Delight(R)- Canada 399,213 Bird Food
Xxxxx Delight(R)- United Kingdom B1 509 678 Bird Food
Flyers' Choice(R)- Canada 400,894 Bird Food
Flyers' Choice(R)- Ireland 149423 Bird Food
Flyers' Choice(R)- United Kingdom B1 509 680 Bird Food
Royal Hybrid(TM) -------------- Hybrid Sunflower Planting Seed
Royal Wing(R)- US 1,597,724 Bird Food
Royal Wing(R)& Design - US 1,596,719 Bird Food
Sunflower (a d/b/a of Agway, Inc.)
registered in North Dakota 15675700
XXXXXXXX.XXX Informational Website
WOODLAND FRIENDS ------------- Block of Wildlife Food
ASSET PURCHASE AGREEMENT
BY AND BETWEEN AGWAY INC. AND
CENEX HARVEST STATES COOPERATIVES
DATED SEPTEMBER 16, 2002
--------------------------------------------------------------------------------
Displayed below is a summary of Exhibits and Disclosure Schedules that have not
been filed. We will furnish supplementally a copy of any omitted Exhibit and/or
Disclosure Schedule to the Commission upon request.
1. Seller's Secretary's Certificate
a. Certificate of Incorporation
b. Bylaws
c. Resolutions of the Board of Directors
2. Seller's Officer's Certificate
3. Good Standing Certificate
4. Xxxx of Sale and Assignment
5. Legal Opinion of the Seller's Counsel, Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
6. Buyer's Secretary's Certificate
a. Articles of Incorporation
b. Bylaws
c. Resolutions of the Board of Directors
7. Buyer's Officer's Certificate
8. Good Standing Certificate
9. Assumption Agreement
10. Legal Opinion of the Purchaser's Counsel, Xxxxx X. Xxxxxxxx
11. License Agreement
12. Assignment of Leases
13. Side Letter
14. Closing Settlement Statement
15. Special Warranty Deeds
16. Title Commitment
17. Owner's Affidavit
18. Settlement Statement
19. Release of Real Estate Financial Statements
20. Termination of Mortgage
21. Notice of Release of Security Interest in Trademarks and Domain Names
22. Release of Security Interest of Certain Pledge Indebtedness
23. Termination of Fleet Financing Statements
24. Termination of GECC Personal Property Financing Statements
25. Release of Assignment of Rents
26. Consent of the Senior Lenders of the Seller
