SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
SECURITIES EXCHANGE ACT of 1934
_________________________________
Date of Report (Date of earliest event reported):
August 29, 1996
McCORMICK & COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland 0-748 52-0408290
(State or other (Commission (IRS Employer
jurisdiction) File Number) Identification No.)
18 Loveton Circle 21152
Sparks, Maryland (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (410) 771-7301
Item 2. Acquisition or Disposition of Assets.
On August 29, 1996, the Registrant sold substantially all of
the assets of Gilroy Foods, Incorporated ("GFI"), a wholly owned
subsidiary of the Registrant engaged in the business of
manufacturing and selling dehydrated onion, garlic, capsicum and
vegetable products. The purchaser of the assets was ConAgra, Inc.
The assets included land, buildings, fixed assets, inventory,
receivables and certain intangible property. The assets sold to
ConAgra, Inc. did not include the investments of GFI in affiliates
in Egypt and Mexico, or in Gilroy Energy Company, Inc. ("GEC"), a
wholly owned subsidiary of GFI. The bargained-for purchase price
was approximately $132,000,000.
On the same date, the Registrant sold substantially all of the
assets of GEC, a wholly owned subsidiary of GFI engaged in the
cogeneration business. The purchaser of the assets was Calpine
Gilroy Cogen, L.P., an affiliate of Calpine Corporation. The
assets included leasehold interests, fixed assets, spare parts and
certain intangibles. The bargained-for purchase price was
approximately $125,000,000 plus a payment for working capital at
the date of sale. The Registrant will be paid an additional sum of
approximately $24,000,000 pursuant to the terms of a
noncompetition/earnings contingency agreement over the next four
years.
The proceeds of the sale of GFI and GEC will be used to repay
debt, fund a previously announced share repurchase program of the
Registrant, future acquisitions and for general working capital
purposes.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information: Pro forma financial
information for the disposition of the businesses as described in
Item 2 is attached as Exhibit 99 to this Report.
(c) Exhibits
Asset Purchase Agreement among the Registrant, GFI and
ConAgra, Inc., dated as of August 28, 1996 and attached as Exhibit
2;
Asset Purchase Agreement among the Registrant, GEC and
Calpine Gilroy Cogen, L.P., dated as of August 28, 1996 and
attached as Exhibit 2;
NonCompetition/Earnings Contingency Agreement among the
Registrant, GEC and Calpine Gilroy Cogen, L.P. dated as of August
28, 1996 and attached as Exhibit 2.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
McCORMICK & COMPANY, INCORPORATED
By:/s/Robert G. Davey
Robert G. Davey
Vice President & Chief Financial
Officer
DATE: September 13, 1996
Sequential
Page
Exhibit Index Number
Exhibit
2. Asset Purchase Agreement
among McCormick & Company,
Incorporated, GFI and ConAgra, Inc.
dated as of August 28, 1996
Asset Purchase Agreement
among McCormick & Company,
Incorporated, GEC and Calpine Gilroy
Cogen, L.P. dated as of
August 28, 1996
NonCompetition/Earnings Contingency Agreement
among Registrant, GEC and Calpine Gilroy
Cogen, L.P. dated as of August 28, 1996
99. Pro Forma Financial Information
Exhibit 99 to Form 8-K
Unaudited Pro Forma Financial Information
McCormick & Company, Incorporated
The Company completed the sale of substantially all of the assets
of Gilroy Foods, Incorporated (GFI) and Gilroy Energy Company,
Inc. (GEC) as described in Item 2 of this Form 8-K. In addition
the sale of GEC necessitated the prepayment of the Company's
11.68% nonrecourse installment note due 2006 (GEC note). The
following unaudited pro forma financial statements reflect all
three of these transactions. The Company will record all of
these transactions in the third quarter ended August 31, 1996,
and the gain and losses on these transactions are not expected to
be materially different than those reflected in these pro forma
financial statements.
The unaudited Pro Forma Condensed Consolidated Statements of
Income for the year ended November 30, 1995 and the six months
ended May 31, 1996 are prepared assuming that the sales of GFI
and GEC and the prepayment of GEC notes had taken place on
December 1, 1994. The unaudited Pro Forma Condensed Consolidated
Balance Sheet as of May 31, 1996 is prepared assuming that the
sales and prepayment of debt had taken place on that date.
The pro forma financial statements have been prepared assuming
that the net proceeds of the sale of GEC and GFI and the
prepayment of GEC notes was used to repay short term borrowings.
On August 29, 1996 when the net proceeds from these transactions
were received, the Company used substantially all of those
proceeds to immediately reduce short term borrowings. However,
in the near term the Company also intends to use these proceeds
to fund a 10 million share stock repurchase program announced on
September 3, 1996, to fund future acquisitions and for general
corporate purposes as the Company expands its core business.
The pro forma financial statements have been prepared by
adjusting the historical financial statements for the effect of
sales, expenses, assets and liabilities which might have occurred
had the sales of GFI and GEC and the prepayment of GEC notes
taken place on the dates indicated. These pro forma financial
statements are provided for informational purposes only and are
not necessarily indicative of what the financial statements of
the Company would have been had the transactions taken place on
the dates indicated. Further, these pro forma financial
statements do not purport to indicate the future results of
operations or financial position of the Company.
These pro forma financial statements should be read in connection
with the historical financial statements of the Company that have
been filed with the Commission.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
MAY 31, 1996
McCORMICK & COMPANY, INCORPORATED
(In Thousands)
Actual Adjustments Pro Forma
ASSETS
Current Assets
Cash and cash equivalents $ 20,787 $ $ 20,787
Accounts receivable - net 185,330 (19,879)(a) 165,451
Inventories 353,266 (104,497)(a) 248,769
Other current assets 51,590 1,554 (b) 50,363
(2,781)(a)
Total current assets 610,973 (125,603) 485,370
Property - net 528,434 (132,021)(a) 396,413
Goodwill - net 175,500 (8,006)(a) 167,494
Prepaid allowances 167,618 167,618
Other assets 68,688 4,663 (b) 73,351
Total assets $1,551,213 $(260,967) $1,290,246
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $294,348 $ 62,920 (d) $ 97,493
(259,775)(c)
Accounts payable, trade 134,082 (11,073)(a) 123,009
Accrued liabilities 165,025 20,646 (b) 189,731
4,060 (e)
Total current liabilities 593,455 (183,222) 410,233
Long-term debt 337,805 (50,120)(d) 287,685
Deferred income taxes 19,428 (19,428)(b)
Employee benefit liabilities 89,824 89,824
Other liabilities 2,326 (397)(a) 1,929
Total liabilities 1,042,838 (253,167) 789,671
Shareholders' Equity
Common Stock 49,843 49,843
Common Stock Non-Voting 116,302 116,302
Retained earnings 378,354 ( 7,800)(f) 370,554
Foreign currency translation adj. (36,124) (36,124)
Total shareholders' equity 508,375 ( 7,800)(f) 500,575
Total liabilities and
shareholders' equity $1,551,213 $(260,967) $1,290,246
(a) To reflect the net assets of GFI and GEC sold.
(b) To reflect the tax effects of the GFI and GEC sales and the tax effects of the
prepayment of the GEC notes.
(c) To reflect the use of proceeds from the sale of GFI and GEC to pay down short-term
borrowings.
(d) To reflect the prepayment of the GEC 11.68% non-recourse installment note due 2006,
through the issuance of short-term borrowings.
(e) To reflect accrued liabilities of GFI and GEC sold, liabilities assumed by McCormick
in the sale of GFI and GEC, and expenses of the sale of GFI and GEC.
(f) To reflect an estimated after tax loss on the prepayment of GEC notes. The combined
gain on GEC sale and loss on GFI sale are estimated to be zero. The Company estimates
that its after tax gain or loss on the sale of GFI and GEC could range from a loss of
$3 million to a gain of $3 million.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
FOR THE YEAR ENDED NOVEMBER 30, 1995
McCORMICK & COMPANY, INCORPORATED
(In Thousands Except Per Share Amounts)
Actual Adjustments Pro Forma
Net sales $1,858,694 $(167,608)(a) $1,691,086
Cost of goods sold 1,211,517 (104,582)(a) 1,106,935
Gross profit 647,177 (63,026) 584,151
Selling, general and
administrative expense 446,128 (30,669)(a) 415,459
Restructuring credit (3,904) (3,904)
Profit from operations 204,953 (32,357) 172,596
Other inc. (expense) - net (530) (162)(a) 7,308
8,000 (c)
Interest expense 55,270 (6,488)(e) 38,365
(10,417)(b)
Income before income taxes 149,153 (7,614) 141,539
Income taxes 53,700 (2,817)(d) 50,883
Income from consolidated
operations 95,453 (4,797) 90,656
Income (loss) from uncon-
solidated operations 2,068 2,068
Net income $ 97,521 $ (4,797) $ 92,724
Earnings per common share $1.20 $1.14
Weighted average common shares
outstanding 81,181 81,181
(a) To reflect the elimination of the operating results of GFI and GEC which were included
in the consolidated results for the periods presented.
(b) To reflect the net reduction of interest expense due to the assumed prepayment of short-
term borrowings. Short-term borrowings were assumed to be reduced by the net proceeds
(after expenses and tax payments) from the sale of GFI and GEC. Short-term borrowings
were assumed to be increased by the prepayment of GEC notes net of the related tax
benefits. The interest rate used was 6.08% for the year ended November 30, 1995 and
5.6% for the six months ended May 31, 1996. These rates approximated the Corporation's
average short-term borrowing rates during the respective periods. The effect on pro
forma net income of a 1/8% variance in the assumed interest rate would be approximately
$130 thousand.
(c) To reflect income earned on a non-compete agreement with Calpine Corporation. It is
assumed that the Corporation would not have violated the terms of the non-compete
agreement during the pro forma periods presented.
(d) To reflect the income tax effect of the pro forma adjustments. Tax effects were
calculated using the marginal tax rates for the taxing jurisdictions affected by the
adjustments.
(e) To reflect the reduction of interest expense for the assumed prepayment of the GEC
notes.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED MAY 31, 1996
McCORMICK & COMPANY, INCORPORATED
(In Thousands Except Per Share Amounts)
Actual Adjustments Pro Forma
Net sales $867,486 $( 77,857)(a) $789,629
Cost of goods sold 590,574 (54,732)(a) 535,842
Gross profit 276,912 (23,125) 253,787
Selling, general and
administrative expense 223,501 (14,110)(a) 209,391
Profit from operations 53,411 (9,015) 44,396
Other inc. (expense) - net 608 (240)(a) 3,868
3,500 (c)
Interest expense 24,394 (3,099)(e) 16,133
(5,162)(b)
Income before income taxes 29,625 2,506 32,131
Income taxes 10,505 927 (d) 11,432
Income from consolidated
operations 19,120 1,579 20,699
Income (loss) from uncon-
solidated operations 1,225 1,225
Net income $ 20,345 $ 1,579 $ 21,924
Earnings per common share $0.25 $0.27
Weighted average common shares
outstanding 81,275 81,275
(a) To reflect the elimination of the operating results of GFI and GEC which were included
in the consolidated results for the periods presented.
(b) To reflect the net reduction of interest expense due to the assumed prepayment of short-
term borrowings. Short-term borrowings were assumed to be reduced by the net proceeds
(after expenses and tax payments) from the sale of GFI and GEC. Short-term borrowings
were assumed to be increased by the prepayment of GEC notes net of the related tax
benefits. The interest rate used was 6.08% for the year ended November 30, 1995 and
5.6% for the six months ended May 31, 1996. These rates approximated the Corporation's
average short-term borrowing rates during the respective periods. The effect on pro
forma net income of a 1/8% variance in the assumed interest rate would be approximately
$130 thousand.
(c) To reflect income earned on a non-compete agreement with Calpine Corporation. It is
assumed that the Corporation would not have violated the terms of the non-compete
agreement during the pro forma periods presented.
(d) To reflect the income tax effect of the pro forma adjustments. Tax effects were
calculated using the marginal tax rates for the taxing jurisdictions affected by the
adjustments.
(e) To reflect the reduction of interest expense for the assumed prepayment of the GEC
notes.
Article 1 Definitions and Interpretation 2
1.1 Defined Terms 2
1.2 Interpretation 10
ARTICLE 2 Sale and Purchase of Assets, Liabilities, and
Purchase Price, Manner of Payment 10
2.1 Sale of Assets 10
2.1.1 Fixed Assets 10
2.1.2 Inventory and Spare Parts 10
2.1.3 Agreements and Contracts 10
2.1.4 Intangibles 11
2.1.5 Books and Records 11
2.1.6 Governmental Approvals 11
2.1.7 Improvements and Real Estate Rights 11
2.1.8 All Property Not Elsewhere Described 11
2.2 Liabilities 11
2.3 Purchase Price 11
2.3.1 Allocation Statement 11
2.3.2 Reporting 12
2.4 Purchase Price Post-Closing Adjustment 12
2.4.1 Preparation of Net Trade Amount 12
2.4.2 Post-Closing Review 12
2.4.3 Access to Books and Records 13
2.4.4 Determination of Purchase Price Post-Closing
Adjustment 13
2.4.5 Payment of Purchase Price Post-Closing Adjustment 13
ARTICLE 3 Closing Date, Actions at Pre-closing, Closing
and Termination Prior to Closing 13
3.1 Closing Date 13
3.2 Actions at Pre-closing or Closing 14
3.2.1 Purchase Price 14
3.2.2 Bill of Sale 14
3.2.3 General Assignment and Assumption Agreement 14
3.2.4 Assignment of Agreements and Contracts 14
3.2.5 ConAgra's Consents and Agreements 14
3.2.6 Noncompete Agreement 14
3.2.7 Books and Records 14
3.2.8 Final Schedules 15
3.2.9 Senior Loan Documents 15
3.2.10 ConAgra Option Agreements 15
3.2.11 Stock Purchase Letter Agreement 15
3.2.12 Escrow Instructions 15
3.3 Additional Actions 15
3.4 Termination Prior to Closing 15
3.4.1 Termination by the Seller/McCormick 15
3.4.2 Termination by the Buyer 15
3.4.3 Termination Due to Failure of Condition 16
3.4.4 Termination by Mutual Consent 16
ARTICLE 4 Representations and Warranties ofthe Seller
and McCormick 17
4.1 Due Organization 17
4.2 Power and Authority 17
4.3 Valid, Binding and Enforceable Obligations 17
4.4 No Violations 18
4.5 Governmental Approvals 18
4.6 Third Party Consents and Notices 18
4.7 No Litigation 18
4.8 Agreements and Contracts; Project Documents 19
4.9 Utility Regulatory Matters 19
4.10 Qualifying Facility Matters 19
4.11 No Undisclosed Liabilities 20
4.12 Fixed Assets and Inventory 20
4.13 Title to Assets 20
4.14 Governmental Approvals for Business 21
4.15 ERISA 21
4.16 Labor Matters 21
4.17 Legal Compliance 21
4.18 Hazardous Materials 21
4.19 Disclosure 22
4.20 Condition of Acquired Assets 22
4.21 Tax Matters 22
4.22 Brokers 22
4.23 O&M Agreement Termination 23
ARTICLE 5 Buyer's Representations and Warranties 23
5.1 Due Organization 23
5.2 Power and Authority 23
5.3 Valid, Binding and Enforceable Obligations 23
5.4 No Violations 24
5.5 No Litigation 24
5.6 Brokers 24
ARTICLE 6 Conditions Precedent to Buyer's Obligation 24
6.1 Representations True and Correct 24
6.2 Compliance with Covenants 24
6.3 Closing Actions 25
6.4 Consents and Governmental Approvals 25
6.5 Seller and McCormick Opinion of Counsel 25
6.6 Proceedings Satisfactory 25
6.7 ConAgra Acquisition 25
6.8 ConAgra Actions 25
6.9 ConAgra Assignment Agreement 25
6.10 ConAgra Opinion of Counsel 26
6.11 Severance of Facilities 26
ARTICLE 7 Conditions Precedent to The Seller's and McCormick's
Obligations 26
7.1 Representations True and Correct 26
7.2 Compliance with Covenants 26
7.3 Closing Actions 26
7.4 Opinion of Counsel 27
7.5 Proceedings Satisfactory 27
7.6 ConAgra Acquisition 27
7.7 Consents and Government Approvals 27
ARTICLE 8 Indemnification 27
8.1 Indemnification by the Seller and McCormick 27
8.2 Indemnification by the Buyer 28
8.3 Threshold and Limits for Indemnity 28
8.4 Bulk Sales Indemnity 28
8.5 Procedure for Indemnification with Respect to
Third Party Claims 29
8.5.1 Notice of Claim 29
8.5.2 Conduct of Claim 29
8.5.3 Payment of Claim 29
8.5.4 Access to Information 30
ARTICLE 9 The Seller's and McCormick's Covenants Prior
to Closing, Taxes and Further Assurances 30
9.1 The Seller's and McCormick's Covenants Prior
to Closing 30
9.2 Taxes 31
9.3 Further Assurances 31
ARTICLE 10 Miscellaneous 31
10.1 Transaction Costs 31
10.2 Entire Agreement 32
10.3 Amendments 32
10.4 Assignments 32
10.5 Binding Effect 32
10.6 Headings 32
10.7 Notices 32
10.8 Severability 33
10.9 Waivers 33
10.10 Arbitration of Disputes 33
10.10.1 Initiation of Arbitration 34
10.10.2 Arbitration Procedure 34
10.10.3 No Power to Amend 34
10.10.4 Costs 34
10.10.5 Complete Defense 35
10.11 Remedies Cumulative 35
10.12 Overdue Interest 36
10.13 Counterparts 36
10.14 Governing Law 36
10.15 Preparation of Agreement 36
10.16 Survival 36
10.17 Materiality 36
10.18 Inducement to Transaction 36
10.19 Public Statements or Releases 36
EXHIBITS
EXHIBIT A - INTENTIONALLY OMITTED
EXHIBIT B - AMENDED AND RESTATED LEASE AGREEMENT
EXHIBIT C - AMENDED AND RESTATED NATURAL GAS SALES
AGREEMENT
EXHIBIT D - ASSIGNMENT OF LEASE AGREEMENT
EXHIBIT E - ASSIGNMENT OF NATURAL GAS SALES AGREEMENT
EXHIBIT F - ASSIGNMENT OF POWER PURCHASE AGREEMENT
EXHIBIT G - ASSIGNMENT OF STEAM SALES AGREEMENT
EXHIBIT H - ASSIGNMENT IN PART OF WASTE DISCHARGE AND WATER
RECLAMATION REQUIREMENTS
EXHIBIT I-1 - QF SITE OPTION AGREEMENT
EXHIBIT I-2 - WASTEWATER DISCHARGE OPTION AGREEMENT
EXHIBIT I-3 FACILITY SITE OPTION AGREEMENT
EXHIBIT J - LESSOR CONSENT AND AGREEMENT
EXHIBIT K - MEMORANDUM OF AMENDED AND RESTATED LEASE
AGREEMENT
EXHIBIT L - MEMORANDUM OF QF SITE OPTION
EXHIBIT M - MEMORANDUM OF FACILITY SITE OPTION
EXHIBIT M-1 - MEMORANDUM OF WASTEWATER DISCHARGE OPTION
AGREEMENT
EXHIBIT N - CONSENT AND AGREEMENT (NATURAL GAS SALES
AGREEMENT)
EXHIBIT 0 - NONCOMPETITION EARNINGS CONTINGENCY AGREEMENT
EXHIBIT P - CONSENT AND AGREEMENT (POWER PURCHASE
AGREEMENT)
EXHIBIT Q - PURCHASER'S CONSENT
EXHIBIT R - SHUTDOWN AGREEMENT
EXHIBIT R-1 - SHUTDOWN CONSENT
EXHIBIT S - FIRST AMENDMENT TO STEAM PURCHASE AND SALE
CONTRACT
EXHIBIT T - SUBSTATION OPERATING AGREEMENT
EXHIBIT U-1 - OPINION OF ROBERT W. SKELTON, GENERAL COUNSEL OF
MCCORMICK
EXHIBIT U-2 - OPINION OF BAKER & MCKENZIE, COUNSEL FOR THE
SELLER AND MCCORMICK
EXHIBIT V-1 - OPINION OF JOSEPH E. RONAN, JR., GENERAL COUNSEL
OF THE BUYER
EXHIBIT V-2 - OPINION OF THELEN, MARRIN, JOHNSON & BRIDGES
COUNSEL FOR THE BUYER
SCHEDULES
SCHEDULE A-1 - DESCRIPTION OF THE FACILITY
SCHEDULE A-2 - PROPERTY DESCRIPTION OF THE SITE
SCHEDULE B - SAMPLE CALCULATION OF NET TRADE AMOUNT
SCHEDULE 2.1.1 - FIXED ASSETS
SCHEDULE 2.1.2 - INVENTORY
SCHEDULE 2.1.3 - ASSIGNED CONTRACTS
SCHEDULE 2.2 - EXCLUDED LIABILITIES
SCHEDULE 4.5 - GOVERNMENTAL APPROVALS
SCHEDULE 4.6 - THIRD PARTY CONSENTS AND NOTICES
SCHEDULE 4.7 - LITIGATION (SELLER AND MCCORMICK)
SCHEDULE 4.8 PROJECT DOCUMENTS
SCHEDULE 4.11 - LIABILITIES
SCHEDULE 4.14.1- ALL GOVERNMENTAL APPROVALS
SCHEDULE 4.14.2- GOVERNMENTAL APPROVALS NOT VALIDLY
ISSUED/TRANSFERRED
SCHEDULE 4.17 - LEGAL COMPLIANCE
SCHEDULE 4.18 - HAZARDOUS MATERIALS
SCHEDULE 5.5 - LITIGATION (BUYER)
SCHEDULE 6.11 - SEVERANCE OF FACILITIES ITEMS
ASSET PURCHASE AGREEMENT
AGREEMENT, dated this 28th day of August, 1996, by and
between GILROY FOODS, INCORPORATED, a California corporation
("Gilroy" or "Seller"), McCORMICK & COMPANY, INCORPORATED, a
Maryland corporation ("McCormick"), and CONAGRA, INC., a Delaware
corporation ("Buyer" or "ConAgra").
RECITALS:
This Agreement is made with reference to the following facts
and circumstances:
(a) McCormick owns all of the issued and outstanding
shares of capital stock of Gilroy.
(b) Gilroy owns certain assets which are used in
connection with the manufacture and sale of dehydrated onion,
garlic, capsicum and vegetable products (the "Business"). The
Business is conducted at the locations described in Exhibit A
hereto (the "Business Locations").
(c) Seller desires to sell substantially all of its
assets related to the Business to Buyer and Buyer desires to
purchase such assets from Seller, all on the terms and conditions
contained herein.
AGREEMENT:
In consideration of the foregoing recitals which are
incorporated with and are made a part of this Agreement, and in
further consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree, subject to the
terms and conditions hereinafter set forth, as follows:
1. Sale of Properties and Assets. Subject to Section 2,
at the Closing described in Section 6, Seller shall sell, convey,
assign, transfer and deliver, or shall cause McCormick to sell,
convey, assign, transfer and deliver, to Buyer (and McCormick shall
cause Seller to sell, convey, assign, transfer and deliver to
Buyer), free and clear of all liens, claims and encumbrances (other
than "Permitted Encumbrances," as defined in Section 8.8) all of
the assets, properties and rights of Seller relating to the
Business as conducted by the Seller as of the Closing Date of every
type and description, real, personal and mixed, tangible and
intangible, known or unknown, fixed or unfixed, choate or inchoate,
accrued, absolute, contingent or otherwise, wherever located and
whether or not reflected on the books and records of Seller (all of
such assets, properties and rights hereinafter collectively
referred to as the "Assets"), including but not limited to all
assets owned by Seller and located at the Business Locations and
including the following assets:
1.1 Real Estate. Fee simple marketable title in and to
the real property legally described on Exhibit 1.1, together with
all improvements, facilities, fixtures, hereditaments and
appurtenances thereto (the "Real Estate").
1.2 Sales, General and Administrative Property. All
customer and supplier lists and files, catalogues, brochures,
pricing and other marketing information, books and records
(other than personnel files of persons other than Hired Employees,
and other than tax records), computer programs, software and
systems and other sales, general and administrative property.
1.3 Receivables. All accounts receivable and
miscellaneous receivables existing on the Closing Date (the
"Receivables").
1.4 Inventories. All of Seller's raw materials,
work-in-process and finished goods inventory existing as of the
Closing Date (the"Inventory").
1.5 Fixed Assets. All machinery, equipment, furniture,
research and development assets, vehicles and other fixed assets
owned or used by Seller in connection with the Business.
1.6 Intellectual Property. All trademarks (including all
right, title and interest of Seller and McCormick in and to the
"Gilroy" name and derivations thereof, but excluding the "Gilroy
Farms" trademark), trade names, service marks, service names,
patents, copyrights, inventions, technology, trade secrets,
formulas, laboratory notebooks, recipes, brand names, brand marks,
labels or registrations or licenses thereof or applications
therefor which Seller or McCormick owns or utilizes in
connection with the Business, together with all knowledge, data,
information, formulations, designs, plans, drawings, manufacturing
documentation, proprietary know-how and use and application
know-how, processes, product development records, technical data
and information, specifications and other intellectual property,
and in and to all know-how or other proprietary or trade rights of
Seller associated with or used in connection with such items.
1.7 Leases and Contracts. All of Seller's right,
title and interest in and to the leases, contracts, purchase and
sales contracts, and other agreements described or listed on
Exhibit 1.7. If any such lease, contract or other agreement shall
require the consent of any party hereto other than Seller,
this Agreement shall not constitute an agreement to assign the
same, and such lease, contract or other agreement shall not be
assigned to or assumed by Buyer if an actual or attempted
assignment thereof would constitute a breach or default thereunder.
Seller shall use all commercially reasonable efforts to obtain such
consents, to the extent required, of such other parties to such
leases, agreements and other contracts. If any such consent cannot
be obtained, Seller and Buyer will cooperate in any reasonable
arrangement designed to obtain for Buyer all benefits and
privileges of the applicable lease, contract or other agreement
while protecting Seller from continuing liabilities or obligations
thereunder.
1.8 Licenses, Permits and Orders. All such approvals,
authorizations, consents, licenses, orders and establishment
numbers and other permits and similar items of all governmental
agencies whether federal, state or local, owned, held or utilized
by Seller in connection with the Business as are transferable by
their respective terms, or otherwise, to Buyer.
1.9 Supplies and Similar Items. All operating supplies,
fuel, packaging supplies, maintenance, warehouse and office
supplies, spare parts, tools, maintenance equipment and all similar
property owned or used by Seller in connection with the Business.
2. Excluded Assets. Notwithstanding Section 1, Buyer
shall not purchase those assets described on Exhibit 2 and shall
not purchase or assume any contract, agreement, judgement, decree
or order other than those described in Exhibit 1.7 or as set forth
in Section 3.1. Except as set forth above, and except as otherwise
provided herein, it is the intent of the parties hereto that Buyer
acquire all other assets of Seller that relate to the Business,
including items which have been heretofore expensed or fully
depreciated.
3. Consideration Payable to Seller by Buyer. Subject to
the terms and conditions of this Agreement, and in reliance upon
the representations and warranties of Seller and McCormick herein
contained, and in consideration of the sale, conveyance,
assignment, transfer and delivery by Seller of the Assets provided
in Section 1 hereof, Buyer agrees as follows:
3.1 Assumption of Liabilities. From and after the
Closing Date, Buyer shall assume and agree to pay, perform and
discharge (i) Seller's trade accounts payable and accrued
liabilities and expenses (including accrued vacation with respect
to the Hired Employees (as defined in Section 7.1), other than
accrued payroll taxes and other than workers' compensation
accruals, to the extent accrued on the Settlement Statement (as
defined in Section 4) (the "Payables"), and (ii) the obligations of
Seller which accrue after the Closing Date with respect to the
leases and other contracts described in Section 1.7 hereof
(collectively, the "Assumed Liabilities"). Buyer does not assume
and shall not be deemed to have assumed any liability or obligation
of Seller to the extent not described above, including, but not
limited to:
3.1.1 Any liability or obligation of Seller for any
taxes (including interest and penalties thereon) imposed on or
measured by Seller's income for any period or periods ending before
or after the Closing Date, including federal, state and local
income taxes, or any liability or obligation of Seller for any
withholding taxes, Social Security taxes, unemployment taxes,
excise taxes, capital stock taxes, sales taxes, use taxes, gross
receipt taxes or other federal, state or local taxes of any nature
(including all penalties) with respect to any time period (other
than as prorated in accordance with Section 20 hereof or to be paid
by Buyer in accordance with Section 24 hereof);
3.1.2 Any liability or obligation of Seller for any
accounts payable or under any loan agreement, lease agreement or
any other contract or agreement, except as otherwise provided for
herein, or for any trade or promotional programs, advertising,
coupons or similar programs;
3.1.3 Any liability or obligation of Seller arising
out of or resulting from any breach by Seller of any lease,
contract or other agreement to which Seller is a party, whether or
not such agreements are assumed by Buyer hereunder;
3.1.4 Any liability or obligation of Seller arising
out of or resulting from any violation of any federal, state or
local laws or regulations including, without limitation,
environmental laws and regulations, or from the sale by Seller of
any product;
3.1.5 Any liability or obligation arising out of or
resulting from any release or disposal by Seller of any hazardous
substances;
3.1.6 Subject to the provisions of Section 10.8, any
claims, actions, suits, proceedings, arbitrations, product claims
or litigation relating to, or resulting from, actions or omissions
of Seller on or prior to the Closing Date, including, without
limitation, those matters described in Section 8.17 of the
Disclosure Schedule;
3.1.7 Any liabilities for product returns, product
replacements, allowances, warranties (whether express or implied)
and refunds for damaged, defective or returned product in respect
of products sold on or prior to the Closing Date.
3.1.8 Workers' Compensation - Hired Employees. Any
and all workers' compensation (including, without limitation,
weekly benefits, medical rehabilitation expenses and any other
expenses or obligations) with respect to injuries or illnesses
suffered by any Hired Employee (as defined in Section 7.1)
resulting from occurrences on or prior to the Closing Date, whether
known or unknown as of the Closing Date.
3.2 Purchase Price for the Assets. The purchase price
for the Assets described in Section 1 (the "Purchase Price") shall
be an amount equal to One Hundred Thirty-Two Million Dollars
($132,000,000) plus (or minus) the amount by which "Net Working
Capital" (as defined in Section 4.6) is greater (or less than) One
Hundred Twelve Million Five Hundred Ninety-Six Thousand Dollars
($112,596,000).
3.3 Payment of Purchase Price. One Hundred Sixteen
Million Dollars ($116,000,000) of the Purchase Price (the
"Preliminary Payment") shall be paid by Buyer to Seller in
immediately available funds on the Closing Date. Sixteen Million
Dollars ($16,000,000) of the Purchase Price (the "Deferred Amount")
shall be paid, without interest, as follows: $4,000,000 on
November 30, 1996, $4,000,000 on March 31, 1997, $4,000,000 on July
31, 1997 and $4,000,000 on November 30, 1997 in accordance with the
terms of the Deferred Purchase Price Promissory Note in the form of
Exhibit 3.3 attached hereto. The balance of the Purchase Price, if
any, shall be paid on the Settlement Date, as hereinafter defined.
3.4 Allocation of Purchase Price. The parties hereto
agree that the Purchase Price shall be allocated to the Assets in
accordance with Exhibit 3.4 hereto. The parties hereto acknowledge
that such allocation represents the fair market value of the Assets
and shall be binding upon the parties hereto for federal and state
tax purposes. Each party covenants to report gain or loss or cost
basis, as the case may be, in a manner consistent with Exhibit 3.4
for federal and state tax purposes. Promptly after Closing, the
parties shall exchange mutually acceptable and completed IRS Forms
8594 which they shall use to report the transaction contemplated
under this Agreement to the Internal Revenue Service in accordance
with such allocation.
3.5 Severance Credit. At Closing, Seller shall credit to
Buyer One Hundred Sixty-Three Thousand Eight Hundred Thirty-Four
Dollars ($163,834) (the "Severance Credit") which shall be used by
Buyer to make severance payments to (i) employees of Buyer who are
employed in connection with the manufacture or sale of vegetable
products by the Business in the event Buyer severs such employees,
and (ii) employees of Buyer who are employed in connection with
operations involving the Umatilla, Oregon Business Location in the
event Buyer severs such employees. To the extent that any such
employees severed are listed in Exhibit 3.5 hereto, Buyer agrees
that the severance payment paid to such employee shall be no less
than the amount set forth opposite such employee's name on Exhibit
3.5. In the event Buyer does not disburse all of the Severance
Credit as provided for in this Section 3.5 on or before December
31, 1997, the remaining balance of the Severance Credit not so
disbursed shall be refunded by Buyer to Seller.
4. Settlement Date and Repurchase of Receivables.
4.1 Preliminary Settlement Statement. No later than
sixty (60) days following the Closing Date, Buyer shall prepare and
deliver to Seller a draft settlement statement (the "Preliminary
Settlement Statement") setting forth the following:
(i) The quantity of Inventory existing as of
Closing based on Seller's perpetual inventory system in place as of
the Closing Date (the "Perpetual Inventory System") and the value
of such Inventory determined in accordance with GAAP (as defined in
Section 8.6);
(ii) The value of the Receivables as of Closing, as
determined in accordance with GAAP; and
(iii) The amount of Payables as of Closing as
determined in accordance with GAAP.
The Settlement Statement shall be in the form
attached hereto as Exhibit 4. For purposes of preparing the
Settlement Statement, the parties agree that month-end closing
procedures consistent with Gilroy's normal month-end closing
procedures will be used.
4.2 Seller Review. Seller shall have thirty (30) days
following receipt of the Preliminary Settlement Statement (the
"Review Period") to notify Buyer in writing of any objections to
the Preliminary Settlement Statement (a "Notice of Objection").
Any such Notice of Objection shall specify in reasonable detail the
nature of each objection so asserted and the basis therefor. If
Seller does not deliver any Notice of Objection during the Review
Period, the Preliminary Settlement Statement shall become final
and binding.
4.3 Settlement Resolution. During the twenty 20) days
following the Review Period, the parties shall use reasonable
efforts to resolve the matters reflected in any Notice of
Objection, and the Preliminary Settlement Statement shall be
revised to reflect any such resolution. Such resolutions
shall be final and binding. If all such disagreements are so
resolved, the revised Preliminary Settlement Statement shall become
final and binding.
4.4 Mediation and Arbitration. In the event the parties
shall be unable to resolve any matter set forth in a Notice of
Objection pursuant to Section 4.3, such disagreement or
disagreements shall be first referred for resolution to the Vice
President Acquisitions and Financial Planning of McCormick and the
Chief Financial Officer of Buyer's United Specialty Food
Ingredients division and the Preliminary Settlement Statement shall
be revised to reflect any such resolutions. Such resolutions shall
be final and binding. In the event that such officers shall be
unable to resolve any disagreement within ten (10) days after such
referral, such disagreement or disagreements shall be referred for
resolution to the Chief Financial Officer of McCormick and the
President of Buyer's United Specialty Food Ingredients division and
the Preliminary Settlement Statement shall be revised to reflect
such resolutions and such resolutions shall be final and binding.
If such officers shall be unable to resolve any disagreement
within ten (10) days after such referral, such disagreement or
disagreements shall be promptly referred for resolution to a
three-member panel (the "Arbitrators") consisting of one member
selected by McCormick, one member selected by Buyer and the third
member selected by the other two members. The Arbitrators shall be
requested to furnish written notice to Seller and Buyer of its
resolution of any such disagreements referred as soon as
practicable and such resolution shall be incorporated into the
Preliminary Settlement Statement and such revised settlement
statement shall be final and binding upon the parties. All fees,
costs and expenses of the Arbitrators shall be split equally
between Buyer and Seller.
4.5 Cooperation. During and with respect to the
preparation of the Preliminary Settlement Statement and revisions
thereto, and the reviews and resolution provisions set forth
herein, Seller and Buyer shall (i) fully cooperate with all
reasonable requests of Seller and Buyer, as the case may be; and
(ii) upon receiving a reasonable request, make available to Seller
and Buyer all work papers, supporting schedules, documents, systems
and other information (including access to all appropriate
knowledgeable personnel).
4.6 Settlement Date. For purposes of this Agreement, the
"Settlement Statement" shall mean the Preliminary Settlement
Statement revised to reflect all resolutions determined pursuant to
Sections 4.2, 4.3 and 4.4, and "Net Working Capital" shall mean the
sum of the value of the Inventory and Receivables (as reflected in
the Settlement Statement) less the amount of the Payables (as
reflected in the Settlement Statement). Within five (5) days
following completion of the Settlement Statement (the "Settlement
Date"), Buyer shall remit to Seller, in immediately available
funds, the amount, if any, by which the Purchase Price exceeds the
sum of the Preliminary Payment plus the Deferred Amount (plus
interest on such excess from the Closing Date at the Prevailing
Rate), or, in the event the sum of the Preliminary Payment plus the
Deferred Amount exceeds the Purchase Price, Seller and/or McCormick
shall remit to Buyer, in immediately available funds, the amount of
such excess (plus interest on such excess from the Closing Date at
the Prevailing Rate).
4.7 Prevailing Rate. For purposes of this Agreement, the
"Prevailing Rate" shall mean six (6) percent (6%) per annum.
4.8 Repurchase of Receivables. Any Receivables that
remain uncollected one hundred twenty (120) days from the date
hereof shall be immediately repurchased by Seller and/or McCormick
at the uncollected amount thereof at the time of repurchase,
provided, however, that an uncollected receivable classified as
"miscellaneous receivables" shall be repurchased one hundred twenty
(120) days after its respective due date.
5. Ancillary Agreements.
5.1 Supply Agreement. At Closing, Buyer and McCormick
shall execute a supply agreement in the form attached hereto as
Exhibit 5.1 (the "Supply Agreement").
5.2 Trademark Agreement. At Closing, Buyer and McCormick
shall execute the Trademark Agreement in the form attached hereto
as Exhibit 5.2 (the "Trademark Agreement").
6. Closing. Subject to the terms and conditions
contained herein, the transfer of the Assets by Seller to Buyer
(the "Closing") will take place on August 28, 1996 (the "Closing
Date") at the offices of Baker & McKenzie, Two Embarcadero Center,
Twenty-Fourth Floor, San Francisco, California, or at such other
time and place as may be mutually acceptable to the parties hereto.
Title to and risk of loss to the Assets shall pass to Buyer at the
time of Closing and all representations and warranties set forth in
Sections 8 and 9 of the Agreement that are made as of the Closing
or as of the Closing Date shall be deemed to be made as of the time
of Closing. Except as set forth in the immediately preceding
sentence, the Closing shall be effective as of 12:00 midnight on
the Closing Date.
6.1 Buyer's Obligation at Closing. At Closing, Buyer
shall:
6.1.1 Payment. Pay to Seller, by wire transfer, the
Preliminary Payment, less the Severance Credit.
6.1.2 Resolutions. Deliver a copy of the
resolutions of Buyer's Board of Directors authorizing the
transactions contemplated by this Agreement, certified by the
Secretary or any Assistant Secretary of Buyer.
6.1.3 Assignment and Assumption Agreement. Execute
and deliver an assignment and assumption agreement in the form
attached hereto as Exhibit 6.1.3 (the "Assignment and Assumption
Agreement").
6.1.4 Legal Opinion. Deliver the legal opinion of
McGrath, North, Mullin & Kratz, P.C., counsel for the Buyer, in a
form mutually acceptable to counsel to both parties.
6.1.5 Supply Agreement. Execute and deliver to
McCormick the Supply Agreement.
6.1.6 Trademark Agreement. Execute and deliver to
McCormick the Trademark Agreement.
6.1.7 Deferred Purchase Price Promissory Note.
Execute and deliver to Seller the Deferred Purchase Price
Promissory Note.
6.2 Seller's Obligations at Closing. At Closing, Seller
shall:
6.2.1 Warranty Deed. Execute and deliver deeds to
the Real Estate in the forms attached hereto as Exhibit 6.2.1 (the
"Deeds").
6.2.2 Bill of Sale. Execute and deliver to Buyer a
general assignment and bill of sale in the form attached hereto as
Exhibit 6.2.2 (the "Bill of Sale"). Simultaneously with such
delivery, Seller shall take all such steps as may be reasonably
necessary to put Buyer in actual possession and control of the
Assets.
6.2.3 Assignment and Assumption Agreement. Execute
and deliver to Buyer the Assignment and Assumption Agreement.
6.2.4 Trademark Assignment. Execute and deliver to
Buyer trademark assignments in the forms attached hereto as Exhibit
6.2.4 (the "Trademark Assignments").
6.2.5 Other Instruments of Conveyance. Execute and
deliver such other assignments, bills of sale, endorsements,
notices, consents, assurances and such other instruments of
conveyance and transfer as counsel for Buyer shall reasonably
request and as shall be effective to vest in Buyer good and
marketable title to all of the Assets. Seller further agrees that
it will at any time, and from time to time after the Closing Date,
upon the reasonable request of Buyer and without additional
consideration, do, execute, acknowledge and deliver, or will cause
to be done, executed, acknowledged and delivered, all such further
acts, bills of sale, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be reasonably required in
conformity with this Agreement for the better assigning,
transferring, granting, conveying, assuring and confirming to Buyer
or to its successors and assigns, or for aiding and assisting in
collecting and reducing to possession, any or all of the Assets
sold, conveyed, assigned, transferred and delivered at the Closing
to Buyer as provided herein.
6.2.6 Resolutions. Deliver a copy of the
resolutions of the Board of Directors of McCormick and Gilroy
authorizing the transactions contemplated by this Agreement,
certified by the Secretary or any Assistant Secretary of each.
6.2.7 Legal Opinion. Deliver the legal opinion of
Piper & Marbury, L.L.P., counsel for Seller and McCormick, in a
form mutually acceptable to counsel to both parties.
6.3 McCormick's Obligation at Closing. At Closing,
McCormick shall:
6.3.1 Supply Agreement. Execute and deliver to
Buyer the Supply Agreement.
6.3.2 Trademark Agreement. Execute and deliver to
Buyer the Trademark Agreement.
6.4 Change of Corporate Name. At or immediately
following the Closing, Seller shall cause to be filed with the
Secretary of State of California, an Amendment to its Articles of
Incorporation which shall change its corporate name to some other
name which bears no resemblance to its present name and does not
use the name "Gilroy" alone or in conjunction with any other name
or words. Except as set forth in the Trademark Agreement, neither
Seller nor McCormick shall use, or allow any entity under its
control to use any name which bears any resemblance to "Gilroy".
6.5 Ancillary Documents. For purposes of this Agreement,
the term "Ancillary Documents" shall mean the Trademark Agreement,
the Assignment and Assumption Agreement, the Deferred Purchase
Price Promissory Note, the Bill of Sale, the Deeds and the
Trademark Assignments.
7. Employee Matters. Notwithstanding anything herein to
the contrary, the parties agree as follows:
7.1 Buyer Offers. At, or immediately prior to, Closing,
Buyer shall offer to employ all of the employees of Seller who, on
the Closing Date, are actively employed at each of the Business
Locations, other than those employees listed on Exhibit 7.1 and
those employees who are on temporary sick leave or short-term
disability. Such offers of employment will be effective following
the Closing and will be on terms and conditions established by
Buyer in its sole discretion. Any employee of Seller employed at
a Business Location who is not listed on Exhibit 7.1 that, on the
Closing Date, is on temporary sick leave or short-term disability
will be offered employment by Buyer only upon return to active
employment with Seller and Seller shall continue to remain
responsible for, and shall provide sick leave or short-term
disability benefits to, such employees entitled thereto during the
period of sick leave or short-term disability. Employees accepting
such offers of employment are herein called "Hired Employees" and
all other employees, whether offered employment or not, shall be
called "Nonhired Employees."
7.2 Retirement and Pension Plans. Seller shall remain
responsible for all retirement and pension plans maintained by
Seller for any of its employees, whether or not hired by Buyer.
7.3 Medical Insurance. Buyer shall not be responsible
(and Seller shall be responsible) for any covered health and
accident claims and expenses with respect to occurrences prior to
the time that a Hired Employee commences employment with Buyer.
7.4 COBRA. Seller will be responsible for satisfying
obligations under Section 601 et seq. of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and Section 4980B
of the Internal Revenue Code of 1986, as amended (the "Code")
("COBRA"), to provide continuation coverage to, or with respect to,
any Hired Employee in accordance with law with respect to any
"qualifying event" occurring on or before the Closing Date or
resulting from the transactions contemplated herein. Buyer shall
be responsible for satisfying obligations under COBRA to provide
continuation coverage to, or with respect to, any Hired Employee in
accordance with law with respect to any "qualifying event"occurring
after the Closing Date.
7.5 Severance. Seller shall be responsible for any
severance or similar obligations payable to any Hired Employee or
Nonhired Employee, including, without limitation, obligations under
the Workers' Adjustment and Retraining Notification Act of 1988, as
amended (the "WARN Act"), resulting from events occurring on or
prior to the Closing Date, or resulting from the consummation of
the transaction contemplated herein (except as set forth in Section
3.5), other than resulting from ConAgra's failure to comply with
Section 7.1.
7.6 Retained Employees. Buyer shall have no obligation
or liability with respect to any Nonhired Employee and Seller shall
be responsible for any and all liabilities and obligations with
respect to Nonhired Employees.
7.7 Vacation. The parties acknowledge and agree that the
Settlement Statement will include an accrual for accrued and unused
vacation for the Hired Employees. Buyer shall assume such accrued
vacation liability (to the extent of such accrual) and shall
provide such vacation benefits to such employees.
7.8 Disability. Any employee that, on the Closing Date,
is on temporary sick leave, short-term disability or long-term
disability shall remain the responsibility of Seller.
8. Representations and Warranties of Seller and
McCormick. Seller and McCormick hereby, jointly and severally,
represent and warrant to and with Buyer as follows:
8.1 Organization, Good Standing and Corporate Power.
Seller and McCormick are corporations duly organized, validly
existing and in good standing under the laws of the States of
California and Maryland, respectively, and each has the corporate
power to own, operate and lease its properties and carry on its
business as now being conducted and to enter into this Agreement,
the Supply Agreement and the Ancillary Documents to which it is a
party. Seller and McCormick are each qualified to do business in
all jurisdictions in which the failure to qualify would have a
material adverse effect on the Business.
8.2 Corporate Authorization; Binding Effect. The
execution, delivery and performance of this Agreement, the Supply
Agreement and the Ancillary Documents by Seller and McCormick, as
applicable, and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized and
approved by all necessary corporate and shareholder action on the
part of Seller and McCormick and constitute the legal, valid and
binding obligations of Seller and McCormick, as applicable, each
enforceable in accordance with its respective terms.
8.3 No Conflict with Other Instruments or Agreements.
Except as set forth in Section 8.3 of the Disclosure Schedule dated
of even date herewith and delivered as a separate document, the
contents of which are incorporated herein (the "Disclosure
Schedule"), the execution, delivery and performance of this
Agreement by Seller and the execution, delivery and performance of
this Agreement, the Supply Agreement and the Ancillary Documents by
Seller and McCormick, as applicable, will not result in the
breach of, or conflict with, any term, covenant, condition or
provision of, result in the modification or termination of,
constitute a default under, or result in the creation or imposition
of any lien, security interest, charge or encumbrance upon any of
the Assets pursuant to, any corporate charter, by-law, commitment,
contract or other agreement or instrument to which Seller or
McCormick is a party or by which Seller or McCormick or any
of its assets or property is or may be bound.
8.4 No Government Authorization Required. Other than
compliance with the Hart-Scott-Rodino Antitrust Improvement Act of
1976, as amended ("HSR Act"), and except as set forth in Section
8.4 of the Disclosure Schedule, no consent, approval, authorization
or order of, or qualification with, any court, regulatory authority
or other governmental body is required for the consummation by
Seller or McCormick of the transactions contemplated by this
Agreement, the Supply Agreement or the Ancillary Documents.
8.5 Effect of Agreement. Except as set forth in Section
8.5 of the Disclosure Schedule, the execution, delivery and
performance of this Agreement by Seller, and the execution,
delivery and performance of this Agreement, the Supply Agreement
and the Ancillary Documents by McCormick and Seller, as applicable,
and the consummation of the transactions contemplated hereby and
thereby will not, with or without the giving of notice or the
lapse of time or both, (a) violate any provision of law, statute,
rule or regulation to which Seller or McCormick is subject; (b)
violate any judgment, order, writ or decree of any court applicable
to Seller or McCormick; or (c) have any effect on any of the
permits, licenses, orders or approvals held or utilized by Seller
with respect to the Business (other than those that are not, by
their terms, assignable).
8.6 Financial Statements. Seller has heretofore
delivered to Buyer copies of Gilroy's balance sheets for its fiscal
years ended November 30, 1995 and 1994 and 1993, and the related
statements of income for the years then ended (such financial
statements are herein collectively called the "Financial
Statements"), together with the interim balance sheets and
statements of income for the interim period ended February 29, 1996
(such financial statements are herein called the "Interim Financial
Statements"). Except as set forth in Section 8.6 of the Disclosure
Schedule, the Financial Statements and the Interim Financial
Statements present fairly the financial position and results of
operation of the Business as of the periods then ended, in
conformity with generally accepted accounting principles applied
on a basis consistent with prior years ("GAAP"), provided that the
Interim Financial Statements are subject to normal year-end
adjustments, none of which would be material. Except as set forth
in Section 8.6 of the Disclosure Schedule and except for the sale
of assets disclosed in Section 8.9 of the Disclosure Schedule,
neither the Financial Statements nor the Interim Financial
Statements contain any items of special or nonrecurring
income or any other income not earned in the ordinary course of
business other than items included in "other income" in the
Financial Statements or Interim Financial Statements. All books
and records of Seller relating to the Business
have been maintained and prepared in conformity with GAAP.
8.7 Undisclosed Liabilities. Except for the litigation
disclosed in Section 8.17 of the Disclosure Schedule, the Seller
does not have any material (individually or in the aggregate)
liability or obligation (whether secured or unsecured and whether
accrued, absolute, direct, indirect, contingent or otherwise) with
respect to the Business, except for (i) liabilities set forth
on the face of the Interim Financial Statements and (ii)
liabilities which have arisen after the date of the Interim
Financial Statements in the ordinary course of business (none of
which results from, arises out of, relates to, is in the nature of,
or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
8.8 Title to Assets, Absence of Liens, Condition of
Assets. Except for the matters disclosed in Section 8.8 of the
Disclosure Schedule (the "Permitted Encumbrances"), Seller has good
and marketable title to all of the Assets, free and clear of all
pledges, liens, defects, leases, licenses, equities, conditional
sales contracts, charges, claims, encumbrances, security interests,
easements, restrictions, chattel mortgages, mortgages or deeds of
trust (collectively, the "Liens"), and the instruments of
conveyance, and other endorsements and instruments of transfer and
assignment contemplated by this Agreement are sufficient to
transfer good and marketable fee simple (in the case of Real
Estate) title to the Assets to Buyer, free and clear of all Liens,
except for Permitted Encumbrances. To the knowledge of Seller and
McCormick, the Assets have, in all material respects, been
maintained in accordance with good manufacturing practice.
Except as disclosed in Section 8.8 of the Disclosure Schedule,
Seller and McCormick do not know of any material latent defects in
the Assets. Except as otherwise provided in this Agreement, Seller
makes no representation or warranty with respect to the condition
of the Assets, including any warranty with respect to implied
warranty of merchantability or fitness for a particular purpose.
8.9 Assets. Except as set forth in Section 8.9 of the
Disclosure Schedule, the Assets and the Excluded Assets constitute
all of the assets, properties, licenses and other agreements which
are presently being used or are related to the Business as
presently conducted; after the transfer of the Assets to Buyer,
Buyer will have all assets, properties, licenses (other than those
licenses, permits, orders, contracts or agreements that are not
assignable) and agreements necessary to conduct the Business in the
same manner as such business and operations have been conducted
prior to the Closing Date. Except as set forth in Section 8.9 of
the Disclosure Schedule, during the past twelve months, Seller has
not sold, assigned, moved or disposed of any assets used in the
Business outside the ordinary course of business.
8.10 Inventory, Packaging and Supplies. Except as set
forth in Section 8.10 of the Disclosure Schedule: (i) the items of
Inventory sold hereunder consist of items suitable and merchantable
for filling orders in the ordinary course of business and at normal
prices, (ii) such Inventory has been manufactured, mixed, packaged
and labeled in accordance with all governmental laws and
regulations, whether federal, state or local, including all
environmental laws and regulations, (iii) the Inventory
includes a sufficient quantity of each type of such Inventory in
order to meet the normal requirements of the Business (considering
the Business' normal inventory cycle and customary methods of
meeting its normal requirements), but does not include obsolete or
out of date items, damaged items, or quantities in excess of
quantities that can be sold for a normal margin within a reasonable
inventory cycle, (iv) the items of packaging supplies, office,
warehouse, processing, operating and storage supplies, spare parts,
fuel, tools, maintenance equipment and similar property sold to
Buyer hereunder are suitable for use in the ordinary course of
business, (v) the Perpetual Inventory System accurately reflects
the actual quantity of each type of Inventory sold hereunder, and
(vi) the Perpetual Inventory System has been maintained by Seller
in accordance with and consistent with Seller's past practices as
reflected in the Financial Statements and the Interim Financial
Statements.
8.11 Licenses, Permits and Orders. Section 8.11 of the
Disclosure Schedule contains a true, complete and correct list of
all material qualifications, registrations, filings, approvals,
authorizations, consents, licenses, orders and other permits of all
governmental agencies, whether federal state, or local, owned, held
or utilized by Seller in connection with the Business. Except as
set forth in Section 8.11 of the Disclosure Schedule, Seller holds
all material qualifications, registrations, filings, approvals,
authorizations, consents, licenses, orders and other permits
necessary to own, operate and lease its properties and carry on the
Business as now being conducted. Seller will reasonably cooperate
with Buyer with respect to Buyer's acquisition of all such
qualifications, registrations, filings, approvals, authorizations,
consents, licenses, orders or other permits which by their terms or
otherwise are transferrable to Buyer.
8.12 Real Property.
8.12.1 Section 8.12.1 of the Disclosure Schedule
lists all real property owned by Seller and used in the Business.
Except as set forth in Section 8.12.1 of the Disclosure Schedule,
with respect to each such parcel of Real Estate:
(i) Except as set forth in Section 8.17 of the
Disclosure Schedule, there are no pending or, to the knowledge
of Seller, threatened condemnation proceedings, lawsuits, or
similar administrative proceedings relating to the property, or the
current use or occupancy thereof;
(ii) Seller has not received notice from any
governmental authority of, and, except as may otherwise be shown
on the surveys and described in the title reports obtained by Buyer
in connection with the transaction contemplated hereby, Seller does
not otherwise have knowledge of, any violation of applicable
setback requirements, zoning laws, or other applicable building or
use law, ordinance or restriction. To Seller's knowledge, and,
except as may otherwise be shown on the surveys and described in
the title reports obtained by Buyer in connection with the
transaction contemplated hereby, (A) the buildings and improvements
do not encroach on any easement which burdens the land; (B) the
land does not serve any adjoining property for any purpose which
materially and adversely affects the use of the land in the conduct
of the Business as currently conducted by Seller; and (C) the
property is not located within any flood plain or subject to any
similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;
(iii) Except as set forth in Section 1.7 of the
Disclosure Schedule, there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of
the parcel of real property;
(iv) Except as set forth in Section 1.7 of the
Disclosure Schedule, there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any
portion thereof or interest therein;
8.12.2 Section 8.12.2 of the Disclosure Schedule lists all real
property leased or subleased to Seller in connection with the
Business. Seller has delivered to the Buyer correct and complete
copies of the leases and subleases (as amended) listed in Section
8.12.2 of the Disclosure Schedule. With respect to each lease and
sublease:
(i) the lease or sublease is the legal, valid and
binding obligation of Seller and, to Seller's knowledge, the other
parties thereto, and is in full force and effect;
(ii) subject to the receipt of all required
consents and approvals to the assignment by Seller to Buyer
contemplated hereby by the landlord or lessor thereunder, to
Seller's knowledge, the lease or sublease will continue to be
legal, valid and binding and in full force and effect following the
consummation of the transactions contemplated hereby, on the
conditions set forth therein, provided Buyer continues to abide by
all the terms of such lease or sublease;
(iii) to the knowledge of Seller and McCormick, no
party to the lease or sublease is in material breach or default,
and no event has occurred which, with notice or lapse of time,
would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(iv) to the knowledge of Seller and McCormick, no
party to the lease or sublease has repudiated any material
provision thereof; and
(v) there are no material disputes, oral
agreements, or forbearance programs in effect as to the lease or
sublease.
8.13 Corporate Services. Section 8.13 of the Disclosure
Schedule describes all corporate and intercompany services provided
by McCormick, or any division or subsidiary of McCormick (other
than Seller), to the Business and all material intercompany
transactions between the Business and McCormick, or between the
Business and any division or subsidiary of McCormick (other than
Seller).
8.14 Insurance. McCormick has provided to Buyer a list
and description of all policies of liability, theft, fidelity,
life, fire and other forms of insurance presently held or within
the past three (3) years held by or for the benefit of McCormick or
Seller with respect to the Business, specifying the insurer, amount
of coverage, type of insurance and policy number. McCormick has
previously provided to Buyer a description of all pending claims
thereunder relating to the Business of which McCormick or Seller
has notice and a summary of material claims made under such
policies of insurance during the past three (3) years. Except as
reflected in Section 8.14 of the Disclosure Schedule, neither
McCormick nor Seller has, with respect to the Business, during the
past three (3) years, been denied or had revoked or rescinded by a
carrier any policy of insurance. There are no outstanding
requirements or recommendations by any insurance company that wrote
any such policy or by any Board of Fire Underwriters or similar
body exercising similar functions or by any governmental authority
which requires or recommends changes in the conduct of the
Business, or repairs or other work to be done or with respect to
any of the properties, assets or operations of the Business or
requiring any equipment or facilities to be installed on or in
connection with any of the properties or assets of the Business.
8.15 Contracts and Other Data. Section 8.15 of the
Disclosure Schedule sets forth, as of the date of this Agreement,
a listing of the following, true and correct copies of which have
been furnished to Buyer:
8.15.1 All of the following contracts and
commitments, whether written or oral, to which Seller is a party
with respect to the Business (other than those relating to assets
excluded from the transactions contemplated herein pursuant to
Section 2 hereof), or to which any of the Assets are subject or
bound:
(i) any agreement (or group of related agreements)
for the lease of personal property to or from any person providing
for lease payments in excess of $100,000 per annum;
(ii) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over a
period of more than one year, or involve consideration in excess of
$100,000;
(iii) any agreement concerning a partnership, joint
venture or other profit sharing arrangement;
(iv) any agreement pursuant to which a Lien is
created with respect to any Asset;
(v) any material agreement concerning
confidentiality or noncompetition;
(vi) any collective bargaining agreement;
(vii) any agreement under which it has advanced or
loaned funds or other property to any employees of the Business;
(viii) any requirements, "take or pay" or similar
agreement relating to the Business;
(ix) any agreement or arrangement establishing,
creating or relating to any rebate, promotion, advertising
coupon or other allowance;
(x) any brokerage or distributor agreements
relating to the Business;
(xi) any power of attorney or agency agreement;
(xii) any agreement under which the consequences of
a default or termination could have a material adverse effect on
the business, financial condition, operations, results of
operations, or future prospects of the Business.
8.15.2 All employment and consulting agreements,
executive compensation plans, bonus plans, deferred compensation
agreements, employee pension plans, employee stock ownership
plans, retirement plans, "golden parachutes", thrift plans,
severance plans, employee profit sharing plans, savings plans,
group life insurance, hospitalization insurance, or other plans or
arrangements, whether written or oral, providing for benefits for
employees of Seller employed in connection with the Business;
8.15.3 A true, correct and complete list of the
names and current annual compensation (including wages, salaries,
bonuses and benefits under pension, profit sharing, deferred
compensation and similar plans or programs) of all current
management employees used in the Business.
8.16 Compliance With Agreements. Except as set forth in
Section 8.16 of the Disclosure Schedule, neither Seller nor, to
Seller's knowledge, any other person, firm, corporation or entity
is in material breach of, or in material default under, any
material agreement, contract or commitment relating to the
Business. To the knowledge of Seller, no state of facts exists or
event has occurred, is pending or is threatened or contemplated,
which, after the giving of notice, the lapse of time or otherwise,
is reasonably likely to constitute or result in a material breach
or a material default by Seller or any other person, firm,
corporation or entity, of any material agreement or commitment.
Except as set forth in Section 8.16 of the Disclosure Schedule, all
such contracts and agreements that are assigned pursuant to this
Agreement are, and after consummation of the transactions
contemplated herein will be, legal, valid and binding obligations
of Buyer, and, to Seller's knowledge the other respective parties
thereto.
8.17 Litigation. Section 8.17 of the Disclosure Schedule
contains a true, complete and correct list and caption of each
pending lawsuit, claim, administrative proceeding, arbitration,
labor dispute or governmental investigation or inspection to which
Seller is a party or which involve or affect the operations or
assets of the Business. Except as set forth in Section 8.17 of the
Disclosure Schedule, to the knowledge of Seller, there are no
material (individually or in the aggregate) claims, legal actions
or investigations threatened or contemplated against Seller
relating to the Business. Section 8.17 of the Disclosure Schedule
further describes all material (individually or in the aggregate)
product liability claims received by Seller during the past three
(3) years in connection with the Business. Except as set forth in
Section 8.17 of the Disclosure Schedule, there are no orders,
decrees, judgments or agreements with any court or governmental
authority to which Seller is a party and that relate to the
Business or by which the Assets are bound.
8.18 Labor Matters. Except as set forth in Section 8.15.1
of the Disclosure Schedule, Seller is not a party to any collective
bargaining agreements with respect to the Business. Except as set
forth in Section 8.18 of the Disclosure Schedule, to the knowledge
of Seller, there are no organizational efforts pending or
threatened by any labor union with respect to employees of the
Business. There are no material controversies pending or, to the
knowledge of Seller, threatened between Seller and any of its
employees employed in connection with the Business, other than as
may result from the transactions contemplated herein. To the
knowledge of Seller and McCormick, Seller has not, with respect to
the Business, committed, or engaged in, any material (individually
or in the aggregate) unfair labor practices as defined in 29 U.S.C.
Section 158(a).
8.19 Transactions with Management. Except as disclosed in
Section 8.19 of the Disclosure Schedule, to Seller's knowledge, no
director, officer or employee of Seller directly or indirectly, (i)
owns any shares of stock or other securities of, or has any other
direct or indirect interest in, any firm, corporation, partnership
or other entity or business which has a material business
relationship (as creditor, lessor, lessee, supplier, dealer,
distributor, franchisee, licensee, customer or otherwise) with the
Business, other than the ownership of securities of publicly traded
corporations; (ii) owns, or has any interest in any process,
invention, know-how, formula, trade secret, trade marks, trade
names, service marks, service names, brand marks, brand names,
labels or registrations or licenses thereof or applications
therefor or other right, property or asset which is used in or
which is required in the ownership or operation by Seller of the
Business; or (iii) has any other material contractual relationship
with the Business (other than contractual employment
relationships).
8.20 Relationship With Suppliers and Customers. Except as
set forth in Section 8.20 of the Disclosure Schedule, to the
knowledge of Seller, the relationship of Seller with the material
suppliers and customers of the Business is satisfactory and Seller
has not received notice of any intention to terminate or materially
modify any of such relationships. To the knowledge of Seller, the
transactions contemplated herein will not adversely affect the
ongoing relationship of the Business with any material customer or
supplier.
8.21 Intellectual Property.
8.21.1 Section 8.21.1 of the Disclosure Schedule
contains a true, complete and correct list of: (i) all patents and
all pending applications for patents which the Seller owns or is
using in connection which the Business ("Patents"), (ii) all
trademarks, service marks, and trade names, and all registrations
and pending applications relating thereto, which the Seller owns or
is using in connection with the Business ("Trademarks"), and (iii)
all copyright registrations and applications which the Seller owns
or is using in connection with the Business ("Copyrights").
8.21.2 Except as disclosed in Section 8.21.2 of the
Disclosure Schedule, (i) Seller owns all right, title and interest
(to the extent related to the Business) in and to the Trademarks,
Patents and Copyrights; (ii) all of the Trademarks, Patents and
Copyrights are in good standing, valid and subsisting and in full
force and effect in accordance with their terms; (iii) to the
knowledge of Seller and McCormick, no impediment exists to the
Seller's exclusive ownership, use and validity of any of the
Trademarks, Patents and Copyrights; (iv) to the knowledge of Seller
and McCormick, no other person, corporation, partnership, joint
venture, organization, association or entity owns any interest in
or uses in any way any of the Trademarks, Patents and Copyrights;
(v) none of the Trademarks, Patents or Copyrights are involved in,
or are the subject of, any pending or, to the knowledge of Seller
and McCormick, threatened, infringement,interference, opposition,
or similar action, suit or proceeding or has otherwise been
challenged in any way; and (vi) to the knowledge of Seller and
McCormick, neither the ownership or operation of the Business and
the Assets by the Seller, nor the production, manufacture,
marketing, sale or distribution by Seller of the Business'
products, nor the marketing, sale or performance by Seller of the
Business' services, nor the use of any product of the Business for
the purposes for which sold, infringes upon or conflicts with any
patent, trademark, trade name, service mark, copyright or other
proprietary right of any other person, firm, corporation or entity.
8.21.3 Section 8.21.3 of the Disclosure Schedule
contains a list of all agreements, contracts and commitments to
which Seller is a party (including, without limitation, licenses
and other such agreements), whether written or oral, which affect
any of the Trademarks, Patents or Copyrights. Except as disclosed
in Section 8.21.3 of the Disclosure Schedule, such agreements,
contracts and commitments are valid, binding and enforceable in
accordance with their respective terms for the periods
stated herein, and there is no existing material default or
material event of default thereunder or any event which with notice
and/or lapse of time would constitute a default.
8.21.4 Except as set forth in Section 8.21.4 of the
Disclosure Schedule, Seller does not use any material
licensed software in the Business.
8.22 Compliance with Laws. Except as set forth in
Section 8.22 of the Disclosure Schedule, Seller owns and
operates the Assets and the Business, and has manufactured, stored,
processed and sold the Business' inventory and products, and
otherwise carried on and conducted the Business in substantial
compliance with all federal, foreign, state and local laws,
ordinances, rules and regulations, provided, however, as set forth
in Section 8.11 of the Disclosure Schedule, Seller does not hold
certain permits. Section 8.22 of the Disclosure Schedule sets
forth for the past three (3) years all material investigations,
inspections or citations under any health, environmental, safety,
labor, employment or other applicable laws or regulations and under
any other federal, state or local laws or regulations and the
results thereof together with a brief description of all corrective
or other action taken with respect thereto. To the knowledge
of Seller and McCormick, there are no material (individually or in
the aggregate) pending governmental investigations, inspections or
citations which relate to the Business. The Assets and all assets
subject to leases described in Exhibit 1.7 are being used and
occupied, and are located, constructed and operated in substantial
compliance with, and conform to all applicable federal, state and
local laws, rules, regulations and ordinances.
8.23 Environmental Matters. Except as set forth in
Section 8.23 of the Disclosure Schedule: (a) all owned and leased
real property used in the Business (the "Property") is free from
any and all Hazardous Materials (as defined below) that require
remediation or clean-up under Environmental Laws (as defined
below); (b) except as authorized by an effective permit or
by applicable law, there have been no material (individually or in
the aggregate) releases, discharges or emissions of any Hazardous
Material, into, onto, under or from the Property; and (c) no wastes
of any kind have at any time been disposed of in a material amount
on, at or under the Property except in accordance with
Environmental Laws. Except as set forth in Section 8.23 of the
Disclosure Schedule, with respect to the Business, Seller is
in compliance with all Environmental Laws, including (a)all laws,
rules and regulations relating to (i) releases,
discharges, emissions or disposal to air, water, land or
groundwater; (ii) the use, manufacture, importing,generation,
treatment, handling or disposal of Hazardous Material; and (iii)
the exposure of persons to toxic, hazardous, harmful or
other controlled, prohibited or regulated substances; and (b) all
judicial and administrative orders, injunctions,
judgments, declarations, directives, notices or demands with
respect to the foregoing matters. There is no pending or, to
the knowledge of Seller and McCormick, threatened, lawsuit, claim,
action, or proceeding by any governmental entity or third party
arising under Environmental Laws in respect to the Property or the
Assets, nor to Seller's knowledge does any valid basis for such
a lawsuit, claim, action, or proceeding exist. For purposes of
this Section 8.23, "Environmental Law" shall mean any law,
regulation, ordinance, order, permit, license, common law, or other
requirement pertaining to protection of the environment, health or
safety of persons, waste management, or Hazardous Material Activity
(as defined below), in effect on or before the Closing Date, and
includes, without limitation, CERCLA, as amended (42 U.S.C. 9601 et
seq.); Solid Waste Disposal Act, as amended (42 U.S.C. 1251
et seq.); Federal Water Pollution Control Act, as amended (33
U.S.C. 7401 et seq.); Toxic Substances Control Act of 1976 (15
U.S.C. 2601 et seq.); OSHA as amended (29 U.S.C. 651 et seq.);
Emergency Planning and Community Right-to-Know Act of 1986 (42
U.S.C. 1101 et seq.); and any similar or implementing law, and all
rules and regulations promulgated thereunder. The term "Hazardous
Material" shall mean any substance, material or waste
(whether solid, liquid or otherwise), including, without
limitation, asbestos (to the extent regulated by any applicable
Environmental Law), petroleum (including crude oil or any fraction
thereof) and urea formaldehyde, which is defined, prohibited,
controlled or regulated by any Environmental Law. "Hazardous
Material Activity" shall mean any and all activity, event or
occurrence involving a Hazardous Material, including, without
limitation, the use, generation, storage or disposal (as those
terms are defined in any Environmental Law) of any Hazardous
Material.
8.24 Conduct of Business Since February 29, 1996. Except
as set forth in Section 8.24 of the Disclosure Schedule,
since February 29, 1996:
(i) The business and affairs of the Business have
been conducted and carried on only in the ordinary course
consistent with its past practices.
(ii) Except for personal property purchased, sold
or leased in the ordinary course of business consistent with its
past practices, Seller has not purchased, sold, leased, mortgaged,
pledged or otherwise acquired or disposed of any material
properties or assets used in the Business, other than increases or
changes in the ordinary course of business.
(iii) There has been no increase or other change
made in the rate or nature of the compensation, including wages,
salaries, bonuses and benefits under employee benefit plans which
has been paid, or will be paid or payable, by Seller to any
employee used in the Business, other than in the ordinary course of
business.
(iv) Seller has not sustained or incurred any loss
or damage (whether or not insured against) on account of
fire, flood, earthquake, accident or other calamity which
has materially interfered or materially affected the Assets or the
Business.
(v) Except as set forth in Section 8.20 of the
Disclosure Schedule, there has been no material adverse change in
or with respect to the financial condition, operations, management,
rights, properties, assets, liabilities or results of operations of
the Business, or its relationship with its employees, creditors,
suppliers or others having business relationships with the Business
and, to the knowledge of Seller and McCormick, no state of facts
exists which may reasonably be expected to give rise to any such
changes.
(vi) Seller has not, in connection with the
Business, entered into any transaction, contract or commitment
which, by reason of its size, nature or otherwise is not in the
ordinary course of business.
(vii) Seller has not, in connection with
the Business, incurred any obligations or liabilities (whether
absolute, accrued, contingent or otherwise and whether due or to
become due), except in the ordinary course of business consistent
with past practices.
(viii) Seller has not changed its method of
accounting for, or valuing, Inventory, Receivables or Payables.
8.25 Brokers and Finders. Neither McCormick nor Seller
has employed any investment banker, broker or finder, or incurred
any liability for any brokerage fees, commissions or finders fees
in connection with the transactions contemplated by this Agreement.
8.26 Disclosure and Reliance. None of the information,
documents, certificates or instruments furnished or to be furnished
by McCormick or Seller or any of their respective representatives
to Buyer or any of its representatives in this Agreement or in the
attachments, exhibits or schedules thereto, are false or misleading
in any material respect or contain any material misstatement of
fact or omit to state any material facts required to be stated to
make the statements therein not misleading. The representations
and warranties made herein are made by Seller and McCormick with
the knowledge and expectation that Buyer is placing reliance
thereon.
8.27 Representations and Warranties on Closing Date. The
representations and warranties contained in this Section 8 shall be
true and complete on and as of the Closing Date with the same force
and effect as though such representations and warranties had been
made on and as of the Closing Date.
9. Representations and Warranties of Buyer.
Buyer represents and warrants to Seller and McCormick as follows:
9.1 Organization, Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware, and has the corporate power to own, operate
and lease its properties and carry on its business as now being
conducted and to enter into this Agreement, the Supply Agreement
and the Ancillary Documents to which it is a party and perform its
obligations hereunder and thereunder.
9.2 Authority Relative to Agreement. The execution,
delivery and performance of this Agreement, the Supply Agreement
and the Ancillary Documents, as applicable, by Buyer and
the consummation by it of the transactions contemplated hereby and
thereby have been duly and validly authorized and approved by all
necessary corporate action on the part of Buyer and this
Agreement, the Supply Agreement and the Ancillary Documents, as
applicable, constitute the legal, valid and binding obligations of
Buyer enforceable in accordance with their respective terms.
9.3 No Government Authorization Required. Other than
compliance with the HSR Act, no consent, approval, authorization or
order of, or qualification with, any court, regulatory authority or
other governmental body is required for the consummation by Buyer
of the transactions contemplated by this Agreement, the Supply
Agreement or the Ancillary Documents, as applicable.
9.4 No Conflict with Other Instruments or Agreements.
The execution, delivery and performance of this Agreement, the
Supply Agreement and the Ancillary Documents, as applicable, by
Buyer will not result in a breach of, or conflict with, any term,
covenant, condition or provision of, result in the modification or
termination of, constitute a default under, any corporate charter,
by-law, commitment, contract or other agreement or instrument to
which Buyer is a party or by which Buyer or any of its assets or
property is or may be bound.
9.5 Effect of Agreement. The execution, delivery and
performance of this Agreement, the Supply Agreement and the
Ancillary Documents by Buyer, as applicable, and the consummation
of the transactions contemplated hereby and thereby will not, with
or without the giving of notice or the lapse of time or both, (a)
violate any provision of law, statute, rule or regulation to
which Buyer is subject; or (b) violate any judgment, order, writ or
decree of any court applicable to Buyer.
9.6 Brokers and Finders. Buyer has not employed any
investment banker, broker or finder, or incurred any liability for
any brokerage fees, commissions or finders fees in connection with
the transactions contemplated by this Agreement.
9.7 Representations and Warranties on Closing Date. The
representations and warranties contained in this Section 9 shall be
true and complete on and as of the Closing Date with the same force
and effect as though such representations and warranties had been
made on and as of the Closing Date.
10. Covenants and Agreements.
10.1 Conduct of Business. From the date hereof through
the Closing Date, neither Seller nor McCormick shall undertake any
of the actions that would violate the provisions of Section 8.24
without the prior written consent of Buyer.
10.2 Insurance. From the date hereof through the Closing
Date, McCormick and Seller shall maintain in force (including
necessary renewals thereof) the insurance policies listed on any
Schedule hereto, except to the extent that they may be replaced
with equivalent policies appropriate to insure the assets and
properties relating to the Business to the same extent as
currently insured at the same or lower rates or at rates approved
by Buyer.
10.3 Preservation of Business. From the date hereof
through the Closing Date, Seller shall use its reasonable efforts
to preserve its business organization intact, keep available the
services of its present officers, employees, consultants and
agents, maintain its present suppliers and customers and preserve
its goodwill.
10.4 Litigation. Seller shall promptly notify Buyer of
any lawsuits, claims, proceedings or investigations which after the
date hereof are threatened or commenced against Seller or against
any officer, director, employee, consultant, agent or shareholder
of Seller with respect to the Business.
10.5 Continued Effectiveness of Representations and
Warranties of Seller and McCormick. From the date hereof through
the Closing Date, Seller and McCormick shall conduct their
respective businesses in such a manner so that the representations
and warranties contained in Section 8 shall continue to be true and
correct on and as of the Closing Date as if made on and as of
the Closing Date, and Buyer shall promptly be given notice
of any event, condition or circumstances occurring from the
date hereof through the Closing Date that would constitute a
violation or breach of this Agreement.
10.6 Corporate Examinations and Investigations. Prior to
the Closing Date, Buyer shall be entitled, through its employees
and representatives, to make such investigation of the property and
plant, and such examination of the books and records of the
Business as Buyer wishes. Any such investigation and examination
shall be conducted at reasonable times and under reasonable
circumstances and Seller and McCormick shall cooperate fully
therein.In order that Buyer may have full opportunity to make such
examination and investigation as it may wish of the affairs of the
Business, Seller and McCormick shall furnish the representatives of
Buyer during such period with all such information concerning the
affairs of the Business as such representatives may reasonably
request and cause its officers, employees, consultants, agents,
accountants and attorneys to cooperate fully with such
representatives in connection with such review and examination and
to make full disclosure to the Buyer of all material facts
affecting the financial condition and operations of the Business.
10.7 Closing. The parties shall use their best efforts to
satisfy their respective conditions to Closing.
10.8 Brady Power Partners. Seller and McCormick shall not
take any material action with respect to the Gilroy Foods, Inc. v.
Brady Power Partners, et. al, litigation ("Brady Litigation")
without first consulting with Buyer. In addition, Seller and
McCormick shall not settle, compromise, dismiss or offer to settle,
compromise or dismiss, the Brady Litigation without Buyer's prior
consent (unless Buyer elects not to assume control of the Brady
Litigation). Following Closing, Buyer may, at its option and by
notice in writing to Seller within twenty (20) days following
Closing, assume control, on Seller's behalf, of the prosecution of
the Brady Litigation (and defense of any counter-claim with respect
thereto), including the right to control and direct any settlement,
compromise or dismissal thereof, or may, by notice in writing to
Seller within twenty (20) days following Closing, require Seller to
assign to Buyer its interest and position in the Brady Litigation,
provided, however, Buyer shall not settle any claim that will
result in the payment by Gilroy or McCormick of any monetary
damages with respect thereto without the prior written consent of
McCormick, which consent shall not be unreasonably withheld.
Notwithstanding anything herein to the contrary, (i) Seller and
McCormick shall pay all costs associated with the Brady Litigation
incurred on or prior to the Closing Date (except to the extent
included in the Payables) and (ii) Seller and McCormick shall
indemnify and hold Buyer harmless from and against any and all
monetary damages determined to be owed by Seller in the Brady
Litigation.Buyer shall be entitled to any recoveries resulting from
the Brady Litigation.
11. Conditions Precedent to the Obligation of Buyer to
Close. The obligation of Buyer to complete the Closing is subject,
at its option, to the fulfillment on or prior to the Closing Date
of the following conditions, any one or more of which may be waived
by it:
11.1 Representations and Covenants. The representations
and warranties of Seller and McCormick contained in this Agreement
shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of
the Closing Date, other than representations and warranties made
with reference to a specified date which shall be true on and as of
such specified date. Seller and McCormick shall have performed and
complied with all covenants and agreements required by this
Agreement to be performed or complied with by Seller and McCormick
on or prior to the Closing Date (including, without limitation, the
obligations under Sections 6.2 and 6.3).Seller and McCormick shall
have delivered to Buyer a certificate, dated the Closing Date and
signed by Seller and McCormick, to the foregoing effect and stating
that all conditions to Buyer's obligations hereunder have been
satisfied.
11.2 Governmental Permits and Approvals. Buyer shall have
received all permits and approvals from the governmental agencies
or regulatory bodies necessary for the operation of the Business
other than those permits and approvals the absence of which will
not materially adversely affect the Business or the operation
thereof.
11.3 Third Party Consents. All consents, permits and
approvals from parties to those contracts and other agreements
previously identified shall have been obtained.
11.4 Litigation. No action, suit or proceeding shall have
been instituted before any court or governmental or regulatory body
or instituted or threatened by any governmental or regulatory body
to restrain or prevent the carrying out of the transactions
contemplated hereby.
11.5 Other Agreements. Seller and McCormick shall each
have executed and delivered such other agreements and documents
contemplated by the parties in connection with this transaction.
11.6 Title Insurance Policy. Seller shall provide Chicago
Title Insurance Company (the "Title Company") with all reasonable
affidavits, indemnities and other documents required of Seller by
the Title Company as a condition precedent to the Title Company
issuing to Buyer at Closing marked-down commitments to issue
owner's title insurance policies on ALTA Form 4-6-90 (except in
Texas where an alternative form is to be used), with extended
coverage endorsement, and insuring, as of the Closing Date, the
fee simple interest of Buyer in and to each parcel of Real Estate,
subject to the Permitted Encumbrances.To the extent reasonably
obtainable by Buyer, without cost to Seller, such commitments shall
contain endorsements on (i) zoning (except in Texas where no
endorsement is to be issued), (ii) access (except in Texas where no
endorsement is to be issued), and (iii) contiguity.
11.7 Survey. Buyer shall have received (i) complete land
surveys of each parcel of Real Estate meeting ALTA/ACSM standards
showing such parcels of Real Estate to be free from material
encroachments and title defects; and (ii) such other surveyor's
certifications or details as required by the title insurance
companies issuing the title insurance policies on such parcels of
Real Estate in order to delete the standard survey exception from
such title insurance policies and to insure title by using the
survey descriptions of such parcels of Real Estate.
11.8 Co-Gen. The sale of the Gilroy Energy, Inc.
co-generation facility to Calpine Gilroy Cogen, L.P. ("Calpine")
shall have been completed on terms and conditions, and pursuant to
documents (to the extent to be executed by, or assigned to,
ConAgra, or amendments of documents to be assigned to ConAgra),
reasonably acceptable to Buyer.
12. Conditions Precedent to the Obligation of Seller and
McCormick to Close. The obligation of Seller and McCormick to
complete the Closing is subject, at the option of Seller and
McCormick, to the fulfillment of the following conditions, any one
or more of which may be waived by them:
12.1 Representations. The representations and warranties
of Buyer contained in this Agreement shall be true in all material
respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date, other than
representations and warranties made with reference to a specified
date which shall be true on and as of such specified date.Buyer
shall have performed and complied with all covenants and agreements
required by this Agreement to be performed or complied with by
Buyer on or prior to the Closing Date (including, without
limitation, the obligations under Section 6.1).Buyer shall have
delivered to Seller and McCormick a certificate, dated the
Closing Date and signed by an officer of Buyer, to the foregoing
effect and stating that all conditions to Seller's and McCormick's
obligations hereunder have been satisfied.
12.2 Litigation. No action, suit or proceeding shall have
been instituted before any court or governmental or regulatory body
or instituted or threatened by any governmental or regulatory body
to restrain or prevent the carrying out of the transactions
contemplated hereby.
12.3 Other Agreements. Buyer shall have executed and
delivered such other agreements and documents contemplated by the
parties in connection with this transaction.
13. Termination of Agreement.
13.1 Termination. This Agreement may be terminated prior
to the Closing as follows:
(i) at the election of Seller or McCormick, if any
one or more of the conditions to its obligation to close has not
been fulfilled as of the Closing Date;
(ii) at the election of Buyer, if any one or more of
the conditions to its obligation to close has not been fulfilled
as of the Closing Date;
(iii) at the election of Seller or McCormick, if Buyer
has breached any material representation, warranty, covenant or
agreement contained in this Agreement;
(iv) at the election of Buyer, if Seller or McCormick
has breached any material representation, warranty, covenant or
agreement contained in this Agreement;
(v) at the election of Seller, McCormick or Buyer,
if any legal proceeding is commenced or threatened by any
governmental agency or other person directed against the
consummation of the Closing or any other transaction contemplated
under this Agreement and either Seller, McCormick or Buyer, as the
case may be, reasonably and in good faith deems it impractical or
inadvisable to proceed in view of such legal proceeding or threat
thereof; or
(vi) at any time on or prior to the Closing Date, by
mutual written consent of Seller, McCormick and Buyer. If this
Agreement so terminates, it shall become null and void and of no
further force or effect, except as otherwise provided herein and
provided that any such termination shall not constitute an election
of remedies and Buyer, Seller or McCormick may pursue whatever
legal rights or remedies they may have by reason of any breach or
default hereunder prior to such termination.
14. Indemnity.
14.1 Indemnification of Buyer by Seller and McCormick.
Seller and McCormick shall, and hereby agree to, jointly and
severally, indemnify and hold Buyer harmless against and in respect
of:
14.1.1 All debts, liabilities and obligations of Seller
of any nature, whether accrued, absolute, contingent, or known or
unknown on the Closing Date, existing or arising on or resulting
from events which occurred or failed to occur on or before the
Closing Date,to the extent not assumed by Buyer hereunder;
14.1.2 Any liability incurred by Buyer due to the
waiver of compliance with the provisions of any applicable bulk
sales law; 14.1.3 Any claim, action, loss, damage or
cost arising by reason of (i) any governmental requirements
relating to the presence, disposal or arranging for disposal
(on-site or off-site), or the release or threatened release on or
prior to the Closing Date, of any Hazardous Material in, on, to,
under, upon or from any of the Assets, or in, on, to, under, upon
or from the Property or any portion thereof upon which the Assets
are, or have been, located,(ii) third-party claims arising from
off-site contamination from a release or disposal on or prior to
the Closing Date, or the migration of any substance released or
disposed of on or prior to the Closing Date, or (iii) any violation
or operation of any applicable Environmental Law which occurs on or
prior to the Closing Date in, on, under, upon or from any of the
Assets, or in, on, to, under, upon or from the Property or any
part thereof upon which the Assets are or have been located or
which otherwise apply to the activities at the Assets;
14.1.4 Any liability, loss, claim, damage or deficiency
resulting directly or indirectly from any misrepresentation,
breach of warranty or nonfulfillment of any agreement on the part
of McCormick or Seller under this Agreement, or from any
misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to Buyer hereunder;
14.1.5 Any liability, claim or obligation relating to
the failure to comply with the WARN Act with respect to the
termination of Seller's employees on or prior to the Closing Date
or in connection with the transactions contemplated herein (other
than transactions contemplated in Section 3.5), other than any such
liability resulting from Buyer's failure to comply with Section 7.1
hereof;
14.1.6 All other actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses directly related to
the foregoing, including, without limitation, reasonable
attorneys' fees and other out-of-pocket expenses.
14.2 Indemnification of Seller and McCormick by Buyer.
Buyer shall indemnify and hold Seller and McCormick harmless
against and in respect of:
14.2.1 Any liability, loss, claim, damage or
deficiency resulting from any misrepresentation, breach of warranty
or nonfulfillment of any agreement on the part of Buyer under this
Agreement, or from any misrepresentation in or omission from any
certificate or other instrument furnished or to be furnished to
Seller or McCormick hereunder;
14.2.2 Any liability resulting from the failure by
Buyer to pay, perform or discharge when due the Assumed Liabilities
or the expenses required to be paid by Buyer pursuant to Section 24
hereof;
14.2.3 Any liability, claim or obligation under the
WARN Act resulting from Buyer's failure to comply with Section 7.1
hereof, or resulting from actions taken by Buyer after the Closing
Date;
14.2.4 Any liability, cost or expense attributable to
any sales, use, gross receipts, or transfer taxes incurred in
connection with the transfer of the Assets including, without
limitation, taxes, interest, penalties, reasonable attorneys' fees
and other out-of-pocket expenses.
14.2.5 All other actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses directly related to
the foregoing, including, without limitation, reasonable attorneys'
fees and other out-of-pocket expenses.
14.3 Notice of Claims. The party seeking indemnification
(the "Indemnified Party") agrees to give the indemnifying party
(the "Indemnifying Party") notice of any and all claims for which
indemnification is or may be sought under this Section 14.Such
notice shall be given within a reasonable time after the
Indemnified Party obtains knowledge of such claim or facts
indicating the likelihood of such claim.Failure to give such
notice shall not abrogate or diminish the Indemnifying Party's
obligation under this Section 14 if the Indemnifying Party has or
receives knowledge of the existence of any such claim by any other
means or if such failure does not prejudice the Indemnifying
Party's ability to defend such claim.
14.4 Defense of Claim. In any third party litigation,
administrative proceeding, negotiation or arbitration for which
indemnification is sought under this Section 14, the Indemnifying
Party shall have the right to select legal counsel to represent the
Indemnified Party and to otherwise control such litigation,
proceedings, negotiations and arbitration. If the Indemnifying
Party elects to control such litigation, proceeding, negotiation or
arbitration, the Indemnified Party shall at all times have the
right to fully participate in the defense at its own expense. If
the Indemnifying Party shall, within a reasonable time after
notice, fail to defend, the Indemnified Party shall have the right,
but not the obligation, to undertake the defense of and to
compromise or settle the claim or other matter on behalf, for the
account, and at the risk of the Indemnifying Party. If the
Indemnifying Party chooses to defend, or if the claim is one that
cannot by its nature be defended solely by the Indemnifying Party
(including, without limitation, any federal or state tax
proceeding) then the Indemnified Party shall make available all
information and assistance as the Indemnifying Party may reasonably
request.The Indemnifying Party shall reimburse the Indemnified
Party for any out-of-pocket costs incurred by the Indemnified Party
in connection with any requested cooperation as to any indemnified
matter.
14.5 Limits on Indemnification. No claim may be made
against an Indemnifying Party for indemnification with respect to
breaches of the representations and warranties contained in
Sections 8 or 9 hereof, unless and only to the extent that the
aggregate for all amounts for which indemnity by that Indemnifying
Party with respect to such Sections would otherwise be due
hereunder exceeds Five Hundred Thousand Dollars ($500,000), in
which event the Indemnifying Party's obligations under this
Agreement shall extend to all such debts, liabilities, obligations,
claims, actions, loss, damage, deficiency or costs and expenses in
excess of such amount; provided, however, that such limitations
shall not apply to claims made with respect to Section 8.2, the
first sentence of Section 8.8 or Section 9.2. Notwithstanding
anything to the contrary that may be set forth in this Agreement,
the total aggregate indemnification obligation of Seller and
McCormick shall not exceed One Hundred Thirty-Two Million Dollars
($132,000,000) collectively. If any event shall occur which would
otherwise entitle a party to assert a claim for indemnification
hereunder, no debt, liability, obligation, claim, action, loss,
damage, deficiency or cost and expense shall be deemed to have been
sustained by such party to the extent of any net tax savings
realized by such party with respect thereto.
15. Non-Interference Agreement. Each of McCormick and
Seller covenants and agrees that for a period of three (3) years
following the Closing, it will not, directly or indirectly, for
whatever reason, whether for its own account or for the account of
any other person, firm, corporation or other organization: (i)
interfere with any of the Business' or Buyer's existing or
potential contracts or relationships with any officer, director or
any independent contractor whether the person is employed by or
associated with the Business on the Closing Date or at any time
thereafter; (ii) interfere with the continuance of supplies or raw
materials to Buyer (or the terms relating to such supplies), from
any suppliers who have been supplying goods, materials or services
to the Business at any time during the last five (5) years prior to
the date of this Agreement; (iii) solicit any of the Business' or
Buyer's existing contracts or relationships with (A) any
independent contractor, customer, client or consultant of the
Business, or (B) any person who is currently a bona fide
independent contractor, customer, client or consultant of the
Business; (iv) solicit the business of any party to any existing or
proposed contract between the Business and such party, or (v) sell
dehydrated capsicum (other than red pepper and paprika), onion (or
any product competitive with, or substitutable therefor) or garlic
product (or any product competitive with, or substitutable
therefor) to any restaurant customer that is currently a customer
of Gilroy. Notwithstanding the foregoing, Seller and McCormick
shall be entitled to (i) conduct the activities set forth in
clauses (a) through (k) of Section 16 hereof, so long as, in the
conduct of such activities, McCormick and Seller do not solicit
persons or entities that are currently customers of Gilroy in such
a way that results in such customers diverting business from Buyer
and so long as the conduct of such activities do not breach subpart
(v) above, (ii) fulfill customer obligations with respect to
returned or defective product sold prior to the Closing Date, or
(iii) collect Receivables repurchased by Seller pursuant to Section
4.8 hereof. In addition, for a period of two (2) years following
the Closing, Seller will not hire, or solicit for employment, any
person employed by Buyer in connection with the Business, provided,
however, Seller or McCormick may hire any such person who
terminates his or her employment with Buyer other than as a result
of solicitation by Seller or McCormick.
16. Non-Competition Agreement. In order to further
induce Buyer to enter into this Agreement and consummate the
transactions contemplated hereunder, Seller and McCormick agree
that from and after the date hereof and for a period of three (3)
years hereafter, neither they nor any of their controlled
subsidiaries or affiliates shall, within the Trade Area (as defined
below) associate in any capacity whatsoever, whether as a promoter,
owner, officer, director, employee, partner, lessee, lessor,
lender, agent, consultant, broker, commission salesman or
otherwise, in any business engaged in the processing,
manufacturing, sale or distribution of dehydrated onions (or
substitutable products), capsicums, or garlic (or substitutable
products) (the "Relevant Products") in or through the industrial
channels; provided, however, that notwithstanding the foregoing (a)
McCormick and its controlled subsidiaries and affiliates shall have
the right to continue to use any such products as ingredients in
other food products which McCormick or its controlled subsidiaries
and affiliates manufactures and sells; (b) McCormick and its
controlled subsidiaries and affiliates shall have the right to
continue to develop, process, distribute and sell other forms of
Relevant Products (e.g. oils, oleoresins, spray-dried,
encapsulated); (c) the performance by McCormick of its obligations
under the Supply Agreement shall not constitute a violation of this
Agreement; (d) McCormick and its controlled subsidiaries and
affiliates shall have the right to sell Relevant Products in order
to perform its existing contractual obligations to supply Relevant
Products to food processors until such time as such contracts or
this Agreement expires, whichever occurs first; (e) foreign
affiliates of McCormick which McCormick does not own more than a
50% interest in, or otherwise manage or control, may continue to
distribute and sell the Relevant Products; (f) McCormick and its
controlled subsidiaries and affiliates may process, sell and
distribute tomato powder, tomato paste, tomato flakes, red pepper,
paprika and parsley; (g) McCormick and its controlled subsidiaries
and affiliates may purchase and resell outside the United States
dehydrated yellow onion, (h) McCormick and its controlled
subsidiaries and affiliates may purchase and resell outside the
United States dehydrated onion and garlic processed by Alimentos
Deshidratados del Bajio so long as such entity is owned by
McCormick, (i) McCormick and its controlled subsidiaries and
affiliates may purchase and resell Chinese garlic purchased from
Shanghai McCormick Seasoning & Foodstuffs Company; (j) McCormick
and its controlled subsidiaries and affiliates may continue to
distribute in Canada, the United Kingdom and Germany products
purchased from Buyer; and (k) McCormick (or its subsidiaries) may
sell product to Campbell Soup that is produced by Buyer and sold
under terms and conditions agreed to by McCormick and Buyer from
time to time. If Seller or McCormick fails to keep and perform
every covenant of Sections 15 and 16, Buyer shall be entitled to
specifically enforce the same by injunction in equity in addition
to any other remedies which Buyer may have. If any portion of
Sections 15 or 16 shall be invalid or unenforceable, such
invalidity or unenforceability shall in no way be deemed or
construed to affect in any way the enforceability of any other
portion of Sections 15 or 16. If any court in which Buyer seeks to
have the provisions of Sections 15 or 16 specifically enforced
determines that the activities, time or geographic area hereinabove
specified are too broad, such court may determine a reasonable
activity, time or geographic area and shall specifically enforce
Section 15 or 16, as the case may be, for such activity, time and
geographic area. The covenants on the part of Seller and McCormick
under Sections 15 and 16 shall be construed as an agreement
independent of any other provision of this Agreement, and the
existence of any claim or cause of action by Seller or McCormick
against Buyer or any corporation affiliated with Buyer, whether
predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Buyer of said covenants. For
purposes of this Section 16, "Trade Area" shall mean the United
States, Canada, United Kingdom, Germany and Japan.
17. Covenant Not to Disclose. Each of McCormick and
Seller agree that as the owner of the Business, it possesses
certain data and knowledge of operations of the Business which are
proprietary in nature and confidential, including, without
limitation, certain trade secrets. Each of McCormick and Seller
covenant and agree that it will not, at any time after the Closing,
reveal, divulge or make known to any person (other than Buyer) or
use for its own account or for the account of any person, firm,
corporation or other organization, any confidential or proprietary
manufacturing method, record, data, trade secret, pricing policy,
bid amount, bid strategy, rate structure, personnel policy, method
or practice of soliciting or obtaining or doing business by the
Business, or any other confidential or proprietary information
whatsoever relating to the Business or Buyer or its affiliates,
whether or not obtained with the knowledge and permission of Buyer
or its affiliates. Each of McCormick and Seller further covenants
and agrees that it shall not divulge any such confidential or
proprietary information which it may acquire during any transition
period in which it assists or consults with Buyer or its affiliates
to facilitate the transfer and the continued success of the
Business. Notwithstanding the foregoing, it shall not be a
violation of the covenant set forth in this Section 17 for Seller
or McCormick to disclose information if required to do so by court
order or by applicable law, or to disclose or use information to
the extent such information is in the public domain other than as
a result of conduct which constitutes the breach of a
confidentiality obligation to Buyer, or to the extent the
information is otherwise of general applicability to Seller's or
McCormick's other businesses and has been used by such business
prior to the consummation of the transactions contemplated herein.
18. Insurance Indemnity. Seller hereby agrees that it
shall be responsible for all prior insurance charges of the
Business relating to the period on or prior to the Closing Date,
including, but not limited to, retrospective additional premiums,
additional charges incurred by an audit or exposure changes or any
deferral charges. Seller shall also be responsible for any
insured, self-insured, or deductible amounts of loss to the
conclusion of each and every loss (including any reopening claims)
incurred by the Business prior to the Closing Date.
19. Waiver of Bulk Sales Compliance. The parties hereto
waive compliance with the provisions of any applicable bulk sales
laws in connection with the transactions contemplated by this
Agreement; provided, however, McCormick and Seller shall indemnify
and hold Buyer harmless, in accordance with the provisions of
Section 14, from any liability for any amounts owing to Seller's
creditors with respect to the Assets transferred to Buyer pursuant
to this Agreement. Notwithstanding the foregoing, nothing herein
shall estop or prevent either Buyer, Seller or McCormick from
asserting, as a bar or defense to any action or proceeding brought
under any applicable bulk sales law, that such law is not
applicable to the transactions contemplated by this Agreement.
20. Prorations. The parties hereto understand and agree
that all utility accounts will be prorated as of the Closing Date
based on average daily usage during the service month immediately
preceding the Closing Date. In addition, all rent and other
charges due under the leases and contracts set forth in Exhibit 1.7
hereof shall be prorated to the date hereof. All real estate and
personal property taxes which are assessed for any taxable period
that includes the Closing Date shall be prorated to the Closing
Date, and all taxes assessed for taxable periods ending prior to
the Closing Date shall be paid by Seller. The prorations set forth
in this Section 20, and payments required as a result thereof,
shall be completed within twenty- five (25) days after the Closing
Date.
21. Public Announcements. All public announcements
relating to this Agreement or the transactions contemplated hereby
shall be made at such time and in such manner as the parties hereto
shall mutually agree, except that nothing in this Agreement shall
prevent a party hereto from making any disclosure in connection
with the transactions contemplated by this Agreement to the extent
required by law or to the extent necessary to satisfy its
contractual obligations, provided that prior notice of such
disclosure is given to the other party.
22. Definition of "Knowledge". As used in this
Agreement, the phrase "to the best of McCormick's knowledge" or "to
the best of Seller's knowledge" and any similar phrase shall mean
the actual knowledge as of the date of this Agreement of Robert G.
Davey, Robert C. Singer, Robert W. Skelton, Esq., after inquiry
into such matters with Michael Brem, Steve Brinkman, Walt Henning,
Penny Reath and Bob Costamagna. As used in this Agreement, the
phrase "to the best of Buyer's knowledge" and any similar phrase
shall mean the actual knowledge as of the date of this Agreement of
Buyer's corporate officers after due inquiry.
23. Access and Retention of Records. After the Closing,
each party shall provide the other parties reasonable access during
regular business hours to all books and records relating to the
Business (with the right to photocopy at the requesting party's
expense) in connection with any and all regulatory compliance by
the requesting party or investigation by any governmental authority
of such party or the Business (including, without limitation, the
Internal Revenue Service and the California Department of Revenue
and environmental regulatory agencies) and litigation matters to
which such party may be or hereafter becomes subject or in
connection with satisfying such party's obligation hereunder or
collecting any Receivables. After the Closing, each party shall
retain all books and records relating to the Business for six (6)
years. Ninety (90) days after such period, either party may
dispose of or permit the disposal of any such books and records
provided, however, after the expiration of such six year period,
and prior to such disposal or destruction, the other party may, at
its own expense, remove and retain any such records (subject to the
other party's reasonable access thereto until such records are
destroyed).
24. Expenses. Each party hereto shall pay its own costs
and expenses incurred in connection with the negotiation and
preparation of this Agreement and the consummation of the
transactions contemplated herein; provided, however, that (i) Buyer
shall pay any sales, use, gross receipts, and transfer taxes
incurred in connection with the transfer of the Assets, and Seller
and Buyer shall reasonably cooperate with each other in connection
therewith, including the delivery by Buyer to Seller on a timely
basis, of resale certificates, (ii) Buyer shall pay the premiums
incurred with respect to the title insurance obtained pursuant to
Section 11.7 and the cost of obtaining the surveys contemplated in
Section 11.8, and (iii) Seller and Buyer shall each pay one-half
(1/2) of the HSR Act filing fee.
25. Miscellaneous. The following miscellaneous
provisions shall apply to this Agreement:
25.1 Notices. All notices which are required or may be
given pursuant to the terms of this Agreement shall be in writing
and shall be sufficient in all respects if given in writing and
delivered personally or mailed by Registered, Certified or Express
mail, postage prepaid, or by reputable overnight courier as follows
(and shall be deemed to have been delivered when so delivered
personally or by overnight courier or, if mailed, five (5) days
after mailing:
If to McCormick: McCormick & Company, Incorporated
18 Loveton Circle
Sparks, Maryland 21152-6000
ATTN: General Counsel
If to Seller: Gilroy Foods, Incorporated
18 Loveton Circle
Sparks, Maryland 21152-6000
ATTN: President
If to Buyer: ConAgra, Inc.
United Specialty Food Ingredients
Division
2000 South Batavia Avenue
Room 209
Geneva, Illinois 60134
ATTN: Chief Financial Officer
With a copy to: ConAgra, Inc.
One ConAgra Drive
Omaha, Nebraska 68102
ATTN: Vice President/Controller
or at such other address as any party hereto shall have
designated by notice in writing to the other parties hereto.
25.2 Waivers. Any party hereto may, by written notice to
the other parties hereto, (i) extend the time for performance of
any of the obligations or other actions of any of the other parties
under this Agreement, (ii) waive any inaccuracies in the
representations and warranties of any of the other parties
contained in this Agreement or in any documents delivered pursuant
to this Agreement, (iii) waive compliance with any of the
conditions or covenants of any of the other parties contained in
this Agreement, or (iv) waive or modify performance of any of the
obligations of any of the other parties under this Agreement.
Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party hereto of a
breach of any portion of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
25.3 Survival of Representations, Warranties, Covenants
and Indemnifications. The representations, warranties, covenants,
agreements and indemnifications contained in this Agreement shall
survive the Closing without limitation; provided, however, that
(i) the representations and warranties contained in Sections 8 and
9 (excluding, however, the first sentence of Section 8.8, and
Sections 8.22 and 8.23) (and the indemnity provisions contained in
Section 14.1.4 as related thereto) shall expire on February 28,
1998, and (ii) the representations and warranties contained in
Sections 8.22 and 8.23 (and the indemnity provisions contained
in Section 14.1.4 as related thereto) shall expire on August 28,
2001.It is specifically understood and agreed that the damages
sustained for which indemnification is sought need not be incurred
or paid by the Indemnified Party within the foregoing periods, but
only that the claim with respect to which indemnification is sought
be asserted and presented to the Indemnifying Party within such
periods.
25.4 Entire Agreement. This Agreement, together with the
Ancillary Documents and the Supply Agreement constitute the entire
agreement among the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with
respect to the subject matter hereof.
25.5 Applicable Law. This Agreement and the legal
relations among the parties hereto shall be governed by and
construed in accordance with the laws of the State of Delaware
applicable to contracts made and performed in such state.
25.6 Binding Effect, Benefits. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns; nothing in this
Agreement, express or implied, is intended to confer on any person
other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
25.7 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto
without the prior written consent of the other parties hereto,
provided that Seller may assign its rights hereunder to McCormick
or to any other wholly-owned subsidiary of McCormick.
25.8 Effect of Headings. The headings of the various
sections and subsections herein are inserted merely as a matter of
convenience and for reference and shall not be construed as in any
manner defining, limiting or describing the scope or intent of the
particular sections to which they refer, or as affecting the
meaning or construction of the language in the body of such
sections.
25.9 Exhibits, Disclosure Schedule. All exhibits and
schedules referred to in this Agreement are attached hereto and are
incorporated herein by reference as if fully set forth herein.For
purposes of this Agreement any item in the Disclosure Schedule
shall be deemed disclosed only in connection with the
representations or warranties to which it is specifically referred.
25.10 Construction. The language in all parts of this
Agreement shall in all cases be construed as a whole according to
its fair meaning, strictly neither for nor against any party
hereto, and without implying a presumption that the terms thereof
shall be more strictly construed against one party by reason of the
rule of construction that a document is to be construed more
strictly against the person who himself or through his agent
prepared the same, it being agreed that representatives of both
parties have participated in the preparation hereof.
25.11 Liability. The liability of Gilroy and McCormick
hereunder shall be joint and several. McCormick hereby
unconditionally and irrevocably guarantees the performance by
Gilroy of its obligations hereunder. McCormick's liability
hereunder shall be absolute, primary and direct, and Buyer shall be
entitled to enforce such guaranty against McCormick without first
pursuing or exhausting remedies against Gilroy.
25.12 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be regarded as an
original and all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have each executed this
Agreement on the date first above written.
McCORMICK & COMPANY, CONAGRA, INC., a Delaware corporation
INCORPORATED, a Maryland
corporation
By: /s/Robert G. Davey____ By:/s/Michael H. Siemer___________
Its: Vice President & Chief Its:Chief Financial Officer-USFI__
Financial Officer
By: /s/Robert C. Singer___
Its: Vice President Acquisitions
& Financial Planning
GILROY FOODS, INCORPORATED, a
California corporation
By: /s/Robert G. Davey________
Its: Vice President___________
I. Exhibits to Asset Purchase Agreement
Exhibit A Business Locations
Exhibit 1.1 Description of Real Estate
Exhibit 1.7 Assumed Contracts
Exhibit 2 Excluded Assets
Exhibit 3.3 Deferred Purchase Price Promissory Note
Exhibit 3.4 Allocation of Purchase Price
Exhibit 3.5 Employees for Severance Credit
Exhibit 4 Settlement Statement Form
Exhibit 5.1 Form of Supply Agreement
Exhibit 5.2 Form of Trademark Agreement
Exhibit 6.1.3 Form of Assignment and Assumption Agreement
Exhibit 6.2.1 Form of Real Estate Deeds
Exhibit 6.2.2 Form of Bill of Sale
Exhibit 6.2.4 Form of Trademark Assignments
Exhibit 7.1 List of Terminated Employees
II. Schedules to Asset Purchase Agreement
Schedule 8.3 Conflicts with other Documents
Schedule 8.4 Required Consents and Approvals
Schedule 8.5 Conflicts with Other Documents
Schedule 8.6 Financial Statements
Schedule 8.8 Permitted Encumbrances
Schedule 8.9 Assets
Schedule 8.10 Inventory
Schedule 8.11 Licenses, Permits and Approvals
Schedule 8.12 Description of Real Estate
ASSET PURCHASE AGREEMENT
Among
Gilroy Energy Company, Inc.,
McCormick & Company, Incorporated
and
Calpine Gilroy Cogen, L.P.
Dated as of August 28, 1996
Gilroy Cogeneration Facility
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of August 28, 1996, by and among Gilroy
Energy Company, Inc., a California corporation (the "Seller");
McCormick & Company, Incorporated, a Maryland corporation
("McCormick"), and Calpine Gilroy Cogen, L.P., a Delaware limited
partnership (the"Buyer"), with reference to the following:
A. The Seller is a wholly-owned subsidiary of Gilroy Foods,
Incorporated, a California corporation ("Gilroy Foods"). Gilroy
Foods is a wholly-owned subsidiary of McCormick. Consequently,
McCormick is the indirect parent of the Seller.
B. Immediately prior to execution and delivery of this
Agreement, Gilroy Foods sold substantially all of its assets,
including the Food Processing Facility (as defined below), and
assigned all of its right, title and interest in and to the
Ground Lease and the Steam Agreement (as defined below), to
ConAgra, Inc., a Delaware corporation ("ConAgra"), and ConAgra
assumed all of Gilroy Foods' obligations under the Ground Lease
and the Steam Agreement (collectively, the "ConAgra
Acquisition").
C. The Seller owns the Gilroy cogeneration facility, a 120
megawatt (nominal net) gas-fired combined cycle cogeneration
facility more fully described in Schedule A-1 (the"Facility")
located on certain real property in the City of Gilroy, State of
California, and more particularly described in Schedule A-2
hereto (the "Site").
D. The Site is leased by the Seller from ConAgra, pursuant to
that certain Lease Agreement, dated June 17, 1986 by and between
the Seller and Gilroy Foods, as amended by that certain Amendment
No. 1 to Lease Agreement dated September 14, 1994 by and between
the Seller and Gilroy Foods, and assigned by Gilroy Foods to
ConAgra pursuant to the ConAgra Acquisition (collectively the
"Ground Lease").
E. ConAgra owns and operates the food dehydrating plant which
is adjacent to the Facility (the "Food Processing Facility") and
purchases steam from the Seller for use at the Food Processing
Facility pursuant to that certain Steam Purchase and Sales
Contract dated January 20, 1986 by and between Gilroy Foods and
the Seller, which was assigned by Gilroy Foods to ConAgra
pursuant to the ConAgra Acquisition.
F. The Buyer desires to purchase, and the Seller desires to
sell, all of the Seller's right,title and interest in the
Facility and other related assets and properties set forth below
in exchange for the Purchase Price (as defined below), all on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants set forth below, the parties, intending to
be legally bound, hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Capitalized terms used in this
Agreement without other definition shall have the meanings
specified in this Section 1.1,unless the context requires
otherwise.
"Affiliate" of a specified Person means any other
Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with the Person specified. For purposes of the
foregoing, "control," "controlled by"and "under common control
with," with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or by contractor
otherwise.
"Agent" means Banque Nationale de Paris, Los Angeles
Branch, as agent for the Issuing Bank, and the other financial
institutions identified as lenders (collectively, the"Lenders")
in that certain Credit Agreement, dated as of even date herewith,
by and among the Buyer, the Agent, the Issuing Bank and the
Lenders.
"Agreement" means this Asset Purchase Agreement,
including all Exhibits,Schedules and Attachments.
"Allocation Statement" has the meaning set forth in
Section 2.3.1.
"Amended and Restated Lease Agreement" means that
certain Amended and Restated Lease Agreement, to be executed by
and between ConAgra and the Buyer, in the form attached hereto as
Exhibit B.
"Amended and Restated Natural Gas Sales Agreement"
means that certain Amended and Restated Natural Gas Sales
Agreement, to be executed by and between Amoco and the Buyer, in
the form attached hereto as Exhibit C.
"Amoco" means Amoco Energy Trading Corporation, a
Delaware corporation and wholly-owned subsidiary of Amoco
Production Company, a Delaware corporation.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in
Section 2.1.3.
"Assignment of Lease Agreement" means that certain
Assignment of Lease Agreement to be executed by and between the
Seller and the Buyer and recorded in the Santa Clara County
Recorders Office, in the form of Exhibit D hereto, whereby the
Seller assigns and the Buyer assumes all of the Seller's rights
and obligations under the Ground Lease, as more fully set forth
therein.
"Assignment of Natural Gas Sales Agreement" means that
certain Assignment of Natural Gas Sales Agreement to be executed
by and between the Seller and the Buyer,in the form of Exhibit E
hereto, whereby the Seller assigns and the Buyer assumes all of
the Seller's rights and obligations under the Natural Gas Sales
Agreement, as more fully set forth therein.
"Assignment of Power Purchase Agreement" means that
certain Assignment of Power Purchase Agreement to be executed by
and between the Seller and the Buyer, in the form of Exhibit F
hereto, whereby the Seller assigns and the Buyer assumes all of
the Seller's rights and obligations under the Power Purchase
Agreement, as more fully set forth therein.
"Assignment of Steam Agreement" means that certain
Assignment of Steam Sales Agreement to be executed by and between
the Seller and the Buyer, in the form of Exhibit G hereto,
whereby the Seller assigns and the Buyer assumes all of the
Seller's rights and obligations under the Steam Agreement, as
more fully set forth therein.
"Assignment of Wastewater Discharge Requirements" means
that certain Assignment in Part of Waste Discharge and Water
Reclamation Requirements among the Seller, ConAgra and the Buyer,
in the form of Exhibit H hereto, whereby the Seller and ConAgra
assign and the Buyer assumes all of the Seller's and ConAgra's
rights, benefits and duties under those certain Waste Discharge
and Water Reclamation Requirements (as defined in the Assignment
of Wastewater Discharge Requirements) to the extent that such
rights, benefits and duties relate to the discharge of wastewater
from the Facility.
"Assumed Liabilities" has the meaning set forth in
Section 2.2.
"Bechtel North American" means Bechtel North American
Power Corporation, a Nevada corporation.
"Bill of Sale" means the Bill of Sale contemplated by
Section 3.2.2.
"Books and Records" has the meaning set forth in
Section 2.1.5.
"Buyer" has the meaning set forth in the preamble.
"Calpine" means Calpine Corporation, a California
corporation.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section
3.1.
"Closing Documents" means, collectively, this
Agreement, the Quitclaim Deed,the Covenant Respecting Easement,
the Amended and Restated Lease Agreement, the Assignment of Lease
Agreement, the Assignment of Natural Gas Sales Agreement, the
Assignment of Power Purchase Agreement, the Assignment of Steam
Agreement, the Assignment of Wastewater Discharge Requirements,
the Bill of Sale, the General Assignment and Assumption
Agreement, the ConAgra Option Agreements, the Lessor Consent and
Agreement, the Natural Gas Sales Consent and Agreement, the
Noncompete Agreement, the Memorandum of Lease, the Memorandum of
Option (QF Property), the Memorandum of Option (Site), the
Memorandum of Wastewater Discharge Option Agreement, the Power
Purchase Consent and Agreement, the Purchaser's Consent, the
Steam Sales Amendment, the Steam Sales Consent and Agreement, the
Shutdown Agreement, the Shutdown Consent, the Stock Purchase
Letter Agreement, the Substation Operating Agreement, and all
other agreements to be executed and delivered at Closing as
agreed to by the parties.
"ConAgra" has the meaning set forth in the Recitals.
"ConAgra Acquisition" has the meaning set forth in the
Recitals.
"ConAgra Assignment Agreement" means that certain
Assignment of Steam Purchase and Sale Contract, dated as of even
date herewith, between Gilroy Foods and ConAgra, pursuant to
which Gilroy Foods assigns to, and ConAgra assumes, all of Gilroy
Foods' right, title and interest in and to, and duties,
liabilities and obligations under the Steam Agreement, from and
after the effective date of such assignment, as more fully set
forth therein.
"ConAgra Option Agreements" collectively means that
certain (i) QF Site Option Agreement between ConAgra and the
Buyer in the form of Exhibit I-1 hereto, (ii)Wastewater Discharge
Option Agreement between ConAgra and the Buyer in the form of
Exhibit I-2 hereto and (iii) Facility Site Option Agreement
between ConAgra and the Buyer in the form of Exhibit I-3 hereto.
"Covenant Respecting Easement" means that certain
Covenant Respecting Easement between Gilroy Foods and Gilroy
Foods relating to the provision of an access easement, for the
benefit of the QF Site.
"CPUC" means the California Public Utilities Commission
and its successors.
"Default" means, when used with reference to any
agreement without other reference, any event or circumstance
that, with the giving of notice or lapse of time, or both, would,
unless cured or waived, become an Event of Default under such
agreement.
"Deposit" means the principal amount of Five Hundred
Thousand Dollars ($500,000), which was paid by the Buyer to
McCormick as a deposit and which amount,without interest, shall
be applied in the following manner: (i) credited against the
Purchase Price on the Closing Date, (ii) nonrefundable, if this
Agreement is terminated by the Seller and McCormick pursuant to
Section 3.4.1 because of a Default by the Buyer, (iii)refundable,
in the event this Agreement is terminated by the Buyer pursuant
to Section 3.4.2 because of a default by the Seller or McCormick
or by mutual consent of the parties, in which case the Deposit
shall be returned to the Buyer by McCormick in immediately
available funds within two (2) business days thereafter, or (iv)
refundable, in the event this Agreement is terminated pursuant to
Section 3.4.3 because of a failure of a condition(absent a
Default by the Buyer), in which case the Deposit shall be
returned to the Buyer by McCormick in immediately available funds
within two (2) business days thereafter.
"Effective Date" means the date on which the Assignment
of Lease Agreement, the ConAgra Assignment Agreement, the
Memorandum of Lease, the Memorandum of QF Site Option Agreement,
the Memorandum of Facility Site Option Agreement, and the
Memorandum of Wastewater Discharge Option Agreement are recorded
in the Santa Clara County Recorders Office.
"Employee Benefit Plan" means any employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974).
"Environmental Laws" means, collectively, all
Governmental Rules which in any way relate to health, safety or
the environment.
"Escrow" has the meaning set forth in Section 3.1.
"Escrow Holder" has the meaning set forth in Section
3.1.
"Event of Default" means, when used with reference to
any agreement without other reference, an event of default or
other similar event as defined in, or pursuant to, the terms of
such agreement.
"Excluded Liabilities" has the meaning set forth in
Section 2.2.
"Facility" has the meaning set forth in the Recitals.
"FERC" means the Federal Energy Regulatory Commission
and its successors.
"Fixed Assets" has the meaning set forth in Section
2.1.1.
"Food Processing Facility" has the meaning set forth in
the Recitals.
"FPA" means the Federal Power Act and the rules and
regulations adopted thereunder.
"GAAP" means generally accepted accounting principles
in effect in the United States from time to time.
"General Assignment and Assumption Agreement" means the
General Assignment and Assumption Agreement contemplated by
Section 3.2.3.
"Gilroy Foods" has the meaning set forth in the
Recitals.
"Governmental Approval" means any applicable
authorization, approval, consent, license, lease, ruling, permit,
tariff, certification, exemption, filing or registration by or
with any Governmental Person.
"Governmental Person" means any federal, state, local
or other government, any political subdivision or any
governmental, judicial, public or statutory instrumentality,
tribunal, agency (including those pertaining to health, safety or
the environment), authority,body or entity, or other regulatory
bureau, authority, body or entity having legal jurisdiction over
the matter or Person in question.
"Governmental Rule" means any applicable federal,
state, local or other law,statute, treaty, rule, regulation,
ordinance, order, code, judgment, decree, directive,injunction,
writ or similar action or decision duly implementing any of the
foregoing by any Governmental Person, but does not include
Governmental Approvals.
"Ground Lease" has the meaning set forth in the
Recitals.
"Hazardous Materials" shall mean any hazardous, toxic
or dangerous substances, materials or wastes, including petroleum
and by-products of petroleum, asbestos and substances defined as
"hazardous substances", "hazardous material", or "toxic
substances"in the Comprehensive Environmental Response
Compensation and Liability Act of 1980 as amended, 42 U.S.C.
Sections 9601 et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C.Sections 6901 et seq., and those
substances defined as "hazardous wastes" in the Hazardous Waste
Control Law, California Health and Safety Code Sections 25110 et
seq., or "hazardous substances" in the Hazardous Substance
Account Act, California Health and Safety Code Sections 25300 et
seq.; in the regulations adopted and publications promulgated
pursuant to such laws, and in the hazardous materials storage and
handling ordinances of the city and/or county in which the Site
is located, if any; as amended.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnitee" has the meaning set forth in Section 8.3.
"Indemnitor" has the meaning set forth in Section 8.3.
"Inventory" has the meaning set forth in Section 2.1.2.
"Lessor Consent and Agreement" means that certain
Consent and Agreement(Real Estate Documents) to be executed by
and between ConAgra and the Buyer in the form attached hereto as
Exhibit J.
"Letter of Credit" means that certain irrevocable
standby letter of credit issued by Banque National de Paris for
the benefit of the Seller and McCormick in the form set forth in
the Noncompete Agreement.
"Liabilities" has the meaning set forth in Section
4.11.
"Lien" means any lien, mortgage, encumbrance, charge,
pledge, lease, security interest, claim, option or right of any
kind (including any conditional sale or other title retention
agreement).
"McCormick" has the meaning set forth in the preamble.
"Memorandum of Lease" means the Memorandum of Lease
Agreement, in the form attached hereto as Exhibit K, to be
executed by and between ConAgra and the Buyer and recorded in the
Santa Clara County Recorders Office.
"Memorandum of QF Site Option Agreement" means the
Memorandum of QF Site Option Agreement, in the form attached
hereto as Exhibit L, to be executed by and between ConAgra and
the Buyer and recorded in the Santa Clara County Recorders
Office.
"Memorandum of Facility Site Option Agreement" means
the
Memorandum of Facility Site Option Agreement, in the form
attached hereto as Exhibit M, be executed by and between ConAgra
and the Buyer and recorded in the Santa Clara County Recorders
Office.
"Memorandum of Wastewater Discharge Option Agreement"
means the Memorandum of Wastewater Discharge Option Agreement, in
the form attached hereto as Exhibit M-1, be executed by and
between ConAgra and the Buyer and recorded in the Santa Clara
County Recorders Office.
"Natural Gas Sales Agreement" means that certain
Natural Gas Sales Agreement, dated August 1, 1995 by and between
the Seller and Amoco.
"Natural Gas Sales Consent and Agreement" means that
certain Consent and Agreement (Natural Gas Sales Agreement) to be
executed by and between Amoco, the Seller and the Agent, in the
form attached hereto as Exhibit N.
"Net Trade Adjustment" means the difference (which may
be a positive or negative number) obtained by subtracting the Net
Trade Estimate from the Net Trade Amount.
"Net Trade Amount" means the trade accounts receivable
plus the prepaid expenses (excluding, however, any amounts
representing prepaid insurance for coverage which is canceled on
the Closing Date) less trade account payables as they appear in
the Seller's balance sheet prepared as of the Closing Date (it
being understood that Buyer has not received such balance sheet
and is relying upon the Net Trade Estimate prepared by McCormick)
plus accrued maintenance items identified on Schedule B. A
sample calculation of the Net Trade Amount, assuming a May 31,
1996 Closing Date, is attached hereto as Schedule B.
"Net Trade Estimate" means an estimate of the Net Trade
Amount as of the Closing Date, also attached hereto as Schedule
B.
"Noncompete Agreement" means that certain
Noncompetition/Earnings Contingency Agreement to be executed by
and among the Seller, McCormick and the Buyer,in the form of
Exhibit O hereto.
"O&M Agreement" means that certain Gilroy Foods
Cogeneration Plant Operation and Maintenance Agreement, dated as
of January 20, 1986, by and between the Seller and Bechtel North
American.
"PG&E" means Pacific Gas and Electric Company, a
California corporation.
"Person" means any individual, corporation,
partnership, trust, joint venture, unincorporated association,
limited liability company, Governmental Person or other entity,
including its permitted successors and permitted assigns.
"Post-Closing Review" has the meaning set forth in
Section 2.4.2.
"Power Purchase Agreement" means that certain Long-Term
Energy and Capacity Power Purchase Agreement among Gilroy Foods,
Pacific Thermonetics, Inc. and PG&E, as executed by PG&E on
December 19, 1983, as amended by a First Amendment to "Long-Term
Energy and Capacity Power Purchase Agreement Between Gilroy
Foods,Inc., Pacific Thermonetics, Inc. and Pacific Gas and
Electric Company" dated December 19,1983, as executed by PG&E on
July 18, 1985, and, as so amended, as assigned by Gilroy Foods to
the Seller, as further amended by a Second Amendment to
"Long-Term Energy and Capacity Power Purchase Agreement" dated
December 19, 1983, as Amended July 18,1985, as executed by PG&E
on June 9, 1986, as further amended by a Third Amendment to
"Long-Term Energy and Capacity Power Purchase Agreement" dated
December 19, 1983, as Amended July 18, 1985 and June 9, 1986, as
executed by PG&E on August 18, 1988, and as further amended by a
Fourth Amendment to the Long-Term Energy and Capacity Power
Purchase Agreement Between Gilroy Energy Company and Pacific Gas
and Electric Company, as executed by PG&E on June 6, 1991.
"Power Purchase Consent and Agreement" means that
certain Consent to Assignment and Agreement (Power Purchase
Agreement) to be executed by and between PG&E, the Buyer and the
Agent, in the form attached hereto as Exhibit P.
"Pre-closing" has the meaning set forth in Section 3.1.
"Project Documents" has the meaning set forth in
Section 4.8.
"Prudential" means The Prudential Life Insurance
Company of America, a New Jersey mutual insurance company.
"PUHCA" means the Public Utility Holding Company Act of
1935 and the rules and regulations adopted thereunder.
"Purchase Price" has the meaning set forth in Section
2.3.
"Purchase Price Adjustment Schedule" has the meaning
set forth in Section 2.4.4.
"Purchaser's Consent" means that certain Consent and
Agreement (Steam Purchase Agreement) to be executed by and
between ConAgra and the Buyer in the form attached hereto as
Exhibit Q.
"PURPA" means the Public Utility Regulatory Policies
Act of 1978, and all rules and regulations adopted thereunder.
"QF Site" means the site described in the Memorandum of
QF Site Option Agreement.
"Qualifying Facility" means a "qualifying facility"
within the meaning of PURPA.
"Quitclaim Deed" means that certain Quitclaim Deed from
Seller to Gilroy Foods relating to the termination of a storm
drain easement.
"Seller" has the meaning set forth in the preamble.
"Senior Loan Documents" means collectively, that
certain Construction and Term Loan Agreement, dated as of May 15,
1986, by and between the Seller and Prudential, and all
agreements, instruments or other documents relating to the loan
made by Prudential to the Seller in connection with the original
construction of the Facility.
"Shutdown Agreement" means that certain Shutdown
Agreement between ConAgra and the Buyer in the form of Exhibit R
hereto.
"Shutdown Consent" means that certain Consent and
Agreement (Shutdown Agreement and Assignment in Part WDR's) to be
executed by and between ConAgra and the Buyer in the form
attached hereto as Exhibit R-1.
"Site" has the meaning set forth in the preamble.
"Steam Agreement" means that certain Steam Purchase and
Sale Contract,dated as of January 20, 1986, by and between the
Seller and Gilroy Foods. "Steam Sales Amendment" means that
certain First Amendment to Steam Purchase and Sale Contract, to
be executed by and between ConAgra and the Buyer, in the form
attached hereto as Exhibit S.
"Stock Purchase Letter Agreement" means that certain
Letter Agreement Regarding Acquisition of Gilroy Foods between
McCormick and Calpine and that certain Indemnity Guaranty from
Calpine.
"Substation Operating Agreement" means that certain
Substation Operating Agreement, to be executed by and between
ConAgra and Calpine, in the form attached hereto as Exhibit T.
"Threshold" has the meaning set forth in Section 8.3.
1.2 Interpretation.
(a) Reference to a given Section, Subsection,
Exhibit or Schedule is a reference to a Section, Subsection,
Exhibit or Schedule of this Agreement, unless otherwise
specified. The terms "hereof," "herein," "hereunder," "herewith"
refer to this Agreement as a whole.
(b) Except where otherwise expressly provided or
unless the context otherwise necessarily requires: (i) reference
to a given Governmental Rule is a reference to that law as
amended or modified as of the date on which the reference is
made, (ii) reference to a given agreement or instrument is a
reference to that agreement or instrument as modified,amended,
supplemented and restated through the date hereof, (iii)
accounting terms have the meanings given to them by GAAP applied
on a consistent basis, and (iv) "including" means"including,
without limitation."
ARTICLE 2
SALE AND PURCHASE OF ASSETS, LIABILITIES, AND PURCHASE
PRICE, MANNER OF PAYMENT
2.1 Sale of Assets. Upon the terms and subject to
the conditions of this Agreement, at the Closing on the Closing
Date, the Seller shall sell,convey, transfer, assign and deliver
to the Buyer, and the Buyer agrees to purchase from the Seller,
all of the Seller's right, title and interest in, to the
following (collectively, the"Assets"):
2.1.1 Fixed Assets. All of the equipment,
machinery, tools, supplies, computers, office equipment, fixtures
and other fixed assets relating to the ownership, management,
operation and maintenance of the Facility, a list of which,
including identification of the location thereof, is attached
hereto as Schedule 2.1.1,which assets shall be deemed to be Fixed
Assets hereunder;
2.1.2 Inventory and Spare Parts. All of the
Seller's inventory and spare parts relating to the ownership,
management, operation and maintenance of the Facility, a list of
which, including identification of the location thereof, is
attached hereto as Schedule 2.1.2 (hereinafter referred to
collectively as the"Inventory");
2.1.3 Agreements and Contracts. The Seller's
right, title and interest in all agreements and contracts listed
in Schedule 2.1.3,including the Power Purchase Agreement, the
Steam Sales Agreement, the Natural Gas Sales Agreement and the
Ground Lease (collectively, the "Assigned Contracts");
2.1.4 Intangibles. All of the trade names,
trademarks, service marks, copyrights, patents, patent rights,
licenses, trade secrets, technical know-how, goodwill and other
intangibles owned by the Seller or in which the Seller has an
interest and which relate to the ownership, management, operation
and maintenance of the Facility;
2.1.5 Books and Records. All papers, databases,
computer programs, disks, software, records, and other books,
records, documents and materials in the Seller's, Bechtel North
American's or Gilroy Foods' care, custody or control relating to
ownership, management, operation or maintenance of the Facility
(collectively, "Books and Records") (The Seller may make and
retain copies of the Books and Records as it sees fit.);
2.1.6 Governmental Approvals. All Governmental
Approvals and other intangible assets relating to ownership,
management, operation or maintenance of the Facility;
2.1.7 Improvements and Real Estate Rights. The
Facility and all easements, rights of way and other appurtenant
rights relating to the Seller's interest in the Site or which are
used to maintain and operate the Facility; and
2.1.8 All Property Not Elsewhere Described. All
other property of the Seller of every kind, character or
description owned, used or held for use (whether or not
exclusively) in connection with the ownership, management,
operation or maintenance of the Facility, wherever located and
whether or not similar to the other Assets set forth elsewhere in
this Section 2.1.
2.2 Liabilities. The Buyer and the Seller hereby
acknowledge and agree that the Buyer is not assuming any of the
debts, obligations or liabilities in connection with the
Facility, including, all liabilities arising out of the
agreements, contracts, leases, licenses, permits and other
arrangements relating to the Assets prior to the Closing Date,
except as expressly set forth in Schedule B. The Buyer shall
assume all of the liabilities, obligations and duties of the
Seller attributable to the Assets arising in respect of all
periods after the Closing Date; provided, that the Buyer shall
not assume any of the liabilities or obligations listed on
Schedule 2.2 attached hereto(collectively, the "Excluded
Liabilities"), which Excluded Liabilities shall be retained by
and remain obligations and liabilities of the Seller (together
with the liabilities assumed under Schedule B, collectively, the
"Assumed Liabilities").
2.3 Purchase Price. At the Closing, the Buyer shall
pay the Seller, in immediately available funds, for the Assets an
aggregate amount of (i)$125,000,000 (the "Purchase Price") plus
(ii) the Net Trade Estimate minus (iii) the Deposit, as follows:
2.3.1 Allocation Statement. The Purchase Price
shall be allocated as follows:
(i) Fixed Assets, Including Inventory $124,900,000
(a) Power Purchase Agreement $ 63,400,000
(b) Property, Plant and Equipment $ 61,500,000
(ii) Other Assets $ 100,000
TOTAL $125,000,000
The allocations set forth above shall be referred to herein
collectively as the "Allocation Statement."
2.3.2 Reporting. The Seller and the Buyer agree
to report an allocation of the Purchase Price among the Assets in
the manner entirely consistent with the foregoing Allocation
Statement and agree to act in accordance with such Allocation
Statement and filing of all tax returns (including, filing Form
8594 with its Federal income tax return for the taxable year that
includes the date of Closing) and in the course of any tax audit,
tax review or tax litigation relating thereto. The Seller's
federal employer identification number is 52-0408290, and the
Buyer's federal employer identification number is 77-0436504.
2.4 Purchase Price Post-Closing Adjustment. The
Purchase Price shall be adjusted after the Closing Date in
accordance with the provisions of this Section 2.4.
2.4.1 Preparation of Net Trade Amount. Within
forty-five (45) days after the Closing Date, the Seller shall
prepare(i) the Net Trade Amount as of the Closing Date, and (ii)
a schedule showing the adjustments to the Purchase Price (if any)
to be made in accordance with Section 2.4.4 (the"Purchase Price
Adjustment Schedule"). Such Net Trade Amount shall be prepared
in accordance with GAAP, consistent with the audited financial
statements as of and for the years ended November 30, 1995 and
November 30, 1994, and shall present fairly the financial
position of the Seller as of the Closing Date, with respect to
those items included in the Net Trade Amount.
2.4.2 Post-Closing Review. The Buyer shall
thereafter have the right to conduct and complete a review (the
"Post-Closing Review") of the Net Trade Amount as of the Closing
Date and the Purchase Price Adjustment Schedule within thirty
(30) days after receipt of (i) the Net Trade Amount as of the
Closing Date, (ii)the Purchase Price Adjustment Schedule, and
(iii) the financial records of the Seller's operation of the
Facility through the Closing Date. The Post-Closing Review shall
be conducted by the Buyer or its representatives, at the Buyer's
expense, in a manner sufficient to reasonably satisfy the Buyer
that the Net Trade Amount as of the Closing Date fairly presents
the financial position of the Seller in conformity with GAAP,
consistent with the audited financial statements as of and for
the years ended November 30, 1995 and November 30, 1994, with
respect to those items included in the Net Trade Amount. The
Buyer shall have the right to audit the books and records of the
Seller and the Seller shall permit the Buyer access to the
Seller's audit work papers pertaining to the Net Trade Amount as
of the Closing Date and the Purchase Price Adjustment Schedule.
2.4.3 Access to Books and Records. The Buyer
shall give representatives of the Seller reasonable access after
the Effective Date to the Books and Records. The Buyer shall
retain all Books and Records relating to periods commencing
January 1, 1989 and expiring on the Closing for all periods
required by law and shall not destroy any of such Books and
Records without prior written notice to McCormick,who shall be
afforded an opportunity to make copies thereof, at McCormick's
expense, prior to their destruction; PROVIDED, HOWEVER, THAT THE
BUYER MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING THE
CONTENTS OR CONDITION OF SUCH BOOKS AND RECORDS WHILE IN THE
BUYER'S POSSESSION.
2.4.4 Determination of Purchase Price Post-Closing
Adjustment. The Purchase Price shall be adjusted after the
completion of the Post-Closing Review to reflect the final
determination of the Net Trade Amount. The Purchase Price
shall be increased by the Net Trade Adjustment if such Net Trade
Adjustment is a positive number, or shall be decreased by the Net
Trade Adjustment if such Net Trade Adjustment is a negative
number.
2.4.5 Payment of Purchase Price Post-Closing
Adjustment. The Net Trade Adjustment, and interest accrued
thereon, in favor of either the Seller or the Buyer shall be paid
to the other party, by wire transfer of immediately available
funds, to an account designated by the party in whose favor such
Net Trade Adjustment is being made, promptly upon the
determination of the Net Trade Amount and in no event later than
ten (10) days after the expiration of the Post-Closing Review
period. Interest on the Net Trade Adjustment shall accrue from
the Closing Date until paid at the rate of the Prime Rate as
published in the Wall Street Journal as of the Closing Date.
Such interest shall be calculated on the basis of a year of 365
days.
ARTICLE 3
CLOSING DATE, ACTIONS AT PRE-CLOSING, CLOSING AND
TERMINATION PRIOR TO CLOSING
3.1 Closing Date. Subject to the other provisions of
this Agreement, the pre-closing of the transactions contemplated
by this Agreement (the "Pre-Closing") shall be held at the
offices of Thelen, Marrin, Johnson & Bridges, Two Embarcadero
Center, San Francisco, California 94111, on or before August 31,
1996, or on such other date and at such other place as may be
mutually agreed upon by the parties. The parties hereby nominate
Stewart Title Company of California as escrow holder ("Escrow
Holder"), who shall be responsible for the transfer of funds and
the delivery and recordation of documents described herein
("Escrow"). The date of the closing shall be the date of
transfer of funds and the delivery and recordation of documents
contemplated herein (the "Closing") and is sometimes referred to
herein as the "Closing Date."
3.2 Actions at Pre-closing or Closing. Subject to
the other provisions in this Agreement, the following actions
shall be taken at the Pre-closing or the Closing, as specified
herein:
3.2.1 Purchase Price. At the Closing, the Buyer
shall deliver or cause to be delivered to the Seller through
Escrow the Purchase Price plus(i) the Net Trade Estimate minus
(ii) the Deposit, in the manner set forth in Section 2.3 hereof.
3.2.2 Bill of Sale. At the Pre-closing, the
Seller shall execute and deliver the Bill of Sale in order to
transfer to the Buyer all of the Assets specified therein.
3.2.3 General Assignment and Assumption Agreement.
At the Pre-closing, the Seller and the Buyer shall execute and
deliver the General Assignment and Assumption Agreement, by which
the Seller shall assign to the Buyer all of the Assets not
transferred by the Bill of Sale, the Assignment of Natural Gas
Sales Agreement, the Assignment of Power Purchase Agreement, the
Assignment of Steam Sales Agreement, and the Assignment of Lease
Agreement, and as of the Closing Date, the Buyer shall assume all
of the Assumed Liabilities.
3.2.4 Assignment of Agreements and Contracts. At
the Pre-closing, the Seller and the Buyer shall execute and
deliver, or cause to be executed and delivered, into Escrow, as
appropriate, the Assignment of Natural Gas Sales Agreement, the
Assignment of Power Purchase Agreement, the Assignment of Steam
Sales Agreement, and the Assignment of Lease Agreement.
3.2.5 ConAgra's Consents and Agreements. At the
Pre-closing, McCormick and the Seller shall cause ConAgra to
execute and deliver into Escrow, as appropriate, and the Buyer
shall execute and deliver into Escrow, as appropriate, the Steam
Sales Consent and Agreement, the Amended and Restated Lease
Agreement, the Lessor Consent and Agreement, the Purchaser's
Consent and the Shutdown Consent, the Shutdown Agreement, the
Steam Sales Amendment, the Substation Operating Agreement, the
Memorandum of Option (QF Property), the Memorandum of Option
(Site), the Memorandum of Lease, the Memorandum of Wastewater
Discharge Option Agreement, and the Assignment of Wastewater
Discharge Requirements.
3.2.6 Noncompete Agreement. At the Pre-closing,
the Seller, McCormick and the Buyer shall execute and deliver the
Noncompete Agreement, and at the Closing the Buyer shall cause
the delivery and issuance of the Letter of Credit as set forth
therein.
3.2.7 Books and Records. At the Closing,the
Seller shall deliver all of the Books and Records to the Buyer;
provided, however, that the Seller shall have a sixty (60) day
period following the Closing to deliver to the Buyer those Books
and Records relating to the operation of the Facility which are
not physically at the Site on the Effective Date.
3.2.8 Final Schedules. At the Pre-closing,
the Buyer and the Seller shall mutually agree upon and execute
and deliver Schedule B (sample calculation of Net Trade Amount),
Schedule 2.1.1 (Fixed Assets), Schedule 2.1.2 (Inventory),
Schedule 2.2 (Excluded Liabilities), and any other Schedule which
the Buyer and the Seller mutually agree to revise; provided,
however, that the Seller shall deliver to the Buyer final
versions of Schedule 2.1.1 (Fixed Assets) and Schedule 2.1.2
(Inventory) within fifteen (15) business days after the Closing,
which final schedules shall not be materially or substantially
different from the schedules delivered at the Pre-Closing.
3.2.9 Senior Loan Documents. At the Closing,
the Seller shall, and McCormick shall cause the Seller to,
satisfy out of the proceeds of the Purchase Price any and all
outstanding obligations of the Seller under the Senior Loan
Documents, and the Seller shall deliver evidence reasonably
satisfactory to the Buyer that all Senior Loan Documents have
terminated and that all Liens held by Prudential pursuant thereto
have been released and appropriate evidence thereof have been
filed with the appropriate Governmental Person.
3.2.10 ConAgra Option Agreements. At the
Pre-closing, McCormick and the Seller shall cause ConAgra to
execute and deliver,and the Buyer shall execute and deliver, the
ConAgra Option Agreements.
3.2.11 Stock Purchase Letter Agreement. At the
Pre-closing, McCormick shall and the Buyer shall cause Calpine to
execute and deliver the Stock Purchase Letter Agreement.
3.2.12 Escrow Instructions. At the Closing,
Escrow Holder shall record the appropriate Closing Documents, as
instructed in the joint escrow instructions mutually agreed upon
by McCormick, the Seller and the Buyer.
3.3 Additional Actions. Each of the Seller,
McCormick and the Buyer shall, on request, at the Pre-closing and
the Closing and after the Effective Date, take such further
actions as may be reasonably requested by the other party(ies) to
carry out the intent of this Agreement and the other Closing
Documents to which any of them or ConAgra is/are or will be a
party(ies).
3.4 Termination Prior to Closing. This
Agreement may, by prior written notice to the other party(ies),
be terminated:
3.4.1 Termination by the Seller/McCormick. By the
Seller and/or McCormick if a Default shall be made by the Buyer
with respect to the due and timely performance of any of its
covenants or agreements contained herein and such Default cannot
be timely cured and has not been waived by the Seller and
McCormick, or if any of the representations and warranties of the
Buyer contained in Article 5 are untrue, incorrect or breached in
any material respect as of the Effective Date; or
3.4.2 Termination by the Buyer. By the Buyer if
a Default shall be made by the Seller and/or McCormick with
respect to the due and timely performance of any of the covenants
or agreements contained herein and such default cannot be timely
cured and has not been waived by the Buyer, or if any of the
representations and warranties of the Seller and/or McCormick
contained in Article 4 are untrue, incorrect or breached in any
material respect as of the Effective Date; or
3.4.3 Termination Due to Failure of Condition.
Either (i) by the Buyer if all of the conditions set forth in
Article 6 shall not have been satisfied or waived by the Buyer on
or before August 31, 1996 (or such later date as mutually agreed
upon among the parties), other than through failure of the Buyer
to fully comply with its obligations hereunder, or (ii) by the
Seller and/or McCormick if all of the conditions set forth in
Article 7 shall not have been satisfied or waived by the Seller
on or before August 31, 1996 (or such later date as mutually
agreed upon among the parties), other than through failure of the
Seller or McCormick to fully comply with its respective
obligations hereunder; or
3.4.4 Termination by Mutual Consent. By mutual
consent of the Seller, McCormick and the Buyer. If this
Agreement is terminated as provided above, all further
obligations of the parties hereunder and under the other Closing
Documents shall terminate, except that the obligations set forth
in Article 8 (indemnification), Section 10.1 (transaction costs),
Section 10.10 (alternative dispute resolution) and, if
applicable, McCormick's obligation to return the Deposit to the
Buyer shall survive; provided, however, that if this Agreement
is terminated (i) by the Seller and/or McCormick pursuant to
Section 3.4.1 because of a Default by the Buyer, the Seller's and
McCormick's right to liquidated damages as set forth below, or
(ii) by the Buyer pursuant to Section 3.4.2 because of a Default
by the Seller or McCormick, the Buyer's right to pursue all legal
remedies for breach of contract or otherwise, including damages
relating thereto, shall also survive such termination unimpaired.
IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE TRANSACTION
HEREIN CONTEMPLATED DO NOT OCCUR AS HEREIN PROVIDED BY REASON OF
DEFAULT OF THE BUYER, THE BUYER, THE SELLER AND MCCORMICK AGREE
THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE
THE DAMAGES SUFFERED BY THE SELLER AND MCCORMICK AS A RESULT OF
THE BUYER'S FAILURE TO COMPLETE THE PURCHASE OF THE ASSETS
PURSUANT TO THIS AGREEMENT, AND THAT UNDER THE CIRCUMSTANCES
EXISTING AS OF THE DATE OF THIS AGREEMENT, THE LIQUIDATED DAMAGES
PROVIDED FOR IN THIS PARAGRAPH REPRESENT A REASONABLE ESTIMATE OF
THE DAMAGES WHICH THE SELLER AND MCCORMICK WILL INCUR AS A RESULT
OF SUCH FAILURE. THEREFORE, THE BUYER, THE SELLER AND MCCORMICK
DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET
DETRIMENT THAT THE SELLER AND MCCORMICK WOULD SUFFER IN THE EVENT
THAT THE BUYER DEFAULTS AND FAILS TO COMPLETE THE PURCHASE OF THE
ASSETS IS AN AMOUNT EQUAL TO THE DEPOSIT MADE HEREBY (WHICH
INCLUDES ANY ACCRUED INTEREST THEREON). SAID AMOUNT WILL BE THE
FULL, AGREED AND LIQUIDATED DAMAGES FOR THE BREACH OF THIS
AGREEMENT BY BUYER. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED
DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE
MEANING OF CALIFORNIA CIVIL CODE SECTION 3275 OR 3369, BUT IS
INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO THE SELLER AND
MCCORMICK PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676
AND 1677. THE SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 3389. NO PARTY SHALL HAVE ANY FURTHER RIGHTS
OR OBLIGATIONS HEREUNDER, EACH TO THE OTHER,EXCEPT THOSE RIGHTS
OR OBLIGATIONS SET FORTH HEREIN AS SURVIVING THE TERMINATION OF
THIS AGREEMENT AND THE RIGHT OF THE SELLER AND MCCORMICK TO
COLLECT SUCH LIQUIDATED DAMAGES FROM THE BUYER.
THE BUYER'S INITIALS ________________
THE SELLER'S INITIALS ________________
MCCORMICK'S INITIALS ________________
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND MCCORMICK
Each of the Seller and McCormick hereby jointly and
severally represents and warrants to the Buyer as follows,
effective as of the Effective Date:
4.1 Due Organization. Each of the Seller and
McCormick is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation, and is qualified to transact business in all
jurisdictions where the ownership of its properties or its
operations require such qualification, except where the failure
to so qualify would not have a material adverse effect on its
financial condition, its ability to own its properties or
transact its business, or to carry out the transactions
contemplated hereby.
4.2 Power and Authority. Each of the Seller and
McCormick has full corporate power and authority to enter into
and perform its obligations hereunder and under the other Closing
Documents to which it is or will be a party and to consummate the
transactions herein and therein contemplated in accordance with
the terms,provisions and conditions hereof and thereof. All
corporate proceedings required to betaken by the Seller and
McCormick, as applicable, to authorize them to execute, deliver
and perform the terms of this Agreement and the other Closing
Documents to which both or either of them is or will be a party
have been duly and validly taken.
4.3 Valid, Binding and Enforceable Obligations. Each
of this Agreement and the other Closing Documents to which either
the Seller and/or McCormick are/is or will be a party(ies) has
been, or will be on the Closing Date, as the case may be, duly
and validly executed by the Seller and/or McCormick, as
applicable, and constitutes, or will constitute when executed and
delivered, a valid, binding, and enforceable obligation,
enforceable against the Seller and/or McCormick in accordance
with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights and the enforcement of
debtors' obligations generally and by general principles of
equity, regardless of whether enforcement is pursuant to a
proceeding in equity or at law or by application of laws limiting
the scope or breadth of covenants therein relating to restraint
of trade.
4.4 No Violations. The execution and delivery by the
Seller and McCormick of this Agreement and the other Closing
Documents to which either or both of them is/are or will be a
party(ies), and the Seller's and McCormick's consummation of the
transactions contemplated hereby and thereby will not (i) violate
or be in conflict with the charter documents of either the Seller
or McCormick, as applicable,(ii) violate, be in conflict with, or
constitute a Default or Event of Default under, or cause or
permit the acceleration of the maturity of, or give rise to any
right of termination,cancellation, imposition of fees or
penalties under, any material agreement or material commitment
under which the Seller or McCormick is bound, except the Senior
Loan Documents, (iii) result in the creation or imposition of any
Lien upon any of the Assets, or under any debt, obligation,
contract, commitment or other agreement by which any of the
Assets is or may be bound or (iv) violate any Governmental Rule.
4.5 Governmental Approvals. To the Seller's and
McCormick's knowledge, other than the filings or approvals set
forth in Schedule 4.5,no Governmental Approval is necessary in
connection with the execution and delivery of this Agreement and
the other Closing Documents, or for the consummation of the
transactions contemplated hereby and thereby, including for the
valid and effective sale, transfer and assignment to the Buyer of
the Assets.
4.6 Third Party Consents and Notices. To the
Seller's and McCormick's knowledge, no filing, registration,
qualification, notice, consent, approval or authorization to,
with or from any Person (excluding Governmental Persons) is
necessary in connection with the execution and delivery of this
Agreement and the other Closing Documents, or for the
consummation of the transactions contemplated hereby and thereby,
including for the valid and effective sale, transfer and
assignment to the Buyer of the Assets, except as otherwise set
forth on Schedule 4.6 attached hereto.
4.7 No Litigation. Except as set forth on Schedule
4.7, to the Seller's or McCormick's knowledge, there are no
actions, suits or proceedings of any type pending or, threatened
at law or in equity, before or by any Governmental Person against
or affecting the Seller and/or the Facility or to which the
Seller may become a party,which actions, suits or proceedings
could materially and adversely affect the Buyer's ownership or
operation of the Facility or the Seller's ability to perform its
obligations under this Agreement and the other Closing Documents.
4.8 Agreements and Contracts; Project Documents. Set
forth on Schedule 4.8 is a complete and accurate list of each and
every material agreement and contract to which the Seller is a
party or by which the Seller is bound or to which the Seller is
subject relating to the Seller's ownership,management, operation
and maintenance of the Facility, including the Assigned Contracts
(collectively, the "Project Documents"). A true, correct and
complete copy of each such contract has been delivered to or been
made available to the Buyer on or before the Effective Date and:
(a) none of the Assigned Contracts has been
modified,supplemented, amended, waived or terminated in any
respect which could reasonably be expected to have a material
adverse effect on the Facility or the transactions contemplated
by this Agreement, whether orally or in writing, except by a
Project Document;
(b) no Default or any Event of Default by the
Seller has occurred and is continuing under any of the Assigned
Contracts and neither the Seller nor McCormick has any knowledge
that any Default or any Event of Default by any other Person has
occurred and is continuing under any Assigned Contract; and
(c) the Assigned Contracts constitute the legal,
valid and binding obligation of the Seller, are in full force and
effect and are enforceable as to the Seller, and to the Seller's
and McCormick's knowledge, constitute the legal, valid and
binding obligation of, and are enforceable against, the third
party signatories to such Assigned Contracts in accordance with
their respective terms (except as such enforceability may be
limited or denied by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights and enforcement of debtors' obligations generally, and
(ii) general principles of equity, regardless of whether
enforcement is pursuant to a proceeding in equity or at law).
4.9 Utility Regulatory Matters. Neither the Seller
nor any Affiliate of the Seller is (i) subject to regulation
under the FPA, other than as contemplated by C.F.R. Section
291.601(c) in respect of qualifying facilities or (ii) subject to
regulation as a "public utility," "electric utility" or other
similar entity under state laws relating to public utilities,
other than as a qualifying facility under PURPA.
4.10 Qualifying Facility Matters. The Facility is a
cogeneration facility that has been certified by the FERC as a
Qualifying Facility. The Facility is, and during all applicable
periods when owned by the Seller has been, a Qualifying Facility
in compliance in all respects with all technical and ownership
requirements contained in all applicable FERC rules and
regulations. the Seller has provided to PG&E all documents,
information and other data requested or required by PG&E in
accordance with PG&E's policies and procedures for monitoring the
compliance of Qualifying Facilities with applicable FERC rules
and regulations. No Person (including PG&E, the CPUC and the
FERC, or any agent or representative of PG&E, the CPUC or the
FERC) has ever provided notice to the effect, or otherwise
asserted or alleged, that the Facility has failed or may fail to
comply in any respect with any applicable FERC rule or regulation
relating to Qualifying Facilities or PG&E procedures or policies
relating thereto, or that the Facility has been placed on
"probation." No payment from PG&E has ever been reduced, delayed
or withheld as a result of noncompliance with any applicable FERC
rules or regulations (and other than as a result of minor
administrative inefficiencies).
4.11 No Undisclosed Liabilities. As of the dates of
the audited financial statements dated as of November 30, 1995
which have been provided to the Buyer, the Seller had no material
debts, liabilities or obligations (whether accrued, absolute,
asserted or unasserted, contingent, by guaranty, surety or
assumption or otherwise and whether due or to become due), of any
nature whatsoever, including (i) any foreign or domestic tax
liabilities or deferred tax liabilities incurred in respect to or
measured by the Seller's income for its period prior to the close
of business on the dates of such financial statements, or (ii)
any other debts, liabilities or obligations relating to or
arising out of any act, omission,transaction, circumstance, sale
of goods, services, state of facts or other condition which
occurred or existed on or before such date, whether or not then
known, due or payable (all of the foregoing, including clauses
(i) and (ii), are collectively referred to as "Liabilities"),
which in accordance with GAAP should be disclosed and which were
not fully disclosed, reflected or reserved against in such
financial statements or the notes thereto, and except for those
Liabilities which have been incurred since the date of the most
recent balance sheets included in such financial statements in
the ordinary course of business which are set forth on Schedule
4.11, the Seller has not incurred any Liabilities relating to the
Facility.
4.12 Fixed Assets and Inventory. Schedule 2.1.1 and
Schedule 2.1.2, respectively, sets forth a complete and accurate
list of all material Fixed Assets and Inventory. Except as set
forth on Schedule 2.1.1, all of the Fixed Assets are located on
the Site. The final Schedule 2.1.1 and Schedule 2.1.2 to be
delivered by the Seller to the Buyer within fifteen (15) business
days after the Closing will not be materially or substantially
different from the schedules delivered into Escrow at the
Pre-Closing.
4.13 Title to Assets. The Seller is the lawful owner
of,has good and valid record and marketable title to, and has the
full right to sell, convey, transfer, assign and deliver the
Assets as contemplated herein, subject to the required consents
otherwise contemplated or disclosed herein. Except for the Liens
evidenced by the Senior Loan Documents, which Liens shall be
released prior to or as of the Closing Date,all of the Assets are
entirely free and clear of any and all Liens of any kind, other
than liens for current or supplemental real and personal property
taxes and assessments not yet due and payable, and there are no
filings in any registry of deeds in any jurisdiction or under the
Uniform Commercial Code or similar statute in any jurisdiction
(except as may be related to the Senior Loan Documents) showing
the Seller as a debtor or which creates or perfects or which
purports to create or perfect any Lien in or on any of the
Assets. Upon the Closing, the Seller shall convey all of the
Assets to the Buyer by the Bill of Sale, the General Assignment
and Assumption Agreement and the other Closing Documents
effective to vest in the Buyer, and the Buyer will have, good and
valid record and marketable title to all of the Assets, free and
clear of all Liens of any kind, other than for current or
supplementary real and personal property taxes and assessments
not yet due and payable.
4.14 Governmental Approvals for Business. Set forth
on Schedule 4.14.1 is a complete and accurate list of each and
every Governmental Approval necessary for the current ownership,
management, operation and maintenance of the Facility and/or the
Assets by the Seller. Except as set forth in Schedule 4.14.2,
each Governmental Approval has been duly and validly issued, or
transferred, to the Seller, and is in full force and effect, and
all rights and entitlements thereunder are vested exclusively in
the Seller. The Seller has not committed any act or failed to act
in any manner or under any circumstances which could reasonably
result in the revocation or suspension of any Governmental
Approval or in any other disciplinary action relating thereto.
No Person has claimed, and the Seller has not received any
notice, that the Seller has committed any such act or failed to
so act. The consummation of the transactions provided for in
this Agreement and the other Closing Documents will not impair or
materially adversely affect any of the rights, powers or
privileges of the Seller granted pursuant to any of the
Governmental Approvals listed on Schedule 4.14.1.
4.15 ERISA. The Seller has no employees and has never
had any employees and has not established, sponsored, maintained,
participated in, incurred any obligation to contribute to, or
incurred any liability under or related to any Employee Benefit
Plan.
4.16 Labor Matters. To the extent related to the
Seller's ownership, management, operation and maintenance of the
Facility, (i) the Seller is not a party to any collective
bargaining agreement, (ii) as the Seller has no employees,no
employee of the Seller is a member of or represented by a
collective bargaining unit with respect to his employment with
the Seller, and (iii) to the knowledge of the Seller or
McCormick, there are no labor controversies or grievances pending
or threatened against the Seller which could reasonably be
expected to have, individually or in the aggregate, a material
adverse effect on the business, operations or financial condition
of the Seller.
4.17 Legal Compliance. Except as set forth in Schedule
4.17, the Seller is in all material respects in full compliance
with, and has at all times fully complied, or has fully corrected
any past non-compliance, in all material respects with, all
Governmental Rules and Governmental Approvals applicable to the
Seller, the Facility and the Site, including all Environmental
Laws; provided, however, that the Seller's and McCormick's
representations with respect to Environmental Laws relating to
Hazardous Materials are given to the Seller's and McCormick's
knowledge. All offsets legally required under the Federal Clean
Air Act (42 U.S.C. 7401 et seq.) or Bay Area Air Quality
Management District Rules for the construction and operation
(including any modification) of Gilroy Foods prior to the Closing
Date have been obtained by Gilroy Foods or its predecessor owners
or operators.
4.18 Hazardous Materials. Except as set forth on
Schedule 4.18 and as disclosed in that certain Phase I
Environmental Site Assessment,Gilroy Energy Company, Gilroy,
California, dated June, 18, 1996, prepared by EMCON, to the
Seller's and McCormick's knowledge, (i) there are no Hazardous
Materials present on the Site that exceed the levels or amounts
permitted by applicable law; (ii) there has been no sudden or
non-sudden, accidental or non-accidental release, discharge,
spillage,uncontrolled loss, seepage or filtration of any
Hazardous Material or any petroleum product or by-product into
the environment which exceeds the levels or amounts permitted by
applicable law, (iii) the Seller has not engaged in, or is not
engaged in, the generation,manufacture, treatment, storage or
disposal of Hazardous Materials which exceeds the levels or
amounts permitted by applicable law, (iv) the Site does not
contain and has not contained any underground or above-ground
tanks for the storage of fuel oil, gasoline and/or other
petroleum products or by-products or Hazardous Materials, and (v)
the Seller is incompliance with all federal, state and local
environmental laws now in effect relating to Hazardous Materials.
The Seller has received no notice of any violation that, as of
the date hereof, remains uncured of any environmental laws now in
effect relating to Hazardous Materials, and there are no writs,
injunctions, decrees, orders or judgments outstanding, no suits,
claims, actions, proceedings or investigations have been
instituted or filed, and none are pending or, to the Seller's
knowledge, threatened, under any environmental laws with respect
to the ownership, use, maintenance or operation of the Assets.
No asbestos or similar substances are contained in the Facility
that pose any current health hazard and no asbestos is "friable."
4.19 Disclosure. In connection with the transactions
contemplated by this Agreement, neither the Seller nor McCormick
has made any untrue written statement of a material fact or
omitted to disclose any material fact necessary in order to make
the written statements made not misleading in light of the
circumstances in which they were made. There is no material fact
or circumstance known to either the Seller or McCormick which
materially adversely affects the Facility or the Assets or the
Seller's ownership, management, operation and maintenance of the
Facility, or the ability of the Seller or McCormick to perform
its respective obligations under this Agreement and the other
Closing Documents to which any of them is a party, provided that
the foregoing representation shall not extend to predictions of
future economic conditions or matters of a general economic or
similar nature. The Seller has given the Buyer full and complete
access to the Books and Records prior to execution of this
Agreement.
4.20 Condition of Acquired Assets. The Assets are in
good operating condition and repair and are adequate for the uses
to which they are being put. None of the Assets is in need of
maintenance or repairs, except for ordinary routine maintenance
and repairs, and there do not exist any condition which
interferes with the economic value or use thereof in a material
way. The Assets include all assets and properties of the Seller
relating to the Seller's ownership, management, operation and
maintenance of the Facility reasonably required for the continued
operation of the Facility in the manner as is presently being
operated.
4.21 Tax Matters. The Seller has duly and timely
filed all federal, state, and local tax reports and returns
required to be filed by it in connection with the Facility and
has duly paid, or made adequate provision for the payment of, all
taxes, assessments and other charges due or claimed to be due in
a writing delivered to the Seller, or any Affiliate thereof by
federal, state or local taxing authorities, which, if not filed
or paid, would have a material adverse impact on the Facility or
the Sellers' ownership or operation of the Facility.
4.22 Brokers. Neither the Seller nor McCormick has
retained,utilized or been represented by any broker or finder in
connection with the transactions contemplated by this
Agreement.
4.23 O&M Agreement Termination. The Seller has
terminated the O&M Agreement, effective as of the Closing Date.
Wherever in this Article 4, the Seller's and McCormick's
representations are limited to knowledge, such reference is
intended to refer to (i) the knowledge of the principal officers
of the Seller and McCormick with responsibility for oversight of
the Seller and the Facility and the operations thereof, which
officers have a duty of inquiry, including inquiry of Dave
Pearson and Brian Martin of Bechtel North American, and (ii) the
knowledge of George Pendergast, Robert Kramer, Steve Brinkman,
Sam Mason and Dave Lewis.
ARTICLE 5
BUYER'S REPRESENTATIONS AND WARRANTIES
The Buyer hereby represents and warrants to the Seller
and McCormick as follows, effective as of the Effective Date:
5.1 Due Organization. The Buyer is a limited
partnership duly organized, validly existing and in good standing
under the laws of jurisdiction of its formation, and will be
qualified to transact business in all jurisdictions where the
ownership of its properties or its operations require such
qualification, except where the failure to so qualify would not
have a material adverse effect on its financial condition, its
ability to own its properties or transact its business, or to
carry out the transactions contemplated hereby.
5.2 Power and Authority. The Buyer has full
partnership power and authority to assume and perform its
obligations hereunder and under the other Closing Documents to
which it is or will be a party and to consummate the transactions
herein and therein contemplated in accordance with the terms,
provisions and conditions hereof and thereof, and all partnership
proceedings required to be taken by the Buyer to authorize it to
assume and perform the terms of this Agreement and the other
Closing Documents to which it is or will be a party will have
been duly and validly taken.
5.3 Valid, Binding and Enforceable Obligations. Each
of this Agreement and the other Closing Documents to which the
Buyer is or will be a party has been, or will be on the Closing
Date, as the case may be, duly and validly executed by the Buyer
and constitutes, or will constitute when executed and delivered,
a valid, binding, and enforceable obligation, enforceable against
the Buyer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and the enforcement of debtors' obligations
generally and by general principles of equity, regardless of
whether enforcement is pursuant to a proceeding in equity or at
law, or by application of laws limiting the scope or breadth of
covenants therein relating to restraint of trade.
5.4 No Violations. The execution and delivery by the
Buyer of this Agreement and the other Closing Documents to which
it is or will be a party,and the Buyer's consummation of the
transactions contemplated hereby and thereby will not (i) violate
or be in conflict with any charter documents, if any, of the
Buyer, (ii) violate, be in conflict with, or constitute a Default
or Event of Default under, or cause or permit the acceleration of
the maturity of, or give rise to any right of termination,
cancellation, imposition of fees or penalties under, any
agreement or commitment under which the Buyer is bound or (iii)
result in the creation or imposition of any Lien upon any of the
Assets, or under any debt, obligation, contract, commitment or
other agreement to which the Buyer is a party or by which any of
the Buyer's properties or assets is or may be bound.
5.5 No Litigation. Except as listed on Schedule 5.5,
to the Buyer's knowledge, there are no actions, suits or
proceedings of any type pending or threatened, against the Buyer
or any of its properties or business, whether at law or inequity,
before or by any Governmental Person. The Buyer has no knowledge
of any state of facts or contemplated event which may reasonably
be expected to give rise to any such action, suit or proceeding.
The Buyer is not operating under, or subject to, or in default
with respect to, any order, writ, injunction or decree of any
Governmental Person.
5.6 Brokers. The Buyer has not retained, utilized or
been represented by any broker or finder in connection with the
transactions contemplated by this Agreement.
Wherever in this Article 5, the Buyer's representations
are limited to knowledge, such reference is intended to refer to
the knowledge of the principal officers of the Buyer and its
partners with responsibility for oversight of the Buyer, which
officers have a duty of inquiry.
ARTICLE 6
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the
transactions contemplated hereby shall be subject to the
fulfillment to the satisfaction of, or waiver by, the Buyer, in
its sole discretion, of each of the following conditions on or
prior to the Closing:
6.1 Representations True and Correct. The
representations and warranties of the Seller and McCormick
contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date with the same
force and effect as if made on and as of the Closing Date.
6.2 Compliance with Covenants. The Seller and
McCormick shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be
performed or complied in all material respects with by it prior
to or on the Closing Date, and, if the Closing Date is different
than the date of this Agreement, the Seller and McCormick shall
have executed and delivered to the Buyer an officer's certificate
confirming the same.
6.3 Closing Actions. Each of the actions required to
be taken by the parties pursuant to Section 3.2 (other than by
the Buyer) or otherwise to effect the transactions contemplated
hereby, including the execution and delivery of each of the
Closing Documents, shall have been duly performed and complied
with, and the Buyer shall have received satisfactory evidence of
any and all such actions.
6.4 Consents and Governmental Approvals. All
consents, approvals, notices and filings with, from or to any
Person, including any Governmental Person, which are required on
or prior to the Closing Date for the consummation of the
transactions contemplated hereby and by the other Closing
Documents, shall have been obtained, given, or made and such
consents, approvals, notices and filings shall be in form and
substance reasonably satisfactory to the Buyer. Each of the
Governmental Approvals necessary for the ownership, management,
operation and/or maintenance of the Facility by the Buyer has
been assigned or reissued to the Buyer or otherwise obtained by
the Buyer.
6.5 Seller and McCormick Opinion of Counsel. The
Buyer shall have received (i) the Opinion of Robert W. Skelton,
General Counsel of McCormick, substantially in the form of
Exhibit U-1 hereto, and (ii) the opinion of Baker & McKenzie,
counsel for the Seller and McCormick, substantially in the form
of Exhibit U-2 hereto, each dated as of the Effective Date.
6.6 Proceedings Satisfactory. All corporate
proceedings to be taken by McCormick and/or the Seller in
connection with the consummation of the transactions contemplated
by this Agreement and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Buyer and
its counsel, and the Buyer and its counsel shall have received
copies of such documents as the Buyer and its counsel may
reasonably request in connection therewith and the Facility.
6.7 ConAgra Acquisition. The ConAgra Acquisition
shall have been consummated as of the Closing Date.
6.8 ConAgra Actions. Each of the actions required to
be taken by ConAgra, including all corporate proceedings, (i)
pursuant to Section 3.2 or otherwise to effect the transactions
contemplated hereby, including the execution and delivery of each
of the Closing Documents to which ConAgra is a party and (ii)
pursuant to the ConAgra Acquisition or otherwise to effect the
transactions contemplated by the ConAgra Acquisition to vest in
ConAgra good and valid title to the assets comprising the Food
Processing Facility and all of the right, title, interest, duties
and obligations of Gilroy Foods in and to the Ground Lease and
the Steam Agreement, shall have been duly performed and complied
with, and the Buyer shall have received satisfactory evidence of
any and all such actions.
6.9 ConAgra Assignment Agreement. The ConAgra
Assignment Agreement shall have been duly and validly executed
and delivered by the parties thereto and shall constitute a
valid, binding and enforceable obligation, enforceable against
each of the parties thereto in accordance with its terms. ConAgra
shall have fully and unconditionally assumed pursuant to the
ConAgra Assignment Agreement all of the duties and obligations of
Gilroy Foods under the Steam Agreement,and all properties,
rights, and Governmental Approvals necessary for the ownership
and operation of the Food Processing Facility by ConAgra shall
have been duly and validly assigned or reissued to ConAgra or
otherwise duly and validly obtained by ConAgra as of the Closing
Date.
6.10 ConAgra Opinion of Counsel. The Buyer shall have
received the opinions of McGrath, North, Mullin & Kratz, P.C.,
counsel for ConAgra, and Piper & Marbury, counsel for Gilroy
Foods, regarding the transactions contemplated by this Agreement
which relate to ConAgra and the ConAgra Acquisition, inform and
substance reasonably satisfactory to the Buyer, dated as of the
Effective Date.
6.11 Severance of Facilities. Except as set forth on
Schedule 6.11, all agreements among the Buyer, the Seller and
ConAgra regarding the common permits, facilities and utilities
currently shared between the Facility and the Food Processing
Facility shall be either severed or otherwise agreed upon among
the parties.
ARTICLE 7
CONDITIONS PRECEDENT TO THE SELLER'S AND
MCCORMICK'S OBLIGATIONS
The obligation of the Seller and McCormick to
consummate the transactions contemplated hereby shall be subject
to the fulfillment to the satisfaction of, or waiver by, the
Seller and McCormick, in its sole discretion, of each of the
following conditions on or prior to the Closing:
7.1 Representations True and Correct. The
representations and warranties of the Buyer contained in
this Agreement shall be true and correct in all material respects
on and as of the Closing Date with the same force and effect as
if made on and as of the Closing Date.
7.2 Compliance with Covenants. The Buyer shall have
performed and complied in all material respects with all
covenants, agreements and conditions required by this Agreement
to be performed or complied with by it prior to or on the Closing
Date, and, if the Closing Date is different than the date of this
Agreement, the Buyer shall have executed and delivered to the
Seller and McCormick an officer's certificate confirming the
same.
7.3 Closing Actions. Each of the actions required to
be taken pursuant to Section 3.2 or otherwise to effect the
transactions contemplated hereby, including the execution and
delivery of each of the Closing Documents, shall have been duly
performed and complied with, and the Seller and McCormick shall
have received satisfactory evidence of any and all such actions.
7.4 Opinion of Counsel. The Seller and McCormick
shall have received (i) the opinion of Joseph E. Ronan, Jr.,
General Counsel of the Buyer, substantially in the form of
Exhibit V-1 hereto, and (ii) the opinion of Thelen, Marrin,
Johnson & Bridges, counsel for the Buyer, substantially in the
form of Exhibit V-2 hereto, each dated as of the Effective Date.
7.5 Proceedings Satisfactory. All partnership
proceedings of the Buyer to be taken in connection with the
consummation of the transactions contemplated by this Agreement
and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Seller and McCormick
and their counsel, and the Seller and McCormick and their counsel
shall have received copies of such documents as the Seller and
McCormick and their counsel may reasonably request in connection
therewith.
7.6 ConAgra Acquisition. The ConAgra Acquisition
shall have been consummated as of the Closing Date.
7.7 Consents and Government Approvals. All consents,
approvals, notices and filings with, from or to any Person,
including any Governmental Person, which are required on or prior
to the Effective Date for the consummation of the transactions
contemplated hereby and by the other Closing Documents, shall
have been obtained, given, or made and such consents, approvals,
notices and filings shall be in form and substance reasonably
satisfactory to the Seller; provided,however, that the Seller
agrees that the failure to obtain a release of the Seller's
liabilities will not make any such consent or approval otherwise
available unsatisfactory.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by the Seller and McCormick.
Subject to the limitations of Section 8.3 below, the Seller and
McCormick shall jointly and severally to the maximum extent not
prohibited by law,indemnify, defend and hold harmless the Buyer
and all of its Affiliates, and each of their respective
shareholders, partners, members, investors, directors, officers,
employees, agents and assignees, from and against any and all
losses, liabilities, damages, claims, judgments,costs or expenses
(including reasonable attorneys' fees and expenses) suffered or
incurred by any such party by reason of or resulting from (i) the
inaccuracy of any representation or warranty of the Seller or
McCormick under this Agreement or any other Closing Document,
(ii) the nonfulfillment or nonperformance of any covenant or
agreement of either the Seller or McCormick under this Agreement
or any other Closing Document, or (iii) any events, occurrences
or conditions relating to the Facility, any Project Document or
the Site, in respect of all periods prior to the Closing Date,
except as caused by the negligence, gross negligence or willful
misconduct of the Buyer or its agents, employees, or contractors,
or as otherwise covered in Section 8.2 below.
8.2 Indemnification by the Buyer. Subject to the
limitations of Section 8.3 below, the Buyer shall to the maximum
extent not prohibited by law, indemnify, defend and hold harmless
the Seller, McCormick and all of their respective Affiliates,
shareholders, partners, members, investors, directors,
officers,employees, agents and assignees, from and against any
and all losses, liabilities, damages,claims, judgments, costs or
expenses (including reasonable attorneys' fees and expenses)
suffered or incurred by any such party by reason of or resulting
from (i) the inaccuracy of any representation or warranty of the
Buyer under this Agreement or any other Closing Document, (ii)
the nonfulfillment or nonperformance of any covenant or agreement
of the Buyer under this Agreement or any other Closing Document,
or (iii) any events, occurrences or conditions relating to the
Facility, any Project Document or the Site, in respect of all
periods after the Closing Date; provided, however, that the
foregoing shall not apply to any of the Excluded Liabilities or
any losses, liabilities, damages, claims, judgments, costs or
expenses caused by the negligence, gross negligence or willful
misconduct of the Seller or McCormick or their respective agents,
employees or contractors. All costs, expenses, liabilities or
charges incurred or relating to the performance of the Buyer's
inspections or inquiries relating to the acquisition of the
Assets shall be borne by the Buyer. The Buyer agrees to
indemnify the Seller and ConAgra and hold the Seller and ConAgra
and the Facility and the Site harmless from and mechanic's and
materialmen's liens and any claims,demands, damages, costs,
liabilities or expenses arising from the entry on the Facility
and the Site by the Buyer pursuant to this Agreement, except as
caused by the negligence, gross negligence or willful misconduct
of the Seller or McCormick or their respective agents, employees
or contractors. Any entry on the Facility and the Site by the
Buyer shall be at reasonable times and shall be conducted in the
manner most calculated to minimize, to as great an extent as
reasonably possible, any disruption to the Seller's operations on
the Site.
8.3 Threshold and Limits for Indemnity.
Notwithstanding anything in Sections 8.1 or 8.2 herein, the
parties' indemnity obligations under Sections 8.1(a) and 8.2(a)
shall be shall be limited to after tax losses and subject to a
threshold of $500,000, after tax (the "Threshold"), whereby the
aggregate claims for indemnity by the party(ies) to be
indemnified (the "Indemnitee") must exceed the Threshold before a
claim shall be payable to the Indemnitee, and whereupon the
indemnifying party(ies) (the "Indemnitor") shall become
immediately liable for the payment of the Threshold amount, plus
any excess, as applicable. If the Indemnitee's aggregate claims
do not exceed the Threshold, then no amount shall be payable
under Sections 8.1 and 8.2 herein. Notwithstanding anything to
the contrary in this Section 8.3, if Buyer or any other
Indemnitee under Section 8.1 has an indemnification claim
relating to (i) the items referenced in the Notification Letter,
as defined in Section 2.5(b) of the Amended and Restated Lease
Agreement, or (ii) the O&M Agreement or the inaccuracy of the
representation in Section 4.23, any such indemnification claim
shall not be subject to the $500,000 limitation contained in the
Threshold.
8.4 Bulk Sales Indemnity. After the Closing, the
Seller shall indemnify, defend and hold the Buyer harmless from
all claims, liabilities, obligations, damages, penalties, fines,
costs and expenses (including, reasonable attorneys' fees and
costs) that arise out of or relate to noncompliance with bulk
transfer laws of any jurisdiction that are applicable or alleged
to be applicable to the sale of assets contemplated in this
Agreement.
8.5 Procedure for Indemnification with Respect to
Third Party Claims. 8.5 Procedure for Indemnification with
Respect to Third Party Claims.
8.5.1 Notice of Claim. If any legal proceedings
shall be instituted or any claim or demand shall be asserted by
any third party in respect of which indemnification may be sought
by any party or parties from any other party or parties under the
provisions of this Article 8, the Indemnitee shall, within
forty-five (45) days of the receipt thereof, cause written notice
of the legal proceedings or the assertion of any claim or demand
of which it has knowledge that is covered by the indemnity under
this Article 8 to be forwarded to the Indemnitor, specifying the
nature of and specific basis for such legal proceedings, claim or
demand and the amount or the estimated amount thereof to the
extent then feasible, which estimate shall not be binding upon
the Indemnitee, in its effort to collect the final amount arising
out of such legal proceedings, claim or demand; provided,that the
failure of an Indemnitee to give timely notice shall not affect
rights to indemnification under this Article 8 except to the
extent that the Indemnitor has been damaged by such failure.
8.5.2 Conduct of Claim. The Indemnitor shall have
the right, at its option and at its own expense, to be
represented by counsel of its choice and to participate in, or to
take exclusive control of, the defense, negotiation and/or
settlement of any proceeding, claim or demand which relates to
any amounts indemnifiable or potentially indemnifiable under this
Article 8; provided, however, that the Indemnitee may participate
in any such proceeding with counsel of its choice, which shall be
at its own expense unless (i) the Indemnitor chooses counsel not
reasonably acceptable to the Indemnitee or (ii) the Indemnitor
does not pursue with reasonable diligence such defense,
negotiation or settlement, in which case, the Indemnitee's
participation shall be at the Indemnitor's expense. The
Indemnitee shall have a right to notice of any settlement, and
the Indemnitor shall not execute or otherwise agree to any
consent decree which provides for other than monetary payment
without the Indemnitee's prior written consent, which consent
shall not be unreasonably withheld. Notwithstanding the
foregoing, the Indemnitee shall have the right to pay or settle
any such claim, provided that in such event it shall waive any
right to indemnity therefor by the Indemnitor. If the Indemnitor
elects not to defend or settle such proceeding, claim or demand
and the Indemnitee defends, settles or otherwise deals with any
such proceeding, claim or demand, which settlement may be without
the consent of the Indemnitor, the Indemnitee shall provide
fifteen (15) days' advance written notice of any property
settlement to the Indemnitor and will act reasonably and in
accordance with its good faith business judgment. The parties
shall cooperate fully with each other in connection with the
defense, negotiation or settlement of any such legal proceeding,
claim or demand.
8.5.3 Payment of Claim. After final judgmentor
award shall have been rendered by a court, arbitration board or
administrative agency of competent jurisdiction and the
expiration of the time in which to appeal therefrom, or a
settlement shall have been consummated, or the Indemnitee and the
Indemnitor shall have arrived at a mutually binding agreement
with respect to each separate matter indemnified by the
Indemnitor, the Indemnitee shall forward to the Indemnitor notice
of any sums due and owing by the Indemnitor with respect to such
matter and the Indemnitor shall pay all of the sums so owing to
the Indemnitee in immediately available funds within thirty (30)
days after the date of such notice.
8.5.4 Access to Information.8.5.4 Access to
Information If any claim is made by a third party against an
Indemnitee, the Indemnitee shall use its best efforts to make
available to the Indemnitor those partners, officers and
employees whose assistance,testimony or presence is necessary to
assist the Indemnitor in evaluating and in defending such claims;
provided, however, that any such access shall be conducted in
such a manner as not to interfere unreasonably with the
operations of the business of the Indemnitee but failure to
provide necessary witnesses or access to information will excuse
Indemnitor's performance.
ARTICLE 9
THE SELLER'S AND MCCORMICK'S COVENANTS
PRIOR TO CLOSING, TAXES AND FURTHER ASSURANCES
9.1 The Seller's and McCormick's Covenants Prior to
Closing. The Seller and McCormick jointly and severally
covenant and agree that until the Effective Date:
9.1.1 The Seller shall afford the Buyer and its
representatives full access during normal business hours to the
Facility and the Assets and to all of the other properties,
books, records and documents of the Seller.
9.1.2 The Seller shall maintain the Assets in good
condition and shall manage and operate the Facility in the same
manner as heretofore.
9.1.3 The Seller shall not waive any right of
material value to its ownership operation of the Facility,
including amending or modifying any of the Project Documents.
9.1.4 Except in the ordinary course of business,
the Seller shall not enter into any lease, sell, abandon or make
any other disposition of any of the Assets, grantor suffer any
Lien on any of the Assets, enter into or amend any contract or
other agreement to which it is a party, or by to which it or the
Assets are bound or subject, or pursuant to which it agrees to
indemnify any party or to refrain from competing with any party.
9.1.5 Except in the ordinary course of business
and in amounts less than $25,000 in each case, the Seller shall
not incur or assume any debt, obligation or liability (whether
absolute or contingent and whether or not currently due and
payable).
9.1.6 The Seller shall not terminate or fail to
renew any of the Project Documents, except as otherwise provided
herein.
9.1.7 Except in the ordinary course of business,
enter into any other material contract or other agreement or
other material transaction relative to the Facility.
9.1.8 Except for this Agreement and discussions
among the Seller, McCormick and the Buyer relating to this
Agreement, during the term of the Agreement the Seller and
McCormick shall not, and shall cause each Person acting on their
behalf and their other Affiliates not to, enter into any
agreement or commitment for the sale or transfer, directly or
indirectly, of the Seller, the Facility or the Assets, nor
entertain any offers to do so or otherwise engage in any
negotiations or discussions in connection with any of the same.
9.1.9 Upon obtaining knowledge that any
representation or warranty of the Seller or McCormick hereunder
is false or misleading in any material respect, or that the
Seller or McCormick is in breach or violation of any covenant
hereunder in any material respect, the Seller and or McCormick,
as applicable, shall promptly provide written notice thereof to
the Buyer.
9.2 Taxes.9.2 Taxes The Seller, McCormick and the
Buyer hereby agree and acknowledge that improvements to real
property, such as the Facility, transferred in the manner herein
contemplated, are not subject to sales, transfer, use,
documentary transfer, stamp or excise taxes or other similar
taxes of any type payable in connection with the sale and
transfer of the Facility. All sales, transfer, use, documentary
transfer, stamp or excise taxes, or other similar taxes of any
type payable in connection with the sale and transfer of the
Assets or otherwise in connection with the consummation of the
transactions contemplated by this Agreement and the other Closing
Documents, shall be the responsibility of and shall be paid as
follows: (i) the Buyer shall pay the first $50,000 and (ii) the
Buyer and the Seller shall each pay an equal share of any such
taxes in excess of$50,000.
9.3 Further Assurances. On and after the Closing
Date, each party shall execute and deliver such further
instruments and documents, and take such further other actions,
as may be reasonably requested by the other party(ies), in order
to effectuate the provisions and purposes of this Agreement and
to secure the Buyer's financing of its purchase of the Assets
hereunder.
ARTICLE 10
MISCELLANEOUS
10.1 Transaction Costs. Except as otherwise expressly
provided herein, the Buyer, the Seller and McCormick each shall
pay all of its own respective costs and expenses (including
attorneys' fees and other legal costs and expenses and
accountants' fees and other accounting costs and expenses)
incurred in connection with negotiation and preparation of this
Agreement and the transactions contemplated hereby, Buyer shall
pay the costs incurred by the Seller and McCormick with Ernest
and Young in connection with the review and audit of the Seller's
books for Calpine's S-1 filing. The fees and expenses of any
third parties mutually engaged by the parties in connection with
the transactions contemplated hereby, and any filing fees
required under the HSR Act, shall be shared equally by the Buyer
and the Seller. The fees and expenses of Prudential shall be paid
for by the Seller. Except as otherwise provided in this
Agreement, all real and personal property taxes and assessments
relating to the Facility and the Site or the Assets shall be
prorated between the Buyer and the Seller to the Closing Date.
The Buyer shall be responsible for and pay all costs and expenses
related to any escrow, title insurance, recordation of documents
and other related activities arising out of the consummation of
the transaction contemplated herein.
10.2 Entire Agreement. This Agreement represents the
entire understanding and agreement among the parties with respect
to the subject matter hereof, and supersedes all other
negotiations and understandings among the parties.
10.3 Amendments. The provisions of this Agreement may
not be amended, supplemented, waived or changed orally, but only
by a writing signed by each of the parties hereto.
10.4 Assignments. No party shall assign its rights
and/or obligations hereunder without the prior written consent of
the other parties to this Agreement, which consent may be
withheld in the other parties' sole and arbitrary discretion.
10.5 Binding Effect. All of the terms and provisions
of this Agreement, whether so expressed or not, shall be binding
upon, inure to the benefit of, and be enforceable by the parties
and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
10.6 Headings. The headings contained in this
Agreement are for convenience of reference only, and shall not
limit or otherwise affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, consents and
other communications required or permitted under this Agreement
shall be in writing and shall be (as elected by the party giving
such notice) hand delivered by messenger or courier service,
telefaxed, or mailed by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Buyer
Calpine Gilroy Cogen, L.P.
50 West San Fernando Street
San Jose, CA 95113
Attn.: Vice President Asset Management
To the Seller
Gilroy Energy Company, Inc.
c/o McCormick & Company, Incorporated
18 Loveton Circle
Sparks, MD 21151
Attn.: Robert W. Skelton, General Counsel
To McCormick
McCormick & Company, Incorporated
18 Loveton Circle
Sparks, MD 21151
Attn.:Robert W. Skelton, General Counsel
or to such other address as any party may designate by notice
complying with the terms of this Section 10.7. Each such notice
shall be deemed delivered (i) on the date actually delivered if
by messenger or courier service; (ii) on the date of confirmed
answer-back if by telefax; and (iii) on the date upon which the
return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the
case may be,if mailed.
10.8 Severability. If any provision of this Agreement
or any other agreement entered into pursuant hereto is contrary
to, prohibited by or deemed invalid under applicable law or
regulation, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be
given full force and effect so far as possible. If any provision
of this Agreement may be construed in two or more ways, one of
which would render the provision invalid or otherwise voidable or
unenforceable and another of which would render the provision
valid and enforceable, such provision shall have the meaning
which renders it valid and enforceable.
10.9 Waivers. The failure or delay of any party at
any time to require performance by another party of any provision
of this Agreement, even if known,shall not affect the right of
such party to require performance of that provision or to
exercise any right, power or remedy hereunder. Any waiver by any
party of any breach of any provision of this Agreement should not
be construed as a waiver of any continuing or succeeding breach
of such provision, a waiver of the provision itself, or a waiver
of any right,power or remedy under this Agreement. No notice to
or demand on any party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or
other circumstances.
10.10 ARBITRATION OF DISPUTES. ANY DISPUTE ARISING
UNDER THIS AGREEMENT SHALL BE DECIDED BY BINDING ARBITRATION
CONDUCTED PURSUANT TO THE PROCEDURES SET FORTH BELOW. FOR
PURPOSES OF THIS SECTION 10.10, THE SELLER AND MCCORMICK SHALL BE
DEEMED TO BE "A PARTY," AND THE BUYER SHALL BE DEEMED TO BE "A
PARTY."
10.10.1 INITIATION OF ARBITRATION. THE PARTY
SEEKING ARBITRATION HEREUNDER MAY REQUEST SUCH ARBITRATION IN
WRITING, WHICH WRITING SHALL INCLUDE A CLEAR STATEMENT OF THE
MATTER(S) IN DISPUTE AND SHALL NAME ONE ARBITRATOR APPOINTED BY
SUCH PARTY. WITHIN TWENTY (20) BUSINESS DAYS AFTER RECEIPT OF
SUCH REQUEST, THE OTHER PARTY SHALL APPOINT ONE ARBITRATOR, OR IN
DEFAULT THEREOF, SUCH ARBITRATOR SHALL BE NAMED AS SOON AS
PRACTICABLE BY THE AMERICAN ARBITRATION ASSOCIATION OFFICE IN SAN
FRANCISCO, CALIFORNIA, AND THE TWO ARBITRATORS SO APPOINTED SHALL
NAME A THIRD ARBITRATOR WITHIN TEN (10) BUSINESS DAYS, OR FAILING
SUCH AGREEMENT ON A THIRD ARBITRATOR BY THE TWO ARBITRATORS SO
APPOINTED, A THIRD ARBITRATOR SHALL BE APPOINTED BY THE AMERICAN
ARBITRATION ASSOCIATION OFFICE IN SAN FRANCISCO, CALIFORNIA. ALL
ARBITRATORS SHALL BE NEUTRAL.
10.10.2 ARBITRATION PROCEDURE. THE ARBITRATION
HEARING SHALL BE HELD IN SAN FRANCISCO,CALIFORNIA, ON AT LEAST
TWENTY (20) BUSINESS DAYS' PRIOR WRITTEN NOTICE TO THE PARTIES.
EXCEPT AS OTHERWISE PROVIDED HEREIN, THE PROCEEDINGS SHALL BE
CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES AND
PROCEDURES OF THE AMERICAN ARBITRATION ASSOCIATION; PROVIDED,
THAT DEPOSITIONS MAY BE TAKEN AND DISCOVERY MAY BE MADE IN
ACCORDANCE WITH THE FEDERAL RULES OF CIVIL PROCEDURE. ANY
DECISION OF THE ARBITRATORS,INCLUDING A DECISION REGARDING AN
ALLOCATION OF COSTS CONSISTENT WITH THIS SECTION 10.10, SHALL BE
JOINED IN BY AT LEAST TWO OF THE ARBITRATORS AND SHALL BE SET
FORTH IN A WRITTEN AWARD WHICH SHALL STATE THE BASIS OF THE AWARD
AND SHALL INCLUDE BOTH FINDINGS OF FACT AND CONCLUSIONS OF LAW.
AN AWARD RENDERED PURSUANT TO THE FOREGOING, WHICH MAY INCLUDE AN
AWARD OR DECREE OF SPECIFIC PERFORMANCE HEREUNDER, SHALL BE FINAL
AND BINDING ON THE PARTIES, AND JUDGMENT THEREON MAY BE ENTERED
OR ENFORCEMENT THEREOF SOUGHT BY EITHER PARTY IN A COURT OF
COMPETENT JURISDICTION.
10.10.3 NO POWER TO AMEND. NOTWITHSTANDING THE
FOREGOING, NOTHING CONTAINED HEREIN SHALL BE DEEMED TO GIVE THE
ARBITRATORS APPOINTED PURSUANT TO THE FOREGOING ANY AUTHORITY,
POWER OR RIGHT TO ALTER, CHANGE,AMEND, MODIFY, WAIVE, ADD TO OR
DELETE FROM ANY OF THE PROVISIONS OF THIS AGREEMENT.
10.10.4 COSTS. EACH PARTY SHALL BEAR THE COSTS
OF ITS APPOINTED ARBITRATOR AND ITS OWN ATTORNEYS' FEES,AND THE
COSTS OF THE THIRD ARBITRATOR INCURRED IN ACCORDANCE WITH THE
FOREGOING SHALL BE SHARED EQUALLY BY THE PARTIES. ADDITIONAL
INCIDENTAL COSTS OF ARBITRATION SHALL BE PAID FOR BY THE
NON-PREVAILING PARTY IN THE ARBITRATION; PROVIDED, THAT WHERE THE
FINAL DECISION OF THE ARBITRATORS IS NOT CLEARLY IN FAVOR OF
EITHER PARTY, SUCH INCIDENTAL COSTS SHALL BE SHARED EQUALLY BY
THE PARTIES.
10.10.5 COMPLETE DEFENSE. COMPLIANCE BY A PARTY
WITH THE PROVISIONS OF THIS SECTION 10.10 SHALL BE A COMPLETE
DEFENSE TO ANY SUIT, ACTION OR PROCEEDING INSTITUTED IN ANY
FEDERAL OR STATE COURT, OR BEFORE ANY ADMINISTRATIVE TRIBUNAL BY
THE OTHER PARTY WITH RESPECT TO ANY CONTROVERSY OR DISPUTE
ARISING UNDER OR PURSUANT TO THIS AGREEMENT AND WHICH IS SUBJECT
TO ARBITRATION AS SET FORTH HEREIN, OTHER THAN A SUIT OR ACTION
ALLEGING NON-COMPLIANCE WITH A FINAL AND BINDING ARBITRATION
AWARD RENDERED HEREUNDER.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE
AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED
IN THE"ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP
ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS
THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO
ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO
SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
THE BUYER'S INITIALS ________
THE SELLER'S INITIALS ________
MCCORMICK'S INITIALS ________
10.11 Remedies Cumulative. Except as otherwise
expressly provided herein, no remedy herein conferred upon any
party is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or
hereafter existing at law or inequity or by statute or otherwise.
No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise
thereof.
10.12 Overdue Interest. In the event any payment
required by this Agreement is not paid when due, the amount
overdue shall bear interest from and including the date on which
such payment was due to but excluding the date of payment at a
rate per annum equal to the Prime Rate as published in the Wall
Street Journal as of the date such payment was due. Such
interest shall be calculated on the basis of a year of 365 days.
10.13 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument. Confirmation of execution by telefax of a
signature page shall be binding upon any party so confirming.
10.14 Governing Law. This Agreement and all
transactions contemplated by this Agreement shall be governed by,
and construed and enforced in accordance with, the internal laws
of the State of California, without regard to principles of
conflicts of laws.
10.15 Preparation of Agreement. This Agreement shall
not be construed more strongly against any party regardless of
who is responsible for its preparation. The parties acknowledge
each contributed and is equally responsible for its preparation.
10.16 Survival. All representations, warranties,
covenants and agreements made herein or otherwise referenced
herein shall survive the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
10.17 Materiality. As used in this Agreement the
word"material" shall refer to materiality with respect to the
subject matter of the particular representation, warranty or
covenant in question, and not materiality in relation to the
Purchase Price or transactions contemplated hereby as taken as a
whole.
10.18 Inducement to Transaction. All
representations and warranties made by any party in this
Agreement shall be deemed made for the purpose of inducing the
other party(ies) to enter into this Agreement.
10.19 Public Statements or Releases. Except as
otherwise required by law, no party hereto shall make any public
statement or release regarding this Agreement or the transactions
contemplated hereby without the consent of the other party(ies),
which consent shall not be unreasonably withheld.
IN WITNESS WHEREOF, the parties hereto have executed
this Asset Purchase Agreement as of the Effective Date.
THE BUYER: Calpine Gilroy Cogen, L.P.,
a Delaware limited partnership
By:Calpine Gilroy 1, Inc.,
a Delaware corporation,
its General Partner
By:/s/Kenneth J. Kerr
Title: Vice President
THE SELLER: Gilroy Energy Company, Inc.,
a California corporation
By:/s/Robert C. Singer
Title: Assistant Treasurer
MCCORMICK: McCormick & Company, Incorporated,
a Maryland corporation
By: Robert C. Singer
Title: Vice President Acquisitions
& Financial Planning
By: Robert G. Davey
Title: Vice President & Chief
Financial Officer
NONCOMPETITION/EARNINGS CONTINGENCY AGREEMENT
This NONCOMPETITION/EARNINGS CONTINGENCY AGREEMENT (the
"Agreement") is entered into on this 28th day of August, 1996, by
and among Calpine Gilroy Cogen, L.P., a Delaware limited
partnership ("Calpine"), McCormick & Company, Incorporated, a
Maryland corporation ("McCormick"), and Gilroy Energy Company,
Inc., a California corporation ("Gilroy").
RECITALS
WHEREAS, Gilroy (as Seller), Calpine (as Buyer), and McCormick
have entered into an Asset Purchase Agreement dated as of August
28, 1996, (the "Purchase Agreement"), pursuant to which Calpine
will acquire all of Gilroy's interest in and to the Gilroy
Cogeneration Facility, a 120 megawatt (nominal net) gas-fired
combined cycle cogeneration facility located in Gilroy, California
(the "Facility"), and certain other assets of Gilroy (the
"Purchased Assets"), as more fully described in the Purchase
Agreement; and
WHEREAS, McCormick is the indirect parent company of Gilroy as
Gilroy is a wholly-owned subsidiary of Gilroy Foods, Incorporated,
a California corporation, and Gilroy Foods, Incorporated is a
wholly-owned subsidiary of McCormick; and
WHEREAS, pursuant to the Purchase Agreement, Gilroy will
receive valuable consideration in exchange for its interest in the
Purchased Assets, and McCormick will receive valuable consideration
in exchange for the agreements contained herein including the
payments hereinafter described; and
WHEREAS, Gilroy and McCormick each further acknowledges that
this Agreement is a separately bargained for consideration and is
a material inducement to Calpine to proceed with the transaction
described in the Purchase Agreement; and
WHEREAS, Calpine acknowledges that this Agreement is a
separately bargained for consideration and is material inducement
to McCormick and Gilroy to proceed with the transaction described
in the Purchase Agreement.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. Noncompetition Covenant. In connection with the transfer
and sale of the Purchased Assets pursuant to the Purchase Agreement
and for good and valuable consideration, receipt of which is hereby
acknowledged by each of Gilroy, McCormick and Calpine, and pursuant
to the other terms and conditions set forth in this Agreement,
McCormick hereby agrees with Calpine that McCormick will not,
without the prior written consent of Calpine, at any time within
the three and one-fourth (3 1/4) year period from and after the
date hereof, and Gilroy hereby agrees with Calpine that Gilroy (so
long as it is owned, directly or indirectly, by McCormick or any of
McCormick's affiliates) will not, without the prior written consent
of Calpine, at any time within the three and one-fourth (3 1/4)
year period from and after the date hereof, engage in the business
of cogeneration of energy in northern California or have more than
an aggregate of a five percent (5%) interest in any business, firm,
corporation or other entity (whether as a principal, partner,
director, officer, employee, consultant, agent, security holder or
otherwise) principally involved in the business of cogeneration of
energy in northern California.
2. Earnings Contingency. If neither McCormick nor Gilroy
has breached its respective obligations pursuant to Section 1 of
this Agreement, and the Facility has total revenues as reported in
the income statement of Calpine (including, but not limited to,
revenues from the sale of electricity to Pacific Gas & Electric
Company or others, revenues from the sale of steam, business
interruption insurance proceeds, and the equivalent dollar value of
any credits resulting from shutting down or starting up the
Facility) of at least $2,500,000 in the period from and after the
date hereof through November 30, 1996 and $10,000,000 in each
fiscal year (ending on November 30th) thereafter or, alternatively,
the Facility has, on a cumulative basis, total revenues in an
amount equal to $10,000,000 multiplied by the number of years or
partial years (partial years to be measured by the actual number of
days elapsed divided by the actual number of days in such year)
that have elapsed between the commencement date of this Agreement
and the required payment date, with a maximum cumulative total of
$32,500,000, Calpine shall pay to McCormick the amounts at the
times set forth in Section 4. Subject to Section 3 hereof, in the
event that the Facility fails to obtain the required minimum
revenues, payments to McCormick under Section 4 shall be suspended
and deferred until such payment date as the Facility does satisfy
the minimum revenue requirements. Except as provided herein, the
payments set forth in Section 4 are absolutely due and payable by
Calpine to McCormick, without offset, on or prior to the dates set
forth in Section 4, and shall in no event be construed to
constitute option payments payable only in the event Calpine wishes
to bind McCormick to the covenants made in Section 1 hereof.
Calpine has obtained and delivered to McCormick, the receipt of
which is hereby acknowledged, irrevocable letters of credit issued
by Banque National de Paris, Los Angeles Branch, to secure the
payment of the amounts required to be paid to McCormick by Calpine,
in form and substance equivalent to the letters of credit attached
hereto and made a part hereof as Exhibit A.
3. Unforeseen Changes in Revenues. In the event that
Calpine and Pacific Gas & Electric Company amend the Power Purchase
Agreement (such term used herein as defined in the Purchase
Agreement) in such a way as to prevent the Facility from meeting
the minimum revenue requirements of Section 2 hereof, or if there
is a change in law or regulation which prevents the Facility from
satisfying said revenue requirements (other than any action by the
California Public Utility Commission or any successor agency (the
"CPUC") which renders the Power Purchase Agreement null and void or
eliminates the capacity payments thereunder and which arises
without the agreement, consent or cooperation of Calpine or despite
Calpine's opposition to such action), or if Calpine ceases or
diminishes operations at the Facility during peak hours or peak
periods as such hours or periods are identified in the Power
Purchase Agreement which prevents the Facility from satisfying said
revenue requirements, including without limitation, by reason of
force majeure events, or if Calpine otherwise fails or is unable to
perform its obligations hereunder or under the Power Purchase
Agreement which prevents the satisfaction of said revenue
requirements, then Calpine shall be deemed to have waived the
revenue requirements of Section 2 hereof and the payments owed by
Calpine to McCormick shall thereupon become absolute and
unconditional, provided that neither McCormick nor Gilroy has
breached its respective obligations under Section 1 hereof.
4. Payments. If neither McCormick nor Gilroy has breached
its respective obligations pursuant to Section 1 of this Agreement,
and the Facility has total revenues in the amounts set forth in
Section 2 of this Agreement, Calpine shall pay to McCormick, at the
address set forth herein as McCormick's notice address, the
following sums during each of the years indicated:
Year Amount
1996 $4,500,000
1997 $8,000,000
1998 $7,000,000
1999 $4,640,000
each such annual payment shall be paid in four equal quarterly
installments on February 28, May 31, August 31 and November 30 of
each year (each a "Quarterly Payment Date") and any payment
deferred pursuant to Section 2 hereof shall be paid in full on the
first Quarterly Payment Date thereafter on which the Facility
satisfies the minimum revenue requirement in accordance with
Section 2 hereof.
5. Enforcement. Each of McCormick and Gilroy acknowledges
and agrees that, because the legal remedies of Calpine may be
inadequate in the event of a breach of, or other failure to
perform, any of the covenants and obligations set forth in Section
1, Calpine may, in addition to obtaining any other remedy or relief
available to it, enforce the provisions of Section 1 by injunction
and other equitable remedies.
6. Severability. The parties agree that the provisions with
respect to duration and geographic scope and restrictions set forth
in Section 1 are reasonable to protect the legitimate interest of
Calpine. The provisions of Section 1 are severable, and in the
event that any provision hereof should, for any reason, be held
invalid or unenforceable in any respect, it shall not invalidate,
render unenforceable to the maximum extent compatible with, and
possible under, applicable law. In the event Section 1 is
invalidated or modified as provided above, no such invalidation or
modification shall in any way reduce, alter or offset Calpine's
obligations to pay the sums set forth in Section 4 to McCormick,
provided that McCormick and Gilroy have not breached their
respective obligations pursuant to Section 1 hereof.
7. Successors and Assigns. This Agreement shall inure to
the benefit of McCormick, Gilroy and Calpine and their respective
successors and assigns; provided, however, that McCormick and
Gilroy may not assign their rights and obligations under this
Agreement without the prior written consent of Calpine, which
consent shall not be unreasonably withheld.
8. Governing Law. The validity, interpretation,
enforceability, and performance of this Agreement shall be governed
by, and construed in accordance with, the laws of the State of
California. The scope and effect of the covenants contained in
this Agreement, as governed by the laws of the State of California,
shall be as broad as may be permitted under the provisions of such
laws or other applicable law.
9. Time is of the Essence. Time is of the essence in the
performance of the parties' respective obligations stated herein.
10. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of
which taken together shall constitute one agreement.
11. Notices. All written notices required to be given
pursuant to the terms hereof shall be sent by (a) personal
delivery, (b) a nationally recognized overnight courier service, or
(c) United States first class mail, registered or certified return
receipt requested and postage prepaid as expressly provided herein.
All notices shall be addressed as follows:
To McCormick McCormick & Company, Incorporated
and Gilroy: 18 Loveton Circle
Sparks, MD 21152-6000
Attention: Robert W. Skelton
Vice President and General Counsel
With copy to: Baker & McKenzie
Two Embarcadero Center, 24th Floor
San Francisco, CA 94111-3099
Attention: Tyrrell M. Prosser, Esq.
To Calpine: Calpine Gilroy Cogen, L.P.
50 West San Fernando Street
San Jose, CA 95113
Attention: Vice President
Asset Management
The foregoing addresses may be changed by written notice. All
notices shall be deemed received upon receipt or the date indicated
on any return receipt or other receipt of delivery.
12. Captions. None of the captions of the paragraphs of this
Agreement shall be construed as a limitation upon the language of
such paragraphs, said captions having been inserted as a guide and
a partial index and not as a complete index of the contents of such
paragraphs.
13. Further Assurances. In a timely fashion, each party
shall execute and deliver such further instruments, documents or
assurances, and take such further action, as shall be required to
carry out the purposes and intent of this Agreement.
14. Attorneys' Fees. In the event of any action at law or in
equity between the parties to this Agreement to enforce any of the
provisions and/or rights hereunder, the unsuccessful party to such
litigation covenants and agrees to pay to the successful party all
costs and expenses, including reasonable attorney's fees, incurred
therein by such successful party, and if such successful party
shall recover judgment in any action or proceeding, such costs,
expenses and fees shall be included in and as part of such
judgment.
15. Entire Agreement. This Agreement and any exhibits which
are attached hereto and all documents in the nature of exhibits,
when executed, contain the entire understanding of the parties and
supersede any and all other written or oral understandings.
CALPINE GILROY COGEN, L.P., GILROY ENERGY COMPANY, INC.,
a Delaware limited partnership a California corporation
By: Calpine Gilroy 1, Inc.,
a Delaware corporation, By:/s/Robert C. Singer
its General Partner Title: Assistant Treasurer
By:/s/Kenneth J. Kerr
Title: Vice President
McCORMICK & COMPANY,
INCORPORATED,
a Maryland corporation
By:/s/Robert C. Singer
Title: Vice President Acquisitions &
Financial Planning
By:/s/Robert G. Davey
Title: Vice President & Chief
Financial Officer
