ASSET PURCHASE AGREEMENT

 

 

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT (this “ Agreement ”) dated as of January 22, 2007 (the “ Effective Date ”) among Kraft Foods Global, Inc., a Delaware corporation(“ Seller ”), COWC Acquisition Corp., a Delaware corporation (“ Buyer ”), and, solely for the purposes of Article 4 and Sections 12.14 through 12.18, B&G Foods, Inc., a Delaware corporation (“ Guarantor ”).

RECITALS

WHEREAS, Buyer desires to purchase the Acquired Assets (as defined below) and to assume the Assumed Liabilities (as defined below) from Seller, and Seller desires to sell or cause to be sold to Buyer the Acquired Assets and transfer or cause to be transferred to Buyer the Assumed Liabilities, on the terms and subject to the conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the parties, intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.01 .  Definitions    (a) The following terms, as used herein, have the following meanings:

“ Acquired Business ” means the production, packaging and sale of the Products as currently conducted by Seller and its Affiliates, including as currently conducted at (i) Seller’s manufacturing facility located at 520 William Street, Cobourg, Ontario K9A 4L4, Canada and (ii) the manufacturing facility of the co-manufacturer specified on Schedule 3.07.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person.  For purposes of this definition, “ control ” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.

“ Ancillary Agreements ” means (i) the Assignment and Assumption Agreement, (ii) the Confidentiality Agreement, (iii) the Co-Manufacturing

 

Agreement, (iv) the Transition Services Agreement, (v) the Trademark Assignment Agreement, (vi) the Patent Application Assignment Agreement, and (vii) the other agreements, instruments and documents delivered at the Closing.

“ Applicable Law ” means, with respect to any Person, the Acquired Assets or the Business, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, the Acquired Assets or the Business, as amended unless expressly specified otherwise.

“ Assignment and Assumption Agreement ” shall mean the Assignment and Assumption Agreement effective as of the Closing Date between Buyer and Seller, substantially in the form attached hereto as Exhibit A .

“ Business ” means the production, packaging, marketing, distibution and sale of the Products as currently conducted by Seller and its Affiliates, including as currently conducted at (i) Seller’s manufacturing facility located at 520 William Street, Cobourg, Ontario K9A 4L4, Canada and (ii) the manufacturing facility of the co-manufacturer specified on Schedule 3.07.

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which commercial banking institutions in New York, New York are not required to be open.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Co-Manufacturing Agreement ” shall mean the Co-Manufacturing Agreement dated as of the Effective Date between Buyer and Kraft Canada, attached hereto as Exhibit B .

“ Competition Law ” means any statute, rule, regulation, order, decree, administrative or judicial doctrine or other law that provides for merger control or is designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, lessening of competition or restraint of trade.

“ Disclosure Schedules ” means the disclosure schedules attached as Attachment A to this Agreement.

“ Employee Benefit Plans and Arrangements ” means any “employee benefit plan” of Seller or its Affiliates, as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and any employment, severance or other similar contract, arrangement or policy and each plan or arrangement (written or oral) providing for compensation, profit sharing,

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bonuses, stock options, stock appreciation or other forms of incentive compensation, deferred compensation, insurance coverage (including any self insured arrangements), health or medical benefits, workers’ compensation, disability or sick leave benefits, supplemental unemployment benefits, vacation benefits, severance benefits, retirement benefits, or post-employment or retirement benefits (including compensation, pension, health, medical or life insurance benefits) which is entered into, maintained or contributed to by Seller or its Affiliates and covers any employee of Seller or its Affiliates.

“ Encumbrance ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, right of others or other encumbrance in respect of such property or asset.

“ Environmental Law ” means any Applicable Law regulating the environment or natural resources, including, laws regulating wetlands, pollution, contamination or the use, generation, manufacture, processing, distribution, treatment, storage, disposal, transport, disposal, Release or threatened Release of pollutants, contaminants, wastes, chemical or any toxic, radioactive, ignitable, corrosive or otherwise hazardous substances.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Existing Co-Pack Agreement ” means collectively, (i) the Master External Manufacturing Agreement, dated as of January 1, 2002, between Kraft Foods North America, Inc. and the co-manufacturer specified on Schedule 3.07 and (ii) the Project Agreement, dated November 16, 2005, between the Post Division of Kraft Foods North America, Inc. and such co-manufacturer.

“ GAAP ” means the generally accepted accounting principles in the United States consistently applied.

“ Governmental Authority ” means any transnational, domestic or foreign federal, state or local, governmental authority or any, court, administrative agency or other regulatory authority constituted or administered thereby, including any political subdivision thereof.

“ Hazardous Substances ” shall mean any hazardous, toxic or polluting substances, chemicals, contaminants, materials or waste that are regulated by or for which standards of conduct are prescribed under or included in the definition of “hazardous substances,” “hazardous materials,” “hazardous constituents,” “toxic substances,” “pollutants,” “contaminants,” or any similar denomination intended to classify or regulate carcinogenicity, ignitability, corrosivity or activity under Environmental Laws, including petroleum or any derivative or by-products thereof, asbestos and asbestos-containing materials, radioactive materials, lead based paint, radon, urea formaldehyde, and polychlorinated biphenyls.

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“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ Intellectual Property Right ” means any trademark, service mark, trade name, Internet domain name, invention, patent, trade secret, copyright, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right.

“ Knowledge ” means, with respect to Seller, the actual knowledge of Brian Graubard (Director, Marketing, Cereals), Richard Pace (Senior Director, Business Planning), Michael H. Morgan (Associate Director, Global Supply Chain Strategy), Richard Fazzolare (Senior Director, Manufacturing Business Development Snacks & Cereals), Marlene Quijano (Director Global Technology & Quality, Cereals & Bars), Sharron Moss-Higham (Senior Director Manufacturing, Grocery) and John MacKenzie (Director, Business Development, Snacks & Cereals).

“ Kraft Canada ” means Kraft Canada Inc., a Canadian corporation and wholly owned Subsidiary of Seller.

“ Kraft Holdings ” means Kraft Foods Holdings, Inc., a Delaware corporation and wholly owned Subsidiary of Seller.

“ Largest Customers ” means the customers of the Business listed on Schedule 1.02.

“ Largest Suppliers ” means the suppliers of goods and services to the Acquired Business listed on Schedule 1.03.

“ Material Adverse Effect ” means any change, effect, event or occurrence that, individually or when taken together with all other such changes, effects, events or occurrences, is materially adverse to, or has a materially adverse effect on, the business, financial condition or results of operations of the Acquired Business or the Acquired Assets, taken as a whole, other than any change, effect, event or occurrence resulting from or attributable to (i) changes in general economic, financial, regulatory, political or market conditions, (ii) changes in laws, rules or regulations affecting the Business, (iii) changes in conditions or circumstances generally affecting the industries in which the Business operates, (iv) the announcement, declaration, commencement, occurrence, continuation or threat of any acts of war, terrorism or other acts of hostility, or any public health or other public emergency or crisis, in each case involving the United States or Canada, (v) actions of the Buyer or any of its Affiliates, (vi) declines in the operational or financial performance of the Business that are not materially worse than the trends experienced by the Business since January 1, 2006, except to the extent that such declines relate to the loss in its entirety of the business of one or

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more of the Largest Customers or Largest Suppliers that is not a result of an acquisition or other change of control, bankruptcy or similar event or other fundamental change in the organizational structure of any such customer or supplier or (vii) the execution, delivery or performance of this Agreement or the public announcement of the transactions contemplated in this Agreement or in any other Transaction Agreement; provided that any change, effect, event or occurrence described in clauses (ii) through (iv) above shall not be disregarded if it disproportionately affects the Business relative to other businesses in the hot cereal industry.

“ Ordinary Course of Business ” means the ordinary course of conduct of the Business, consistent with Seller’s and its Affiliates’ past practice since January 1, 2006.  The parties hereto acknowledge and agree that the operational and financial performance of the Business declined during the year ended December 31, 2006, as reflected in the Financial Information, and that such declines and any such declines after the date hereof that are not materially worse than the trends experienced by the Business since January 1, 2006 shall not in and of itself constitute a failure to conduct the Business in the Ordinary Course of Business.

“ Patent Application Assignment Agreement ” shall mean the Patent Application Assignment Agreement between Kraft Holdings and Buyer effective as of the Closing Date, substantially in the form attached hereto as Exhibit E .

“ Permitted Encumbrances ” mean (i) the matters disclosed in Schedule 1.01, (ii) any statutory mechanic’s, materialman’s, carrier’s, workmen’s, repairmen’s, warehousemen’s or other like Encumbrance arising or incurred in the Ordinary Course of Business for sums not yet delinquent or which are being contested in good faith by appropriate proceedings, (iii) any Encumbrances for Taxes and other governmental charges that are not due and payable or the validity of which are being contested in good faith by appropriate proceedings and (iv) any other Encumbrances that are not material to the Business and do not interfere with the present use, or affect the value, of the properties they affect.

“ Person ” means any individual, trustee, firm, corporation, partnership, limited liability company, trust, joint venture, bank, Government Authority, trust or other organization or entity.

“ Pre-Closing Environmental Liabilities ” means any Liabilities arising from or relating to (A) environmental conditions, including, without limitation, contamination or the presence, Release, threat of Release, use, generation, manufacture, processing, distribution, treatment, storage, disposal, transport, disposal of or exposure to Hazardous Substances, first occurring on or prior to the Closing Date at, on, in, under or from any property now or previously owned, operated or leased by Seller or any predecessors of Seller in connection with the

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Business (as currently or formerly operated); (B) the off-site transportation, storage, treatment, recycling, disposal or Release of Hazardous Substances used, generated, manufactured, processed, distributed, treated, stored, transported, disposed of or Released by or on behalf of Seller or any predecessors of Seller in connection with the Business (as currently or formerly operated); or (C) any violation first occurring or first existing on or prior to the Closing Date of any Environmental Law by Seller or any predecessors of Seller in connection with the Business.

“ Pre-Closing Tax Period ” means (i) the Tax period ending before the Closing Date and (ii) with respect to a Tax period that commences before but ends after the Closing Date, the portion of such period up to but excluding the Closing Date.

“ Prime Rate ” means, for any day, the rate per annum equal to the “Prime Rate” for such day as published in The Wall Street Journal , Eastern Edition.

“ Products ” means the products manufactured and sold by Seller and its Affiliates or that are currently under development that are listed or described on Schedule 1.04 hereto.

“ Release ” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping, migrating, dumping or disposing of any Hazardous Substances (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Substance) into the indoor or outdoor environment, including, without limitation, the movement or migration of Hazardous Substances through or in the ambient air, soil, surface or ground water, or property.

“ Subsidiary ” means with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

“ Trademark Assignment Agreement ” shall mean the Trademark Assignment Agreement between Buyer and Kraft Holdings effective as of the Closing Date, substantially in the form attached hereto as Exhibit D .

“ Transition Services Agreement ” means the Transition Services Agreement dated as of the Effective Date between Buyer and Seller, attached hereto as Exhibit C .

(b)     Each of the following terms is defined in the Section set forth opposite such term:

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ARTICLE 2

PURCHASE AND SALE

Section 2.01 .  Acquired Assets.  On the terms and subject to the conditions of this Agreement, on the Closing Date, Seller agrees to sell, convey, transfer, assign and deliver, and cause its Subsidiaries to sell, convey, transfer, assign and deliver, to Buyer and Buyer’s designated Affiliates, and Buyer agrees to purchase and cause its designated Affiliates to purchase and accept from Seller and its Subsidiaries, all of Seller’s and its Subsidiaries’ right, title and interest in and to the following assets, properties, rights, contracts and claims of Seller or its Subsidiaries that are owned, leased or licensed by Seller or its Subsidiaries on the Closing Date and used in the Acquired Business (other than the Excluded Assets), in each case free and clear of all Encumbrances other than Permitted Encumbrances (collectively, the “ Acquired Assets ”):

(a)     all inventories of finished goods, including any such items in transit on the Closing Date, related exclusively to the Business (collectively, “ Inventory ”);

(b)      those items of machinery and equipment and other tangible personal property listed on Schedule 2.01(b) and, except as set forth on Schedule 3.09, all other machinery and equipment used exclusively in the manufacturing of the Products (collectively, the “ Equipment ”);

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(c)     the following intellectual property assets (collectively, the “ Business Intellectual Property ”):

(i)    the registered trademarks and trademark applications listed on Schedule 2.01(c)(i), together with associated goodwill (the “ Trademarks ”);

(ii)   all unregistered trademarks, service marks, trade dress and trade names, in each case related exclusively to the Business, together with associated goodwill;

(iii)  all copyrights, all current product formulations, all raw material, manufacturing, processing, packaging, labeling, quality assurance and other specifications, and all current processing instructions, trade secrets, know-how and inventions, in each case related exclusively to the Acquired Business;

(iv)  the patent application listed on Schedule 2.01(c)(iv) (the “ Patent Application ”); and

(v)   the Internet domain names listed on Schedule 2.01(c)(v) and, to the extent transferable, the content appearing on www.kraftfoods.com/cw related exclusively to the Business (the “ Exclusive Content ”); provided that the Exclusive Content shall be delivered by Seller no later than 60 days after the Closing Date.

(d)   all commitments, agreements and orders (subject to their terms and conditions) for the purchase of Products from Seller or any of its Subsidiaries that have not been shipped before the Closing Date (collectively, the “ Purchase Orders ”), as well as the portion (to the extent severable) of any other purchase orders of Seller or its Subsidiaries relating to any of the Products that have not been shipped before the Closing Date, and all rights to payments, prepayments and deposits for the Purchase Orders or such portion of such other purchase orders;

(e)   the Existing Co-Pack Agreement and all other contracts, leases, licenses, commitments or agreements (other than Purchase Orders) relating exclusively to the Acquired Business or the Products (“ Contracts ”), to the extent freely assignable or any required third-party consents to assignment are obtained but excluding the Related Party Contracts (collectively, the “ Assigned Contracts ”);

(f)    all books and records to the extent exclusively related to the Acquired Business, whether in hard copy or electronic format, including technical information, computerized data, customer lists, vendor lists, service provider lists,

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sales and promotional literature, catalogs and advertising material, cost information, pricing and sales data, market surveys, purchase and sale records and correspondence for each Product, but excluding those described in Section 2.02(d) (collectively, the “ Transferred Information ”); provided , that, subject to Section 5.03, Seller may retain and use copies of the Transferred Information for internal archival and reference purposes;

(g)   all UPC bar codes that are listed on Schedule 2.01(g), subject to the limitations set forth thereon (the “ Assigned UPC Codes ”);

(h)   all permits, approvals, authorizations, licenses or other registrations required by Governmental Authorities and used or held for use exclusively in the conduct of the Acquired Business (collectively, “ Permits ”), if any, to the extent transferable; and

(i)    all rights, causes of action, claims and credits to the extent related primarily to any Acquired Asset or any Assumed Liability from and after the Closing Date, including all guarantees, warranties, indemnities and similar rights in favor of Seller or its Affiliates in respect of any Acquired Asset or any Assumed Liability.

Section 2.02 .  Excluded Assets.  The Acquired Assets do not include any assets, properties, rights, contracts or claims other than those specifically listed or described in Section 2.01, and, without limiting the generality of the foregoing, expressly exclude the following:

(a)   all cash, cash equivalents, marketable securities, bank accounts, lockboxes and deposits of, and any rights or interests in, the cash management system of Seller and its Affiliates;

(b)   all accounts and notes receivable of the Business arising prior to the Closing Date and any collateral or other security relating thereto and all proceeds thereof;

(c)   all rights, title and interest in any real property owned or leased by Seller or its Affiliates, together with the buildings, structures, fixtures and all other improvements on such real property, including the facilities used by Seller or its Affiliates in the operation of the Business;

(d)   all minute books, records, files, documents and papers, whether in hard copy or electronic format, prepared in connection with this Agreement or the transactions contemplated hereby and all minute books and other corporate books and records, Tax Returns and work papers, accounting records and related notes, worksheets, files or documents of Seller and its Affiliates and any documents

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prepared in connection with the transactions contemplated by this Agreement or any Ancillary Agreement;

(e)   all raw materials, work in progress and product supplies and all machinery, equipment, furniture, furnishings, fixtures, tools and other tangible personal property other than the Inventory and Equipment;

(f)    all intellectual property assets or rights that are not included in the Acquired Assets, including (i) all rights to use each of the “KRAFT”, “NABISCO” and “CHRISTIE” trade name or trademark, any derivation thereof and all associated goodwill and (ii) the trademarks identified on Schedule 2.02(f);

(g)   except as otherwise provided in Section 2.01(c)(v), all content appearing on www.kraftfoods.com or any other website of Seller or its Affiliates;

(h)   except as otherwise provided in Section 7.02(b), all rights of Seller and its Affiliates under any Contract other than the Assigned Contracts;

(i)    all Contracts between Seller or any Affiliate of Seller, on the one hand, and Seller or any Affiliate of Seller, on the other hand (the “ Related Party Contracts ”), and all inter-company receivables owed by Seller or an Affiliate of Seller to Seller or an Affiliate of Seller;

(j)    all UPC bar codes other than the Assigned UPC Codes;

(k)   all assets used in connection with the centralized management functions provided by Seller or any of its Affiliates;

(l)    all Employee Benefit Plans and Arrangements and any trusts, insurance arrangements or other assets held pursuant to, or set aside to fund the obligations of Seller or any of its Affiliates under, any Employee Benefit Plans and Arrangements;

(m)  all insurance policies relating to the Business and all claims, credits, causes of action or rights thereunder and proceeds thereof;

(n)   all claims and rights to receive Tax refunds or credits relating to the operation or ownership of the Business or any Acquired Assets for any Pre-Closing Tax period;

(o)   except to the extent expressly set forth on Schedule 2.01(c)(v), all application systems and software, including all computer software, programs and source disks, and related program documentation, tapes, manuals, forms, guides and other materials, computer hardware and other systems hardware and networking and communications assets, including servers, databases, backups and peripherals;

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(p)      Seller’s rights under this Agreement and the Ancillary Agreements, and the transactions contemplated hereby and thereby;

(q)       any Acquired Assets sold or otherwise disposed of in the Ordinary Course of Business during the period from the Effective Date until the Closing Date;

(r)        any shares of capital stock, partnership, membership or other debt or equity securities or other interests in any Person;

(s)        any works of art listed on Schedule 2.02(s) (“ Works of Art ”), subject to the limitations and rights of Buyer set forth in Section 7.05; and

(t)        any other assets (including any related claims) that are not described in Section 2.01 (clauses (a) through (t), collectively, the “ Excluded Assets ”).

Section 2.03 .  Assumed Liabilities.  On the terms and subject to the conditions of this Agreement, on the Closing Date, Buyer will assume and be liable for, and will pay, perform and discharge as and when due, only the following debts, claims, liabilities, obligations, damages, fines, penalties or expenses (whether known or unknown, accrued, absolute, contingent or otherwise) of Seller or its Subsidiaries (each, a “ Liability ”) relating to, or arising from, the conduct of the Business or the use of the Acquired Assets (collectively, the “ Assumed Liabilities ”):

(a)        all Liabilities under the Assigned Contracts, to the extent arising or relating to performance thereof on or after the Closing Date, but excluding any such Liability to the extent arising out of or relating to any breach or default by Seller or its Affiliates with respect to any such Assigned Contract;

(b)       all Liabilities relating to any Products manufactured by or on behalf of Buyer or its Affiliates on or after the Closing Date, including warranty obligations and product recall or withdrawal Liabilities, regardless of the legal theory asserted, it being understood that any Product the date of manufacture of which cannot be determined by the coding on such Product will be deemed to have been manufactured after the Closing Date if such Product was sold by or on behalf of Buyer or its Affiliates more than 60 days after the Closing Date;

(c)        all Liabilities relating to Products returned or claimed as spoiled more than 60 days after the Closing Date or that were manufactured or sold on or after the Closing Date, it being understood that any Product the date of manufacture of which cannot be determined by the coding of such Product will be deemed to have been manufactured or sold on or after the Closing Date if such Product was sold by or on behalf of Buyer or its Affiliates more than 60 days after the Closing Date; provided that notwithstanding the foregoing, Seller shall not be

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liable for any Liabilities relating to the Products returned or claimed as spoiled at any time after the Closing Date in excess of $150,000 in the aggregate;

(d)       all Liabilities of Seller and its Affiliates under the Purchase Orders and that portion of the other purchase orders described in Section 2.01(d), to the extent arising or relating to performance on or after the Closing Date, but excluding any Liability arising out of or relating to any breach or default by Seller or its Affiliates with respect to any such Purchase Order or such other purchase order;

(e)        all Liabilities for manufacturer’s coupons relating to Products (i) which coupons are issued, granted, delivered or otherwise made available before the Closing Date and are received by the clearinghouse for reimbursement more than 60 days after the Closing Date and (ii)  which coupons are issued, granted, delivered or otherwise made available by Buyer on or after the Closing Date;

(f)        all Liabilities for trade and consumer promotions relating to the Products (other than any such Liability contained in a Related Party Contract) arising from trade and consumer promotions occurring on or after the Closing Date;

(g)       all Liabilities for customer deductions to the extent attributable to Products sold on or after the Closing Date, other than for those reasons addressed by clauses (b) and (c) above;

(h)       all fines, penalties, costs or charges described in Section 6.03(e), if any;

(i)         all Liabilities to be paid or assumed by Buyer under Article 10; and

(j)         all Liabilities arising from or relating to the use, ownership, operation or resale on or after the Closing Date of the Acquired Assets, including Liabilities arising under any Environmental Law.

Buyer’s obligations under this Section 2.03 shall not be subject to offset or reduction by reason of any actual or alleged breach of any representation, warranty or covenant contained in this Agreement or any Ancillary Agreement or any right or alleged right to indemnification hereunder or thereunder; provided that the foregoing shall in no way be interpreted to limit or impair Buyer’s indemnification or other rights under this Agreement.

Section  2.04 .  Excluded Liabilities.   Buyer will not assume or be liable for any Liabilities of Seller or any of its Affiliates other than the Assumed Liabilities (collectively, the “ Excluded Liabilities ”), which Excluded Liabilities include:

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(a)        all Liabilities under debt instruments, loan documents, indentures, debentures, guarantees or other written obligations which involve indebtedness for borrowed money;

(b)       all accounts payable of Seller or any of its Affiliates;

(c)        all Liabilities arising under or with respect to any Related Party Contracts;

(d)       all Liabilities with respect to any employees of Seller or its Affiliates or arising under any Employee Benefit Plans and Arrangements;

(e)        all Liabilities to be paid or assumed by Seller under Article 10;

(f)        all Liabilities to the extent related to the Excluded Assets;

(g)       all Liabilities with respect to Seller’s or its Affiliate’s failure to comply with any Applicable Law prior to the Closing Date;

(h)       all Pre-Closing Environmental Liabilities;

(i)         all Liabilities for trade and consumer promotions relating to the Products arising from trade and consumer promotions occurring prior to the Closing Date;

(j)         all Liabilities for customer deductions to the extent attributable to Products sold prior to the Closing Date;

(k)        all Liabilities for legal, accounting, audit and investment banking fees, brokerage commissions and any other like expense incurred by Seller or any of its Affiliates in connection with the negotiation and preparation of this Agreement and the transactions contemplated by this Agreement;

(l)         all Liabilities for Taxes relating to the operation or ownership of the Business or any Acquired Assets for any Pre-Closing Period; and

(m)       all Liabilities arising from or relating to the use, ownership, operation or resale prior to the Closing Date of the Business or the Acquired Assets, other than the Assumed Liabilities.

Section  2.05.   Purchase Price.   The base purchase price to be paid by Buyer to Seller for the Acquired Assets and Assumed Liabilities (the “ Base Purchase Price ”) is Two Hundred Million Dollars ($200,000,000) in cash.  The Base Purchase Price shall be paid as provided in Section 2.07 and shall be subject to adjustment as provided in Section 2.09 (such adjusted amount referred to herein as the “ Final Purchase Price ”).

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Section  2.06.   Allocation of Purchase Price.   (a)  Schedule 2.06(a) sets forth a statement delivered by Seller to Buyer (the “ Allocation Statement ”) allocating the Base Purchase Price (plus Assumed Liabilities) among the Acquired Assets (except for the Canadian Equipment, Canadian spare parts referred to in Section 2.10 and Canadian Inventory) in accordance with Section 1060 of the Code and applicable local law.  If within thirty (30) days after the Effective Date, Buyer notifies Seller in writing that Buyer objects to the allocation set forth in the Allocation Statement, Buyer and Seller shall use commercially reasonable efforts to resolve such dispute within thirty (30) days.  If Buyer and Seller are unable to resolve such dispute within thirty (30) days, Buyer and Seller shall jointly retain an Accounting Referee (as provided in Section 2.08(c)) to resolve the disputed items.  Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution.  The costs, fees and expenses of the Accounting Referee in connection with any dispute regarding the Allocation Statement shall be borne equally by Buyer and Seller.

(b)       Buyer and Seller agree to allocate an amount of the Base Purchase Price to the Canadian Equipment, Canadian spare parts referred to in Section 2.10, and Canadian Inventory in accordance with Schedule 2.06(b).  The allocations made on Schedule 2.06(b) are intended to be made in accordance with Section 1060 of the Code and applicable law.

(c)        If an adjustment is made with respect to the Base Purchase Price pursuant to Section 2.09, such adjustment will be allocated solely to Inventory for purposes of the Allocation Statement.  Buyer and Seller agree to file any additional information return required to be filed pursuant to Section 1060 of the Code and applicable local law and to treat the Allocation Statement as adjusted to reflect such resolution.

(d)       Neither Buyer nor Seller, nor any of their respective Affiliates, shall take any position for Tax purposes (including the filing of Form 8594 with its federal income tax return for the taxable year that includes the Closing Date) that is inconsistent with the allocation of the Final Purchase Price and Assumed Liabilities unless required to do so by Section 1060 of the Code or other applicable local law.  The Seller will provide any information returns required by Section 1060 of the Code and any similar state statute at least sixty (60) days prior to filing such returns.  The provisions of this Section 2.06 shall survive the Closing.  The Federal Employer Identification Number of each party to this Agreement is as follows: Seller (36-3083135) and Buyer (20-8271107).

Section  2.07.   Closing.   The closing (the “ Closing ”) of the transactions contemplated by this Agreement shall take place at 9:00 A.M. New York time at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York on the first Business Day after the last day of the accounting period of Seller

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set forth on Schedule 2.07 during which all of the conditions set forth in Article 8 have been satisfied (or to the extent permitted by law, waived); provided that in any event “ Closing Date ” shall mean 12:01 A.M. New York time on the day immediately following the last day of such accounting period.  On the Closing Date:

(a)        Buyer shall become unconditionally obligated to deliver to Seller, as promptly as practicable on the first Business Day after the Closing Date, the Base Purchase Price in immediately available funds by wire transfer to a bank account designated in writing at least two (2) Business Days prior to the Closing Date by Seller;

(b)       Seller and Buyer shall enter into, and exchange executed counterparts to, the Assignment and Assumption Agreement;

(c)        Kraft Food Holdings, Inc. and Buyer shall enter into, and exchange executed counterparts to, the Trademark Assignment Agreement;

(d)       Kraft Food Holdings, Inc. and Buyer shall enter into, and exchange executed counterparts to, the Patent Application Assignment Agreement;

(e)        Buyer shall deliver to Seller the form of purchase order to be used by Buyer to order Products pursuant to the Co-Manufacturing Agreement, which form of purchase order must be reasonably acceptable to Seller and shall, in any event, provide that if there is any inconsistency between the terms of such purchase order and the terms of the Co-Manufacturing Agreement, the terms of the Co-Manufacturing Agreement shall govern;

(f)        Seller shall deliver, or cause its Subsidiaries to deliver, to Buyer specifications for the Products and for related raw materials, packaging materials, packaging labels and product labels pursuant to the Co-Manufacturing Agreement;

(g)       Seller shall deliver, or cause its Subsidiaries to deliver, to Buyer or its Subsidiaries such further bills of sale, endorsements, consents, assignments and other good and sufficient instruments of conveyance and assignment as the parties and their respective counsel shall deem reasonably necessary under applicable law to vest in Buyer, all right, title and interest in, to and under the Acquired Assets and to evidence Buyer’s, assumption of the Assumed Liabilities;

(h)       Buyer shall deliver to Seller the certificate specified in Section 8.02(c);

(i)         Seller will deliver to Buyer the certificate specified inSection 8.03(c); and

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(j)         Buyer and Seller shall enter into such other documents and instruments reasonably necessary to consummate the transactions contemplated by this Agreement.

Section  2.08.   Closing Inventory Calculation.   (a) As soon as practicable, but in no event later than sixty (60) days following the Closing Date, Seller shall deliver to Buyer a report setting forth Seller’s calculation of the dollar amount of the Inventory as of the Closing Date (the “ Closing Inventory Amount ”) prepared as described herein.  The Closing Inventory Amount and Final Inventory Amount shall be determined in accordance with GAAP applied consistently with the Seller’s internal management accounting and quality control policies and shall be calculated without giving effect to any changes or adjustments arising from the transactions contemplated by this Agreement or the Ancillary Agreements.  Buyer shall have the right to be present to observe and verify the taking of any physical inventory in conjunction with the preparation of Seller’s calculation of the Closing Inventory Amount, and, at any time after Seller’s notice of its calculation of the Closing Inventory Amount but prior to the determination of the Final Inventory Amount in accordance with this Section 2.08, may review and examine the procedures, books, records and work papers of Seller relating to such calculation.

(b)       If Buyer disagrees with Seller’s calculation of the Closing Inventory Amount delivered pursuant to Section 2.08(a), Buyer may, within thirty (30) days following such delivery, notify Seller in writing that it objects to the computation of said amount, specifying those items and amounts as to which Buyer disagrees with a written explanation of the reasons for disagreement with each such item and amount, and its alternative computation of each such item and amount, and Buyer shall be deemed to have agreed with all other items and amounts contained in Seller’s calculation of the Closing Inventory Amount.  If Buyer fails to deliver such written notice within such 30-day period, Seller’s calculation of the Closing Inventory Amount shall be the Final Inventory Amount, which shall be binding upon the parties.  Notwithstanding anything in this Section 2.08 to the contrary, Buyer shall not contest Seller’s calculation of the Closing Inventory Amount if the difference between their respective calculations of Closing Inventory Amount is less than $100,000.

(c)        If a notice of disagreement shall be duly delivered pursuant to Section 2.08(b), Buyer and Seller shall, during the ten (10) Business Days following such delivery, use their commercially reasonable efforts to reach agreement on the disputed items or amounts in order to determine, as may be required, a mutually agreed Closing Inventory Amount.  If during such period or any mutually agreed upon extension thereof, Buyer and Seller are unable to reach such agreement, they shall promptly thereafter retain a nationally recognized accounting firm which is reasonably acceptable to Buyer and Seller and which has no material relationship with Buyer, Seller or their respective Affiliates or other

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material conflict (the “ Accounting Referee ”) to review this Section 2.08, the definitions for the terms used herein and the disputed items or amounts for the purpose of promptly calculating Closing Inventory Amount, which amount shall not be more than the amount thereof shown in Seller’s calculations delivered pursuant to Section 2.08(a) nor less than the amount thereof shown in Buyer’s calculation delivered pursuant to Section 2.08(b).  Each party agrees to execute, if requested by the Accounting Referee, a reasonable engagement letter.  If Buyer and Seller do not promptly agree on the selection of the Accounting Referee, which shall occur no later than five (5) days after the end of the ten-day period referred to above, then each shall select an independent accounting firm of nationally recognized standing and such two independent accounting firms shall jointly select the Accounting Referee pursuant to this Section 2.08(c).  In making its calculation in accordance with this Agreement, the Accounting Referee will make its determination based solely on presentations by Seller and Buyer and not by independent review and shall consider only those items or amounts in Seller’s calculation of the Closing Inventory Amount as to which Buyer has disagreed.  The Accounting Referee shall deliver to Buyer and Seller, as promptly as practicable, a written report setting forth such calculation.  Such report shall be final and binding upon Buyer and Seller.  Buyer and Seller will use commercially reasonable efforts to cause the Accounting Referee to render its decision as soon as reasonably practicable, including by promptly complying with all reasonable requests by the Accounting Referee for information, books, records and similar items.  The costs, fees and expenses of the Accounting Referee in connection with any dispute regarding the Closing Inventory Amount shall be borne proportionately by Buyer and Seller to the extent that Buyer’s and Seller’s respective calculations of Closing Inventory Amount differ from the Accounting Referee’s determination.

Section  2.09 .  Adjustment of Purchase Price.   (a) If the Final Inventory Amount exceeds $1,800,000 (the “ Target Closing Inventory Amount ”) by more than $100,000, Buyer shall pay to Seller, as an adjustment to the Base Purchase Price, in the manner and with interest as provided in Section 2.09(b), the amount of such excess.  If the Target Closing Inventory Amount exceeds the Final Inventory Amount by more than $100,000, Seller shall pay to Buyer, as an adjustment to the Base Purchase Price, in the manner and with interest as provided in Section 2.09(b), the amount of such excess.  The “ Final Inventory Amount ” means the Closing Inventory Amount (i) as shown in Seller’s calculation delivered pursuant to Section 2.08(a)if no notice of disagreement with respect thereto is duly delivered pursuant to Section 2.08(b); or (ii) if such a notice of disagreement is delivered, (A) as agreed by Buyer and Seller pursuant to Section 2.08(c) or (B) in the absence of such agreement, as shown in the Accounting Referee’s calculation delivered pursuant to Section 2.08(c); provided that in no event shall the Final Inventory Amount be more than Seller’s calculation of the Closing Inventory Amount delivered pursuant to Section 2.08(a)

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or less than Buyer’s calculation of the Closing Inventory Amount delivered pursuant to Section 2.08(b).

(b)       Any payment pursuant to Section 2.09(a) shall be made at a mutually convenient time and place within five (5) Business Days after the Final Inventory Amount has been determined by delivery by Buyer or Seller, as the case may be, by wire transfer of immediately available funds to the other party or by causing such payments to be credited to such account of such other party as may be designated by such other party; provided that if Buyer shall have delivered a notice of disagreement pursuant to Section 2.08(b) and either (i) Buyer’s and Seller’s calculations of Closing Inventory Amount would both require a payment by Buyer pursuant to Section 2.09(a) or (ii) Buyer’s and Seller’s calculations of Closing Inventory Amount would both require a payment by Seller pursuant to Section 2.09(a) (although in each case there is disagreement as to the amount of such payment), then Buyer or Seller, as the case may be, shall pay the lesser of the amounts that would be payable pursuant to Section 2.09(a) based on their respective calculations of Closing Inventory Amount within five (5) Business Days of the date such notice of disagreement was delivered, and any such payment shall be credited against the payment required by Section 2.09(a).  The amount of any payments to be made pursuant to this Section 2.09 shall bear interest from and including the Closing Date but excluding the date of payment at the Prime Rate in effect from time to time during the period from the Closing Date to the date of payment.  Such interest shall be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days elapsed, compounded quarterly.

Section  2.10.   Purchase of Spare Parts .  Upon the expiration or termination of the Co-Manufacturing Agreement, subject to the terms thereof, Buyer shall purchase from Kraft Canada all of its right, title and interest in and to the spare parts owned by Kraft Canada at such time that are exclusively related to the Equipment for a payment of $1 in Canadian currency.

Article 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the Disclosure Schedule, Seller represents and warrants to Buyer as of the date hereof as follows:

Section  3.01.   Organization, Existence and Good Standing.   Seller is a corporation duly organized, validly existing and in good standing under the laws of Delaware, and has all corporate power and authority and all material governmental licenses, authorizations, permits, consents and approvals required to carry on the Business as currently being conducted.  Seller is duly qualified or licensed as a foreign corporation and is in good standing in each jurisdiction in

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which its right, title or interest in or to any Acquired Assets or the conduct of the Business by it makes such qualification necessary, except where the failure to be so duly qualified or licensed would not have a Material Adverse Effect.

Section  3.02 .  Authorization, Validity and Execution.   Seller has all necessary corporate power and authority (a) to execute and deliver this Agreement and the Ancillary Agreements, (b) to perform its obligations under this Agreement and the Ancillary Agreements and (c) to consummate the transactions contemplated under this Agreement and the Ancillary Agreements.  This Agreement has been, and each of the Ancillary Agreements will be on or before the Closing Date, duly executed and delivered by Seller and its Affiliates that are parties to such Ancillary Agreements and, assuming the due execution hereof and thereof by Buyer, will be a legal, valid and binding obligation of Seller and each such Affiliate, enforceable against each of them in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar laws affecting the enforcement of creditors’ rights generally and to general equitable principles.

Section  3.03 .  Consents and Approvals; No Violations.   Except (x) for compliance with the HSR Act , and the rules promulgated under the HSR Act and any other Competition Law, (y) for filings that may be required under the Exchange Act and (z) as set forth on Schedule 3.03, the execution and delivery by Seller of this Agreement and the Ancillary Agreements (including the execution by those Affiliates of Seller which are parties to such Ancillary Agreements), and the consummation by Seller and its Affiliates of the transactions contemplated by this Agreement and the Ancillary Agreements will not (a) violate the provisions of the certificate of incorporation or bylaws of Seller or any its Affiliates, (b) violate any Applicable Law (including, without limitation, any Environmental Law), (c) require any consent or approval of, or the giving of any notice to, or filing with, any Governmental Authority, (d) require any consent or other action by any Person under, constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation or to a loss of any benefit with respect to any of the Acquired Assets under any provision of any agreement or other instrument binding upon Seller or any of its Affiliates or by which the Acquired Assets are bound or (e) result in the creation or imposition of any Encumbrance on any asset (including the Acquired Assets) of Seller or any of its Affiliates, excluding from the foregoing clauses (b) through (e) consents, approvals, notices and filings the absence of which, and violations, defaults, rights, conflicts or Encumbrances the existence of which, would not have a Material Adverse Effect.

Section  3.04.   Financial Information.   Schedule 3.04 sets forth the unaudited reported net assets statement for the Acquired Business as of December 31, 2005 and December 30, 2006 and the unaudited statement of earnings before interest, taxes and amortization of intangible assets for the Business for the 52

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week periods ending on each of December 31, 2005 (on a pro forma basis) and December 30, 2006 (collectively, the “ Financial Information ”).  The Financial Information (i) has been prepared in conformity with Seller’s internal management accounting policies, which are consistent with GAAP, applied on a consistent basis, (ii) has been prepared from Seller’s books and records, (iii) has eliminated all inter-company sales and profits, and (iv) presents fairly in all material respects the net assets and results of operations of the Business as of the dates indicated therein and the 52 week periods then ended.

Section  3.05 .  Inventory.   The Inventory was acquired or manufactured in the Ordinary Course of Business.  On the Closing Date, except to the extent excluded from the Final Inventory Amount or set forth on Schedule 3.12, the Inventory will consist of goods usable and saleable in the ordinary course and pursuant in all material respects to all Applicable Laws, including the Federal, Food, Drug and Cosmetic Act and, with respect to the packaging for the Products, all applicable federal and state labeling requirements.

Section  3.06 .  Intellectual Property.   (a) Except as set forth on Schedule 3.06(a), the Trademarks set forth on Schedule 2.01(c)(i) constitute a full and complete list of all of the registrations and applications for trademarks or service marks used or held for use exclusively in the conduct of the Business (the “Registered Trademarks”).  To the Knowledge of Seller, the Business Intellectual Property, the Retained IP and any Intellectual Property Rights granted to Buyer under the Transition Services Agreement and the Co-Manufacturing Agreement constitute all the Intellectual Property Rights necessary for the operation of the Acquired Business as currently conducted by Seller and its Subsidiaries.  The Registered Trademarks in the United States and Canada are valid, in full force, owned and held in the record name of Kraft Holdings.  The Business Intellectual Property in the United States and Canada and, to the Knowledge of Seller, the Business Intellectual Property outside of the United States and Canada, is owned free and clear of all Encumbrances (other than Permitted Encumbrances), excluding (i) matters listed on Schedule 3.06(a) and (ii) claims of invalidity that, if true, would not, individually or in the aggregate, be material to the Acquired Business.

(b)       Except as set forth on Schedule 3.06(b), there is no pending legal action or other proceeding nor has Seller or any of its Subsidiaries received in the three-year period before the Effective Date any written claim from a third party contesting the registrability, validity, enforceability or ownership of any of the Business Intellectual Property, and, to the Knowledge of Seller, no such claims have been threatened by a third party.  There is no pending legal action or other proceeding and neither the Seller nor any of its Subsidiaries has received in the three-year period before the Effective Date any written notice that the operation of the Business infringes on, dilutes, misappropriates or otherwise violates any Intellectual Property Rights of any third party, and, to the Knowledge of Seller, no

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such claims have been threatened by a third party.  To the Knowledge of Seller, the operation of the Business as currently conducted does not infringe, dilute, misappropriate or otherwise violate the Intellectual Property Rights of any third party in any material respect.  There is no pending legal action or other proceeding nor has Seller or any of its Subsidiaries asserted any written claim in the three-year period before the Effective Date that a third party has infringed, diluted, misappropriated or otherwise violated in any material respect any of the Business Intellectual Property.

(c)        Other than as set forth on Schedule 3.06(a), neither the Seller nor any of its Subsidiaries has granted any material license to any third party which is in currently in effect with respect to the Business Intellectual Property.

(d)       Other than as set forth on Schedule 3.06(a), no opposition, extension of time to oppose, final rejection or final refusal has been received by Seller or any of its Subsidiaries in the three year period before the Effective Date in connection with any of the material Registered Trademarks.  Other than as set forth on Schedule 3.06(a), there are no actions that must be taken by the Seller or any Subsidiary within ninety (90) days after the Effective Date, including the payment of any registration, maintenance or renewal fees of the filing of any documents, applications or certificates for purposes of maintaining, perfecting or preserving or renewing any of the material Registered Trademarks and the Patent Application in the United States and Canada and to the Knowledge of Seller, no such actions must be taken outside of the United States and Canada.

(e)        The Seller and each Subsidiary has taken all reasonable steps in accordance with normal industry practice to maintain the confidentiality of any material trade secret, know-how, or other confidential or proprietary information contained in the Business Intellectual Property.  To the Knowledge of the Seller, none of the material trade secret, know-how, or other confidential or proprietary information contained in the Business Intellectual Property has been disclosed to any person unless such disclosure was made pursuant to an appropriate confidentiality agreement.

Section  3.07.   Contracts; Purchase Orders.   (a) Seller has delivered or made available to Buyer current and complete copies of all Contracts, together with any amendments thereto, other than Contracts that individually have a future liability not in excess of $50,000 or are cancelable by Seller or an Affiliate of Seller upon notice of not more than 90 calendar days for a cost of not more than $50,000.  Except as would not, individually or in the aggregate, be material to the Business, to the Knowledge of the Seller, there are no oral Contracts or oral amendments to any written Contracts.  Schedule 3.07 sets forth each Contract included in the Acquired Assets involving:

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(i)    &